Family feud: court cases and controversy among Australia’s mining dynasties

JP Casey 18 May 2020 (Last Updated June 1st, 2020 12:32)

Julian Wright, estranged son of late Australian mining mogul Peter Wright, is suing his siblings for allegedly lying to him about the value of his share in the company, effectively cheating him out of billions of dollars in inheritance money. We consider the case, and how it reflects on Australia’s mining dynasties.

Family feud: court cases and controversy among Australia’s mining dynasties
Bauxite deposit Weipa, Australia. Credit: Werner Schellmann.

A protracted legal saga between the children of late Australian mining giant Peter Wright shows no signs of slowing down. His son Julian is suing his billionaire siblings, his late brother Michael and his sister Angela Bennett, named as Australia’s fourth-richest woman in 2017 by Forbes, for misrepresenting the value of the shares he inherited, leading to him selling his stake for a much lower price than he considers fair.

The court battle has dragged on since 2008, when a settlement was first agreed upon by the siblings, and has shone a spotlight on the controversies surrounding one of Australia’s wealthiest families. The Wright family has been in a series of legal battles with Hancock Prospecting, a rival firm whose vague agreement with Peter Wright, made in 1984, has been the source of considerable legal drama. The episodes have demonstrated the influence one family can have over such a vital sector in the Australian economy, and how personal grievances and professional relationships can be joined at the hip.

 

A decades-long controversy

The Wright family has been engaged in legal disputes over inheritance for more than a decade now. Following the unexpected death of Peter Wright in 1985, shares in his mining firm Wright Prospecting were divided amongst his children, eldest son Michael, daughter Angela and younger son Julian, but there was immediate controversy. Following an argument between Peter and Julian in 1983, the former announced plans to acquire the latter’s shares, seeming to believe that his son couldn’t be trusted with such a large stake in the company.

Yet this plan was never enacted, and Peter’s death two years later made it difficult to draw a coherent conclusion as to the division of the company’s shares among the children; Julian asserted that as no formal deal was struck, he ought to be entitled to a full third of the shares, while Michael and Angela argued he would only be entitled to one-ninth of the total value.

This was compounded two years later, when Julian sold his stake in the company, which he already considered to be unfairly small, for $6.8m, bringing to a close a strained relationship between Julian and the rest of his family, which saw him pursue alternate careers in journalism and finance as opposed to mining.

This unceremonious sale was not the end of relations, however, as the noughties commodity boom dramatically increased the value of Australian mining. With demand for raw metals from foreign countries, most notably China, increasing, Australian mining exports exploded, bringing a boom to the sector that lasted for a decade.

Between 2000 and 2009, mining revenue increased from 6% of GDP to 14%, while mining investment increased from 1.5% of GDP to over 4% by 2011. This boom was particularly significant for Wright Prospecting, which had made its name in iron ore prospecting and mining. The average annual growth of iron ore production increased from 5% in the decade 1990-2000 to 10% in the decade 2000-2010, while iron ore prices jumped from an average annual growth of 2% to 15% over this period.

This boom catapulted the Wright siblings to the upper echelons of Australian wealth, with Angela worth almost $2bn in 2017, and Michael worth over half a billion dollars at the time of his death in 2012. Whether motivated by a genuine slight, or frustration at missing out on this kind of wealth, Julian alleged in 2017 that his siblings had “fraudulently misrepresented” the value of the company and its assets in the 1980s, and that without this misdirection, he might have kept his shares and enjoyed some of the company’s exploding value.

The case is further complicated by a 2008 agreement between Julian’s children, Tim and Natalie Wright, and Angela and Michael, which saw the younger Wrights awarded $68m by their uncle and aunt, in exchange for Julian dropping any future claims to the family fortune. The awarding of millions to Julian’s children seems to suggest that he was unfairly cut out of at least some of the family’s wealth, lending credibility to his claim, but the clause preventing him from making future claims is a major sticking point. The case highlights the risks of embedding a family so deeply into a company, as personal quarrels can easily spiral into disagreements that affect the entire operation.

 

Hancock Prospecting

Yet the Wright case doesn’t just affect Wright Prospecting, but rival firm Hancock Prospecting. The history of the two miners is closely entwined, with founders Peter Wright and Lang Hancock working as business partners prior to Peter’s death in 1985. Hancock discovered the world’s largest iron ore deposit in the Pilbara region of Western Australia in 1952, and the two men worked with Rio Tinto to develop mines in the region in the 1960s, which eventually became known as the Hope Downs project.

At the time of Peter’s death, the two men had made assurances to one another about the ownership of as-yet-undeveloped iron ore deposits in the region but, like Peter’s plan to buy Julian’s shares in his company, this agreement was never made clear, nor codified, and has gone on to be the source of legal troubles between the companies. There are currently two operational mines at Hope Downs, known as Hope Downs 1 and 4, which collectively produced nearly 34 million tonnes of iron ore in 2013; while both are ostensibly owned by Hancock, Wright has already won a partnership interest in Hope Down 4 through a court case, and plans to pursue a similar stake in Hope Downs 1.

This dispute not only mirrors the internal Wright family rift, but takes place on a larger scale, with larger companies and greater fortunes involved. Not only has Rio Tinto been dragged into what is ostensibly a family feud, but the debate involves the woman dubbed “Australia’s richest citizen” by GQ, Gina Rinehart.

Valued at $14.8bn, Rinehart is the daughter of Lang Hancock, and inherited her father’s company upon his death in 1992, succeeding him as executive chair. She has kept ownership of the company in the family, with shares not owned by her personally stored in a trust fund for her children, a move that saw her enhance her personal fortune – Forbes noted that she was the world’s richest woman in 2012 – but has also entrenched the family bonds and rifts that first began to affect relations with Wright Prospecting in 1985.

These entrenched bonds are symbolic of a resistance to change that permeates throughout the Australian mining industry. While other energy companies such as Shell are reforming their policies, yielding to environmental concerns and broad shareholder pressure , these Australian miners are still concerned with family rivalries and decades-old feuds. Even within Australian mining, some companies are embracing a forward-looking approach, such as Rio Tinto’s heavy investment into autonomous technology, a modernisation that further highlights the backwards-looking controversies plaguing Wright and Hancock.