Regina v Fysh

Judgment 1HER HONOUR: Stuart Fysh stands trial on four counts of insider trading contrary to sections 1043A(1)(c) and 1311(1) of the Corporations Act 2001 (Cth). The trial began before me with a jury on 15 October 2012. After the Crown closed its case last Friday, 2 November 2012, the accused submitted that there was no case to answer. The submission invoked the undoubted duty of a trial judge to direct a jury to return a verdict of not guilty if there is no evidence upon which the jury could convict: Doney v R [1990] HCA 51; (1990) 171 CLR 207 at [11]. 2The submission was directed to two elements of the offence in particular, the element of possession of the alleged inside information and the element referred to in shorthand as the materiality of that information. Yesterday, I rejected the application, ruling that there was a case to answer. These are my reasons for making that ruling insofar as it was directed to the first aspect of the submission, in the interests of having the following analysis available before the Crown's address. My reasons in respect of the second aspect of the submission will be published separately.

Basis for the application 3In order to understand the basis for the application, it is necessary to explain the way in which the case has been brought forward by the Crown. 4The four charges against the accused arise from his undisputed acquisition of two parcels of shares in Arrow Energy N/L (counts 1 and 2) and, six months later, his acquisition of two parcels of shares in Queensland Gas Company Ltd (counts 3 and 4). It is not in dispute that the accused instructed his broker to sell the Arrow shares on the date he acquired the QGC shares and to use the proceeds to buy those shares. However, the disposal of the Arrow shares is not the subject of any charge. 5Section 1043A prohibits the acquisition of relevant shares if a person (referred to in the section as the insider) possesses "inside information". That term is defined, and the terms that define it are further defined, in the Act. It will be necessary to return to those definitions. 6The indictment on which the accused was arraigned reflects the terms of the section, alleging simply that the accused acquired the relevant shares "whilst in possession of inside information". 7In advance of the trial, the Crown provided particulars of the alleged inside information for each count. The particulars relied upon in respect of counts 1 and 2 (the Arrow counts) are the same. Those particulars are set out in a document now marked MFI 3. That document contains five separately numbered paragraphs. However, as submitted by Mr Walker on behalf of the accused, I do not think there is any significance in the formatting. Similarly, the particulars relied upon in respect of counts 3 and 4 (the QGC counts) are the same. Those particulars are set out in a document marked MFI 4, which contains nine separately numbered paragraphs. 8Mr Walker submitted, as a premise of the application, that the particulars are, in each case, "a whole composed of everything set out in the particulars document", such that it is the combined effect of the matters set out which constitutes the alleged "inside information". The conclusion he submitted flows from that premise is that if, as to any single component of the particulars, the accused were successful in satisfying the test to be met on a no case submission, it would necessarily follow that there is no case to go to the jury on the two counts to which that information relates. Resting on that conclusion, Mr Walker submitted that the evidence falls short in that each of MFI3 and MFI4 includes a component as to which the jury could not be satisfied that the accused came into possession of that particular part of the information. 9The starting point is to examine the premise. It is trite to observe that the Crown must prove, and has only to prove, the essential elements of the offence charged. It might be thought, on orthodox analysis, that the relevant element required to be proved in the present context is that the accused was in possession of "inside information" (as averred in the indictment) and that the particulars given separately by the Crown cannot expand or circumscribe the requirement to prove that element. 10Support for that analysis may be found in the body of jurisprudence that rails against the proposition that the provision of separate particulars elevates the matters alleged in such particulars to the status of essential elements of the offence required to be proved by the Crown: see for example R v Saffron (1988) 17 NSWLR 395 at 448E to 449A per Hunt AJA; EPA v Sydney Water Corporation [1997] 98 A Crim R 481 per Gleeson CJ at 484-485. As those authorities reveal, however, the question as to what is essential to be proved turns critically on the nature of the offence in question. 11The neatness of the term "inside information" in s 1043A belies the complexity of its treatment in the statute, which carves its role in the offence. A convoluted series of definitions reveals that the "information" comprehended within that term is the subject of four elements of the offence: a.the accused must be shown to have possessed it; b.it must be shown not to have been generally available; c.it must be shown to have been information that would, or would be likely to, influence persons who commonly acquire Division 3 financial products in deciding whether to acquire or dispose of the relevant shares (materiality); d.it must be shown to have been known by the accused to be not generally available and material (in the sense expanded above). 12As a matter of the plain construction of the statute, as well as of fairness and common sense, it must be the same body of information for the purpose of each element. So much is recognised, certainly implicitly, in the judgment of Spigelman CJ in R v Hannes [2000] NSWCCA 503 at [26] to [28]. I did not understand the Crown to contend otherwise. 13The critical issue is to identify the extent to which the Crown's hand is tied, in that respect, by the particulars provided in the present case. Some assistance on that issue may be found in the decision of the Court of Criminal Appeal in Hannes v DPP (No 2) [2006] NSWCCA 373 at [573] to [580]. In that case, the Court rejected the proposition that, where the particulars had three separate "limbs", the jury had to be satisfied that each limb was not generally available and that each, if available, could have a material effect on the share price. 14In considering that issue, the Court approved directions given to the jury by the trial judge in the following terms (set out at [576] and [577] of the appeal judgment): "I confirm the directions I gave you that in considering the third element you have to determine whether the information particularised in the indictment, considered as a combination, was not generally available. I confirm that it is not necessary for the Crown to prove that each part of the combination considered separately, by itself, in isolation from the rest of the information in the combination, was information which was not generally available." "You could, if you saw fit, be satisfied beyond reasonable doubt that the combination of the information particularised in the indictment would have influenced or would have been likely to have influenced investors in deciding whether to buy or sell $2 November 1996 TNT option contracts, even though it is reasonably possible that some part taken by itself, such as that securities in TNT had been placed on an embargo list, was information which was already generally available or information which would not have influenced or would not have been likely to have influenced investors." 15Mr Walker submitted, and I accept, that the position cannot be different in respect of the element of possession. The "inside information" must be the same body of information for the purpose of all elements of the offence. 16In the way in which the present charges have been brought forward by the Crown, the "inside information" is the body of information, taken in combination and as a whole, set out in MFI3 and MFI4 respectively. 17It follows, in my view, that the premise of Mr Walker's submission is correct, so long as it is properly understood. The reasoning of the Court in Hannes (No 2) at [579] to [580] reveals two further important considerations. First, in approving the trial judge's directions to the jury, the Court emphasised that the critical consideration is the "particular flavour and likely effect" of the particularised information taken as a body of information. The Court noted in that context that "the relevant effect was not fairly assessed by dividing it into parts and assessing each separately" (at [579]). Similarly in the first appeal in Hannes, Spigelman CJ said at [28] that the information consisted of "the cumulative effect of four separate elements". 18Secondly, the Court in Hannes (No 2) noted at [580] that it was a matter for the jury to identify the nature of the information particularised and the relationship between different components of the information. 19Those considerations lead me to conclude that, although the premise of Mr Walker's submission (that the particulars must be taken in combination and regarded as a whole) is correct, it does not necessarily follow, as contended for the accused, that an absence of direct evidence as to his possession of any single individual component of those particulars is necessarily fatal to the Crown's case such as to require a directed verdict. 20That is so for at least two reasons. First, the issue whether the accused possessed any individual part of the information is a matter of inference. The accused's submissions implicitly equated possessing a part of the information with having read or heard words in the terms of that part of the information. That is one way in which possession of the information may be proved, but it is not the only way. The jury would also be entitled to consider any deductions, conclusions or inferences taken from the information by the accused. That follows from the premise argued by Mr Walker, since the test of materiality has regard to such deductions, conclusions or inferences. Whealy J expressly directed the jury in those terms in directions approved by the Court of Criminal Appeal in R v Rivkin [2004] NSWCCA 7 at [227]. 21It follows that, although the words heard or read by the accused will be important, the issue whether any individual component of the information was possessed by the accused is not to be tested by those words alone. The task for the jury is an evaluative one which calls for consideration of all of the evidence to determine whether it conveyed to the accused the body of "inside information" particularised by the Crown, taken as a whole. That is a question of fact which will be informed by a multitude of considerations, including any inferences that may properly be drawn from other information found to be possessed by the accused. That is not to say that a no case submission could never be made good on the approach contended for by Mr Walker, but it illustrates the difficulty of his application. 22Secondly, the significance of any discrete component of the body of information relied upon by the Crown is a question of fact for the jury. In focussing on particular components of the information, the application implicitly assumed their several significance, but that is a matter for the jury. 23In any event, even if that analysis is wrong, I have concluded that a jury could be satisfied that the accused possessed the parts of the particularised information focussed on by Mr Walker in the no case submission. 24As to counts 1 and 2 relating to the acquisition of shares in Arrow, the application focused on two components of the particularised "inside information". The first is particular (b), as follows: The Team proposed that pursuing a merger and acquisition (M & A) or strategic alliance with a company that had already existing LNG interests in Australia would be the "best fit" to deliver a material supply. 25The Crown case is that the information was derived from a presentation made by Mr Maxwell on 12 June 2007, the day before the accused acquired the first parcel of shares in Arrow. 26The slides do not include words in the precise terms of particular (b). The slides are, in the main, not in narrative form, but present information in a variety of ways including graphs, annotated maps and tables. 27It may be noted that particular (b) has the words "best fit" in quotation marks, indicating to that extent at least a direct quote from the slide presentation or something said by Mr Maxwell. Mr Maxwell did not use that expression. So far as the slides are concerned, the words "best fit" appear in two places (pages 17 and 20 of exhibit B). Neither place precisely replicates the terms of particular (b). 28In my view, however, the material contained in the slides, taken in the context of the whole of the evidence including the evidence of Mr Maxwell, is capable of being understood to convey information substantially in the terms specified in particular (b). I do not think it is necessary for the Crown to prove that the alleged "inside information" was communicated in the exact terms particularised. It is not the role of the particulars to replicate the evidence. The Crown has, in MFI3, distilled the relevant "information". A question of fact for the jury to determine is whether, on the evidence, the accused possessed that body of information. The differences between the terms of the evidence and the terms of the particulars raise issues of analysis, inference and nuance of meaning. It is not for the trial judge to arrogate that analysis in the determination of a no case submission. To do so would be to enlarge the powers of a trial judge at the expense of the traditional jury function: cf Doney at [18]. 29For those reasons, I am not satisfied that a jury could not find the accused knew the information in particular (b). 30The next component of the particularised "inside information" focused on in the application was particular (d), as follows: The Team identified Arrow and QGC as the only companies that conducted pure CSG businesses in Australia and that, while the Team rated the "value proposition" and "portfolio fit" of both companies as "M & A opportunities" with BG Group to be substantially the same, it rated the "availability/doability" of Arrow much higher than that of QGC. 31That component of the information is drawn primarily from a slide presented by Mr Maxwell which contains a considerable amount of information in addition to that purportedly summarised in the particular. Mr Walker submitted that, as a summary, it is inaccurate. He noted that, whereas particular (d) notes that the Team rated the "value proposition" and "portfolio fit" of both companies as "M & A opportunities" with BG Group to be substantially the same, the rating it gave them was the lowest rating on the score, whereas other companies on the same slide had higher ratings on that score. 32There is no doubt that particular (d) draws a refined proposition from a broader collection of information. That is the task of the Crown in distilling the alleged "inside information". The accused has been told, in particular (d), what it is alleged he drew from the broader body of information presented to him from a variety of sources. 33I am not satisfied that a jury could not find the accused knew the information in particular (b). 34As to counts 3 and 4, the application focused on the following component of the particularised inside information (particular (f) in MFI4): The Team had prepared evaluations of QGC and Arrow in which the net asset valuation (NAV) of QGC was more than 2.5 times its then current share price on the ASX while the NAV for Arrow was about half its then current share price on the ASX. 35That information is alleged to have been derived from two slides tabled at a meeting between the accused and two members of the Team, Gary Thompson and James Seaton. Mr Walker made two points in respect of their evidence. First, he submitted that the evidence did not go so high as to establish that the accused read the two slides. There was evidence to the effect that the slides were taken to the meeting by Mr Seaton but no evidence that the accused considered their contents so as to draw the conclusions identified in the particulars. 36Secondly, Mr Walker submitted that the slides did not present information in the form identified in the particulars. The slides present the information in the following form (at pages 162 and 177 of exhibit B): As to Arrow: Net asset value A$mm 664 A$/share 1.24 Current share price A$mm1560 A$/share 2.43 As to QGC: Net asset value A$mm 4357 A$/share 7.13 Current share price A$mm 0 A$/share 2.58 37It may be seen that the mathematical conclusion articulated in the particulars does not appear in terms in the slides. That information is derived from an analysis of the graph and by doing the relevant calculations, and taking both slides together. 38Those are matters which might be put forcefully to the jury. In my view, however, the slides, taken together, are capable of conveying the information alleged to have been in the possession of the accused. 39As to whether the evidence is capable of establishing that the accused read or absorbed the contents of the slides, in my view, there is evidence on that issue capable of going to the jury. Mr Seaton recalled taking the slides to the meeting but did not recall saying anything in relation to the slides. However, Mr Thompson recalled that Mr Seaton took the two slides to the meeting and that, as to the Arrow slide, Mr Seaton "went through the slide". As to both slides, Mr Thompson gave evidence that Mr Seaton "showed them to the accused". In my view, that evidence is capable of sustaining an inference that the accused examined the slides sufficiently to enable him to draw the conclusion articulated in the particulars. 40I am not satisfied that a jury could not find the accused knew the information in particular (b). 41Those are my reasons for rejecting the application insofar as it related to the element of possession of the alleged "inside information".