In the email, Mr Newby warned Mr Hancock he could be chased by the Australian government for tax liability even if he is overseas, similar to what happened to businessman Christopher Skase, if the son didn't turn over control of the family trust to his mum.
Mr Skase left Australia for Spain in 1991 when his business failed, and he became a fugitive.
"Remember what happened to Skase when he tried to escape being brought back to Australia when bankrupt. The government simply doesn't let people off for not paying due taxation," The Sydney Morning Herald quoted Mr Newby's email.
A day before Mr Newby sent the email, Ms Rinehart warned her four children they would have tax liabilities of millions of dollars if the trust would be allowed to vest on the 25th birthday of youngest child, Ginia, and they would become bankrupt.
Mr Newby added, "Please don't think for one second this means you can enjoy your Thai palace should a court-appointed designate be appointed for your bankruptcy."
He was referring to a house that Mr Hancock built in Thailand financed partly by a loan from Hancock Prospecting.
Mr Hancock, however, believed his mum was acting deceitfully and dishonestly in moving the vesting date by another 25 years, prompting him and two of his sisters to file a court case asking for the removal of Ms Rinehart as head of the trust.
His basis appears to be confirmed by a private binding ruling he got from the Australian Tax Office (ATO) that the beneficiaries of the trust would have no capital gains tax liability on vesting of the trust.
Mr Newby admitted to the court that he instructed PricewaterhouseCoopers, the tax advisor of Hancock Prospecting, to prepare two versions of its tax advice with the sanitised version sent to the Hancock children which removed any reference to the possibility that the shares could be assessed for pre-capital gains tax.
Mr Hancock, in response to Mr Newby's email, wrote back, "Nothing I've hear makes me believe the CGT fabrication."
Mr Newby replied, "Your five-minute study of the tax act can hardly be used to challenge the advice of PwC's tax experts."
He added, "Your statement that CGT is triggered on transfer only is simplistic and incorrect. To put it simply a beneficiary cannot dictate when CGT is triggered - it is triggered when the tax legislation and the ATO (who administers the legislation) says it is. There is zero you or the trustee can do that. Arguing with me or indeed your mother will not change this."
Before he wrote the email, Mr Newby even offered the Rinehart son a position as chief executive of a new family investment company being planned, to be named ICo. However, the proposal was withdrawn when Ms Rinehart wrote her children of the possibility of facing bankruptcy.
The New South Wales Supreme Court resumes hearing of the case on Oct 8.