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Bankside Employed Barrister Nic Lawrence considers the decision in Future Sustainable Development Limited v Wenjing Liu and whether, following the Court of Appeal judgement, there is some relief for vendors in not being misconstrued as associates under the Overseas Investment Act 2005 (OIA). 

The core issue with the OIA

The OIA recognises “it is a privilege for overseas persons to own or control sensitive New Zealand assets”.[1] As such, conditions are imposed on overseas investment. 

One such condition is the requirement for Overseas Investment Office (OIO) consent for overseas investment in sensitive New Zealand assets.[2] New Zealand has decided that not only does it wish to prevent overseas persons owning sensitive New Zealand assets, it also wishes to prevent overseas persons from attempting to circumvent the rule by using ‘proxies’ or fiduciaries who are New Zealand residents but hold assets on behalf of or for the benefit of overseas persons who would otherwise require consent. In order to prevent overseas persons using third parties to circumvent the Act, “associates” of overseas persons are captured by the OIA as well.[3]

The definition of associate under s 8 of the OIA potentially posed an issue for vendors selling properties to overseas persons who required consent. Could a vendor who sold a property to an overseas person be considered an “associate” if the property was sold to an overseas person, simply by virtue of being the vendor? Even if they did so innocently or on the understanding that the purchaser had obtained consent? 

This potential issue was identified briefly by Rebecca Rose in 2016 in her article Too clever by half – Court’s first Overseas Investment Act penalties decision warns against circumvention attempts [2016] NZLJ 213. This article builds on the issue of associates touched on in Ms Rose’s article.

The issue was recently considered in Future Sustainable Development Limited v Wenjing Liu.[4] If vendors are captured by the associate definition, the OIA obligations to obtain consent would shift from purchaser to vendor. Vendors would have the burden of determining whether a purchaser was an overseas person and thus whether obligations under the OIA arise – a considerable burden for vendors in arm’s-length transactions such as that in Future Sustainable Development Limited v Wenjing Liu.

The core issue in Future Sustainable Development Limited v Wenjing Liu was whether the purchaser could unilaterally waive a clause which made the sale and purchase agreement conditional on the purchaser obtaining consent under the OIA.[5] A party can waive a condition that is solely for their benefit and severable.[6] Thus, this issue turns on whether such a clause is for the sole benefit of the purchaser, or whether it is also, in part, for the benefit of the vendor. This is a novel question. Whether the vendor also benefits from the clause hinges on whether vendors fall within the OIA’s definition of “associate”. 

In the High Court, Justice Jagose cautiously suggested a vendor could be an associate under the OIA. As a result, he held the clause benefited both parties so could not be unilaterally waived by the purchaser. This was overturned by the Court of Appeal. 

What is an associate under the OIA?

To give context to the judgments in Future Sustainable Development Ltd v Liu it is necessary to understand how one can breach the OIA by being an associate. 

Consent is required for overseas investment in sensitive New Zealand assets, including sensitive land.[7] An overseas investment in sensitive land is where an overseas person [8] or their associate [9] acquires an interest in sensitive land.[10] Schedule one of the OIA indicates which land is classified as sensitive land. Sensitive land includes an interest in residential land. 

Associate is defined at s 8 of the OIA. A New Zealand person will be an associate where they:

  1. Are controlled by or subject to the direction of an overseas person;[11] or 
  2. Are an overseas person’s agent, trustee or representative or act on behalf of the overseas person;[12] or
  3. Are subject to an overseas person’s direction, control or influence in relation to the investment in question;[13] or
  4. Act jointly or in concert with an overseas person in relation to the overseas investment;[14] or
  5. Participate “in the overseas investment or the other matter as a consequence of any arrangement or understanding with” the overseas person.[15]

The relationship between the associate and the overseas person can be direct or indirect, general or specific, legally enforceable or not.[16]

The breadth of the associate definition is consistent with the OIA’s policy.[17] The rules relating to associates aim to curb the use of third parties to bypass the Act.

The facts in Future Sustainable Development Ltd v Liu

In Future Sustainable Ms Liu was the vendor of a residential property and FSD the purchaser. [18] Ms Hou, a New Zealand citizen, was the sole director and shareholder of FSD.[19] No party was an overseas person.[20] They negotiated an arm’s length commercial deal for FSD to purchase a residential property owned by Ms Liu.

However, during negotiations, FSD requested the agreement be conditional on obtaining consent under the OIA as it was in discussions with an overseas person who may acquire the property via FSD’s ability to nominate the purchaser under the agreement for sale and purchase.[21] Consequently, a special clause was added to the sale and purchase agreement making it conditional, inter alia, on FSD obtaining OIA consent.[22] A further special clause was added so if the OIA condition was not satisfied by a particular date, either party was entitled to cancel the agreement.[23]

The agreement named FSD “and/or nominee” as purchaser. FSD could either “take title itself, or it might nominate another person to take title under the transfer”.[24] Even where it nominated a third party as transferee, FSD remained liable for purchaser’s obligations under clause 1.5(2).[25] As such, FSD was not an agent of an overseas principal.[26]

Prior to the date by which the OIA condition had to be fulfilled FSD notified the vendor that it was waiving the OIA condition and would settle the purchase itself. Remember, FSD was a New Zealand company that did not require OIO consent.


The vendor did not accept the waiver. She claimed, amongst other things, that FSD could not unilaterally waive the OIA condition because the condition was not for FSD’s sole benefit. She then purported to cancel the agreement based on FSD’s failure to satisfy the condition.[27]

FSD registered a caveat against the property to protect its interests. Ms Liu applied to have the caveat set aside and a declaration that she had validly cancelled the sale and purchase agreement. FSD counterclaimed for declaration the cancellation was invalid and orders maintaining the caveat until Ms Liu performed the agreement.

The High Court decision

Despite expressing some doubts, the High Court ultimately found for Ms Liu on the issue of whether or not a vendor of an arm’s length transaction could be an associate under s 8 of the OIA by refusing to rule it out and then finding that the particular terms of the contract meant that Ms Liu did, in fact, derive benefit from the OIA condition clause.[28]

The reasoning of the High Court on what was the most crucial issue in the case was surprisingly short and difficult to follow. While it correctly identified that there may be some circumstances in which a vendor is also an “associate” under s 8 of the OIA, it misinterpreted the effect and meanings of the specific terms of the agreement in this case where the parties were engaging in an arm’s length commercial transaction and there was nothing else to suggest that the vendor was anything other than that (i.e. nothing else suggesting it was an “associate” trying to assist the purchaser circumvent the OIA).

Ultimately, the effect of the High Court judgment was to find that vendors in arm’s length commercial transactions could be found to be associates under s 8 of the OIA simply by virtue of being vendors.  

The Court of Appeal decision

FSD appealed the High Court decision to the Court of Appeal. Its primary argument was that the OIA condition clause was inserted solely for its benefit because Ms Liu could not, as a matter of law, be an “associate” under s 8 of the OIA purely by way of being the vendor to an agreement for sale and purchase, there being no other facts or circumstances in the case which gave rise to a risk to Ms Liu that she would be deemed to be an associate under s 8 of the OIA. 

In its judgment released in late 2022 the Court of Appeal reversed the High Court decision by finding that the OIA condition was for FSD’s sole benefit and making clear statements that vendors could not be associates under s 8 of the OIA simply by being vendors in an arm’s length commercial contract. 

It agreed with the High Court when it decided that while it was possible for a vendor to be found to be an associate under s 8 if there were other circumstances in which the vendor was involved which caused them to be an associate (e.g. vendor financing an overseas purchaser’s purchase)[29], s 8 of the OIA was not intended capture as an associate a vendor in an arm’s length transaction purely via its contractual relationship as vendor selling a sensitive asset.

At [43] of the Court of Appeal judgment it stated:

We do not exclude the possibility that there may be circumstances in which a vendor makes an investment in sensitive land as an associate of the purchaser. But on the evidence Ms Liu’s role was that of a vendor only. She was not making an overseas investment as an associate of FSD; and that being so, she did not attract an obligation to seek consent under s 22.

There was no evidence in the case that the vendor, Ms Liu, was anything other than an arm’s length party to the sale and purchase agreement. Accordingly, she could not be at risk of breaching the associate rules under s 8 of the OIA because the Act did not put an obligation on vendors in that situation to ensure compliance.

Effect of the Court of Appeal judgment

The Court of Appeal judgment should come as a relief to vendors in New Zealand.

The effect of the High Court decision in Future Sustainable was to leave open the possibility that vendors in arm’s length transactions could be found to be associates under s 8 of the OIA. If correct this would in turn have triggered a requirement by vendors to inquire with purchasers to the extent necessary to satisfy themselves that the purchaser was not an overseas person so that they could not be deemed an associate.

It would have also left vendors open to possible breaches of the OIA without their knowing it. For example, if the purchaser chose to nominate an overseas person as the purchaser at the last minute, which the author submits would be likely to throw conveyancing practices in New Zealand into a tailspin as they figured out how to protect against that risk.

The Court of Appeal ruled this risk out by finding that vendors in arm’s length commercial transactions cannot be associates simply by being a vendor. That does not mean that a vendor can never be an associate; there are a multitude of other ways that a vendor can be caught by the associate rule, but simply being a vendor is not one of them.


[1] Overseas Investment Act 2005, s 3. 

[2] Section 10.

[3] Section 8.

[4] Future Sustainable Development Limited v Wenjing Liu [2022] NZCA 249.

[5] At [1]. 

[6] Hawker v Vickers [1991] 1 NZLR 399 (CA) at 402.

[7] Section 10.

[8] Section 7.

[9] Section 8.

[10] Section 12.

[11] Section 8(1)(a).

[12] Section 8(1)(b).

[13] Section 8(1)(b).

[14] Section 8(1)(c).

[15] Section 8(1)(d).

[16] Section 8(3).

[17] Section 3; Tiroa E and Te Hape B Trusts v Chief Executive of Land Information & Ors [2012] NZCA 355 at [14] – [15].

[18] Future Sustainable Development Limited v Wenjing Liu [2022] NZCA 249 at [5]. 

[19] At [5].

[20] At [41].

[21] At [7].

[22] At [20].

[23] At [21].

[24] At [19].

[25] At [19].

[26] At [19].

[27] At [2].

[28] Liu v Future Sustainable Development Ltd [2021] NZHC 2909 at [28] – [30].

[29] Future Sustainable Development Limited v Wenjing Liu [2022] NZCA 249 at [43].