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Supreme Court 17 August 2011

R v Joffe; R v Stromer

[2011] NSWSC 894

Fraud & dishonesty
EVIDENCE 10 COUNTS CHARGED AGAINST TWO ACCUSED ADMISSIBILITY OF EVIDENCE MEANING OF “PROBATIVE VALUE”

Citation: R v Joffe; R v Stromer [2011] NSWSC 894
Court: Supreme Court of New South Wales
Date: 17 August 2011
Judge(s): Hall J

Background

Two accused faced 20 counts on indictment under the insider trading provisions of the Corporations Act 2001 (Cth). The first accused was an associate analyst employed by a credit ratings agency who allegedly came into possession of inside information about various corporate entities during his work. The second accused was his friend, who allegedly acquired financial products while in possession of that inside information. The Crown alleged that across ten separate transactions between June 2006 and January 2007, the first accused procured the second to trade on inside information passed between them.

The Crown served a Notice of Coincidence Evidence under section 98 of the Evidence Act 1995, seeking to adduce evidence of each charged transaction as coincidence evidence in relation to every other charged transaction. The Crown also sought to adduce evidence of three uncharged matters involving different companies. The accused brought pre-trial applications seeking advance rulings on admissibility and, in the alternative, orders for separate trials of individual counts.

The central dispute was whether the Crown's evidence of a repeated pattern of conduct across multiple transactions could be admitted as coincidence evidence, and whether that evidence met the threshold of "significant probative value" required by section 98(1)(b) of the Evidence Act.

Legal Issues

  • Whether the coincidence evidence relating to the charged transactions met the "significant probative value" threshold under section 98(1)(b) of the Evidence Act
  • Whether a court assessing significant probative value under section 98 must identify and weigh alternative inferences open on the evidence, not only those the Crown relies upon
  • Whether the Crown's circumstantial case involved impermissible circular reasoning
  • Whether evidence susceptible to alternative inferences fails to satisfy the relevance test under section 55 of the Evidence Act
  • Whether the evidence in relation to three uncharged matters (PBL, DOW, and APA) was admissible under section 98
  • Whether the Coincidence Notice was adequate in its particulars
  • Whether the probative value of the coincidence evidence substantially outweighed its prejudicial effect under section 101(2) of the Evidence Act

Decision

Issue 1: The correct approach to "significant probative value" under section 98

Hall J held that in assessing significant probative value at the admissibility stage, the court proceeds on the assumption that the evidence will be accepted by the jury. The question is whether, on that assumption, a jury would likely assign the evidence significant probative value in the sense that it could rationally affect the assessment of the probability of the existence of the facts in issue (at [152]-[153]). The court drew a clear distinction between the judge's assessment of significant probative value at the admissibility stage and the jury's ultimate determination of actual probative value once all evidence is complete (at [168]).

Issue 2: Whether the judge must weigh alternative inferences

The court rejected the submission that a judge assessing significant probative value under section 98 must identify possible alternative inferences and then sift and weigh them against the Crown's preferred inferences (at [181]). Hall J held that the determination of available rational inferences is for the jury to make at the conclusion of all evidence, not for the judge at the admissibility stage (at [181]-[182]). The court noted that evidence susceptible to alternative inferences may nonetheless remain capable of carrying significant probative value if it can be predicted that a jury would likely prefer the Crown's inference (at [167]).

Issue 3: Circular reasoning

The court rejected the argument that the Crown's circumstantial case constituted circular reasoning. Unlike the situation in Perry v The Queen (1982) 150 CLR 580, where it was necessary to assume the accused's guilt on the charged offences to render a critical fact admissible at all, the Crown here relied on a sequential set of primary facts from which inferences were to be drawn (at [82]-[87]). Seeking to prove facts such as possession of inside information through inferential reasoning in a circumstantial case does not amount to assuming the existence of those facts in order to give cogency to the evidence (at [85]).

Issue 4: Relevance and alternative inferences

The court rejected the submission that evidence susceptible to inconsistent inferences fails the relevance test under section 55. Evidence that may support more than one inference can still rationally affect the assessment of the probability of a fact in issue and therefore remain relevant (at [197]-[200]). The proposition that evidence is irrelevant where it is "equally consistent" with an innocent explanation does not find support in the Evidence Act provisions or in principle (at [199]-[201]).

Issue 5: Admissibility of coincidence evidence on the charged counts

Hall J was satisfied that the evidence in Table A of the Coincidence Notice was capable of rationally affecting the probability of the facts in issue against both accused (at [227]). Accepting the Crown evidence as required for the purpose of the admissibility ruling, the court found that the events exhibited striking similarities across multiple transactions, including the sequence and timing of communications between the accused, the acquisition and disposal of financial products, the pattern of website surveillance, and the connection to inside information received by the ratings agency (at [195]). The probative value of that evidence was assessed as high (at [229]).

Issue 6: Uncharged matters

The court excluded all three uncharged matters. The PBL evidence was excluded because its probative force stood in marked contrast to the charged matters and did not outweigh its prejudicial effect (at [260]-[261]). The DOW evidence was excluded because its probative value was not high, given the 20-day gap between receipt of information and trading and the limited materiality of the alleged inside information (at [266]-[267]). The APA evidence was excluded because it did not exhibit the same level of similarity as the charged matters, particularly because the accused acquired units rather than CFDs and strong public information explained the trading (at [268]-[275]).

Issue 7: Adequacy of the Coincidence Notice and section 101(2)

The court found the Coincidence Notice was not deficient. The acts, state of mind issues, and substance of the evidence were adequately particularised, and the subsequently produced Statement of Facts provided further supporting detail (at [254]-[255]). On the section 101(2) balancing exercise, Hall J acknowledged that framing appropriate jury directions would demand considerable attention, but was satisfied that this task was within the capability of a trial judge and that any prejudicial effect could be managed through careful directions (at [232]-[233], [237]).

Orders Made

  • The evidence particularised in Table A of the Notice of Coincidence Evidence dated 8 July 2011 (charged counts) is admissible pursuant to section 98(1)(b) of the Evidence Act 1995.
  • The evidence particularised in Table B of the Notice of Coincidence Evidence dated 8 July 2011 (uncharged counts) is not admissible under section 98(1)(b) of the Evidence Act.
  • Leave granted to any party to apply with respect to consequential or ancillary orders.

Key Takeaways

  • Under section 98(1)(b) of the Evidence Act, a judge assessing "significant probative value" does not conduct a weighing exercise between the Crown's preferred inferences and available alternative inferences. That task belongs to the jury at the conclusion of all the evidence (at [181]-[182]). The judge asks only whether, assuming the evidence is accepted, a jury would likely assign it significant probative value.

  • Evidence susceptible to competing inferences is not thereby rendered irrelevant. The relevance test under section 55 turns on whether evidence could rationally affect the probability of a fact in issue, and evidence open to more than one inference can still satisfy that test (at [197]-[200]).

  • In a circumstantial evidence case, relying on inferential reasoning to prove facts such as possession of inside information does not constitute the impermissible circular reasoning condemned in Perry v The Queen. Circular reasoning arises only where it is necessary to assume guilt on the charged offences to establish the admissibility of a critical fact not otherwise proved (at [82]-[87]).

  • Uncharged matters sought to be admitted as coincidence evidence face individual scrutiny: the court assessed each of the three uncharged transactions separately against the pattern established by the charged counts and excluded all three where either the probative value was low or the evidence did not exhibit the same level of similarity (at [261], [267], [275]).

  • Where coincidence evidence relates overwhelmingly to charged conduct, occurs across a short and defined period, and involves similar circumstances for each transaction, the risk of prejudice from a joint trial may be manageable through judicial directions rather than through severance or exclusion of counts (at [232]-[233], [237]).

Legislation and Cases Referenced

Legislation
- Corporations Act 2001 (Cth)
- Crimes Act 1900
- Criminal Law Consolidation Act 1935 (SA)
- Criminal Procedure Act 1986
- Evidence Act 1995
- Jury Act 1977

Cases
- Adam v R [2001] HCA 57; (2001) 207 CLR 96
- Attorney General's Reference (No 1 of 1983) [1983] 2 VR 410
- Deutsch v The Queen [1986] 2 SCR 2
- Edwards v The Queen [1993] HCA 63; (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; (2006) 225 CLR 303
- R v AB [2001] NSWCCA 496
- R v Boardman [1975] AC 456
- R v Broadfoot (1976) 64 Cr App R 71
- R v Carusi (1997) 92 A Crim R 52
- R v Ceissman [2010] NSWCCA 50
- R v Cengiz [1998] 3 VR 720
- R v Cook [2004] NSWCCA 52
- R v Doney [1990] HCA 51; (1990) 171 CLR 207
- R v Ellis [2003] NSWCCA 319; (2003) 58 NSWLR 700
- R v F; Ex 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; (2007) 234 CLR 492