Land law repeal mainly symbolic

Press, 24 January 1986, Page 16

Land law repeal mainly symbolic

The Government’s decision to remove restrictions on the aggregation of farmland, and on the sale of farmland to foreigners, probably will not change land ownership much since the old law was easily avoided, argues HOWARD JOSEPH, a Christchurch lawyer.

The Land Settlement Promotion and Land Acquisition Act of 1952 hardly has the ring of Shakespearian prose about it. Perhaps this is one reason for the paucity of comment on the Government’s end of year decision to repeal the act as part of an economic package to farmers.

Yet the December announcement in Parliament by the Minister of Finance, Mr Douglas, was of historic importance, for the act enshrined for nearly a century certain assumptions about rural landholding and economic growth. ' : These assumptions gained such credence that successive postwar National and Labour Governments treated them as virtually inviolate; that is until very recently now that farming is perceived to be something less than the motor of the economy.

The principal assumption was that controls on rural land aggregation served national economic and social interests. The Government, however, disagrees and has decided to repeal the act for the.simple expedient, as stated by Mr Douglas, that “controls on aggregation are easily avoided and have little more than nuisance value in complicating dealings in farm property.” Certainly many lawyers with farmer clients would agree. However, the strategic rationale for repeal is more than likely to be the continued restructuring of farming in this country.

The Minister indicated as much in his statement to Parliament, saying “that these changes will help assist the process of restructuring to occur.” “It will increase the opportunities for new capital, new technology and new management practices to be introduced,” he said.

With repeal expected soon, the unfettered right of those already owning farms to further pur-

chase more than two hectares without the consent of the Land Valuation Tribunal will be an historical departure from previous policy, or rather the mythology of rural landholding in this country.

Probably it is not enough to say repeal was prompted merely on the ground of controls being “easily avoided,” because the Government would have tightened or removed the exemption for ten-man companies, the principal device for avoiding statutory, restrictions. Historically, repeal is thereforejof huge significance to New Zealanders. Reversed are certain policy assumptions dating back to Dick Seddon’s Liberal administration of last century which legislated for the break-up of the big landed estates. A’principal assumption behind Seddon’s land reforms was that rural land was a national resource and not the private preserve of a self-perpetuating gentry. This was not an unnatural premise for a Government so radically reformist for the time that New Zealand was soon to be called the social laboratory of the world. Therefore, in promoting individual!" land rights, the Liberal Government encouraged a policy of closer, more intensive settlement of farmland. This policy was further refined by the enactment in 1952 of The Land Settlement Promotion and Land Acquisition Act. Probably the social intent of the act was less doctrinaire than the estatebreakers of Seddon’s time and emphasised more the economic utility of intensive land settlement, especially as a means of bringing into production marginal land. The statutory object of closer settlement into smaller economic units, using mechanisation and grassland science and technowas to be obtained by

restrictions on foreign ownership and the “undue” aggregation and acquisition of farmland. The Land Settlement Promotion and Land Acquisition Act recognised, indeed sanctified the role of the family farm in achieving national economic goals; and this country’s rise in post-war living standards showd 'the legislation was not a misplaced article of faith.

The act did no more than reflect the reality that this country was prospering under a farmer-led export strategy of bulk agricultural production. The Korean War wool boom, an unrestricted British market, and a manufacturing sector yet to challenge seriously for the ear of Government made the act opposite for the times.

It was the heyday of a rugged independent “yeomanry” of New Zealand farmers, creating to this day, but only now waning, a view of ourselves as essentially a rural people.

Particularly revealing was the original passage of the bill through Parliament. The Hansard transcripts reveal some attitudes to land ownership that now sound curiously outdated or even quaint given the current emphasis on competition and market alone. The Hon. R. E. Corbett, the National Government Minister speaking for the bill, was to say: “Land is limited in area, and for that reason, if for no other, there must inevitably be some control on land transactions. “Ownership of land carries with it an implied trust and I am certain that that trust is better fulfilled when there is the maximum number of farmers carrying out their own farming operations and working out their own destinies. “When it is all said and done, we are only stewards in the custodianship of our own land,” said the Minister.

That statement has also a certain Seddonian ring, for what the Minister was really propounding was an avuncular form of State interventionalism as practised by the old Liberal Party — until very recently the methodology of government of

both major parties. There is another reason why the act’s impending repeal should invoke historical curiosity. The policy behind the act reveals the New Zealand trait of putting party-line philosophy on the political anvil and hammering out a new accord, often to the concern of party purists. Mr Corbett, in defending his department’s bill from farmer and Chamber of Commerce attack, was to say: “It has been stated that the measure was socialism; that it was communism. “It had every kind of ‘ism’ attached to it that ingenuity of man could devise,’’ he said. Conceivably, the present Labour Government, in promoting land aggregation could also face allegations of monopoly land capitalism from its party pure. The Government, however, in repealing the provisions of the ace restricting foreign ownership, has nevertheless retained the consent of the Overseas Investment Commission (a complementary requirement under the old statutory regime) as,a prerequisite to foreign ownership of farmland. Policy considerations aside, many lawyers dealing with the act will welcome its demise. A report presented to the Costs and Conveyancing Committee of the New Zealand Law Society called the act “an ineffective ... expensive, bureaucratic obstacle course.” Until now, farmers wishing to purchase m6re farmland in blocks exceeding two hectares have been required to submit a consent application to the Land Valuation Tribunal, Parliament’s delegate administering the act. This applied to both freehold land and to leases of three years or more duration, with the onus on the purchaser or lessee to show the transaction was justified in terms of economic utility, or rather creating a viable “economic unit,” and not merely for the sake of aggregation. However, it is doubtful whether aggregation was ever controlled and in the year to March 31, 1982, two hearings only arose from 6982 applica-

tions to the Land Valuation Tribunal. J •'

The main avoidance device has been the formation of tenman purchasing companies exempted under the act from submitting consent applications to the tribunal. Presumably, the legislature saw a ten-man company as sufficiently spreading property rights so as to obviate the odour of aggregation. The upshot, or rather fiction, is the number of legal staff throughout New Zealand who now own one share in a farming company. However, successive Governments of the day could have tightened the company loophole and it is a mystery why this was never done. Indeed, it could be argued that to have tightened the act would have been a positive change in Government policy, given the level of avoidance. Also, some of the secondary policy considerations behind the act now appear somewhat antiquated. Setting returned servicemen on the land was long ago achieved and the settlement of small, independent landed proprietors as a bulwark against Communism — as perceived by New Zealanders in the McCarthyite era of the fifties — no longer appears a compelling argument . ’■ The significance of repeal is essentially symbolic, for it severs a century old concept of landholding; namely that it is socially and economically desirable for the Government to sponsor land settlement by a broad spectrum of the population. Perhaps, however, a sacred cow has grown up about the disposition of farmland because repeal will probably not change much that has already occurred through avoidance. Possibly repeal will alert pub- x lie companies, superannuation fund managers, and the like to the possibilities of diversifying *

their portfolio of investments into farming. It may be that the corporate collective is not far away; but then again, Watties have been there a long time for all that. ;