CHIEF EXECUTIVE OF LAND INFORMATION NEW ZEALAND v SMITH ROAD FARM LTD [2021] NZHC 795

CHIEF EXECUTIVE OF LAND INFORMATION NEW ZEALAND v SMITH ROAD FARM LTD[2021] NZHC 795 [14 April 2021]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2019-404-000259[2021] NZHC 795UNDER Overseas Investment Act 2005BETWEEN CHIEF EXECUTIVE OF LANDINFORMATION NEW ZEALANDPlaintiffAND SMITH ROAD FARM LIMITEDFirst DefendantPARANUI FOREST LIMITEDSecond Defendant488 MANGANUI ROAD FARM LIMITEDThird DefendantHearing: 14 April 2021Counsel: KR Muirhead for PlaintiffDA Campbell and JS Wang for DefendantsJudgment: 14 April 2021ORAL JUDGMENT OF DOWNS JSolicitors:Meredith Connell, Auckland.Dentons Kensington Swan, Auckland.[1] The Overseas Investment Act 2005 regulates investments in New Zealand bypersons overseas. The Act recognises it is a privilege for overseas persons to own orcontrol sensitive assets in this country. The three defendants, Smith Road Farm Ltd,1Paranui Forest Ltd2 and 488 Manganui Road Farm Ltd,3 contravened the Act. TheChief Executive of Land Information New Zealand4 seeks civil pecuniary penaltiesand costs. The defendants do not dispute either—indeed anything.[2] The Song family controlled the defendants. Between 9 August 2011 and16 February 2016, the defendants acquired interests in sensitive land in Awakino,Ngaruawahia, Awaroa, Paranui and Manganui. The defendants and Song family wereoverseas persons in terms of the Act. The defendants did not seek permission to obtaininterests in any of the properties. Now a little more detail.[3] On 9 August 2011, Smith Road entered an agreement to purchase land inAwakino comprising 1,100 hectares. Smith Road obtained title 1 December 2011.[4] On 14 February 2012, Menglu Song, the daughter of Jun Song and Jing Liu,entered an agreement to buy land in Ngaruawahia comprising 1,146 hectares (acrossnine titles). On 27 February 2012, title was transferred to Smith Road as Ms Song'snominee.[5] On 24 February 2012, Smith Road entered an agreement to purchase land inAwaroa comprising 284 hectares (across 25 titles). Smith Road gained title29 February 2012.[6] The same day, Paranui Forest entered an agreement to purchase Paranui landcomprising 786 hectares (across 12 titles).[7] On 24 December 2015, Jihai Hu, the nephew of Mr Song and Ms Liu, enteredan agreement to buy land in Manganui comprising 345 hectares. Manganui Roadobtained title 16 February 2016.1 Smith Road.2 Paranui Forest.3 Manganui Road.4 The Chief Executive.[8] The breaches were serious because the properties are large. Indeed, each ismuch larger than any other to-date under the Act. Unsurprisingly, the properties arealso valuable. The total purchase price was $12.8 million. The breaches are alsoserious because the properties were acquired for commercial gain. The Song familywished to diversify their investment portfolio.[9] The family knew permission was required to buy the land. However, thefamily was not well served by their lawyer. The breaches reflect negligence, notworse.[10] The Court of Appeal has warned of the dangers of comparisons with otherpenalty judgments given the intensely fact-dependent nature of each case. I haveconsidered three: Chief Executive of Land Information New Zealand v Tang,5Chief Executive of Land Information New Zealand v Hong,6 and Chief Executive ofLand Information New Zealand v BCH Investments Ltd.7[11] The defendants' culpability is greater than Tang and Hong, but less than BCH.[12] The Chief Executive contends an appropriate starting range for each of the fourproperties is between $170,000 and $200,000, subject to totality.[13] The defendants admitted liability promptly; provided "some co-operation"during the investigation, then "fulsome co-operation" during litigation. Thedefendants have agreed to pay the penalties sought. The Song family are contrite.[14] Smith Road made a substantial gain in relation to the land at Ngaruawahia.This must be disgorged. The proposed penalty is $879,304.[15] The proposed penalty for the land at Awakino and Awaroa is $236,250. Thisreflects a totality adjusted starting point of $315,000, less 25 percent discount formitigating features.5 Chief Executive of Land Information New Zealand v Tang [2018] NZHC 382, (2018) 19 NZCPR460.6 Chief Executive of Land Information New Zealand v Hong [2019] NZHC 1561.7 Chief Executive of Land Information New Zealand v BCH Investments Ltd [2019] NZHC 1630.[16] The proposed penalty in relation to the Paranui property is $138,750. Thisreflects a starting point of $185,000, less 25 percent discount for mitigating features.[17] The proposed penalty in relation to the Manganui property is $127,500. Thisrepresents a starting point of $170,000, again less 25 percent for mitigating features.[18] The penalties are within the range identified by case law. I order them.[19] I also order the defendants pay costs of $16,626.50...Downs J