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Court of Criminal Appeal 24 November 2006

HANNES v DIRECTOR OF PUBLIC PROSECUTIONS (CTH) (NO. 2)

[2006] NSWCCA 373

Also reported as (2006) 165 A Crim R 151
Fraud & dishonesty
CONSTITUTION S 109 INCONSISTENCY STATE AND FEDERAL LAW STANDARD OF PROOF CRIMINAL PLEADINGS DUPLICITY

Citation: Hannes v Director of Public Prosecutions (Cth) (No. 2) [2006] NSWCCA 373
Court: New South Wales Court of Criminal Appeal
Date: 24 November 2006
Judge(s): Basten JA, Barr J, Hall J

Background

The appellant was an executive director at Macquarie Corporate Finance, which advised TNT Limited during a friendly takeover by Dutch company KPN in October 1996. Approximately two weeks before the takeover was publicly announced, a man calling himself "M Booth" instructed a stockbroker to purchase $90,000 worth of TNT call options. When the takeover was announced, those options returned a profit of more than $2 million.

The Crown alleged that "M Booth" was in fact the appellant, and that he had used inside information held by his employer to make the purchase. He was tried before Bruce James J in the Supreme Court and convicted on one count of insider trading contrary to s 1002G(2) of the Corporations Law, and two counts of structuring cash transactions contrary to s 31(1) of the Financial Transaction Reports Act 1988 (Cth). The structuring counts arose from a series of cash withdrawals and bank cheque purchases alleged to have been made to avoid reporting obligations.

The appellant, who appeared in person before the Court of Criminal Appeal, brought a wide-ranging appeal challenging his convictions on numerous grounds spanning pleading, evidence, jury directions, and constitutional inconsistency. He also applied for leave to appeal against his sentence.

The appeal raised a substantial number of discrete legal questions, including:

  • Whether the indictment was duplicitous or uncertain, and whether the evidence conformed to the pleadings
  • Whether s 109 of the Constitution rendered the Financial Transaction Reports Act 1988 (Cth) inconsistent with the Evidence Act 1995 (NSW) regarding the standard of proof
  • Whether identification evidence from a photoboard selection should have been excluded because its probative value was outweighed by the danger of unfair prejudice
  • Whether adverse character evidence elicited during re-examination of a witness was admissible, and whether the prosecution's comment on the defence's failure to call character evidence was appropriate
  • Whether handwriting expert evidence was admissible, including whether a change in the expert's opinion rendered it inadmissible, and whether the method of obtaining the handwriting sample was prejudicial
  • Whether the expert opinion evidence was properly grounded in specialised knowledge under ss 76 and 79 of the Evidence Act 1995 (NSW)
  • Whether call options fell within the statutory definitions of "purchase" and "securities" for the purposes of the insider trading provisions
  • Whether information could be established by inference from conduct, and whether that inference needed to be the only reasonable one available
  • Whether the "generally available" requirement in the insider trading provisions was satisfied where only particular aspects of the relevant information were in the public domain
  • Whether a Shepherd direction (a direction requiring the jury to be unanimous on indispensable intermediate facts before returning a verdict) was required
  • What the word "likely" meant in the context of the indictment
  • Whether the standard of proof for the structuring offence under s 31(1)(b) of the FTR Act was correctly applied

Decision

The Court dismissed the appeal on all grounds and refused leave to appeal against sentence. The judgment is principally authored by Basten JA, with Barr J and Hall J agreeing.

On the insider trading counts, the Court confirmed that option contracts fell within the statutory definition of "purchase" and "securities." The Court held that information relevant to the insider trading charge could be established by inference drawn from conduct, and that such an inference did not need to be the only reasonable inference available. The Court also held that the "generally available" requirement was not satisfied merely because some component facts were publicly known: the information had to be assessed as a whole, and partial public availability of constituent elements did not render the whole body of information generally available.

On the evidence grounds, the Court found that the photoboard identification evidence was properly admitted, that the handwriting expert evidence was not rendered inadmissible by a change in the expert's reasoning, and that it was not a requirement that every step in an expert's reasoning be independently referable to specialised knowledge. The Court accepted that adverse character evidence introduced through re-examination should not have been admitted, but concluded the error did not affect the verdicts. On the structuring counts, the Court was satisfied that on the whole of the evidence it was open to the jury to conclude beyond reasonable doubt that the appellant had conducted the transactions for the dominant purpose of avoiding reporting obligations under the FTR Act.

On the constitutional point, the Court rejected the argument that the FTR Act was inconsistent with the Evidence Act 1995 (NSW) in a way that engaged s 109 of the Constitution. On the pleading challenges, the Court found no duplicity or uncertainty in the indictment and concluded the evidence conformed to the particulars pleaded. No Shepherd direction was required on the facts as the elements identified in the indictment were the only indispensable facts.

Orders Made

  • Appeal against conviction dismissed
  • Application for leave to appeal against sentence dismissed

Key Takeaways

  • The Court of Criminal Appeal confirmed that, in an insider trading prosecution, information can be established by inference from conduct, and that inference need not be the only reasonable inference available from the facts.
  • Where inside information consists of a combination of facts, the "generally available" requirement is not met simply because individual components of that information had been publicly reported. The information must be assessed as a whole.
  • Under the insider trading provisions then in force, the purchase of call option contracts fell within the statutory definitions of "purchase" and "securities."
  • Handwriting expert evidence is not automatically inadmissible because the expert changed the basis for their opinion during proceedings, nor is it required that every step in an expert's chain of reasoning be independently grounded in specialised knowledge, provided the ultimate opinion is properly based.
  • In dismissing the appeal, the Court reinforced that an error in admitting adverse character evidence during re-examination will not necessarily warrant overturning a conviction where the evidence as a whole amply supports the verdicts.

Legislation and Cases Referenced

Legislation:
- Corporations Law, ss 1002A, 1002B, 1002C, 1002G
- Corporations Act 2001 (Cth), ss 1383, 1401
- Financial Transaction Reports Act 1988 (Cth), ss 3, 31
- Evidence Act 1995 (NSW), ss 4, 8, 18, 20, 37, 38, 76, 79, 135, 136, 137, 141
- Constitution (Cth), s 109
- Criminal Procedure Act 1986 (NSW), s 64
- Judiciary Act 1903 (Cth), ss 68, 78B, 79
- Criminal Appeal Act 1912 (NSW), s 6
- Crimes Act (Cth), s 3ZO

Key Cases:
- Shepherd v The Queen (1990) 170 CLR 573
- HG v The Queen (1999) 197 CLR 414
- Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705
- M v The Queen (1994) 181 CLR 487
- Dyers v The Queen (2002) 210 CLR 285
- Jones v Dunkel (1959) 101 CLR 298
- Weiss v The Queen (2005) 80 ALJR 444
- R v Rivkin (2004) 59 NSWLR 284
- Regina v Firns (2001) 51 NSWLR 548
- R v Hannes (2000) 158 FLR 359
- Director of Public Prosecutions v Merriman [1973] AC 584
- Sydney Futures Exchange Limited v Australian Stock Exchange (1995) 56 FCR 236