Covenants over part of Synlait Milk's Pokeno site have been overtaken by the area's development into a commercial hub, the company told the Supreme Court today.

The restrictions the covenants impose on the site of the firm's $260 million dairy factory are unjustified given the degree to which the nature of the area has changed since the covenants were initially imposed in 1998 and 2000, Julian Miles, QC, said in his opening address.

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"The neighbourhood and the use of the land has fundamentally changed over the past 20 years. The original parties to the covenants have long gone," he said, adding the area has morphed from a "rural idyll" to a "commercial hub."

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Synlait is appealing a May 2019 Court of Appeal decision which ruled the covenants must stand.

The company bought the land in February 2018 conditional on the seller, Stonehill Trustee, procuring the removal of covenants which restrict the site's use to grazing, lifestyle farming and forestry.

A High Court decision in November 2018 removed the covenants and then Synlait took the title of the land and built the factory.

However, the owner of adjacent land, Ye Qing and his company New Zealand Industrial Park succeeded in getting that decision overturned in May last year.

Changing neighbourhood

Miles noted that Yashili NZ Dairy Company has already built a very similar milk plant "literally on the other side of the road" from the Synlait plant and is expanding. Winston Nutritional also has permits to build another milk treatment plant nearby, he said.

"This just indicates what the area is like, what the character of the neighbourhood is and just how close Yashili and Winston are to New Zealand Industrial Park," he said.

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Any impact that Synlait might have on Ye's plans for the land would be identical to that from the other two milk processing plants, Miles said.

He underscored the only issue Synlait has with the covenants is the first paragraph that restricts the use of the land.

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The other paragraphs – which basically stipulate things like it won't stand in the way or object to a quarry being developed on adjacent land – create no issues, he said.

Ye has indicated he plans to develop a quarry adjacent to Synlait's factory and has said there could be issues around food safety that might create obstacles for resource consent.

The same issue

Miles today argued that the same issue would exist for Yashili and Winston and therefore wasn't reason to maintain the covenants.

Also, Synlait had entered into an undertaking that it won't object to Ye's plans.

"Not only will we not object, we will actually support you. We have no concerns about dust, particulates, noise or whatever else might result," he said.

Synlait processed its first milk at Pokeno last September and the plant's nutritional spray dryer can produce 45,000 tonnes of product each year.

The facility, like Synlait Dunsandel, can produce a full suite of nutritional, formulated powders, including infant-grade skim milk, whole milk and infant formula base powders.

Miles will continue his submission into the afternoon before the counsel for New Zealand Industry Park and Ye present their response. The hearing will continue Thursday.