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Ginia Rinehart Loses Bid for Mediation of Trust Dispute

An Australian judge rejected a bid by the youngest daughter of Gina Rinehart, Asia’s richest woman, to have a family dispute over a multibillion-dollar trust moved from court to private mediation.

New South Wales Supreme Court Justice Paul Brereton yesterday rejected the request from Ginia Rinehart, who has sided with her mother, saying “there is little to indicate” the dispute could be successfully resolved in mediation.

Hope Rinehart Welker, Bianca Rinehart and John Hancock sued their 58-year-old mother in Australian state court last September, accusing her of misconduct by threatening their financial ruin and breach of trust. They want her removed as trustee of the Hope Margaret Hancock Trust, which holds 23.45 percent of the voting shares of Hancock Prospecting Pty and may be worth as much as $4.5 billion.

Gina Rinehart’s lawyer David Russell yesterday pressed Brereton to throw out the lawsuit, after the bid for mediation was rejected, saying Gina Rinehart has complied with all demands made by the children, including having agreed to turn over the shares when they request them.

Pursuing the lawsuit further is “simply a matter of spite,” Russell said.

Brereton reserved his decision on the request, giving no indication of when he may rule.

Gina Rinehart inherited iron ore mining assets from her father, Lang Hancock, and has an agreement with Rio Tinto Group (RIO) under which she collects royalties on properties in Western Australia mined by Rio. She agreed last year to sell coal projects in Queensland to GVK Power & Infrastructure Ltd. (GVKP) for $2.2 billion.

Capital Gains

Gina Rinehart is ranked 33rd wealthiest person in the world by the Bloomberg Billionaires Index, with an estimated net worth of $19.3 billion.

Welker, Bianca Rinehart and Hancock were instilled with fear by their mother that they’d have to pay capital gains taxes on the shares when they acquire them, said Andrew Bell, a lawyer representing the children.

Jay Newby, chief financial officer of Hancock Prospecting, said in a Sept. 4, 2011, e-mail to Bianca that based on her stake, then valued at A$600 million ($630 million), she would have to pay about A$142 million in capital gains taxes.

Bankruptcy Risk

Gina Rinehart had warned Bianca in an e-mail last year that acquiring the shares could force the children into bankruptcy because the stock can’t be sold outside the family or used as collateral for loans, according to the company’s constitution.

Based on additional advice and a review of a PriceWaterhouseCoopers report Gina Rinehart had, it’s evident there is no risk of bankruptcy now, Bell said.

The tax office has six years to make a final decision however, and the children will have the risk of a tax liability hanging over them, Bell said.

Gina Rinehart’s threats to the children, including a warning in a recent e-mail that said “if you verify the statement of claim, that will be held against you all your life,” has revealed her character, Bell said.

“What she has done is to reveal herself as wholly unsuitable to continue as the trustee,” Bell said. It shows she’s prepared to resort to “dishonesty and deceit” to get her way, he said.

The case is Hope Rinehart Welker v Gina Rinehart. 2011/285907. New South Wales Supreme Court (Sydney).

To contact the reporter on this story: Joe Schneider in Sydney at jschneider5@bloomberg.net

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net

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