Firm asked to sanitise Hancock tax advice

One of Gina Rinehart's chief lieutenants asked a top accountancy firm to "sanitise" its tax advice three weeks before the mining magnate warned her children they would be bankrupted if she vested their multibillion-dollar family trust.

Hancock Prospecting chief financial officer Jay Newby told PricewaterhouseCoopers to prepare two versions of its advice with one to specifically remove any reference to the possibility that shares in the family company, which were to be distributed to the children, could be pre-capital gains tax.

According to the firm's internal documents, this new version was "for provision to the children".

Three weeks after the request and just three days before the trust was due to vest, Mrs Rinehart told her four children PwC had given her firm advice that capital gains tax would bankrupt them if the vesting went ahead.

She said they had to agree to let her postpone the trust's vesting by more than 50 years to avoid ruin.

Her surprise move in September 2011 sparked the now famous family split and the long battle between Mrs Rinehart and two of her four children, who accuse her of "gross misconduct" over her handling of the trust. The pair want their mother removed as head of the trust.

The latest revelations in the NSW Supreme Court yesterday came after Mrs Rinehart's lawyers tried to block her estranged children, John Hancock and Bianca Rinehart, getting access to 14 months of communications between Mrs Rinehart's camp and PwC, arguing it was a "fishing expedition".

But the court rejected the protests and granted Mrs Rinehart's two eldest children access to hundreds of pages of documents.

These include emails between senior Hancock Prospecting staff and PwC requesting changes to the company's advice over the trust.

In an email on August 15, 2011, Mr Newby refers to draft advice from PwC dated two weeks earlier: "I have marked requested amendments on the attached - would appreciate if you could treat this as the 'sanitised version'," he wrote.

A short time later, an internal PwC email said: "Jay would like a 'sanitised version' for provision to the children. Let's discuss."

In another, on September 2, 2011, a day before Mr Newby wrote to Mrs Rinehart's four children stressing they would be bankrupted if the trust's vesting date was not delayed, he told a senior manager at PwC: "Thanks, that's fine for signature. I would like the 'sanitised' version signed and sent please."

Yesterday, Mrs Rinehart also lost a last-minute attempt to move the battle behind closed doors, meaning the siblings' allegations against her will almost certainly be played out in court next month. The court also rejected her attempts to delay indefinitely the imminent trial over her handling of the trust.

Mrs Rinehart's lawyers applied last week to have the long-running case put on hold, saying fresh claims against her by the two children fell within the terms of a private deed they signed years ago, which meant the whole case should be moved to private arbitration.

But Supreme Court Justice Patricia Bergin said the case could go ahead, though she ordered both sides to attempt mediation in the next two weeks to find some common ground.

She said it was the court's job to ensure "every step is taken prior to a trial - every step - to ensure that the parties are able to come to an agreement". Barring a late settlement in the next fortnight, the case will go to trial on October 8.

Yesterday's decisions were the latest blows to Mrs Rinehart, who has failed in her attempts over the past two years to get the case dropped, thrown out or moved behind closed doors.

Her oldest children argued the documents ordered released yesterday were critical to proving whether or not their mother deceived them in September 2011 when she told them capital gains tax would bankrupt them unless they let her delay vesting the trust.

The two children are beneficiaries of the trust with half-sisters Hope Welker and Ginia Rinehart.

Ginia, Mrs Rinehart's youngest child, has sided with her mother throughout the two-year battle.

Hope launched the originally legal action but dropped out this year amid financial problems.

'I would like the "sanitised" version signed and sent please.'"Hancock executive *Jay Newby *to accountants PricewaterhouseCoopers