A precedent for future New Zealand land sales will be set if the Crafar farms sale to the Shanghai Pengxin Group goes ahead, the lawyer mounting a court challenge against the purchase says.

Milk New Zealand Holdings, a subsidiary of Shanghai Pengxin Group, is set to buy the 16 farms, for a reported price of $210 million after the Government last week approved the sale following advice from the Overseas Investment Office (OIO).

The Crafar Farms Purchase Group, which made an unsuccessful $171.5m bid for the farms last September, today challenged the sale in a judicial review at the High Court in Wellington.

Alan Galbraith QC told the court that the purchasing company did not fulfil the legislative requirements for relevant business experience, because it did not have dairy farming experience.


The OIO said the company met the business experience requirement because it planned to partner with Landcorp Farming, which provided the necessary dairying support.

However, Mr Galbraith said that decision did not reflect the intention of the Overseas Investment Act that those actually running the company needed to have the relevant experience.

Mr Galbraith told APNZ that if the sale went ahead it would set a precedent for future land sales, as it would change the way the OIO approached similar applications.

"It's possible that any well-resourced overseas conglomerate could come and buy dairy farms in New Zealand provided it had a contract with Landcorp.''

Mr Galbraith also questioned the OIO's decision with respect to what benefits the sale would have.

"What the OIO said was that because these are run down farms, because the receiver's running them, and this company undoubtedly will come in, run them properly and improve their production,'' he said.

"What we're saying is if this transaction doesn't proceed, is it likely somebody else will buy them and do exactly the same thing.''

It should be a question of whether the benefits were specific to the company buying the land, Mr Galbraith said.


Hamish Hancock, of Crown Law, maintained that the Chinese company met all the necessary requirements to buy the farms, and said specific dairy farming experience was not required.

"Reliance on independent experts when acquiring a new business or undertaking a new venture is an accepted and normal commercial and management practice. This is irrespective of whether the investor is foreign or not,'' Mr Hancock said in his submission to the court.

Mr Hancock argued that the necessary experience for a major farming business had to include high level business experience, which Shanghai Pengxin Group had.

Mr Hancock also criticised the Crafar Farms Purchase Group's appeal, saying Parliament did not intend the Overseas Investment Act to "be used by business interests such as the applicants for their financial benefit by reducing the price of assets they are competing to buy''.

Justice Forrest Miller reserved his decision, and said he was likely to release it in the week of Monday, February 13.

The farms' receivers, KordaMentha, and New Zealand Milk Holdings agreed to extend the settlement date until that week.