If Murray McCully told Parliament that MFAT told him legal risk justified the Saudi Sheep deal, then why does MFAT say they never told him that?

One of the problems for an incumbent Government seeking re-election is that, no matter your best intentions and efforts over the previous term, there will be skeletons hiding in the closet.

That’s because something always goes wrong when you are trying to run an entire country. Ministers screw up, corners get cut, plans go awry. In which case, the best an incumbent Government can hope for is that its skeletons get interred quickly and the closet remains firmly locked.

Now, eight days out from the end of the campaign, the door has creaked open on something National must have hoped was buried forever: its “Saudi sheep deal”. If your memory needs jogged, this was the $11.5 million deal with Saudi businessman Hamood Al Ali Al Khalaf reached after then Foreign Affairs Minister Murray McCully advised Cabinet that the Al Khalaf Group was threatening to sue New Zealand for $20-$30m.

Concerns about that deal and the reasons for entering into it resulted in an Auditor General's  report, which found no evidence of corruption, but criticised “significant shortcomings” in the government's process. In particular, the Auditor General stated that “we saw no evidence of internal or external advice being sought on the extent of the risk of a claim for compensation from the Al Khalaf Group against the government”.

That seemed odd, given that the architect of the deal, Murray McCully, was very clear such advice existed and it justified the Government’s subsequent actions.

Back on May 27, 2015, he said this to the House during question time:

James Shaw: What legal advice did the Government receive as to the likely success of the potential claim by Mr Al Khalaf?

Hon MURRAY McCULLY: As I have made clear, the Government did not wish to proceed down that path, and it entered into talks with the parties to try to avoid such an outcome. I am satisfied that we would never have done so had we not been advised that the claim had some prospect of success. 

Next day, the following exchange took place:

James Shaw: Why did the Minister agree to pay off Mr Al Khalaf with no legal advice about whether there was any credible cause of action?

Hon MURRAY McCULLY: The Government took advice from very senior officials in the Ministry of Foreign Affairs and Trade, including from the legal division.

And following the release of the Auditor General’s report in November 2016, this answer was given:

JAMES SHAW (Co-Leader—Green) to the Minister of Foreign Affairs: Did he ask for, or receive, any advice or assessment from officials about the stated legal threat of up to $30 million from the Al-Khalaf group; if so, what was the nature of that advice?

Hon MURRAY McCULLY (Minister of Foreign Affairs): I received advice from ministry officials prior to meeting with Mr Al Khalaf, in relation to both legal advice that Mr Al Khalaf was known to have taken regarding a compensation claim and the risks of a claim being in breach of New Zealand's World Trade Organization obligations. These formed part of an oral briefing.

However, none of those answers appear to be consistent with a just released Official Information Act response from MFAT to RNZ’s (and Pundit's!) Tim Watkin, which states that “the Ministry advises that it did not seek or provide advice on the extent of the risk of a claim in the New Zealand courts for compensation from … the Government.”

Note also that Watkin’s initial OIA request was for “all and any legal advice". And under the OIA, the content of an “oral briefing” is just as much official information as are documents or computer files.

Consequently, someone’s claim appears to be false. Either MFAT is breaching its obligations under the OIA and failing to follow the Ombudsman’s advice by not revealing the existence of an oral briefing that advised on the litigation risk posed by Mr Al Khalaf’s claim, or McCully outright mislead the House when he told it on at least three occasions that he had received such advice.

If McCully did in fact mislead the House, then that is a big deal. It’s one thing to apparently cover up matters to a TV journalist in an interview, but deliberately misleading the House can be treated as a contempt of Parliament under Standing Order 410(b).

Which is a narrative – “dodgy Minister treated Parliament with contempt to cover up questionable deal with rich foreigner” – that no incumbent Government really wants in the news going into the last week of an election campaign.

Comments (9)

by Greg Presland on September 15, 2017
Greg Presland

Gee that second example is pretty compelling especially if you watch the video ...


Maybe McCully was referring to the fact that generally advice from MFAT was given about all sorts of things.

Otherwise it seems to be a rather large fib.

by Kat on September 15, 2017

"If Murray McCully told Parliament that MFAT told him legal risk justified the Saudi Sheep deal, then why does MFAT say they never told him that?"

Could be another National lie perhaps.

by Nick Gibbs on September 15, 2017
Nick Gibbs

Given Mr McCully has left parliament, what can be done about his fibbing?

by Ian MacKay on September 16, 2017
Ian MacKay

And since Sir John Key also confirmed the lie during Question Time does he escape too?

by Alan Johnstone on September 16, 2017
Alan Johnstone

@Ian presumably he just accepted the story given to him by Mr McCully.

by Rich on September 18, 2017

what can be done about his fibbing

I'm not sure, but I believe there is some sort of exercise going on where people can express pleasure or distaste at the governing party to which McCully belonged. Something to do with a "polling booth" and an orange man or something.


by Graeme Edgeler on September 18, 2017
Graeme Edgeler

deliberately misleading the House can be treated as a contempt of Parliament under Standing Order 410(b)

Parliament has expired. It is now too late for a complaint to be brought.

by Andrew Geddis on September 18, 2017
Andrew Geddis


I know - but the lack of an enforcement mechanism doesn't change the seriousness of the  behaviour.

by Landon Watt on September 19, 2017
Landon Watt

I think you've got things a bit muddled. The initial request appears to have been for "any and all legal advice received by MFAT and/or the Minister of Foreign Affairs on the Saudi sheep deal". The response from MFAT indicates there was advice provided within the scope of the request - it appears to have been withheld on the ground of legal privilege initially (s 9(2)(h) of the OIA). If the advice didn't exist they would have used the administrative grounds 18(e) or 18(g). There is a "neither confirm nor deny" provision in s 10, but it doesn't apply to information withheld under legal privilege, and even where it does apply the agency has to inform the person that they are neither confirming nor denying the existence of the information requested.

It looks like there was some legal advice provided to the Minister, but it is not specifically legal advice on the "extent of the risk of a claim in the New Zealand courts for compensation from the Al Khalaf Group against the government". As the Ombudsman is involved this must be true but it is a very narrow statement. For example, advice provided about risks of claims in other forums than New Zealand courts is excluded. McCully makes specific reference to the WTO, and WTO disputes are not heard by NZ courts.

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