Conditions of consent usually require the people who control the relevant asset to remain of good character. Investors must also tell us of any breaches of the good character condition.
A breach of the condition may result in a court order to dispose of the asset and/or penalties.
If we discover that someone has failed to disclose relevant information to assess good character or has provided false or misleading information, strong penalties are available under the Act and we take such matters very seriously. Where we are dealing with a potential breach of a good character condition there are various considerations we need to take into account before we can take enforcement proceedings.
Where a breach is found, the High Court has stated that there is a strong need to deter breaches of the good character requirement given its importance in the context of the Act.
Onus and public interest
Before we can ask a court to make orders to impose a penalty, we need to consider whether:
- we can satisfy a court that the person is not of good character such that they are no longer fit to hold the asset. This requires us to consider:
- what has the person been accused of?
- does the allegation indicate the person is unfit to hold the asset or would otherwise bring the country into disrepute?
- what evidence does the OIO have or could call in a court to prove the allegation?
- it is in the public interest to take a court proceeding? This requires us to consider such things as the seriousness of the matter, what the likely penalty might be and the potential impact on other people (such as New Zealand employees and other investors) in taking action.
The Solicitor-General’s Prosecution Guidelines will be followed for all prosecutions under the Overseas Investment Act. They are a useful framework for considering civil action.
We set out more detail about these considerations below.
Is the person no longer of good character to hold an investment?
We are likely to investigate a possible breach of a good character condition where:
the alleged behaviour indicates that the person is unfit to hold the asset, for instance because their alleged behaviour may indicate that they might misuse their position in relation to the asset. This is likely to require consideration of the connection between the allegation and the asset they have consent to hold. Some examples of the types of matters that might mean a person may be unfit to hold the asset are if, for example, the person:
- has been convicted of an animal welfare offence and has consent to hold a farm asset
- has been found guilty of fraud or market manipulation and has consent to manage a company in New Zealand
- their behaviour means they bring (or could bring) New Zealand’s reputation into disrepute. Matters likely to be relevant are:
- has the person been convicted of a serious offence that would meet with similar sanction in New Zealand?
- have they shown a reckless disregard for New Zealand laws or regulations? or
- does their behaviour raise international relations or security concerns?
The seriousness of the alleged behaviour is likely to be determinative of any penalty imposed given the importance of good character to the Overseas Investment regime. Investors, particularly large corporations, are expected to take their obligations seriously.
What factors will the OIO need to consider before taking action?
Given the evidential standard and public interest considerations we must take into account before we can take court proceedings, we will need to consider such factors as:
- whether we can prove to a court that the alleged behaviour amounts to a breach of the condition – findings by a court or another regulator (here or overseas) are likely to be relevant, or if there is testimony of an identifiable person
- what the current role of the person is in relation to the asset – for instance, are they a relatively passive investor who is not really involved in how the New Zealand asset is operated or managed, or do they make decisions which affect the control or operation of the asset?
- if the actions indicate a pattern of poor behaviour
- the potential impact of taking enforcement action on other people such as employees and other investors
- the length of time between the alleged behaviour and the OIO taking action
- the length of time the investor has held the asset and their track record in relation to the investment
- the significance of the asset to New Zealand, and
- whether there is an alternative remedy to going to court – for instance, is there some other remedial action that might protect the sensitive asset, or has the person agreed to dispose of their interest in the asset?
In taking any action, we will be guided by the purpose of the Act, which is to recognise that it is a privilege for overseas investors to own or control New Zealand’s sensitive assets.
When will we take action?
Natural justice considerations will usually mean that where another regulator or enforcement agency (here or overseas) is investigating a person, we will wait until that investigation or court action is complete before reaching a position on whether the condition has been breached. It may be that the other regulatory or enforcement agency is better placed to access and investigate information relevant to the alleged behaviour, especially if the matter happened overseas.
It will not usually be appropriate for us to act only on allegations or speculation in the media.
 Chief Executive of Land Information New Zealand v Agria (Singapore) PTE Limited and Lai Guanglin  NZHC 514
 Chief Executive of Land Information New Zealand v Agria (Singapore) PTE Limited and Lai Guanglin  NZHC 514 at , ,  and .