The nature and seriousness of the contravening conduct and related considerations
134 There could be little doubt that Hochtief AG's contravention of s 1043A of the Corporations Law was a serious contravention.
135 Hochtief AG was at the time, and remains, a very large foreign corporation with subsidiaries in many countries throughout the world. The corporate group it controls employs 44,000 employees. At the end of 2013 it had a market capitalisation of almost €5 billion.
136 At the time of the contravention, Hochtief AG was aware, through its senior officers, of the insider trading prohibition in the Corporations Act in Australia. That is apparent from, amongst other things, the terms of the original instruction and the Variation of Instruction, both of which include the statement that Hochtief AG, Hochtief Australia and their respective officers "do not currently possess any price sensitive information regarding Leighton Holdings Limited". The original instruction also referred to the establishment of a "Chinese wall to ensure that price sensitive information regarding Leighton which may become known to [Hochtief AG and Hochtief Australia] and its respective officers" did not become known to Mr Lancero and Mr Somerville. It also noted that Hochtief AG's Australian legal counsel could advise on compliance with "Australian law requirements".
137 The contravening conduct involved Hochtief AG procuring its subsidiary, Hochtief Australia, to acquire shares in a major listed public company in circumstances where it was prohibited from doing so by s 1043A. In the end result, Hochtief AG's conduct resulted in the acquisition of shares in Leighton the value of which well exceeded $3 million. That is by no means an insignificant amount. The acquisitions by Hochtief Australia on 3 February represented a significant proportion of the volume of trading in Leighton shares that day. Hochtief AG's notional and unrealised profit from its acquisitions on 3 February was $206,740.
138 While it is possible to calculate a notional unrealised profit derived by Hochtief AG as a result of the impugned trades, it does not necessarily follow that there were any identifiable "victims" of the contravention. While of course there were sellers of Leighton shares on the other side of Hochtief Australia's trades, those sellers may nonetheless have sold their Leighton shares to other purchasers at the same price even if Hochtief Australia had not been an active buyer of Leighton shares on 3 February. Given the volume of trading on that day, it is not possible to reach a conclusion one way or another. Nor, unlike many cases of insider trading, could it be said that this was a case where it could be inferred that Hochtief AG procured Hochtief Australia to acquire Leighton shares because it knew that it was in possession of inside information, or that Hochtief AG was motivated to act because it was in possession of inside information, or that Hochtief AG intended to profit from the fact that sellers in the market were unaware of the inside information.
139 Nevertheless, while it is difficult, if not impossible, to quantify any loss or detriment suffered by other traders on that day, the point remains that the contravention no doubt had a significant adverse impact on the integrity and efficiency of the market. Such conduct has the capacity to significantly undermine public confidence in public securities markets: R v Rivkin (2003) at 409 [44]; R v Zhu [2013] NSWSC 127 at [18]. That is perhaps evidenced by the media reports concerning Hochtief Australia's acquisition of Leighton shares that followed the release of Leighton's financial results. One well-known commentator associated with the Australian Shareholders' Association was quoted as saying, for example, that "[w]hen you consider that Hochtief is represented on the Leighton board by its CEO and CFO, the argument that they were unaware of the timing of the share purchase stretches credulity. They were certainly in a position to ensure that such trades didn't happen".
140 The contravention involved the acts or omissions of very senior officers of Hochtief AG. Mr Sassenfeld, who was primarily responsible for the contravention, was Hochtief AG's Chief Financial Officer, Labour Director and a director of the Executive Board. Mr Robinson, Hochtief AG's local agent, and the most senior of its officers based in Australia, also failed to take any steps to avoid the contravention. Mr Robinson also displayed a lack of insight into the contravening conduct, at least initially. On 12 February 2014, he wrote to the Chairman of Leighton denying any wrongdoing. The letter was subsequently released to the ASX. Statements that were made in that letter were plainly incorrect.
141 It is not entirely clear how the contravention occurred in light of Hochtief AG's apparent knowledge of the insider trading prohibitions in the Corporations Act. While Hochtief AG led affidavit evidence from Mr Georg von Bronk, Hochtief AG's head of corporate governance and general counsel, it did not lead any evidence from either Mr Sassenfeld or Mr Robinson, or any other evidence that directly explained how or why the contravention occurred. The following matters should, however, be noted.
142 First, it would appear that at the time of the contravention, Hochtief AG had no comprehensive compliance system, procedures or training in place to ensure that its officers who were involved in its operations in Australia were aware of, properly understood, and did not contravene Australia's insider trading prohibition, either generally, or specifically in the context of its strategy to acquire Leighton shares. That is perhaps surprising given the obvious risks that arose as a result of the Leighton share acquisition scheme and the overlapping directorships of Hochtief AG, Hochtief Australia and Leighton. The original instruction and Variation of Instruction plainly recognised and reflected the insider trading prohibition, and contained instructions designed to avoid any risk of insider trading. As already indicated, the instructions included: that Hochtief AG, Hochtief Australia and their respective officers did not possess price sensitive information regarding Leighton; the establishment of a so-called "Chinese wall" to ensure that Mr Lancero and Mr Somerville did not come into possession of price sensitive information, though the precise nature and scope of that "wall" was not specified; an instruction that Mr Lancero and Mr Somerville were not to trade in Leighton shares and were to comply with Australia's insider trading provisions; a statement that the original instruction could only be varied if Hochtief AG, Hochtief Australia and their officers were not in possession of price sensitive information; and a note that Hochtief AG's Australian lawyers could advise on compliance with Australian law.
143 Those directives that were included in the original instruction could perhaps loosely be characterised as a policy. They could not, however, properly be characterised as a compliance system or scheme. Perhaps more importantly, and however those directives might be characterised, there is nothing to suggest that Hochtief AG had provided any training or education to its officers concerning the Australian insider trading laws. There is nothing to suggest that officers of Hochtief AG or Hochtief Australia were educated about what might constitute inside information for the purposes of Australia's insider trading provisions, or what conduct was prohibited. While the instruction referred to "price sensitive information" (an expression not in fact used in the relevant provisions in the Corporations Act), there is nothing to suggest that officers received any training about what might constitute price sensitive information, or how to recognise it.
144 If there had been a proper compliance system, which included education and training, the contravention may have been avoided. It may, for example, then have been appreciated that the Chinese wall was deficient because it only applied to Mr Lancero and Mr Somerville, not officers of Hochtief AG, like Mr Sassenseld, who might come into possession of price sensitive information concerning Leighton, and who might procure Hochtief Australia to acquire Leighton shares by issuing instructions. If there had been some education or training about what might constitute inside information, including what information might materially affect the price of relevant securities, Mr Sassenfeld and Mr Robinson would no doubt have been in a much better position to judge whether the information concerning Leighton that Mr Sassenfeld did come into possession of was inside information.
145 Second, it cannot be inferred that the contravention was the result of dishonest, deliberate or reckless conduct on the part of Mr Sassenfeld, Mr Robinson or any other senior officer of Hochtief AG. ASIC did not submit that such an inference could or should be drawn. Important also is that ASIC did not allege that Hochtief AG knew that the relevant information it possessed concerning Leighton's financial results possessed the qualities that made it inside information. Nor could it be inferred that Hochtief AG knew that the information was inside information. Rather, ASIC alleged, and Hochtief admitted, that it ought reasonably to have known that the information was inside information.
146 To that extent, the contravention may fairly be characterised as involving inadvertence and carelessness on the part of Mr Sassenfeld and Mr Robinson, and perhaps others. It appears that it did not occur to Mr Sassenfeld that the information concerning Leighton's financial results possessed the qualities that made it inside information. Mr Sassenfeld and others may also not have appreciated that the Variation of Instruction procured Hochtief Australia to acquire Leighton shares, and may therefore have constituted conduct prohibited by Australia's insider trading laws if Hochtief AG did possess price sensitive information. That may go some way to explaining how the contravention occurred. It also means that the contravention was significantly less serious than a contravention that involved actual knowledge that the information that was possessed was inside information, and deliberate conduct in defiance of the insider trading prohibition.
147 By the same token, the contravention cannot simply be dismissed as a simple mistake or "mere carelessness": cf. Chemeq at 538 [112(4)]. The failure by Mr Sassenfeld to appreciate that the Leighton information was information that, if available to the market, might have had a material impact on the price of Leighton's shares was surprising, to say the least. Mr Sassenfeld became aware of the information because he attended the meeting of Leighton's audit committee. It must have been readily apparent that the information Mr Sassenfeld obtained at, or in preparation for, the meeting, had not been released to the market. The information concerned Leighton's financial results. Perhaps more significantly, if Mr Sassenfeld had carefully turned his mind to the issue, it is difficult to see how he could have assumed or believed that the information was not price sensitive. While the results, which including improving profit results, were consistent with previous forecasts or guidance that had been disclosed to the market, it would not have been reasonable to simply assume that the results were therefore not price sensitive.
148 Hochtief AG submitted that it should be inferred, in effect, that Mr Sassenfeld turned his mind to the question, but wrongly assumed or judged that the information was not price sensitive. That submission is rejected. Mr Sassenfeld did not give evidence. There was accordingly no direct evidence that Mr Sassenfeld actually and actively turned his mind to the question of the materiality or price sensitivity of the information he possessed and made a wrong judgment. Nor can that be inferred. While the Variation of Instruction included a statement that officers of Hochtief AG did not possess any price sensitive information, there is nothing to suggest that Mr Sassenfeld read that statement, understood it, or properly or carefully turned his mind to whether it was in fact correct. The mere fact that he signed the Variation of Instruction does not mean that he did any of those things.
149 The available and preferable inference is that Mr Sassenfeld did not actively or carefully turn his mind to whether the statement concerning price sensitive information in the Variation of Instruction was correct, and did not actively or carefully turn his mind to the nature of the information that he did possess concerning Leighton. Had he done so, it is likely that he would have appreciated that the information was material, or at least that there was a possibility that it was, such that he should have sought advice in relation to that issue from Hochtief AG's Australian lawyers (the availability of which was referred to in the original instruction). The apparent failure by Mr Sassenfeld to reasonably or properly turn his mind to this issue showed a serious lack of appreciation by Mr Sassenfeld of the situation and circumstances, particularly given his directorships with Leighton, Hochtief AG and Hochtief Australia, and his role in the acquisition of Leighton shares by Hochtief Australia. It was not mere carelessness or a simple mistake. It was a serious failure by Mr Sassenfeld to exercise appropriate care and diligence in the circumstances.
150 While in all the circumstances the contravention by Hochtief AG must be regarded as a serious contravention, there are a number of features that lessen the seriousness of Hochtief AG's conduct. First, as has already been noted, the contravention did not involve actual knowledge that the information possessed the qualities that made it inside information, and did not involve deliberate conduct in defiance of the insider trading prohibition. The conduct that constituted the contravention was not engaged in with a view to deriving a profit from trading while in possession of insider information at the expense of counterparties who did not possess that information. The contravention occurred as a result of a single communication on one day. It did not involve ongoing conduct. It resulted in trading on a single day, albeit trading that involved significant volume and value.
151 Having regard to each and all of those matters, and all of the facts and circumstances of and surrounding the contravention, it would be perhaps be fair to characterise this contravention as being towards the middle, or perhaps the slightly lower side, of the scale of seriousness of civil contraventions of the insider trading prohibition.