R v Hannes

SOLICITORS : Commonwealth Director of Public Prosecutions (Crown) Phillips Fox - Prisoner CATCHWORDS : Corporations Act 100G(2) - Financial Transaction Reports Act s 31(1) - re-sentencing after second trial s 1002G Corporations Act LEGISLATION CITED : s 31(1) Financial Transaction Reports Act ss 16A, 16C, 16G, 17A, 19AB, 19AC Crimes Act (C'th) Pearce v The Queen (1998) 194 CLR 610 R v Gilmore (1979) 1 A Crim R 416 R v Bedford (1986) 5 NSWLR 711 R v Merritt (No. 1) [1999] NSWCCA 29 CASES CITED : R v Merritt (No.2) [2000] NSWCCA 365 McL v The Queen (2000) 203 CLR 452 R v Petersen (1999) 2 Qd R 85 Rv MM [2000] NSWCCA 431 R v Pantano (1990) 49 A Crim R 328 DECISION : Sentence: Offence under s 1002G of the Corporations Act - imprisonment for 2 years 2 months commencing 22/08/01 and fine of $100,000.; Financial Transaction Reports Act for each offence imprisonment for 4 months commencing 22/10/03 - recognisance release order to take effect on 21 April 03

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

1 HIS HONOUR: On 11 September 2002 at the conclusion of a trial presided over by me a jury found the prisoner Simon Gautier Hannes guilty of each of the offences charged in the three counts in the indictment, namely an offence under s 1002G of the Corporations Act (the first count) and offences under s 31(1) of the Financial Transaction Reports Act (the second and third counts). 2 Section 1002G provides, so far as is relevant:- "where: (a) a person (in this section called the 'insider') possesses information that is not generally available but, if the information were generally available, a reasonable person would expect it to have a material effect on the price or value of securities of a body corporate; and (b) the person knows, or ought reasonably to know, that: (i) the information is not generally available; and (ii) if it were generally available, it might have a material effect on the price or value of those securities; . . . The insider must not… purchase… any such securities;" 3 By virtue of s 1311 and Schedule 3 of the Corporations Act the maximum penalty for an offence under s 1002G is a fine of $200,000 or imprisonment for five years or both. It is convenient to refer to the offence under s 1002G of the Corporations Act which was charged in the first count in the indictment as "the insider trading offence". 4 Section 31(1) of the Financial Transaction Reports Act provides so far as is relevant:-

"A person commits an offence against this section if: (a) a person is a party to 2 or more non-reportable cash transactions; and (b) having regard to: (i) the manner and form in which the transactions were conducted, including, without limiting the generality of this, all or any of the following: (A) the value of the currency involved in each transaction; (B) the aggregated value of the transactions; (C) the period of time over which the transactions took place; (D) the interval of time between any of the transactions; (E) the locations at which the transactions took place; and (ii) any explanation made by the person as to the manner or form in which the transactions were conducted; it would be reasonable to conclude that the person conducted the transactions in that manner or form for the … dominant purpose of ensuring …that the currency involved in the transactions was transferred in a manner and form that: (iii) would not give rise to a significant cash transaction; …" 5 Under the Financial Transaction Reports Act a significant cash transaction includes a transfer of not less than $10,000 in cash. A significant cash transaction to which a cash dealer, which includes a bank, is a party must be reported to a government agency AUSTRAC, the Australian Transaction Reports and Analysis Centre. Under subs (3) of s 31 a person who commits an offence against s 31 is liable to a fine not exceeding $10,000 or imprisonment for a period not exceeding five years or both. It is convenient to refer to the offences under s 31(1) of the Financial Transaction Reports Act charged in the second and third counts in the indictment as "the reporting offences". 6 After the verdicts of guilty were returned by the jury on 11 September the proceedings for the sentencing of Mr Hannes were adjourned. I received lengthy written submissions on sentence on behalf of both the Crown and the prisoner and I heard extensive oral argument on 19 November. As I required further time in which to consider the many submissions which had been made to me, I reserved my sentencing decision. 7 The three offences for which I am sentencing Mr Hannes are Federal offences and in sentencing him I must apply Pt 1B of the Commonwealth Crimes Act. I have taken into account all of the relevant provisions of Pt 1B, including s 16A, s 16C, s 16G, s 17A, s 19AB and s 19AC. 8 As I am sentencing for more than one offence, I am required to apply what McHugh, Hayne and Callinan JJ said at par 45 of their joint judgment in Pearce v The Queen (1998) 194 CLR 610.:- "A judge sentencing an offender for more than one offence must fix an appropriate sentence for each offence and then consider questions of cumulation or concurrence, as well, of course, as questions of totality".

Facts Relating to the Offence 9 I have the usual task of a sentencing judge of finding the facts relevant to sentencing. The facts found by me must be consistent with the verdicts of the jury and I cannot make a finding of fact which is adverse to Mr Hannes unless I am satisfied of that fact beyond reasonable doubt. I am not, however, required to sentence Mr Hannes on a view of the facts, consistent with the jury's verdicts, which would be the view most favourable to him. I can make a finding of fact in favour of Mr Hannes, if the fact is not disputed by the Crown or is proved on the balance of probabilities. 10 A very large amount of evidence was adduced at the trial in the examination in chief, cross-examination and re-examination of witnesses called by the Crown or by the reading of statements by Crown witnesses who were not required to attend court or by the tendering of many documents by either the Crown or the defence. Mr Hannes himself did not give evidence either at the trial or in the proceedings on sentence and no witness was called in his case either at the trial or in the proceedings on sentence. 11 I am satisfied to the requisite standard that the following facts relating to the three offences are established by evidence given at the trial or must be taken to have been established by the jury's verdicts of guilty. I will confine the following statement to some of the more salient facts. Certain other facts found by me will be referred to in later parts of these remarks. 12 Mr Hannes was an executive director of the Corporate Advisory Division of Macquarie Corporate Finance, which was a part of the Macquarie Bank. In 1996 the Corporate Advisory Division occupied a largely open space office on level 20 of an office building in Bond Street in the City. 13 At about the end of May 1996 there was a meeting in Hong Kong between representatives of the Australian company T.N.T. and representatives of a Dutch company which was usually referred to at the trial by its initials K.P.N. or as "the Dutch Post Office". T.N.T. was a longstanding client of the Corporate Advisory Division. Mr Poole, an executive director of the Corporate Advisory Division stationed in Sydney and hence a colleague of Mr Hannes, attended the meeting in Hong Kong. At the meeting in Hong Kong there was discussion of a possible transaction between T.N.T. and K.P.N. Although other forms of transactions were not entirely excluded, the most likely form any transaction would take would be a friendly take over of T.N.T. by K.P.N. 14 After Mr Poole returned from Hong Kong a group of people from within the Corporate Advisory Division was assembled to work on the project involving T.N.T. and K.P.N. The project came to be known as "Project Tennis" and the group came to be known as "the Tennis Team". The group ultimately comprised Mr Poole, Mr Joyce, Miss Rousselot, Mr Murdoch and Mr Wentworth and, to some extent, Mr Johnson the deputy chairman of Macquarie Corporate Finance. Mr Hannes was not a member of the Tennis Team. The members of the Tennis Team kept documents relating to project Tennis in files on or near their desks and in electronic form in their computers. Members of the Tennis Team were instructed to keep information about the Project confidential. 15 A task performed by some members of the Tennis Team was to prepare a whole of company valuation of T.N.T. At some time in the week commencing 8 July 1996 Mr Hannes had a conversation with Mr Murdoch, who was working on the valuation of T.N.T. Mr Hannes asked Mr Murdoch, who was junior to him, what valuation he had come up with for T.N.T. Mr Hannes, as an executive director of the Corporate Advisory Division, was entitled to information about a project on which the Corporate Advisory Division was working, even if he himself was not working on the project. Mr Murdoch told Mr Hannes that the preliminary valuation range was between about $2.20 or $2.25 to $3.10 or $3.20 per share. Mr Hannes said words to the effect that that sounded like a very high valuation. Mr Murdoch replied that it was a very high valuation and probably a bit too high but there were good reasons for a high valuation of T.N.T., particularly its very good European businesses. The whole of company valuation of T.N.T. prepared by members of the Tennis Team was submitted to a meeting of the Board of Directors of T.N.T. on 15 July 1996. 16 On 22 July 1996 there was a meeting of the Executive Directors of the Corporate Advisory Division from both Sydney and Melbourne at a Japanese restaurant in Sydney. Mr Hannes attended the meeting. At the meeting there was a Macquarie Corporate Finance document known as a bow wave document, which referred to "Project Tennis". One of the executive directors, not Mr Hannes, asked what "Project Tennis" was and Mr Poole replied that it was "a major restructuring for T.N.T.". I am satisfied that I should find that Mr Hannes heard this part of the conversation. 17 Over the week-end of 25-27 July 1996 there was a conference of Macquarie Corporate Finance at Mt Buller in Victoria. Mr Hannes attended the conference. At the conference Mr Lucas, an Executive Director from Melbourne, made a slide presentation. One slide which was included in the presentation referred to Project Tennis with an estimated possible fee for Macquarie Corporate Finance of $5-10m dollars. I am satisfied that I should find that Mr Hannes saw the slide. 18 On 1 August 1996 Mr Hannes went on indefinite leave from Macquarie Corporate Finance. He was allowed to retain keys to the office building which had been issued to him for his personal use, because, even though he was on leave, he would continue to do some work for at least one client. Evidence of the recorded uses of the keys which had been issued to Mr Hannes showed that before and after 1 August Mr Hannes made a number of late night visits to the office of the Corporate Advisory Division. I am satisfied that on at least some of these late night visits and particularly after he had gone on leave, Mr Hannes took the opportunity to inspect documents kept by members of the Tennis Team relating to Project Tennis, either by looking at hard copies of documents or by accessing documents on a computer. Inspection of such documents revealed to Mr Hannes that broad agreement had been reached at the meeting in Hong Kong for a friendly take over of T.N.T. by K.P.N., that the gap between the price K.P.N. was prepared to offer of between $2.20-$2.40 per share and the price T.N.T. said it would be prepared to accept, $2.50 per share, was narrow, that while alternatives to a take over were still under consideration it was the view of the Tennis Team that a take over of T.N.T. by K.P.N. would be more beneficial to shareholders of T.N.T. than any alternative form of transaction and that the prospects of a take over would increase if T.N.T. could dispose of its shareholding in Ansett to Air New Zealand. 19 On 2 September 1996 there was a public announcement that T.N.T. had entered into a written conditional agreement for the sale of its shares in Ansett to Air New Zealand. The making of this agreement largely removed an obstacle to a take-over of T.N.T. by K.P.N. 20 I am satisfied to the requisite degree that, after learning of the conditional sale by T.N.T. of its shares in Ansett to Air New Zealand, Mr Hannes, having acquired information, which he knew was not generally available, and, if it were generally available, could be expected to have a material effect on the price of shares in T.N.T., that it was likely that shares in T.N.T. would be the subject of a take over offer at a price in excess of $2 per share and that the Corporate Advisory Division of Macquarie Corporate Finance was advising T.N.T. in connection with that potential take over and had placed securities in T.N.T. on an embargo list, decided to acquire options to acquire shares in T.N.T.. In early September the price of shares in T.N.T. was only about $1.50. Mr Hannes decided to acquire options rather than shares, because the acquisition of options would increase the profit that could be made from expenditure of the same sum of money. 21 On 4 September 1996 Mr Hannes drew down an amount on his account with a company named Leveraged Equities and caused that amount to be deposited in his bank account at the Commonwealth Bank, Wynyard. 22 On 5 September 1996 Mr Hannes attended at the office of a firm named Mail Boxes etc at Mosman and, representing that his name was "Mark Booth" entered into an agreement to rent a mail box, which, although only a mail box, was called "Suite 140, 656 Military Road, Mosman". 23 I am satisfied that there never was any person "Mark Booth", separate from Mr Hannes, that "Mark Booth" was a fictitious person created by Mr Hannes and that whenever in the events I will describe a person identified himself as "M Booth" or "Mark Booth', it was Mr Hannes. Mr Hannes derived the name 'Mark Booth" or "M. Booth" from the married name of his sister Mignon Booth, that is M. Booth. 24 On 6 September 1996 Mr Hannes made three withdrawals of cash of $10,000, $10,000 and $20,000 from his bank account at the Commonwealth Bank, Wynyard. Although the withdrawals were made from that account, Mr Hannes went to three other branches of the Commonwealth Bank in order to make the withdrawals. 25 The first two withdrawals made on 6 September, being of amounts of not less than $10,000, were reported by the Bank to AUSTRAC but the reports were made electronically and Mr Hannes did not become aware that the transactions had been reported to AUSTRAC. 26 However, the third transaction, the withdrawal of $20,000, was reported manually by the bank at which the withdrawal was made. A bank officer completed a Significant Cash Transaction Report form, which had a conspicuous heading "$10,000 or more", and had Mr Hannes sign the form. Mr Hannes then became aware that a cash transaction of $10,000 or more was required by law to be reported to a government agency. 27 I am satisfied that Mr Hannes decided to make withdrawals in cash so that the money withdrawn would be more difficult to trace and, having discovered that a cash transaction of $10,000 or more was required to be reported to a government agency, decided to make future cash withdrawals in amounts of less than $10,000, so that they would not have to be reported. 28 On 6 September Mr Hannes obtained a bank cheque for $9,000 and forwarded it to a cash management trust known as the Ord Minnett Cash Management Trust, the trustee of which was the Perpetual Trustee Co Limited, to open an account in the name of M. Booth and such an account was opened. 29 On Monday 9 September 1996 Mr Hannes made six withdrawals of cash from his account at the Commonwealth Bank, Wynyard. The six withdrawals were all made at different branches of the Commonwealth Bank. Four of the withdrawals were for amounts of $9,000, one withdrawal was for an amount of $9,900 and one withdrawal was for an amount of $6,000. These withdrawals were the transactions which formed the subject of the second count in the indictment. 30 On the same day 9 September 1996 Mr Hannes using the name "M. Booth" or "Mark Booth" obtained nine bank cheques by making payments of cash. All the bank cheques were payable to Perpetual Trustee Co Limited - Ord Minnett Cash Management Trust. In some cases the amounts paid by him included a bank fee for the issuing of a bank cheque. All of the payments of cash were for amounts of between $9,000 and $9,910. 31 Three of the payments for bank cheques were made at separate branches of the Commonwealth Bank, two of the payments were made at separate branches of the A.N.Z. Bank, two of the payments were made at separate branches of the National Australia Bank and two of the payments were made at separate branches of Westpac. A number of the bank branches were very close to each other. For example, separate payments were made and separate bank cheques were obtained at the Leichhardt branches of all of the Commonwealth Bank, the National Australia Bank and the A.N.Z. Bank. 32 The nine payments of cash to obtain the nine bank cheques were the transactions which formed the subject of the third count in the indictment. 33 Mr Hannes caused the nine bank cheques to be deposited in the account in the Ord Minnett Cash Management Trust in the name of M. Booth. 34 I am satisfied that Mr Hannes made further late night visits to the office of the Corporate Advisory Division in which he inspected documents, including a document dated 10 September which revealed inter alia a detailed draft timetable for the taking of steps in Project Tennis, including the holding of meetings in Sydney that very week between advisers of T.N.T. and advisers of K.P.N., the holding of meetings in Sydney between principals of T.N.T. and K.P.N. between Monday 16 September and Wednesday 18 September, the taking of various other steps including the preparation of take over documents and the public announcement of the take over of T.N.T. by K.P.N. in early October. 35 On 17 September 1996 Mr Hannes telephoned Ord Minnett Stockbrokers. He was referred by a telephonist at Ord Minnett to Mr Staehli, a stockbroker at Ord Minnett. 36 I accept Mr Staehli's evidence about what happened in his dealings with Mr Hannes, in preference to accounts given by Mr Hannes in letters he later wrote, purporting to be Mark Booth. 37 In the telephone conversation which occurred on 17 September Mr Hannes told Mr Staehli that his name was Mark Booth and that he was a marketing consultant from the United Kingdom. Throughout his dealings with Mr Staehli Mr Hannes falsely represented that he was Mark Booth and Mr Staehli, who never met Mr Hannes face to face, believed that the person he was dealing with was Mark Booth. In the telephone conversation on 17 September Mr Hannes said that he did not yet have any permanent place of residence in Sydney and he gave Mr Staehli two telephone numbers. One telephone number was the number of the Intercontinental Hotel - Mr Hannes was not staying at the Intercontinental Hotel. The other telephone number was a number of the New South Wales Department of Health at North Sydney, with which Mr Hannes had no connection. 38 In the telephone conversation on 17 September Mr Hannes told Mr Staehli that he wanted to buy $2 November 1996 call options in T.N.T., that is options to acquire shares in T.N.T., which would be exercisable up to 28 November 1996, at a strike price or exercise price of $2 per share, and that he wanted to spend up to the total amount of the money standing to the credit of Mark Booth in the Ord Minnett Cash Management Trust. Mr Staehli obtained a quote from an operator that the price of such options was between 1 cent and 3 cents per share and he so informed Mr Hannes. I am satisfied that Mr Hannes selected $2 November 1996 options as the options he would acquire, because, if the price of T.N.T. shares rose above $2.25, the acquisition of such options would maximise the profit he would make. 39 Mr Staehli told Mr Hannes that he would require written instructions, because he had no prior knowledge of the person he was speaking to on the telephone and because he regarded $2 November 1996 call options in T.N.T. as a very risky investment, in circumstances where the current share price of T.N.T. shares was much less than $2 and November 1996 options would expire in about two months. He asked Mr Hannes for an address to which he could post documents but Mr Hannes said that he would pick up the documents. 40 Mr Staehli prepared various documents, put them in an envelope marked "M. Booth" and left the envelope at the reception counter of Ord Minnett. 41 The following morning, the morning of 18 September, an envelope was placed on Mr Staehli's desk, which contained the completed documents and a letter of instructions. Mr Staehli did not know how the envelope had reached his desk. 42 The completed documents were an Options Client Agreement, an Application for an account and a Sponsorship Agreement, all of which Mr Hannes had completed and signed, using the name "Mark Booth" and giving the address Suite 140, 656 Military Road, Mosman. As a witness to his signature on the Sponsorship Agreement Mr Hannes wrote a fictitious name and address "Alexi Voltraint, 52 Railway Road, Petersham". 43 In a letter of instructions signed by him as "M. Booth" Mr Hannes instructed Mr Staehli to acquire T.N.T. call options with a strike price of $2 maturing in November 1996, "until the total amount (purchase price plus brokerage and other charges) equals the amount standing to my credit in my cash management trust account". 44 On 19 September Mr Hannes, identifying himself as M. Booth, attended at the office of Voicemail National at 160 Goulburn Street, Surry Hills and obtained a voicemail service in the name of Mark Booth. 45 Pursuant to the instructions he had received from Mr Hannes, Mr Staehli caused 5,000 November 1996 $2 option contracts to purchase shares in T.N.T. to be acquired on 18 and 19 September at a price of 1.5 or 2 cents per share. Each option contract was for 1,000 shares, so that options to acquire 5,000,000 shares were acquired. 46 On 20 September 1996 Mr Staehli spoke on the telephone to Mr Hannes. Mr Staehli reported that 5,000 option contracts had been acquired. He said that there was small balance left in the Cash Management account of M. Booth of about $1,500. Mr Hannes expressed annoyance that not all of the money in the account had been used. Mr Hannes told Mr Staehli that he had established the voicemail service. 47 On 30 September Mr Hannes telephoned Mr Staehli. Mr Hannes expressed concern that there had not been any movement up in the share price of T.N.T. and he wondered if he should reduce his holding of options. Mr Staehli advised Mr Hannes to wait a little longer before reducing his holding. 48 In the absence of any evidence from Mr Hannes it is difficult to reach any conclusions about why Mr Hannes said what he did in this conversation. The Crown suggested that Mr Hannes had by that time realised that, when the take-over was announced his acquisition of the options would be likely to attract attention. Another possible explanation is that Mr Hannes, well knowing that the take-over was imminent, was laying the foundation for a subsequent claim by "M Booth" that he did not have any insider information. I do not consider that the conversation indicates any contrition on Mr Hannes' part. 49 On 2 October 1996 there was a public announcement that K.P.N. would make a take over offer for T.N.T. at a price of $2.45 per share. 50 On the afternoon of 2 October Mr Staehli spoke on the telephone to Mr Hannes and informed him of the take over offer. He congratulated Mr Hannes on having become a millionaire. The difference between the take over price of $2.45 per share and the options strike price of $2 per share, when multiplied by the number of options, would produce a figure of just over $2m dollars. Mr Hannes professed to be surprised by the news. He said that he would have to travel back to England to visit his father who was ill. 51 Mr Staehli received a letter from Mr Hannes, which was dated 3 October. In the letter Mr Hannes said that selling the options immediately might deprive him of the chance of benefiting from a higher take over offer for T.N.T. from some other bidder. He instructed Mr Staehli to hold the options until 4 November and then begin selling the options "for the best price you can obtain on the market and in those parcels or lots you think will realise the best price". In the letter he falsely claimed that "I somewhat stumbled into such a large option holding, when you were able to secure many more options than I expected". In the final paragraph of the letter Mr Hannes noted that the authorities were conducting an inquiry into trading in T.N.T. options. 52 In fact the Australian Securities Commission had immediately begun an inquiry. The Commission commenced proceedings in the Federal Court in which "Mark Booth" was named as a defendant and on 4 October it obtained a court order effectively freezing the proceeds of any sale of the options. 53 Mr Staehli received a further letter from Mr Hannes, dated 4 October. In the letter Mr Hannes said that he now realised that there was a suspicion that he had been guilty of insider trading. With the letter he enclosed a statement purporting to be by M. Booth. In the statement he claimed that for a number of reasons, based on information which was generally available, he had formed the opinion that there was likely to be an increase in the price of shares in T.N.T. and he denied that he had had any insider information. He claimed that he had not expected to be able to acquire more than 1,000 to 2,000 contracts and that he had been surprised that he had ended up with so many contracts. I am satisfied that the statement contained many falsehoods. 54 Beginning on 4 November the option contracts were sold by Ord Minnett, realising a profit of more than $2m, but the proceeds of sale were frozen by the court order. 55 In November 1996 Mr Staehli received a further faxed document from Mr Hannes, still identifying himself as M. Booth, in which he said that he did not want investors from whom he had acquired the options to suffer loss and he authorised and directed Ord Minnett and the Trustee of the Ord Minnett Cash Management Trust to pay all monies in the Cash Management Trust account, as might be recommended by the Australian Securities Commission. The proceeds of the sale of the options were paid to the persons who had sold the options to Mr Hannes. 56 On 17 January 1997 a search warrant was executed at Mr Hannes' home and a number of items of property were seized. Later on 17 January 1997 Mr Hannes was interviewed. In the interview he claimed that the options had been bought, without his authority, by a person who he declined to name, with whom he had entered into an investment syndicate. 57 That concludes my statement of the facts relating to the offences. I have obviously not attempted to refer to all of the facts established by evidence given at the trial which might have some relevance to the sentencing of Mr Hannes. 58 I will not at this stage in these remarks refer to Mr Hannes' subjective circumstances, except to note the following. He was born in 1960, so that he was thirty-six years old at the time of committing the offences and is now forty-two years old. Before committing the offences he had had an outstanding career as a merchant banker with Macquarie Bank. He has no other criminal convictions. 59 Previous Criminal Proceedings against Mr Hannes 60 An important matter in the sentencing of Mr Hannes is that this is not the first time he has been sentenced for substantially the same three offences. 61 At a trial conducted in the District Court in 1999 before her Honour Judge Backhouse and a jury, the jury returned verdicts of guilty on similar charges, consisting of one charge of contravening s 1002G of the Corporations Act or Corporations Law and two charges of offences under s 31(1) of the Financial Transaction Reports Act. 62 On 17 September 1999 her Honour delivered lengthy remarks on sentence occupying 45 pages of transcript, to parts of which I will refer later in these remarks, and her Honour then sentenced Mr Hannes. On the insider trading charge her Honour sentenced Mr Hannes to a term of imprisonment of two years two months and a fine of $100,000 and on each of the charges under the Financial Transaction Reports Act she sentenced Mr Hannes to a term of imprisonment of four months, the two sentences to be served concurrently with each other and concurrently with the sentence of imprisonment on the insider trading charge, and to a fine on each charge of $5,000. Her Honour made the sentences of imprisonment commence from 11 August 1999, the date on which Mr Hannes had gone into custody after the jury at the District Court trial returned the last of their three verdicts of guilty. Her Honour made a recognisance release order to take effect 18 months after the commencement of the sentences. 63 Mr Hannes appealed to the Court of Criminal Appeal against his convictions. The Crown appealed against the sentences imposed by Judge Backhouse. The Court of Criminal Appeal allowed the appeal against conviction on all three charges and, having allowed the appeal against conviction, did not have to deal, and did not deal, with the Crown appeal against sentence. However, having allowed the appeal against conviction, the Court of Criminal Appeal did have to decide whether it should order a new trial or whether, as was urged by counsel for Mr Hannes, it should direct an acquittal on all three charges. At pars 389-395 of his judgment in the Court of Criminal Appeal, with which the other members of the Court agreed, the Chief Justice decided, for the reasons he gave, that the Court of Criminal Appeal should order a new trial of the charges. I will return to this part of the Chief Justice's judgment later in these remarks. The trial conducted before me was the new trial ordered by the Court of Criminal Appeal. 64 Mr Hannes was released from prison on 1 December 2000, the date on which the Court of Criminal Appeal handed down its judgment, and he has ever since been at liberty on bail. He served 15 months 22 days of imprisonment, so that the part of the pre-release period under the sentences of imprisonment imposed by Judge Backhouse which he has not served, is 2 months 9 days. Mr Hannes paid the fines imposed by Judge Backhouse but, after his appeal against conviction was allowed, the amounts of the fines were refunded to him.

Principles of Law Relating to Re-sentencing 65 I have to determine what principles of law I should apply, as governing the re-sentencing of Mr Hannes. 66 In argument in the proceedings on sentence reference was made to the decisions of the Court of Criminal Appeal in R v Gilmore (1979) 1 A Crim R 416, R v Bedford (1986) 5 NSWLR 711, R v Merritt (No.1) [1999] NSWCCA 29 and R v Merritt (No.2) [2000] NSWCCA 365 and the decision of the High Court in McL v The Queen (2000) 203 CLR 452. 67 In Gilmore Street CJ said at 419:- "It is a sound principle of sentencing that, on a new trial consequent upon the quashing of a conviction by the Court of Criminal Appeal, the accused should ordinarily not receive a longer sentence or non-parole period than those following upon the first trial". 68 His Honour referred to the policy considerations for such a principle, saying:- "The policy consideration underlying the specification of the upper limit on the sentence is twofold. In the first place, a person whose conviction is tainted in that the first trial was defective to an extent not capable of being saved by the proviso, should not, in fairness, be required to run any risk of suffering a heavier sentence on a new trial as a consequence of exposing on appeal the defective nature of the first trial. It is in the public interest in ensuring orderly and proper administration of the criminal law that defects in trials should be challenged and laid bare on appeal. As a corollary to this, it is wrong that any person should suffer ill-founded criminal judgment in consequence of a defective trial, and feel constrained to avoid exposing that defect lest on a new trial a heavier sentence be passed. In the second place, the passing of a heavier sentence on a new trial could be seen by the convicted person, as well, perhaps, by others in the community at large, as possibly importing some element of retribution by the machinery of criminal justice in consequence of the conviction on the first trial having been successfully overthrown". 69 Later in his judgment the Chief Justice said at p 421:- "The principle to which I refer restricts the upper limit of the sentence on the new trial. It does not operate to restrict the discretion to pass a lesser sentence".

70 In Bedford Street CJ retreated from what he had said in Gilmore. His Honour said inter alia:- "Where the judge at the new trial considers that the circumstances of the case do call for a longer sentence he will not be absolutely fettered by the approach prima facie to be adopted. He is both at liberty, and indeed obliged, to give effect to his own assessment. It could be expected, however, that, if he did take the view that a longer sentence were called for than that passed at the first trial, then there would be a specific indication of the reasons leading him to this view. For example, there could be cases in which at the first trial the accused was dealt with remarkably leniently - perhaps by being released on a bond or subjected to a non-custodial order by reason of an unduly favourable impression created in the mind of the then sentencing judge. Subsequent reconsideration after a second trial or plea of guilty might well give rise to an appreciation that the criminality involved was of a greater degree or more serious nature than previously perceived. The subjective aspects may, on re-appraisal, be less favourable to the prisoner. There could be a multiplicity of factors persuading the second judge that he should depart from the prima facie approach. What was described as a principle ordinarily to be followed will not prevent such a departure. The second judge might well, with complete propriety, take the view that a custodial sentence, indeed even a lengthy custodial sentence, is required in order to meet the requirements of the responsible and proper administration of the criminal law, rather than being absolutely fettered and limited by the bond or non-custodial order granted after the first trial." 71 In Merritt (No.1) the Court of Criminal Appeal allowed an appeal against conviction and ordered a new trial. Having allowed the appeal against conviction the Court of Criminal Appeal did not have to deal with a Crown appeal against sentence. However, in the final paragraph of the judgment of the Court the members of the Court said that in their opinion the argument that the sentences imposed on Merritt were unjustifiably lenient was a strong one. 72 Merritt was tried again and convicted. The judge at the second trial in re-sentencing Merritt felt constrained, having regard to Gilmore and Bedford, not to impose heavier sentences than had been imposed after the first trial. The Crown appealed against the sentences imposed after the second trial. In Merritt (No.2) O'Keefe J who delivered the principal judgment in the Court of Criminal Appeal referred to what Street CJ had said in Bedford and concluded that the sentences imposed on Merritt were manifestly inadequate and that the Court of Criminal Appeal should allow the Crown appeal. 73 The decision of the High Court in McL v The Queen is not directly in point. McL was an appeal from a decision of the Victorian Court of Appeal. At his trial the accused had been found guilty on sixteen counts. On appeal to the Victorian Court of Appeal the Court of Appeal allowed an appeal against conviction on four counts and ordered a new trial on those counts and then increased the sentences on the remaining counts, so that the total effective sentence was the same as that imposed by the trial judge. Although it was not necessary for the determination of the appeal, all members of the High Court referred to the re-sentencing of an offender who has appealed successfully against his conviction at a first trial but then has been convicted again at a new trial. 74 At par 23 Gleeson CJ, Gaudron and Callinan JJ said in their joint judgment:- "In the course of argument in this Court, references were made, not by counsel, but by members of the Court, to the decision in Gilmore in which Street CJ referred to a consideration which a judge, re-sentencing after a second trial an offender who had earlier appealed successfully against the conviction at a first trial, ought to take into account. In brief, in the absence of countervailing considerations, the sentences imposed following the first trial should be regarded as the upper limit of the sentence to be imposed following the second trial, otherwise an offender will be seen to have been worse off as a result of having brought a successful appeal against a conviction. The weight to be given to that consideration depends, of course, upon the circumstances of the individual case. This would be a matter relevant to the exercise of discretion by a judge sentencing the appellant following convictions after a second trial on the four counts in question". 75 At par 72 McHugh, Gummow and Hayne JJ said in their joint judgment:- "If the appellant is convicted on any count at the re-trial, the sentencing judge will also have to take into account another important factor in the sentencing process. Ordinarily but not invariably, a successful appellant should not receive a longer sentence after conviction on a re-trial than he or she received at the original trial. If the sentencing judge at the re-trial thinks that the original sentence was manifestly inadequate, it is open to that judge in the exercise of the sentencing discretion to give a sentence higher than that imposed on the first occasion. But an exercise of discretion by a sentencing judge that increases the original sentence given to the accused is necessarily rare. That is because such an increase may be perceived, by the public and the accused, as containing a retributive element imposed because the accused had successfully appealed against his or her earlier conviction or sentence. If the raising of a sentence after a successful appeal became common, it might discourage appeals. Such a result would be contrary to the public interest, for an organised society has a vital interest in the proper administration of its criminal justice system. Rights of appeal are an important means of preventing the perpetuation of error in criminal trials". 76 Kirby J, who delivered a separate judgment, dealt with the issue at pars 131-142 of his judgment. At par 142 his Honour approved of what the Queensland Court of Criminal Appeal had said in R v Petersen (1999) 2 Qd R 85 at 97:- "Where an offender is to be re-sentenced following a successful appeal and re-trial, the second sentencing Judge should start with the proposition that the offender ought, in general, not receive a harsher sentence than that imposed after the first trial. If minded to depart from that approach, he or she should consider the powerful policy considerations outlined above. Only if the second sentencing judge concludes that the earlier sentence was outside the appropriate range, or the facts as they appear at the time of the re-sentence are significantly different from those upon which the first sentence was based should he or she impose a heavier sentence". 77 No reference was made in argument in the proceedings on sentence to the recent decision of the Court of Criminal Appeal in R v MM [2000] NSWCCA 431, handed down on 1 November 2002, which concerned a prisoner's appeal against sentence where the prisoner had been convicted on fourteen counts at the first trial but had been convicted on only eleven counts at the re-trial. 78 Although the Crown in its submissions referred to the Crown appeal which had been brought against the sentences imposed by Judge Backhouse, it was not submitted by the Crown that the bringing of that Crown appeal meant that any different principles should be applied than those stated in the cases to which I have referred. 79 It was submitted by the Crown that I should apply what Street CJ said in Bedford, in preference to what was said by way of dicta by justices of the High Court in McL; that my sentencing discretion was not fettered by the previous sentencing decision of Judge Backhouse; that manifest inadequacy of the earlier sentence or significant new facts were merely examples of cases in which a second sentencing judge is not bound by the sentences imposed by the first sentencing judge; and that I should make my own assessment of the criminality involved in the commission of the offences and impose such sentences as I considered to be appropriate. 80 It was further submitted by the Crown that, in any event, the sentences imposed by Judge Backhouse were manifestly inadequate; that the evidence before me included evidence of significant new facts which had not been before Judge Backhouse; that Judge Backhouse had erred in applying s 16G of the Commonwealth Crimes Act; and that Judge Backhouse had erred in applying Pearce v The Queen. 81 The Crown submitted that in the exercise of my own sentencing discretion I should impose a heavier sentence of imprisonment for the insider trading offence than Judge Backhouse had, that I should impose heavier sentences of imprisonment for the reporting offences than Judge Backhouse had, that the sentences of imprisonment for the reporting offences should be cumulative upon each other and should be cumulative upon the sentence of imprisonment for the insider trading offence and that I should impose substantial fines for the insider trading offence and each of the reporting offences. 82 It was submitted by counsel for Mr Hannes that I could not properly impose heavier sentences than had been imposed by Judge Backhouse, unless I found that the sentences imposed by Judge Backhouse were manifestly inadequate to the point where the Court of Criminal Appeal would allow a Crown appeal against sentence on the ground of manifest inadequacy or I found that the facts before me were significantly different from the facts which had been before Judge Backhouse. It was submitted that the sentences imposed by Judge Backhouse were not manifestly inadequate and that the facts before me were not significantly different. It was further contended that Judge Backhouse had not erred in applying s 16G of the Commonwealth Crimes Act and had not erred in applying Pearce v The Queen. 83 Counsel for Mr Hannes further submitted that I was not constrained from imposing lighter sentences than had been imposed by Judge Backhouse, that I should impose lighter sentences than her Honour had, that I should not impose any fine, and that I should, either by reducing the terms of the sentences of imprisonment or by making a different recognizance release order, impose sentences such that Mr Hannes would be entitled to be released immediately and would not have to serve any further period of imprisonment. 84 Because of the division of judicial opinion and because the remarks by justices of the High Court in McL were, strictly speaking, dicta, it is not entirely clear what principles I should apply in the re-sentencing of Mr Hannes. I consider that it would clearly be open to me to impose a heavier sentence than Judge Backhouse did, if I consider that a sentence imposed by her was so manifestly inadequate that it would be set aside on a Crown appeal on the ground of its manifest inadequacy. I also consider that it would be open to me to impose a heavier sentence than Judge Backhouse did, if I consider that there are new, significantly different facts before me which were not before Judge Backhouse. I also consider that it would be open to me to impose a heavier sentence than Judge Backhouse did, if I consider that Judge Backhouse made a significant specific error in sentencing Mr Hannes. It is not clear whether there are any other circumstances in which I would be justified in imposing a heavier sentence than Judge Backhouse did. If I consider that a sentence imposed by Judge Backhouse is within the permissible range of sentences and, hence, is not manifestly inadequate, it is at least doubtful whether I should impose any heavier sentence, merely because, if I had been sentencing Mr Hannes for the first time, I would have imposed a somewhat heavier sentence. In the sentencing of Mr Hannes I take into account the policy considerations referred to in the judgments from which I have quoted.

The Insider Trading Offence 85 It was submitted by the Crown that, subject only to the fact that Mr Hannes was ultimately thwarted from obtaining the proceeds of the sale of the options, it would be difficult to conceive of a more objectively serious offence of insider trading than that committed by Mr Hannes. In support of this submission the Crown referred to a number of facts. Substantially the same facts had also been relied on in the proceedings on sentence before Judge Backhouse and are listed at pages 28-30 of her Honour's Remarks on Sentence. 86 In the list I am about to give I have abbreviated, re-arranged and elaborated on these facts to some extent and I have omitted alleged facts on which I consider the Crown is not entitled to rely. Subject to these qualifications, the facts which were relied on by the Crown and which I accept were:- 87 (a) Mr Hannes was an experienced share trader, with particular expertise in take-overs. 88 (b) He held a senior position in the Corporate Advisory Division of the merchant bank which was advising the target company T.N.T. with respect to the proposed take-over. 89 (c) The information which Mr Hannes acquired and used was highly confidential information, which had been entrusted by T.N.T. to its financial adviser Macquarie Corporate Finance and, although Mr Hannes was not one of the persons in the Corporate Advisory Division directly entrusted with the information, the use of the information by Mr Hannes was a serious breach of trust. 90 (d) The kind of conduct in which Mr Hannes engaged undermines the efficacy and integrity of the market in public securities. The Crown referred to what the present Chief Judge at Common Law said in R v Pantano (1990) 49 A Crim R 328 at 330:- "Those involved in serious white collar crime must expect condign sentences. The commercial world expects executives and employees in positions of trust,… to conform to exacting standards of honesty. It is impossible to be unmindful of the difficulty in detecting sophisticated crimes of the kind here involved or of the possibility for substantial loss by the public… the element of general deterrence is an important element of sentencing for such offences". 91 (e) Mr Hannes' motive was profit for himself. He endeavoured to maximise his profit by acquiring options and not shares in T.N.T., by instructing Mr Staehli not to sell immediately after the announcement of the take-over offer by K.P.N. in case some other party made a higher offer and by instructing Mr Staehli to sell the options from 4 November 1996 onwards in such a way as to maximise the profit. 92 (f) An elaborate scheme was planned by Mr Hannes and carried out by him over a period of time. The scheme involved the creation by Mr Hannes of a fictitious person Mark Booth so as to distance himself from the commission of the offence and conceal that he was the offender. 93 (g) The implementing of the plan involved a series of dishonest acts, including the making of many knowingly false representations, both orally and in writing. 94 (h) Mr Hannes was fully conscious of the wrongfulness of his conduct, both as being in breach of the law and as being in breach of the rules of the Macquarie Bank regarding investing in securities by employees or officers of the Bank. 95 (i) After the acquisition of the options Mr Hannes engaged in further knowingly false and deceptive conduct, for example in writing or speaking on the telephone to Mr Staehli and when being interviewed by the Australian Federal Police and the Australian Securities Commission, and he endeavoured to destroy potentially incriminating evidence by ripping pages out of notebooks on which he had made notes planning the criminal venture and by deleting files from his computer. 96 Counsel for Mr Hannes submitted that the objective seriousness of the insider trading offence was mitigated by a number of factors, including that Mr Hannes had not ultimately gained any benefit and no one had ultimately suffered any loss, this was a case of a single transaction rather than a number of transactions, Mr Hannes had not disclosed the confidential information to anyone else, he had not been the person who had been directly entrusted with the information and this was not a case where the person responsible for keeping the share market informed withholds information so as to benefit from the information. 97 It was also submitted by counsel for Mr Hannes that some of the facts relied on by the Crown as showing the objective seriousness of the offence of insider trading committed by Mr Hannes will usually be present in offences of insider trading, for example that the information is highly confidential, that the offender's conduct has a tendency to undermine the integrity of the securities market, that the offender's motive is profit for himself and that the offender is conscious that he is acting wrongly. 98 It was also submitted by counsel for Mr Hannes that I should not accept some of the matters initially sought to be relied on by the Crown as showing the objective seriousness of the insider trading offence. It was submitted that, contrary to a submission made by the Crown, the sellers of the options would not necessarily have incurred heavy losses by reason of Mr Hannes' conduct if the court proceedings had not been brought, because the sellers might have sold the options in any event or, having sold the options to Mr Hannes, might have taken steps to hedge their potential exposure. It was also submitted that I could not be satisfied that at the time of his conversation with Mr Murdoch Mr Hannes had already formed an intent to commit the insider trading offence and had abused his position of authority in obtaining information from Mr Murdoch. I am prepared to accept these submissions by counsel for Mr Hannes. However, it was, at least, quite possible that the sellers of the options would have incurred heavy losses by reason of Mr Hannes' conduct. 99 It was also pointed out by counsel for Mr Hannes that the white collar crime involved in Pantano was a different kind of white collar crime. I accept that the white collar crime in Pantano was a different kind of white collar crime but the principles stated by the Chief Judge are equally applicable. 100 In relation to both the insider trading offence and the reporting offences counsel for Mr Hannes referred to the favourable subjective circumstances of Mr Hannes and to the severe punishment Mr Hannes has already suffered and will continue to suffer, quite apart from any sentences I impose, as a result of committing the offences. 101 Mr Hannes' favourable subjective circumstances include that he is a person of previous good character, who had an outstanding, unblemished career as a merchant banker. He had often previously been in possession of highly confidential information and there was no previous instance of his misusing confidential information. 102 As a result of being convicted of these offences Mr Hannes was dismissed by the Macquarie Bank. He has not obtained other employment and it will be impossible for him to find other employment as a merchant banker or a corporate adviser. 103 Mr Hannes has suffered heavy financial loss as a result of committing these offences. He has lost the income he otherwise would have earned as a merchant banker. By giving Ord Minnett and the trustee of the Ord Minnett Cash Management Trust the direction he did, he lost, not merely the profits from the sale of the options, but also the sum of about $90,000 of his own money which he had paid into the Ord Minnett Cash Management Trust account. He has forfeited an amount of almost $1m in benefits in a fund for executives of the Macquarie Bank. Since he was arrested on 17 January 1997 he has incurred more than $3m in legal costs in defending the charges or in appealing. 104 The offences were committed in September 1996, more than six years ago. During that period there have been two aborted trials in the District Court, the District Court trial presided over by Judge Backhouse, the appeal to the Court of Criminal Appeal, a long voir dire inquiry before me and a long trial in the Supreme Court presided over by me. During that period Mr Hannes has been subject to severe stress and his life has been in a state of suspense. During that period Mr Hannes has been subject to much media attention and he has suffered public disgrace and humiliation. 105 It was submitted by his counsel that I should find that Mr Hannes has good prospects of rehabilitation and that I should find that he had taken steps to ensure that the sellers of the options would not suffer loss. Throughout the years he has been on bail he has not committed any further offence. 106 It was submitted that, as stated by the Chief Justice in his judgment on the appeal to the Court of Criminal Appeal, the very fact of Mr Hannes' conviction is, in itself, a severe punishment for a person who was in the position of Mr Hannes. 107 The Crown accepted that Mr Hannes had the favourable subjective circumstances relied on by counsel for Mr Hannes. However, the Crown submitted that previous good character is not as significant in sentencing for an offence such as insider trading as it might be in sentencing for some other offences, because it is less likely that a person of bad character or having a previous criminal history will be in a position of trust or come into possession of confidential information and so have an opportunity of committing an offence of insider trading. 108 The Crown accepted that Mr Hannes had suffered the various items of extra-curial punishment referred to by counsel for Mr Hannes. The Crown pointed out that there was no evidence that the legal costs incurred by Mr Hannes had actually been paid or, if paid, had been paid by Mr Hannes. 109 The Crown submitted that Mr Hannes had not manifested any contrition. His action in directing Ord Minnett and the trustee of the Ord Minnett Cash Management Trust to pay the money in the Cash Management Trust account as the Australian Securities Commission should direct, did not spring from any contrition or any desire to ensure that no one suffered any loss but out of a realisation that it would be impossible, given the court proceedings and the court order, for him to collect the money and out of a hope that, if the sellers of the options did not suffer any loss, the investigation into the trading in the options might be discontinued. 110 The Crown submitted that I should not find that Mr Hannes, notwithstanding his previous good character, had good prospects of rehabilitation. It was submitted that there had been a high level of deceit in the commission of the offences and in Mr Hannes' subsequent attempts to frustrate the investigation into the offences. Mr Hannes had not made any admission of guilt. 111 Counsel for Mr Hannes submitted that I should infer from the part of the Chief Justice's judgment on the appeal to the Court of Criminal Appeal, in which the Chief Justice was considering whether, the appeal against conviction having succeeded, a new trial should be ordered, that the Chief Justice had formed the view that the sentences imposed by Judge Backhouse were not manifestly inadequate. The Crown appeal against sentence had been the subject of written submissions to the Court of Criminal Appeal and was fully argued at the hearing before the Court of Criminal Appeal. It was submitted that, if the Chief Justice had thought that the sentences imposed by Judge Backhouse were manifestly inadequate, he would have said so, as supplying an additional ground for rejecting a submission made on behalf of Mr Hannes that the short time remaining unserved of the pre-release period of the sentences imposed by Judge Backhouse was a reason for not ordering a new trial. Not only did the Chief Justice not make such a remark but the Chief Justice expressly said that "the likely additional penalty to be imposed on a further conviction would be short". In this respect the present case was quite different from that of Merritt, where the Court of Criminal Appeal in Merritt (No.1) had expressly said that the argument that the sentences imposed on Merritt after the first trial were unjustifiably lenient was a strong one. 112 Counsel for the Crown submitted that I should not infer from the Chief Justice's quite brief remarks in dealing with a different subject, that is whether a new trial should be ordered, that the Chief Justice had formed any concluded view about the adequacy of the sentences imposed by Judge Backhouse. I have decided that I can obtain some, but only limited, guidance from this part of the Chief Justice's judgment. 113 After considering the submissions made by the parties I have concluded that the offence of insider trading committed by Mr Hannes was, by virtue of facts relied on by the Crown, objectively very serious and would, objectively, have been within the worst class of cases of the offence, were it not that Mr Hannes did not gain any benefit from his trading in the options and no one suffered any loss. I do not consider that any of the other circumstances sought to be relied on by counsel for Mr Hannes as mitigating circumstances, taken singly or in combination, would have prevented the offence falling within the worst class of cases. As to the circumstance that Mr Hannes did not gain any benefit and no one suffered any loss, I accept the Crown's submission that this was not due to any contrition or any desire on Mr Hannes' part to ensure that no one suffered any loss, but to the swift action taken by the Australian Securities Commission and to a realisation by Mr Hannes that it would be impossible for him to collect the proceeds of the sale of the options and a hope on his part that, if the sellers of the options were paid the proceeds of sale, the investigation into the trading in the options might be discontinued. 114 The conclusion I have come to about the objective seriousness of the offence of insider trading committed by Mr Hannes seems to be the same as that reached by Judge Backhouse at p 36 of her Remarks on Sentence. 115 I accept that Mr Hannes has favourable subjective circumstances, including his previous good character, the absence of any previous criminal convictions, his outstanding career as a merchant banker and the absence of any previous instance of a misuse of confidential information. However, I also accept the Crown's submission that previous good character is not as significant as it is in the case of some other offences. 116 I accept that, as submitted by counsel for Mr Hannes, Mr Hannes has suffered severe extra-curial punishment, quite apart from any sentence imposed by me, some of which has been suffered since he was sentenced by Judge Backhouse and I should give some weight to this factor. 117 I accept that for a person who was in Mr Hannes' position the fact of conviction of these offences is part of the punishment. 118 I do not consider that Mr Hannes has shown any contrition and, for the reasons advanced by the Crown, I consider that I should not make a finding that Mr Hannes has good prospects of rehabilitation. 119 Having made findings about the degree of objective seriousness of the insider trading offence and the subjective circumstances of Mr Hannes and the punishment he has suffered and will continue to suffer, quite apart from any sentence imposed by me, I have first to determine whether the sentence imposed by Judge Backhouse for the insider trading offence was manifestly inadequate. 120 As I noted near the beginning of these remarks, under the Corporations Act the maximum penalty which can be imposed for an offence of insider trading is imprisonment for five years or a fine of $200,000, or both. 121 However, it is necessary in sentencing Mr Hannes to apply s 16G of the Commonwealth Crimes Act, which provides:- "If a federal sentence is to be served in a prison of a State or Territory where State or Territory sentences are not subject to remission or reduction, the court imposing the sentence must take that fact into account in determining the length of the sentence and must adjust the sentence accordingly". 122 Because of s 16G of the Commonwealth Crimes Act and the absence of remissions on sentence in New South Wales, the maximum sentence of imprisonment which can be imposed in New South Wales for an offence of insider trading, if the adjustment downwards required by s 16G is made at the usual, if not inflexible, rate of one third, is imprisonment for three years four months. 123 The maximum sentence of imprisonment for an offence should be reserved for cases falling within the worst class of cases of the offence. It has been found both by Judge Backhouse and myself and would appear to me to have been conceded by the Crown both before Judge Backhouse and myself, that the present case does not fall within the worst class of cases, because Mr Hannes did not gain any benefit from his trading in the options and no one suffered any loss. Additionally, it was not disputed by the Crown, and I find, that some allowance should be made in favour of Mr Hannes for his subjective circumstances and the undoubtedly severe extra-curial punishment he has suffered as a result of committing the offences. I consider that the matters to which I have referred would have the consequence of reducing any sentence of imprisonment which could properly be imposed for the insider trading offence, after making the adjustment downwards required by s 16G, to a sentence of less than three years. In my opinion, the sentence of imprisonment for two years two months which was imposed by Judge Backhouse, particularly when combined with a fine of $100,000, cannot be regarded as manifestly inadequate so as to justify me in imposing a heavier sentence of imprisonment than Judge Backhouse did, on the grounds that the sentence of imprisonment imposed by her was manifestly inadequate. 124 I have held that it would be open to me to impose a heavier sentence for the insider trading offence than Judge Backhouse did, if I considered that there were significantly different facts before me than were before Judge Backhouse. It was submitted by the Crown that there were significantly different facts before me, in:- 125 1. Four deleted files from a floppy disk seized during the execution of the search warrant on 17 January 1997, which were retrieved by Mr Buttner, an information technology expert, and which became exhibits D71 to D74 at the trial before me. These files purport to be an agreement between Mr Hannes and Mark Booth and three communications from Mark Booth to Mr Hannes. In the light of the jury's verdicts all these documents must be regarded as fictions created by Mr Hannes. 126 2. The so called "pros and cons" document, which became exhibit 261 at the trial before me. This document refers to a separate person Mark Booth and must also, in the light of the jury's verdicts, be regarded as a fiction created by Mr Hannes. 127 I accept that evidence of the four files and evidence of the "pros and cons" document constitutes evidence of new facts which were not before Judge Backhouse. However, I do not consider that the new facts are significantly different from the facts which were before Judge Backhouse. There was much evidence before Judge Backhouse of false assertions by Mr Hannes that there was another person, quite separate from Mr Hannes, who was the person who had acquired the options. The files from the disk and the pros and cons document are simply further evidence of false representations by Mr Hannes that there was such a person. 128 It was submitted by the Crown that Judge Backhouse, in sentencing Mr Hannes, had made a specific error in applying s 16G of the Commonwealth Crimes Act and that the making of this error entitled me to impose whatever sentence I considered appropriate, even if it was heavier than the sentence imposed by Judge Backhouse. 129 In her Remarks on Sentence Judge Backhouse said at p 45:- "…the starting point before taking into account the adjustment, which must be made by reason of the fact you will serve your sentence in a prison in New South Wales, where there is no provision for remissions or reduction, is a period of four years. I adjust that for the absence of remissions in New South Wales, and for all of the matters I have indicated I will take into account, and I impose a term of imprisonment of two years and two months in respect of the offence of insider trading". 130 The Crown submitted that Judge Backhouse gave no explanation of how she had arrived at a period of four years as being a starting point; that her Honour should have applied the s 16G adjustment to a period of five years, because the maximum sentence of imprisonment for an offence of insider trading is five years; and that, even if the s 16G adjustment was applied, at the usual rate of one third, to a period of four years, the result would be two years eight months, and not two years two months. 131 This part of her Honour's Remarks on Sentence is not entirely clear. However, it seems to me probable that her Honour took a period of four years, and not a period of five years, as being a starting point, because she had found that the offence committed by Mr Hannes was saved from being an example of the worst class of cases by the fact that Mr Hannes had not obtained any benefit from his trading. At the beginning of her Remarks on Sentence her Honour had correctly stated the maximum penalty of imprisonment for an offence of insider trading as being five years and I do not consider that I should find that her Honour was under any misapprehension regarding the maximum period of imprisonment for the offence. 132 I further consider that it is quite clear from her Honour's Remarks on Sentence that she reduced the period of four years to two years two months, not just by applying s 16G of the Commonwealth Crimes Act, but also by taking into account the matters she had earlier in her remarks said she would take into account in favour of Mr Hannes, including his previous good character and the severe extra-curial punishment he had suffered, including delay, anxiety and stress, public disgrace and humiliation, loss of standing, position and livelihood, his life being in a state of suspense and the forfeiture of his interest in the fund for executives of the Macquarie Bank. 133 I do not consider that her Honour made the errors suggested by counsel for the Crown. 134 Having decided that the sentence imposed by Judge Backhouse was not manifestly inadequate, that there are no significantly different facts before me, that Judge Backhouse did not make the specific errors alleged, and that the maximum sentence of imprisonment which could properly be imposed for the insider trading offence, after making the adjustment downwards required by s 16G, would be less than three years, I conclude that I should not impose a heavier sentence for the insider trading offence than Judge Backhouse did. 135 It was submitted, correctly, by counsel for Mr Hannes that, while in accordance with the cases to which I have referred earlier in these remarks, a sentencing judge should not ordinarily impose a heavier sentence on a re-sentencing after a successful appeal and a further conviction than was imposed by the first sentencing judge, there is no such restriction on the imposing of a lighter sentence than was imposed by the first sentencing judge. 136 It was submitted by counsel for Mr Hannes that the sentence imposed by Judge Backhouse for the insider trading offence, so far from being lenient, was severe. Even if the sentence imposed by Judge Backhouse was a proper sentence at the time at which her Honour imposed it, events which had happened subsequently would entitle Mr Hannes to a lighter sentence. Since Judge Backhouse sentenced Mr Hannes a further period of three years has elapsed, in which Mr Hannes has suffered further anxiety and stress and further suspension of his life, has been subjected to further legal proceedings and has incurred further legal expenses of nearly $2m. 137 It was submitted in written submissions on behalf of Mr Hannes that Mr Hannes had been prepared to consent to steps which would have shortened the proceedings before me but which the Crown was not prepared to consent to. However, at the hearing of the proceedings on sentence it was agreed by the parties that I should not seek to attribute any fault to either party for the length of the proceedings before me. 138 Counsel for Mr Hannes submitted that I should impose a lighter sentence for the insider trading offence, by imposing a lesser term of imprisonment and by not imposing any fine. 139 In support of the submission that I should not impose any fine, it was submitted that under s 16C of the Commonwealth Crimes Act I have to take into account Mr Hannes' financial circumstances, that Mr Hannes has continued to be unable to earn income, that his personal income tax returns which he produced at the hearing of the proceedings on sentence disclosed only modest income, that he had incurred very heavy legal costs, that at times during the trial he had been unable to afford full representation by two counsel and a solicitor, that his lack of means would limit the legal representation he could afford on any appeal, that Judge Backhouse's attention had not been drawn to the loss by Mr Hannes of the $90,000 of his own money paid into the Cash Management Trust account and that the loss of his benefits in the fund for executives of the Macquarie Bank, which Judge Backhouse had taken into account as a possible outcome for him, was now a definite or at least highly probable outcome. It was submitted that a common reason for imposing a fine is to strip an offender of the proceeds of his offence. Such a reason was inapplicable here. 140 The Crown submitted that I should not impose any lighter sentence for the insider trading offence than had been imposed by Judge Backhouse. Indeed, the Crown's submission, as I have already noted, was that I should impose a heavier sentence. 141 As regards the imposition of a fine, the Crown accepted that I had to take into account Mr Hannes' financial circumstances. However, the Crown submitted, it is the responsibility of an offender to give and produce evidence of his financial circumstances. Mr Hannes did not give evidence in the proceedings on sentence and there was no evidence to support some of the submissions made by counsel for Mr Hannes. Although Mr Hannes produced copies of his personal income tax returns, he did not produce copies of the income tax returns of his private company Taxola Pty Limited, although he had been specifically requested to do so by the Crown. Evidence was given in the trial that Mr Hannes had in the past conducted share trading through Taxola Pty Limited. 142 It was submitted by the Crown that the fact that legal representatives had appeared for Mr Hannes on a voir dire inquiry that lasted for approximately two months and at a trial that lasted approximately four months suggested the existence of resources out of which a fine could be paid. 143 I accept that I am at liberty to impose a lighter sentence for the insider trading offence than Judge Backhouse did. However, even allowing for further facts which have occurred since Judge Backhouse sentenced Mr Hannes, I do not consider that I should impose a lighter sentence than her Honour did. I regard the offence of insider trading committed by Mr Hannes as objectively very serious and, even after other matters are taken into account, as requiring a sentence as severe as the sentence imposed by Judge Backhouse. In reaching this conclusion I have taken into account inter alia the provisions of s 16A and s 17A of the Commonwealth Crimes Act. I do not regard the sentencing decisions made some years ago on markedly different facts by a New South Wales District Court judge and a Victorian County Court judge as affording any real assistance in the sentencing of Mr Hannes. 144 I consider that I should impose the same fine of $100,000 as Judge Backhouse did. In reaching this conclusion I have taken into account the submissions made by the parties which I have summarised. 145 The imposition by Judge Backhouse of a fine of $100,000 played a part in my concluding that the total sentence imposed by her Honour for the insider trading offence was not manifestly inadequate. The imposition of a fine can properly serve the purpose of supplementing a sentence of imprisonment, so that the total sentence is an appropriate one. 146 I take into account Mr Hannes' financial circumstances, including the loss of his position with Macquarie Bank and the heavy expenses and losses he has incurred. However, as submitted by the Crown, I note that he himself did not give evidence in the proceedings on sentence, that he has been legally represented in court proceedings lasting approximately six months, that there is no evidence that the legal costs which he has incurred have been paid or, if paid, have been paid by him and that, notwithstanding a specific request made by the Crown, he has not produced the income tax returns of a company through which he conducted share trading in the past. There is no evidence to support a number of the submissions made by his counsel.

The Reporting Offences 147 The Crown submitted that the two reporting offences exhibited a number of the same features as the insider trading offence and that they also were objectively serious. It was submitted that the reporting offences, although closely linked to the insider trading offence, involved additional substantial criminality for which Mr Hannes should be separately punished. 148 Counsel for Mr Hannes submitted that the objective seriousness of the reporting offences was mitigated by the circumstances that the offences were not premeditated and that, although Mr Hannes must be taken to have been aware that cash transactions of $10,000 or more had to be reported, he did not know it was a criminal offence to conduct cash transactions in such a manner as to avoid the reporting requirement. 149 In assessing the degree of objective seriousness of the reporting offences, I am not bound to sentence Mr Hannes on a view of the facts, consistent with the jury's verdicts of guilty, which would be most favourable to him. Although the jury were directed that it would be sufficient for a verdict of guilty for them to find that Mr Hannes was a party to only two transactions falling within s 31(1) of the Financial Transaction Reports Act, I am satisfied, in regard to the second count, that Mr Hannes was a party to six transactions falling within s 31(1) and, in regard to the third count, that Mr Hannes was a party to nine transactions falling with s 31(1). Hence, even though all the transactions occurred on the same day, Mr Hannes on that day engaged in persistent wrongful conduct. 150 I accept the submission made on behalf of Mr Hannes that the reporting offences were not long premeditated. On the Crown case Mr Hannes did not become aware of the reporting requirement under the Financial Transaction Reports Act until he made the withdrawal of $20,000 on Friday 6 September. At some time between the making of that withdrawal and his entering into the first cash transaction on 9 September, Mr Hannes decided that he would conduct all cash transactions in such a manner that they would not have to be reported. 151 The jury were directed that, in order to find Mr Hannes guilty of each reporting offence, they would have to be satisfied that at the time of conducting the transactions Mr Hannes knew that a transaction involving a transfer in cash of not less than $10,000 was required by law to be reported to a government agency but that a transaction involving a transfer in cash of less than $10,000 did not have to be reported and the jury must be taken to have been satisfied beyond reasonable doubt of this element of each offence. Accordingly, I will sentence Mr Hannes on the basis that he had such knowledge. 152 On the other hand, I could not be satisfied beyond reasonable doubt that at the time of conducting the transactions Mr Hannes knew that it was an offence to conduct cash transactions in such a manner as to avoid the reporting requirement. 153 I conclude that the reporting offences were objectively serious but not at the same level of seriousness as the insider trading offence. 154 I incorporate in this part of my Remarks on Sentence dealing with the reporting offences what I said earlier, when dealing with the insider trading offence, about the submissions of the parties and my findings concerning the subjective circumstances of Mr Hannes and the extra-curial punishment he has suffered. 155 When measured against the maximum sentence of imprisonment of five years, the sentences of imprisonment for four months for each of the reporting offences imposed by Judge Backhouse, given the level of objective seriousness of the offences and even taking into account the sentencing principle of totality, are lenient rather than severe. Nevertheless, I do not consider that I would be justified in finding that the sentences of imprisonment imposed by Judge Backhouse were manifestly inadequate, provided that the sentences of imprisonment for four months imposed by Judge Backhouse are treated as already incorporating any deduction required by s 16G and are not subject to any further adjustment downwards. 156 I note that in the written submissions by the Crown in support of the Crown appeal against the sentences imposed by Judge Backhouse, it was not submitted by the Crown that the sentences of four months imprisonment and a fine of $5,000 which Judge Backhouse had imposed for each of the reporting offences were in themselves manifestly inadequate. What was submitted by the Crown on the Crown appeal against the sentences for the reporting offences was that the sentences of imprisonment for the reporting offences should have been cumulative upon, and not concurrent with, the sentence of imprisonment for the insider trading offence. 157 As in the case of the insider trading offence I do not consider that there are new, significantly different facts before me which were not before Judge Backhouse, such as would justify me in imposing heavier sentences than her Honour did for the reporting offences. 158 I conclude that I should not impose heavier sentences of imprisonment for the reporting offences than Judge Backhouse did. On the other hand, having regard to the level of objective seriousness of the reporting offences, I do not consider that I should impose any lighter sentences of imprisonment than her Honour did. In reaching this conclusion I have taken into account inter alia the provisions of s 16A and s 17A of the Commonwealth Crimes Act. Accordingly, I will impose sentences of imprisonment for four months for each of the reporting offences. 159 I will reserve, until slightly later in these remarks, the question of fines for the reporting offences.

Concurrent or Cumulative Sentences 160 Judge Backhouse ordered that the two sentences of imprisonment for four months for the reporting offences be served concurrently with each other and concurrently with the sentence of imprisonment for the insider trading offence. 161 In the proceedings before Judge Backhouse the Crown accepted, and indeed submitted, that sentences of imprisonment for the reporting offences should be ordered to be served concurrently with each other. On the other hand, the Crown submitted before Judge Backhouse that sentences of imprisonment for the reporting offences should be ordered to be served cumulatively upon a sentence of imprisonment for the insider trading offence. 162 The Crown submitted before me that sentences of imprisonment for the reporting offences should be ordered to be served cumulatively on each other. This submission was not made in the proceedings on sentence before Judge Backhouse and was not made in the Crown appeal against the sentences imposed by Judge Backhouse and, as I have noted, is actually contrary to a submission which was made by the Crown in the proceedings on sentence before Judge Backhouse. I do not consider that I should order that the sentences of imprisonment for the reporting offences should be served cumulatively upon each other. 163 The Crown also submitted before me that sentences of imprisonment for the reporting offences, even if made concurrent with each other, should be made cumulative upon the sentence of imprisonment for the insider trading offence. This submission had also been made by the Crown in the proceedings on sentence before Judge Backhouse and on the Crown appeal. 164 The Crown accepted that the reporting offences were connected with the insider trading offence. However, the Crown submitted, the reporting offences involved substantial additional criminality to the criminality involved in the insider trading offence, for which Mr Hannes should be separately and effectively punished, and sentences of imprisonment for the reporting offences should be made cumulative on the sentence of imprisonment for the insider trading offence. 165 The Crown submitted that, in not making the sentences of imprisonment for the reporting offences cumulative upon the sentence of imprisonment for the insider trading offence, Judge Backhouse had made an error which was described by the Crown as an error in applying Pearce v The Queen. In order to understand this submission it is necessary to refer to parts of Judge Backhouse's Remarks on Sentence. 166 In her Remarks on Sentence Judge Backhouse made a number of findings of fact about the reporting offences. At p 8 of her Honour's Remarks on Sentence her Honour found that Mr Hannes had entered into the cash transactions the subject of the reporting offences with the intention of committing the insider trading offence but she further found that it did not follow that it would be appropriate to subsume punishment for the reporting offences under the insider trading offence. 167 At p 11 of her Remarks on Sentence her Honour found that the two reporting offences occurred in substantially the one enterprise, that Mr Hannes had had the intention of distancing himself from the fictitious person "Mark Booth" and that the criminality involved in the two reporting offences was considerable and called for custodial sentences for the offences. 168 At p 44 of her Remarks on Sentence her Honour said:- "In my view, the insider trading and the FTRA offences (that is, the reporting offences) committed by the prisoner cannot be said to arise out of the one incident. The insider trading offence could have been committed without the FTRA offences. The FTRA offences were separate acts calculated to put distance between himself and Booth so as to conceal his conduct. The FTRA offences involve discrete conduct which is not necessarily a prerequisite for the insider trading offence. However, rather than making the sentence which I propose to impose for the FTRA offences cumulative, I propose to impose a fine" 169 It was submitted by the Crown that Judge Backhouse, having found that the criminality in the reporting offences was considerable and required the imposition of custodial sentences and that the reporting offences involved conduct which was discrete from the conduct in the insider trading offence, erred in not making the sentences for the reporting offences cumulative on the sentence for the insider trading offence and, instead, in the case of each reporting offence imposing a fine of $5,000, which, although half the maximum fine, was a comparatively trifling amount. 170 Counsel for Mr Hannes submitted that it was proper to make sentences of imprisonment for the reporting offences fully concurrent with a sentence of imprisonment for the insider trading offence. The cash transactions which were the subject of the reporting offences had been entered into by Mr Hannes, with the intention of committing the insider trading offence. It was submitted that the reporting offences were part of Mr Hannes' course of conduct in committing the insider trading offence; that Mr Hannes had been engaged in one multi-faceted course of criminal conduct. 171 It was submitted by counsel for Mr Hannes that Judge Backhouse had not erred in applying the sentencing principle in Pearce v The Queen. On the contrary, she had properly applied that principle. Her Honour had fixed appropriate sentences for each of the offences and had then considered questions of cumulation or concurrence and questions of totality. Her Honour had decided to impose fines, which were solely referable to the reporting offences, in lieu of making the sentences of imprisonment for the reporting offences cumulative on the sentence of imprisonment for the insider trading offence. 172 It was submitted by counsel for Mr Hannes that, if her Honour had made the sentences of imprisonment for the reporting offences cumulative on the sentence of imprisonment for the insider trading offence, the resulting combination of prison sentences would have offended the principle of totality and would have been excessive. 173 I agree with the findings made by Judge Backhouse that the criminality involved in the commission of the reporting offences was considerable and required the imposition of sentences of imprisonment. I also agree with her Honour's finding that, although the commission of the reporting offences was connected with the commission of the insider trading offence, there was discrete criminality in the commission of the reporting offences and punishment for the reporting offences should not be subsumed in the punishment for the insider trader offence. 174 However, I do not agree with her Honour's decision, after making all her earlier findings, not to make the sentences of imprisonment for the reporting offences cumulative on the sentence of imprisonment for the insider trading offence but to impose two fines of $5,000 each. In my opinion, this decision, whether or not it is described as an error in applying Pearce v The Queen, had the effect, even paying full regard to the principles governing the imposing of concurrent and cumulative sentences and the sentencing principle of totality, of making the punishment for the reporting offences manifestly inadequate. The only effective punishment under her Honour's sentences for the reporting offences, which were objectively serious and which involved additional criminality to the criminality in the insider trading offence, consisted of fines of comparatively trifling amounts (even if half of the maximum fine). In my opinion, I should order that the two sentences of imprisonment for four months for the reporting offences, while they are to be served concurrently with each other, should be served cumulatively on the sentence of imprisonment for the insider trading offence. Because the terms of imprisonment for four months are lenient rather than severe and are to be served concurrently with each other, they should be served fully cumulatively upon the sentence for the insider trading offence. 175 As Judge Backhouse imposed the fines of $5,000 each in lieu of making the sentences cumulative and I have decided that the sentences should be served cumulatively, I will not impose any fines for the reporting offences.

Recognisance Release Order 176 I have decided that for the insider trading offence I should sentence Mr Hannes to imprisonment for a term of two years two months and that for each of the reporting offences I should sentence him to imprisonment for a term of four months, these latter two sentences to be served concurrently with each other but cumulatively upon the sentence for the insider trading offence. The total sentence is, accordingly, two years six months. As the sentences do not in the aggregate exceed three years and as I am not satisfied that it is not appropriate to make a recognisance release order, I am required to make a recognisance release order. 177 Judge Backhouse, who imposed sentences totalling two years two months, made a recognisance release order that Mr Hannes be released at the expiration of eighteen months, that is her Honour made a recognisance release order such that the pre-release period, which Mr Hannes would have to serve in prison before being released, was just under 70 per cent of the total sentence. 178 It was submitted by counsel for Mr Hannes that Judge Backhouse had erred in making such a recognisance release order under which the pre-release period was such a high percentage of the total sentence. It was submitted that the usual range of percentages was lower; that a percentage of about 70 per cent or higher should be reserved for the most serious cases; that Judge Backhouse had not given any reason in her Remarks on Sentence for making a recognisance release order under which the pre-release period would be such a high percentage of the total sentence; that in sentencing white collar offenders there is often a substantial gap between the head sentence and the non-parole period or the pre-release period, because such offenders often have no prior criminal history, are unlikely to re-offend and have good prospects of rehabilitation; and that an important factor in determining what percentage of a head sentence an offender should have to serve in prison before being released or being eligible to be released on parole is the offender's prospects of rehabilitation. It was submitted that Mr Hannes had no previous criminal history and has good prospects of rehabilitation. 179 It was accepted by the Crown that generally in the sentencing of federal offenders non-parole periods or pre-release periods range between 60 per cent to 66 2/3 per cent of the head sentences. 180 The Court of Criminal Appeal has held that generally, although far from inflexibly, the norm for non-parole periods or pre-release periods in sentences for Federal offences is in the range of between 60 per cent and 662/3 per cent of the head sentences. Judge Backhouse gave no reason for making a recognisance release order such that the pre-release period would be as much as approximately 70 per cent of the head sentence and I do not consider that I should make a recognisance release order under which the percentage would be so high. 181 I propose to make a recognisance release order such that the pre-release period is 662/3 per cent of the total sentences of two years six months. As I have indicated, such a recognisance release order would be within the normal range of such orders. A factor which I can properly take into account in fixing the pre-release period is the length of the head sentences and the position of the head sentences in the permissible range of sentences for those offences. I have also taken into account my earlier finding that Mr Hannes has not shown any contrition and my decision that I should not make a finding that Mr Hannes has good prospects of rehabilitation. 182 The effect of my sentencing decisions is that Mr Hannes, having already served 15 months 22 days of imprisonment under the sentences passed by Judge Backhouse, will have to serve a short further period of imprisonment of four months nine days. It was submitted on behalf of Mr Hannes that no purpose would be served in requiring Mr Hannes to serve a short further period of imprisonment. If I had been sentencing Mr Hannes for the first time, this argument would have had more force. However, I am sentencing Mr Hannes after a previous sentencing and an appeal. I note that the Chief Justice in his judgment in the Court of Criminal Appeal clearly contemplated that a likely result of a conviction on a re-trial would be a short further period of imprisonment. 183 I will make the sentences I am about to pass commence from 22 August 2001, that is fifteen months twenty-two days before today, so as to allow for the period of fifteen months twenty-two days Mr Hannes has already served in prison. 184 Mr Hannes stand up 185 For the offence of insider trading I sentence you to imprisonment for a term of two years two months commencing on 22 August 2001 and expiring on 21 October 2003 and I impose a fine of $100,000. For each of the reporting offences I sentence you to imprisonment for a term of four months commencing on 22 October 2003 and expiring on 21 February 2004, the two sentences to be served concurrently with each other but cumulatively upon the sentence of imprisonment for the insider trading offence. I do not impose any fine for the reporting offences. I make a recognisance release order to take effect after one year eight months from 22 August 2001, that is on 21 April 2003. 186 I am required to explain the purpose and consequences of the making of the recognisance release order. Service of the sentence will entail a period of imprisonment equal to the re-release period of one year eight months from 22 August 2001 which I have specified and then a period of service in the community equal to the balance of the sentence. Your release on recognisance pursuant to the recognisance release order may be subject to conditions. If without reasonable excuse you breach any of those conditions, you may have to return to prison to serve the balance of the sentence. Any recognisance you enter into in accordance with the recognisance release order may be discharged or varied.

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