Overseas investor associate fined over sensitive land deal

An overseas investor associate has been fined for not seeking consent to buy sensitive land in Auckland.

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Land Information New Zealand released a statement today over the judgement of Clevedon Kawakawa Road Limited (CKRL) to pay $160,000 in penalties and $15,000 in costs for not seeking approval for a sensitive land purchase it made on behalf of an overseas investor.

It is the first time the court has considered a penalty against an associate of an overseas investor.

In February 2013 businessman Zhaorong Mai agreed to purchase two adjoining properties totalling just over 87 hectares in Clevedon.

The land is categorised as sensitive land as it is non-urban land exceeding five hectares and one of the properties adjoins the foreshore at Kauri Bay and Kahuru Point in Auckland.

According the judgement of Justice Katz, Mai is a Chinese citizen and not a resident of New Zealand. CKRL is a New Zealand company.

At the time of CKRL’s incorporation, and at all relevant times subsequently, Guanxing Zhong has owned 76 per cent of CKRL’s shares and has been the sole director of CKRL. Cong Zhang has owned the remaining 24 per cent of CKRL shares. 

Mai is a friend of Zhong and the de facto husband of Zhang.

The Overseas Investment Act states it is an"offence for an overseas person or an associate of an overseas person to give effect to an overseas investment without the consent required by the Act."

Mai nominated CKRL to complete the purchase before the transaction was settled.

CKRL has conceded it acted as Mai’s associate when it purchased the land and that it failed to seek Overseas Investment Office (OIO) consent, which is a breach of the Overseas Investment Act 2005.

Justice Katz said in her judgment: “CKRL’s culpability is not materially reduced by its associate status. On the contrary, there is a strong need to deter breaches of the Act by associates of overseas persons, given that breaches of the Act by associates of overseas persons had the potential to alienate sensitive New Zealand land in a way that is potentially difficult to monitor and detect.”

OIO Group Manager Anna Wilson-Farrell says the regulator will pursue associates for breaches of the Act as actively as overseas investors directly making purchases.

“It is a privilege for overseas people to invest in New Zealand and we will continue to investigate when investors fail to seek consent to buy sensitive land.

“This is the eleventh case in which the court has awarded penalties for the purchase of sensitive land without consent.

“We will continue to focus on the use of associate relationships as part of our ongoing compliance efforts, and we will take enforcement action whenever we see a breach of the Act. The court decision recognises this,“ says Wilson-Farrell.