Curtis v R

[This headnote is not to be read as part of the judgment] On 2 June 2016, the appellant Oliver Curtis was convicted by a jury of one count of conspiracy to commit insider trading. The Crown case at trial was that Mr Curtis and Mr John Hartman were good friends. Mr Hartman was an equities dealer who worked for Orion Asset Management Limited. Over time, Mr Hartman observed that the stock market trading he carried out as part of his employment would sometimes affect the share price on the Australian Stock Exchange for the stocks he traded. Mr Hartman gave evidence that he engaged in insider trading of his own accord, using information from his employer, Orion. Mr Hartman told Mr Curtis what he had observed, and together they agreed to take advantage of that inside information. The Crown case was that Mr Hartman would, from time to time, use a Blackberry device (purchased for him by Mr Curtis) to "pin" instructions to Mr Curtis about shares he would be trading in on behalf of Orion, where Mr Hartman knew or believed that the trading would affect the price of those shares. Mr Curtis would then "front-run" those shares by buying Contracts for Difference, and selling them before Mr Hartman completed Orion's trading in those shares. The Crown alleged that the men acted on this agreement on 45 separate occasions, allowing them to make a profit from the share price movement caused by Orion's trading of over $1.4 million. Mr Curtis appealed pursuant to s 5 of the Criminal Appeal Act 1912 (NSW) against his conviction on the following ground: "The verdict is unreasonable or cannot be supported by the evidence, because it was not open to the jury to be satisfied that "information about the trading intentions of Orion Asset Management Limited in relation to the purchase or sale of shares in certain companies" was material in the sense that, if such information were generally available, a reasonable person would expect it to have a material effect on the price or value of relevant contracts for difference." The appeal raised the following issues: (1) whether the generality of the agreement alleged required the Crown to prove that all information about the trading intentions of Orion which Mr Hartman would come to possess would be "material" in the sense that it would likely influence persons who commonly trade in CFDs. (2) whether it was necessary, in the context of insider trading, for the prosecution to prove: (a) a subjective state of mind on the part of Mr Hartman and the appellant: namely, that they each knew or believed in the existence of the relevant facts; and (b) an objective matter: namely, that the facts that each man knew, or believed, were facts which would make the conduct the subject of the agreement an offence. (3) whether or not information will have a "material effect" on the price of shares should be the subject of expert evidence Held (Payne JA, Price and Davies JJ agreeing): (1) The agreement as pleaded did not require the Crown to prove that all of the information about Orion's trading intentions would be material. The wording of the indictment specifically alleged an agreement to engage in trading using only information that would have a material effect: [46] - [57] R v LK; R v RK (2010) 241 CLR 177; [2010] HCA 17 at [122]; Ansari v R (2010) 241 CLR 299; [2010] HCA 18 at [57] - [61] applied (2) The jury were given careful directions by the trial judge with the specific acquiescence, if not agreement of the Crown, that the Crown had to establish that the information the subject of the agreement would in fact not be generally available and would in fact, if it were generally available, be likely to influence persons who commonly acquire Division 3 financial products in deciding whether or not to acquire or dispose of contracts for difference in respect of such shares: [55] The jury were fully entitled, given Mr Hartman's successful history of insider trading based upon his knowledge of Orion's trading intentions, to conclude that information the subject of the agreement between Mr Hartman and the appellant was in fact information that, if it were generally available, would (at the very least) be likely to influence persons who commonly acquire Division 3 financial products in deciding whether or not to acquire or dispose of those financial products: [59] (3) This was not a case where expert evidence was necessary to establish materiality: [58] (4) The direction given by the trial judge that the information Mr Hartman would possess must in fact be information which was material in the s 1042D sense was not a necessary element of the charge. All the Crown was required to prove was that Mr Hartman and the appellant entered into an agreement to commit an insider trading offence. It was not an element of the conspiracy offence charged that the information the subject of the agreement be proven in fact to be material in the s 1042D sense: [62] Ansari v R (2010) 241 CLR 299; [2010] HCA 18 at [59] - [60]; R v Mansfield (2011) 251 FLR 286; [2011] WASCA 132 applied

Judgment

1. PAYNE JA: On 2 June 2016, the appellant Oliver Curtis was convicted by a jury of one count of conspiracy to commit insider trading. Mr Curtis appeals pursuant to s 5 of the Criminal Appeal Act 1912 (NSW) against his conviction.

Relevant facts

1. The Crown alleged that the appellant and Mr John Hartman entered into an agreement to exploit inside information that Mr Hartman would come into possession of in the course of his employment as an equities dealer with the funds manager Orion Asset Management Limited ("Orion"). The Crown alleged that the agreement devised by them was implemented. Thereafter, over a period in excess of a year, the pair pursued their agreement from which each derived significant financial gain.
2. As part of his employment, Mr Hartman was responsible for trading stocks on behalf of Orion on a daily basis. He was required to trade certain types and volumes of shares in companies listed on the Australian Stock Exchange ("ASX") in order to achieve desired target portfolio weightings set by his employer. Over time, Mr Hartman observed that the trading he carried out in accordance with the instructions he received from his employer would sometimes affect the share price for the stocks he traded. From mid-2006, Mr Hartman, in his own name, used inside information about the trading intentions of Orion to "front run" the Company's trading for personal profit: AB Vol 3 pages 1205-1208; 1288; see also R v Curtis (No 2) at [10]: AB Vol 1 p43. Mr Hartman told the appellant what he had observed. Together they agreed upon a plan to take advantage of inside information Mr Hartman would possess in respect of Orion's trading intentions so that the appellant could "front-run" the expected trades that Mr Hartman would carry out on behalf of Orion in order to make a profit from that information. It was agreed that the proceeds of the trading would be shared.
3. The Crown alleged that Mr Hartman and the appellant agreed that, from time to time, Mr Hartman would provide the appellant with information about trading instructions he had received in respect of particular stocks that Orion intended to trade. Mr Hartman provided the trading instructions to the appellant via a secure service referred to as "pinning", whereby a message, similar to a text message, could be covertly sent from Mr Hartman to the appellant using a Blackberry device. A Blackberry device was purchased by the appellant for Mr Hartman specifically for this purpose. The appellant then acted upon the trading information he received from Mr Hartman to buy or sell particular leveraged Division 3 financial products that were linked to the share price of ASX companies, known as a Contracts for Difference ("CFDs").
4. The CFDs that the appellant agreed with Mr Hartman to trade were to be in respect of the same stocks that Orion was to trade shares. The appellant carried out the CFD trading through a company named Encounter Investments Pty Ltd ("Encounter Investments"), of which he was the sole director. To that end, the appellant caused Encounter Investments to set up, and later to operate, a CFD trading account with the CFD provider CMC Markets.
5. Mr Hartman and the appellant agreed that in this way they would "front-run" based on Orion's proposed share trading, taking up a CFD position in respect of a particular stock before Orion commenced trading in that stock, in cases where Mr Hartman believed that proposed trading would affect the price for shares in that stock in a manner that was favourable to the CFD position they had taken up. The appellant would close the CFD position before Orion completed its trading in that stock, thereby profiting from the difference between the opening and closing positions because of the share price movement for the stock caused by Orion's trading.
6. The trading instructions agreed to be provided by Mr Hartman to the appellant were to be based upon inside information that Mr Hartman would possess regarding Orion's trading intentions in respect of those same stocks. It was agreed that when Mr Hartman, based on the trading instructions he was given by Orion, knew or believed that the opportunity presented itself for a profit to be made, Mr Hartman would communicate the relevant inside information, Orion's trading intentions, to the appellant.
7. It was the Crown case that the profits were to be split on an approximate 50/50 basis as between the appellant and Mr Hartman. In addition to the evidence of the purchase of the Blackberry and the opening of an account with CMC Markets in the name of Encounter Investments, the evidence of overt acts performed in furtherance of the conspiracy included 45 instances of trading conducted by the appellant. The total net profit realised from that trading was approximately $1.43 million. There was also evidence of the profits being used to pay for the rent of an apartment in Bondi shared by the appellant and Mr Hartman and other items given to Mr Hartman by the appellant including a Ducati motorcycle. A number of payments of various amounts were also made to Mr Hartman from the account of Encounter Investments.
8. Mr Hartman pleaded guilty to a number of substantive offences, including offences relating to transactions conducted in furtherance of the conspiracy. He gave evidence for the Crown. Most of his evidence was unchallenged. The appellant's senior counsel at trial did not challenge evidence that: 1. there was an arrangement between Mr Hartman and the appellant whereby Mr Hartman would from time to time communicate trading instructions he had received from Orion to the appellant in respect of particular shares Orion proposed to trade in, where Mr Hartman believed that giving effect to that proposed trading on behalf of Orion would materially affect the price of the target company's securities; 2. on 23 May 2007, the appellant purchased a Blackberry mobile telephone for Mr Hartman's use in Mr Hartman's name; 3. on 24 May 2007, the appellant opened up an account with CMC Markets in the name of Encounter Investments with a deposit of $80,000; 4. on 45 separate occasions, commencing on 25 May 2007, the appellant opened a CFD position relating to particular shares on the same day that Orion bought or sold a large volume of the same shares; 5. on most of those 45 occasions, the appellant opened his position shortly before Orion's trading began and closed it before Orion finished its trading; 6. on at least some of those 45 occasions, the appellant acted on trading instructions sent to him by Mr Hartman via a Blackberry PIN message ("pinning"); 7. the information concerning Orion's trading intentions (which informed Mr Hartman's instructions to the appellant) was not generally available; 8. in some instances Mr Hartman aggressively traded on behalf of Orion in the shares in respect of which the appellant had taken a CFD position in order to affect the price of the shares so as to create the opportunity to make profit; 9. profits were realised by the appellant from the trading in CFDs; 10. the appellant purchased a Ducati motorcycle for Mr Hartman; 11. the appellant provided various sums of money to Mr Hartman ($20,000 in October 2007 and $50,000 in January 2008) out of the account conducted by Encounter Investments; 12. the appellant paid the $156,000 advance rent for the apartment in Bondi he occupied together with Mr Hartman (along with the appellant's then partner) out of the account conducted by Encounter Investments.

The statutory prohibition upon conspiracy to engage in insider trading

1. Insider trading is an offence under ss 1043A and 1311 of the Corporations Act 2001 (Cth) which provide: 1043A Prohibited conduct by person in possession of inside information (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. (2) 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; and (c) relevant Division 3 financial products are able to be traded on a financial market operated in this jurisdiction; the insider must not, directly or indirectly, communicate the information, or cause the information to be communicated, to another person if the insider knows, or ought reasonably to know, that the other person would or would be likely to: (d) 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 (e) 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. (3) For the purposes of the application of the Criminal Code in relation to an offence based on subsection (1) or (2): (a) paragraph (1)(a) is a physical element, the fault element for which is as specified in paragraph (1)(b); and (b) paragraph (2)(a) is a physical element, the fault element for which is as specified in paragraph (2)(b). 1311(1) General penalty provisions (1) A person who: (a) does an act or thing that the person is forbidden to do by or under a provision of this Act; or (b) does not do an act or thing that the person is required or directed to do by or under a provision of this Act; or (c) otherwise contravenes a provision of this Act; is guilty of an offence by virtue of this subsection, unless that or another provision of this Act provides that the person: (d) is guilty of an offence; or (e) is not guilty of an offence.
2. "Inside information" is defined in s 1042A: inside information means information in relation to which the following 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.
3. "Material effect" is defined in s 1042D: 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.
4. At the time of the relevant conduct in this case, the penalty prescribed for breach of s 1043A by Schedule 3 of the Corporations Act was 5 years imprisonment or a fine of $220,000 or both. The penalty has since been increased to 10 years imprisonment or a fine of either $810,000 or, where possible, an amount calculated on the basis of the benefits obtained by virtue of the offence, or both.
5. Conspiracy to commit a crime is an offence under s 11.5 of the Criminal Code Act 1995 (Cth), which provides: (1) A person who conspires with another person to commit an offence punishable by imprisonment for more than 12 months, or by a fine of 200 penalty units or more, commits the offence of conspiracy to commit that offence and is punishable as if the offence to which the conspiracy relates had been committed. (2) For the person to be guilty: (a) the person must have entered into an agreement with one or more other persons; and (b) the person and at least one other party to the agreement must have intended that an offence would be committed pursuant to the agreement; and (c) the person or at least one other party to the agreement must have committed an overt act pursuant to the agreement. (2A) Subsection (2) has effect subject to subsection (7A). (3) A person may be found guilty of conspiracy to commit an offence even if: (a) committing the offence is impossible; or (b) the only other party to the agreement is a body corporate; or (c) each other party to the agreement is at least one of the following: (i) a person who is not criminally responsible; (ii) a person for whose benefit or protection the offence exists; or (d) subject to paragraph (4)(a), all other parties to the agreement have been acquitted of the conspiracy. (4) A person cannot be found guilty of conspiracy to commit an offence if: (a) all other parties to the agreement have been acquitted of the conspiracy and a finding of guilt would be inconsistent with their acquittal; or (b) he or she is a person for whose benefit or protection the offence exists. (5) A person cannot be found guilty of conspiracy to commit an offence if, before the commission of an overt act pursuant to the agreement, the person: (a) withdrew from the agreement; and (b) took all reasonable steps to prevent the commission of the offence. (6) A court may dismiss a charge of conspiracy if it thinks that the interests of justice require it to do so. (7) Any defences, procedures, limitations or qualifying provisions that apply to an offence apply also to the offence of conspiracy to commit that offence. (7A) Any special liability provisions that apply to an offence apply also to the offence of conspiracy to commit that offence. (8) Proceedings for an offence of conspiracy must not be commenced without the consent of the Director of Public Prosecutions. However, a person may be arrested for, charged with, or remanded in custody or on bail in connection with, an offence of conspiracy before the necessary consent has been given.

The indictment as particularised

1. The indictment in relation to the appellant provided that: Oliver Peter Curtis…Between about 1 May 2007 and about 30 June 2008 at Sydney in the State of New South Wales, did conspire with John Joseph Hartman to commit an offence, being the contravention of sub-sections 1311(1) and 1043A(1)(d) of the Corporations Act 2001 (Cth).
2. The particulars of the indictment provided: The agreement was that John Joseph Hartman would, from time to time, procure Oliver Peter Curtis to acquire or dispose of relevant Division 3 Financial Products, namely, Contracts for Difference, when John Joseph Hartman possessed inside information about the trading intentions of Orion Asset Management Limited in relation to the purchase or sale of shares in certain companies and when John Joseph Hartman knew that such information was not generally available and if it were generally available, a reasonable person would expect it to have a material effect on the price or value of those Contracts for Difference.

The trial judge's directions to the jury

1. The jury was provided with a document (MFI 25) setting out the elements of the offence: R v Curtis Conspiracy to commit an offence in relation to the use of inside information Element Before you can find the accused guilty, the Crown must prove beyond reasonable doubt the following elements: 1. The accused agreed with John Hartman to commit an offence in relation to the use of inside information contrary to s 1043A(1)(d) and s 1311(1) of the Corporations Act. 2. The accused intended (or meant) to enter into the agreement. The Crown must establish that, in entering into the agreement, the accused and John Hartman each intended that an offence in relation to the use of inside information contrary to s 1043A(1)(d) and s 1311(1) of the Corporations Act would be committed pursuant to the agreement. More specifically, for the accused to be guilty, the Crown must establish that, at the time of entering into the agreement the accused and John Hartman each knew or believed that particular facts would exist or acts would be performed pursuant to the agreement; AND the Crown must also establish that such facts or acts would in fact make the conduct that was the subject of the agreement an offence in relation to the use of inside information contrary to s 1043A(1)(d) and s 1311(1) of the Corporations Act. To that end, the Crown must establish the accused and John Hartman each knew or believed, at the time of entering into the agreement, that the following facts and acts would exist or be performed: (a) John Hartman would, from time to time, possess information about the trading intentions of Orion in relation to the acquisition or disposal of shares ("the information"); and (b) the information that John Hartman would possess would not be generally available; and (c) the information John Hartman would possess would be information that, if it were generally available, 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 contracts for difference in respect of such shares; and (d) John Hartman would when in possession of such information, procure the accused to acquire or dispose of CFDs in respect of the shares Orion intended to acquire or dispose of by inciting, inducing or encouraging the accused to acquire or dispose of such CFDs. The Crown must also establish that the information the accused and John Hartman knew or believed John Hartman would possess would: (a) in fact not be generally available; (b) in fact be information that, if it were generally available, 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 contracts for difference in respect of such shares. The Crown must also establish that either the accused or John Hartman committed an overt act pursuant to the agreement.
2. No complaint was made by the appellant about the content of this document or otherwise about the summing up to the jury.

The ground of appeal

1. The appellant relied upon the following sole ground of appeal: The verdict is unreasonable or cannot be supported by the evidence, because it was not open to the jury to be satisfied that "information about the trading intentions of Orion Asset Management Limited in relation to the purchase or sale of shares in certain companies" was material in the sense that, if such information were generally available, a reasonable person would expect it to have a material effect on the price or value of relevant contracts for difference.

Appellant's submissions

1. The appellant's point was essentially a simple one based on the indictment as particularised. It was submitted that the indictment as particularised was incapable of constituting an offence because the indictment identified as the subject matter of the conspiracy occasions: …when John Joseph Hartman possessed inside information about the trading intentions of Orion Asset Management Limited in relation to the purchase or sale of shares in certain companies…
2. The appellant submitted that the generality of the agreement alleged required the Crown to prove that all information about the trading intentions of Orion which Mr Hartman would come to possess would be "material" in the sense that it would likely influence persons who commonly trade in CFDs. This is because: The Crown had to select a generic description of the information said to be material, precisely because the information that Mr Hartman may or would possess did not exist at the time of the agreement. However, in respect of trading intentions, it is the particular details of the specific information that will determine whether or not it is material. This argument does not deny the possibility of a conspiracy to commit insider procuring being properly charged. It merely requires the information to be specified in a way that discloses materiality. Some categories of future information will be capable of being proved material. A charge that turns on the wide class of "the trading intentions of Orion" does not have that character.
3. The appellant submitted that to prove that the conspirators had "knowledge of, or belief in, the existence of the facts that make the conduct that is the subject of the agreement an offence", it is necessary, in the context of insider trading, for the prosecution to prove: a. a subjective state of mind on the part of Mr Hartman and the appellant: namely, that they each knew or believed in the existence of the relevant facts; and b. an objective matter: namely, that the facts that each man knew, or believed, were facts which would make the conduct the subject of the agreement an offence.
4. It was submitted that the decision of the High Court in R v LK; R v RK (2010) 241 CLR 177; [2010] HCA 17 mandated a conclusion that the appeal should be allowed. The appellant submitted that the offence of conspiracy created by s 11.5(1) has a "single physical element of conduct: conspiring with another person to commit a non-trivial offence": R v LK at [141]. The (default) fault element for this physical element is intention: s 5.6(1) of the Criminal Code Act; R v LK at [141]. The matters specified in sub-sections (a) and (b) of s 11.5(2) are "epexegetical of what it is to 'conspire' with another person to commit an offence within the meaning of s 11.5(1)", and do not separately identify elements of the offence: R v LK at [133].
5. It was submitted that to prove the relevant fault element (i.e., that Mr Hartman and the appellant intended to enter into an agreement to commit the offence the subject of the conspiracy), the prosecution had to prove that both men had "knowledge of, or belief in, the existence of the facts that make the conduct that is the subject of the agreement an offence": R v LK at [177]. That, it was submitted, required the Crown to prove that the inside information the subject of the agreement would rather than may have the quality of materiality.
6. As Mr Walker SC, Senior Counsel for the appellant submitted: My point is that it's the objective quality of the information, as the Crown proved to be that which the putative conspirators knew or believed one would have and would pass on or act on, it's the objective quality of that as being material that is requisite to the offence of conspiracy in order that performing the agreement would, rather than may, be the commission of insider trading.
7. It was submitted that the question of materiality is accordingly not one of mere impression, and requires a "targeted and precise, reasoned, analysis". The appellant submitted that because the required, objective, analysis "must satisfy a test of probable and not merely possible effect on the requisite class of investor" [Lyon and du Plessis, The Law of Insider Trading in Australia (Sydney: The Federation Press, 2005) at 29], there was a risk that, without expert evidence, "the jury might be tempted either to speculate or possibly to be influenced by the experience of one or more among their number … [W]ithout the assistance of opinion evidence, the jury would [be] unlikely to form a proper judgment on the evidence": R v Wright [1980] VR 593 at 607-8 (see also at 597-8). It was submitted that whether expert or not, the evidence relied upon to demonstrate materiality of the evidence the subject of the agreement must be clear and cogent.
8. Regarding the evidence about the materiality of the information Mr Hartman would possess the subject of the agreement the appellant made the following submissions.
9. First, while Orion managed funds totalling some five to seven billion dollars, its trading on any given day in any particular stock was nowhere near that amount. Indeed, a "busy day" (one where there was a "big change in portfolio weights") could involve trades in the stocks of 60 different companies with a combined value of one hundred million dollars.
10. Secondly, Orion did not only trade on "busy days", however, and bought or sold shares nearly every day upon which the ASX was open.
11. Thirdly, the shares in which Orion traded ranged from "ASX 100" companies, to companies with a small market capitalisation, and from liquid to relatively illiquid companies.
12. Fourthly, only "some of" Orion's trades were "large trades". In relation to such trades: a. the effect of a trade varied from stock to stock; b. a large purchase order "could have" the effect of increasing the price; c. a large sell order could "potentially" cause the price to decrease; d. any effect of a trade varied with the liquidity of the stock in question; the more liquid the stock the less impact a large order would have; and e. the effect of a trade depended on how "aggressively" it was undertaken.
13. Fifthly, there was no attempt to prove that Orion's trades other than "large trades" would have any effect whatsoever.
14. Sixthly, because only some of Orion's trades would have an effect on the market, in order for Mr Hartman to decide what transactions he would instruct the appellant to execute, he would need to "make the judgment of whether there was an opportunity" in relation to a particular trade to be undertaken by Orion by assessing "what impact Orion's trading was likely to have on that stock and share".
15. Seventhly, the range of circumstances relevant to whether particular information about Orion's trading intentions would have an effect included: a. the particular stock in question; b. the liquidity of that stock; c. the size of Orion's proposed trade in the stock; d. the nature of trading in that stock in the market on the day in question; and e. how aggressively the trade was undertaken.
16. It was submitted that the evidence thus demonstrated that some information about Orion's trading intentions would be material. That information was information about proposed large transactions to be executed in an aggressive manner or in illiquid stocks. It was submitted that other information about Orion's trading intentions would not be material. That information was information about small transactions or even large transactions in highly liquid stocks.
17. Thus, it was submitted that whether an offence would be committed pursuant to the agreement alleged by the prosecution necessarily depended on the precise nature of the information about Orion's trading intentions possessed by Mr Hartman at the time he procured the appellant to trade. It was submitted that the information the subject of the agreement described in the indictment could be "inside information", but equally it may not be.
18. It was submitted that there was thus no evidence upon which the jury could be satisfied beyond reasonable doubt that the appellant and Mr Hartman intended to enter into an agreement to commit the offence of insider procuring. Proof that those men knew or believed that Mr Hartman would, in the future, possess information about Orion's trading intentions, and that, when in possession of that information, would procure the appellant to trade in CFDs, would not prove that they intended an offence be committed pursuant to their agreement.

Respondent's submissions

1. The Crown submitted that proof of the fault element of the offence of conspiracy does not require proof that the subject information was, or would be, capable of objectively satisfying the definition of inside information. The penultimate direction given to the jury was superfluous. It was not supported or required by the decisions of the High Court in R v LK and Ansari v R (2010) 241 CLR 299; [2010] HCA 18.
2. The Crown submitted that, in any event, the direction given by the trial judge recorded at [17] above did not bear the interpretation placed on it by the appellant. That direction did not require the Crown to prove that all of the information about the trading intentions of Orion which Mr Hartman expected to possess was necessarily material. It was submitted that the direction given was based upon what the Crown submitted was the essence of the agreement alleged, namely, that the information Mr Hartman would give to the appellant to permit trading in CFDs was information from Orion he knew or believed to be not generally available and material.
3. The Crown submitted that it did not have to prove that all information about Orion's trading intentions Mr Hartman expected to receive would be material and it did not set out to do so. The appellant's submission to the contrary attempted to re-characterise the Crown case. The Crown alleged an agreement in respect of the use of a particular type of information that Mr Hartman and the appellant believed would come into the possession of Mr Hartman in the future. The wording of the charge and particulars in the indictment identified that the information would be information that Mr Hartman would possess when he would "procure" the appellant to acquire or dispose of relevant Division 3 financial products. The information would be information about the trading intentions of Orion in relation to the purchase or sale of shares in "certain companies". The information would be information that Mr Hartman knew or believed would be both "not generally available" and "material".
4. The Crown submitted that LK should be understood as addressing a case concerning a substantive offence involving the element of recklessness. In LK, the prosecution case at its highest was that the respondents intentionally entered into an agreement to deal with money whether or not it was proceeds of crime. That is not the foundation of the present case; Mr Hartman and the appellant entered into an agreement to commit the offence of insider procuring knowing or believing the information Mr Hartman would possess would be not generally available and would be material.
5. The Crown submitted that a person can be guilty of conspiring to commit the offence of insider procuring where, in relation to the information he or she knew or believed the procurer possessed, he or she mistakenly believed the information was material. The Crown submitted that the appellant did not challenge the conclusion that it was open to the jury to be satisfied that: 1. Mr Hartman and the appellant entered the agreement alleged; 2. at the time of entering into the agreement they each knew or believed that Mr Hartman would, from time to time, possess information about the trading intentions of Orion, which would not be generally available and, if it were generally available, would be likely to influence relevant persons in deciding whether or not to acquire or dispose of relevant CFDs, and would, when in possession of such information, procure the appellant to acquire or dispose of relevant CFDs in the manner alleged; and 3. pursuant to that agreement Mr Hartman and the appellant committed an overt act.
6. The Crown submitted that this was sufficient to prove the offence.

Consideration

1. The principles relevant to an unreasonable verdict have recently been re-iterated by the High Court in The Queen v Baden-Clay [2016] HCA 35 referring to M v The Queen (1994) 181 CLR 487 and MFA v The Queen (2002) 213 CLR 606. The question for the appeal court "must always be whether the [appeal] court thinks that upon the whole of the evidence it was open to the jury to be satisfied beyond reasonable doubt that the accused was guilty": Baden-Clay at [66].
2. A consideration of the whole of the evidence in the present case reveals the following pertinent matters: 1. Mr Hartman had access to information about the trading intentions of Orion which was not publicly available; 2. Orion managed funds totalling some five to seven billion dollars. On any given day trading in any particular stock was nowhere near that amount. Orion bought or sold shares nearly every day the ASX was open; 3. the shares in which Orion traded ranged from "ASX 100" companies, to companies with a small market capitalisation, and from liquid to relatively illiquid companies. The more liquid the stock the less impact a large order would have; 4. only some of Orion's trades were large trades. In relation to such trades a large purchase order could have the effect of increasing the price and a large sell order could cause the price to decrease. The effect of a trade depended on how aggressively it was undertaken; 5. because only some of Orion's trades would have an effect on the market, in order for Mr Hartman to decide what transactions he would instruct the appellant to execute, he would need to make the judgment of whether there was an opportunity in relation to a particular trade to be undertaken by Orion by assessing what impact Orion's trading was likely to have on that stock and share; 6. prior to making the agreement with the appellant, Mr Hartman was in a position to judge when information he possessed about Orion's trading intentions was likely to have a material impact on the price of particular securities. Prior to making the agreement with the appellant, Mr Hartman had selected certain information about Orion's trading intentions and had used that information himself to engage in insider trading; that is, prior to making the agreement with the appellant, Mr Hartman had successfully used his inside information about Orion's trading intentions on selected occasions when he knew or believed that giving effect to those intentions would have a material effect on the price of the securities in question; 7. Mr Hartman believed that the appellant had access to larger financial resources than those otherwise available to him. By agreeing with the appellant as he did, Mr Hartman believed that larger profits would accrue than if he simply traded on his own account; 8. after making the agreement the subject of the indictment, Mr Hartman provided information to the appellant on 45 occasions between 25 May 2007 and 11 June 2008 about Orion's trading intentions which was not publicly available. Forty of the resulting trades enabled a profit to be made by the appellant from acquiring or disposing of relevant Division 3 Financial Products ahead of those trades by Orion using the Encounter Investments account, while five of those trades resulted in a loss to the Encounter Investments account. At the conclusion of all 45 trades, the Encounter Investments account recorded a total profit of $1,432,228.85; 9. the appellant used the profits of the trading to pay for the rent of an apartment in Bondi shared by the appellant and Mr Hartman and other items including a Ducati motorcycle for Mr Hartman. A number of payments of various amounts were also made to Mr Hartman from the account of Encounter Investments.
3. It should of course be accepted, as the appellant submitted, that at the time of making the agreement, Mr Hartman and the appellant knew that not all of the information about Orion's trading intentions that Mr Hartman would come into possession of would be material. Equally, it is clear that Mr Hartman and the appellant knew or believed that some of the information that would become available to Mr Hartman about Orion's trading intentions would be material, in that a reasonable person would consider it likely that the information, if publicly available, would affect the price of Division 3 financial products. Mr Hartman had previously used some information in his possession about the trading intentions of Orion to successfully engage in "front-running" in his own name.
4. In my view, the agreement alleged in the indictment, as particularised, was to engage in trading using only information of the latter description, being information available to Mr Hartman about Orion's trading intentions which he knew or believed would be material, in that a reasonable person would consider it likely that the information, if publicly available, would affect the price of Division 3 financial products. The wording of the indictment (as particularised) specifically identified the information the subject of the agreement as having that character.
5. The correct interpretation of the High Court's decision in R v LK; R v RK and the decision in Ansari delivered by the Court on the same day is critical in this case. In R v LK; R v RK the plurality stated at [122]: The prosecution case at its highest was that the respondents intentionally entered an agreement to deal with money whether or not it was proceeds of crime. The matters upon which the appellant relies as providing the factual basis for the inference of intent, namely the respondents' awareness that the money may be proceeds of crime and their agreement to deal with it even if it was, expose the flaw in the analysis. At the time the agreement was made the money may, or may not, have been (or have become) proceeds of crime. The agreement, if carried out in accordance with LK's and RK's intention, may not have involved a dealing with money that is proceeds of crime. It follows that, on the evidence given at the trial, it was not open to find that either respondent intentionally entered an agreement to commit the offence that is said to have been the object of the conspiracy.
6. In R v LK; R v RK, the prosecution case at its highest was that the respondents intentionally entered into an agreement to deal with money, whether or not that money was the proceeds of crime. That is not this case. The appellant and Mr Hartman entered into an agreement to commit the offence of insider procuring knowing or believing that information Mr Hartman would (in the future) possess would not be generally available and would be material. The whole purpose of the agreement was to exploit inside information about intended trades by Orion. It is only the knowledge or belief that the information was "material", with the consequence that the trades, when carried out, would affect the relevant share price that provided the reason for Mr Hartman and the appellant to expect that a profit could be made from acquiring or disposing of relevant Division 3 Financial Products ahead those trades.
7. In Ansari v R, the plurality said, at [57] - [61]: The premise for the appellants' argument is that proof that a person intends to commit an offence requires proof that the person intends that each physical element of the offence will come into existence and that the fault element specified for that physical element will also come into existence at that time. It is a proposition which, if correct, would lead to directions of considerable complexity in summing-up to a jury with respect to a conspiracy to commit an offence of recklessness. However, it would not follow from this that the charge is "bad in law". The proposition is, in any event, incorrect. Section 11.5(1) makes it an offence to conspire with another person to commit an offence. In the appellants' submission, the emphasised words are to be understood by reference to s 3.1(1), which provides that "[a]n offence consists of physical elements and fault elements". The legislative intent, it is said, is to require proof of each of the constituent elements of the subsidiary offence in order to establish guilt of the conspiracy. As explained in LK, the words "conspires" and "conspiracy" as used in s 11.5 are to be understood by reference to the common law subject to express modification under s 11.5. One such modification is that the offence is confined to agreements to commit an offence (being a non-trivial offence). Liability for conspiracy under the common law covers a wider field. This is the legislative intent to be discerned in the use of the words "to commit an offence" in s 11.5(1). Proof of intention to commit an offence requires proof of the accused's knowledge of, or belief in, the facts that make the proposed conduct an offence. Fault elements are specified with respect to physical elements of an offence. They are defined in Div 5 of Pt 2.2 in a descending order of culpability: intention, knowledge, recklessness and negligence. The most blameworthy fault element is intention and the least blameworthy is negligence. To intend that a fact, circumstance or state of affairs will exist includes a lesser mental state with respect to the existence of that fact, circumstance or state of affairs. A person may be criminally responsible for an offence even if he or she is mistaken about, or ignorant of, the existence or content of an Act that directly or indirectly creates the offence. This rule of criminal responsibility provides a further reason for rejecting the contention that s 11.5 is to be interpreted as requiring proof that an accused conspirator intended that a specified fault element (being a fault element of lesser culpability than the fault element of intention) accompany a particular physical element of an offence as distinct from proof that the accused intended that an act or acts be performed which, if carried out in accordance with the agreement, would amount to the commission of an offence. The appellants' submission, that under s 11.5 a person does not intend that an offence will be committed unless he or she intends that any fault element specified for that offence will exist at the time the physical element for the fault element comes into existence, is unsustainable.(Citations omitted)
8. In the present case it is clear that the single physical element of the offence is that the appellant and Mr Hartman entered into the agreement alleged: LK and RK at [131]; Ansari at [40]. The fault element required to prove the charge was intention. It was also necessary to prove that pursuant to that agreement the appellant or Mr Hartman committed one or more overt acts. It is common ground that this occurred.
9. The direction given by the trial judge in MFI 25 (about which no complaint was made) does not suggest that the Crown was required to prove that all information about the trading intentions of Orion Mr Hartman possessed was necessarily material. The direction given by the trial judge was that the nature and character of the information the subject of the agreement would be as Mr Hartman knew or believed it would be; that is, not generally available and material. Her Honour made that clear in terms. Although set out in full above, the salient parts of that direction bear repeating: To that end, the Crown must establish the accused and John Hartman each knew or believed, at the time of entering into the agreement, that the following facts and acts would exist or be performed: (a) John Hartman would, from time to time, possess information about the trading intentions of Orion in relation to the acquisition or disposal of shares ("the information"); and (b) the information that John Hartman would possess would not be generally available; and (c) the information John Hartman would possess would be information that, if it were generally available, 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 contracts for difference in respect of such shares; and (d) John Hartman would when in possession of such information, procure the accused to acquire or dispose of CFDs in respect of the shares Orion intended to acquire or dispose of by inciting, inducing or encouraging the accused to acquire or dispose of such CFDs. (italics added)
10. Her Honour's direction drew specific attention to the features of the information the subject of the indictment as particularised. The knowledge or belief of the appellant and Mr Hartman about the materiality of the information the subject of the agreement was specifically identified.
11. The jury was correctly instructed that Mr Hartman and the appellant agreed that when Mr Hartman came into possession of information about the trading intentions of Orion, knowing or believing that information to be not generally available and material, Mr Hartman would provide that information to the appellant, who would trade in certain CFDs with a view to making a profit. The Crown did not have to prove that all information Mr Hartman possessed about Orion's trading intentions would be material and Her Honour did not instruct the jury that they must so find.
12. Regarding the second aspect of the appellant's complaint which refers to MFI 25, I accept that the following direction was given with the specific acquiescence, if not agreement, of the Crown at the trial: The Crown must also establish that the information the accused and John Hartman knew or believed John Hartman would possess would: (a) in fact not be generally available; (b) in fact be information that, if it were generally available, 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 contracts for difference in respect of such shares.
13. I will return below to the question of whether this direction accurately reflected the elements of the offence the Crown was required to prove. I will first address the question posed by this appeal on the hypothesis that this part of the trial judge's directions correctly reflected the elements of the offence.
14. In my view the jury were entitled to be satisfied beyond reasonable doubt on all the evidence in this case that the information identified in the indictment (as particularised) which Mr Hartman would possess and pass on to the appellant would in fact be "material" in the sense required by s 1042D of the Corporations Act.
15. The jury were entitled to be satisfied that the Crown had established beyond reasonable doubt that prior to making the agreement with the appellant, Mr Hartman had selected pertinent information from that available to him about the trading intentions of Orion and used that information to conduct successful trades in his own name. Those transactions were a breach of the insider trading provisions. No attack was made by Senior Counsel for the appellant at the trial upon that evidence. Indeed, the defence theory of the case presented to the jury below rested on Mr Hartman being a successful insider trader on his own account prior to the appellant becoming at all involved in his activities: AB Vol 3 page 1288. This was not a case where expert evidence was necessary to establish materiality.
16. The jury were fully entitled, given Mr Hartman's successful history of insider trading based upon his knowledge of Orion's trading intentions, to conclude that information the subject of the agreement between Mr Hartman and the appellant was in fact information that, if it were generally available, would (at the very least) be likely to influence persons who commonly acquire Division 3 financial products in deciding whether or not to acquire or dispose of those financial products.
17. This conclusion, together with my conclusion set out above about the correct characterisation of the "information" the subject of the conspiracy, is a sufficient basis to conclude that the appeal should be dismissed. Upon the whole of the evidence, and based on directions to the jury that the appellant does not challenge, it was open to the jury to be satisfied beyond reasonable doubt that the accused was guilty.
18. Returning then to the question of whether the part of the trial judge's direction extracted at [55] above was a necessary element of the offence, in my view it was not. In saying that I readily acknowledge that her Honour was led into giving the direction with the specific acquiescence, if not agreement, of the Crown.
19. The direction given by the trial judge that the information Mr Hartman would possess must in fact be information which was material in the s 1042D sense was not a necessary element of the charge. All the Crown was required to prove was that Mr Hartman and the appellant entered into an agreement to commit an insider trading offence. It was not an element of the conspiracy offence charged that the information the subject of the agreement be proven in fact to be material in the s 1042D sense. This conclusion is consistent with what the High Court said in Ansari at [59]-[60] quoted at [50] above.
20. This conclusion is also consistent with s 11.5(3) of the Criminal Code which provides that "a person may be found guilty of conspiracy to commit an offence even if … committing the offence is impossible". That is, even if (which is not this case) the information the subject of the conspiracy had been leaked to the media by another officer of Orion without the appellant's knowledge on each occasion prior to the appellant commencing trading - and thus the information was no longer "in fact" material - the appellant would still be guilty of conspiracy.
21. Further, this conclusion is also consistent with the decision of the West Australian Court of Appeal in R v Mansfield (2011) 251 FLR 286; [2011] WASCA 132, where the court rejected the argument which underpins the appellant's approach in this case. In Mansfield, the two accused (Mansfield and Kizon) were charged with committing numerous insider trading offences, including offences of conspiring to commit insider procuring. The information concerned two particular companies. The information the conspirators received was not actually true. At the conclusion of the Crown case each of the accused made a no case to answer application. The trial judge upheld the applications. He concluded that the concept of "information" the subject of the charge necessarily connoted information which was true. The Crown had not established the truth of the information. The Crown appealed against the orders for directed verdicts of acquittal. A central issue on appeal was therefore whether "information" had to be true, in the sense of factually correct, to make out the offence of conspiracy to procure insider trading. The Court of Appeal upheld the Crown's appeal, concluding, inter alia, that "information" could include statements that are false, unreasonable or lies.
22. By Notice of Contention, Mansfield and Kizon contended that the "known and proven source of the information" was essential to proof of the conspiracy counts because the matter went directly to the "objective test as to whether the information was price-sensitive". In rejecting that argument Buss JA (Murray J agreeing) stated: The submissions on behalf of Mr Mansfield and Mr Kizon that the 'known and proven source of the information' was essential to proof of the conspiracy counts does not accurately reflect the state of mind required of each accused. The Crown was only required to prove, relevantly, that each accused had knowledge of, or belief in, and possession of the particulars provided in relation to each conspiracy count and that each conspirator believed that the alleged inside information was not generally available and that, if it were generally available, a reasonable person would expect it to have a material effect on the price or value of the relevant securities. See LK [117]; Ansari [59]" (emphasis added)
23. An appeal by Mansfield and Kizon to the High Court was dismissed: (2012) 247 CLR 86; [2012] HCA 49. The present question (the notice of contention point) was not the subject of the appeal.
24. In my view, Mansfield reflects a correct application of LK and Ansari to the offence of conspiracy to commit insider trading. This Court should not depart from decisions of other intermediate appellate courts in another jurisdiction on the interpretation of Commonwealth legislation unless they are convinced that the interpretation is plainly wrong: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at 152 [135]. In the present case, far from being persuaded that Mansfield is plainly wrong, I respectfully agree with its conclusion.
25. The Crown here was only required to prove, relevantly, that at the time of making the agreement the appellant and Mr Hartman each believed that the Orion trading information the subject of the conspiracy would not be generally available and that, if it were generally available, a reasonable person would expect it to have a material effect on the price or value of the relevant securities.
26. Accordingly, the trial judge's direction that the Crown must also establish that the information the accused and Mr Hartman knew or believed Mr Hartman would possess would "in fact" be material in the s 1042D sense was incorrect. To establish this offence, it was sufficient for the Crown to establish that Mr Hartman and the appellant entered an agreement to commit an insider trading offence. The jury was entitled to be satisfied on all the evidence that when Mr Hartman and the appellant agreed they intended that Mr Hartman would, at some future time, possess information that he knew or believed would be information that would not be generally available and, if it were to be generally available, a reasonable person would expect it to have a material effect on the price or value of CFDs in respect of the share price for relevant ASX listed companies. It was information of that character that the appellant and Mr Hartman agreed would be provided to the appellant to facilitate profitable trades in advance of Orion's trading.
27. Therefore, on the correctly identified elements of the offence, upon the whole of the evidence, it was also open to the jury to be satisfied beyond reasonable doubt that the accused was guilty.

Conclusion and orders

1. It was open to the jury to be satisfied beyond reasonable doubt of the physical element, the fault element and the relevant overt act(s) alleged in the indictment as particularised. The verdict was not unreasonable.
2. The appeal should be dismissed.
3. PRICE J: I agree with Payne JA.
4. DAVIES J: I agree with Payne JA.

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