Bayly AndrewANDREW BAYLY (National—Hunua): Thank you Madam Chair—so many issues to talk about. I just want to respond on that issue around the forestry. Whilst I don't really want to focus on that the issue is: why would you want a New Zealand industry that's already 72 percent owned by foreigners to be able to get bigger—100 percent? I just do not understand that rationale. I don't think the Minister has properly addressed that issue in its totality.The other thing I want to return to is my colleague the Rt Hon David Carter—a very insightful man I have to say. I think you brushed aside his example which was the case of a foreigner who works with a farm manager gives him 1 percent and then basically controls the farm manager. Of course the Minister said Oh well that won't work and there are plenty of rules." Well actually I don't think it actually needs to be 99 percent; it only needs to be 75 percent—i.e. the foreigner could own 24.9 percent. But if you were a smart commercial lawyer—and I know there are some frustrated lawyers in this House. I know there are some people who were smart and might be smart but we need good commercial lawyers and unfortunately not many of those are in Christchurch. But the issue I want to raise is that if you wanted to be smart—to answer David Carter's question—what you might do is you would structure the affairs with that farm manager where you might have two different classes of shares with different entitlements. You might have different powers around the directors—one of which the foreigner might own—which would say that his or her right is to have a veto right. Therefore effectively by a negative arrangement they could actually still control what the activities of that business are and there would be rights around the dividends. To actually deal with the equity issue that the Minister raised which is "Why would you do that? It's a rather silly commercial arrangement." what you would do is you would have a bullet payment at the end of the term of the lease or the property arrangement or the partnership or the company—at which point the foreigner would get full value and at which point he or she would need to sell it—thereby still capturing the upside. Now if there were smart lawyers like Dr Duncan Webb who if he had actually thought about this for more than five minutes might have come up with the answer—and I don't think the Minister has actually properly thought it through. I think that was a very valid scenario that the Rt Hon David Carter put up. Rt Hon David Carter: Well he said there'd be no equity because the prices are going to decline anyway. ANDREW BAYLY: Oh well they're going down. We haven't heard about the reduction in the price that he wants in farmland and residential land and I really would like to hear that figure because I think many New Zealanders would also like to know what the value of their land or home is when they've got a mortgage on it. I think that's an important aspect. Now what I really wanted to talk about was new section—[Interruption] I know. There are so many things in this bill. Hon Amy Adams: You're just warming up. ANDREW BAYLY: I know—I'm just warming up. Of course new section 51A under the subheading "Statement relating to compliance with consent requirement"—and it's a bit of a theme. The Hon Amy Adams was talking about it and the Rt Hon David Carter and I'm sure Mr Bennett's going to talk about this. This is the issue about compliance. I've got to say that the last time I spoke on this bill right at the close of play last week I was cut off at the pass because—Hon David Bennett: No way! ANDREW BAYLY: I was and I was very disappointed because we were talking about the Overseas Investment Office (OIO). As people have noted we asked the OIO what were their resourcing. We heard that at the moment they process a few hundred OIO requests a year—and of course quite rightly so. In general I think they do a very good job. But the missing figure that I just couldn't say last time was that when we asked the OIO about this they said that their estimation and it could be much higher was 4000 consents a year—4000 OIO consents that they are going to have to review every year. Of course what new section 51A deals with is the requirement for the foreigner to make a statement. We had a long conversation on this because one of the issues was who should be making that statement and whose responsibility was it to make that statement. When the bill first got introduced by the Minister it placed the obligation on the conveyancer. Of course we all know what a conveyancer is. It means a lawyer or conveyancer under the Lawyers and Conveyancers Act 2006. Madam Chair Madam Chair Madam Chair. CHAIRPERSON (Hon Anne Tolley): I haven't rung the bell yet. [Bell rung] Andrew Bayly. ANDREW BAYLY: Thank you Madam Chair. So what this new section 51A requires is in effect that a foreigner acquiring an interest in residential land must make a return and that interest is defined as "a freehold estate or a lease or any other interest for a term of 3 years or more (including rights of renewal". Of course what the foreigner must do is actually write a statement to the best of their knowledge and belief saying that they have met the requirements of new section 51A and also whether in fact they are acting on behalf of someone else. So we've got nominees—we might have foreigners acting on behalf of other foreigners. So that's all captured under new section 51A(2) and on the face of it that looks fine. Of course the question then becomes: who lodges it? That's covered under new section 51A(5) which states that the foreigner "must before the instrument is lodged provide the statement or a copy of the statement to the conveyancer who will lodge or direct the lodgement of the instrument." So of course by implication the foreigner can't make that lodgment but a conveyancer must. Of course this is where some of the issues start to arise because in the context of what I was talking about there and the number of consents—4000 consents—there is the potential for the foreigner and the conveyancer to misinterpret the rules and secondly what it means for the OIO such as whether in fact they know it's been done whether it's been done in the prescribed period of time and all those sorts of issues. One of the clauses states that if you don't do it on time there's a $20000 fee which sounds quite reasonable on the face of it. But when you're talking about large chunks of money with large values of land in the scheme of things $20000 is actually a very small fine. In fact you might take that as part of the business cost of doing this. The requirement is that they will have to sell the land at some point in time but the issue I've got is how do we make sure that those obligations are met in a timely way how does the OIO go about doing that and of course there is the resourcing around that and the cost relating to that. We started to talk about the cost that the OIO might have to incur with the additional people and I'd really like to hear from the Minister what is the estimate of the number of new people that the OIO will have to employ to meet these requirements because if we are talking about substantial numbers already doing the few hundred consents at the moment we are talking about millions and millions of dollars of compliance costs. So that's just on the first period when the first consent is sought. The other thing that came out of the Finance and Expenditure Committee was what happens in subsequent rollovers after three years and how does the OIO go about following those? So if you are having 4000 transactions a year quickly within four years you'd get to 16000 and obviously it cascades and goes beyond that. The issue is how the whole process is to be managed in a proper manner so that we can make sure that in fact—if it is the real intent of the Government to make sure that they've got some control over it—it is adequately resourced and it actually complies with the bill. I think these are issues that I'd very much like to hear from the Minister on.The other issue round this whole thing is the rules around the regulator requesting the disposal of property. This is covered in new section 41E—and I know some of my colleagues may have traversed this—and this is the requirement to enforce those conditions. I think that when you're talking about people who are very sophisticated about the way they're investing it's very important that we have clarity around those provisions and that they are brought to bear quickly at the time that they need to be applied because otherwise—again I'd just make the point—even under new section 41E we're going to see some potential for these transactions to still slip through underneath the radar and not actually comply with this legislation. I think that these are fundamental issues which I haven't heard the Minister speak about. I am dying to hear the Minister talk about it—Hon Amy Adams: Oh don't die—that'd be a shame. ANDREW BAYLY: —in a figurative sense—because this is essential to this piece of legislation and whether in fact it's going to work."