Citation: Regina v Fysh (No 3) [2012] NSWSC 1390
Court: Supreme Court of New South Wales
Date: 22 November 2012
Judge(s): McCallum J
Background
The accused stood trial on four counts of insider trading contrary to the Corporations Act 2001 (Cth). The charges arose from his acquisition of shares in two companies, Arrow Energy NL and Queensland Gas Company Ltd, at separate times approximately six months apart. The Crown alleged he possessed "inside information" at the time of each acquisition.
At the close of the Crown case, the accused made a no-case submission seeking directed verdicts of acquittal. The submission rested on two discrete grounds. McCallum J had already published reasons rejecting the first ground (concerning whether the accused possessed the alleged inside information) in an earlier judgment. These reserved reasons addressed the second ground, which concerned the "materiality" element of the offence.
The materiality element requires proof that, if the allegedly inside information were generally available, a reasonable person would expect it to have a material effect on the share price. More specifically, under section 1042D of the Corporations Act, that test is satisfied only if the information would, or would be likely to, influence persons who commonly acquire the relevant class of financial products in deciding whether to acquire or dispose of those shares.
Legal Issues
- Whether the Crown had adduced sufficient evidence on the materiality element to warrant the charges being left to the jury
- Whether the alleged inside information, as particularised by the Crown, fundamentally misstated what the underlying evidentiary material actually conveyed
- Whether share price movements following a later public announcement could support an inference of materiality in relation to earlier, allegedly inside information
- Whether the expert evidence on materiality was so heavily qualified as to be of no utility, leaving no evidence on that element for the jury to consider
Decision
Ground 1(a): Whether the Crown's particulars misstated the inside information
The accused argued that the Crown's particulars for the Arrow counts (MFI 3) fundamentally mischaracterised the slide presentation upon which those counts were based. Specifically, the accused contended that the slides did not identify particular target companies, while the particulars suggested the field had been narrowed to Arrow and QGC. McCallum J found that this question of meaning, analysis, and inference was precisely the kind of matter that should be left to the jury rather than resolved on a no-case application.
Ground 1(b): Whether the information was derived from publicly available material already priced by the market
The accused submitted that the Crown's evidence for both the Arrow and QGC counts was drawn from publicly available information already reflected in the market price, and that there was therefore no basis for the jury to conclude materiality. McCallum J rejected this submission as inconsistent with the applicable standard, drawn from Doney v R, which requires a no-case application to succeed only where there is a total absence of evidence capable of supporting a guilty verdict. The submissions identified weaknesses in the Crown case but did not establish that absence.
Ground 2: Evidence of the later share price increase
The accused argued that evidence of QGC's share price rise following the announcement of a deal in early 2008 provided no proper basis for the jury to assess materiality in relation to the earlier information in MFI 4. McCallum J noted the evidence had been admitted by consent without objection, and observed that the Court of Criminal Appeal in R v Rivkin had approved the admission of later share price evidence with appropriate jury directions. The evidence was capable of being taken into account by the jury, and any concerns went to direction rather than admissibility or sufficiency.
Ground 3: Adequacy of the expert evidence
The accused contended that the expert evidence of Mr Dreyfus was so extensively qualified as to be worthless, leaving no evidence on materiality at all. McCallum J declined to accept that characterisation but held that, even if it were correct, it would not follow that there was no evidence on materiality. The Crown is not obliged to prove materiality through expert evidence, and the materiality test itself involves questions of common sense well within a jury's province. The submissions on Mr Dreyfus went to weight and jury argument, not to the existence of a case to answer.
Orders Made
- Publication of reserved reasons for refusing the application for directed verdicts on the ground of materiality
Key Takeaways
- A no-case submission in a criminal trial succeeds only where there is a complete absence of evidence capable of supporting a guilty verdict; evidence that is tenuous, weak, or vague is still evidence capable of going to a jury, consistent with the High Court's approach in Doney v R.
- Under the Corporations Act 2001 (Cth), the materiality of alleged inside information is assessed by reference to the combined effect of the information as a whole, not limb by limb, where the particulars are framed as an integrated body of information.
- Evidence of a later share price movement following a public announcement can be relevant to the materiality of earlier, allegedly inside information, provided appropriate jury directions accompany it, as confirmed by the Court of Criminal Appeal in R v Rivkin.
- The Crown is not required to establish materiality through expert opinion evidence; the materiality test under sections 1042A and 1042D of the Corporations Act draws on matters of common sense within a jury's ordinary competence.
- Submissions that identify weaknesses or limitations in the Crown's evidence, including heavy qualifications in expert testimony, do not establish a no-case submission; they are matters for closing address and, if accepted, may bear on jury directions.
Legislation and Cases Referenced
Legislation
- Corporations Act 2001 (Cth)
Cases
- Doney v R [1990] HCA 51; (1990) 171 CLR 207
- Hannes v DPP (No 2) [2006] NSWCCA 373
- R v Fysh [2012] NSWSC 1266
- R v Fysh (No 2) [2012] NSWSC 1340
- R v Rivkin [2004] NSWCCA 7