(1988) 165 CLR 292
Papakosmas v The Queen [1999] HCA 37
(1999) 196 CLR 297
Perry v The Queen [1982] HCA 75
Source
Original judgment source is linked above.
Catchwords
(1993) 178 CLR 193
HML v The Queen [2008] HCA 16(2008) 235 CLR 334
Hoch v The Queen [1988] HCA 50(1988) 165 CLR 292
Papakosmas v The Queen [1999] HCA 37(1999) 196 CLR 297
Perry v The Queen [1982] HCA 75(1982) 150 CLR 580
Pfennig v The Queen [1995] HCA 7(1995) 182 CLR 461
Phillips v The Queen [2006] HCA 4(1990) 171 CLR 207
R v Ellis [2003] NSWCCA 319(2003) 58 NSWLR 700
R v FEx parte Attorney-General [2004] 1 QD R 162
R v Folbigg [2005] NSWCCA 23(2005) 152 A Crim R 35
R v GAC [2007] NSWCCA 315(2007) 178 A Crim R 408
R v Lockyer (1996) 89 A Crim R 457
R v Scholl (No 2) [2009] VSC 237(2009) 53 MVR 8
R v Shamouil [2006] NSWCCA 112(2006) 66 NSWLR 228
R v Teys [2001] ACTSC 29(2001) 119 A Crim R 398
R v Zhang [2005] NSWCCA 437(2005) 158 A Crim R 504
Re Attorney General's Reference (No 1 of 1975) [1975] QB 773
Samadi & Anor v R [2008] NSWCCA 330(2008) 192 A Crim R 251
Shepherd v The Queen [1990] HCA 56
(1990) 170 CLR 573
Sutton v R [1984] HCA 5
(1984) 152 CLR 528
TKWJ v The Queen [2002] HCA 46
(2002) 212 CLR 124
Washer v Western Australia [2007] HCA 48
Judgment (88 paragraphs)
[1]
R v Folbigg [2005] NSWCCA 23; (2005) 152 A Crim R 35
R v GAC [2007] NSWCCA 315; (2007) 178 A Crim R 408
R v Lockyer (1996) 89 A Crim R 457
R v Scholl (No 2) [2009] VSC 237; (2009) 53 MVR 8
R v Shamouil [2006] NSWCCA 112; (2006) 66 NSWLR 228
R v Teys [2001] ACTSC 29; (2001) 119 A Crim R 398
R v Zhang [2005] NSWCCA 437; (2005) 158 A Crim R 504
Re Attorney General's Reference (No 1 of 1975) [1975] QB 773
Samadi & Anor v R [2008] NSWCCA 330; (2008) 192 A Crim R 251
Shepherd v The Queen [1990] HCA 56; (1990) 170 CLR 573
Sutton v R [1984] HCA 5; (1984) 152 CLR 528
TKWJ v The Queen [2002] HCA 46; (2002) 212 CLR 124
Washer v Western Australia [2007] HCA 48; (2007) 234 CLR 492
Category: Procedural and other rulings
Parties: Regina (Crown)
Daniel Shayne Joffe (Accused)
Nathan Stromer (Accused)
Representation: Counsel:
J V Agius SC/J Paingakulam (Crown)
R G McHugh SC/G A Bashir (Joffe)
S J Odgers SC/L Fernandez (Stromer)
The Crown, on indictment, charged Daniel Shayne Joffe with 10 counts pursuant to s.1043A(1)(d) of the Corporations Act 2001 (the Act) and Nathan Stromer, with 10 counts pursuant to s.1043A(1)(c) of that Act.
The provisions of s.1043A form part of Subdivision B - The Prohibited Conduct - under Chapter 7, Part 7.10 (the insider trader prohibitions):-
"1043A Prohibited conduct by person in possession of inside information
(1) Subject to this Subdivision, if:-
(a) a person (the insider) possesses inside information; and
(b) the insider knows, or ought reasonably to know, that the matters specified in paragraphs (a) and (b) of the definition of inside information in section 1042A are satisfied in relation to the information;
the insider must not (whether as principal or agent):-
(c) apply for, acquire, or dispose of, relevant Division 3 financial products, or enter into an agreement to apply for, acquire, or dispose of, relevant Division 3 financial products; or
(d) procure another person to apply for, acquire, or dispose of, relevant Division 3 financial products, or enter into an agreement to apply for, acquire, or dispose of, relevant Division 3 financial products.
…"
The elements of the offences with which Mr Joffe has been charged include:-
(1) That he was an insider.
(2) That he "possessed" inside information as defined in s.1042A.
(3) That, contrary to s.1043A(1), he procured another person, namely, the accused Mr Stromer, to apply for, acquire or dispose of relevant Division 3 products being the products in the counts in the indictment.
The Crown alleges against Mr Stromer that he had possession of inside information as particularised in each of Counts 11 to 20 in the indictment and that he intentionally acquired the financial products particularised in those counts whilst in possession of such information.
In relation to the offence with which Mr Joffe has been charged, s.1043A(1)(d) defines the term "procure" as including, without limiting its meaning, "... incites, induces or encourages an act or omission by another person ...": s.1042F of the Act.
In the indictment, the Crown alleges that between about 1 June 2006 and 31 January 2007, Mr Joffe (through his employment with Moody's Investor Services Pty Ltd) ("Moody's") came into possession of inside information concerning a number of different corporate entities and that, on each occasion, he procured his friend, Mr Stromer, to acquire the relevant financial products.
The entities, the financial products and the counts in the indictment are as follows:-
"(a) GasNET Australia Group (GasNet) - financial products acquired by Mr Stromer were GasNet shares - count 1 (Mr Joffe) and [count] 11 (Mr Stromer)
(b) Auckland International Airport Ltd (AIA) - financial products acquired by Mr Stromer were AIA shares - [count 2 Mr Joffe) and] count 12 (Mr Stromer)
(c) AWB Ltd (AWB) - financial products acquired by Mr Stromer were AWB CFDs - count 3 (Mr Joffe) and count 13 (Mr Stromer)
(d) Bora! Ltd (BLD) - financial products acquired by Mr Stromer were BLD CFDs - count 4 (Mr Joffe) and count 14 (Mr Stromer)
(e) Alinta Infrastructure Holdings (AIHCA) - financial products acquired by Mr Stromer were AIHCA CFDs - count 5 (Mr Joffe) and count 15 (Mr Stromer)
(f) Sydney Roads Group Ltd (SRG) - financial products acquired by Mr Stromer were SRG CFDs and SRG warrants - counts 6-9 (Mr Joffe) and counts 16-19 (Mr Stromer)
(g) Rinker Group Ltd (RIN) - financial products acquired by Mr Stromer were RIN CFDs & RIN shares - count 10 (Mr Joffe) and count 20 (Mr Stromer)."
[4]
(a) Mr Joffe's notice of motion
The accused, Mr Joffe, by way of notice of motion filed on 11 March 2011, seeks, inter alia, the following orders:-
"1 An order pursuant to section 192A of the Evidence Act 1995 that the question of the admissibility of the Crown's Coincidence Evidence be determined in advance of the trial.
2. Further to order 1, a ruling pursuant to section 98 or 101 of the Evidence Act 1995 that the Crown's Coincidence Evidence not be admitted at the trial of each of the charges in the indictment.
3. order pursuant to section 21 of the Criminal Procedure Act 1986 that the charges in the indictment, other than charges 6 to 9, be tried separately."
[5]
(b) Stromer's notice of motion
A notice of motion was filed on behalf of Mr Stromer on 11 March 2011, in slightly different terms, however, the orders sought are to the same effect.
[6]
(3) Advance Ruling
The hearing of the motions proceeded over a number of days (20, 21, 22 June 2011,19 and 20 July 2011). "Advance rulings" on such applications may add to the overall efficiency of a criminal trial and thereby serve the ends of justice: Adam v R [2001] HCA 57; (2001) 207 CLR 96, 112; see also TKWJ v The Queen [2002] HCA 46 at [42]-[43]; (2002) 212 CLR 124 per Gaudron J at 137-138. Difficult questions concerning the admissibility of evidence may qualify in that respect. In the present proceedings, a number of issues have been raised on behalf of the applicants/accused, which, in turn, has required a detailed examination of the evidence proposed to be led in the Crown case in relation to specified "events" as set out in the Coincidence Notice. The detailed documentary analyses undertaken by counsel for the Crown and counsel for Mr Joffe and Mr Stromer, the written primary and reply submissions and the supplementary oral submissions (supplementing both the primary and reply submissions) and the five day hearing all indicate that an advance ruling approach is appropriate. Accordingly, I make an order as sought in paragraph 1 of the notices of motion.
[7]
(4) The evidence sought to be admitted under s.98
The Crown seeks to lead coincidence evidence on the basis that the evidence pertaining to each individual count is admissible in respect of each other count.
The Crown also proposes to adduce evidence of three uncharged events relating to the following entities and financial products:-
(1) Publishing and Broadcasting Ltd ("PBL"). The financial products acquired by Mr Stromer in respect of PBL were Contracts for Difference ("CFDs").
(2) Downer EDI Ltd ("DOW"). The financial products acquired by Mr Stromer in respect of DOW were CFDs.
(3) Australian Pipeline Trust ("APA"). The financial products acquired by Mr Stromer were APA units.
The object of the orders sought in the notices of motion under to s.29(3) and s.21 of the Criminal Procedure Act 1986 is to create the basis for an order severing the counts on the indictment so that there is a trial of each accused on the individual counts (other than in relation to Sydney Roads Group Ltd ("SRG")).
The separate trial issue is, in that way, interdependent with the coincidence evidence issue. The question of severance of the counts, in other words, turns on whether the Crown is to be permitted, in relation to each individual count, to rely upon the evidence it seeks to tender in proof of each other count and vice versa.
The applications seek orders for joint trials of the two accused in respect of the counts identified below:-
(1) Counts 1 and 11 - GasNet Australia Group ("GasNet").
(2) Counts 2 and 12 - Auckland International Airport Ltd ("AIA").
(3) Counts 3 and 13 - AWB Ltd ("AWB").
(4) Counts 4 and 14 - Boral Ltd ("BLD").
(5) Counts 5 and 15 - Alinta Infrastructure Holdings Ltd ("AIHCA").
(6) Counts 6, 7, 8, 9, 16, 17, 18 and 19 - Sydney Roads Group Ltd ("SRG").
(7) Counts 19 and 20 - Rinker Group Ltd ("RIN").
The Crown served a Notice of Coincidence Evidence on 25 February 2011 pursuant to s.98 of the Evidence Act 1995 (the coincidence rule) for the purpose of establishing that each of the accused did the acts alleged against them in the indictment and that each had the required state of mind on the basis that, having regard to the similarity of the events and circumstances, it is improbable that the events occurred coincidentally.
The Crown, therefore, seeks the admission of evidence as referred to in the Coincidence Notice in proof of what is a circumstantial case against the two accused. That case has been described in the Supplementary Submissions on behalf of the Crown as follows (at pp. 1-2):-
"There was a scheme in place whereby Joffe would obtain inside or confidential information through the opportunity afforded by his employment at Moody's. He would then pass it on to his trusted friend, Stromer, whom he had recruited to purchase shares/securities in the circumstances pleaded. Each of the counts in the indictment represents an instance of the scheme in action. The fact that 10 separate charges have been laid against each accused ought not to distract from what is the central allegation of the Crown and that is that there was a scheme in place whereby Joffe would pass the relevant information on to his recruit, Stromer, in the circumstances alleged in the charges. The Crown case is circumstantial. It is the Crown case that taken together, each pair of charges represents the scheme in action."
[8]
(5) Seven events
The combined course of conduct, summarised in pp.5-8 of the Coincidence Notice, was compartmentalised into seven "events" as follows:-
(1) The receipt by Moody's of information from seven entities the subject of charges, being "inside information".
(2) Mr Joffe's direct receipt of inside information in some instances and indirect receipt of information in others.
(3) Telephone communications between Mr Joffe and Mr Stromer, by which means Mr Joffe allegedly communicated the inside information to Mr Stromer, thereby procuring Mr Stromer to trade whilst in possession of the inside information.
(4) Mr Stromer's acquisition of the financial products in the seven entities whilst in possession of the inside information.
(5) The announcement made to the market of an event that pre‑empted the transaction.
(6) Mr Stromer's trading out of his position in the seven entities.
(7) Mr Joffe's significant surveillance of the share price in the entities traded in by Mr Stromer, usually on CommSec, throughout the material time.
The Crown also relies, as indicated above, upon the combined course of conduct not charged but which is summarised at p.9 of the Coincidence Notice, and being constituted by a set of events which correspond with those set out in Table A of the Coincidence Notice, except that it is alleged (in Table B) that Mr Joffe was in direct or indirect receipt of "confidential", as opposed to, "inside" information and that Mr Stromer traded in "confidential", as opposed to, "inside" information.
[9]
(B) RELEVANT STATUTORY PROVISIONS
Part 3.6 of the Evidence Act - Tendency and Coincidence - contains the provisions of s.98 and s.101.
Section 98 establishes the "coincidence rule" which excludes evidence of "2 or more events occurred" being adduced to prove that a person did a particular act or had a particular state of mind on the basis that "it is improbable that the events occurred coincidentally" (relying on similarities in the events and/or the circumstances in which they occurred) unless the requirements imposed by s.98(1) are satisfied. The use of such evidence is additionally subject to s.101.
Section 98 is in the following terms:-
"98 The Coincidence Rule
(1) Evidence that 2 or more events occurred is not admissible to prove that a person did a particular act or had a particular state of mind on the basis that, having regard to any similarities in the events or the circumstances in which they occurred, or any similarities in both the events and the circumstances in which they occurred, it is improbable that the events occurred coincidentally unless:
(a) the party seeking to adduce the evidence gave reasonable notice in writing to each other party of the party's intention to adduce the evidence, and
(b) the court thinks that the evidence will, either by itself or having regard to other evidence adduced or to be adduced by the party seeking to adduce the evidence, have significant probative value.
(2) ..."
Section 101 is in the following terms:-
"101 Further restrictions on tendency evidence and coincidence evidence adduced by prosecution
(1) This section only applies in a criminal proceeding and so applies in addition to sections 97 and 98.
(2) Tendency evidence about a defendant, or coincidence evidence about a defendant, that is adduced by the prosecution cannot be used against the defendant unless the probative value of the evidence substantially outweighs any prejudicial effect it may have on the defendant.
(3) This section does not apply to tendency evidence that the prosecution adduces to explain or contradict tendency evidence adduced by the defendant.
(4) This section does not apply to coincidence evidence that the prosecution adduces to explain or contradict coincidence evidence adduced by the defendant."
As to the requirement specified in s.98(1)(a), the Crown relies upon the Coincidence Notice served on the legal representatives of Mr Joffe and Mr Stromer on 25 February 2011 as sufficient compliance with that requirement.
[10]
(1) Similarities in evidence
In relation to the requirements specified in s.98(1)(b), the Crown set out what it contended were the similarities in the events and circumstances recorded in Tables A and B of the Coincidence Notice. The Crown relied upon the following:-
"A All information alleged to be inside information or confidential information was received by Moody's by way of Moody's clients, often referred to as Credits.
B Mr Joffe was employed at Moody's as an associate analyst at all times during which the inside information or confidential information was received by Moody's.
C Shortly after receipt of the inside information or confidential information by Moody's, Mr Joffe communicated with Mr Stromer.
D Shortly after communication with Mr Joffe, Mr Stromer acquired the financial products in the entities about which Moody's had received inside information or confidential information.
E Shortly after Mr Stromer had acquired the financial products, either an announcement was made to the market that made public the information that had previously been inside information or confidential information, or Moody's was advised that the transaction would not be going ahead.
F Shortly after the public announcements or Moody's being advised that the transaction was not going ahead, Mr Stromer traded out of his position in the financial products.
G During the time that Moody's was receiving the inside information or confidential information, Mr Joffe maintained significance surveillance of the share price in the entities in which Mr Stromer traded."
[11]
(2) The Crown's contentions
The Crown observed that Mr Stromer commenced his trading in and after June 2006 by acquiring shares in GasNet (between 8 June 2006 and 14 June 2006) and AIA (between 1 August 2006 and 8 August 2006).
Following those acquisitions, Mr Stromer principally acquired financial products in the form of derivatives known as CFDs. The Crown anticipated that CFD providers who give evidence in the proceedings will address the characteristics of a derivative.
Ms Natalie Beirne from the CFD market maker IG Australia, it is anticipated, will explain that CFDs are leveraged so that they allow the client to use a small amount of equity to secure a larger exposure of an underlying asset. Leverage can be beneficial in strengthening returns, however, it may also work against the investor, resulting in increased losses.
The Crown's contention was that Mr Stromer was a relatively inexperienced trader. He would not, it was argued, have entered into high risk derivatives without being apprised of the "inside" and "confidential" information about the entities in which he traded. The Crown submitted that Mr Joffe, through his employment at Moody's, had access to inside information in the case of each charged transaction. The evidence, the Crown anticipated, would establish significant telephone contact between Mr Stromer and Mr Joffe at times that were significant in relation to the relevant purchases and sales made by Mr Stromer.
On the "improbability of coincidence", in addition to relevant communications between the two accused, the Crown also relied on the timing of the purchases and sales of the relevant financial products by Mr Stromer.
The submission was that the probability that the acts of Mr Joffe (A, B, C and G in paragraph [31] above) and their circumstances and those of Mr Stromer (C, D, F and G in that paragraph) are coincidental, are reduced once it is understood that the acts were repeated time after time in similar circumstances.
The Crown submitted that that probability is proportionately reduced as each set of similar circumstances is taken into the mix. It is the coincidence in time and circumstance, over and over again, the Crown stated that was relied upon to prove that the conduct of each accused in relation to any one count was not merely innocent and coincidental: Outline of Submissions on behalf of the Crown at p.4.
[12]
(3) The facts in issue
Mr Joffe is charged under Counts 1 to 10 in the indictment with having "procured" Mr Stromer to acquire the specified financial products: s.1043A(1)(d).
In understanding what "acts" may be relevant to an offence charged under those counts, it is necessary to consider aspects of the offences charged. In that respect, the following matters arise:-
(1) An offence under s.1043A(1)(d) involves a concept of "procurement". The word "procure" as noted includes incites, induces or encourages an act or omission by another person: s.1042F(1).
(2) As used in s.1043A(d), the term "procure", accordingly, involves the act of procuring a person to do something (as distinct, for example, from simply procuring an act that constitutes an offence).
(3) The acts are stated as being "... to apply for, acquire, or dispose of, relevant Division 3 financial products ..." in s.1043A(1 )(d). So read, the words connote a causal connection between alleged acts directed to procuring another person (in this case, Mr Stromer) to do or undertake the act(s) of applying for, acquiring or disposing of the specified financial products and the acts of the other person in doing so. The concept of an act(s) by one person to "procure" another to do an act has been considered in a number of cases including R v F; Ex parte Attorney-General [2004] 1 QD R 162; Deutsch v The Queen [1986] 2 SCR 2; R v Broadfoot (1976) 64 Cr App R 71, 74 and Re Attorney General's Reference (No 1 of 1975) [1975] QB 773, 779 to 780.
(4) The issue of "procure another" in the present proceedings, accordingly, involves factual matters concerning communications between Mr Joffe and Mr Stromer, the content of any communications and what, if any, related acts occurred at material dates and times.
In the present proceedings the Crown seeks to lead evidence to establish procuring by Mr Joffe of acts by Mr Stromer within s.1043A and in relation thereto to prove the following:-
(1) That whilst in the employ of Moody's in the relevant period Mr Joffe had access to relevant "inside information".
(2) That by one or more means he utilised the means of access available to him to obtain and possess the inside information being:-
(a) inside information within the meaning of s.1042A;
(b) inside information that was provided by specified entities to Moody's;
(c) having obtained the inside information, Mr Joffe conveyed the inside information to Mr Stromer for the purpose of having him perform the acts referred to in that provision;
(d) Mr Joffe procured Mr Stromer to do acts that fell within s.1043A(1)(b);
(e) that Mr Stromer then performed a number of acts by way of applying for, acquiring and disposing of the specified Division 3 financial products.
[13]
(4) The events relied upon by the Crown
The events specified in the Coincidence Notice were reproduced and set out in a spreadsheet format described as a Table. Particular factual matters concerning each of the events were set out in the document which was marked MFI 1.
A similar spreadsheet analysis was made in relation to PBL, DOW and APA relevant to the "uncharged events":
Particular factual events set out in MFI 1 led to responses by the Crown which were set out in a document, again in spreadsheet format, which became MFI 2.
Accordingly, Mr Joffe's response to the Coincidence Notice, the Crown's response thereto and a Reply by Mr Joffe took the following form:-
(1) Table of responses by Mr Joffe to "events" set out in the Coincidence Notice (MFI 1), being Mr Joffe's responses to each of the events in the Coincidence Notice in relation to the entities identified in the indictment and Coincidence Notice. In MFI 1 there are 91 "events" consistent with the Coincidence Notice together with Mr Joffe's response to each event.
(2) Responses by the Crown in comparable spreadsheet format entitled Response by the Crown to the Table relied upon by Mr Joffe (MFI 2).
(3) Reply by Mr Joffe to the Crown's response to the Table - being a point by point response on behalf of Mr Joffe in the nature of a rejoinder to the Crown's responses in MFI 2 as follows:-
(a) GasNet - specific responses to (i) Event 1; (ii) Event 14; (iii) Event 27; (iv) Event 40; (v) Event 66; (vi) Event 79
(b) AIA - specific responses to (i) Event 2; (ii) Event 28; (iii) Event 41; (iv) Event 54; (v) Event 80
(c) AWB - specific responses to (i) Event 3; (ii) Event 29; (iii) Event 42; (iv) Event 55; (v) Event 68; (vi) Event 81
(d) BLD - specific responses to (i) Event 4; (ii) Event 17; (iii) Event 30; (iv) Event 43; (v) Event 56; (vi) Event 69; (vii) Event 82
(e) AIHCA - specific responses to (i) Event 18; (ii) Event 31; (iii) Event 44
(f) SRG (charge 6) - specific responses to (i) Event 6; (ii) Event 19; (iii) Event 32; (iv) Event 84
(g) SRG (charge 7) - specific responses to (i) Event 21; (ii) Event 47
(h) SRG (charge 8) - specific responses to (i) Event 21; (ii) Event 34; (iii) Event 47; (iv) Event 86
(i) SRG (charge 9) - specific responses to (i) Event 9; (ii) Event 22; (iii) Event 35; (iv) Event 48; (v) Event 87
(j) RIN - specific responses to (i) Event 10; (ii) Event 23; (iii) Event 36; (iv) Event 62
(k) PBL - specific responses to (i) Event 11; (ii) Event 24; (iii) Event 37; (iv) Event 50; (v) Event 76
(I) DOW - specific responses to (i) Event 12; (ii) Event 38; (iii) Event 51; (iv) Event 64; (v) Event 77; (vi) Event 90
(m) APA - specific responses to (i) Event 13; (ii) Event 26; (iii) Event 39; (iv) Event 52; (v) Event 78; (vi) Event 91
[14]
(1) The issue of alternative or inconsistent inferences
It has been argued on behalf of each accused (although with somewhat different emphasis having regard to the particular nature of the charges presented against each of them), that, in determining the admissibility of evidence sought to be adduced by the Crown under s.98, I am required to consider and evaluate the extent to which "alternative interpretations" of the evidence may be open. In that respect, it has been argued on behalf of Mr Joffe and Mr Stromer that a determination of significant probative value for the purposes of s.98 "... necessarily requires an evaluation of inferences, at least where the evidence raises the possibility of alternative inferences". Mr S Odgers SC, who appeared on behalf of Mr Stromer submitted that the assessment under s.98, in particular in relation to significant probative value is directed to determining whether it could be rationally concluded that the probability of the inference that the Crown seeks to draw is significantly greater than the probability of an inference inconsistent with that inference.
In the submissions for Mr Joffe, it was argued by Mr McHugh that, in discharging the requisite evaluative and predictive function under s.98, it was not only permissible, but it was necessary for the Court, inter alia, to have regard to the availability and strength of inferences founded in the evidence other than the inferences for which the Crown contends.
It was not suggested in the submissions for the accused that there was any case law authority that determined that such an approach was either appropriate or open to be taken when assessing significant probative value under s.98. A number of authorities in relation to common law principles pertaining to similar fact evidence and s.98 were referred to but none have been suggested as standing as authority for the submissions referred to in paragraph [68] and [69].
[15]
(2) Submissions for Mr Joffe
Detailed written submissions were made on behalf of Mr Joffe. These were supplemented by oral submissions. The written submissions were:-
(1) Defence Written Submissions on separate trial application dated 13 May 2011.
(2) Mr Joffe's Submissions in Reply dated 18 July 2011
[16]
(a) The circular reasoning submission
Mr McHugh, on behalf of Mr Joffe, in the course of his oral submissions, as indicated, above undertook an analysis of specific matters relating to certain of the "events" set out in MFI 1.
He contended that, insofar as the Crown seeks to prove that Mr Joffe possessed inside information by reference to factual matters concerning other events referred to in the Coincidence Notice, there is a problem with the Coincidence Notice "because it becomes circular" (t.19).
Mr McHugh in this regard referred to the High Court's decision in Perry v The Queen [1982] HCA 75; (1982) 150 CLR 580. It is necessary in order to deal with the submission to refer here to the facts of that case.
Mrs Perry was tried on indictment on two charges of attempting to murder Mr Perry, who was her third husband. The Crown case was that in two separate periods, the first in 1978, the second in 1979 she administered poison to her husband with intent to kill him. She was convicted on the two counts and sought special leave to appeal to the High Court which was granted upon one ground only, namely, that the trial judge wrongly admitted evidence which the Crown contended showed that three other persons with whom the applicant had had a close relationship had died of poisoning.
The issue in the case turned on the admission of evidence that the accused's second husband and her brother (M) had died of arsenic poisoning in 1961 and 1962 respectively and that her de facto husband (D) had died of an overdose of barbiturates in 1970. The accused benefited financially from the deaths of her second husband and de facto husband and would have benefited financially from the death of her third husband if he had died.
However, it had not been established that D had, in fact, ingested any poison. It was necessary for the Crown to rely on the other instances of poisoning, including those the subject of the particular charges in question, in an attempt to provide an inference that D had in fact suffered from arsenic poisoning. In other words, as Gibbs CJ observed (at 589), it was necessary to assume the guilt of the accused of the offences of which she was charged in order to render admissible the evidence regarding the cause of death of D. Such a line of reasoning was obviously objectionable.
Accordingly, the critical aspect which gave rise to the issue of circular reasoning - the need to assume the guilt of the accused on the subject charges - was the absence of evidence on the critical fact - namely the absence of direct evidence that D had died from arsenic poisoning at all. In fact, it was clear that he died from an overdose of sleeping tablets. Without evidence of death by arsenic poisoning, the evidence could only possess a speculative character.
[17]
(b) The issue of "alternative inferences"
It was submitted for Mr Joffe that s.98 and s.101 do not prevent the Court from assessing the probability of inferences other than those relied on by the party who seeks to adduce the evidence.
It was contended that it is logically impossible to assess the relative probability or improbability that a set of similar events occurred coincidentally without considering the likelihood of "alternative available inferences". That is a matter, it was submitted, that can only be rationally assessed in light of all the circumstances in which the events occurred: Mr Joffe's Submissions in Reply at [58]. This, it was said, constitutes the predictive and evaluative exercise to which reference was made in R v Zhang [2005] NSWCCA 437; (2005) 158 A Crim R 504 at [139].
The approach to be taken by the Court in the application of s.98, Mr McHugh submitted, involved six matters as set out in a document dated 22 June 2011 in the following terms:-
"…
The Court's task:
1. For each accused, for each count, for each particular act or state of mind which the Crown seeks to establish, what are the specific events which the Crown asserts are 'similar' (s.98(1))?
2. Is the Court satisfied that those events are 'substantially and relevantly similar (Zhang)?
3. As to proof of the Crown's asserted similar events:-
a. if the proof of the asserted event is testimonial, the Court is bound to assume that the jury will accept that evidence, without considering credibility or reliability (Shamouil);
b. but if the asserted event depends on an inference, the Court must form its own view of the probabilities and the process of reasoning must not be circular (Perry, Sutton).
Compare the factual circumstances in cases such as e.g., Perry (as to the deaths other than Duncan's), Folbigg and Zhang, where there was little or no doubt on the evidence as to the existence of the events asserted to be similar.
4. Taking an evaluative and predictive approach in light of all the anticipated evidence, is it improbable that the [similar] events occurred coincidentally' (s.98(1))?
5. Taking an evaluative and predictive approach in light of all the anticipated evidence, has the Crown satisfied the Court that (in accordance with the no-coincidence process of reasoning) the evidence of the alleged similar events has 'significant probative value' (s.98(1)(b))?
6. If so, has the Crown satisfied the Court that the probative value of the evidence of the similar events substantially outweighs any prejudicial effect it may have on the accused (s.101)?"
[18]
(3) Submissions on behalf of Mr Stromer
Mr S Odgers SC, who appeared with Mr L Fernandez of counsel on behalf of Mr Stromer, relied on written submissions lodged on 11 May 2011 and submissions in reply dated 17 June 2011. The submissions were supplemented by oral submissions made in the course of the hearing.
In the written submissions it was observed that, as against Mr Stromer, it had been submitted on behalf of the Crown that the evidence was tendered to prove that:-
(1) He "did the particular acts alleged in each of Counts 11-20 in the indictment, namely, that he acquired the relevant Division 3 financial products identified in each count in the indictment".
(2) He "had a particular state of mind, namely, that at the time he acquired the relevant Division 3 financial products identified in each of Counts 11-20 in the indictment, he acted intentionally and was in possession of the inside information as particularised in each of Counts 11-20 in the indictment".
The question was whether the evidence could rationally be regarded as having a significant effect on the probabilities relating to the existence of a fact in issue in the trial (Written Submissions, p.3).
Mr Odgers noted that the acquisition of the relevant Division 3 financial products identified in each count of the indictment is not in issue at all in respect of any of the counts, except Count 11 (written submissions at [6]). It was indicated that an appropriate formal admission would be made in due course.
Mr Odgers focussed his submissions under two headings.
The first related to the proposition that, if evidence sought to be admitted under s.98 was susceptible to inferences that were inconsistent with each other, it could not and did not meet the test of "relevance" under the Evidence Act.
Second, if the evidence in question was open to alternative inferences (one or more being consistent with innocence) the evidence could not satisfy the requirement of significant probative value.
[19]
(a) "Relevance" and "inconsistent inference"
In the Defence Further Written Submissions on the proper approach to Coincidence Evidence, it was noted that coincidence evidence, as is the case with all circumstantial evidence, must be evidence that satisfies the provisions of s.55 in order for it to be admissible: s.56(2).
Mr Odgers acknowledged that if an inference that the Crown seeks to draw with respect to a fact in issue is one that is reasonably open, the mere existence of other possible inferences will not mean that the evidence ceases to be relevant. However, the submission was that the existence of other possible inferences that are inconsistent with the fact in issue may, in certain limited circumstances, lead to a conclusion that the evidence is not "relevant" (at [5]).
It was contended that if the coincidence evidence on which the Crown relies in the proceedings could rationally only be regarded as "equally consistent with two possible inferences, one that the accused was in possession of inside information" (as contended for by the Crown), the other that he was only the recipient of a tip (an alternative inference said to be open on the evidence), then the evidence is not relevant to the fact in issue of whether the accused was in possession of inside information (written submissions at [13]).
The submissions acknowledged at [14] that this specific issue in relation to s.55 of the Evidence Act has not previously been addressed by courts in this State. However, reliance was placed upon the proposition that the definition of "relevant evidence" reflects the common law. Reference was made in this respect to the observations in footnote 4 in Washer v Western Australia [2007] HCA 48; (2007) 234 CLR 492 (Gleeson CJ, Heydon and Crennan JJ).
The argument was developed by reference to the High Court's decision in Edwards v The Queen [1993] HCA 63; (1993) 178 CLR 193, in particular, to observations concerning the proper approach to be taken with respect to an inference of consciousness of guilt where the Crown wished to invite the jury to infer guilt from a lie told by the appellant in that case.
Relevant principles concerning s.98 enunciated by Simpson J in Zhang (supra) and dicta of Latham J in R v Ceissman [2010] NSWCCA 50 at [8]‑[9] were also noted and the observations of Spigelman CJ in R v Shamouil [2006] NSWCCA 112; (2006) 66 NSWLR 228 at [61] extracted. A little later, the submission was:-
"26 However, Spigelman CJ said nothing in Shamouil about the proper approach to the drawing of inferences in general, or coincidence evidence in particular."
[20]
(b) Alternative inferences
Whilst it was accepted that Mr Stromer "acted intentionally" insofar as he intended to acquire the financial products in question, there were a number of matters raised on the question of whether Mr Stromer was in possession of the inside information as particularised. It was submitted that the evidence sought to be relied upon by the Crown was not capable of proving that he did possess such information.
Additionally, on behalf of Mr Stromer, Mr Odgers submitted that it was important to take into account that it was not a fact in issue as regards Mr Stromer that Mr Joffe gave him a "tip" to buy the particular financial products (at [9]):-
"... It would not be an offence under s.1043A(1) for the accused to have received a 'tip' that a particular financial product should be acquired, even if the person who provided the 'tip' did so on the basis of inside information."
The fact in issue, accordingly, was said to be whether Mr Joffe communicated the particularised (allegedly) "inside" information to Mr Stromer, and not that Mr Joffe gave him a "tip to buy particular financial products" (at [9]).
Mr Odgers argued that the evidence would not satisfy the test of relevance if it was equally consistent with two possibilities, as discussed above, namely, the possibilities that insider information was received or that Mr Stromer merely received a "tip". In that event, Mr Odgers contended it would follow that the evidence would not have significant probative value.
It was also submitted that there was no "substantial evidence" available to the Crown that would provide a clear and persuasive basis for a jury to infer that, at the time Mr Stromer acquired the particular financial products in question, he was in possession of the particularised inside information rather than simply being the recipient of a "tip" (at [11]).
The contention was that the available evidence pointed to the contrary.
The term "tip" was said to refer to a suggestion that a particular trade is likely to result in a profit. The coincidence evidence, it was submitted, did not possess significant probative value to prove the further alleged fact: Reply Submissions at [2].
The issue of "significant probative value" with respect to the particular fact in issue (that the accused Mr Stromer received inside information from Mr Joffe) should be resolved against the Crown where (Reply Submissions at [2]):-
(1) The evidence is equally consistent with two possible explanations -in Mr Stromer's case, one that establishes the fact in issue (that he received inside information from Mr Joffe), the other inconsistent with guilt (he received only "tips" from Mr Joffe).
(2) It would be a matter of speculation to choose between the two possible explanations.
(3) There is no clear and persuasive basis available from the evidence on which the tribunal of fact could be satisfied beyond reasonable doubt of the first explanation rather than the second.
[21]
(1) Similar fact evidence principles
In the discussion below, references are made to a number of authorities on particular aspects of the common law concept of "similar fact evidence" as variously applied in the case law. Those references are instructive to the extent that they assist in elucidating the application of the provisions of s.98 and s.101. It is, however, the language of the statute (the Evidence Act) which determines the admissibility of the evidence in question: Papakosmas v The Queen [1999] HCA 37; (1999) 196 CLR 297; R v Ellis [2003] NSWCCA 319; (2003) 58 NSWLR 700. The present applications are to be determined on that basis.
For coincidence evidence to be admitted, it must be both relevant evidence and adduced for a coincidence reasoning purpose.
Evidence admitted under s.98 is intended to be adduced for the purpose of establishing that, because of the improbability of two or more events occurring coincidentally, a person did a particular act and/or he or she had a particular state of mind at the time.
In Perry (supra), the High Court determined that in order to render admissible similar fact evidence, a species of propensity evidence, it could not be assumed that the accused had committed the crime charged (at 589, 594-595, 607, 612). That, of course, is a fundamental proposition to be borne in mind and applied throughout the consideration of the present applications. The facts of Perry (supra) and the principle to be derived from the case are discussed in paragraphs [75] to [78].
Similar fact evidence, a form of circumstantial evidence, was subject to a special rule of exclusion in criminal cases. Its admission was exceptional: Sutton (supra) at 533 per Gibbs CJ. Gibbs CJ referred to the decision of Lord Wilberforce in R v Boardman [1975] AC 456 where, at [22], it was stated:-
"The basic principle must be that the admission of similar fact evidence (of the kind now in question) is exceptional and requires a strong degree of probative force".
In accordance with common law principles, similar fact evidence could only be admitted if it was relevant in some other way than that of showing that the accused had a propensity or disposition to commit crime, or crime of a particular kind, or that he or she was the sort of person likely to commit the crime charged: Sutton (supra) at 533. Further, in Perry (supra), Wilson J stated at 604:-
"... To be admissible, the evidence must have a sufficiently high degree of probative force to outweigh the inevitable prejudice flowing from the nature of the evidence. It is a question of degree in each case, since probative value will vary with the nature of the similar fact evidence itself, the issues, and the other evidence in the case ..."
[22]
(2) The evaluation of the probative force of similar fact evidence
A question as to the admissibility of evidence, not unlike the position with a "no prima facie case" submission, does not permit a court deciding the issue to make findings on the accuracy or the weight of disputed parts of the evidence especially where the Crown case is wholly or mainly a circumstantial evidence one. In determining whether charges are founded on the same facts or form part of a series of offences of the same or a similar character, it has been held that "It is immaterial that those facts are disputed by the defence": Sutton (supra) per Brennan J at 541.
In assessing probative value under the Evidence Act, the approach to be taken is one based upon an assumption that the evidence in the Crown case will be accepted.
As discussed in greater detail in the Appendix to this judgment, submissions were made to the effect that the probative value of the evidence on a number of aspects was either low or non-existent or diminished or were amenable to alternative explanations or inferences. Particular matters relied upon included:-
(1) Evidence in the Crown case in relation to some events was open to "plausible" explanations or inferences as against the inferences contended for by the Crown.
(2) That there was information about a particular entity in the public domain in relation to a particular count. This included speculation in the media that the entity was a possible or likely takeover target. Such information could provide the basis for some of the trading by Mr Stromer.
(3) That some "events" did not fit the "pattern" alleged by the Crown, eg, the GasNet charge, the absence in some instances of stock-checking by Mr Joffe prior to particular trading by Mr Stromer.
(4) Although particular information was, according to expert evidence in the Crown case, "material" information, in some cases it was contended that the information was "not very good" information and could not be considered as likely to operate as an incentive.
(5) The strength of many inferences as contended for by the Crown, it was argued, was not high.
(6) Phone and text message contacts were in the main initiated by Mr Stromer and not by Mr Joffe.
(7) There was no evidence of the content of such contacts or communications.
A number of submissions for Mr Joffe did not deal with the subject of "alternative inferences" by considering particular evidence referred to in the context of the whole of the evidence in relation to a particular count or the evidence in relation to other counts or both. Rather, the approach was to refer to parts of the evidence in the Crown case relating to particular "events" referred to in MFI 1 as individual segments of evidence. As discussed below, such an approach does not sit comfortably with principles that apply to the assessment of probative value of evidence particularly in circumstantial evidence cases.
[23]
(3) Application of s.98 in these proceedings
As discussed above, the Crown seeks to adduce evidence in relation to each of the counts on the basis, inter alia, that the alleged offences represent a pattern of conduct. In that sense, the contention was, in effect, that there is an underlying unity between the offences charged. It was also argued that the alleged offences arose out of a "scheme in action" between the two accused and that the facts associated with each count have a striking similarity about them: Outline of submissions on behalf of the Commonwealth DPP in Response to submissions on a separate trial application, p.7 and Supplementary Submissions for Director of Public Prosecutions, at pp.1-2.
The level or degree of cogency of the evidence sought to be admitted under s.98 in these proceedings was said by the Crown to be established by a number of matters. These include:-
(1) The relationship between Mr Joffe and Moody's. His employment throughout the relevant period by Moody's was as an associate analyst in Moody's Corporate Finance Group (CFG) and Project and Infrastructure Finance Group (PIFG).
(2) The long-term relationship between Mr Joffe and Mr Stromer in the nature of a friendship shared by them.
(3) The receipt by Moody's of information that constituted "inside information" at specified times from entities that were "credits" of Moody's.
(4) The fact that in some cases such information was directly disclosed to Mr Joffe.
(5) The opportunity in other cases, it was claimed, that existed for Mr Joffe to access such information, that is, to indirectly obtain inside information.
(6) The provision of other confidential information to Moody's by "credits" in relation to proposed corporate activity.
(7) The actions of Mr Joffe in making internet searches, usually on the CommSec website, for market information concerning the securities of specific entities that were "credits" of Moody's and the timing of those searches.
(8) Contemporaneous telephone contact between Mr Joffe and Mr Stromer.
(9) The number, nature and circumstances of the trading activities of Mr Stromer in the relevant period. In this respect, the facts relied upon included the acquisition of financial products in the relevant corporate entities after contacts were made by Mr Stromer with Mr Joffe. The Crown contended this usually occurred shortly before a public announcement of the proposed activity.
(10) The timing in relation to the acquisition of financial products by Mr Stromer and announcements made to the market in relation to information that had previously been inside or confidential information. Alternatively, the timing of specific trading where Moody's had advised that a transaction would not be proceeding.
(11) That during the period June 2006 to February 2007, the fact that the only financial products Mr Stromer traded in were in relation to entities that had provided Moody's with confidential/inside information.
(12) The evidence establishing that Mr Stromer traded in those entities a short time after the information had been received by Moody's.
(13) The evidence as to financial dealings between Mr Joffe and Mr Stromer.
[24]
(4) Section 101: probative force and prejudicial effect
Section 101(2) requires a balancing exercise that can only be conducted on the facts of each case: Ellis (supra) at [95] per Spigelman CJ. Consideration is to be given to the actual prejudice in the specific case which the probative value of the evidence must substantially outweigh: Ellis (supra) at [94].
In HML v The Queen [2008] HCA 16; (2008) 235 CLR 334, Gleeson CJ stated at [12] that prejudice in terms of evaluating similar fact evidence meant the danger of improper use of the evidence - not its legitimate tendency to inculpate.
Some forms of prejudice are amenable to management as, for example, by giving suitable directions and warnings to juries: HML (supra) at [28].
On the other hand, if the trial judge concludes the risk of prejudice is such as to put it beyond reasonably effective management, then the evidence should be excluded.
In the present case, the issue is whether the coincidence evidence will have a prejudicial effect that is disproportionate to the probative force of the evidence.
Prejudicial effect is a reference to the undue impact adverse to an accused, that the evidence may have in the mind of the jury over and above the impact it might be expected to have if consideration were confined to its probative force: Pfennig v The Queen [1995] HCA 7; (1995) 182 CLR 461 at 488.
The reasons as to why propensity evidence has been treated as evidence that has or is likely to have a prejudicial effect were identified in Pfennig (supra) at 488. Hence the need for the evidence to have a high level of cogency.
In the submissions for Mr Joffe, reference was made to the authorities that recognise the most serious risk of prejudice in cases involving coincidence evidence, namely, the risk that the jury will give too much weight to the evidence without regard to the strengths and weaknesses of the balance of the Crown case. The danger, it was said, was that the jury could be overborne by the coincidence evidence, and ignore features of the evidence which point to the accused's innocence, or gaps in the evidence of guilt. Dicta of Murphy J in Perry (supra) at 593 to 594 was set out in the written submissions at [112].
It was further submitted for Mr Joffe that "the tenuous nature" of the Crown case, the complicated nature of the evidence that was referred to in the submissions and the lack of probative value of the coincidence evidence makes the issue as to prejudice more relevant in these proceedings. The proposal to have all 20 counts heard together in one trial, it was submitted, meant that the focus of the trial would require the accused to convince the jury that the "smear" of the coincidence evidence should be ignored, and will detract attention from the key elements of each charge.
[25]
(5) Conclusions as to the charged matters
I am satisfied and determine that the evidence identified and particularised in Table A in the Coincidence Notice is evidence that is capable of rationally affecting the probability of the existence of the following facts in issue:-
(1) Possession of Mr Joffe of inside information.
(2) That that information was communicated by him to Mr Stromer.
(3) That he procured Mr Stromer to acquire Division 3 financial products.
(4) That Mr Stromer, whilst in possession of inside information, acquired Division 3 financial products.
For the purpose of determining admissibility, I am satisfied and determine, in light of the evidence which the Crown proposes to adduce that, in accordance with the test to be applied, the jury would be likely to assign that evidence significant probative value within the meaning of s.98(1)(b).
The probative value of the evidence referred to in [228], I assess as being high based upon the following matters:-
(1) The similar events identified and particularised in the Coincidence Notice.
(2) The sequence and timing of the specified events before and following the acquisitions the subject of the counts in the indictment.
(3) The number of events and the attenuated similarity of such events. A pattern of events may still exist on the basis of similarities even though a variation in the pattern may occur in some aspects (as in the case of GasNet).
(4) The capacity of the evidence in relation to such events to rationally affect the probability of the existence of facts in issue including, in particular, the issue of "possession" and procurement within s.1043A(1)(d).
(5) The capacity of the evidence in question to establish a relevant interrelationship between the issues of possession of inside information, communications between Mr Joffe and Mr Stromer, the transfer of such information from one to the other, the issue of procurement by Mr Joffe and arrangements for the acquisition of the relevant financial products and the acquisitions themselves.
(6) The evidence establishing that, in relation to all acquisitions in entities referred to in the counts in the indictment, Moody's had previously been entrusted with inside information by and in relation to all such entities.
[26]
(6) Consideration: s.101(2)
Clearly, the balancing exercise under s.101(2) can only be conducted on the facts of each case: Ellis (supra) at [95]. As there observed, this requires consideration of the actual prejudice in the specific case which the probative value of the evidence must substantially outweigh. The issue of prejudicial effect goes to the question of the fairness of the trial, being any prejudicial effect the evidence "may" have on both the accused (or either of them).
In determining the issue, it is necessary to have regard to the evidence in question, the issue or issues to which it is directed and the nature of the evidence. These and other matters need to be considered in determining the degree and the level of any unfairness to the accused.
I do not underestimate either the challenge in conducting a joint trial of all counts nor that in framing appropriate directions and the provision of necessary warnings so as to ensure that the jury's consideration is appropriately confined to the issues and the probative force of the evidence upon such issues.
Although the framing of appropriate and effective directions and warnings will demand considerable attention, it is not, in my opinion, one that is beyond the capability of a trial judge. Clearly, it will require assiduous attention to both the facts and issues and the evidence bearing upon them. Counsel for the Crown and the accused should, of course, be provided with an adequate opportunity to contribute to the content and the form in which directions are to be provided.
The submissions made on behalf of Mr Joffe and Mr Stromer have raised a number of important matters in relation to s.101(2) that have required close consideration.
The number and nature of the counts and the issues and evidence associated with each count are, in particular, to be borne in mind. The necessity for the probative value of the evidence in question to substantially outweigh any prejudicial effect it may have on either or both accused is a demanding requirement - the evidence must clearly substantially outweigh any prejudicial effect the evidence may have.
The detailed submissions and analyses of factual material in relation to the present applications have provided an opportunity to gain an understanding of the nature and complexities involved in the issues that are likely to arise at trial and the evidence intended to be adduced by the Crown. As a result, the following observations may be made:-
(1) The facts relating to that the individual counts each fall within a limited timeframe.
(2) The respective counts against Mr Joffe and Mr Stromer each involve the allegation of the possession and use of inside information which the Crown claims was at the material times received by the one entity, Moody's. The counts against Mr Joffe also allege acts by him to procure Mr Stromer to acquire relevant financial products.
(3) The Crown case in relation to each count does not involve voluminous transaction documentation as often occurs in a case which is primarily documentary in nature. There will, however, nonetheless be a considerable amount of other documentation.
(4) As to the issue of the jury's ability to distinguish the evidence in relation to one charge from evidence of other charges:-
(a) The counts in the indictment concerning both accused relate to trading in securities of a particular entity.
(b) The discrete facts (meetings, discussions, website visits, purchases, sales of financial products and other "events" or "acts") are capable of identification and segmentation.
(c) Copies of documentation in evidence that is peculiar to a transaction can be presented in a way or by a particular method that enables the jury to link the documentation to a transaction and the "events" concerning it.
(d) Statements of agreed facts in relation to particular issues may be of assistance and may also serve to reduce any risk of confusion between transactions.
[27]
(7) Whether the Coincidence Notice complies with notice requirements
In the submissions for Mr Joffe, a separate issue was raised concerning the adequacy of the Crown's Coincidence Notice.
The Coincidence Notice in its original form incorporated the table, Table 1 entitled "Table of related events the subject of the counts in the Indictment". The original Coincidence Notice was dated 25 February 2011. It was amended in the form of the Coincidence Notice dated 8 July 2011.
Each "event" in relation to each transaction is sub-titled as discussed below. Several entries under each purport to provide in relation to certain events a reference to particular evidence as well as the substance or effect of the coincidence relied upon. During the course of the hearing, the Amended Statement of Facts was produced by the Crown (Exhibit A) which contains a further and detailed description of factual matters relied upon by the Crown in its evidentiary case with references to the primary sources for many such matters.
In oral submissions, Mr McHugh for Mr Joffe referred to entries on the Table to the Coincidence Notice as containing facts but that such facts are in some instances facts in issue. There was, in this respect, said to be a problem of circularity (transcript, 20 June 2011, p.8).
In the Reply Submissions for Mr Joffe, it was contended that the evidence should not be admitted by reason of its failure to comply with notice requirements (at [36]-[42]). It was argued that a properly drawn Coincidence Notice should identify for each fact in issue (and for each accused and each count) the "events" or "circumstances' by reason of which the Crown contends "that it is improbable that the events occurred coincidentally". Otherwise, it was submitted it is impossible for the Court to carry out the "evaluative and predictive" task which s.98 and s.101 require.
Reference was made to dicta of the High Court in Phillips (supra) and Hoch (supra) in relation to the need to identify the issues at trial on which similar fact evidence is to be tendered that being central to determining relevance and to the assessment of probative force upon which the admissibility of similar fact evidence depends. It was submitted the Crown had failed to identify this in relation to each charge and each accused.
Regulation 5(3) of the Evidence Regulation 2005 contains provisions as to what a Coincidence Notice given under s.98(1)(a) must state. This includes, inter alia, a requirement for the substance of the occurrence of two or more events that the party giving the notice intends to adduce and particulars of the date, time, place and circumstances at or in which each of the events occurred.
[28]
(8) Conclusions as to the uncharged matters
The evidence proposed to be relied upon by the Crown in relation to PBL, DOW and APA are referred to in the Appendix together with the contentions of the parties.
I have considered the evidence in light of all written and oral submissions. I set out below the conclusions I have reached in relation to the three uncharged matters.
[29]
(a) PBL
The material dates and events may be summarised as follows:-
(1) Wednesday 11 October 2000 meeting between Moody's representatives and Ms Bernadette Sarroff of PBL regarding a publicly announced joint venture involving PBL.
(2) Thursday 12 October 2000 telephone communications between Mr Stromer and Mr Joffe (four occasions). At 11.32, Mr Stromer transferred $30,000 from his ANZ access account to CMC Markets.
(3) Friday 13 October 2006 emails circulating at Moody's concerning the proposed PBL meeting. At 10.07 am, Mr Joffe made "numerous" CommSec searches on PBL.
(4) Saturday/Sunday 14/15 October 2006 telephone calls between Mr Joffe and Mr Stromer.
(5) Monday 16 October 2006, after media speculation the previous week, PBL announced it was declining to comment on speculation it was selling off its assets. At 10.08 am, Mr Joffe made a CommSec search for PBL. Between 12.13 am and 12.16 am (that is, three hours after the announcement), Mr Stromer acquired 12,125 PBL CFDs from CMC Markets. At 12.20 pm, Mr Stromer sent a text message to Mr Joffe and they spoke by phone twice subsequently.
(6) Tuesday 17 October 2006 at PBL offices, Moody's representatives were informed of the proposed sale of 50% of PBL's equity in its media interests.
(7) Wednesday 18 October 2006, PBL issued a public announcement advising it was recapitalising certain of its media assets.
(8) 20 October 2006, Mr Stromer closed out his PBL CFD position at 2.32 pm.
The following matters are to be noted:-
(1) On 11 October 2006, at the meeting at the offices of PBL, there was no discussion of a concrete or detailed proposal. The discussion concerned an unspecified joint venture proposal involving PBL. There was no discussion of any proposed sale of any portion of PBL's equity in its media interests.
(2) There had been media speculation about PBL over the previous week commencing on 9 October 2006. Without more information than that referred to in (1) above, in the context of the particular media speculation that was occurring, it is difficult to evaluate whether and what information could have passed from Mr Joffe to Mr Stromer. This is especially so given that the Crown in MFI 2 acknowledged that there was market speculation about PBL planning some activity which was likely to affect its share price. The internet traffic in those circumstances must be seen in that context. The same comment applies to CommSec searching.
[30]
(b) DOW
The material matters may be summarised as follows:-
(1) On 4 October 2006, Mr Smith of B&B advised Mr Chong the Rail Reliance Consortium ("RRC") had been invited to revise its bid to supply new rolling stock.
(2) On 5 October 2006, Mr Chong forwarded Mr Smith's email to Mr Joffe.
(3) On 6, 9, 10 and 13 October 2006, Mr Chong and Mr Joffe received information about the RRC bid.
(4) On 25 October 2006, Mr Joffe accessed CommSec websites relating to DOW on seven occasions.
(5) On 25 October 2006, Mr Joffe and Mr Stromer made telephone contact with each other. Between 3.41 pm and 3.43 pm, Mr Stromer acquired 5,000 DOW CFDs and between 3.44 pm and 3.56 pm, he acquired a further 29,000 CFDs.
(6) On 26 October 2006, Mr Stromer disposed of his DOW CFDs.
(7) On 7 November 2006, RRC was awarded the tender by the NSW Government.
The Crown, in particular, relied upon telephone calls and text messages as follows:-
(1) 12.05 pm - Mr Joffe rang Mr Stromer (4.30 minutes).
(2) 1.13 pm - Mr Stromer rang Mr Joffe (1.30 minutes).
(3) 2.45 pm - Mr Stromer sent a text message to Mr Joffe.
(4) 3.37 pm - Mr Stromer sent a text message to Mr Joffe.
The proximity in time between these communications and Mr Stromer's trading was emphasised and must be taken into account in assessing the probative value of the evidence.
It is to be noted that the initial "information" was provided to Mr Joffe on 5 October 2006 but there was no trading by Mr Stromer until 25 October 2006.
There are a number of matters which, in my assessment reduce the probative value of this matter for the purposes of s.98(1)(b).
(1) The information provided on 4 October 2006, that RRC were invited to revise the tender, is not, in itself, information suggesting that it was likely that RRC's bid would be successful. Tendering for public - private infrastructure/facilities is a complex process and the outcome of competitive tendering is uncertain.
(2) There is no evidence of the further information received after 4 October 2006 being of a quality that would convey particularly useful information as to the tender outcome.
(3) The Australian Financial Review published an article on 9 October 2006. The article recorded a likely delay in the $3 million railcar bid and referred to the fact that "fine-tuning" of bids was occurring and the Government was seeking "final clarification from the bidders". There is a suggestion in the material that each of the bidders had been asked to revise their bids.
(4) The period of 20 days between the "information" supplied on 5 October 2006 and the acquisitions in question is a delay period which assumes significance when considered along with other contemporaneous events.
(5) An article in the Australian Financial Review on 23 October 2006 (two days before Mr Stromer's trades) stated "Downer EDI has staked its claim as the logical choice for the $4 billion public-private partnership (PPP) to build and maintain railcars for Sydney's commuter network". The article went on to refer to DOW and United Group as "jockeying for position as lead players" for the contract.
(6) The trading pattern for 25 October 2006 in DOW CFDs does not enhance the probative value of the evidence relied upon by the Crown (the Appendix refers to details on this aspect).
[31]
(c) APA
In the case of APA, there are a number of discrete facts that make it difficult to accept that the relevant acquisitions of the 23,750 APA units on 21 November 2006 was part of the pattern the Crown relies upon.
First, Mr Stromer acquired APA units not CFDs on 21 November 2006.
Second, the evidence provides strong support for the proposition that he, like others, was influenced by the announcement made by APA on 16 November 2006 involving what appears to have been an attractive offer as reflected by the very significant increase in trades generally in APA made on 21 November 2006, the day Mr Stromer traded. The offer was only open to 5.00 pm on 24 November 2006.
Third, the period of time that elapsed in this instance between the date Moody's received the information and Mr Stromer's trading is a relevant factor in conjunction with the above matters in determining whether the evidence establishes that the "information" was a relevant aspect to the acquisitions in question.
Fourthly, I accept the submission that there was no relevant announcement identified in the evidence that explains the sale of units on 29 November 2006.
The Crown, in oral submissions, submitted that, even if the evidence in relation to the acquisitions of the APA units was not relevant on the question of coincidence evidence, the evidence relating to the APA matter was relevant to the AIHCA matter and SRG matter.
I have concluded that the probative value of the evidence in relation to APA does not exhibit the similarities to the same extent and level as the evidence in question in relation to the charged matters.
Additionally, the matters referred to above provide additional bases for the above conclusion, namely, that the probative value of the evidence the Crown seeks to rely upon under s.98 cannot be considered to be high and does not, in my assessment, exceed its prejudicial effect. Accordingly, I do not consider that evidence concerning the APA matter is admissible under s.98.
Whether the evidence has relevance and is admissible on any other basis by reason of a link or connection with the AIHCA or SRG matters will depend upon the evidence led at trial.
(G) ORDERS
In relation to the notice of motion filed on behalf of Mr Joffe on 11 March 2011 and the notice of motion filed on behalf of Mr Stromer on 11 March 2011, I make the following orders:-
(1) The evidence particularised in the table to the Notice of Coincidence Evidence dated 8 July 2011, being Table A entitled "Table of related events the subject of counts in the Indictment" is admissible pursuant to s.98(1)(b) of the Evidence Act 1995.
(2) The evidence particularised in the table to the Notice of Coincidence Evidence dated 8 July 2011 being Table B entitled "Table of related events not the subject of counts in the Indictment" is not admissible under s.98(1)(b) of the Evidence Act.
(3) Leave is granted to any party to apply with respect to any consequential or ancillary orders.
[32]
APPENDIX TO JUDGMENT
This schedule refers to particular matters raised by the Crown in MFI 1 and in submissions and also by way of response and submissions made on behalf of Mr Joffe in relation to evidence the Crown proposes to adduce at trial pursuant to s.98.
The "events" identified in the Schedule are references to particular events contained in the Table (MFI 1) relevant to the counts in the indictment with which Mr Joffe has been charged.
[33]
Event 27: GasNet - (3) Joffe and Stromer communicated by telephone, by which means Joffe communicated the insider information to Stromer, thereby procuring Stromer to trade whilst in possession of the inside Information
[34]
Facts and contentions
The Crown case was that Mr Joffe attended the meeting on 8 June 2006 at BBI. It, inter alia, relied upon Mr Howell's statement. Mr Upson, Mr Whalley and others from BBI attended. Mr Howell's diary notes are relied upon as evidence of Mr Joffe's attendance. The Crown case is that, at the meeting, Mr Joffe and Mr Howell were given details of a proposed takeover of GasNet by BBI and APA as joint-partners. BBI told them they were planning an announcement of the takeover on 16 June 2006. It would be a script offer.
On the same day at 5.19 pm, 8.36 pm and 9.10 pm, Mr Joffe and Mr Stromer exchanged "mobile SMS calls".
On 9 June 2006, Mr Joffe sent an email to Mr Upson. On Saturday 10 June 2006, Mr Upson sent an email to Mr Joffe and others which included the briefing paper for the proposed GasNet transaction.
The briefing paper notes a maximum offer price of $2.80 and a current price of $2.25 with an announcement in mid-June.
Mr Stromer sent three text messages to Mr Joffe on Sunday 11 June 2006 and one on Monday 12 June 2006 at 11.59 pm.
On Tuesday 13 June 2006, Mr Joffe emailed Mr Upson, Mr Chong and others and informed them he was "conflicted out from this particular deal".
On Wednesday 14 June 2006, Mr Stromer's father, Tom Stromer, purchased 22,322 GasNet stapled securities at $2.21 through UBS (at a cost of $49,602.95). The purchase was allocated to an account in the name of Nathan Stromer and his sister, Simone Stromer.
At the same time, Tom Stromer acquired 10,000 GasNet stapled securities in his own name (at a total cost of $22,221.55).
At 11.17 pm that night, Mr Stromer placed a "mobile SMS call" to Mr Joffe. On 15 June 2006, there was one text message sent by Mr Stromer to Mr Joffe at 6.31 pm. Telephone calls were made between them at 6.47 pm and 9.18 pm.
On 16 June 2006, payment for both lots of GasNet securities was made in the sum of $71,824.50 from the Westpac account of Nathan and Simone Stromer.
That morning at 10.49 am, Mr Joffe visited the CommSec internet site for GasNet.
On 19 June 2006, the takeover bid was announced.
Between 2 August and 18 August 2006, Mr Joffe visited the website of GasNet on nine occasions. Competing bids were made as follows:-
15 August 2006 by Colonial - $2.88 cash per stapled security.
22 August 2006 by APA -$3.10 cash per stapled security.
[35]
Event 40: GasNet - (4) Stromer traded in or otherwise acquired share in the entities whilst in possession of the insider Information
Mr Stromer's father acquired the securities on 14 June 2006. This was said on behalf of Mr Joffe to be significant to the Crown case as to the "pattern" of conduct. It was the father, not Mr Stromer, who did the trading and had control of the relevant account.
A further point to be noted on Mr Joffe's behalf was that there was a very plausible explanation. Reference was made in this respect to an article in the Sun Herald on 21 May 2006 (Exhibit 1 at p.83). The article referred to "takeover speculation" in relation to GasNet.
Reliance was also placed on other evidence in the statement of Mr David Howell, a statement by him to the effect that "they would be an easy target for a takeover" (t.47).
Reliance was also placed upon material indicating that GasNet would be taken out of the Australian Stock Exchange ("ASX") 200 which would have a depressing effect on the price of shares indicating that it was good time to buy. This was said to be programmed to occur some two days after Mr Tom Stromer acquired the shares. These circumstances were said to constitute "a perfectly sensible reason to think the price was going to go down ..." (t.47).
These circumstances, it was submitted, constituted coincidence circumstances. These circumstances constitute what was termed "plausible alternative explanations for Mr Stromer's trading" (t.48).
The article was also relied upon by Mr Joffe as identifying likely bidders.
The Crown distinguished speculation from fact. The Crown acknowledged that the purchase was made by Mr Stromer's father a number of days after Mr Joffe is said to have received the information. However, it relied upon the fact that it was not necessarily in every case that Mr Stromer (and in this instance, his father) would act immediately upon being allegedly informed of insider information.
The Crown contended that sometimes time was taken to put together cash to make purchases. The essential point, it said, was that the purchases were made after the alleged receipt of the information.
The Crown case was that the purchase made by Mr Stromer's father was consistent, this being the first relevant purchase of financial products, to put "space" between himself and Mr Joffe and that Mr Stromer became "less cautious" as time went by (t.162). The Crown relied upon the contention that the evidence would support the proposition that there was a scheme operating between Mr Joffe and Mr Stromer in the relevant period and that the financial products traded (the subject of the counts) were all in relation to companies about whom Moody's were said to have received inside information.
[36]
Event 66: GasNet - (6) Stromer traded out of his position following an announcement or Moody's being advised of the transaction not going ahead
It was observed on behalf of Mr Joffe that there was a two month delay before Mr Tom Stromer sold his stocks and that it was, accordingly, "very difficulty to connect the acquisition of the GasNet shares with some speculative theory about selling out once the stock moves after an announcement..." (t.48).
It was further submitted for Mr Joffe that this took it out of any "kind of pattern", namely, that the purchases were by Mr Tom Stromer and not his son, Mr Stromer (t.48).
A further point was that there were two further takeover bids that occurred in the interim before Mr Tom Stromer sold and there was no suggestion that Moody's had information about those further bids (t.48).
Accordingly, it was said that there was an alternative rational explanation, namely, that Mr Tom Stromer saw the company was a takeover candidate based on speculation of the market. Had he been trading on inside information, he would have sold after the bid.
The Crown stated it was not an essential part of its case that Mr Stromer would trade out of a position immediately after an announcement was made which reflected information said to have been obtained by Mr Joffe. When the financial products were originally purchased, it was the Crown's position that Mr Joffe and Mr Stromer were then aware of the impending BBI takeover bid. The Crown case was that, as to the particular purchases of parcels of shares (one in the name of himself and another in the names of Nathan Stromer and Simone Stromer), Mr Tom Stromer may not have known of the content of inside information, but that did not at all mean that inside information had not been obtained by his son. Accordingly, the purchase by Mr Tom Stromer, it was contended, was not inconsistent with the Crown case.
As to the issue of timing in the sale of financial products, the fact of sale after an announcement is made was the important event. The timing of a sale could depend upon a number of factors after the announcement is made which may lead someone to hold the shares for a further period.
[37]
Event 79: GasNet - (7) Joffe maintained significant surveillance of the share price, usually on CommSec, throughout the material time
This event relates to the contention that, on 16 June 2006, Mr Joffe visited the CommSec internet site for GasNet.
The first submission related to Mr Joffe's internet usage involving CommSec searches and to the issue of significant surveillance on share prices using CommSec by Mr Joffe.
A question was raised on Mr Joffe's behalf as to what the similarity was in circumstances where there was no visiting the website until two days after the trading. Additionally, a contrast was made between the 600 hits made in respect of the BLD transaction. The submission was it was impossible to draw any "relevant probative inference" (t.49). It was submitted there was no pattern to the trading.
It was further submitted that there was "a perfectly sensible explanation" for the fact that Mr Joffe was looking at the GasNet share price, as it was part of his job.
In relation to the accessing of the website, a problem was said to exist in identifying the particular listed entity from the web page as it did not have the code for the particular stock.
This fact was said on Mr Joffe's behalf to be significant, given that the Crown case was that at various points the first time that Mr Joffe accessed the web page was on a particular day and the Crown sought to have an inference drawn from the fact that it was close in time to Mr Stromer's trading and that inferences should be drawn on that basis. The submission was (t.52):-
"... that there are a very large number of CommSec hits where it is Mr Joffe's contention that in fact one can't tell what the stock price was."
[38]
Event 2: AIA - (1) Moody's received information from seven entities the subject of charges, being 'inside information'
[39]
Facts and contentions
In June 2006, B&B received a proposal from Deutsche Bank to consider the takeover of AIA.
On Monday 3 July 2006, Mr Howell and Mr Joffe attended a meeting with Mr Len Chersky of B&B and Mr Phillipe Fontaine of Deutsche Bank. At that meeting, they were given details of the proposed transaction to make a bid for an airport. The target was not identified. AIA was identified as the target at a meeting on 1 August 2006. The meeting was attended by Mr Howell, Mr Joffe and Ms Wells from Moody's and Mr Chersky and others. Mr Joffe's notebook entry noted a friendly takeover and "NZ Airport" Auckland.
An email was sent on 2 August 2006 from B&B to Mr Howell. Mr Joffe and Mr Chersky attached links to information including "www.auckland-airport.co.nz".
On the weekend of 5 and 6 August 2006, the Crown contended Mr Stromer and Mr Joffe spoke by phone twice. As noted below, it was contended for Mr Joffe he would not have been home on 5 August 2006. At 12.10 pm on Monday 7 August 2006, Mr Stromer called UBS. At 12.14 pm, he placed a "mobile SMS call" to Mr Joffe.
On 8 August 2006, Mr Stromer purchased 29,500 AIA shares at $1.6972 through UBS.
On 9 and 10 August 2006, Mr Stromer placed mobile calls to Mr Stromer (two on 10 August). The same day, Mr Joffe visited the CommSec website "security Code - AIA".
On Tuesday 15 August 2006, $50,000 was withdrawn from Mr Stromer's ANZ account and transferred to "UBSWA Equities".
On 15 August 2006, Mr Stromer placed a "mobile SMS call" to Mr Joffe at 12.02 pm and at 12.03 pm made a call to UBS.
On 16 August 2006, Mr Stromer called UBS. At 6.15 pm, he sent Mr Joffe a text message. At 6.16 pm, Mr Stromer called Mr Joffe on his mobile phone.
On 17 August 2006, $50,478.40 was credited to Nathan and Simone Stromer's UBS account. The same amount was debited to pay for the acquisition of 29,580 AIA shares acquired on 8 August 2006.
On 12 September 2006, Mr Chersky sent an email to Ms Wells, "... the deal dead at this point".
On 12 September 2006 at 10.17 am, Mr Joffe received an email from Ms Wells advising "... not going to plan for B&B ...". At 10.55 am, Mr Joffe visited the CommSec website re AIA.
[40]
Event 28: AIA - (3) Joffe and Stromer communicated by telephone, by which means Joffe communicated the insider information to Stromer, thereby procuring Stromer to trade whilst in possession of the inside Information
In relation to electronic communications between Mr Joffe and Mr Stromer, it was observed on behalf of Mr Joffe that the text messages relied upon by the Crown were from Mr Stromer to Mr Joffe and they would not be seen as an occasion for communication of inside information.
In relation to two particular phone calls, analysis revealed that, on one day (5 August 2006), Mr Joffe could not have been at home. On the other date (6 August 2006), the call occurred five days after 1 August 2006, when, on the Crown case, Mr Joffe learned of AIA as a "target". Accordingly, the submission was, there was no evidence of a telephone communication immediately after 6 August 2006 and before the purchase of shares on 8 August 2006.
[41]
Event 41: AIA - (4) Stromer traded in or otherwise acquired share in the entities whilst in possession of the inside information
As noted above, Mr Stromer purchased the AIA shares on 8 August 2006. The Crown relied on an "SMS call" to Mr Joffe placed by Mr Stromer at 12.14 pm on 7 August 2006.
However, it was said that a check of the entries shows that there was a call made on 6 August 2006 and not Monday 7 August 2006. Additionally, the following Monday was not a trading day.
The second point made for Mr Joffe was that there was a rational alternative explanation for Mr Stromer's trading. Particular reliance was placed upon a media release of 24 July 2006: Exhibit 1 at p.200. The media release referred to an announcement of the re-valuation of the non-current assets of AIA which resulted in an increase in value of $3,399 million.
The article was only a week or so before Mr Stromer traded in the AIA shares. Reliance was place on the fact that the article reflected a view in the market that the airport was a strong takeover candidate, although not necessarily an imminent takeover. The submission was that Mr Stromer can be seen in context to have traded while there were "market rumours about takeovers" or "market views formed that a company is a strong takeover candidate" (t.58).
Against this background, questions were posed as to how the Crown could explain these circumstances and make it fit into its case theory (t.58). In relation to Mr Stromer trading out of AIA shares, reference was made to the document dated 12 September 2006 in which it was recorded, inter alia:-
"All is not going to plan for B&B". They are still 'in negotiations' with Auckland Airport management and are not sure what the outcome will be ..."
Mr McHugh observed that the email of 12 September 2006, in this respect, was some 35 days after Mr Stromer acquired the shares, that is to say, he held the shares for a longer period than on other occasions and this went to the issue of "similarities".
On 13 September 2006, Mr Stromer sold the shares. The submission was (t.59):-
"The Crown is certainly right that he sells his shares the day after this, but the real question is: how strong is the inference that this is what causes him to sell when he's been prepared to sit on them for so long?"
The Crown in MFI 2 relied on the contention that Mr Joffe viewed the Market Depth page for AIA on 1 August 2006 and on 10 August, 18 August and 12 September 2006, he viewed the Charting Page for AIA.
[42]
Event 80: AIA - (7) Joffe maintained significant surveillance of the share price, usually on CommSec, throughout the material time
This item relates to the use of CommSec. It was noted that, between 1 August 2006 and 12 September 2006, Mr Joffe used the CommSec internet site for AIA on four occasions for a period of 43 days, being an average of one every 10 days.
The submission was that the access to the website was explicable by the fact that Mr Joffe had been given information that AIA was a potential target and, accordingly, it was not difficult to see why he might be interested in it.
On the issue of "similarities", it was said to differ from other trading activities such as BLD where there was a very large number of occasions on which the CommSec site was accessed.
Additionally, it was said the fact that he only accessed the site on four occasions was "hardly powerful evidence that he is watching the stock to see what is happening to it" (t.64). It was said to be different from any other kind of pattern.
It was also said to be a departure from the "pattern" that Mr Stromer hung on to the shares for 35 days and that there was no announcement causing him to sell. Additionally, it was noted that the "Crown theory" was that what prompted the sale was not an announcement but the giving of further information to Moody's.
Finally, as noted above, the submission was that the quality of the information was very low and that the takeover price was less than the company was trading for.
[43]
Facts: AWB
In 2006, Mr Howell and Mr Joffe were respectively senior and associate analysts in respect of the AWB Harvest Finance Ltd "credit".
On 14 September 2006, Mr Howell sent "pre-meeting" information regarding AWB to Mr Cahill, CEO of Moody's, PA to Mr Cahill, Mr Patrick Winsbury (a senior analyst) and Mr Joffe.
On Friday 15 September 2006 and the following weekend, Mr Joffe and Mr Stromer spoke by phone on eight occasions and exchanged one "SMS call".
On Monday 18 September 2006 at 3.00 pm, the pre-meeting took place with AWB representatives in preparation for a Melbourne conference on Wednesday 20 September 2006. Mr Joffe attended.
On 18 September 2006, Mr Joffe viewed a Sydney Morning Herald article relating to AWB and later at 2.59 pm viewed the AWB share price on the CommSec website. After the pre-meeting, he viewed internet sites regarding AWB.
On 19 and 20 September 2006, Mr Joffe visited a number of websites relating to AWB.
On Wednesday 20 September 2006, Mr Joffe, Mr Cahill, Mr Howell and Mr Winsbury met with AWB representatives. At the meeting, information was disclosed:-
That AWB was considering providing an indemnity to its subsidiary AWB International Ltd regarding the potential tax exposures and liabilities arising out of the Royal Commission into its activities.
AWB's wheat production forecast for 2006/2007 was lower than previously estimated.
On the evening of 12 September 2006, Mr Joffe phoned Mr Stromer.
On 13 September 2006, Mr Joffe and Mr Stromer made telephone contact on three occasions.
On Friday 22 September 2006, Mr Joffe, by email to Mr Morris of AWB requested a draft of AWB's proposed announcement regarding the indemnity.
On 22 September 2006, Mr Joffe checked the share price regarding AWB on CommSec.
On the weekend of 23 and 24 September 2006, Mr Joffe and Mr Stromer made telephone contact on nine occasions.
On Monday 25 September 2006, Mr Stromer established a trading account with CMC Markets. At 11.43 am that day, Mr Stromer called Mr Joffe's mobile phone and again Mr Stromer called at 3.12 pm. Mr Joffe used his home phone to call Mr Stromer's home at 8.36 pm.
[44]
Event 16: AWB - (2) Joffe was in direct receipt of the inside information in some instances and indirectly in others
The submissions at some length referred to the position of the AWB following the Royal Commission into the AWB concerning information about the AWB. First, as discussed above, AWB advised Moody's that it would indemnify its subsidiary, AWBI, in respect of legal costs incurred in the Royal Commission and any tax that might be assessed against AWBI in connection with transport fees that were paid for wheat sold to Iraq. The estimate, on a worst case scenario, was $259 million.
The second segment of information, also discussed above, related to the wheat crop forecast. The publication, ABARE, forecast production of 16.4 million tonnes.
The point made in submissions for Mr Joffe was that these matters "were out in the open". Although it was stated in submissions for Mr Joffe that an attempt was not being made to contradict the Wilson Report on the "material information", nonetheless emphasis was placed upon the fact that the information said to have been publicly known meant that the "material information" was very poor quality information for Mr Joffe to have traded on. This, it was contended, was relevant to the issue of "probabilities" in terms of assessing "significant probative value" (t.68). The further submission was (t.69):-
"... It is just not rational to infer that one would trade on that part of the information ..."
In support of this contention, it was submitted that it was known that the company was going to have to support its subsidiary and that the expected tax liability was known. The submission was repeated, accordingly, that the information was (t.70):-
"... so weak that it is just in my submission really irrational to suggest that days later with all this being in the market Mr Stromer is trading on that basis."
In relation to the ABARE published forecast, the Crown relied upon the difference between a forecast and an actuality. In this respect, reference was made to Mr Joffe's notebook record of the meeting with AWB, in particular, the entry which includes the words "that the ABARE forecast was correct" (t.169). The submission for the Crown was that the position had moved from where ABARE had made a forecast to where the forecast was confirmed.
The Crown contended that the arguments concerning materiality do not detract from Mr Wilson's evidence and that, on the present application, full weight had to be given to that evidence.
[45]
Event 29: AWB - (3) Joffe and Stromer communicated by telephone, by which means Joffe communicated the insider information to Stromer, thereby procuring Stromer to trade whilst in possession of the inside Information
It was noted that in the eight days after the receipt of the information, Mr Joffe and Mr Stromer spoke by telephone on 18 occasions and exchanged three text messages (t.72). It was observed that the three text messages all originated from Mr Stromer.
Whilst Mr McHugh acknowledged that there were "lots (of) opportunity to communicate because they were friends ..." (t.72), that did not take the Crown case very far insofar as reliance was placed on the phone calls. The Crown needed to point to a particular occasion when it was said that there was relevant communication and that this went to the issue of "procuring" (t 72-73).
It was further observed that, of the 18 phone calls, many of them were very short and the inference is that there was not much that could be inferred from them (t.73).
[46]
Event 42: AWB - (4) Stromer traded in or otherwise acquired share in the entities whilst in possession of the inside information
As noted above, on 27 September 2006, Mr Stromer acquired 135,000 short AWB CFDs.
It was submitted that there was a perfectly rational explanation for the trading, namely, newspaper articles which were adverse following the Royal Commission and that there was considerable other material to that effect. Additionally, reliance was placed upon the fact that the Royal Commission report was due to come down on 29 September 2006.
The Crown relied upon announcements made by AWB on 28 September 2006 to the ASX, in particular, the announcement of a reduction in 2006/07 wheat production forecast from 18 to 20 million tonnes to 12 to 15 million tonnes.
The other matters referred to in the discussion of factual matters were also relied upon by the Crown.
[47]
Event 68: AWB - (6) Stromer traded out of his position following an announcement or Moody's being advised of the transaction not going ahead
As noted above, on 28 September 2006, AWB made the announcements to the ASX as detailed above. On 29 September 2006, Mr Stromer disposed of all of his 135,000 CFDs in AWB. This was said to be the day after the relevant information came into his possession. The announcement was the wheat forecast was down to 12 million tonnes. In submissions for Mr Joffe, it was said, however, that that was worse than the insider information said to have been given to Mr Joffe. The submission was that this was in line with market expectations, but worse than what Moody's had been told (t.74).
It was said that it was hardly surprising that Mr Stromer traded out as he had a "short position".
The submission for the Crown was that the submissions for Mr Joffe as to a further reduction in wheat production forecast (there was no evidence that Moody's had the information and, therefore, no evidence that could lead to an inference that that information was passed on to Mr Stromer) was irrelevant because the information is not pleaded as being the substance of the charge. It was irrelevant that Moody's were not aware that AWB would be announcing a further reduction in wheat production. What is pleaded in the charges is the information that was provided on 20 September 2006 to Moody's by AWB.
The Crown also relied upon evidence of contact which was said to be significant between Mr Stromer and Mr Joffe on 29 September 2006. Mr Stromer sent three text messages to Mr Joffe between 10.15 am and 10.42 am. It was submitted this supported an inference that there was return text messages from Mr Joffe, there being three messages within a short period of time. He spoke to Mr Joffe at 11.00 am and 11.50 am and then immediately began to sell his AWB CFDs at 11.51 am. They again spoke at 12.54 pm and Mr Stromer was said to have again subsequently commenced disposing of more of his AWB CFDs at 12.57 pm, three minutes after he had made the call to Mr Joffe.
[48]
Event 81: AWB - (7) Joffe maintained significant surveillance of the share price, usually on CommSec, throughout the material time
In the Crown's submissions it was noted that, between 18 and 27 September 2006, a period of approximately nine days, Mr Joffe visited the AWB website on eight occasions.
It was observed that AWB was a client of Moody's at the relevant time and it was noted that Mr Joffe, having been at the relevant meeting with AWB, was looking at the website.
As opposed to the "overall conclusion" to be drawn, it was submitted for Mr Joffe (t.75):-
"First of all, it is a weak case as to the information and as to the inferences. And it just doesn't seem to fit the pattern. If this was such good information, why did Mr Joffe wait days before he trades?"
It was further submitted that there was nothing unusual about the pattern of phone calls made over the 18 days. It did not fit the pattern of Mr Joffe obtaining information and then passing it on to Mr Stromer to trade. It did not indicate persistent examination of the website.
[49]
Events 4 and 17: BLD - (1) Moody's received information from seven entities the subject of charges, being "inside information"; (2) Joffe was in direct receipt of the inside information in some instances and indirectly in others
[50]
Facts
Moody's representatives met with BLD representatives on 25 October 2006. At the meeting, Moody's was told of a downturn in the US that was going to be more severe than anticipated and NSW would remain poor, leading to probably lower results in 2007 than had been anticipated.
In submissions, reference was made by Mr McHugh to a document dated 19 October 2006 (Exhibit 1, p.415). It referred to that the trading results for the September quarter were "significantly below" last year. The company did not anticipate operating profit for the half year would vary by more than 15%.
A question was posed as to why BLD would tell Moody's six days later that they were about to make an announcement of downgrade.
Mr Joffe was not at the relevant meeting. The question was whether anything was said at the meeting on 25 October 2006 about a profit announcement.
Submissions were made in relation to a number of documents contained within Exhibit 1, in particular, at p.449 ("Financial indicators"), in particular, in relation to 2006 and 2007 forecasts (pp.485, 493 and 499). Submissions were made in relation to these documents at t.80-82.
Reference was made to there being no evidence that the Moody's representatives were told that there was going to be an announcement of a profit downgrade, that, in fact, the documents pointed in the other direction (t.82).
On the question as to whether anything was said at the meeting on 25 October 2006 about a profit announcement, the Crown responded, firstly, by relying on the expert report of Mr Wilson as to "materiality" of inside information, secondly, that it was not asserted by the Crown that inside information was disclosed during the Moody's "pre-meeting" and, thirdly, reliance was placed upon a note by Mr Brian Cahill of 25 October 2006 containing the entry:-
"Will be /- downturn in US is going to be more severe than anticipated & NSW still poor (these two are 60% earnings) leading to probably lower results in 07 than originally anticipated."
[51]
Event 17: BLD - (2) Joffe was in direct receipt of the inside information in some instances and indirectly in others
The Crown case is that Mr Joffe was told the effect of the inside information by 10.37 am on Thursday 26 October 2006 at which point he accessed the CommSec internet site for BLD. On that day, 26 October 2006, a meeting took place with BLD and Moody's where the information was communicated to Mr Cahill, Mr Fullerton and Mr Brown. On that day, Mr Joffe viewed the BLD CommSec page on 15 occasions. He was in contact with Mr Stromer throughout the day. Mr Stromer purchased the CFDs the same day.
The Crown case is that there was no legitimate explanation for Mr Joffe's viewing the BLD CommSec page on that day. His repeated viewing of the BLD CommSec page and contact with Mr Stromer throughout the day, together with the opportunity, it was asserted, that he had to learn the information within Moody's as well as the timing of Mr Stromer's purchases are all factors available to be taken into account.
Mr McHugh observed that there was no document in Moody's possession that recorded that there was going to be such an announcement, hence, Mr Joffe could not have found it on the server or on a file or elsewhere.
There was said to be nothing in the statements of Mr Peter Fullerton or Mr Cahill as to this aspect.
Reference was made to extracts from Mr Stuart Brown's s.19 examination (Exhibit 1, pp.516-520).
It was submitted that there was no document suggesting that Moody's were told that there was going to be an announcement of a profit downgrade. Reference was also made to Mr Brown's evidence at Exhibit l, p.522.
It was submitted that the inference that Mr Joffe had information does not appear to be available on any basis and that it can be concluded that the jury will be asked to infer that fact "somehow or other".
The Crown has responded by observing that, firstly, BLD was not a "credit" of Mr Joffe's and he had no reason to view the BLD CommSec website. The Crown did not assert that inside information was disclosed at the pre‑meeting. However, on 26 October 2006, the day following the BLD meeting with Moody's, at which it was said the information was communicated, Mr Joffe viewed the web page on 15 occasions while in contact with Mr Stromer throughout the day. Mr Stromer purchased the CFDs the same day.
[52]
Event 43: BLD - (4) Stromer traded in or otherwise acquired share in the entities whilst in possession of the inside information
On 26 October 2006, Mr Stromer acquired 54,200 short BLD CFDs said to indicate he was expecting the price of the security in BLD to decline. It was contended for Mr Stromer there is a clear alternative explanation for that. On 19 October 2006, there had been an announcement. It was submitted "... it looked as though things were going badly ..." (t.86). Given "problems internationally", it was there asserted it is not surprising that Mr Stromer formed the view the price was going down (t.86).
[53]
Event 69: BLD - (6) Stromer traded out of his position following an announcement or Moody's being advised of the transaction not going ahead
The "event" is Mr Stromer trading out of his short position, "The same day (27 October 2006) ..." by 6,000 CFDs. On Thursday 2 November 2006, he reduced his short position in BLD by a further 8,000 CFDs and again on 8 November 2006 (19,000 CFDs) and 13 November 2006 (33,200 CFDs).
It was submitted on behalf of Mr Stromer that there was another explanation - he took a short position betting on the stock going down.
[54]
Event 82: BLD - (7) Joffe maintained significant surveillance of the share price, usually on CommSec, throughout the material time
This event asserts that, between 26 October and 13 November 2006, Mr Joffe visited the CommSec internet site for BLD on approximately 696 occasions. The submission was the high number of visits to the website in relation to this event is so high as not to fit the "pattern" (t.86). The contention is that there is no relevant "similarity".
[55]
Facts: AIHCA
Mr David de Loub was Group Treasurer at Alinta Ltd ("Alinta"). As at November 2006, that company was the owner and manager of energy and infrastructure assets including gas, pipes and energy transmission lines. Alinta also owned power generation assets.
Following a divestment of assets into AIHCA, it was decided, as part of a broader corporate strategy, to consolidate all of Alinta's assets and acquire AIHCA.
The acquisition of AIHCA was known within Alinta as Project Wren/Little Duck. It was stated that it was common practice to use code names for acquisitions and takeovers because it provided Alinta with comfort in terms of confidentiality.
Mr de Loub's role in the acquisition of AIHCA involved the management of the credit rating implications for Alinta and their subsidiary companies. In the Crown case, it is said that an integral part of Mr de Loub's role was to manage the interface with Moody's during the acquisition process.
[56]
Event 5: AIHCA - (1) Moody's received information from seven entities the subject of charges, being 'inside information'
This event relates to a communication relied upon by the Crown on 10 November 2006 between Mr Adrian Atkins of Moody's and Mr de Loub that AIHCA planned to announce a takeover bid for the issue partly paid stapled securities of AIHCA and thereafter APA.
The alleged advice was that the takeover bid would be announced on Wednesday 15 November 2006.
The contention for Mr Stromer was that this was information communicated to Mr Atkins, not to Mr Joffe (t.80). The issue was the "information". In particular, who got the information (t.89)?
Mr Atkins' statement (commencing at p.9 of Exhibit 2) refers to the conversation with Mr de Loub at paragraph [73]. In paragraph [76], he said he could not recall discussing the proposed takeover bid with any other Moody's employees but added, "It is possible that such a conversation did occur". He did discuss it with Mr Joffe on one particular occasion which he identified in that paragraph of the statement.
The statement, despite its terms, expressly left open the possibility that Mr Atkins spoke to Mr Joffe on the issue, although he, Mr Atkins, has no specific recollection of a particular conversation with him about that aspect. The submission for Mr Joffe, however, focussed, not on that aspect, but on the abovementioned denial of having spoken about the matter on the particular occasion identified to in the statement concerning Mr Howell's diary.
[57]
Event 44: AIHCA - (4) Stromer traded in or otherwise acquired share in the entities whilst in possession of the inside information
This event relates to Mr Stromer purchasing AIHCA CFDs (962,000) on Monday 13 November 2006 commencing at 11.46 am.
The Crown seeks to rely upon evidence to establish that, on Saturday 11 November 2006 on two occasions Mr Stromer used his home phone to call Mr Joffe's home phone and also on Sunday 12 November 2006, Mr Stromer used his home phone to call Mr Joffe's home phone.
On Monday 13 November 2006, the Crown case is that between 9.28 and 11.50 am, Mr Joffe visited the CommSec internet site for AIHCA 13 times.
It was submitted there were alternative explanations for the purchases. Reliance was placed upon information that was publicly available, including Macquarie Bank "telling the market" on 30 October 2006 that there was an 80% probability that a takeover would be announced (t.92).
The Crown pointed, firstly, to the fact that AIHCA and APA were not "credits" of Mr Joffe and, secondly, to the fact of Mr Joffe visiting the CommSec website for AIHCA on the day Mr Atkins spoke to him about Mr Howell's calendar. This occurred two minutes after Mr Joffe spoke to Mr de Loub. Mr Joffe visited AIHCA CommSec pages on two other occasions the same afternoon as well as the CommSec page for APA, which was another takeover target that the Crown asserts was discussed between Mr Atkins and Mr de Loub. Records allegedly indicate that Mr Joffe had not previously visited the AIHCA website before that day. The Crown relies upon what it referred to as (Crown submissions at t.175):-
"... a congruence in timing of activity by Mr Joffe and the receipt of that information by Moody's. That is particularly relevant given that Mr Joffe was not the person who received the information from the credit directly."
The Crown also pointed to some of the funds that Mr Stromer used to make the purchases.
On 13 November 2006, Mr Joffe obtained a bank cheque for $30,000 which was payable to Mr Stromer. On 14 November 2006, Mr Stromer attempted to bank it into his CMC Markets account. He was unable to do so and, accordingly, banked it into his own account and obtained a cheque for $30,000, which was deposited in the CMC Markets account. After the deposit, Mr Stromer purchased a further 229,000 long AIHCA CFDs. Mr Stromer's evidence to the Australian Securities and Investments Commission ("ASIC") was that the $30,000 were monies borrowed from Mr Joffe. The details about this aspect were summarised in the Crown submissions (at t.178).
[58]
Facts: SRG
The Crown case is that at 11.46 am on 13 November 2006, Mr Stromer commenced trading in AIHCA CFDs with CMC Markets, acquiring 4,000 long AIHCA CFDs.
The Crown case also is that 11.51 am, Mr Joffe used his mobile phone to call Mr Stromer's mobile phone.
The Crown case also alleges that between 12.01 pm and 3.36 pm, Mr Stromer acquired a further 551,000 long AIHCA CFDs.
The Crown case also alleges that between 12.04 pm and 4.21 pm, Mr Joffe visited the CommSec internet for AIHCA approximately 56 times.
[59]
Event 6: SRG (Charge 6) - (1) Moody's received information from seven entities the subject of charges, being 'inside information'
There are four counts in the indictment against each accused in relation to SRG (eight in total). This event concerns contact made on 24 November 2006 by Transurban Ltd ("Transurban") (a toll road developer) with Ms Natalie Wells of Moody's in relation to a proposed announcement that the company was intending to make a takeover bid for SRG. (The takeover was later announced on 14 December 2006.)
Transurban was a "credit" of Mr Joffe. When the first information came to Moody's on 21 November 2006 about a proposed announcement, SRG was tentatively identified as the target of Moody's, although Transurban had not confirmed that fact. It was observed, on that assumption, that Mr Joffe may be in a position of conflict.
An initial invitation to a meeting sent on 27 November 2006 was withdrawn later that day.
The precise information concerning the proposed takeover was provided to Moody's at a meeting on 30 November 2006. The Crown, however, alleges that the effect of it was already apparent.
On 27 November 2006, a series of emails were sent by Transurban to Mr Howell and others at Moody's providing further details of the proposed acquisition.
The submission for Mr Joffe was that the evidence did not support the proposition at the start of the trading that Mr Joffe had any information as he was in Singapore (t.93). It was submitted that it is difficult to infer that Mr Stromer was conducting his trading based on information that is already in the market. It is a coincidence (t.93).
It was observed that Mr Joffe was in Singapore between 25 and 30 November 2006. There is no evidence he accessed his computer whilst in Singapore. He was initially invited to attend the Transurban meeting but the invitation was cancelled by reason of the "conflict" issue. Mr Howell was in Sydney in the above period. There was only one telephone call between them lasting for 6.5 minutes. Mr Howell does not recall the contents of the phone call, but assumes it was about work-related issues.
Mr Stromer, it was noted, traded at 2.22 pm on 30 November 2006. Mr Joffe was on the plane at that point. It was observed that there was no evidence of "stock checking" by Mr Joffe following his return to Sydney. It was submitted that this "event" does not conform to the "pattern" asserted in the Crown case.
[60]
Event 32: SRG (Charge 6) - (3) Joffe and Stromer communicated by telephone, by which means Joffe communicated the insider information to Stromer, thereby procuring Stromer to trade whilst in possession of the inside Information
In MFI 1, the Crown referred to Mr Joffe and Mr Stromer speaking by telephone on the evening of 27 November 2006 and again on the afternoon of 28 November 2006.
The reply on behalf of Mr Joffe was that there is no evidence of them communicating of inside information. There is no evidence of procuring.
In MFI 2, the Crown responded saying that it relied upon the timing of the communication in support of its case that Mr Joffe procured Mr Stromer and that he passed the information to Mr Stromer and that Mr Stromer, in trading, acted on it.
In oral submissions, the Crown stated it relied also on the other coincidences identified so as to defeat an argument that the purchases of CFDs were simply a matter of coincidence.
In response, it was contended for Mr Joffe the Crown's reply does not address the submissions as to whether or not Mr Joffe received inside information.
It was contended the inferences relied upon by the Crown were weak and did not overcome the gap in the evidence as to the receipt of information. Some of the text messages sent by Mr Stromer occurred when Mr Joffe was on the plane returning from Singapore.
[61]
Event 45: SRG (Charge 6) - (4) Stromer traded in or otherwise acquired share in the entities whilst in possession of the inside information
The Crown, in MFI 1, referred to Mr Stromer purchasing 265,487 SRG CFDs on 30 November 2006.
The response for Mr Stromer was that he had explained his reasons for acquiring SRG securities.
In MFI 2, the Crown referred to the fact that Mr Joffe and Mr Atkins worked on the preparation of the financial model for the RAS on Saturday 2 December 2006 in advising Transurban is evidence of opportunity for Mr Joffe to learn of the proposed takeover. Mr Joffe assisted, notwithstanding that he was to have been excluded due to his position of conflict. It goes against Moody's managing the conflict appropriately.
There was telephone contact later that day between Mr Joffe and Mr Stromer and again on Sunday 3 December 2006. There was an email from Mr Stromer to Mr Joffe on Monday at 2.05 pm and Mr Stromer sent a text message at 2.23 pm before acquiring further SRG CFDs between 2.46 pm and 2.53 pm.
In response in Reply Submissions for Mr Joffe, it was said, inter alia, the alleged work with Mr Atkins did not occur until 2 December 2006 two days after Mr Stromer's trading and one day after Mr Joffe returned from Singapore.
In MFI 2, the Crown response was that the procuring occurred between 27 and 30 November 2006. The fact that Mr Joffe was visiting websites between 7 and 13 December 2006 is relevant to that earlier procuring as indicating Mr Joffe's interest in the share price which is relevant to the value of CFDs. The profit achieved by Mr Stromer was not manifest until Mr Stromer traded out of his positions. This was after 30 November 2006 and not before 14 December 2006 when the public announcement of the takeover was made.
[62]
Event 20: SRG (Charge 7) - (2) Joffe was in direct receipt of the inside information in some instances and indirectly in others
In MFI 1, the Crown relied on Mr Joffe being told the effect of the inside information by 11.24 am on 1 December 2006 when he had his last communication with Mr Stromer before Mr Stromer purchased further SRG CFDs.
It asserted Mr Joffe was told the effect of the information by Mr Howell, Mr Atkins or Ms Wells who were all apprised of the inside information at the meeting with Transurban on 30 November 2006.
In response, there was said to have been no communication by Mr Howell, Mr Atkins and Ms Wells.
In Mr Joffe's Reply Submissions, reliance was placed on Mr Atkins' statement (Exhibit 2, Tab 20, p.122-123). Mr Atkins there recalled working on the Transurban financial model with Mr Joffe on 2 December 2006. He did not recall discussing the identity of the takeover target with Mr Joffe.
In his examination, he said he did not think he would have had such a conversation with Mr Joffe. A little later, he said, following instructions from Mr Cong to work with Mr Joffe but to be a bit sensitive with the information, "... so I assume that's what I did" (Exhibit 2, p. 123).
It is noted that there was contact by Mr Stromer with Mr Joffe on Monday 4 December 2006 at 2.05 pm and a text message sent by him at 2.23 pm before acquiring further SRG CFDs between 2.56 pm and 2.53 pm.
On 4 December 2006, Mr Stromer opened an account with UBS - Mr Stromer acquired $20,000 worth (ie 500,000 SRG warrants). In the course of the conversation he stated he did not want to draw attention to himself and that he thought SRG would be taken over.
On 3 December 2006, a further 400,000 Macquarie Bank SRG warrants were ordered by Mr Stromer.
On 14 December 2006, the bid was announced by Transurban and SRG at 9.12 am. Internet searches of "Recent Sensitive Announcements" were made by Mr Joffe at 9.30 am, 9.53 am and 10.09 am. He then rang Mr Stromer at 11.02 am. Between 11.26 am and 11.30 am, Mr Stromer proceeded to dispose of all his SRG CFDs. At 11.38 am, he instructed UBS to dispose of all his Macquarie Bank SRG warrants.
[63]
Facts: RIN
On 27 October 2006, Cemex (a Mexican corporation) made a public announcement that it was making an unsolicited bid to acquire the issued shares of RIN. A Bidder's Statement was lodged with the ASX on 20 October 2006.
RIN is an Australian based building material company. UBS was engaged by RIN as a Corporate Defence Advisor and, in that capacity, advised RIN in connection with a proposed bid by Cemex to takeover RIN. Mr Mathew Taylor of UBS Investment Bank liaised with Moody's in relation to the provision of a rating in connection with a proposed Cemex bid.
Moody's was retained to provide a rating outcome about the implications for RIN's rating arising from strategies being considered by RIN to defend itself against the Cemex bid.
RIN put forward for Moody's consideration six recapitalisation scenarios including state debt funded as well as partially sponsor funded special dividend payments to shareholders. The recapitalisation strategies were said to represent an attempt to crystallise some additional value which was not initially reflected in RIN's share price prior to the takeover offer from Cemex. Further, it was said the intention, following confirmation from the ratings agencies that RIN could maintain investment grade ratings, RIN would, at a later date, put forward a proposal for shareholders advising them not to accept the Cemex offer and in return they would receive a significant cash payment. UBS, in conjunction with RIN, prepared a rating agency presentation in order to assist Moody's.
The project was given a project name to maintain confidentiality of the transaction.
On 17 January 2007 at 3.21 pm, the Crown case is that Mr Fullerton and Mr McGregor of Moody's received from UBS a draft presentation for their meeting on RIN later that week. It set out further details of the proposed strategies of RIN to deal with the Cemex takeover bid.
The Crown relies upon checking of the RIN Commsec website by Mr Joffe that afternoon. The Crown case is that Mr Joffe and Mr Stromer spoke twice later that evening.
It is also alleged on 18 January 2007, Mr Stromer transferred $25,000 and $50,000 into his account with City Index.
It is alleged that Mr Joffe and Mr Stromer telephoned each other on two occasions later that day.
[64]
Event 10: RIN - (1) Moody's received information from seven entities the subject of charges, being "inside information"
In MFI 1, Event 49, the Crown stated that, on 22 January 2007, Mr Stromer commenced acquiring RIN CFDs and he continued to purchase them on 23 January, 25 January and 29 January 2007.
In response, it was noted for Mr Joffe, that Mr Stromer also sold RIN CFDs on 24 January 2007 and that Mr Stromer had explained his reasons for acquiring RIN securities.
An independent valuation put RIN securities at between $20.58 and $23.04 per security. Mr Stromer acquired a small parcel on 22 January 2007. RIN securities opened at $18.20 that day. On 23 January, he acquired a substantial parcel of RIN CFDs after Cemex announced that day an increase in the size of its loan facilities and a term loan would replace a bridging loan. This allegedly conveyed Cemex's serious intent to increase the offer price. Mr Stromer commenced transferring funds on 17 January 2007, two days before the meeting on 19 January 2007.
The Crown relies on evidence that the increase in earnings per share was material and was beyond speculation that RIN would be a takeover target. The information was alleged to have been consistent with Mr Stromer taking a "long position" in that he expected the share price to rise as would be expected if Moody's instructed there would be a 16% rise in earnings and there would be a cash back and new share offer strategy. The Crown distinguished a confirmed increase in earnings not a forecast three months in advance.
Also, it was accompanied by the cash back to shareholders plus shares in a new company.
The Crown also relied upon Mr Stromer not trading until Monday 22 January 2007, a week before Moody's became aware that RIN would be approaching it to obtain a ratings assessment of the various defensive proposals.
Moody's received the totality of information between 15 and 22 January 2007. The last meeting between RIN and Moody's took place on Friday 19 January 2007.
In oral submissions, Mr McHugh referred to the terms of the indictment. It was observed that the takeover had already been announced. The question was what steps would RIN take in defence of the takeover. RIN had engaged Moody's to provide indicative ratings in relation to various restructure scenarios proposed as a defence to the Cemex, SAB de CV takeover offer. Each scenario was designed by RIN to maximise shareholder value and provide a significant cash payment to shareholders along with shares in a new company. In the course of the engagement, RIN informed Moody's that its third quarter trading results included a 15% increase in earnings per share.
[65]
Event 36: RIN - (3) Joffe and Stromer communicated by telephone, by which means Joffe communicated the insider information to Stromer, thereby procuring Stromer to trade whilst in possession of the inside information
The submission for Mr Joffe was that there is no evidence of the communication of inside information. None of the six calls between 15 and 22 January 2007 referred to by the Crown were made in work hours. The general submission made on the subject of telephone communications between Mr Joffe and Mr Stromer was relied upon in relation to these calls. Additionally, it was submitted, there was no evidence of procurement by Mr Joffe.
The Crown, in response, contended the telephone communications constituted direct evidence of the opportunity Mr Stromer and Mr Joffe had to communicate about the information.
Mr McHugh noted the number of calls represents less than a call a day and it was therefore very difficult to draw an inference from them (t.107). In fact, given the volume of securities that Mr Stromer was trading, it was said to assist the accused.
On the Crown theory of "joint enterprise", it was argued for Mr Joffe that it was difficult to see why Mr Stromer was carrying an exposure of about $7 million (t.107). Making fewer calls was not in accordance with the Crown contention as to a "pattern".
Mr Stromer's position was a long position. He expected the stock to rise. This was in the middle of the takeover battle (t.107).
The Crown, in oral submissions, responded to what was termed the argument as "a lack of similarity" (t.202) - that on 24 January 2007, Mr Stromer sold some shares in RIN. Before the announcement, he did, in fact, sell 5,000 shares. That was the only parcel of shares that he had purchased prior to any announcement being made. The Crown's contention was that the purchase of shares was a mistake which he quickly rectified. On the same day as purchasing them, he sold the same parcel of shares.
The purchase of Mr Stromer's CFDs rather than shares made sense as one's capital goes a lot further and the profit per outlay of capital is greater than with shares. His sale, it was said, was not inconsistent because it occurred straight away (t.202). By selling the shares, Mr Stromer was able to purchase 10,000 CFDs. It was argued this was consistent with the Crown case about his activity being motivated by information available to him from Mr Joffe.
[66]
Event 23: RIN - (2) Joffe was in direct receipt of the inside information in some instances and indirectly in others
The Crown, it was stated, proposed to seek an inference from the jury that Mr Joffe came into possession of the information and that it was not just a coincidence that Mr Stromer commenced to trade on the first trading day after Moody's last meeting with RIN, as discussed above.
The Crown contended that Mr Joffe had no reason to be monitoring the RIN CommSec website on the afternoon that Moody's received a draft presentation setting out RIN's proposed strategies. The Crown relied on telephone calls between Mr Joffe and Mr Stromer on the evenings of 17, 18 and 19 January 2007. It also asserted that Mr Stromer was continuing to amass cash in preparation for his proposed purchases of RIN. Mr McHugh relied upon his oral submissions at t.106.18 to t.107.18.
Mr Joffe also relied on the absence of evidence of information given to him. As to Mr Fullerton and Mr Brown:-
Mr Fullerton - Exhibit 3, Tab 23, p.215 - there was no reference to providing information to Mr Joffe.
Mr Brown - Exhibit 3, Tab 23, p.225 - transcript of examination - Mr Brown said he was certain he did not tell Mr Joffe about RIN's third quarterly results which would be released on 30 January 2007.
The contention then was, there was no evidence in support of the proposition Mr Joffe was aware of the information (t.107).
[67]
Table B: Related events not the subject of counts in the indictment
[68]
Facts: PBL
A meeting took place in the offices of PBL, Park Street, Sydney on Wednesday 11 October 2006. Those present at the meeting included Mr Fullerton and Mr Brown and Ms Sarroff of PBL. The purpose of the meeting was to discuss a publicly announced joint venture involving PBL.
Ms Sarroff raised a question as to the need for a conference in order to obtain details about a transaction that would be likely to be announced the following week. There was no other information provided at that meeting.
Ms Sarroff became treasurer of PBL in 1994. Her responsibilities included dealing with credit agencies such as Moody's in relation to issues such as debt raising and debt rating exposures.
As discussed below, the Crown relies on evidence of an alleged communication between Mr Stromer and Mr Joffe on a number of occasions on Thursday 12 October 2006 and the transfer by Mr Stromer on that date of $30,000 from his account with CMC Markets.
[69]
(1) - Moody's received information from three entities not the subject of charges, being confidential information
The Crown relied upon evidence concerning the meeting of 11 October 2006 and emails circulating on Friday 13 October at Moody's concerning a proposed PBL meeting on 17 October 2006.
In response, it was contended on behalf of Mr Joffe that the information was not material. Reference was made to Ms Sarroff's evidence that she did not remember referring to a transaction and, if she did, it would have been a reference to a proposed transaction. Mr Brown did not recall Ms Sarroff making such a statement. The extent of the confidential information was that PBL had organised a meeting with Moody's. Moody's had many meetings with PBL. Mr Fullerton's evidence was that he did not know or suspect that the proposed transaction to be discussed with Ms Sarroff the following week related to PBL's media interests.
In response, in MFI 2, the Crown acknowledged that the information was not material. It was said to be material for the purpose of the charge. It was information provided to Moody's which had not been provided to the market. The Crown case is that it stimulated Mr Joffe's interest, taken together with market speculation that PBL was planning some activity which was likely to affect its share price. The Crown contention was that it was enough for Mr Joffe and Mr Stromer to prepare to implement their scheme whereby Mr Joffe would pass information to Mr Stromer and procure him to trade as it claimed was the case in the 10 charged matters. The Crown contended that there was a deal of "internet traffic" within Moody's concerning the proposed meeting with PBL.
[70]
(2) - Joffe was in direct receipt of the inside information in some instances and indirectly in others
The Crown contended that Mr Joffe was told the effect of the information by 10.07 am on 13 October 2006 at which point he accessed the CommSec internet site for PBL.
Mr Joffe was not told the effect of the information by Mr Brown or Mr Fullerton from Moody's, who, it was contended, were all appraised of the information at the meeting with PBL representatives on the afternoon of 11 October 2006 and subsequent received emails regarding the conference.
In response on behalf of Mr Joffe, it was stated that the viewing of a CommSec internet site does not show receipt of inside information.
There was no evidence that Mr Joffe was in possession of the information directly or indirectly. There was no evidence from either Mr Brown or Mr Fullerton that they communicated any information in relation to PBL to Mr Joffe.
In MFI 2, the Crown's response was that this was consistent with Mr Joffe's activity in relation to the charged matters where, it was contended, he monitored share prices after the receipt of information by Moody's and where he allegedly passed information on to Mr Stromer and allegedly procured him to trade. The Crown contends that it is consistent with Mr Joffe's alleged interest in the up-coming meeting with PBL.
[71]
Event 37: (3) - Joffe and Stromer communicated by telephone, by which means Joffe communicated the confidential information to Stromer, thereby procuring Stromer to trade whilst in possession of the confidential information
In relation to Event 37, the Crown contended that, after becoming aware of the information on 13 October 2006, Mr Joffe had telephone contact with Mr Stromer on five occasions before 11.13 pm on 16 October 2006.
In response, it was stated on behalf of Mr Joffe, that there was no evidence of the communication of the information. The five calls were all outside work hours and on the weekend. Mr Joffe had become aware of the information by 10.07 am on Friday 13 October 2006, but there was no telephone call from him after 10.07 am on that day. Reliance was placed on the general submissions made in relation to the conversations between Mr Joffe and Mr Stromer. It was also stated that there was no evidence of procuring.
The Crown, in reply in MFI 2, stated that Mr Stromer allegedly communicated with Mr Joffe at 12.20 pm within four minutes of making his purchase (between 12.13 pm and 12.16 pm). In that respect, reference was made to paragraphs 596 and 597 of the Amended Statement of Facts.
[72]
(4) - Stromer traded in or otherwise acquired a share in the entities whilst in possession of the confidential information
The Crown relied on evidence that on 16 October 2006, Mr Stromer acquired 12,125 PBL CFDs.
In response, on behalf of Mr Joffe, it was said that there was no evidence that Mr Stromer was in possession of the information and that he had explained his reasons for acquiring PBL CFDs. Reference was made to the considerable speculation in the press and amongst broking analysts surrounding changes to Australian cross media ownership rules. It was expected that changes would ignite merger and takeover activity in the sector.
On 16 October 2006, PBL issued an announcement to the ASX in response to the media speculation. This caused a surge in the price and volume of PBL securities. Mr Stromer acquired CFDs within three hours following PBL's ASX announcement. Moody's only became aware that the transaction involved PBL media interests at the meeting on 17 October 2006.
In the Crown's response in MFI 2, it was stated that Mr Stromer's explanations for his purchases are not material at this time. They seek to explain the circumstances and were said to be beyond consideration.
[73]
(5) - An announcement is made to the market or an event that occurs that pre-empts the transaction
The Crown relied on the public announcement on 18 October 2006 by PBL that they were recapitalising certain of its media assets, along the lines of the information provided to Moody's at the previous day's meeting.
[74]
(6) - Stromer traded out of his position following an announcement or Moody's being advised of the transaction not going ahead
The Crown relied on evidence that on 20 October 2006, Mr Stromer closed out his PBL CFD position. In response, on behalf of Mr Joffe, it was said that, on 20 October 2006 at 3.26 pm, Mr Joffe said in an email to Mr Brown "PBL is flying mate". At 3.27 pm, Mr Brown responded, "There is no stopping it now. 21C up ... from 60c down earlier". Mr Joffe at 3.38 pm replied, "Will hit $21 soon". This was said to be contrary to Mr Stromer exiting his position at 2.32 pm that day at an average price of $19.93.
In MFI 2, the Crown's response was that the fact that PBL "is flying" at approximately 3.30 pm on 20 October 2006 and that Mr Joffe thought that it would continue to go up, is not "contrary to Stromer exiting his position at 2.32 pm". The Crown stated that two days had passed since the relevant announcement when the immediate market reaction had passed, suggesting that the price was towards the top end of the likely gains. It was further said that it was 60 cents down earlier in the day so exiting with a modest gain made sense. The Crown also stated that the subsequent emails between Mr Joffe and Mr Brown suggest that the sudden price rise in PBL was totally unexpected (by them at least). Therefore there should have been no reason for Mr Stromer to maintain his position once the price moved from a loss to a modest gain.
In oral submissions, Mr McHugh stated that, if the Crown theory is a joint enterprise and that Mr Joffe's view was as recorded in the emails, then it is difficult to see why Mr Stromer sold out on 20 October 2006 at less than $50, to be sold at $19.93 and $19.96. If Mr Joffe thought that the stock was going to keep going up and hit $21, then, if they were "in it together" and this was Mr Joffe's view that the stock was going to keep rising and that Mr Stromer had taken a long position, then why would Mr Stromer sell at $19.93. It was submitted that it was certainly not consistent with the Crown theory.
[75]
(7) - Joffe maintained significant surveillance of the share price, usually on CommSec, throughout the material time
The Crown relied on evidence said to establish that between 13 and 20 October 2006, Mr Joffe visited websites relating to PBL on 29 occasions.
In response, it was stated that Mr Joffe visited CommSec internet websites in relation to PBL on 13 occasions between 13 and 20 October 2006. Six websites were graphs of the historical price of PBL shares. Seven websites were graphs of historical price of PBL warrants. Mr Stromer acquired PBL CFDs. None of the websites visited by Mr Joffe related to PBL CFDs. In respect of Mr Joffe's share price surveillance, the earlier submissions on such surveillance were relied on.
In MFI 2, the Crown replied that the share price is relevant to the value of CFDs.
[76]
Facts: DOW
This matter relates to a consortium which included, amongst others, DOW.
In October 2006, the Moody's senior analyst was Mr Chong. The matter related to a credit rating in respect of a revised tender bid by RRC to construct a large number of railway carriages for RailCorp. The consortium comprised, in addition to DOW, ABN AMRO and B&B. Mr Joffe, at the time, was an associate analyst on this credit.
On 4 October 2006, Mr Chong received an email from Mr Smith at B&B informing him that RRC had been invited to revise its bid for the NSW Government's Rolling Stock Public Private Partnership to supply new carriages for the CityRail network.
On 5 October 2006, Mr Chong forwarded the email to Mr Joffe.
Mr Chong and Mr Joffe received information about the RRC bid from Mr Smith on a number of occasions, 6, 9, 10 and 13 October 2006.
The Crown relies on evidence that on 25 October 2006, Mr Joffe accessed CommSec websites relating to DOW on seven occasions.
The Crown also relies on evidence to establish that on 25 October 2006, Mr Joffe and Mr Stromer made contact by telephone on four occasions.
The Crown further relies upon evidence to establish that between 3.41 pm and 3.43 pm, Mr Stromer acquired 5,000 DOW CFDs through CMC Markets and between 3.44 pm and 3.56 pm, he acquired a further 29,000 DOW CFDs through CMC Markets.
The Crown also points to evidence that Mr Stromer sent two text messages to Mr Joffe after the trading was completed at 4.10 pm and 4.11 pm.
Evidence that Mr Joffe thereafter visited six websites relating to DOW on that day and evidence that Mr Joffe and Mr Stromer spoke to each other by telephone that evening is also said by the Crown to be significant.
On 26 October 2006 at 3.36 pm, Mr Stromer disposed of his holding of DOW CFDs said to have finished with a modest lost.
[77]
Event 12: (1) - Moody's received information from three entities not the subject of charges, being confidential information
The Crown, as noted above, points to the above events said to have occurred on 4 and 5 October 2006 and the receipt of further information on 6,9,10 and 13 October 2008
In response, it was contended for Mr Joffe that the information was publicly available and not material. The extent of the confidential information was that RRC had been invited to revise its bid to the NSW Government. The RRC consisted of a number of "partners".
The Crown responded in MFI 2 that it is not intended that the information was material.
In other submissions, Mr McHugh emphasised that the information was not inside information but that could not be upon the basis that the information was already public because the Crown claimed the information was confidential. The only remaining basis, it was submitted, must be on the ground that the information was not such as to induce a person to trade. On that assumption, the premises upon which the Crown proceeded in relation to this information was said to be "irrational" in the sense that it was irrational to have any theory that a person is trading on information that was not material to trade (t.110).
The non-charge matters were said to be of assistance to the defence insofar as they were consistent with a pattern of Mr Stromer trading "under his own sail". The submission was that whatever the explanation was for the trades, they had nothing to do with Mr Joffe and the whole Crown case turned on a pattern. These matters undermined the pattern.
Additionally, reliance was placed on the fact that Mr Stromer did not trade until 25 October 2006 and, therefore, it was difficult to see a connection with the information.
In relation to the email of 4 October 2006, it was stated that its terms indicated that each of the bidders had been asked to revise the bid and that this was plainly information that was not material. As with PBL, it was submitted that, if the information was not material and would not induce somebody to trade, then it was irrational to suggest, by any process of inference, that it must have been communicated by Mr Joffe to Mr Stromer (t.115).
[78]
Event 25: (2) - Joffe was in direct receipt of the information in some instances and indirectly in others
The Crown contended that Mr Joffe was a direct recipient of the information via the emails referred to, received on 5, 6, 9, 10 and 13 October 2006.
[79]
Event 38: (3) - Joffe and Stromer communicated by telephone, by which means Joffe communicated the inside information to Stromer, thereby procuring Stromer to trade whilst in possession of the inside information
In relation to Event 38, the Crown relied on evidence that between 18 October 2006 and 3.37 pm on 25 October 2006, Mr Joffe and Mr Stromer spoke by telephone on 23 occasions and exchanged four text messages, including occasions on the day of 25 October 2006 prior to Mr Stromer commencing trading.
In response on behalf of Mr Joffe, it was stated that there was no evidence of the communication of the "information". According to prosecution statements for Events 12 and 25, Mr Joffe received the information on 5 October 2006, yet the prosecution only referred to calls between 18 to 25 October 2006. Reliance was placed on other submissions made on the question of communications between Mr Stromer and Mr Joffe. It was also stated that there was no evidence of "procuring".
In MFI 2, the Crown drew attention to paragraphs 608 and 609 of the Amended Statement of Facts and to the closeness in time between Mr Stromer's purchases and his communications with Mr Joffe. The Crown contended there were telecommunications between the two accused at 12.05 pm for 4.30 minutes (Mr Joffe to Mr Stromer) and 1.13 pm for 1.30 minutes (Mr Stromer to Mr Joffe) and text messages from Mr Stromer to Mr Joffe at 2.45 pm and 3.37 pm. Mr Stromer acquired, as noted above, 5,000 DOW CFDs between 3.41 pm and 3.43 pm and then 29,000 CFDs between 3.44 pm and 3.56 pm.
The Crown also relied on evidence to establish that Mr Stromer then sent two text messages to Mr Joffe following completion of his trading at 4.10 pm and 4.11 pm. The Crown contention was that it was likely that Mr Joffe himself sent text messages to Mr Stromer, given the closeness in proximity of Mr Stromer's text messages to him. Meanwhile, the Crown contended, Mr Joffe visited six websites relating to DOW between 4.11 pm and 5.44 pm.
In Mr Joffe's submissions in reply (paragraph 79), it was stated that, having regard to the overall extent of telephone communications between the two men and the overall extent of CommSec searches, it was submitted that it is unremarkable that the Crown is able to identify telephone calls, CommSec entries within hours of trading by Mr Stromer.
Additionally, the Crown did not address, it was contended, the matters referred to in relation to Event 12, which was relevant to the s.98 determination
[80]
Event 51: (4) - Stromer traded in the entities whilst in possession of the inside information
The Crown relied on Mr Stromer's acquisition of 34,000 DOW CFDs.
In response, it was stated that 25 October 2006 is 20 days after Mr Joffe is alleged to have received the information and there was considerable speculation in the press before 25 October 2006 that DOW was a takeover target. Further, Mr Stromer had explained his reasons for acquiring the CFDs.
In MFI 2, the Crown stated that it relied upon the timing of telecommunications between the two accused and the purchases by Mr Stromer and the timing and number of DOW website visits by Mr Joffe.
In the reply on behalf of Mr Joffe, reliance was placed on oral submissions at t.115.23 to t.115.44.
Reliance was again placed on the fact that 20 days elapsed after Mr Joffe allegedly acquired the information.
Additionally, it was said that there was a perfectly rational explanation for Mr Stromer's trading. Reference was made to articles behind Tab 51 in Exhibit 3. At p.411 is a copy of an article in the Australian Financial Review dated 19 October 2006 referring to takeover rumours concerning DOW. A further article referred to in the Financial Review on the same date spoke of "talk" concerning a Macquarie Bank led break-up of DOW.
The submission was it was easy to see why Mr Stromer would take the position he did.
In relation to Event 64, it was noted on behalf of Mr Joffe that the RRC had been awarded a tender by the NSW Government on 9 November 2006, that is well after Mr Stromer's trading.
It was stated there was no suggestion that Moody's had any inside information concerning whether the RRC would be selected as the successful tenderer. No bid for DOW eventuated. Mr Stromer sold long before the awarding of the tender.
There was no response in MFI 2 by the Crown to this event. It was submitted for Mr Joffe that this would be because there was no material on which the Crown could link this event to some kind of announcement (t.115).
[81]
Event 77: (6) - Stromer traded out of his position following an announcement or Moody's being advised of the transaction not going ahead
The Crown in this respect referred to the fact that on the afternoon of 26 October 2006 Mr Stromer closed out his DOW CFD position.
In response on behalf of Mr Joffe it was noted that this was two weeks before 9 November 2006 when the NSW Government announced that the RRC was the successful tenderer.
Reliance was placed upon the matters raised in oral submissions on behalf of Mr Joffe at t.116.01 to t.117.02 to which the Crown did not provide a response. Reference was there made to Mr Stromer's trading account with CMC Markets. Particular attention was drawn to the trading pattern on 25 and 26 October 2006 which revealed Mr Stromer altering or reversing his position as to whether he acquired short CFDs or long CFDs. The submission was that he closed out in a space of two days and at different times his position was both long and short and it was difficult to make that referrable to anything and it was not referrable to Mr Joffe's information.
[82]
Event 90: (7) - Joffe maintained significant surveillance of the share price, usually on CommSec throughout the material time.
The Crown relied upon the visits by Mr Joffe between 18 and 26 October 2006 relating to DOW on 52 occasions.
In response on behalf of Mr Joffe, it was said that, according to CommSec URL history, Mr Joffe viewed 5,020 CommSec URL searches in this period. Those that related to DOW account for approximately one percent. Mr Joffe also visited websites related to DOW outside the period. None of the websites visited by Mr Joffe were said to be related to DOW CFDs. Reliance was placed on other submissions made on the question of price surveillance by Mr Joffe.
In MFI 2, the Crown contended that the full record of URL records extracted by ASIC officers revealed DOW searches conducted by Mr Joffe as follows: August 2006 - three occasions, October 2006 - 49 occasions (including 47 occasions between 25 and 27 October 2006), November 2006 - two occasions and January 2007 - two occasions.
In reply, Mr Joffe relied on oral submissions made at t.117.04 to t.117.14.
It was there stated again that there had been a lot of speculation in the press about the takeovers for DOW. Also, the information revealed that Mr Joffe was capable of spending a good amount of time checking stocks, even where it had nothing to do with inside information and there was apparently nothing otherwise connected with this work.
[83]
Facts: APA
The Crown contends the evidence establishes that Moody's acquired confidential information in connection with APA in the course of Mr Atkins carrying out his duties as an employee of Moody's at about 3.27 pm on Friday 10 November 2006.
The information was said to be that Alinta proposed to announce a bid to acquire all the issued securities of APA soon after it had bid for AIHCA.
The Crown relied on the fact that Mr Joffe and Mr Stromer telephoned each other twice that same day subsequent to the information being received by Mr Atkins.
The Crown also claims that the evidence establishes that Mr Joffe viewed the CommSec website relating to APA at 4.01 pm and 4.05 pm that afternoon.
On 13 and 14 November 2006, Mr Stromer acquired AIHCA CFDs through CMC Markets prior to the announcement of the AIHCA and sold those CFDs on 15 November 2006 after the bid had been announced.
Further, the Crown relies on the acquisition on Tuesday 21 November 2006 by Mr Stromer of 23,750 APA units through UBS.
It also relies upon the fact that Mr Joffe and Mr Stromer were said to have spoken that evening and that Mr Joffe allegedly viewed the CommSec website relating to APA 69 times over the following three days.
On Wednesday 29 November 2006, Mr Stromer sold his APA units. At the time of the sale, it is said that Mr Stromer was making arrangements to acquire securities relating to SRG.
Mr Stromer suffered a loss of $969.88.
[84]
Event 13: (1) - Moody's received information from three entities not the subject of charges, being confidential information
As noted above, the Crown relied on the fact that Moody's acquired inside information in the course of Mr Atkins carrying out his duties as an employee of Moody's on Friday 10 November 2006. The information was that Alinta proposed to announce a bid to acquire all the issued securities of APA soon after it had bid for AIHCA.
In response, on behalf of Mr Joffe, it was stated that the information was not material. The proposed bid price ($4.35) was significantly below the closing price of APA on 10 November 2006 ($4.56). There was no proposed time by which the bid was to be made. No bid eventuated.
In response, the Crown stated that the materiality of the information was not alleged. The dealing with APA was intertwined with the evidence relating to the dealing in AIHCA.
In the submissions in reply, reliance was placed on the oral submissions at t.110.01 to t.111.11, t.117.16 to t.117.30
[85]
Event 26: (2) - Joffe was in direct receipt of the information in some instances and indirectly in others.
The Crown relied on evidence to establish that Mr Joffe was allegedly told the effect of the inside information by 3.36 pm on Friday 10 November 2006 when he accessed the CommSec internet site for AIHCA.
Mr Joffe was told the effect of the inside information by Mr Atkins who, in turn, it was said had been apprised of the inside information during a call with Mr de Loub from Alinta on that day.
In response, it was stated that there was no evidence that Mr Joffe was in receipt of the information directly or indirectly. Accessing the CommSec URL relating to AIHCA was not evidence that showed that Mr Joffe was in receipt of information relating to APA. Mr Atkins' evidence was that he did not tell Mr Joffe the information.
The Crown relied upon its submissions concerning AIHCA. The relevant information, it was said, came to Moody's on Friday 10 November 2006. The trading in AIHCA commenced the following Monday 13 November 2006 and continued on 14 November 2006 prior to the announcement of the AIHCA bid.
The Crown contends there is an inference that Mr Stromer's trading in APA was related to his trading in AIHCA. Reliance was placed in this regard to his conversation with Ms Sally Pintaric at paragraph 621 of the Amended Statement of Facts.
The Crown contended the evidence establishes that Mr Stromer's first instruction to buy APA was given not long after his conversation with Mr Joffe and that the two accused spoke on the evening of Mr Stromer's last purchases on 21 November 2006.
In reply, Mr Joffe relied upon submissions made in relation to Event 13. It was noted that the Crown sought an inference that the trading in APA was "related to" trading in AIHCA. It is stated that it was unclear what was meant by that phrase. Nevertheless, the inference could not, it was contended, arise, given the apparent unchallenged submissions as to "utility" referred to in the submissions in reply.
[86]
Event 39: (3) - Joffe and Stromer communicated by telephone, by which means Joffe communicated confidential information to Stromer thereby procuring Stromer to trade whilst in possession of the confidential information.
In relation to Event 39, the Crown relied upon evidence to establish Mr Joffe spoke to Mr Stromer by telephone at 3.38 pm and 7.38 pm on 10 November 2006.
Between that time and 3.08 pm on 21 November 2006, they spoke a further 46 times by telephone and exchanged three text messages.
In response, it was stated there was no evidence of the communication of information by Mr Joffe to Mr Stromer.
Reference was made to five of the previous Friday afternoons in which there had been telephone contact between the two accused and on 18 of the 22 Fridays in the period 1 September 2006 to 31 January 2007.
In MFI 2, the Crown stated that this was an attempt to explain circumstances in a neutral way. The fact of the circumstances taken with other circumstances, the Crown contended, is what ought to be at issue at this time, not any competing explanations for the circumstances.
[87]
Event 52: (4) - Stromer traded in or otherwise acquired share in the entities whilst in possession of the confidential information
The Crown relied upon Mr Stromer's acquisition of 23,750 APA units on Tuesday 21 November 2006.
In response, Mr Joffe referred to the 11‑day gap from when information came to Moody's and when Mr Stromer traded in APA units. He had explained his reasons for acquiring APA CFDs. Five days before he traded on 16 November 2006, APA announced a two for seven renounceable rights issue of 94.9 million shares to raise $356,000,000.
The shares were said to be offered at an issue price of $3.75, a 17% discount to the closing price of APA shares on 15 November 2006. The offer was open until 5.00 pm on 24 November 2006.
[88]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 26 July 2016
On 4 February 2011, each accused was arraigned before Latham J and pleaded not guilty to all counts.
The trial of the proceedings has been set down to commence on Monday 12 September 2011. The Crown proposes to proceed with all 20 counts in the indictment at trial.
In the Outline of Submissions on behalf of the Crown, the purpose of the Coincidence Notice was stated to be as follows:-
"Mr Joffe
The evidence of the two or more related events is to be tendered to prove Mr Joffe did the particular acts alleged in each of Counts 1-10 in the Indictment, namely, that he procured Nathan Stromer to acquire the relevant Division 3 financial products identified in each count in the Indictment.
The evidence of the two or more related events is also to be tendered to prove that Mr Joffe had a particular state of mind, namely, that at the time he procured Nathan Stromer to acquire the relevant Division 3 financial products identified in each of the Counts 1-10 in the Indictment, he acted intentionally and was in possession of the inside information as particularised in each of Counts 1-10 in the Indictment.
Conversely, the Crown submits that the evidence will rebut any suggestion that the contacts between Messrs Joffe and Stromer were merely coincidental.
Mr Stromer
The evidence of the two or more related events is to be tendered to prove that Mr Stromer did the particular acts alleged in each of Counts 11-20 in the Indictment, namely, that he acquired the relevant Division 3 financial products identified in each act in the Indictment.
The evidence of the two or more related events is also to be tendered to prove that Mr Stromer had a particular state of mind, namely, that, at the time he acquired the relevant Division 3 financial products identified in each of Counts 11-20 in the Indictment, he acted intentionally and was in possession of the inside information as particularised in each of Counts 11-20 in the Indictment.
Again, conversely, the Crown submits that the evidence will rebut any suggestion that the contacts between Messrs Joffe and Stromer were merely coincidental."
In its Outline of Submissions, the Crown stated that it proposes, in relation to each of Counts 1-10 in the indictment against Mr Joffe, to adduce the evidence in the Crown case in relation to each of the other counts against Mr Joffe. The Crown also proposes, in relation to each of Counts 11-20 in the indictment which concern Mr Stromer, to adduce the evidence in the Crown case in relation to each of the other counts against Mr Stromer.
The substance of the coincidence evidence that the Crown intends to adduce against each accused is set out in a table: Table A of the Crown's Coincidence Notice.
The Crown, accordingly, seeks to lead, in one trial, the evidence that supports the 20 charges alleged to have been committed by Mr Joffe and Mr Stromer on the basis that their conduct was not coincidental, but was an intended course of conduct.
The Crown therefore contended that it is improbable that the alleged acts and circumstances in relation to each count in the indictment occurred coincidentally. It defied probability, it was argued, that, on each occasion, the same pattern of trading by Mr Stromer took place shortly after Moody's had received "inside" or "confidential" information (which it alleged was known or available to Mr Joffe) always prior to any public announcement of that information, and in circumstances where Mr Stromer always traded out of his position shortly after a public announcement or alternatively Moody's was advised or (to the knowledge of Mr Joffe) that a transaction was not going forward or would occur. The contention was that it was improbable that these events occurred otherwise than as part of a pattern of deliberate conduct on the part of each of the accused.
The Crown also distinguished the "facts in issue" in respect of each accused and the position it understood was adopted by each accused as follows:-
"(a) As to Mr Joffe:-
(i) The receipt of inside information in connection with all entities other than GasNet. This is presently accounted for by (Mr Joffe's) submissions to the effect that, aside from GasNet, the information in the charged entities is not inside information, and otherwise that he did not receive any information at all in connection with the entities that he (was) not involved with as a junior analyst (circumstances).
(ii) The procuring of Mr Stromer to trade in the entities, principally by way of telephone communication of the inside information or confidential information as particularised (act).
(b) As to Mr Stromer:-
(i) Being in possession of the inside information or confidential information as particularised, when acquiring financial products. The submissions made on his behalf indicate that his defence will be that he was merely 'tipped' (circumstance)."
On the question of the admissibility of the evidence, the Crown submitted that the evidence has "significant probative value within the meaning of s.98(1)(b)". The Dictionary to the Evidence Act defines "probative value" as follows:-
"probative value of evidence means the extent to which the evidence could rationally affect the assessment of the probability of the existence of a fact in issue."
The Crown noted that "striking similarities" are not essential, but accepted that the absence of striking or unusual similarities would make it less likely that the requirement of "significant probative value" could be satisfied.
It, however, contended that, in this case, the similarities were striking and that, in all instances, the same pattern is shown.
It was further submitted that the probative value of the coincidence evidence is enhanced by other evidence available to the Crown and which it proposes to adduce.
Importantly to the issues raised on the present applications, the Crown submitted that the Court is confined in determining admissibility of evidence under s.98 to a consideration of the evidence to be adduced by the party seeking to rely on the evidence of those events. The determination, it submitted, is to be made in the absence of any consideration of another party's alternate interpretations of the evidence to the interpretations of the party who seeks to have the evidence admitted.
The Crown, in this respect, referred to the observations of Beazley JA in Samadi & Anor v R [2008] NSWCCA 330; (2008) 192 A Crim R 251 at [97] (with whom Hislop and Price JJ agreed). I will refer to those observations later in this judgment.
In relation to s.101 of the Evidence Act, the Crown submitted that the evidence sought to be adduced in a joint trial does not give rise to any unfair prejudice against the accused. The overwhelming majority of the events of which evidence is sought to be adduced, it observed, are charged as offences.
The Crown also observed that the material events occurred over a short period of time (about seven months) and in alleged circumstances that were similar. It was contended that there was nothing about the circumstances alleged in relation to any particular transaction which could give rise to relevant prejudice.
Any possible prejudice that could arise, the Crown submitted, could be dealt with by the giving of directions to the jury, the presumption being that the jury will obey any such directions.
The submissions on behalf of the accused will be separately considered below.
The Crown's contention is that, when the individual matters are considered together, their probative force is greatly increased. In addition, when evidence on the matters is considered with other evidence in the Crown case, the strength of its circumstantial case will also be increased.
The Crown, in this way, seeks to adduce evidence of basic facts from which the jury will be asked to infer further facts and make intermediate factual conclusions before making ultimate findings arising with respect to each count.
In the written submissions for Mr Stromer, it was stated at [8] that, in respect of financial products acquired by the accused, there is no issue (and it would be, in due course, admitted) that he "acted intentionally", in the sense that he intended to acquire them.
In addition to the Table (MFI 1), the Crown Response (MFI 2) and the points in Reply by Mr Joffe, the Crown produced a voluminous document entitled Amended Statement of Facts (Exhibit A). The document was admitted subject to objections raised in the Reply Submissions for Mr Joffe. The document sets out in 132 pages containing 603 paragraphs a statement of the particular factual matters about which it intends to adduce evidence at trial and source references to specific matters referred to in the Statement (based on Exhibit C1 to C14). The document was referred to by the Crown in its submissions and constitutes a summary of material in those 14 volumes of material.
"Significant probative value" under s.98 requires an examination of the facts which the Crown contends constitute similarities in the events or in the circumstances surrounding those events, or both. It is necessary for there to be a relevant connection between the evidence of the events and the facts in issue in the proceedings.
A considerable volume of written material and time at the hearing was devoted to a detailed examination of particular facts and events set out or referred to in the Table - MFI 1.
The Appendix to this judgment contains a summary of facts and particular matters that were raised in the submissions for Mr Joffe and in the Crown's reply. For reasons discussed below, I have concluded that there is no requirement for the purposes of a ruling on admissibility under s.98 to determine the existence and weight to be given to inferences that may be considered as alternative or inconsistent with those relied upon by the Crown by analysing parts or segments of evidence in a circumstantial evidence case. In deference to the arguments raised, the Appendix endeavours to capture many matters raised and relied upon in the submissions made on behalf of Mr Joffe. The summary of factual material relating to the "events" in MFI 1 set out in the Appendix also assist in understanding the contentions made on behalf of Mr Joffe and Mr Stromer.
In his oral submissions, Mr R G McHugh SC, who appeared, with Ms G A Bashir of counsel, for Mr Joffe, analysed in some detail the evidence in the Crown case bearing upon particular "events" referred to in the Table to the Coincidence Notice.
The purpose of the analysis was, in part, to identify asserted deficiencies, inadequacies and evidence which was said to have low or no probative value including evidence in relation to the question under s.98(1)(b) of "similarities" and the "pattern" of conduct alleged by the Crown. The submissions also raised matters that were said to support alternative explanations or inferences to those the Crown argued were to be derived from the evidence.
Amongst the matters raised as deficiencies and alternative inferences or explanations in the submissions were the following:-
(1) The absence of evidence to establish that in particular communications (telephone or text messages) between Mr Stromer and Mr Joffe inside information was or could have been conveyed. Reference was made, in this respect, to evidence which would indicate that Mr Joffe was not at his home when a particular call was made or that other calls were of extremely short duration.
(2) The particular timing of specific events which it was argued did not conform with or were inconsistent with the "pattern" of conduct or events asserted by the Crown.
(3) Evidence it was contended that supported an alternative explanation for Mr Joffe having accessed the CommSec internet site on particular occasions (eg, the GasNet share purchase).
(4) Whilst accepting that Mr Wilson's expert opinion to the effect that certain "information" was "material" information and it could not be disputed on the present applications, nonetheless, it was contended that an amount of it could not be regarded as very worthwhile or valuable information. In one submission it was asserted that certain information the subject of the expert opinion of Mr Wilson was "not very good information" or was "terrible information" (t.54).
(5) That the evidence concerning particular trading activities in shares or derivatives could be explained by media releases or other information that had entered the public domain. One illustration was said to be found in a media release dated 24 July 2006 which referred to a re-evaluation of AlA's non-current assets resulting in an increase in value of $1.399 million. The submission was "that is a reason why one might be interested in the company" (t.58). This "event" is discussed in the Appendix to this judgment.
I am unable, with respect, to accept, as Mr McHugh argued, that there is a parallel in the flawed process of reasoning in Perry (supra) and what is contended for in the present case. Whilst there are a number of disputed factual matters concerning the "events" in the Coincidence Notice and MFI 1, as discussed in the analysis in the Appendix to this judgment, the challenge to particular factual matters, their truth or accuracy does not equate to an unequivocal absence of evidence of a critical fact as occurred in Perry (supra) - the absence of evidence of arsenic poisoning.
It was contended by Mr McHugh in his written submissions that the Crown had applied "reverse and circular logic" in respect of the alleged receipt, either directly or indirectly, of inside information: at [36]. It was further contended that there was "no actual evidence" in respect of a number of matters, in particular as to:-
Mr Joffe having received any confidential information as alleged by the Crown in relation to specified entities: at [38].
Of such information being conveyed to Mr Stromer.
Of what was said during telephone calls or in text messages between Mr Joffe and Mr Stromer.
Of Mr Joffe using text messages as a means of communicating insider information with Mr Stromer or of the content of any such messages.
Of Mr Joffe procuring Mr Stromer to acquire the financial products detailed in Counts 1 to 10 - that the Crown relied entirely on inference.
Reference was made to dicta of Brennan and Murphy JJ in Perry (supra) which, it was stated, explained why, if an event is relied on by the Crown as a "similar event", the existence of that event must be able to be safely concluded on the basis of the evidence led by the Crown. Where, it was submitted, the evidence does not prove the existence of the event, then the Crown used the (presumed) existence of the event to support the charge: at [60]. The dicta of Brennan J in Sutton v R [1984] HCA 5; (1984) 152 CLR 528 was also relied upon in relation to the proposition that one cannot prove a fact by a chain of reasoning which assumes the truth of that fact: at [61].
The fact that the Crown does not have direct evidence (or what was referred to as "actual evidence') in relation to any of the matters referred to in paragraph [80], is not to the point. The Crown case is said to be largely a circumstantial one. Circumstantial evidence is evidence of a basic fact or facts from which a jury is asked to infer a further fact or facts: Shepherd v The Queen [1990] HCA 56; (1990) 170 CLR 573 at 579 per Dawson J. As Dawson J there noted, it is traditionally contrasted with direct or testimonial evidence. In most, if not all, cases the ultimate inference must be drawn from some intermediate fact or conclusion, whether identified expressly or not. Intermediate facts constitute indispensable links in a chain of reasoning towards an inference of guilt.
As outlined by the Crown in its submissions, the evidence to be relied upon is intended to establish a circumstantial case by establishing a sequence of events by adducing evidence of primary facts that are relevant to establishing the facts in issue. Once relevant primary facts have been proved, the Crown then relies upon what it contends are reasonable or rational inferences that such facts permit.
The Crown's Statement of Facts summarises the evidence which it will seek to call to prove that Moody's held inside information at relevant times and that Mr Joffe had access to computerised and other information, including information communicated to him orally.
The fact that the Crown seeks to prove particular facts such as the possession of inside information by Mr Joffe and Mr Stromer and the subject matter of communications between Mr Joffe and Mr Stromer as well as the issue of "procuring" under s.1043A(1)(d) by inferential reasoning as part of a circumstantial evidence case, does not mean that it is engaged in a process of circular reasoning. In other words, by seeking to prove a sequential set of primary facts by the tendering of evidence and relying upon the drawing of circumstantial inferences does not constitute the Crown relying upon similar fact evidence to prove a critical fact not otherwise proved as occurred in Perry (supra). There is, in my opinion, no foundation for the proposition that the Crown is proceeding upon an assumption as to the existence of a fact in order to give cogency to the evidence it seeks to adduce under s.98: Perry (supra); Sutton (supra).
The Crown case, as it presently stands, proceeds upon the basis of establishing a sequence of factual events and surrounding circumstances relevant to those events including the acquisitions of the financial products the subject of the counts in the indictment. Clearly, a sequence of interrelated events may constitute a chain constituting circumstantial evidence capable of establishing facts in issue.
The Crown's proposed course of establishing primary facts linked by circumstantial evidence does not, in my opinion, constitute circular reasoning in these proceedings. The use of such evidence to establish facts, including facts in issue, is unexceptional. Whether it does so will depend upon the nature and cogency of the evidence ultimately adduced.
It was submitted on behalf of Mr Joffe that the coincidence evidence in relation to Count 11 lacked significant probative value for a number of other reasons. One reason was stated to be that a particular event did not fit the "pattern" asserted by the Crown. The evidence is relied upon by the Crown to support an inference that, on the one occasion when the accused's father, not the accused, acquired financial products, he did so on behalf of his son, Nathan Stromer. It was submitted (at [6]):-
"... However, even if the other events show a pattern when the accused acquires financial products, it is a large step to extend that pattern to an acquisition by another person ..."
A number of matters were also noted in relation to the GasNet acquisition. They may be briefly stated, as follows:-
(1) The acquisition preceded all other acquisitions. It, therefore, could not be said to fall within the period of the alleged pattern.
(2) If the acquisition by Mr Stromer's father was an attempted disguise, then it would be surprising that it occurred before other acquisitions relied upon by the Crown when no such disguise was adopted.
(3) There was minimal evidence of an opportunity for inside information relating to GasNet to be communicated by Mr Joffe.
(4) There was no evidence that established that Mr Joffe had any interest in GasNet prior to the acquisition on 14 June 2006 (the first inquiry in relation to securities in the company was on the CommSec website on 16 June 2006).
(5) More than two months passed between the relevant announcement and the sale of the financial products by Mr Stromer's father. (The announcement was made on 16 June 2006 and the sale occurred on 23 August 2006).
These matters, it was contended, supported the conclusion that the coincidence evidence lacked significant probative value in establishing that the accused unlawfully acquired the financial products, the subject of Count 11.
The submissions on the question of prejudice were stated in the submissions for Mr Joffe dated 13 May 2011 at [120]) as follows:-
"(a) The admission of the coincidence evidence would likely lead the jury to place improper emphasis on or to overestimate the weight of the coincidence evidence and distract the jury's attention from the key issues of fact with respect to each charge.
(b) The admission of the occurrence of the 13 events in a single trial before a single judge would involve great confusion and complication, particularly given the number of witnesses proposed to be called and the number of documents proposed to be tendered.
(c) It would be near impossible for the jury at the conclusion of the trial to distinguish evidence of one charge from evidence of the other charges when reaching a verdict on each charge separately, as it would be required to do.
(d) It would be difficult or impossible for the accused to give evidence coherently and to be cross-examined about so many different allegations, given the potential for confusion amongst the charges."
Further, detailed submissions made on behalf of Mr Joffe, in particular, in relation to events set out in MFI 1 and evidence in relation thereto are referred to and discussed later in this judgment.
It was submitted that, in applying the test in s.98, namely, in deciding whether it would be open to the jury to consider that the coincidence evidence has a significant probative effect on the probability of the existence of a fact in issue "... necessarily requires an assessment of the strength of the inference sought to be drawn" (at [27]).
It was argued that this proposition was consistent with the common law authorities on the proper approach to similar fact evidence.
One difficulty, apart from the absence of authority to support the above line of argument is that, at this stage of proceedings in which an advance ruling is sought on admissibility, there is evident difficulty in determining the availability of inferences and the comparative strength of alternative inferences in relation to a particular fact or matter. The drawing of inferences will, to an extent, depend, as it does with a jury's finding, upon what particular facts or combination of facts the evidence is found to establish. This, at a pre-trial stage, is problematic where there exists a dispute as to primary facts or where the Crown case is largely or wholly a circumstantial one.
In the present proceedings, in the submissions for Mr Joffe, a number of matters were said to be in issue or in dispute. These included the following:-
(1) The extent or degree of "materiality" of information having regard to other information that had been discussed in the media.
(2) The proposition that, on particular occasions, Mr Joffe was available to discuss particular proposed acquisitions with Mr Stromer when there was evidence to the contrary.
(3) The proposition that Mr Joffe could have had access to inside information in relation to particular acquisitions made by Mr Stromer.
(4) The question as to whether Mr Joffe was present at particular meetings when inside information was discussed.
(5) That certain acquisitions could be explained as based on information that was publicly available.
The capacity to draw inferences depends upon the facts that go into the mix of facts. The drawing of inferences will often depend upon the weight to be given to particular facts and the interrelationship between facts.
It was submitted that there is no evidence to support the proposition that a person in Mr Stromer's position would not have traded in CFDs without being informed of the inside information.
Finally, it was stated that there would be a substantial prejudicial effect on Mr Stromer if the evidence was admitted. In that respect, it was argued, the requirements of s.101(2) had not been satisfied. The particular issues of prejudice were identified in the submissions at [7], as to which, see the discussion below.
It was submitted that it was sufficient that the evidence may, rather than it necessarily would, impact adversely on Mr Stromer, and it should not be assumed that judicial directions to the jury would cure any danger of unfair prejudice: Phillips v The Queen [2006] HCA 4; (2006) 225 CLR 303 at [78] per Gleeson CJ, Gummow, Kirby, Hayne and Heydon JJ; R v GAC [2007] NSWCCA 315 at [89]; (2007) 178 A Crim R 408.
Section 101 now provides for a second exclusionary rule relating to tendency evidence and coincidence evidence in criminal proceedings. Section 101(2), which is considered below, calls for a balancing exercise to be conducted on the facts of each case: Ellis (supra) at [95] per Spigelman CJ.
In determining the admissibility of evidence under s.98(2), it is necessary to consider both evidence as to discrete facts as well as the relevant interrelation in or between facts which make up the fabric of a circumstantial evidence case.
Brennan J, in referring to the observations of Lord Hailsham in Boardman (supra), referred to in the analysis of particular facts in Perry (supra) at 610:-
"... Lord Hailsham in Boardman referred to the kind of factor which might usefully guide a judge in determining the question: 'the number of instances involved, any interrelation between them, the intervals or similarities of time, circumstances and the details and character of the evidence."
In Perry (supra), Brennan J also observed (at 610):-
"... Evidence of strikingly similar facts may be received in an appropriate case, though they occurred on only one other occasion, as Reg v Straffen (74) illustrates. But evidence of a series of occurrences exhibiting a more attenuated similarity may be admissible because the frequency of the occurrence of the similar fact enhances the probative force of the evidence, though the necessary probative force would be lacking if the similar fact had occurred but once or on a few occasions only ..."
In Perry (supra), Wilson J at 604 stated that "similar facts" involve questions of degree in each case, as probative value will vary with:-
the nature of the similar fact evidence itself;
the issues;
the other evidence in the case.
Brennan J in Sutton (supra) at 550 also emphasised the need to assess evidence in its overall context:-
"... It is often impossible to perceive the similarity between a fact proved directly in evidence and a fact to be proved inferentially or to determine the cogency of the former to prove the latter unless the fact proved directly is seen in the context of the other evidence in the case. Where the Crown seeks to prove or confirm a fact by inference drawn from similar facts, the fact to be proved or confirmed may be likened to a scene depicted in a mosaic and the pieces of evidence - direct and circumstantial -may be likened to the tiles of which the mosaic is composed. The pieces of similar fact evidence may, like the tiles, reveal their significance only in context with the rest of the evidence, appearing insignificant in isolation but clearly revealing the guilty inference when all the evidentiary tiles are locked together." (emphasis added)
The close analysis of principle undertaken by Brennan J in Sutton (supra) upon which evidence may be admitted as coincidence evidence identified the following as necessary inquiries:-
(1) Whether the evidence can be said to be relevant evidence.
(2) Whether, having regard to their number, their context, their nature and similarity, including similarities of time and circumstance, the facts said to be similar have significant probative value by reference to their connection with a fact in issue or to a fact in the chain of a fact in issue.
(3) The cogency of evidence of the commission of other alleged offences is to be ascertained by reference to the whole body of proof in the case viewed in the light of experience. See Hoch v The Queen [1988] HCA 50; (1988) 165 CLR 292 at 301 per Brennan and Dawson JJ; Phillips (supra) at [26] and R v Folbigg [2005] NSWCCA 23; (2005) 152 A Crim R 35 at 80 per Sully J.
In Zhang (supra) at [139], Simpson J, in relation to s.98, identified the following principles:-
"(i) coincidence evidence is not to be admitted if the Court thinks that evidence would not, either by itself, or having regard to other evidence already adduced, or anticipated, have significant probative value;
(ii) probative value is the extent to which the evidence could rationally affect the assessment of the probability of the existence of a fact in issue (see the Dictionary to the Evidence Act);
(iii) the actual probative value to be assigned to any item of evidence is a question for the tribunal of fact - here, the jury;
(iv) the probative value actually to be assigned to any item of evidence cannot finally be determined until all of the evidence in the case is complete;
(v) the task of a judge in determining whether to admit evidence tendered as coincidence evidence is therefore essentially an evaluative and predictive one. The judge is required, firstly, to determine whether the evidence is capable of rationally affecting the probability of the existence of a fact in issue; secondly, (if that determination is affirmative) to evaluate, in the light of any evidence already adduced, and evidence that is anticipated, the likelihood that the jury would assign the evidence significant (in the sense explained by Hunt CJ at CL in R v Lockyer (1996) 89 A Crim R 457) probative value. If the evaluation results in the conclusion that the jury would be likely to assign the evidence significant probative value, the evidence is admissible. If the assessment is otherwise, s.98 mandates that the evidence is not to be admitted."
Her Honour observed at [140], that it is necessary in the case of coincidence evidence to determine whether two or more events being the subject of the evidence sought to be tendered, are substantially and relevantly similar and whether the circumstances in which they occurred or are alleged to have occurred are substantially similar.
Since admission of the proposed evidence depends upon the existence of relevant similarities, her Honour observed that it is obvious that the assessment of similarities is to be made by the judge and not left to the tribunal of fact.
The assessment under s.98 also requires a determination as to whether the similar fact evidence has the requisite connection with the facts in issue.
In R v Lockyer (1996) 89 A Crim R 457 at 459, Hunt CJ at CL noted that one of the primary meanings of the word "significant" is "important" or "of consequence". His Honour stated:-
"... In my opinion, that is the sense in which it is used in s.97. To some extent, it seems to me, the significance of the probative value of the tendency evidence (whether led by the Crown or by the accused) must depend upon the nature of the fact in issue to which it is relevant and the significance (or importance) which that evidence may have in establishing that fact..."
The principles formulated by Simpson J as set out in paragraph [144] draw attention to the Dictionary meaning of "probative value". Her Honour's expression "... the actual probative value" to be assigned to any item of evidence in paragraph 144 above is also of particular importance. The actual probative value assigned to any piece of evidence can, of course, only be determined by a jury upon completion of the evidence.
The evidence under s.98 is to be assessed by consideration of the evidence itself and/or "having regard to other evidence adduced or to be adduced ..." by the party seeking to adduce the evidence.
The Crown has identified particular items of evidence which it proposes to rely upon in relation to the "events" set out in the Coincidence Notice and in MFI 1 relevant to each individual count. The content of the evidence is established by Exhibits C1 to C14 as summarised in the Statement of Facts. What "actual probative value" a jury may attach or assign to any particular item of evidence in the context of all the circumstantial evidence will, amongst other things, depend upon whether or not there is satisfaction in the jury as to the accuracy or integrity of particular parts of the evidence. Once determined, it is again a matter for the jury to determine whether, in light of all the evidence in the case which it accepts, it is prepared to draw the inferences which the Crown invites it to draw, the drawing of inferences, of course, being part of the fact-finding function of a jury.
The analysis of Simpson J in Zhang (supra) and her Honour's expression "... an evaluative and predictive one" are to be understood on the basis discussed above, namely, that, in determining the admissibility of coincidence evidence, the judge acts upon an assumption that the evidence in question will be accepted. That is an important part of the evaluative and predictive task under s.98 to which reference was made in Zhang (supra). On that basis, the question of which I must satisfy myself is, would it be likely that the jury would assign the evidence significant probative value in the sense that the evidence could rationally affect the assessment of the probability of the existence of the facts in issue.
I have earlier referred to submissions on behalf of Mr Joffe in which a number of items of evidence relied upon by the Crown were either disputed on one or more bases or which were said to be susceptible to innocent or alternative explanations or inferences. The submission was that alternative inferences were open in relation to such evidence. In dealing with those submissions, it is important to identify the role of a court in determining the admissibility of evidence on the basis of an assessment of probative value. The cases referred to in the paragraphs that follow have considered that role.
In Shamouil (supra), the Court of Criminal Appeal considered the concept of "probative value" within s.137 observing that the phrase "probative value" is defined in the Dictionary to the Act as:-
"Probative value of evidence means the extent to which the evidence could rationally effect the assessment of the probability of the existence of a fact in issue."
In Adam (supra) at 115, [60], Gaudron J concluded that the Dictionary definition of "probative value" must have read into it an "assumption" that the evidence would be accepted on the basis the "evidence can rationally affect the assessment of the probability of a fact in issue only if it is accepted".
A contrary view was taken by McHugh J in Papakosmas (supra) at 323, [86] where his Honour said that the assessment required by the definition of probative value "would necessarily involve considerations of reliability".
Spigelman CJ quoted the following dicta of Simpson J in R v Cook [2004] NSWCCA 52 at [43]:-
"... / am satisfied that it is not the role of a trial judge in New South Wales, under the Evidence Act, to make a finding of fact about the actual reasons for flight where such evidence is given on behalf of the Crown. That remains the province of the jury. The role of the judge in New South Wales, at least post-1995, is merely to determine the relative probative value against the danger of unfair prejudice that might result. In saying this, I do not mean to lay down a blanket rule that, in considering evidence on a voir dire in which the issue is the admissibility of evidence having regard to s.137, there is never any room for findings concerning credibility. There will be occasions when an assessment of the credibility of the evidence will be inextricably entwined with the balancing process. That means that particular caution must be exercised that ensures that the balancing exercise is not confused with the assessment of credibility, a task committed to the jury. There may, for example, be occasions on which the accused's response is so preposterous as to give rise to the conclusion that it could be accepted by no reasonable jury. The credibility exercised, in those circumstances, is to determine whether the evidence given by (or on behalf of) the accused is capable of belief by the jury. If it is, then its prejudicial effect must be considered. If it is not, then the balancing exercise may well result in an answer favourable to the Crown. That is essentially because any prejudice arising to an accused from putting a preposterous explanation to the jury would not be unfair prejudice."
In R v AB [2001] NSWCCA 496, the issue related to the admission of tendency evidence under s.101 of the Evidence Act, where the question was whether or not the "probative value of the evidence substantially outweighs any prejudicial effect it may have". In that context, Adams J stated at [17]:-
"... In my view, the probative value of that evidence was high in the circumstances of this case, upon the assumption, of course, that it was true, but that must be necessarily the assumption with which s.101 is concerned." (emphasis added)
The Chief Justice in Shamouil (supra) concluded at [60]:-
"The preponderant body of authority in this Court is in favour of a restrictive approach to the circumstances in which issues of reliability and credibility are to be taken into account in determining the probative value of evidence for the purposes of determining questions of admissibility. There is no reason to change that approach."
The definition of "probative value" ("could rationally affect", namely, "the extent to which the evidence could rationally effect the assessment…") focuses on "capability" and draws attention to what is "open" for the tribunal of fact to conclude. It does not, by itself, direct attention to what a tribunal of fact is ultimately "likely" to conclude. Evidence has "probative value" as defined, if it is "capable" of affecting the assessment of the probability of the existence of a fact in issue. Gaudron J emphasised in Adam (supra), a "test" of "rationality" also directs attention to capability, rather than weight. The issue of significant probative value is considered below.
In Shamouil (supra) the Court concluded that the trial judge hearing the voir dire erroneously determined the probative value of the evidence by determining credibility issues and by forming a view as to the general unreliability of identification evidence and the possibility of a displacement effect. The approach that had been taken involved the trial judge determining issues that were for the jury and not for the judge to determine.
The Chief Justice at [61], in determining probative value under s.137, also observed:-
"In my opinion, the critical word in this regard is the word could in the definition of probative value as set out above, namely, 'the extent to which the evidence could rationally affect the assessment ...'. The focus on capability draws attention to what is open for the tribunal of fact to conclude it does not direct attention to what a tribunal of fact is likely to conclude. Evidence has 'probative value', as defined, if it is capable of supporting a verdict of guilty." (emphasis added)
Any other approach, it was observed, by a trial judge would usurp critical aspects of the traditional role of a jury. In the case of evidence of critical significance, such a ruling by a trial judge would, in substance, be equivalent to directing a verdict of acquittal on the basis that the trial judge was of the view that a verdict of guilty would be unsafe and unsatisfactory. Spigelman CJ further observed at [65]:-
"This Court should be very slow to conclude that it was the intention of Parliament in enacting the Evidence Act to alter the fundamental relationship between the judge and jury in a criminal case in the manner suggested. Such a change would occur on each occasion that 'probative value' falls to be assessed by the trial judge including: tendency and coincidence evidence (ss.97(1)(b), 98(1)(b), 101(2)) ... s.103(1), s.135(b) ands. 135(c) ... and the comparative weight with unfair prejudice (s. 135(a) and s.137) ..." (emphasis added)
The specific reference in those observations to s.98(1)(b) is noted.
In the submissions for Mr Joffe it was argued (Submissions in Reply at [57]):-
"... there is nothing in s.98 and s.101 to prevent the Court from assessing the probability of inferences other than those relied on by the party who seeks to adduce the evidence ..."
The submission in this respect continued by stating that the Court "must have regard to all the circumstances in which the allegedly similar events are said to have occurred and to all the available inferences" (at [57]) and that it was impossible to assess the relative probability or improbability that a similar set of events occurred coincidentally without considering the likelihood of alternative available inferences: at [58].
There are a number of matters raised by these submissions in relation to the subject of alternative inferences. Even if evidence on a particular aspect is capable of carrying an alternative inference, that does not detract from the fact that that evidence nonetheless remains open to any rational inference relied upon by the Crown. In other words, in terms of the capability of the evidence in the sense discussed above, it may nonetheless remain capable of carrying significant probative value in the relevant sense as explained in Zhang (supra) even though other inferences may also be open. This may be because, as a matter of evaluation and prediction, it can be considered likely that the jury would assign it significant probative value and prefer the inference the Crown relies upon. Importantly, the evaluation of the probative value of the evidence, when it is considered along with other evidence, may further enhance the probative value of the evidence in question.
There is, of course, a clear and an important distinction to be made between an assessment and determination by a judge of "significant probative value" under s.98 (which assessment considers the likelihood that a jury would assign significant probative value to the evidence based on the assumption that the jury accepts the evidence as discussed above) and a determination of actual probative value of evidence by the collective minds of a jury once the evidence is complete.
At the centre of the submissions made on behalf of both accused is the proposition that the probative value of the evidence proposed to be led by the Crown is diminished if the evidence may be considered to be open to alternative inferences or explanations and not only the inferences which the Crown proposes to ask the jury to draw. Not only, it was suggested, must a judge in evaluating significant probative value determine whether alternative inferences are open but he or she must set about weighing and evaluating the strength of competing inferences, a task that would require, in most cases, that the whole of relevant circumstantial and other evidence in the proceedings be evaluated, that is, in similar fashion to the approach required of a jury.
These submissions are to be assessed, firstly, by the principle that, in determining the admissibility of evidence, a court is to proceed on the basis of taking the evidence in the Crown case on the basis that it will ultimately be accepted by the jury and, secondly, that parts of the evidence must be considered in the whole context of a circumstantial evidence case.
In Samadi (supra), an issue arose as to the admissibility of evidence pursuant to s.98 of evidence in respect of all counts under s.38 of the Crimes Act 1900. The appellants had been jointly tried and convicted by a jury upon 12 counts of jointly administering a stupefying drug to 12 separate complainants, with the intention of stealing property from each complainant, contrary to s.38 of the Crimes Act.
In respect of some counts, it was argued for the appellants that it was not a relevant fact that property had been stolen from two other victims by reason of the possibility that the appellants might have had different intentions, each to the other. One may have had the intention to sexually assault the victim, whereas the intention in relation to the other two victims may have been to commit larceny.
Beazley JA (with whom Hislop and Price JJ) stated at [97]:-
"Whilst an array of circumstances might be posited against the availability of drawing an inference, s.98, at the admissibility level, does not work in that way. The Court is concerned with determining whether evidence is substantially and relevantly similar and occurred in substantially similar circumstances, so that those events may be relied upon to prove, if accepted, that it is improbable that the events occurred coincidentally. In determining that question, the Court is not required to engage in an imaginative task of speculating what possible other explanations there could be for the circumstances relied upon."
Although the point considered in that case arose in circumstances that are very different to those with which the present proceedings are concerned, it is, nonetheless instructive to observe the distinction drawn by Beazley JA between the task required by s.98 to be undertaken at "the admissibility level" from issues that are for a jury's ultimate determination. The former obviously involves a significantly different approach to that involved in the process by which a jury determines subjacent issues of fact (including inferences) and ultimately the facts in issue.
In Shamouil (supra), the issue as to probative value was considered in terms of s.137 of the Evidence Act which provides:-
"737 In a criminal proceedings, the Court must refuse to admit evidence adduced by the prosecutor if its probative value is outweighed by the danger of unfair prejudice to the defendant."
Spigelman CJ at [50] (with whom Simpson and Adams JJ agreed) referred to dicta of Hunt CJ at CL in R v Carusi (1997) 92 A Crim R 52 at 65, as follows:-
"It was for the jury, and not for the trial judge, to determine the factual issues at the trial. Applying the ordinary tests, there was clearly a case to go to the jury based upon the evidence in chief of Mrs McHugh which (if that evidence were accepted) was a strong one, and it was for the jury to determine which parts of her evidence they accepted and which parts they rejected. The power of the trial judge to exclude evidence in accordance with the Christie discretion does not permit the judge, in assessing what its probative value is, to determine whether the jury should or should not accept the evidence of the witness upon which the Crown case depends. The trial judge can only exclude the evidence of such a witness where, taken at its highest, its probative value is outweighed by its prejudicial effect; whereas this Court may use its supervisory powers to set aside a verdict where, the issue having been left to the jury, this Court is satisfied - on the whole of the evidence - that the jury ought nevertheless have had a reasonable doubt." (emphasis added)
In Shamouil (supra) at [56], Spigelman CJ referred to the observations of Simpson J in Cook (supra) in which evidence of flight was sought to be excluded under s.137. Her Honour in Cook (supra) at [43] stated that it was not the role of a trial judge in New South Wales, under the Evidence Act, to make a finding of fact about the actual reasons for flight where evidence of that nature is given on behalf of the Crown. That was held to be within the sole province of the jury.
There is evident difficulty in many of the submissions made on behalf of Mr Joffe in determining the question of admissibility of evidence under s.98. In relation to many counts, submissions were made as to the absence of evidence on particular or discrete "events" (as, for example, "no actual evidence" of Mr Joffe receiving any information as alleged, of what was said in telephone calls or the content of text messages or of acts of Mr Joffe to "procure" acts by Mr Stromer). Particular submissions, as noted above, related to the weight to be given to expert evidence on "materiality" in light of certain information in the public domain.
The Crown case being wholly or mainly a circumstantial case, relies upon inferential reasoning based upon evidence of primary facts. Reasonable or rational inferences drawn from such evidence are, of course, as much "actual" evidence as direct evidence. Circumstantial evidence cases, it has long been acknowledged, may be as strong and sometimes can be stronger than a direct evidence case. The ability to draw reasonable or rational inferences from evidence is very much a part of assessing its capability in terms of "probative value" as defined. The weight to be accorded to available inferences will ultimately be central to a jury determining actual probative value.
The following observations are instructive in the assessment of "actual probative value" of evidence in a circumstantial evidence case:-
"... But the jury may quite properly draw the necessary inferences having regard to the whole of the evidence, whether or not each individual piece of evidence relied upon is proved beyond reasonable doubt, provided they reach their conclusion upon the criminal standard of proof. Indeed, probative force of a mass of evidence maybe cumulative, making it pointless to consider the degree of probability of each item of evidence separately: Shepherd v The Queen (1990) 170 CLR 580 per Dawson J." (emphasis added).
There is nothing either in the terms of s.98 nor in the analysis of Simpson J in Zhang (supra) or, in my opinion, in any other authority that indicates or mandates that a judge in assessing "significant probative value" under s.98 must identify the possible alternative inferences that could have support from the evidence or parts of the evidence the Crown proposes to rely upon in relation to particular matters and then set out about sifting and weighing the alternative inferences for the purpose of determining "probative value".
In accordance with common law trial principles, the determination of available rational inferences is to be made in the context of all relevant evidence at the conclusion of the evidence and then only by the tribunal of fact, the jury. The provisions of s.98 do not state or suggest that, at the level of admissibility, the judge is to conduct an inquiry of all evidence with a view to determining whether more than one inference is open on the basis of particular evidence and whether one possible inference, in fact, trumps another. It is not the function or within the province of a judge in determining an admissibility question under s.98 to predict the inferences or hypotheses that might ultimately be drawn by the jury from the evidence in the course of it determining actual probative value. This is so, even with respect to the power to direct an acquittal at an advanced stage of a trial. In R v Scholl (No 2) [2009] VSC 237; (2009) 53 MVR 8 at [23]-[24] it was observed:-
"In a case in which the Crown essentially relies on an inference, the trial judge is not entitled to direct an acquittal where, at the end of the Crown case, he considers there is still open and not excluded a reasonable hypothesis consistent with innocence; see Attorney General's Reference (No 1 of 1983) [1983] VR410 at [24].
In such a case, the applicable test for the trial judge is whether the jury could rationally conclude that any reference or hypothesis consistent with innocence is not reasonably open on the evidence. In applying that test, it is important to bear in mind that the drawing of inferences is quintessentially the province of the jury as the sole judges of the facts in the trial."
See also R v Doney [1990] HCA 51; (1990) 171 CLR 207 at 213 approving the statement of principle in Attorney General's Reference (No 1 of 1983) [1983] 2 VR 410 at 415. See also R v Cengiz [1998] 3 VR 720 at 721 per Ormiston JA.
The difficulty of resolving the comparative availability and strength of alternative inferences or explanations at the admissibility stage when assessing the probative value of evidence in a Crown case is underlined by the fact that alternative inferences to those relied on by the Crown will often necessarily depend upon how a jury resolves conflicting evidence and how it may determine the probative force of evidence on the basis of the mass of evidence, as noted in Shepherd (supra).
The significance of particular parts of the evidence in Crown case, particularly in terms of the reasonable inferences to be drawn from the evidence, may not be fully discernible or revealed until seen in the context of the rest of the evidence, Sutton (supra), per Brennan J. The simile referred to by Brennan J in that case in describing similar fact evidence of the tiles constituting a mosaic is equally apposite with coincidence evidence. The scene portrayed by a mosaic may be apparent once the tiles are locked together. This may be the case even if some tiles are missing or are defective in some way. It is when seen in context that the significance of the constituent parts become apparent.
Additionally, in evaluating the evidence in the Crown case sought to be admitted under s.98, its probative value is to be assessed having regard to the nature, sequence and particular timing of relevant "events" and taking into account the circumstances of their occurrence according to the evidence.
In making that evaluation, the cogency or probative force of such events and circumstances is to be considered, in particular, in terms as to whether they provide evidentiary support for the inferences the Crown relies upon. In determining for the purposes of the present applications what events or matters such evidence may inferentially support, no assumptions are to be made as to the issues of "possession" of inside information by Mr Joffe and Mr Stromer or the issue of procurement by Mr Joffe in terms of s.1043A(1)(d).
The Crown relies, in particular, upon the interrelation between the above events and the timing of the events leading up to the making of the acquisitions and their subsequent sale. The Crown case also includes evidence as to other matters, some of which are identified in the Statement of Facts, Exhibit A. The relevant sequences of events in relation to each count are said to have occurred within a relatively limited period of time. The Crown relies, in particular, upon what it contends is a significant and close timing of events leading up to the acquisitions of the individual financial products the subject of the counts.
The Crown contends that such matters constitute evidence of facts that support the drawing of inferences in relation, in particular, to the elements of "possession" and "procurement" in respect of each count. In addition, the Crown relies upon the similarities of the events referred to in the Coincidence Notice and MFI 1.
The Crown case is that the nature of the "events" in respect of each count are the same. The events in relation to each count that are relied upon by the Crown may be categorised as relating to:-
information;
communication;
acquisition of financial products.
In relation to each count, the information was supplied by entities to Moody's on a confidential basis and which the Crown claims constituted "inside information". The Crown case, as discussed above, is that that information was either directly disclosed to Mr Joffe in some instances or that he had the opportunity to access such information in other instances and did access it.
As to "communications", the Crown relies upon the fact of multiple communications between Mr Joffe and Mr Stromer at specific times. Again as discussed above, the Crown submits that these matters carry particular significance to relevant events that preceded "announcements" and, similarly, in relation to the events post-dating the same.
As to "acquisition" of financial products, the Crown case relies upon the fact and timing of events preparatory to the acquisition referred to in each count and, in particular, the arrangements put in place to effect the acquisitions. These include:-
The alleged fact of and frequency in surveillance of shares in the entities by Mr Joffe being entities whose financial products were subsequently acquired.
The timing of arrangements being put in place for financing the acquisitions.
The fact that the financial products acquired were all in entities in respect of which Moody's had received inside information.
The timing of the acquisitions relative to announcements to the market.
The Crown, as earlier discussed, additionally relies upon events and surrounding circumstances concerning Mr Stromer's trading out of his position.
Accepting the Crown evidence as I must for the purpose of determining the issue of significant probative value, I have concluded that the "events" and their surrounding circumstances do exhibit similarities and for the purposes of determining admissibility under s.98, I consider they constitute striking similarities. In assessing the probative value of the evidence in question, it is relevant to take into account the facts relied upon in the Crown case in relation to each count that are, at least, consistent with what might be termed selectivity in the acquisitions in the sense that those acquisitions, the subject of all counts, related to entities that had provided to Moody's what became inside information.
Finally, I turn to particular issues raised by Mr Odgers in his further written submissions.
I am, with respect, unable to accept as valid, the submission to the effect that evidence that is susceptible to inferences that are inconsistent with each other do not meet the test of "relevance".
Evidence in a circumstantial evidence case may, when considered in isolation, be susceptible to different inferences to those that may be available when the evidence is considered in context or in light of all the other evidence in the case. Whether or not evidence is capable of giving rise to competing inferences, the position remains that its relevance depends upon whether, if accepted, it could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceedings: s.55 of the Evidence Act. Evidence that may be open to competing inferences can, by definition, nonetheless be capable of rationally affecting the assessment of the probability of a fact in issue. Whether it does actually support one inference or the other, of course requires an assessment by the jury in light of the other evidence in the case. It may only then be possible to determine whether or not only one rational inference is open and should be drawn. Such an assessment, of necessity, follows the stage at which the evidence is admitted.
As to the submission that another possible inference inconsistent with the fact in issue may in certain limited circumstances lead to a conclusion that the evidence is not relevant, I cannot, with respect accept the submission as one that finds support either in the Evidence Act provisions or in principle.
The fact that evidence may be capable of supporting more than one inference as discussed above does not mean the evidence is not relevant evidence.
Equally, the fact that, at the admissibility level, it could not rationally be concluded that the probability of the fact sought to be inferred by the Crown is greater than the probability of an inference inconsistent with the fact in issue does not provide a basis for determining whether evidence is "relevant" as that term is defined by s.55 ("... could rationally affect.."'). Such a proposition, of course, is not and cannot be considered to be a test of what evidence is "relevant".
The last-mentioned submission was based, inter alia, upon the proposition that the evidence in question "... is considered in the context of other evidence in the proceeding ..." (Further Written submissions, p.3).
But at the point of admissibility of particular evidence, which is the point at which the issue of relevance is determined, there may, at that point, not be any other or much evidence admitted up to that point to permit consideration in the context of other evidence. That is merely one way of seeing the difficulty with the submission and the premise upon which it is based.
In relation to the time at which the question "significant probative value" is to be assessed under s.98 (Further Written Submissions at [17] and [18]), it is not necessary to repeat here the analysis of the approach to be taken in assessing that question discussed earlier in this judgment.
In relation to the submission that under s.98 more is required than that an inference is "open" on the evidence for a finding in respect of "significant probative value", I respectfully agree. I have proceeded on that basis. An assessment under that provision is directed to evaluating the strength of the evidence including inferences based on an acceptance of the evidence in question.
I, with respect, do not accept the submission that the requirement under s.98(1)(b) means "... the Court must evaluate whether it could rationally be concluded that the probability of the inference the Crown seeks to draw is significantly greater than the probability of an inference inconsistent with that fact..." at [32]. In that respect, I refer to what has been said on that issue above. However, in my assessment, for the purposes of determining admissibility under s.98(1)(b), I consider that the "probative value" of the evidence relied upon by the Crown in relation to the charged matters is such that, assuming a jury accepted that evidence at trial, then, on that basis, the jury would be likely to assign the evidence significant probative value such as to render the inferences relied upon by the Crown as having a high degree of probability. It need hardly be said that that is not intended to be the expression by me of any final opinion as to what or how a jury should decide. A jury's actual assessment will depend, of course, upon its acceptance of the evidence in the Crown case following cross-examination and in light of all the evidence in the case.
In the written submissions at [120] it was stated:-
"The prejudice relied on by Mr Joffe to ground the application is that which is set out in paragraphs 104 to 115 above, namely, that in a joint trial of all counts:-
(a) the admission of the coincidence evidence would likely lead the jury to place improper emphasis on or to overestimate the weight of the coincidence evidence, and distract the jury's attention from the key questions of fact with respect to each charge;
(b) the admission of the occurrence of the 13 events in a single trial before a single jury would involve great confusion and complication, particularly given the number of witnesses proposed to be called and the number of documents proposed to be tendered;
(c) it would be near impossible for the jury at the conclusion of the trial to distinguish evidence of one charge from evidence of the other charges when reaching a verdict on each charge separately, as it would be required to do; and
(d) it would be difficult or impossible for the accused to give evidence coherently and to be cross-examined about so many different allegations, given the potential for confusion amongst the charges."
It was further submitted that it would be impossible, by the giving of directions to the jury, to overcome (at [121]):-
"... the great confusion that would result from a trial of all counts". Similarly, the over-estimation of the value of the coincidence evidence by the jury would be difficult to avoid once the evidence is placed before it."
Accordingly, it was submitted that if all counts were heard together, it would not be possible for there to be a trial which is fair to the accused, or which is capable of proper determination by the jury.
Mr Joffe, in the event that he was unsuccessful in severing the counts in the manner submitted, reserved his position in relation to any other combination of counts.
Mr Odgers on behalf of Mr Stromer submitted that the Crown had not satisfied the onus of establishing that the probative value of the evidence would "substantially outweigh" the risk of prejudice in terms of s.101(2). The risk of prejudice, Mr Odgers contended, would include (Defence written submissions on separate trial application at [7]):-
The danger that the jury would give too much weight to the coincidence evidence, notwithstanding its low probative value (as said to have been demonstrated in the written submissions on behalf of Mr Stromer) and bearing in mind the observations of Murphy J in Perry (supra) at 594, that "[C]ommon assumptions about improbability of consequences are often wrong".
The danger, notwithstanding any directions to the contrary, of the jury using the evidence in relation to all the other counts (and the uncharged matters) to show a tendency on the part of the accused to acquire financial products, supporting an inference that he did so in respect of the GasNet financial products.
The sheer number of other incidents relied upon to show coincidence may generate unfairness to the accused. It was noted that in R v Teys [2001] ACTSC 29; (2001) 119 A Crim R 398, Miles CJ at [67]-[70] considered that to have allowed evidence of many other instances of allegedly similar acts on the part of the accused meant that the jury were unlikely to give particular attention to each and every one of those instances. "The distraction that a large volume, or multiplicity of complex, subtly but significantly different events or surrounding circumstances can have is powerful."
Mr Odgers stated that it was important to note that the focus is on the way that the evidence may, rather than necessarily will impact adversely on the accused. Further, he submitted, it should not be simply assumed that judicial directions to the jury will cure any danger of unfair prejudice. Reference was made to Phillips (supra); GAC (supra) at [89] per Giles JA.
The Crown submitted that, in relation to the particular matters relied upon said to support a substantial prejudicial effect on the accused, to the extent they are "real rather than theoretical", they can be adequately guarded against by appropriate directions.
As noted earlier, the Crown contended that the evidence sought to be adduced in the joint trial under s.98 does not give rise to any unfair prejudice against the accused, it being submitted that the "... overwhelming majority of the events of which evidence is sought to be adduced are charged as offences": Written submissions at p.8
It was also observed on behalf of the Crown that the events occurred over a short period of time (approximately seven months) and in alleged circumstances which are similar. Further, it was contended that there is nothing about the circumstances alleged in relation to any particular transaction which could give rise to relevant prejudice.
Additionally, the Crown contended that each "event transaction" is relatively straightforward and the number of transactions is not such as to give rise to any significant concern of unfair prejudice. Further, it was to be expected that the Court can deal with any prejudice that may arise by the giving of directions to the jury and that there is a presumption that the jury will obey any such directions.
The Crown suggested that, in any event, the "defence", such as had been indicated in the case of each accused, is anticipated to be the same in relation to each count and each set of circumstances that relate to each transaction.
In the application of the balancing test under s.101(2), the issue of prejudicial effect, involving the danger of improper use of the evidence rather than its legitimate tendency to inculpate, is, as stated above, to be carefully assessed against its probative value. Having considered the issues that have been raised in relation to the application of s.101(2), I have concluded that:-
(1) The risk of confusion suggested as arising from the number of counts and the number of "events" and other matters to which reference has been made can be managed so as to control the issue of prejudicial effect.
(2) The capacity exists to formulate directions to the jury designed to and having the effect of ensuring that the jury understand and proceed upon the basis of properly assessing the probative value of the evidence and not upon an improper approach to coincidence evidence.
(3) The evidence the Crown seeks to have admitted under s.98, in my assessment, has high probative value.
(4) The probative value of the evidence which the Crown proposes to adduce is significant within the meaning of s.98(1)(b). The prejudicial effect which such evidence may have on the accused, in my assessment, is substantially outweighed by its probative value. In that respect, I rely upon the matters relevant to the evaluation of probative value, as earlier discussed.
The objective of a Coincidence Notice is to ensure fairness in terms of providing an accused person with particulars as to the events relied upon in support of the admission of evidence on a coincidence reasoning basis.
In Zhang (supra), Simpson J identified at [13] the four matters that a properly drafted Coincidence Notice under s.98 should contain:-
(1) The two or more events the subject of the proposed evidence.
(2) The person whose conduct or state of mind is the subject of the proposed evidence.
(3) Whether the evidence is to be tendered to prove that a person did a particular act, and, if so, what that "act" is.
(4) Whether the evidence is to be tendered to establish that that person had a particular state of mind and, if so, what that "state of mind" is.
Zhang (supra) involved offences of attempt possession of not less than trafficable quantity of illegally imported drugs (narcotics) and an offence of possess not less than the trafficable quantity of goods reasonably suspected of having been allegedly imported (also narcotics). There was only one issue at trial raised by the defence, namely, the essential element of knowledge on the part of the appellant in relation to each count as to the identity of the substance of which she was alleged to have attempted to obtain possession.
In the present proceedings, the seven "events" in the Table to the Coincidence Notice provide particulars of the substance of the evidence in relation to facts concerning specific matters discussed earlier in this judgment including Moody's receipt of confidential/inside information and Mr Joffe's alleged receipt of the same (Events 1 and 2). Other events deal with events that the Crown submitted were probative in relation to actions of Mr Joffe and Mr Stromer including:-
The acts of allegedly communicating inside information (Event 3).
The acts of Mr Joffe in allegedly procuring Mr Stromer to trade whilst in possession of the inside information (Event 3).
Other "events" deal with the alleged acts of Mr Stromer (trading whilst allegedly in possession of inside information) (Events 4 and 6) and acts of third parties, namely, the acts of corporate entities (the Credits of Moody's) in making announcements to the market or events pre-empting the transaction (Event 5).
Finally, the Table to the Coincidence Notice refers to the alleged acts of Mr Joffe in maintaining "significant surveillance" on dates and in periods specified (Event 7).
When consideration is given to the elements of Counts 1 to 10 and Counts 11 to 20 under s.1043A, the "events" referred to in the Coincidence Notice particularised in the Table to the Coincidence Notice particularise the evidence relied upon to establish the alleged conduct of Mr Joffe and Mr Stromer said to constitute a joint enterprise or pattern of conduct in which both are said to have acted in concert. If accepted, the evidence is relevant to the facts in issue.
The particulars as to the substance of the evidence the Crown relies upon as provided in the Coincidence Notice provide the bases upon which it will be contended that Mr Joffe had possession of the inside information in relation to each transaction and the evidence relied upon to establish possession of such information by Mr Stromer allegedly obtained through specified communications with Mr Joffe. The timing of particular communications between them are specified and relied upon.
The issue of alleged procurement by Mr Joffe within s.1043A(1)(d), as discussed earlier in this judgment, is sought to be established inferentially based upon evidence concerning primary facts falling within the Coincidence Notice.
I do not consider that the Coincidence Notice is deficient or defective as has been claimed on Mr Joffe's behalf. In particular, the "acts", state of mind issues in relation to the accused with respect to each count and each "event" are particularised and the substance of the evidence in those respects as identified is, in my opinion, sufficient to constitute compliance with the requirements under Regulation 5(3).
Additionally, the material subsequently produced by the Crown in Exhibits A and C1 to C14 provide further information which assists in understanding the material particularised in the Coincidence Notice.
Event accepting the Crown's submission at t.203 that the "information" was additional to that publicly available, there was no information given to Moody's before the acquisition by Mr Stromer of what matter any announcement to be made by PBL would relate to.
The probative force of the receipt by Moody's of inside information, availability of such information to Mr Joffe and the interrelationship as to the sequence and timing of events in relation to the charged matters (Counts 1 to 10 and Counts 11 to 20) stand in marked contrast to the events and circumstances associated with the PBL matter. The probative force of the evidence sought to be relied upon by the Crown in relation to PBL is limited and does not, in my assessment, outweigh the prejudicial effect of such evidence. Accordingly, the evidence is not admissible under s.98
I have concluded that the probative value of the evidence relied upon by the Crown in relation to the DOW matter is not high. The evidence is, accordingly, not admissible under s.98(1)(b).
On 23 August 2006, Tom Stromer directed the sale of the two GasNet securities at $3.10 per share. On 23 August 2006 at 11.37, Mr Stromer sent a "mobile SMS call" to Mr Joffe.
A profit of $19,600 was made on the sale of the securities purchased on the Nathan and Simone Stromer account. A profit of $8,600 was made on the sale of the securities purchases in Tom Stromer's name.
In relation to this event, the Crown noted that, in the five days on and after the alleged receipt of insider information, Mr Joffe and Mr Stromer spoke by telephone on one occasion and exchanged eight text messages.
The Crown stated that Mr Joffe had the opportunity of viewing the email from Mr Upson of BBI on the weekend of 10 and 11 June 2006. He did, it claimed, attend the meeting on 8 June 2006 according to the evidence and spoke to Mr Stromer on Sunday 11 June 2006 and exchanged text messages that afternoon.
The submission on behalf of Mr Joffe (at t.45-46) related to that assertion. Copies of relevant documentary material are to be found in Exhibit 1, Tab 27 commencing at p.60.
The effect of the submission for Mr Joffe was that the information contained in the material would hardly support the proposition that there was communication of insider information. A number of points were made in this respect, including:-
(1) The very short duration of the relevant phone calls, in particular, the telephone call on Sunday 11 June 2006 was said, not only to be short, but occurred three days after Mr Joffe allegedly attended a particular meeting on 8 June 2006.
(2) There are no other phone calls recorded in the documents until after Mr Stromer acquired the GasNet security.
(3) In relation to phone calls generally, there were an "enormous number" of phone calls between Mr Joffe and Mr Stromer which is not unexpected between friends.
On behalf of Mr Joffe, it was noted the trading in GasNet securities occurred six days after 8 June 2006 and four days after 10 June 2006. Mr Stromer provided his explanation for acquiring them. There was takeover speculation in relation to key shareholders.
It was also stated that there was no evidence of communication of inside information.
The Crown, in particular, referred to its abovementioned assertion that Mr Joffe viewed the email from Mr Upson of BBI containing detailed offer information over the weekend prior to speaking with Mr Stromer on Sunday 11 June 2006. It noted that it was not necessary for Mr Joffe to actually go to his office over the weekend, as he had a remote access facility. The Crown relied upon the proximity between receipt of the information on 8 and 10 June 2006 and the claimed transmission of the information to Mr Stromer.
The Crown suggested the delay in trading could be indicative of Mr Stromer and Mr Joffe being hesitant in putting "their scheme" into action as this was, it contended, their first trade utilising inside information. In any event, a four‑day delay was said not to be probative of anything.
The Crown also argued the fact that Tom Stromer also purchased GasNet securities in his own name was irrelevant in as much as it did not detract from the Crown case.
At 2.59 pm, Mr Stromer sent Mr Joffe a text message. That evening, Mr Joffe and Mr Stromer spoke by telephone on three occasions (7.46 pm, 8.27 pm and 9.01 pm).
At 8.53 am on 13 September 2006, Mr Joffe visited the NZX webpage for AIA.
At 10.46 am on 13 September 2006, Mr Stromer sent a text message to Mr Joffe.
At 10.48 am on 13 September 2006, Mr Stromer placed the order with UBS to sell the AIA shares.
At 6.38 pm on 13 September 2006, Mr Stromer called Mr Joffe.
The submission for Mr Joffe in relation to this aspect was that, although the expert report relied upon by the Crown establishes that information discussed at a meeting held on 3 July 2006 was "material" information, on examination "... it is not very good information" (t.54).
The relevant document in Volume 1, p.121, being a statement of Mr Howell refers to the meeting of 3 July 2006 with B&B and Mr Fontaine from Deutsche Bank. The meeting, as noted above, discussed the fact that B&B were considering commencing a takeover bid in relation to AIA. Mr McHugh stated that there was no issue but that Mr Joffe was present at the meeting.
Whilst Mr McHugh said that he was not "going behind" Mr Wilson's opinion on the present application to suggest that it was not inside information, he submitted it was relevant to have account of the circumstances.
In relation to the equity value of the takeover in respect of AIA, it was contended that the proposed price of the order of only $1.64 per security based upon the "Airport Capital Structure" document contained in Exhibit 1 at p.133 was below the market price of AIA. It is noted that the Crown disputed the basis suggested as appropriate for deriving the takeover price.
Accordingly, the submission for Mr Joffe was that a combination of information publicly available and the proposed takeover price $1.64 meant that the information was "bad information" (t.56). The submission was:-
"The first point is that when your Honour comes to the probabilities, although Mr Wilson has said that this is inside information in the formal sense that what he is told is that somebody wants to take over the company, without knowing the price it is really very difficult to know how good the information is. The price that one can readily determine shows that it is terrible information to trade on."
On the issue of "materiality", the Crown relied upon the expert report of Mr Wilson (paragraphs [11] to [16]). It was contended there is no evidence to support the proposition upon which the defence submission was predicated, namely, that Mr Joffe did not regard the information as material as would lead him to recruit Mr Stromer to act upon it. This, it was submitted, was an inquiry that the Court would not undertake at this time as it was a jury question.
The Charting Page was said to allow the user to access information including:-
A graph showing daily fluctuations in the share price of the company.
A graph showing daily trading volume.
The share price at the previous day's close.
At 12.18 pm on 25 September 2006, Mr Joffe checked the AWB share price.
On Tuesday 26 September 2006, Mr Stromer's CMC account was credited with amounts of $1,000 and $25,000.
At 2.35 pm, Mr Joffe accessed online Sydney Morning Herald articles regarding AWB and between 3.10 pm and 3.15 pm conducted a Google search for "CFD" and "macquariecfd". At 5.16 pm, Mr Stromer sent a text message to Mr Joffe. At 9.58 pm, Mr Joffe used his home phone to call Mr Stromer.
On Wednesday 27 September 2006 at 9.58 am, Mr Stromer used his mobile phone to contact Mr Joffe.
At 10.45 am and 10.49 am, Mr Stromer acquired 135,000 short AWB CFDs through CMC Markets.
At 10.53 am, Mr Joffe used his mobile phone to call Mr Stromer's mobile phone. Soon after acquiring the CFDs, the share price of AWB rose causing a margin call to issue. At 12.09 pm, Mr Stromer transferred $28,000 to CMC Markets.
At 1.24 pm and 2.19 pm, Mr Joffe visited the CommSec website for AWB.
Mr Stromer and Mr Joffe spoke by phone at 1.51 pm, 8.49 pm, 9.06 pm and 9.49 pm.
At 10.25 am on 28 September 2006, AWB made four announcements to ASX. These included announcements as to:-
(1) A reduction in 2006/2007 wheat production forecast from 18‑20 tonnes to 12.015 tonnes.
(2) AWB to pay legal costs of AWB International arising from the Royal Commission and any costs of contesting any ATO assessment and any outstanding tax regarding any liability in connection with inland transportation fees for wheat sold to Israel.
At 3.07 pm, Mr Stromer sent a text message to Mr Joffe. They spoke by phone at 7.09 pm, 9.12 pm, 9.30 pm and 9.53 pm.
At 6.17 pm on that evening, Mr Joffe accessed the CommSec website regarding AWB.
The Crown pointed to a call made by Mr Joffe to Mr Stromer on 27 September 2006 at 9.58 am just before Mr Stromer began to acquire the short AWB CFDs at 10.45 am and 10.49 am. The Crown contended that the evidence would indicate that, immediately subsequent to those purchases, Mr Joffe rang Mr Stromer at 10.53 am. These circumstances were said to be other than coincidental reflecting "... close telephone communication at the very time that Mr Stromer is engaged in making the purchase". Reference was made to paragraphs [329]-[331] in the Amended Statement of Facts.
The Crown responded to the submissions in relation to the seven days that lapsed between 20 September 2006 and the acquisition of the AWB CFDs by Mr Stromer as well as what was said to be alternative reasons for purchasing the financial products, in particular, newspaper reports prior to 27 September 2006.
The Crown pointed to evidence of activity by Mr Stromer which it was contended indicated that he was intent on holding on to his CFDs pending some other event. These were referred to in p.6 of the Crown's schedule, MFI 2. The Crown noted that, immediately after Mr Stromer acquired the short AWB CFDs, the AWB share price rose and that led to a margin call being made on this account requiring that he deposit funds. At that point, he deposited a further $28,000 into the account to cover the margin call. The Crown contended there was an inference that his reason for doing so was because he wanted to hold onto his CFDs pending information which was yet to come. The evidence in this respect was referred to in paragraphs [334]-[335] of the Amended Statement of Facts (t.170).
The Crown responded to the submission that Moody's did not hold information concerning a further reduction in the wheat production forecast to 12 to 15 million tonnes. However, the Crown contended that it was irrelevant whether Moody's were aware that AWB would be announcing a further reduction in wheat production. What was pleaded in the charges was the information that was said to have been provided on 20 September 2006 to Moody's by AWB.
The Crown further relied on the significance that was said to attach to communications between Mr Joffe and Mr Stromer on 29 September 2006 (at 1.170).
The Crown relied on the expert evidence of Mr Wilson to establish that the information was "material": paragraphs [67]-[78].
The Crown's position is that there is no legitimate explanation for Mr Joffe's viewing the BLD CommSec page on the day.
On 14 November 2006, Mr Stromer unsuccessfully attempted to deposit the cheque into his CMC Market's account.
At approximately 9.44 am on 14 November 2006, Mr Stromer deposited Mr Joffe's bank cheque for $30,000 into a Westpac Bank account in the name of N & S Stromer. At the same time, Mr Stromer arranged for the issue of a Westpac bank cheque for $30,000 payable to CMC Markets Asia Pacific drawn on the last-mentioned account.
The Crown relied on the following matters:-
(1) The email invitation of 27 November 2006 which was sent to Mr Joffe and others stated, inter alia:-
"We possibly have a RAS for Transurban - a hostile takeover. Target is a group where we already rate 2 assets (roads - Sydney Roads ???) ..."
(2) SRG was then a "credit" of Mr Joffe. The email contained sufficient information to warn him that it was likely that SRG was to be a takeover target of Transurban in circumstances where there had been speculation about a takeover (Statement of Facts at [497]).
(3) It is likely Mr Joffe would have had access to his Blackberry whilst in Singapore. He was attending a work-related conference. The fact that the email was sent to him whilst he was away supports an inference that Moody's expected that he would be in receipt of the email.
(4) Mr Joffe called Mr Stromer immediately after he spoke to Mr Howell and they spoke for four minutes. A few minutes later, Mr Stromer phoned CMC to clarify the position regarding his account. When told he could not trade on that account, he opened an account with IG Markets via the IG Markets website. The Crown case is that this indicated an intention on his part to begin trading.
(5) Mr Stromer commenced trading in SRG CFDs at 2.22 pm on the day Transurban met with Moody's personnel at 2.27 pm on 30 November 2006. In the Statement of Facts (paragraph [486]) it is said that it is unlikely that the information conveyed during the meeting of 30 November 2006 could have been available to Mr Joffe and, in turn, conveyed to Mr Stromer before Mr Stromer made his first acquisition of SRG CFDs at 2.22 pm. Mr Stromer made a second and larger purchase (262,832) and, within minutes of making this purchase, he sent a text message to Mr Joffe (at 2.34 pm). He sent two further text messages that night to Mr Joffe (10.26 pm and 11.24 pm).
On 30 November 2006, Mr Joffe returned from Singapore.
On 1 December 2006, Mr Stromer withdrew $70,000 from his ANZ account and deposited it with Westpac to the credit of his IG Markets account. He then proceeded to acquire SRG CFDs that afternoon from IG Markets.
In the course of his oral submissions, Mr McHugh undertook a close examination of the material in the Crown evidence bearing upon some of the "events" in MFI 1. This Appendix contains reference to some of the matters raised by Mr McHugh in relation to particular "events" in MFI 1.
A meeting was held on 19 January 2007 at 9.00 am to 12.00 pm with RIN. It was attended by Mr Fullerton and Mr Brown. Additional information was provided, including that RIN's December 2007 earnings figures would be up 15%.
On Saturday 20 January 2007, Mr Stromer transferred $110,000 into his E Trade Account which was opened by him on 16 June 2006.
The Crown case is that, at 2.21 pm on Monday 22 January 2007, Mr Stromer commenced acquiring 100,500 RIN CFDs with a contract value of $1,839,150 through City Index.
The Crown case is that, on 23 January 2007, Mr Stromer allegedly continued to acquire RIN CFDs, acquiring 48,290 CFDs through City Index and 246,500 CFDs through E Trade.
The Crown further alleges that he purchased 5,000 RIN shares through E Trade on 23 January 2007 which he disposed of the same morning.
The Crown alleges that Mr Joffe visited three different websites relating to the Cemex/RIN position between 9.51 am and 4.59 pm on 23 January 2007.
On 25 January 2007, the Crown alleges Mr Stromer acquired a further 10,000 RIN CFDs through E Trade.
The Crown relies upon alleged communications at various times between Mr Joffe and Mr Stromer in this period.
It is part of the Crown case that at 2.00 pm on 29 January 2007, an ASIC officer contacted Mr Stromer and asked him to attend ASIC to discuss a complaint with CMC Markets.
At 3.30 pm on 29 January 2007, another ASIC officer spoke to Mr Stromer and arranged for him to attend an examination pursuant to s.19 of the ASIC Act 2001 on 2 February 2007.
On 29 January 2007, Mr Stromer was served with a s.19 Notice by email.
The Crown relies upon contact made by Mr Stromer with Mr Joffe later that afternoon.
On 30 January 2007, Mr Fullerton received an email from RIN containing the announcement of their third quarter trading results for the period ending 31 December 2006.
It is part of the Crown case that Mr Stromer then commenced selling the RIN CFDs on 30 January 2007 (30,000) and that on 31 January 2007, he sold 179,428 MAN Financial RIN CFDs through E Trade and, a little later, 60,000 City Index RIN CFDs.
On 1 February 2007, the Crown alleges that Mr Stromer sold his remaining 59,572 MAN Financial RIN CFDs through E Trade and opened a short position in MAN Financial RIN CFDs of $35,000.
On 13 February 2007, Mr Joffe was placed on paid leave by Moody's following the service on Moody's of a notice to produce books.
The Crown alleges that, on 14 February 2007, Mr Stromer acquired a further short position in MAN Financial RIN CFDs of 41,500 CFDs which it was claimed moved his total short position to $76,500. That afternoon, the Crown alleges he sold his remaining 77,790 City Index RIN CFDs.
On 15 February 2007, it is alleged Mr Stromer closed his short position in MAN Financial RIN CFDs. The Crown relies upon the fact that Mr Joffe allegedly visited websites relating to RIN's share price and news regarding the Cemex takeover bid on 31 occasions in the period 30 January 2007 and 15 February 2007.
The Crown alleges that Mr Stromer had invested $477,000 and made a profit of $61,206.10 on the CFDs acquired through the City Index, and paid commission of $5,533.74 and a profit of $81,409.83 on the CFDs through E Trade and paid commission of $19,842.40.
On behalf of Mr Joffe, it was observed what RIN wanted to know was what it would do to its credit rating because it would affect the cost of its debt on a series of different scenarios.
The reference to 15% increase in earnings was said to be an error - 16% was the correct figure.
Mr McHugh turned to each aspect - cash payments and shares in the new company.
It was said that the expert witness, Mr Wilson, was simply asked to assume that the information about the cash payment was not generally available. On the assumption it was not generally available, he said it was "material" information.
Reference was made to Exhibit 3, p.57, the statement of Mr Fullerton. That was a reference to the meeting of 19 January 2007 attended by Mr Fullerton at Moody's which related to the Cemex bid for RIN and the defence strategies. One of the RIN or UBS representatives stated that certain assumptions could be made about RIN's December 2006 figures scheduled for release on 30 January 2007.
The assumptions were set out in paragraph [125] of his statement. The earnings per share on this basis was put as up 16% (against a norm of 9%).
The "assumptions" were recorded in handwritten notes, a copy of which is at Exhibit 3, p.58. Mr McHugh referred to the note "Guidance" which had figures recorded of 84 to 90 cents earnings per share and stated "around 84 cents" mark. This, it was stated, was a reference to earnings per share guidance for the full year.
At Exhibit 3, p.110, is a document sent to the ASX on 9 November 2006, that is, shortly before the meeting of 19 January 2007.
At p.111 of Exhibit 3 is the RIN "Results Presentation" for the six months ended 30 September 2006 (the half year for the company).
At p.151 of Exhibit 3, regarding the presentation document, reference was made as follows:-
"We expect full year profits to be around the bottom end of the 84-90 US cents per ordinary share range previously announced. This assumes some further modest deterioration in housing in our major US markets."
Mr McHugh noted that this was in line with the "guidance" referred to in Mr Fullerton's notes. The important point, it was said, was that RIN was staying with what it had already told the market. There were two ways of interpreting this, one, either "neutral" in the sense that the market had already been told "it is at the bottom of the range" or, two, it is "negative" because the market was being told that earnings per share was at the bottom of the range. If "neutral", it would be expected to have no effect on the stock. If "negative", it would have a depressing effect.
However, Mr Stromer took the long position expecting the stock would rise. The submission was (transcript, 22 June 2011, p.105):-
"It is very difficult to see that somebody who was given this information would conclude that it was a good time to buy; that is as far as that information goes."
It was noted that Mr Joffe was not present at the meeting.
The Crown responded as follows. The defence sought to present a different "scenario" to an earnings estimate at the low end of a previously disclosed range. That "scenario" ignored the fact that it was or became a confirmed increase in earnings, not a forecast three months in advance and it was accompanied by a strategy as alleged in the indictment (there would be an offer of a cash back to shareholders defence together with shares in a new company).
In oral submissions, the Crown confirmed its position as alleged, namely, that the increase in earnings per share was a material matter. That evidence, the Crown submitted, had to be accepted for the purpose of a ruling under s.98. Additionally, the information went beyond "mere speculation" that RIN would be the target of a takeover and was consistent with Mr Stromer taking a long position in expecting a share price rise, as it contended one would expect if, as Moody's was instructed on 19 January, there would be a 16% rise in earnings, and that there would be cash back as well as a new share offer strategy put in place by RIN. The submission put forward on behalf of Mr Joffe was said to ignore the fact that the information provided to Moody's was that there was now confirmed an increase in earnings and it included detail as to the strategy RIN would adopt in defence of the hostile takeover.
As to Mr Stromer's trading not commencing until Monday 22 January 2007, the Crown observed time was allegedly spent by Mr Stromer between 15 and 22 January 2007 "amassing a cash fund which he used to purchase the securities in Rinker thereafter" (t.202). The last information, it was observed, came to Moody's on Friday 19 January 2007. The next working day, Mr Stromer commenced trading. Reference was also made to telephone communications between Mr Joffe and Mr Stromer on 17, 18 and 19 January 2007.
The Crown also relied upon the increased activity of Mr Joffe in visiting the CommSec URL for RIN. On the question of the number of times he accessed the website for RIN, Mr Joffe was alleged to have visited it on 27 October, 23 November, 8 December 2006, 2 January, 3 January, 17 January and 1 February 2007, amongst other occasions (t.202).