R v Dulhunty; R v Roach

[2015] NSWSC 1747

Supreme Court

New South Wales

• Summary available
• Amendment notes

Medium Neutral Citation:	R v Dulhunty; R v Roach [2015] NSWSC 1747
Hearing dates:	26 and 27 October 2015
Date of orders:	30 November 2015
Decision date:	30 November 2015
Jurisdiction:	Common Law
Before:	Bellew J
Decision:	See [115] and [116]
Catchwords:	CRIMINAL LAW – Sentence – Conspiracy – Manipulation of share price by two directors of a publicly listed company – Where offending involved multiple trades and substantial monetary investment – Whether the actions of another investor mitigated the offending – Where offenders were not motivated by immediate personal gain but would likely have derived benefit in the longer term – Where neither offender had any prior convictions – Where there was extra curial punishment in the case of each offender in terms of loss of career – Good prospects of rehabilitation in each case – No real likelihood of further offending – Expressions of remorse by each offender – Early plea of guilty in each case - Where counsel for each offender accepted that a sentence of imprisonment was warranted but submitted that each offender should be immediately released on a recognisance or considered for some other sentencing option which did not require actual full time custody – Where Crown submitted that any sentence of imprisonment which was imposed should require a period of actual full time custody to be served by each offender – Where offending was serious and sustained over a long period - Necessity to maintain the integrity of financial markets – Importance of general deterrence – Term of imprisonment imposed in each case requiring a period of actual custody to be served
Legislation Cited:	Corporations Act 2001 (Cth) Criminal Code Act 1995 (Cth Crimes Act 1914 (Cth)
Cases Cited:	Cameron v R [2002] HCA 6; (2002) 209 CLR 339 Cappis v R [2015] NSWCCA 138 Danial v R [2008] NSWCCA 15 DPP (Cth) v Gow [2015] NSWCCA 208 Hili v R; Jones v R [2010] HCA 45; (2010) 242 CLR 520 McMahon v R [2011] NSWCCA 147 Pearce v R [1998] HCA 57; (1999) 194 CLR 610 R v Boulden [2006] NSWSC 1274 R v Hinchcliffe [2013] NSWCCA 327 R v Jacobson [2014] VSC 592 R v Kennedy [2000] NSWCCA 527 R v Olbrich [1999] HCA 54; (1999) 199 CLR 270 R v Pogson, Lapham and Martin [2012] NSWCCA 225; (2012) 82 NSWLR 60 R v Storey [1998] 1 VR 359 R v Zerafa [2013] NSWCCA 222; (2013) 235 A Crim R 265 Tyler v R; R v Chalmers [2007] NSWCCA 247; (2007) 173 A Crim R 458
Category:	Principal judgment
Parties:	Regina - Crown Peter Roach - Offender Robert Venour Dulhunty - Offender
Representation:	Counsel: S Rushton SC - Crown H Dhanji SC and R Pontello - Offender Roach M Thangaraj SC – Offender Dulhunty   Solicitors: Commonwealth Director of Public Prosecutions - Crown Charnock O’Brien – Offender Roach Laxon Lex - Offender Dulhunty
File Number(s):	2014/235633; 2014/235644
Publication restriction:	Nil

Judgment

INTRODUCTION

1. The offender Robert Venour Dulhunty (“Dulhunty”) has pleaded guilty to an indictment alleging the following:

“Between about 1 May 2007 and about 12 December 2010 at Sydney in the State of NSW, and elsewhere, conspired with Ge Wu and (Roach) to commit an offence contrary to s. 1041A and s. 1311(1) of the Corporations Act 2001 (Cth), namely to take part in, or carry out, either directly or indirectly, two or more transactions that would have the effect of, or would be likely to have the effect of, creating or maintaining an artificial price for trading in financial products on a financial market operated in this jurisdiction, namely the price for shares in Healthzone Limited (“Healthzone”) contrary to s. 11.5 of the Criminal Code (Cth) and s. 1041A and s. 1311 of the Corporations Act 2001 (Cth).”

2. The offender Peter Roach (“Roach”) has pleaded guilty to an indictment alleging the following:

“Between about 1 May 2007 and about 12 December 2010, at Sydney in the State of NSW, and elsewhere, conspired with Ge Wu and Robert Dulhunty to commit an offence contrary to s. 1041A and s. 1311(1) of the Corporations Act 2001 (Cth), namely to take part in, or carry out, either directly or indirectly, two or more transactions that would have the effect of, or would be likely to have the effect of, creating or maintaining an artificial price for trading in financial products on a financial market operated in this jurisdiction, namely the price for shares in Healthzone Limited (“Healthzone”) contrary to s. 11.5 of the Criminal Code (Cth) and s. 1041A and s. 1311 of the Corporations Act 2001 (Cth)” (count 1);

“Between about 13 December 2010 and about 7 November 2011, at Sydney in the State of NSW, and elsewhere, conspired with Ge Wu and Robert Dulhunty to commit an offence contrary to s. 1041A and s. 1311(1) of the Corporations Act 2001 (Cth), namely to take part in, or carry out, either directly or indirectly, two or more transactions that would have the effect of, or would be likely to have the effect of, creating or maintaining an artificial price for trading in financial products on a financial market operated in this jurisdiction, namely the price for shares in Healthzone Limited (“Healthzone”) contrary to s. 11.5 of the Criminal Code (Cth) and s. 1041A and s. 1311 of the Corporations Act 2001 (Cth)” (count 2).

3. The charge against Dulhunty carries a maximum penalty of 5 years imprisonment, or 2000 penalty units, or both. The first of the charges against Roach carries the same maximum penalty. The second of the charges against Roach carries a maximum penalty of 10 years imprisonment, or 4500 penalty units, or both. The legislative amendment which increased the maximum penalty explains why there are two charges laid against Roach. However it will be apparent that those two charges cover one continuing conspiracy.

4. The sentence hearing in respect of the co-offender Ge Wu (“Wu”) was originally listed to take place at the same time as the hearings in respect of the present offenders. However following application made by senior counsel for Wu, to which the Crown consented, those proceedings were adjourned. Wu will be sentenced at a later date.

THE FACTS

5. With the consent of senior counsel for each of the present offenders the Crown tendered a lengthy statement of facts which was in the following terms (although Annexures A and B to those facts have not been reproduced in this judgment):

OUTLINE OF OFFENCES

1. The offences in this matter relate to a single conspiracy to commit market manipulation regarding the price for shares in Healthzone Ltd (Healthzone), contrary to s 11.5 Criminal Code (Cth) (the Criminal Code) and ss 1041A and 1311(1) Corporations Act 2001 (Cth) (the Corporations Act).

2. Ge (also known as Michael) Wu (Wu), Robert Venour Dulhunty (Dulhunty) and Peter Roach (Roach) (together, the Offenders) were directors of Healthzone. The Offenders agreed to create or maintain an artificial price for shares in Healthzone, from time to time, as required, to support the corporate activities of Healthzone (the agreement).

3. The conspiracy commenced around six months after Healthzone became a publicly listed entity on the Australian Securities Exchange (the ASX) on 6 November 2006 and ended when Healthzone was placed in external administration on 17 November 2011.

4. After Healthzone was placed in administration, ASIC obtained a copy of the Healthzone email server, which contained extensive written communication documenting the involvement of the Offenders in the conspiracy.

5. In summary:

•   Between around 1 May 2007 and around 30 October 2008, Wu and Dulhunty used five trading accounts to carry out 142 trades, involving the purchase of 456,501 shares and an overall investment of $236,629 (the First Period of Offending).

•   Between around 10 November 2008 and around 25 June 2010, Wu, Dulhunty and Roach used eight of their own trading accounts, and used or requested third parties to operate a further 10 trading accounts, including by giving trading instructions to those persons. In total, there were 235 trades, involving the purchase of 1,340,923 shares and an overall investment of $442,846 (the Second Period of Offending).

•   Between around 9 August 2010 and 17 November 2011, Wu and Roach used or requested third parties to operate six trading accounts, including by giving trading instructions to those persons. In total, there were 260 trades, involving the purchase of 2,101,654 shares and an overall investment of $711,122 (the Third Period of Offending).

6. A summary of all trades conducted in furtherance of the conspiracy is set out in Annexure A, and a summary of the volume of shares traded and overall investment is set out in Annexure B.

7. In total, there were 637 trades, involving the purchase of 3,899,078 shares and an overall investment of $1,390,597.

HEALTHZONE LIMITED

8. Healthzone, incorporated on 8 March 2006 and originally known as Natural Health and Beauty Limited, was an Australian company engaged in the distribution and sale of various health products.

9. Between 6 November 2006 and 17 November 2011, following an Initial Public Offering (IPO), Healthzone shares were publicly listed and traded on the ASX under the code “HZL”.

10. As part of the IPO, Healthzone issued a prospectus on 21 September 2006 for an offering of 8,000,000 shares at $0.50 per share. The new shares were to rank equally with 22,923,469 shares already issued.

11. Prior to the IPO, the largest shareholders of the 22,923,469 existing shares in Healthzone were:

•   Wu: 9,948,968 shares (43.4%).

•   Guoguang Tao (the Head of China markets): 8,158,154 shares (35.6%).

•   Dulhunty’s company Development Capital Corporation Pty Ltd (DCC): 1,790,173 shares (7.8%).

12. Each of these shareholders held more than 5% of the issued share capital and were therefore "substantial shareholders" and subject to certain disclosure requirements in relation to changes to their shareholdings.

13. Dulhunty and numerous family members also personally held a small number of existing shares (in total approximately 50,000 shares).

14. As part of the IPO, the ASX Listing Rules required at least 400 shareholders holding a parcel of securities with a value of at least $2,000 as a condition of admission to the official list. Email correspondence between Dulhunty and Wu referred to difficulties in attaining the minimum shareholder number (or “spread”) during the IPO period.

15. Accordingly, a large number of Wu's associates and family members subscribed to the Healthzone IPO, including both Wei Wang and Huanzhong Wang, referred to in more detail below.

16. The IPO was managed and underwritten by Intersuisse Ltd (Intersuisse). Andrew Sekely worked for Intersuisse during the First, Second and Third Periods of Offending and, as the broker for Wu, Wei Wang and DCC, was referred to in various communications between the Offenders.

17. After the IPO, Healthzone on two occasions conducted acquisitions of businesses and companies where the purchase was partly funded through the issue of Healthzone shares to the vendors. Healthzone acquired Health Minders Pty Ltd (HMPL) in October 2007 and Jasham International Pty Limited in June 2008. Healthzone had the election to pay 14% of the purchase price by cash or shares. Shares were issued to vendors based on the performance of the businesses and long term weighted average price of Healthzone shares after the businesses were acquired.

18. Healthzone shares were infrequently traded and illiquid stock, and accordingly small trades could cause price movements upwards or downwards. From time to time, the price for Healthzone shares faced downward pressure from selling shareholders.

19. At various times between late 2007 and mid-2010, the Offenders referred to a belief that one such investor in particular, Russell Goodman (Goodman), was exerting downward pressure on the Healthzone share price by placing Sell orders for improper purposes.

20. [Repeat of paragraph 19].

THE OFFENDERS

Wu

21. Wu was one of the founding directors of Healthzone and held that office until Healthzone was placed in external administration on 17 November 2011.

22. Wu has a Bachelor of Commerce and a Masters of Commerce from the University of Western Sydney. He was a justice of the peace between 7 January 2009 and 6 January 2014. According to the Healthzone annual report, he was a member of the Australian Institute of Company Directors. He was also a director of a number of Australian companies, including MGR International Pty Limited (MGR), which was incorporated on 8 April 2004 and received consultancy fees for services it provided to Healthzone. According to the Healthzone annual reports, Wu received remuneration that included an annual salary of $60,000 over the 2007-2011 financial years. He was also entitled to bonus payments.

23. On 12 June 2009, Wu opened a share trading account with Hub 24 in the name of MGR. Wu was the only person authorised to trade on that account.

24. Wu also operated an Intersuisse trading account, in his name, which at various times was number 163116, 84838 and N84838. Wu lodged forms with the ASX disclosing trading in his own name.

25. As at 17 November 2011, Wu’s shareholding in Healthzone was in the order of 8.5% of the issued share capital.

Roach

26. Roach became a director of Healthzone on 4 May 2007. He was appointed the Executive Chairman on 1 November 2007, the Managing Director on 1 January 2008, and the Executive Chairman and Chief Executive Officer on 1 July 2010. He held those offices until Healthzone was placed in external administration on 17 November 2011. According to the Healthzone annual reports, Roach received remuneration that included a salary and consultancy fees, amounting to $1,195,674 over the 2007-2011 financial years. He was also entitled to bonus payments, as well as allotments of shares and options.

27. According to the Healthzone 2007 Annual Report, Roach was a member of the Australian Institute of Company Directors. Prior to his appointment to the board of Healthzone, Roach had more than 20 years’ experience in the Australian health food industry and had been a director of a number of private Australian companies. Roach had no previous experience managing or being on the board of a publicly listed Australian company.

28. Roach operated an E*Trade trading account, in his name, which was number 3201093, opened on 26 May 2009. Roach lodged forms with the ASX disclosing trading in his own name.

Dulhunty

29. Dulhunty is the sole director and secretary of DCC, a company providing corporate finance and advisory services and which in 2006 became a consultant to Healthzone. From 22 November 2002, DCC held an Australian Financial Services Licence, number 221667.

30. Dulhunty was a lecturer in corporate finance for the Masters of Finance Program at the University of Technology Sydney. He was also a Chartered Accountant, a member of the Australian Institute of Company Directors, and has a Masters of Business Administration, a Bachelor of Laws with Honours and a Bachelor of Commerce.

31. Through DCC, Dulhunty was engaged by Healthzone for its IPO and continued as a consultant in relation to its capital raising and business acquisition activities. Following the IPO, DCC was one of the largest shareholders in Healthzone, with 1,790,173 shares (7.8%).

32. DCC received fees from Healthzone based on a percentage of funds raised or a percentage of the value of successful acquisitions. The DCC Capital Raising Mandate (relating to work performed on capital raisings pursued by Healthzone in 2010) set out a weekly fee of $5,000 and a net structuring fee of 2% of all funds raised together with out of pocket expenses. The DCC Business Acquisitions Mandate (relating to work carried out in relation to the various business acquisitions made by Healthzone) also specified a weekly fee of $5,000 and a structuring fee of 7.5% of the total consideration paid. DCC invoiced Healthzone as follows: $771,375 in 2007 in relation to the acquisition of HMPL, $418,000 in 2008 in relation to the acquisition of Jasham International Pty Limited, $220,000 in 2009 in respect to Part B consideration to HMPL and a total of $346,500 in relation to various capital raisings in 2010.

33. Dulhunty became a director of Healthzone on 4 May 2007 and held that office until 27 March 2009. He continued his business association with Healthzone and its directors until around the middle of 2010. He ceased his involvement with Healthzone after a dispute with the company. DCC subsequently claimed to have not received payment from Healthzone in respect of some structuring fees and further that it had voluntarily paid more than $100,000 of its own money for legal and accounting fees on behalf of Healthzone, waived more than $200,000 of fees that it was entitled to, and agreed to a settlement discount of $280,000 in relation to fees due from 2009 and 2010.

34. Dulhunty operated a number of trading accounts in his name and that of his company, DCC, including a Commonwealth Securities Limited (CommSec) trading account number 487298 in his own name and for which he was the only person authorised to trade.

35. DCC had various trading accounts which included: Novus Capital Limited (Novus) account number 123489; Tricom Equities Limited (Tricom) account which at various times had number 24576/143414; an Intersuisse account which at various times had number 163137/84860/N84860 and a CommSec account number 4243736. Dulhunty was the only person authorised to trade on the DCC trading accounts. Contrary to ASX requirements, other than an initial notice of director’s interests, Dulhunty never lodged any form as a director of Healthzone disclosing that he, either personally or through entities he controlled, had purchased or sold Healthzone shares.

OTHER RELEVANT PERSONS

36. The following persons, or their share trading accounts, were used by the Offenders in furtherance of the conspiracy.

Wei Wang

37. Wei Wang is a cousin of Wu. A trading account which at various times was numbered 163185, 84907 and N84907 was set up in his name with Intersuisse in 2006 and used to trade in Healthzone shares (the Wang Intersuisse Account). Only Wei Wang was authorised to trade on this account.

Huanzhong Wang

38. Huanzhong Wang was a founding director of Healthzone until he resigned on 15 July 2006. A CommSec trading account number 2285829 in the name of Huanzhong Wang was used to trade in Healthzone shares.

Michael Jenkins

39. Michael Jenkins (Jenkins) (also referred to in emails as "MJ2") was employed by Healthzone from 2008 to 2011, initially as the Chief Financial Officer (CFO) and Company Secretary. In August 2009 he became a director of Healthzone, until he resigned in November 2010. Jenkins then reverted to being the CFO and Company Secretary until he left Healthzone in March 2011.

40. On 24 August 2007 Jenkins opened a CommSec online trading account in the name of Mrs Yvonne Jenkins and Mr Michael Jenkins, account number 2299724 (the Jenkins CommSec Account).

Bernard Tynas

41. Bernard Tynas (Tynas) (referred to in emails as "BT", "Mr X" and "Bernie") worked at Healthzone from 2005 to 2007 as a General Manager for Retail.

42. On 14 January 1998, Tynas opened a share trading account with CommSec, account number 140534, and was the only person authorized to place trades on the account (the Tynas CommSec Account).

Mary Ann Harper and Andrew Harper

43. Mary Ann Elizabeth Harper (Mary Ann Harper) is Roach’s sister. Her husband is Andrew John Harper (Andrew Harper).

44. On 11 December 1999, Mary Ann Harper had opened a CommSec share trading account, number 493362 (the Harper CommSec Account) (also referred to in emails as the "Mary Account"). CommSec closed the Harper CommSec Account on 18 March 2010. Healthzone shares held in this this account were transferred to the Vringer E*Trade Account in January 2011.

Ellen Vringer and Adrian Vringer

45. Ellen Vringer was Roach’s Personal Assistant for 11 years. Her husband is Adrian Vringer.

46. On or about 20 January 2010, Adrian Vringer opened a CommSec share trading account, number 4326142 (the Vringer Commsec Account). This account was closed on 28 May 2010.

47. On 11 May 2010, Adrian Vringer opened a share trading account with E*Trade Account, number 4362043 (the Vringer E*Trade Account). Both the CommSec and E*Trade Accounts were referred to in emails as the "Trumpy Account".

Brett Pattinson and Lorena Sigala

48. Brett Pattinson (Pattinson) (also referred to in emails as "BP" and "Z") owned a company called BOD, which was taken over by Healthzone in 2006 before the IPO. Pattinson’s wife is Lorena Sigala.

49. Pattinson went to work for Healthzone as a contractor to oversee the BOD brand from 2006 to 2010.

50. Pattinson traded on a Macquarie Equities share account in the name of his wife and purchased Healthzone shares on this account. He also asked a friend, Perry Andronos to purchase Healthzone shares on his behalf.

Perry Andronos

51. Perry Andronos (Andronos) was a friend of Pattinson’s for over 30 years. On 23 May 1997, Andronos opened a CommSec share trading account number 97035 (the Andronos CommSec Account). Andronos purchased Healthzone shares on this account in accordance with Pattinson's instructions.

Dennis Limbert

52. Dennis Limbert (Limbert) (also referred to in emails as "DL" and "Dennis") was employed by Healthzone as a Marketing Communications Manager from 2007 to 2012.

53. On 20 April 2010 Limbert opened a CommSec share trading account number 4343318 (the Limbert CommSec Account) and purchased Healthzone shares through this account.

Matthew Jinks

54. Matthew Jinks (Jinks) (also referred to in the emails as "MJ1") was an employee of Healthzone and looked after warehousing and suppliers from 2008 to 2011.

55. On 20 April 2010 Jinks opened a CommSec share trading account number 4341683 in the name of his wife Shiona Heather Frame (the Frame CommSec Account) and purchased Healthzone shares on this account.

FIRST PERIOD OF OFFENDING, MAY 2007-OCTOBER 2008: WU AND DULHUNTY

Overview

56. In the First Period of Offending, Wu and Dulhunty took action whenever they deemed it necessary to create or maintain an artificial price for Healthzone shares at a level they believed was required in the circumstances. They regularly monitored the price for Healthzone shares as listed on the ASX, often on a daily basis.

57. Wu and Dulhunty communicated with each other, first to inform the other of or to discuss the status of the current share price, and then to agree upon a strategy or plan for trading with the intention of creating or maintaining the price for Healthzone shares at an artificial level.

58. Once Wu and Dulhunty agreed upon a strategy, they would seek to ensure that the necessary trading in Healthzone shares occurred in order to create or maintain the artificial price. The trading was conducted by Dulhunty through his own trading accounts or through his DCC accounts and by Wu operating third party accounts or asking family members to trade based on his instructions.

59. Once the various instructions to buy Healthzone shares were executed, they often had the effect of creating or maintaining an artificial price for Healthzone shares, as intended by Wu and Dulhunty. On other occasions, despite their actions, the share price fell or stayed the same. The pair monitored the effects of their trades and kept in communication with each other so that each was aware of the fact that the planned trading occurred and whether the price moved towards or had reached the desired level.

60. On a number of occasions, Wu and Dulhunty sought to create or maintain an artificial price for Healthzone shares after a "positive" ASX announcement, for example on 8 October 2007 (HMPL acquisition), 31 October 2007 (Appendix 4C Quarterly Report), 1 November 2007 (Roach appointed as Executive Chairman), 13 November 2007 (Integration and growth update), 27 November 2007 (following reinstatement and announcement of $6 million placement), and 19 December 2007 (acquisition of Atherton International).

61. Throughout the First Period of Offending from May 2007 to October 2008 there were 142 trades conducted pursuant to the agreement, as follows:

•   Dulhunty used three trading accounts in his name or in the name his company DCC to execute 102 trades, involving the purchase of 370,000 shares and an overall investment of $162,382.

•   Wu used, or asked family members to use, by providing trading instructions, two trading accounts in the names of Wei Wang and Huanzhong Wang. There were a total of 40 trades, involving the purchase of 149,501 shares and an overall investment of $74,248.

62. Examples of the communications and trading for this period are set out below.

5 to 8 May 2007

63. Between 1 January 2007 and 3 May 2007, the price of Healthzone shares dropped from a closing price of 65 cents to a closing price of 34 cents. On 5 May 2007, Dulhunty sent an email to Wu setting out reasons why they should get the price of Healthzone shares up on Monday after a number of company announcements:

“We need to get the share price up straight away on Monday in order to:

* Make the purchase of DS shares at 50c easy for you

* Build momentum quickly upwards (versus downwards)

* Give NAB comfort

* Boost value of shares for potential scrip / mixed scrip acquisitions (MIA, HMPL, Cronulla, more Wild Food)

* Shares to be 50c within 3 weeks for roadshows

* Once shares are 50c, then HZL can use media

* Provide strong defence to any DS potential actions – evidence that the shares dropped with him and spiked upon DS resignation

* Show DS how he harmed the company to discourage DS = as above

* Make my discussions with Intersuisse from late Monday very easy and very compelling for them to get behind HZL and create a market

There’s very good reasons for people we know to buy shares on Monday (after the Wild Food and GVR announcements are posted at 9am on Monday)

* Per the last interim announcement, the FY07 forecast is at the higher end of the range (i.e. $1.9m)

* The intrinsic value of shares at a 10x to 12x PE (still big discount to 16x market) is 60c to 70c (January price)

* 3 positive announcements on Monday

* Roadshows to core brokers to commence in 2-3 weeks

* Hotel ball room roadshows (1 Sydney / 1 Melbourne) to all brokers and institutions in 6-8 weeks

* Media when shares above 50c

* There will never be a better buying opportunity

* For HZL staff and associates, will support growth

I think we can drum up $70k to $130k buying support as follows:

Low       High

DCC    $10,000    $20,000 – Me

DCC family    $10,000    $15,000 – Me

Wu    $10,000    $20,000 – You

Wu family    $10,000    $15,000 – You

Tynas    $4,000    $8,000 – Me

Roach    $10,000    $20,000 (use proceeds of $75k) – Me

Pattinson    $3,000    $6,000 – Me

Dare    $3,000    $6,000 – Me

Tao    $10,000    $20,000 – You

Other    MW to advise

Inside info:

* As long as we stick to the fundamentals outlined above, there are no issues with inside buying

* There will be regular announcements (fortnightly) which will enable people to sell shares immediately after announcements

Next

* What do you think?

* If OK, I will start drumming up people on my side to buy shares after the Monday announcements

* If OK, you start drumming up people on your side to buy shares after Monday announcements

* Hopefully, shares will get to 50c within 2 weeks"

64. Wu agreed. They then exchanged emails regarding the amount of money they could provide to support the Healthzone share price. On 6 May 2007, Wu sent an email to Dulhunty saying that he had limited cash available to trade. Dulhunty sent an email to Wu, stating: “Me too, but if we can execute 'buy' at Monday price and 'sell' at 50c, the cash should be coming back soon. WE should be doing announcements every couple of weeks so I'm hoping we will be able to sell soon. If the price goes above 50c, then will alleviate your obligation to find cash for DS shares. See what you can do. The more we do on Monday, the better for the company. If we can get some early momentum, then we should be able to get Intersuisse, Sheng Ong and others to keep the price going up...but wil need some early fast movement on Monday. PS: you better send me your account details so I can transfer the cash” Later that day, Dulhunty sent an email to Wu in which he set out what he proposed to tell Andrew Sekely of Intersuisse about purchasing HZL shares. Wu replied: “I think this looks alright but we have to make sure AS won't have a feeling that we are buying shares just because we want to lift up the price to maintain a steady trend...we need him to believe we will have lots of excited news/acquisitions happening down the track.”

65. On 7 and 8 May 2007, Dulhunty purchased Healthzone shares using his DCC accounts with Intersuisse and Tricom and his CommSec Account, causing the share price to rise on 7 May from 34c to 43c, and on 8 May from 43c to 44c, in trades having a total value of approximately $25,745.

26 to 27 July 2007

66. On 26 July 2007, the price of Healthzone shares dropped from a previous closing price of 45 cents to 38 cents.

67. During the day, Dulhunty and Wu corresponded by email about increasing the Healthzone share price, with Dulhunty stating at 10.08am: “Know anyone that could buy 1000-2000 shares at 46c?” and Wu responding: “Bernie?...joking…A bit hard because the guy I know went to Ski”. After the close of trading, Dulhunty noted "Shares down 7c to 38c – not a good look" and advised: "Need someone to start the shares on a positive note to calm HMPL". Wu replied: "You didn't see this. Already arranged the support for 45c as an opening price!!...But he's not sure if he can be in front of computer at closed to 4pm as he'll be tied up from 1pm." Wu and Dulhunty exchanged emails discussing arranging support for the close at 4pm, but they were not involved in any trades on that day.

68. On 27 July 2007, Wu sent an email to Dulhunty, stating: "My mate actually bought 2000 shares today........", confirming a trade made on a CommSec Account in the name of Huanzhong Wang which had increased the price of Healthzone shares from 38c to 41c. After this, more shares were sold by other shareholders at 38 cents and the closing price of 38 cents was 7 cents below the previous closing price of 45 cents on 26 July 2007.

8 to 9 October 2007

69. On 8 October 2007, Healthzone announced the completion of its acquisition of HMPL.

70. On 9 October Dulhunty sent out emails to Wu and others trying to find out who was selling 10,000 shares at 46c, but was not able to find out.

71. At 10:31, Dulhunty placed a Bid for 2,000 shares at 49c on his CommSec Account. It traded immediately and in full, increasing the price of Healthzone shares from 46c to 49c.

72. At 11:50 Dulhunty sent an email to Wu with the subject "See below: 294,000 shares today: price now 45c (down 4c). Not too bad, not too good. Will buy some to get price to 49c."

73. At 12:01, after a price fall, Dulhunty placed another Bid for 2,000 Healthzone shares at 49c on his CommSec Account. It traded immediately and in full, increasing the price of Healthzone shares from 45c to 49c, restoring the price to 49c. The trade set the closing price for Healthzone shares at 49c, which was the same as the closing price on the previous day.

74. There was no further trading in Healthzone shares after 12:01, but Dulhunty and Wu continued to watch the market and corresponded by email about Dulhunty's trade and the lack of actual volume in Healthzone shares.

75. In the evening, Goodman sent an email to Wu in which he made his first approach to Healthzone, offering to market its shares to his network of investors. He also asked if Healthzone’s major shareholders were interested in selling their shares. Dulhunty then engaged in discussions with Goodman on behalf of Healthzone. In November 2007, Goodman said that 10 million new Healthzone shares could be placed with his network at a price ranging from 60c to 75c per share. The Offenders resolved to issue 10 million shares to Goodman and his investors at 60c per share, which occurred in December 2007. Goodman also encouraged the Offenders to buy shares to prove their confidence in Healthzone.

19 December 2007 to 16 January 2008

76. On 19 December 2007 at 9:22, Healthzone announced the acquisition of Atherton International Pty Limited. At 9.45am Dulhunty sent an email to Wu and Roach and said: “RG called AGAIN this morning … Asked AGAIN if we are buying shares today.” At 11.38am, Dulhunty sent an email to Wu and Roach and said: “Can you guys buy some shares today? RG has been hassling for 2 weeks”.

77. On 21 December 2007, the previous closing price of Healthzone shares was 70 cents and the opening trade was 66 cents. Dulhunty sent an email to Wu and said: "Share trading should be very light over the next few days. We might want to consider getting in and buying some shares with light volume to get price closer to 75c. Would be good to get it up before 31 Dec for half year accounts + AFR tables."

78. Dulhunty traded on his CommSec Account and increased the price for Healthzone shares from 66c to 70c and set the closing price, which was the same as the closing price on the previous day.

79. At 15:31, although Wu replied to Dulhunty's email "Ok, happy to buy some over the next few days", it was Dulhunty who did the trading on his CommSec Account and told Wu to keep an eye on the share price.

80. On 24 December, the previous closing price of Healthzone shares was 70 cents. There were 30,000 shares sold at 60 cents. According to a subsequent analysis of trading data, the seller was an investor who was part of Goodman’s initial placement of shares, but Dulhunty and Wu were not aware of that fact at the time and did not refer to any belief at the time that the trade was associated with Goodman. There is no evidence that the investor colluded with Goodman in relation to the sale. At this time the communications between Goodman and the Offenders indicated a positive relationship and that Goodman was buying shares in Healthzone. Dulhunty entered two Bids on his CommSec Account, which traded in three lots and increased the price of Healthzone shares from 60c to 70c and then from 72c to 73c. Market participants bought 143,000 shares at prices from 70c to 73c.

81. In an email dated Sunday 23 December Dulhunty told Wu: "Been doing some buying....now 73c." On 3 January 2008, Dulhunty and Wu discussed further trades to raise the share price to 79 cents. Dulhunty stated: “Now just 9,000 shares will do it” and asked Wu when he would be buying shares. Wu replied: “I don't use my a/c to buy but my mate who has been instructed by me. Will follow up with him now”. On 16 January 2008, Dulhunty and Wu discussed who could be used for a further purchase of Healthzone shares, with Dulhunty stating to Wu: “UP to you. If BT, then make sure he keeps his mouth shut”.

11 February to 4 March 2008

82. On 11 February 2008, Dulhunty sent an email to Wu with the subject “Need some volume through HZL”, stating: “3-4 days a week until the shares flow by themselves. If there is no activity, people will dump…whether good news or bad news….just to get out”. Wu replied: “OK. Will try to support say up to 3 weeks (ie. 20k shares/week) but somehow can I receive some reasonable reimbursement as: during the last 6 months, I’ve been asked my mates to purchase the shares (for me but under different titles) and I’ve a large bill due to them and need to pay soon ($120k) just for these shares purchased in the past”. On 28 February 2008, Dulhunty sent an email to Wu stating: “Need to have buyers/volume lined up for Monday morning = first momentum after announcement Will need to work on it over weekend. We will also be able to buy directly then”. Wu replied: “I have been buying indirectly although not much. How many required for today? On blackberry”. On 29 February 2008 Healthzone released its half yearly results. On 2 March, a Sunday, Dulhunty sent an email to Wu and said:

"We’ll need to support shares tomorrow.

I plan to directly commit $5k to $10k

How much can your people commit?

Target = price of 65c (no less) to 70c (no more)"

83. Later Dulhunty sent details of the current sells to Wu, stating:

"Current sells are at:

0.640 2,000

0.690 11,000

0.700 10,000

0.850 32,338

I will get in early with 3000 shares to get price to 0.69.You will then need to do around 1,000 shares an hour in the 69 to 70 range (i.e. 6,000 shares). Day 1 after announcement is most important. Keep rest of ammo until the end of the day + tomorrow."

84. Wu replied to Dulhunty’s email, stating: "OK, will keep an eye on and standby all day tomorrow." At 7.21pm, Dulhunty separately sent an email to Roach (who was not yet an offender), stating: “Are you able to buy $5k to $10k of HZL shares tomorrow? Day 1 after half year profit important to set momentum of the shares. If positive, then interpreted positively. Also, do you think that MB and CF would be willing to buy some shares over time with their pay rises? You’d think so and people like RG would expect management to want shares.”

85. On 3 March, the previous closing price was 64c. At 8.56am, Dulhunty sent an email to Wu, stating:

“Seller profile has changed to the following:

0.640 18,544

0.650 8,120

0.690 11,000

Suggestions:

- I buy 2,000 at 64

- you buy 1,000 each hour from 11am at market ONLY if price is 64 or more

- don’t buy any below 64

- I do the closing bid at 3.50pm.”

86. Wu responded: “Ok”. At 8.59am, Dulhunty sent an email to Wu, stating: “Put in an open bid now for 3000 shares before market at 64c I have done one at 65c”. At 9.03am, Dulhunty sent an email to Roach, stating: "Any chance of putting in a pre-market bid order with your broker for say 2,000 to 10,000 shares at 65c. Would be ideal to have order on screen asap before market opens.” At 9:27am, Roach responded: "I have a Sanford account. I have just been redirected to Commsec and my ID is not working and can't access my account. Problem has been logged however can't lodge a premarket bid unless fixed before 10am. Unlikely as they say there has been much issue with Sanford customers and I may have to re-register Commsec."

87. Later that day, Dulhunty sent an email to Roach titled “shares down”, and asked: “Was there anything that RG said/indicated relevant to this?” Roach reported on a conversation with Goodman about his concerns for the operation of Healthzone and seeking more involvement in the company. Dulhunty responded: “Looks like he’s keen to find a life boat / exit. Might be better to keep RG stuck in HZL with no way out. If he is half out, then could burn price. If stuck, then will do what he can to make shares stay up.”

88. During the course of the day Dulhunty and Wu exchanged emails about when to trade.

89. Dulhunty placed Bids on his CommSec and DCC's Tricom Accounts and there were also Bids placed on the Wang Intersuisse Account, following phone calls by Wu to Intersuisse, which traded at 10:04 at 64c. After a price decrease to 60c, Dulhunty traded again on his CommSec Account with a Bid for 2,000 Healthzone shares at 64c which traded immediately and increased the price of Healthzone shares to 62c.

90. Within twenty minutes of another price decrease to 60c, Dulhunty entered another Bid for 1,000 Healthzone shares at 64c on his CommSec Account. The Bid traded immediately and in full through two price levels of orders increasing the price again from 60c to 62c. The trade set the close at 62c, which was 2c below the previous closing price.

91. After this trading Dulhunty sent an email to Wu with details of his monitoring of the Healthzone share price including:

"Just got some more to keep up at 62c. Need to keep eye on shares"; and

"Can you give me a call on 3:30pm to see what actions (how many shares) is needed as I'm not online at the moment."

92. At the close Dulhunty sent an email to Wu telling him to “save his bullets” for tomorrow. According to a subsequent analysis of trading data, one of the sellers during the day was an investor who was part of Goodman’s initial placement of shares, but Dulhunty and Wu were not aware of that fact at the time and did not express a belief at the time that Goodman was responsible for the trade. There is no evidence that the seller colluded with Goodman in relation to the sale. At 4.16pm, Wu sent an email to Roach and Dulhunty, stating: “Are you guys happy for me to call Han Lee? RG is concerned he will start selling down and says he is big on relationship and a puppy with his questions”. Roach reported on a conversation with Han Lee, to which Dulhunty replied: “Nice work …and very funny Maybe RG needs you as a front man to build his own credibility At least our shares are still above IPO issue price + placement price despite massive share market crash Wouldn’t be the same for many other companies Need to be careful of RG. Will be seeking to exert pressure to suit his needs (i.e. not issue shares), which may be inconsistent with best interests of HZL”.

93. On 4 March Dulhunty sent Wu an email and told him: "Put in opening order asap for 2000 shares at 62c before sellers drop price".

94. Wu made a call to the broker Intersuisse and approximately 20 minutes later a Bid for 2,000 Healthzone shares at 62c was entered on the Wang Intersuisse Account. The Bid traded at 10:04 and decreased the price of Healthzone shares from 62c to 61.5c, due to the entry of a late Ask.

95. At 11.46am, Dulhunty sent an email to Wu, stating: “6000 at 62 would be good To prevent sell orders dropping to 60”. Wu replied “Will get my mate to get in now” and then reported “Instructed my mate to buy 6000”. At 1.15pm, Dulhunty noted “Hasn't happened...can you go direct?” Wu replied: “Done...” and six minutes later a Bid was entered on the Wang Intersuisse Account for 6,000 Healthzone shares at 62c, which traded in full through two price levels, increasing the price for Healthzone shares from 61.5c to 62c. The trade set the close and the price of Healthzone shares closed at the previous closing price of 62c.

23 to 24 April 2008

96. On 22 April 2008, the closing price of Healthzone shares dropped from 53c to 46.5c.

97. The next day, Wu sent an email to Dulhunty saying:

"I've been watching the shares today though without action yet. How many are needed to bring it back to say 55c?....Will consider this tomorrow or a better timing?...."

98. The lowest Ask was for 500 shares at 55c, which was 3.5c below the next lowest ask of 58.5c. At 15:10 Dulhunty traded on his DCC Tricom Account with a Bid for 500 Healthzone shares at 55c which increased the price for Healthzone shares from 46.5c to 55c. The trade set the close. Dulhunty sent an email to Wu which said: "Currently 55c with 500 shares volume" and included details of the next Asks: “Next shares - 6000 at 58.5c - 9370 at 59c – 10,104 at 59.5c”. Wu replied "Better …I will see what I can do."

99. On 24 April the Wang Intersuisse Account placed a Bid for 1,000 Healthzone shares at 58.5c which traded, increasing the price for Healthzone shares (set by Dulhunty the previous day) from 55c to 58.5c. The trade set the close.

100. Wu confirmed the trade on the Wang Intersuisse Account by sending an email to Dulhunty with the subject "1000 shares ordered at 58.5c" and Dulhunty replied: "Good, has gone through".

25 June to 3 July 2008

101. On 25 June 2008, at 8:22am, Dulhunty sent an email to Wu, stating: “Although the closing price of HZL shares was 50c yesterday, the opening bid if 45c and opening offer (5,000 shares) is 46c. Will need to have at least 5,000 shares ready to clear out the opening offer if someone hits the price. Suggest wait until offer is hit before buying up the shares. At 50c, whoever buys the shares today should do pretty well.” The price of Healthzone shares dropped from the previous close of 50c to 45c, then 42c. Dulhunty sent an email to Wu and said: “HZL price getting slammed + getting calls from RG mates”. Wu asked "How many required to take it back?"

102. The lowest Ask was for 2,000 shares at 50c. Dulhunty replied with details of Healthzone share sells and suggested putting in an order at 3.50 pm. At 15:49 the Wang Intersuisse Account entered a Bid for 2,000 Healthzone shares at 50c which traded, increasing the price for Healthzone shares from 42c to 50c. This trade set the close and the price of Healthzone shares closed at the previous closing price of 50c.

103. Dulhunty sent an email to Wu which said: "closing price 50c."

104. On 26 June Dulhunty sent an email to Wu that said:"50c held as no trading."

105. On 27 June Healthzone requested a trading halt and Dulhunty sent an email to Wu "All done".

106. On 30 June 2008 Healthzone announced the completion of contracts for the acquisition of Jasham International Pty Limited.

107. Following the announcement, 4,000 shares were sold at 54c and 31,902 shares were bought, raising the price to 56.5c. According to a subsequent analysis of trading data, the seller was Goodman, but Dulhunty and Wu were not aware of that fact at the time and did not express a belief at the time that Goodman was responsible for the trade. Dulhunty sent an email to Wu and Roach saying: “shares up 13% to 56.5c Lowest sell orders are below Would be good to see at least 60c (and more) by 4pm” and sent an email to Wu separately which said:

"See below, there’s a small batch of 6,400 HZL shares for sale at 56.5c before getting to 57c level

Are you able to buy some within 20 mins or do you want me to?

Price Quantity Number

0.565 6,401 2

0.570 30,000 1

0.600 52,000 1

0.700 10,000 1"

108. Wu replied that he was in a meeting. Dulhunty entered a Bid on his DCC Tricom Account for 7,000 Healthzone shares at market which traded and cleared all 6,400 Healthzone shares on offer at 56.5c and the residual was amended to 60c which also traded. This increased the price for Healthzone shares from 56.5c to 60c and set the close. Dulhunty sent an email to Wu with details of the trade and said:

"Just got 7,000 = price now 60c. Keep an eye on it until 4pm. If dips, be prepared to come in to hold 30 June close price at 60c. Important for published year end summaries etc"

109. Later Dulhunty sent Wu an email which confirmed the close at 60c, identified the current lowest sell orders and stated: “Hopefully will be support tomorrow as media / investors find out. We should aim for conducting roadshows in 3-4 weeks, subject to PC having numbers that we are confident about”.

110. On 1 July 2008, 10,000 shares were sold at 52.5c, and the price of Healthzone shares dropped from 60c to 52.5c. According to a subsequent analysis of trading data, the seller was Goodman, but Dulhunty and Wu were not aware of that fact at the time and did not express a belief at the time that Goodman was responsible for the trade. On the evening of 1 July Dulhunty sent an email to Wu that said the price of Healthzone shares was back down to 52.5c.

111. On 3 July Dulhunty sent an email to Wu and Roach, stating: “Lowest HZL sell prices are per below. Buying 5,000 at market could get the price back up to 60c”. Then Wu and Dulhunty exchanged emails, with Wu stating: “Couldn't work with bberry just now...is it too late to jump in now? If not, I will ring and buy”. Dulhunty replied “Same now .,.get them if can”. Wu made a phone call to Intersuisse and five minutes after the call at 12:09 the Wang Intersuisse Account placed a Bid for 5,000 Healthzone shares at 60c which traded through two price levels increasing the price of Healthzone shares by 7.5c from 52.5c to 60c. This trade set the close.

112. Wu and Dulhunty exchanged emails about the trade and the closing price of 60c for Healthzone shares.

1 to 23 September 2008

113. On 31 July 2008, Wu and Dulhunty reported to each other and Roach on conversations they had with Goodman, in which he complained of a lack of consultation in relation to the company and warned of possible sell orders at low prices as a result. On 1 August 2008, Goodman suggested that Healthzone attend a meeting with the parent company of Athletes Foot to discuss a possible merger as they were both franchise businesses. Goodman arranged a meeting between the companies, but on 13 August 2008 Roach sent an email to Dulhunty and Wu, noting: “RG idea is that the proposed new entity would become a Franchise Super Group with the logistics provided by the HZL Group… I remain cautious of RG motivation and could be a scam to get him & others into HZL business detail – Big waste of time. What do you guys thinks? Are you available to meet?”

114. By September 2008, the relationship between Healthzone and Goodman had begun to deteriorate. On 1 September 2008, the price of Healthzone shares dropped from 53c to 36c. The previous day, Dulhunty had sent an email to Wu and Roach, expressing his concern that Goodman was intending to place sell orders at a low price.

115. On 2 September, Goodman sent an email to the Offenders, setting out his concerns with the management of Healthzone, asking for a board seat, suggesting the company should consider merging with Athletes Foot and encouraging the directors of Healthzone to buy shares. On 10 September, the price of Healthzone shares dropped from 42c to 36c. That day, Goodman sent an email to Dulhunty in which he predicted that the share price would drop to 16c by October and that there would then be a takeover bid at 25c. According to a subsequent analysis of trading data, one of the sellers during the day was an investor who was part of Goodman’s initial placement of shares, but Dulhunty and Wu were not aware of that fact at the time and did not express a belief at the time that Goodman was responsible for the trade. There is no evidence that the seller colluded with Goodman in relation to the sale.

116. On 22 September 2008, the previous closing price was 52c, as a result of four trades on 11-12 September by Dulhunty’s company DCC and the Wang Intersuisse account. Dulhunty sent an email to Wu saying:

"Good time to buy HZL shares. Market scared shitless, no activity and ASX restrictions on selling. How about you buy 10,000 shares and I buy 10,000 shares? Would get price up to 55c and people are reluctant to sell now. Would need to be done quickly (i.e. same time) with tight co-ordination between us."

117. Wu replied he was in a meeting. Dulhunty replied “Just let me know when you’re free Timing is up to us… but needs to be at same time”, but they did not buy shares that day.

118. The price of Asks dropped to 49c. The following day Dulhunty sent an email to Wu which again stated they needed to co-ordinate buying 10,000 shares which included: "When are you ready to buy 10,000 shares soon? Let’s co-ordinate." Wu made a call to Intersuisse and approximately three minutes later at 12:05 the Wang Intersuisse Account placed a Bid for 12,000 Healthzone shares at 51.5c which traded through two price levels, but decreased the price by half a cent. At 12:08 Dulhunty traded on his DCC Tricom Account and placed a Bid for 12,000 Healthzone shares at 55c which traded through three price levels, increasing the price of Healthzone shares from 51.5c to 55c. This trade set the close. Dulhunty sent an email to Wu: "Price 55c" and Wu replied: "Done Mine."

1 to 30 October 2008

119. On 1 October 2008, Goodman sent an email to the Offenders in which he expressed dissatisfaction with the management of Healthzone and asked for a board seat by 3 October in order to have a say in the direction of the company, otherwise he would divest his stock holdings in Healthzone. On 3 October, the previous closing price was 55c and Goodman placed 1 million shares for sale on market, at a price of 42c. Dulhunty sent an email to Wu and Roach, stating: “He’s back: 1m shares ...we should now not be so nice. This is a message that RG will act in breach of Corps Act best interests for the company. Lets discuss after 4pm Might need a letter from B&M about corps act and manipulation”.

120. On 13 October, Goodman sent another email to Wu and Dulhunty, confirming his intention to exit Healthzone, and giving notice that he would offer around 9 million remaining Healthzone shares to the market, with two possible purchasers already expressing interest. Between 15 and 23 October 2008, Goodman placed 8.4 million shares for sale on market at 49c, and the price of Healthzone shares dropped from 55c to 35c. On 16 October 2008, Wu sent an email to Dulhunty, stating: “On reflection, I’m thinking maybe we would shoot us on the foot if we did go with “Selective Capital Reduction” on RG/Alex’s shares. Without a question these guys will fight against us to the end and they may not care by spending big $$ for legal disputes as they have big pocket and if they won, they could gain lot more!? Also, in this volatile market, it’s very hard to prove he’s manipulate the share price as everyone are dumping the shares anyway?”

121. On 24 October 2008, Dulhunty sent an email to Roach and Wu, stating:

“Just got SMS from RG.

– Hi One associate says he is about to hit a bid at 21c. What a bargain. Russ. From [phone]:14pm 24 – OCT – 08

Really really stupid with ASX investigation going on to do this in writing and ahead of what might happen. I HOPE this occurs. It would establish a very clear audit trial … and is easy to fix.”

122. On Monday 27 October 2008, Goodman amended the Ask to 184,000 shares and dropped the Ask price of shares from 49c to 29c, which was 6c below other Asks of 35c. Dulhunty sent an email to Wu and said: “Sell order profile dropping. RG’s 3 mates still sitting there with 248k shares, but not as bad as 4 mates with 400k shares on Friday”.

123. On 28 October, Goodman emailed a presentation to Wu and Dulhunty, stating: “You will find this of interest…HZL..29c still no interest. OVERSUBCSCRIBED LOL. At least it shows me exactly what you guys think your stock is worth. 2/5ths of f all .Water always finds its true level and what goes around comes around. Good luck.” When Goodman removed his sell orders, Dulhunty said “Sell order profile has improved a lot. See below, RG mates gone.” Nearly an hour later on 28 October Dulhunty sent a further email to Wu with the pros and cons of buying, stating::

”Buy decision for:

• Can do it now without blocking tranches

• Certainty of getting price up

• Provides buffer for future reductions

• May force had of strategic seller to catch out

• May be possible to mitigate strategic sales with phone calls

• Keep up VWAP

• Make shareholders happier – Tao, franchisees, other

• Make future shareholders happier – vendors

• Better for placement discussions

• Demonstrate resilience to downturn

• Good value for buyer

• If not buy, then concerns to other buyers

• When price goes up, people wish they’d bought cheap

Buy decision against:

• Invite strategic sell down

• Potential defence by seller – H associates buy to manipulate

• Show seller that price easily recovers after attack – no long term consequences of actions

• Use up powder

Net result = buy

Timing

• 7000 at 35c at 10:20 am

• 8000 at 38c at 10:30 am

• 5000 at 42c at 10:40 am

- 2 buyers preferable

• 2 brokers preferable"

124. In accordance with a suggested Bid and time the Wang Intersuisse Account at 10:17 placed a Bid for 7,000 Healthzone shares at 35c which traded but did not move the price of Healthzone shares. Dulhunty sent an email to Wu saying: "Now looks better."

125. On 30 October, Dulhunty sent an email to Wu with the sell profile for Healthzone shares and a further email with the “Friday strategy”, which discussed the timing of purchases and the release of Healthzone announcements:

”Thinking about timing of 4C and purchases…

Could be an idea to:

- Lodge 4C at say 3:15pm on Friday

- Do some buying to get momentum up before Friday close

- Lodge AGM notice and annual report after 4pm

- A bit of support on Monday What do you think?”

126. Following this email the Wang Intersuisse Account over a period of 20 minutes placed two Bids: the first for 10,000 Healthzone shares at 38c traded in two lots and increased the price from 35c (set by the previous Wang trade) to 38c. After that, Wu sent an email to Dulhunty which said: "Just done. On the other matter, while we have discussed and agreed for quite a while, I'd greatly appreciate if the 70k of 'acquisition fees' (or whatever other titles that can be capitalized) can be granted to me as this has become an serious to me. I'm only receiving $60k of director fees/year while investing 100k to 200k a year in our shares, I'm having nothing left really.... ".

127. The second Bid of 7,400 Healthzone shares at 38c on the Wang Intersuisse Account also traded and this trade set the close at 38c.

128. Dulhunty sent an email to Wu and suggested a further 2,000 at 44c but by someone other than them. Wu replied "Still finding the mates I know". At 4.01pm, Goodman sent an email to Dulhunty, stating: “Would you prefer I stayed out of the screen. And for your interest the ASX has no power to demand an order be taken out of the screen as long as it portrays a fair price at which the seller is prepared to sell at and is in no way trying to manipulate the market. Your call but don't say I didn't ask.” Dulhunty forwarded the email to Wu and Roach but suggested they ignore Goodman. Later that day Healthzone released three announcements as foreshadowed in an earlier email from Dulhunty.

SECOND PERIOD OF OFFENDING, NOVEMBER 2008-JULY 2010: WU, DULHUNTY AND ROACH

Overview

129. In the Second Period of Offending, the Offenders (Roach having joined the conspiracy in November 2008) took action whenever they deemed it necessary to create or maintain an artificial price for Healthzone shares at a level that they believed required in the circumstances.

130. The Offenders communicated by email to monitor the price of Healthzone shares and agree on a plan to create or maintain the price to an artificial level. They traded on their own accounts, but there was also an increased use of third parties, as some accounts previously used by the Offenders were blocked from further trading. Dulhunty in particular expressed a desire in this period for the Offenders to move to third party accounts and different brokers to assist in their continued manipulation of the price of Healthzone shares.

131. The use of third parties included Roach asking Jenkins to trade, which Jenkins did using his CommSec Account. Jenkins claims that Roach gave him trading instructions by email, face to face and over the phone. There was also trading conducted on third party accounts with CommSec in the names of Adrian Vringer and Mary Ann Harper and Andrew John Harper, with the Offenders operating and placing the trades on these accounts. Following discussions between the Offenders, Roach also asked Healthzone employees Limbert and Jinks to open CommSec trading accounts and sent details of the trading the Offenders wanted them to carry out. Roach also communicated with Pattinson, a contractor, sending him details of Healthzone shares that the Offenders wanted him to buy. Roach also used his own E*Trade share trading account number, 3201093, from 1 September 2009.

132. Throughout the Second Period of Offending from November 2008 to July 2010 there were 235 trades conducted pursuant to the agreement, of which 30 were wash trades where buy and sell orders were coordinated between the Offenders, as follows:

•   Dulhunty used five trading accounts in his name or in the name of DCC to execute 55 trades, involving the purchase of 305,500 shares and an overall investment of $100,977;

•   Wu operated trading accounts in his name and the name of his company MGR, and used or asked family members to use a trading account in the name of Wei Wang, by providing trading instructions. There were a total of 46 trades, involving the purchase of 336,860 shares and an overall investment of $108,480;

•   Roach used a trading account in his name to carry out 6 trades, involving the purchase of 31,500 shares and an overall investment of $13,032;

•   the Offenders operated a trading account in the name of Roach’s sister Mary Ann Harper and her husband Andrew Harper, and two trading accounts in the name of the husband of Roach’s personal assistant, Adrian Vringer, for which Roach had obtained the log-in details, to carry out 83 trades, involving the purchase of 397,830 shares and an overall investment of $128,938; and

•   Roach requested five other people – Jenkins, Tynas, Limbert, Jinks and Pattinson – to buy shares in Healthzone, including by giving them trading instructions. In total these five individuals and one other, Andronos, who was a friend of Pattinson but was not personally known to Roach, carried out 45 trades, involving the purchase of 269,233 shares and an overall investment of $91,420.

133. Examples of the communications and trading for this period are set out below.

5 to 17 November 2008

134. On 5 November 2008, Dulhunty sent notes of a conversation he had with Goodman to Wu and Roach, in which he reported details of Goodman’s concerns about Healthzone. Dulhunty raised with Roach and Wu his concern that the Healthzone share price was down because Goodman was selling shares. On 6 November 2008, Dulhunty sent an email to Wu, stating: “We should line up independent people to buy shares on market over the next few days for important reasons: • Get price up • Show clear impact of RG transactions on share price • Show clearly that the transaction were at below market value Ideally, we want to see a ‘V’ whenever RG traded..i.e. a sharp dip, then recovery. This will platform us for later if worst case scenario action is required”. Wu said “I will talk to my people today but many of my friends have moved to property market after the market crashed since few months ago”, and later added “The challenge is, US crashed over 400 points over night and if I asked people to buy, I would be looked odd and even lose credibility”. On 10 November 2008, the price of Healthzone shares dropped from 29.5c to 25c. Dulhunty and Wu attributed the price fall to Goodman, although it was not him.

135. Dulhunty sent an email to Wu which said: “We need someone to buy 8,000 shares at market to get the price up to 29.5c. Reasons: Get price up with V shape. We can see in a few days of RG continues dumping and trace trades. Here’s today’s sell profile. Got anyone lined up?”

136. Later that day Roach sent an email to Wu, saying: "I want to start calling the HL Franchisees to arrange payment for their shares. Did you say you were going to arrange a friend to stand in the market to improve the SP? Let me know so I did’nt have a false start on the ring around."

137. Wu replied and suggested to Roach and Dulhunty that they coordinate with each other, but there was no trading that day by or on behalf of Roach, Wu or Dulhunty.

138. On 11 November 2008, an opening Ask of 27c was 7.5c below the next lowest Ask of 34.5c. Dulhunty sent emails to Wu and said: "OK to get 7,250 at 27c. Wait a few hours before the 6,500 at 34.5c". At 10:24 the Wang Intersuisse Account bought 7,250 Healthzone shares at 27c and increased the price from 25c to 27c. This trade set the close. Wu sent an email to Dulhunty "Done". Although Dulhunty made further suggestions there were no further trades that day by or on behalf of Dulhunty, Wu or Roach.

139. On 12 November, at 10.26am, Dulhunty sent an email to Wu stating: “Here’s today’s sell profile. Suggest buy 7,000 at 30c”. Wu replied: “Ok. Can you talk to Roach re the timing of calling the franchisees about the options? The idea was to support the price at say 40c right before calling them so we don’t want to invest twice.” Dulhunty replied: “OK, will do. In the meantime..suggest you get working on getting the price up. Will take time and we need V shape for other purposes. HMPL will be able to send out invoices as soon as price hits 40c. It will take a few days to get there.” Dulhunty then forwarded that email chain to Roach, stating: “Agree with the approach below? I think buying on our side needs to speed up.”

140. Wu then separately confirmed in an email to Dulhunty:

"Ok. Roach, MJ2 and I discussed this strategy (getting price up at 40c before calling) and we agree to have an outside investor doing this and I told them I could find this one and all agreed HZL could pay $20k to this investor for helping this. But as you know, it's actually me who is funding this. When you talk to Roach, can you get an OK from him for paying this say next week? Something can be capitalized. But probably better not mention that I am the one who is funding shares purchase. The reason for asking this was explained to you, cash dried for continuely buying shares since IPO."

141. At 11:28:24 the Wang Intersuisse Account bought 7,000 Healthzone shares at 30c as set out in an email from Dulhunty earlier in the day and increased the price for Healthzone shares by a further 3c to 30c, from the last trade at 27c which was executed on the Wang Intersuisse Account at 10:24:12 on 11 November 2008. Wu confirmed to Dulhunty that 7,000 Healthzone shares had been purchased.

142. Dulhunty confirmed in an email to Wu that the $20,000 “booty” had been approved and would be added to Wu's fees and to ask if he needed more. Dulhunty added: “Roach wants to get price up to 40c asap. He’s hanging to make calls to franchisees and will do as soon as price is up.”

143. Shortly afterwards Dulhunty sent an email to Wu , stating: "Would be good to get some at 33c at around 3pm. This would platform step up to 34c. How many people / entities do you have to buy the shares? Better if different ones" and set out the current order profile. Wu replied he would check but that many of them were on holiday.

144. Roach sent an email to Wu, stating ”After discussion with RD I have arranged $20k to be put into your account as your “Performance Bonus” payment we have been talking about”, referring to an entitlement to a bonus that was contained in Wu’s executive service agreement. Roach then sent an email to Jenkins stating that “the Healthzone board” had confirmed the payment and it should be deposited into Wu’s account.

145. Dulhunty sent a further email to Wu which said: "Someone has come in with 8,000 at 33c. Suggest snap it up asap" with the sell profile and within the hour sent another email which said: "One hour to go..same profile" and at 15:27:28 the Wang Intersuisse Account bought 8,000 at 31c. This increased the price of Healthzone shares by a further 1c to 31c, from the last trade at 30c which was executed on the Wang Intersuisse Account at 11:28:24 that morning. The trading set the closing price for Healthzone shares at 31c that day.

146. On 13 November, the previous closing price was 31c. Dulhunty sent an email to Wu, stating: “You’re going to slow with share buying. I spoke to a broker I know yesterday and he reckons there’s no reason we can’t buy shares in HZL. He says it would be a good sign to everyone else. I propose to buy up the first batch and suggest you jump on board at 34c. We need to pull our fingers out and get on with getting the price up to 40c asap”.

147. To this Wu replied that he was not in the country and was “in the trade show with customers yesterday and cannot keep looking at the bberry while talking to them Plus AS stopped me from buying that, I cant force him”..

148. Later Dulhunty bought 5,500 Healthzone shares at 31c on his Dulhunty CommSec account and a minute later a further 2,000 Healthzone shares at 33.5c on his CommSec Account. The second Bid traded immediately and in full through two price levels, increasing the price by 2c to 33c.

149. Dulhunty sent an email to Wu which confirmed the trades and said: "I bought 7500 shares to 33c. We need to get price up. AS needs to relax. I thought you were going to be the price driver with me filling you in?"

150. Wu replied and again said he was being stopped by Intersuisse but asked how many were needed to act now and Dulhunty replied 7,000 up to 34c.

151. Wu replied: "bought 11,000 shares from 31 to34c" and at 11:37 the Wang Intersuisse Account bought 11,000 Healthzone shares at 34c and traded through three price levels from 31c to 34c, increasing the price from 33c to 34c. This was an increase of 1c from the last trade at 33c, which was executed on the Dulhunty CommSec Account at 10:47 earlier that morning. At 11.41am, Dulhunty sent an email to Wu, stating: “Nice work, profile now as follows” and set out the current orders. The trade set the closing price for Healthzone shares at 34c that day and the following day.

152. At 4.53pm, Dulhunty sent a further email to Wu, stating: “I suspect that when franchisees get their shares + bill to pay…some might sell to pay the bill?” and setting out the current orders, to which Wu replied: “I’m more concerned that it would probably be a big gap from now to 40c as more we bought, more sell is there = might cost big $ to get what we want?” At 5.32pm, Dulhunty sent an email to Wu stating:

“It looks like:

- For tomorrow.. do nothing until 15500 at 32 clears

- Over week, will better idea of tone and timing nee announcements Might be best to get negative announcements out of way while share price low, then build.”

153. Wu and Dulhunty exchanged emails which discussed getting the price to 40c but there was no further trading by or on behalf of Dulhunty, Roach or Wu.

154. On 17 November, the previous closing price was 34c. Roach, Wu and Dulhunty continued to discuss getting the Healthzone share price to 40c. Wu confirmed his mate could clear stock below 40c.

155. There was trading on the Wang Intersuisse Account which cleared some of this stock. A Bid for 21,050 Healthzone shares at 34c traded immediately and in full through two price levels, consuming all Healthzone shares on offer at 32c and all 5,550 Healthzone shares on offer at 34c, being the same price as the previous trade which was executed on the Wang Intersuisse Account at 11:37 on 13 November 2008. This trading set the closing price for Healthzone shares at 34c.

156. At 3.33pm, Wu sent an email to Dulhunty and Roach, stating: “32c and 34c stock have ALL been cleared up and I hope tomorrow’s sell profile can be changed a bit otherwise it will probably cost us more to get the price up to high or even mid 40s”. At 6.17pm, Dulhunty replied: “Nice work. Current sell profile. Expect someone will come in around 35c tomorrow. Might see if I can get some at 44c to get things kick started after Hilson meeting”. At 9.28pm, Roach replied: “Good result well done… as soon as we get into the 40’s I can start calling HL franchisees to lock down the share payments”. At 9.32pm, Dulhunty replied: “Might be better to wait a few days and see if the RG gang dump stock. We also need to get a negative announcement out soon.” At 9.43pm, Roach replied: “I think we need to keep pushing fwd with the SP … to pull back wasts the efforts of the day. I also think your too keen with the negative announcement.” At 9.57pm, Dulhunty replied with his reasons for an announcement, concluding: “Get ‘a’ negative announcement out soon Then build share price up again.”

10 December 2008

157. In early December, there were a series of emails between Goodman and Dulhunty, in which Goodman expressed interest in acquiring a larger stake in Healthzone, but also indicated he wanted to sell and was suspicious that the market for Healthzone shares was being manipulated. On 10 December 2008, Dulhunty and Roach approved a further $70,000 to $100,000 in fees for Wu, with Dulhunty stating: “MW seeks fees of around $70k $100k to compensate for salary and buying”. Dulhunty and Wu discussed Goodman wanting to sell Healthzone shares at 35c and who they could get to buy Healthzone shares.

158. At 11.39am, Wu sent an email to Dulhunty, stating: “If we stepped in to buy shares now, it would just make us look like admitting guilty to RG especially after his email?” Dulhunty replied: “Not sure ... We need to have some people buying shares / putting orders on screen. Sekely told me that RG didn’t have issues with people buying, was just interested in selling his shares for 35c Need 5 min plan fast to get some orders from people we know. It is OK to encourage employees, associates to buy shares”.

159. According to notes made by Dulhunty, Andrew Sekely at Intersuisse called Dulhunty, reported on a conversation with Goodman and expressed concern that there were no buyers for Healthzone shares. Wu and Dulhunty subsequently put on Bids, and provided details of the Bids to each other: "Placed bid of 5000 shares at 28c" and "Just ordered 5,000 at 27c and working through another broker".

160. The Bids traded and reduced the price for Healthzone shares from 34c to 27c. After the Bids traded, Dulhunty sent an email to Wu, stating: “Bad news…we got hit on both of our buy orders…shares down to 27c. Probably RG”. Wu responded: “90% is a trap set by RG with his previous emails…unfortunately you and I jumped onto it”. At 1.50pm, Goodman sent an email to Wu and encouraged him to consider Goodman’s proposals in relation to the company. Goodman also said he would introduce himself to “your partner in China”, a reference to Guoguang Tao, who was Healthzone’s second largest shareholder. Goodman’s email stated:

"Michael Can I just say that I can't understand your change of heart re meeting parties who can forward your ambitions it is December and you may be busy but I would be surprised if you didn't see the importance of the help I am offering you. The stock is 27c no buyer. For your own benefit I would rethink your decision. Business is not going to get any easier in these challenging times and your ebit to debt ratio is alarming. Still happy to help. I will be speaking to your partner in China shortly,via an interpreter if I need . I am sure he is wondering what is going on. I will introduce myself and tell him".

161. Roach asked what happened with the share price and Dulhunty said: “It was me at 27c and MW at 28 Fell into RG trap. Now there are zero buyers and share price is back down to 27c”. According to notes of a conversation with Goodman which Dulhunty sent to himself, around this time Goodman expressed further concerns about Healthzone, asked for a meeting between Healthzone and a franchise company, and suggested that he would tell Tao about his concerns. Goodman later sent an email to Tao and said: “I am a holder of about 19% of Healthzone and believe you hold about the same percentage. I thought I should contact you to make sure you are aware of what is happening to HZL and its share price in Australia and also see if you have any interested in either buying more stock or selling your stock” and “I will email more detail if I can ascertain whether you are happy with your investment in the company and which way you think it should go forward. Also interested as to why you are not a director of the company”.

9 to 10 March 2009

162. On 9 March 2009, the previous close for Healthzone shares was 27 cents. Dulhunty sent an email to Wu and Roach, stating: “What are doing about the share price collapse? Did you guys get any bites from potential investors such as franchisees, staff? We should remedy this quickly to avoid issues/distractions i.e. RG, JS, GV queries, strategic dumping etc””

163. At 16:07 an amended Bid for 1,500 Healthzone shares at 38c was entered on the Wang Intersuisse Account. The Bid traded in the Closing Auction at 16:10:40, increasing the price of Healthzone shares by 11c from 27c to 38c and set the closing price for Healthzone shares that day.

164. Dulhunty noticed the trade and told Wu that the Healthzone shares price was back up to 38c. Wu confirmed “that was me” and Dulhunty replied he thought it was, and he would buy tomorrow.

165. On 10 March 2008 at 10:28:04, DCC’s CommSec account purchased 5,000 Healthzone shares at 38c and at 10:28:59 a further 5,000 at 39c. The second Bid traded immediately and in full through two price levels increasing the price of Healthzone shares by 1c to 39c, from the last trade at 38c which was executed on the DCC CommSec Account at 10:28:04 that morning. This trade set the closing price for Healthzone shares at 39c that day.

166. Dulhunty confirmed to Wu his purchases and said: "Put through some buying today. I can now only buy through one of 3 brokers since 2 won’t let me buy HZL shares anymore...Need to get some more support from other people"

14 May 2009

167. On 14 May Wu sent an email to Roach in which he admitted:

"...just between you and me, I've been funding my mates (through their names of course) to buy HZL shares over the last 3 years for at least $250k under RD's 'instruction'..."

17 June to 2 July 2009

168. On 17 June 2009 Roach sent emails to Wu and Jenkins which set out the trades that should be placed to keep the share price at 39c and said:

"We need to keep some momentum going... After the 39c was hit yesterday another BUY for 5000 shares returned the price to 40c... I assume it may have been RG teaching us another management lesson. Profile this morning a 70,000 SELL @ 39c.

We need to put another BUY for say 2000 at 38c, 1500 at .37c FIRST THING TODAY and then watch and when they get hit take another 1000 at 39c to close the price at 39c as the 40c will be too bigger jump. With the screen pretty low on SELL we could also place a few lower BUYS at at mid 30’s that will be likely to sit... but if they get hit we can manage at the close of market to return to 39c with a late small buy. What do you think? "

169. Roach and Wu approved a bonus to Jenkins of $10,000, in accordance with Jenkin’s executive service agreement.

170. Jenkins on the Jenkins CommSec Account placed Bids for 1,500 Healthzone shares at 37c and 2,000 Healthzone shares at 38c. On 1 July, he placed a further Bid for 1,000 Healthzone shares at 37c and on 2 July another Bid for 1,000 Healthzone shares at 38c. All these Bids traded on 2 July 2009 in full at 37c. The price of Healthzone shares decreased from 39c to 37c due to the entry of an Ask at 37c at 10:02:44 that morning.

171. Jenkins sent an email to Wu and Roach with a screenshot of the market for Healthzone shares after his Bids traded which said: "Shares" and Roach replied to Jenkins "We need to get back to .39 before close... What is the profile?"

172. At 11:01 on 2 July 2009, 1,500 Healthzone shares were bought on the Jenkins CommSec Account. This trade did not move the Healthzone share price. The residual Bid for 500 Healthzone shares at 37c traded on 15 July 2009.

173. At 11:05 on 2 July 2009, 2,000 Healthzone shares were bought on the Jenkins CommSec Account. This trade increased the Healthzone shares price from 37c to 39c from the previous trade at 37c which was executed on the Jenkins CommSec Account at 11:01 that morning. The trade set the closing price for Healthzone shares at 39c that day.

174. At 11:06 Jenkins replied to Roach and copied to Wu: "done" and at 11:07 Jenkins sent another email to Roach and copied to Wu which said: "Done at 39 cents".

31 August to 1 September 2009

175. On 31 August 2009 at 16:14:23 Healthzone announced 23% growth in net profit after tax for the year to 30 June 2009.

176. On 31 August 2009 Roach sent an email to Wu and Dulhunty, stating: “$24k would close HZL at .42c tomorrow. We need to make sure this happens through support… We can show RG that the market likes what they see even if he thinks its pathetic! I asked Andre if he was a buyer based on his positive response … he said he is “always a buyer if there remains value”. Dulhunty replied "Good stuff and who and when?"

177. Roach replied that he would "shop his regulars for commitment."

178. On 1 September 2009 at 7:56 Roach sent an email to Dulhunty and Wu, referring to two scenarios which would involve spending $29,000 to increase the share price to 42c or spending $15,600 to increase the share price to 40c. Wu replied, stating: “Maybe the best thing is for directors to buy, which ticks another box for RG but I suspect he won’t be pleased but only blaming market manipulation if pushing the price too high? (Eg. Over 25% jumped from 32c to 40c)”.

179. At 14:54 Roach made a small buy on his E*Trade Account of 1,500 Healthzone shares at 34c. Prior to this trade Roach had not purchased shares in Healthzone or in any other listed company on his E*Trade Account. The trade had the effect of increasing the price for Healthzone shares from 32c to 34c. Wu after being unable to purchase Healthzone shares on his Hub 24 account used his Intersuisse Account and placed a Bid for 15,000 Healthzone shares at 36c which traded immediately and in full through two price levels. This increased the price of Healthzone shares by a further 2c to 36c from the previous trade at 34c which was executed on the Roach E*Trade Account at 14:54:22 that afternoon. The trading of this Bid set the closing price for Healthzone shares at 36c for that day.

7 to 15 January 2010

180. In January 2010, the Offenders were about to commence a capital raising through the issue of shares to institutional investors, in two tranches known as “T1” and “T2”. Between 6 and 8 January 2010, the price of Healthzone shares dropped from 41c to 33c. On 7 January 2010, Dulhunty sent an email to Wu and Michael Jenkins, stating: “Shares still down. Needs immediate marketing so as not to stuff T1 and T2. Tried to fix but I cannot.” Roach then responded separately to Wu and Jenkins: “If we don’t get this price back up to .41c HZL will need to issue and xtra 385,965 shares for T1 with issue price to be 75% of the 5 day VWAP = $110,000 dilution Already potentially costing $22k per day for every day we leave at .38c for T1 issue. This is urgent and we can’t buy as Directors or EC but we need to find someone who can fast.” Roach, Wu and Jenkins discussed who might be available to trade.

181. On 8 January 2010, at 8.11am, Roach sent an email to Wu and Jenkins, stating: “We need to do something as USA raised an issue overnight…With investors watching. Potentially could go lower and need to act today and everyday to remedy. Must be someone outside I/S that can support?” At 9.09am, Dulhunty sent an email to Roach, copied to Jenkins and Wu, stating: “Guys…you need to 'market' the shares so as not to stuff the close T1 and T2. Suggest get onto it straight away I tried by am blocked”. Roach approached one associate, who did not have an online trading account, and then asked Pattinson to call him. At 12.57pm, Pattinson placed a Buy order through his wife’s account for 5,005 Healthzone shares, which traded immediately and caused the share price to increase from 31 cents to 33 cents. Pattinson then sent his wife’s bank account details to Roach. Pattinson and Roach exchanged text messages about further trading, with Roach identifying a block of $12,000 worth of Healthzone shares at 33 cents, adding: “If they ask you why tell them they have not been this cheap for ages”. At 3.57pm, Pattinson placed a further Buy order for 37,500 Healthzone shares at the market price, which partially traded before the close.

63. A report of Dulhunty’s General Practitioner, Dr Arthur Huang, was also tendered. Dr Huang confirmed that in 2011 Dulhunty was diagnosed with atrial fibrillation and had been prescribed medication to control his heart rate and rhythm. Dr Huang also reported that Dulhunty was diagnosed with thyroiditis in December 2011, although his last blood test in 2014 demonstrated satisfactory blood levels. Dr Huang further confirmed that Dulhunty had been referred for a psychiatric assessment in June 2012 and that his depression recently worsened. He is presently taking Zoloft prescribed by his treating psychiatrist, Dr Jacobson, and has suffered from insomnia since 2011. A report of Dr Jacobson which was tendered confirmed that Dulhunty remains mentally unwell and in need of ongoing medication.

64. A report was also tendered from Ingrid Stengelis, Psychologist. Ms Stengelis reported that in November 2008 Dulhunty had attended for treatment to manage anxiety, and had returned for treatment in November 2011 for the same reason. She reported that in May 2014 he returned for further treatment to manage the stress caused by the current proceedings. Although Ms Stengelis has treated Dulhunty in a professional capacity, much of her report had, as its focus, matters personal to him. She described Dulhunty as having displayed genuine remorse for his actions, and reported that his focus in life had altered due to the stress arising from his offending and the associated proceedings.

65. A large body of testimonial material was also tendered from persons who have become acquainted with Dulhunty in both a professional and a personal capacity. He is variously described in that material as highly motivated, principled, a man of unblemished character and a person of considerable generosity. Many of the testimonials spoke of his love for, and dedication towards, his family, and of the potential impact, upon that family, of a custodial sentence. In this regard, considerable emphasis was placed on the fact that he is the father of two young children. Reference was also made to his expressions of remorse.

66. One of the testimonials tendered was from the offender’s former wife. She described the offending as being extremely out of character, and spoke specifically of Dulhunty’s generosity towards friends in need. She described the devastating consequences of the offending, both for Dulhunty personally and for their family as a whole. She spoke of his devotion to his children and his continued involvement in their lives. Consistent with the report of Dr Nielssen, she attested to Dulhunty’s depression and anxiety. Like a number of other persons who provided testimonials, she expressed the view that Dulhunty would not re-offend, and described the fact that he would not be able to resume his career as amounting to “the equivalent of a life sentence”.

67. There is also evidence that Dulhunty corresponded with officers of the Australian Securities and Investments Commission and, in a general sense, co-operated with the Commission’s investigation.

Evidence in the case of Roach

71. A pre-sentence report of 15 October 2015 set out Roach’s background. He is one of four children and has been married for 32 years. He divides his time between assisting his elderly mother, who is in poor health, and residing with his wife. He has been unemployed, and reliant upon his wife financially, since his offending.

72. Roach completed his formal education in Year 11, at which time he left to commence an apprenticeship as an aircraft engineer which he successfully completed. The author of the pre-sentence report stated that Roach acknowledged the seriousness of his behaviour, took responsibility for his actions, and expressed remorse.

73. An affidavit of Roach’s wife was tendered. She and Roach have three children, aged 26, 22 and 18. Both Roach and his wife have been involved in community work with their local church for a number of years, during which Roach has been instrumental in establishing and conducting programmes to assist those who were unemployed or otherwise disadvantaged.

74. Roach’s wife described the pressure, upon Roach personally and upon their family as a whole, which had resulted from the offending and the associated proceedings. She made specific reference to the impact upon members of her family as a consequence of the attendance, at her home, of police when conducting their investigation. Roach became bankrupt in 2012. As a consequence, his wife has assumed a greater level of responsibility within the family. She described the effect of all of these matters upon her children. Those effects have included their second son discontinuing his tertiary studies.

75. Roach’s wife also made reference to the loss of what she described as the offender’s “impeccable business reputation and community service record”. She described him as a person of integrity who had been shamed and humiliated by his offending.

76. Testimonials provided by persons who have known Roach in both a personal and professional capacity were tendered. The authors of those testimonials variously described Roach as a person of character, integrity and honesty. They expressed having been shocked upon becoming aware of the offending, and spoke of Roach’s expressions of remorse.

SUBMISSIONS OF THE PARTIES

Submissions on behalf of the Crown

77. In written submissions, the Crown argued that apart from the pleas of guilty entered by each offender, neither had otherwise expressed any contrition or remorse for the offending. These submissions were seemingly prepared without the Crown having the benefit of reading the testimonial material to which I have referred. The Crown submitted that in any event, the fact that each offender had sought to diminish his respective criminality by relying on the conduct of Goodman demonstrated that neither of them had fully accepted responsibility for the offending. It was submitted that in these circumstances, any expressions of contrition should be viewed as qualified.

78. The Crown accepted that each offender had entered a plea of guilty before the Local Court. However, it was submitted that it was relevant to consider whether the plea in each case had been motivated by a willingness to facilitate the course of justice, or whether it was little more than a recognition of the inevitable, in the face of a strong Crown case. In terms of the timing of the pleas, the Crown traced the chronology of the proceedings against each offender. The Crown pointed to the fact that the charges were laid on 6 August 2014, that the pleas of guilty were not entered until 19 May 2015, and that in the intervening period a Brief of Evidence was served. Between about 10 September 2014 and 19 May 2015 there were discussions between the legal representatives of each offender and the representatives of the Crown regarding the possibility of a plea of guilty being entered, and the possibility of reaching an agreement as to the facts.

79. Ultimately, the Crown’s position was that the plea in each case was “some evidence” on the part of each offender of remorse, acceptance of responsibility and a willingness to facilitate the course of justice. However, the Crown argued that the significance of each of these factors was limited by the strength of the Crown case which, it was submitted, had rendered a conviction inevitable. It was submitted that any allowance for the plea of guilty in each case should be assessed with these matters in mind.

80. The Crown further submitted that general deterrence was a particularly important consideration in determining sentence in a matter of this nature, and that specific deterrence was also important.

81. The Crown acknowledged that neither offender had any relevant prior convictions. However it was submitted that in the context of offending of this nature, good character and the absence of prior convictions were of less significance.

82. Finally, the Crown submitted that because of the ongoing nature of the conspiracy, its sophistication and the awareness of wrong doing by the offenders, I should be cautious in concluding that either offender had positive prospects of rehabilitation. It was submitted that apart from the nature and extent of the offending conduct, other factors which bore on that consideration included, in the case of each offender, his age and the degree of available family support.

Submissions on behalf of Dulhunty

83. Senior counsel for Dulhunty acknowledged the relevance of general deterrence on sentence although he did not accept that it had the significance suggested by the Crown. It was submitted that Dulhunty’s actions did not constitute undermining the integrity and efficacy of markets to any significant extent and that in these circumstances general deterrence had a lesser role to play than might otherwise be the case. It was further submitted that there was no evidence of any personal profit being derived by Dulhunty from his offending, such that this court would otherwise have an interest in imposing a sentence which would deter those from abusing markets for personal gain. In terms of personal deterrence, it was submitted that Dulhunty’s subjective intention was to protect the company from damage during the duration of the conspiracy. It was submitted that in these circumstances, personal deterrence was of little significance.

84. It was submitted that Dulhunty had been co-operative throughout the investigation and that his plea of guilty was, in effect, a continuation of that co-operation. It was submitted that in these circumstances, he should receive the full benefit of that plea.

85. Senior counsel made reference to the evidence of Dulhunty’s relationship with his children, and the harmful impact that a custodial sentence would have upon them. It was pointed out that within the testimonial material there was evidence that Dulhunty had structured his career so that he could spend more time with his children and that, as a consequence, he played an invaluable role in their lives. Senior counsel also relied upon Dulhunty’s prior good character and the significant contribution he has made to the community over a long period. It was submitted that in all of the circumstances, I should find that Dulhunty had shown genuine remorse, that he had good prospects of rehabilitation, and that he was unlikely to reoffend.

86. Senior counsel also relied upon the fact that Dulhunty had, in effect, lost the career to which he had been dedicated and that he had little or no prospect of obtaining similar employment at any time in the future. This, it was submitted, constituted significant extra curial punishment.

Submissions on behalf of Roach

87. Senior counsel for Roach submitted that Roach had shown contrition over and above that evidenced by his pleas of guilty. It was submitted that those pleas, which had been entered in the Local Court, were demonstrative of Roach’s remorse, and of his acceptance of responsibility. It was further submitted that the fact that Roach sought to reach agreement with the Crown as to the facts to be put before the Court underscored, rather than undermined, his willingness to facilitate to the course of justice. It was submitted that in all of these circumstances Roach should be given the full benefit of his pleas.

88. Senior counsel for Roach also relied upon the delay which had been occasioned in bringing these proceedings. It was pointed out that an examination of Roach in relation to this matter took place in September 2012, but that it was not until 2014 that he was charged. It was submitted that the investigation was not one of great complexity but that the delay it had resulted in significant stress for the offender and had left him in a state of uncertain suspense.

89. Senior counsel also cited Roach’s previous good character which, it was submitted, extended well beyond the mere absence of criminal convictions. In this regard, emphasis was placed on the content of the testimonial material to which I have referred.

90. In all of the circumstances, and whilst acknowledging that prior good character and a lack of criminal antecedents may be of less weight as separate mitigating features in offending of this type, senior counsel submitted that such matters remained of considerable significance, particularly when assessing the Roach’s prospects of rehabilitation. It was submitted that the evidence in the present case supported the conclusion that it was most unlikely that Roach would re-offend at any time.

91. Whilst not advancing the proposition that it was exceptional, it was submitted that there was evidence that a custodial sentence would cause hardship to Roach’s family. This, it was submitted, arose from the evidence of Roach caring for his elderly mother, as well as the matters to which his wife referred in her affidavit and which I have previously summarised. It was submitted that these were necessarily matters to be taken into account as part of Roach’s general subjective case.

Consideration

92. I am obviously mindful of the need to consider the case of each offender separately. However, their respective subjective circumstances are, generally speaking, common and in large measure can be dealt with together.

93. I am satisfied that each offender is genuinely remorseful and contrite. That is the overwhelming effect of the testimonial material which has been tendered in each case, and to which the Crown did not object. I do not regard the position taken by the either offender in relation to Goodman as qualifying, to any significant degree, the remorse that each of them has expressed to others (and in the case of Dulhunty, to the Court).

94. I am also satisfied that each offender has good prospects of rehabilitation. It is apparent that each has learned a salutary lesson. There is nothing to suggest any real prospect of re-offending in either case. In all of these circumstances I have concluded that specific deterrence has no role to play in determining sentence.

95. Each offender is a person of prior good character. Apart from the absence of convictions, each has made a significant contribution to the wider community in differing ways. Each is entitled to draw upon his previous good character as a factor in mitigation of penalty. However, two observations must be made in that regard. Firstly, for the reasons I have developed further below, general deterrence remains an important factor in this case and because of that, less weight is to be given to evidence of good character: McMahon v R [2011] NSWCCA 147 at [76] per Hoeben J (as his Honour then was), Hodgson JA and Grove AJ agreeing. Secondly, and as previously outlined, the offending occurred over an extended period of time in each case. That also operates to lessen the weight to be given to the prior good character of each offender: R v Kennedy [2000] NSWCCA 527 at [22] per Howie J, Simpson J (as her Honour then was) agreeing.

96. In the case of Dulhunty, there is evidence of current symptoms of a depressive illness. I have had regard to that circumstance.

97. Each offender entered a plea of guilty before the Local Court. Although the pleas were entered some time after the charges were laid, it is apparent that in the intervening period discussions and negotiations took place regarding the possibility of a plea being entered, and the content of any factual material which would be put before the Court in that event.

98. In Cameron v R [2002] HCA 6; (2002) 209 CLR 339 the plurality (Gaudron, Gummow and Callinan JJ) observed at [14]:

“Reconciliation of the requirement that a person not be penalised for pleading not guilty with the rule that a plea of guilty may be taken into account in mitigation requires that the rationale for that rule, so far as it depends on factors other than remorse and acceptance of responsibility, be expressed in terms of willingness to facilitate the course of justice and not on the basis that the plea has saved the community the expense of a contested hearing”.

99. Their Honours went on to say (at [22]):

“… leaving aside remorse and acceptance of responsibility, the operative consideration is willingness to facilitate the course of justice. And once that rationale is accepted, the respondent’s suggestion that the extent to which a plea of guilty may be taken into account in mitigation may vary according to whether it was or was not a ‘fast-track’ plea must be rejected. Rather, the issue is to what extent the plea is indicative of remorse, acceptance of responsibility and willingness to facilitate the course of justice. And a significant consideration on that issue is whether the plea was entered at the first reasonable opportunity.”

100. In Cappis v R [2015] NSWCCA 138 Garling J (with whom Gleeson JA and Johnson J agreed) said (at [57]):

“The central matter which is required to be considered by the sentencing judge is the willingness of the offender to facilitate the course of justice by entering the plea. In assessing that willingness, when a sentencing court is dealing with a Commonwealth offence, a relevant consideration for the sentencing Court is the strength of the Crown case against the offender: see Tyler v R; R v Chalmers [2007] NSWCCA 247; (2007) 173 A Crim R 458 at [114] per Simpson J; Danial v R [2008] NSWCCA 15 at [28] per James J.”

101. Recently, in DPP (Cth) v Gow [2015] NSWCCA 208 Basten JA concluded (at [28]) that the decision in Cameron had nothing to say about the operation of Commonwealth law with respect to sentencing. His Honour expressed some doubt as to whether the decision operated to limit the basis upon which a plea of guilty may be taken into account. Hamill J (at [72]) agreed that the decision in Cameron did not limit the impact of a Federal offender’s plea of guilty to an assessment of the extent to which it demonstrated a willingness to facilitate the course of justice. However, his Honour expressed a preference to leave the more general consideration of the interaction of Commonwealth sentencing provisions with the general sentencing law of New South Wales, along with the extent to which that consideration is informed by decisions such as that in Cameron, for a case when those matters were the subject of full argument.

102. Based on the available documentation, the Crown case against each offender was strong. Further, the pleas were entered a considerable period of time after the charges were laid. However to use these factors as a basis for concluding that the pleas were not entered at the first reasonable opportunity, or that they were entered other than in a willingness to facilitate the course of justice, would in my view be wrong. Such an approach would ignore, in particular, the discussions which were apparently taking place over a protracted period which seemingly resulted in the pleas being entered. In my view, the fact that each offender was prepared to engage in those discussions is indicative of a willingness to facilitate the course of justice. The fact that an agreement could not be reached as to the entirety of the factual material (necessitating the tender of Annexure A) does not derogate from such willingness on the part of either offender. In all of the circumstances, I am satisfied that the plea in each case was entered at the first reasonable opportunity.

103. Further, and although the documentary evidence established a strong case against each offender, and although this is a factor which has the capacity to cast some light upon the question of whether the plea of guilty was truly motivated by a willingness to facilitate the course of justice or by a recognition of the inevitable (Tyler v R; R v Chalmers [2007] NSWCCA 247 at [114] per Simpson J (as her Honour then was), Spigelman CJ and Harrison J agreeing), I am satisfied in all of the circumstances that each offender has demonstrated a willingness to facilitate the course of justice, not only by entering a plea of guilty but by endeavouring, as far as possible, to reach agreement as to the factual material to be placed before the court. Providing the guilty plea is taken into account in each case, it is not necessary for me to quantify the discount: Tyler at [112]. Each offender should have the benefit of a discount which falls at the uppermost level.

101. Each offender has suffered significant extra curial punishment as a consequence of his offending. Each will be disqualified, upon conviction, from managing a corporation for a period of 5 years. The Crown conceded that this was an appropriate factor to take into account on sentence. The Crown also conceded that a person’s loss of career and reputation may amount to a form of extra-curial punishment. However, the Crown submitted that it remained open to each offender, at the expiration of the statutory disqualification period, to re-enter the corporate world in some capacity or other.

102. In my view, the possibility that either offender might obtain similar employment in the future is, to say the least, remote. The nature of the offending, and the fact that it has been made public, make it difficult to envisage either offender being appointed to any position of corporate responsibility at any time in the future. Needless to say, each offender must have known of these likely consequences at the time of the offending and whilst that must be taken into account, it does not mean that extra curial punishment is of no relevance at all. I have taken it into account in determining sentence in each case.

103. I accept the submissions made on behalf of each offender regarding the effect of any custodial penalty upon their respective families. I accept that such effect is likely to be significant in respect of each offender, albeit for different reasons. However, the effect is not exceptional: R v Zerafa [2013] NSWCCA 222; (2013) 235 A Crim R 265 at [93] per Hoeben CJ at CL, Latham J agreeing. It is no greater than what one might reasonably expect in a case such as this. I have taken it into account in assessing the general subjective circumstances of each offender.

104. I have also had regard to the delay in the institution, and finalisation of, these proceedings. I do not intend to level criticism at any party for that delay. The fact is that both offenders have been in a state of uncertain suspense for a period of time.

GENERAL DETERRENCE

108. I have previously found that neither offender was motivated by the desire to derive immediate personal profit. I have also found that there was no deliberate obfuscation on the part of the offenders, such as the use of false names or false accounts. Accordingly, this is not a case where the adoption of such forms of subterfuge made the offending difficult to detect. However that does not mean that general deterrence (for which provision is now made in s. 16A(2)(ja) of the Act) is not important. On the contrary, it must be given significant weight.

109. In R v Pogson, Lapham and Martin [2012] NSWCCA 225; (2012) 82 NSWLR 60, McClellan CJ at CL and Johnson J (with whom R A Hulme and Button JJ agreed) said (at [143]):

“Sentencing courts have a responsibility to ensure that the sentence imposed punishes the offender, denounces their criminal conduct and provides sufficient disincentive to others who may be tempted to offend, to ensure that they refrain from criminal activities. Although some statements have been made suggesting that in relation to some offences general deterrence may be controversial, this is not the case with crimes involving the market or other business dealings”.

110. In Jacobson (supra) Kaye J said (at [74]):

“In cases such as this, the courts have emphasised that the principles of general deterrence and denunciation must be given significant weight. …. Unless the courts adopt a firm approach in the imposition of sentences for such offences, those persons who are minded to commit such offences will consider that the risks in doing so are outweighed by the potential benefits which may accrue from involvement in such offences. For those reasons it has been emphasised by the courts that the considerations of denunciation and general deterrence must take precedence, and be given significantly more weight than the mitigatory factors …..”

THE IMPOSITION OF SENTENCE

111. Section 16A(1) of the Act provides that I must impose a sentence that is of a severity which is appropriate in all of the circumstances of the case. In light of s. 17A(1), I must not pass a sentence of imprisonment on any person for a federal offence unless, having considered all other available sentences, I am satisfied that no other sentence is appropriate. Under s. 17A(2), in the event that I pass a sentence of imprisonment on either offender, I must state my reasons for concluding that no other sentence is appropriate, and I must cause those reasons to be entered in the records of the court. In the event that I conclude that a period of custody must be served, I am required to determine the minimum term that justice requires each offender serve in accordance with Part 1B of the Act, and not by reference to an assumed starting point or ratio: Hili v R; Jones v R [2010] HCA 45; (2010) 242 CLR 520 at [36] – [45].

112. The Crown submitted that in the case of each offender, a custodial sentence should be imposed. Senior counsel for each offender accepted that to be the case. For the reasons I have stated, I am satisfied that no sentence other than a sentence of imprisonment is appropriate in the circumstances of the present case. The issue, however, is how any such sentence should be served. The Crown submitted that any sentence should require each offender to serve a period of actual custody. Senior counsel for each offender submitted that having regard to all of the circumstances, it was appropriate for any sentence of imprisonment to be served in a way which did not involve serving such a period, be it by way of immediate release pursuant to a Recognisance Release Order or otherwise.

113. For the reasons I have already expressed, the offending in this case was of considerable seriousness, and general deterrence has a significant role to play. I accept that general deterrence does not, of itself, mandate that in each and every case of this type of offending, a period of actual custody must be served. Whether a particular sentencing alternative is appropriate or adequate must necessarily be determined on a case by case basis, taking into account all of the relevant circumstances: R v Boulden [2006] NSWSC 1274 at [51]; R v Hinchcliffe [2013] NSWCCA 327 at [276]. However having considered all relevant factors, I have come to the view that a period of actual full time custody must be served in each case.

114. I have already explained the circumstances in which the offender Roach faces two charges. That requires the imposition of two separate sentences, reflective of the criminality in each case: Pearce v R [1998] HCA 57; (1998) 194 CLR 610. I must also bear in mind that although the majority of Roach’s offending occurred over a period when the lower maximum penalty applied, the offending in Count 2 occurred at a time when the maximum penalty had doubled. At the same time, I have found that the roles played by each offender cannot be differentiated, and that the total period over which they each offended was essentially the same. All of these considerations are reflected in the sentences I propose to impose.

ORDERS

115. In respect of the offender Robert Venour Dulhunty:

1. The offender is convicted.

2. The offender is sentenced to a term of imprisonment of 1 year and 6 months, commencing on 30 November 2015 and expiring on 31 May 2017.

3. I direct that at the expiration of a period of 6 months, namely on 31 May 2016, the offender be released upon his own recognisance, without security, in a sum of $500.00, to be of good behaviour for a period of 12 months.

116. In respect of the offender Roach:

1. The offender is convicted of counts 1 and 2.

2. In respect of count 1, the offender is sentenced to a term of imprisonment of 11 months, commencing on 30 November 2015 and expiring on 31 October 2016.

3. In respect of count 2, the offender is sentenced to a term of imprisonment of 7 months, commencing on 1 November 2016 and expiring on 31 May 2017.

4. I direct that at the expiration of a period of 6 months, namely on 31 May 2016, the offender be released upon his own recognisance, without security, in a sum of $500.00, to be of good behaviour for a period of 12 months.

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Amendments

16 October 2017 - Typographical corrections to [101] and [108]

16 October 2017 - 13 October 2017 - Non-publication order preventing publication of the name of the offender Roach vacated.

Decision last updated: 16 October 2017