Federal Court of Australia Auken Animal Husbandry Pty Ltd v 3rd Solution Investment Pty Ltd [2022] FCA 294 File number: NSD 2412 of 2018 Judgment of: STEWART J Date of judgment: 29 March 2022 Catchwords: CONSUMER LAW – alleged misleading and deceptive conduct resulting in conclusion of improvident agricultural lease – "Belt and Road" and "Going Out" initiatives of the Government of the People's Republic of China – Chinese state-owned highly resourced agricultural company claiming to be misled by Australian lessor – representation as to prohibition on foreign state-owned entity purchasing agricultural land – representation as to grazing beef cattle carrying capacity of agricultural land in New England region – representation as to rental being a fair market rental– whether alleged representations made – whether alleged representations relied on or causative of any loss – other reasons for improvident lease to have been concluded LANDLORD AND TENANT – lease terminated for lessee's failure to pay rent – lessor's cross-claim for loss of benefit of lease – net present value of the difference between the rent payable under the lease for the term of the lease and the market rent value over the term of the lease Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 281 Date of revised transcript and last submissions: 1 March 2021 Date of hearing: 12-28 October 2020 Counsel for the Applicant M R Pesman SC and N Furlan Solicitor for the Applicant Baker McKenzie Counsel for the Respondent M Ashurst SC, G Farland and M Keene Solicitor for the Respondent HWL Ebsworth ORDERS NSD 2412 of 2018 BETWEEN: AUKEN ANIMAL HUSBANDRY PTY LTD (ACN 611 163 690) Applicant AND: 3RD SOLUTION INVESTMENT PTY LTD (ACN 610 060 172) First Respondent CAREY LEE Second Respondent AND BETWEEN: 3RD SOLUTION INVESTMENT PTY LTD (ACN 610 060 172) Cross-Claimant AND: AUKEN ANIMAL HUSBANDRY PTY LTD (ACN 611 163 690) Cross-Respondent order made by: STEWART J DATE OF ORDER: 29 March 2022 THE COURT ORDERS THAT: 1. Within 14 days of these orders, the parties provide by email to the Associate of Stewart J agreed or competing orders for the disposition of the matter including as to costs. 2. In the event of competing orders, the parties also provide short written submissions in support of their respective positions and which identify any outstanding matters to be dealt with. 3. The making of final orders to be dealt with on the papers unless either party seeks an oral hearing, in which event that is to be communicated in the email referred to in order 1. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT STEWART J: A. BACKGROUND [1] A.1 Introduction [1] A.2 A note on units of measure and currency [15] A.3 Ningxia and Auken [18] A.4 3SI and Carey Lee [36] A.5 Assessing the witnesses [46] A.6 The Kia Ora aggregation [50] B. THE COURSE OF EVENTS [52] B.1 Mr Lee's visit to the PRC in March 2015 [54] B.2 Ningxia's first investigation visit to Australia in May 2015 [58] B.3 Ningxia's second investigation visit to Australia in December 2015 [87] B.4 The lead-up to Ningxia's third investigation visit to Australia [136] B.5 Ningxia's third investigation visit to Australia in April 2016 [166] B.6 Following the third investigation trip [184] B.7 Ningxia's fourth investigation visit to Australia in September 2016 [192] B.8 The lease and thereafter [205] C. A DISPUTE EMERGES [213] D. THE PLEADED MISREPRESENTATIONS [218] D.1 The one-sided bargain [218] D.2 The Ningxia incapacity representation [222] D.3 The grazing cattle capacity representations [231] D.4 The fair/market rental terms representations [246] E. DISPOSITION [280] A. BACKGROUND A.1 Introduction 1 The applicant, Auken Animal Husbandry Pty Ltd, is an indirectly wholly-owned subsidiary of Ningxia Agricultural Reclamation Group Co Ltd. Ningxia is incorporated in the People's Republic of China and is indirectly wholly-owned and controlled by the Government of the Ningxia Hui Autonomous Region, an autonomous region in the north-west of the PRC. The Government of the Autonomous Region is in turn controlled by the Chinese Communist Party (CCP). 2 Pursuant to the well-known "Belt and Road Initiative" of the CCP and the Government of the PRC, in 2015 the Government of the Autonomous Region adopted a policy of "Going Global" or "Going Out" which included facilitating the opening of the economy of the region by, amongst other strategies, encouraging investment by local companies in foreign countries. This was described as "Increasing the efforts of enterprises to go global". [CB316/2607] Ningxia pursued this strategy, resolving to "make good use of the state and autonomous region's support for the 'going global' policy, and strengthen the acquisition and control of source resources such as Australia's high-quality farms and pastures." [CB435/4058] 3 That strategy is the impetus to Ningxia causing Auken to be incorporated and, on 16 September 2016, to conclude a 30 year lease of approximately 15,000 acres of agricultural land (known as Kia Ora or the Kia Ora aggregation) between Tamworth and Armidale in New South Wales. The lessor, which bought the Kia Ora aggregation in order to lease it to Auken, was 3rd Solution Investment Pty Ltd (3SI), the first respondent. The second respondent, Carey Lee, is a 50% shareholder and one of two directors of 3SI. The other shareholder and director is his father. 4 Disputes subsequently arose between Auken and 3SI about the lease, and on 15 May 2018 it was terminated by 3SI on account of Auken's default in making further payments. The disputes are now the subject of this proceeding. 5 The principal relief sought by Auken is a declaration that the lease is void from inception and an order for the refund of $5,852,412 paid by Auken to 3SI under the lease, plus interest from 19 September 2016, being the date of payment. Auken claims against 3SI and Mr Lee for misleading and deceptive conduct in the form of misrepresentations by Mr Lee in contravention of the applicable consumer law, and against Mr Lee as an accessory to 3SI's contravention. 6 Auken pleaded a staggering number and complexity of misrepresentations said to have been made by Mr Lee on his own behalf and on behalf of 3SI. Many of these were ultimately not pressed. The misrepresentations that Auken ultimately pressed against 3SI and Mr Lee that it says caused it to enter into the improvident lease can be summarised as follows: (1) the Ningxia Incapacity Representation (i.e., that Ningxia or its subsidiary was not legally permitted to acquire agricultural land in Australia); (2) the Kia Ora Grazing Cattle Representations, being: (a) the Kia Ora Grazing Cattle Representation (i.e., that the grazing carrying capacity of Kia Ora was 5,000 to 10,000 head of cattle); (b) the Further Kia Ora Grazing Cattle Representation (i.e., that the carrying capacity of Kia Ora could reach more than 10,000 head of cattle through a variety of operations); and (3) the Fair Price Representation (i.e., that the rent to be charged by 3SI in the cooperation agreement and the 30 year lease, including with regard to an annual escalation of CPI +3% in the cooperation agreement, was a fair market price). 7 Auken pleaded a Transaction Urgency Representation (i.e., that entry into the cooperation agreement that preceded the lease and the lease was urgent because of likely price increases or the unavailability of Kia Ora), but it subsequently accepted that that representation is insufficient of itself to found relief. It says that the significance of the urgency representation is that Auken directly acted in accordance with it, which supports the proposition that Ningxia and Auken trusted and were prepared to act on information received from Mr Lee. [T526] Those are matters of evidence that will be dealt with in relation to each of the representations that is relied on. Nothing more need be said about the Transaction Urgency Representation. 8 Auken pleaded and pressed until during closing submissions a Kia Ora Acquisition Cost Representation (i.e., that the price paid for Kia Ora by 3SI in September 2016 was more than $20 million when in fact it was $10 million). That representation was ultimately not pressed as a basis to found relief on the same basis as the Transaction Urgency Representation. [T501:14-15, T548:33-34] I will deal with it similarly. 9 Auken also pleaded a 5,000 Acres Price Reduction Statement (i.e., that Mr Lee had succeeded in bargaining down the price for 5,000 acres of Kia Ora which enabled him to offer a lower rental). However, in closing submissions it said that it places no reliance on that representation other than as an example of Mr Lee providing false information to Auken. [ACS421] 10 Auken also pleaded another misrepresentation, namely that the various terms of the proposed lease were standard for agricultural leases, but by email to the Court on 23 December 2020 it advised that that misrepresentation was not pressed. 11 Aside from denying the misrepresentations and denying that even if they were made they caused Auken to enter into the lease, the respondents dispute Auken's entitlement to the sum claimed. They say that the sum of $5,852,412 should be reduced to $5,210,746 to take account of a notional market rent of $385,000 per annum for the 20 month period from the conclusion of the lease on 16 September 2016 to its termination on 15 May 2018. They also say that interest should only commence to run from the date of termination. In response, Auken says that it is entitled to restitution to its position prior to the lease having been entered into, and that since it never utilised the property for any commercial purpose, or gained any benefit from it, no account should be taken of the period that it notionally had possession of the property. 12 3SI has cross-claimed, seeking damages arising from its loss by reason of the early termination of the lease. It seeks payment of $5,112,284 plus interest at 10% per annum on that sum, being the default rate in the lease, from 15 May 2018, being the termination date. The figure of $5,112,284 is comprised of two amounts. The first amount is $4,976,351, being the net present value at 15 May 2018 of the difference between the rent payable under the lease for the term of the lease and the market rent value over the term of the lease with reference to the evidence of an expert witness. The other is the sum of $135,933, being the net present value at 15 May 2018 of the additional future expenses which may be expected to be incurred during the remainder of the lease. 13 I understand the parties to accept that if Auken is successful then the cross-claim must be dismissed, and if Auken is unsuccessful then the cross-claim must succeed. However, in case I have misunderstood this, I will give the parties the opportunity to bring in competing orders to resolve the matters in accordance with these reasons, or to identify any remaining matters requiring determination. 14 I have included references to the court book and to the transcript in these reasons. That is to make future reference easier, but it is not thereby intended to convey that the references are complete or that in any instance that is the only evidence, or the only evidence that I have had regard to, on the point. A.2 A note on units of measure and currency 15 The expression of area of agricultural land features prominently in this case. Such area is variously referred to in the proceeding in hectares, acres and mu, a Chinese unit of area. The case was conducted on the basis that: (1) 1 ha = 2.47105 ac (2) 1 ac = approx. 6 mu (3) Therefore, 1 ha = approx. 15 mu. 16 The carrying capacity of agricultural land in Australia, also described as the land area required to provide adequate maintenance feed for livestock, is measured in Dry Sheep Equivalents (DSE). A DSE is a 45 kg wether (a castrated ram) or non-lactating, non-pregnant ewe on a maintenance diet. One cow (with a following calf) is equivalent to approximately 15 DSE. [CB19/281] 17 Also significant in the parties' discussions and calculations are units of currency. The case was conducted on the basis that at the relevant time A$1 = approx. 5 Chinese yuan (yuan being the basic unit of the renminbi, or RMB). A.3 Ningxia and Auken 18 As mentioned, Ningxia is a state-owned enterprise. The documentary record shows that it is controlled and run by a committee of the CCP. According to Mr Longjin Xia, Auken's principal witness, Ningxia has 14 farms as well as industries, businesses, and construction and transportation enterprises. There are 140,000 residents on Ningxia properties and 12,000 staff working for Ningxia and its farms. [CB16/181[18]] By the end of 2014, the total assets of Ningxia were about RMB 13.5 billion, i.e., approximately AU$2.7 billion. [CB204/2229] 19 Ningxia holds farmlands in China of 2.38 million mu (about 400,000 acres) and owns about 60,000 head of cattle. [CB16/181[19], CB204/2229] By any measure, Ningxia's agricultural interests in China are extensive. As would be expected, it has considerable expertise and experience in "grazing beef cattle production", i.e., beef cattle production on open grazing land. [T264:21 – T265:1] 20 From early 2015, Ningxia proposed to implement the "Going Out" strategy. The strategy included an item described as the "Sino-Australia cattle and sheep industry". It was apparently in furtherance of that strategy that there was within Ningxia an Australian Project Preparation Office (APPO) that was established on 17 March 2016. Ningxia incorporated Ningxia Agricultural (Hong Kong) Investment Co Ltd in the Special Administrative Region of Hong Kong with the aim of then incorporating Auken in Australia. That was done in March 2016 with the Hong Kong company as Auken's sole shareholder. [CB16/182[30-35], CB111/1442] 21 As will be seen, delegations from Ningxia visited Australia on "investigation trips" on four occasions in 2015 and 2016 which culminated in the disputed lease with 3SI. It is principally on those trips that it is alleged that Mr Lee made the misrepresentations on which Auken relies, although Auken also relies on some written communications from Mr Lee and things said by him during two visits by him to the Autonomous Region and in communications leading up to the conclusion of the lease. The four trips to Australia were in May 2015, December 2015, April 2016 and September 2016. 22 As mentioned previously, Mr Xia was Auken's primary witness. Mr Xia worked for Ningxia and its subsidiaries from 1982. His training was as an accountant. From 2004, he has held a number of managerial roles in Ningxia's Settlement, Finance and Audit departments. In December 2016, he became the Manager-Staff of Ningxia's Modern Husbandry Department, a specialist department with primary responsibility for dairy, beef and pork farms. Between March 2016 and March 2018 he was also Deputy Director of the APPO and a director of Auken. [CB16/181-182[20, 26-30], CB111/1442] 23 At the time he gave evidence, Mr Xia was the Operations Director of Ningxia. [T32:13-16] 24 Mr Xia was part of all four of the Ningxia delegations to Australia. 25 The Director of the APPO over the relevant period was Mr Hong Wang. Although an outline of the evidence to be given by Hong Wang was served, he was not called to give evidence because he advised Mr Salgo, Auken's solicitor, shortly before the trial that he was in hospital due to illness and could not be discharged or have further calls or conversations about the matter due to his condition. Hong Wang was also a director of Auken. He signed the relevant contracts, including the lease, with 3SI on behalf of Ningxia. [CB16/183[36], CB111/1442] 26 The Chairman of the Board of Ningxia whose approval was required before Ningxia could make any contractual commitments with 3SI was Mr Yongzhong Wang. [T177:3-37] Mr Yongzhong Wang did not give evidence although, as will be seen, he was said to have been a witness to several of the alleged misrepresentations by Mr Lee. 27 Mr Zuoming Li gave evidence for Auken. Mr Li is the General Manager of Helanshan Cattle and Sheep Co Ltd, a subsidiary of Ningxia. In 2016, Mr Li was the Deputy General Manager of Helanshan. He was part of the Ningxia delegation to Australia in April 2016. He explained that his role was to take notes and "also assist with the daily operation". Mr Li has a university degree in biotechnology. He has worked for Helanshan since 2009. [T238:2 – T239:31] 28 Mr Duo Yang gave evidence for Auken. Mr Yang is the Deputy General Manager of Ningxia. He has a bachelor's degree in business and economics. He has worked for Ningxia since 1990, save for 2008 and 2009 when he was the Deputy Magistrate of Yanchi County in the Autonomous Region. In 2015, Mr Yang was appointed chairman of the Supervision Department of Ningxia. That department is responsible for supervising and monitoring investments and major decisions made by Ningxia. He was in that position in 2015 and 2016. [T247:33 – T249:7] 29 Mr Yang was part of the Ningxia delegation to Australia in December 2015. His role was to facilitate the trip and to report back to the Ningxia board. He was responsible for taking notes in relation to foreign trade. He understood that the purpose of the visit to Australia was to obtain a general idea about Australian cattle farms. [T250:12-24] 30 Mr Jianning Liu gave evidence for Auken. Mr Liu is a director of Helanshan and the Deputy Director of the APPO. In 2015-2016, he was the General Manager of Helanshan. Mr Liu initially qualified and worked in sugar production. In 2003, he began working for Helanshan. From 2004 he had roles in relation to the export of cattle, including negotiating with foreign customers and monitoring the quality of products and the process of delivery. In his role as General Manager of Helanshan, Mr Liu was in charge of the company's activities in the beef and lamb markets. At that time, Helanshan bred about 10,000 beef cattle in feedlots and about 3,000 sheep per annum. [T268-270] Mr Liu was also appointed as a Deputy Director of the APPO from March 2016. [CB111/1442] 31 Mr Xiaobo Ning gave evidence for Auken. Mr Ning manages three dairy farms operated by Ningxia, each farm having between 1,000 and 10,000 head of cattle. He commenced work in 1988 as a dairy cattle vet working for a subsidiary of Ningxia. Mr Ning does not have specific experience in relation to beef cattle. Mr Ning was a member of the December 2015 and May 2016 delegations to Australia. [T279-281] 32 Mr Xuehua Guo gave evidence for Auken. Mr Guo is a Human Resources Manager employed by Ningxia. Mr Guo has a diploma in corporation management and a degree in business management. He has worked for Ningxia since 1991, initially in relation to phosphate farms and later as a director of the Publicity and Culture Department of Ningxia and secretary and member of the board of directors. Mr Guo was a member of the April 2016 Ningxia delegation to Australia. [T291-293] 33 Mr Jiqing Zhou also gave evidence for Auken. Mr Zhou is a director of Auken. Mr Zhou has a diploma in animal husbandry and worked initially on a feed processing and dairy farm. He rose to manager of the farm. He was responsible for overseeing production and disease prevention for approximately 1,000 dairy cattle. In 2002, he commenced working for Helanshan in a managerial position where he was ultimately responsible for about 9,000 dairy cattle across several locations. He was a member of the May 2015 Ningxia delegation to Australia. [T303-305] 34 Auken also read the affidavit of Robert Parrey, a solicitor based in Lismore. Mr Parrey was not required for cross-examination. Mr Parrey acted for the owner of the Kia Ora aggregation, NGD Enterprises Pty Ltd, a company owned by Graham and Dianne Reid, in the sale of the Kia Ora aggregation to 3SI in September 2016, and the attempted sales of the properties over the preceding two years. His evidence concerned the process of conclusion of the sale and confirmed that the price sought and the price paid for the properties was $10 million. [CB15/134-138] 35 Auken tendered an expert report of Sam Newsome who expressed opinions on, amongst other things, the fair market price for the Kia Ora aggregation in September 2016, a fair market rental for the properties on an annual basis at that time, and the carrying capacity of the properties in respect of grazing cattle. Mr Newsome's report was admitted subject to a number of objections and he was not required for cross-examination. [CB17/217] A.4 3SI and Carey Lee 36 Carey Lee was born in China and qualified and practised there as a medical doctor. After a few years in Singapore for the purpose of learning English, Mr Lee moved to Australia in 1998. He worked as practice manager for a medical practice for a number of years. Following the outbreak of the SARS epidemic in late 2002, Mr Lee returned to China where he worked again as a doctor. He then returned to live in Australia in 2014. It was at that time that he acquired a small farm at Coolongolook in NSW – about halfway between Newcastle and Port Macquarie. [T332-333] 37 Mr Lee explained that in China if his name were to be written in the Latin alphabet it would normally be "Li", but that in Australia he changed it to Lee in the belief that it would be more readily understood in that form. Apparently that is the common Anglicised form of the surname Li. He was also referred to by some of the Chinese witnesses as Lee Zeheng, it being explained that Lee is his family name. Mr Lee also explained that in China he would be known by the title Dr, whereas in Australia he does not use the title Dr because he is not a medical doctor in Australia. That nevertheless explains why some of the English translations of Chinese documents refer to him as Dr Li. [T36:29-36, T332:9-24] 38 Mr Lee explained that he had in mind a business model of purchasing farmland in Australia and leasing it to Chinese interests. In particular, he had in mind the possibility of there being interest from the Autonomous Region because it is a predominantly Muslim area and the staple table protein for Muslims is beef. That is in contrast to non-Muslim areas of China where the main table protein is pork. I infer that it was for that purpose that he incorporated 3SI. [T334:14-27] 39 Mr Xia accepted that Mr Lee had no experience in grazing beef cattle production other than his small farm at Coolongolook, and that he did not have any experience in feedlot production. Also, Mr Xia accepted that he was never told by Mr Lee that 3SI had ever owned and operated any beef grazing farms. [T230:1-33] 40 The respondents called Daniel McCulloch as a witness. Mr McCulloch is the Managing Director of McCulloch Agencies which offers services in relation to rural property real estate sales, livestock sales, property management and financial services for livestock. He is an award-winning licensed auctioneer, and a licensed rural property and real estate salesperson. He and his wife also operate their own farming operations running approximately 6,000 sheep and 800 cattle over three properties in north-west New South Wales totalling about 18,400 acres and an additional 20,000 acres of leased land. Mr McCulloch introduced Mr Lee to the Kia Ora aggregation and showed the properties to the Ningxia delegations on each of the four investigation visits. [T466-467] 41 The respondents also called Grant Campbell as a witness. Mr Campbell was the farm manager of the Kia Ora farms from 2004 until 2016 when they were sold to 3SI. He was present when the Ningxia delegations visited the farms and gave evidence about conversations that took place during the December 2015 and April 2016 visits. [T491-493] 42 The respondents also tendered a number of expert reports, the authors of which were not required for cross-examination. The experts are the following. 43 Diane Skapinker is a solicitor and a partner of Ashurst Australia in Sydney. She gave evidence with regard to the reasonable conduct of solicitors in the position of the solicitors advising Auken on the lease of the Kia Ora properties. [CB18/255] 44 Angus Ross is a certified practising valuer and a director of Herron Todd White in Tamworth. He gave evidence about the Kia Ora aggregation, and in particular the rental market value of the properties in September 2016 based on different assumptions. [CB19/279] 45 Dr Rodney Ferrier is the Managing Partner of Ferriers, corporate and forensic accountants in Sydney. He has a PhD in accounting from the University of Edinburgh. Dr Ferrier gave evidence in support of the cross-claim with regard to the present value (as at 15 May 2018) of the difference between the rent payable under the lease for the term of the lease and the market rent value over the term of the lease. [CB20/339] A.5 Assessing the witnesses 46 All the Ningxia employee witnesses gave evidence in Mandarin through an interpreter. They gave their evidence by way of audio visual link as they were unable to travel to Australia because of travel restrictions related to the COVID-19 pandemic. Although the interpreter was good and no doubt did her best, and I am grateful to her, the evidence was often unclear and difficult to follow or understand. The combination of those factors had the result that I found it very difficult to assess the demeanour of those witnesses in the witness box. Without the benefit of being able to properly assess demeanour, I am left compelled to assess the evidence of the Ningxia employee witnesses principally with reference to the probabilities, internal consistency and consistency with other evidence, especially the documentary record. However, with respect to demeanour it did appear to me that some of their evidence was rehearsed, in particular their frequent and at times unprompted statements that Mr Lee had told them that as a state-owned corporation Ningxia was prohibited from purchasing land in Australia. 47 As will be examined in greater depth later in relation to what is pleaded as the "Ningxia Incapacity Representation", in addition to the apparently rehearsed nature of the evidence provided by the Ningxia employee witnesses on this point, that evidence is inconsistent with other evidence, in particular the documentary evidence showing that Ningxia had intentions to, and an understanding that it could, purchase agricultural land in Australia around the same time it decided to lease Kia Ora. The consistency between the Ningxia employee witnesses in relation to this specific point is notable in light of the significant documentary evidence to the contrary, and suggests to me that the evidence of those witnesses was so cross-contaminated, whether consciously or otherwise, that it is unreliable in respect of the contested issues in the case. I therefore approach the evidence of these witnesses with caution. Mr Xia's evidence is coloured in the same way, and also by my rejection (as will be seen) of his evidence that Mr Lee told him that 3SI bought Kia Ora for more than $20 million. 48 Mr Lee gave his evidence in English. His English is workable, but not good. I make allowance for that. Like the Ningxia employee witnesses, I must ultimately assess Mr Lee's evidence with reference to the probabilities, its internal consistency and its consistency with other evidence, especially the documentary record. In that regard, Mr Lee went beyond the outline of his evidence on occasion in ways that suggest he was making the evidence up. Also, as will be seen, Mr Lee was prepared to be dishonest in his dealings with Mr Xia. I therefore approach his evidence with caution. 49 Mr McCulloch and Mr Campbell were independent witnesses with no interest in the case. They gave their evidence in a straightforward and matter-of-fact way. Except that Mr McCulloch was understandably unsure about what was said, or what occurred, on which of the four visits by Ningxia delegations to Kia Ora, I accept their evidence. A.6 The Kia Ora aggregation 50 The Kia Ora aggregation which 3SI bought and then leased to Auken consists of 51 independent lots forming five farms known as Kia Ora, Glencair, Birralee, Banalasta and Burlington. The aggregation has an area of 6,139.26 ha (or approx. 15,170 ac or 91,000 mu). The non-Birralee portion of the aggregation, which, as will be seen, was treated separately in the lease, has an area of approximately 4,453 ha, or 11,000 ac or 66,000 mu. [CB17/224, 19/282 and 309, 361/2853, 389/3310, 3313 and 3328] 51 The Kia Ora aggregation has improvements consisting of two main homesteads, four cottages, four machinery sheds, three hay sheds, three storage sheds/workshops, seven silos, five sets of cattle yards and four sets of sheep yards. Soils across the aggregation are mainly granite with large areas of heavily timbered support country particularly through the central and northern sections. [CB19/285] There are approximately 285 ha of open arable grazing, 3,000 ha of open and shaded timbered grazing, 430 ha of lighter timbered grazing country and 2,425 ha of native timber with limited grazing value. [CB19/293] B. THE COURSE OF EVENTS 52 Auken's case is that Mr Lee misled it over a period of time – between March 2015 and September 2016 – which conduct ultimately caused it to conclude the lease. The various misrepresentations alleged by Auken and their impact on its decision-making are best understood by breaking that period of time into different phases, as follows: (1) Mr Lee's first visit to the PRC and his meeting there with personnel from Ningxia in March 2015; (2) Ningxia's first investigation visit to Australia in May 2015; (3) Ningxia's second investigation visit to Australia in December 2015; (4) The lead-up to Ningxia's third investigation visit to Australia; (5) Ningxia's third investigation visit to Australia in April 2016; (6) Following the third investigation visit; (7) Ningxia's fourth investigation visit to Australia in September 2016; and (8) The lease and thereafter. 53 It is convenient to deal with each of these periods in turn. B.1 Mr Lee's first visit to the PRC in March 2015 54 Mr Lee visited the Autonomous Region in March 2015 accompanied by a friend, Michael Keough. They visited Yinchuan, the capital of the Autonomous Region, where they were invited to introductory meetings at Ningxia's offices. There are different recollections, or versions, of what transpired although for the most part the differences are not relevant. Mr Keough does not speak Mandarin, the language of the meetings, so there is no significance in him not having been called as a witness. 55 Mr Xia said that at the introductory meetings Mr Lee said that he "is doing trustee company and he is doing some investigation about importing the beef cattle", he has "a trustee company [and] knowledge about the pastoral in Australia", and he is "doing a kind of the loan business for the pastoral in Australia". Mr Xia said that on another occasion, Mr Lee told him that from time to time he lent money to farm owners and if they could not repay the money, he would take over the land. [T37:22-27] Mr Xia did not say that Mr Lee presented himself as having any particular agricultural experience or expertise, let alone that he was an expert on cattle nutrition, animal husbandry or pasture or grassland science. [T33:14 – T34:15] 56 The other possible significance of the introductory meetings is that Mr Lee said that he was asked in the meetings whether Ningxia could buy land rather than lease it, to which Mr Lee responded that Ningxia could buy land with Australian government approval and that he, Mr Lee, could not help in that regard as his company was intent on leasing land to Ningxia. [T335:16 – T337:10] However, Mr Lee's outline of evidence did not give notice that he would give evidence to that effect, and it was not put to Auken's witnesses that those conversations had taken place in the introductory meetings. That was despite Mr Lee accepting in cross-examination that at the time that he prepared his outline of evidence he was aware that an important issue in the case was what he had told Ningxia about its ability to buy agricultural land in Australia. [T358:45 – T359:9] 57 In the circumstances, I am not persuaded that Mr Lee told Ningxia during the introductory meetings in March 2015 that it was able to buy agricultural land in Australia, albeit subject to Australian government approval. Mr Lee explained that he had not mentioned this matter in his outline of evidence because he had not recalled it at that time, but that he remembered it later "after this case becoming more and more serious". [T359:42 –T360:2] I am not satisfied that Mr Lee's late recall of the conversation about buying land is sufficiently reliable to form the basis of any positive finding that he advised Ningxia as he said that he did. B.2 Ningxia's first investigation visit to Australia in May 2015 58 The principal outcome of the introductory meetings was that Mr Lee was to organise an investigation trip to be undertaken by Ningxia to Australia. From Ningxia's perspective, the purpose of the trip was to learn about the beef market and the general situation for cattle grazing in Australia. [T35:24] Mr Lee sent Ningxia an invitation letter on behalf of 3SI, presumably for visa application purposes, in which he referred to "our previous discussions about the lease of an Australian farm". [CB15/505] Thus, whatever broader objectives Ningxia may have had, it was clear that in respect of any future relationship with 3SI that was likely to be as lessee. 59 As mentioned, the trip took place in May 2015. The Ningxia delegation consisted of the following people: [CB15/505] (1) Rongye Mao, Deputy General Manager of Ningxia who was the trip leader; [T34:30] (2) Mr Xia, Manager of the Finance Department of Ningxia who was the trip organiser; [T36:7] (3) Mr Zhou, Dairy Manager at Helanshan who described his role on the trip as being to investigate, observe and consider pasture conditions and grazing methods – it will be recalled that Mr Zhou had considerable expertise in animal husbandry; and [T304-305] (4) Mr Liu, General Manager of Helanshan. [T269:42] 60 Mr Xia said that both Mr Zhou and Mr Liu's roles on the trip were "in charge of the industry of the cattle feeding of the beef cattle industry". [T36:1] I take this to mean that although Mr Zhou's responsibility at Helanshan was principally in respect of dairy cattle and Mr Liu's responsibility at Helanshan included sheep, their responsibilities as members of the delegation to Australia were in respect of the beef industry, and in particular the feeding of beef cattle. 61 The itinerary was developed between Mr Lee and Mr Xia. The Kia Ora aggregation was included because Mr Lee had found it and that it was for sale by searching a real estate website. He envisaged that if Ningxia committed to leasing it then his company would buy it for that purpose. [T365] Aside from Kia Ora, the delegation visited a farm in Victoria owned or operated by Modern Animal Husbandry Co Ltd, a farm in Queensland variously described as being near Gladstone or Townsville which is owned or operated through a company by Yang Fei, and some other farms near Tamworth, Rockhampton and Townsville. The owner of Modern Animal Husbandry Co Ltd, Jiangou Liu, and Yang Fei were previously known to Mr Xia or Ningxia. [T35:30] Modern Animal Husbandry Co Ltd was described in Ningxia's report of the visit, referred to further below, as a joint-venture of the Ningxia Group. [CB18/537] 62 Mr Xia said that when visiting some farms at Townsville, the group asked Mr Lee whether "we can buy a farm". Mr Lee said "no, you cannot because you are a state-owned company". Mr Xia said, "But Yang Fei bought a farm in Queensland", to which Mr Lee responded that Yang Fei's company is a private company so he could buy the farm. Mr Lee also said, "But if, personally, if you want to buy a farm which the value is over $15 million, you also need to get approval." [T38:1-7] 63 Mr Liu said that in Tamworth Mr Lee told the delegation that as a state-owned company, Ningxia cannot buy land in Australia; it can only rent land. [T271:46 – T272:9] 64 Mr Zhou said that during a visit to a farm near Tamworth, Mr Lee said that as a state-owned company Ningxia cannot buy land but can only rent it. [T307:1-3] Mr Zhou recorded notes on his mobile phone during the trip. Those notes do not record anything about buying or not buying land. [CB16/508] They do, however, record the following in relation to a meeting in Tamworth on 22 May 2015: Carrying capacity of 3-3.5 lamb/acre, normal cattle "1 head/4 acre. After improvement, it could reach 1 head/acre… 65 The effect of the note is that the carrying capacity was 3,800 "normal cattle" but that it could be increased to 15,000 with improvements. The note does not record the source of that information although Mr Zhou said that it was Mr Lee. [T307:30] There may be some doubt about that because it was not pleaded that Mr Lee made any carrying capacity representation on the May 2015 trip and a capacity of 15,000 head, whether that is understood as base cows or cows with calves, well exceeds anything that is pleaded against Mr Lee. The most likely possibility is that Mr Zhou misunderstood what Mr McCulloch had said (see [72] below) and which Mr Lee interpreted, namely that in a particular part of the Kia Ora aggregation the capacity could reach one head per acre, and not that that could be achieved over the whole area. 66 Mr Zhou accepted that each member of the delegation was given a brochure about the farm by Mr McCulloch but because it was in English, which he does not understand, he did not keep it. [T311:9-16] Although Mr Zhou said that his role on the trip was to observe the pasture conditions and grazing methods, he did not do a calculation or an assessment of the dry matter per acre (i.e., the nutrition available to grazing cattle) that was available on the farm, being an important integer to any carrying capacity calculation. He said that that was to be calculated "later on". [T311:20-36] 67 Mr Lee said that during the delegation's visit to Tamworth, Mr Mao asked him, "Can we purchase the farm?". Mr Lee said that he responded: "I am not sure. In my understanding, you can purchase or lease the farm, but you need the Australian government to approve because you are foreign government company." After that, Mr Lee said that he was not interested in helping them purchase the land because his business model is to buy the land and then lease it out. [T341:15-19, T372:43-46] He said that they could select a farm and he would purchase it and lease it to them. [T373:41] 68 Mr McCulloch accompanied the delegation on its tour of the Kia Ora aggregation. He met them at their hotel in Tamworth and drove them in his seven-seater Toyota Prado vehicle with Mr Lee acting as interpreter. Mr McCulloch and Mr Lee said that the members of the delegation were all given a copy of an information memorandum. As mentioned, Mr Zhou accepted this, and I find that it occurred. Mr McCulloch said that he went through the main important points about the property, namely its name, size, carrying capacity and the rainfall for the area and Mr Lee interpreted what he said for the delegation. [T470, T309:17-20] He also said that he gave the asking price for the property. [T473:17] 69 Whether or not what Mr McCulloch stated about carrying capacity was accurately interpreted cannot be established, but it is not disputed that the delegation members were given copies of the memorandum which they then had available to take away with them. Pertinently, the 15 page memorandum included the following statements in addition to considerable detail about the farms: [CB5/402-405] (1) Listed price: "$10,000,000" (2) Area: 15,315 acres / 6,197 hectares (3) Carrying capacity: 1,500 cows and calves "depending on management". 70 Given the way in which the listed price was recorded, as reflected above, even someone not able to read or understand English would have been able to understand that figure. I note from the documents written in Chinese hanzi characters which were tendered in evidence, that Arabic numerals are regularly used and, I infer, readily understood. 71 Mr McCulloch said that during the inspection, which lasted three to four hours, he was asked about the grazing capacity of the farms to which he replied that at that time the farms were carrying "1800 cows and calves" but that in his opinion "the normal carrying capacity in an average year would be only 1500 cows and calves". He said that at every inspection with every different prospective purchaser he said that that was his opinion. [T471:23-34, T472:32] This evidence was not challenged, although Mr McCulloch could not have known whether what he said was accurately interpreted. 72 Mr McCulloch said that he also explained that there were approximately 700 acres of fodder crop with the result that, by sewing the crop, that area is taken out of production for four to six months and the carrying capacity is increased for six to eight months, when the fodder is available to be eaten. He said that "on that country, you can run up to a beast an acre". [T471:35-40] This is an important statement as it is the likely source of the idea that the carrying capacity of the whole aggregation could be increased to 15,000 head (i.e., a beast an acre). 73 Once the Ningxia delegation returned to China, Mr Zhou drafted a report of the trip which he then circulated to the rest of the team for review. [T308:1-29] 74 The first section of the report gives background on beef cattle husbandry in Australia. [CB18/530] 75 In the second section, which is headed "Investigating farms at different areas", there is a discussion of each of the areas visited by the delegation. In respect of the Tamworth area it was recorded that: [CB18/533] The carrying capacity is also high – 3 to 3.5 lambs per 25 mu and 1 head of cattle per 25 mu. Through modifying techniques, the carrying capacity can be improved to 1 head per 5 mu. … Major downsides: Firstly, the leasing cost is relatively high with 115 yuan per mu. 76 These are the same carrying capacity figures as reflected in Mr Zhou's note discussed at [64]-[66] above. As explained, they are likely to have been a misunderstanding of what Mr McCulloch had said. 77 The third section of the report is headed "Advantages and risk analysis of cattle husbandry in rented land". There is no consideration in this section of Ningxia buying land, and there is no statement to the effect that it cannot buy land. There is, however, a statement that "One cannot rent a land without establishing a shareholding system; there are also certain restrictions on the participants and uncertain factors." [CB18/534-535] 78 The fourth section of the report is headed "Suggestion". There are five subsections as follows: [CB18/535-537] (1) "Suggestion on performing beef cattle husbandry on a rented land": The suggestion is made to rent a small farm in order to build up experience because even if the project does not succeed in the end, the loss will be relatively small; it is "preferable to make full use of this platform to learn." (2) "Consider purchasing a ranch in Australia": Instead of renting, purchasing a ranch in Australia might be a better option. Although purchasing a ranch costs a large amount of investment upfront, long-term operation leads to smaller risk and a larger flexibility. Form a company with a local Australian unit or person via joint-venture. However, this requires a longer investigation and research before making a decision. Notably, this discussion presupposes that it may be possible for Ningxia to purchase farmland in Australia, whether directly or through a subsidiary. It is inconsistent with Mr Lee's alleged representation that such a purchase is prohibited by Australian law. It also acknowledges that "longer investigation and research" would be required. That does not suggest that reliance would in any event be placed on a statement by Mr Lee as to the state of the law. (3) "Suggestions on engaging in business activities with Australia": The report says that it would be the most profitable to engage in trade with Australia and that the risk is small – "We could actively seek information from relevant companies and do business with them (live cattle or beef products trade)." (4) "Operating farms in Australia shall be regarded as a project at the national level": It is recorded that the "opening-up" policy announced by the Chinese government should be adhered to and that the government should show support at the national level for Ningxia to realise the policy through farming operations. (5) "Other": Some additional immaterial matters were recorded. 79 The report records that of the first three "suggestions" in the fourth section of the report, the investigation team considered that the third suggestion – "engaging in business activities with Australia" – was the most feasible. It states that beef farming on rented or purchased land: [CB18/536] is challenging; problems that may occur include financial problems, compliance with local regulations, policies and many more, which is no better than simply doing business with Australia. It is suggested that further investigation and research to be carried out before the leader of the company makes the final decision. 80 The first attachment to the report is a detailed analysis table of Australian farm leasing operations, comparing the possible leasing of land in the areas of Townsville, Rockhampton and New England. In respect of each area, the calculations reflect that a profit could be made from the fourth year, with the highest profit being in the New England area in respect of the lease of 200,000 acres at an annual rental of 115 yuan per mu (i.e., $138 per ac). It is not apparent where the figure of 200,000 acres came from, which exceeds the size of the Kia Ora aggregation more than tenfold. [SCB13/315] 81 It is noteworthy that there was no evidence that Mr Lee had said that a rental of 115 yuan per mu was a fair market rental, yet Ningxia performed profitability calculations based on that figure. The calculations showed profitability within four years. As will be seen, that weighs against Ningxia's case that had it not been told that the lower rental that it ultimately agreed to (90 yuan per mu or $108 per acre) was a fair market price it would not have agreed to the lease. 82 On the question of whether Ningxia could, as a matter of Australian law, purchase agricultural land in Australia, Mr Xia said that after the first investigation there was a meeting with Ningxia's legal department. During that meeting, Mr Xia says that he told the legal department that Mr Lee had told him that Ningxia was not permitted to purchase agricultural land in Australia. [T161:12-23] 83 The report was presented to a Ningxia general manager office meeting on 26 June 2015. It was minuted that: [CB19/578] the group itself does not have the ability to engage in direct foreign investment due to the limitation of financial strength, talent reserve, management level, etc.; It is agreed that it is appropriate to start foreign cooperation with foreign trade; investing abroad, forming joint-ventures and engaging in cooperation shall be carried out step-by-step and steadily in accordance with the development stage of the group company and the actual needs of production and operations, and taking into account the current capability of the group company. 84 On 9 July 2015, there was a meeting of the Ningxia CCP committee at which there was a discussion about "going to Australia for beef cattle husbandry investigation". The same matters were minuted as had been minuted from the general manager office meeting on 26 June 2015. [CB20/584] 85 In a report dated 15 July 2015, Ningxia reported to Secretary Jianhua Li of the CCP on the trip to Australia. The report is essentially a summary of the report that was prepared by the delegation and ultimately makes the suggestions that Ningxia should "engage in business activities with Australia first, which has room for profits, less risk factors and higher operability" by seeking partners in Australia and gaining experience so as to further expand the scope of operations gradually. [CB21/588-591] 86 A Ningxia document titled "Relevant Policies on Investment in Australia" was jointly tendered. It summarises relevant policies with respect to agricultural investment, tax laws and agricultural tariff regulations. Amongst other things, it states that the Foreign Investment Review Board (FIRB) will "strictly verify all investments made by state-owned enterprises of China." [CB6/426] No statement is made with regard to the purchase of agricultural land being prohibited. B.3 Ningxia's second investigation visit to Australia in December 2015 87 Mr Lee visited the Autonomous Region in October 2015 where he met with Mr Mao and Mr Xia and encouraged Ningxia to "go out" by investing in Australia. [T56:26] Mr Lee was encouraging Ningxia to do business with his company. The visit is not otherwise significant to the resolution of the parties' dispute. 88 Plans for a further visit to Australia began to emerge. There was a meeting of the Ningxia CCP committee on 7 November 2015. Mr Xia said that the meeting was to discuss an instruction from Secretary Jianhua Li to have a further trip to Australia. [T57:1-6] As part of establishing the "open cooperation concept of 'going out' with greater courage and faster pace", it was resolved "to organise the persons in charge of the group companies in the dairy and halal beef and mutton industries, legal consultants and the autonomous region's SASAC and other relevant departments and bureaus for targeted on-site inspections with inspection reports prepared." [CB22/602-3] (I was told that SASAC is the State Administration Security Commission.) [T566:44] 89 Prior to the trip, Mr Xia and Mr Lee exchanged a number of WeChat messages. Mr Xia asked Mr Lee a number of questions ranging from details about various farms that the delegation might visit, Mr Lee's suggestions for a name for a company to be registered, how long it takes to register a company and what the requirements are. A message from Mr Lee to Mr Xia on 9 December 2015 stated: [CB547.5] Rent is based on today's Australian dollar and RMB exchange rate, that is: 18 Australian dollar per mu/year, 150,000 mu. 12 Australian dollar per mu/year, 69,000 mu. 90 Those rentals translate to $108 per acre and $72 per acre per year respectively. It is apparent from their sizes that neither of the farms referred to is the Kia Ora aggregation, but in any event those rentals are markedly different from each other. Auken's reliance on this WeChat message as supporting the fair market price representation is accordingly misplaced. 91 The following formed the delegation to Australia for the second trip in December 2015: (1) Yongzhong Wang, chairman of the board of Ningxia; (2) Mr Xia, who had attended the May 2015 investigation trip; (3) Duo Yang, Deputy General Manager of Ningxia; (4) Mr Liu, who had attended the May 2015 investigation trip; and (5) Xiaobo Ning. [T57:13-15, T250:36-37, T273:22-24; CB36/676] 92 The delegation visited Dubbo, Tamworth and Gladstone, in that order, between 19 and 26 December 2015. [T59:42-44, T250:16] 93 The delegation was met in Tamworth by Mr Lee and Mr McCulloch. Mr Lee did the translating as none of the Ningxia delegates understood or spoke English. [T60:23-26, T61:20-21] 94 According to Mr Xia, Mr Lee told the delegation that he was at that time lending money to the owner of Kia Ora; Ningxia could not purchase any farm; and, if they wanted to rent the farm he would like to help them. [T60:42-45] According to Mr Xia, when the delegation was shown Kia Ora, Mr Lee said that it currently had 3,600 cattle, being 1,800 cows and 1,800 calves, but that with Ningxia's skill and ability there would be no problem to have 5,000 to 10,000 grazing cattle, i.e., cows and calves. [T61:5-15, T191:20-22, T192:19-24] Mr Xia was adamant that that was said by Mr Lee during the visit to Kia Ora. [T192:4, 24] Mr Xia said that Mr Lee was asked by Mr Mao (who was not on the December 2015 trip, so Mr Xia must be mistaken on this), "can we buy this farm?", to which he responded, "no, you can't, but you can rent for 30 or 50 years which is the same." [T61:36] 95 That evening, back at the hotel in Tamworth, the delegation had dinner with Mr Lee at which discussion continued. In particular, Mr Xia said that there was a discussion about possible rental terms during which Mr Lee said that the rent would be $18 per mu (converted the next day to be $109.26 per acre), between two and five years' rent would be required as a deposit with a greater discount on rent being offered the greater the deposit, and that the rent would increase at CPI+3% per annum. Mr Xia said that Mr Lee also said that these rental terms are all common practice in the Australian market. [T62:1-19, CB45/846] 96 Mr Xia made rough manuscript notes during the inspection which he then later typed up for the translator. The typed notes were then translated and all three versions became the subject of oral evidence. [T64:24 – T67:44] The notes show that Mr Xia did profit and loss calculations based on 5,000 head of cattle. He said that that was based on Mr Lee having mentioned about 5,000 to 10,000 head, although the notes do not reveal the source of the figure of 5,000. [CB44/726, T66:11-14] The note that was taken on site during the Kia Ora visit does not reflect that figure, but rather reflects 1,800 cattle and 1,800 calves. [CB44/724, T67:22] This tells against Mr Xia's evidence that Mr Lee had given the figures of 5,000 to 10,000 head during the farm visit. There is also no reason why Mr Xia would rely on figures given by Mr Lee when he knew him not to have relevant expertise, Mr Xia had considerable expertise at his disposal in the delegation and at Ningxia more broadly, and he had the opportunity to ask Mr McCulloch any question that he had about carrying capacity. 97 Mr Yang gave evidence about the trip. He said that Mr Lee introduced himself to the delegation as having a "trustee company", and said that he lends money to the owners of farms and if they cannot repay the money he takes over the land and then either rents it out or sells it. [T251:17-35] In cross-examination, Mr Yang agreed that what Mr Lee had said was that sometimes farmers get into trouble with their finances with the bank which then gives an opportunity to purchase the farm cheaply. [T265:9-13] Mr Yang did not say that Mr Lee claimed any expertise in animal husbandry or beef cattle nutrition. 98 Mr Yang said that Mr Lee said that the carrying capacity of Kia Ora was 5,000 to 10,000 head of cattle. [T252:11, 34] He also said that Mr Lee had said that that is the "current capacity", and later in response to it being put to him that Mr Lee had said that the current capacity was 1,800 cows with their calves he said "no", Mr Lee said "can reach 5,000 to 10,000 head" (i.e., not that those figures were the current capacity). [T256:13, T257:35] Mr Yang said that the delegation said to Mr Lee that in order to do business in Australia they definitely needed a farm which could have 5,000 to 10,000 head to which Mr Lee said, "this farm definitely can be reached to 5,000 to 10,000 head". [T258:24-26] Mr Yang accepted that "in order to reach 10,000 or 15,000 head, definitely need feedlot". [T258:41-42] Mr Yang clarified that his understanding was that those numbers referred to "basic cows" and therefore did not include calves. [T259:40-43] 99 Mr Yang said that Mr Lee told the delegation that it was common practice in Australia to escalate rental at CPI +3% per annum. [T254:7-14] He was not challenged on this. 100 Mr Yang said that Mr Lee told them that as a state-owned company Ningxia cannot buy the farm, it can only rent it. [T252:22-23, T262:9-10] Mr Yang was asked in cross-examination why the suggestion of buying farmland was made in the final report if Ningxia thought that buying such land in Australia was prohibited at law. Mr Yang's answer was, in essence, that they were told by Ningxia Shang Yen Group, which owns a farm in Queensland, that it was possible to buy a farm "if we participate some shares in a company". [T262:44 – T263:20] 101 When asked what Mr Lee said in Tamworth during the trip, Mr Liu said that Mr Lee said that as a state-owned company, Ningxia was not able to purchase land in Australia and that it could only rent. He said he could not recall anything else that Mr Lee had told them. [T275:12-18] When shown the delegation's trip report where it is stated that the carrying capacity of Kia Ora is between 5,000 and 10,000 head, Mr Liu said that Mr Lee had said that the carrying capacity could be increased to 10,000 head "by using some supplementary feeding". [T276:13-15] 102 Mr Ning took notes during the delegation's December 2015 visit to Australia. His notes were later typed up and then translated to English. He explained that he did not take the notes on site, but rather wrote them up each evening. His notes record that Mr Lee informed the delegation that there were 1,800 base (i.e., breeding) cows on Kia Ora, of which more than 1,000 were pregnant. There were also 1,000 head of sheep. The farm produced 2,000 head of cattle for slaughter each year. [CB43/705, T283:32-45] 103 Mr Ning said that Mr Lee said that the farm could carry up to 10,000 head, and that it would be possible for them to rent a feedlot. [T284:6-16] The figures of 5,000 and 10,000 head of cattle do not appear in Mr Ning's notes. There is, however, a calculation based on production of 2,000 head per annum, which is consistent with what Mr Ning said that Mr Lee had said that the current position was. Mr Ning's notes accordingly suggest that Mr Lee did not say that the farm could carry 10,000 head, or, if he did, that that was not regarded as noteworthy or reliable by Mr Ning. Indeed, Mr Ning said that his understanding was that 10,000 head was not an "accurate" number because at the time the farm only produced 2,000 head per annum but that "we understood that this farm can have more cattle, even can reach 10,000 head". [T289:6-9] 104 It was put to Mr Ning that when there was a discussion about the possibility of increasing the capacity of the farm to 10,000 head it was in the context of "using the Chinese method to build a feedlot". Mr Ning disputed that saying that it was said to be "mainly by grazing, and for the feedlot, just from time to time". [T288:22-26] He later accepted that there would need to be supplementary feed brought onto the farm and that the mention of 10,000 head was during a discussion about the feedlot. [T290:11-19] 105 Mr Ning's notes record that Mr Lee told the delegation the basic terms of a lease that he proposed. The notes also record: "Early stage of engaging Mr. Li: Lawyers, accountants, managers". [CB43/706] 106 Mr Ning said that Mr Lee repeated many times that as a state-owned company, Ningxia cannot buy any land in Australia. [T290:1-2] 107 Mr Lee explained that he and Mr McCulloch met the Ningxia delegation in Tamworth. As on the previous occasion, each member of the delegation was provided with an information memorandum or brochure about Kia Ora that had been prepared by Mr McCulloch. [T342:40-41] The delegation travelled to Kia Ora where they had a conversation with the farm manager, Mr Campbell. Mr Lee said that Mr Campbell was asked about the carrying capacity of the farm for cattle to which Mr Campbell responded that it was 1,800 cows and calves. Mr Lee sought clarification as to whether that meant 1,800 pregnant cows to which Mr McCulloch explained that it meant 1,800 cows and 1,800 calves, being a total of 3,600 head. Mr Lee said that he translated that all for Yongzhong Wang who pointed to members of his delegation saying that they are experts in cattle raising or the cattle industry. [T343:16-22] 108 Mr Lee said that Mr Campbell also answered questions about a feedlot. He explained that seven years previously the farm had had a feedlot for 1,200 cattle. They had bought fodder to feed the cattle in the feedlot. The delegation then visited the site of the old feedlot. Mr Lee said that one of the delegation said that on a farm the size of Kia Ora, in Ningxia province they could easily reach a capacity of 5,000 to 10,000. Mr Lee said that Mr Campbell or Mr McCulloch responded by saying that for that number of cattle a feedlot with supplementary feed would be required. Mr Lee said that Mr McCulloch or Mr Campbell explained that a feedlot for more than 1,000 cattle would require the approval of the local council. [T343:28 – T344:3] Mr Lee was not shaken from this in cross-examination. [T395:39 – T396:3] He also said that he does not know about operating a feedlot, which is borne out by him not understanding the question when it was put to him that a feedlot is not used for breeding cattle. [T396:5-18] 109 Mr Lee said that at the dinner that evening at the hotel, Mr Wang asked whether Ningxia could purchase a farm. Mr Lee said that he responded as follows: [T344:20-23] You can purchase the land. You need Government approval. But it is not my business model. If you purchase the land, I cannot help you. My business model is you select the farm, I purchase the farm and lease to you. 110 Mr Lee said that Yongzhong Wang responded by saying that they would be happy to lease a farm at first in order to gain experience, and that the capital investment for a lease would be less than a purchase. There was also discussion about the possible terms of a lease. [T344:22-37] 111 Mr Lee denied having said that he was lending money to the owner of Kia Ora, or that the owner was in debt which is why there were not more cattle on the farm. [T394:30-44] He denied saying that the farm could carry 5,000 to 10,000 cattle. [T395:9-10] 112 Mr McCulloch said that he met the delegation in Tamworth and took them to Kia Ora in his Toyota Prado. He said that because he was told that the delegation would include different people from the previous occasion, he reprinted the information memorandum and handed it out to the members of the delegation. [T473:32-35] Mr McCulloch said that he once again read out key information from the memorandum. He said that that information included the carrying capacity. [T474:6-13] 113 He said that he and the delegation met Mr Campbell on the farm and a lot of questions were directed to him. Mr Campbell was asked about whether they had ever run a feedlot, to which he responded that they used to run a feedlot with 1,000 to 1,200 head. He said that Mr Campbell also said that they were presently running 1,800 cows and calves. [T474:27-32] 114 Mr McCulloch said that when they were on another part of the farm he was asked about the potential for building a feedlot. He said that he explained that if they wanted to build a feedlot with more than 999 head, they would require local council and EPA (Environment Protection Authority) approval. He said that the delegation indicated that they wanted to increase the capacity to 15,000 to 20,000 head, to which Mr Campbell said that the only way that that could be done would be by building a feedlot and using supplementary feeding. He said that one of the members of the delegation (he thought it was Mr Liu) said that for a property the size of that in China they would run 5,000 cattle, to which Mr Campbell replied that the most that they had ever run on Kia Ora was 2,000 and that to run any more than that would require a feedlot with supplementary feed. [T475:22-31] 115 Mr McCulloch said that there was a discussion about other feedlots in the Tamworth area. He said that he told the delegation that there were many other feedlots, including some with 10,000 to 30,000 head, so that he did not think that getting council approval for a feedlot would be difficult. [T475:45 – T476:2] 116 Mr McCulloch's evidence with regard to the visit of the delegation in December 2015 was not challenged other than it was said that Mr Lee acted as interpreter (and not someone referred to as Miranda as Mr McCulloch had recalled) and that Mr McCulloch could not say with confidence what had been said on which visit. [T486-488] That is to say, the content of what Mr McCulloch said was not challenged, but only the occasion on which it was said. 117 Mr Campbell said that he met the delegation on the farm. He was asked how big the property was and whether it had a feedlot. He explained that it had previously had a feedlot, that the capacity of the farm was 1,800 breeding cows and calves, and that the feedlot had been 1,000 to 1,200 head. When asked what the maximum capacity of the farm was, he said that he said that it was 2,000 cows and calves (i.e., 4,000 in total) without supplementary feed. He said that someone from the delegation said that in China a farm that size would run 5,000 cows. Mr Campbell said that it was explained to the delegation that for a feedlot for more than 1,000 head, approval would be required. [T492-493] 118 None of Mr Campbell's evidence was challenged in cross-examination. He was asked whether Mr Lee acted as interpreter, to which he replied that he was "pretty sure" that he did. [T493:45-47] 119 It is noteworthy that Mr McCulloch, Mr Campbell and Mr Lee gave evidence that someone from the delegation said that Ningxia would want to increase the carrying capacity to 5,000-10,000 (or even 20,000) head or that in China a farm like Kia Ora would have a capacity of 5,000 head. Although the delegation's questions had to be interpreted by Mr Lee, and it is possible that he misrepresented to Mr McCulloch and Mr Campbell the questions being asked, that seems particularly far-fetched. Auken's case is in part that Mr Lee deliberately misrepresented Mr McCulloch and Mr Campbell's answers, which makes a certain amount of sense since, if anyone, it was the delegation who he was seeking to mislead. But there is no reason why he would want to mislead Mr McCulloch and Mr Campbell on the questions that were being asked. It is also the case that it was not put to Mr Lee that he misinterpreted the questions that the delegation asked. 120 In the circumstances, I find that the delegation asked those questions. The questions show that the delegation was itself contemplating increasing the carrying capacity to 5,000-10,000 head. It is possible that these figures came from Mr Zhou's report following the first visit. The delegation's questions are inconsistent with it having been Mr Lee who gave the assurance or positively represented that that was the carrying capacity. Also, in the light of the carrying capacity recorded in the memorandum, which the delegation could easily have had translated, it is unlikely that Mr Lee would have misrepresented Mr McCulloch and Mr Campbell's answers to questions on carrying capacity. 121 After Tamworth, the delegation visited a farm that neighboured on Yang Fei's farm near Gladstone. It was referred to as the Robert Ranch. Mr Xia asked Yang Fei whether Ningxia could buy the farm in view of Mr Lee having said that they could not buy any farm in Australia. Yang Fei said that they could buy the farm, with him as the main shareholder and Ningxia as a minor shareholder. [T63:42-46] The farm, however, was regarded as unsuitable so no purchase was pursued. [T64:1-6] 122 After the delegation had returned home, on 28 December 2015 Mr Xia and Mr Lee exchanged WeChat messages in which Mr Lee made the following statements: [CB52/865] (1) the basic terms of a lease agreement would be: rent of $109.27 per acre per year increasing at CPI +3% pa with a term of 30 or 50 years; (2) the existing livestock were about 1,800 base cows, about 1,800 calves and about 1,000 sheep; (3) "the ranch has a history of keeping 1,000 heads of cattle and relative facilities". 123 Mr Xia said that Mr Lee said that the above rental is a fair price in the Australian market. [T70:10-11] 124 Mr Lee also recommended that Ningxia appoint an accountant to advise on registering a company. [CB53/868] 125 After the December 2015 trip, an "agricultural studies" expert from the Ningxia Agricultural Institute, Jie Yong, was hired to prepare a detailed feasibility study in which two proposals were compared. The one proposal was for Ningxia to rent the Kia Ora aggregation for 30 years and the other was for Ningxia to purchase the Robert Ranch near Townsville. The report is dated December 2015. Mr Xia said that he "provided some basic information" for the preparation of the report. [T83:10-14, T88:4-26, T236:1-35] 126 Notable features of the feasibility study are the following: [CB44.1/758] (1) The land that is the subject of the rental proposal is the Kia Ora aggregation. It is stated that it has "a carrying capacity of 5,000 – 10,000 head" and that "the production scale is estimated to reach an annual slaughter of 5000 – 10,000 head of feeder cattle", although no source for those figures is identified. [CB44.1/762-763] (2) Elsewhere it is said that the carrying capacity of the 90,000 mu farm is 3 to 3.5 lambs per 25 mu and 1 head of cattle per 25 mu, and that "through modifying techniques, the carrying capacity can be improved to 1 head per 6 mu". [CB44.1/772] That is to say, the present carrying capacity was stated to be 3,600 head, which is consistent with what the delegation was told, and the future capacity through "modifying techniques" was said to be 15,000 head which is consistent with Mr Zhou's figures from the first trip. (3) Surprisingly, given the discussions during the site visit about the need to build a large feedlot in order to increase the carrying capacity, the report states that the production scale is estimated to reach an annual slaughter of 5,000 – 10,000 head of feeder cattle "through self-breeding and self-feeding", that "existing production equipment" would be used, that certain facilities would be fixed and maintained but that there were "no further plans of investing in civil engineering constructions", no investment would be made in building new facilities and there were no plans to buy equipment. [CB44.1/773-774] (4) The proposal with regard to the purchase of a ranch refers to that being done "in the form of shareholding" with another party, but no mention is made of Ningxia being prohibited from buying agricultural land in Australia and the business case, including the calculation of prospective profit, does not include any allowance for the sharing of expenses or profit with another party. [CB44.1/762, 783] 127 There is no suggestion in the evidence that Jie Yong, the author of the report, relied on any representation from Mr Lee about the carrying capacity of the Kia Ora farms. He seems to have either taken his figures from Mr Zhou's report following the first visit, or to have done his own calculations, perhaps based on Chinese conditions. The significance of the report is that it demonstrates, as one would expect, that Ningxia did not casually rely on what it was told by the likes of Messrs McCulloch, Campbell and Lee who all had an interest in promoting farms to Ningxia, but commissioned an independent specialist report on the viability of the proposed project. 128 Another report prepared after the delegation's visit is headed "Australia Animal Husbandry Investigation Report" and is dated 30 December 2015. [CB54/870] Mr Xia is the author of the report. [T70] Certain of the information in the report is said by Mr Xia to be based on what the delegation was told by Mr Lee. Mr Xia said that "we trusted Mr Lee very much, so we didn't check the information – whether the information was accurate or not". [T82] Mr Xia said that the suggestions made in the report were suggestions of the delegation group. [T83:34] 129 Notable features of the report are the following: [CB54/870] (1) There is no mention in the report that Ningxia was prohibited from buying agricultural land in Australia, or that if it was to purchase land it would have to do it by way of cooperative shareholding with another party. Rather, it is said that Ningxia would need to "establish a holding company to purchase ranches for operation". [CB54/875] Moreover, a number of the farms that are discussed in the report are discussed on the basis of being purchased by Ningxia, and one is said to have been purchased by Ningxia Xiangyan Industrial Group, another state-owned entity, in 2014. [CB54/873] (2) In respect of the Kia Ora farms, it is stated that "the owner intends to offer a long-term lease". It is stated that "the carrying capacity of the ranch falls between 5000 – 10,000 head", without the source of those figures being identified. [CB54/874] It is also stated that "the carrying capacity can reach 10,000 head through various ways of operation". [CB54/875] (3) In the "Suggestions" section of the report, the recommendations include: [CB54/877] i. We suggest the Group to rent the ranch in "Kia Ora" and purchase the ranch in "Robert". ii. … iii. We suggest that the Group employs law firms, accounting firms and professional agencies specialising in investments in Australia to provide full-service and detailed consultation on the project, so is to realise the strategy of connecting with world.… 130 In cross-examination, Mr Xia agreed that in drafting the report he was careful to ensure that all the relevant information about Kia Ora of which he was aware was included in the report but that there was no mention of Ningxia not being permitted to purchase Australian agricultural land. [T141:31-40] He denied the suggestion put to him that he would not have recommended that Ningxia purchase the Robert Ranch if he understood that Ningxia was prohibited from purchasing Australian agricultural land. [T142:29-38] When pressed, he said that the Australian prohibition on state-owned enterprises buying land could be avoided by Ningxia owning some shares with some other "main shareholders" in a company owning a farm. [T143] Those answers are not consistent with what he wrote in his report. 131 Mr Xia prepared a further report following the investigation trip to Australia. It is addressed to the Autonomous Region SASAC, is headed "Report on Matters Related to the Field Trip With Regard to Animal Husbandry Projects in Australia Made by Agricultural Reclamation Group" and is dated 31 December 2015. [T71:3-10, CB55/898] 132 Notable features of the report are the following: [CB55/898] (1) The report records that there are "1800 base cows, approximately 1800 calves and replacement heifers" on Kia Ora and that Ningxia plans to lease the farm "raising 10,000 heads of beef cattle a year, of which 5,000 will be available for slaughter". [CB55/899] (2) The report further records that "we also propose to purchase a ranch in eastern Queensland". [CB55/900] For the purpose of such a purchase, it is said that Ningxia needs to register a company which "is proposed to be a shareholding company". [CB55/901, T144:11-45] Mr Xia said that Ningxia would have to be a minority shareholder of such a company for it to purchase agricultural land, but that is not stated anywhere in the report. [T144:1-17] 133 The final report following the December 2015 trip is addressed to Secretary-General Li Jianhua of the CCP, has almost exactly the same title as the previous report and is dated 6 February 2016. [CB72/1112] Mr Xia said that it was prepared by "the office". [T71:19] 134 Notable features of the report include: [CB72/1112] (1) In respect of Kia Ora, it records that there are "1,800 base cows, 1,800 calves and replacement heifers", and that "it is estimated that the carrying capacity will reach 10,000 heads". [CB72/1113-4] (2) The report states that "we believe that a combination of acquisition and leasing shall be adopted to advance our project", being a lease of Kia Ora and suggests establishing "a joint-stock company to purchase 37,000 mu of Robert Ranch in Queensland to gain a firm foothold". [CB72/1114] It is also said that "we need to seek partners and set up a joint-stock company to share the risks and benefits", which might be said to imply that the purchase would involve a participating partner but nowhere is it stated that that was necessary in order to avoid a legal prohibition against Ningxia purchasing entirely in its own interests. [CB72/1115] (3) Further recommendations were to conduct an in-depth due diligence investigation and feasibility study for acquisition and leasing and hiring "relevant lawyers, accountants and other agencies to participate in and witness the process of the project implementation". [CB72/1115] 135 The tone and content of the reports do not suggest any casual reliance on sales talk by Mr Lee and others, but rather suggest a thorough process of investigation including taking independent professional advice. B.4 The lead-up to Ningxia's third investigation visit to Australia 136 There was a meeting of the board of directors of Ningxia on 4 January 2016. The materials for the meeting included a background report to a proposed motion (Motion 8) with regard to Ningxia "developing animal husbandry in Australia based on the opening-up strategy". The materials were drafted by Mr Xia. As with the previous reports, the report correctly recorded that Kia Ora currently had 1,800 cows and 1,800 calves, and then it incorrectly stated: [CB56/911] The number of beef cattle reared per year is 10,000 head with an annual slaughter of 5,000 head. More operations could be developed once the operation conditions are stable. 137 It is not suggested that those figures came from anything said by Mr Lee. 138 The materials also stated that a "joint-stock company for purchasing ranches" should be registered, without mention of any other participating shareholder or any prohibition on Ningxia purchasing agricultural land in Australia. [CB56/913] 139 Motion 8 was adopted by the Board of Ningxia, with six votes in favour and one against, as follows: [CB57/924] "A Motion on [Ningxia] Developing Animal Husbandry in Australia Based on the Opening-up Strategy" has been approved. The Board of Directors approved to establish a wholly-owned subsidiary in Hong Kong. The subsidiary will serve as the entity who cooperates with Australia. It will work on the leasing project of the ranch in Kia Ora, New South Wales and the purchase of the ranch in Robert, Queensland. 140 In early January 2016, Mr Lee visited the Autonomous Region and met with Mr Xia and Mr Yang. One of the purposes was to negotiate a cooperation agreement between Ningxia and 3SI. Mr Lee produced a draft of the cooperation agreement for Mr Xia on 6 January 2016. [T89:11-16] 141 The draft cooperation agreement, which is dated 5 January 2016, envisaged that Party A (presumably 3SI) would purchase the Kia Ora aggregation (of approximately 15,300 acres) and lease it to Party B (presumably a Ningxia subsidiary to be incorporated) for 30 years at $109.26 per acre per year to be adjusted each year by CPI +3%. It was envisaged that a rental deposit equivalent to one month's rent for each year of the lease (i.e., 30 months' rent) would be paid in advance of a formal lease agreement being signed, and that Party A would finalise the acquisition of the property within 60 working days and transfer possession to Party B within 30 working days. [CB58/934-935] 142 Over the next week or so there were many WeChat messages between Mr Lee and Mr Xia. Mr Xia identified that Party A in the cooperation agreement was 3SI, and he suggested that Party B could be named either Auken Livestock Ltd or Auken Livestock Co Ltd. [CB59/947, CB63/957] Mr Lee advised that a FIRB approval application should be made, and that "You have to entrust and authorise the accounting firm to do your work as soon as possible". [CB63/957] Mr Lee set out for Mr Xia a long list of FIRB requirements and proposed an accounting firm. [CB64/962] He continued to press Mr Xia to commence the FIRB application and on 14 January 2016 said, "You have to hurry up". [CB64/963] 143 On 19 January 2016, Mr Lee recommended an accountant in Australia, Ms Jingjing Wang, to assist Ningxia with the registration of an Australian company and with seeking approval from the FIRB. [CB68/1096] Mr Xia responded to the recommendation by saying that he was in a meeting the whole morning but that he had contacted Ms Wang. To that, Mr Lee replied: "Okay, speed it up, the market is changing too fast." Mr Lee explained in evidence that he had read at that time that property prices were rising which is why he expressed the opinion that the market was rising. Auken submits that Mr Lee should be disbelieved on that, but whether or not it is true is not much to the point. It is clear, despite Mr Lee's denial, that Mr Lee was seeking to put pressure on Mr Xia, or Ningxia, to move more quickly to finalise the arrangements. [T406:21-T407:43] 144 Mr Lee's frustration with the pace of developments continued to show. On 25 January 2016, in response to a message from Mr Xia that the registration certificate for Auken was still awaited, Mr Lee said that the accountant was waiting for authorisation from Ningxia and that Ningxia is "bloody too slow". [CB70/1102] 145 On 23 February 2016, Mr Lee recommended a solicitor to Ningxia, namely Ms Lili Pan of MinterEllison. [T93:17-21, CB75/1131] Ms Pan had been recommended to Mr Lee by Ms Wang, the accountant. [T411:15-18] Mr Xia immediately contacted Ms Pan, and shortly thereafter Ningxia appointed MinterEllison to prepare a FIRB application for Auken to lease agricultural land. [CB76/1133, 85/1193] 146 In February 2016, Mr McCulloch contacted Mr Lee and told him that the Birralee portion of the Kia Ora aggregation, which is about 5,000 acres, had been sold. He told Mr Lee that the remaining approximately 10,000 acres was still for sale and that the asking price was $7.5 million. Mr Lee said that he would have to "talk to China" and then get back to Mr McCulloch on whether he was interested in purchasing the remainder. [T476:25 – T477:47] 147 Mr Lee then wrote two WeChat messages to Mr Xia: (1) On 24 February 2016, he wrote: [CB77/1137] Notice: Due to the recent increase in investment in Australian agricultural and animal husbandry resources from overseas (mainly from China) investors, the market supply and demand situation has changed significantly, the market status of the 15,000 acres of ranch your company visited in 2015 in New England has changed as follows: the original 15,000 has changed to 10,000 acres. The original rent AU$109.26 per acre/year has been adjusted to AU$126 per acre/year. I hereby notify you of the above! 3rd Solution Trust and Investment Co., Ltd. (2) On 25 February 2016, he wrote: [CB80/1151] Market information: With the implementation of the China-Australia Free Trade Agreement, import tariff for Australian cattle and sheep exported to China will be reduced to 0 in three years, the market price adjustment of agricultural and animal husbandry resources: according to the market prediction, Australia's agricultural and animal husbandry resources prices are expected to rise by 200%, mainly because the price of Australian agricultural and livestock resources is too low, This will lead to a sharp increase in the market price of agricultural and pastoral resources over the next three years. 148 Mr Lee said that he obtained the market information (as opposed to the information specifically about Kia Ora) in those WeChat messages from the internet, although he could not remember from which websites. The market information appears to be in formal language not otherwise used by Mr Lee, so that may be correct. Mr Lee said that he did not intend by his message to put pressure on Mr Xia. [T411:27 – T413:20] I do not accept that evidence. It is apparent that Mr Lee was seeking to put pressure on Mr Xia to speed things up; approximately one third of the Kia Ora aggregation had been lost to him, and if the parties did not move quickly the rest might also be lost. Moreover, the pressure appeared to be having effect because Mr Xia responded to the second message by saying "We will speed up". [CB547.34] 149 Mr Lee prepared a further draft of the cooperation agreement that he sent to Mr Xia on 27 February 2016. [T94:5, T347:39] It recorded that the size of the farm to be leased was approximately 10,000 acres and that the initial rental would be $126 per acre. It provided that that rent would be unchanged for the first three years, but from the fourth year it would vary at CPI +3% per annum. The draft also provided the lessee (Auken) with a pre-emptive right to purchase the land in the event that 3SI decided to sell it. [CB84/1180-1182] Mr Lee described the clause as providing Ningxia with "the first right to purchase the land Kia Ora during the lease term, if I want to sell it". He said that it was included on the insistence of Ningxia even though he told them that 3SI would not want to sell the farm. [T347:45 – T348:4] This clause is significant in the examination of the Ningxia Incapacity Representation, which I will come to, as it rather tells against Ningxia/Auken's claim that it was told that it could not purchase agricultural land in Australia, and that it relied on such a representation. 150 Mr Xia said that he asked Mr Lee why the area had been reduced, and Mr Lee said that the owner only wanted to sell 10,000 acres and the reason for the rental increase from $109.26 to $126 was "because Australia's market is changing every day, every day is different." [T94:36-40] 151 On 1 March 2016, Ningxia sent a draft of the cooperation agreement back to Mr Lee that had been revised by Ningxia's legal department. Mr Lee described it to Mr Xia as "fairly silly", although it was not explored why he thought that. [CB547.39] The draft recorded the total area of the farm to be approximately 15,300 acres (i.e., it did not account for the sale of Birralee to someone else) and that "at present" there were 1,800 base cows, about 1,000 calves and replacement cattle,1,000 sheep and "each year there are about 2,000 heads of beef cattle ready for slaughter". A lease period of 30 years was envisaged with the initial rent of $109.26 per acre to be adjusted with reference to CPI and a further percentage that was left blank. Blanks were also left in the draft for the amount of the deposit, although it was recorded that the deposit was to be used for 3SI's acquisition of the property. There was no right of first refusal provided for. [CB89/1225] 152 Later on 1 March 2016, Mr Lee sent a revised version of the cooperation agreement back to Ningxia. The revisions included the area, reducing it to "about 10,000 acres", and the rent, increasing it to $126 per acre. Mr Lee's earlier clauses with regard to the rent varying annually at CPI +3% and 30 months' rent payable by deposit were reintroduced. [CB90/1256] 153 On 4 March 2016, Mr Lee sent a series of WeChat messages to Mr Xia which included the following: [CB94/1277] The Australian government has begun to reject Chinese investment, and Australia's foreign investment review. Has been increased from 40 to 90 days, which suggests that the US-led Trans-Pacific Economic Cooperation (TPP) will put obstacles in the way of China's outbound investment, eventually creating an economic containment, with Ningxia Agricultural Reclamation starting its Australian project in May last year. After 10 months, it still fails to control Australia's project resources, this is entirely due to inaction, ideological and operational rigidity of leaders and cadres Australian farm rental prices are expected to rise sharply within six months There will be an increase of 50% -70%. 154 Once again, Mr Lee said that the non-project specific information in these messages was obtained by him from the internet but that he could not recall the particular website, save that he said that the projected increase of 50%-70% was his own opinion. [T414:33 – T415:42] Although it is possible that Mr Lee did obtain this information from an unknown website, I do not accept that an opinion that farm rental prices might increase by 50%-70% over a short period could have been honestly held. The messages appear to be an expression of Mr Lee's frustration with how long things were taking, and were intended by him to put pressure on Ningxia to speed up the finalisation of the arrangements. 155 Over the next few weeks, several versions of the draft cooperation agreement were exchanged between Mr Lee and Ningxia. Ultimately, on 18 March 2016, and after JunZeJun lawyers in China had reviewed it for Ningxia, the parties executed the cooperation agreement. In final form, it included the following features: [CB120/1490, T160:30] (1) The parties were 3SI and Auken. (2) The land was identified as being approximately 10,000 acres and having "a relatively high carrying capacity". (3) The period of the envisaged lease was 30 years with a rental of $126 per acre per annum which would remain unchanged during the first three years and be varied annually after that at CPI +3%. (4) Auken would pay a deposit equivalent to 30 months' rent (approximately $3.15 million) plus one year's rent ($1.2 million) on the date of signing the lease agreement. (5) Within three working days after the signing of the cooperation agreement, Auken would pay a deposit of $1 million. (6) It was provided that if 3SI intended to sell the land, Auken "shall have the priority to purchase this land under the same conditions and terms" (clause 12). 156 In the meanwhile, Ms Pan sought information from Ningxia for the purposes of the FIRB application. The information that she sought included "Details of the new business proposed to be operated by Ningxia", to which Ningxia responded as follows: [CB131/1533] Raise livestock (cattle, sheep, lamb etc) and feedlot, increase the numbers of livestock, manage other enterprises to make feed of the livestock, including irrigation, pasture, graze, crops, hay or silage 157 On 24 March 2016, Mr McCulloch conveyed to the owners a written offer by Mr Lee on behalf of 3SI to purchase the Kia Ora aggregation excluding Birralee (i.e., approximately 10,000 acres) for $7.4 million subject to FIRB approval for Auken as proposed lessee. [CB135/1721] Thereafter, on 30 March 2016, Mr McCulloch again wrote to the owners saying that he had received a phone call from the purchasers of Birralee who had advised that they would not be proceeding with the purchase. Mr McCulloch had therefore contacted Mr Lee and asked whether he would increase his offer to $10 million for all the Kia Ora properties including Birralee (i.e., 15,300 acres). He said that Mr Lee had said that he would have to get it approved by his business partner (i.e., Ningxia) but that he had requested that a contract be sent to his solicitor. [CB144/1751] 158 On 31 March 2016, Mr Lee sent a draft supplementary cooperation agreement to Ningxia. The draft envisaged the increase of the leased area of 10,000 acres by an additional 5,000 acres and that the rental for the additional area would be $109.26 per acre per year. [CB148/1819] 159 Mr Xia said that he was given the following explanation by Mr Lee for the changes: [T99:10] For the area increase, Mr Lee said because he successfully had negotiation with owner of the rent and after very hard discussion and negotiation. And also I asked him how come the price changed to $109.26 and also he said, he said, it is the Australian market is changing every day. And also, we had a discussion about how can we just use the same price as $109.26 price for the previous 10,000 acres, Mr Lee said now [sic]. 160 Mr Lee accepted that he had told Mr Xia that he had had a successful negotiation with the owners of the farm, but he could not remember whether he had said that the Australian market is changing every day as an explanation for the price of $109.26. He said that it is possible that he had said that the Australian market is changing every day. [T420:9-33] 161 Mr Lee's explanation is possibly not as bad as Auken seeks to portray it. The truth is that the market for agricultural land does change every day, in particular with regard to what land is available for purchase and what is not. Further, Mr Lee had had a discussion with Mr McCulloch about what land was available and its price, which was a continuation of previous negotiations that he had had about the land and its price. It is not particularly far-fetched to refer to the discussion with Mr McCulloch as a negotiation with the owner, although certainly not a "very hard discussion and a big negotiation" which Mr Lee accepted that he told Mr Xia. [T420:14] It is also to be observed that the price of $109.26 per acre was the amount that Mr Lee had previously indicated he wanted for the whole aggregation. He was thus reverting to a previous position, albeit only in respect of 5,000 acres. 162 This exchange, like several others, does Mr Lee no credit. He was prepared to mislead, and even lie, in order to get Ningxia over the line. 163 The supplementary cooperation agreement was concluded the following day, on 1 April 2016. It provided for the increase of the area to be leased by 5,000 acres and for the initial rent for that area to be $109.26 per acre per annum. [CB156/1886] 164 Mr Lee then confirmed to Mr McCulloch that 3SI was willing to purchase the whole aggregation for $10 million. [T480:6] That was recorded by Mr McCulloch in a "Sales Advice" dated 11 April 2016. [CB173/1995] 165 It is noteworthy that Ms Pan was in China in early April 2016 and she met with representatives of Ningxia. [CB166/1952] She took instructions to prepare, and prepared, an application to the FIRB for approval for the lease. In correspondence to Mr Xia and Mr Lee, Ms Pan explained that she had included a pre-emptive right in the FIRB application, "noting that a separate application will need to be lodged with the FIRB if we propose to acquire the leased land if the Proposed Lessor sells the Target Farms". That is to say, Ms Pan, who was Ningxia's Australian solicitor, was providing for the possibility that 3SI might sell the farms to Ningxia in the future. [CB179/2031, 2037] Mr Xia replied, confirming that a separate FIRB application will be made in the event of the purchase of the farms by Ningxia. [CB181/2108] Even on its own, that exchange scotches the notion that Ningxia relied on advice from Mr Lee that it was prohibited from purchasing agricultural land in Australia – its own Australian solicitor in effect advised that it could, and Mr Xia acknowledged that written advice. B.5 Ningxia's third investigation visit to Australia in April 2016 166 Ningxia's third investigation trip to Australia was from 19 to 26 April 2016. The delegation, which was identified on the day that the cooperation agreement was signed, consisted of: (1) Mr Xia, who had attended the May 2015 and December 2015 investigation visits; (2) Cunping Zhang; (3) Hong Wang, director of the board of APPO and director of Auken; (4) Mr Guo, secretary and member of Ningxia's board; (5) Mr Li, as note-taker; and (6) Jing Xu, as interpreter. [T100:21, CB122/1507] 167 Mr Xia said that on 23 April 2016, Mr Lee accompanied the delegation to the Kia Ora farms. Ms Wang, the accountant, and Mr McCulloch accompanied them. Mr Lee had suggested that Ms Wang and Ms Pan, the solicitor, join the visit to the farm but Ms Pan did not make it. [T101:24 – T102:8] 168 Mr Xia said that during the inspection Mr Lee said that the carrying capacity of the farm could be more than 10,000 head and that they could build a feedlot with over 15,000 head. Mr McCulloch told them that any feedlot with over 1,000 head would require approval from the local council. [T102:12-22] Mr Xia said that some members of the delegation said that Ningxia still wanted to buy the ranch, to which Mr Lee replied, "no, you can't". They then asked him after how many years of leasing it they could buy it, to which Mr Lee replied that they could maybe buy it after eight or ten years' operation. [T102:31-36] 169 Mr Xia said that that evening at the hotel they had further discussions with Mr Lee. He said that Mr Lee said that the carrying capacity was more than "10,000 head for the grazing cattle". There was also discussion about the possible need to build a feedlot with over 15,000 head which would require 200 acres as well as a further 2,000 acres for a forage base, i.e., for growing feed for the feedlot cattle. [T103-104] 170 Mr Xia took manuscript notes during the trip which, as previously, were typed-up and then translated. The notes for 23 April 2016, which Mr Xia said were written up by him that evening, include the following: [T163:15-19, CB153/1840] 1. Grazing 2. In pens 3. Pasture base 5000-1000 15000=20000 2000 acres 200 acres 2. Farming method or mode must be determined … [Note: the translation records 2000 acres as the feedlot area (i.e., "In pens") but this was corrected orally to 200 acres: T109:8-33.] 171 In relation to this note, Mr Xia said the following: [T108:21-41] On that day while we were doing the inspection, Mr Lee suggested we can use different ways to have a different numbers of the cattle. For example, if we have different kind of the grass, we can have different numbers of the cattles and possibly the carrying capacity can be reached over 10,000 head. Currently that farm has 3000 head and it possible it can have 5000 to 10,000 head in 25 grazing cattles and also the second – the number two means in pen, that if we can build a feedlot with over 15,000 head how many areas or how many acres do we need. After the calculation you can see that we only need 200 acres to build a feedlot with over 15,000 head. … Unusual that – and also the number three means that – how big, how large the area do we need if we need to build a feedlot for the over 15,000 head. So that's why we calculated that we probably need 2000 acres to build a kind of a feed base or forage base. For example, we need to plant corns or oats or something like that. 172 The notes include calculations of revenue on different scenarios and other matters that Mr Lee was apparently not party to, such as references to using the existence of mountainous land as negotiation leverage on the rental. Taken together with Mr Xia's explanation, it is quite apparent that the Ningxia delegation was engaged in its own calculations of carrying capacity. The notes are accordingly not corroborative of Mr Xia's claim that Mr Lee was the source of the carrying capacity projections. 173 One of the notes in respect of the discussion during the morning on 24 April 2016 records as follows: [CB153/1842] 7. Land transfer issue {company impact Good for the motherland When it is appropriate, about 10 years, transfer after approval 174 In respect of that note, Mr Xia said that that was when Mr Lee was told that Ningxia still wanted to purchase land in Australia to which Mr Lee said that Ningxia could not do so, but that they could do so "after operation for a while, and after you get approval from FIRB". [T166:1-6] There is nothing else in Mr Xia's notes which references the possible purchase, or any prohibition on the purchase, of agricultural land in Australia by Ningxia. The note stands against the proposition that Mr Lee told the delegation that Ningxia was prohibited from buying agricultural land in Australia. 175 Mr Li said that during the visit Mr Lee said that the current carrying capacity of the farm was 3,600 head, but that in the future by improving the condition of the farm a carrying capacity of 5,000 to 10,000 head could be reached. He said that Mr Lee also said that 1,000 acres could be used to build a feedlot for 10,000 to 20,000 head, but that that would require approval. [T240:21-36] This is inconsistent with the other evidence that references 200 acres being required for a feedlot. 176 Mr Guo said that during the visit Mr Lee told the delegation that as a state-owned company Ningxia cannot purchase Kia Ora, it can only rent it, but that "after some years, like eight years, with approval maybe you can buy it." [T294:24-26, T295:15-18] He said that Mr Lee said that after operating the farm Ningxia could have "a priority to purchase land", which I understand to be a reference to a right of first refusal. [T302:31-33] 177 Mr Guo said that there was a discussion about building a feedlot for over 15,000 head. [T295:27-29, T301:1-2] He said that the delegation had a discussion about what could be done to increase the carrying capacity from the current capacity of 3,600 head to reach 5,000 to 10,000 head, such as clearing plantation and increasing density. [T298:10-13] He said that one method of increasing the breeding stock to 5,000 head that the delegation decided on was to use supplementary feed. [T300:13-16] This again shows the delegation making their own assessments and calculations as to the productive capacity of the Kia Ora farms. 178 Mr Li said that after the trip he drafted a report which was revised by Mr Guo. [T240:43-47, T296:1-3] Notable features of the report, which is dated 29 April 2016, include: [CB220/2268] (1) It is recorded that the current carrying capacity of Kia Ora, which was described as a low-density husbandry ranch, is about 3,600 head. It is recorded that operating the ranch depending on free range farming is not profitable enough, but that an "ideal" site with an area of 1,000 acres had been identified to build a feedlot for 15,000 cattle. [CB220/2269] (2) In the "Conclusion" section of the report, the following is recorded: [CB220/2270] Renting the ranch in Kia Ora is essential. Once we have the husbandry base, we can apply to operate a fattening farm and increase earning capacity through free range farming, providing supplementary feed, fattening etc. Breeding stocks can increase from 3,000 to 5,000 head. We can build a fattening farm of 15,000 head and increase slaughter to 50,000 head by means of 3 times of trade turnover so as to ensure that the ranch is profitable. … It is agreed upon to add the right of first refusal on the purchase of the ranch in the contract. (3) In the "Suggestions" section of the report, in addition to covering the lease of Kia Ora, there is the suggestion, or recommendation, of cooperating with the Australia China Development Group in respect of "purchase a beef cattle fattening farm". [CB220/2272] There is otherwise nothing in the report to support the notion that Ningxia was prohibited from purchasing agricultural land in Australia or that the carrying capacity and productivity calculations depended on anything said by Mr Lee. 179 Mr Lee said that once again he and the delegation were accompanied to the farm by Mr McCulloch, and that Mr McCulloch gave each member of the delegation an information memorandum about Kia Ora. He said that he and the delegation's interpreter interpreted. He said that there was discussion with Mr McCulloch about the possibility of a feedlot for 15,000 head, and the need to get local council approval. [T350:26-43] 180 It is to be noted that since the delegation had its own interpreter, unlike on the prior visits, there is no reason why the details on the memorandum, including the purchase price and carrying capacity, were not immediately available to and understandable by the delegation. 181 Mr Lee said that once again he was asked about the possibility of Ningxia purchasing the farm. In particular, he was asked whether he would buy the farm first and then sell it to Ningxia after a few years. He said that his reply was that he would not do that as that was not his business model. He said that his business model was that Ningxia could select a farm which he would then purchase to lease it to them. He told them that if they wanted to purchase the farm they can get FIRB approval and would have to organise everything themselves as he would not assist them. [T351:34-43] He said that he was asked when he would be prepared to sell the farm to Ningxia, to which he said maybe in eight to ten years, although in cross-examination he denied saying that during the April 2016 inspection. [T351:45 – T352:1, T421:25-26] 182 Mr McCulloch also said that he provided each member of the delegation with a memorandum about Kia Ora, told them the essential details about the farm and drove them there from Tamworth where he met them. [T480:20-34] He said that once again they were told that the carrying capacity was 1,800 cows and calves being 3,600 cattle in total. [T481:1-4] With regard to discussions about a feedlot, Mr McCulloch said that Ningxia wanted to build a feedlot that would handle 15,000 to 20,000 cattle. He told them that they would require local council and EPA approval. [T481:44 – T482:1] Significantly, all these things were said in the presence of the delegations interpreter so it cannot be thought that perhaps Mr Lee was misinterpreting what the delegation was told. 183 Mr McCulloch said that the delegation wanted to increase the grazing capacity on the farm to 5,000, but he and Mr Campbell said that that if they meant 5,000 breeding cows that could not be done using traditional methods of farming in Australia. Mr Campbell told them that the most that the farm had ever had was 2,000 cows and 2,000 calves. [T482:26] It is, however, to be noted that Mr Campbell did not say that he met the Ningxia delegation on this trip and no-one else said that he did, so Mr McCulloch is likely to have been confused about the visit on which these statements were made. If these statements had been made on the third visit that would have been particularly significant because Ningxia had its own interpreter. However, I am unable to find that they were made on that trip. B.6 Following the third investigation trip 184 On 18 May 2016, the vendor's solicitors sent a draft option agreement to 3SI's solicitors, which went through various drafts and was ultimately executed on 15 July 2016 between NGD Enterprises Pty Ltd and 3SI. It gave 3SI an option to purchase the Kia Ora farms. [CB235/2317, CB273/2471] 185 On 20 May 2016, Mr Xia prepared a draft supplementary cooperation agreement to be concluded between 3SI and Auken. It provided for some variation in the rental provisions, for Auken to have a pre-emptive right to purchase the farms in the event that it obtains FIRB approval, and for an application to be made for approval for a feedlot with a capacity "tentatively set to be 15,000 heads". [T111:38 – T112:8; CB237/2323] There were further drafts of the supplementary cooperation agreement which was ultimately executed on 24 May 2016. [T112:15-21] 186 The FIRB application was lodged on 26 May 2016. The approval process took some time, during which there were several communications between Mr Xia and Mr Lee. In one of those, on 1 July 2016, Mr Xia said that Ningxia would purchase the farms "in one or two years". [CB258/2412] This is yet another indication that Mr Xia held no belief or understanding that Ningxia was prevented from purchasing the farms. 187 It was also at that time that Mr Lee sent a message to Mr Xia stating that "the owner of the farm told the lawyer to inform us, telling me to pay another 2 million if they have to wait for another one month, fuck, this is looting a burning house!" Mr Lee unconvincingly explained that this was a reference to him having asked Mr McCulloch if the price could be reduced by $500,000 and Mr McCulloch had said that if the sale was done quickly that might be possible. The reference to "2 million" in the message was to Chinese yuan, not dollars, according to Mr Lee. Just where the truth lies on this issue is not particularly relevant. The point is that this was a transparent ploy by Mr Lee to keep the pressure up on Ningxia. [CB258/2412, T353:35-46, T426:5-13] 188 Mr Lee followed up with similar messages of questionable veracity which were designed to keep the pressure on Ningxia and to give the impression that he was fighting hard to keep the price down. [CB547/70-71] 189 FIRB ultimately granted approval to Auken to lease the Kia Ora farms on 2 September 2016. However, the approval was not given in respect of the full 15,000 acres, but only for approximately 5,000 acres, as a result of the inadvertent omission of certain lot numbers from the application. It would appear that only the Birralee lots were included. 190 Immediately after the approval came through, 3SI exercised its option to purchase the farms and work began on the lease agreement. In the latter regard, MinterEllison was instructed by Ningxia to advise it on the lease agreement. [CB352/2759] It was negotiated between solicitors – Gunnar Molenbeck & Associates for 3SI and MinterEllison for Auken. [CB253/2761ff] 191 The contract for sale of the Kia Ora aggregation (i.e., the full approximately 15,000 acres) was exchanged on 14 September 2016. The price was $10m, with $1m payable as a deposit. Completion was stipulated to be 42 days after the contract date. [CB361/2831, CB15/137] B.7 Ningxia's fourth investigation visit to Australia in September 2016 192 After the FIRB approval had come through, plans were made to make a further visit to Australia. The visit commenced on 14 September 2016, with the delegation arriving in Tamworth the following morning. The delegation consisted of: [T115:17 – T116:47] (1) Mr Xia, who had attended the May 2015, December 2015 and April 2016 investigation visits; (2) Hong Wang, who was by then a director of Auken and had attended the April 2016 investigation visit; (3) Zhen Ma, who was there to set up a Northern Territory farm in which Ningxia was interested; (4) Long Zhang, a grasses expert; and (5) Peiyao Lan, as interpreter. 193 Ms Pan and the accountant, Ms Wang, accompanied the delegation on its visit to Kia Ora on the suggestion of Mr Lee. [T115:46-47] 194 The delegation briefly visited the farm where they were again accompanied by Mr McCulloch. In the afternoon they had a meeting with the Tamworth Council to discuss getting approval for the planned feedlot. [T485:10-40] 195 During the visit, Mr Xia and Mr Lee were informed about the problem that several of the lot numbers had been omitted from the FIRB approval, following which Auken wanted to lease only the 5,000 acres in respect of which approval had been given and Mr Lee wanted the whole 15,000 acres to be leased as 3SI had committed to buy all of it. [T116:19-41] 196 In the meanwhile, Ms Pan emailed Mr Xia her detailed comments on the draft lease agreement. [CB375/3120] Those comments included comments with regard to particular provisions being "usual", "unusual" or "traditional". [CB375/3124, 3136] Ms Pan also noted that she had been instructed that the "commercial terms" of the lease had been agreed. She made no further comment about the base rental or annual escalation at CPI +1% per annum after three years. 197 On the morning of 16 September 2016, the delegation flew to Darwin where they were to look at another farm. They were accompanied by Mr Lee, Mr McCulloch and Ms Pan. Late in the afternoon they were all at the Hilton Hotel in Darwin when authority came through from Ningxia in China for the lease to be signed. [T117-118] 198 Mr Xia said that before the lease was signed, Mr Lee asked Ms Pan to interpret the lease for Mr Wang, and that Ms Pan interpreted "some main terms" and said of the rest, "these are all common practice and … standard in Australia", so there was no need to interpret them. It was not identified which terms were interpreted and which were not. [T118:19-27] 199 Mr Xia said that before he signed the lease he asked Mr Lee whether he had purchased the Kia Ora farms and Mr Lee responded that he had and that they had cost "over 20 million". Mr Xia asked to see the sale agreement, which Mr Lee then produced but with the purchase price redacted. Mr Lee explained that on the basis that the price was "a business secret". Mr Xia said that if he had known that the price was $10 million he would not have signed the lease with Mr Lee and would have had a new discussion regarding the rental price. [T118:32 – T119:12] 200 Mr Lee denied having said that the farms cost him over 20 million. He said that his response to Mr Xia was "no matter [if] I paid nothing or paid 20 million, it is not your business, it doesn't matter". [T354:17-18, T434:35 – T435:17] Mr McCulloch said that Mr Lee had asked him to redact the price on the copy of the sale contract to be given to Mr Xia with the explanation "it is none of their business", which Mr McCulloch regarded as "fair enough". [T486:3-21] 201 I prefer Mr Lee's version. The principal difficulty with Mr Xia's version is that it makes no sense for Mr Lee to have told him what the price was for the farms and at the same time to have redacted the price from the sale contract and told them that the price was a business secret. If indeed that is what Mr Xia had been told and the price mattered to him, then he could be expected to immediately have been suspicious and demanded to see the price on the contract and not signed the lease until he had. So, either Mr Xia's version is not what happened or the price was not material to him. 202 Another difficulty with Mr Xia's version is that according to him, Ms Pan, Auken's solicitor, was present during the conversation when Mr Lee said that the purchase price was over $20 million. [T227:4-7] However, Ms Pan knew from Mr McCulloch only a month before as part of her preparation of the FIRB application that the asking price for the farms had been $10 million since 2014. [CB309/2574] It is not credible that, knowing that, she would not have raised such a major discrepancy with Mr Xia. That was raised with Mr Xia in cross-examination, but Ms Pan was not called by Auken to explain. 203 A further difficulty with Mr Xia's version is that the starting rental recorded in the lease agreement that was signed later that day, to which I will come, was $108 per acre per annum for the full 15,000 acres. That is much less that the amount of $126 for 10,000 acres and $109 for 5,000 acres (i.e., an average of $120 per acre per annum) that was agreed in the cooperation agreement and supplementary cooperation agreement (see [155] and [163] above), and much the same as the figures originally given by Mr Lee in December 2015 (see [90] above) and during the second visit to Australia (see [95] above). At that time, Mr Xia knew that the asking price for the farms was $10 million as that was recorded in the information memorandum prepared and distributed by Mr McCulloch. There is therefore no support for the notion that Mr Xia thought that Ningxia was paying a premium because of any belief on his part that the sale price was over $20 million. 204 The lease was then signed by Mr Lee for 3SI and Mr Xia and Hong Wang for Auken. [CB389/3330] B.8 The lease and thereafter 205 As mentioned, the lease was signed on 16 September 2016 in Darwin. It provided for the lease by Auken of 22 lots, defined as "the Land", and excluded a further 29 lots, defined as "the Expansion Land" and having a maximum area of 10,000 acres, of the Kia Ora aggregation. In other words, the lease at that time was for only approximately 5,000 acres being the area in respect of which FIRB approval had been given, but it provided for it to be extended over the whole area once further approval was given. The term of the lease was 30 years. [CB389/3308] 206 The effective rental, i.e., excluding GST which would be neutral for Auken, was $108.38 per acre per annum paid yearly in advance. It was to increase at CPI +1% per annum each year after three years, i.e., not at CPI +3% as had been agreed in the cooperation agreement. 207 The starting rent, excluding GST, for the Land and the Expansion Land together was $1,625,670 per annum. 208 A security deposit for both the Land and the Expansion Land of $4,064,175 had to be paid at inception. 209 Under the lease, Auken therefore had to make the following initial payments to 3SI which total $5,852,412: [CB389/3309-3310] (1) Security deposit for 5,000 acres – $1,354,725 (2) Annual rent for first year on 5,000 acres (incl. GST) – $596,079 (3) Security deposit for 10,000 acres – $2,709,450 (4) Bond for annual rent for the first full year for 10,000 acres (incl. GST) – $1,192,158 210 The lease included a term giving Auken an option to purchase the land in the event that 3SI wished to sell it. Most expenses of maintenance, upkeep and outgoings were for Auken's account. 211 The commencement date of the lease was provided to be the date that 3SI became the registered proprietor of "the Land and the Expansion Land". That occurred on 26 October 2016. [CB389/3309, CB15/137] Auken can thus be taken to have had possession of the farms from that date. 212 FIRB approval for the remaining lots of Kia Ora was granted on 13 June 2017. [CB496/4542] C. A DISPUTE EMERGES 213 In September 2017, Stacks Law Firm in Tamworth wrote to 3SI on behalf of Auken. It complained that the term, market rental, rent review and security deposit under the lease were not comparable with the common practice and usual market terms and conditions contained in rural leases in the New England district. They said that Auken had conducted a detailed calculation and analysis regarding the operation of a farming enterprise on the land which showed that the projected income was limited due to the low grazing capacity of the property. As a result, they said that the farming business would not be profitable because the leasing costs were too high. With that as a backdrop, Stacks requested amendments to the lease agreement. These included reducing it to a term of five years with five year renewal options and reducing the rent to 3% of the market value of the land. [CB501/4553] 214 There then followed correspondence between the parties in which various possible amendments to the lease agreement were discussed. [CB504-513] For the first time, on 1 December 2017 Stacks claimed that there was no legally binding lease agreement between the parties, although it did not identify the basis for that assertion. [CB514/4592] HWL Ebsworth Lawyers, for 3SI, disputed that position and further correspondence ensued. [CB515/4594] On 22 December 2017, HWL Ebsworth wrote that on their instructions Auken had received keys to the premises on 27 October 2016 but had not yet entered into possession. It was asserted that the property had fallen into disrepair as a result. [CB518/4602] 215 Further correspondence ensued, which included 3SI demanding unpaid rental for the second year of the lease. A delegation from Auken visited Australia at least once in 2018 to try to resolve the parties' differences. 216 On 15 May 2018, 3SI gave notice to Auken that it had retaken possession of the farms. [CB535/4683] The parties are agreed that that is the date that the lease was terminated. 217 Eventually, in December 2018 Auken commenced the current proceeding. D. THE PLEADED MISREPRESENTATIONS D.1 The one-sided bargain 218 Before considering the representations, something should be said about how improvident the lease was for Auken and what a windfall it was for Mr Lee and 3SI. That is because Auken submits that but for one or more of Mr Lee's representations, there is no explanation for why it would enter into such a one-sided bargain. Mr Lee submits in response that there are other reasons, including Ningxia/Auken's own ineptitude and poor decision-making. 219 Mr Lee's valuation expert, Mr Ross, undertook an assessment of the market rental of the Kia Ora aggregation as at May 2018 on two different assumptions as to carrying capacity. The one scenario is on the assumption of carrying capacity of 1,500 breeding cows, and the other is on the assumption of 1,800 breeding cows. The annual market rental values he arrived at are $325,000 and $385,000 respectively (excluding GST). [CB19/286] Mr Newsome, Auken's expert, said that the market rental was between $180,000 and $400,000 per annum. [CB17/220] The rental agreed in the lease agreement was therefore between four and five times the market rental. That is a clear demonstration of the improvidence of the lease from Auken's perspective. 220 Mr Ross said that he considered market rental as likely to increase in line with CPI. [CB19/320] On that basis, escalation at CPI +1% exceeds the market, but it is not possible to say whether such an escalation is exceptional or improvident. 221 I now turn to deal with each representation in turn. D.2 The Ningxia incapacity representation 222 The pleaded misrepresentation is that the respondents represented to Auken that due to Australia's foreign investment regulations, neither Ningxia nor its subsidiaries would be legally permitted to acquire farming land in Australia. [ASOC para 19(a)] 223 As recorded in the summary of evidence above, all of Auken's Ningxia employee witnesses gave evidence that Mr Lee had made such a representation to them at various times. However, I reject the contention that such a representation was made or, if it was, that it was ever believed or relied on. The principal reasons for reaching that conclusion are the following. 224 First, in none of the post-investigation visit reports is such a representation recorded. The reports can be expected to cover the important or significant facts that were learned and observations that were made during the visits. The absence of any such representation being recorded suggests that it was either not made, or, if it was, it was not believed or it was not regarded as significant. 225 Secondly, Ningxia seems at all material times to have understood and believed that it or a subsidiary could buy agricultural land in Australia. That that is so is most obviously exemplified in the option to purchase included in the cooperation agreement and the lease agreement. Additionally, the report following the first investigation visit discussed Ningxia or a subsidiary buying land in Australia without qualifying that with regard to having a minority shareholding in a joint venture with Australian interests (see [78(2)] above). Ningxia's detailed research report on investment policies in Australia says nothing about purchasing agricultural land being prohibited (see [86] above). 226 Further, Ningxia's December 2015 feasibility report recommended that Ningxia purchase the Robert Ranch, which is inconsistent with any belief that such a purchase was prohibited (see [126(4)] above). The report to the Ningxia board in January 2016 recommending the establishment of a company to purchase land makes no mention of any restrictions, such as a need for Ningxia's interest to be a minority interest (see [138] above). 227 Thirdly, Ningxia's Australian solicitor, Ms Pan, told Mr Xia in correspondence that mention of a pre-emptive right by which Ningxia/Auken could purchase the property could be included in the FIRB application but that a separate FIRB application would be required if the option was to be exercised (see [157] above). Mr Xia replied, indicating that he understood. That exchange is inconsistent with Mr Xia labouring under the misapprehension that it would not be possible, because of a legal impediment, for Ningxia/Auken to purchase the property. 228 Finally, even if Ningxia laboured under the misapprehension that the only means of purchasing agricultural property in Australia was in a joint venture in which it had a minority interest, as its witnesses sought to make out, there is no evidence that it had any interest in pursuing such an option in relation to the Kia Ora aggregation in the immediate future. The report following the first visit gave reasons why leasing was preferable to purchase, indicating that from the start Ningxia was principally interested in renting Kia Ora. The correspondence between Mr Xia and Ningxia's Australian solicitor regarding the inclusion of a pre-emptive right in the lease (referred to above), as well as messages from Mr Xia to Mr Lee such as that sent on 1 July 2016 in which Mr Xia said that Ningxia would purchase the farms "in one or two years" (see [186] above), suggest that Ningxia contemplated purchasing Kia Ora at some point in the future but was only interested in renting the farms to begin with. 229 In the circumstances, the case based on the Ningxia incapacity representation must fail. 230 In view of my finding that the representation was never made, serious doubt is cast on the reliability of Ningxia's employee witnesses. They all parroted that Mr Lee had told them that Ningxia was prohibited by law from purchasing agricultural land in Australia. Yet, for the reasons I have given, Mr Lee said no such thing. Whether consciously or otherwise, the evidence of these witnesses on this point was false. They developed between themselves a common narrative. They may even have believed that narrative, but it was false. D.3 The grazing cattle capacity representations 231 Auken relies on two grazing cattle capacity representations, namely that the respondents represented to Auken that: (1) the Kia Ora farms had a carrying capacity of 5,000 to 10,000 head of grazing cattle; [ASOC paras 23(c) and 30(b)] and (2) through a variety of operations, the carrying capacity of the Kia Ora farms could reach more than 10,000 head of grazing cattle. [ASOC para 30(d)] 232 The first of those two representations, referred to as the Kia Ora Grazing Cattle Representation, was pleaded to have been made on the second and third of the Ningxia visits to Australia (in December 2015 and April 2016). The second of the representations, referred to as the Further Kia Ora Grazing Cattle Representation, was pleaded to have been made during the third Ningxia visit to Australia (in April 2016). There is some significance to it being said that it was during the third visit that the representation was made because Ningxia had its own interpreter on that visit and there were discussions with Mr McCulloch about carrying capacity – both grazing and by the use of a feedlot. Given the presence of the interpreter, it cannot be suggested that Mr Lee misinterpreted Mr McCulloch's answers. 233 Auken's case is that the substantial divergence between 5,000 and 10,000 head is explained by the difference between base cows and cows with calves, i.e., the representation was that the farm could carry 5,000 cows with calves being a total of 10,000 head. The figure of more than 10,000 head of cattle that could be grazed on the farms "through a variety of operations" is said to mean more than 5,000 base cows and calves, i.e., more than 10,000 head in total. 234 Auken's case that these representations were made is, firstly, that each of its employee witnesses said that they were made. Secondly, it says that their evidence is corroborated by many documents, in particular notes taken during the visits and post-visit reports, which reflect those figures or calculations based on those figures. Thirdly, it says that Mr Lee's evidence that he did not make the representations is not corroborated by any documents. Fourthly, it says that it is apparent from the various forecasts prepared on behalf of Auken that the profitability of the project depended on a carrying capacity of at least 5,000 head (without other measures such as supplementary feed); the carrying capacity was thus a matter of great significance to Auken such that its witnesses are unlikely to be mistaken in their recollections on this topic. 235 There are multiple problems with this aspect of Auken's case. 236 First, Ningxia/Auken had considerable expertise, experience and resources available to it to be able to properly calculate, or estimate, the carrying capacity of the Kia Ora farms whereas Mr Lee had none. Even if their experience of grazing cattle was limited, they had animal husbandry and grassland science specialists who could be expected to calculate the nutritional needs of cattle and the nutrition available or to be available on the farm. Mr Lee operated on his own, and he had no relevant experience or expertise. Moreover, Auken's evidence is not that Mr Lee told Ningxia that he had relevant experience or expertise (see [55] above). 237 It is apparent from Mr Newsome's report that the question of carrying capacity is highly technical. [SCB10/179-183] A short discussion with Mr Lee would quickly have made it apparent to anyone with relevant animal husbandry expertise and experience that he had none. It is simply not credible that Ningxia's highly experienced agriculturalists would have been taken in by, and relied on, anything said by Mr Lee with regard to the projected carrying capacity of the farms. However, they might well have relied on answers given by Mr McCulloch and Mr Campbell to questions about carrying capacity because of their knowledge and expertise on the subject in the specific context of the Kia Ora aggregation. 238 It is also clear from the evidence that I have summarised above that a number of carrying capacity figures were thrown around in conversation and at times recorded in contemporaneous notes. Frequently, no distinction was made between base cows and cows with calves so it is unclear just what was being spoken of or understood, and just what improvement techniques might have supported the numbers being discussed was not clear. Sometimes it was supplementary feed for cattle that were otherwise essentially grazing, and other times it was supplementing the carrying capacity by using a feedlot in conjunction with grazing cattle. Also, sometimes reference was to growing supplementary feed on the farms, and at other times growing it elsewhere or purchasing it to be brought onto the farms. The result is that even if Auken's evidence was accepted, there is no sufficiently clear and unambiguous representation on which reliance could have been placed – what were the "variety of operations" referred to in the pleaded representations, and could they have been implemented? There are too many questions and too many uncertainties for the representations to be meaningful. 239 In the circumstances, even if Mr Lee made the representations, I do not consider that they were the cause of any loss because they were not relied on. The cause of Auken/Ningxia's decision to lease the farms was its own investigations, calculations and projections and the substantial political impetus or encouragement to "Go Out". The various reports reflect Ningxia to have had significant confidence in its ability to intensify farming activity on the farms more in line with what is apparently done by Ningxia in the Autonomous Region; anything said by Mr Lee about carrying capacity and farming methods had no material impact on Ningxia's decision. 240 Secondly, there is no particular significance in the fact that all of Auken's Ningxia employee witnesses gave the same or similar evidence with regard to what Mr Lee is alleged to have said about carrying capacity. As I have shown with regard to the Ningxia Incapacity Representation, the witnesses are all capable of giving rehearsed untruthful evidence, and they could readily have done so with regard to the carrying capacity representations. However, as the summary of evidence above shows, the witnesses were not consistent. They gave evidence of a range of different carrying capacity figures and often failed to make it clear just what they were referring to. The evidence is simply not clear or consistent enough to accept that the pleaded representations were made. 241 Thirdly, the documents do not corroborate that Mr Lee was the source of the carrying capacity figures reflected in them. Indeed, none of the documents shows Mr Lee as having been the source. To the contrary, Mr Zhou, who had substantial relevant experience, said that calculations relevant to carrying capacity were done "later on", i.e., not on the trip, and his figures in any event are likely to have been be the result of a misunderstanding of what Mr McCulloch had said (see [65]-[66] above). His subsequent report then reflects his independent assessment of carrying capacity (see [75]-[76] above). 242 Fourthly, there is no significance in the documents not corroborating Mr Lee's version that he was not the source of the capacity representations because his is a negative version which could not be expected to be reflected in the documents. In any event, as indicated in the preceding paragraph, to some extent the documents support Mr Lee's version that he was not the source of the figures. 243 Fifthly, it can certainly be accepted that the projected carrying capacity of the farms was of considerable importance to Ningxia; the profitability of the project depended on it – so much so that it is not surprising that in a large organisation fingers are pointed and blame shifted after a substantial error having been made on the point became apparent. It is in that context that Ningxia's witnesses pointed the accusatory finger in unison at Mr Lee, whereas the truth more likely lies in one or more of them having made a grave miscalculation or proceeded upon unfounded assumptions about farming conditions in Australia. The project seems to have been driven by political considerations, being the "Belt and Road" initiative and "Going Out", which may have led to unrealistic projections of profitability or under assessment of risk. 244 Sixthly, the information brochure that was given to the members of each delegation by Mr McCulloch stated that the carrying capacity of the farms was 1,500 cows with calves "depending on management" (see [69] above). Although for the most part the members of the delegation could not understand English, they had this critical information available to them in written form and they could easily have had someone translate it for them. They had their own interpreter on the third and fourth trips who could have translated the document for them and who interpreted what Mr McCulloch said about carrying capacity. That suggests that it is unlikely that Mr Lee would have made projections substantially at odds with those figures as he could so easily have been caught out, and it suggests that if Mr Lee did make such projections, he is not likely to have been believed without Ningxia doing its own assessment or calculation to test it. 245 For completeness, Mr Newsome's unchallenged evidence was that the carrying capacity of the Kia Ora aggregation in 2016 was 13,600 DSE or, say, 90% of the long-term carrying capacity of 15,500 DSE with the winter period being worse than an average year and the spring being better than an average year. For a beef cattle herd, the carrying capacity was approximately 1,100 cows and calves with weaners being sold, or 1,000 cows and calves plus retaining 180 replacement breeding heifers from the previous crop of calves as future breeders. [SCB10/175] That is an opinion on capacity well below what Mr McCulloch and Mr Campbell told the delegation. D.4 The fair/market rental terms representations 246 Auken alleges that the respondents represented to it that: (1) the initial rental price for the Kia Ora farms of $126 per acre per annum with rental increases after the first three years for a 30 year lease of 3% more than the CPI was a fair market price for the initial rental, and normal market escalation for annual rental increases for the Kia Ora farms; and [ASOC para 23H] (2) the rental amounts set out in the cooperation agreement and the lease were fair market prices. [ASOC para 38A] 247 The first of those representations, referred to as the March 2016 Representations as to Market Rental, is pleaded to have arisen from 18 separately identified matters which took place or occurred between May 2015 and March 2016. [ASOC para 23H] The second of those representations, referred to as the Fair Price Representation, is pleaded to have arisen from the March 2016 Representations as to Market Rental (i.e., the same 18 matters) and a representation by Mr Lee to Mr Xia between 18 March 2016 and 1 April 2016 that a further 5,000 acres needed to be added to the 10,000 acres included under the cooperation agreement and that the rent for this further area, at $109.26 per acre, was lower because Mr Lee had succeeded in bargaining down the price of the last 5,000 acres. [ASOC para 24A] 248 The latter aspect can be dealt with immediately. Mr Xia said that Mr Lee had told him that the rental came down because the price of the land came down, not because the market rental or even the market sale price came down. Even if that could be said to imply that the new rental to be charged was market-related, which is doubtful, Mr Xia did not say that that is how he understood it. Also, even a representation that the rental to be charged is market-related, does not amount to a representation that it is a fair market rental – it could be multiples of the market rental and still be related to that market rental. 249 Auken's principal argument in support of its case in reliance on these representations is that entry into the cooperation agreement and the lease on terms of such commercial disadvantage to Auken can only be explained by a belief by Auken that the terms were fair and that it should agree to them. It is said that that belief, in turn, can only have come from statements made by Mr Lee who was the person Auken trusted and its sole source of information in relation to Australian farmland leasing conditions. Auken also submits that it is significant that the respondents have argued no other theory as to why such terms would be agreed to by Auken. 250 Although it might be accepted that Auken trusted Mr Lee and placed significant reliance on him, particularly with respect to identifying and visiting properties in Australia that were available to lease or purchase, it is not established that he was the sole source of information for Auken in relation to Australian farmland leasing conditions. Based on the earlier discussion of Auken conducting its own investigations, calculations and projections about Kia Ora's profitability (and that of other Australian properties) and its own considerable agricultural expertise, Ningxia clearly did not rely solely, or even principally, on Mr Lee's knowledge or expertise. Ningxia had other agricultural contacts in Australia, in particular Yang Fei and Modern Animal Husbandry Co Ltd, a Ningxia joint venture, and it visited many farms in at least three states independently of Mr Lee. Also, in response to Mr Lee's encouragement, Ningxia appointed an Australian accountant and solicitor who advised it on relevant matters relating to the conclusion of the lease. It can be accepted, however, that their advice was not sought on the commercial terms that were negotiated between Mr Lee and Mr Xia. 251 It is necessary to say something about Auken's Australian accountant (Ms Wang) and solicitor (Ms Pan). As early as the second investigation trip in December 2015, there was discussion about appointing lawyers and accountants to advise Ningxia (see [105], [129(3)] and [134(3)] above). On 29 December 2015, Mr Lee advised Mr Xia to appoint an Australian accountant (see [124] above), which advice he subsequently repeated on a number of occasions (e.g., [142], [143] and [144] above). On 23 February 2016, Mr Lee recommended a solicitor to Mr Xia and MinterEllison was immediately appointed (see [145] above). 252 For the third investigation trip, Mr Lee suggested that both Ms Wang and Ms Pan accompany the delegation, although in the end only Ms Wang attended (see [167] above). Ms Wang and Ms Pan attended the fourth investigation trip. Ms Pan was also given open access to Mr McCulloch to get relevant information from him, including the price at which the Kia Ora farms were being sold. [CB309] 253 The relevance of all that is that Mr Lee was intent on Ningxia/Auken having independent professional advice in Australia; his actions in relation to accountants and solicitors is not consistent with someone who has lied about commercial terms being standard or reflecting fair market terms and then seeking to keep Ningxia/Auken in the dark by insulating them from possible sources of the truth. In short, his encouragement of Ningxia/Auken taking independent professional advice and his openness to the advisors meeting Mr McCulloch and getting information from him does not suggest that he was making representations to Ningxia/Auken that the professional advisors or Mr McCulloch might readily contradict. 254 There are available explanations for Auken concluding the lease on unfavourable terms other than Mr Lee having represented that those terms reflected the fair market price. Those include that Ningxia made that assumption without any sufficiently clearly implied representation by Mr Lee, taken together with other imperatives to conclude the lease including the political impetus to pursue the "Belt and Road" and "Going Out" initiatives and that Mr Lee's was the best or only lease option available to Auken. The investigation reports indicate that Ningxia's profitability projections based on its own assumptions about being able to increase the carrying capacity of Kia Ora may have caused it to perceive that Mr Lee's proposed terms reflected fair market value, or at least were not unreasonable. It is to be observed that in the May 2015 report following the first investigation trip, it was calculated that a profit could be made in the fourth year of a long-term lease based on rentals exceeding even those ultimately agreed with 3SI (see [80] above). Thus, the belief in profitability is as likely to have driven an agreement to lease at a particular rental as any belief that that rental reflected a fair market price. 255 In any event, the way in which Auken's case is put necessitates identifying the 18 independent matters that it relies on. That is done with reference to each of the sub-paragraphs of paragraph 23H of the amended statement of claim. 256 The first matter (i.e., (a)) relied on is "the expressed familiarity of Carey Lee with farming conditions in Australia". Extensive references to the evidence are given by Auken to substantiate this, but almost all of them go no further than showing that from time to time Mr Lee gave Ningxia information about farms and farming in Australia. Even on Auken's evidence, Mr Lee said very little about his own experience of farming or his knowledge of farming conditions in Australia. Nevertheless, it can be accepted that he had some familiarity with farming conditions and put himself forward as a person with whom Ningxia could cooperate for the purpose of learning more about Australian agriculture and leasing a farm in Australia. These matters may be relevant to whether Auken relied on things said by Mr Lee, but they say nothing about whether he made the relevant representations. 257 The following four matters (i.e., (b)-(e)) are the unfamiliarity of the May 2015 and December 2015 Ningxia delegations to Australia with farming conditions in Australia, the inability of those delegations to speak or read English, and those matters being known to Mr Lee. All of that can be accepted and may be relevant to any issue of reliance, but it goes nowhere in establishing that Mr Lee made any representation, implied or otherwise, as to the rent proposed to be charged by 3SI being a fair or market rental. 258 The next matter (i.e., (f)) is Mr Lee's communication of the May 2015 Tamworth Farm Lease Price Statement. That is a reference to the allegation that during the May 2015 investigation visit, Mr Lee told the delegates that the lease costs of farms near Tamworth was about 115 yuan per mu per annum (i.e., $138 per acre per annum). However, the reference to the evidence in support of that allegation does not make it out. It is to Mr Xia's evidence in chief where he said that Mr Lee told the delegation that the "rental cost" for "another" farm in Tamworth of 200,000 mu (i.e., 33,333 acres) was 115 yuan per mu. It is not apparent what farm that was in reference to, and the statement was not that that was a market rental, but only that that is the rental that Mr Lee would offer. [T39:16-25] 259 The next matter (i.e., (g)) is Mr Lee's communication of the Carey Lee Facilitation Statement. That is a reference to the allegation that during the May 2015 investigation Mr Lee told the delegation that he did business by lending money to farm owners who were in debt to a bank and if they were unable to repay him he could take over the farm and sell it. That evidence is contested, but even if it were accepted it is not relevant to whether or not Mr Lee made representations about fair or market rental terms. 260 Next (i.e., (h)), it is said that Mr Lee told the December 2015 delegation that increasing rental by 3% per annum over the consumer price index was common practice in Australia. Both Mr Xia and Mr Yang gave evidence to this effect (see [95] and [100] above, respectively), and Mr Yang's evidence on it was not challenged. Mr Lee denied having said it. It is difficult to make a finding, one way or the other, on whether Mr Lee said that CPI +3% was common escalation practice, particularly in circumstances where there is no mention in writing that Mr Lee had said that, and none of the reports that went up to the decision-makers suggest that the term was common or standard practice. 261 The real difficulty with this aspect, though, is that it cannot be said that if Mr Lee had not said that CPI +3% escalation was common practice, the lease, or a lease on the same terms, would not have been concluded. Noting that the escalation that was ultimately agreed was CPI +1% per annum, it is not established that had Mr Lee not said that CPI +3% per annum was common practice, CPI +1% per annum would not have been agreed. 262 The next matter (i.e., (i)) is the averment that on 28 December 2015 Mr Lee communicated to Mr Xia that the rental price per acre per year for 15,315 acres, being the area of the Kia Ora farm, was $109.26 plus yearly increases of 3% plus CPI. It can be accepted that Mr Lee made that communication (see [122] above), but that does not assist in establishing that he said that it reflected a market price. 263 The next matter (i.e., (j)) is the averment that Mr Lee communicated the Early 2016 Price Increase of Kia Ora Statement. That is a reference to the averment that between 1 January 2016 and 18 March 2016 Mr Lee told Mr Xia and/or Hong Wang that the farm owner of the Kia Ora farm had raised the selling price. That is a reference to Mr Xia's evidence that when he asked Mr Lee why the area had been reduced from 15,000 to 10,000 acres, "Mr Lin" (scil., Lee?) said that the owner only wanted to sell 10,000 acres to him, "and for the reason of the rental price, from $109.26 increased to $126, Mr Lin said because Australia's market is changing every day, every day is different". [T94:36-40] 264 That exchange is a reference to the matters dealt with at [149]-[150] above when Mr Lee presented a draft cooperation agreement with a reduced acreage because he had been advised by Mr McCulloch that 5,000 acres had been sold to someone else. Mr Lee denied that he told Mr Xia that the increase in price was because of what the market was doing; Mr Lee said that that was the price he wanted. [T412:12-17] Once again, there is no basis upon which to prefer Mr Xia's explanation. But in any event, what Mr Lee is said to have said does not establish any representation that the rental ultimately agreed for the lease, which is the one that matters, was a fair market rental. 265 The next matter (i.e., (k)) is the allegation that Mr Lee communicated the Early 2016 Rental Increase Statement. That is a reference to the allegation that between 1 January 2016 and 18 March 2016, Mr Lee told Mr Xia and/or Hong Wang that the rental price of the land at the Kia Ora farm had moved from $18 per mu per annum to $20 per mu per annum because of market changes. Those figures translate to $108 per acre per annum to $120 per acre per annum. 266 The evidence that is referred to is the evidence in chief of Mr Xia where he said that in February 2016, Mr Lee told him that the Australian market was changing rapidly with a different price every day, and that the price increased from $18 to $20 (per mu). [T93:1-3] There is also a reference to the WeChat message sent by Mr Lee on 24 February 2016 quoted at [147(1)] above. It is evident from the WeChat message that Mr Lee told Mr Xia that the Australian agricultural market was changing rapidly in order to exert pressure on Ningxia, and that he told Mr Xia that the rent had been changed from $109.25 per acre per year to $126 per acre per year (being the equivalent of $18-$20 per mu). However, the WeChat message does not imply that the increased rental was fair or market rental, but rather that the increase arose because the available area had been substantially reduced. The implication as to market rental can be said to arise from Mr Xia's referenced evidence, but I do not accept that evidence. Mr Lee denied saying that the price increase arose because the Australian market is changing every day, and said that he possibly said that that was the price that he wants and he possibly said that the Australian market is changing every day. [T420:19-35] It was not put to him that he said that the price is different every day, which is what Mr Xia said that he had said. 267 As explained, it is safest to rest my findings on the documents and uncontested evidence. If Mr Lee had said orally that the rent was a market rent then I would expect that to have been said in the WeChat messages as well, but it was not, and I would expect it to have been reflected in one or more reports to the Ningxia decision-makers, and it was not. There is simply no objective and contemporaneous evidence that shows that Mr Xia or the decision-makers to whom he reported had any belief that the rental was a fair market rental. The reference in the feasibility report (referred to at [125] above) to "Leasing standard" in relation to basic terms of the proposed lease does not convey that those terms are common or fair market terms. [CB44.1/762] 268 The next matter (i.e., (l)) is the allegation that Mr Lee communicated the Further Early 2016 Rental Increase Statement. That is a reference to the allegation that on or about the same day of the receipt of the draft cooperation agreement, Mr Lee stated to Mr Xia that the reason for the increase in rent to $126 per acre was that the market price for farmland in Australia had gone up. The reference given is the same as for matter (j) dealt with above. It therefore adds nothing. 269 The next matter (i.e., (m)) is the allegation that Mr Lee communicated the Market Volatility Statement. That is a reference to the allegation that between 1 January 2016 and 18 March 2016, Mr Lee told Mr Xia and/or Hong Wang that the market price in Australia for land changed every day, so Ningxia should sign a lease as soon as possible to avoid higher costs. That particular representation was conveyed by Mr Lee to Mr Xia in several We Chat messages that Auken references in its submissions and was also said by Mr Xia to have been conveyed orally to him by Mr Lee. However, the representation that the market price for land changes daily does not carry with it the implication that the rent to be charged by Mr Lee is a fair market rental; it implies only that what he will charge has a relationship to the cost of the land. In an arrangement where Mr Lee was to purchase land in order to lease it to Ningxia, that would appear to be self-evident and does not assist Auken's case. 270 However, one of the WeChat exchanges referenced in Auken's submissions is the series of messages from Mr Lee that are quoted at [153] above. The messages include the statements that "Australian farm rental prices are expected to rise sharply within six months" and that "there will be an increase of 50%-70%". Those statements, in context, could be said to carry the implication that the rental to be charged by Mr Lee bears some relationship to market rental. However, it is certainly not a clear or unambiguous representation. 271 The next matter (i.e., (n)) is the allegation that Mr Lee communicated the CPI +3% Australian Practice Statement. That is a reference to the allegation that between 1 January 2016 and 18 March 2016, Mr Lee told Mr Xia and/or Hong Wang that rental increases of 3% over CPI each year was the Australian practice and could not be negotiated. That has already been dealt with in relation to matter (h) above and adds nothing. 272 The next matter (i.e., (o)) is the allegation that Mr Lee communicated the Further Early 2016 Rental Increase Statement. That allegation is identical to that in matter (l) above and adds nothing. 273 The next matter (i.e., (p)) is the allegation that Mr Lee communicated the $126 Acre Price Requirement. That is a reference to the averment that on 24 February 2016 Mr Lee stated to Mr Xia that market changes in the New England area had the result that the original rental price of $109.26 per acre per year was adjusted to $126 per acre. That covers the same ground as matter (j) above and adds nothing. 274 The next matter (i.e., (q)) is the allegation that Mr Lee communicated the February 2016 Agriculture Price Prediction. That is a reference to the averment that on 25 February 2016, Mr Lee stated to Mr Xia that because of the implementation of the China-Australia Free Trade Agreement the market price of animal husbandry and agricultural resources would increase by 200% by or before the end of 2020. That is with reference to the WeChat message quoted at [147(2)] above. Clearly, Mr Lee made that statement but it does not imply that the rental he proposed to charge was a fair or market rental. 275 The next matter (i.e., (r)) is the allegation that Mr Lee communicated the March 2016 Farm Price Increase Prediction. That is a reference to the allegation that on 14 March 2016 Mr Lee communicated to Mr Xia that the market price for Australian farmers would have a large increase in six months, of around 50%-70%. That is with reference to the WeChat message quoted at [153] above and already discussed at [270] above. 276 I am ultimately not satisfied that Mr Lee made any implied representation to the effect that the rental that he required under the cooperation agreement and then the lease was a fair or market rental. The highest that the evidence rises is the statements by Mr Lee to Mr Xia on 4 March 2016 (quoted at [153] and discussed at [270] above) to the effect that Australian "farm rental prices" are expected to rise sharply within the next six months and his opinion that there will be an increase of 50%-70%. As discussed, those statements do not give rise to any clear or unambiguous representation that the rental to be charged by Mr Lee would be a fair market rental. In any event, although those statements were made only a short time before the cooperation agreement was concluded on 18 March 2016, the lease was not concluded until more than six months later and the rental in the lease was considerably less than in the cooperation agreement. There is, therefore, no causal nexus established between the representation that was made on 14 March 2016 and the conclusion of the lease on 16 September 2016. The purpose, and result, of this and other statements by Mr Lee to the effect that the market was rising and thus the rent that he proposed to charge might rise, was to put the pressure of time of Ningxia; he was trying to and partially succeeded at speeding Ningxia up. However, it cannot be said that these statements caused the lease to be concluded on terms less favourable than would have been the case had the statements not been made. 277 What troubles me most about this part of Auken's case is the question of causation. Even assuming that Mr Lee made an implied representation that the rental in the cooperation agreement and the lease was a fair market rental and that escalation at CPI +3% per annum was common practice, can it be concluded that that representation caused Auken to enter into the lease? There is no evidence that Ningxia/Auken had any interest in whether the rental was a fair market rental; none of the trip reports or other reports and resolutions that went up to the decision-makers say anything about fair market rental or common practice, and no question was ever asked by the Ningxia personnel of Mr Lee or anyone else what a fair market rental was or what a common escalation clause would be. 278 In addition, there is no evidence of what Mr Xia, or Hong Wang, would have done if Mr Lee had not made the pleaded representations. Mr Xia was asked what would have occurred if he had been told that the rental was not a fair market rental, but that is the wrong question. He should have dealt with what would have occurred if he had not been told that the rental was a fair market rental, which is a different scenario. Although it is not necessary for there to be such evidence, in this case and for the reasons given, I am not satisfied that if the representations had not been made, Ningxia/Auken's conduct in relation to the conclusion of the lease would have been any different. 279 In the result, I am not only not satisfied that the pleaded representations were made, but I am also not satisfied that if they were made they were material in causing Auken to conclude the improvident lease. E. DISPOSITION 280 In view of my findings, Auken's proceeding falls to be dismissed. 281 As mentioned, I understand the parties to accept that in that event the cross-claim should succeed. Against the possibility that I have misunderstood that or there are any issues with the amount to be awarded, or the possibility that other issues remain to be dealt with, I will provide the opportunity for the parties to bring in orders. I certify that the preceding two hundred and eighty-one (281) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart. Associate: Dated: 28 March 2022