In the “first case of its kind”, the High Court has ordered Australian-owned Carbon Conscious New Zealand Ltd (CCNZ) pay a NZ$40,000 penalty and more than NZ$6,000 in costs for breaching the Overseas Investment Act (the Act).
CCNZ, an “overseas person” for the purposes of the Act, needed Overseas Investment Office (OIO) consent to buy the property in question (the property meeting the definition of sensitive land under the Act). However, the time which would have been required to obtain
OIO consent under the Act posed difficulties for CCNZ in meeting certain tree planting obligations that it owed to a third party. In an attempt to circumvent these difficulties, but following legal advice, CCNZ had a New Zealand associate buy the property instead – and in doing so became a party to a transaction which resulted in an overseas investment in sensitive land without OIO consent.
The purchaser was an associate because of various contractual arrangements with CCNZ (including an option for CCNZ to acquire the land). According to the judgment “the nature of the breach in this case involved a deliberate circumventing of the Act’s controls on overseas investment. Katey LR was incorporated so as to avoid the need for CCNZ to obtain consent, and to disguise and distance CCNZ from the purchase of the property.”
This case demonstrates the broad reach of the “associate” provisions of the Act, and the risks involved with seeking to structure transactions to avoid the application of the Act. While similar issues arose back in 2010, when associates of overseas company Natural Dairy (NZ) Holdings Limited acquired various “Crafar Farms” interests, in that case the OIO for various reasons did not seek pecuniary penalties. Accordingly, this was the first case to grapple with quantum of pecuniary penalties for acquiring sensitive land without consent.
A copy of the judgment can be viewed
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