Carbon Conscious New Zealand Ltd wanted to plant trees on an eastern Taranaki property to earn carbon credits. Source: Stuff NZ
Although the purchase of a Taranaki hill country property for planting in forestry breached the Overseas Investment Act (OIA), it was based on poor legal advice, the High Court has found.
The Overseas Investment Office (OIO) has welcomed the court’s decision to impose a NZ$40,000 penalty on an Australian-owned company for the breach.
The High Court order, which also requires the payment of more than NZ$6000 costs, relates to the purchase in August 2012 by Gisborne based Katey LR Investment (KLRI) of Riverbank, a 115ha property on Mangaehu Rd, Puniwhakau, east of Stratford.
In the decision, Justice Edwards said KLRI was an associate company of Carbon Conscious New Zealand (CCNZ).
KLRI was incorporated on the basis of legal advice to avoid the requirement for CCNZ to obtain OIO consent to buy the property.
CCNZ, a subsidiary of Australian-listed Carbon Conscious Ltd (CCL), wanted to disguise and distance itself from its plan to ultimately purchase Riverbank and plant trees on it. CCL and CCNZ plant forests to earn and sell carbon credits.
The OIO proceeded with the High Court action following an investigation it began in 2013 when it learned KLRI had bought Riverbank.
Justice Edwards said KLRI’s purchase of the property went ahead so CCNZ could begin planting trees in 2012.
CCNZ wanted to avoid breaching a 2011 agreement with Origin Energy Resources New Zealand Ltd to plant forests for the delivery of carbon credits.
Origin is a part owner and operator of the Kupe oil and gas field off the South Taranaki coast.
Describing the arrangement as a “deliberate circumventing of the act’s controls on overseas investment,” the court found CCNZ had not intentionally broken the law because it acted on legal advice. However, ultimately it was responsible for complying with the act.
OIO group manager Annelies McClure said the High Court decision sent a strong message to lawyers advising overseas investors.
“Giving poor advice can expose clients to significant legal liability, as they’re responsible for complying with the law. They can’t hide behind their lawyer’s advice if things go wrong,” she said.
McClure said the OIO was pursuing action against CCNZ’s lawyer, who was no longer practising.
