Lawyers who give poor advice “can expose clients to significant legal liability,” Overseas Investment Office (OIO) Group Manager Annelies McClure says.

This is because it is clients that are responsible for complying with the law. “They can’t hide behind their lawyer’s advice if things go wrong,” Ms McClure says.

This was highlighted in the 4 April judgment of Justice Edwards in The Chief Executive of Land Information New Zealand v Carbon Conscious New Zealand Limited [2016] NZHC 558.

Justice Edwards ordered that Australian-owned Carbon Conscious New Zealand Ltd (CCNZ) pay a $40,000 penalty – and more than $6,000 in costs – for breaching the Overseas Investment Act 2005.

The penalty relates to the purchase of a Taranaki property in 2012. CCNZ needed consent to buy, and plant trees on, the property but had a New Zealand associate – Katey LR – buy it instead.

CCNZ planned to obtain consent and buy the property later – a plan its lawyer incorrectly advised was not in breach of the Act.

The OIO learned of the purchase in 2013, and began an investigation that resulted in the OIO taking High Court action last year.

In her judgment, Justice Edwards described the arrangement as a “deliberate circumventing of the Act’s controls on overseas investment. Katey LR was incorporated so as to avoid the need for CCNZ to obtain consent, and to disguise and distance CCNZ from the ultimate purchase of the property” (at [33]).

“The Court found that Carbon Conscious hadn’t intentionally broken the law – having acted on legal advice – but Carbon Conscious was still ultimately responsible for complying with the Act and, therefore, had to be penalised,” Ms McClure says.

“The lawyer who acted for Carbon Conscious is no longer practising, and the OIO is pursuing action against him for his role in the Carbon Conscious matter.”

This decision sends a “strong message to the lawyers that advise overseas investors,” Ms McClure says.

This is the first case to deal with the quantum of pecuniary penalties for acquiring sensitive land without consent. As liability was not contested in the case, the sole issue to be determined was the quantum of any penalty imposed.