R v Chan [2010] VSC 312

R v Chan [2010] VSC 312 - VSC 2010 case summary — Zoe

[54]

Bill Express Limited (ACN 090 059 564) ("Bill Express") was originally incorporated on 21 October 1999, as Dial Time Pty Limited. On 23 July 2004, the Company changed its name to Bill Express Pty Ltd.[15]
On 19 October 2004 the fully paid ordinary shares of Bill Express were admitted to the Official List of the Australian Securities Exchange ("ASX") under the unique stock code "BXP". Official quotation of BXP shares on the ASX commenced on 21 October 2004.[16]
Bill Express was a subsidiary of OnQ Group Limited ("OnQ"). During the relevant periods a principal asset of OnQ was its shareholding in Bill Express.[17]
During the relevant periods, the directors of Bill Express included, but were not limited to, Ian Douglas Christiansen ("Ian Christiansen") and Harold Edward Christiansen ("Hal Christiansen").[18] Ian Christiansen was also the Chief Executive Officer of Bill Express.[19]
During the relevant periods, Ian Christiansen and Hal Christiansen were also directors of OnQ.[20] Hal Christiansen was also the Chief Executive Officer and Managing Director of OnQ.[21]
Bill Express operated both the 'DIALTIME' prepayment system for mobile telephone recharges, long distance calling cards, and internet access, and the 'BILL EXPRESS' bill payment system.[22] The Bill Express group operated an electronic network of approximately 13,000 terminals throughout Australia.[23]
The revenue of Bill Express for the 2006/2007 financial year was in excess of $1 billion.[24]
During the relevant periods Bill Express had an arrangement in place such that Technology Business Systems Pty Ltd ("TBS") and related companies provided certain services to it. These services included the provision of administration, payroll, call centre and banking services to Bill Express[25].
The services provided by TBS to Bill Express during the relevant period included the management of a 'treasury' bank account ("TBS treasury account").
During the relevant periods, the sole director of TBS was Sandro Di Donato. Ian Christiansen and Hal Christiansen had previously been directors of TBS until 2003 when the company was transferred to Sandro Di Donato.[26]
The Chief Financial Officer of OnQ was Peter Couper ("Couper").
During the relevant periods Couper would also direct payments from the TBS treasury account[27].

[59]

Order Giver (name of the natural person who provided the instructions); and 2. Any other instructions provided by client.
All orders created in IOS are allocated a unique order number.
IOS enables the creation of 'Advisor Working' orders. An Advisor Working order is an order, typically of a large volume, where the entire volume of the order is not necessarily to be entered on the ASX at once. Rather the client advisor is able to determine the manner in which the order is to be executed. For example, a client advisor may create an Advisor Working order for a total volume 1,000,000 shares to be purchased but instruct that it be filled (executed) by way of a number of smaller volume purchases. Rather than submitting the entire volume, the client advisor is able to submit smaller volumes of the order to the MEL Designated Trading Representative ("DTR") as and when the advisor sees fit.
Every order is subjected to internal MEL filter parameters prior to being submitted to the DTR. The advisor (or advisor assistant) responsible for creating the order is notified if the order breaches one or multiple filter parameters by way of an alert message. The advisor (or advisor assistant) is then required to confirm that they wish to proceed with the order to be placed into ITS. If the advisor or advisor assistant confirms the order, it is then routed to the DTR for entry onto ASX. [34]
A DTR is licensed by the ASX and authorised to place orders to buy and sell equities into the ASX trading platform (known as the Integrated Trading System, "ITS") on behalf of the responsible Trading Participant. Orders are entered onto ITS through a dedicated terminal.[35]
During the relevant periods it was MEL practice for DTR's to input the relevant client advisor reference, followed by the unique order number (as created by IOS) in the 'BuyOpRef' field within ITS for order identification purposes. The client advisor code reference allocated by MEL to Chan during the relevant period was NXC.[36]

[60]

The Trading Participant's broker identification number is automatically recorded in ITS when the DTR makes an entry (eg order to buy "Bid" or order to sell "Ask"). The broker identification number allocated by the ASX for MEL is 244.[37]
ITS is a priority based trading system. Accordingly all Bids that are entered into ITS are, until they are traded or cancelled, given priority and displayed on ITS in order of:
1. Firstly, price. That is, the Bid with the highest price is displayed first and that with the lowest price is displayed last. A Bid with a higher price is transacted as a trade before a Bid with a lower price; and
2. Secondly, time of entry into ITS. That is, a Bid entered earlier in time transacts as a trade before a Bid entered subsequently.
The current Bids on ITS for any given security are commonly referred to as comprising the 'Bid Schedule'.
All Asks that are entered into ITS are, until they are traded or cancelled, given priority and displayed on ITS in order of:
1. Firstly, price. That is, the Ask with the lowest price is displayed first and that with the highest price is displayed last. An Ask with a lower price is transacted as a trade before an Ask with a higher price; and
2. Secondly, time of entry into ITS
The current Asks on ITS for any given security are commonly referred to as comprising the 'Ask Schedule'.
A trade in a security occurs automatically when the price of a Bid and an Ask for that security overlaps on ITS. That is, either
1. The price of a Bid and an Ask are the same; or
2. The price of a Bid is greater than the price of an Ask.
Typically, when discussing the 'market' for any given security the price of the priority Bid, the priority Ask and the last traded price are quoted. This is generally referred to as the 'Bid/Ask Spread'.
The closing price for any given security is determined by the final traded price for the day. Trading in securities listed on the ASX occurs during the "Open" phase, which is conducted between 10:00am and 4:00 each trading day. Between 4:00pm and 4:10pm, trading ceases although there remains an opportunity for orders to be entered, amended or cancelled. At a random time between 4:10pm and 4:12pm[38] on each trading day there is a Closing Single Price Auction ("CSPA"), where any overlapping Bids and Asks are traded. The CSPA effectively sets the final closing price for securities traded in a company.
Up to 29 September 2006, all trading in quoted equities on ASX was conducted by a screen based, computerised trading system known as the Stock Exchange Automated Trading System ("SEATS"). All users of SEATS were licensed. SEATS was owned and operated by ASX Operations Pty Limited, a wholly owned subsidiary of ASXL.
There is no relevant difference between SEATS and ITS. Any reference to ITS should be taken to include a reference to SEATS where a particular process was effected prior to 30 September 2006.

[74]

As a result, on 3 July 2006 an amount of $42,500.00 was transferred from the TBS treasury account to the Chan account.[54]
Of the shares Chan purchased on his account, between 27 December 2006 and 29 February 2008 Chan sold a total of 355,900 BXP shares valued at $52,340.20 on market. Included in this amount are 100,000 BXP shares purchased by Chan prior to the relevant period. The proceeds from these sales were credited to the Chan trading account. There is no evidence of these funds ever being repaid to the TBS treasury account or any other related entity.
Of the shares Chan purchased on his account, a volume of 1,917,293 was transferred in November 2006. The circumstances surrounding this transfer and the application of funds received by Chan from it is discussed further at paragraph 79.
On 2 April 2008, Chan transferred his BXP holdings (744,100) into his superannuation account. The price for BXP shares at this time was 8.5 cents representing a value of $63,248.50[55].
During the period 14 June 2006 to 17 July 2006, there were 24 trading days. Trading in BXP occurred through the Chan account on each of these days.
During this period, the 33 Bids entered into the market on behalf of the Chan account resulted in 100 trades and represented 7.9% of all Bids entered into the market for BXP, accounted for 20.2% of all trades, 19.5% of the volume, 54.1% of late trades, 25% of the last trades of the day, and 62.5% of the trades during the CSPA[56]. Additionally,
- 72.7% of Bids were at higher prices than the existing priority Bid. By comparison, 387 Bids were entered by the rest of the market, of which 27.6% set new priority Bids;
- 14% of trades were at higher prices than the previous trade prices. By comparison, of 394 trades executed by the rest of the market, 9.1% were at higher prices than the previous trade prices; and
- 14 price increases were caused. Of these, 57.1% were late trades, 7.1% were the last trade of the day, although none were executed during the CSPA. By comparison, of the 36 price increases caused by the rest of the market during the same period, 5.6% were late trades, 5.6% were the last trade of the day, and 2.8% were trades during the CSPA[57].

[76]

Since approximately 2001 Enzo Di Donato ("Di Donato"), in various professional capacities including engagement as a sales person, has been associated with Ian and Hal Christiansen and their associated companies, including Bill Express.
During the relevant period Di Donato was the sole director and shareholder of 3D Salesforce Pty Ltd ("3D Salesforce").[60]
On 12 July 2006 at 2:10pm a facsimile (bearing 'Bill Express' header details) was sent to Chan at MEL. Following this facsimile, Chan arranged for the 3D Salesforce account to be opened with MEL. On the account opening documentation were instructions advising the MEL back office staff that the opening of the 3D Salesforce account was urgent due to the client wishing to trade on that day.[61]
Chan is recorded on the account opening documentation as the responsible MEL client advisor. No person other than Di Donato is recorded as having any authority to operate the 3D Salesforce account.
On 12 July 2006, Chan commenced trading in BXP through the 3D Salesforce account, by arranging for a Bid for 150,000 BXP shares at a price of 19 cents to be entered into SEATS at 3:55pm. The DTR reference allocated to this Bid was 'NXC' (Advisor Code allocated by MEL to Chan). This Bid traded in its entirety and resulted in a price increase of 1.5 cents (from 17.5 to 19 cents). MEL subsequently booked these shares to the 3D Salesforce account.[62]
During the period 12 July 2006 to 26 March 2008 a total of 21,581,405 BXP shares, valued at $3,899,346.43 (including brokerage), was purchased through the 3D Salesforce account.
The $3,899,346.43 worth of BXP shares purchased through the 3D Salesforce account were settled by way of payments drawn on a number of bank accounts held in the name of 3D Salesforce ("3D Salesforce bank accounts").
The funds that enabled payments to be drawn on the 3D Salesforce bank accounts were sourced primarily from:
1. The TBS treasury account. During the relevant period a total amount of $2,136,190 was transferred from the TBS treasury account to the 3D Salesforce bank accounts[63]; and
2. Proceeds from the sale of BXP shares during the relevant period, discussed further at paragraph 76 onwards.
There is no evidence of any communication between Chan and Di Donato during the periods in which BXP shares were purchased or sold through the 3D Salesforce account. However, relevant call charge records evidence telephone communication between Chan and Ian Christiansen, and Chan and Couper in close proximity to:
- Times following a fall in the BXP share price; and
- Times preceding Bids being entered into and or amended into SEATS against the 3D Salesforce account.

[83]

This charge relates to the Winwood Mac account, the same account as charge one. During the period 8 February 2008 to 22 February 2008 a total of 2,000,000 BXP shares, valued at $312,009.58 (including brokerage), were purchased through the Winwood Mac account. These shares were purchased against order number 3246639 by way of 8 Bids entered into ITS.
The $312,009.58 worth of BXP shares purchased through the Winwood Mac account were settled by way of cheque payments drawn on McKenzie's St George Bank account.
During this period a total amount of $375,000.00 was transferred from either the TBS treasury account or ANZ bank account held in the name of OnQ Group Ltd to McKenzie's St George bank account[76].
There is no evidence of any communication between Chan and McKenzie during this period. However, relevant call charge records evidence telephone communication between Chan and Couper in close proximity to:
- Times following a fall in the BXP share price;
- Times preceding Bids being entered into and or amended into SEATS against the Winwood Mac account. [77]
During this period, there were 11 trading days. Trading in BXP occurred through the Winwood Mac account on 8 of these days[78].
During this period, 8 Bids were entered into the market on behalf of the Winwood Mac account, which resulted in 24 trades and represented 13.8% of all Bids entered into the market for BXP, accounted for 45.3% of all trades, 63.0% of volume, 9.1% of late trades ("late" defined as within 20 minutes of the end of the Open phase), 40.0% of the last trades of the day, and 0% of the trades during the CSPA[79]. Additionally,
- 62.5% of Bids were at higher prices than the existing priority Bid (i.e. they set a higher price for the priority Bid). By comparison, 50 Bids were entered by the rest of the market, of which 16.0% set new priority Bids;
- 12.5% of trades were at higher prices than the previous trade prices. By comparison, of 29 trades executed by the rest of the market, 13.8% were at higher prices that the previous trade prices; and
- 3 price increases were caused. Of these, 0% were late trades, 0% were the last trade of the day, and 0% were trades executed during the CSPA. By comparison, of the 4 price increases caused by the rest of the market during the same periods, 25.0% were late trades, 25.0% were the last trade of the day, and 0% were trades during the CSPA[80].

[87]

Anthony Eastwell ("Eastwell") has been a close friend of Ian and Harold Christiansen for approximately 20 years. Ian Christiansen was best man at Eastwell's wedding.[84]
On 19 February 2008, the Eastwell account was opened with MEL. Chan is recorded on the account opening documentation as the responsible MEL client advisor. No person other than Eastwell is recorded as having any authority to operate the Eastwell account.[85]
On 26 February 2008, Chan commenced trading in BXP through the Eastwell account. On this day, at 11:34am (4 minutes after cancelling McKenzie order number 3281096) Advisor Working order number 3288709 was created in IOS against the Eastwell account. This order was for the purchase of 1,300,000 BXP shares at a limit of 15 cents[86].
During the period 26 February 2008 to 4 March 2008 a total of 1,300,000 BXP shares, valued at $186,490.25 (including brokerage), were purchased through the Eastwell account. These shares were purchased against Advisor Working order 3288709 by way of 15 Bids entered into ITS.
The $186,490.25 worth of BXP shares purchased through the Eastwell account were settled by way of payments drawn on a number of bank accounts held in the name of Eastwell.
During the period 24 January 2008 to 7 March 2008 a total amount of $200,000.00 was transferred from the TBS treasury account to Eastwell's bank accounts[87].
There is no evidence of any communication between Chan and Eastwell during the periods in which BXP shares were purchased through the Eastwell account. However, relevant call charge records evidence telephone communication between Chan and Ian Christiansen, and Chan and Couper in close proximity to:
- Times following a fall in the BXP share price; and
- Times preceding Bids being entered into and or amended into SEATS against the Eastwell account[88].
Eastwell states that he never provided any instructions to Chan or any other MEL staff to purchase any shares through the Eastwell account.[89]
During the period 26 February 2008 to 4 March 2008, there were 6 trading days. Trading in BXP occurred through the Eastwell account on each of these days.
During this period, the 15 Bids entered into the market resulted in 32 trades and represented 30% of all Bids entered into the market for BXP, accounted for 43.8% of all trades, 19.6% of the volume, 50% of late trades and 66.7% of the last trades of the day[90]. Additionally,
- 66.7% of Bids were at higher prices than the existing priority Bid. By comparison, 35 Bids were entered by the rest of the market, of which 20% set new priority Bids;
- 15.6% of trades were at higher prices that the previous trade prices. By comparison, of 41 trades executed by the rest of the market, 4.9% were at higher prices that the previous trade prices; and
- 5 price increases were caused[91].

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