Cabinet minister David Parker said he acted with Cabinet's authority in seeking an exemption for the Te Arai property development at Mangawhai involving two iwi from the impacts of the Overseas Investment Amendment Bill.
Parker told Parliament he had presented a Cabinet paper dated March 22 recommending that a "transitional period" be provided for the development, and the transitional exemption was approved by Cabinet on April 3.
Parker said a submission to the select committee about the impact of the proposed law on the development involved two iwi was the first time that he or his office had become aware of it.
He was answering questions from the National Party which opposed the exemption.
The submission was made to the Finance and Expenditure select committee by the three parties behind the development, Georgina Connelly of Te Uri o Hau, Mook Hohneck of Ngati Manuhiri, and John Darby of Darby Partners.
The high-end development involves two former Crown forests acquired by Te Uri o Hau and Ngati Manuhiri as commercial redress for their Treaty of Waitangi settlements, the 616ha Mangawhai North Forest where 46 house sites are planned, and the 754ha Mangawhai South Forest where 60 house sites are planned.
"Due to the required price point for such home sites to be economical, and the relatively small size of the New Zealand/Australian buyer pool in this price point, such a purchaser pool is necessarily going to be a wider international one," their submission said.
The main aim of the bill was to ban the sale of existing houses to foreign speculators but some exemptions have been made, including for foreign speculators to buy and keep units in apartments of more than 20 units.
The bill as reported back from the Finance and Expenditure committee also included a special exemption for Te Arai from the ban for 15 years.
It was ruled out of order by Speaker Trevor Mallard because combining a public bill and what should have been a private bill was against the rules of the House.
National MPs on the select committee opposed a special exemption for Te Arai, arguing in its minority report that the Clerk of the House had advised the committee it was against standing orders.
Treasury advised the select committee the exemption would be within the rules.
"The advice we received from Treasury, which was also provided to the select committee, that this development is of great significance to these iwi - it's the largest asset they own," Parker said.
Parker also revealed that Treasury had advised against an exemption for Treaty-based land.
In an earlier question to Acting Prime Minister Winston Peters he launched a strong defence of Parker's character under questioning from National leader Simon Bridges.
Bridges asked Peters if he would have expected Parker to seek Cabinet Office advice about managing the appearance of a conflict of interest over the proposed exemption "if it came to light that David Parker has at any time provided legal advice to John Darby."
Peters said "I know Mr Parker. He's a man of integrity and a man of honour. What he says in the truth."