Foreign investors face maximum penalty for breach after $13M purchase
By Victoria Young
July 15 (BusinessDesk) - Overseas investors who paid $13 million for five hectares of land in Auckland have been told to pay $300,000 to the Overseas Investment Office (OIO) and sell the 117-lot development they started within two years.
In a decision released on Friday, Justice Grant Powell approved the maximum penalty for BCH Investments after the company admitted it was an overseas person that had acquired sensitive land, a breach of the Overseas Investment Act.
The Albany property adjoins a scenic reserve, which made it sensitive and requiring OIO approval, the High Court at Auckland said.
BCH is directed and owned by Xianghua Huang and Qian Yu Bu, Companies Office records show.
While the OIO can also receive a developer’s gains on a property, in this case there was no financial benefit to BCH in carrying out the 117-lot development.
Justice Powell’s judgment said despite the project not making money it was nonetheless a significant undertaking and given the size, scope and nature of the development the firm should have undertaken explicit enquiries as to its obligations under the law.
“This case shows the importance for investors to seek the right advice when making overseas investments. This includes choosing a suitably qualified lawyer and asking the right questions,” Land Information New Zealand (LINZ) group manager Vanessa Horne said.
LINZ, which oversees OIO breaches, issued proceedings against BCH two years ago, but then worked with the company to enable the subdivision to be completed. It was able to do this because BCH admitted liability four months after LINZ brought the case and put in KPMG as an account taker.
The judge said KPMG should be paid $260,000 for its costs, which BCH must pay in addition to the $300,000 penalty.
In July this year, the High Court ordered Chinese businessmen Zhongliang Hong and Xueli Ke, and IRL Investment and Grand Energetic Company, to pay $2.95 million for breaching the Overseas Investment Act when they bought two properties in 2012 and 2014.