Lawyers for the company founded by mining pioneer Lang Hancock have told a court he left it in such a precarious position when he died, that he almost sent it bankrupt.
Sydney Barrister Noel Hutley SC detailed the “errors” Mr Hancock made in his later life – all in a bid to placate his second wife Rose Porteous – in the West Australian Supreme Court on Friday.
Some of those errors were laid bare in increasingly pointed letters exchanged between the late magnate and his daughter Gina Rinehart, who now controls the family business.
As Mr Hutley attempted to fend off claims to an ownership and royalty stake in the Hope Downs mining fortune, he painted a clear picture of what he said was Mr Hancock’s self interest and misguided belief that Hancock Prospecting Pty Ltd (HPPL) was purely under his control despite only being a one-third shareholder.
Correspondence between Mr Hancock and his daughter, mining magnate in her own right Gina Rinehart, brought to light just how bad tensions were between the pair following his second marriage and in the lead up to his death.
“As you are currently spending all three thirds of the company income, do you believe that all income is attached only to your one third, and that nothing is attached to the other two thirds,” Mrs Rinehart wrote to her father sometime after he married Mrs Porteous in 1985.
“As Governing Director, what are you going to do to safeguard our company from any further spending from (Rose).”
So concerned about Mr Hancock’s “unauthorised” and “unlawful” spending of company funds, Mrs Rinehart continued to ask questions throughout 1985 and as her concerns became more pointed, so too did her father’s replies.
Mr Hancock – who Mr Hutley said acted without seeking the proper permission of shareholders before wheeling and dealing company assets between a raft of family companies to bankroll mansions, luxury cars, jewellery and a private jet – responded by removing Mrs Rinehart from all positions of prominence.
“Please remember it is my company, and I will say how its money is spent,” Mr Hancock wrote to his daughter.
Statements, Mr Hutley argued, were that of a “deluded governing director”, who took part in a “classic textbook case” breaching his fiduciary duties.
The court heard Mr Hancock only came to realise his errors as he attempted to make a quick sale of the McCamey’s mining asset to BHP in a bid to continue funding the lavish lifestyle he and his wife had come to afford.
BHP was very interested in acquiring McCameys, Mr Hutley told the court, especially as they had valued the asset at $150 million.
“(It) gives a sense of the desperate financial position of the company under Lang’s control … hearing he was willing to sell for $31.3 million to get a sale through as quickly as possible,” Mr Hutley said.
The court heard BHP’s due diligence led to them rightfully demanding proof that the McCamey’s asset was in fact property of the company Lang was attempting to sell it from – Hancock Mining Limited.
Unable to prove that because of the tangled web he created for himself in a bid to get around company law and keep his own daughter out of the loop about his spending, Mr Hancock – who had been transferring tenements he had the rights to outside of his joint venture between a number of his companies – offered up a statutory declaration trying to explain the company’s position.
It was a move that Mr Hutley said BHP saw straight through.
“About this time Lang finally had an epiphany and came to realise his wrongdoing and came to steps to address it,” Mr Hutley told the court.
Proceedings at many times painted a less than favourable picture of the life of Mr Hancock, particularly following the death of his first wife, Mrs Rinehart’s mother, Hope.
While the court heard he didn’t mind spending company coin on lavish things, he loathed giving it to the Commonwealth.
The court also heard how ruthless Mr Hancock could be.
A final change in Mr Hancock’s will one month before his death reduced the inheritance of Mrs Porteous – who was his housemaid at the time the pair fell in love – to the entitlement of his housemaid only and not his widow.
A decision his lawyer warned him would “effectively disinherit Rose from any tangible benefit above and beyond the money you have set aside for one year’s housekeeping”.
Friday marked the end of a week of complex opening submissions by Hancock’s legal team against each of the claims to the Hope Downs fortune by parties Wright Prospecting Pty Ltd, DFD Rhodes and two of Mrs Rinehart’s children, John Hancock and Bianca Rinehart.
Next week it is anticipated lawyers for Mr Hancock’s grandchildren will sift through many documents, laying bare the internal Hancock family communications, in a bid to sure up their own claim to further family assets.
The trial is due to return to Perth’s David Malcolm Justice Centre on Monday.