Chinese company Shanghai Pengxin's bid for the Crafar farms is headed for a legal morass as the Sir Michael Fay-led group of rival bidders yesterday launched yet another legal challenge.

The Fay group has begun Court of Appeal action challenging the Chinese company's relevant experience and ability to operate the farms. However, the move opens the door for a cross appeal by Shanghai Pengxin.

In his decision last week, the High Court's Justice Forrest Miller ordered the Overseas Investment Office (OIO) and ministers to reconsider their assessment of the economic benefits of Shanghai Pengxin's offer.

He upheld the Fay group's contention that the OIO and ministers did not assess the economic benefits of Shanghai Pengxin's bid correctly. However he dismissed the Fay group's claim that Shanghai Pengxin lacked the necessary business experience and acumen to run the farms.

Fay group lawyer David Cooper of Bell Gully said the group wanted to contest Justice Miller's decision on the experience and acumen issue as a second avenue of legal challenge against Shanghai Pengxin's application. That was in case the OIO and ministers gave the bid the green light when reconsidering it against the economic benefits test stipulated by Justice Miller.

A well-placed legal source said the appeal opened the door for a cross appeal from Shanghai Pengxin or even the Crown to be heard at the same time.

The Fay group later said there was always a chance Justice Miller's decision would be appealed against by Shanghai Pengxin or the Crown and they believed that risk had increased.

However the appeal is likely to delay the OIO's reconsideration of Shanghai Pengxin's offer, something it has previously said would take "a matter of days".

Shanghai Pengxin spokesman Cedric Allan said the company was still considering the implications of the Fay group's latest move and would make a statement today.

He said the group's criticism of the Chinese company's farming credentials were part of "a self-serving campaign of allegations and half-truths".

The company had a controlling interest in a profitable cropping farm in Bolivia, half as big again as all the Crafar farms, and had also been involved in cropping and sheep farming in China for years, with a target of three million sheep within five years.

Mr Allan said the Fay group's offer was a "phantom bid" which had already been rejected by the receiver.

By Adam Bennett Email Adam