Ponsonby lawyer Andrew Jarvis has been fined $275,000 for breaching foreign buyer rules in connection with his role facilitating the sale of 271ha of forestry land Gisborne and Auckland.
Ponsonby lawyer Andrew Jarvis has been fined $275,000 for breaching foreign buyer rules in connection with his role facilitating the sale of 271ha of forestry land Gisborne and Auckland.
Auckland lawyer Andrew Jarvis fined $275,000 for helping overseas businessmen avoid foreign ownership rules.
Justice Lang said Jarvis' actions were reckless, facilitating transactions that circumvented the law.
An Auckland lawyer who devised a complicated company structure to “recklessly” help rich overseas businessmen avoid New Zealand’s foreign ownership rules has been fined $275,000.
Andrew James Jarvis was ordered to pay the civil penalties for his role in facilitating thesale of 271ha of sensitive forestry land in Gisborne and Auckland in 2011 and 2014.
The purchasers were wealthy British citizen William Mitchell, who resides in Singapore, and German businessman Marzio Keiling, who also lived overseas.
The High Court last year ordered the two foreign nationals and their associate companies to pay $1.7 million in pecuniary penalties for purchasing sensitive NZ land in breach of the Overseas Investment Act.
The Overseas Investment Office (OIO) also brought proceedings against Jarvis - an experienced commercial lawyer and director at Ponsonby law firm Chambers Craig Jarvis - for his role in the schemes.
A just-released High Court judgment by Justice Lang says Jarvis was commissioned by Mitchell to provide advice over the purchase of several East Coast forestry blocks in 2011.
Jarvis and his firm agreed to advise Mitchell on the “application of New Zealand legislation to purchases of land by overseas investors”.
Jarvis was aware Mitchell would need to obtain OIO consent, but told him this would be an expensive exercise costing up to $40,000 per block.
After discussing the best ways to proceed, Jarvis suggested a company structure that could avoid the necessity of obtaining OIO consent.
He proposed incorporating a company with a NZ resident as the majority shareholder, and Mitchell owning only a minority share.
“Mr Mitchell would then lend funds to the company to enable it to buy the land, with the option to buy back the remaining shares at any time for a nominal price.
“Mr Jarvis advised Mr Mitchell that the share ‘buy-back’ could be effected through the New Zealand shareholder agreeing to hold the shares in the company on bare trust in favour of Mr Mitchell.”
In May that year, Jarvis arranged for a company called Heidi Mitchell Sustainable Ltd (HMSL) to be incorporated.
In the following months, Mitchell purchased seven East Coast forestry blocks on behalf of HMSL without obtaining OIO consent.
Ponsonby lawyer Andrew Jarvis has been fined $275,000 for breaching foreign buyer rules in connection with his role facilitating the sale of 271ha of forestry land Gisborne and Auckland.
Jarvis meanwhile arranged the execution of documents under which a NZ citizen agreed to hold shares in HMSL for Mitchell, but “to transfer the shares to him at his request and to vote at meetings of the company’s shareholders in accordance with his wishes”.
The purchase of the blocks then went ahead.
In 2014, Keiling emailed Jarvis saying he was a colleague of Mitchell’s who also lived in Singapore.
Keiling said he wanted to acquire NZ land using the same structure that Mitchell had used.
“Mr Keiling sought Mr Jarvis’ legal advice about this proposal, including whether it would ‘work’.”
Jarvis replied he would be “happy to assist” the German businessman and advise on the structure of the transactions and “OIA consent issues”.
Jarvis then incorporated a company called AJN Land Ltd to purchase land on Keiling’s behalf, with a NZ resident recorded as the sole director and shareholder.
In September that year, Jarvis wrote to Keiling saying the structure he’d created meant the company “on the face of it” would not meet the definition of an overseas person under the Act.
Later that year, Keiling began negotiations to buy forestry land north of Auckland. A real estate agent emailed Jarvis saying he assumed the lawyer had advised Keiling on the application of foreign buyer rules.
Jarvis replied that Keiling’s involvement was limited to providing funds and being an adviser.
“He said Mr Keiling was not involved in the ownership of AJN.”
The sale went ahead.
The judgment says that after the transactions came to the attention of the OIO, Jarvis co-operated and provided documents to investigators.
He accepted that his actions breached the law by “recklessly assisting Mr Mitchell and Mr Keiling to set up company structures that defeated, evaded or circumvented the requirements of the Act”.
Jarvis admitted the breaches and accepted he should pay a pecuniary penalty.
Forestry has attracted some big name investors. Photo / Supplied
Justice Lang said the purchasers had already been penalised, with the hefty fines handed down reflecting the profits they made when on-selling the land.
In Jarvis' case, the only financial benefit he derived was legal fees charged to set up structures used to evade the Act.
The offending was described as moderately serious.
“Although Mr Jarvis had no specific expertise in relation to transactions to which the Act applies, he was nevertheless an experienced lawyer.”
He was culpable because he knew the requirements imposed on his clients as overseas persons, but “devised and implemented structures” to avoid those responsibilities.
“His conduct was reckless because he facilitated the transactions without having carefully reviewed the restrictions imposed by the Act.”
The judge ordered Jarvis to pay penalties of $275,000 for the transactions plus $10,000 towards Land Information New Zealand’s costs.
In a statement this morning, Jarvis said: “We cannot comment due to issues of client confidentiality”.
LINZ acting compliance leader Pedro Morgan said Jarvis used “local associates” to skirt the requirements of the Act.
During the investigation, LINZ uncovered evidence that Jarvis structured the transactions and gave legal advice that resulted in the investors acquiring interests in sensitive land without consent.
Jarvis admitted his actions were reckless.
“Lawyers and advisers play a crucial role in supporting our overseas investment regime by providing investors with the right information and advice.
“Good legal advice helps the regime work effectively and supports New Zealanders and overseas investors to have confidence in it.
“The vast majority of advisers help their clients to understand the law and make the right decisions, which is why it is so disappointing that in this case, overseas investors have been enabled to break the rules by a legal adviser.”
The penalties awarded reflected the seriousness of the breaches and should send a warning to anyone seeking to undermine the rules, Morgan said.
Lane Nichols is Deputy Head of News and a senior journalist for the New Zealand Herald with more than 20 years' experience in the industry.
Sign up to The Daily H, a free newsletter curated by our editors and delivered straight to your inbox every weekday.
