Braysich v The Queen

Braysich v The Queen - [2011] HCA 14 - HCA 2011 case summary — Zoe

[10]

Following a trial before a judge and a jury in the District Court of Western Australia, the appellant, a stockbroker, was convicted on 10 November 2007 of 25 counts of creating a false or misleading appearance of active trading in securities on the stock market. The offence was created by s 998(1), read with s 1311(1), of the Corporations Law of Western Australia, as incorporated into the Corporations Act 2001 (Cth) ("the Corporations Act") by operation of s 1401 of that Act[1].
The convictions should be quashed. The trial miscarried. The Crown case on each of the counts was that the appellant had caused a sale of listed shares to be made in circumstances in which, to the appellant's knowledge, there was no change in their beneficial ownership. If that fact were established he was, by force of s 998(5) of the Corporations Law, deemed to have created a false or misleading appearance of active trading in the shares. The finding of fact and the application of the deeming provision were therefore sufficient for conviction. The appellant, however, wished to rely at trial upon a statutory defence, under s 998(6) of the Corporations Law, that the purpose or purposes for which he caused the sales to take place did not include the purpose of creating a false or misleading appearance of active trading. It is common ground that he would have had the burden of establishing that defence on the balance of probabilities.
The trial judge ruled at the close of the appellant's testimony that he had not raised the statutory defence. On the basis of that ruling his Honour refused to allow the appellant to call expert evidence to rebut an expert witness called by the Crown in anticipation of the appellant's reliance upon the defence. Counsel was not permitted to address the jury on the defence and the jury were told that it had no application to the appellant. The defence was able to be availed of by his co-accused, who had been his client and one of the principals in the impugned transactions. The trial judge directed the jury accordingly.
The Court of Appeal of the Supreme Court of Western Australia (Pullin, Buss and Miller JJA) dismissed an appeal against conviction[2]. It held that the statutory defence was properly withheld from the jury and the objection to the appellant's expert evidence properly allowed. The Court of Appeal also held that, in any event, there had been no substantial miscarriage of justice and that, had it come to a different view of the trial judge's rulings, it would have dismissed the appeal[3]. In this Court, the Crown expressly disclaimed reliance upon and support for that aspect of the Court of Appeal's decision. The appeal to this Court is brought by special leave granted on 30 July 2010 by Hayne and Bell JJ. Its outcome turns upon whether the trial judge erred in withdrawing the statutory defence from the jury and in not permitting the appellant to call expert evidence said to be relevant to that defence. In our opinion his Honour did so err.

[75]

The trial judge said, in his ruling on the objection, that "the proposed evidence, does not have probative consequence in the issue to be determined by the jury." His Honour's reasons for reaching that conclusion did not elucidate its basis beyond his evident acceptance of the submission made by counsel for the Crown that "the evidence cannot properly be [led] because it does not go to any issues between the [C]rown and Braysich particularly having regard to the nature of the evidence given by Braysich." That evidence, as described by the trial judge, was that the appellant at no stage knew or believed that the shares in the Walthamstow account were held by that company other than as their beneficial owner. His Honour also referred to the appellant's evidence that "he took positive steps because of some concerns to ensure that the position was that these transactions involved a change in beneficial ownership."
The logic of the ruling seems to have been that the appellant's case that he did not know or believe that there was no change in beneficial ownership involved an implied disclaimer of the statutory defence. The logic was erroneous. The implication could not follow from the appellant's case. It would have been open to the appellant to say that he believed there was a change in beneficial ownership and to contend, by reference to his own direct evidence or otherwise, that he did not have any purpose of creating a false or misleading appearance of active trading. It would have been open to him to maintain the latter contention, even if the first were rejected. It was not to the point that he did not expressly state that he had no such subjective purpose. In principle he could point to any evidence, his own and/or that of other witnesses, which, as a matter of logic or human experience, was inconsistent with the existence of the proscribed purpose and therefore tending against the probability that he had that purpose. He could invite the jury, on the basis of such evidence, to conclude that it was not likely, on the balance of probabilities, that he had the proscribed purpose. The judge's ruling was framed on a basis which prematurely foreclosed those possibilities and thus the question whether, at the close of the appellant's case and that of his co-accused, there was evidence upon which the jury properly instructed could reasonably find the statutory defence made out.

[115]

The indictment, alleging, as it did, offences against a law of the Commonwealth[41], attracted the mandate in s 80 of the Constitution that "[t]he trial on indictment of any offence against any law of the Commonwealth shall be by jury". That section constitutes "an adoption of the institution of 'trial by jury' with all that was connoted by that phrase in constitutional law and in the common law of England."[42]
In a trial by jury the issues of fact are decided by the jury "in the presence and under the superintendence of a judge empowered to instruct them on the law"[43]. It is an "elementary principle of the criminal law that unless express statutory provision to the contrary be made, the onus lies upon the Crown throughout to negative defences sufficiently raised."[44] The authority and responsibility of the judge to instruct the jury on questions of law requires the judge "to put to the jury every lawfully available defence open to the accused on the evidence even if the accused's counsel has not put that defence and even if counsel has expressly abandoned it."[45] It may also require a direction to the jury that there is no evidence capable of supporting a particular defence to the charge and that they are not to consider that defence in their deliberations[46]. In such a case the accused is said to have failed to meet the "evidential burden" necessary to raise the defence. Such a direction may be made in respect of a defence which, if open, the prosecution, bearing the "legal burden" of proof, would have to negative beyond reasonable doubt[47]. It may also be made in respect of a statutory defence, such as that created by s 998(6), which by statute the accused is required to establish[48]. The standard of proof necessary to discharge the legal burden imposed upon the accused in such a case is proof on the balance of probabilities[49].
The distinction between the "legal burden" and the "evidential burden" has been explained in this Court as the difference between "the burden … of establishing a case, whether by preponderance of evidence, or beyond a reasonable doubt" and "the burden of proof in the sense of introducing evidence"[50] (emphasis in original). It has also been explained in the 8th Australian edition of Cross on Evidence by reference to the distinction between the functions of judge and jury[51]:

[141]

Whatever weight might be attached to these aspects of the evidence in light of the evidence taken as a whole, it cannot be said they were irrelevant to whether the appellant lacked the proscribed dishonest purpose in effecting the transactions the subject of the charges against him. A jury, if they considered such evidence at its most favourable to the appellant, could well ask: is it really likely that an honest man who is acting on instructions from reputable people, who he has no reason to believe have a dishonest purpose, is himself acting with the dishonest purpose of creating a false appearance of active trading in shares - when he was aware of the requirements of the business rules of the ASX and of the law? It may be said that the narrow focus of the question renders it artificial. However, it is framed as it is to illustrate that there was a basis rooted in logic and experience upon which a reasonable jury, considering the evidence identified above, might come to a conclusion in favour of the appellant on the balance of probabilities. The reality of the jury's ultimate decision-making would be more complex because they would have to decide whether to accept all or any of those favourable elements of the evidence and weigh them up against evidence in the case pointing in another direction. Nevertheless, the question as framed is one which counsel for the defence could fairly have put to the jury and should have been allowed to put to the jury in his closing address. It was evidence which, viewed at its most favourable to the appellant, could have led the jury to be satisfied on the balance of probabilities that he lacked the proscribed purpose under s 998(6). In coming to a contrary conclusion the Court of Appeal erred.
It is true that much of the appellant's evidence was directed to his assertion that he did not know of the absence of any change in beneficial ownership of the shares the subject of the impugned transactions. There is a question whether evidence directed to that assertion is to be excluded from consideration in relation to the statutory defence. It may be said that the sequence of decision-making required of the jury by the structure of s 998 would render evidence of the requisite lack of knowledge irrelevant to the absence of the proscribed purpose. The assumed sequence involves the following steps:

[149]

HEYDON J. I agree that the appeal should be dismissed for the reasons given by Bell J, and would add only three things.
It was submitted for the appellant that one purpose of his conduct was performing a service for a client in return for a fee and that that was a purpose which was not the purpose of creating a false or misleading appearance of active trading in securities on a stock market. But the purpose of performing a service for a client for a fee is a purpose compatible with the existence of a purpose of creating a false or misleading appearance, unless there is evidence that the first purpose is the sole purpose. The evidence in this case could not establish that the first purpose was the sole purpose. As Bell J points out, a person may act with the purpose of bringing about a result (like creating a false or misleading appearance of active trading) without necessarily having a financial or other interest in that result. And a person may also act with the purpose of bringing about that result even if another purpose was to perform a service for a client in return for a fee. The purpose of performing a service for a fee does not exclude the purpose of creating a false or misleading appearance of active trading. Each item on which the appellant relied in support of his argument that evidence existed to justify his defence under s 998(6) of the Corporations Act 2001 (Cth) was not inconsistent with the defence in the sense that it did not contradict it[61]. The difficulty is that none of them supported it.
Secondly, even if the expert evidence filed by the appellant was capable of constituting evidence of the appellant's purpose, which is a proposition postulating a very indirect and Byzantine form of reasoning, the trial judge's failure to take it into account was not wrong. That is because it was never tendered. No argument was ever put as to why a tender should have succeeded in relation to the s 998(6) defence. Nor was it demonstrated in this Court how the expert evidence supported the s 998(6) defence.
Thirdly, s 998(6) is unorthodox. It reverses the burden of proof, and calls for proof of a negative proposition. The appellant's testimony did not contain direct evidence of that negative proposition. What is the evidentiary significance of a person in the position of the appellant failing to give direct testimony? In a civil case, Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd[62], Handley JA extended the principles of Jones v Dunkel[63] to a case where a party failed to ask a witness questions in chief on a particular topic. He said[64]: "I do not consider that inferences should be drawn favourable to a party whose counsel refrained from asking any question on [the particular] topic." Could that reasoning be employed in a criminal case like the present[65]? Could it be employed adversely to the accused? Could it be employed on a submission that there was no evidence to support the s 998(6) defence? These questions were only briefly raised in argument. In view of the existence of other reasons for dismissing the appeal, it is not necessary to examine them.

[151]

The prosecution depended upon the deeming provision in proof of each of the counts. None of the transactions were said to have involved a change in the beneficial ownership of the shares.
At the time of these events the appellant was a director of a stockbroking firm, Paul Morgan Securities Pty Ltd ("Paul Morgan Securities"). One of his clients was Dean Scook, who controlled a company, Challiston Pty Ltd ("Challiston"). Another was Steven Masel. Another was Lance Masel, who with Steven controlled a finance company, Walthamstow Pty Ltd ("Walthamstow"). Challiston and Walthamstow each had accounts with Paul Morgan Securities.
In late 1997 and early 1998 Dean Scook entered into a series of share finance facilities with Walthamstow in order to fund the purchase of parcels of shares in Intrepid. One of Walthamstow's requirements under the finance arrangements was that the shares purchased by Dean Scook or Challiston were to be held in Walthamstow's name as security for the loan monies. Shares purchased by Challiston through Paul Morgan Securities as sponsoring broker on CHESS[69] were "re-booked" by the appellant on the instructions of Dean Scook or Steven Masel to the Walthamstow account.
The offences related to the placement of orders by the appellant effecting the purchase by Challiston of parcels of Intrepid shares that were held on the Walthamstow account as security for the loan advances made by it to Challiston. Beneficial ownership of the shares at all times remained with Challiston. The transactions were carried out between 2 and 27 February 1998.
Since the prosecution depended upon proof of acts that engaged the deeming provision it was not necessary to prove that any transaction had created a false or misleading appearance of active trading on the ASX. Nonetheless, expert evidence to prove that the transactions had created that appearance in order to rebut the anticipated statutory defence was led in the prosecution case.
The appellant gave evidence that he had not known that there had been no change in the beneficial ownership of the shares. However, he did not state that he had not had the proscribed purpose in carrying out the transactions. He proposed to lead expert evidence to counter that led in the prosecution case. The trial judge found that expert evidence was not relevant to any issue between the parties. His Honour considered that the statutory defence had not been raised in circumstances in which the appellant's case was that he did not know the character of the transactions.
The appellant was convicted of 25 of 26 counts charged in the indictment against him[70]. He was sentenced to 12 months' imprisonment on one count, subject to him being immediately released on entering a bond to be of good behaviour for a period of two years[71]. He was fined the sum of $1,000 on each of the remaining counts.
It was a joint trial. Dean Scook was charged in the same indictment with 259 counts of false trading in Intrepid shares. One hundred of these counts charged offences in the alternative. In the event, Dean Scook was convicted of 158 offences. Many of the transactions charged against Dean Scook had been carried out by him through other firms of stockbrokers. The prosecution did not contend that the appellant was aware of these other transactions. It did not seek to make a case that Dean Scook and the appellant had been engaged in a joint criminal enterprise.
The appellant unsuccessfully appealed against his convictions to the Court of Appeal of the Supreme Court of Western Australia (Pullin, Buss and Miller JJA). He appeals by special leave to this Court on grounds which challenge the rejection of the expert evidence in his case and the refusal to leave the statutory defence for the jury's consideration. For the reasons that follow I would dismiss the appeal.

[152]

The central issue in the appeal concerns the sufficiency of the evidence to raise the statutory defence and for this reason it is helpful to refer to the appellant's evidence in somewhat greater detail. What follows is a summary of parts of that evidence.
In January 1998 the appellant opened accounts for Challiston and Walthamstow with Paul Morgan Securities. In late January 1998 on Dean Scook's instructions the appellant effected the purchase of a parcel of Intrepid shares for Challiston. Dean Scook asked the appellant to re-book the shares to the Walthamstow account. The appellant did so. In the result the shares purchased by Challiston were held in Walthamstow's name with Paul Morgan Securities as the sponsoring broker. Re-booking was unusual. Ordinarily, it was carried out to correct errors.
The officer charged with ensuring compliance with the ASX business rules at Paul Morgan Securities was Carol Simpson. She asked the appellant for further information about the re-booking of the Challiston shares to the Walthamstow account. She told the appellant that she wanted to make sure that there had been a change in the beneficial ownership of the shares. The appellant knew that Walthamstow was acting for Dean Scook or Challiston in connection with the purchase of Intrepid shares but he did not know the details of the finance arrangements. He was aware that under the ASX business rules it was necessary that there be a change in the beneficial ownership of securities that were traded. Steven Masel, on behalf of Walthamstow, advised Paul Morgan Securities that Dean Scook was authorised to sell shares held on its account.
Following his discussion with Carol Simpson, the appellant asked Dean Scook about the nature of his finance arrangements with Walthamstow. Dean Scook said that he had a long association with Walthamstow and that there were a variety of finance agreements between them. He did not disclose the details of these arrangements. The appellant told Dean Scook that Carol Simpson was concerned about the re-booking of transactions because of the possibility of trading without a change of beneficial ownership. Dean Scook assured the appellant that this would not occur. He undertook to inform the appellant whether he was selling shares which he owned or shares that Walthamstow owned. The appellant relayed the contents of this discussion to Ms Simpson. He proposed that he would keep a record of sales on the Walthamstow account in which Walthamstow was the owner and those in which Dean Scook was the owner. Ms Simpson agreed to this proposal.
Following these discussions, during February 1998 the appellant placed buy and sell orders effecting the purchase by Challiston of Intrepid shares held on the Walthamstow account. Instructions for the buy orders were always given by Dean Scook. The appellant received instructions for the sell orders from Dean Scook or Lance Masel. Settlement was on a "T plus five" basis, meaning within five working days from the date of the transaction. After placing the buy orders the appellant would speak to Steven Masel, or Steven Masel would contact the appellant, and instructions would be received to re-book the shares to the Walthamstow account.
The appellant did not put through sell orders on the Walthamstow account without being advised whether the shares belonged to Walthamstow or to Challiston. He kept a record of the advice that he was given concerning the ownership of the shares, designating parcels as "Lance" or "Dean" parcels respectively. In this way the appellant sought to make sure that he did not trade shares belonging to Challiston held on the Walthamstow account to Challiston. He did not knowingly execute any sell orders from Walthamstow to Challiston that did not involve a change in beneficial ownership. On the occasions when Dean Scook told the appellant that the sell order related to shares owned by him, the appellant ensured that the stock was not purchased by Challiston.
The appellant did not press Lance Masel or Dean Scook for more information about their dealings. He regarded himself as providing "an execution service". It was a service that did not include the provision of advice to either client.
It did not occur to the appellant that Dean Scook had an interest in creating a false appearance of active trading in Intrepid's shares. The appellant had not perceived any irregularity about the conduct of Dean Scook's trading. Dean Scook was a "believer" in Intrepid, whereas the appellant believed that Lance Masel had made a profit and that he was "moving on".
The appellant was pleased when the Masels started trading with Paul Morgan Securities since he was keen to see the firm grow. At the time the appellant opened the Walthamstow account, it appeared that Walthamstow was an existing Intrepid shareholder. The Masels were major traders on the ASX and the appellant assumed that their holdings in Intrepid were substantial.

[154]

The determinations of the admissibility of the appellant's expert evidence and the availability of the statutory defence were not assisted by the informality with which each was approached by trial counsel. At the end of the appellant's evidence the prosecutor informed the Court that expert reports by Dr Michael Aitken and Mr Guy Le Page had been served on the prosecution before the trial. The prosecutor foreshadowed that he would object to the admission of expert evidence in the appellant's case on the ground of relevance. The appellant's counsel did not tender the reports and seek a ruling on the admissibility of the opinions expressed in them. It does not appear from material in the appeal books that counsel made the submissions that were developed on appeal as to the claimed relevance of opinion evidence to a circumstantial case supporting the statutory defence.
There was no evidence before the trial judge or on appeal as to the contents of either report. From the prosecutor's summary of their contents, it appears that each report was directed to establishing that there existed reasonable explanations for the changes in the price of Intrepid shares, and in the volume of trading in Intrepid stock, other than that the market in Intrepid's stock was being manipulated to convey a false or misleading appearance of active trading.
The appellant's expert evidence was not formally rejected, neither report having been tendered. The trial judge did indicate his acceptance of the prosecutor's submission. His Honour said the expert evidence did not "have probative consequence in the issue to be determined by the jury." Following this indication the appellant's counsel raised the use that was to be made of Professor da Silva Rosa's reports. The prosecutor responded by expressing his willingness to withdraw "the report". In context, the exchange is to be understood as referring to both of Professor da Silva Rosa's reports. The two reports were withdrawn and thereafter no further reference was made to Professor da Silva Rosa's evidence in the trial.
The material parts of the trial judge's remarks made in response to the foreshadowed objection are set out below:

[188]

Proof that a transaction created a false or misleading appearance of active trading in securities on the stock market will often be attended by the difficulty of distinguishing between transactions that have that effect because they are designed to have that effect and those that have that effect even though they are carried out for legitimate commercial purposes[82]. However, certain classes of transaction are well recognised as being carried out for the purpose of market manipulation. These include "wash sales" and "matched orders"[83]. "Wash sales" are transactions of sale and purchase in which there is no change in the beneficial ownership of the securities[84]. "Matched orders" are transactions in which a person making an offer to buy or sell securities knows that an associate has made, or will make, a corresponding offer to sell or buy the same number of securities at the same price. Section 998(1) makes it an offence to create a false or misleading appearance of active trading in securities on a stock market. Section 998(5) deems the conduct of "wash sales" in par (a) and "matched orders" in pars (b) and (c) to have the effect of creating that appearance.
The Court of Appeal, correctly, held that the presumption of mens rea is not displaced either expressly or by necessary implication in the offence found in "the first limb" of s 998(1) (creating a false or misleading appearance of active trading on a stock market)[85]. It said that the requisite blameworthy state of mind for this offence is purpose: the prosecution must prove that it was the accused's purpose to create a false or misleading appearance of active trading in the securities[86]. In the case of a prosecution invoking the deeming provision, the Court of Appeal said that it was necessary to prove beyond reasonable doubt that the accused knowingly engaged in the activity described in s 998(5)[87]. The analysis reads the requirement of knowledge into s 998(5). It is, of course, common to read a provision creating a serious criminal offence such as this offence[88] as requiring proof of knowledge or some other blameworthy state of mind[89].
An alternative interpretation of the provision, taking into account the relationship between sub-ss (1), (5) and (6), is that proof of knowledge is not a requirement of the engagement of sub-s (5). Section 998(5) does not create an offence. It is a provision that facilitates proof of the offence created by s 998(1). It might have been thought that the function of s 998(6) in a prosecution of a s 998(1) offence when "constituted by an act referred to in subsection (5)" (emphasis added) was to transfer the onus of negativing the existence of a blameworthy state of mind to the accused. It is not uncommon in the provision of a statutory offence to transfer the onus with respect to the mental element to the accused, requiring that he or she persuade the jury on the balance of probabilities of the absence of "any criminal intention."[90]
However, the Court of Appeal's analysis of the operation of s 998 accorded with the way in which the trial was conducted. At trial the prosecution accepted that it was required to prove three elements of the offence: (i) that the appellant entered into or carried out the transaction charged in each count; (ii) that the transaction did not involve a change in the beneficial ownership of the shares; and (iii) that the appellant knew that fact[91]. Since the analysis, which was favourable to the appellant, was not in issue in this Court it is appropriate, in addressing the grounds of challenge, to assume its correctness[92]. Proof that an accused had knowledge of the facts and circumstances making his or her act criminal will frequently serve to establish that he or she possessed the purpose, or intention, of producing the result that flowed from the doing of the act. The defence provided by s 998(6) recognises that entering into or carrying out a transaction of sale or purchase that is known not to involve a change in beneficial ownership might be for purposes that do not include the proscribed purpose.

[190]

Section 998(6) is a true defence. The legal burden is placed upon the accused to prove that he or she did not have the proscribed purpose in entering into, or carrying out, the transaction. It requires the accused to prove a negative as to his or her state of mind at the time of the transaction. That burden is discharged by proof on the balance of probabilities[93]. The accused must first discharge an evidential burden of demonstrating that there is sufficient evidence to warrant the defence being left for the jury's consideration. Proof of a person's state of mind is a fact which like any other may be proved by circumstantial evidence[94]. Provided that there was evidence upon which the jury acting reasonably could have concluded that the appellant's purposes in carrying out the transaction charged did not include the proscribed purpose, the trial judge was obliged to leave the statutory defence for the jury's consideration.
The determination of the sufficiency of the evidence to raise the defence was to be made after the close of the evidence. At that time it was necessary to identify the evidence upon which it would be open to find that the defence was made out. The determination is analogous to the determination of an application that there is "no case to answer". The capacity of evidence to prove a defence (on the balance of probabilities) or the elements of an offence (beyond reasonable doubt) is a question of law[95]. The determination requires that the evidence is taken at its highest. This recognises that weighing evidence, finding facts and drawing inferences from the facts are matters for the jury to decide. In the case of a defence, the jury may draw any inference fairly open on the evidence favouring its acceptance and reject those parts of the evidence that are against that acceptance.
The appellant's evidence at trial was directed to his primary case - that he did not know that there had not been a change in the beneficial ownership of the shares. His omission to state that he did not have the proscribed purpose in carrying out the transactions did not preclude him from reliance on that alternative case in the event that the jury decided the question of knowledge against him.
The jury was free to approach its deliberations in whatever way it chose[96]. However, as earlier noted, the statutory defence could only arise in the event that s 998(5) was engaged. The appellant was entitled to be acquitted in the event that the prosecution failed to prove to the criminal standard that in carrying out the transaction charged he knew there had been no change in the beneficial ownership of the shares. It was necessary for the trial judge to identify evidence from which it was open to find that the appellant's purposes in carrying out the transaction knowing that it did not involve a change in beneficial ownership did not include the proscribed purpose. Once the issue of knowledge was determined against the appellant, as it had to be before consideration of the statutory defence arose, some parts of the evidence on which the appellant relied as supporting his circumstantial case, that he did not have the proscribed purpose, ceased to have the capacity to do that work.
The point is illustrated by the appellant's reliance on evidence that he had not suspected that Dean Scook wanted to manipulate the market in Intrepid's shares. In the Court of Appeal and in this Court the appellant submitted that it was open to reason from this evidence that it was unlikely that he had a purpose of creating a false or misleading appearance. However, regardless of whether the jury accepted the appellant's evidence on this topic, it was evidence that could not provide a basis for inferring that the appellant did not have the proscribed purpose in carrying out a transaction knowing that it involved no change in beneficial ownership. This explains the Court of Appeal's rejection of the evidence summarised in (c), (e), (f), (g) and (h) as not going to proof of the appellant's purpose. It is convenient to consider the refusal to receive the appellant's expert evidence before addressing the evidence summarised in (b) and (d).

[191]

The Court of Appeal said that the trial judge had been right to exclude the appellant's expert evidence. This was a conclusion that flowed from the Court's acceptance that the appellant had not raised the statutory defence. The Court of Appeal said that Professor da Silva Rosa's evidence had ceased to be relevant when the statutory defence was not raised and it followed that no occasion arose to rebut that evidence. It said that the appellant was not entitled, by expert evidence or otherwise, to "go behind" the deeming provision once that provision was engaged[97].
The appellant complains that the Court of Appeal did not address the nub of his argument, which was that the expert evidence went to proof of his purpose within s 998(6). In his submission, the admission of Professor da Silva Rosa's evidence carried with it implicit recognition that proof that the transactions did, or did not, have the effect of creating a false or misleading appearance of active trading on the ASX was logically relevant to the assessment of whether in carrying out the transactions he had that outcome as one of his purposes.
All that is known of the content of the opinion evidence that the appellant wished to lead is that it went to demonstrating that reasonable explanations could be posited for the changes in the price of Intrepid shares and in the volume of trading in Intrepid other than that the market in Intrepid stock was being manipulated. Proof of those explanations was not capable of affecting the likelihood that the appellant did not have the proscribed purpose in carrying out transactions of sale and purchase on the market knowing that they did not involve any change of beneficial ownership.
At the end of the appellant's evidence, when the prosecutor raised the question of the relevance of expert evidence to the issues in the trial, it was open to the trial judge to review the basis upon which Professor da Silva Rosa's evidence had been received and to exclude it. The prosecutor's submissions invited such a course. So much was acknowledged by his offer to withdraw Professor da Silva Rosa's reports. It is regrettable that no attention was given to Professor da Silva Rosa's oral evidence. It, too, should have been withdrawn and the jury should have been given a direction to put the whole of his evidence out of consideration when dealing with the appellant's case. However, there is no reason to doubt the Court of Appeal's conclusion that the omission did not occasion a miscarriage of justice. Neither party made any reference to Professor da Silva Rosa's evidence in the course of their closing addresses. Senior counsel for the appellant did not ask the trial judge to give any direction concerning the matter.

[192]

The appellant's circumstantial case that he did not have the proscribed purpose in carrying out the transactions knowing that they did not involve a change in beneficial ownership comes down to the evidence summarised in (b) and (d) above. Together they support his submission that he was doing no more than providing an "execution service": the appellant, a man of good character, carried out the transactions on his clients' instructions in his professional capacity as a stockbroker. From this evidence it is said to have been open to conclude that it was probable that the appellant's only purposes were to perform a service for his clients (the evidence summarised in (b) above) in return for discounted brokerage fees (the evidence summarised in (d) above).
In considering the sufficiency of the circumstantial evidence to raise the defence the appellant is right to point to evidence from which it was open to infer that he did not have a financial incentive to engage in manipulation of the market. Whether this was the inference to be drawn from the whole of the evidence was a matter for the jury to determine. In what follows, the assessment of the "execution service" evidence includes taking into account the appellant's lack of financial motive for manipulating the market in Intrepid's shares.
Although the Court of Appeal said that the evidence summarised in (b) above did not address the appellant's subjective purpose, it went on to acknowledge that the inference was open that at all material times the appellant was acting in the ordinary course of his business as a stockbroker in carrying out the transactions[98]. The Court of Appeal is to be understood as having concluded that the "execution service" evidence did not provide a sufficient foundation for leaving the statutory defence for the jury's consideration.
An understanding of the reasons for the Court of Appeal's conclusion requires consideration of proof of purpose within s 998(6) and what it means to create a false or misleading appearance of active trading in securities on a stock market.
In North v Marra Developments Ltd[99] Mason J said of a provision of a New South Wales statute framed in similar terms to s 998(1)[100] that:

[198]

Transactions of sale and purchase in which there is no change of beneficial ownership do not reflect genuine forces of supply and demand in the market, and for this reason, if the true circumstances are not disclosed, are apt to convey a false or misleading appearance of active trading. Section 998(6) recognises that a person may enter into, or carry out, such a transaction for purposes that do not include the purpose of creating that appearance. "Purpose" in s 998(6) is to be understood as connoting the intention of bringing about the result to which the intent is directed[106]. Thus, the appellant carrying out transactions of sale and purchase of shares in Intrepid on the ASX knowing that they were transactions in which there was no change of beneficial ownership of the shares might nonetheless demonstrate that his purposes did not include the proscribed purpose. Evidence identifying a commercial or other purpose for a person carrying out a transaction caught by the deeming provision (being a purpose other than the creation of a false or misleading appearance of active trading) may suffice to raise the defence. There was no evidence of that character here. The "execution service" submission tends to overlook the fact that a person may act with the purpose of bringing about a result without necessarily having a financial or other interest in that outcome.
The appellant, a stockbroker, was aware that trades not involving a change in beneficial ownership are not to be carried out on the ASX. He carried out such transactions. The fact that he did so in return for the payment of fees, on the instructions of valued clients, could not, without more, establish that it was probable that his purposes did not include the outcome that the conduct of transactions on the ASX not involving sales by a genuine seller to a genuine buyer was likely to produce.
The Court of Appeal was right to conclude that the evidence was insufficient to warrant leaving the statutory defence for the jury's consideration.
I would dismiss the appeal.

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Judgment (259 paragraphs)

Parties

Legislation Cited (6)

Cases Cited (50)