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Court of Criminal Appeal 16 December 2016

Curtis v R

[2016] NSWCCA 299

Fraud & dishonesty
CRIMINAL LAW APPEAL AGAINST CONVICTION CRIMINAL CODE ACT 1995 (CTH) S 11.5 WHETHER VERDICT UNREASONABLE APPEAL DISMISSED

Citation: Curtis v R [2016] NSWCCA 299
Court: Court of Criminal Appeal, NSW
Date: 16 December 2016
Judge(s): Payne JA (principal judgment); Price J and Davies J (agreeing)

Background

The appellant was convicted by a jury of one count of conspiracy to commit insider trading. The Crown alleged that the appellant and a colleague, an equities dealer at a funds management company, entered into an agreement to exploit inside information that the dealer would obtain through his employment. Specifically, the dealer would observe large share trades he was required to execute on behalf of his employer, pass instructions to the appellant via a covert messaging device, and the appellant would then "front-run" those trades by taking up Contracts for Difference (CFDs) in the same stocks before his colleague completed the employer's trades. The pair allegedly acted on this agreement on 45 occasions, generating profits exceeding $1.4 million.

The dealer gave evidence that he had already been insider trading on his own account using his employer's trading information, and that he brought the appellant into a more formalised arrangement. A Blackberry device, purchased by the appellant for the dealer, was used to pass the covert trading instructions.

The appellant appealed against his conviction on the ground that the jury's verdict was unreasonable, arguing that the Crown had failed to prove the information involved was "material" in the statutory sense, namely that a reasonable person would expect it to have a material effect on the price or value of the relevant CFDs if it were generally available.

  • Whether the conspiracy charge required the Crown to prove that all information about the employer's trading intentions that the dealer would possess would be "material" under s 1042D of the Corporations Act 2001 (Cth).
  • Whether the Crown needed to prove both a subjective element (that each accused knew or believed the relevant facts) and an objective element (that those facts would in fact make the conduct an offence).
  • Whether expert evidence was required to establish the "material effect" element.
  • Whether the trial judge's direction that the information must "in fact" be material in the s 1042D sense accurately stated the elements of the conspiracy offence.

Decision

On the scope of the agreement as charged: Payne JA held that the indictment, properly read, did not require the Crown to prove that every piece of information the dealer might obtain would be material. The indictment specifically alleged an agreement to trade using information that would have a material effect, so the relevant question was confined to information of that character. The broader question of whether "all" such information met the threshold did not arise on the pleadings as framed.

On the jury's entitlement to find materiality: The Court held that the jury was fully entitled, having regard to the dealer's successful history of profitable insider trading based on his employer's trading intentions, to conclude that the information the subject of the agreement was in fact information that, if generally available, would be likely to influence persons who commonly acquire Division 3 financial products. Expert evidence was not necessary to establish this on the facts of the case.

On the conspiracy elements and the trial judge's direction: Payne JA found that the trial judge's direction to the jury, requiring the Crown to prove the information would "in fact" be material in the s 1042D sense, actually imposed a higher burden on the Crown than the law required. For a conspiracy charge, the Crown only needed to prove that the appellant and the dealer each believed, at the time of entering the agreement, that the information would not be generally available and that a reasonable person would expect it to have a material effect on the price or value of the relevant securities. The objective materiality of the information did not need to be independently established. Despite this misdirection in the appellant's favour, the jury's verdict remained open on the evidence.

On the appeal: All three judges agreed the verdict was not unreasonable and the appeal was dismissed.

Orders Made

  • The appeal against conviction was dismissed.

Key Takeaways

  • For a conspiracy to commit insider trading under s 11.5 of the Criminal Code Act 1995 (Cth), the Crown is not required to prove that the information the subject of the agreement was objectively material in the s 1042D sense. It is sufficient to prove that the parties to the agreement each believed the information would not be generally available and would, if generally available, have a material effect on the price or value of the relevant securities.
  • A trial direction imposing a higher evidentiary burden on the Crown than the law requires does not, without more, render a conviction unreasonable if the jury was nonetheless entitled to reach its verdict on the whole of the evidence.
  • The scope of what the Crown must prove in a conspiracy charge is shaped by the specific terms of the indictment as pleaded, not by a broader reading of the agreement alleged.
  • Expert evidence is not invariably required to establish the "material effect" element in insider trading prosecutions. On appropriate facts, circumstantial evidence, including a history of profitable trading based on the same type of information, can suffice.
  • In dismissing the appeal, the Court of Criminal Appeal applied the principle from Farah Constructions that intermediate appellate courts should not depart from the interpretation of Commonwealth legislation adopted by courts in other jurisdictions unless that interpretation is plainly wrong, endorsing the approach taken in R v Mansfield [2011] WASCA 132.

Legislation and Cases Referenced

Legislation:
- Criminal Appeal Act 1912 (NSW), s 5
- Corporations Act 2001 (Cth), ss 1042A, 1042D, 1043A, 1311
- Criminal Code Act 1995 (Cth), ss 5.6, 11.5

Cases:
- Ansari v R (2010) 241 CLR 299; [2010] HCA 18
- Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22
- M v The Queen (1994) 181 CLR 487
- MFA v The Queen (2002) 213 CLR 606
- R v LK; R v RK (2010) 241 CLR 177; [2010] HCA 17
- R v Mansfield (2011) 251 FLR 286; [2011] WASCA 132
- R v Wright [1980] VR 593
- The Queen v Baden-Clay [2016] HCA 35