The Crown Law Office has told the High Court at Wellington that Shanghai Pengxin owner Jiang Zhaobai could not have got high up on China's rich list "by accident" and ministers had the right to take that into account when they approved the sale of Crafar Farms to the Chinese firm.
A last-ditch High Court challenge to the $200 million sale of Crafar Farms to Pengxin, by a group of farmers led by Sir Michael Fay, may hinge on a point of law.
That is whether the Overseas Investment Office (OIO) should have considered what might otherwise have happened to the 16 North Island farms, when weighing up the benefits of the sale, and whether doing so might have altered its recommendation that ministers give permission.
Alan Galbraith, QC, acting for Sir Michael's group, said the sale to Pengxin would not bring significant benefits to New Zealanders as required by law.
Galbraith said the OIO applied the wrong test by taking into account improvements Pengxin might make at the properties, which are in receivership, without considering whether these would be made anyway by another buyer.
He also told the court that at least one of the individuals controlling Pengxin personally needed to have business expertise and acumen relevant to the investment for it to be legal.
Galbraith said Pengxin instead intended to be a passive investor. He said the OIO had acknowledged state-owned farmer Landcorp, which has offered to operate the farms for Pengxin, would provide the "required specialist dairying experience".
Pengxin was bringing only money, not experience or acumen, to Crafar, and if the sale went unchallenged, any overseas firm, such as Microsoft, could buy sensitive New Zealand land, he said.
"All they would need to do is hire a local manager and you are away."
Justice Forrie Miller said that argument appeared to rely on a "strict concept" of what relevant experience might entail, noting it had been suggested Pengxin could help sell more New Zealand dairy products into China.
But Galbraith said there was also no evidence Pengxin had experience importing foodstuffs into China, which he said was a "difficult business".
Hamish Hancock, from the Crown Law Office, said Pengxin had significant agricultural interests in South America and China. Crafar Farms was a very large "agribusiness", so Pengxin's financial experience was more relevant than dairying skills.
"The goodwill to be obtained from non-discriminatory and even-handed treatment for non-New Zealand nationals is of substantial benefit to New Zealand," Hancock said.
Galbraith said that if the Chinese purchase was blocked, farmers belonging to Sir Michael's group would be likely to individually acquire the 16 farms, and turn them around. He noted the farms had not been offered for sale individually before they were offered to overseas buyers.
He said that made "no sense at all" given the sensitive status of rural land was well-reflected in New Zealand legislation and that its purchase by foreigners was "a privilege".
Adam Ross, acting for Shanghai Pengxin subsidiary New Zealand Milk Holdings, said the company was seeking clarification on the conditions of ministerial approval before making its offer to buy the farms unconditional.
Justice Miller was expected to reserve his decision.
- © Fairfax NZ News
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