AI-generated summaries. Not legal advice. Always verify against the official judgment on NSW Caselaw.
← All decisions
1
Supreme Court 18 May 2012

Joffe v R; Stromer v R

[2012] NSWSC 409

Fraud & dishonesty
EVIDENCE INSIDER TRADING PROSECUTION INCIDENCE EVIDENCE INFERENTIAL REASONING CIRCUMSTANTIAL CASE WHETHER CO

Citation: Joffe v R; Stromer v R [2012] NSWSC 409
Court: Supreme Court of New South Wales
Date: 18 May 2012
Judge(s): Hall J

Background

Two accused, a Moody's analyst and his associate, faced charges under the Corporations Act 2001 (Cth) relating to alleged insider trading. The prosecution sought to rely on "coincidence evidence," meaning evidence of a pattern of telephone contacts between the two men occurring in close proximity to trading activity in shares of companies whose confidential information had passed through Moody's.

Prior to trial, the accused brought motions seeking a ruling that the coincidence evidence be excluded under s 98 or s 101 of the Evidence Act 1995. The trial judge initially ruled on admissibility but was found on appeal to have applied an incorrect approach. The Court of Criminal Appeal in DSJ v R; NS v R [2011] NSWCCA 9 referred the matter back to Hall J for reconsideration.

The core dispute was whether the trial judge, when assessing whether coincidence evidence had "significant probative value" under s 98, was required to recognise and account for alternative explanations inconsistent with guilt, even though weighing those explanations remained a task for the jury.

  • Whether the coincidence evidence satisfied the admissibility threshold of "significant probative value" under s 98 of the Evidence Act 1995
  • Whether, in assessing significant probative value, a trial judge must consider real alternative explanations inconsistent with guilt, and to what extent
  • Whether the original ruling erred by failing to account for such alternative inferences in the s 98 evaluation
  • Whether charges should be severed and tried separately under s 21 of the Criminal Procedure Act 1986

Decision

The Court of Criminal Appeal had found that the original ruling fell into error by not recognising the need to account for alternative inferences inconsistent with guilt when evaluating coincidence evidence under s 98. Hall J was required to undertake the reconsideration directed by that court, applying the correct framework.

The correct approach, as confirmed by the Court of Criminal Appeal, involves two steps. First, the trial judge must consider whether, from the coincidence evidence and any other evidence adduced or to be adduced, a real (not fanciful) alternative explanation inconsistent with guilt arises. Second, the judge must ask whether that real possibility substantially alters the otherwise significant capacity of the coincidence evidence to establish the facts in issue. Crucially, this assessment does not require the judge to weigh competing inferences or determine which is more probable; that function belongs to the jury.

In applying this framework, Hall J worked through the detailed chronology of telephone contacts between the two accused and the timing of trading activity across multiple corporate entities. The analysis covered repeated instances where telephone communications preceded or closely followed trading transactions, and where one accused had access to confidential information through his employment. The coincidence evidence was considered in conjunction with the broader Crown case, including registry access logs, email records, and trading data.

Hall J concluded, following the re-evaluation directed by the Court of Criminal Appeal, that the coincidence evidence carried significant probative value and was admissible. The existence of alternative explanations, such as the possibility that the communications were social rather than trading-related, was recognised and considered, but those possibilities did not substantially diminish the probative capacity of the evidence when assessed at the threshold stage.

Orders Made

No orders were made in this decision.

Key Takeaways

  • Under s 98 of the Evidence Act 1995, a trial judge assessing "significant probative value" must recognise any real (not fanciful) alternative explanation inconsistent with guilt that arises from the evidence, and ask whether that possibility substantially diminishes the evidence's probative capacity.
  • The trial judge's role at the admissibility threshold is strictly limited: the judge does not weigh competing inferences, compare their relative probabilities, or anticipate the actual weight a jury would attach to the evidence. Those remain jury functions.
  • A real alternative explanation must be stated in broad or overarching terms and must genuinely arise from the evidence; a merely speculative possibility does not require the same consideration.
  • The Court of Criminal Appeal in DSJ v R; NS v R confirmed that failing to recognise alternative inferences altogether, even when correctly declining to weigh them, constitutes an error in the s 98 evaluation.
  • Coincidence evidence in insider trading prosecutions may satisfy the significant probative value threshold where a detailed chronological pattern of communications and trading is established, even where individual pieces of evidence may bear innocent explanations.

Legislation and Cases Referenced

Legislation
- Evidence Act 1995 (NSW), ss 55, 98, 101, 192A
- Corporations Act 2001 (Cth)
- Criminal Procedure Act 1986 (NSW), s 21

Cases
- DSJ v R; NS v R [2011] NSWCCA 9
- Edwards v The Queen (1993) 178 CLR 193
- Perry v The Queen [1982] HCA 75; 150 CLR 580
- R v Zhang [2005] NSWCCA 437; 158 A Crim R 504
- Sutton v R [1984] HCA 5; 152 CLR 528