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District Court 4 June 2020

R v Wong

[2020] NSWDC 382

Fraud & dishonesty

Citation: R v Wong [2020] NSWDC 382
Court: District Court of New South Wales
Date: 4 June 2020
Judge: Bennett SC DCJ

Background

The offender was charged with insider trading contrary to ss 1043A(1) and 1311(1) of the Corporations Act 2001 (Cth). The charge arose from the disposal of 74,968 shares in Sirtex Medical Limited on or about 26 October 2016, while the offender was in possession of inside information about the company. The information in question related to actual dosage sales data that was not generally available and that a reasonable person would have expected to materially affect the price of those shares.

The matter proceeded on agreed facts. Critically, the parties agreed the offender was to be sentenced on the basis that he ought reasonably to have known the information was inside information, not that he actually knew it. The fault element was therefore negligence under the Criminal Code Act 1995 (Cth), rather than knowledge, intention, or recklessness.

The offender pleaded guilty upon arraignment on 15 May 2020, though his acknowledgment of guilt had been indicated earlier in the Local Court proceedings before committal.

  • What fault element applied to the insider trading charge, and at what level of objective seriousness did the offending fall?
  • What discount was appropriate for the guilty plea in a Commonwealth prosecution?
  • Whether the sentencing threshold under s 17A of the Crimes Act 1914 (Cth) requiring a custodial sentence had been crossed.
  • Whether immediate release on a recognizance under s 20(1)(b) of the Crimes Act 1914 (Cth) was appropriate in the circumstances.

Decision

The court determined that negligence was the applicable fault element on the agreed facts, rather than recklessness. The court reasoned that because the Corporations Act provision encompasses all three lesser fault elements (negligence, recklessness, and knowledge or intention), offending at the negligence level sits toward the lower end of the range of objective seriousness for insider trading.

A 25% discount was applied to the sentence for the guilty plea. The court accepted the Crown's concession that the plea provided considerable utility, noting the early indication of guilt in the Local Court prior to committal, even though a formal arraignment on indictment was ultimately required.

The court was satisfied that the s 17A threshold for a custodial sentence had been crossed, meaning a term of imprisonment had to be identified. However, the court found that the circumstances did not require the offender to be physically incarcerated. Relevant subjective factors included the absence of any prior criminal record, genuine remorse, a low risk of reoffending, the significant personal and financial stress experienced throughout the investigation and prosecution, and the offender's age and otherwise good character.

The court convicted the offender and imposed a sentence of 18 months imprisonment, ordering immediate release under s 20(1)(b) of the Crimes Act 1914 (Cth) on a recognizance to be of good behaviour for three years.

Orders Made

  • The offender was convicted of the insider trading offence.
  • A term of imprisonment of 1 year and 6 months was imposed.
  • Pursuant to s 20(1)(b) of the Crimes Act 1914 (Cth), the offender was immediately released on a recognizance in the sum of $10,000 to be of good behaviour for a period of 3 years.
  • Liberty to apply was reserved regarding any order sought by the Australian Federal Police.

Key Takeaways

  • Under the insider trading provisions of the Corporations Act 2001 (Cth), the fault element can be satisfied by negligence alone, and offending at that level will generally attract lower objective seriousness than offending involving knowledge, intention, or recklessness.
  • A 25% discount for a guilty plea in a Commonwealth prosecution was confirmed as appropriate where guilt was indicated early, even where procedural steps resulted in a formal arraignment on indictment.
  • The District Court confirmed that insider trading of this kind crosses the s 17A threshold requiring a custodial sentence, even where the fault element is negligence and the quantity of shares involved does not represent the most serious example of the conduct.
  • Immediate release on a recognizance under s 20(1)(b) of the Crimes Act 1914 (Cth) remained available where, despite the custodial threshold being met, the combination of subjective factors (including no prior record, remorse, low reoffending risk, and personal hardship) did not warrant actual incarceration.
  • Parliament's successive increases to the maximum penalty for insider trading (from 5 years to 10 years, and subsequently to 15 years imprisonment) were noted by the court as reflecting the legislature's view of the seriousness of such misconduct.

Legislation and Cases Referenced

Legislation
- Corporations Act 2001 (Cth), ss 1042A, 1042D, 1043A, 1311(1), Schedule 3
- Crimes Act 1914 (Cth), ss 17A, 20(1)(b)
- Criminal Code Act 1995 (Cth), ss 5.1, 5.2, 5.4, 5.5

Cases
- R v Doff [2005] NSWCCA 119
- R v Olbrich (1999) 119 CLR 270
- R v Pogson, Lapham and Martin [2012] NSWCCA 225
- R v Qutami [2001] NSWCCA 353
- R v Rivkin (2003) 198 ALR 400