Lang Hancock breached duties under pressure from Rose, court hears
Lang Hancock’s shuffling of assets allowed him freeze out his daughter and access large sums of money for his own benefit, court hears.
Gina Rinehart’s legal team says her father Lang Hancock breached his fiduciary duties late in life after being pressured to sustain “the luxurious lifestyle” of his wife Rose Porteous, the WA Supreme Court has heard.
On an explosive day in the marathon legal proceedings between Mrs Rinehart’s Hancock Prospecting (HPPL), the billionaires behind Wright Prospecting (WPPL), and Mrs Rinehart’s children, the lawyers for Australia’s richest person said her iron ore pioneer father had acted improperly when he shifted assets from HPPL into a trust set up to benefit his grandchildren.
WPPL claims it should be entitled to hundreds of millions of dollars in royalties from HPPL’s Hope Downs iron ore joint venture with Rio Tinto, as well as a stake in the East Angelas iron ore deposits, while two of Mrs Rinehart’s children, John Hancock and Bianca Rinehart, are arguing the assets belong in the Hancock Family Memorial Foundation (HFMF) trust.
Noel Hutley SC, acting for Mrs Rinehart, told the court Lang Hancock’s transfer of assets from HPPL to HFMF were a breach of his fiduciary duties in an attempt to benefit himself and Ms Porteous, the Filipino housemaid he married in 1985. Lang Hancock, Mr Hutley said, had succumbed “principally to the pressures of Rose Porteous and her desire for a luxurious lifestyle”.
“That was done for his own benefit, and not for the benefit of HPPL shareholders of which Mrs Gina Rinehart was a one-third holder,” he said. “He diverted these tenements … so that he could do with the tenements whatever he so chose without having to be accountable to the shareholders.”
The assets were shifted without consideration to HPPL, and Mrs Rinehart and other HPPL directors were not informed.
The restructure allowed Lang Hancock to access “large sums of money” and divert benefits from the iron ore assets.
“Sadly and wrongly, Lang Hancock deliberately went about to deprive Mrs Rinehart of the ability to obtain information by removing her from all positions with HFMF and from her directorial position with HPPL,” Mr Hutley said.
“Your honour will see repeated requests for information from Mrs Gina Rinehart, obfuscations on the part of Lang Hancock, and when Mrs Rinehart did somehow discover various diversions that had taken place, vociferous objections on her part to what Lang was doing ensued.
“All this, and it does pain us to say, was a patent breach of fiduciary duty on the part of Lang Hancock.”
The iron ore pioneer, Mr Hutley said, “realised the errors of his ways and started to undo his wrongdoings” but died before that work was complete.
Earlier, Mr Hutley detailed how the general manager of Wright Prospecting emphatically denied the company had any interest in East Angelas in what he said was “devastating evidence” to Wright’s case. Mr Hutley cited the diary of Wright Prospecting’s long-term general manager, a Mr McSweeney, from the time that Hancock struck a joint venture deal with Rio Tinto to develop the Hope Downs and East Angelas deposits in 2005.
The diary, Mr Hutley said, made it clear Wright knew it did not have any interest in the assets.
The diary noted that Mr McSweeney had a call on the day HPPL struck the Rio Tinto joint venture with Ken Rhodes from DFD Rhodes – the family office of another Pilbara iron ore pioneer – who said they believed they were entitled to East Angelas royalties.
According to Mr McSweeney’s diary, he told DFD Rhodes responsibility for the royalties sat with Hancock Prospecting, and Wright Prospecting “has no further interest in those areas”.
“He was saying ‘don’t look to us about the royalty, we are out of those areas’,” Mr Hutley said. “This is the general manager of WPPL who is confidently able to say … WPPL has no interest.”
Mr Hutley also cited further WPPL documents from the lead-up to a 1987 agreement to divide the Pilbara assets between the two groups, which he said showed WPPL knew the limits of its holdings. He also noted Mr McSweeney had not been called by WPPL as a witness.
Mr Hutley said the fact more than 20 years elapsed between the 1987 agreement and WPPL lodging its claim meant the claim should be dismissed.
WPPL had brought the case after all of those involved in the 1987 agreement had died and the one person actively involved in 2005 – Mr McSweeney – had not been called. “This case, with respect, is hopeless, should not have been brought, and we invite WPPL to withdraw the claim on East Angelas,” he said.