Court of Appeal backs overseas investment decision on Westland Dairy

30 November 2021

The Court of Appeal has found that a claim brought by the Social Credit political party against the Overseas Investment Office was unmeritorious and not in the public interest.

The decision was released on 15 November and follows a challenge by the Social Credit political party of a 2019 Toitū Te Whenua overseas investment decision to grant consent for the sale of Westland Dairy.

The sale required consent because the overseas purchaser, Yili, was buying 4.8 hectares of residential land and significant business assets worth more than $100 million.

Consent was granted because the application met all the tests required for residential land and significant business assets under the Overseas Investment Act. The benefit to New Zealand test didn’t apply as the transaction didn’t involve rural land.

However Social Credit argued that Westland’s two factory sites should have been treated as “farm land” (and therefore as rural land) because they were used to process raw milk. Social Credit argued that processing of raw milk was an agricultural purpose.

The Court of Appeal was satisfied that the term “agricultural” related to the growing of crops and the raising of stock and the harvesting or extraction of primary products from those crops and animals on a farm.

“Where primary products are transported from a farm and processed elsewhere into other products, then the processing of those products beyond the farm gate does not come within the natural and ordinary meaning of an agricultural purpose.”

The Court’s decision endorses the Overseas Investment Office’s long -standing approach to the meaning of “farm land”.

Social Credit also argued that the Overseas Investment Office didn’t do enough to verify the status of the land.

The Court didn’t agree, saying: “We do not accept that any criticism can be properly levelled against the processes followed by the OIO”.

Background

What is “farm land”?

The Overseas Investment Act defines farm land as 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.

The following activities are not farm land:

  • maintaining a crop of trees,
  • harvesting a crop of trees, and
  • establishing a crop of trees.

What did Social Credit argue?

Social Credit argued that the processing of raw milk was an agricultural process, and therefore the land on which raw milk was processed must be farm land.

Social Credit also argued that the OIO failed to verify the status of the land.

Finally, Social Credit argued that the costs awarded in the earlier High Court case they took against the consent should be reduced, as the proceedings were taken in the public interest.

What did the Overseas Investment Office of Toitū Te Whenua argue?

The OIO argued that the phrase “farm land” should be given its plain meaning. As the processing of raw milk is an industrial and not an agricultural procedure, the processing plants did not come within the definition of “farm land” under the Act.

The OIO argued that the land was clearly not farm land, that its processes correctly identified the status of the land, and that no further verification was required.

What did the Court decide?

The Court of Appeal agreed with the Overseas Investment Office.

The Court found that where primary products are transported from a farm and processed elsewhere into other products, then the processing of those products beyond the farm gate does not come within the natural and ordinary meaning of an agricultural purpose.

The Court did not accept that any criticism could be properly levelled against the processes followed by the OIO, or that the OIO lacked sufficient information to grant consent to Yili.

Finally, the Court found that the arguments put forward by Social Credit lacked merit, and that it can never be in the public interest to place unmeritorious arguments before the courts.

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