Fran O'Sullivan: Govt should seek judgment on farms

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There was no real difference between the way the Crafar farms were marketed in New Zealand and overseas. Photo / Christine Cornege
There was no real difference between the way the Crafar farms were marketed in New Zealand and overseas. Photo / Christine Cornege

Prime Minister John Key easily batted away a story revealing he had received more than 100 letters or emails opposing the Government's decision to approve the sale of the 16 Crafar dairy farms to Shanghai Pengxin.

"What the Sunday Star-Times breathlessly printed was a couple of emails that had been sent to my office - I think they said there had been 100 in total.

"Hate to tell them the bad news, but pretty much on any issue in New Zealand I will get 100 emails, and sometimes I get 10,000 emails if it's a significant issue," Key told TVNZ this week.

The Prime Minister is clearly not exercised by any potential fallout from within the National Party, even though dozens of the emails were reported to be from party members.

Key still has plenty of political capital and time to consolidate his support among National's base before the 2014 election.

This was displayed by the ease with which his Government forged a pragmatic deal with the Maori Party to include Treaty provisions in legislation paving the way for asset sales. Neither Pita Sharples nor Tariana Turia will be throwing their toys out of the cot.

Yet just weeks ago, opponents were predicting his Government might fall. Now private investors will be able to buy shares in the SOEs that are partially privatised without worrying that the value of their investments will be compromised through subsequent Treaty claims and settlements.

Where the Government is foundering is by failing to stem the growing perception among potential overseas investors that New Zealand's once clear foreign investment framework is now decidedly opaque.

On February 15, the High Court overturned the ministerial decision to approve Shanghai Penguin's bid for the Crafar farms.

The investment banking fraternity, lawyers and accountants are still struggling to come to terms with what Justice Forrie Miller's decision means in practice. Talk around the business community suggests the Miller judgment points to several anomalies in the Overseas Investment Office's practices.

The OIO is still working through Shanghai Pengxin's reworked application to see if the Chinese firm has outlined the substantial benefits to New Zealand that would not normally be provided by any other local acquirer.

The big question is whether what sounds good at the high principle level can actually work in practice.

Key has said the Government may seek a declaratory judgment to determine the real meaning of the Miller judgment.

He wouldn't want to face more embarrassment if the OIO recommends ministers approve the refashioned application only to find it is immediately subject to a new judicial review.

The situation is further complicated by the decision by the Crafar Frams Independent Purchaser Group (aka the Sir Michael Fay consortium) to seek a Court of Appeal hearing to overturn Judge Miller's ruling that Shanghai Pengxin had sufficient business acumen to successfully invest in the farms.

The Court of Appeal has yet to advise a hearing date.

The OIO told the Business Herald yesterday it was still considering "what effect, if any, these Court of Appeal proceedings will have on the development of its new recommendation to ministers".

This legal war of attrition is fundamentally embarrassing to the Government. Both Trade Minister Tim Groser and Foreign Minister Murray McCully have diplomatic talks pending in Beijing.

The issue of the foreign investment regime is bound to be raised - but they will be "ad libbing in the key of C" if there is no clarity before their respective departures.

In my view, the Key Government should go ahead and seek a declaratory judgment so the OIO and Cabinet ministers are on firm ground when they make their respective decisions.

The overall debate on the Crafar farms purchase is deeply polarising. But no one from the Government side is prepared to stick their neck out and clarify obvious misinformation.

For instance, Opposition political leaders were quick to chime in when the Sunday Star-Times claimed that advertisements it obtained from the OIO under the Official Information Act, proved the Crafar receiver was prepared to sell individual dairy farms to overseas investors, but wouldn't do the same here.

"Farms offered for sale individually in Asia" - blared the headline over last weekend's front-page story which said the ads placed in newspapers in Singapore and China said the farms "are for sale individually or as a portfolio".

Labour's David Shearer said the story confirmed "they were trying to sell our land offshore".

But KordaMentha receiver Brendon Gibson confirms there was no real difference between the way the Crafar farms were marketed here and overseas.

The wording used in the advertising material in New Zealand was quite explicit in what was being offered. "There is the potential to purchase a single property, a selection of properties, or the entire portfolio," the advertisement stated.

This was patently clear in copies of the NZ advertisements which Bayleys placed.

The firm had been instructed to market the portfolio to the widest potential buyer audience possible and secure the best possible outcome by maximising the value of its clients' property assets.

Bayleys ran a "blanket awareness" campaign which involved marketing the properties to the immediate vicinity in which they were located, marketing them regionally throughout the Central North Island, and marketing them to the greater rural sector throughout New Zealand.

Local print media were used and advertisements placed in major metros, including the Sunday Star-Times, and rural newspapers.

The properties were also marketed to the individual buyer databases of all Bayleys' rural sales people in regions where the Crafar farms were located and 20,000 copies of a special Crafar portfolio brochure were distributed through rural sales teams in areas such as Rotorua, Feilding, Wanganui, Hamilton, Matamata, Cambridge, Tauranga, Taupo and New Plymouth.

Some 500 copies of the brochure were distributed to rural bank managers, an additional 800 copies sent to rural business investors, and 11,516 copies of the publication were mailed directly to rural delivery addresses.

Of the entire print run, 250 copies were sent offshore.

The properties were also advertised internationally in the Australian Financial Review, the South China Morning Post, the Singapore Straits Times, the Chinese Herald, and Neue Zyrcher Zeitung in Switzerland.

All this could have been ascertained if Shearer's team phoned Bayleys and KordaMentha.

The best offer came from Natural Dairy which bid for the entire portfolio.

Shanghai Pengxin emerged as the successful bidder when the OIO turned down the application from Natural Dairy.

Such niceties will bother those who are adamantly opposed to any Chinese firm buying New Zealand farmland.

But it is surprising that Shearer did not seek more information before reacting.

His advisers must surely have been able to tell him that the OIO has to first satisfy itself that the receivers have offered the farms locally - in keeping with overseas investment laws - before recommending ministers approve such an application.

In any event, copies of the advertisements promote the sale to New Zealand buyers as a "single property, a selection of properties, or the entire portfolio" are clearly displayed within the OIO's formal recommendation to ministers to approve Shanghai Pengxin's application.

It is clear that as long as Key lets this vacuum exist it will continue to be filled by misinformation - whether wittingly or by accident.

- NZ Herald

Fran O'Sullivan

A columnist for the NZ Herald

Fran O'Sullivan has written a weekly column for the Business Herald since its inception in April 1997. In her early journalistic career she was a political journalist in Wellington and subsequently an investigative journalist who broke many major business stories including the first articles that led to the Winebox Inquiry in both NBR and the Sydney Morning Herald. She has specific expertise in relation to China where she has been a frequent visitor since the late 1990s. She is a former Editor of the National Business Review; has twice been awarded Qantas Journalist of the Year and is a multiple winner of the Westpac Financial Journalism Supreme Award.

Read more by Fran O'Sullivan

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