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Court deems Pengxin has business nous to buy Crafar farms

NZ court satisfied Shanghai Pengxin has business nous to buy Crafar farms, rejects appeal

By Paul McBeth

Aug. 8 (BusinessDesk) - The Court of Appeal has turned down a bid by merchant banker Michael Fay and two Maori trusts to stop the sale of 16 Central North Island farms, saying it was satisfied with the general business acumen and experience of the Chinese buyer.

Judges Mark O'Regan, Terence Arnold and Douglas White dismissed the judicial review, saying Jiang Zhaobai's ability to bring himself from humble beginnings to become "a person of some stature in the Chinese commercial world," would satisfy the minister making the decision in approving the sale of the Crafar family farms.

"The information provided to the ministers was sufficient to enable them to determine that he and the other controlling individuals had generic business skills and acumen relevant to the Crafar farms investment," Judge Arnold said in delivering the judgment.

"We see nothing in the language, taken in context, to indicate that Parliament had in mind that an investor must have any particular combination of the requisite skills and experience," the judgment said.

The judges bench wasn't swayed by the argument that Land Information Minister Maurice Williamson hadn't delved deeply enough into the success of Pengxin's agribusiness investments.

"The agribusiness experience was only one of the factors relied on by the ministers in concluding that the controlling individuals had the necessary business skills and acumen," the judgment said. "While apparently important, it did not lead to a conclusion that was insupportable or unreasonable in the absence of that experience."

The judges said even if the ministers erred in accepting Pengxin's agribusiness investments, "it is unlikely that we would have exercised our discretion to grant a remedy."

That's because the ministers decided the foreign investment would have a substantial benefit to New Zealand, the deal hasn't been settled and creditors are still waiting on repayments, and that the farms are being operated by the receiver in a manner than presumably "involves minimal further investment."

The farms were tipped into receivership in 2009, and owed its bankers some $274 million as at April, according to the latest receiver's reports.

Pengxin's proposal to enter into a joint venture with state-owned Landcorp Farming recognised their lack of specific experience in the dairy sector, and satisfied any concerns the minister might have had, the judgment said.

The legislation holds a tension between the parliament's description of overseas investment as a privilege against it giving foreign investors an entitlement to consent when they meet the act's criteria, the judges said.

The purchase of large blocks of farmland by foreigners became a topic of national debate after an aborted bid for the Crafar farms in 2010 by Hong Kong Exchange-listed Natural Dairy (NZ).

The government was pushing for looser controls on foreign investment, but ultimately did an about-face and imposed stricter processes amid rising opposition to the sale.

Fay, who fronted the Crafar Farms Independent Purchaser Group, said he was disappointed with the decision, and that "the majority of New Zealanders have significant concerns about the issue."

Haride Peni, chairman of the Tiroa E and Te Hape B Trusts, said kiwi farmers will become disenfranchised with the system.

"It seems all you need to enjoy the privilege of owning New Zealand farm land is deeper pockets and some knowledge of business to become a major owner of dairy farms," he said.

Pengxin welcomed the decision, saying its "immediate priority is to begin the process of improving the farms, increasing production, and making sure we comply with all of the conditions imposed by the Overseas Investment Office,” according to a statement issued by spokesman Cedric Allan.

(BusinessDesk)

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