Re-Thinking the Sale of Crafar Farms

Unintended Consequences

The decision of High Court Justice Miller to introduce a new interpretation of  legislation pertaining to overseas buyers of New Zealand assets will no doubt be scrutinised carefully in a number of quarters.  What appears at first glance is yet another activist decision by a Judge who interpreted the law to mean what he thought would be a better outcome for New Zealand.  If so, the Justice changed from being a judge to a political advocate.
 

Hitherto, the law appeared to require that any overseas buyer of New Zealand assets had to demonstrate it was going to add value to New Zealand and the New Zealand economy.  Previous court decisions had consistently interpreted the statute that way.  It was the prima facie meaning of the Act.  But Justice Miller ruled  that the Act really meant an overseas buyer had to prove that they could add more value to New Zealand than any other hypothetical NZ buyer (who may or may not emerge as a purchaser). 

At first glance this would appear to stop all overseas investors from significant purchases of assets.  At first glance it would appear that the property rights of all New Zealanders have been eroded by the good judge advocate. 

But we think not.  Like all activist regulators and legislators, the judge is about to discover the law of unintended outcomes.  What will most likely happen now will be a boon for sellers of farms and other strategic assets. 

If you were selling a farm or suchlike now and initial inquiries indicated there would be overseas interest in purchasing, the sales process will be different.  Firstly, you would put the asset up for tender locally.  Then when the best price/deal had been identified, you would then shop the asset offshore.  The challenge would be "exceed this price, and add more value".  Every asset up for sale requiring the Overseas Investment Office sign-off will now likely go through this new process.  OIO approval will be more likely than ever before--and, the price achieved by the seller is likely to be better than it otherwise would have been. 

The law of unintended outcomes remains firmly in place.