New Zealand Democratic Party for Social Credit Incorporated v Minister for Land Information
[2020] NZHC 2816
•28 October 2020
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2019-485-563
[2020] NZHC 2816
UNDER the Judicial Review Procedure Act 2016 and Part 30 of the High Court Rules 2016 BETWEEN
THE NEW ZEALAND DEMOCRATIC PARTY FOR SOCIAL CREDIT INCORPORATED
Applicant
AND
THE MINISTER FOR LAND INFORMATION
First Respondent
THE MINISTER OF FINANCE
Second RespondentWESTLAND DAIRY COMPANY LIMITED
Third Respondent
HONG KONG JINGANG TRADE HOLDING COMPANY LIMITED
Fourth Respondent
Hearing: 14-15 September 2020 Counsel:
R A Kirkness and S W H Fletcher for applicant
N C Anderson and S J Jensen for first and second respondents
S V McKechnie, J C Dickson and H S Cunningham for third and fourth respondentsJudgment:
28 October 2020
RESERVED JUDGMENT OF DOBSON J
THE NEW ZEALAND DEMOCRATIC PARTY FOR SOCIAL CREDIT INC v THE MINISTER FOR LAND INFORMATION [2020] NZHC 2816 [28 October 2020]
Contents
Introduction [1]
The respondents [4]
The circumstances of the transaction [7]
The application and its approval [13]
Grounds for review [27]
The statutory definitions [30]
The nature of the land use [51]
First ground: error of law in interpretation adopted of “sensitive land” [59]
Third ground: decision ultra vires because it was non-delegable [62]
Second ground: inadequate assessment of land type [64]
Fourth ground: decision made on insufficient information [72]
Result [82]
Costs [84]
Introduction
[1] The applicant (Social Credit) is a minor New Zealand political party, the policies of which include opposition to overseas ownership of any significant New Zealand assets. Social Credit has brought this application for judicial review to challenge the lawfulness of the decision by a delegated decision-maker in the Overseas Investment Office (the OIO) to grant approval to an overseas purchaser for the acquisition of all the shares in a former co-operative, Westland Dairy Company Limited (Westland). The statement of claim sought a declaration that the decision was unlawful and invalid, and an order that it be quashed.1
[2] Social Credit contends that the decision-maker adopted the wrong test as to the character of two sites owned by Westland – one in Hokitika and one in Rolleston, near Christchurch – that are used for processing, manufacturing and warehousing of processed products. Under the Overseas Investment Act 2005 (the Act), the acquisition of sensitive land by overseas persons must pass the so-called “benefit to New Zealand” test in ss 16A and 17 of the Act. If the sensitive land is farm land, the benefit to New Zealand must be substantial and identifiable. The Hokitika and
1 In submissions, relief was proposed on somewhat more refined terms.
Rolleston sites were treated as not comprising sensitive land, for the purposes of the assessment of the purchase transaction.
[3] In essence, Social Credit argues that the sites, both of which are in urban areas and are zoned for planning purposes as commercial/industrial, should be classified as farm land for the purposes of the Act because the receipt, processing and subsequent manufacture of milk products constitute agricultural processes.
The respondents
[4] The first and second respondents (the Ministers) have statutory responsibility for decisions made under the Act, subject to delegating some categories of decision on certain statutory criteria. The decision relevant to this proceeding was made by a senior officer in the OIO, as delegate of the Ministers. The OIO receives applications for consent to transactions regulated by the Act and provides the personnel to assess applications and make recommendations on them.
[5] Westland, the third respondent, operated as a co-operative dairy company from 1937 until the transaction to which this proceeding relates, which resulted in it ceasing to operate as a co-operative from 1 August 2019. Westland currently takes milk from approximately 429 farmers who are unusually widely spread from Karamea in the north to Haast in the south of the West Coast, as well as some suppliers in the Canterbury region. Westland employs 643 full-time staff, 15 part-time staff and five casuals, and is said to be the largest private employer on the West Coast and the second largest overall after only the District Health Board.
[6] The fourth respondent (Jingang) has acquired Westland. Jingang is a company incorporated in Hong Kong. It is a wholly owned subsidiary of Yili Group, which is described as a market leading dairy products producer in China and globally. It markets over 1,000 brands and owns more than 130 branches and subsidiaries worldwide. In its 2018 financial year, Yili Group generated approximately NZ$17 billion in gross revenue, with approximately NZ$1.5 billion in net profit.
The circumstances of the transaction
[7] The prospect of the sale of Westland’s business to Chinese interests provoked a sharp division of views among supplier shareholders. A small sample of those who supported the transaction completed affidavits for Westland, explaining the reasons for what they saw as the necessity for completing the transaction and describing the very substantial prejudice they foresaw if the outcome of Social Credit’s proceeding was a requirement for the transaction to be undone.2
[8] Social Credit filed affidavits from a milk supplier who was disappointed at the decision to sell and voted against the scheme, and a former contractor to Westland who also provided reasons for opposing the transaction.3
[9] For a number of years up to the point where the board of Westland considered the options available to it, the company had been unable to pay its suppliers a competitive price for their milk. Given the extraordinarily wide spread of the location of the dairy farms supplying it, it appears that collection costs would have been materially higher than for Fonterra. If Westland went out of business, many of the suppliers in more outlying areas were likely to have no market for their milk as Fonterra would decline to take them on. The suppliers nearer to a sufficient base of other farms supplying Fonterra to be attractive, or at least acceptable, to it as additional suppliers were having their loyalty to Westland tested, given the disparity between what Westland was paying for their milk and what they could receive from Fonterra.
[10] After an assessment of alternatives, the board of Westland recommended a sale to Jingang on terms that, under a scheme of arrangement, Jingang would assume liability for all of Westland’s existing debts and pay out to the shareholders what were seen as meaningful sums for their shares.4 The shareholders who completed affidavits in opposition to the judicial review both explained that the proceeds of sale were used to pay down debt and to carry out deferred maintenance on their properties. It is a
2 Affidavits of Chris Volckman and Paul Stevenson.
3 Affidavits of Elizabeth Dennehy and Rachel Teen.
4 The offer valued the shares at a higher price than an independent valuation procured to advise shareholders.
reasonable inference that a significant proportion of shareholders would have applied the proceeds in similar ways.
[11] An important condition of the sale was that Jingang committed to taking milk from all existing suppliers for a period of 10 years, and to pay them the price that matched what Fonterra pays its suppliers. Those commitments were seen as important because, in their absence, there was a realistic prospect that dairy farms in more isolated areas would no longer have a market for their milk.
[12] Jingang’s acquisition of Westland was structured as the acquisition of 100 per cent of its shares by means of a scheme of arrangement under pt 15 of the Companies Act 1993. The implementation of the scheme was conditional on approval of Westland’s shareholders and this Court making final orders under s 236 of the Companies Act approving the scheme. Relevantly, the consent of the OIO to the acquisition by Jingang was also required.
The application and its approval
[13] Sections 30 and 32 of the Act provide that a Minister may delegate to the regulator (the chief executive of the relevant department) or any other person the Minister’s powers or functions under the Act, with some exceptions. Under s 33, the delegation must be in writing and contained in a ministerial directive letter.
[14] A letter dated 17 October 2018 from the Ministers of Finance, Fisheries and Land Information to the acting chief executive of LINZ delegated a number of their powers and functions under the Act to the chief executive of LINZ. The letter stated that the power to make decisions on applications for consent on sensitive land that was both subject to the benefit to New Zealand test and where the “substantial and identifiable” criteria under s 16A(1)(b) applied, was not delegable, except in defined circumstances that do not apply in this case.
[15] However, in applications where the decision is delegable, there is still a discretion for the Ministers to “call in” the application so that the decision is made by
them, for example if any particular concern is perceived as arising from the acquisition of the assets in question.5
[16] Mr Andrew Petersen, a solicitor with Bell Gully, contacted the OIO on 10 December 2018, requesting a “vendor pre-application meeting”, on behalf of Westland. A focus of Mr Petersen’s initial contact was the way in which the OIO would deal with a number of residential sites in the vicinity of Westland’s processing plant in Hokitika, and one residential property adjoining the Rolleston site. A then recent amendment to the Act had required that residential properties be treated as sensitive land for the purposes of an OIO application,6 and Mr Petersen was interested to understand the approach the OIO would take to the numerous residential sites that were included in Westland’s assets. The sites had been acquired over a period of time, either to provide for expansion of the Hokitika processing plant, or as a buffer zone between the site and other residential areas.
[17] Mr Petersen produced a number of versions of a schedule of all the land holdings owned by Westland that would pass into overseas ownership by the transaction. Those schedules included the processing plants in Hokitika and Rolleston but, relative to the focus on residential sites, endorsed them in both cases as “N/A – OIO consent not required”. The use of the Hokitika plant was described as “main Westland production/processing site”, and the Rolleston plant as “main Rolleston production/warehouse facility and adjoining land”.7
[18] In late February 2019, Mr Petersen provided a sensitive land certificate, which acknowledged Westland’s ownership of the residential sites that were sensitive for the purposes of the application. In a footnote to that certificate, it stated that the OIO did not require the certificate to address land unless it is relevant land,8 as that expression was defined in the Act. No reference was made to the sites of the processing plants.
5 Section 33(5) of the Act provides that a delegation does not prevent the delegator from exercising the power or function that has been delegated.
6 The Overseas Investment Amendment Act 2018 came into force in October 2018. Subject to certain exemptions, it brought residential land into the definition of “sensitive land” under the Act.
7 This annotation was first endorsed on the second version of the schedule, dated 21 December 2018.
8 The concepts of “relevant land” and “sensitive land” (referred to in [20] below) are discussed at
[30] below.
[19] In early March 2019, Mr Andrew Morris, the officer at the OIO with whom Mr Petersen had been dealing, confirmed a review of the updated schedule that had been presented by Mr Petersen, and acknowledged that no obvious issues had arisen.
[20] On 18 March 2019, the scheme of arrangement was publicly notified and on 21 March 2019 Jingang applied to the OIO for consent to acquire Westland. After an initial appraisal of the application, the OIO issued a media release on 12 April 2019 stating:
The benefit to New Zealand test does not apply to this application because the only sensitive land involved is residential.
[21] During May 2019, the OIO processed Jingang’s application, leading to a briefing to the Ministers on 27 May 2019 providing background to the application and requesting a decision on whether the Ministers wished to “call in” the application. That reflected the limits on the scope of the delegated decision-making power. Where overseas interests acquire sensitive land, including farm land, so that the benefit to New Zealand test is required to be considered, and the “substantial and identifiable” criteria under s 16A(1)(b) apply, the application has to be determined by the Ministers and is not delegable, subject to a limited number of exceptions. Where the application does not involve those considerations, the decision on it is delegable to senior OIO personnel.
[22]The 27 May 2019 briefing advised Ministers:9
For completeness, the processing plants are not on sensitive land and do not form part of the sensitive land aspect of the application.
[23] In terms of the further steps to be taken on the application, the briefing advised:10
For the reasons outlined in this briefing (ie that there is little discretion in the relevant test; and that the Office has previously considered much of the relevant information), we suggest this investment may be better suited to remaining a delegated decision.
9 Briefing to the Minister for Land Information and Associate Minister for Finance, overseas investment application for Westland Co-operative Dairy Company Limited.
10 CB 303.0794.
[24] Following a meeting on 20 June 2019 between OIO personnel and the private secretaries of the Ministers, Mr Michael Appleyard of the OIO emailed the private secretaries on 21 June 2019 providing further information on the status of the land where the processing plants were situated. His email advised:
We confirm that both the Rolleston and Hokitika plants are not sensitive land
and do not require consent.
Hokitika plant
The Hokitika plant is urban land and categorised commercial/industrial. These characteristics, regardless of size, do not trigger any requirement for consent. The plant does not adjoin the river because there is an unstopped road that runs along the boundary. This title prevents the Hokitika plant from adjoining that water body and is not sensitive.
…
Rolleston plant
The Rolleston plant is urban land and also categorised commercial/ industrial. As above, these characteristics, regardless of size, do not trigger any requirement for consent. There are no adjoining sensitivities (such as lakebeds, conservation land, regional parks and so on). This land does not therefore require consent.
[25] In late June 2019, there were communications from the Ministers’ offices stating that the Ministers wished to call in the decision, but that did not occur and, on 10 July 2019, the Ministers confirmed they did not wish to call in the application. The OIO granted the application on 16 July 2019 and the acquisition proceeded on 1 August 2019.
[26]This proceeding was commenced on 1 October 2019.
Grounds for review
[27] Social Credit advanced four grounds for review of the OIO decision, which are conveniently considered in two groups. The first ground was that the OIO wrongly classified the land on which Westland’s processing plants are located because that land is arguably used for an agricultural purpose and is therefore farm land. The third ground, dependent on making out the first ground, is that because the land at issue is farm land, the decision had to be made by the Ministers and the OIO acted ultra vires in making what was a non-delegable decision.
[28] The second group, comprising the second and fourth grounds, pleaded respectively that the OIO failed to consider whether the land at issue was used for agricultural purposes, and that the OIO had insufficient information before it to determine whether the land at issue was indeed farm land.
[29] The determinative issue in this judicial review is the correct definition of farm land under the Act.
The statutory definitions
[30] Acquisitions by overseas persons of interests in land in New Zealand are to be assessed against a more stringent test if the land is sensitive. Such land becomes relevant land for the purposes of an application made under the Act if it is subject to acquisition by an overseas person. Within the category of sensitive land, residential land is dealt with separately, so that the starting point in the present case is the definition in s 6(1) of the Act of sensitive (but not residential) land. That is defined as land that:
(a)is not and does not include residential land; but
(b)is sensitive under Part 1 of Schedule 1 for some other reason.
[31] The categories of land listed as sensitive in that schedule include non-urban land that exceeds five hectares in area. Non-urban land is defined in s 6 as meaning:
(a)farm land; and
(b)any land other than land that is both—
(i)in an urban area; and
(ii)used for commercial, industrial, or residential purposes
[32]Section 6 defines farm land to mean:
land (other than residential (but not otherwise sensitive) land) used exclusively or principally for agricultural, horticultural, or pastoral purposes, or for the keeping of bees, poultry, or livestock
[33] As discussed at [3] above, Social Credit’s case rests on the proposition that Westland’s processing plants in Hokitika and Rolleston are farm land because they are used principally for agricultural purposes.
[34] Mr Kirkness submitted that “agricultural” is an adjective having wider scope than “agriculture”, because it extends to describing matters that relate to, or are used in or concerned with, agriculture. Further, that agriculture is not limited to producing crops or keeping animals but includes the preparation and marketing of the resulting products. Mr Kirkness cited the Merriam-Webster dictionary for definitions consistent with these propositions.11
[35] On his argument it followed that, in the context of a dairy farming operation, “agricultural purposes” would extend to both the milking of the cows and the production of dairy products from their milk. He submitted that an interpretation of this breadth is consistent with the statutory scheme. Arguably, the purposes of the Act require a wide interpretation of what is caught by the concept of sensitive land so that the privilege of overseas persons acquiring sensitive New Zealand assets is tested in appropriately wide circumstances. The link between the production of milk and its immediate processing into saleable forms arguably requires all land used for both aspects of that process to be treated as being used for agricultural purposes, and therefore farm land, and therefore sensitive.
[36] The meaning of a statute is to be ascertained from its text and in light of its purpose, having regard to context. The classic observation on this test from s 5 of the Interpretation Act 1999 is that of the Supreme Court in Commerce Commission v Fonterra Co-operative Ltd:12
[22] It is necessary to bear in mind that s 5 of the Interpretation Act 1999 makes text and purpose the key drivers of statutory interpretation. The meaning of an enactment must be ascertained from its text and in the light of its purpose. Even if the meaning of the text may appear plain in isolation of purpose, that meaning should always be cross checked against purpose in order to observe the dual requirements of s 5. In determining purpose the court must obviously have regard to both the immediate and the general legislative context. Of relevance too may be the social, commercial or other objective of the enactment.
11 Merriam-Webster Dictionary: Commission v Fonterra Co-operative Ltd [2007] NZSC 36 (footnotes omitted).
[37]The purpose of the Act is specified in s 3 in the following terms:
3 Purpose
(1)The purpose of this Act is to acknowledge that it is a privilege for overseas persons to own or control sensitive New Zealand assets by—
(a)requiring overseas investments in those assets, before being made, to meet criteria for consent; and
(b)imposing conditions on those overseas investments.
(2)This Act also has the purpose of managing certain risks, such as national security and public order risks, associated with transactions by overseas persons.
[38] For the Ministers, Mr Anderson drew on the distinction made in texts on statutory interpretation between lexical and stipulative definitions.13 Lexical definitions are those which confirm that a word or phrase is being used in the statute in its natural or ordinary meaning so that the definition confirms that usual scope and clarifies or delimits the scope of what is intended. On the other hand, a stipulative definition is one which requires a word or phrase to take on a special meaning for the purpose of the statute in which it is used, so as to act as a form of code for the scope of what is intended when it is used in the Act. This is demonstrably different to a natural and ordinary meaning.
[39] Here, Mr Anderson submitted that there is no indication anywhere that the definition of farm land is intended to be any broader than the scope attributed to that phrase in common usage, that is, a lexical definition. He submitted that if a stipulative definition extending the scope of the concept of farm land was intended by Parliament, there would have been much clearer indications of that.
[40] I agree with Mr Anderson’s approach to the interpretation of farm land. I am satisfied that the definition of farm land is land used exclusively or principally for (in the relevant context) agricultural or pastoral purposes and is intended to confirm the common usage of that phrase as identifying the land on which primary production occurs. Those working on farm land are farmers, they treat themselves at least in
13 R I Carter, Burrows and Carter Statute Law in New Zealand (5th ed, LexisNexis, Wellington, 2015) at 430; Diggory Bailey and Luke Norbury Bennion on Statutory interpretation (7th ed, LexisNexis, London, 2017) at 478.
general terms as being paid for producing the produce that goes out the farm gate and
– despite financial interests in post-farm gate processes such as being shareholders in dairy co-operatives or horticultural pack house operations – their occupation or ownership of farm land is tied to the capacity of their land to produce whatever it is that goes out the farm gate.
[41] As to statutory purpose, successive regimes constraining overseas ownership of any New Zealand assets have reflected a consistent concern that New Zealand ought not to lose control of the land capable of producing agricultural produce without close scrutiny against strict criteria. That is the primary reason why farm land is categorised as being sensitive. Neither the Hokitika nor Rolleston sites could be seen as valued for that purpose. It does not frustrate the statutory aim of closer scrutiny of transactions that result in overseas persons gaining control of New Zealand’s productive farm land if the extended definition for which Social Credit contends is not adopted.
[42] The statutory purpose in s 3, and the scheme of the Act, do not suggest that acquisitions by overseas persons should have to meet the higher threshold for consent that applies to sensitive land more broadly than the natural and ordinary meaning of the definition of that concept would otherwise require in the context in which it is used in the Act.
[43] On the first reading of the Bill that became the current Act, the then Minister of Finance, Dr Michael Cullen, described the review of the statutory regime that had taken place as having two purposes:14
First, to ensure that New Zealand’s approach to the regulation of foreign investment focuses on those assets that really matter to New Zealanders. They include sensitive land, fisheries, and assets with historical or cultural significance. Second, we wanted to ensure that potential overseas investors did not face unnecessary compliance costs and that foreign investment that can make a positive contribution to the economy and to New Zealand is encouraged.
[44] In the litigation over OIO consent for sale to foreign interests of the Crafar farms, the Court of Appeal made the following comments which put in context the
14 (14 December 2004) 622 NZPD 18023.
weight to be attributed to the fact that acquisition by overseas persons is “a privilege”:15
[Considering the language of s 16(1)(a) of the Act which provides for the benefit to New Zealand test] … In particular, we see no reason to construe the words narrowly because overseas investment in New Zealand is described in s 3 as a “privilege”. The implications of the use of this word must be assessed against the background that the Act provides that, if the criteria are met, the Ministers must grant consent. The Act attempts to place some controls on the acquisition of significant tracts of New Zealand farm land by overseas persons, but also seeks to allow such persons to invest in farm land where they meet the relevant criteria. We agree with Mr Goddard that the balance that Parliament has struck between the various interests at play is found in the wording of the legislation and that there is no warrant to read the language of s 16(1)(a) down or to qualify it in some way.
[45] The higher level of protection for New Zealand ownership of farm land is reflected in an additional requirement that, before any sale to an overseas person, farm land must be offered on the open market within New Zealand.16 There would be no compelling rationale for requiring the Hokitika and Rolleston sites to be separately offered to discharge that obligation in this case. The value attributed to the sites was less than five per cent of the total consideration involved in the acquisition, and there would very obviously be no interest in these urban sites for use as farm land in the natural and ordinary meaning of that activity.
[46] References to the application of similarly defined terms in other statutes are generally of limited value given the importance of the statutory context and individual purposes of different statutes. In this case, Mr Anderson submitted that the legislature has treated the concept of farm land consistently, and that in considering the Overseas Investment Amendment Bill 1998, the Select Committee had stated that the definition of farm land was similar to other statutory definitions of the same phrase.17
[47] I would not be persuaded to alter the interpretation of farm land that was otherwise applicable to have it conform with the interpretation in other statutory contexts. However, the range of other statutes in which the phrase is applied to the
15 Tiroa E and Te Hape B Trusts v Chief Executive of Land Information New Zealand [2012] NZCA 355, [2012] 3 NZLR 808 at [40] (footnote omitted).
16 Section 16(1)(f), subject to the exceptions in s 20.
17 References included to Public Bodies Leases Act 1969, s 2, and in subsequently repealed statutes including the Rating Powers Act 1988, s 2 and the Real Estate Agents Act 1976, s 2.
same concept does add additional justification for adopting what is a common sense and natural and ordinary meaning of the phrase.
[48] Mr Kirkness was less than precise as to how far his preferred definition would extend in the context of other forms of agriculture: by parity of reasoning it would have to include meat processing plants, and all forms of pack houses and other processing operations for horticultural produce. As with the Hokitika and Rolleston plants in issue here, the majority of such facilities throughout New Zealand are located in areas that are, for all other purposes, routinely categorised as industrial or industrial/commercial. Mr Kirkness did not resist my proposition during argument that all those working at the two plants in issue would be most surprised to learn that the statute governing acquisition of the businesses by overseas persons required the sites to be characterised as farm land. The interpretation he contends for is an unnatural one.
[49] The unnatural and forced consequences of adopting the broader definition contended for by Social Credit confirm that an extension beyond the natural and ordinary meaning of the words as used in the definition would certainly require more by way of expanded definition than the wording used in s 6 of the Act. There is no indication that the definition of farm land was intended to be stipulative.
[50] Mr Kirkness raised an inventively wide range of arguments in support of the substantially broader interpretation of agricultural purposes and therefore of farm land for which he contended. I intend no disrespect by not addressing each of them in providing individual reasons for rejection. Both singularly and cumulatively, they are unable to outweigh the compelling common sense in adopting an interpretation which accords with the natural and ordinary meaning of the phrase, as assessed in its statutory context.
The nature of the land use
[51] Counsel for all respondents, and particularly Ms McKechnie for Westland, took some trouble to emphasise the detail of the range of activities undertaken at both the sites, to distinguish them from anything within the usual concepts of activities for agricultural purposes, and what occurs on farm land.
[52] The Hokitika plant is within Hokitika town. The site is a little less than eight hectares and is zoned industrial/commercial under the Westland District Plan. It is in every general sense of the word being used for industrial purposes. Within its boundaries, there are sealed roads and parking areas and a large number of buildings which are used for a range of activities including pasteurising the raw milk, churning and packaging butter, manufacturing various milk powders and infant formulas, water treatment, research and development, packaging, warehousing, administration and storage. Facilities at the site include an industrial scale x-ray machine used to check infant formula for foreign substances. It is serviced by a private railway siding which is used to send and receive goods to and from the Rolleston plant.
[53] The operations at Hokitika include the use of highly dangerous chemicals used in some of the industrial processes and to clean equipment, and include ammonia for cooling which is treated as a poisonous gas.
[54] The Rolleston plant occupies nearly nine hectares and is zoned business 2A in the Selwyn District Plan, that being designated as a commercial/industrial area. In resource management terms it is part of a light industrial zone in Rolleston. The buildings on that site include a reverse osmosis plant used to reduce the water content in raw milk, a UHT milk and cream plant, warehousing, loading areas and administration offices. The Rolleston site does include some vacant land which is to be used for future expansion as required.
[55] Mr Kirkness disputed the relevance of land use zoning provisions applying to the sites. First, he submitted that a zone for commercial uses was either meaningless, or could certainly not exclude farming operations, which are inherently commercial in character. Secondly, he took the point that zoning provisions regulated what sites could be used for, as distinct from the use that is actually being made of them.
[56] I do not accept that these points render the zoning of the sites irrelevant when determining whether they are farm land. In the zoning context, commercial zones tend to be used mutually exclusively with rural/agricultural uses, and commercial uses are commonly bracketed with industrial uses, particularly to enable cohesive zoning for a range of business activities likely to extend from light industrial/manufacturing uses
through to wholesale and potentially retail product suppliers. The fact that both suppliers of raw milk to Westland and the Westland processing plants are commercial, in the sense that they are business enterprises undertaken for profit, cannot distract from the legitimate distinction drawn between uses of farm land and uses of various activities in commercial/industrial zones.
[57] Mr Kirkness’s second point on the lack of relevance of zoning was that what is permitted by way of land use does not dictate what is actually occurring there. This cannot assume relevance in advancing his argument that these commercial/industrial sites are to be treated as farm land for the purposes of the Act. He is correct on the point that definitions in the Act are to be applied by what is actually occurring on any given site, but that does not avail him in contending that these processing and manufacturing activities should be treated as farm land for the purposes of the Act.
[58] The sites are dependent for their raw material on raw milk produced from land used for agricultural purposes, and those farming activities depend vitally on the ability of these sites to take and pay for their produce. However, I am satisfied that the use of the sites inarguably falls outside the nature of agricultural purposes as that expression is used in the definition of farm land.
First ground: error of law in interpretation adopted of “sensitive land”
[59] The first and primary ground of challenge to the decision was that the OIO had adopted the wrong interpretation of sensitive land by failing to recognise that the Westland processing sites in Hokitika and Rolleston were used primarily for agricultural purposes, which brought them within the definition of farm land and hence sensitive land for the purposes of the application to the OIO.
[60] It follows from my analysis above that I do not accept the interpretation of farm land contended for by Social Credit. I am satisfied that the OIO approached the application having regard to an interpretation of farm land that correctly did not extend to sites used for processing raw milk and further manufacturing and processing activities.
[61] To varying extents, each of the subsequent grounds of review depended on the interpretation of farm land contended for by Social Credit. I turn to consider them in light of the interpretation of farm land I have adopted, consistently with that applied by the OIO.
Third ground: decision ultra vires because it was non-delegable
[62] Had Social Credit been correct in contending that the Hokitika and Rolleston sites were used for agricultural purposes, and were therefore farm land, then the decision on Jingang’s application to the OIO would have been a non-delegable one required to be made by the Ministers. Had Social Credit succeeded with the first ground for review, it would have followed that they also succeeded on this third ground.
[63] However, equally the failure of the first ground necessarily means that the third ground must also be dismissed. The decision on Jingang’s application was properly delegable.
Second ground: inadequate assessment of land type
[64] The second ground for Social Credit’s challenge was that the OIO personnel did not undertake adequate enquiries to determine the status of the land for the purposes of the Act when considering the Jingang application. A statutory power of decision exercised on insufficient information may constitute a ground for judicial review for a failure to consider relevant factors, on a material error of fact or even on unreasonableness. As Graham Taylor observes:18
… inadequacy of information can be analysed as a material error of fact. This is considered to be a valuable approach. The absence of information may lead an authority to make a decision that is contrary to the objective facts. This can be analysed in terms of either material error of fact, or failure to consider relevant factors.
[65] This criticism relied on the broader definition of agricultural purposes contended for in Social Credit’s first ground of review. Arguably, if an evaluation of
18 Graham Taylor Judicial Review: A New Zealand Perspective (4th ed, LexisNexis, Wellington, 2018) at 789–790.
the nature of the activity undertaken required a decision on whether the activities at the sites were for agricultural purposes by reference to a comprehensive review of the closeness of the connection to the processing of raw milk delivered to the sites, then the OIO had not undertaken sufficient enquiries to adequately inform itself in making that decision.
[66] However, the adequacy of the factual enquiries and analysis undertaken by the OIO is to be assessed on a quite different premise if activities that were principally for agricultural purposes were confined to the natural and ordinary meaning of what occurred on farm land. On that more straightforward approach which I have preferred, OIO personnel could sufficiently satisfy themselves that the Hokitika and Rolleston sites did not constitute sensitive land on a far more limited assessment of the nature of the activities undertaken at those sites.
[67] A specific aspect of the criticisms of inadequate research is the extent to which OIO personnel relied upon the assurances of Mr Petersen, solicitor for Westland, in his course of dealings with them. I consider that criticism separately under the fourth ground of review.
[68] More generally, Mr Kirkness analysed the records of the OIO’s dealings with the application to demonstrate that they had only the most superficial of information about the land use at the sites when the public media statement was made on 12 April 2019, which recorded that the only sensitive land involved in the application were the residential sites. The information available to the OIO at that time was allegedly limited to Mr Petersen’s opinion of the non-sensitive status of the sites, and relatively indistinct aerial photographs showing the general layout of buildings and other structures on the sites but without revealing any detail as to the activities undertaken. Mr Kirkness’s criticism of the OIO’s assessment of the status of the land is that a substantially more detailed analysis was required as to whether the activities undertaken qualified the sites as ones used principally for agricultural purposes.
[69] Submissions for the Ministers made the point that the OIO also had knowledge of the zoning of the plants and a sensitive land certificate that had been completed in addition to the schedules Mr Petersen had provided. The OIO also had the investment
plan provided by Jingang with its application, which gave indications of the proposal to expand further manufacturing activities.
[70] If the categorisation of the sites was not sufficiently clear on a superficial understanding of the use of those sites, then a tenable point may have arisen as to the inadequacy of information and analysis on which the decision was made. However, on the information that was available to OIO, I consider it was inarguably clear that the sites did not qualify as farm land, so as to obviate the need for any greater level of enquiry or assessment by OIO.
[71] The essence of this criticism by Mr Kirkness was not that they misunderstood or mischaracterised what was occurring at the sites, but rather that they dismissed the need for any more detailed analysis of those activities when considering the categorisation of the land. That alleged error is because, on Social Credit’s analysis, the OIO adopted the wrong interpretation of the concepts of agricultural purposes and accordingly farm land. Once that premise for their criticism falls away, so does the relevance of the concern at the inadequacy of the analysis of what was occurring at the sites. Consequently, this ground must also fail.
Fourth ground: decision made on insufficient information
[72] A primary plank of this ground of review was that OIO personnel inappropriately relied upon the information and assurances provided to them by Mr Petersen. Affidavits by OIO personnel acknowledged that the course of dealings with Mr Petersen in respect of numerous applications over a number of years led them to trust his judgement and be confident in his analysis of the aspects of any particular application that were likely to be contentious. In this case, Mr Petersen had, from the very outset, treated the status of the Hokitika and Rolleston sites as entirely non-contentious on the basis that they did not constitute farm land.
[73] On 11 November 2019, and after this proceeding had been commenced, OIO personnel visited Westland’s Rolleston milk processing plant to assess it. Whilst some of those involved were inclined to downplay it as merely taking up an opportunity to see the site for themselves whilst otherwise in the area, Mr Kirkness pointed to internal communications that suggested the visit was specifically to gather information for the
purposes of defending this proceeding. A report prepared on the visit afterwards stated that those who attended:
… walked away firmly of the view that the land is not “farm land”
[74] However, Mr Kirkness’s point is that the visit was necessary to gather information which the OIO ought to have appreciated it needed before making the decision as to the categorisation of the land. He treated the fact of the visit as strong support for his fourth ground that, when the challenged decision was made, the OIO had insufficient information as to whether the sites were farm land.
[75] The first of these criticisms on the insufficiency of information gathered by the OIO is one of general application, advanced on the ground that the OIO should not trust information received from applicants, or those acting for parties to a transaction that is subject to OIO consent. The criticism is somewhat theoretical, given my finding that the exclusion of the processing sites from the category of farm land was abundantly clear on the correct interpretation of that phrase, which very substantially reduced the scope of enquiries reasonably required by the OIO. Had the OIO been wrong in its interpretation of farm land, then the extent of information on which it relied in deciding that the sites were not sensitive land were likely to be held to be inadequate. However, that is not the case.
[76] I took Mr Kirkness’s submissions to be that even if the OIO was correct in its interpretation of what amounted to farm land, then it still failed to adequately inform itself and those inadequacies included inappropriate reliance on Mr Petersen’s views.
[77] In defending the adequacy of the OIO assessment of the application, Mr Anderson cited the observations of McGechan J in a judicial review of decisions made on quota management for fish species.19 In that context, McGechan J observed:20
What is “reasonable” will depend on the circumstances prevailing at the time. Matters such as time available, resources to hand, existing knowledge and expertise, and reliability or apparent reliability of sources all can have a bearing, along with all else.
19 CRA3 Industry Association v Ministry of Fisheries HC Wellington CP317/99, 24 May 2000.
20 At [60].
[78] The appropriateness of such a regulator accepting, rather than independently checking, all details presented to it raises resourcing considerations, and a reflection on the consequences of a decision having been made on inaccurate information. There was no detailed evidence on the responsibility assumed by applicants and their advisers for errors in any certificates provided by them on the character of assets involved in acquisitions by an overseas person. The range of adverse consequences which might flow from a decision made in reliance on incorrect information provided by an applicant might reasonably be seen as a sufficient incentive for applicants to take care that such certificates are factually accurate.21
[79] It is tolerably clear that regulators such as the OIO are not resourced to independently research all details of all applications made to them on the basis that they must distrust the accuracy of information provided in support of an application. Judgement calls are required and, given the lack of direct relevance of any alleged insufficiency of the independent investigation undertaken in this case, it is not a situation in which to make any adverse finding in respect of the OIO’s processes. The OIO would be vulnerable if grounds existed for questioning the accuracy of information certified as accurate on behalf of an applicant, and which the OIO ought to have had grounds for questioning, but did not independently research. That is not the context here.
[80] I am not satisfied that any error is made out on that aspect of the OIO’s process in relying on information Mr Petersen provided.
[81] As to the second criticism, I accept that the November 2019 visit by OIO personnel was motivated to assist in the preparation of a response to the present judicial review challenge. However, given that the OIO had correctly applied the interpretation of farm land, I am not persuaded that the timing of that visit can be held against the OIO as a demonstration of the inadequacy of the information it previously had when the decision was made. There is no suggestion that the greater understanding of what occurred at the site changed either the OIO’s categorisation of the site in determining whether it was sensitive land, or even the grounds that would
21 Knowing provision of false information is an offence under s 46 of the Act.
be relied on for justifying a decision that it was not. OIO personnel took the opportunity to familiarise themselves with the site in circumstances where the grounds of Social Credit’s challenge raised issues that they had not previously considered it necessary to focus on.
Result
[82] Accordingly, none of Social Credit’s four grounds of challenge to the decision can be made out.
[83] That outcome obviates the need to review relatively wide-ranging arguments on the forms of relief that may have been appropriate, had the grounds for review been made out. I heard at some length separately from Mr Fletcher about the limited forms of relief Social Credit would have sought, short of any order requiring the transaction to be reversed. That prospect was the cause of serious concern expressed both for Jingang and shareholder suppliers to the company whose financial positions have been altered substantially by completion of the transaction and the commencement of business on new terms.
Costs
[84] In dismissing an application for security for costs, Clark J recognised public interest aspects in the proceeding.22 That character might influence the discretion on costs. However, having heard the arguments, I am not persuaded there was a tenable basis for asserting error by the OIO on the critical issue of the interpretation of farm land. As a political party, it can fairly be inferred that Social Credit has pursued the proceeding at least in part for political purposes. I am satisfied that costs ought to follow the event. My provisional view is that both groups of respondents ought to be entitled to an award of costs on a 2B basis, without certifying for a second counsel.
[85] If the parties are unable to settle costs issues, I will receive memoranda from the respondents, limited to five pages, which are to be filed within 15 working days of
22 The New Zealand Democratic Party for Social Credit Inc v The Minister for Land Information
[2020] NZHC 1104 at [28].
delivery of the judgment. Social Credit will then have five working days in which to file a reply of no greater length.
Dobson J
Solicitors:
Woods Fletcher, Wellington for applicant
Crown Law, Wellington for first and second respondents Simpson Grierson, Wellington for third and fourth respondents
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