Australian Securities and Investments Commission v Hochtief Aktiengesellschaft

Date of hearing: 12 April, 25 May 2016

National Practice Area: Commercial and Corporations

Sub-area: Regulator and Consumer Protection

Counsel for the Plaintiff: Ms S Pritchard SC with Ms J Single

Solicitor for the Plaintiff: Australian Securities and Investments Commission

Counsel for the Defendant: Mr N Young QC with Mr J Barber

BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Plaintiff

AND: HOCHTIEF AKTIENGESELLSCHAFT ARBN 101 525 651 Defendant

JUDGE: WIGNEY J DATE OF ORDER: 8 DECEMBER 2016

1. Hochtief Aktiengesellschaft (Hochtief AG) contravened section 1043A(1)(d) of the Corporations Act 2001 (Cth) (Act) in that: (a) on 14 January 2014, at a meeting of the Audit Committee of Leighton Holdings Limited ACN 004 482 982 (now known as Cimic Group Limited) (Leighton), Hochtief AG, through its Chief Financial Officer, came into possession of information in relation to Leighton's expected financial result for the year ended 31 December 2013, which information it ought reasonably to have known was inside information within the meaning of ss 1042A and 1042D of the Act (the inside information); (b) on 27 January 2014, whilst in possession of the inside information, Hochtief AG extended the completion date for the acquisition of shares in Leighton by Hochtief Australia Holdings Limited (Hochtief Australia) from January 2014 to 14 February 2014 (Variation of Instruction); (c) on 29 January 2014, whilst in possession of the inside information, Hochtief AG issued the Variation of Instruction to various directors and officers of Hochtief Australia, thereby procuring Hochtief Australia to acquire shares in Leighton in contravention of s 1043A(1)(d) of the Act, and that the contravention was serious within the meaning of s 1317G(1A)(c)(iii) of the Act.

2. Pursuant to s 1317G(1A) of the Corporations Act 2001 (Cth), Hochtief AG pay to the Commonwealth a pecuniary penalty of $400,000 in respect of the declared contravention.
3. Hochtief AG pay the costs of the Australian Securities and Investments Commission in the agreed amount of $50,000. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

WIGNEY J: 1 Hochtief Aktiengesellschaft (Hochtief AG) is a large corporation based in Essen in the Federal Republic of Germany. It controls a worldwide group of companies that operate in the construction industry. One of its subsidiaries was Hochtief Australia Holdings Limited. Hochtief Australia was a substantial shareholder in a well-known Australian construction company, Leighton Holdings Limited. Leighton's shares were listed on the Australian Stock Exchange. On 29 January 2014, Hochtief AG procured Hochtief Australia to acquire further shares in Leighton. It did so in circumstances where it was in possession of "inside information" concerning Leighton. It thereby contravened s 1043A(1)(d) of the Corporations Act 2001 (Cth). 2 The Australian Securities and Investments Commission instituted proceedings against Hochtief AG in relation to that contravention. ASIC sought not only a declaration that Hochtief AG had contravened s 1043A(1)(d) of the Corporations Act, but also an order that Hochtief AG pay the Commonwealth a pecuniary penalty in respect of that contravention pursuant to s 1317G(1A) of the Corporations Act. Hochtief AG did not take issue with the making of the declaration sought by ASIC. Nor did it dispute that it should be ordered to pay a pecuniary penalty. The issue was the appropriate amount of the pecuniary penalty. ASIC contended that a pecuniary penalty in the order of $600,000 was just and appropriate. Hochtief AG, on the other hand, submitted that a penalty of $100,000 would be appropriate. 3 For the reasons that follow, Hochtief AG should be ordered to pay a pecuniary penalty of $400,000 to the Commonwealth in respect of its contravention of s 1043A(1)(d) of the Corporations Act.

Facts 4 The facts relating to the contravention, for the most part, were not in dispute. They were set out in a statement of agreed facts. The main factual dispute concerned the result or consequences of the contravention by Hochtief AG: While Hochtief AG's actions incited, induced or encouraged Hochtief Australia AG to acquire shares in Leighton, how many Leighton shares were in fact acquired by Hochtief Australia as a result of that incitement, inducement or encouragement? ASIC contended that Hochtief AG's contravening conduct in fact caused Hochtief Australia to acquire, or resulted in Hochtief Australia acquiring, Leighton shares over a four day period following the contravention. Hochtief AG did not dispute that Hochtief Australia acquired Leighton shares over a four days period immediately following the contravention. It argued, however, that only one of those days of trading resulted from, or was caused by, the contravention. That factual issue will be addressed separately later. 5 Both ASIC and Hochtief AG also led some evidence concerning various matters that were said to be relevant to the fixing of an appropriate pecuniary penalty. While that evidence was not challenged, the parties disagreed to a certain extent about the inferences that should be drawn from, or the weight to be given to, certain facts established by that evidence. Those factual issues will be considered separately in the context of determining the appropriate penalty amount. 6 Following is a summary of the agreed facts relating to the contravention. 7 Hochtief AG was incorporated in, and is based in, Essen in the Federal Republic of Germany. It is the holding company of a worldwide group of construction companies. The group's operations extend to the Americas, Asia Pacific, Europe, the Middle East and Africa. Hochtief AG's shares are listed on the Frankfurt Stock Exchange. It is one of Germany's 50 top ranked companies, with market capitalisation of approximately €4.778 billion as at 31 December 2013. It is registered as a foreign company in Australia. 8 During the period relevant to this matter, Hochtief AG's senior management included: Mr Peter Sassenfeld, who was the Chief Financial Officer, the Labour Director, and one of four directors comprising the Executive Board; Mr Carl Hoestermann, who was Head of Corporate Finance; and Mr Thomas Sonnenberg, who was Chief Compliance Officer. 9 Hochtief Australia was ultimately owned and controlled by Hochtief AG and was part of Hochtief AG's Asia Pacific division. It was essentially operated by Hochtief AG as a vehicle to hold, acquire and dispose of securities, including shares in Leighton. During the relevant period the board of directors of Hochtief Australia comprised Mr Sassenfeld, Mr David Robinson, who was also Chairman, and Mr Kenneth Del Rosario Lancero, who was also the Secretary. Hochtief Australia retained an accounting firm, Harveys Accounting Services Pty, to provide it with accounting services. Harveys was owned and controlled by Mr Robinson and employed Mr Lancero and Mr William Somerville. 10 During the relevant period, Leighton was one of the largest and most well-known construction companies in Australia. It had operations in over 20 countries. Leighton's shares were traded on the ASX within the index known as "S&P/ASX 100", comprising the top 100 listed companies in Australia by market capitalisation. Leighton's shares were also traded on the financial market known as "Chi-X Australia". Hochtief was a substantial shareholder in Leighton, holding more than 50% of its issued shares and more than 50% of its voting shares. Each of the directors of Hochtief Australia was also a director of Leighton, having been nominated for that position by Hochtief AG as Leighton's majority shareholder. Mr Sassenfeld had been a non-executive director of Leighton since 29 November 2011 and Mr Robinson had been a non-executive director since 17 December 1990. Both Mr Sassenfeld and Mr Robinson were also on Leighton's audit committee.

Release of Leighton's financial results 11 During 2013, Leighton made a number of announcements to the ASX concerning its financial results. 12 On 6 May 2013, Leighton released its quarterly results for the 3 months to 31 March 2013. The released results included: net profit after tax (NPAT) of $123 million for the first quarter of financial year 2013, compared to a loss of $80 million in the prior comparable period; and revenue of $5.4 billion compared to $5.1 billion in the prior comparable period. The release stated that Leighton remained "on track" to deliver a full year underlying NPAT within the previous guidance range of $520 to $600 million. 13 On 14 August 2013, Leighton released its half yearly results for the 2013 financial year. The released results included: NPAT of $366 million, up 218% from the previous financial year; underlying NPAT (UNPAT) of $255 million, up 122%; and UNPAT margin of 2.25% of revenue, up from 1%. The release stated that Leighton remained on track to deliver a full year UNPAT of $520 to $600 million and a gearing level within the target band of 25 to 35% by year end "subject to market conditions and any unforeseen circumstances". 14 On 13 November 2013, Leighton released its quarterly results for the 9 months to 30 September 2013. The released results included NPAT of $444 million, up 40% from the prior comparable period; and UNPAT of $389 million, up 65% from the prior comparable period. The release reiterated the forecast full year UNPAT of $520 to $600 million. 15 In November 2013, Hochtief AG had a plan to increase its shareholding to 69.9% of the ordinary shares in Leighton by the end of January 2016 pursuant to the "creep" exception in s 611 (item 9) of the Corporations Act. A proposal for the implementation of the plan was set out in a draft memorandum prepared by Mr Robinson and emailed by him to Mr Sassenfeld on 20 November 2013. The draft memorandum proposed, as part of the acquisition plan, that 4.8 million Leighton shares be acquired by Hochtief Australia between 6 and 20 January 2014.

The share acquisition instruction 16 On 28 November 2013, Mr Sassenfeld and Mr Hoestermann, on behalf of Hochtief AG, signed a written instruction to Mr Lancero and Mr Somerville. The instruction directed Mr Lancero and Mr Somerville to acquire up to 4.8 million Leighton shares; specified the earliest dates on which specified numbers of shares could be acquired; specified the maximum price at which shares could be acquired; specified that the maximum number of shares acquired on any given day should not exceed 25% of daily turnover of Leighton shares traded on the ASX; directed Mr Lancero and Mr Somerville to ensure that Hochtief Australia would not breach the "creep provisions" (as noted earlier, a reference to s 611, item 9 of the Corporations Act); and directed that the acquisition of the 4.8 million Leighton Shares must be completed by 31 January 2014. 17 Importantly, the instruction noted that Hochtief AG and Hochtief Australia had established a "Chinese wall" to ensure that price sensitive information regarding Leighton which may become known to Hochtief AG and Hochtief Australia and their respective officers did not become known to Mr Lancero and Mr Somerville. It stated that Mr Lancero and Mr Somerville were required to strictly comply with the Chinese wall arrangement, and in particular: were to refrain from discussing the affairs of Leighton with any officer or employee of Hochtief AG or Hochtief Australia; were to ensure that JP Morgan, Hochtief Australia's stockbroker, was instructed to communicate in relation to the acquisitions with Mr Lancero and Mr Somerville only and with no other officer, employee or representative of Hochtief AG or Hochtief Australia, unless otherwise authorised by Mr Lancero and Mr Somerville; were to submit daily reports on the progress of the acquisitions to nominated officers of Hochtief AG or Hochtief Australia, including Mr Sassenfeld, Mr Hoestermann and Mr Robinson; were to refrain from seeking revised instructions or input in deciding the terms of the acquisitions from any officer or employee of Hochtief AG or Hochtief Australia; and were to refrain from trading in Leighton Shares in a personal capacity during the period covered by the Instruction, and otherwise comply with the insider trading provisions in the Corporations Act. 18 Equally importantly, the instruction stated that the instruction could be varied by Hochtief AG provided that confirmation was first given to Mr Lancero and Mr Somerville that Hochtief AG, Hochtief Australia and their respective officers were not in possession of any price sensitive information at the time of the variation. 19 It is patently obvious that the person or persons who drafted the instruction had the insider trading prohibition in s 1043A of the Corporations Act in mind when inserting these directives in the instruction. The risk of a contravention of the insider trading prohibition was obviously well understood by the drafter or drafters. Less clear is whether the person or persons who approved and signed the instruction, including Mr Sassenfeld, fully appreciated the risk and sufficiently understood the directives. 20 On 28 November 2013, there was a meeting of the directors of Hochtief Australia. The attendees included Mr Sassenfeld, Mr Robinson and Mr Lancero. A number of resolutions relating to the instruction were passed. On the following day, Mr Hoestermann, on behalf of Hochtief AG, sent an email to Mr Lancero, copied to Mr Sassenfeld, Mr Robinson, Mr Sonnenberg and others, that attached a copy of the instruction. Mr Robinson forwarded the email to Mr Somerville. Mr Lancero sent an email to Mr Hoestermann, copied to Mr Sassenfeld, Mr Robinson, Mr Sonnenberg, Mr Somerville and others, which acknowledged receipt of the instruction. 21 On 3 December 2013, Mr Sonnenberg sent an email to Mr Robinson titled "Chinese wall arrangements in respect of Leighton Holdings". The email attached the instruction, as well as a document with the subject "Chinese wall arrangements in respect of Leighton Holdings Limited". In the email, Mr Sonnenberg stated: A Chinese wall has been established to ensure that price sensitive information regarding Leighton which may come known to HOCHTIEF, HTAHL and its respective officers does not become known to Ken, William or JP Morgan (Quarantined Persons) during the period of acquisitions. It is important that we strictly comply with the Chinese wall arrangements set out in the attached instruction."

December 2013 meetings of the Leighton directors and audit committee 22 On Friday 13 December 2013 at 7:00 am, a meeting of the Leighton audit committee was held. It was attended by, amongst others, Mr Sassenfeld and Mr Robinson. A number of papers and reports were circulated prior to the meeting. They included a paper titled "Leighton Group Report November 2013". That report contained financial information, including figures in respect of of Leighton's guidance, forecast and consensus UNPAT. It noted, amongst other things, that forecast UNPAT remained within the guidance range after increasing $40 million to $580 million. 23 A meeting of the directors of Leighton was convened immediately after the audit committee meeting. The minutes of the meeting noted that the board considered the Leighton Group Report and that the company "remains on target to meet the underlying net profit after tax in the guidance range of $520 - 600m".

The inside information 24 Further meetings of the Leighton directors and audit committee were scheduled to be held on Tuesday 14 January 2014. Various papers and reports were made available electronically to the members of the board and the audit committee on the weekend prior to those meetings. 25 One of the reports that was made available was a management report titled "Draft Management Review Ongoing: Leighton Holdings Limited Preliminary Reporting to Hochtief 31 December 2013 dated 14 January". That report reported Leighton's UNPAT as being $583.3 million for the 12 months ending December 2013, compared to $448.6 million for the 12 months ending December 2012. It also stated that the profit attributable to members was $508.7 million for the 12 months ending December 2013, compared to $450.1 million for the 12 months ending December 2012. 26 Another report that was made available to the members of the audit committee was a report prepared by Leighton's external auditors, Deloitte. That report included the following financial information: profit before income tax for the year ended 31 December 2013 was $731.7 million, compared with $563.1 million for the previous year; profit for the year was $468.9 million, compared with $442.1 for the previous year; and profit attributable to members for the year was $508.4 million, compared with $450.1 million for the previous year. 27 At 3.00 pm on Tuesday 14 January 2014, a meeting of the Leighton audit committee was held in Sydney. Both Mr Sassenfeld and Mr Robinson attended the meeting. The management report was the subject of a presentation by Leighton's Deputy Chief Financial Officer and a hard copy of the report was tabled. The Deloitte report was the subject of a presentation by officers of Deloitte and a hard copy of the report was tabled. 28 As a result of the presentations and reports tabled at the audit committee meeting, as at 4.46 pm on Tuesday 14 January 2014, Mr Sassenfeld and Mr Robinson were aware that for the 2013 financial year Leighton's profit was expected to be an UNPAT of $583.8 million (market guidance was $520 million to $600 million) and an NPAT of between $508.4 and $508.7 million. Hochtief AG possessed that information through Mr Sassenfeld. 29 That information was not generally available to persons beyond the narrow group of officers from Leighton, Hochtief AG, Hochtief Australia and Deloitte. It had not been released to the public or the ASX and would not have been discoverable upon inquiry by a third party. Had the information been generally available, a reasonable person would have expected it to have had a material effect on the price of ordinary shares in Leighton. It was common ground between the parties that the information was accordingly "inside information" as defined in s 1042A of the Corporations Act, the terms of which are referred to later.

Initial acquisitions of Leighton shares pursuant to the instruction 30 On Monday 20 January 2014, Hochtief Australia, through its brokers JP Morgan, commenced purchasing Leighton shares on behalf of Hochtief AG in accordance with the instruction. On 20 January, 195,000 shares were purchased for the total consideration (excluding fees) of $3,110,815.50; on 21 January, 213,554 shares were purchased for $3,430,189.77; on 22 January, 187,194 shares were purchased for $3,014,721.93; on 23 January, 292,751 shares were purchased for $4,711,358.94; and on 24 January, 248,664 shares were purchased for $4,014,531.08. All in all, between 20 and 24 January, 1,137,163 Leighton shares were purchased pursuant to the instruction for a total consideration of $18,281,512.22 (excluding fees). Following each of those acquisitions, Mr Somerville sent an email to Mr Sassenfeld and Mr Hoestermann notifying them of the details of the acquisitions.

Variation of the instruction 31 At 2.46 pm on Thursday 23 January 2014, Mr Robinson sent an email to Mr Sonnenberg attaching a document titled "Variation of Instruction". The email contained the following explanation of the need to vary the original instruction: The acquisition of the Leighton shares by Ken Lancero and Will Somerville has been slow due to delays in arrival of funds and the extremely low volume of trading (average 600k per day compared to 1.2m) over the last week. The purchase of the full 4.8m is not likely to occur therefore before 31 January at the current acquisition rate. …I propose to vary the instruction by increasing the time period to 14 February. I can confirm that we continue to be NOT in possession of any price sensitive information. If the attached document could be signed and returned on 27 January that would be most helpful. 32 The Variation of Instruction was discussed at a meeting of the directors of Hochtief Australia held at 5.00 pm on Monday 27 January 2014. The minutes of the meeting record that the following resolutions were adopted: It was RESOLVED that, the previous instruction issued to Kenneth Lancero and William Somerville on 28 November 2013, regarding the purchase of 4.8M LEI shares through JPM, be amended to extend the completion date of acquisitions from 31 January 2014 to 14 February 2014. It was RESOLVED that, the attached amendment to the instruction be approved and sent to Kenneth Lancero and William Somerville. 33 On about 27 January 2014, Mr Sassenfeld and Mr Hoestermann signed the Variation of Instruction on behalf of Hochtief AG. It was in the following terms: HOCHTIEF acknowledge that due to market conditions the daily volume turnover in Leighton Shares on the Australian Stock Exchange is substantially less than anticipated and therefore difficult for you to execute the instructions and complete all acquisitions by the date nominated in Clause 1 (e) of the instructions being 31 January 2014. HOCHTIEF therefore varies the instructions and directs you to complete the acquisition of 4.8 million Leighton shares before the 14th February 2014. In all other respects the instructions are unchanged. HOCHTIEF, HTAHL and its respective officers do not currently possess any price sensitive information regarding Leighton Holdings Limited. 34 On Tuesday 28 January 2014, Hochtief Australia acquired a further 358,165 Leighton shares for a total cost of $5,741,333.00 (excluding fees) in accordance with the instruction. As with previous acquisitions, and in accordance with the instruction, Mr Somerville advised Mr Sassenfeld and Mr Hoestermann of the details of that acquisition. 35 At 2:56am on Wednesday 29 January 2014, Mr Hoestermann sent an email to Mr Lancero, copied to Mr Sassenfeld, Mr Robinson, Mr Sonnenberg and others. The email attached a copy of the signed Variation of Instruction and stated "Attached Variation of Instruction as of today.'' Later that morning, Mr Lancero informed Mr Somerville via email that, "per revised instruction", the last day for acquiring shares in Leighton had been extended to 14 February 2014. 36 It was common ground between the parties that, by sending the email attaching the signed Variation of Instruction, Hochtief AG procured Hochtief Australia to acquire shares in Leighton. It did so while it was in possession of the inside information.

Further acquisition of Leighton shares 37 From Wednesday 29 January to Monday 3 February 2014, Hochtief Australia, through its brokers JP Morgan, acquired further Leighton shares on behalf of Hochtief AG. On 29 January, 254,928 shares were purchased for the total consideration (excluding fees) of $4,131,312.18; on 30 January 389,745 shares were purchased for $6,224,890.22; on 31 January, 430,943 shares were purchased for $7,076,816.66; and on 3 February, 200,000 shares were purchased for $3,235,260. In total, in the period from 29 January to 3 February 2014, Hochtief Australia purchased 1,275,616 Leighton shares for a total consideration (excluding fees) of $20,668,279. The trading over that four day period (excluding the intervening weekend) involved about 6,706 separate transactions and comprised 20.25% of the total volume and 21.4871% of the total value of Leighton shares traded across the markets. 38 Following each of the acquisitions on those days, Mr Somerville sent an email to Mr Sassenfeld and Mr Hoestermann notifying them to the details of the acquisitions. 39 As explained earlier, there was a dispute between the parties concerning whether the acquisition of Leighton shares by Hochtief Australia on each of the four days over the period 29 January to 3 February was procured by Hochtief AG's actions in sending the email attaching the Variation of Instruction to Mr Lancero on the afternoon of 29 January. ASIC contended that the trading on each of the four days was procured by the Variation of Instruction. Hochtief AG contended that the only trading that was procured by the variation was the trading that occurred on 3 February 2014. That dispute is considered and resolved later in these reasons. It was common ground that the extent of the trading procured by Hochtief AG's actions, and the notional profit that resulted from those impugned trades, was relevant to the amount of the penalty that should be imposed.

Withdrawal of the instruction 40 On about Monday 3 February 2014, Hochtief AG determined to cease acquiring Leighton Shares through Hochtief Australia. 41 At a meeting of the directors of Hochtief Australia that was held at 5.00 pm on 3 February and attended by Mr Sassenfeld, Mr Robinson and Mr Lancero, amongst others, a document titled "Withdrawal of Instruction" was tabled. It was addressed to Mr Lancero and Mr Somerville from Mr Sassenfeld and Mr Hoestermann on behalf of Hochtief AG and dated 3 February 2014. It stated: HOCHTIEF AG (HOCHTIEF) hereby withdraws and revokes with immediate effect the instructions given to you dated 28 November 2013 and 27 January 2014 (the instructions) whereby on behalf of HOCHTIEF Australia Holdings limited (HTAHL) you were to acquire shares in Leighton Holdings Limited (Leighton Shares). 42 At the meeting, the following resolutions were adopted: It was RESOLVED that, the previous instruction issued to Kenneth Lancero and William Somerville on 28 November 2013 (and amended 27 January 2014), regarding the purchase of 4.8M LEI shares through JPM, be withdrawn and revoked with immediate effect. It was RESOLVED that, the attached revocation of the instruction be approved and sent to Kenneth Lancero and William Somerville. 43 At 5:05pm on Monday 3 February 2014, following the directors meeting, Mr Lancero sent an email to Mr Hoestermann and others at Hochtief AG, copied to Mr Sassenfeld, Mr Robinson and Mr Somerville. In that email, Mr Lancero advised of the purchase of Leighton shares and attached an excel spreadsheet and contract note relating to the day's trade. Mr Lancero also noted: We have now crossed the 1% threshold from the previous notice of substantial shareholding lodged to the market last 31 Dec. Please expect an announcement on Wednesday. 44 At 5:26 pm on Monday 3 February 2014, Mr Robinson sent an email to Mr Sassenfeld, copied to Mr Hoestermann, attaching an unsigned copy of the Withdrawal of Instruction. In the email, Mr Robinson stated: Further to the decision to postpone the current acquisitions to the 2nd quarter I attach a notice to my staff to cease further activity. Would you please sign this and email to Ken Lancero. 45 At 3.03 am on Tuesday 4 February 2014, Mr Hoestermann sent an email to Mr Lancero, copied to Mr Sassenfeld, Mr Robinson and others, attaching the signed Withdrawal of Instruction. Mr Lancero replied by email in the following terms: Acknowledging receipt of instructions. There [won't] be any orders to be processed from today on relating to the previous instructions.

Subsequent announcements and media coverage 46 On Wednesday 5 February 2014, Hochtief Australia released, through the ASX, a document dated 3 February 2014 and titled "Form 604 Notice of change of interests of substantial holder". The notice was given by Hochtief Australia on behalf of itself and Hochtief AG (and its related bodies corporate). It stated that as a result of on-market acquisitions by Hochtief Australia between 30 December 2013 and 3 February 2014, Hochtief Australia had increased its ownership in Leighton by 3,420,943 shares and had increased its voting power by 1.02% (from 57.75% to 58.77%). Hochtief Australia was required by s 671B of the Corporations Act to give that notice to both Hochtief AG and the ASX. 47 Hochtief Australia's acquisition of Leighton shares, on behalf of Hochtief AG, from 20 January 2014 to 3 February 2014 received substantial press coverage, including in major Australian daily newspapers. That coverage followed Hochtief Australia's release, through the ASX, of the Form 604. The media coverage drew attention to the fact that Hochtief Australia's acquisitions of Leighton shares had occurred shortly before Leighton was due to release its preliminary final results for the financial year ended 31 December 2013. The suggestion was that the acquisitions had occurred while either Hochtief AG or Hochtief Australia was in possession of material information concerning Leighton which was not available to the market. For example, on Friday 7 February 2014, the Australian Financial Review published an article by Ms Jenny Wiggins titled "ASA queries Hochtief trades ahead of Leighton's results". Among other things, the article stated: The ASA [Australian Shareholders Association] on Thursday sent a letter to the Australian Securities Exchange asking why trading blackouts did not apply to Hochtief, given it has several board seats at Leighton. … "It doesn't seem right that a party with inside information on the forthcoming result can purchase shares so soon before making a material earnings release to the market," the ASA's policy and engagement coordinator, Stephen Mayne, said in a letter to the ASX. The ASX does not prescribe blackout periods and Hochtief, which is listed in Germany, is not subject to ASX listing rules. … "By now [Hochtief] will be in possession of the results, the audit process will be largely complete, so Hochtief has information that the market doesn't have and they are trading." Three Hochtief-appointed directors sit on Leighton's 10-member board ... Hochtief has only been making substantial trades in Leighton's shares since June, when it signalled intentions to creep up the group's shareholder-register… 48 On Wednesday 12 February 2014, Hochtief Australia sent a letter to the Chairman of Leighton at that time, Mr Robert Humphris, denying that it had engaged in insider trading. On Thursday 13 February 2014, Leighton sent the letter to ASX market announcements platform for publication. The letter was released to the market that day. It stated: The ASA appears to suggest that HOCHTIEF recently acquired shares in Leighton Holdings Limited ('Leighton') with the benefit of price sensitive information concerning Leighton's soon to be announced result for the 2013 financial year. This is not the case. HOCHTIEF issued instructions to acquire the shares in question during the prescribed securities trading period ('window') following Leighton earnings announcements for the 30 September 2013 quarter. Authorisation was given to third parties not involved in Leighton and who were not in possession of any price sensitive information to acquire a certain number of shares on or by a future date. The HOCHTIEF nominee directors on the Leighton Board played no role in the purchase of shares at the time of acquisition 49 The letter was incorrect to the extent that Hochtief AG, by the issue of the Variation of Instruction, had procured Hochtief Australia to purchase Leighton shares while in possession of inside information. 50 At 9.01 am on Thursday 20 February 2014, Leighton released through the ASX a document titled "Preliminary Final Report (Appendix 4E) and Management Commentary of the year ended 31 December 2013", together with a media release titled "Leighton FY13 underlying NPAT up 30% to $584m, within guidance; NPAT up 13% to $509m"; and an investor presentation titled "Preliminary Final Results". The management commentary included the following statements: For the year ended 31 December 2013 (FY13), the Leighton Group recorded Statutory Net Profit after Tax (NPAT) of $509 million and Underlying Net Profit After Tax (UNPAT) of $584 million. This result represented an increase of 13% and 30% respectively over the NPAT and UNPAT performance in the year ended 31 December 2012 (FY12). 51 The media release included the following information: UNPAT of $584 million, up 30% on the previous financial year; UNPAT margin of 2.4% of revenue, up from 1.9%; NPAT of $509 million, up 13%; 2014 UPAT expected to be $540 million to $620 million and gearing to be within target range of 20% to 35%, subject to market conditions and unfavourable developments; and final dividend of 60 cents per share, 50% franked, payable on 4 April 2014. 52 On Thursday 20 February 2014, following the announcement by Leighton to the ASX of the Preliminary Final Report at 9:01am, there was a material increase in the price and volume of Leighton shares traded on the ASX and Chi-X markets. Relevantly, Leighton shares: opened at a price of $18.30 per share; closed at a price of $17.21 per share, an increase of 4.88% from the closing price of $16.41 per share on 19 February 2014; traded at an intra-day high of $18.40 per share; traded at an intra-day low of $16.90 per share; and traded for a total volume of 4,498,614, which was 5.1 times higher than the average traded volume of 874,145 shares over the previous five trading days. The total value of the Leighton shares traded on 20 February was $79,024,512.

elements of the insider trading contravention 53 The "insider trading prohibitions" are contained in Division 3 of Part 7.10 of the Corporations Act. In Subdivision B of Division 3 (titled "The prohibited conduct"), section 1043A (titled "Prohibited conduct by person in possession of inside information") provides in sub­ section (1) as follows: (1) Subject to this Subdivision, if: (a) a person (the insider) possesses inside information; and (b) the insider knows, or ought reasonably to know, that the matters specified in paragraphs (a) and (b) of the definition of inside information in section 1042A are satisfied in relation to the information; the insider must not (whether as principal or agent): (c) apply for, acquire, or dispose of, relevant Division 3 financial products, or enter into an agreement to apply for, acquire, or dispose of, relevant Division 3 financial products; or (d) procure another person to apply for, acquire, or dispose of, relevant Division 3 financial products, or enter into an agreement to apply for, acquire, or dispose of, relevant Division 3 financial products." 54 Section 1042A defines "information" as including matters of supposition and other matters that are insufficiently definite to warrant being made known to the public, as well as matters relating to the intentions, or likely intentions, of a person. 55 Perhaps more significantly, "inside information" is defined in s 1042A in the following terms: inside information means information in relation to which the following two paragraphs are satisfied: (a) the information is not generally available; (b) if the information were generally available, a reasonable person would expect it to have a material effect on the price or value of particular Division 3 financial products 56 The two elements of the "inside information" definition - not generally available and materiality - are the subject of a number of further definitional provisions. 57 In relation to the first element, s 1042C(1) provides as follows in relation to when information is generally available: For the purposes of this Division, information is generally available if: (a) it consists of readily observable matter; or (b) both of the following subparagraphs apply: (i) it has been made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invest in Division 3 financial products of a kind whose price might be affected by the information; and (ii) since it was made known, a reasonable period for it to be disseminated among such persons has elapsed; or (c) it consists of deductions, conclusions or inferences made or drawn from either or both of the following: (i) information referred to in paragraph (a); (ii) information made known as mentioned in subparagraph (b)(i). 58 Plainly, information is "not generally available" for the purposes of the "inside information" definition if it is not "generally available" as provided in s 1042C(1). Fortunately, given the agreed facts in this matter, it is unnecessary to explore in detail the meaning of the somewhat obscure expression "readily observable matter". 59 In relation to the materiality element of the inside information definition, it is (somewhat bafflingly, but typically of modern-day legislative drafting) necessary to have regard to two further definitional provisions. First, s 1042A provides as follows in relation to "material effect": material effect, in relation to a reasonable person's expectations of the effect of information on the price or value of Division 3 financial products, has the meaning given by section 1042D." 60 Second, s 1042D defines the circumstances in which a reasonable person would be taken to expect information to have a material effect, s 1042D provides as follows: For the purposes of this Division, a reasonable person would be taken to expect information to have a material effect on the price or value of particular Division 3 financial products if (and only if) the information would, or would be likely to, influence persons who commonly acquire Division 3 financial products in deciding whether or not to acquire or dispose of the first-mentioned financial products. 61 The key question accordingly becomes whether the information would have been likely to influence investors to acquire or dispose of the relevant financial product (in this case shares in Leighton). 62 In relation to the requirement that a person (which may be a corporation) "possess" the inside information, s 1042G defines the circumstances in which a corporation is taken to be in possession of information. It provides as follows: For the purposes of this Division: (a) a body corporate is taken to possess any information which an officer of the body corporate possesses and which came into his or her possession in the course of the performance of duties as such an officer; and (b) if an officer of a body corporate knows any matter or thing because he or she is an officer of the body corporate, it is to be presumed that the body corporate knows that matter or thing; and (c) if an officer of a body corporate, in that capacity, is reckless as to a circumstance or result, it is to be presumed that the body corporate is reckless as to that circumstance or result; and (d) for the purposes of paragraph 1043M(2)(b), if an officer of a body corporate ought reasonably to know any matter or thing because he or she is an officer of the body corporate, it is to be presumed that the body corporate ought reasonably to know that matter or thing. 63 An "officer" of a corporation is defined in s 9 as including, relevantly: a director; or a person who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or a person who has the capacity to affect significantly the corporation's financial standing. 64 In relation to the conduct element of the insider trading prohibition relevant to this matter, s 1042F(1) provides as follows in relation to the meaning of "procure" in the context of the insider trading prohibition: For the purposes of this Division, but without limiting the meaning that the expression procure has apart from this section, if a person incites, induces, or encourages an act or omission by another person, the first-mentioned person is taken to procure the act or omission by the other person. 65 Further "helpful" assistance in relation to the meaning of "procure" is provided by s 9, which states that "procure" includes "cause". 66 Finally, the complex web of relevant definitional provisions includes a definition of "Division 3 financial products". Suffice it to say that such products include "securities". "Securities" is defined in s 92 as including, relevantly, shares in a body. 67 In simple terms, relevant to this matter, the elements which together constitute a contravention of s 1043A are as follows. 68 First, the person (in this case a corporation) procured (which includes incited, induced, encouraged or caused) another person to acquire shares. 69 Second, at the time it did so, the corporation possessed information (which is taken to be the case if an officer of the corporation possessed the information); 70 Third, the information possessed by the corporation at the time: (a) was not generally available (that is, was not readily observable matter and had not been made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invest in securities of the kind whose price might be affected by the information); and (b) would have, or would have been likely to, influence persons who commonly acquire securities in deciding whether or not to acquire or dispose of the shares the acquisition of which was procured by the corporation. 71 Fourth, at the time that the corporation engaged in the conduct of, relevantly, procuring another person to acquire shares, the corporation knew, or ought reasonably to have known, that the information (being the information referred to in the second element) possessed by it had the two qualities the subject of the third element. 72 It is to be noted that, where the conduct element (the first element) involves procuring, it is not an element of a contravention of s 1043A that the other person, the person procured, subsequently acquired the relevant shares. A person can be found to have incited, induced or encouraged another person to acquire shares, even if that other person does not go on acquire the shares. Nor is it an element of the contravention that the contravenor's conduct was motivated by the fact that the contravenor possessed the inside information: it is not necessary to prove that the contravenor procured someone else to acquire shares because he, she or it possessed the inside information.

declaration of Contravention 73 Hochtief AG admitted that it had contravened s 1043A(1)(d) of the Corporations Act. It admitted that it procured Hochtief Australia to acquire shares in Leighton at a time when it possessed information that was both not generally available and material to the price of Leighton shares. It also admitted that it ought reasonably to have known that the information possessed the qualities that made it inside information for the purposes of s 1043A(1)(d). ASIC sought, and Hochtief AG consented to the making of, a declaration that Hochtief had contravened s 1043A(1)(d). 74 The fact that the parties have agreed that a declaration of contravention should be made does not relieve the Court of the obligation to satisfy itself that the making of the declaration is appropriate: Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 326 ALR 476 at 489 [59] (Commonwealth v Director, FWBII); Australian Competition and Consumer Commission v MSY Technology Pty Ltd No 2 [2011] FCA 382 at [7] (overturned by the Full Court of the Federal Court of Australia in Australian Competition and Consumer Commission v MSY Technology Pty Ltd (2012) 201 FCR 378 on a separate issue). It is not the role of the Court to merely rubber stamp orders that are agreed as between a regulator and a person who has admitted contravening a public statute: Australian Securities and Investments Commission, in the matter of Chemeq Limited (ACN 009 135 264) v Chemeq Limited (ACN 009 135 264) [2006] FCA 936; (2006) 234 ALR 511 at 534-535 [100]; Commonwealth v Director, FWBII at 484 [31], 489 [48], 491 [58]. 75 The Court has a wide discretionary power to make declarations under s 21 of the Federal Court of Australia Act 1976 (Cth): Forster v Jododex Australia Pty Limited (1972) 127 CLR 421 at 437-438 (per Gibbs J, citing Russian Commercial and Industrial Bank v British Bank for Foreign Trade Limited [1921] 2 AC 438 at 448); Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 at 99 (per Sheppard J). 76 The facts necessary to support the declaration may be established by agreed facts (under s 191 of the Evidence Act 1995 (Cth)) and admissions: Minister for Environment, Heritage and the Arts v PGP Developments Pty Ltd (2010) 183 FCR 10. 77 Before making a declaration, the Court should be satisfied that the question is real, not hypothetical or theoretical, that the applicant has a real interest in raising the issue, and that there is a proper contradictor: Forster at 437-438. 78 Declarations relating to contraventions of legislative provisions are likely to be appropriate where they serve to record the Court's disapproval of the contravening conduct, vindicate the regulator's claim that the respondent contravened the provisions, assist the regulator to carry out its duties, and deter other persons from contravening the provisions: Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union [2006] FCA 1730; (2007) ATPR 42-140 at [6], and the cases there cited. 79 Some of these general principles in relation to the discretionary nature of the Court's power to grant of declaratory relief would appear to have limited applicability to contraventions of s 1043A of the Corporations Act. That is because s 1317E(1) provides that if a Court (which includes this Court: s 58AA(1) of the Corporations Act) is satisfied that a person has contravened, inter alia, s 1043A of the Corporations Act, it must make a "declaration of contravention". A declaration of contravention must specify, relevantly, the name of the Court that made the declaration, the provision that was contravened, the person who contravened the provision, and the conduct that constituted the contravention. 80 The agreed facts provide a proper factual basis for the declaration sought by ASIC and agreed to by Hochtief AG. The agreed facts, together with the inferences that may properly be drawn from them, are sufficient to establish each of the elements of a contravention by Hochtief AG of s 1043A(1)(d) of the Corporations Act. 81 First, the facts establish that on 29 January 2014 Hochtief AG procured Hochtief Australia to acquire shares in Leighton. The conduct that amounted to procuring was the communication of the Variation of Instruction by Mr Hoesterman, on behalf of Hochtief AG, to Mr Lancero, on behalf of Hochtief Australia. Various other senior officers of both Hochtief AG and Hochtief Australia were also sent copies of the email communication attaching the Variation of Instruction. The Variation of Instruction was sent to Hochtief Australia following a resolution of the board of directors of Hochtief AG. The terms of the Variation of Instruction amounted to an inducement or encouragement to Hochtief Australia to acquire shares in Leighton. 82 The Variation of Instruction also caused Hochtief AG to acquire Leighton shares that it otherwise would not have acquired. That is because the acquisitions could not have been made under the terms of the original instruction. The original instruction by Hochtief AG to Hochtief Australia to acquire shares in Leighton required the share acquisitions to be completed by 31 January 2014. The Variation of Instruction extended the period during which the acquisitions were required to be made to 14 February 2014. The original instruction otherwise remained unchanged. It may be inferred that, but for the Variation of Instruction, Hochtief Australia would not have acquired the 200,000 shares in Leighton that it acquired on 3 February 2014. 83 The question whether the sending of the Variation of Instruction on 29 January 2014 also caused or resulted in Hochtief Australia's acquisitions of Leighton shares on 29, 30 and 31 January is addressed separately later. It is sufficient to note at this stage that the relevant act or conduct that amounted to procuring was the sending of the Variation of Instruction on 29 January. The terms of that document amounted to an inducement or encouragement. That was sufficient to make out the conduct element of the contravention. The result of that act - the number of Leighton shares that were in fact acquired as a result of the inducement or encouragement - is a separate question that is important to the question of penalty. As indicated earlier, Hochtief AG did not admit that the acquisitions that occurred on 29, 30 and 31 January were caused by, or were the result of, the communication of the Variation of Instruction that occurred on 29 January. It contended that they were not. ASIC, on the other hand, contended that the acquisitions on those days were in fact procured by the Variation of Instruction. 84 Second, at the time that Hochtief AG sent the Variation of Instruction, it was in possession of information concerning the financial results of Leighton. Specifically, it was in possession of information that for the 2013 financial year Leighton's profit was expected to be an UNPAT of $583.8 million (where market guidance was $520 million to $600 million) and an NPAT of between $508.4 and $508.7 million. Hochtief AG came into possession of that information because Mr Sassenfeld, a director and senior executive officer of Hochtief AG, attended the meeting of Leighton's audit committee on 14 January 2014. Documents containing the information were disseminated in advance of, and tabled at, the meeting. Hochtief AG possessed the information because its director, Mr Sasseneld, knew it: R v Farris [2015] WASC 251. 85 Third, the information possessed by Hochtief AG had the two qualities necessary for it to be inside information for the purposes of s 1043A of the Corporations Act: it was both not generally available and was likely to influence prospective investors in deciding whether or not to acquire Leighton shares. 86 In relation to the relevant information being not generally available, it was contained in reports the dissemination of which had been restricted to a limited number of senior officers of Leighton (some of whom were also officers of Hochtief AG and Hochtief Australia) and Leighton's auditors. The documents and the relevant financial information in them had not been published or disseminated or released to the market or the public generally. It was accordingly not generally available. It was not "readily observable" because it could not have been widely observed: R v Firns (2001) 51 NSWLR 548 at 565 [88], 566 [91] (per Mason P); Hannes v Director of Public Prosecutions (Cth) (No 2) [2006] NSWCCA 373; (2006) 205 FLR 217 at 384 [626] (per Barr and Hall JJ) (Hannes (No 2)). It also had not been made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invest in securities of the kind whose price might be affected by the information. Leighton did not announce the relevant information to the market until 20 February 2014. The fact that the information was not generally available as at 29 January 2014 is, at least to a certain extent, supported by the fact that Leighton's share price and trading volume increased when Leighton's financial results were announced to the market on 20 February: cf. R v Doff [2005] NSWCCA 119; (2005) 54 ACSR 200 at 205 [19]; Hannes (No 2) at 300-303 [346]-[354] (per Barr and Hall JJ). As noted later, however, in some circumstances one has to be cautious in drawing inferences from the effect that an announcement may have had on the price of, and volume of trading in, a particular security. 87 As for materiality, the very nature of the relevant information meant that it had the capacity to influence investors in deciding whether or not to acquire shares in Leighton at the time. In simple terms, the information concerned Leighton's increasing profitability: NPAT had increased 13% from the previous financial year and UNPAT had increased 30% from the previous financial year. One does not have to be a financial expert or experienced share trader to appreciate that positive information concerning the profitability of a company would, or would be likely to, influence investors in deciding whether or not to acquire shares in that company. The fact that the profit results were within the previously publicly announced market guidance does not mean that the information was not material in the required sense. So much so was admitted by Hochtief AG. Information which confirms the actuality of what previously had only been a prediction, forecast or expectation, is still capable of, and depending on the precise circumstances, likely to influence prospective investors. 88 In any event, the market reaction when Leighton's financial results were released to the market on 20 February 2014 supports the finding that the information was material in the relevant sense. It should be emphasised, however, that in drawing inferences from the "announcement effect", some consideration must be given to other contemporaneous announcements and other factors that might have influenced investor behaviour at the time: R v Hannes [2000] NSWCCA 503; (2000) 158 FLR 359 at 409 [297]-[299]; R v Rivkin [2004] NSWCCA 7; (2004) 184 FLR 365 at 397-401 [186]-[205] (R v Rivkin (2004)); Rivkin Financial Services Ltd v Sofcom Ltd [2004] FCA 1538; (2004) 51 ACSR 486 at 516 [113]-[115]; Doff at 205-210 [19]-[50]; Hannes (No 2) at 300-303 [346]-[354]; Fysh v R [2013] NSWCCA 284 at [153], [158]-[161], [180] and [214] (per Hoeben CJ at CL, Bathurst CJ and Schmidt J agreeing at [1] and [216]). In some cases, the alleged inside information may not coincide precisely with the information subsequently publicly released. In such a case, the drawing of inferences concerning the materiality and general availability of the alleged inside information from the effect that the announcement had on trading price and volume is potentially problematic. That is not, however, the case here. 89 Fourth, Hochtief AG admitted that, on 29 January 2014, when it procured Hochtief Australia to acquire shares in Leighton, it ought reasonably to have known that the relevant information it possessed was both not generally available and material. Importantly, Hochtief AG did not admit, and ASIC did not contend, that Hochtief AG in fact knew that the information it possessed was not generally available and material in the relevant sense. Nor did ASIC submit that such an inference was available, or should be drawn, from the agreed facts. 90 The Court is satisfied on the basis of the facts as agreed between the parties that on 29 January 2014, Hochtief AG contravened s 1043A(1)(d) by procuring Hochtief Australia to acquire shares in Leighton in circumstances where it possessed inside information and ought reasonably to have been aware that the information possessed the qualities that made it inside information. 91 The issue concerning the contravention of s 1043A of the Corporations Act by Hochtief AG is a real, not a hypothetical or theoretical issue. The making of a declaration in relation to the contravention is appropriate because it will serve to record the Court's disapproval of the contravening conduct, will vindicate ASIC's claim that Hochtief AG contravened s 1043A, and will assist ASIC to carry out its duties and deter person from engaging in similar contravening conduct. The declaration sought by ASIC is of utility and is an appropriate exercise of the Court's jurisdiction. In any event, given that the Court is satisfied that Hochtief AG contravened s 1043A(1)(d), a "declaration of contravention" must be made: s 1317E(1) of the Corporations Act.

The APPROPRIATE PECUNIARY PENALTY 92 Section 1043A(1)(d) is a "financial services civil penalty" provision: ss 1317DA and 1317E(1) (item 45). 93 Section 1317G(1A) provides that a Court may order a person to pay the Commonwealth a pecuniary penalty of the "relevant maximum amount" if three conditions are satisfied. The relevant maximum amount for a contravention satisfying the three conditions is $1 million for a body corporate: s 1317G(1B). 94 The first condition that must be satisfied for a maximum pecuniary penalty of $1 million to apply is that a declaration of contravention has been made under s 1317E. That condition is or will be satisfied here because, for the reasons just given, a declaration of contravention will be made in respect of Hochtief AG's contravention of s 1043A(1)(d). 95 The second condition is that the contravention is of a financial services civil penalty provision not dealt with in subsections (1E) to (1G). Section 1043A(1) is a financial services civil penalty provision and is not dealt with in s 1317(1E) to (1G). 96 The third condition is that the contravention is "serious". Hochtief AG admitted that its contravention of s 1043A(1)(d) was serious for the purposes of s 1317G(1A). Even putting that admission to one side, there could be little doubt that Hochtief AG's contravention was serious. 97 Unusually (particularly for relatively modern Commonwealth legislation like the Corporations Act), there is no definition of "serious" in the Corporations Act. The ordinary meaning of "serious" in this context would include "grave", "not trifling", "weighty" or "important". In Re Idylic Solutions Pty Ltd; Australian Securities and Investments Commission v Hobbs [2013] NSWSC 106; (2013) 93 ACSR 421 at 449-450 [109], Ward JA said that a contravention would be "serious" for the purposes of s 1317G(1)(b) of the Corporations Act (which is the corresponding pecuniary penalty provision for corporation/scheme civil penalty provisions) if the relevant default or neglect was "grave or significant", including by reference to the potential or actual consequences of the contravention. 98 The question whether a contravention meets the description "serious" is ultimately a question of fact. There are a number of features of Hochtief AG's contravening conduct which support the conclusion that the contravention was grave and significant, and therefore serious for the purposes of s 1317G(1A). Those features are considered in detail later in these reasons in the context of fixing the appropriate pecuniary penalty. Hochtief AG's contravention could not in any sense be considered to be trivial, minor or inconsequential. 99 That is not to say that all contraventions of s 1043A(1) are serious. ASIC's submissions in relation to s 1317G(1A) appeared to proceed on the basis that any contravention of s 1043A would, almost by definition, be serious. Such a submission cannot be accepted. It is clear that s 1317G(1A) only allows for the imposition of a pecuniary penalty for a financial services civil penalty provision, including s 1043A, if the contravention is serious. There would be little point in imposing such a condition if all contraventions of s 1043A were necessarily to be regarded as serious. It is possible to imagine some civil contraventions of s 1043A that could fairly be regarded as trivial or inconsequential. For example, a contravention by a financially unsophisticated person who unintentionally encouraged someone else to acquire (but the third person did not in fact acquire) a very small parcel of shares in a small and inconsequential company, despite being in possession of information that they ought reasonably to have known (but did not actually know) was not generally available and material, could hardly be said to be serious a serious contravention. 100 ASIC relied on statements made in a number of well-known criminal cases which involved the sentencing of offenders, almost invariably natural persons not corporations, who had committed the criminal offence of insider trading. Failure to comply with s 1043A(1) is also a criminal offence (s 1311(1) of the Corporations Act), though criminal liability also requires proof of relevant "fault elements" under the Criminal Code Act 1995 (Cth). A natural person who is tried and convicted of the criminal offence of insider trading is liable to imprisonment for 10 years, or a fine the greater of 4,500 penalty units (a penalty unit at the time of Hochtief AG's contravention was $170) or, if a benefit is able to be calculated, three times the total value of the benefit obtained from the offence. A corporation convicted of the criminal offence of insider trading is liable to pay the greater of 45,000 penalty units (at the time of Hochtief AG's contravention, that would have amounted to $7.65 million), or, if able to be calculated, three time the benefits obtained from the offence, or otherwise 10% of the corporation's annual turnover in the preceding 12 month period. 101 For whatever reason, ASIC elected to commence civil penalty proceedings against Hochtief AG, rather than pursue criminal relief in conjunction with the Commonwealth Director of Public Prosecutions. It may have been the case that ASIC did not believe that it would have been able to prove the fault elements required for a criminal conviction. In any event, the point remains that this matter must be dealt with as a civil contravention. It is doubtful that observations made by sentencing judges in criminal proceedings, concerning the seriousness of the criminal offence of insider trading, greatly assist in determining whether Hochtief AG's civil penalty contravention of s 1043A(1) was serious for the purposes of s 1317G(1A). 102 ASIC also relied on some observations made in Australian Securities and Investments Commission v Petsas [2005] FCA 88. In that matter, Finkelstein J was called upon to impose a pecuniary penalty on two defendants for civil contraventions of s 1043A. Despite the fact that his Honour was imposing a pecuniary penalty for a civil contravention, not sentencing for a criminal offence, his Honour observed (at [11]), the passage relied on by ASIC, that "the offence with which each defendant is charged is a serious criminal offence". His Honour then surveyed the criminal penalties that had been imposed for breaches of the insider trading prohibition since 1992. That survey indicated that offenders tended to be sentenced to a term of imprisonment. His Honour then appeared to approach the matter on the basis that it was possible to calculate a monetary equivalent of a term of imprisonment. Overall, his Honour appeared to be influenced by what his Honour regarded (at [1]) as the "disappearance of the line between criminal and civil proceedings". 103 The difficulty in relying on the approach taken by Finkelstein J in Petsas is that, if indeed the line between criminal and civil proceedings was disappearing, or had disappeared, at the time his Honour decided the matter, the line was relevantly redrawn by the High Court in Commonwealth v Director, FWBII at 490-491 [51]-[57] (French CJ, Kiefel, Bell, Nettle and Gordon JJ), at least for particular purposes (at 498-499 [90] per Keane J), including the purpose under consideration in that matter (the applicability, to civil pecuniary penalty proceedings, of the reasoning in Barbaro v R (2014) 253 CLR 58 in respect of the practice of criminal prosecutors nominating a quantified range of sentences). In any event, the observations of Finkelstein J in Petsas do not support the proposition that any civil contravention of the insider trading prohibition must necessarily be regarded as serious for the purpose of s 1317G(1A). 104 ASIC also pointed out that the maximum penalty applicable to insider trading reflected the seriousness of the contravention. That is a non sequitur. The maximum penalty for a civil contravention only applies if the Court finds that the particular contravention was serious. The cases cited by ASIC in support of that submission were also all criminal sentencing cases and referred to the maximum penalty for the criminal offence of insider trading. 105 Putting ASIC's submissions to one side, Hochtief AG admitted, or rather conceded, that its contravention was serious. That admission or concession was properly made. For the reasons already given, and expanded on later, Hochtief AG's contravention was serious. The maximum pecuniary penalty amount of $1 million was applicable for the contravention. 106 The more difficult question is what penalty is appropriate in the particular circumstances of this matter. 107 There was a wide gulf between the parties' submissions in relation to the appropriate penalty. On the one hand, ASIC submitted that in the circumstances a penalty of $600,000 was appropriate. On the other hand, Hochtief AG submitted that a penalty of $100,000 was appropriate. Did the facts and circumstances support ASIC's submission, or Hochtief AG's submission? Or was a different amount appropriate?

Fixing the appropriate penalty - relevant principles 108 Beyond providing the relevant maximum amount, the Corporations Act does not provide any express guidance in relation to the fixing of an appropriate pecuniary penalty in respect of a contravention of a financial services civil penalty provision. This is also the first case where the Court has been asked to fix a pecuniary penalty on a corporation in respect of a civil contravention of s 1043A of the Corporations Act. Petsas involved the imposition of pecuniary penalties on two individuals for contraventions of s 1043A. For the reasons already touched on, however, at least some aspects of the approach taken by Finkelstein J in that matter may now, with respect, be considered somewhat questionable. 109 Whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty is primarily, if not wholly, protective in promoting the public interest in compliance: Trade Practices Commission v CSR Ltd [1990] FCA 521; (1991) ATPR 41-076 at 52,152 [42]; Commonwealth v Director, FWBII at 490 [55] (per French CJ, Kiefel, Bell, Nettle and Gordon JJ). The principal object of a pecuniary penalty is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene: both specific and general deterrence are important: Chemeq at 532 [90]. A civil penalty for a contravention of the law must be fixed with a view to ensuring that the penalty is not to be regarded by the contravenor or others as an acceptable cost of doing business: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at 659 [66] (per French CJ, Crennan, Bell and Keane JJ); Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; (2012) 287 ALR 249 at 265 [62]-[63]. Or, in perhaps more colloquial terms, it is important to send a message into the marketplace that contraventions of the sort under consideration are serious and not acceptable: Australian Securities and Investments Commission v Southcorp Ltd (2003) 130 FCR 406 at 418 [32] (per Lindgren J). 110 It should also be noted in this context that, when sentencing offenders for the criminal offence of insider trading, sentencing judges and courts of criminal appeal have consistently emphasised the importance of general deterrence as a sentencing consideration. That is not only because insider trading is difficult to detect and investigate, but also because there is a need to protect the integrity and efficacy of the market: R v Fysh (No 4) [2012] NSWSC 1587; (2012) 92 ACSR 116 at 118 [11]-[12]; R v Rivkin [2003] NSWSC 447; (2003) 198 ALR 400 at 409-410 [44] (R v Rivkin (2003)); Doff at 212 [56]. There is no reason to doubt that this reasoning applies equally to the fixing a penalty for a civil contravention of the insider trading provisions. 111 The fixing of a pecuniary penalty in respect of a contravention of a civil penalty provision in the Corporations Act involves the identification and balancing of all the factors relevant to the contravention and the contravenor, and the making of a value judgment as to what is the appropriate penalty in light of the protective and deterrent purpose of a pecuniary penalty. While there may be differences between the criminal sentencing process and the process of fixing a pecuniary penalty (cf. Commonwealth v Director, FWBII at 491 [56]-[57]), the fixing of a pecuniary penalty may to an extent be likened to the "instinctive synthesis" involved in criminal sentencing: TPG Internet Pty Ltd v Australian Competition and Consumer Commission (2012) 210 FCR 277 at 294. Instinctive synthesis is the "method of sentencing by which the judge identifies all the factors that are relevant to the sentence, discusses their significance and then makes a value judgment as to what is the appropriate sentence given all the factors of the case": Markarian v The Queen (2005) 228 CLR 357 at 378 [51] (per McHugh J). Or, as the plurality put it in Markarian (at 374 [37], per Gleeson CJ, Gummow, Hayne and Callinan JJ) "the sentencer is called on to reach a single sentence which … balances many different and conflicting features." 112 In fixing the amount of a civil penalty, reference is frequently made to the lists of factors or considerations identified by Santow J in Australian Securities and Investments Commission v Adler (No 5) [2002] NSWSC 483; (2002) 42 ACSR 80 at 114-115 [126] and French J in Chemeq at 534 [99]. Those lists of relevant considerations, which have been approved and elaborated on by many subsequent decisions of this Court, were not, and were not intended to be, exhaustive. Nor was it suggested that each of the factors referred to in the respective lists was necessarily relevant or important in every case. These lists of factors should not be treated as a rigid catalogue or checklist of matters to be applied in each case: the overriding principle is that the Court should weigh all relevant circumstances: Australian Securities and Investments Commission v GE Capital Finance Australia [2014] FCA 701 at [72]. 113 In general terms, the factors that may be relevant when fixing a pecuniary penalty may conveniently be categorised according to whether they relate to the objective nature and serious of the offending conduct, or concern the particular circumstances of the contravenor in question (what sentencing judges commonly refer to as the offender's "subjectives" or the "subjective circumstances"). 114 The factors relating to the objective seriousness of the offence include: the extent to which the contravention was the result of deliberate, covert or reckless conduct, as opposed to negligence or carelessness; whether the contravention comprised isolated conduct, or was systematic or occurred over a period of time; if the contravenor is a corporation, the seniority of the officers responsible for the contravention; the existence, within the corporation, of compliance systems and whether there was a culture of compliance at the corporation; the impact or consequences of the contravention on the market or innocent third parties; and the extent of any profit or benefit derived as a result of the contravention. 115 The factors that concern the particular circumstances of the contravenor (where the contravenor is a corporation) generally include: the size and financial position of the contravening company; whether the company has been found to have engaged in similar conduct in the past; whether the company has improved or modified its compliance systems since the contravention; whether the company (through its senior officers) has demonstrated contrition and remorse; whether the company had disgorged any profit or benefit received as a result of the contravention, or made reparation; whether the company has cooperated with and assisted the relevant regulatory authority in the investigation and prosecution of the contravention; and whether the company has suffered any extra-curial punishment or detriment arising from the finding that it had contravened the law. 116 The size of the contravening corporation does not of itself justify a higher penalty than might otherwise be imposed: Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2015] FCA 330; (2015) 327 ALR 540 at 559-561 [89]-[92] (ACCC v Coles). The size of the corporation may, however, be particularly relevant in determining the size of the pecuniary penalty that would operate as an effective deterrent. The sum required to achieve this object will be larger where the company has vast resources: Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) [2005] FCA 265; (2005) 215 ALR 301 at 309 [39]; Australian Competition and Consumer Commission v Apple Pty Limited [2012] FCA 646 at [38]. 117 Careful attention must also be given to the maximum penalty for the contravention. That is so for at least three reasons: first, because the legislature has legislated for the maximum penalty and it is therefore an expression of the legislature's policy concerning the seriousness of the proscribed conduct; second, because it permits comparison between the worst possible case and the case that the Court is being asked to address; and third, because the maximum penalty provides a "yardstick" which should be taken and balanced with all the other relevant factors: Markarian at 372 [31] (per Gleeson CJ, Gummow, Hayne and Callinan JJ). 118 Even where the maximum penalty for the contravention is high, and the amount necessary to provide effective deterrence is large, the amount of the penalty cannot be so high as to be oppressive: Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd (1978) ATPR 40-091 at 17,896; NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 293 (per Burchett and Kiefel JJ). The pecuniary penalty imposed must be proportionate to the contravention. 119 Before identifying, discussing and balancing the factors or considerations relevant to the fixing of an appropriate penalty for Hochtief AG's contravention, it is necessary to resolve a particular factual dispute which is relevant to the seriousness of the contravention and the notional profit derived from it. As noted earlier, that dispute concerns the number of days of trading in Leighton shares that were in fact caused by, or resulted, the contravening conduct.

The trading that resulted from the contravening conduct 120 It is not in dispute that the relevant act or conduct that constituted the contravention was the sending, at 2.56 am on 29 January 2014, by Mr Hoestermann on behalf of Hochtief AG, of an email attaching the Variation of Instruction, to Mr Lancero on behalf of Hochtief Australia. The Variation of Instruction was sent at a time that Hochtief AG, through Mr Sassenfeld, was in possession of inside information relating to Leighton. The sending of the Variation of Instruction, which was signed by Mr Sassenfeld, procured Hochtief Australia to acquire shares in Leighton because it incited, induced, or encouraged Hochtief Australia to acquire shares in Leighton. 121 As noted earlier, the conduct of a contravenor can be found to have procured the acquisition of shares by another person even if no shares were in fact acquired by that person. That is because the conduct of the contravenor might have incited or encouraged the other person to acquire shares, but the person might ultimately have ignored that encouragement, or been unable to act on it. While the definition of "procure" in the Corporations Act includes "cause", conduct may procure the acquisition of shares, but not cause shares to be acquired. 122 Hochtief AG submitted that a person cannot be found to have contravened s 1043A by procuring another person to acquire shares unless it is proved that the other person acquired those shares. For the reasons just given, that submission is rejected. Hochtief AG relied, in support of its submissions, on authorities that concerned the criminal law principles of accessorial liability or complicity, or statutory provisions that import those principles (see for example Yorke v Lucas (1985) 158 CLR 661 at 667). That reliance was misconceived. The criminal law principles of accessorial liability and complicity, and the statutory provisions that import them, almost invariably require that the offence must have been committed by the other person before accessorial liability can arise. Those principles are not readily applicable to a statutory provision that includes "procure" as a substantive conduct element of the contravention or offence. 123 In any event, Hochtief AG admitted that its contravening conduct in fact caused Hochtief Australia to acquire shares in Leighton on 3 February 2014. Hochtief AG denied, however, that its contravening conduct relevantly caused Hochtief AG to acquire Leighton shares on 29, 30, or 31 January 2014. ASIC, on the other hand, submitted that the admitted facts demonstrated that Hochtief AG's conduct caused Hochtief Australia to acquire Leighton shares on those additional days. 124 There was no direct evidence, or agreed fact, that the sending of the Variation of Instruction caused Hochtief Australia's trading on 29, 30 or 31 January 2014. There was, for example, no evidence from any officer of Hochtief Australia (including, in particular, Mr Somerville) to the effect that they instructed Hochtief Australia's broker to acquire Leighton shares on any of those days because they had received, read and acted on the Variation of Instruction. ASIC submitted, however, that such a conclusion could nonetheless be inferred from the agreed facts. 125 The crux of ASIC's case in that regard was (or at least appeared to be) that the communication by Hochtief AG of the Variation of Instruction on 29 January 2014 was a "positive act" that was taken at a time when Hochtief AG was in possession of inside information. ASIC contended that the effect of the issue and communication of the Variation of Instruction was to replace or supersede the original instruction by Hochtief AG to Hochtief Australia to acquire Leighton shares which was given on 28 November 2013. Put another way, in ASIC's submission the original instruction, which was given at a time when Hochtief AG was not in possession of inside information, only remained lawful until the further positive act of procurement - the issue of the Variation of Instruction - occurred. It followed, in ASIC's submission, that all trading that occurred after the issue of the Variation of Instruction was carried out pursuant to, or under the authority of, the instructions contained in the Variation of Instruction. 126 ASIC conceded that it bore the onus of proving that the contravening conduct caused the trading on 29 30 and 31 January. That concession was properly made. It was a factual contention or allegation which, if proved, would have constituted an aggravating factor. A contravention which caused or resulted in trading on four days, involving a considerably larger number of Leighton shares and a larger notional profit for Hochtief AG, could legitimately be considered to be more serious than a contravention which caused or resulted in trading on only one day involving a smaller number of Leighton shares and a smaller notional profit for Hochtief AG. 127 There are, with respect, a number of difficulties with ASIC's case that all the trades that occurred after the communication of the Variation of Instruction were procured by the Variation. The main hurdle is that ASIC's submission is not supported by, indeed flies in the face of, the clear wording of both the original instruction and the Variation of Instruction. It is also inconsistent with the history of acquisitions of Leighton shares by Hochtief Australia up to and including 29 January 2014. 128 The original instruction directed Hochtief Australia to acquire Leighton shares on the terms set out in the instruction. In effect, the terms were that Hochtief Australia was authorised to acquire up to 4.8 million shares between 6 January 2014 and 31 January 2014, subject to certain parameters concerning maximum acquisition price and maximum daily volume. That instruction was given at a time when Hochthief AG was not in possession of any inside information. The Variation of Instruction did not state, in terms, that it operated to replace, supersede or otherwise terminate the original instruction. Indeed, quite the contrary. It stated that because market conditions had made it difficult to execute the existing instructions and complete the acquisitions by 31 January 2014, the original instruction was varied by extending the completion date to 14 February 2014. It then stated that "[i]n all other respects the instructions are unchanged". 129 The important point is that the acquisitions of Leighton shares that occurred on 29, 30 and 31 January 2014 were able to be made under the authority of, and pursuant to the directions contained in, the original instruction. That instruction effectively remained on foot. The Variation of Instruction, properly construed, did not authorise or direct Hochtief Australia to acquire Leighton shares on 29, 30 or 31 January 2014. It did not need to because acquisitions on those days were already authorised under the original instruction. All that the Variation of Instruction did was to vary the original instruction such that the completion date was changed from 31 January 2014 to 14 February. In that sense, it only relevantly operated to authorise or direct the acquisition of shares Leighton shares from 1 February to 14 February. 130 ASIC's submission that the Variation of Instruction superseded, replaced or terminated the original instruction accordingly must be rejected. So too must its submission that the original instruction only remained lawful until the issue of the Variation of Instruction. It follows that it cannot be concluded that the acquisitions of Leighton shares which occurred on 29, 30 and 31 January were caused by, or were the result of, the issue and communication of Variation of the Instruction simply because they occurred on or after the day that the Variation of Instruction was sent to Hochtief Australia. The mere fact that the acquisitions occurred after that so-called "positive act" does not mean that they were caused by, or resulted from, that act. 131 The terms of the Variation of Instruction also indicate that its object or intention was limited to inciting, inducing, encouraging or causing Hochtief AG to acquire Leighton shares after 31 January 2014. It did not need to incite, induce, encourage or cause the acquisition of shares before that date because the acquisition of shares on or prior to 31 January 2014 was already the subject of the original instruction. No variation was necessary for those acquisitions to take place. In those circumstances, and in the absence of any evidence additional to the agreed statement of facts, it is somewhat difficult to see why it should necessarily be concluded that the Variation of Instruction was intended to, or did, incite, induce or encourage the acquisition of shares on 29, 30 or 31 January. It is even more difficult to see why it should necessarily be concluded, again in the absence of any additional evidence, that the Variation of Instruction caused or resulted in the acquisitions that occurred on those days. 132 The agreed facts in relation to the history of acquisition of Leighton shares by Hochtief Australia also support the inference that Hochtief Australia would most likely have acquired Leighton shares on 29, 30 and 31 January, even if the Variation of Instruction had not been issued and communicated to it. Hochtief Australia acquired Leighton shares pursuant to the original instruction on every day that the relevant exchanges (ASX and Chi-X Australia) were open from the time it commenced acquisitions on 20 January 2014 up to and including 28 January 2014. There is no reason to infer that the acquisitions which occurred on 29, 30 and 31 January 2014 would not have occurred if the Variation of Instruction had not issued. It is difficult to see why, in those circumstances, it should be inferred that the Variation of Instruction caused those acquisitions to occur. 133 For the reasons already given, ASIC bore the onus of proving that the acquisitions that occurred on 29, 30 and 31 January 2014 were caused by Hochtief AG's contravening conduct, being the communication of the Variation of Instruction on 29 January 2014. ASIC failed to discharge that onus. The appropriate pecuniary penalty payable by Hochtief AG should be determined on the basis that the contravening conduct only caused the trading that occurred on 3 February 2014: the acquisition of 200,000 Leighton shares for the total consideration (excluding fees) of $3,235,260. It was common ground that the notional profit derived by Leighton from the shares acquired on 3 February 2014 was $206,740.00. The profit was only notional because the shares have not been sold by Hochtief Australia.

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.

Considerations relating to Hochtief AG's particular circumstances 152 As has already been indicated, Hochtief is a large multinational company with a large turnover. In and of itself, that does not justify a higher penalty than might otherwise be imposed: ACCC v Coles at 559-561 [89]-[92]. The size of a corporate contravenor may be a particularly important consideration in some cases, particularly those that involve deliberate contraventions and thus specific deterrence is an important consideration. In this matter, however, specific deterrence does not loom large as a consideration in fixing the level of the pecuniary penalty, mainly because the contravention was not a deliberate or intentional. 153 Nevertheless, the public is entitled to expect that a corporation of the size and status of Hochtief AG would have had adequate compliance systems and training to ensure that contraventions of the insider trading prohibition do not occur. Whatever may be said of the "policy" contained in the original instruction, it was plainly inadequate and ineffective. The penalty should be sufficiently large to send a strong message to large multinational companies, like Hochtief Australia, that have operations in Australia, that they should ensure that they have established suitable and effective compliance systems, and conducted appropriate training, concerning Australia's insider trading prohibition. In that sense, at least, general deterrence is an important consideration. It should also perhaps be noted that, given the size of Hochtief AG, there could be no question that it has the financial capacity to pay a large pecuniary penalty without suffering any material hardship. 154 Hochtief AG has not been found to have engaged in any similar conduct on any prior occasion. ASIC did not draw the Court's attention to any prior finding that Hochtief had contravened the Corporations Law, or any other commercial regulatory statute, such as the Competition and Consumer Act 2010 (Cth). 155 ASIC submitted that as Hochtief's contravention concerned insider trading, less weight should be given to its good corporate character. ASIC relied, in that regard, on observations that are often made made by sentencing judges, when sentencing individuals in respect of insider trading offences, to the effect that good character should be given less weight when sentencing for offences such as insider trading: see for example R v Rivkin (2004) at 441 [410]; Doff at 208-209 [42]. Upon careful examination, however, the reasoning that lies behind that principle or proposition is that it was the offender's good character and standing in the community that resulted in them being entrusted with inside information in the first place. For that reason, it is said that the offender should be given less credit for their prior good character. Whatever one may think of that reasoning, it has limited application to the facts and circumstances of this matter, which involve a corporate offender and a contravention that did not involve any dishonesty, or any deliberate or intentional disregard of the law. It follows that full regard must be given to Hochtief AG's good corporate standing. 156 Hochtief AG ultimately provided a high level of cooperation in respect of ASIC's investigation concerning the contravention and its prosecution of this proceeding. It is true that Hochtief AG initially denied any wrongdoing in response to press reports concerning its acquisition of Leighton shares before the public announcement of Leighton's financial results. Hochtief AG did not bring its contravention to the attention of ASIC. ASIC's investigation was commenced as a result of contact from the Australian Shareholders Association and members of the public. When ASIC's investigation commenced, however, Hochtief AG fully cooperated with it and ultimately admitted its contravention. That avoided the necessity of a lengthy and costly contested hearing. These proceedings were conducted primarily on the basis of an agreed statement of facts. Hochtief AG has agreed to pay $100,000 to ASIC in respect of ASIC's investigation and legal costs. 157 Hochtief AG's cooperation with ASIC, as well as its admission of the contravention and its cooperation in the conduct of these proceedings, are all matters relevant to the fixing of the appropriate penalty in a number of respects. 158 First, there is a considerable benefit to the community and public interest in proceedings such as this being resolved without the need for a costly contested hearing. Such conduct should be encouraged. 159 Second, Hochtief's response to ASIC's investigation and this proceeding demonstrates contrition, remorse and insight into its contravening conduct. 160 Third, and related to the second point, Hochtief's attitude to ASIC's investigation and this proceeding bears upon an evaluation of the need for specific deterrence. 161 In relation to contrition and remorse, Hochtief AG adduced affidavit evidence from its head of corporate governance and general counsel, Mr von Bronk. Mr von Bronk, who resides in Germany, personally attended the hearing. Mr von Bronk, with the authority of the executive board, delivered an apology on behalf of Hochtief AG for the conduct of Hochtief AG's officers and itself. Mr von Bronk stated that the Hochtief Group, including Hochtief AG, "prides itself on being a leading global corporate citizen and we always seek to abide by the laws of the jurisdictions in which we operate". He also stated that "Hochtief AG understands and appreciates that even an inadvertent contravention is a serious matter and we deeply regret that the contravention occurred". The genuineness of the contrition and remorse shown by this apology was not doubted by ASIC. Hochtief AG was correct to appreciate that this contravention was a serious matter. 162 Hochtief AG's contrition and remorse was also reflected in the fact that, by the time the penalty hearing was conducted, it had voluntarily paid an amount reflecting its notional profit from the trades that occurred on 2 March 2014 to two bodies: half was paid to the Australian Shareholders Association and half to the First Nations Foundation. The voluntary disgorgement of profits derived from a contravention should be encouraged and, as indicated, reflected Hochtief's contrition and remorse. However, as White J said in Australian Competition and Consumer Commission v AGL South Australia Limited (2015) 146 ALD 385 at 391 [38], "the court should be careful not to allow the making of reparation to be given undue significance when it amounts to little more than a disgorging by a contravenor of profits achieved through the contravening conduct and, in effect, is a recognition of the inevitable". 163 As has already been noted in the context of the seriousness of the contravening conduct, Hochtief AG did not have a comprehensive scheme or system concerning insider trading in place at the relevant time. That has now been largely remedied. Mr von Bronk's evidence included the fact that Hochtief AG now conducts specific training in respect of insider trading law in Australia. That training will be ongoing. Mr von Bronk gave some details concerning a training session that occurred in February 2015. The training was conducted by Hochtief AG's Australian lawyers and involved all of Hochtief AG's then current officers and employees who had responsibility for overseeing Hochtief AG's business in Australia, including any trading by Hochtief Australia in shares in Leighton. Mr Sassenfeld and Mr Robinson attended. It is unnecessary to recite the details of the training. 164 ASIC did not question Mr von Bronk in relation to the training. In its submissions, however, it was somewhat critical of Hochtief AG's post-contravention training. It submitted that the training was "theoretical" and did not set in place any specific policy or procedure to avoid future contraventions of the insider trading provisions. ASIC also pointed out that the compliance measures taken by Hochtief AG did not include a relevant "black out" period for Hochtief AG and Hochtief Australia trading in Leighton shares, or a procedure for checking and approving trading in financial products. Those criticisms would have had considerable merit if Hochtief AG was an investment bank or other financial institution, rather than a construction company. ASIC's criticisms of the training also ignored, to a certain extent, the somewhat unique and unusual circumstances in which the contravention occurred. Hochtief AG and Hochtief Australia are not corporations that regularly trade in securities. The acquisition plan in relation to shares in Leighton was largely a one-off event. 165 While it would no doubt be possible, and perhaps desirable, for Hochtief AG to improve aspects of this training by, for example, producing a compliance manual containing specific policies and procedures, including, perhaps, a "black out" period, the training carried out by Hochtief AG reflected a genuine attempt to decrease the risk of any further contraventions of s 1043A. Given that it may be inferred that the contravention was, at least in part, a result of an almost complete absence of any training or education in relation to insider trading, the training that has and will continue to occur is likely to reduce the risk of a repeat contravention. That must also be borne in mind when considering the need for specific deterrence.

Balancing the relevant considerations - the appropriate penalty 166 The fixing of an appropriate penalty for Hochtief AG's contravention of s 1043A of the Corporations Act involves balancing all of the relevant factors that have just been identified and discussed, having regard to the "yardstick" maximum penalty of $1 million and the primarily protective and deterrent purpose of a pecuniary penalty. 167 In all the circumstances, an appropriate pecuniary penalty in respect of Hochtief AG's contravention is $400,000. A pecuniary penalty of $400,000 adequately reflects the serious nature of Hochtief AG's contravention, but also takes into account that the contravention was the result of a single act on one day, resulted in a single day of trading and was not deliberate or intentional, but was the result of a serious failure by a senior officer to exercise appropriate care and diligence in all the circumstances. The contravention was towards the middle or slightly lower side of the scale of seriousness of civil contraventions of the insider trading prohibition. It was by no means a minor or trivial contravention. By the same token, it was nowhere near the worst possible case. 168 A penalty of $400,000 also gives weight to the various mitigating and ameliorating circumstances to which reference has been made: the fact that Hochtief AG has no prior contraventions, cooperated with ASIC and admitted liability, has demonstrated contrition and remorse and has conducted appropriate training to reduce the risk of further offending. A penalty of $400,000, while not particularly large for a company the size of Hochtief AG, would nevertheless have a sufficient deterrent effect, both specific and general, in all the circumstances. Given the nature and circumstances of the offending conduct, and Hochtief AG's specific circumstances, specific deterrence is not be a major consideration in the fixing of an appropriate penalty. It remains, however, of some significance, as is the need for general deterrence. In the particular circumstances of this matter, a penalty of $400,000 is sufficient to send a message to companies operating in Australia, even large companies like Hochtief AG, that contraventions of the insider trading prohibition, even those that may be the product of carelessness, are serious and not acceptable. 169 It is implicit in what has just been said that ASIC's submission that a penalty of $600,000 should be imposed is rejected. ASIC's submissions tended to overstate the seriousness of the contravention and minimise some of the mitigating circumstances. A penalty of that amount would be more appropriate where the contravention was deliberate or reckless, involved actual knowledge concerning the possession of inside information, extended over a lengthier period and was not mitigated by circumstances such as cooperation, remorse and prior good character. Likewise, Hochtief AG's submission that a penalty of $100,000 would be appropriate is rejected. Hochtief AG's submissions, which characterised the contravention as involving mere carelessness and inadvertence, tended to understate the seriousness of the contravention. While the contravention did involve carelessness and inadvertence, rather than actual knowledge and deliberateness, the careless was such as to amount to a serious failure to exercise appropriate care and diligence in the circumstances. It also involved a serious failure on the part of Hochtief AG to put in place appropriate systems and procedures relating to insider trading. It resulted in significant trading in a major Australian public company which, because it involved insider trading, had the capacity to significantly undermine the integrity and efficiency of the relevant securities markets. It was by no means a victimless crime: the victim was the market.

Disposition 170 A declaration of Hochtief AG's contravention of s 1043A(1)(d) of the Corporations Act contravention should be made pursuant to s1317E(1) of the Corporations Act in the terms set out in ASIC's originating process. 171 An order should be made pursuant to s 1317G(1A) of the Corporations Act that Hochtief AG pay to the Commonwealth a pecuniary penalty of $400,000 in respect of the declared contravention. 172 Hochtief AG should pay ASIC's legal costs which have been agreed at $50,000. It is noted that Hochtief AG has also separately agreed to pay ASIC's investigation costs of $50,000. I certify that the preceding one hundred and seventy-two (172) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wigney.