The would-be Chinese buyer of the 16 Crafar dairy farms remains optimistic it will still get to own the properties.
The High Court in Wellington has ordered the Government to review its decision to allow Shanghai Pengxin to buy the Crafar farms.
Two ministers approved the sale last month after receiving a recommendation from the Overseas Investment Office (OIO).
The OIO is expecting to make a new recommendation on the bid "in a matter of days".
"It's eminently possible that the OIO will come up with the same recommendation and that the ministers will accept that," Prime Minister John Key said in Parliament as a political furore erupted over the High Court's order.
The High Court challenge was made by rival bidders Crafar Farms Purchase Group, led by Sir Michael Fay and including local farmers and iwi groups.
In his decision today, Justice Forrest Miller found that the Overseas Investment Office's recommendation to allow the purchase to occur "materially overstated" the economic benefit of the transaction to the New Zealand economy.
That was because any new purchaser of the farms would be expected to return them from their current unsatisfactory state "to bring their production up to its potential."
Asked on Radio New Zealand whether Pengxin still expected to be allowed to buy the farms, which have been in receivership since 2010, a spokesman, Cedric Allan, said: "Yes I do."
"There has never been a purchase subjected to such rigorous scrutiny."
Allan said Pengxin was "quite astonished" by the decision.
However, Green Party leader Russel Norman used the court's decision to claim the Pengxin deal had only been approved after lobbying by Chinese government officials who had made it clear the deal was important for diplomatic relations between China and New Zealand.
The judgment appeared to require foreign bidders and the OIO in future to second-guess what another buyer might do to improve a farm's output.
Key's initial response to the judgment was that the government was "highly unlikely" to appeal the decision, but Land Information Minister Maurice Williamson was more circumspect.
In a statement this evening, Williamson and the other consenting Minister, Associate Finance Minister Jonathan Coleman, said the judgment of Judge Forrest Miller was "a new judicial interpretation of complex legislation", which the OIO would now apply.
They pointed out that the judge had rejected arguments by a consortium of New Zealand bidders, led by merchant banker Michael Fay, that Pengxin should be rejected because it did not have relevant business experience and acumen.
The 16 farms represent almost 8000 hectares of land across the North Island. The price has not been disclosed but there has been speculation of a $210 million figure.
Crafar Farms Purchase Group spokesperson Alan McDonald said the decision confirms its view that Shanghai Pengxin's purchase of the Crafar Farms would bring no additional economic benefit to New Zealand.
"New Zealand dairy farmers are the best in the world so to say that an overseas investor can come in and offer more than you get from New Zealand diary farmers, we just don't think that makes sense," said McDonald.
"It is reassuring that a High Court judge has come to a similar conclusion and set aside the Minister's approval," said McDonald.
McDonald said the Purchase Group and its legal team were now taking time to fully consider the details of Justice Miller's decision.
Labour leader David Shearer has also welcomed the decision.
"The Government's handling of this process has been absolutely shambolic," Shearer said.
"It always intended to sell this valuable land to Shanghai Pengxin despite clear evidence that it was not the right decision for New Zealand."
The decision sparked a barrage of questions in Parliament today.
Shearer asked Key if he still had confidence in his own judgement "given he said the law would not have allowed us to reverse the decision made by the Overseas Investment Office."
Key replied "absolutely,". He said the ruling may have implications for overseas investors wanting to apply in the future.
"What's certainly clear, is it may be quite different for people with future applications about whether they are successful or not," Key said.
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