THE CHIEF EXECUTIVE OF LAND INFORMATION NEW ZEALAND v TRINITY GREEN ESTATE PARTNERSHIP [2023] NZHC 2330

THE CHIEF EXECUTIVE OF LAND INFORMATION NEW ZEALAND v TRINITY GREEN ESTATEPARTNERSHIP [2023] NZHC 2330 [25 August 2023]IN THE HIGH COURT OF NEW ZEALANDHAMILTON REGISTRYI TE KŌTI MATUA O AOTEAROAKIRIKIRIROA ROHECIV-2022-419-210[2023] NZHC 2330BETWEEN THE CHIEF EXECUTIVE OFLAND INFORMATION NEW ZEALANDPlaintiffAND TRINITY GREEN ESTATEPARTNERSHIPDefendantHearing: On the papersCounsel: F J Cuncannon and K R Muirhead for plaintiffK E Cornegé and C R Stewart for defendantDate of judgment: 25 August 2023JUDGMENT OF JAGOSE JThis judgment was delivered by me on 25 August 2023 at 12.30pm.Pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarSolicitors:Meredith Connell, WellingtonTompkins Wake, Hamilton[1] The Chief Executive of Land Information New Zealand, the regulator in termsof the Overseas Investment Act 2005 (the Act),1 seeks Trinity Green Estate Partnership(the partnership) pay a civil penalty of $97,500 on its contravention of the Act.[2] Given the regulator's application was scheduled to be heard during anunrelated three-week criminal jury trial before me, at my suggestion, the parties agreedI could determine the application on the papers. This is that determination.Background[3] The partnership comprised the New Zealand resident Geng Wu andNew Zealand incorporated Ho No 2 Trustees Limited (Ho Ltd) in equal shares. Ho Ltd— solely owned by Suet Ching Ho, a citizen of the Hong Kong Special AdministrativeRegion of the People's Republic of China — and therefore the partnership accordinglywere "overseas persons" for the Act's purposes.2[4] In March and May 2016, the partnership progressively acquired equitable andlegal interests in non-urban land, larger than five hectares in area, in the Waikato'sCambridge (the land). As such, the land was "sensitive land" in terms of the Act.3 Asan overseas investment in sensitive land, the transaction required consent under theAct,4 to be obtained before the investment was given effect under the transaction.5[5] The partnership had not obtained such consent. In May 2019, the partnershipvoluntarily disclosed its unconsented acquisition to the Chief Executive of LandInformation New Zealand (the regulator).6 In December 2019, Suet Ching Ho divestedher interest in Ho Ltd to New Zealand residents, meaning the partnership ceased to bean overseas person. For present purposes, in referring to "the partnership", I mean asan overseas person.1 Overseas Investment Act 2005, s 30(1).2 Section 7(d) and (e).3 Section 12(a) and sch 1, pt 1, table 1, row 2.4 Section 10(1)(a).5 Section 11(1).6 Section 30(1).[6] The partnership admits the equitable and legal interests it acquired in the landgave effect to an overseas investment without the requisite consent. Such is an offencepunishable by a fine not exceeding $300,000.7 Alternatively, the regulator may seeka contravener's payment of a civil penalty not exceeding the higher (relevantly here)of $300,000 or any quantifiable gain to the contravener in relation to the land for whichconsent should have been obtained.8[7] The regulator and partnership agree the partnership's breach — in acquiringnon-urban land of some 8.5 hectares in area, at a purchase price of $6.1 million, forsubdivision and building of an intended 97-lot residential development — ismoderately serious offending, but gave rise to no quantifiable gain to the partnership.And they also agree — as an acquisition structured on legal advice in the interests ofone of the New Zealand residents to whom Suet Ching Ho's interests became divested,which obtained no benefit from the structure and was achievable by Suet Ching Ho'sdirect gift to the New Zealand resident without any requirement for overseasinvestment in sensitive land — the partnership's breach was inadvertent. Notably, it isagreed Suet Ching Ho's financial contribution to the transaction always was availableas a gift to the New Zealand resident, but she benefited from achieving the transactionwithout either consent or conditions as may have attached to that consent.[8] For my determination now is the amount of the civil penalty sought by theregulator. The regulator proposes a civil penalty of $97,500, derived from a startingpoint in a range from $120,000 to $140,000, discounted by 25 per cent for thepartnership's co-operation. The partnership, emphasising its voluntary disclosure,would accept such a penalty.Approach to civil penalties[9] At the time of the partnership's contravention, the Act's s 48 relevantlyprovided:Court may order person in breach to pay civil penalty7 Section 42.8 Section 48, as it applied at the date of the breach.(1) On the application of the regulator, the court may order a person (A) to paya civil penalty to the Crown or any other person specified by the court ifA has—(a) contravened this Act; or(b) committed an offence under this Act; or(2) The court may order A to pay a civil penalty not exceeding the higher of—(a) $300,000; or(b) any quantifiable gain (for example, the increase in the value sinceacquisition) by A in relation to the property to which the consent orexemption relates or for which a consent should have been obtained;or(3) A person cannot be ordered to pay a penalty under this section and berequired to pay a fine under any of sections 42 to 46 for the same conduct.(4) For the purposes of this section, the court must determine whether aperson's conduct falls within subsection (1) on a balance of probabilities.[10] Given the partnership's admission, I determine on a balance of probabilities itsconduct was in contravention of (and commission of an offence under) the Act.Sentencing then usually engages two steps, so that — with 'non-mechanical' referenceto analogous cases,9 and aggravating and mitigating features of the offending —I should first decide a starting point for the breach, to adjust that up or down to takeinto account individual circumstances, for determination of the applicable civilpenalty.10[11] As an exercise in sentencing for regulatory offending, "[t]he primaryconsideration is deterrence and penalties must be set at a level that achieves bothspecific and general deterrence".11 Reservations against drawing too close analogywith criminal sentencing principle — particularly given the Act's regulatory rather9 Telecom Corporation of New Zealand Ltd v Commerce Commission [2012] NZCA 344 at [62],citing Australian Competition and Consumer Commission v Telstra Corp Ltd [2010] FCA 790 at[211].10 Moses v R [2020] NZCA 296, [2020] 3 NZLR 583 at [46]; R v Taueki [2005] 3 NZLR 372 (CA)at [8].11 Telecom Corporation of New Zealand Ltd v Commerce Commission, above n 9, at [28] and [55],the latter citing Carter Holt Harvey Building Products Group Ltd v Commerce Commission (2001)10 TCLR 247 (CA) at [94]; Commerce Commission v Qantas Airways Ltd HC AucklandCIV-2008-404-8366, 11 May 2011 at [28]; and Commerce Commission v New Zealand DiagnosticGroup Ltd HC Auckland CIV-2008-404-4321, 19 July 2010 at [17].than penal nature, and the need to have regard for the contravention in its context —are notorious.12 Nonetheless, some have resonance: the gravity of the contraventionand the culpability of the contravener; the seriousness of the contravention in thespectrum of proscribed conduct; and "the general desirability of consistency" ofoutcome with similar contraveners committing similar contraventions in similarcircumstances.13Discussion[12] The regulator identifies 14 cases in which this Court has ordered payment ofcivil penalties under s 48, 13 of which relate to failures to obtain consent beforeoverseas investment in sensitive land was given effect.14 Although those cases all relyon the more structured pecuniary penalty regime derived from s 80 of the CommerceAct 1986 to penalise improper exercise of market power, such nonetheless isconsistent with applicable sentencing principle as outlined at [11] above. I accept —in circumstances in which penalty is agreed, to promote such negotiated resolution asbeing of public benefit — I need only ensure the penalty falls within a proper range.15[13] The regulator highlights five of those cases — each involving contraveningacquisition of interests in land for commercial purposes, without quantifiable gain —for assessment of consistency.16 Other material factors were the size and value of the12 Commerce Commission v Telecom Corporation of New Zealand Ltd (2011) 13 TCLR 270 (HC) at[6].13 Sentencing Act 2002, s 8.14 Chief Executive of Land Information New Zealand v Carbon Conscious New Zealand Ltd [2016]NZHC 558; Chief Executive of Land Information New Zealand v Tang [2018] NZHC 382, (2018)19 NZCPR 460; Chief Executive of Land Information New Zealand v Hong [2019] NZHC 1561;Chief Executive of Land Information New Zealand v BCH Investments Ltd [2019] NZHC 1630;Chief Executive of Land Information New Zealand v FFG Investment Ltd [2019] NZHC 3293;Chief Executive of Land Information New Zealand v Chor Ltd [2020] NZHC 1254; ChiefExecutive of Land Information New Zealand v West Drury Holding Ltd [2021] NZHC 704; ChiefExecutive of Land Information New Zealand v Smith Road Farm Ltd [2021] NZHC 795; ChiefExecutive of Land Information New Zealand v Zhao [2021] NZHC 857; Chief Executive of LandInformation New Zealand v Lee [2021] NZHC 1214; Chief Executive of Land Information NewZealand v Zhang [2021] NZHC 1266; Chief Executive of Land Information New Zealand vClevedon-Kawakawa Road Ltd [2021] NZHC 1831; Chief Executive of Land Information NewZealand v HK Search Ltd [2022] NZHC 444; Chief Executive of Land Information New Zealandv Agria (Singapore) PTE Ltd [2019] NZHC 514.15 Commerce Commission v Alstom Holdings SA [2009] NZCCLR 22 (HC) at [18], referring to NWFrozen Foods v ACCC (1996) 71 FCR 285 and Commerce Commission v Koppers Arch WoodProtection (NZ) Ltd HC Auckland CIV-2005-404-2080, 6 April 2006, (2006) 11 TCLR 581.16 BCH Investments, above n 14; FFG Investment, above n 14; Hong, above n 14; West DruryHolding, above n 14; Lee, above n 14.land acquired, and the contravener's awareness of the Act's requirements. Startingpoints for penalties ranged from $103,000 to $300,000, and from $130,000 to$170,000 for "inadvertent" or "negligent and careless" breaches.17[14] The Law Commission has observed "[w]hich factors will be relevant willdepend on the features of the specific legislative regime and what it is seeking toachieve."18 At the time of the partnership's acquisition, the Act's purpose was:19 to acknowledge that it is a privilege for overseas persons to own or controlsensitive New Zealand assets by—(a) requiring overseas investments in those assets, before being made, to meetcriteria for consent; and(b) imposing conditions on those overseas investments.[15] Relevantly here, the Act requires advance consent be obtained for acquisitionsof non-urban land exceeding five hectares in area. At the time of the acquisition, unders 16(1), the criteria for such consent included the overseas person's "good character",possession of relevant "business experience and acumen" and demonstration of"financial commitment to the overseas investment". As Suet Ching Ho neither wasordinarily resident in New Zealand nor intending to reside in New Zealandindefinitely, under s 16(1), her effective investment through the partnership needed tobe determined by Ministers (or their delegates) as at least likely to "benefitNew Zealand (or any part of it or group of New Zealanders)" and, as in non-urbanland exceeding five hectares in area, such being of at least "substantial andidentifiable" benefit. In making that determination, a range of factors was to beconsidered.20[16] Clearly then — under the Act, for assessment of the partnership's penalty —the size of non-urban land in excess of five hectares in area is a material factor. So toois the overseas investor's character, business skills and financial resources. As is theinvestment's substantial and identifiable benefit to New Zealand. The less likelyconsent may have been obtained, the larger should be the penalty to reinforce the17 Lee, above n 14, at [51]; West Drury Holding, above n 14, at [31]; Hong, above n 14, at [25].18 Law Commission Pecuniary Penalties: Guidance for Legislative Design (NZLC R113, 2014) at16.50.19 Overseas Investment Act, s 3.20 Section 17(2).privilege of acquisition. Conversely, the more the impugned transaction did not requireto rely on overseas investment (and particularly if it has been restructured withoutqualifying overseas investment), a less severe penalty may be ordered.[17] From those perspectives, the value of the land — if demonstrative of theoverseas investor's financial resources, or the transaction's benefit to New Zealand —may be more a mitigating than aggravating factor in assessment of breach. But anyprospective gain in value to the overseas investor, whether or not quantifiable, plainlyaggravates the breach and may do so quite substantially.21 I have some resistance toan overseas investor's lack of "awareness" of the Act mitigating any breach. If the Actapplies, the overseas investor necessarily is to be taken to know of it.22 Any lack ofawareness instead may resound in the investor's culpability or responsibility for thebreach. Where, as here, the investor appropriately has relied on professional assistancein formalising the transaction, that culpability may be thought low.[18] The overseas investment at issue here is in non-urban land materially in excessof the five-hectare threshold, pulling any penalty above the lower third of themaximum penalty. There is no evidence the partnership demonstrated any financialcommitment to the investment beyond its purchase price. Thus any benefit toNew Zealand from the land's prospective residential subdivision is not attributable tothe partnership. That aggravates the breach to a penalty of, say, $150,000. On the otherhand, there is no evidence the partnership stood to obtain any gain from the investmentand its culpability for the breach is low.[19] On that basis, consistently with (and disregarding outliers in) the cases onwhich the regulator relies, I take a starting point of $130,000–$140,000, from whicha discount of 25–30 per cent should be available for prompt voluntary disclosure andco-operation with the regulator.23 That brings me to an end penalty somewhere in the$90,000–$100,000 range. I endorse the parties' agreement on a penalty of $97,500.21 See, for example, the maximum available penalty starting point adopted in BCH Investments,above n 14, at [10].22 See for example Crimes Act 1961, s 25.23 Comparably with discounts on an early guilty plea: Hessell v R [2010] NZSC 135, [2011] 1 NZLR607 at [70] and [75]; Moses v R, above n 10, at [22]–[26]; and for "special assistance" or"co-operation": Hessell v R, above, at [73]; R v Strickland [1989] 3 NZLR 47 (CA) at 51.Result[20] Under s 48 of the Overseas Investment Act 2005 as it applied over the periodof the contravention, I order Trinity Green Estate Partnership pay a civil penalty inthe amount of $97,500 to the Crown.—Jagose J