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Rinehart s bombshell to kids over Hancock legacy
Rinehart's bombshell to kids over Hancock legacy

The House of Hancock has rarely been without conflict. But even by its standards, the first weekend in September was explosive.

For years, Gina Rinehart has kept her four children on a legal leash. A complex web of secret agreements guaranteed their silence and ensured that the iron ore billionaire's near-impenetrable privacy was maintained, no matter how ugly things got.

Loyalty - at least in public - was assured. And legally binding.

So on September 3, when Mrs Rinehart told Hancock Prospecting chief financial officer Jay Newby to email her children, laying out a decision which would rock her family, she had no reason to think this time would be any different, that her children would not play ball or that her move would backfire.

In documents presented to the NSW Supreme Court, the reasons behind the family split that Mrs Rinehart has been trying to keep under wraps for months have finally been revealed.

In that one weekend last year, the reclusive billionaire banked big on her family's loyalty. Three of her children called her bluff and private, long-simmering tensions turned into open warfare.

To understand the battle, it is important to understand the timing.

Three days after Mr Newby's email, Mrs Rinehart's youngest child, Ginia, was to turn 25. This milestone should have set off a chain of events put in place 23 years earlier by the children's grandfather, the late Lang Hancock.

In December 1988, the legendary miner gave a gift to his four grandchildren, then aged between two and 12.

Two days after Christmas, he set up the Hope Margaret Hancock Trust, named after his late wife, and transferred more than 3000 Hancock Prospecting shares into the new entity.

He would be trustee until he died and then his daughter, Gina, would take over and look after the trust.

It would pay for his grandchildren's "education, advancement and benefit" and once the youngest turned 25, it would be dissolved and the money distributed among them, giving them financial independence.

At least that is what the four of them believed.

Despite repeated requests, they claim they have never been shown any paperwork, financial records or the original trust deed.

They had no reason to believe that such a big chunk of the company which had made their mother the richest person in Australia would not set them up for life.

They were wrong.

Just three days before the event they had assumed for years was a mere formality, Mrs Rinehart officially informed them otherwise.

The letter she sent might have been from a mother to her children but the tone was corporate - four pages, typed on Mrs Rinehart's business letterhead and setting out in business terms a scenario she had never discussed with them.

The trust, she told them, not only had very little money in it but also "owes a substantial amount of money to me personally, which I contributed during more difficult times prior to the substantial iron ore price increases we are familiar with today".

She said that, taking into account capital gains tax and the fact that Hancock Prospecting's constitution meant they could never sell the shares to anyone who was not a lineal descendant of Lang Hancock, the children would find themselves bankrupt if the trust was vested.

"It may however be reasonably arguable that personal development-wise it would be in the best interests of the beneficiaries to force them to go to work and reconsider their holidaying lifestyles and attitudes," she wrote.

She told them she had decided for their own good to delay the vesting of the trust until 2068, the latest date possible.

Her eldest child, John, would by then be 92.

The children had just three days to agree - only one of those days being a business day - and they would also have to sign another deed containing clauses similar to a series of previous agreements that had guaranteed their silence.

They would have to promise "not to seek or query or challenge in court proceedings or otherwise any act or omission of Mrs Rinehart in relation to the trust".

Like the previous deeds, the children would be bound by secrecy and have to resolve any dispute through confidential arbitration.

But most significantly, it barred them from ever asking their mother to reveal accounts relating to the trust, its beneficiaries or any other person unless she failed to have it independently audited each year.

Not only would they have had to accept the 11th-hour bombshell that the trust would not be vested on Ginia's 25th birthday, but they would also have to take their mother's word about its financial position, without question.

When they were told of their mother's decision, Lang Hancock's grandchildren - now aged 25 to 36 - were spread across the globe.

John Hancock was in Thailand, Bianca Rinehart in Hawaii, Hope Welker in New York and Ginia Rinehart in London. They were stunned.

"I can't sign that," Hope replied in an email to her mother.

"You're going to cut me off until I move to Perth or Singapore. Or you will make more 'loans' to yourself or the company and we'll be forever in debt.

"I'm never going to be able to provide for my children. Please call me, we need to talk."

In the court documents, these alleged loans are not explained.

But straight after that email, Hope sent a second to Mr Newby requesting immediate access to all the trust's accounts, saying: "Please do this, I don't want this to tear my family apart and I don't want to get a lawyer."

In a separate letter, her sister, Bianca, also demanded the trust's paperwork, which she said had never been provided, despite repeated requests.

Two days later, on Monday, September 5, and with the clock ticking, Mrs Rinehart replied.

She provided no details of the finances, just a warning.

"If you choose not to extend the trust you will face the consequences of so doing, you will then not 'be able to provide for (your) children' for many years and will have to go to work," she wrote.

"You have a very easy financial decision to make - you certainly do not need weeks or months to consider."

And in a reference to Hope's husband, Ryan Welker, who was encouraging his wife's defiance, she wrote: "I'm sorry if you have been confused by anyone else."

The email was signed: "Mother."

What Hope did not know was that when that warning was sent, Mrs Rinehart had already extended the vesting date of the trust, removing any need for an urgent decision by the children.

But in the court documents, Mrs Rinehart is accused of deliberately hiding that fact and keeping up emotional pressure on Hope to secure her agreement by the Monday, communicating with her as though the deed still needed to be executed within hours to stave off bankruptcy and "provide for your children".

Ginia, Mrs Rinehart's youngest child, also appears to have been unaware that the urgency had passed.

"Hey Hopie," she wrote to her sister in an email.

"Just spoke to Mum. I have to sign the deed if for no-one else's sake then yours and my two nieces. You know at the bottom of your heart this lawyer stuff will never work . . . I love you and I will always do whatever I can for you and your family. You guys are my world."

Ginia had clearly backed her mother but Mrs Rinehart, in an email to Ginia, wanted to make sure: "John has advised you took legal action against your mother and you will appreciate, if correct, this changes the arrangements for 6 September. Please advise immediately. Mummy."

There is no detail of the "arrangements" proposed, but Ginia fired back a denial from her Blackberry saying she had not sided with her siblings: "I didn't do anything! I had absolutely nothing to do with it!"

Hope firmed up John and Bianca's backing while Ginia was in her mother's corner.

Just after 2pm on the day of the supposed deadline, encouraged by her husband, Ryan, and with the backing of two of her siblings, Hope felt she had no choice but to make an urgent application to the NSW Supreme Court to have the vesting date extended and her mother kicked out as trustee, something John had tried unsuccessfully to do six years earlier.

The plan was to stave off the urgency of a decision, buy the children time and get access to the trust's records to see what its financial position was. Her mother responded: "Having professionals involved is not considering the interests of your family. Please confirm you have instructed your lawyer to cease."

As the deadline to sign the deed loomed, two senior Hancock Prospecting executives got involved.

At 10.40pm, Hancock Prospecting's senior counsel, Tim Kavenagh, reminded Hope that there was "little over an hour left until midnight passes and it becomes 6 September".

Hope and Bianca then received separate emails from Mr Newby telling them that Hope had lodged the court papers wrongly and their court bid was invalid.

He attached a modified deed for Hope to sign in the remaining minutes under which, among other things, she "releases and discharges Mrs Rinehart from all actions, suits, claims, demands and causes of action both in law and in equity in relation to, or in connection with, Mrs Rinehart including amending the deed".

She refused, and the battle lines were drawn.

What followed is described in Hope, John and Bianca's court submission as a "further course of wholly inappropriate action involving a combination of emotional, financial, psychological and legal pressure" designed to force the children to withdraw court action.

On Tuesday September 6, Ginia's birthday, Mr Newby offered Bianca an olive branch in the form of a virtual blank cheque allowing her to name her price if she backed down.

He said Mrs Rinehart was prepared to give her money every three months - and she could suggest how much - if she withdrew from the court battle.

If she did not, she and Hope's husband Ryan, "need to send me your resignations today for all company group directorships you hold".

The following day, Ginia, whose birthday had been the catalyst for the battle, emerged as the only one supporting Mrs Rinehart in the escalating tensions. In a signed letter emailed from Hancock Prospecting to her siblings' lawyer, she said she did not want to be part of their action and did not want her mother removed as trustee.

With one of her children now officially onside, Mrs Rinehart tried to convince the others to join her and scolded John: "Stop the nonsense.

"You are always saying you want a leadership role, but very sadly in the past you have taken the wrong directions . . . Please set a positive example that you will be acting in the interest of the company group and the family."

She warned him that if he and Bianca sided with Hope or her husband and "pursued Ryan's more widespread proceedings agenda with its various dangerous consequences" then they would have breached a 2006 deed they had signed promising not to take legal action in relation to the trust.

"Please use your intelligence John to good effect, develop a positive leadership role, sign the deed and don't be talked by a 29-year-old into assisting his ill- conceived and dangerous path," Mrs Rinehart wrote.

It didn't work. Hope had convinced Bianca to join her action and Bianca had then contacted John and asked him do the same.

The emails continued for the rest of the week.

By Friday, Mrs Rinehart was warning Hope that her "ill-considered" and "irresponsible" fishing trip was causing media attention. "Enough is enough," she wrote, saying Hope was jeopardising her children and family.

"Hope, this goes beyond my arguments/concerns with you regarding your not looking after your dear children properly - if you prolong this litigation you will also be running the risk of jeopardising their lives and your mother's, Ginny, nieces and other family members' lives so please act responsibly and stop this litigation. Mother."

But it was too late and Mrs Rinehart's worst fears were about to be realised.

Her strategy had backfired and the web of agreements she had put in place over almost a decade to lock in her children's loyalty had unravelled in just one weekend.