Canterbury milk company Synlait's chief executive Leon Clement said the company acted on legal advice over buying land at Pokeno where it is building a $280 million factory.
SUPPLIED Synlait's new boiler for its factory was built by Lyttelton Engineering and recently transported on the Interislander ferry and then by truck to Pokeno.

 


SYNLAIT MILK
Canterbury milk processor’s shares fall.

Synlait’s share price fell from $10.66 to $9.95 after the Court of Appeal restored covenants affecting the near-complete factory.
Clement said the court decision was unexpected and the company had taken title after an earlier High Court decision removing the covenants.
About 160 workers are building the factory, and a huge boiler commissioned from Lyttelton Engineering was last week en route to Pokeno on one of the Interislander ferries.
The factory is a major project for Synlait to help eliminate single-site risk and source milk from Waikato farmers.
Clement said Synlait has been confident the covenants no longer remained relevant because of rezoning and development in the Pokeno area.
“Synlait will continue to engage with all parties involved and is confident the covenants issue should be able to be resolved by the parties,” Clement said.
Analysts expected Synlait would negotiate with the company that sold it the land, Stonehill Trustee, on the condition covenants were removed.
The February 2018 agreement to buy 28 hectares included conditions that if Stonehill was unable to extinguish the covenants then Synlait could choose to take possession without any obligation to pay interest, cancel the deal, or settle the purchase, “without prejudice to its rights, including as to compensation”.
The covenants were originally placed on the land by Winstone Aggregates to allow for development of a quarry, although it abandoned the plan and sold several blocks to different owners, including Stonehill.
Stonehill succeeded in removing the covenants in the High Court in 2018.
But Ye Qing, the owner of an adjacent ex-Winstone block that included ownership of the covenants, has been successful in overturning the decision in the Court of Appeal.
Judges in both cases said that because of numerous developments around the Synlait site it was unlikely that a quarry would ever be built, even though Ye told the Court of Appeal he intended to establish one.
The nearby developments include a Yashili NZ Dairy factory that is unaffected by covenants, a planned Winston Nutritional milk products plant, and a residential village development planned by Ye.
When the High Court had extinguished the covenants the judge said it was because all of these developments had made the covenants worthless or ineffective because of the difficulty anyone would have obtaining resource consents to set up a quarry.
But the Appeal Court judges disagreed and ruled that the covenants did have value and should remain, even despite the practical resource consent and zoning hurdles of developing a quarry.
The covenants were 20 years old and had a term of 200 years. When Stonehill bought the land it knew it was subject to the covenants and had been unsuccessful negotiating with Ye to extinguish them.
Stonehill had given Synlait consent to start building its plant “in knowing breach of the covenants”, the Court of Appeal said.

The number of dairy producers across Britain stood at an estimated 7,200 in October 2024, according to figures released by the AHDB.

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