R v Catena [No 2]

[2013] WASC 7

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CRIMINAL

CITATION:   R -v- CATENA [No 2] [2013] WASC 7

CORAM:   CORBOY J

HEARD:   13 DECEMBER 2012

DELIVERED          :   14 JANUARY 2013

FILE NO/S:   INS 162 of 2011

BETWEEN:   THE QUEEN

Applicant

AND

ROBERTO GERALD CATENA
First-named Accused

FLEMMING HOOD NIELSEN
Second-named Accused

COLIN EDWARD HEBBARD
Third-named Accused

Catchwords:

Criminal law and procedure - Insider trading - Corporations Act 2001 (Cth), s 1043A(1) and (2) - Whether prosecution required to give particulars of allegations that the accused knew or ought to have known that information was inside information - No new principles

Legislation:

Corporations Act 2004 (Cth), s 1042A, s 1042D, s 1043A(1) and s 1043A(2)
Criminal Procedure Act 2004 (WA), s 98 and s 131

Result:

No order made requiring the prosecution to give particulars of the allegation that the accused knew that the information was inside information (the prosecution having accepted that particulars of the allegation that the accused ought to have known were required)

Category:    B

Representation:

Counsel:

Applicant:     Mr S Vandongen SC (30 November 2012) &

Mr P Yovich (13 December 2012)

First-named Accused     :     Mr S Nigam (30 November 2012) &

Ms M Perling (13 December 2012)

Second-named Accused :     Mr G Massey (13 December 2012)

Third-named Accused    :     Mr T Percy QC

Solicitors:

Applicant:     Director of Public Prosecutions (Cth)

First-named Accused     :     Nigam & Co

Second-named Accused :     Holborn Lenhoff Massey

Third-named Accused    :     Lawton Gillon

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

Burgess v Beethoven Electric Equipment Ltd [1942] 2 All ER 658

Fox v H Wood (Harrow) Ltd [1963] 2 QB 601

Johnson v Miller (1937) 59 CLR 467

Patel v R [2012] HCA 29; 290 ALR 189; 86 ALJR 954

R v Saffron (1988) 17 NSWLR 395

Scolaro v Shephard [No 2] [2010] WASC 271

Smith v Littlemore (1996) 15 WAR 289

Smith v The Queen [2008] WASCA 128; 37 WAR 297

Vrisakis v Australian Securities Commission (1993) 11 ACSR 162

CORBOY J: 

The application

1. Roberto Gerald Catena and Colin Edward George Hebbard are charged with having contravened s 1043A(2) of the Corporations Act 2001 (Cth) (the Act); Flemming Hood Nielsen is charged with contraventions of s 1043A(1) of the Act. Section 1043A(1) of the Act prohibits insider trading; s 1043A(2) prohibits the communication of inside information. Contravention of those prohibitions constitutes an offence: s 1311(1) of the Act.

2. Mr Catena and Mr Hebbard sought particulars of the allegation that they knew or ought to have known that the information that was the subject of the charges was inside information. The Commonwealth Director of Public Prosecutions (DPP) declined to provide further particulars and so Mr Catena and Mr Hebbard applied for an order under s 131 of the Criminal Procedure Act 2004 (WA). The DPP accepted at the hearing of the application that the prosecution should provide further particulars of the allegation that the accused ought to have known that the information was inside information but contended that particulars of the allegation that they actually knew were not required.

The provisions of the Act concerning insider trading

1. Sections 1043A(1) and (2) provide:

   1043A(1)   [Insider trading prohibited] 

   Subject to this Subdivision, if:

   (a)a person (the insider) possesses inside information; and

   (b)the insider knows, or ought reasonably to know, that the matters specified in paragraphs (a) and (b) of the definition of inside information in section 1042A are satisfied in relation to the information;

   the insider must not (whether as principal or agent):

   (c)apply for, acquire, or dispose of, relevant Division 3 financial products, or enter into an agreement to apply for, acquire, or dispose of, relevant Division 3 financial products; or

   (d)procure another person to apply for, acquire, or dispose of, relevant Division 3 financial products, or enter into an agreement to apply for, acquire, or dispose of, relevant Division 3 financial products.

   1043A(2)   [Communicating information to another prohibited] 

   Subject to this Subdivision, if:

   (a)a person (the insider) possesses inside information; and

   (b)the insider knows, or ought reasonably to know, that the matters specified in paragraphs (a) and (b) of the definition of inside information in section 1042A are satisfied in relation to the information; and

   (c)relevant Division 3 financial products are able to be traded on a financial market operated in this jurisdiction;

   the insider must not, directly or indirectly, communicate the information, or cause the information to be communicated, to another person if the insider knows, or ought reasonably to know, that the other person would or would be likely to:

   (d)apply for, acquire, or dispose of, relevant Division 3 financial products, or enter into an agreement to apply for, acquire, or dispose of, relevant Division 3 financial products; or

   (e)procure another person to apply for, acquire, or dispose of, relevant Division 3 financial products, or enter into an agreement to apply for, acquire, or dispose of, relevant Division 3 financial products.

2. Section 1042A defines a number of terms that appear in s 1043A:

   (a)'Division 3 financial products' is defined to include securities;

   (b)'information' includes 'matters of supposition and other matters that are insufficiently definite to warrant being made known to the public', and 'matters relating to the intentions, or likely intentions, of a person';

   (c)'inside information' is defined to mean information that is not generally available or information that a reasonable person would expect to have a material effect on the price or value of particular Division 3 financial products if the information were generally available.

3. Further, s 1042C defines the meaning of 'generally available':

   [I]nformation is generally available if:

   (a)it consists of readily observable matter; or

   (b)both of the following subparagraphs apply:

   (i)it has been made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invest in Division 3 financial products of a kind whose price might be affected by the information; and

   (ii)since it was made known, a reasonable period for it to be disseminated among such persons has elapsed; or

   (c)it consists of deductions, conclusions or inferences made or drawn from either or both of the following:

   (i)information referred to in paragraph (a);

   (ii)information made known as mentioned in subparagraph (b)(i).

4. Section 1042D provides that a reasonable person will be taken to expect information to have a material effect on the price or value of particular Division 3 financial products if (and only if) the information would, or would be likely to, influence persons who commonly acquire Division 3 financial products in deciding whether or not to acquire or dispose of the first‑mentioned financial products.

The charges

1. Multiple contraventions of the prohibitions in the Act on insider trading are alleged against the accused.  It is not necessary to reproduce the detail of those charges for the purposes of further explaining the application and my reasons.  It is sufficient to note that:

   (a)Each count on the indictment contains particulars of the information allegedly possessed by the accused.  The information particularised differs between the accused and the various counts.  Broadly, it is alleged that the information concerned rumours about the possibility of a takeover bid for a listed company, Vision Systems Limited, and the price of its shares.  Importantly, the information allegedly possessed by the accused has been pleaded with some specificity.

   (b)Each count alleges that the accused:

   (i)possessed information that was not generally available but which, if it had been generally available, a reasonable person would have expected it to have a material effect on the price or value of the shares to which the charges referred;

   (ii)knew or ought reasonably to have known that such information was not generally available and that if it had been generally available a reasonable person would have expected it to have a material effect on the price or value of those shares.

The function of particulars

1. In Smith v The Queen [2008] WASCA 128; 37 WAR 297, Buss JA observed at [105]:

   The function of particulars is to inform the accused of the legal nature of the offence charged and the particular acts, omissions, matters and things (as the case may be) which are the foundation of the charge.  See Johnson v Miller (1937) 59 CLR 467, 489, 497; R v Saffron (1988) 17 NSWLR 395, 445; Stanton v Abernathy (1990) 19 NSWLR 656, 670 ‑ 671. An accused is not able to plead to the charge unless he or she knows the precise case which is the basis for the charge preferred against him or her. See Ex parte Graham; Re Dowling [1969] 1 NSWR 231, 241; Saffron (447); Stanton (666). The Crown, in criminal proceedings, will normally not be permitted to go outside its particulars, in the interests of a fair trial, but the trial judge has a discretion to permit a departure from the particulars when appropriate.

2. Similarly, Martin CJ observed in Scolaro v Shephard [No 2] [2010] WASC 271 [66]:

   The function of particulars in a criminal case is to provide the accused person with sufficient knowledge of the case brought by the prosecution to adequately understand and answer that case.  So, provided that the requirements for procedural fairness are met, it is not appropriate to require the prosecution to give particulars which are not material or which would confine the case to one only of a number of alternative factual scenarios which are consistent with each other, and equally consistent with guilt.  Much will depend upon the factual circumstances of the particular case.

3. A primary function of particulars of a criminal charge is, of course, to identify the boundaries of relevance for the purpose of determining the admissibility of evidence against the accused:  see Johnson v Miller (1937) 59 CLR 467, especially Evatt J at 497 - 498 and Patel v R [2012] HCA 29; 290 ALR 189; 86 ALJR 954, especially Heydon J at [167].

4. Particulars perform essentially the same function in criminal and civil proceedings of ensuring fairness.  As Ipp JA observed in Vrisakis v Australian Securities Commission (1993) 11 ACSR 162, '[t]he paramount consideration, both in civil and criminal cases, is that particulars will be ordered to avoid injustice being done' (207). Consequently, an accused's entitlement to particulars in a criminal case is the same as a defendant's in a civil case: R v Saffron (1988) 17 NSWLR 395, 447 (Hunt AJA); Vrisakis, 180 (Malcolm CJ) and 207 (Ipp JA).

Smith v Littlemore

1. The plaintiffs in Smith v Littlemore (1996) 15 WAR 289 alleged that they had been defamed by the defendants. They claimed aggravated and exemplary damages based on a number of matters. The defendants sought further particulars of those matters. Owen J observed (300):

   Generally speaking, matters such as knowledge, notice or recklessness are pleaded as material facts without particulars:  see Rules of the Supreme Court 1971 (WA) O 20 r 13(1)(a). However, where the allegation goes beyond actual knowledge or lack of knowledge and contends that the party concerned ought to have known something it implies the existence of facts and circumstances from which the requisite knowledge should have been acquired. Particulars of those facts and circumstances ought to be given: see Fox v H Wood (Harrow) Ltd [1963] 2 QB 601 at 604.

2. His Honour concluded that it was appropriate that the plaintiffs be required to provide particulars

   where the assertion goes beyond a state of mind and asserts (either expressly or by implication) that some other state of mind or things ought to have prevailed.  It is not a question of requiring the disclosure of evidence.  It is, though, a mechanism by which the relevance of any evidence that the plaintiffs wish to call at trial can be judged (301).

3. Smith v Littlemore explains why a party may be required to provide particulars of an allegation that another party ought to have known of a matter. It does not, in my view, establish as the obverse proposition that particulars of an allegation of actual knowledge will not be ordered. Order 20 r 13(4) RSC permits - and permitted at the time that Smith v Littlemore was decided ‑ the court to order particulars of knowledge on such terms as it thinks just. The effect of O 20 r 13(1) and r 13(4) is to modify the English rule of pleading that applied at the time that Fox v H Wood (Harrow) Ltd [1963] 2 QB 601 was decided ‑ that particulars of an allegation that a party held a particular state of mind could not be ordered: see Burgess v Beethoven Electric Equipment Ltd [1942] 2 All ER 658.

The DPP's position

1. I drew the parties' attention to the judgment of Owen J in Smith v Littlemore prior to the hearing of the application by Mr Catena and Mr Hebbard.  The DPP advised at the hearing of the application that particulars would be provided of the allegations that the accused ought reasonably to have known that the information referred to in each count on the indictment was not generally available and, if the information had been generally available, a reasonable person would have expected the information to have a material effect on the price or value of shares in Vision Systems.  The DPP was, in my view, right to make that concession.  However, as has been noted, the DPP declined to give further particulars of the allegation that the accused knew of those matters having regard to the reasons of Owen J in Smith v Littlemore.

2. The DPP has now provided the particulars that it indicated would be given.  However, Mr Catena and Mr Hebbard press their application for particulars of the allegations that they actually knew that the information was inside information.  That application is to be decided according to the principles relevant to determining whether any charge has been sufficiently particularised to fulfil the purposes identified by Buss JA in Smith and the Chief Justice in Scolaro.  As I have already indicated, I do not read Smith v Littlemore as establishing that a mere allegation of actual knowledge will necessarily be sufficient to satisfy those purposes.  There may be instances where further particulars of the matters relied on to make an allegation of actual knowledge are required.

Conclusion

1. I have concluded that the DPP is not required to provide further particulars of the allegations that Mr Catena and Mr Hebbard actually knew that the information the subject of the charges against them was inside information.  I have reached that conclusion having regard to the specificity with which the various counts on the indictment had been pleaded read with the definitions of 'inside information' and 'generally available' contained in s 1042A and s 1042C of the Act and the provisions of s 1042D relating to the circumstances in which a reasonable person who commonly traded in securities would take information to have a material effect on the price or value of the Vision System shares. 

2. Each count in the indictment pleads the particular date on which it is alleged the accused possessed the information that is the subject of the count. The information possessed at that time alleged is pleaded with considerable specificity. So, for example, count 1 of the indictment alleges that on 19 July 2006, Mr Catena contravened s 1043A(1)(d) of the Act in that he was a person who:

   (a)possessed information that 'there was a rumour that Vision Systems Ltd would be taken over' and 'that the price (payable per share in the takeover) was going to be about $2.20 (per share)' (the particulars of 'information' provided to the count);

   (b)actually knew that this information was not generally available ‑ that is, it consisted of information that was not readily observable or it had not been made known in a manner that would or would be likely to bring it to the attention of persons commonly investing in shares; and if it had been made known, a reasonable period for it to be disseminated amongst such persons had not elapsed nor did the information consist of deductions, conclusions or inferences made or drawn from readily observable information or information that had been known in a manner that would or would be likely to bring it to the attention of persons who commonly invested in listed shares;

   (c)also actually knew that a reasonable person would expect the information to have a material effect on the price or value of the Vision System shares because it would or would be likely to influence persons who commonly acquired listed shares in deciding whether or not to acquire or dispose of the shares.

3. It might be thought that there is some complexity about the definition of inside information and therefore, about the matters that it is alleged by count 1 of the indictment that Mr Catena knew.  However, that reflects the statutory definitions relevant to the alleged offence.  It does not mean that the count, as presently pleaded and particularised, does not inform Mr Catena of the particular acts and matters alleged as the 'foundation of the charge' (refer, Johnson v Miller, Dixon J (489)).  The specificity with which the information has been particularised means that it is not necessary for further particulars to be provided of the allegation of actual knowledge to 'avoid injustice being done'.

4. Subject to any admission that might be made, proof of the state of mind of the accused will rely on inferences drawn from the evidence.  In my view, the particulars sought by Mr Catena and Mr Hebbard would only elicit evidence ‑ presumably, in the form of a summary of those parts the evidence to be found in the prosecution brief that the DPP considered might be relevant to that issue.  The function of particulars is, among other things, to ensure that a charge is pleaded in such a way that the accused and the court will know whether any particular item of evidence is relevant.  It is not a function of particulars to require the prosecution to identify which parts of the prosecution case it considers to be relevant to any particular allegation pleaded in the indictment.