Most Read Contributor in New Zealand, September 2016
The Court of Appeal yesterday cleared the way for Milk
NZ, in association with Landcorp, to bring the Crafar farms back to
decision should close the door on a campaign by the rival New
Zealand bidders to overturn the deal and restores some much needed
certainty to New Zealand's overseas investment
It should invigorate New Zealand's Free Trade
Agreement with China and reinforce the upcoming celebrations to
mark 40 years of diplomatic relations between New Zealand and
Crafar Farms Independent Purchaser Group (CFIPG) took
the appeal. CFIPG is a consortium which itself wanted to buy the
farms and had earlier applied for a judicial review of the
Ministers' decision to approve purchase by Milk NZ, a Hong Kong
registered subsidiary of Shanghai Pengxin Group Co Ltd.
The earlier challenge in the High Court argued that the
Ministers were wrong to consent to the purchase because it did not
comply with the Overseas Investment Act in two respects:
the overseas investors, although successful business people,
did not have any direct experience in the dairying industry so did
not meet the "good investor test", and
the benefits to New Zealand from the investment had not been
assessed correctly, because the Overseas Investment Office (and,
therefore, the Ministers) had applied a "before and
after" approach, instead of a "with and without"
approach – which would have focussed on what would happen
if the transaction did not proceed.
The High Court rejected the first argument but agreed with the
second. The Judge ordered the Ministers to reconsider their
decision. This they did, and again granted consent.
CFIPG then appealed the High Court's interpretation of the
good investor test. The High Court had ruled that the language was
"broad and flexible" and that the Act required only that
the people connected with the offer collectively possessed the
skills and expertise necessary to realise the promised benefits to
New Zealand from the investment.
Important to the High Court's conclusion was the joint
venture agreement that Milk NZ had made with Landcorp. Under the
agreement Milk NZ was to be the financier and Landcorp was to
manage the farms.
Milk NZ had also commissioned an experienced farm management
consultancy (Perrin AG Consultants Ltd) to prepare a detailed
business strategy in relation to the properties.
The Court of Appeal decision
The Court of Appeal upheld the High Court's decision on the
good investor test.
It said that the principal shareholder of Shanghai Pengxin, Mr
Zhaobai Jiang, was a very successful entrepreneur who had built a
substantial Chinese and international business group from small
beginnings. It was true that Shanghai Pengxin had no background in
"Recognising this, they did what would be expected of
sophisticated investors, namely they ensured that Milk NZ obtained
professional advice and entered into appropriate arrangements with
persons who had industry-specific experience, in particular Perrin
Against this background, we consider that the Ministers were
entitled to conclude that the controlling individuals have relevant
business experience and acumen within the meaning of s
Chapman Tripp comments
Chapman Tripp has been directly engaged in this matter as
advisers to Shanghai Pengxin on its OIO application. We welcome the
emphatic nature of the Appeal Court's judgment and the clarity
and certainty that it offers investors wishing to invest in New
Zealand. We expect that it will bring this long process to a
The information in this article is for informative purposes
only and should not be relied on as legal advice. Please contact
Chapman Tripp for advice tailored to your situation.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The NPP states that India is located on a strategically important location and is well connected to several international trade and commerce routes.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).