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21
Court of Criminal Appeal 8 April 2005

R v Doff

[2005] NSWCCA 119

Fraud & dishonesty
CRIMINAL LAW APPEAL AGAINST CONVICTION INSIDER TRADING POSSESSION OF INFORMATION PURCHASE OF QANTAS SHARES ESTABLISHMENT OF CRIMINAL STANDARD

Citation: R v Doff [2005] NSWCCA 119
Court: NSW Court of Criminal Appeal
Date: 8 April 2005
Judge(s): Wood CJ at CL, Adams J, Bell J

Background

The appellant was a real estate agent who had been engaged to sell a property owned by Rene Rivkin. During a meeting at the appellant's premises in April 2001, the executive chairman of Impulse Airlines attended to discuss purchasing the property. In the course of that meeting, information was conveyed about a secret deal under which Impulse Airlines was to merge its business with Qantas Airways Limited, subject to regulatory approval.

Approximately three hours after the meeting, the appellant instructed a stockbroker to purchase 20,000 Qantas shares in the name of a company he controlled, at a total cost of around $55,855. The shares were acquired the same afternoon. When the Qantas-Impulse deal became public on 1 May 2001, the share price rose.

The appellant was convicted after a jury trial before Barr J in the Supreme Court on a charge of insider trading under the Corporations Act 2001. He was sentenced to 350 hours of community service, a $30,000 fine, and was ordered to disgorge $37,225.75 under the Proceeds of Crime Act 2002. He appealed against the conviction, and the Crown separately appealed against the leniency of the sentence.

  • Whether the conviction for insider trading was supported by the evidence, given that witnesses gave differing accounts of exactly what information was disclosed at the meeting
  • Whether the criminal standard of proof was properly applied in assessing those differing accounts
  • Whether the sentencing judge erred in imposing a sentence that the Crown contended was manifestly inadequate

Decision

On the conviction appeal, the central dispute concerned what the appellant had actually heard at the meeting. The witnesses gave varying accounts of the Impulse-Qantas arrangement: one described it as a "merger", another as a "financial arrangement", and another as a "sale of part of the business". The appellant exercised his right to silence and gave no evidence about what he understood from the discussion.

The Court of Criminal Appeal found no error in the approach taken at trial to these differing accounts. The jury, properly directed, was entitled to conclude beyond reasonable doubt that the appellant had received information about the secret negotiations between Impulse and Qantas, and that he had then traded in Qantas shares on the basis of that information. The conviction appeal was dismissed.

On the Crown's sentence appeal, the Court identified several factors that justified the sentencing judge's approach. These included the significant delay in bringing the matter to trial (caused by the related Rivkin proceedings, not by the appellant), the appellant's cooperation in facilitating the efficiency of the trial, and his comparatively lower level of culpability relative to Rivkin, who was a professional stockbroker and investment adviser with far greater market experience. The appellant had also invested a smaller amount than Rivkin.

The Court further noted that the combined effect of the community service, the fine, the disgorgement order, the automatic disqualification from managing a corporation, and the potential consequences for his real estate licence amounted to a substantial overall penalty. No error was established in the exercise of the sentencing discretion, and the Crown's appeal was also dismissed.

Orders Made

  • Appeal against conviction dismissed
  • Crown appeal against sentence dismissed

Key Takeaways

  • A conviction for insider trading does not require all witnesses to give identical accounts of the information disclosed; a jury can find the criminal standard satisfied where the overall evidence supports the conclusion that material non-public information was received and acted upon.
  • In dismissing the Crown's sentence appeal, the Court of Criminal Appeal confirmed that delay in bringing a matter to trial, where that delay is entirely attributable to related proceedings and not to the offender, is a legitimate mitigating factor in sentencing.
  • Relative culpability between co-offenders can properly be assessed by reference to professional expertise and the scale of trading; the sentencing court was entitled to treat the appellant as less culpable than Rivkin given his lack of stockbroking experience and his smaller investment.
  • The overall penalty package, including community service, a fine, a proceeds of crime order, and consequential professional and corporate disabilities, may be assessed in combination when determining whether a sentence is manifestly inadequate.
  • Comparison with sentences in other insider trading cases is of limited utility where the objective and subjective circumstances of those cases differ materially.

Legislation and Cases Referenced

Legislation:
- Corporations Act 2001 (Cth), ss 1002G(2), 1311(1)
- Crimes Act 1914 (Cth)
- Criminal Appeal Act 1912 (NSW)
- Proceeds of Crime Act 2002 (Cth)

Cases:
- R v Rivkin [2004] NSWCCA 7
- R v Hannes (2000) 158 FLR 359; (2002) 173 FLR 1
- ASIC v Petsas [2005] FCA 88
- House v The Queen (1936) 55 CLR 499
- Dinsdale v The Queen (2000) 115 A Crim R 558
- Jones v The Queen (1997) 191 CLR 439
- M v The Queen (1994) 181 CLR 487
- R v Morgan (1993) 70 A Crim R 368
- R v Martin (1994) 74 A Crim R 252
- R v Wall [2002] NSWCCA 42
- R v Pangello (1991) 56 A Crim R 441
- R v Pantano (1990) 49 A Crim R 328
- R v Radloff (1996) 88 A Crim R 26
- R v Corner, NSWCCA, 19 December 1997
- R v Moore and Weibe, NSWCCA, 11 August 1992
- R v Williams, NSW District Court, 4 October 1996
- R v Cribb, District Court of WA, 9 June 1998
- R v Kin Lang Teh, District Court of Victoria, 2 September 1991