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Supreme Court 24 June 2016

R v Curtis (No 3)

[2016] NSWSC 866

Fraud & dishonesty
CRIME SENTENCE SIGNIFICANCE OF DELAY

Citation: R v Curtis (No 3) [2016] NSWSC 866
Court: Supreme Court of New South Wales
Date: 24 June 2016
Judge(s): McCallum J

Background

The offender, Oliver Curtis, was found guilty by a jury of conspiracy to commit an offence of insider procuring, contrary to the Corporations Act 2001 (Cth). The offending involved an agreement between Curtis and his best friend, John Hartman, who worked as an equities dealer at Orion Asset Management Limited, a firm managing over $7 billion in assets at its peak.

The unlawful agreement operated between May 2007 and June 2008. Hartman had access to information about Orion's trading intentions in particular shares. Under the scheme, Hartman would relay trading instructions to Curtis via covert Blackberry PIN messages, and Curtis would then buy or sell contracts for difference (CFDs) in the same shares, effectively "front-running" Orion's trades. Most of the 45 identified trading occasions generated a profit. Curtis provided the initial funds, proposed the covert communication method, and purchased the Blackberry used for that purpose.

Hartman had previously traded unlawfully on his own behalf. The court found that both men were equal and willing participants in the conspiracy, though Curtis, as the non-insider, bore no breach of trust in the same way Hartman did.

  • What is the appropriate sentence for an offence of conspiracy to commit insider procuring, assessed in all the circumstances?
  • How should the court assess the objective seriousness of this particular form of market misconduct?
  • What weight should be given to the length of delay between the offending and sentencing?
  • What is the relative priority of punishment and general deterrence in sentencing for insider trading offences?

Decision

McCallum J assessed the offending as being of high objective seriousness. The conspiracy was methodical and sustained over approximately 13 months, involving 45 separate trading occasions. Curtis played an active and equal role: he supplied the funds, devised the covert communications system, and executed the trades. The court accepted that Curtis did not breach a position of trust in the way Hartman did, which moderated his culpability relative to Hartman's, but this did not diminish the overall seriousness of the conduct.

The court acknowledged that a significant period of time had elapsed between the offending (2007 to 2008) and sentencing (2016). Some weight was given to this delay as a mitigating factor in the assessment of the appropriate sentence, though the court was careful not to overstate its significance.

McCallum J emphasised that punishment and general deterrence were the primary sentencing considerations for this type of offence. Insider trading, including the procuring variant, undermines the public trust that is essential to the integrity and viability of financial markets. The court drew on the Court of Criminal Appeal's observation in R v Glynatsis that such offending is a form of cheating, and that people of otherwise good character who engage in it should expect a custodial sentence.

Consistent with the principle that the conspiracy offence is assessed by reference to its "content, duration and reality," including how it was implemented, the court sentenced Curtis having regard to the full period of the unlawful agreement and its systematic execution, while remaining careful not to sentence him for uncharged conduct.

Orders Made

• Convicted of conspiracy to commit an offence of insider procuring contrary to ss 1311(1)(a) and 1043A(1)(d) of the Corporations Act 2001 (Cth)
• Sentenced to imprisonment for two years commencing 24 June 2016 and expiring 23 June 2018
• Directed to be released after serving one year of imprisonment upon giving security by recognisance in the sum of $2000 without surety to be of good behaviour for the balance of the sentence

Key Takeaways

  • Conspiracy to commit insider procuring is assessed by reference to the content, duration, and reality of the agreement, including the offender's role in its implementation, not merely the moment of agreement.
  • High objective seriousness was established where the scheme was sustained over 13 months, executed on 45 discrete occasions, and involved deliberate steps to conceal communications from detection.
  • Significant delay between offending and sentencing may be treated as a mitigating factor, though its weight is limited and does not displace the primacy of punishment and general deterrence.
  • The Court confirmed that general deterrence carries particular weight in insider trading offences because such conduct corrodes the public confidence that underpins market integrity.
  • A non-insider participant in a front-running conspiracy may have their culpability assessed as somewhat less than that of the person who held and disclosed the inside information, but this difference does not remove the need for a custodial term.

Legislation and Cases Referenced

Legislation
- Corporations Act 2001 (Cth), ss 1043A(1)(d), 1311(1)(a)
- Criminal Code (Cth), s 11.5(1)
- Crimes Act 1914 (Cth), ss 16A, 19AC, 20

Cases
- Savvas v The Queen (1995) 183 CLR 1
- Hili v The Queen; Jones v The Queen [2010] HCA 45
- R v Glynatsis [2013] NSWCCA 131
- Hartman v R [2011] NSWCCA 261
- Kamay v R [2015] VSCA 296
- Khoo v R [2013] NSWCCA 323
- R v Rivkin [2004] NSWCCA 7; (2004) 184 FLR 365
- R v De Silva [2011] NSWSC 243
- R v Joffe & Stromer [2015] NSWSC 741; 106 ASCR 525
- R v Xiao [2016] NSWSC 240
- R v Curtis (No 2) [2016] NSWSC 795
- R v Zerafa [2013] NSWCCA 222
- R v Fowler [2003] NSWCCA 321
- R v Fysh [2012] NSWSC 1587
- R v Einfeld [2009] NSWSC 119
- R v Whilhelm [2010] NSWSC 378
- R v Pantano (1990) 49 A Crim R 328
- R v Kennedy [2000] NSWCC 527
- R v El Rashid (unreported, NSWCCA, 7 April 1995)
- Scook v The Queen [2008] WASCA 114