An Australian judge ruled it too risky to name an independent trustee for a $4 billion fund after a lawyer said billionaire Gina Rinehart’s children, who proposed the idea, were on a “Kamikaze mission” that could destroy her iron ore company.
John Hancock and Bianca Rinehart’s attempt to replace their mother as trust manager with a non-family member could jeopardize an agreement with Rio Tinto Group on operations of the Hope Downs mine in Western Australia, said David Studdy, a lawyer for the billionaire’s Hancock Prospecting Pty.
“It would be imprudent to appoint an non-lineal trustee,” Justice Paul Brereton said at the conclusion of a four-day trial in Sydney to determine the replacement for Gina Rinehart in a two-year-old lawsuit.
Gina Rinehart inherited iron ore and coal assets from her father Lang Hancock and built them into an $18.4 billion fortune, making her the 41st richest person in the world, according to the Bloomberg Billionaires Index.
Brereton said he’s left with two options, naming Bianca Rinehart as trustee or choosing a corporate structure recommended by Gina Rinehart’s youngest daughter Ginia, who has sided with her mother through the two years of litigation over the trust. Naming Bianca Rinehart and her sister Hope Welker Rinehart as co-trustees had “some potential,” but Hope Welker Rinehart indicated she doesn’t want the job, Brereton said.
“It would be fraught with further difficulty to appoint either John or Ginia, or them jointly,” Brereton said.
The judge gave lawyers until Oct. 18 to submit their suggestions on replacements.
Ginia Rinehart has created JBHG Pty, which would be co-owned by the four children of Gina Rinehart and own the trust assets. She proposed hiring an independent trustee company that would name a sole director for JBHG who would manage the trust.
Such a structure would comply with the Rio agreement, Ginia’s lawyer Richard McHugh said.
Appointing an independent trustee would put almost a quarter of Hancock Prospecting’s shares outside of the family’s direct control, breaching an accord with Rio Tinto that requires the Rineharts to wholly own and control the company, Studdy said.
The requirement was put in place to prevent Rio’s competitors from gaining access to its infrastructure, including a port and railway, Studdy told the court. A breach in the deal could also mean Hancock Prospecting loses acess to the infrastructure for projects beyond Hope Downs, he said.
“The damage would be enormous” and “irreparable,” Studdy told the judge.
John Hancock and Bianca Rinehart don’t wish for Hancock Prospecting to lose its interest in the Hope Downs joint venture, their lawyer Christopher Withers said.
There is no indication Rio would object if the shares are held in trust for the family members and if it did, Hancock Prospecting would have 95 days to fix any problem, Withers said. The issue could be resolved with the appointment of Bianca Rinehart in that time frame, he said.
The 95-day window doesn’t afford sufficient mitigation to the risk involved, Brereton said.
John Hancock, Bianca Rinehart and Hope Welker Rinehart sued in September 2011 accusing their mother of misconduct when she sought to delay the trust’s vesting date from that month to 2068. Hope Welker Rinehart has withdrawn from the lawsuit.
The case is John Langley Hancock v. Gina Hope Rinehart. 2011/285907, New South Wales Supreme Court (Sydney).