Synlait Milk says it is confident it can find a solution to the ownership problem now afflicting most of the land on which its new Pokeno factory stands because of an adverse Court of Appeal decision.

That ruling effectively means the factory was built in breach of covenants affecting Synlait's land.

When Synlait purchased the 28 hectares of land in February 2018 it was conditional on the seller, Stonehill Trustee, procuring the removal of the covenants on the land which restricted its use to grazing, lifestyle farming or forestry.

A High Court decision last November had removed the covenants but the owner of adjacent land, Ye Qing and his company New Zealand Industrial Park, has won an appeal against that decision, which was published late yesterday.


"Synlait will continue to engage with all parties involved and is confident the covenants issue should be able to be resolved by the parties. The company remains committed to the location," Synlait chief executive Leon Clement says in his second statement today on the issue.

Synlait shares fell as much as 6 per cent to $9.90 in morning trading but had recently recovered to $10.28.

The company says it has acted "in accordance with legal advice at all times in respect to the land at Pokeno."

That land had been rezoned from rural to industrial, and other industrial developments, including another dairy plant, have been built on nearby land, it says.

The Yashili New Zealand Dairy Company has built a milk processing plant on land across the road from Synlait's land but which isn't subject to the same covenants affecting Synlait's land.

Another dairy company, Winston Nutritional, is planning to build a milk products factory on the other side of the Yashili property on land that is also not subject to such covenants.

Synlait says it had been confident that the land covenants were no longer relevant and that was confirmed by the High Court decision removing the covenants

"It made sense that, as a result of zoning and proper planning that allowed for industrial zoning, that the land covenants would be removed by the court, which they were," Clement says.


Synlait had only taken legal title to the land after the High Court decision, he says. "We intend to continue with our plans at Pokeno."

However, the judgment says that Synlait had started earthworks in March last year and started building the factory in May after gaining resource consents.

The Pokeno plant is due to be commissioned for the upcoming 2019/20 dairy season.