Heatley v Chief Executive of Land Information New Zealand
[2023] NZHC 1856
•17 July 2023
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2022-485-790
[2023] NZHC 1856
BETWEEN CRAIG LEONARD HEATLEY and
HAYLEY MAREE PYLE as the trustees of the Bentzen No. 2 Trust and
GRANT HOLDINGS LIMITED as thetrustee of the Grant Trust, together as the partners in the BENTZEN FARM JOINT VENTURE
Applicants
AND
CHIEF EXECUTIVE OF LAND INFORMATION NEW ZEALAND
Respondent
Hearing: 3–4 April 2023 Counsel:
J B M Smith KC and J B Orpin-Dowell for Applicants
J K Gorman, D J Watson and N B de Lautour for Respondent
Judgment:
17 July 2023
JUDGMENT OF CHURCHMAN J
TABLE OF CONTENTS
What the case is about [1]
Bentzen’s challenge [4]
Statutory scheme controlling foreign investment [6]
Purchasing programmes [9]
The Bentzen application [14]
Subsequent developments [17]
The OIO’s position on the application [22]
HEATLEY v CHIEF EXECUTIVE OF LAND INFORMATION NEW ZEALAND [2023] NZHC 1856 [17 Jul 2023]
The dispute [29]
The conditions imposed on Bentzen [33]
Conditions imposed on prospective purchasers [34]
Analysis [38]
Was the consent granted to the Bentzen’s purchasing programme
unlawful? [54]
Analysis [62]
The principle of validity [63]
The Court’s discretion [69]
Analysis [78]
Relief [86]
Second (alternative) ground of review – legitimate expectation [104] Clear and unambiguous undertaking [113] Is the expectation reasonably understood to be what Bentzen claims? [115] Did OIO know of the representation but chose to act contrary to it? [119] Did Bentzen suffer detriment by relying on the representation? [120]
Can the decision-maker’s conduct be objectively justified as being in the public interest and a proportionate response to the circumstances
of the case? [123]
Declarations [127]
Costs [128]
What the case is about
[1] The Bay of Islands contains many areas of outstanding natural beauty and historical significance. The Ōmarino coastal block on the south side of Te Rawhiti Inlet and west of Parekura Bay is said to be an exceptional example.1 This case is about the validity of a consent to sell lots in the Ōmarino Development to overseas persons.
1 The affidavit of Mr Craig Heatley filed in support of the applicants described the site as being in a “prized location” and described it as “extremely unique and iconic in terms of its position outlook and the context of New Zealand history”: affidavit of Craig Heatley, 21 December 2022 at [10]– [11].
[2] In 2010, the Overseas Investment Office (OIO) granted a consent under the Overseas Investment Act 2005 (OIA) authorising the sale of lots in the Ōmarino Development to overseas persons whose identity was as yet unknown. Some 12 years later, officials decided that the consent had been unlawfully granted. Reaching that decision involved the officials effectively repudiating the practice of granting consent to “purchasing programmes” which had been a long-established method of granting consents to foreign investment under the OIA. A consequence of that decision was that the officials treated a decision made by Ministers under the OIA granting consent to a purchasing programme relating to Ōmarino as if it were unlawful, and refused to process an application for consent made in accordance with the ministerial determination.
[3] The applicants in this matter are Mr Craig Heatley and Ms Hayley Pyle, as the trustees of the Bentzen No 2 Trust, and Grant Holdings Ltd, as the trustee of the Grant Trust, who together are the partners in the Bentzen Farm Joint Venture (Bentzen).2 Bentzen is the developer of Ōmarino. By way of judicial review, Bentzen challenges the decision of the Chief Executive of Land Information New Zealand (LINZ) to refuse to recognise what it says was a consent granted in 2010 under the OIA in respect of a purchasing programme.
Bentzen’s challenge
[4] Bentzen challenges the decision of OIO officials to require all overseas purchasers to comply with all elements of the current test under the OIA, advancing two alternative grounds of review. First, it says the OIO erred in law when it refused to recognise the validity of the consent. It says the consent is valid unless and until it is set aside by a Court of competent jurisdiction. It contends the vendor purchasing programme is a lawful means of granting consent under the OIA. Secondly, Bentzen says the OIO created and has now breached a legitimate expectation that the OIO would receive, consider and process information supplied by overseas persons for the purpose of showing compliance with the conditions of the purchasing programme, and that consent would be unconditional once all conditions were fulfilled. For both grounds it seeks declarations requiring the respondent to:
2 I refer to the applicants as Bentzen throughout.
(a)accept applications from any overseas persons “seeking a determination as to whether the requirements of condition 2 are satisfied”; and
(b)process those applications to allow a decision to be made on such applications in a timely way.
[5]The respondent opposes both grounds of review and the relief sought.
Statutory scheme controlling foreign investment
[6] Before setting out the details of what actually happened in the present case, it is necessary to briefly outline the structure and history of the OIA.
[7] The predecessor of the OIA was the Overseas Investment Act 1973 (the 1973 Act). The 1973 Act articulated a scheme regulating overseas investment in land and other assets. It was not the first legislation in this area but was the first comprehensive Act governing all forms of overseas investment.3
[8] For more than half a century, the key principles of the legislation governing overseas investment in New Zealand have been that:
(a)it is a privilege for overseas persons to own or control sensitive New Zealand assets and sensitive New Zealand land;4
(b)a consenting regime exists which overseas persons wishing to acquire sensitive land or assets must submit to;
(c)two broad criteria need to be met: firstly, that the proposed acquisition is likely to benefit New Zealand and the benefit would be substantial and identifiable (the benefits test), and secondly, that the applicants
3 The Land Settlement Promotion Act 1952 had previously regulated sale of land to overseas persons.
4 “Sensitive” land is defined in sch 1 to the current version of the Overseas Investment Act 2005 [OIA]. As at 2010, the land, the subject of the 2010 consent, was sensitive land because it was non-urban land exceeding five hectares and adjoined the foreshore. Under the current version of the OIA it is also sensitive land because it is residential.
meet specified character requirements and, depending on the type of land or assets to be acquired, other competency requirements (the investor test); and
(d)if the tests set out in the OIA are met, it is mandatory that the applications for consent will be granted, and likewise if they are not met, it is mandatory that they must be declined.
Purchasing programmes
[9] The concept of “purchasing programmes” is central to this case and requires some explanation. Neither the OIA, nor its predecessors, specifically refer to purchasing programmes, notwithstanding that consents were granted for purchasing programmes over a period of some 30 years.
[10]There were two types of purchasing programmes:
(a)a purchaser’s purchasing programme, where a single overseas person obtains consent to purchase multiple blocks of land for a particular purpose where the identity of all of the actual land to be acquired is not known at the time the consent is granted; and
(b)a vendor’s purchasing programme, where a vendor is granted consent to the sale of multiple lots in a development to overseas persons, where the identity of such persons is not known as at the date of the grant of consent.
[11]The present case involves a vendor’s purchasing programme.
[12] The evidence on behalf of the respondent was that some 36 purchasing programmes were consented to between 1983 and 2010, with an unknown but likely smaller number approved prior to 1983. Each of the purchasing programmes is likely to have related to multiple transactions.
[13] Although the concept of purchasing programmes is not found in the OIA, public guidance documents published by the Overseas Investment Commission (the predecessor to the OIO) in 1998 and 2002 referred to the availability of consent in respect of such purchasing programmes.5 The Overseas Investment Regulations 2005 even provided for fees to be paid in respect of purchasing programmes applications.6
The Bentzen application
[14] I turn now to set out the details of the purchasing programme that is at the centre of these proceedings.
[15] Bentzen developed the Ōmarino 17-lot subdivision on a coastal farming block in the Bay of Islands. Its intention was to build what was described as a “world class eco-development” on the site. It wished to be able to market the lots to overseas persons. It recognised that it would require consent under the OIA to do so. Bentzen applied for consent in 2006 and 2008. The 2006 application did not ultimately proceed to conclusion but Bentzen’s 2008 application was approved by the relevant Ministers, subject to conditions, including that an overseas purchaser would need to make a secondary application for consent.
[16] The consent decision was notified in 2010 (the 2010 consent) and Bentzen then set out to satisfy the various conditions that had been imposed on it as vendor. A significant feature of the application was that it was made by Bentzen “on behalf of unknown overseas investors” (emphasis added). The reason that the application had to be framed that way was because only overseas persons could apply under the OIA for consent and Bentzen was not an overseas person.7
5 Overseas Investment Commission “Land Purchasing Programmes” (6 October 1998); and Overseas Investment Commission “Land Purchasing Programmes” (1 February 2002).
6 Overseas Investment Regulations 2005, sch 2. The fees were initially set at $8,000 for the initial application and $6,000 for secondary applications. In 2009, those fees were increased to $17,000 and $13,000 respectively.
7 The term “overseas persons” is defined comprehensively in s 7 of the OIA.
Subsequent developments
[17] As anticipated by Bentzen, the high costs8 involved in developing the subdivision and the consequent high price of the lots meant that relatively few New Zealanders would be able to purchase them. There were some initial sales, mostly to entities associated with Bentzen. However, in 2022, some 13 years after the grant of the consent for the purchasing programme, Bentzen identified an overseas purchaser and contacted the OIO seeking confirmation that the 2010 consent could still be relied upon. The OIO advised that the consent could no longer be relied upon as it was unlawful under the OIA.
[18] That decision represented a complete about-face from the position adopted by the officials at the time of the grant of the consent and for many years prior to that.
[19] Although it appears that the officials changed their minds about the lawfulness of purchasing programmes sometime in the second half of 2012, they did not notify Bentzen of that decision. That was so notwithstanding they had identified that, of the 18 such programmes that had not already expired, or would not expire in the next five years, two were likely to result in further applications (the Bentzen purchasing programme being one).
[20] Neither did the OIO provide any opportunity to Bentzen to make submissions in respect of their change of position. Mr Pedro Morgan, an OIO official, in his affidavit acknowledged that in hindsight it would have been better to advise those with active purchasing programmes about the OIO’s change in position. That is a significant understatement.
[21] Not only was there no communication of the new position to Bentzen, there appears to have been no public announcement at all. The OIO even continued, after 2012, to communicate with Bentzen’s representatives about what was required to satisfy the conditions imposed in 2010 as part of the consent, without alerting Bentzen to their new position that the consent was unlawful.
8 Bentzen estimated that the extensive planting programme, earth works roading and utility costs alone would be in the range of $15–17 million.
The OIO’s position on the application
[22] OIO officials were in no doubt, at the time when the application was processed, that a consent for a purchasing programme application in this form was lawful. They wrote a report to the relevant Ministers (Hon Simon Power, the Associate Minister of Finance, and Hon Maurice Williamson, the Minister of LINZ) which recommended that the Ministers could determine that the mandatory statutory criteria for consent in s 16 of the OIA had been met, and that the consent to the purchasing programme should be granted subject to conditions.
[23] On 26 April 2010, Minister Power’s office requested an explanation of purchasing programmes.
[24]The advice provided by the officials said:
In terms of the application process itself, the Applicant (who is usually the current registered proprietor) submits an initial “purchasing programme” (the establishment) application in order to satisfy the “Benefits Test” under section 17 of the Act. If consent is granted, any future (and as yet unknown) overseas investor will then “only” have to individually satisfy the more personal “Investor Test” under s 16(a-d).
[25] As to the OIO’s view of the rationale for purchasing programmes, the official providing the advice said:9
In summary, this type of consent application is now commonly used and has become a commercial necessity in many cases. To date, the use of this type of consent device has proved successful in ensuring the survival of a large number of developments which have been found to produce very real overall benefits (usually “substantial and identifiable”) under the Act.
[26] After receiving the advice, Minister Power signed the consent and forwarded it to Minister Williamson. The OIO subsequently received a telephone call from Minister Williamson’s office querying whether the “unknown overseas investors” – on whose behalf the application was made – would need to make any further application. The OIO official advised that the proposed conditions of the consent required such individuals to make what was described as a “sub-application” to allow the investor tests to be assessed.
9 Emphasis added.
[27] On 29 April 2010, the OIO issued a notice of decision to Bentzen, the relevant parts of which said:
Decision
Consent has been granted to … Bentzen Joint Venture on behalf of unknown overseas investors (the Applicant), giving effect to a transaction which will result in:
·An overseas investment in sensitive land, being the Applicant’s acquisition of a freehold interest in 119.3382 hectares of land at Manawaora Road, Russell, Far North.
[28] The decision set out several conditions. Some of the conditions imposed obligations on Bentzen while others purported to impose conditions on as yet unknown purchasers. The detail of the conditions is set out fully at [34] below. Condition 2 required each overseas purchaser of a title to provide certain information relevant to whether or not the investor tests were met by that purchaser.
The dispute
[29] The legal effect of the imposition of condition 2 is a matter of dispute between the parties. The applicants say that the imposition of conditions is one means by which the relevant Ministers were able to satisfy themselves that the criteria set out in s 16 had been met. The respondent says that the power to impose conditions only arises once the Ministers are satisfied that the statutory criteria have been met. They say that Ministers have no power to dispense with the requirement that the statutory criteria be met.10
[30] The applicants say that what was granted in 2010 was a consent under the OIA. The respondent denies that it was a consent, although the respondent concedes that a number of aspects of the decision report and recommendation for the Ministers, together with the background context, suggest the decision on the application for a purchasing programme had been approached by officials acting under delegation from the Regulator on the basis that it was a decision as to whether to grant consent under the Act.
10 Relying on an observation to that effect by the Court of Appeal in Tiroa E and Te Hape B Trusts v Chief Executive of Land Information New Zealand [2012] NZCA 355, [2012] 3 NZLR 808 at [41].
[31] Relevant evidence supporting the applicants’ contention that what was granted in 2010 was a consent includes the following:
(a)the memorandum accompanying the assessment report to the Ministers (drafted by officials at LINZ) stated:
(i)“Ministerial consent is required under the ‘Designation and Delegation Letter’ of 22 April 2009 as Ministers have not delegated their power to the OIO to make decisions in respect of the establishment of purchasing programmes”;
(ii)“The Overseas Investment Office recommends Ministers grant consent to the proposed investment”; and
(iii)“In considering whether or not to grant consent, you must grant consent if satisfied that all of the applicable criteria in s 16 is [sic] met”;
(b)the recommendation in the memorandum was that the Ministers:
(i)would be satisfied that the criteria for consent in s 16 have been met; and
(ii)accordingly grant consent to the overseas investment subject to conditions;
(c)as noted above, the notice of consent also contained the words “consent has been granted”; and
(d)the decision summary issued refers to a decision under s 12(a) of the OIA and states “the overseas investment transaction has satisfied the criteria in section 16 of the Overseas Investment Act 2005.”
[32] The only conclusion possible is that the officials treated the application as one for a consent under the OIA, assessed the application as having satisfied the mandatory
criteria for the issue of a consent and recommended that the Ministers grant it on that basis, and that the Ministers accepted their advice and granted the consent. The real issue is whether the consent that was issued was unlawful or ultra vires. In order to determine that, it is necessary to examine the conditions that were imposed and the legal consequences that the applicants claim flow from them.
The conditions imposed on Bentzen
[33] A number of conditions that were imposed required Bentzen to undertake certain activities at a cost to themselves. These were activities they would not have been required to undertake had the lots in the subdivision been sold to New Zealand purchasers. They included entering into a conservation covenant and registering it against two of the titles; developing a wetland area and applying for a Queen Elizabeth II (QEII) Open Space Covenant; and assisting the Department of Conservation with its predator eradication programme at no cost for five years, including allowing the Department to use a helipad on the property as a refuelling and storage-base for pest eradication flights.
Conditions imposed on prospective purchasers
[34]Condition 2 required the following:
2.Each Overseas Purchaser of a title (Computer Register) must:
(a)provide the following information to the Overseas Investment Office in support of their application for consent:
(i)the full name, date of birth, nationality, passport number and residential address of the overseas person;
(ii)a summary of the overseas person’s visa and permit status;
(iii)a curriculum vitae or biography of the overseas person;
(iv)a description of the overseas person’s business activities;
(v)a summary of the overseas person’s assets, liabilities and net worth;
(vi)if the overseas person is not an individual, all of the details required to be provided in respect of the entity, including the relevant details of the persons who exercise control over the entity, ownership, structure and financial information;
(vii)full details of the title to be acquired, including land area and location, legal description and a historical copy of the title;
(viii)a copy of the fully executed agreement for sale and purchase for the title, including details of the price and date of settlement;
(ix)details of how the purchase of the title will be financed;
(x)a statutory declaration that the overseas person is, or if the overseas person is not an individual, that each person controlling the overseas person is, of good character and is not an individual of the kind referred to in section 7(1) of the Immigration Act 1987;
(b)otherwise comply with section 23 of the Overseas Investment Act 2005 (requirements for application for consent;
(c)meet the criteria specified in section 16(1)(a) to (d) (inclusive) of the Overseas Investment Act 2005;
(d)acquire the title within twelve months of the date that consent is given to the acquisition of that title;
(e)notify the Overseas Investment Office in writing as soon as practicable, and no later than twelve months from the date of consent, whether settlement of the acquisition of the title took place;
(f)agree to abide by all the consent conditions set out below insofar as they affect the title purchased.
[35] Special condition 3 stipulated that the purchasing programme was limited to the initial acquisition by an overseas person or persons of a title from the current registered proprietors. In other words, it did not authorise the on-sale by a purchaser to another overseas person.
[36] The information sought was information without which the decision-maker could not be satisfied that the investor test was met. As meeting the investor test was a mandatory requirement, without which consent under the OIA could not be granted, the consent granted to a purchasing programme could not be complete consent.
Although the official responding to the query from Minister Williamson as to whether a prospective purchaser would have to make a further application described the effect of condition 2 as requiring a “sub-application”, neither that term nor any cognate is used in the notice of the decision. However, special condition 2(a) implies that a prospective overseas purchaser will have to make a separate application for consent by stating that the information specified in condition 2 is required to be provided “in support of their application for consent”.
[37] The significant difference between the parties is that the applicant asserts that by imposing conditions on prospective purchasers of the nature set out above, the OIO was discharging its obligations in relation to assessing the investor test.
Analysis
[38] In support of the argument that the imposition of conditions was all that was required to ensure all of the statutory criteria were met, the applicants referred to the decision of the Court of Appeal in Tiroa E and Te Hape B Trusts v Chief Executive of Land Information New Zealand.11 However, that case does not support the proposition contended by the applicants. The issue before the Court of Appeal was whether an overseas investor who wished to acquire a large agricultural operation known as the Crafar Farms, consisting of 16 farms in all (13 of them dairy farms), comprising a total of 7,892 ha, was required, in order to meet the criteria in s 16(1)(a) of having “business experience and acumen relevant to (the) overseas investment”, to have actual experience in large-scale dairy farming.
[39] In that case, the overseas purchaser had generic business experience and acumen in the development and management of large-scale businesses including agri businesses, although not dairy farms. A condition that had been imposed by the OIO was that the applicant enter into a joint venture with Landcorp New Zealand who would manage and operate the farms for the investor.
[40] However, the difference with the present case is that this condition was not imposed so that the investor would meet the test in s 16(1)(a). It was imposed once
11 Tiroa E and Te Hape B Trusts v Chief Executive of Land Information New Zealand, above n 10.
the OIO had concluded that the investor did have the experience and acumen required by s 16(1)(a) notwithstanding that this experience and acumen did not include dairy farm operation and management.
[41]The Court of Appeal made this clear when it said:12
…we see nothing in the language [of s 16(1)(a)], taken in context, to indicate that Parliament had in mind that an investor must have any particular combination of the requisite skills and experience. As long as the investor has some business experience and acumen that can reasonably said to be relevant to the investment’s success, we consider that s 16(1)(a) will be met, even though the investor will have to supplement its experience and acumen by utilising the experience and acumen of others to ensure the investment succeeds.
[42] The concepts of “consent” and “conditions” are addressed separately in s 4(1)(b)(i) and (ii). Subpart 1 of Part 2 provides for “when consent is required and the criteria for consent” and subpart 2 of Part 2 details the “procedure for obtaining consent and imposing conditions of consent”. The respondent contends that this supports its contention that “consent” and “conditions” are different concepts and should not be conflated.
[43] The respondent’s contention that the granting of consent and the imposition of conditions are sequential steps is supported by this Court’s decision in Coromandel Watchdog of Hauraki v Minister of Finance,13 where the Court noted that by the time conditions are imposed on an overseas investment, “the substantial and identifiable likely benefit has already been assessed by reference to the permissible criteria and factors.”14 The threshold determination having been reached, the Court held it was then “available to Ministers to impose, as they did, conditions of consent under s 28.”15
[44] The applicants also argue that allowing Ministers an area of judgement about how the mandatory criteria are satisfied accords with the general administrative law principle that the assessment of whether the statutory criteria are met is a matter for the decision-maker, not the Court.
12 At [43].
13 Coromandel Watchdog of Hauraki v Minister of Finance [2020] NZHC 2345.
14 At [59].
15 At [59].
[45] In support of this argument, the applicants again referred to the observations of the Court of Appeal in Tiroa E and Te Hape B Trusts v Chief Executive of Land Information New Zealand that the OIA is drafted to allow Ministers considerable flexibility to accommodate different governmental policies in relation to foreign investment in New Zealand.16
[46] While Ministers clearly have flexibility as to the imposition of conditions to achieve Government policies in relation to foreign investment, the applicants go too far in their submission that:
… It is clear that, in granting the consent, Ministers endorsed the view that the government’s policies in relation to foreign investment in New Zealand were best served by utilising the purchasing programme concept in granting consent subject to conditions that the investor test was satisfied.
[47] There is no evidence that the Ministers considered any particular Government policies. They granted consent because the officials assured them that purchasing programmes were commonly used and that a further application would be required by any purchaser in order to confirm that the investor tests had been met.
[48] Relying on the decision of this Court in Winton Property Investments Ltd v Minister of Finance,17 the applicants submitted that although the relevant Ministers must be satisfied that all of the criteria in s 16 are met, the OIA gives the Ministers “an area of judgment [sic] in which they may assess how those criteria are satisfied.”18 They contend that the latitude granted by the Act extends to the use of conditions as a means of ensuring that unknown foreign persons will meet the mandatory criteria.
[49] That is not what Winton decided. It was not a case about purchasing programmes or unknown overseas persons. In that case, the Ministers determined that an application by an identified overseas person met the benefit test, and they imposed conditions requiring the development to proceed in accordance with a strict timeframe so as to ensure that the value of the identified benefits was maximised by the development being completed as quickly as possible.
16 Tiroa E and Te Hape B Trusts v Chief Executive of Land Information New Zealand, above n 8, at [48].
17 Winton Property Investments Ltd v Minister of Finance [2022] NZHC 638.
18 Emphasis in original.
[50] The judgement or latitude the Ministers had was in respect of the weighing of material factors or considerations, which the Court correctly concluded was the function of the Ministers, not the Court on a judicial review application.
[51] An alternative argument advanced by the appellants relies on s 25(1)(b), which provides that consent may be granted in respect of classes of transactions, instruments or persons that the relevant Minister determines. The “class” of transactions is said to be “sale of lots in the Ōmarino Development to overseas purchasers who satisfy the investor test”. The problem with this argument is that it ignores the requirement in the Act that consent may only be granted when the decision-maker is satisfied that the criteria in the Act are met. In order to do that, the decision-maker needs an application from an identified overseas applicant which sets out the information in relation to that applicant and that application.
[52] Bentzen’s argument is that instead of the 2010 consent being only the first stage of a two-stage consent, the 2010 consent is properly understood on the basis that the Ministers were satisfied that the investor test criteria were satisfied through the imposition of conditions. That argument cannot be sustained in light of the fact that the Ministers who granted the 2010 consent did so on the assurance of the officials that any overseas investor would have to make a separate application, described as a sub-application.
[53] For the reasons articulated, I do not accept the applicants’ proposition that the decision-maker could use the imposition of conditions as an alternative to making a decision as to whether the investor test had been met.
Was the consent granted to Bentzen’s purchasing programme unlawful?
[54] The respondent’s position on the lawfulness of the consent has evolved over time. Mr Morgan, in his affidavit for the respondent, described his understanding of the process that would be adopted when considering applications for consents under purchasing programmes. He said:
71.Having determined that purchase consents could no longer be granted in accordance with the process envisaged under conditions imposed on purchasing programmes, the OIO’s intention was to approach any
future applications for purchase consents under existing purchasing programmes as a regular application for consent. That is, to assess all the required criteria for consent as part of that application.
72.It was considered this assessment might require no more than the decision maker(s) satisfying themselves that there had been no material change in facts since the purchasing programme was established, and then forming the same or a similar view to that reached by that earlier decision maker(s). In other cases, the decision maker(s) might need to seek further information, or reconsider the criteria afresh. But this was not considered to be an insurmountable problem and in some cases, before the changes discussed below occurred, it may have been possible for applicants to obtain consent under a regular assessment process where they had submitted an application for a purchase consent in reliance on a purchasing programme.
[55] That view seems to accord some weight to the 2010 decision, at least in relation to the question of whether the benefits test is satisfied. It is difficult to reconcile the view expressed by Mr Morgan that, when an application for consent was filed by an overseas person, all the decision-maker had to do was satisfy themselves that there had been no material change in fact since the purchasing programme was established and then form the same view as the earlier decision-maker, with the proposition that the 2010 consent decision was ultra vires and invalid. Either the granting of consent to the purchasing programme was ultra vires and therefore of no effect or it was not. It is not tenable to argue that the consent was unlawfully granted but the decision-maker on the subsequent application could have regard to it.
[56] The initial position adopted by the respondent was not that purchasing programmes were unlawful per se, but that amendments to the legislation rendered them ineffective.
[57] On 20 January 2022, Ms Catherine Reid, a barrister, wrote to the OIO on behalf of an overseas investor interested in purchasing a lot in the Ōmarino Development. Ms Reid sought confirmation that the consent could be relied on by overseas investors. The OIO did not initially reveal that, some 10 years previously, it had decided all purchasing programmes were unlawful. Instead, it responded on 4 February 2022, advising that overseas investors could not rely on the consent due to statutory changes and the passage of time, stating:
Existing purchasing programmes can no longer be relied upon. The purchase programme regime was retired some time ago, and the Act has been amended a number of times since then also.
The current position is that section 14 requires the decision maker to have regard to all of the relevant criteria, and only grant consent if satisfied that all of the relevant criteria are met. Any application would therefore need to meet the requirements of one of the current pathways in the Act, regardless of what the purchasing programme consent provides.
[58] When Bentzen learnt of this, its representatives wrote to the OIO on 21 April 2022, seeking confirmation that the consent was still in effect and could be relied on. On 31 May 2022, the OIO replied, declining to recognise the validity of the consent. It is worth setting out the contents of its letter in some detail:
The ‘purchasing programme’ regime was a means by which [the OIO] used to give vendors and purchasers some confidence that future transactions would be granted consent. The last programme established was in June 2010. The last purchase under a purchasing programme was in 2011.
…
A purchasing programme is not a consent in its own right (for the reasons that follow, it can’t be). A binding consent cannot be granted without knowing who the purchaser is. Section 14 requires the decision maker to be satisfied that the relevant criteria are met. The decision maker must grant consent if satisfied that all of the criteria are met and must decline consent if not satisfied. Without knowing the identity of the investor, the decision maker cannot be satisfied that the criteria are met.
A purchasing programme is better thought of as ‘pre-consideration’ of certain matters by the OIO. Purchasing programmes also define a process by which the purchasers could seek consent under a streamlined process (in light of the ‘pre-consideration’ of the benefit test). In [Bentzen’s] case, this process is set out in condition 2. That consent (issued to each individual purchaser) is the consent which formally allows the investor to acquire the land. Purchasing programmes can also set out the likely conditions that will be applied to subsequent consents, and set out the conditions that will need to be met for the programme to remain in force.
The difficulty is that the Overseas Investment Act 2005 has changed substantially since 2010. In particular, the consent pathways and the consent criteria have changed, especially for residential land like that owned by [Bentzen]. The transitional provisions provide that the new rules apply to all transactions entered into after the commencement of those rules. Accordingly, a transaction entered into today must be considered under those new rules.
This negates the value of the ‘pre-consideration’ that occurred in 2010 …
[59] On 24 July 2022, Bentzen asked the OIO to reconsider its position. On 11 October 2022, Crown Law responded with the Crown’s position. This was that:
(a)The consent could not be relied upon by an overseas purchaser as authorising the acquisition of a freehold estate in one of the lots. Although the consent conditions require an overseas person to submit an application for a further consent to the acquisition of a particular lot and consent to be given to that acquisition, such a decision could not lawfully be made under the Act.
(b)An overseas person wishing to acquire a lot from Bentzen would need to submit an application which complies with the Act as it currently stands.
[60] The letter expressly stated that its position did not rest on an argument that the consent had been revoked, varied, lapsed, or rendered invalid by subsequent amendments to the Act. That contention is difficult to reconcile with some of the arguments advanced in this Court.
[61] The concession that the consent had not been revoked varied or lapsed was an appropriate one. Unlike consents for some other purchasing programmes, the 2010 consent did not contain a lapse date and there was no requirement that the conditions relating to investors be satisfied within any time limit. Bentzen did not have to sell the lots within any particular time. If the decision was ultra vires, then whether it was affected by subsequent legislative changes is irrelevant to its lawfulness.
Analysis
[62] I have reached the conclusion that the 2010 decision was ultra vires because the Act did not authorise the decision-makers to make a decision that the application should be granted notwithstanding that they were only in a position to assess it against some of the mandatory statutory requirements. The imposition of conditions was not a lawful substitute for an analysis by the decision-makers as to whether an application met all of the statutory criteria, including the investor test.
The principle of validity
[63] Although I have found that the 2010 consent was unlawful under the 2005 Act at the time, it is necessary to consider the applicants’ argument that the OIO must nevertheless uphold it under the principle of validity.
[64] Bentzen relies on the well-established principle that applies to administrative action, the principle of validity. That is, an administrative decision, once communicated as a final decision to the parties, must be treated as valid unless and until set aside by a court of competent jurisdiction. This principle upholds legal certainty under the rule of law.19 As Somers J explained in Hill v Wellington Transport District Licensing Authority:20
It is for the Courts to say. This exemplifies a general proposition – there is no method of establishing the invalidity of a decision or order save by the determination of a Court of competent jurisdiction. It may be valid it may be invalid. The averred defect or error may be patent or obvious or it may be latent or concealed. But until declared invalid by a Court of competent jurisdiction it is to be treated as valid. In this area logic corresponds with the requirements of society. The orderly conduct of affairs would be impossible on any other footing.
[65] The principle was also articulated by McGrath J in Goulding v Chief Executive, Ministry of Fisheries in the following way:21
… [O]nce a certain point in the process has been reached the alteration of a decision which has been taken, especially if a benefit that otherwise would have been gained by an interested party is thereby lost, is capable of producing financial loss, unfairness and great inconvenience to the public. Citizens necessarily rely on administrative decisions in their daily lives. While statutory rights of appeal or review must be tolerated, the risk of further uncertainty from open-ended administrative reconsideration need not be and to allow it would lead to loss of public confidence in the integrity and competence of public administration. While from an administrator’s viewpoint a better decision may still be made, at some point the countervailing advantages of treating the decision already made as conclusive must assume greater weight.
[66] Bentzen says that it was not open for the OIO to conclude that the consent was unlawful and could not be upheld on the basis of this principle. It is for a court of
19 R v Smith [2003] 3 NZLR 617 (CA) at [46].
20 Hill v Wellington Transport District Licensing Authority [1984] 2 NZLR 314 (CA) at 324.
21 Goulding v Chief Executive, Ministry of Fisheries [2004] 3 NZLR 173 (CA) at [41].
competent jurisdiction or Parliament, and neither have addressed the issue. The respondent accepts the existence of this principle but points to one potential exception to the presumption, where the decision-maker has made a “flagrantly invalid” decision, that is, one that is manifestly a legal nullity where there was a usurpation or total absence of lawful authority.22
[67] In New Zealand Employers Federations Inc v National Union of Public Employees, the Registrar of Unions registered several unions under the Employment Relations Act 2000 before the Act came into force. The Court of Appeal held that the power as invoked “simply did not exist” and the process adopted was “fatally flawed”.23 Although the Courts have been slow to find that a decision was flagrantly invalid, it has been suggested more recently that a decision based on a reviewable error which was “readily apparent” would not attract the presumption of validity.24
[68] Given that the OIO had developed the practice of granting consents through purchasing programmes over some 30 years and had granted a large number of such consents, and considering that regulations had even been passed setting the fees required for processing such applications, it cannot be seriously asserted that the unlawfulness of doing so was “readily apparent”. The OIO clearly believed at the relevant time, and for many years previously, that it could approach the s 16 criteria in the segmented manner upon which the 2010 consent was granted.
The Court’s discretion
[69] The discretionary nature of judicial review means that even where a court acknowledges a defective decision, it will not always be set aside.25 Working practical justice may require declaring retrospective invalidity, prospective invalidity, invalidity for some purposes only, partial invalidity or validity despite the vitiating error.26 In
22 Murray v Whakatane District Council [1999] 3 NZLR 276 (HC) at 320.
23 New Zealand Employers Federation Inc v National Union of Public Employees [2002] 2 NZLR 54 (CA) at [50]. Now, per s 43(1)(e) of the Legislation Act 2019, a statutory power may be exercised before the statute comes into force in order to confer or impose a legal status.
24 Target Painters & Decorators Ltd v Fehl [2019] NZHC 3237 at [26].
25 Martin v Ryan [1990] 2 NZLR 209 (HC) at 238–241; and Murray v Whakatane District Council, above n 22, at 320.
26 For prospective-only remedies in judicial review, see R v Governor of Brockhill Prison, ex p Evans (No 2) [1999] QB 1043 (CA) at 1058; and R v Governor of Brockhill Prison, ex p Evans (No 2) [2001] 2 AC 19 (HL) at 26. See also Lord Woolf “The Additional Responsibilities of the Judiciary
exercising the discretion to invalidate, the court may consider the statutory and factual context, the seriousness of the error and third-party interests. In terms of the statutory and factual context, the “nature and importance of the requirement that has not been observed” should be examined, alongside the “the nature of and reason for the failure to observe it” and “the effects of the failure to observe it”.27
[70] The High Court has previously held that the distinction between mandatory and directory provisions is “no longer seen as crucial on questions of validity”.28 As to the interests of third parties, because of the drastic consequences of retrospective invalidity, courts must ensure that “serious injustice” is not done to third parties having particular regard to their knowledge of invalidity.29 In Martin v Ryan, Fisher J noted that “powerful reasons” would be needed to justify a fragmented approach to validation in the face of coherence and predictability.30
[71] The respondent submits that Parliament, in effect, has legislated to provide that there is no power to uphold the consent under the earlier versions of the Act, pursuant to the conditions of a purchasing programme. It submits that one would expect Parliament to speak clearly if it intended contemporary decision-makers to decide applications for consent in accordance with such programmes.
[72] The respondent also argues that the transitional provisions in the current Act have overtaken events so that consent applications for transactions that had not been entered into prior to the 2018 Amendment Act have lapsed and applications must now be determined in accordance with the current provisions. As such, carrying out what the programme purports to undertake would require further unlawful action. Rather than rebutting the application of the principle of validity, I take this submission to go to the appropriate remedy.
in the new Millennium” in BS Markesines (ed) The Clifford Chance Millennium Lectures: The Coming Together of the Common Law and the Civil Law (Hart, Oxford, 2000) at 142–148, discussing prospective declarations as an aid to expansion of judicial review. On prospective overruling, see PA Joseph “Constitutional law” [2006] NZ Law Review 123 at 138–149.
27 Sestan v Auckland District Health Board (2006) 26 FRNZ 784 (HC) at [43] per Asher J.
28 Evalast Engines Ltd (in rec and in liq) v Police [1993] NZAR 26 (HC) at 30 per Smellie J.
29 DFC Financial Services Ltd v Abel [1991] 2 NZLR 619 (HC) at 630–631 per Fisher J.
30 Martin v Ryan, above n 25, at 241.
[73] The principle of validity required the OIO to consider Bentzen’s secondary application from its overseas investor in terms of the original consent. It did not do so because it formed the view that the vendor purchasing programme was unlawful under the Act. The principle of validity did not entitle it to do that. As the Court of Appeal said in Goulding v Chief Executive, Ministry of Fisheries, “[a] final decision which is made in the exercise of a power which affects legal rights, including those arising from the grant of a licence, is irrevocable.”31
[74] The respondent does not deny the effect of settled administrative law principles on the decision to grant consent to the establishment of the purchasing programme but qualifies that concession by saying that such a decision is valid “unless and until set aside” (unless it has lapsed in accordance with the Act’s transitional provisions).
[75] The respondent advances an argument that Parliament has legislated to provide there is no power to grant consent under earlier versions of the Act pursuant to conditions of a purchasing programme. The respondent says this is so because Parliament has not expressly made provision in transitional provisions in the 2018 amendments for preservation of purchasing programmes consented to under earlier versions of the Act.
[76] The respondent submits that one would expect Parliament to “speak clearly” if it intended to preserve the powers of contemporary decision-makers to make decisions on purchasing programme consents granted under earlier versions of the Act.
[77] The respondent claims that even if the 2010 consent was interpreted as enabling the decision-maker to assess a current application against the criteria in place as at 2010, the transitional provisions associated with the 2018 Amendment Act have overtaken events.
Analysis
[78] It is unsurprising that the 2018 amendments did not refer expressly to purchasing programmes. Such programmes had not been created by statute and
31 Goulding v Chief Executive, Ministry of Fisheries, above n 21, at [43].
therefore there was nothing in the Act to repeal. Although officials had decided that purchasing programmes were not available some six years previously, there is no indication that they communicated that view to Parliament (or indeed anyone outside the OIO). The officials seem to have proceeded on the assumption that if they did not tell anyone about their change of view about purchasing programmes, and quietly stopped accepting such applications, the problem would just go away.
[79] For the reasons set out above, the granting of the 2010 consent, until it is set aside by a Court, or specifically revoked by statute, must be treated as conferring rights on Bentzen and the prospective applicants in accordance with its terms.
[80] Parliament could have legislated to take away those rights, but needed to do so by clear words. At the time of the 2018 amendments, s 17(1) of the Interpretation Act 1999 applied. This section has since been replaced by s 32 of the Legislation Act 2019, but s 32 is materially the same.
[81] Section 17(1) contained a general savings provisions preserving existing rights on the repeal of legislation. It said:
17 Effect of repeal generally
(1)The repeal of an enactment does not affect—
(a)the validity, invalidity, effect, or consequences of anything done or suffered:
(b)an existing right, interest, title, immunity or duty:
(c)an existing status or capacity:
(d)an amendment made by the enactment to another enactment:
(e)the previous operation of the enactment or anything done or suffered under it.
[82] The respondent concedes that Parliament had not expressly made provision for existing purchasing programmes in any transitional provisions relating to the 2018 amendments. In the absence of any statutory indication that consents granted to such programmes would lapse as a result of the 2018 amendments, s 17 of the Interpretation Act means that relevant existing rights, interests, status or capacity continue to apply. The term “right” has been held for the purposes of s 20(e)(iii) of the Interpretation Act
1924 (the predecessor to s 17 of the Interpretation Act 1999) to include contingent rights.32
[83] I therefore do not accept the respondent’s argument that, by not specifically providing for the continuation of existing purchasing programmes in the 2018 amendments, any rights parties might have accrued under such programmes have lapsed or been otherwise extinguished.
[84] Until the 2010 consent is set aside, one of the contingent rights conferred on a prospective overseas purchaser is the right to have their “sub-application” considered in accordance with the terms of the 2010 consent, such consideration being in accordance with the criteria that existed as at 2010.
[85] A consequence of this conclusion is that unless this Court quashes the 2010 consent, following such a procedure could not be said to be requiring the respondent to act unlawfully in the sense claimed by the respondent.
Relief
[86] Having concluded that purchasing programmes were ultra vires the Act, I now turn to discuss what the consequences of that finding should be. In terms of the factors identified in Sestan v Auckland District Health Board above, I accept that the requirement that the decision-maker, in respect of an application for consent under the OIA, consider all of the relevant criteria, is an important one.
[87] In this case, the nature of, and reason for, the failure to observe the requirement are also significant. This was not a one-off error by officials in recommending that consent to a purchasing programme be granted in this way. The officials were consistently applying a settled and longstanding practice that had been followed for decades. While the OIA did not specifically refer to purchasing programmes, the legislature clearly knew about them and could be said to have endorsed them by enacting regulations prescribing fees for them.
32 Official Assignee v NZI Life Superannuation Nominees Ltd [1995] 1 NZLR 684 (HC) at 695.
[88] As discussed in more detail below, the effects of the failure to observe the requirement are also important.
[89] The respondent’s case is that the officials were entitled to reassess the concept of purchasing programmes and to decide, contrary to the position they had adopted over some 30 years, that, without inviting Parliament to address the situation or even consulting with the parties who had been granted consent for the establishment of purchasing programmes, they could treat such programmes as being unlawful.
[90] This approach contradicts the fundamental administrative law position that decision-makers cannot set aside final decisions they have made because they have thought the better of those decisions. The policy reasons supporting this principle are set out at [65] above.
[91] The possibility of relief being refused notwithstanding that an invalidity has been made out has been long-recognised. The English Court of Appeal in R v Panel on the Take-Overs and Mergers, ex p Datafin plc said:33
… public law decisions … however wrong they may be, however lacking in jurisdiction they may be, they subsist and remain fully effective unless and until they are set aside by a court of competent jurisdiction. Furthermore, the court has an ultimate discretion whether to set them aside and may refuse to do so in the public interest, notwithstanding that it holds and declares the decision to have been made ultra vires …
[92] The learned author of Judicial Review: A New Zealand Perspective expresses the view that prejudice to public administration by itself has little weight in relation to the exercise of the Court’s discretion, but acknowledges that the situation is different if it is considered in combination with other factors, particularly prejudice to third parties.34
[93]In Air Nelson Ltd v Minister of Transport, the Court of Appeal said:35
[59] Public law remedies are discretionary. In considering whether to exercise its discretion not to quash an unlawful decision or grant another
33 R v Panel on the Take-Overs and Mergers, ex p Datafin plc [1987] QB 815 (CA) at 840.
34 Graham Taylor Judicial Review: A New Zealand Perspective (4th ed, LexisNexis, Wellington, 2018) at [5.40].
35 Air Nelson Ltd v Minister of Transport [2008] NZCA 26, [2008] NZAR 139.
remedy, the court can take into account the needs of good administration, any delay or other disentitling conduct of the claimant, the effect on third parties, the commercial community or industry, and the utility of granting a remedy.
[94] The Court went on to note that there must be what it described as “extremely strong reasons to decline to grant relief”.36
[95] The Court of Appeal in Rees v Firth acknowledged that a more nuanced approach than that taken in the Air Nelson Ltd case could be required.37 The Court said “[i]n any event, given the discretionary nature of public law remedies, it may be that a more nuanced approach is necessary in the generality of cases.”38
[96] This is a case where the prejudice to public administration is a matter of significant concern. The case is unusual in that it is effectively the respondent decision-maker that is inviting the Court to conclude that its own decision in relation to the 2010 consent was unlawful. As noted above, the consequences of such a finding go further than merely that decision. In effect, the respondent is contending that all decisions made under purchasing programmes were unlawful as, at the time of the decision, the decision-maker did not have sufficient information to be able to conclude that all the statutory criteria were met.
[97] The actual number of transactions potentially affected by a finding that the purchasing programme regime was invalid and ultra vires ab initio is unknown. As noted at [25] above, the respondent’s own evidence was that type of consent had been used in respect of “a large number of developments”.
[98] The concept of purchasing programmes had been developed by officials in the respondent’s office and implemented for some 30 years. The Court has no information about the potential effect of a finding of ultra vires on third parties, but potentially, the effect is significant.
[99] Just focusing on the applicants, it is clear that in reliance on the respondent’s then position that purchasing programmes were lawful, it has incurred expenses
36 At [60].
37 Rees v Firth [2011] NZCA 668, [2012] 1 NZLR 408 at [48].
38 At [48].
(including the payment of fees charged for the processing of a purchasing programme), and agreed to a number of other concessions39 that it would not have been obliged to agree to if they had not been insisted upon by the respondent as a condition of obtaining consent.
[100] One of the factors that the officials, in their report to the Ministers in respect of the 2010 consent, identified as justifying the granting of the consent was the effect on New Zealand’s reputation overseas. It is difficult to see how a decision which had the effect of invalidating a large number of consents given over an extended period of time could be seen as enhancing New Zealand’s reputation, at least in relation to consistency and fairness in the application of the statutory system regulating overseas investment.
[101]I also have regard to the manner in which the challenged decision was made.
[102] At the point, sometime in the second half of 2012, when the officials decided that purchasing programmes were ultra vires, they made no attempt to inform the applicants or any other parties potentially affected by a decision. This was notwithstanding their knowledge that the applicant was continuing to work to satisfy the various conditions that had been imposed on it, and that the purchasing programme was still current and had the potential to generate sub-applications by overseas investors. Such behaviour strikes at the heart of the confidence that the public should be able to have in administrative decision-making.
[103] Accordingly, although I have found that purchasing programmes were ultra vires the legislation, there are extremely strong reasons which justify me declining the respondent’s invitation to grant relief by way of quashing or setting aside the 2010 consent. The consequence of this is that the presumption of validity applies and the 2010 consent decision is presumed to have been validly made.
39 Summarised at [33] above.
Second (alternative) ground of review – legitimate expectation
[104] As a result of my findings on the first cause of action, it is unnecessary to consider the alternative. However, in case the matter goes further, I set out my view.
[105] Bentzen’s second and alternative ground of review is that the OIO breached its legitimate expectation that the OIO would receive, consider and process information supplied by overseas persons, evidencing compliance with condition 2, to purchase lots in the Ōmarino Development; and consent to purchase the lots would be unconditional once all conditions set out in the consent were fulfilled, including those in relation to purchases by overseas persons.
[106] It says this legitimate expectation was created by OIO’s public guidance about purchasing programmes and its engagement with Bentzen in relation to the 2006 and 2009 applications and the process leading up to the granting of consent in 2010. It was subsequently affirmed and reinforced by consent being issued, communication of the consent’s terms to Bentzen and the OIO’s monitoring and confirmation of compliance with the consent conditions. Bentzen says it relied on this expectation when it undertook and carried out the process of applying for the consent, carried out the consent conditions and satisfied the OIO it was complying with the conditions, and marketed the lots to overseas purchasers.
[107] The respondent says that a legitimate expectation cannot be invoked to undermine parliamentary sovereignty and compel public authorities to act contrary to law. Further, the relief sought in this case is substantive in nature and this is not the kind of “truly exceptional” case which justifies or requires the Court to grant relief. As a result, the application for review should be declined.
[108] This ground of review relies on the Court recognising a substantive legitimate expectation. While the ground is recognised in England, that is not the case in New Zealand. The High Court recently described the position in the following way:40
40 Back Country Helicopters Ltd v Minister of Conservation [2013] NZHC 982, [2013] NZAR 1474 at [184].
… Such recent Court of Appeal authority as there is is hostile to substantive legitimate expectation, although it does not shut the gate altogether.41 The prevailing trend is I think against its recognition, expect perhaps in a truly exceptional case. But in such a case another more conventional ground of review is likely to be available. It is tempting to think that substantive legitimate expectation adds little colour to the palette of review grounds.
[109] When rejecting substantive legitimate expectation in Australia, Brennan J said the following in Attorney-General (NSW) v Quin:42
… The question can be put quite starkly: when an administrative power is conferred by the legislature on the executive and its lawful exercise is apt to disappoint the expectations of the individual, what is the jurisdiction of the courts to protect that individual’s legitimate expectations against adverse exercises of the power? I have no doubt that the answer is: none. Judicial review provides no remedies to protect interests, falling short of enforceable rights, which are apt to be affected by the lawful exercise of executive or administrative power. If it were otherwise, the courts would be asserting a jurisdiction, in protection of individual interests, to override the law by which a power to affect those interests is conferred on the repository.
[110] The type of legitimate expectation relied on by Bentzen here is the breach of a specific promise. The Court of Appeal has identified three steps that are generally required to establish a legitimate expectation: to establish the nature of the commitment made by the public authority; to determine whether the plaintiff’s reliance on it is legitimate; and to decide what remedy, if any, should be granted.43
[111] The applicants rely on Oosterveen v Ministry of Business, Innovation and Employment as providing a framework for considering a claim of substantive legitimate expectation.44 In that case, Collins J said:45
[50] If the doctrine were to gain traction in New Zealand it might found a claim for judicial review where:
(1)a public authority has given a clear and unambiguous undertaking;
41 GXL Royalties Ltd v Minister of Energy [2010] NZCA 185, [2010] NZAR 518 at [45]; but see Burt v Governor-General [1992] 3 NZLR 672 (CA) at 679 (categories of legitimate expectation “not closed”).
42 Attorney-General (NSW) v Quin (1990) 93 ALR 1 at 24.
43 Comptroller of Customs v Terminals (NZ) Ltd [2012] NZCA 598, [2014] 2 NZLR 137 at [125]– [127].
44 Oosterveen v Ministry of Business, Innovation and Employment [2014] NZHC 1709, [2014] NZAR 1091 at [50].
45 Citations omitted.
(2)the undertaking was reasonably understood to mean what the applicant claims;
(3)the decision-maker knew of the representation and chose to act contrary to it;
(4)the applicant has suffered some detriment by relying on the representation; and
(5)the decision-maker’s conduct cannot be objectively justified as being in the public interest and a proportionate response to the circumstances of the case.
[112] Bentzen submits that all the elements of Oosterveen are met in the present case. The respondent admits that some elements are likely made out, but that others are more complex to establish and require more evidence.
Clear and unambiguous undertaking
[113] The clear and unambiguous undertaking Bentzen submits was made by the OIO was:
(a)the OIO would receive, consider and process information supplied by overseas persons for the purpose of showing compliance with the conditions of the consent given to Bentzen, on behalf of unknown overseas purchasers, to purchase lots in the Ōmarino Development; and
(b)consent to purchase lots in the Ōmarino Development would be unconditional once all conditions set out in the consent given to Bentzen, on behalf of the unknown overseas purchasers, were fulfilled, including special condition 2.
[114] It says this undertaking was conveyed to Bentzen when it granted the application for consent in 2010. It says this is also consistent with the way purchasing programmes were described in the public guidance as to purchasing programmes on the OIO’s website. This guidance was taken down once the OIO decided that purchasing programmes were unlawful under the Act. The respondent does not dispute that this criterion is likely met. I proceed on the basis that it is. The OIO issued Bentzen with a decision notice and summary that stated “[c]onsent has been
granted to Bentzen Farm Joint Venture on behalf of unknown overseas investors” subject to the conditions. The Ministers had signed off on that document.
Is the expectation reasonably understood to be what Bentzen claims?
[115] Bentzen submits that the respondent’s conduct, as described above, can only be understood to mean that overseas investors wishing to purchase a lot in the Ōmarino Development could do so in reliance on the consent by making an application to the OIO to satisfy condition 2. It says that this was also clearly illustrated by the fact that this was the respondent’s understanding at the time. Bentzen relies on OIO officials’ response to the query from Minister Power’s office, discussed above. That advice stated that “[i]f consent is granted, any future … overseas investor will then ‘only’ have to individually satisfy the more personal ‘Investor Test’ under section 16(a–d).”
[116] The respondent contests the nature of the representation. It says the representation was that overseas persons could purchase titles in the development if they submitted an application for consent, and if that application (considered in accordance with the conditions) was granted. The second application therefore required a decision, although the conditions purported otherwise.
[117] The difference between the claimed meanings is slight. Bentzen’s submission here is the same as what it claims in the error of law ground. That is, it was granted full consent in 2010, and on this basis, all the Regulator had to do was check the overseas investor’s secondary application satisfied the criteria – a checklist approach.
[118] The reasonableness requirement for this limb would invoke the standard of the ordinary reasonable person. As the Court in Oosterveen did not find that the applicant there had demonstrated that Immigration New Zealand had made a clear and unambiguous undertaking, the nature of the second ground was not analysed. A reasonable person, upon reading the Minister’s decision document alone, could favour Bentzen’s interpretation. But, for the reasons discussed above, the OIO did not issue a complete consent in its 2010 decision, but rather the first of two linked decisions, with a subsequent decision required on the “sub-application”.
Did the OIO know of the representation but chose to act contrary to it?
[119] The parties do not dispute this element and it would likely be satisfied. It is borne out in the OIO’s 2022 correspondence to Bentzen.
Did Bentzen suffer detriment by relying on the representation?
[120] This aspect is clear. As a result of the OIO’s decision, Bentzen cannot sell lots to overseas investors on the basis of the vendor purchasing programme. It has incurred the cost of proceeding with that application and meeting its conditions on the understanding that, by doing so, it would be able to sell the land to overseas investors by means of a purchasing programme. It says that it would have been unlikely to have taken steps towards satisfying those conditions had it not been for the representation. It says this is especially true in relation to the wetland area as it would not have applied for the QEII Open Space Covenant. It had no obligation to do this but for the conditions of the consent.
[121] The respondent admits that Bentzen has taken some steps in reliance on the representation. However, it says the connection between the undertaking and some of the steps in the consenting process is more complex. It says that some of the development steps were of benefit to Bentzen anyway. Moreover, as Bentzen had not identified overseas purchasers at the time of the 2008 application, the likelihood of them purchasing titles was uncertain. It says further that reliance on the representation must be reasonable.46 The reasonableness of relying on the consent is called into some doubt, as Bentzen waited 13 years before inquiring about the consent.
[122] Assuming that there should be a reasonableness requirement in relation to reliance, the gap between the grant of the consent and the application by the overseas investor could not be said to be unreasonable given that the consent did not have any time limits, compliance with the conditions imposed on Bentzen would inevitably take some time, and the OIO had not communicated its view that the consent could not be relied on any longer.
46 Although admitting that this is not part of the Oosterveen test.
Can the decision-maker’s conduct be objectively justified as being in the public interest and a proportionate response to the circumstances of the case?
[123] Whether the decision-maker’s conduct is objectively justified as being in the public interest and proportionate is a more complex issue. Bentzen submits that the rule of law prioritises certainty over legal correctness in certain situations. It says that while a decision-maker exceeding their authority is relevant to a “legitimate” inquiry under “legitimate expectation” grounds of review, the more appropriate test is whether the departure was in the public interest and proportionate. It says the decision by the OIO was not proportionate because the consent was not subject to a power of revocation, the revocation was made on the basis of its own policy change, the principle of validity operates, it did not give Bentzen notice when it changed its view, and there is no prejudice to the public interest in that applications like this have been processed before.
[124] In response, the respondent submits that a public body cannot be forced, on the basis of a representation, to act contrary to the law, even in the interests of certainty.
[125] The issue of whether the effect of the 2018 amendments would require the respondent to act contrary to the law in fulfilling the claimed expectation has been addressed. In relation to the first cause of action, I have found that the 2018 amendments did not clearly extinguish the contingent rights conferred by the 2010 decision. On that basis, enforcement of the claimed expectation would not involve the OIO acting unlawfully. I accept the factors put forward by Bentzen as supporting a conclusion that the response was not proportionate.
[126] However, all of this is academic. The doctrine of substantive legitimate expectation is not the law in New Zealand. This is not a case that would justify its adoption. The application of such a doctrine is not necessary for the applicants to succeed given the result of its first cause of action, which is founded on conventional administrative law principles.
Declarations
[127] The applicant seeks two declarations. The second declaration is, in substance, an alternative way of expressing the outcome achieved by the first proposed declaration. Because I have declined to set aside or quash the 2010 consent, it remains effective according to its terms. All that is required to confirm that is a declaration in accordance with the first declaration proposed. Accordingly, I declare:
An overseas investor may purchase a lot in the Ōmarino Development from Bentzen in reliance on the 2010 consent if they are able to satisfy the requirements of special condition 2 (which incorporate the investor tests in force at the date the consent was granted).
Costs
[128] I invite the parties to settle costs themselves. If that is not possible, the applicant is to file a memorandum of no greater than five pages in length within 14 days of this decision, and the respondent will file a similar memorandum in reply within 14 days. I will then deal with the matter on the papers.
Churchman J
Solicitors:
Harmos Horton Lusk, Auckland for Applicants Crown Law, Wellington for Respondent
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