Tiroa E and Te Hape B Trusts v Chief Executive of Land Information

The plaintiffs, two trusts and a company, challenged the consent given by the Ministers of Finance, Land Information and the Minister for Overseas Investment to a Chinese company, Milk New Zealand Holdings Limited, to buy 16 farms known as the Crafar farms. The plaintiffs wanted the consent set aside on judicial review. They complained that the people who controlled Milk NZ lacked the necessary skills and that the Ministers had misdirected themselves in law by attributing to the transaction benefits which any buyer, including a domestic buyer, would bring, notably the $14m (approximately) needed to bring the farms into full production. The Ministers and the Overseas Investment Office denied those allegations, and all defendants said that the plaintiffs should be denied standing because they had no interest, or none that the law should dignify, in the Ministers' decision.

The Court held that the Ministers had not misdirected themselves in law when deciding whether the business skills of the individuals who controlled Milk NZ were relevant to the investment. The Act insisted only that the relevant individuals collectively possessed business acumen and experience relevant to the particular investment, which comprised not one but 16 farms. The evidence tended to show that Mr Jiang and his colleagues were not mere passive investors but entrepreneurs who built a major business from nothing. That suggested they were astute and experienced managers and investors. The Ministers might conclude that their skills, although not specific to dairy farming or even agriculture, would help to ensure the investment delivered the promised benefits.

The Court held that the Ministers misdirected themselves in law by attributing to the overseas investment benefits which any buyer, including a domestic buyer, would bring. The Act required that the Ministers be satisfied, using the s 17 factors, that the overseas investment will benefit New Zealand, or is likely to do so. The benefit must take the form of one or more of the s 17 factors, and the Ministers must not only identify such factors but also determine their relative importance. The causal connection between investment and most of the permissible benefits must be assessed by reference to some other state of affairs ­that is, a counterfactual. The real issue was whether the economic counterfactual was the state of affairs before the overseas investment or the likely state of affairs if the investment does not proceed. The Court held that the Ministers must assess the application against what will happen without the overseas investment, which is a 'with and without' approach. The Court found that the Ministers misdirected themselves in law by attributing to the overseas investment benefits which any buyer, including a domestic buyer, would bring.

The Court held that the plaintiffs enjoyed standing to bring this application. There was an undoubted public interest in overseas investment generally and in the administration of the legislation. It had been highlighted in this case. The plaintiffs wanted to stop the Milk NZ transaction but they could not sue to cancel it under the Act. If the consent was set aside they might achieve their objective by indirect means. Milk NZ, which apparently means to prove itself a good corporate resident of New Zealand, might abandon the transaction rather than complete it without consent. Although counsel did not take this point expressly, it was arguable that too liberal an approach to standing might encourage strategic litigation by public interest groups or competing bidders, so raising barriers to overseas investment. But the Ministers' decision was judicially reviewable and the case must be examined on its merits. The plaintiffs had a proper interest. They had not tried to delay this litigation or to push the boundaries of judicial review. On the contrary, they had strictly confined themselves to two questions of law and done everything possible to get the case heard urgently.

The Court set aside the Ministers' consent to the overseas investment to be made by Milk NZ in the Crafar farms and directed that the Ministers reconsider Milk NZ's application.