Braysich v R - [2009] WASCA 178

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: BRAYSICH -v- THE QUEEN [2009] WASCA 178

CORAM: PULLIN JA
BUSS JA
MILLER JA

HEARD: 23-24 JUNE 2009

DELIVERED : 16 OCTOBER 2009

FILE NO/S: CACR 156 of 2007

BETWEEN: JEFFREY JOSEPH BRAYSICH
Appellant
AND
THE QUEEN
Respondent

ON APPEAL FROM:
Jurisdiction              :  DISTRICT COURT OF WESTERN AUSTRALIA
Coram  :WISBEY DCJ
File No  :IND 1691 of 2004

Catchwords:

Criminal law - Creating a false or misleading appearance of active trading in securities on a stock market contrary to s 998(1) of the Corporations Law - Share trading involving 'wash sales' or no change in beneficial ownership - Whether mens rea required - The nature and effect of the deeming provisions in s 998(5) - What the accused must prove to make out the defence under s 998(6) - The meaning of 'active trading'

Criminal law - The elements of the offence of creating a false or misleading appearance of active trading in securities on a stock market contrary to s 998(1) of the Corporations Law - Share trading involving 'wash sales' or no change in beneficial ownership - Prosecution relied on the deeming provision in s 998(5)(a) - Whether the trial judge erred in failing to leave to the jury the defence under s 998(6) - Whether the trial judge erred in refusing to permit the accused to adduce expert evidence to the effect that the share trading transactions did not in fact create, and were not in fact likely to create, a false or misleading appearance of active trading - Whether the trial judge erred in failing to direct the jury that expert evidence called by the prosecution was only relevant to the prosecution case against the co-accused and not to the prosecution case against the accused

Criminal law - Creating a false or misleading appearance of active trading in securities on a stock market contrary to s 998(1) of the Corporations Law - Whether the trial judge failed adequately to put the defence case to the jury in summing up - Whether the verdicts of conviction were 'unsafe or unsatisfactory' - Whether there was sufficient evidence from which the jury could conclude beyond reasonable doubt that there was no change in beneficial ownership of the shares sold and purchased and that the accused knew there was no change in beneficial ownership

Legislation:

Corporations Act 2001 (Cth), s 998, s 1041B, s 1311, s 1401
Corporations Law, s 998, s 1311
Criminal Appeals Act 2004 (WA), s 30(3), s 30(4)
Criminal Procedure Act 2004 (WA), s 112

Result:

Leave to appeal granted
Appeal dismissed

Category: A

Representation:

Counsel:

Appellant: Mr M J McCusker QC & Mr J McGrath
Respondent: Mr P S Hastings QC & Ms W F Gillan

Solicitors:

Appellant: Ainslie Van Onselen
Respondent: Director of Public Prosecutions (Cth)

Case(s) referred to in judgment(s):

Adelaide Building Co Pty Ltd (in liq) v ABC Investments Pty Ltd (1990) 8 ACLC 445
Australian Securities Commission v Nomura International Plc [1998] FCA 1570; (1998) 89 FCR 301
Brown v The Queen [2006] WASCA 145; (2006) 202 FLR 98
Cameron v Holt [1980] HCA 5; (1980) 142 CLR 342
Cesan v The Queen [2008] HCA 52; (2008) 236 CLR 358
CTM v The Queen [2008] HCA 25; (2008) 236 CLR 440
Donald v Australian Securities & Investments Commission [2000] FCA 1142; (2000) 104 FCR 126
Endresz v Whitehouse (1994) 14 ACSR 31
Endresz v Whitehouse [1998] 3 VR 461
Ernst & Ernst v Hochfelder (1976) 425 US 185
Fame Decorator Agencies Pty Ltd v Jeffries Industries Ltd (1998) 28 ACSR 58
Fingleton v The Queen [2005] HCA 34; (2005) 227 CLR 166
Forge v Australian Securities & Investments Commission [2006] HCA 44; (2006) 228 CLR 45
Gammon (Hong Kong) Ltd v Attorney‑General of Hong Kong [1985] 1 AC 1
Harrold v Plenty [1901] 2 Ch 314
He Kaw Teh v The Queen [1985] HCA 43; (1985) 157 CLR 523
Hepples v Federal Commissioner of Taxation [1991] HCA 39; (1991) 173 CLR 492
Hunter Douglas Australia Pty Ltd v Perma Blinds [1970] HCA 63; (1970) 122 CLR 49
Interlego AG v Croner Trading Pty Ltd [1992] FCA 624; (1992) 39 FCR 348
Jones v The Queen (1997) 191 CLR 439
Kennedy v Australian Securities & Investments Commission [2005] FCAFC 32; (2005) 142 FCR 343
Kural v The Queen [1987] HCA 16; (1987) 162 CLR 502
Leonard v Morris (1975) 10 SASR 528
Libke v The Queen [2007] HCA 30; (2007) 230 CLR 559
M v The Queen [1994] HCA 63; (1994) 181 CLR 487
Macquarie Bank Ltd v Fociri Pty Ltd (1992) 27 NSWLR 203
Mahmood v The State of Western Australia [No 2] [2008] WASCA 259
MFA v The Queen [2002] HCA 53; (2002) 213 CLR 606
North v Marra Developments Ltd [1981] HCA 68; (1981) 148 CLR 42
Pemble v The Queen [1971] HCA 20; (1971) 124 CLR 107
Plomp v The Queen [1963] HCA 44; (1963) 110 CLR 234
R v Hillier [2007] HCA 13; (2007) 228 CLR 618
R v Manasseh [2002] NSWCCA 27; (2002) 167 FLR 44
R v Wampfler (1987) 11 NSWLR 541
Re Woods; Ex parte Braysich [2004] WASCA 120; (2004) 28 WAR 530
RPS v The Queen [2000] HCA 3; (2000) 199 CLR 620
Scook v The Queen [2008] WASCA 114; (2008) 185 A Crim R 164
Shepherd v The Queen [1990] HCA 56; (1990) 170 CLR 573
Sherras v De Rutzen [1895] 1 QB 918
St Aubyn v Attorney‑General [1952] AC 15
Stingel v The Queen [1990] HCA 61; (1990) 171 CLR 312
Stubbs v Slater [1910] 1 Ch 632
The Council of the Shire of Redland v Stradbroke Rutile Pty Ltd [1974] HCA 4; (1974) 133 CLR 641
The State of Western Australia v Pollock [2009] WASCA 96
United States v Brown (1935) 79 F 2d 321
Van Den Hoek v The Queen [1986] HCA 76; (1986) 161 CLR 158
Weiss v The Queen [2005] HCA 81; (2005) 224 CLR 300

Table of contents

Buss JA's reasons

The relevant interaction between the Act and the Corporations Law
The prosecution's case at trial
The appellant's case at trial
Section 998 of the Corporations Law: legislative history and proper construction
Section 998 of the Corporations Law: the deeming provision in s 998(5)(a)
Section 998 of the Corporations Law: where the prosecution relies on the deeming provision in s 998(5)(a), is it necessary for the prosecution to prove that the accused had the intention or purpose of creating a false or misleading appearance of active trading or to prove some other aspect of mens rea?
Section 998 of the Corporations Law: what must the accused prove to make out the defence conferred by s 998(6)?
Section 998 of the Corporations Law: what is the meaning of a false or misleading appearance of 'active trading'?
The grounds of appeal

Ground 1: the learned trial judge's rulings
Ground 1: the appellant's submissions
Ground 1: it merits
Ground 2: the learned trial judge's ruling
Ground 2: the appellant's submissions
Ground 2: its merits
Ground 2A: the learned trial judge's failure to direct the jury that Professor da Silva Rosa's evidence was not relevant to the prosecution case against the appellant
Ground 2A: the appellant's submissions
Ground 2A: its merits
Ground 3: the learned trial judge's failure to direct the jury that they could not convict the appellant unless they were satisfied that he knew the relevant transactions would create, or were likely to create, a false or misleading appearance of active trading
Ground 3: the appellant's submissions
Ground 3: its merits
Ground 4: the learned trial judge's alleged failure adequately to put the defence case
Ground 4: its merits
Ground 5: the verdicts are 'unsafe or unsatisfactory'
Ground 5: its merits

Conclusion

PULLIN JA: I have read a draft of Buss JA's reasons and I agree with them. I agree that the orders should be that leave to appeal should be granted and the appeal dismissed.
I only wish to take the opportunity of making the following observations about the formulation of ground 5 because it is a formulation which persists despite observations by the High Court that it is undesirable.
Ground 5 reads that the verdicts of the jury were:
[U]nsafe or unsatisfactory, as there was no evidence, or insufficient evidence, from which the jury could conclude beyond reasonable doubt that there was no change in beneficial ownership of the shares sold by Walthamstow to Challiston or that in any event the appellant knew that.
The appellant said that this ground relied upon s 30(3)(a) of the Criminal Appeals Act 2004 (WA) which provides that the Court of Appeal must allow an appeal if in its opinion the verdict of guilty on which the conviction is based should be set aside because, having regard to the evidence, it is unreasonable or cannot be supported. As Buss JA observes, that section does not contain the expression 'unsafe or unsatisfactory'. It was 'once common' for that expression to be used in place of the language of the section. See MFA v The Queen [2002] HCA 53; (2002) 213 CLR 606 [25] (Gleeson CJ, Hayne and Callinan JJ). However, the High Court has recently said, (in relation to another aspect of the Victorian equivalent of s 30) that it would be preferable if the words of the section were used, and not the many 'judicial expositions' about what the words mean, because substitutes for the language of the section may 'mask the nature of the appellate court's task' in considering the application of the statute. See Weiss v The Queen [2005] HCA 81; (2005) 224 CLR 300 [9] and [33]. See also Cesan v The Queen [2008] HCA 52; (2008) 236 CLR 358 [126] (in relation to the New South Wales equivalent of s 30).
BUSS JA: The appellant was convicted, after a trial in the District Court before Wisbey DCJ and a jury, on 25 counts of creating a false or misleading appearance of active trading on the Australian Stock Exchange (ASX), contrary to s 998(1) of the Corporations Act 2001 (Cth) (the Act). A person who contravened s 998(1) was guilty of an offence. See s 1311(1) of the Act. The penalty applicable to the offence was 200 penalty units or imprisonment for 5 years, or both. See s 1311(3) and sch 3 of the Act.

The appellant was tried with Dean George Scook on an indictment containing 285 counts of alleged breaches of s 998(1). The appellant was charged on 26 of those counts. Mr Scook was tried on the balance and convicted on 158 counts. See Scook v The Queen [2008] WASCA 114; (2008) 185 A Crim R 164 [1].
The counts against the appellant and Mr Scook concerned trading on the ASX in the shares of Intrepid Mining Corporation NL (Intrepid).
Section 998(1) prohibited a person from creating, or doing anything that is intended or likely to create, a false or misleading appearance of active trading in any securities on a stock market. The prosecution relied on s 998(5)(a), by which, relevantly, a person who enters into, or carries out, either directly or indirectly, any transaction of sale or purchase of any securities, being a transaction that does not involve any change in the beneficial ownership of the securities, is deemed to have created a false or misleading appearance of active trading in those securities on a stock market. The appellant, in his defence, sought to rely on, amongst other things, s 998(6), by which, in a prosecution of a person for a contravention of s 998(1) constituted by an act referred to in s 998(5), it is a defence if it is proved that the purpose or purposes for which the person did the act was not, or did not include, the purpose of creating a false or misleading appearance of active trading in securities on a stock market.
The appellant has appealed to this court against his conviction. On 4 April 2008, Miller JA ordered that the application for leave to appeal be heard together with the appeal.

The relevant interaction between the Act and the Corporations Law

The offences were committed by the appellant between 2 February 1998 and 27 February 1998. At that time, the creation of a false or misleading appearance of active trading on the ASX was an offence against s 998(1) of the Corporations Law. Contraventions of this provision occurring before the commencement of the Act were preserved as a 'pre‑commencement liability' within s 1401(1) of the Act. By s 1401(2)(a) of the Act, for the purposes of subs (3) and (4) of s 1401, the Act was taken to include, relevantly, s 998 and s 1311 of the Corporations Law as enacted when the offences were committed. By s 1401(3) of the Act, the appellant incurred a 'substituted liability', equivalent to the 'pre‑commencement liability' under s 998(1) and s 1311(1) of the Corporations Law, as if the provisions taken to be included in the Act by s 1401(2)(a) had applied to the conduct or circumstances that gave rise to the 'pre‑commencement liability' in February 1998. See Forge v Australian Securities & Investments Commission [2006] HCA 44; (2006) 228 CLR 45 [103] ‑ [115]; Kennedy v Australian Securities & Investments Commission [2005] FCAFC 32; (2005) 142 FCR 343 [40] ‑ [57].

The prosecution's case at trial

All of the offences concerned fully paid ordinary shares in Intrepid and conduct on the ASX.
The prosecution alleged that:
(a)each of the transactions in the indictment relating to the appellant involved Challiston Pty Ltd (Challiston), a company associated with Mr Scook, purchasing shares in Intrepid from Walthamstow Pty Ltd (Walthamstow), a company associated with Steven Masel and his father, Lance Masel; and
(b)each of these transactions did not involve any change in the beneficial ownership of the shares.
The prosecution relied on the deeming provision in s 998(5)(a) of the Act in relation to each of the counts against the appellant.
The prosecution accepted at the trial that the deeming provision in s 998(5)(a) would not apply unless it proved beyond reasonable doubt that:
(a)the appellant entered into or carried out, either directly or indirectly, the relevant transactions;
(b)the transactions did not involve any change in the beneficial ownership of the shares; and
(c)the appellant knew there was no change in beneficial ownership.
The prosecution alleged the appellant caused the relevant transactions to take place.
The prosecution contended that:
(a)at all material times, the appellant was a director of Paul Morgan Securities Pty Ltd (Paul Morgan Securities), a stockbroking company;
(b)he was the broker who effected each of the transactions by taking the buy and sell orders; and
(c)he dealt directly with Mr Scook in relation to the placing of the orders, and also with members of the Masel family in relation to the re‑booking of shares which Challiston had previously purchased, so that after the re‑booking they were held by Walthamstow.
The facts and circumstances relied on by the prosecution to establish there was no change in beneficial ownership were these:
(a)Challiston purchased the shares in its own name.
(b)Walthamstow was a finance company that traded under the name Reliance Finance & Mortgage Services. It advanced money on the security of shares. Walthamstow perfected its security by transferring the shares into its name.
(c)From late 1997, Walthamstow advanced money to Mr Scook or one of his companies (including Challiston) under a series of nine loan facility letters for the purpose of enabling Mr Scook or one of his companies to buy shares in Intrepid. There were also a series of bridging loans in or about February 1998.
(d)At or before the time when settlement of a purchase of shares in Intrepid was required, the shares in question were re‑booked to Walthamstow, with Walthamstow paying the purchase price.
(e)Walthamstow then held the shares in its name.
(f)The re‑booking to Walthamstow was necessary to enable Walthamstow to hold the shares as security for the finance made available by it to Mr Scook or one of his companies (including Challiston) for the purpose of purchasing the shares.
(g)The shares were held on the CHESS system (that is, the Clearing House Electronic Subregister System), with Paul Morgan Securities as the sponsoring broker. (CHESS performs two major functions for the ASX. First, it facilitates the settlement and clearing of trades in shares. Secondly, it provides an electronic subregister for shares in companies listed on the ASX.)
(h)Walthamstow was registered under the CHESS system as the holder of the shares. It could initiate transactions or cause transactions to be initiated on the CHESS system in relation to the shares. Walthamstow authorised Mr Scook to initiate sales, but not purchases, on Walthamstow's account. Walthamstow might itself sell shares or it might require Mr Scook to sell them if the value of the shares (and, therefore, the value of Walthamstow's security for its loans) fell.
According to the prosecution, in the circumstances, at all material times Challiston retained a beneficial interest in the shares in question.
The prosecution alleged the appellant knew that the shares were being re‑booked to Walthamstow pursuant to finance arrangements between Mr Scook/Challiston and Walthamstow. In particular:
(a)The appellant was the broker in each of the trades.
(b)The appellant knew of, and initiated, the re‑booking of each parcel of shares upon taking instructions from Mr S Masel on behalf of Walthamstow.
(c)The number of, and reason for, the re‑bookings was unusual. Ordinarily, re‑booking was undertaken to correct an error.
(d)The appellant marked the re‑booking forms with the word 'finance' or 'financing'.
(e)The appellant knew that Walthamstow was a finance company and was acting as Mr Scook's/Challiston's financier in connection with the purchases. The appellant spoke to Mr S Masel of Walthamstow 'probably dozens of times' about whether Walthamstow was financing shares or was prepared to accept a transfer of shares into its name. Also, the appellant received facsimile transmissions from Walthamstow addressed to Paul Morgan Securities regarding the loans to Mr Scook/Challiston and the financing of particular purchases. On occasions, the appellant approached Mr S Masel about whether Walthamstow would be advancing finance even before Mr S Masel had received a request for finance from Mr Scook/Challiston.
(f)The appellant informed his colleague at Paul Morgan Securities, Carol Simpson (who was the manager in charge of compliance with rules and regulations affecting the company and its business), that the re‑bookings were necessary, as a result of Walthamstow's provision of finance to Mr Scook/Challiston, because Walthamstow did not want to accept a credit risk and therefore did not want any of the shares booked to its name until the settlement date for each transaction.

The appellant's case at trial

The appellant made extensive admissions at the trial. In particular, he admitted, in relation to each transaction in question:
(a)Challiston was the buyer and Walthamstow the seller;
(b)Mr Scook gave instructions for the buy order;
(c)Paul Morgan Securities was the broker for both buyer and seller; and
(d)the time and place of the buy order, sell order and trade.
The appellant also admitted that 11 of the relevant transactions were effected by a 'crossing'. The term 'crossing' describes a securities transaction where a broker acts for both the seller and the buyer. On one of these trades, the subject of count 283 on the indictment, the appellant was acquitted.
Further, the appellant admitted various facts which facilitated the tendering of numerous documents.
The appellant did not admit he caused all of the relevant transactions to occur. He denied the transactions did not involve any change in beneficial ownership. Further, he denied he knew that Challiston was the beneficial owner of the shares held in Walthamstow's name.

Section 998 of the Corporations Law: legislative history and proper construction

This appeal raises several issues as to the proper construction and application of s 998 of the Corporations Law. It is convenient to identify and address those issues, in the context of the legislative history, before turning to the grounds of appeal.

In the United States, federal regulation of securities transactions emerged from the ruins of the 1929 stock market crash. The Securities Act 1933, 48 Stat 74, as amended, 15 USC chap 77a and following, was intended to provide investors with proper disclosure of material information in relation to public offerings of securities in commerce, to protect investors against fraud and to promote ethical standards of honesty and fair dealing. The Securities Exchange Act 1934, 48 Stat 891, 15 USC chap 78j(b) (the 1934 Act) was intended primarily to protect investors against manipulation of stock prices by regulating securities transactions and imposing regular reporting requirements on companies listed on national securities exchanges. See Ernst & Ernst v Hochfelder (1976) 425 US 185, 194 ‑ 195.
Section 9(a)(1) of the 1934 Act prohibited 'wash sales' and 'matched orders' effected for the purpose of creating a false or misleading appearance of active trading in any security register on a national securities exchange, or a false or misleading appearance with respect to the market for any such security. A 'wash sale' is a securities transaction in which, by the intent of the parties, there is no change in the beneficial ownership: s 9(a)(1)(A). 'Matched orders' are orders entered for the purchase of a security with the knowledge that an order or orders of substantially the same size at substantially the same price have been or will be entered at substantially the same time for the sale of such security and vice versa with respect to sale and purchase: s 9(a)(1)(B) ‑ (C). It appears the United States Congress specifically prohibited 'wash sales' and 'matched orders' in the 1934 Act because this form of activity was considered in 1934 to be 'the most vicious practice of the stock exchanges … on a par with the use of loaded dice … however, more reprehensible': 78 Cong Rec 7,717 (1934). See also Poser NS, 'Stock Market Manipulation & Corporate Control Transactions' (1986) 40 University of Miami Law Review 671, 702; Lowenfels LD, 'Sections 9(a)(1) and 9(a)(2) of the Securities Exchange Act of 1934: An analysis of two important anti‑manipulative provisions under the federal securities laws' (1991) 85 (Spring) Northwestern University Law Review 698, 698 ‑ 700. In United States v Brown (1935) 79 F 2d 321, it was said:
'Wash' sales are a deceit, because they broadcast the fact that a buyer and a seller have agreed to exchange the shares at the published price, when they have not done so (325).
In 1970 and 1971, New South Wales, Victoria, Western Australia and Queensland (the four States that were parties to the Interstate Corporate Affairs Agreement) enacted securities industry legislation. The statutes were, relevantly, comparable. Section 79 of the Securities Industry Act 1970 (WA) provided, relevantly:
(1)A person shall not, by means of the purported purchases or sales of securities involving no change in the beneficial ownership of the securities, or by any fictitious transaction or other device, inflate, depress, or cause fluctuations in, the market price of any securities.
Penalty ‑ On conviction on indictment, two thousand dollars or imprisonment for two years, or both.
(2)For the purposes of subsection (1) of this section, a purchase or sale of securities involves no change in the beneficial ownership of the securities if a person, or a person associated with him in relation to the securities, who held an interest in the securities, before the purchase or sale, holds an interest in them after the purchase or sale.
…
On 19 March 1970, the Senate of the Parliament of the Commonwealth resolved to appoint a select committee to inquire into and report on the desirability and feasibility of establishing a securities and exchange commission by the Commonwealth, either alone or in cooperation with the States, to act against, amongst other things, market manipulation and other injurious practices. In July 1974, the report of the select committee (the Rae Report) was published. In chapter 8 of the Rae Report, reference was made to three manipulative practices which it described as 'pools', 'churning' and 'runs in shares'. The committee had received evidence on how share traders operating in the Australian markets had used the device of 'churning'. The Rae Report reads, relevantly:
They first acquired a holding in a share and then proceeded to place both buying and selling orders for that share, usually at about the same price, or at slightly rising prices, in order to build up the turnover. The buying and selling following the initial purchase about balanced each other out, so that no great additional investment was required. These schemes apparently were usually carried out through several brokers, some of whom did not know that they were being used for the purpose of market manipulation.
When sales arising from the churning were reported to the stock exchanges, unsuspecting investors interpreted the statistics as reflecting genuine interest by the market, and were induced to buy the shares. As the process gathered way, both price and turnover increased further, thereby providing the opportunity for the organisers of this churning to sell the shares they had originally acquired at a profit (8.2 ‑ 8.3).
The device of 'churning' was similar to (if not identical with) 'wash sales' as defined in s 9(a)(1)(A) of the 1934 Act. The device of 'pooling' was similar to (if not identical with) 'matched orders' as defined in s 9(a)(1)(B) ‑ (C) of the 1934 Act.
The Rae Report recommended that a new national regulatory body be established by the Commonwealth Government and legislation be enacted to ensure the securities market was properly regulated. The objects of the legislation would be, first, to maintain, facilitate and improve the performance of the capital market in the interests of economic development, efficiency and stability and, secondly, to ensure adequate protection of those who invest in the securities of public companies and in the securities market (16.14 ‑ 16.15).
In 1975, New South Wales, Victoria, Western Australia and Queensland enacted new securities legislation. Again, the statutes were, relevantly, comparable. Section 109 of the Securities Industry Act 1975 (WA) provided, relevantly:
(1)A person shall not create, or cause to be created, or do anything that is calculated to create, a false or misleading appearance of active trading in any securities on a stock market in the State, or a false or misleading appearance with respect to the market for, or the price of, any such securities.
…
(3)Without affecting the generality of [subsection (1)], a person who ‑
(a)effects, takes part in, is concerned in or carries out, either directly or indirectly, any transaction of sale or purchase of any securities, being a transaction that does not involve any change in the beneficial ownership of the securities;
(b) … ; or
(c) …
shall be deemed to have created a false or misleading appearance of active trading in securities on a stock market.
(4)It is a defence to a prosecution of a person for an offence under this section in respect of acts referred to in subsection (3) done by him if the person proves that he did the acts for a purpose other than the purpose of creating a false or misleading appearance of active trading in securities on a stock market.
(5)A purchase or sale of securities does not involve a change in the beneficial ownership for the purposes of this section if a person who had an interest in the securities before the purchase or sale, or a person associated with the first‑mentioned person in relation to those securities, has an interest in the securities after the purchase or sale.
On 22 December 1978, the Commonwealth and the six States executed a formal agreement that provided the framework for a cooperative Commonwealth/State scheme for a uniform system of law and administration in relation to company law and the regulation of the securities industry in the six States and the Australian Capital Territory. Pursuant to that agreement, a new securities industry code was drafted and enacted. It included a provision based on s 109 of the 1975 legislation. See s 124 of the Securities Industry Act 1980 (Cth).
At the material time, for the purposes of this appeal, s 998 of the Corporations Law read, relevantly:
(1)A person shall not create, or do anything that is intended or likely to create, a false or misleading appearance of active trading in any securities on a stock market or a false or misleading appearance with respect to the market for, or the price of, any securities.
…
(5)Without limiting the generality of subsection (1), a person who:
(a)enters into, or carries out, either directly or indirectly, any transaction of sale or purchase of any securities, being a transaction that does not involve any change in the beneficial ownership of the securities;
(b)offers to sell any securities at a specified price where the person has made or proposes to make, or knows that an associate of the person has made or proposes to make, an offer to buy the same number, or substantially the same number, of securities at a price that is substantially the same as the first‑mentioned price; or
(c)offers to buy any securities at a specified price where the person has made or proposes to make, or knows that an associate of the person has made or proposes to make, an offer to sell the same number, or substantially the same number, of securities at a price that is substantially the same as the first‑mentioned price;
shall be deemed to have created a false or misleading appearance of active trading in those securities on a stock market.
(6)In a prosecution of a person for a contravention of subsection (1) constituted by an act referred to in subsection (5), it is a defence if it is proved that the purpose or purposes for which the person did the act was not, or did not include, the purpose of creating a false or misleading appearance of active trading in securities on a stock market.
(7)A purchase or sale of securities does not involve a change in the beneficial ownership for the purposes of this section if a person who had an interest in the securities before the purchase or sale, or an associate of the person in relation to those securities, has an interest in the securities after the purchase or sale.
…
(9)The reference in paragraph (5)(a) to a transaction of sale or purchase of securities includes:
(a)a reference to the making of an offer to sell or buy securities; and
(b)a reference to the making of an invitation, however expressed, that expressly or impliedly invites a person to offer to sell or buy securities.
In North v Marra Developments Ltd [1981] HCA 68; (1981) 148 CLR 42, the High Court considered s 70 of the Securities Industry Act 1970 (NSW), which was relevantly comparable to s 79 of the Securities Industry Act 1970 (WA). See [27] above. Mason J (with whom the other members of the court agreed) examined the meaning to be ascribed to the word 'calculated' in s 70, in the context of the prohibition against doing anything which is calculated to create 'a false or misleading appearance with respect to the market for, or the price of, any securities':
In terms the statutory prohibition is directed against activity which is designed to give the market for securities or the price of securities a false or misleading appearance. In this setting, 'calculated' means 'designed' or 'intended' rather than 'adapted' or 'suited'. It is not altogether easy to translate the generality of this language into a specific prohibition against injurious activity, whilst at the same time leaving people free to engage in legitimate commercial activity which will have an effect on the market and on the price of securities. Purchases or sales are often made for indirect or collateral motives, in circumstances where the transactions will, to the knowledge of the participants, have an effect on the market for, or the price of, shares. Plainly enough it is not the object of the section to outlaw all such transactions (58 ‑ 59).
His Honour then noted that the object of s 70 was to protect the market for securities against activities which will result in artificial or managed manipulation:
The section seeks to ensure that the market reflects the forces of genuine supply and demand. By 'genuine supply and demand' I exclude buyers and sellers whose transactions are undertaken for the sole or primary purpose of setting or maintaining the market price. It is in the interests of the community that the market for securities should be real and genuine, free from manipulation. The section is a legislative measure designed to ensure such a market and it should be interpreted accordingly (59).
See also Fame Decorator Agencies Pty Ltd v Jeffries Industries Ltd (1998) 28 ACSR 58, 62 ‑ 63 (Gleeson CJ, Powell JA agreeing).
In North, Mason J rejected the suggestion that s 70 struck only at fictitious or colourable transactions:
Transactions which are real and genuine but only in the sense that they are intended to operate according to their terms, like fictitious or colourable transactions, are capable of creating quite a false or misleading impression as to the market or the price. This is because they would not have been entered into but for the object on the part of the buyer or of the seller of setting and maintaining the price, yet in the absence of revelation of their true character they are seen as transactions reflecting genuine supply and demand and having as such an impact on the market (59).
Section 998(1) of the Corporations Law is materially different from s 70 of the Securities Industry Act 1970 (NSW) in that s 998(1) removed the phrase 'cause to be created', and substituted the phrase 'intended or likely to create' for 'calculated to create'.
Section 998(1) is directed at numerous forms of related conduct. In Australian Securities Commission v Nomura International Plc [1998] FCA 1570; (1998) 89 FCR 301, Sackville J illustrated this point by re‑formulating the provision as follows:
Section 998(1) of the Corporations Law provides that a person shall not:
(i) create; or
(ii)do anything that is intended to create; or
(iii)do anything that is likely to create
a false or misleading appearance
(iv)of active trading in any securities on a stock market;
(v)with respect to the market for any securities; or
(vi)with respect to the price of any securities (390). (original emphasis)
As Wheeler JA (Martin CJ & Buss JA agreeing) observed in Brown v The Queen [2006] WASCA 145; (2006) 202 FLR 98, his Honour could have broken down the proscribed conduct further in that, at least in some circumstances, conduct may be characterised as creating either a false or a misleading appearance [18].
Section 998(1) does not create a hierarchy of offending. The provision, read with s 1311(1), creates one offence which can be committed in numerous different ways with but one penalty attached to it. See Brown [19]. For the purposes of this appeal, s 998(1) has, relevantly, three limbs. The first prohibits a person from creating a false or misleading appearance of active trading in any securities on a stock market. The second prohibits a person from doing anything that is intended to create a false or misleading appearance of active trading. The third prohibits a person from doing anything that is likely to create a false or misleading appearance of active trading.
Section 998(5)(a) refers, in substance, to wash sales. Section 998(5)(b) and (c) refer, in substance, to matched orders. The deeming provisions of s 998(5), and the defence in s 998(6), are confined to the creation of a false or misleading appearance of active trading in securities on a stock market, within the first limb of s 998(1). That is, the deeming provisions and the defence do not apply to the creation of a false or misleading appearance with respect to the market for, or the price of, any securities. Also, the deeming provisions and the defence do not apply to the second and third limbs of s 998(1). The words 'without limiting the generality of subsection (1)' in s 998(5) manifest a Parliamentary intention that the prohibition in the first limb of s 998(1), against the creation of a false or misleading appearance of active trading in any securities on a stock market, is not confined to wash sales and matched orders.
In the present case, all of the counts against the appellant in the indictment charged that he had 'created a false or misleading appearance of active trading' in the fully paid ordinary shares of Intrepid. That is, it was alleged he had actually created, within the first limb of s 998(1), a false or misleading appearance of active trading. It was not alleged he had done anything that was 'intended or likely to create' a false or misleading appearance of active trading.
Counts 260, 261, 262, 264, 265, 267, 269, 270, 272, 276, 277 and 278 alleged that the appellant created a false or misleading appearance of active trading in that he 'caused to be made an offer to buy' (emphasis added) a specified number of fully paid ordinary shares in Intrepid at a specified price, and thereby caused to be carried out a transaction that did not involve any change in the beneficial ownership of those shares. Counts 263, 268 and 271 alleged that the appellant created a false or misleading appearance of active trading in that he 'caused to be made an offer to sell' (emphasis added) a specified number of fully paid ordinary shares in Intrepid at a specified price, and thereby caused to be carried out a transaction that did not involve any change in the beneficial ownership of those shares. Counts 266, 273, 274, 275, 279, 280, 281, 282, 283, 284 and 285 alleged that the appellant created a false or misleading appearance of active trading in that he 'caused to be carried out a transaction' in respect of a specified number of fully paid ordinary shares in Intrepid which did not involve any change in beneficial ownership. The appellant was acquitted on count 283.
As I have mentioned, the prosecution relied on the deeming provision in s 998(5)(a) in relation to all of the counts against the appellant.
In the present case, the issues which arise as to the proper construction and application of s 998 are as follows. Where a person has been charged with actually creating a false or misleading appearance of active trading, within the first limb of s 998(1), and the prosecution relies on the deeming provision in s 998(5)(a):
(a)What is the nature and effect of the deeming provision?
(b)Is it necessary for the prosecution to prove that the accused had the intention or purpose of creating a false or misleading appearance of active trading or to prove some other aspect of mens rea?
(c)What must the accused prove to make out the defence conferred by s 998(6)?
(d)What is the meaning of a false or misleading appearance of 'active trading'?
I turn now to consider each of these issues.

Section 998 of the Corporations Law: the deeming provision in s 998(5)(a)

By s 998(5)(a) of the Corporations Law, relevantly, a person who enters into, or carries out, either directly or indirectly, any transaction of sale or purchase of any securities, being a transaction that does not involve any change in the beneficial ownership of the securities, 'shall be deemed' to have created a false or misleading appearance of active trading in those securities on a stock market.
It is necessary, in considering s 998(5)(a), to distinguish between two different questions. First, what is the meaning of the word 'deemed'? Secondly, what was the intention of the Parliament in enacting the deeming provision?

As to the first question, the word 'deemed' means 'judged'. See Macquarie Bank Ltd v Fociri Pty Ltd (1992) 27 NSWLR 203, 207 (Gleeson CJ, Cripps JA agreeing). See also Hunter Douglas Australia Pty Ltd v Perma Blinds [1970] HCA 63; (1970) 122 CLR 49, where Windeyer J explained:
[T]o deem means simply to judge or reach a conclusion about something (65).
As to the second question (that is, the intention of the Parliament in enacting the deeming provision), Gleeson CJ observed in Macquarie Bank (207):
It commonly happens that, because legislation contains a deeming provision, there may arise a question of construction which turns, not so much upon the meaning of the word 'deemed', as upon a view concerning the statutory purpose for which it has been used. Such a question may turn, for example, upon whether the legislature is intending to create a statutory fiction or whether, on the other hand, it is merely making a provision for the removal of doubt which might otherwise exist: see, eg, Muller v Dalgety & Co Ltd (1909) 9 CLR 693 at 696 per Griffith CJ.
In Hunter Douglas Australia, Windeyer J expounded upon the legislative contexts in which the word 'deemed' is used (65 ‑ 67). His Honour said the word does not necessarily import artificiality or fiction (67):
There is no presumption, still less any rule, that wherever the word 'deemed' appears in a statute it demonstrates a 'fiction' or some abnormality of terminology. Sometimes it does. Often it does not. Much depends upon the context in which the word appears, as appears among other cases from Minister for Lands v. Everingham ((1915) 15 SR (NSW) 311) and more recently in the judgment of Walsh J in the Supreme Court in Ex parte Armstrong; Re Hughes ((1962) 80 WN (NSW) 566, at p 568).
Compare The Council of the Shire of Redland v Stradbroke Rutile Pty Ltd [1974] HCA 4; (1974) 133 CLR 641, 655, where Gibbs J said it is clear that in many contexts the word 'deemed' does import artificiality or fiction. His Honour referred, at 655, to this passage from Lord Radcliffe's speech in St Aubyn v Attorney‑General [1952] AC 15:
The word 'deemed' is used a great deal in modern legislation. Sometimes it is used to impose for the purposes of a statute an artificial construction of a word or phrase that would not otherwise prevail. Sometimes it is used to put beyond doubt a particular construction that might otherwise be uncertain. Sometimes it is used to give a comprehensive description that includes what is obvious, what is uncertain and what is, in the ordinary sense, impossible (53).
In Re Woods; Ex parte Braysich [2004] WASCA 120; (2004) 28 WAR 530, Murray J (Templeman J agreeing & McLure J agreeing in substance) said in relation to s 998(5):
Proof of any of the matters to which the subsection refers, in this case the carrying out of transactions of sale or purchase of securities which do not involve any change in the beneficial ownership of the securities, will prove the creation of a false or misleading appearance of active trading in those securities on a stock market, whether the subsection is applied with or without benefit of the assistance of the expanded notion of a transaction of sale or purchase of securities provided by the application of subs (9).
To rely upon those provisions in aid of the process of proving an offence charged contrary to s 998(1), is not to create an offence of entering into or carrying out a transaction of sale or purchase of the kind described in s 998(5)(a). It remains a mode of proof of an offence against s 998(1). Therefore the offence with which the Court is concerned in this case may be described as an offence constituted by any act or omission which has the effect or result of creating the false or misleading appearance of active trading proscribed by s 998(1) [9] ‑ [10].
In my opinion, s 998(5)(a) facilitates proof. Section 998(5)(a) may be relied on by the prosecution to prove that the accused, by engaging in the activity described in the provision, created a false or misleading appearance of active trading in the securities in question on a stock market, within the first limb of s 998(1). Proof of the activity described in s 998(5)(a) is sufficient to produce the consequence that the accused, for the purposes of s 998(1) read with s 1311(1) of the Corporations Law, is to be judged to have created a false or misleading appearance of active trading. These observations also apply, with necessary modifications, to s 998(5)(b) and (c).
The prosecution is not, of course, confined to s 998(5) in proving that an accused created a false or misleading appearance of active trading. Section 998(5) expressly states that its provisions are without limitation to the generality of s 998(1). So, where the prosecution is unable or, for some reason, chooses not to rely on the deeming provisions in s 998(5), it may prove, by conventional evidentiary means, that the accused in fact created a false or misleading appearance of active trading.
In my opinion, where the prosecution relies on and proves beyond reasonable doubt that the accused knowingly engaged in the activity described in s 998(5)(a) then, subject to s 998(6), the prosecution will have established the offence created by the first limb of s 998(1), read with s 1311(1). The accused will have 'knowingly engaged' in the activity described in s 998(5)(a) if he or she knew that the transaction of sale or purchase of securities did not involve any change in the beneficial ownership of the securities. See [90] ‑ [94] below. The accused cannot go behind the deeming provision once the prosecution has proved the conditions for its engagement. He or she may, however, endeavour to make out the defence conferred by s 998(6).

Section 998 of the Corporations Law: where the prosecution relies on the deeming provision in s 998(5)(a), is it necessary for the prosecution to prove that the accused had the intention or purpose of creating a false or misleading appearance of active trading or to prove some other aspect of mens rea?

The first limb of s 998(1) (that is, a person shall not create a false or misleading appearance of active trading) does not expressly incorporate a subjective fault element. The second limb (that is, a person shall not do anything that is intended to create a false or misleading appearance of active trading) embodies a subjective fault element in that an intention to create the proscribed consequence or result is an element of the offence. The third limb (that is, a person shall not do anything that is likely to create a false or misleading appearance of active trading) does not expressly incorporate a subjective fault element.
At common law, there is a presumption that all offences, including statutory offences, involve a subjective fault element. See Sherras v De Rutzen [1895] 1 QB 918, 921 (Wright J); Cameron v Holt [1980] HCA 5; (1980) 142 CLR 342, 346 (Barwick CJ), 348 (Mason J).
In Gammon (Hong Kong) Ltd v Attorney‑General of Hong Kong [1985] 1 AC 1, Lord Scarman, delivering the advice of the Privy Council, said:
In their Lordships' opinion, the law relevant to this appeal may be stated in the following propositions … (1) there is a presumption of law that mens rea is required before a person can be held guilty of a criminal offence; (2) the presumption is particularly strong where the offence is 'truly criminal' in character; (3) the presumption applies to statutory offences, and can be displaced only if this is clearly or by necessary implication the effect of the statute; (4) the only situation in which the presumption can be displaced is where the statute is concerned with an issue of social concern, and public safety is such an issue; (5) even where a statute is concerned with such an issue, the presumption of mens rea stands unless it can also be shown that the creation of strict liability will be effective to promote the objects of the statute by encouraging greater vigilance to prevent the commission of the prohibited act (14).
See also He Kaw Teh v The Queen [1985] HCA 43; (1985) 157 CLR 523, 528, 530 (Gibbs CJ), 566 (Brennan J).
In R v Wampfler (1987) 11 NSWLR 541, Street CJ (Hunt & McInerney JJ agreeing) reviewed the High Court's decision in He Kaw Teh and said the case was authority for the proposition that, for the purposes of considering criminal intent, statutory offences fall into three categories (546). The first category is those in which there is an original obligation on the prosecution to prove mens rea. The second is those in which mens rea is presumed to be present unless and until the defence adduces or points to evidence of the existence of honest and reasonable belief that the impugned conduct is not criminal, in which case the prosecution bears the burden of negativing such belief beyond reasonable doubt. The third is those in which mens rea is irrelevant, and guilt is established by proof of the objective elements of the offence (546).
The common law presumption that all offences, including statutory offences, involve a subjective fault element, may be displaced either expressly or by necessary implication. See Cameron, 346 (Barwick CJ), 348 (Mason J); He Kaw Teh, 566 (Brennan J).
In He Kaw Teh, Gibbs CJ pointed out that the presumption is not always easy to apply. He referred, in the context of the case before him, to two difficulties. The first was in deciding whether the Parliament intended that the proscribed conduct should be punishable even in the absence of some blameworthy state of mind. The second was, if it is held that mens rea is an element of the offence, in deciding exactly what mental state is imported (529).
The expression 'mens rea' is ambiguous and imprecise. See He Kaw Teh, 530 (Gibbs CJ), 568 (Brennan J). As Brennan J noted in that case:
It is the 'beginning of wisdom', as Lord Hailsham of St. Marylebone said in Reg v Morgan ([1976] AC 182, at p 213), to see 'that "mens rea" means a number of quite different things in relation to different crimes'. Indeed, it may connote different states of mind in respect of the several external elements of the same crime (568).
In He Kaw Teh, Gibbs CJ held that in deciding whether, on the facts of that case, the Parliament intended that the statutory offence in question should have no mental element, several matters must be considered. First, the language of the provision creating the offence. Secondly, the subject matter dealt with by the statute. Thirdly, the seriousness of the consequences of the offence for the community. Fourthly, the seriousness of the consequences for a defendant who had no intention to do anything wrong and no knowledge that he or she was doing something wrong (529 ‑ 530).
He Kaw Teh was concerned with the form of mens rea that relates to conduct defined as 'importing' and 'having in possession', in the context of the offence created by s 233B(1) of the Customs Act 1901 (Cth). According to Brennan J:
The principle applicable at common law was stated by Jordan CJ in R v Turnbull ((1943) 44 SR (NSW) 108, at p 109):
' … it is also necessary at common law for the prosecution to prove that he knew that he was doing the criminal act which is charged against him, that is, that he knew that all the facts constituting the ingredients necessary to make the act criminal were involved in what he was doing. If this be established, it is no defence that he did not know that the act which he was consciously doing was forbidden by law. Ignorance of the law is no excuse. But it is a good defence if he displaces the evidence relied upon as establishing his knowledge of the presence of some essential factual ingredient of the crime charged' …
In O'Connor ((1980) 146 CLR, at p 97), Stephen J defined 'criminal intention' by citing Jordan CJ's statement of the requirement of knowledge. Prima facie, the requirement of knowledge relates not only to the facts which give character to the physical act involved in the commission of the offence but also to the circumstances which attend its occurrence and make it criminal (572). (original emphasis)
As Mason CJ, Deane and Dawson JJ pointed out in Kural v The Queen [1987] HCA 16; (1987) 162 CLR 502, the mental elements in different offences vary widely and, as a result, it is impossible to make a statement which is universally valid for all purposes about the essential elements of a guilty mind (504). Their Honours elaborated:
Depending upon the nature of the particular offence the requirement of a guilty mind may involve intention, foresight, knowledge or awareness with respect to some act, circumstance or consequence (504).
Where an offence comprises a subjective fault element and a physical element, and the physical element involves a consequence or result brought about by the accused's conduct, the prosecution must ordinarily prove beyond reasonable doubt that the accused's purpose was to produce the consequence or result in question. If an accused has the requisite purpose, he or she will have acted intentionally even though, to the accused's knowledge, it is improbable that the consequence or result will eventuate. See Leonard v Morris (1975) 10 SASR 528, 531 ‑ 532 (Bray CJ). See also the discussion in Bronitt S and McSherry B, Principles of Criminal Law (2nd ed, 2005) 174 - 178.
Where an offence involves the commission of a proscribed act, a guilty mind exists where the accused's intention was to do the proscribed act. In Kural, Mason CJ, Deane and Dawson JJ said in relation to the proof of the existence of the requisite intention in such circumstances:
Sometimes there is direct evidence in the form of an admission by the accused that he intended his conduct to involve the forbidden act. More often, the existence of the requisite intention is a matter of inference from what the accused has actually done. The intention may be inferred from the doing of the proscribed act and the circumstances in which it was done (504).
In Endresz v Whitehouse (1994) 14 ACSR 31, Hansen J said, in the context of a prosecution under s 124(1) of the Securities Industry (Vic) Code (being the counterpart of s 998(1)), that where s 124(3)(a) (being the counterpart of s 998(5)(a)) applies, evidence of mens rea is not required for a conviction. Remarkably, in the present case, neither counsel for the appellant nor counsel for the respondent referred to Hansen J's decision, although counsel for the respondent did cite the judgment on appeal from his Honour.
The salient facts of Endresz were these. The appellant was a director of CTC Nominees Pty Ltd (CTC). He was also a director of Emu Hill Goldmines NL (Emu), a company listed on the stock exchange. The appellant, on behalf of CTC, negotiated an agreement to acquire from a third party a majority interest in Emu, subject to the approval of the shareholders of Emu. The agreement was terminated before being submitted for approval to Emu's shareholders. Some time later, a similar agreement was entered into between the parties for the acquisition of a majority interest in Emu at a lower price. The appellant then instructed a broker to purchase four million shares in Emu at a price in excess of the then current market price. He also gave instructions to another broker to sell four million shares in Emu at the same price. The appellant was charged with, relevantly, breaching s 124(1) of the Securities Industry (Vic) Code in that he had created a false or misleading appearance of active trading in Emu on a stock market in Victoria. He was convicted by a magistrate and appealed. Hansen J dismissed the appeal.
The respondent in Endresz argued relevantly that, as a matter of construction, the burden of proof in relation to intention for the purpose of proving (or disproving, as the case may be) a charge under s 124(1) was reversed where s 124(3)(a) is invoked. It was submitted that the burden lies on the defendant by reason of s 124(4) (being the counterpart of s 998(6)). Hansen J held that it was unnecessary to resolve 'these questions of intention' because the magistrate had not merely based his decision upon the deeming provision in s 124(3)(a) and a rejection of the defence under s 124(4). Rather, the magistrate had, in addition, found that the appellant had in fact created a false or misleading appearance of active trading in the stock contrary to the specific terms of s 124(1) (39).
Nevertheless, Hansen J expressed his view on the point:
While proof of the commission of an offence against s 124(1), standing alone, may be taken as requiring proof by the informant of the necessary mens rea of the defendant, where s 124(3)(a) applies, the necessity of proving this element is removed. It was argued by the appellant that the legislature could not have intended this and that by reference to the principles in He Kaw Teh the court should be reluctant to find that the presumption of mens rea was not a necessary element of the offence. It seems to me that this ignores the specific terms of s 124(3) and the operation of the defence in s 124(4). The latter provision makes consideration of the element of intention or purpose relevant to a charge under s 124(1) where the deeming provisions contained in s 124(3) apply, but only in terms of the defendant establishing that the purpose was not or did not include the purpose of creating a false or misleading appearance of active trading. Of course the prosecution may by the evidence seek to counter the defence but in such a case it remains for the defendant to establish the defence and not for the prosecution to prove a positive intention to commit the offence (which has been 'deemed' to have occurred). On the facts the learned magistrate found that the defence was not made out (40).
The Court of Appeal of Victoria dismissed an appeal from Hansen J's decision: Endresz v Whitehouse [1998] 3 VR 461. It was unnecessary for the Court of Appeal to rule on the correctness of the view expressed by the learned primary judge, and it did not make any comment on the point.
In Nomura International, Sackville J considered whether the third limb of s 998(1) (that is, a person shall not do anything that is likely to create a false or misleading appearance of active trading) required proof of mens rea. It was not essential to his Honour's decision in the case to resolve this point, but he expressed the view that s 998(1) did not 'require proof that the defendant knew, at the time of the allegedly contravening conduct, that the false or misleading appearances were likely to be created by the conduct' (405 ‑ 406). His Honour then said:
It is true that, as Brennan J said in He Kaw Teh v The Queen (1985) 157 CLR 523 at 567:
'[h]owever grave the mischief at which a statute is aimed may be, the presumption is that the statute does not impose criminal liability without mens rea unless the purpose of the statute is not merely to deter a person from engaging in prohibited conduct but to compel him to take preventive measures to avoid the possibility that, without deliberate conduct on his part, the external elements of the offence might occur.'
Nonetheless, his Honour recognised (at 567) that the question of whether mens rea is an essential element of an offence is 'after all, a question of statutory construction'. Brennan J also pointed out (at 568) that mens rea may 'connote different states of mind in respect of the several external elements of the same crime'; see also Gibbs CJ, at 530.
As Mr Bathurst accepted, s 998(1) embodies alternatives. The subsection specifically proscribes the conduct intended to create a false or misleading appearance of active trading or with respect to the price of any security. The introduction of the expression 'likely to create' in s 998(1) of the Corporations Law was clearly designed to cover conduct other than conduct intended to create misleading appearance. By the words 'likely to create', the drafter sought to prohibit conduct which, objectively assessed, was likely to create a false or misleading appearance and thus be likely to detract from the operation of the ordinary forces of supply and demand. The severity of the consequences attaching to a breach of s 998(1) are sufficiently recognised by construing 'likely' to mean more probable than not.
This does not mean, of course, that the third limb of s 998(1) involves no mental element. Doubtless, it is necessary to show that the alleged contravener intended to carry out the conduct relied on as creating the likelihood of a misleading or deceptive appearance. But I do not think it is necessary to prove that the alleged contravener was aware that the conduct would be likely to have a false or misleading appearance of the kind specified in s 998(1). However, as I have already indicated, it is not necessary to express a final view on this issue (406).
His Honour did not express any view in relation to whether the first limb of s 998(1) required proof of mens rea, either where the deeming provision in s 998(5) was relied on or where it was not.

In Donald v Australian Securities & Investments Commission [2000] FCA 1142; (2000) 104 FCR 126, Heerey J agreed with Sackville J's obiter view in Nomura International that the third limb of s 998(1) did not import any requirement of mens rea. His Honour elaborated as follows:
[Sackville J's obiter view] is also supported by an examination of other provisions of Div 2 of Pt 7.11 where the statute specifically provides for carefully differentiated states of minds, and in some cases no state of mind at all. Section 995(2) prohibits misleading or deceptive conduct in relation to dealings in securities. No mental element is specified. The section corresponds to s 52 of the Trade Practices Act 1974 (Cth) where it has long been established that proof of intention to engage in misleading or deceptive conduct is not required to establish a contravention. By contrast, s 997 prohibits carrying out two or more transactions in securities which are likely to have the effect of increasing the price of those securities with a particular defined intent; namely an 'intent to induce other persons to buy or subscribe for securities of the body corporate'. A specific intention is also prescribed in s 998 itself. Subsections (5) and (6) are concerned with that part of s 998(1) which prohibits creating etc a false or misleading appearance of active trading in any securities. Subsection (5) stipulates certain forms of conduct which are deemed to create such an appearance, for example, a transaction for the sale of securities which does not involve any change in beneficial ownership: s 998(5)(a). However if any of the deeming provisions are relied on s 998(6) provides a defence if it is proved that the purposes for which the person did the act did not include the purpose of creating a false or misleading appearance of active trading. Section 999 prohibits the making of a statement that is false in a material particular or materially misleading and is likely to induce other persons to subscribe for securities if the person making the statement 'does not care whether the statement or information is true or false' or 'knows or ought reasonably to have known' that statement or information is false in a material particular or materially misleading. Section 1001A(2) prohibits a 'disclosing entity' contravening the provisions of the listing rules of a securities exchange by 'intentionally, recklessly or negligently' failing to notify the securities exchange of certain information.
An example of different states of mind being required for different elements of the same offence is Alphacell Ltd v Woodward [1972] AC 824 where a statute made it an offence if a person 'causes or knowingly permits to enter a stream any poisonous, noxious or polluting matter'. The House of Lords held there was no reason to read 'knowingly' into the provision before 'causes' and the concept of mens rea was inapplicable [25] ‑ [26].
His Honour concluded that there was no requirement that the applicant, Donald, knew or had in mind at the time he engaged in conduct contravening the third limb of s 998(1) that a false or misleading appearance was likely to be created by that conduct [27]. His Honour did not consider whether any requirement of mens rea existed in relation to the first limb of s 998(1).
In R v Manasseh [2002] NSWCCA 27; (2002) 167 FLR 44, the appellants, Manasseh and Austin, were convicted after a trial before a judge and jury of creating a false or misleading appearance of active trading in shares on the ASX, contrary to the first limb of s 998(1). The Crown relied on the deeming provisions in s 998(5). On appeal, the Court of Criminal Appeal of New South Wales discussed Heerey J's decision in Donald. Sheller JA (Simpson & Howie JJ agreeing) held that where the Crown relies on the deeming provisions in s 998(5), it is not required to prove what the purpose or purposes were of the person who engaged in the conduct alleged to contravene the first limb of s 998(1). His Honour said that once the presumption under s 998(5) arises, it is for the accused to make out the defence conferred by s 998(6). His Honour's reasoning was this:
The object and purpose of s 998 was to prevent the creation of a false or misleading appearance of active trading in any securities on a stock market. Section 998(5) provided that a person who engaged in any of the activities described in pars (a), (b) or par (c) should be deemed to have created a false or misleading appearance of active trading in those securities on a stock market. The statutory presumption that the person had created the false or misleading appearance of active trading flowed from proof of that person's involvement in any one or more [of] the activities described. It was [not] part of the Crown case to prove what the purpose or purposes were of the person engaged in the conduct described. Once the presumption arose the person charged was left with a defence under subs (6). It was for the defence to persuade the jury on the balance of probabilities that the purpose or purposes for which the person engaged in the activity were not or did not include the purpose of creating a false or misleading appearance of active trading of securities on a stock market [42].
The intention of the Parliament in enacting s 998(1) and creating the relevant offence was to maintain the integrity of stock markets. As Gleeson CJ noted in Fame Decorator:
Markets, in reflecting the interaction of forces of supply and demand, may suffer from a variety of imperfections, including mismatches of information, without such imperfections destroying their integrity (62).
In North, Mason J observed that purchases or sales on a stock market are often made for indirect or collateral motives in circumstances where, to the knowledge of the sellers and buyers, the transactions will have an effect on the market for, or the price of, shares. His Honour added that it was plainly not the object of the Parliament in enacting s 70 of the Securities Industry Act 1970 (NSW) to outlaw all such transactions (58 ‑ 59).
However, it is apparent from the case law and the extrinsic material to which I have referred that wash sales and matched orders are, ordinarily and of their nature, pernicious practices which will, invariably, have the purpose and, often, the effect of interfering with the integrity of a stock market. The interference will arise from the creation of the false or misleading appearance of trading between unassociated sellers and buyers who do not intend, by their dealings, to create an artificial market or price. Wash sales and matched orders are devices for creating or maintaining an appearance of market activity or a price. See 'Regulation of Stock Market Manipulation' (1947) 56 Yale Law Journal 509, 513. These features of wash sales and matched orders explain, no doubt, why the Parliament enacted the deeming provisions in s 998(5). As I have mentioned, the first limb of s 998(1) includes wash sales and matched orders (they are the subject of the deeming provisions in s 998(5)), but it is not confined to them.
The physical elements of the offence created by the first limb of s 998(1), read with s 1311(1), are these:
(a)the accused must create the appearance of active trading in securities on a stock market; and
(b)the appearance of active trading so created must be false or misleading.
In my opinion, the Parliament did not intend that where the prosecution does not rely on the deeming provisions in s 998(5), a person who contravenes the first limb of s 998(1) should be guilty of a criminal offence in the absence of a blameworthy state of mind. I am of that opinion for these reasons.
First, the offence created by the first limb of s 998(1), read with s 1311(1), is a serious criminal offence, as demonstrated by the maximum penalty, namely 200 penalty units or imprisonment for 5 years, or both. Plainly, the consequences for a person who contravenes the first limb of s 998(1), without a blameworthy state of mind, are, potentially at least, severe.
Secondly, the second limb of s 998(1) (that is, a person shall not do anything that is intended to create a false or misleading appearance of active trading) embodies a subjective fault element, namely, the person must have had the intention of creating the proscribed consequence or result. It is unlikely the Parliament would have intended that the first limb, involving the actual creation of a false or misleading appearance of active trading, should be an offence without any blameworthy state of mind, but an attempt to create a false or misleading appearance of active trading by doing anything that is intended to create that result or consequence should depend on proof of intention.
Thirdly, where the prosecution does not rely on the deeming provisions in s 998(5), the prosecution must prove beyond reasonable doubt, by conventional evidentiary means, relevantly, that the accused in fact created a false or misleading appearance of active trading. No statutory defence is available. Where the prosecution relies on the deeming provisions, it is unnecessary for the prosecution to prove that the accused in fact created a false or misleading appearance of active trading. It is sufficient if the prosecution proves beyond reasonable doubt that the accused knowingly engaged in the relevant activity described in s 998(5). The accused may rely on the statutory defence in s 998(6). It is unlikely the Parliament would have intended that the absence of a blameworthy state of mind should be relevant to the defence of a charge where the prosecution has the advantage of the deeming provisions, but irrelevant to the prosecution or defence of a charge where the deeming provisions are not available to, or are not relied on by, the prosecution and there is no statutory defence available.
Fourthly, the structure or scheme of div 2 of pt 7.11 of the Corporations Law does not, in my opinion, provide a reliable basis for concluding that where a provision creates an offence (either by itself or read with s 1311(1)) and the provision does not expressly state a mental element, then the Parliament intended that a person should be guilty of the offence in the absence of a blameworthy state of mind. I will refer to some of the provisions of div 2 of pt 7.11. Section 995(2) prohibited a person from, in essence, engaging in misleading or deceptive conduct or conduct that is likely to mislead or deceive in, or in connection with, any dealing in securities. No express mental element is specified but, significantly, s 995(3) provides that a person who contravenes s 995 is not guilty of an offence. By s 996(1), a person must not authorise or cause the issue of a prospectus in relation to securities of a corporation if the prospectus has been, or is required to be, lodged under pt 7.12 and, either a material statement in the prospectus is false or misleading, or there is a material omission from the prospectus. No express mental element is specified. However, a statutory defence, which applies generally, is contained in s 996(2). It is a defence to a prosecution for a contravention of s 996(1) if it is proved that the defendant, after making such inquiries (if any) as were reasonable, had reasonable grounds to believe, and did until the time of the issue of the prospectus believe, that the statement was true and not misleading or the omission was not material; or, where there was an omission from the prospectus, that the omission was inadvertent. Section 997 prohibited stock market manipulation. In particular, s 997(1), (4) and (7), in essence, prohibited a person from entering into or carrying out, either directly or indirectly, two or more transactions in securities of a body corporate, being transactions that have, or are likely to have, a specified effect, with intent to induce other persons to engage in a specified form of dealing in the securities. Each of the subsections expressly requires that the person who contravenes the subsection engage in the relevant conduct 'with intent to induce other persons' to deal in a specified manner in the securities in question. Section 997(1), (4) and (7) do not, however, expressly incorporate a subjective fault element in relation to the transactions having, or being likely to have, the specified effect; namely, increasing or reducing the price of securities or maintaining or stabilising the price of securities, as the case may be. In my opinion, it is necessary in the case of s 998(1) (and, indeed, in the case of s 997(1), (4) and (7)) to construe the provision by reference to the factors referred to by Gibbs CJ and Brennan J in He Kaw Teh in order to determine whether the common law presumption has been displaced.
Fifthly, there is no doubt that the stock markets are an important and integral feature of the Australian economic system and that interfering with their integrity may undermine investor confidence, cause loss to innocent third parties and damage the reputation of the stock markets. However, the protection of the public interest in relation to those matters does not necessarily require the imputation to the Parliament of an intention that a person who contravenes the first limb of s 998(1) should have committed the serious criminal offence which that provision, read with s 1311(1), creates, in the absence of a blameworthy state of mind. That is, it is not apparent to me that the Parliament intended that such a person should take preventative measures to ensure that the physical elements of the offence do not occur.
Sixthly, in North, Mason J noted that it was not 'altogether easy' to translate the generality of the language of s 70 of the Securities Industry Act 1970 (NSW) into 'a specific prohibition against injurious activity, whilst at the same time leaving people free to engage in legitimate commercial activity which will have an effect on the market and on the price of securities' (58). His Honour referred to the 'indirect or collateral motives' of participants in the purchase or sale of shares and their knowledge that their transactions will have an effect on the market for, or the price of, shares (58 ‑ 59). His Honour emphasised that s 70 sought to ensure the market reflects the forces of genuine supply and demand; that it was in the public interest for the market for securities to be real and genuine and free from manipulation; that s 70 was designed to ensure such a market, and that s 70 should be interpreted accordingly (59). Mason J's observations about s 70 are applicable generally to s 998(1). His Honour appears to have been of the view that the legislative precursor to s 998(1) which he was considering presupposed the existence of a mental element in the offence it created.
I am not satisfied the common law presumption that offences (including statutory offences) have a subjective fault element has been displaced, either expressly or by necessary implication, in the offence created by the first limb of s 998(1), read with s 1311(1), where the prosecution does not rely on the deeming provisions in s 998(5).
I turn now to consider the precise blameworthy state of mind required under the first limb of s 998(1) where the prosecution does not rely on the deeming provisions in s 998(5).
In my opinion, it is apparent, from the context of the deeming provisions in s 998(5) and the defence under s 998(6), that the requisite state of mind, for the purposes of the first limb of s 998(1), is purpose.
As I have mentioned, the physical elements of the offence created by the first limb of s 998(1), read with s 1311(1), are that the accused must have created the appearance of active trading in securities on a stock market and the appearance of active trading so created must be false or misleading. In my opinion, where the prosecution does not rely on the deeming provisions in s 998(5), it must prove beyond reasonable doubt that the accused's purpose was to bring about those consequences or results. That is, the prosecution must prove to the requisite standard that the accused's purpose, by his or her conduct, was to create a false or misleading appearance of active trading in the securities in question on a stock market.
However, in my opinion the Parliament did not intend that, where the prosecution does rely on the deeming provisions in s 998(5), the prosecution must prove that the accused had a blameworthy state of mind beyond knowledge of the relevant activity, the subject of the deeming provisions. (In the present case, the relevant activity was entering into or carrying out transactions of sale or purchase of shares in Intrepid that did not involve any change in the beneficial ownership of the shares.) My reasons for that opinion are as follows.
First, the Parliament may provide for different states of mind in respect of different elements of the same offence.
Secondly, offences relating to trading in securities which require proof of the accused's subjective intention or purpose are often difficult to prove, because they usually involve transactions which are also commonly engaged in for legitimate commercial reasons. Proof will invariably depend on inferences drawn from circumstantial evidence. Where the prosecution bears the burden of proof and relies on circumstantial evidence, guilt should not only be a reasonable and rational inference, but must be the only reasonable and rational inference that could be drawn from the circumstances. See Plomp v The Queen [1963] HCA 44; (1963) 110 CLR 234, 243 (Dixon CJ); Shepherd v The Queen [1990] HCA 56; (1990) 170 CLR 573, 578 (Dawson J).
Thirdly, as I have mentioned, s 998(5)(a) refers, in substance, to wash sales and s 998(5)(b) and (c) refer, in substance, to matched orders. Also, as I have mentioned, it is well established that these kinds of transactions are, ordinarily and of their nature, pernicious and they will, invariably, have the purpose and, often, the effect of undermining a stock market's integrity. The Parliament's intention in enacting the deeming provisions in s 998(5) was to facilitate proof of an offence under the first limb of s 998(1), read with s 1311(1), by, in essence, deeming a person who enters into or carries out a wash sale or matched order on a stock market to have created a false or misleading appearance of active trading in the securities in question. The legislative object was that where an accused has entered into or carried out, either directly or indirectly, a wash sale or matched order, and the prosecution proves beyond reasonable doubt that the accused knowingly entered into or carried out the transaction in question, then the accused should be deemed to have created a false or misleading appearance of active trading. Further, the accused should bear the burden of proving that the purpose or purposes for which he entered into or carried out the transaction was not, or did not include, the proscribed purpose.
Fourthly, where the prosecution relies on the deeming provisions in s 998(5) it is evident, when the first limb of s 998(1) is read together with s 998(5) and (6), that upon the prosecution proving beyond reasonable doubt that the accused knowingly engaged in the relevant activity described in s 998(5), purpose (or intention) is only relevant in the context of the defence under s 998(6). The accused will be convicted unless he or she, in reliance on the statutory defence, proves, on the balance of probabilities, that the purpose or purposes for which he or she engaged in the relevant activity were not or did not include the purpose of creating a false or misleading appearance of active trading.

Section 998 of the Corporations Law: what must the accused prove to make out the defence conferred by s 998(6)?

As I have mentioned, an accused who seeks to rely on the defence under s 998(6) must prove, on the balance of probabilities, that the purpose or purposes for which he or she engaged in the relevant activity (that is, the activity the subject of the relevant deeming provision in s 998(5)) were not, or did not include, the purpose of creating a false or misleading appearance of active trading in the securities in question on a stock market.

Counsel for the appellant submitted that there was no evidence the appellant was ever told that the shares booked to Walthamstow's account were only 'mortgaged' to Walthamstow, or that Walthamstow was to be a trustee or was not to become the beneficial owner of them. It was submitted that, for all the appellant knew, there was an arrangement under which:
(a)Mr Scook would purchase shares in Challiston's name;
(b)if Mr S Masel agreed, the shares would be re‑booked to Walthamstow, and Walthamstow would pay for them; and
(c)when re‑booked and paid for, Walthamstow became the beneficial owner of the shares, but with a profit sharing arrangement under which, as and when shares were sold from Walthamstow's account, profits from the sale would be divided in some (unspecified) proportions.
It was contended that it cannot follow, from the mere fact the appellant knew Walthamstow was paying the purchase price of the shares at settlement, that the appellant therefore knew all of the shares registered in Walthamstow's name were not beneficially owned by it.
According to counsel for the appellant, the following inferences were open on the evidence, and were consistent with innocence:
(a)the appellant thought that Walthamstow was to be both the registered and beneficial owner of the shares, but under some kind of (undisclosed) profit sharing arrangement the profits made from the sale of the shares would be divided between Walthamstow and Challiston; or
(b)that some (again undisclosed) portion of the shares purchased with funds advanced by Walthamstow would be owned by Walthamstow, and the remainder would be owned by Challiston.
It was submitted that the inference relied on by the prosecution (namely, the appellant knew that the beneficial ownership of the shares booked to Walthamstow, and for which Walthamstow paid, did not pass to Walthamstow) was the weakest of any possible inferences to be drawn from the evidence (if, which counsel disputed, this inference were open at all). In particular, counsel argued:
(a)Mr S Masel said in evidence he never told the appellant that Walthamstow was holding the shares on trust or other than beneficially.
(b)Walthamstow's account with Paul Morgan Securities was opened with a registration form completed by Walthamstow. The form required the client to state if the account was opened 'as trustee'. There was no reference in Walthamstow's registration or account opening form to its acting 'as trustee', or other than on its own behalf.
(c)Walthamstow always paid for the shares re‑booked to its account. Mr S Masel informed the appellant that any one of the Masels or Mr Scook had authority to give sell orders on the account, with all proceeds to be credited to the account.
(d)The applications for the placement shares were made by Walthamstow. There was no suggestion that Mr Scook or Challiston was to have any interest in the placement shares. The cost of the placement shares was paid by cheques drawn by Walthamstow.
(e)Ms Simpson informed the appellant that she had run the re‑booking process and transactions past Mr Berry, and he could not see anything wrong with them.
(f)At Ms Simpson's request, the appellant made enquiries with Mr Scook to ensure the transactions involved a change in beneficial ownership.
(g)After receipt of Walthamstow's application forms for the placement shares, Mr Scook told the appellant in late January/early February 1998 that Walthamstow had 'equity' in the arrangement and would be taking 50% of the placement shares.
(h)Mr Scook told the appellant that when sales were made of shares in Intrepid on Walthamstow's account, he was selling either his/Challiston's shares or Walthamstow's shares.
It was submitted on behalf of the appellant that, in the circumstances, there was no evidence from which it could be concluded, beyond reasonable doubt, that the shares in question were not beneficially owned by Walthamstow when they were sold to Challiston. Further, there was no basis in the evidence on which a reasonable jury, properly directed, could be satisfied beyond reasonable doubt that the appellant knew that to be the case.

Ground 5: its merits

By s 30(3)(a) of the Criminal Appeals Act, in the case of an appeal against conviction, the Court of Appeal must allow the appeal if, in its opinion, the verdict of guilty on which the conviction is based should be set aside because, having regard to the evidence, it is unreasonable or cannot be supported.
In M v The Queen [1994] HCA 63; (1994) 181 CLR 487, Mason CJ, Deane, Dawson and Toohey JJ said, in relation to s 6(1) of the Criminal Appeal Act 1912 (NSW) (which is in substance identical to s 30(3) of the Western Australian Criminal Appeals Act), that although the phrase 'unsafe and unsatisfactory' does not appear in the statutory provision:
Where a court of criminal appeal sets aside a verdict on the ground that it is unreasonable or cannot be supported having regard to the evidence, it frequently does so expressing its conclusion in terms of a verdict which is unsafe or unsatisfactory (492).
See also Jones v The Queen (1997) 191 CLR 439, 450.
In M, McHugh J held that a 'miscarriage of justice' arises whenever the accused has not had a fair trial according to law or whenever the nature of the evidence, the directions to the jury or the procedures that were followed raise a real doubt as to whether the conviction can be regarded as a safe or just conviction (523). In Jones, Gaudron, McHugh and Gummow JJ said that, having regard to the statements in M, there can be no doubt that a 'miscarriage of justice' also occurs when the findings or verdicts of the jury raise a real doubt as to whether a conviction is safe or just (450).
In M, Mason CJ, Deane, Dawson and Toohey JJ held that the test for an unsafe or unsatisfactory verdict was whether the court thought that
upon the whole of the evidence it was open to the jury to be satisfied beyond reasonable doubt that the accused was guilty (493).
In answering that question, their Honours said:
[T]he court must not disregard or discount either the consideration that the jury is the body entrusted with the primary responsibility of determining guilt or innocence, or the consideration that the jury has had the benefit of having seen and heard the witnesses. On the contrary, the court must pay full regard to those considerations (493).
Their Honours explained the application of the test:
In most cases a doubt experienced by an appellate court will be a doubt which a jury ought also to have experienced. It is only where a jury's advantage in seeing and hearing the evidence is capable of resolving a doubt experienced by a court of criminal appeal that the court may conclude that no miscarriage of justice occurred. That is to say, where the evidence lacks credibility for reasons which are not explained by the manner in which it was given, a reasonable doubt experienced by the court is a doubt which a reasonable jury ought to have experienced. If the evidence, upon the record itself, contains discrepancies, displays inadequacies, is tainted or otherwise lacks probative force in such a way as to lead the court of criminal appeal to conclude that, even making full allowance for the advantages enjoyed by the jury, there is a significant possibility that an innocent person has been convicted, then the court is bound to act and to set aside a verdict based upon that evidence. In doing so, the court is not substituting trial by a court of appeal for trial by jury, for the ultimate question must always be whether the court thinks that upon the whole of the evidence it was open to the jury to be satisfied beyond reasonable doubt that the accused was guilty (494 ‑ 495). (footnotes omitted)
See also Jones, 450 ‑ 451. The test formulated by the majority in M is the appropriate test for determining whether a verdict is unsafe or unsatisfactory: Jones, 452; MFA v The Queen [2002] HCA 53; (2002) 213 CLR 606 [25].
In Libke v The Queen [2007] HCA 30; (2007) 230 CLR 559, Hayne J (with whom Gleeson CJ & Heydon J relevantly agreed) said that where it is alleged that a conviction is unsafe or unsatisfactory, the question for an appellate court is
whether it was open to the jury to be satisfied of guilt beyond reasonable doubt, which is to say whether the jury must, as distinct from might, have entertained a doubt about the appellant's guilt (M v The Queen (1994) 181 CLR 487 at 492 ‑ 493). It is not sufficient to show that there was material which might have been taken by the jury to be sufficient to preclude satisfaction of guilt to the requisite standard. In the present case, the critical question for the jury was what assessment they made of the whole of the evidence that the complainant and the appellant gave that was relevant to the issue of consent to the digital penetration that had occurred in the park. That evidence did not require the conclusion that the jury should necessarily have entertained a doubt about the appellant's guilt [113]. (original emphasis)
See also Weiss [41] (Gleeson CJ, Gummow, Kirby, Hayne, Callinan & Heydon JJ).
In my opinion, in the present case the appellant's conviction is not unsafe or unsatisfactory. His conviction is capable of being supported, having regard to the evidence.
As to the appellant's contention that there was insufficient evidence from which the jury could conclude that there was no change in beneficial ownership of the shares sold by Walthamstow to Challiston, in my opinion there was sufficient evidence to prove beyond reasonable doubt that there was no change in beneficial ownership. I refer, in particular, to the following evidence:
(a)The shares were purchased by Challiston in its own name.
(b)Walthamstow made loans to Challiston pursuant to the loan facility letters for the purpose of financing Challiston's acquisition of the shares. It was a term of the loan facility letters that the shares would be charged or mortgaged to Walthamstow to secure the repayment of the loans. Upon Challiston acquiring the shares, Walthamstow's security was perfected by the shares being transferred into its name. The transfer of the shares into Walthamstow's name occurred at or prior to settlement of their acquisition, by the shares being re‑booked to Walthamstow. Pursuant to the loan facility letters, Walthamstow paid the purchase price. It then held the shares in its own name. See the material terms of the loan facility letters at [207] ‑ [211] above. See also the evidence of Mr S Masel at ts 341 ‑ 342, 344, 346, 354 ‑ 356, 387 ‑ 398, 461; the evidence of Ms Robson at ts 585, 587 ‑ 590; and the evidence of Mr Scook at ts 1026.
(c)The shares were held on the CHESS system with Paul Morgan Securities as the sponsoring broker. Walthamstow was registered as the holder of the shares under the CHESS system and could initiate transactions on it (or cause them to be initiated). Walthamstow authorised Mr Scook to initiate sales, but not purchases, on Walthamstow's account. See the evidence of the appellant at ts 1074. See also the facsimile transmission form sent by Mr S Masel to the appellant on 30 January 1998 (exhibit P00090998). The jury were entitled to conclude that this indicated that Mr Scook/Challiston had a continuing interest in the shares. Walthamstow might itself sell the shares, or might require Mr Scook to sell them if their value fell. See Mr S Masel's evidence at ts 346.
(d)The number of re‑bookings and the reasons for them were unusual. Normally, re‑booking was undertaken to correct an error. See Ms Robson's evidence at ts 585; Ms Simpson's evidence at ts 648; the appellant's evidence at ts 1068. In the present case, the reason specified by the appellant on the re‑booking forms was 'finance' or 'financing'.
If the jury were satisfied beyond reasonable doubt that the shares held in Walthamstow's name were held by it as security for loans advanced by it to Challiston for their purchase, it was a question of law whether Challiston had a beneficial interest in them.
In my opinion, based on the evidence referred to at [242] above, at all material times Challiston retained a beneficial interest in the shares. See Harrold v Plenty [1901] 2 Ch 314, 316; Stubbs v Slater [1910] 1 Ch 632, 638 ‑ 639; Adelaide Building Co Pty Ltd (in liq) v ABC Investments Pty Ltd (1990) 8 ACLC 445, 447 ‑ 448. By s 998(7), a purchase or sale of securities does not involve a change in the beneficial ownership, for the purposes of s 998, if a person who had an interest in the securities before purchase or sale, or an associate of the person in relation to those securities, has an interest in the securities after the purchase or sale.
As to the appellant's contention that there was insufficient evidence from which the jury could conclude that the appellant knew there was no change in beneficial ownership, in my opinion there was sufficient evidence to prove beyond reasonable doubt that the appellant knew there was no change in beneficial ownership. It was open to the jury to be satisfied beyond reasonable doubt that the only reasonable and rational inference that could be drawn from the circumstances disclosed by the evidence was that the appellant knew there was no change in beneficial ownership. See Plomp, 243; Shepherd, 578. I refer, in particular, to the following evidence:
(a)The appellant was a very experienced stock broker.
(b)The appellant was the broker in relation to each of the trades. See Ms Robson's evidence at ts 603 ‑ 604. (Compare the appellant's evidence to the effect that some of the trades may have been made by colleagues.)
(c)The appellant knew of and initiated the re‑booking from Challiston to Walthamstow of each acquisition of shares. See Ms Robson's evidence at ts 585, 587 ‑ 590. He did so on taking instructions from Mr S Masel.
(d)The number of re‑bookings and the reasons for them were unusual. Normally, re‑booking was undertaken to correct an error. See Ms Robson's evidence at ts 585; Ms Simpson's evidence at ts 648; the appellant's evidence at ts 1068. In the present case, there was no error and, on the basis of the evidence referred to at [242] above, no sale.
(e)The appellant knew that the re‑bookings were as a result of financing arrangements, and he marked the re‑booking forms, relevantly, either 'finance' or 'financing'. See Ms Robson's evidence at ts 587; the appellant's evidence at ts 1072.
(f)The appellant knew that Walthamstow was a finance company and was acting as financier to Mr Scook/Challiston in connection with the purchases. See Ms Simpson's evidence at ts 648; Lindsay Phillips' evidence at ts 668; Mr Scook's evidence at ts 1030 ‑ 1031; the appellant's evidence at ts 1072, 1074, 1098, 1101, 1103. The appellant spoke to Mr S Masel 'probably dozens of times' about whether Walthamstow was financing shares and was prepared to take shares into its name. See Mr S Masel's evidence at ts 350 ‑ 351. Also, the appellant received facsimile transmissions from, and sent facsimile transmissions to, Walthamstow regarding the loans and financing of particular purchases. See exhibits P00090561, P00113976, P00113988. On occasions, the appellant approached Mr S Masel about whether Walthamstow would be advancing money, sometimes even before Mr S Masel had a request for finance from Mr Scook. See Mr S Masel's evidence at ts 408.
(g)The appellant informed Ms Simpson that the re‑bookings were as a result of the financing arrangements between Challiston and Walthamstow because Walthamstow did not want to accept a credit risk, and accordingly did not want the shares booked to its name until the settlement date. See Ms Simpson's evidence at ts 648, 649; the appellant's evidence at ts 1072, 1109.
(h)In the printed order forms for the shares, the appellant completed a space on the forms marked 'Contact'. In this space he inserted the word 'Dean' (being Mr Scook), S Masel or Steve (being Mr S Masel) or Lance Masel or Lance/Steve (being Lance Masel and Mr S Masel). See the bundle of order forms in the combined blue and green appeal book volume 2, pages 171 ‑ 205. The jury were entitled to reject the appellant's evidence to the effect that the name he inserted in the 'Contact' box did not refer to the person who had given him the order but to the entity (Challiston or Walthamstow) who, according to his belief, was the owner of the shares.
(i)Ms Robson's evidence of this conversation with the appellant (which the appellant denied):
You may recall the first of them, the crossing buy and sells, the one I showed you that related to 415,000 shares. Those shares crossed at a price of $1.37. You remember me showing that to you a moment ago? I can tell you that at that time the last trade on the market was $1.34. Do you recall at some point having a discussion with [the appellant] in regard to crossing transactions that he was instructing you to undertake?---I have some recollection of a ‑ not a dispute, not even an argument, just a comment, a passing comment, saying that I was not happy with going up into the market up to 1.37 when the market was only 1.34.
All right. When you say you had a dispute, was that with [the appellant]? You raised it with him?---I did raise it with him and said I wasn't happy about this kind of crossing.
Do you recall the words you used?---That he could possibly be ‑ or he would [get] me in trouble with SEATS market control and possibly manipulating the market.
Did he respond?---Well, he did tell me to be quiet or shut up and just 'Get on with your job'.
And did you?---Get on with my job?
Did you do that transaction there?---Yes, I did. I felt I had to (ts 605).
Ms Robson said in cross‑examination, in relation to this conversation, that she was informing the appellant that she was not happy with the transactions or the manner in which the trading was occurring (ts 616). She did not, however, make 'a big fuss' because she did not want to 'get [herself] sacked' (ts 616).
Also, there was evidence on the basis of which the jury could be satisfied that the appellant had a motive for engaging in the impugned conduct. As I have mentioned, at all material times Paul Morgan Securities was the underwriter of the private placement. The placement was made pursuant to a resolution passed at a general meeting of Intrepid's members held on 15 November 1997. The placement shares were allotted on or shortly before 27 February 1998. The private placement was sub‑underwritten. After Paul Morgan Securities paid the sub‑underwriter, it received about $55,000 or $60,000. See the appellant's evidence at ts 1100. Also, Boulder Enterprises Pty Ltd (a wholly owned subsidiary of Saxby Bridge Pty Ltd) received 40,000 shares in the private placement. At all material times, the appellant owned 40% of the issued share capital of Saxby Bridge Pty Ltd. Further, Paul Morgan Securities subscribed for 50,000 shares in the private placement. See the letter dated 3 March 1998 from Ms Simpson, on behalf of Paul Morgan Securities, to the ASX and the annexure attached to that letter (exhibit P00239255), and see the appellant's evidence at ts 1100.
The circumstantial evidence relied on by the prosecution to prove knowledge must, of course, be evaluated in its entirety, and not considered on a piecemeal basis. See R v Hillier [2007] HCA 13; (2007) 228 CLR 618 [46] (Gummow, Hayne & Crennan JJ).
None of the matters raised on the appellant's behalf precluded the jury's finding that he was guilty beyond reasonable doubt on each of the counts in respect of which verdicts of conviction were recorded (including their finding beyond reasonable doubt that the only reasonable and

rational inference that could be drawn from the circumstances disclosed by the evidence was that the appellant knew there was no change in beneficial ownership). My examination of the trial record does not require the conclusion that the jury must have entertained a doubt about his guilt (including a doubt as to whether the only reasonable and rational inference that could be drawn was that he knew there was no change in beneficial ownership). I do not experience such a doubt. The verdict of the jury was not unreasonable, and it is a verdict which is supported by the evidence.

Ground 5 fails.

Conclusion

I would grant leave to appeal but, for the reasons I have given, the appeal should be dismissed.
MILLER JA: I agree with Buss JA.