New Zealand Crafar Farms Court Decision Sends Out Shock Waves

February 18, 2012 Updated: October 1, 2015
Dairy cows stand at a farm near Ashburton.
Dairy cows stand at a farm near Ashburton. The High Court decision overturning the Government's approval for the sale of the Crafar farms to Shanghai Pengxin sent shock waves through the Beehive. (Martin Hunter/Getty Images)

The sale of 16 dairy farms in New Zealand’s North Island to a major Chinese conglomerate hit a snag in the High Court this week, with the Overseas Investment Office’s (OIC) approval of the deal called into question.

The High Court sent out shock waves when it asked the Government to reconsider the application from Shanghai Pengxin to buy the Crafar dairy farms, the largest family-owned dairy business in New Zealand.

The Court found that the OIO’s approval of the farm purchase had “materially overstated” the economic benefit of the transaction to the New Zealand economy.

The Ministers involved have made a “blunder” says the Green Party, who say that selling the farms to overseas interests would bring no economic benefit to New Zealand.

“Behind-the-scenes lobbying from Chinese officials was one of the reasons the Government approved the Crafar farms deal,” says Green Party co-leader Russell Norman.

The OIO gave a tick of approval on Jan 27 to the Shanghai Pengxin Group to buy 16 dairy farms owned by the Crafar family.

The Chinese bid of $200 million outrivalled a $171.5 million offer by a consortium of New Zealand companies, led by investment banker Sir Michael Fay, that includes iwi (Maori) and local farming interests.

The consortium sought to block the sale when it requested a judicial review of the process.

“The Government’s claims that giving Shanghai Pengxin approval to buy the Crafar farms was in no way influenced by the NZ-China Free Trade Agreement are untrue,” said Dr Norman.

“The cost of John Key’s attempts to woo Chinese investors through his China Strategy will be the loss of our productive farmland.

“The High Court judgment states the Overseas Investment Office argued that this investment promoted an important Government policy by demonstrating our compliance with the NZ-China Free Trade Agreement.”

Alan McDonald, spokesman for the Crafar Farms Purchase Group, welcomed the High Court decision, adding that the Shanghai Pengxin bid was neither in the best interests of New Zealanders nor would it result in economic benefits.

“It is reassuring that a High Court judge has come to a similar conclusion and set aside the Ministers’ approval,” said Mr McDonald.

The government is expecting a fresh OIO report on the Crafar farms sale within days.

Federated Farmers believe that the legal challenge to the Crafar farm sale would put “new overseas investment rules and processes through an acid test”.

“Whatever falls out from this, it can only help to make overseas investment processes more robust, said Willy Leferink, Federated Farmers Dairy chairperson.

“It’s also no secret farmers are asking some big questions about the receivers ‘all or nothing’ approach to selling these farms. There are plenty of farmers who could have bought individual farms as going concerns.”

Mr Leferink says that around 150 dairy farms have been sold since the farms went into receivership, and in the last quarter of 2011, 16 dairy farms were sold in the Waikato and Bay of Plenty region. Eyebrows were raised when the Waikato Times reported the receivership bill was over $6 million as of last October, he said.

New Zealand is the first country in the developed world to have signed a free trade agreement with China, now New Zealand’s second largest export market.