Mokau South Resources Limited v Xu

[2025] NZHC 2227

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-001034

[2025] NZHC 2227

BETWEEN

MOKAU SOUTH RESOURCES LIMITED

Plaintiff

AND

JUNGE XU

Defendant

Hearing:

12 – 14, 16, 19 – 20 May 2025

Appearances:

R O Parmenter for Plaintiff

S Wroe and Q Zhu for Defendant

Judgment:

8 August 2025

JUDGMENT OF ANDREW J

This judgment was delivered by Justice Andrew on 8 August 2025 at 4.00 pm

pursuant to r 11.5 of the High Court Rules 2016 Registrar / Deputy Registrar

Date: ……………………………..

MOKAU SOUTH RESOURCES LTD v XU [2025] NZHC 2227 [8 August 2025]

Introduction

[1]                 Mokau South Resources Ltd (MSR) owns a coal mining lease (the lease) and a coal mining licence (the licence) for land in the Mōkau coal field located near Ōhura in the central North Island. The underlying land is owned by the Crown and administered by the Department of Conservation. The licence, an area of approximately 743 hectares, relates to a site commonly known as the Panirau Plateau.

[2]                 The defendant, Ms Junge Xu, is a Chinese national and a self-employed businesswoman. On 18 June 2011, MSR and Ms Xu signed an agreement for the sale and purchase of the mining lease and its associated assets (the ASP). That included the licence. The total purchase price was $76 million plus GST if any.

[3]                 The ASP was ultimately cancelled in late 2013. A central issue for determination is whether it was validly cancelled by Ms Xu in reliance on a “sunset” clause or whether MSR was entitled to cancel because Ms Xu had failed to obtain resource consents within a stipulated two-year timeframe and did not comply with the settlement notice to pay $5 million.

[4]                 MSR alleges that Ms Xu did not use reasonable efforts to obtain the resource consents from Environment Waikato1 that it says were required “to enable mining” within the area  of  the  licence  “as  quickly  as  reasonably  possible”  but  before  18 June 2013. Consequently, MSR says that the condition in relation to resource consents was deemed to be fulfilled and MSR was entitled to issue a settlement notice demanding payment of $5 million and cancel the contract when that was not paid.

[5]                 A second critical issue is causation: if Ms Xu did breach the “best endeavours” clause, did that contribute materially to the non-fulfilment of the condition?

[6]                 Ms Xu denies breaching the ASP. She disputes MSR’s interpretation of it and denies causation. She says that even if breach and causation are established, MSR is not entitled to the full contract price because she has a right to set-off for breach of warranty by MSR as vendor, which cancels out any liability she might have. In her

1      Environment Waikato was the operating name for the Waikato Regional Council (WRC) until 2011. The names are used largely interchangeably throughout this judgment.

counterclaim, she contends that MSR breached s 9 of the Fair Trading Act 1986 (FTA) because it told her that only one limited resource consent was required and that it would be easy to get within a year. She also says that it was misleading or deceptive for MSR not to have told her that it had applied for more than one type of resource consent in 1997 and then subsequently withdrawn the application in 2002.

[7]                 The coal at the Panirau Plateau is low grade coal with a high sulphurous content. It is said to have a thin seam, meaning there are potentially significant implications for the washing of coal2 as part of any coal mining operation. The proposed operation at issue is a greenfields opencast coal mining project and, as noted, is on conservation estate. The location is remote with moderate to steep topography. There is no infrastructure in place, including electricity, transportation and adequate roading.

[8]                 MSR says that at the time of cancellation of the ASP, the market value of the lease and licence assets was only $10 million, some $50 million (approximately) less than the agreed sale price (two years earlier). MSR seeks by way of damages in its second amended statement of claim (2ASOC) the sum of $49.9 million. I understand that that figure is based on the difference between the contract price and the said market value at the time of cancellation. In closing submissions, counsel for MSR, Mr Parmenter, indicated that MSR was prepared to accept that the most MSR could recover was $5 million.

[9]                 It is clear and obvious that the international political climate and concerns about greenhouse gas emissions from burning fossil fuels did and are impacting on the economic value of the coal reserves at Mōkau.

Background facts

[10]              MSR, previously under its former name of Ohura Timber and Coal Products Ltd, has held:

2      Washing of coal, also known as beneficiation, is a process of removing impurities.

(a)Coal  Mining   Lease   18714   since   13   May   1955,   renewed   on 9 November 1990, and renewed and varied on 1 September 2017; and

(b)Coal Mining Licence 37089 since 9 November 1990.

[11]              The lessor under the lease is the Crown (Department of Conservation) with responsibility for the land lying with the Department of Conservation.

[12]              The area of the lease is approximately 10,870 hectares. The licence covers an area of approximately 743 hectares.

[13]              The Panirau Plateau is located in the Mōkau River catchment approximately 15 km north/north-east of Ōhura. It is contained within the sub-catchments of the Panirau Stream and the Tikaputa Stream, which ultimately converge and discharge into the Mōkau River.

[14]              In 1997, MSR lodged applications for five resource consents with the Waikato Regional Council (WRC) to enable opencast mining. They were applications for two discharge permits for discharge to land, and three water permits for groundwater take and diversion.

[15]              Following a WRC decision served on 11 January 2002, MSR withdrew the applications.

[16]              On 31 May 2005, Mr Grant Blackie, Programme Manager of the Ministry of Forestry and Minerals, wrote to Mr Murray Sampson of MSR3 on the topic of possible resource consents required by WRC for all activities associated with MSR’s proposed opencast coal mine on the Panirau Plateau. Mr Blackie noted any consent application process required for the development of the proposed mine would most likely be a publicly notified process with a reasonable expectation of appeals. He suggested to Mr Sampson that he should plan accordingly.

3      Mr Sampson is a director of MSR and has been since 1989.

[17]              In March 2006, Ashby Consultants Ltd prepared for MSR a Phase 1 Pre-Feasibility Assessment of the opencast coal mining potential within the licence held by MSR. The report was based primarily on the results of the logging of eight core holes drilled on the Panirau Plateau in 1995.

[18]              On 30 April 2007, Ashby Consultants Ltd issued a Phase 2 Pre-Feasibility Assessment for MSR which concluded that there were 9.277 million tonnes of recoverable coal within the licence. That report also noted that there were some additional 5.765 million tonnes of recoverable coal outside of the licence area but within the lease (total cumulative tonnes of 15.042 million). The final page of the report entitled “Further Investigation and Work” referred to the securing of resource consent from WRC to take and discharge water.

[19]              On 18 June 2011, MSR and Ms Xu (and/or her nominee) signed the ASP for the mining lease and associated assets. The total purchase price was $76 million plus GST if any. The initial deposit of $100,000 was paid by Ms Xu.

[20]MSR gave the following vendor warranty at cl 5.2 of the Schedule to the ASP:

5.2The Vendor has provided to the Purchaser all information in relation  to the Assets available to the vendor that would be considered material by a reasonable and prudent person to its decision to purchase the Assets on the terms set out in this agreement in which the Vendor is authorised to disclose. As far as the Vendor is aware, the information provided to the Purchaser relating to the Assets is full, complete and not misleading.

[21]Both the terms “information” and the assets are defined in cl 1.1 of the ASP.

[22]              At cl 13.3 of the ASP, the parties agreed that the only information that the vendor might disclose to alternative purchasers was that within a pre-agreed data sheet. The data sheet is attached to the ASP. It reads as follows:

We have a Thermal Coal resource lease that may become available, that is situated in the central part of the North Island of New Zealand.

Mokau South has 20+ million tonnes of opencast coal and 17+ million tonnes of underground coal. Consents for the opencast mine are mostly in place for this resource.

It is envisaged that it would take approx 1 year to get the infrastructure in place to produce the first tonne of coal. The resource does not have the infrastructure in place to mine coal at present. Before mining could commence roads, bridges, buildings, a coal washery plus any other infrastructure that would be required, would have to be built.

Exploration work as to how much coal is obtainable has been carried out by the NZ government and other professional people.

[23]              By a variation dated 25 August 2011 (the first variation), the parties agreed to extend the date for due diligence by four months while MSR obtained their renewal of the licence.

[24]              The  licence  was  renewed  by  a  Memorandum  of  Variation  on  about    20 December 2011.4

[25]              On 31 December 2011, the parties agreed a second variation to the ASP and recorded it in writing (the second variation). The interpretation of that second variation is a central issue in the case. However, in the agreed summary of facts, the parties acknowledge the following “areas”:

(a)Ms Xu waived the conditions under cl 4.1 of the ASP and declared the ASP unconditional.

(b)The total purchase price was reduced to $59,100,000 and the provisions for payment were changed so that payments would be on a staged basis tied to obtaining resource consents and the mining of the first 200,000 tonnes of coal.

(c)There was a provision requiring Ms Xu to use her “best endeavours” to procure the “required resource consents from Environment Waikato to enable mining within the area of the [Licence]” and to do so “as quickly as reasonably possible” (the “best endeavours” clause).

4      Its agreed relevance is only as to timing, being connected to the need for the first variation some four months earlier.

(d)If the required consents were not obtained within two years (i.e. by  18 June 2013), “the contract may be terminated by notice in writing by either party” (the “termination” clause). On such termination MSR would retain the $100,000 deposit already paid.

[26]              On 6 January 2012, the parties agreed a third variation to increase the amount of the final payment to $34,900,000, taking the total purchase price to $60 million (the third variation).

[27]              In February 2012, Ms Xu received legal advice that, as drafted, the sub-lease and sub-licence arrangement contemplated by the second variation would not comply with New Zealand law. The advice noted that government consents would be required (i.e. the consent of the New Zealand Government as lessor and the consent of the Minister of Energy under s 89 of the Coal Mines Act 1979 (CMA)) and that overseas investment consent would also be required.

[28]              On 7 December 2012, MSR raised a notice of dispute pursuant to cl 15 of the ASP contending that Ms Xu, as the purchaser, had failed to use her best endeavours to procure, as quickly as reasonably possible, the resource consents from WRC, contrary to her alleged obligations under the second variation.

[29]              In early 2013, the parties corresponded on the issue of a transfer of shares in MSR to Ms Xu (with a corresponding mortgage held by Mr Sampson and the other shareholders in MSR) as a possible solution to the problems identified in the February 2012 legal opinion about a sub-lease and sub-licence arrangement. In correspondence on that issue dated 27 February 2013, Mr Neil Barker, a real estate agent and the agent for MSR as vendor, wrote to Ms Xu indicating that Mr Sampson had offered “To proceed with the resource consent process for you. His time will be free of charge.”   The correspondence also noted Mr Barker’s understanding that   Ms Xu had been working hard to bring investors to New Zealand.

[30]              On 9 May 2013, Mr Neil Barker emailed Ms Xu indicating that the share transfer proposal had not proceeded because Ms Xu had not replied or even

commented on a share transfer document sent to her. The email noted that a new share transfer document would need to be arranged before “any deal can move forward”.

[31]Resource consents were not obtained by 18 June 2013.

[32]              The total invoice by Mine Design Systems Ltd for work undertaken for Ms Xu between January 2012 and December 2013 was for $110,996.59.

[33]              On 24 September 2013, MSR demanded payment of $5 million as payable under the second variation. It asserted that Ms Xu had not taken reasonable steps to fulfil the condition as to obtaining resource consents and could not rely on its non-fulfilment.

[34]              On 13 November 2013, MSR issued a settlement notice demanding payment of $5 million on the basis that the “resource consent” is deemed to have been obtained “because the purchaser [defendant] has not taken any or any reasonable steps towards the obtaining of the resource consent”.

[35]              Notices of cancellation by both parties followed.   Ms Xu issued hers on     21 November 2013 and MSR issued its notice on 18 December 2013. Ms Xu relied on the termination clause. MSR relied on non-compliance with the settlement notice.

[36]              At the time of cancellation (November and December 2013) there was no valid sub-lease and sub-licence or any other legally binding contractual arrangement which would have enabled Ms Xu to mine within the area of the licence (as anticipated by cl 2(ii) of the second variation).

[37]              In 2014, there was some further negotiation and attempts to keep the deal alive, but this was limited and unsuccessful.

[38]              On 26 March 2014, MSR lodged an application with WRC for resource consents:

(a)to discharge over burden to land; and

(b)to dam and divert surface water.

[39]On 14 October 2014, MSR applied for further resource consents:

(a)to divert groundwater;

(b)to discharge treated pit water and stormwater to land;

(c)to drill holes below the water table; and

(d)for soil disturbance and vegetation removal.

[40]              On 17 November 2015, MSR lodged another resource consent application to take 500 m3/day of water from sediment ponds for dust suppression.

[41]              On 9 December 2015, WRC issued a notification recommendation and decision in relation to the seven resource consent applications lodged by MSR. WRC concluded that  these applications should be publicly notified and  the provisions of  s 95C(2) of the Resource Management Act 1991 (RMA) applied.

[42]              In September 2016, the Ministry of Business, Innovation and Employment renewed MSR’s licence for a further 21-year term, with a right to renew for a further 21-year term from 2 October 2037.

[43]              In November 2016, MSR received legal advice from Russell McVeagh and Mr Nolan KC that resource consent for the land use components of MSR’s licence resource applications was not required because they were already authorised by the licence. Prior to that, many of those involved in the various previous resource consent applications for coal mining on the Panirau Plateau and within the licence had understood and proceeded (incorrectly) on the basis that land use consents were required.

[44]The resource consent applications were all withdrawn on 24 April 2017.

[45]On 23 September 2024, MSR applied for four resource consents from WRC:

(a)diversion of groundwater;

(b)discharge of treated pit and stormwater to land and water;

(c)well drilling below water table; and

(d)disturbance.

[46]              On 25 November 2024, the WRC requested further information from MSR under s 92 of the RMA. MSR provided a response on 31 March 2025. This included a response to some 39 specific further information requests. The application is currently being considered by WRC.

The pleadings

[47]              The 2ASOC dated 24 September 2020 contains one cause of action. It is alleged the resource consents, the subject of the second variation, were not obtained within the two-year period stipulated and that Ms Xu’s failure to obtain those consents was a breach of her obligations to use her best endeavours contrary to cl 2(i) of the second variation.

[48]              MSR contended that it cancelled the ASP on the grounds of non-compliance of the terms of a settlement notice.

[49]              At [8], MSR alleges that an order, timeously to procure “require resource consents from [WRC] to enable mining within the area of [Mokau’s] licence” the following steps ought, reasonably, to have been undertaken:

Step	Action	Timeframe
1	Project Definition - Appoint a Project Manager and define the nature of the proposed activities.	January–March 2012
2	Engage resource management planner expertise, and review relevant provisions of the Waikato Regional Plan to determine the need or otherwise for resource consents from WRC.	March 2012

3	Liaison with WRC / Pre-application meeting to confirm consent requirements the environmental issues to be addressed in the context of the applications required.	Mid-March 2012
4	Assemble a project team with the required areas of expertise to address the environmental issues identified.	Late March 2012
5	Site visit (including with WRC reps) to confirm the nature and extent of the environmental issues to be addressed in the context of the applications required.	April 2012
6	Undertake all necessary site / environmental investigations.	April–June 2012
7	Preparation of technical reports.	June–July 2012
8	Undertake consultation with interested and potentially affected parties (in this case, DOC, local iwi/hapu and Fish & Game).	April–July 2012
9	Preparation of resource consent applications and Assessment of Environmental Effects (AEE).	June–August 2012
10	Lodge resource consent applications and AEE with WRC.	End of August 2012
11	WRC to process resource consent applications and release decision.	September 2012–June 2013

[50]Paragraphs 16 and 17 of the 2ASOC read:

16.At the time of cancellation of the sale agreement, the subject of the sale agreement (Coal Mining lease 18714 and related assets) had a market value of $10m.

17.As a consequence of Ms Xu’s breach, Mokau has suffered loss, viz. the difference between the sale price (as varied) and the market value of Coal Mining lease 18714 and related assets, viz $49.9m.

[51]              As noted above, in closing submissions, MSR accepted that the most it could claim was $5 million.

The issues

[52]I need to resolve the following issues:

(a)What was being bought and sold?

(b)What did the second variation mean?

(c)Did the defendant, Ms Xu, comply with the best endeavours clause (the second variation)?

(d)If not, did that failure materially contribute to the fact that the required resource consents were not obtained by 18 June 2013?

(e)If breach and causation are established, was MSR entitled to issue a settlement notice for $5 million? (Was the plaintiff ready, willing and able to settle?)

(f)Is MSR entitled to damages of $5 million?

(g)Does Ms Xu have a defence of set-off based on misrepresentation and failure to disclose material information (i.e. a breach of warranty)?

(h)Are the counterclaim defendants (MSR/Mr Sampson) liable under s 9 of the Fair Trading Act 1986?

Analysis and decision

Issue (a) – What was Ms Xu buying?

[53]              MSR says that Ms Xu was buying a discrete and limited set of assets, namely the lease, the licence and some associated information, but not a coal mining operation. It relies principally on the more limited definition of mining in s 2 of the Crown Minerals Act 1991 which MSR contends is restricted to the bare extraction of minerals from the earth. Ms Xu, on the other hand, says she did not simply agree to purchase

the right for simple extraction; rather, the package of assets, the subject of the ASP, was the sale of mining operations: a commercial mine.

[54]              In my view, this first issue, namely what was Ms Xu buying, provides some important context to addressing the truly critical issue of whether, as Ms Xu contends, “to enable mining” in the second variation means to commence mining operations. However, the question of whether Ms Xu was buying only a limited set of assets is not the complete answer to that question.

[55]              In emphasising the limited purpose of the purchase (i.e. buying the lease/licence and assets – nothing more than a simple right to extract coal from the land), MSR contends that whatever happens after the extraction “is nothing to do with the [ASP]”. It submits that that is why the condition in the second variation is limited to consents from Environment Waikato only, with those consents pertaining only to the licence area.

[56]The issue of what Ms Xu was buying is one of contractual interpretation.

[57]              The Supreme Court in Bathurst Resources Ltd v L & M Coal Holdings Ltd5 confirmed the general approach to contractual interpretation, outlined in its previous decision in Firm PI 1 Ltd v Zurich Australia Insurance Ltd.6 In Firm PI 1 Ltd, the Court summarised the approach in this way:

[60]      … [T]he proper approach is an objective one, the aim being to ascertain “the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract”. This objective meaning is taken to be that which the parties intended. While there is no conceptual limit on what can be regarded as “background”, it has to be background that a reasonable person would regard as relevant. Accordingly, the context provided by the contract as a whole and any relevant background informs meaning.

[61]      The requirement that the reasonable person have all the background knowledge known or reasonably available to the parties is a reflection of the fact that contractual language, like all language, must be interpreted within its overall context, broadly viewed. …

5      Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696.

6      Firm PI 1 Ltd v Zurich Australia Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 at [60]–[63].

…

[63] While context is a necessary element of the interpretative process and the focus is on interpreting the document rather than particular words, the text remains centrally important. If the language at issue, construed in the context of the contract as a whole, has an ordinary and natural meaning, that would be a powerful, albeit not conclusive, indicator of what the parties meant. …

(footnotes omitted)

[58]              Evidence extrinsic to the document and factual background may be admissible as an aid to interpretation only if it has a tendency to prove or disprove anything of consequence to the notional reasonable person.7

[59]              Here, what must be proven is what the objective intention of the parties was in relation to the “assets” and key terms in the second variation, such as “to enable mining”, “required resource consent” and “best endeavours”.

[60]The “assets” are defined in cl 1.1 of the ASP: “(a) the Lease; (b) the Licence;

(c) the Easement; (d) the Land; and (e) the Information”.

[61]Each of those terms are further defined.

[62]              The “lease” refers to mining and mining operations. It includes various clauses that clearly suggest that the rights and powers conveyed by the lease relate to removing the coal from the ground, removing it from the site and selling it. For example:

(a)Clause 1(a) refers to personnel entering the land as necessary for “carrying on the work of mining for coal and marketing the same”.

(b)Clause 8 refers to winning coal from the land “to as great an extent as reasonably possible” and removal of the coal on an “economic basis”.

[63]              In my view, the definitions in s 2 of the CMA remain relevant context for the interpretation of the licence because it was issued while that legislation was in force. It provided that:

7      Bathurst Resources Ltd v L & M Coal Holdings Ltd, above n 5, at [62] and [75].

(a)“Mine”, as a verb, includes any manner or method of working a coal mine.

(b)“Mining” means mining operations; and includes prospecting.

(c)“Mining operations” are defined widely to include activities connected with extracting the coal from the ground, storing, treating, and moving it and the overburden around.

[64]The term “information” is defined in the ASP as:

… all geological, geotechnical, seismic, exploration and other technical information and all plans, work programmes, records and reports held by the Vendor in connection with the Assets and which the Vendor is authorised to disclose.

[65]              The information, as defined, included the Pre-Feasibility Assessment Report from Mr John Ashby, which addressed considerations for producing and transporting the coal, including a forecast cost to get it as far as the mine gate.8

[66]              I accept the submission of the defendant that the interpretation of the licence in the lease (which falls under the definition of “assets” in the ASP) and the pre-agreed data sheet need to be taken into account since they all form part of the contract.

[67]The commercial context for the ASP was initially set by MSR’s advertisement:

After 25 years of ground work to gather consents, mining [licence], surveys and assessments, Mokau South Opencast Coal Reserves are ready to be mined. Coal is in high demand worldwide and the timing couldn’t be better. Over 15 million tonnes have been identified as being recoverable at a cumulative cost of less than NZ $61 per tonne. … The Mokau Coalfield has been identified as the largest contiguous steam coal resource on New Zealand’s North Island and Mokau South is ready to break ground.

[68]              The clear message conveyed by this advertisement is that there is an investment opportunity to purchase a coal mining operation and that mining, in the sense of extracting and selling coal, could commence without any significant impediment.

8      The Ashby Consultants Ltd report entitled “Phase 2: Pre-Feasibility Assessment” identified resources within the leased area of about 15 million tonnes. Of that, 9.277 million tonnes were within the licence area. It envisaged annual production of 300,000 tonnes.

Albeit with the benefit of hindsight, the claims of “ready to be mined” and “ready to break ground” have proven to be quite illusory. I will return to address the advertisement later in this judgment when I address the issue of misrepresentation.

[69]Ms Xu’s initial inquiries about price elicited an indication of under

$120 million. Her first offer for her “friend”, Mr Bai, was $100 million.

[70]              I accept that the assets are defined in the ASP in discrete and clearly defined terms. I also acknowledge that what was not being sold was of some importance, namely no supply agreements, no freight agreements, and no stevedoring agreements. I also accept that the narrow statutory definition of mining in the CMA is an important and helpful starting point. Equally, it is clear that there is no functioning commercial coal mining operation in existence that MSR could credibly offer for sale. There is no infrastructure in place and all parties must have understood that. However, I reject MSR’s contention that the ASP was for the very limited purpose of buying the lease/licence, with the assets being nothing more than the simple right to extract coal from the land such that whatever happens after the extraction is nothing to do with the ASP.

[71]              The ASP must, of course, be read together with all three variations. In my view it is abundantly clear that the ASP (construed as a whole in accordance with the three variations) expressly addresses and is concerned with what happens after bare extraction. It was the clear mutual understanding and expectation of the parties that Ms Xu was buying the assets for the express purpose of developing a commercially viable coal mine and the second variation, in particular, clearly anticipated that extraction, sale and export of coal would commence as soon as reasonably possible and before Ms Xu’s obligations under the ASP had been completed.

[72]              As noted above, the assets were marketed as “opencast coal reserves” that were “ready to be mined”. Their commercial value was expressly referred to. The pre-agreed data sheet (part of the ASP) records “consents for the opencast mine are mostly in place for this resource”. It is inconceivable that Ms Xu would have paid the agreed purchase price for simply the limited right to remove the coal from the ground.

[73]              There is some merit in Mr Parmenter’s submission that the due diligence clause is contemplative of Ms Xu proceeding in two discrete stages:

(a)the purchase of the assets, and then

(b)the proposed development of the coal resource contained within the assets (i.e. when the purchase of the assets is complete, the proposed development proceeds).

[74]              However, subsequent to the due diligence period, the structure of the deal was essentially changed through the second variation. The purchase price was reduced and the parties expressly agreed to a staggered payment structure with the payments linked to particular stages in a commercial coal mining operation. That second variation imposed specific obligations on MSR as vendor to assist with the development of the coal reserves for economic gain (cl 2(iv) of the second variation, which required MSR, before the final payment of $34 million is made, to obtain the necessary land use resource consents for mining outside the licence area (i.e. within the lease, being one of the assets being sold)).

[75]              It is thus not correct to say, as MSR does, that when the “purchase of the assets” is complete, the proposed development proceeds.

[76]              Viewing the contract as a whole, objectively and in its commercial context, I find that the sale was of a collection of assets and rights that would enable the purchaser to extract coal ore and to begin the process of selling it. The assets were being sold at a high price exactly because they involved the handing over of potentially lucrative mining rights. It was clearly anticipated there would be commercial mining.

[77]              The way the second variation is linked to staggered payments makes clear that there is an economic and commercial aspect to what Ms Xu wanted to do and what her advisers wanted her to do. The second variation makes it clear that the intention was that the large sums of money (i.e. the $10 million and the $34 million in cl 2(iii) and (iv) of the second variation) would not be payable until a coal mine was operating and fully functional. That is because the buyer did not want to find itself in the position

where it was handing over large sums of money and was not able to start recovering capital and start actual mining. The initial payment of $5 million (itself a substantial sum) was to be paid after the issuing of the “required resource consents” to enable the extracting of economic value (i.e. the process of selling coal) to begin.

[78]              It would seem that the reason for the second variation was because Ms Xu and her advisers had come to understand that they were not going to be in a position to mine straight away. The assets were not ready for mining in the sense of “ready to break ground”. The parties had to look at a different way of structuring the deal and to addressing their competing, respective  interests.  On  the  one  hand  MSR  and Mr Sampson wished to receive substantial funds as soon as possible – but it was equally clear that mining was not able to begin (“mining” in the sense of having coal to sell). Therefore, the first $5 million is linked to the ability to start mining and the next two payments of $10 million each are linked to having sold product. That is after the mining of the first 100,000 tonnes of coal.

[79]              The basic, common-sense view of what a mine is and what the assets are is persistent throughout the first and second variations. As Mr Gray said in evidence, the idea of just digging up the coal and not doing anything with it is plainly absurd. That must be right. The whole purpose of the contract and the variations was to see if a deal could be saved by staggering payments alongside mining – an economic activity that would begin to bring in money for the buyer at different stages through the years that followed.

[80]              Under the second variation, MSR was obliged to begin preparing legal documents for the sub-lease/sub-licence or other contractual arrangement to allow mining to begin within the licence area so that those documents could be handed over at the same time as payment of the first instalment of the $5 million. No additional amounts under the second variation were payable by Ms Xu for preparation of those documents that would allow access to begin mining.

[81]              I thus answer Issue (a) as follows. Ms Xu was buying more than the simple right to extract coal from the land. She was buying a mining operation, albeit one that was in a very incomplete and undeveloped state. The contract expressly contemplated

the development over time of a commercially viable coal mine with staggered payments linked to the obtaining of necessary resource and regulatory consents leading to full commercial production.

Issue (b) – What did the second variation mean?

[82]              In opening submissions, Ms Xu submitted that cl 2(i) of the second variation (i.e. the best endeavours clause) was not sufficiently precise to be enforceable. That submission is no longer pursued. However, it is entirely understandable, particularly given the very ambitious and highly risky nature of the proposed coal mining project here, that Ms Xu and her legal advisers would have looked closely at that issue.

[83]              In his evidence, Ms Xu’s expert witness, Mr Martin Gummer, a very experienced consultant (with degrees in commerce and law) and extensive experience in business project analysis and stakeholder negotiations, referred to what he described as “the big picture”. Mr Gummer noted the real challenges and difficulties that a greenfields opencast coal mining project on Department of Conservation land (whatever a historical licence and lease had provided for) would likely give rise to “in this modern age”. Mr Gummer referred to “so many interdependent practical, engineering, infrastructure, logistical, environmental, community and even political issues”. He noted that many of these factors would need to be addressed sequentially and noted the importance of scoping out an economically viable project from the outset. As I discuss below in greater detail, that proper scope (a project definition) had never been completed before the ASP was cancelled – and substantial work on that project definition and scoping did not commence until after the signing of the second variation. The risks of the deal falling over were, in my view, always very high.

[84]              The critical words of the second variation are “… granting of the required resource consents from Environment Waikato to enable mining within the area of the [Licence].” It is the consents contemplated by this clause that Ms Xu was required to use her best endeavours to procure.

[85]              It is not in dispute that water and air discharge resource consents would be required and fall within cl 2(i). However, the extent to which resource consents were

required under cl 2(i) for matters beyond water and air discharges, and for activities outside the licence area, is at issue.

[86]              Mr Sampson’s subjective understanding and intention was that the required “resource consents” would be of a very limited kind; not land use consents (they were not required) but limited to water and air discharges. However, his subjective intention and understanding is ultimately not relevant. As Ms Wroe submitted, if Mr Sampson had his own private ideas about what Ms Xu was meant to be getting and what it would enable her to do, that is not evidence that is relevant for the Court as it does not demonstrate a mutual understanding on those points.

[87]              I agree with Ms Wroe’s general proposition that to “enable” must mean to make mining possible, to allow it to happen. As Mr Stevenson, expert witness for MSR agreed, no commercial party is going to start extracting coal if they do not have a plan to sell it and would not dig out the coal unless they were going to sell it. I also generally agree with the submission of Ms Wroe that “mining” must be read consistent with the rest of the contract, including the use of the same term in cl 2(iii) to mean something more than a theoretical ability to extract ore from the ground without more. It must mean getting to the point where a commercial party can commence mining operations. That is clear from how cl 2(ii) operates alongside cl 2(i). MSR had concurrent obligations to ensure that the contractual arrangements were in place to allow the buyer to be able to use the rights under the lease and licence which provided access and authority to undertake activities that would otherwise require land use consents.

[88]              Having said all that, the clear and obvious limits to the resource consents referred to in cl 2(i) must be confronted and addressed – and it is necessary to ask what the commencement of mining operations actually means in the context of this clause.

[89]              There are three key restraints or limitations apparent on the face of cl 2(i). They are:

(a)the need to obtain resource consents from Environment Waikato;

(b)the requirement to mine within the area of the licence; and

(c)the absence of the consents required for coal washing or a preparation plant.

[90]              In relation to the latter, I would observe the express reference to coal washing reinforces my finding that commercial coal mining operations are expressly contemplated by the contract as a whole.

[91]              I do not find it necessary to make a final determination on the vexed issue of whether land use resource consents are required for coal mining pursuant to a licence (i.e. the proper interpretation of the transitional provisions of the CMA). My impression is that land use resource consents are not required; there is clear support for that proposition in some of the cases relied on by MSR and, of course, the legal opinion commissioned from Mr Nolan.9 It is not only unnecessary for me to reach a definitive conclusion but it would also, in my view, be inappropriate when there is no live resource consent application before me (with proper disputing parties).10 For present purposes, I proceed on the basis that the consents that Ms Xu was required to use her best endeavours to procure, did not include land use resource consents.

[92]That said, what is of significance and importance here is that:

(a)even establishing that land use consents are not needed for licence holders has been less than straightforward, requiring at  least  two High Court proceedings with involvement of senior counsel;11 and

9      Powelliphanta Augustus Inc v Solid Energy New Zealand Ltd (2007) 13 ELRNZ 200 (HC); and New Zealand Steel Ltd v Attorney-General [2013] NZHC 3524. See also Derek Nolan (ed) Environmental and Resource Management Law (online looseleaf ed, LexisNexis) at [7.19].

10 That might include the local authority and/or the Crown.

11 In Powelliphanta Augustus Inc v Solid Energy New Zealand Ltd, above n 9, at [32], Panckhurst J held that s 107 of the Crown Minerals Act 1991 (the transitional provision) was “less than straight-forward”. In New Zealand Steel Ltd v Attorney-General, above n 9, at [5], Kós J stated that the issue of whether the Crown was still required to obtain resource consents for land disturbance associated with mining activity had a “rather Gilbertian quality” to it.

(b)WRC’s position throughout has been that it can consider (and, in my view, would always likely have taken that position) land use activities in applications for non-land-use activity.

[93]              The question of whether a resource consent is needed for an activity is a distinct question from whether that activity can be considered by a consenting authority in deciding a resource consent application. The two cannot be conflated. Therefore, it does not follow from land use activities not needing resource consent that land use activities cannot be considered in an application for a water (or other non-land-use) consent. I return to the issue of the likely approach of WRC when I address the issue of causation below.

[94]              I accept that the resource consents contemplated by cl 2(i) do not involve a pit to port operation. They do not, for example, include any resource consent that might be required for coal export facilities at the Port of Taranaki (beyond the jurisdiction of WRC). Nor do they include resource consents from other local authorities such as the Horizons Regional Council12 or the Ruapehu or Waitomo District Councils. They would, however, include other resource consents (i.e. beyond water and air discharge) required from Environment Waikato, for activities inside and outside the licence area so as to enable mining within the licence area to commence. That would, for example, include resource consents (if any) associated with the construction of the necessary infrastructure to get vehicles and equipment onto the site to start mining. What is contemplated is, in my view, some resource consents associated with infrastructure development (albeit not the fully operational mine) to allow for the extraction of coal from the ground and then to transport it away from the site for the purposes of sale and export.

[95]              The actual resource consents MSR applied for in 2014 and again in 2024 are illustrative of the type of consents that cl 2(i) covered. I note they included an application to discharge overburden to land, to dam and divert surplus water, to divert groundwater, to discharge treated pit water and stormwater to land, to drill holes below the water table, and for soil disturbance and vegetation material removal. However,

12     Responsible for the Manawatū-Whanganui region.

the clause was not confined to those particular matters, but extended, as I have indicated,  to  other  resource  consents  that  might  be   required   from  Environment Waikato and associated with the infrastructure development of the coal mine in the licence area at Panirau.

Issue (c) – Did Ms Xu comply with the best endeavours clause?

[96]              The parties are in broad agreement about what was required in legal terms for Ms Xu to comply with the “best endeavours” clause. The wording of the clause with its reference to “as quickly as reasonably possible” meant that Ms Xu was not being required to act beyond the bounds of reason, but rather to do all that she could reasonably be expected to do in the circumstances to achieve the contractual objective.13 The meaning of “best endeavours” has been summarised as “some honest and positive effort but [which] must be balanced against any other duty or commercial interest” and is “quite simply what a reasonable person should do in that situation at that time after considering all the circumstances”.14

[97]              The test is objective in the sense that the Court makes a sound assessment of whether the defendant’s endeavours were “best” or “reasonable”. But what is “best” or “reasonable” turns on the “nature, capacity, qualifications and responsibilities” of the defendant, viewed in light of the particular conflict.15

[98]              While a defendant bears an evidential burden to show that he did actually make reasonable efforts, the legal burden rests with the plaintiff.

[99]              The experts before me were largely in agreement as to the eleven steps that ought reasonably to have been undertaken by Ms Xu to procure resource consents. However, they differed significantly on the critical issue of timing and, in particular, in relation to the time required for the first step, namely the project definition.

13 Centaur Investments Company Ltd v Joker’s Wild Ltd (2004) 5 NZCPR 675 (HC) at [69], citing

Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41.

14 Centaur Investments Company Ltd v Joker’s Wild  Ltd, above n 13, at [70], quoting Quentin  Lowcay “‘Best Endeavours’ and ‘Reasonable Endeavours’” [1999] NZLJ 211 at 215 with apparent approval.

15 Transfield Pty Ltd v Arlo International Ltd [1980] HCA 15, (1980) 144 CLR 83 at [101].

[100]          I accept that Ms Xu, for sound commercial reasons, was intent on developing a comprehensive and full project definition as a first step in the process towards obtaining the resource consents. I also accept, in principle, the evidence of the defendants’ experts that this would have taken at least two years given the scale, complexity and challenges involved. However, the various steps that Ms Xu should have taken have to be interpreted within the context of a clause which imposed reasonably tight timeframes. As Mr Parmenter submitted, the fundamental problem for Ms Xu is that she did not come even close to actually filing any resource consent applications with Environment Waikato – albeit I accept that she took significant steps towards developing a project definition with a view to assessing critical economic aspects and viability of the overall project. In my view, Ms Xu breached the “best endeavours” clause because she focused solely on the project definition and took no real meaningful or concrete steps to do most of the things necessary beyond that initial project definition phase to even get a resource consent application close to being lodged with Environment Waikato.

[101]          I acknowledge that Ms Xu may have used her best endeavours to try and get this project off the ground. She invested a lot personally and professionally and no doubt wanted the project to succeed. I note, too, that she remained keen to try and make the deal happen even when the MSR could not provide the sub-lease and sub-licence, and even after cancellation. However, as MSR submits, the focus on commercial and financial considerations should have been undertaken before the due diligence clause was waived (or, as legally required, a much more truncated project definition phase) – and even if there is some air of commercial unreality about the operation of this clause, given that Ms Xu was at a “standing start” at the time she signed the second variation, she signed up to it with the benefit of legal advice and other professional expert assistance. The second variation and restructuring of the deal may have arisen from a combination of Ms Xu’s determination (and perhaps naivety) to try and secure a deal and Mr Sampson’s recognition (and perhaps desperation) that a deal with Ms Xu was the only realistic option that he had had or would have for a very long time.

[102]          In conclusion on Issue (c), I find that Ms Xu did breach the best endeavours clause.

Issue (d) – Did Ms Xu’s failure materially contribute to the fact that the required consents were not obtained by 18 June 2013?

[103]The relevant legal principles as to causation are not in dispute.

[104]          In Melco Property Holdings (NZ) 2012 Ltd v Hall,16 the Supreme Court held that a party whose breach of the contract has contributed materially to non-fulfilment of a condition may not rely on such non-fulfilment to avoid a contract. The Court further held that when considering the situation where both parties have contributed to some extent in the non-fulfilment of a condition – in other words, the contribution to the non-fulfilment is shared – it will be necessary to construe “material” as meaning “substantial and operating”.17

[105]          In my view, the answer to the question in issue is clearly “No”. MSR has failed to establish causation in circumstances where both parties, in my view, have contributed to some extent to the non-fulfilment of the condition (i.e. a breach of warranty by MSR as vendor; a matter I address below). Any failure by Ms Xu to use her best endeavours has not materially contributed to the required “resource consents” to enable mining not being issued by 18 June 2013. MSR has not shown that it is remotely likely that she would have got the resource consents by that date.

[106]          In my view, even on the plaintiff’s own more limited definition of mining and what was required, its own experiences with a five-year period from the 1997 consent application and a three-year period from that in 2014, together with a current, as yet undetermined, experience in 2024/2025, illustrate that there was virtually no chance of resource consents being granted within the specified timeframe. I note that, in May 2005, the Ministry of Forestry and Minerals advised Mr Sampson that any consent application process required for the development of the mine at Panirau would most likely be a publicly notified process with a reasonable expectation of appeal. Mr Sampson was advised to plan accordingly. Indeed, that advice proved to be correct because, in December 2015, WRC (in relation to the second round of resource consent applications) concluded that the applications should be publicly notified. MSR did,

16     Melco Property Holdings (NZ) 2012 Ltd v Hall [2022] NZSC 60, [2022] 1 NZLR 59 at [53].

17 At [53].

of course, subsequently withdraw the second round of resource consent applications as well.

[107]          In addressing this issue of causation, it is important to recall that the second variation, which includes the two-year period, was signed on 31 December 2011. The document is dated 18 June 2011, and it is not disputed that the two-year period ran from that date, so that  the  deadline  for  obtaining  the  consents  by  Ms  Xu  was 18 June 2013 (i.e. 18 months after the signing of the second variation). In reality, whether 18 months or two years, the timeframe was a tightly compressed one.

[108]          The Court has been greatly assisted by the evidence of the experts, including their comprehensive agreed expert statement (also recording disagreements) addressing the issues of both causation and whether Ms Xu breached the best endeavours clause. The experts addressed questions such as what resource consents from Environment Waikato were necessary to enable mining within the area of the licence. The experts all agreed that all of the steps/actions pleaded at [8] of the 2ASOC were necessary to procure the required resource consents. They also all agreed that the steps are generally sequential, but some could be undertaken in parallel. The experts also generally agreed on what each step involved (i.e. as pleaded).

[109]          At the “big picture” general overview level, the expert defence witness assessment that at least two years would be required for the critical project definition phase has a compelling and real-world logic to it. However, as reasoned above, given the contractual obligations that Ms Xu had signed up to (i.e. the best endeavours) that extended timeframe was not legally open to her. However, in my view, the importance of the project definition phase to the project generally, and the likelihood of obtaining resource consents, is directly relevant and of importance in determining whether, even on the contractually agreed truncated timetable, there was any realistic prospect of the resource consents being obtained. Had Ms Xu made  an  application  to  Environment Waikato for the necessary resource consents (as I have found she was required to do) then the lack of a complete and fully developed project assessment would likely have materially impacted on the timeliness and outcome of any resource consent application.

[110]          Mr Mark Chrisp, expert witness for MSR, was an impressive witness and is obviously highly experienced. However, his evidence is based on a number of assumptions, including the assumption that only limited resource consents were required and what he saw as a “takes and discharges in a remote location.”

[111]          The defence expert witnesses, Mr Craig Welsh and Mr Michael Parsonson, were of the view that it would “take a well-resourced and experienced mining company at least five years” to obtain resource consents from the consenting authorities for the project at issue here. That view assumed a publicly notified consent process but excluded any appeals to the Environment Court. The opinion is based on an estimated project definition period of two years. Generally, I prefer the evidence of Mr Welsh and Mr Parsonson. In my view, the plaintiff’s experts, and indeed the whole of the plaintiff’s case, underestimates the difficulties that would inevitably have been encountered with a resource consent application of the kind at issue here. The “big picture” perspective that Mr Gummer refers to and that is directly relevant to the question of the likelihood of obtaining resource consents within a tight timeframe is, in my view, generally missing from the plaintiff’s case. The likelihood of a project of this kind generating significant opposition and complications, even if an application for consent had been filed, as Ms Xu was obliged to do, was always very high. Indeed, the parties themselves expressly contemplated difficulties of that kind arising.  Clause 2(iii) of the second variation expressly refers to the issue of delay “to mining activity caused by political action within New Zealand.”

[112]          I find the evidence of Mr Welsh on the issue of the practical and real-world inability to de-couple the land use consents from the water and discharge of contaminants resource consents to be compelling. Even if land use consents were not required (I make that assumption), I agree with and accept the evidence of Mr Welsh and Mr Parsonson that Environment Waikato would inevitably have considered associated land use activities in addressing the applications for water and discharge of contaminant consent applications. Whatever the more restrictive contractual obligations as between the parties (giving rise to Ms Xu’s obligations), these could not have precluded Environment Waikato from discharging its statutory responsibilities of making a fully informed decision (i.e. a consideration of the associated related land use activity). Furthermore, and as the defence experts noted, it is highly likely that

Environment Waikato would have been concerned that it not be left with the responsibility of cleaning up the site if an economically unviable coal mining operation were to take place.

[113]          As I have discussed above, the uncertainty surrounding the legal issue of whether land use consents are required would also likely have contributed to delays. I note that Mr Chrisp, before he became involved with this project in 2016, understood that land use consents were in fact required. It appears that Mr Welsh (probably because of his experience with coal mining on the South Island’s west coast) did know from reasonably early on that land use consents were most likely not required. That observation is not a criticism of Mr Chrisp; the matter is clearly not straightforward and, in any event, is ultimately a legal question. The point is that the difficulties and complexities are relevant to an assessment of how realistic it was for Ms Xu to have obtained the necessary consents within the stipulated time period.

[114]          In conclusion on the issue of causation, I find that MSR has not established that Ms Xu contributed materially to non-fulfilment of the condition. She may have been in breach of the best endeavours clause in having failed to even make an application for resource consent. However, even if she had done that, there was no real likelihood, in my view, that the resource consents would have been obtained within the stipulated time period (i.e. by June 2013). There were simply too many hurdles; both practically and legally. Ms Xu’s failure was not substantial and “operating”, even if the breach of the best endeavours clause was an elementary one. The recent letter from Brookfields, solicitors, to WRC (dated 31 March 2025), responding to a request for further information under s 92(1) of the RMA (part of the current resource consent application by MSR), highlights the complexity and uncertainty of resource consents of the kind at issue here. I note that even in 2025, it was necessary for the solicitors for MSR to clarify “the legal position regarding the interface between the mining licence and the RMA.”

[115]          The difficulties and complexities were foreshadowed in the somewhat prescient observations of Mr Perry Empson, of Environment Waikato, in his email of 1 June 2012 to Mr Garry Gray, mining engineer and mining consultant. The email

addresses the issue of the resource consent processes being undertaken within statutory timeframes:

The process is in theory very straightforward. In the real world there are people who may disagree with what you are proposing for any number of reasons and the RMA enables affected party engagement. All of this is a business risk for the applicant where time means money – not telling you anything new here.

[116]          The “blunt” and “big picture” observation of Mr Martin Gummer I have referred to above provides clear support for my conclusion about the unreality of the two-year time period. I find to be compelling his observation about the interconnected nature of all of the factors (many of which need to be addressed sequentially).

Issue (e) – If breach and causation are established, was MSR entitled to issue a settlement notice for $5 million: was MSR, as the plaintiff, ready, willing and able to settle?

[117]          Strictly speaking, it is not necessary for me to address this issue since I have found that causation has not been established (i.e. that is the end of MSR’s case). However, it is appropriate in a case of this kind that I do so.

[118]          Ms Wroe submitted that even if Ms Xu has no defence, MSR was still not permitted under the contract to issue a settlement notice and cancel as it was not ready, willing and able to settle.18 It is contended that MSR needed to be in a position to provide a legal means for Ms Xu (or her buyers) to rely on the rights under the licence and lease. When faced with the prospect that a sub-lease or sub-licence would not work, Mr Sampson tried to re-negotiate the deal by suggesting that Ms Xu should pay more money as part of a shareholder arrangement for her company to take shares in the plaintiff.

[119]          In my view, MSR was obliged under the second variation to begin preparing legal documents for the sub-lease, sub-licence or other contractual arrangements to allow mining to begin within the licence area so that those documents could be handed over at the same time as payment of the first instalment of the $5 million. I agree with Ms Wroe that MSR was under an obligation to begin preparing the legal documents

18     Clause 8.1 of the ASP.

not from the date when the resource consents were obtained, but as from the date of the second variation, namely 31 December 2011, when the parties expressly agreed that the contract had become unconditional.

[120]          Despite the force of Ms Wroe’s submissions on this point, I ultimately conclude that Ms Xu was not entitled to resist the MSR settlement notice demanding payment of the $5 million and cancelling the contract when that was not paid. MSR did begin preparing the necessary legal documents and/or taking steps to obtaining the necessary “legally binding contractual arrangements” as required, as soon as the contract became unconditional (i.e. as from 31 December 2011).

[121]          Ms Xu may have had some valid reasons not to engage with MSR – given her understandable focus on the project definition phase – but she did fail to engage in a reasonable and meaningful with MSR’s attempts to resolve the issue. The email from Mr Barker, dated 9 May 2013, is revealing:

Murray spent a lot of money on a share transfer document but it did not proceed because you did not reply or even comment on the document. Any new share transfer document will be based on that document so this all needs to be sorted out before any deal can move forward. If Murray spends more money and again puts a share transfer doc together, on terms that you both agree to, then how does he know that you will proceed this time? Are you prepared to instruct your solicitor to compile the document?

[122]          I find that Ms Xu may not use her own default to deny MSR’s claim. I agree with Mr Parmenter’s submission that MSR was complying – or doing all it could to comply – with its obligations under cl 2(ii) of the second variation.

Issue (f) – Is MSR entitled to damages of $5 million?

[123]          It follows from the above analysis on Issue (d) (i.e. no causation) that MSR is not entitled to damages of $5 million or any damages at all. MSR’s claim does not succeed.

Issue (g) – Does Ms Xu have a defence of set-off based on failure to disclose material information?

[124]          Having concluded that MSR’s claim fails for lack of causation, it is not strictly necessary for me to determine this issue. However, I will. I would also note that my

analysis and conclusion about this issue is relevant to my finding (above), in relation to causation, that MSR also contributed to the non-fulfilment of the condition.

[125]          Clause 5.2 of the schedule to the ASP (quoted above at [20]) contains a vendor warranty. Ms Xu contends there has been a material breach of warranty. In the statement of defence to the amended statement of claim,19 she contends that MSR did not provide to her all information in relation to the assets available to MSR that would be considered material by a reasonable and prudent person to its decision to purchase the assets on the terms of the ASP. The particulars relied upon include:

(a)the ability of the local Ruapehu and New Plymouth District Councils to regulate the use of, and to require the commitment of funds to pay for upgrading and maintaining of, about 50 km of local council roads along the plaintiffs’ proposed  route  from  the  Mōkau  claim  to  State Highway 3 in order to accommodate 60–100 truck journeys per day, six or seven days per week;20

(b)the fact that it applied for resource consents in 1997 and withdrew its applications in 2002;21

(c)the lack of any of the detailed information that the plaintiff had submitted as part of its own previous resource consent applications;22 and

(d)the true position as to the Councils’ control over their roads.23

[126]        Ms Xu contends that the set-off she has operates to cancel out any liability that MSR may have against her as her claim would be as much as, or more than, the amount of damages claimed by MSR. She says the defence is available where it would be unjust to allow MSR’s claim without taking her claim into account. She relies on OHL

19     Statement of defence to amended statement of claim, dated 24 June 2020 (relied on as statement of defence to 2ASOC also) at [18]–[21].

20     At [19(a)(ii)].

21     At [19(a)(vii)].

22     At [19(a)(viii)].

23     At [19(b)(vi)].

Ltd v Johns & Ors24 for the proposition that the two are so intertwined that it would be unfair to deal with the claim without taking into account the set-off. She further contends that the MSR claim for damages is based on the contract going ahead – and had it gone ahead she would have been entitled to a refund of the purchase price as the mine was in fact effectively worthless and, importantly to her buyers, was not even close to being ready to be mined.

[127]          I find that the failure by MSR to disclose the fact that it had applied for resource consents in 1997 and withdrawn its applications in 2002 was a material and, in the circumstances, an egregious breach of the warranty. Clause 4.2 of the ASP (purchaser acknowledgments) does not apply to the vendor warranties (cl 4.2(b)) and there is no dispute by MSR that it failed to disclose that information. Mr Sampson’s excuse that he did not wish to complicate matters for Ms Xu (i.e. the issue of whether land use consents are legally required) is, in my view, likely a post factum (after the event) excuse.25 Even if Mr Sampson and MSR were genuinely of that position, that did not absolve them from the requirement under the vendor warranty to make the information about the resource consent history available to Ms Xu. Given the nature of the operation at issue, its history and, as the current dispute makes clear, the significance and importance of the resource consents, I find the breach here not only to be material but wholly inexcusable. I agree also with the submission of Ms Xu that, as the two are so intertwined, it would be unjust to allow MSR’s claim (if a valid one) without taking this claim of set-off into account.  Given the now reduced claim by MSR for

$5 million and the fact that, had the contract gone ahead, Ms Xu would in effect have

purchased assets of a relatively minimal value (that were not even close to being mined), the defence of set-off is clearly made out.

[128]          My finding that the decision not to disclose the earlier resource consent application history was an egregious breach of the warranty (it was clearly deliberate)

24 OHL Ltd v Johns [2019] NZHC 594. See also Henriksens Rederi A/S v PHZ Romlipex [1974] QB 233, [1973] 3 All ER 589; and Christine French Laws of New Zealand Equitable set-off (online ed) at [24]–[31].

25   In the plaintiff’s second amended reply to the statement of defence and counterclaim defence to  the defendants’ counterclaim dated 11 March 2025, the plaintiff, MSR, pleads that the WRC responses to previous applications were based on a misunderstanding of MSR’s legal rights flowing from the licence. It further pleads that it would have been misleading to Ms Xu to have raised previous applications which were not in accordance with the laws of New Zealand.

reinforces my finding about unfairness. In the circumstances, it was a calculated attempt by MSR to downplay the difficulties which it knew would likely arise with any fresh resource consent application. In the circumstances, it is difficult to see how MSR could in good faith have sanctioned the marketing material which very much minimised the regulatory resource consent hurdles.

[129]          Had the earlier resource consent application history been disclosed, Ms Xu would have received critical and key information as to how to go about the resource consent application, including the need to do so promptly. Indeed, she would likely not have signed up to the deadline in the second variation or at least negotiated different terms.

[130]          Mr Parmenter submitted that a breach of warranty claim is just a breach of contract claim and, as with such claims, a breach needs to be causative of the loss. He contended that, given what was discovered in due diligence, even if there had been a breach of warranty, any lack of information ceased to have an effect and the second variation “is a fresh start to the deal between the parties; the ASP ceased to have effect.” However, I reject that submission. There was loss caused by the breach as I have reasoned above. Furthermore, the waiving of the due diligence requirement did not suspend or cancel the vendor’s warranty obligations under cl 5.2 of the schedule to the ASP. Indeed, the second variation explicitly provides:

Subject to Clause 5.2 the assets will be at the sole risk of the purchaser from the date of the sub-lease and sublicense referred to in 3(ii) above.

All other terms and conditions remain the same

(italicised emphasis added)

[131]          The second variation is not a fresh start to the extent that all that preceded it and all original terms of the ASP are no longer relevant or binding. I acknowledge that the deal was substantially restructured, but it was a variation to the original ASP.

[132]          In the circumstances, it is not necessary for me to address the other particulars relied upon by Ms Xu. I simply observe that they are far less clear-cut than the view I have taken on the egregious non-disclosure in relation to the resource consents.

[133]          I would further note that the information relating to the 1997 resource consent application and the subsequent withdrawal of those applications in 2002 falls within the definition of information in the definition section (cl 1.1) of the ASP (see above at [64]). The definition is broad and includes “all plans, work programmes, records and reports held by the Vendor in connection with the Assets and which the Vendor is authorised to disclose”. This clearly encompasses information relating to the resource consent application. As noted, the information is part of the assets being sold (see definition of “Assets”; cl 1.1). This means that the vendor, MSR, failed to disclose (as it was required to do) an important component of the assets that Ms Xu was purchasing.

Issue (h) – Are the counterclaim defendants (MSR/Mr Sampson) liable under s 9 of the Fair Trading Act 1986?

[134]          Ms Xu contends that MSR and Mr Sampson were acting in trade for the purposes of s 9 of the FTA. She says that Mr Sampson is responsible for statements that were made in relation to the mine and decisions that were made of what to disclose and not to disclose. She submits that he can be personally liable even though he was acting as a director or agent for MSR.26

[135]          Ms Xu contends that the evidence demonstrates that the following representations remained operative at the time of the second variation:

(a)Only one type of resource consent (for water discharge) was required from Environment Waikato; and

(b)this would be easy to obtain within one year.

[136]          Mr Sampson broadly accepts what was said but he denies liability on the basis that he was merely expressing an opinion. Ms Xu on the other hand says that the meaning of the representations was that with those types of resource consent Ms Xu would be able to mine within the area of the licence. She says that Mr Sampson’s

26     Body Corporate 202254 v Taylor [2008] NZCA 317, [2009] 2 NZLR 17.

opinions are actionable as misleading misrepresentations because he had no reasonable basis for them. She relies upon Premium Real Estate Ltd v Stevens.27

[137]          I do not accept that the representation that only one type of resource consent was required from Environment Waikato is, in the circumstances here, an actionable misleading representation. To his credit, Mr Sampson was one of the first to hold the view (likely the legally correct one) that land use consents are not required under a coal mining licence. For reasons given above, this issue is complex and there is a degree of uncertainty. I find that, in these circumstances, Ms Xu has failed to establish that there was no reasonable basis for Mr Sampson’s belief. He was entitled to conclude that the consents required were limited – given my findings on the scope of the contract, as outlined above – even if he underestimated the particular number of consents required and was misinformed  as  to  the  likely  approach  of  Environment Waikato in having regard to land use issues as part of any decision on water and air discharge resource consent applications.

[138]          As to the representation that a resource consent would be easy to obtain within one year, I agree with Ms Xu’s submission that that is an actionable misrepresentation. I find that Mr Sampson knew from experience that the process was not likely to be easy, having earlier withdrawn applications for consents in 2002 and having been presented with a contrary opinion as to what was required from Environment Waikato in a 2005 letter. Mr Sampson also knew, in my view, that in order to establish a fully operational and viable coal mining operation, multiple resource consents would be required, and likely beyond Environment Waikato (i.e. from other consenting authorities).

[139]          Equally, Mr Sampson’s decision not to disclose the 1997 resource consent applications and their withdrawal in 2002 was actionable misleading conduct. He did not disclose full information (when he was contractually obliged to) and it was misleading because, contrary to what he had said (namely that the resource consents would be easy to obtain within one year) the non-disclosure suggested something completely otherwise (i.e. the very reverse).

27     Premium Real Estate Ltd v Stevens [2008] NZCA 82, [2009] 1 NZLR 148 at [51].

[140]          I now turn to address the question of causation and the Court’s discretion under s 43 of the FTA.

[141]          The law is settled that Ms  Xu  must  establish  that  the  conduct  of  MSR/Mr Sampson was an operating or effective cause of her loss. It does not have to be the sole cause, but it had to be an effective cause.28

[142]          I find that Ms Xu has failed to establish causation in relation to the misrepresentation about the ease of obtaining a resource consent within one year. It is clear from the evidence that, at the time Ms Xu entered into the second variation, she had access to extensive, high-quality legal advice and advice from mining and other experts. I accept that Ms Xu may have placed some reliance on Mr Sampson, but in the circumstances here it is highly likely, in my view, that the advisers to Ms Xu (and I heard evidence from a number of them) would have given clear advice as to the significant  risks  she  was  undertaking  in  signing  up  to  the  second  variation.  Mr Sampson’s misleading representation was not an effective cause of Ms Xu’s loss. In the circumstances, it was not reasonable for her to rely on any representation from Mr Sampson in circumstances where her own advisers were highly likely, in my view, to have fully informed her of the challenges and risks involved.

[143]          Having said that, the actionable misleading conduct of non-disclosure (i.e. failing to disclose the 1997 resource consent application and its subsequent withdrawal in 2002) which I have described above as an egregious breach of MSR’s vendor warranty, is in a different category. Neither Ms Xu nor her advisers were aware of this important history and I accept Ms Xu’s evidence that, had she known about this (i.e. resource consents relating to this particular licence, which were withdrawn and therefore did not achieve the outcome and which remained highly relevant to her intentions), she would not have signed the second variation, or it would have been of a fundamentally different kind. As she said, she would not have been able in such circumstances to have reported honestly to her coal buyers and investors in China.

28     Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [26]–[29].

[144]          The misrepresentation by way of non-disclosure was, in my view, an operating and effective cause of Ms Xu’s alleged loss. I turn now to address remedy for the breach of s 9.

[145]          In Red Eagle Corporation Ltd v Ellis,29 the Supreme Court held that the Court has a discretion under s 43. The proper exercise of that discretion might lead the Court to decide that only part of the amount of the loss or damage should be paid by the defendant to the claimant – or, in some cases of reckless behaviour with a client, even that no order for payment should be made. The Court held that the matter was one of “doing justice to the parties in the circumstances of the particular case and in terms of the policy of the Act.”30 The Court accepted that such an assessment was necessarily broad brush.

[146]          Ms Xu here estimates losses of $500,000 as a result, she says, of relying on MSR/Mr Sampson’s misleading and deceptive conduct. She relies on the $100,000 deposit and the estimated $400,000 in costs in relation to work towards the project definition and making the contract work. She also relies on the $110,996.59 fees for Mine Designs Ltd (as agreed as part of the admitted facts), with the balance based on estimates summarised in Mr Gray’s evidence.31

[147]          Exercising my discretion under s 43 of the FTA, I find that in the somewhat unusual circumstances here there should be no award of damages. Both parties here must accept, in my view, responsibility for signing up to a very high-risk endeavour

— and, in the case of Ms Xu, with the benefit of highly competent, professional legal and other expert advice.32 In my view, there was an element of recklessness on her behalf in agreeing to the relatively onerous best endeavours obligations and in circumstances where she had not even started on the critical project assessment phase.

29     Red Eagle Corporation Ltd v Ellis, above n 28.

30     Red Eagle Corporation Ltd v Ellis, above n 28, at [31].

31     Ms Xu accepts that Mr Gray’s figures go beyond the amount of loss being claimed.

32 Mr Wootton, Ms Xu’s primary adviser during the process of purchase negotiation, lists the significant number of specialist advisers to Ms Xu at [6] of his brief of evidence (I acknowledge that not were all engaged prior to the second variation). It includes mining and earthwork consultants, mining engineers, geotechnical engineers, roading consultants, consenting consultants, solicitors and a general contract and project manager. Mr Wootton notes that he resigned from his role “in July 2011 and 2012 as I saw massive stress and high probability of failure due to the fundamental suggestion by Mr Sampson of MSR that we only needed 1 or 2 resource consents.”

As her own expert witness stated, namely Mr Welsh, the project definition phase here should have taken at least two years, and it would have taken a “well resourced and experienced mining company” at least five years to obtain resource consents from the consenting bodies for this mining project. I acknowledge that Ms Xu may have been somewhat naïve (i.e. unfamiliar with New Zealand conditions) and that the way business is conducted in New Zealand is quite different to her experience in China, but she did nevertheless have the benefit of high-quality, local New Zealand advice.33 It is also likely, in my view, that she was under some commercial pressure from her buyers in China.34

[148]          I find that the best way to do justice in this case is to exercise my discretion under s 43 and make no order for payment of damages in Ms Xu’s favour. In coming to that conclusion, I have also taken into account the elementary failure by Ms Xu to even apply for a resource consent (in order to discharge her best endeavours contractual obligation) and the fact that she did not really engage with MSR’s initiatives to try and satisfy the condition in cl 2(ii) of the second variation (i.e. the provision of a sub-lease or sub-licence or such “other legally binding contractual arrangements”).

[149]For all these reasons, the counterclaim is dismissed.

Result

[150]          I enter judgment for the defendant on the second amended statement of claim. MSR, as plaintiff, has failed to establish its sole cause of action.

[151]          I dismiss the defendant’s, Ms Xu, counterclaims. I enter judgment for the plaintiff, MSR, on the counterclaims.

[152]          As to costs, I am of the preliminary view that, having succeeded on the main claims, namely the plaintiff’s sole cause of action, Ms Xu is entitled to costs and

33 Chapman Tripp, solicitors, acted for Ms Xu in relation to the ASP and the second variation.

34 Mr Parmenter, for MSR, submitted that the rationale for Ms Xu’s determination to ignore her experts was the 500,000 tonnes per annum coal deal signed two weeks before the second variation. There may well be some merit to that contention, but I do not need to make a particular finding about it.

disbursements. I am also of the preliminary view that in relation to the counterclaim there should be no order for costs.

[153]          If the parties cannot agree on costs, then memoranda (no more than three pages) are to be filed and served by 19 September 2025.

Andrew J