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Court of Criminal Appeal 18 May 2006

Adler v R

[2006] NSWCCA 158

Fraud & dishonesty
CRIMINAL LAW BREACHES OF THE CORPORATIONS ACT APPEAL AGAINST SENTENCE DISSEMINATION OF FALSE INFORMATION DISHONESTY APPLICATION OF DE SIMONI PRINCIPLE

Citation: Adler v R [2006] NSWCCA 158
Court: New South Wales Court of Criminal Appeal
Date: 18 May 2006
Judges: McClellan CJ at CL, Sully J, Hislop J

Background

The appellant was a non-executive director of HIH Insurance Limited who pleaded guilty to four offences. Two counts arose under s 999 of the Corporations Act 2001 (Cth) for disseminating false information to a journalist at the Australian Financial Review on 19 and 20 June 2000. The appellant falsely implied, and then directly stated, that he was purchasing HIH shares with his own money, when in fact the shares were acquired using HIH funds channelled through a trust.

Two further counts related to a company called Business Thinking Systems Pty Ltd (BTS), in which the appellant held a substantial interest. He made false representations to induce HIH to invest $2 million in BTS (a State offence under s 178BB of the Crimes Act 1900 (NSW)), and then attended a HIH board meeting to ratify that investment without disclosing material adverse information about BTS or his own financial interest in the outcome (an offence under s 184(1)(b) of the Corporations Act).

At first instance the appellant was sentenced to a total of four years and six months imprisonment, with a non-parole period of two years and six months. He sought leave to appeal against sentence on multiple grounds.

  • Whether the sentencing judge had sufficient evidence to support findings that the appellant's false statements induced others to purchase HIH securities, caused a rise in the share price, and resulted in loss to investors.
  • Whether the sentencing judge gave adequate weight to the principle of double jeopardy, given that civil penalty proceedings had already been brought against the appellant by ASIC.
  • Whether the sentencing judge applied the De Simoni principle incorrectly by punishing the appellant for conduct beyond the offences of which he was convicted.
  • Whether the overall sentence adequately reflected the objective seriousness of the offending.
  • Whether sufficient weight was given to the appellant's guilty plea.
  • Whether the sentence was manifestly excessive.

Decision

The Court of Criminal Appeal dismissed the appeal by majority, granting leave but finding no error in the sentencing judge's approach.

On the s 999 counts, the sentencing judge's findings that the false statements were likely to induce share purchases, did cause the price to rise, and did result in investor losses were held to be open on the evidence. The sentencing judge had expressly found that the appellant disseminated the false information with the intention of driving up the HIH share price, and noted that many small investors who purchased shares on the strength of those statements subsequently lost their money when HIH collapsed.

On the double jeopardy argument, the Court acknowledged that prior civil penalty proceedings are a relevant sentencing consideration but found that the sentencing judge had properly taken them into account. No failure to give adequate weight to that principle was established.

The Court rejected the contention that the sentencing judge had breached the De Simoni principle by punishing the appellant for uncharged conduct. The findings about the nature and context of the offending were consistent with the charges proved. The Court also held that the starting point of four years imprisonment for the s 184(1)(b) director's duties offence was within the available discretionary range, and that the overall sentence was not manifestly excessive. The sentencing judge's treatment of the guilty plea was found to be consistent with established principles, including those in R v Thomson (2000) 49 NSWLR 383.

Orders Made

  • Leave to appeal granted.
  • Appeal dismissed.

Key Takeaways

  • The Court of Criminal Appeal confirmed that prior civil penalty proceedings constitute a relevant factor in sentencing for corporate offences, but their existence does not automatically require a substantial further reduction in the custodial sentence imposed.
  • A sentencing judge is entitled to find that false market statements induced share purchases and caused investor loss where that conclusion is supported by the evidence, even without direct proof from individual investors.
  • Under the De Simoni principle, a sentencing court cannot punish an offender for more serious conduct than the offence charged; here, however, the Court found that the sentencing judge's characterisation of the offending remained within the bounds of the proved charges.
  • Conduct by a director who obtains funds from a company by false representation and then attends a board meeting to secure ratification without disclosing known adverse information was characterised as a very serious breach of director's duties.
  • No single correct sentence exists; the Court emphasised that sentencing judges retain significant discretion and an appellate court will not intervene unless identifiable error is established, consistent with Markarian v R (2005) 215 ALR 213.

Legislation and Cases Referenced

Legislation
- Corporations Act 2001 (Cth), ss 184(1)(b), 999
- Crimes Act 1900 (NSW), s 178BB
- Crimes Act 1914 (Cth)

Cases
- Adler & Anor v Australian Securities and Investment Commission; Williams v Australian Securities and Investments Commission [2003] NSWCA 131; (2003) 179 FLR 1
- Australian Securities Investment Commission v Adler [2002] NSWSC 171; (2002) 168 FLR 253
- Gas v The Queen (2004) 217 CLR 198
- Markarian v R (2005) 215 ALR 213
- Pearce v The Queen (1998) 194 CLR 610
- R v Goward (unreported, NSWCCA, 16 October 1998)
- R v Loiterton [2005] NSWSC 905
- R v Thomson (2000) 49 NSWLR 383
- R v Thomson [2003] VSCA 164
- Rich & Anor v Australian Securities and Investment Commission (2004) 209 ALR 271