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Court of Criminal Appeal 25 February 2016

Heath v Regina

[2016] NSWCCA 24

Fraud & dishonesty
CRIMINAL LAW APPEAL AGAINST SENTENCE MARKET MISCONDUCT OFFENCES WHERE APPLICANT’S EVIDENCE UNCHALLENGED APPEAL AGAINST SENTENCE MARKET MISCONDUCT OFFENCES

Citation: Heath v Regina [2016] NSWCCA 24
Court: NSW Court of Criminal Appeal
Date: 25 February 2016
Judges: Simpson JA, Johnson J, McCallum J (judgment by McCallum J, others agreeing)

Background

The appellant was a long-term share trader who pleaded guilty in the District Court to two market misconduct offences under the Corporations Act 2001 (Cth). The first was market manipulation under s 1041A(c), arising from 138 transactions in shares and contracts for difference (CFDs) in Petsec Energy Limited that had the effect of creating an artificial price. The second was a matched trade offence under s 1041B(1)(b), involving 30 transactions that created a false or misleading appearance as to the price of those and other securities.

The appellant was sentenced to 18 months' imprisonment for the matched trade offence and 2 years for the market manipulation offence, with the terms partially cumulative. The sentencing judge directed that he be released after serving 9 months on a recognisance release order.

The appellant sought leave to appeal, arguing that the sentencing judge made errors in rejecting aspects of his unchallenged evidence, misapprehended the objective seriousness of the offending, and denied him procedural fairness.

  • Whether the sentencing judge erred by rejecting the appellant's evidence about his lack of knowledge of the criminality of his conduct, where that evidence was unchallenged by the Crown
  • Whether the judge misapprehended the seriousness of the offending by failing to have regard to the appellant's unchallenged evidence about the limited impact of his conduct on the market
  • Whether the rejection of unchallenged evidence, without affording the appellant an opportunity to address the judge's concern, amounted to a denial of procedural fairness
  • What the appropriate remedy was where both error and a denial of procedural fairness were established, including whether the Court of Criminal Appeal should re-exercise the sentencing discretion rather than remit the matter

Decision

The Court of Criminal Appeal found that the sentencing judge erred in rejecting the appellant's evidence that he did not know his conduct was criminal, where the Crown had not cross-examined him on that evidence and had not otherwise challenged it. The court confirmed that a judge is not bound to accept unchallenged evidence, but where a judge proposes to reject such evidence on grounds not raised at the hearing, fairness requires that the party be given an opportunity to respond. The judge's failure to do so constituted a denial of procedural fairness.

The court also found that the judge had misapprehended the extent of the market impact of the offending. The appellant's unchallenged evidence addressed the limited effect his trading had on Petsec's share price, and that evidence was relevant to the objective assessment of seriousness. By effectively disregarding it without notice or challenge, the judge had proceeded on an incorrect factual basis.

On remedy, the court considered that remitting the matter to the District Court would be counterproductive given the relatively short sentences already partly served. The Court of Criminal Appeal instead re-exercised the sentencing discretion itself. Taking into account all objective and subjective circumstances, including the serious medical condition of the appellant's daughter (which had deteriorated during his incarceration), the court reduced the market manipulation sentence from 2 years to 18 months and directed his immediate release on a recognisance release order, noting that the 5 months already served was adequate.

Orders Made

  • Leave to appeal granted
  • Appeal allowed
  • Sentences passed in the District Court quashed and substituted as follows:
  • Matched trade offence: 18 months' imprisonment commencing 25 September 2015, expiring 24 March 2017 (unchanged)
  • Market manipulation offence: 18 months' imprisonment commencing 25 December 2015, expiring 24 June 2017 (reduced from 2 years)
  • Appellant released on 25 February 2016 on a recognisance release order of $10,000 without surety, to be of good behaviour until 24 June 2017

Key Takeaways

  • A sentencing judge is not automatically bound by unchallenged evidence, but where the judge proposes to reject such evidence on a basis not raised during proceedings, the accused must be given an opportunity to address that concern. Failure to do so can constitute a denial of procedural fairness.
  • Under the Criminal Code 1995 (Cth), the fault element for the result element of both the market manipulation and matched trade offences is recklessness, but proof of intention, knowledge or recklessness each suffices to establish it. The distinction matters to the objective seriousness of the offending.
  • Where both legal error and a denial of procedural fairness are established on a sentence appeal, remittal to the original court is not automatic. The Court of Criminal Appeal may re-sentence where remittal would defeat the practical object of the appeal.
  • Evidence of the limited impact of offending on the relevant financial market is a legitimate consideration in assessing objective seriousness of market misconduct offences, and a sentencing court must engage with such evidence where it is before it.
  • Exceptional family hardship circumstances, particularly where incarceration has demonstrably worsened a family member's serious medical condition, remain a recognised consideration in fixing the non-parole period (or equivalent release mechanism) on sentence.

Legislation and Cases Referenced

Legislation:
- Corporations Act 2001 (Cth), ss 1041A(c), 1041B(1)(b)
- Criminal Code 1995 (Cth), Ch 1, cl 5.6(2), cl 5.4(4)
- Crimes Act 1914 (Cth), s 16A(2)(p)
- Australian Securities and Investments Commission Act 2001 (Cth), s 19

Cases:
- Green v R; Quinn v R [2011] HCA 49; 244 CLR 462
- R v Glynatsis [2013] NSWCCA 131; 230 A Crim R 99
- Khoo v R [2013] NSWCCA 323
- R v Togias [2001] NSWCCA 522; 127 A Crim R 23
- R v Hinton [2001] NSWCCA 405; 134 A Crim R 286
- O'Neil-Shaw v R [2010] NSWCCA 42
- Chow v Director of Public Prosecutions (1992) 28 NSWLR 593
- Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336
- Fame Decorator Agencies Pty Ltd v Jeffries Industries Ltd (1998) 28 ACSR 58