R v Farris - [2015] WASC 251

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CRIMINAL

CITATION: R -v- FARRIS [2015] WASC 251

CORAM: HALL J

HEARD: 25 - 29 MAY 2015

DELIVERED : 13 JULY 2015

FILE NO/S: INS 289 of 2014

BETWEEN: THE QUEEN
Prosecution
AND
PETER CHARLES PRITCHARD FARRIS
Defence

Catchwords:

Criminal law - Insider trading - Trial of issues - Whether offender knew or only ought to have known that information was price sensitive and not generally available - Whether knowledge must be shown to exist at time of sale - Whether necessary to be 'consciously aware' of information at that time - fault element of knowledge applies to physical element of possession not physical element of sale

Legislation:

Corporations Law 2001 (Cth), 1042A, 1042D, 1042F, 1043A, 1308F
Crimes Act 1914 (Cth), s 3.1, 4.1, 5.1, 5.2, 5.6

Result:

Factual issue determined against the offender

Category: B

Representation:

Counsel:

Prosecution : Mr S Vandongen SC & Mr P I Lyons
Defence: Mr S Penglis & Mr M J Keogh

Solicitors:

Prosecution : Director of Public Prosecutions (Cth)
Defence: Herbert Smith Freehills

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

Law v The State of Western Australia [2009] WASCA 193
Mansfield v The Queen [2012] HCA 49; (2012) 247 CLR 86
Medan v The Queen [2011] WASCA 142
R v Hannes [2000] NSWCCA 503; (2000) 158 FLR 359
R v Olbrich [1999] HCA 54; (1999) 199 CLR 270
R v Selim [2007] NSWSC 362
R v Storey [1998] 1 VR 359
The Queen v Gay (Unreported, TasSC, 23 August 2013)
HALL J:

Introduction

On 19 February 2015 Peter Farris (the offender) pleaded guilty to two charges of procuring another to sell shares in a publicly listed company at a time when he was in possession of information that he knew or ought to have known was price sensitive and not generally available, contrary to s 1043A(1)(d) of the Corporations Act 2001 (Cth). Offences of this type are commonly referred to as 'insider trading'.
At the time of entering the pleas the offender stated that he accepted his guilt on the basis that he ought to have known the character of the information that he possessed rather than that he did know of that character. It is possible for a person to be guilty of the offence if it is established, or admitted, that the person either knew or ought to have known that the information was not generally available and was price sensitive. The offender's admission that he ought to have known the character of the information was sufficient for him to be guilty of the offences. However, the prosecution did not accept that the offender did not know the character of the information. Accordingly there was an issue between the parties as to the factual basis on which the offender should be sentenced.
Generally speaking, an offence committed in circumstances where the offender knows the character of the information will be more morally culpable than one where the offender does not know…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading R v Farris

Details

AGLC: R v Farris [2015] WASC 251
Case: [2015] WASC 251
Decision Date: 13 JULY 2015

CaseChat Overview and Summary

The case of R v Farris involved a prosecution for insider trading by Mr Peter Charles Pritchard Farris. Mr Farris, a director of Northern Star Resources Limited and Investmet Limited, sold shares in Northern Star before a public announcement of a large-scale sell-down of shares by Investmet and other directors. The key legal issues were whether Mr Farris knew or ought to have known that the information he possessed was price-sensitive and not generally available, and whether the fault element of knowledge applied to the physical element of possession rather than the physical element of the sale. The court had to determine if Mr Farris was 'consciously aware' of the information at the time of the sale.

The court examined the evidence and concluded that Mr Farris was aware of the legal prohibitions against insider trading and the requirements of Northern Star's Share Trading Policy. Despite his repeated requests for trading clearance being denied, he proceeded to sell his shares, acting on information he obtained through his involvement in discussions about the planned sell-down. The court found that Mr Farris had the requisite knowledge that the information he possessed was not generally available and had a material effect on the share price. It was established that Mr Farris was 'consciously aware' of the information at the time of the sale, satisfying the fault element of the offence.

The court ruled in favour of the prosecution, finding Mr Farris guilty of insider trading. The final orders of the court included the imposition of penalties and potential disqualification from being a director of a corporation.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

At the commencement of the trial of issues senior counsel for the Crown read out a statement of material facts. That statement is reproduced below. With the exception of those parts that are underlined, the offender formally admitted the facts. This was done both orally through counsel and by tendering signed admissions which incorporated all of the facts other than those expressly disputed.1.Peter Charles Pritchard Farris ('Mr Farris') is 70 years old.2.Mr Farris attended the Perth Technical College in 1999, graduating with a Diploma of Business. He also attained a Diploma of Business from the Royal Melbourne Institute of Technology which he attended in 1966 and 1967.3.Mr Farris has been a Member of the Australian Institute of Company Directors since 2009.4.Mr Farris worked as a real estate agent from 1972 to 2005 for a number of organisations, including Satterly Real Estate, where he was employed as a managing director between 1988 and 1990.5.In 1990, Mr Farris established P Farris and Co, where he was the managing director until 1999. Between 1999 and 2005, Mr Farris was the managing director of Peter Farris Real Estate.6.Mr Farris remains a licensed real estate agent in Western Australia.7.Mr Farris has been a director of Farris Corporation Pty Ltd (Farris Corporation) since 29 August 1980. 8.Farris Corporation Pty Ltd is a private company, of which Mr Farris is the sole director. The primary purpose of the company is to provide business advisory and management consulting services. The company also manages M Farris's personal financial affairs. 9.Farris Corporation has held a trading account with Hartleys Limited (Hartleys) since October 2003. Mr Farris is the only person authorised to provide instructions to Hartleys to place orders on this account. 10.At various times, Mr Farris was a director of:a.Nevana Holdings Pt Ltd from 11 October 1988 to 23 March 1989 and from 9 October 1990 to 9 May 1991;b.Bali Investments Pty Ltd from 26 January 1990 to 10 June 1993;c.Stirling Resources Limited from 17 September 2012 to 9 November 2012.;d.Northern Star Resources Limited ('Northern Star') from 22 April 2009 to 30 November 2012. Northern Star is a mid-tier gold producer and exploration company operating in Northern Western Australia. Northern Star has been listed on the ASX since 17 December 2003;e.Northern Star Mining Services Pty Ltd from 2 March 2011 to 30 November 2012;f.Swan Gold Mining Limited from 17 September 2012 to 5 February 2013;g.Atlantic Capital Corporation Pty Ltd from 6 February 2001 to 11 February 2013;h.Redbank Copper Limited ('Redbank Copper') from 17 September 2012 to 4 February 2013;i.Whotune Music Group Limited ('Whotune Music') from 23 April 2010 to 5 February 2013;j.Lithium International Limited from 6 August 2009 to 5 February 2013;k.Investmet Limited ('Investmet') from 8 October 2008 to 5 February 2013. Investmet is an investment company focused on low capitalisation resource companies and assists them with their projects to acquire projects in order to add value to those companies.l.Whitestone Minerals Pty Ltd from 6 April 2009 to 5 February 2013.11.At the material time, being late November 2012, Mr Farris remained the director of 9 companies, one of which was listed on the ASX.12.In February 2013, Mr Farris retired from all of his existing directorships with the exception of Farris Corporation.NORTHERN STAR13.Northern Star was incorporated on 12 May 2000, and listed on the Australian Securities Exchange ('ASX') on 17 December 2003 with the listing code, 'NST'.14.Northern Star is a gold producer and exploration company operating in the regions of Ashburton, Pilbara Murchison and the Kimberley in Western Australia. As at 28 November 2012 its market capitalisation was $655,508,006.71.15.Northern Star was included in the ASX 200 index on 16 December 2012.16.In 2012, the board of Northern Star comprised of:a.Christopher Kenneth George Rowe, Chairman, appointed on 20 February 2003.b.William James Beament (also known as Bill), Managing Director, appointed on 20 August 2007;c.Michael George Fotios , non-executive director, appointed on 4 September 2009;d.Peter Edmund O'Connor, (resides in London, United Kingdom), non‑executive director appointed on 21 May 2012;e.John Daniel Fitzgerald, non‑executive director appointed at Northern Star Annual General Meeting on 30 November 2012; andf.Mr Farris, non‑executive director appointed on 22 April 2009. Mr Farris did not stand for re-election as a director at the Northern Star Annual General Meeting on 30 November 2012. INVESTMET17.Investmet was incorporated on 24 May 2007.18.In 2012, the board of Investmet was comprised of:a.Michael George Fotios (who founded Investmet) Managing Director since 24 May 2007;b.Alan Still, (resides in South Africa), appointed as a non-executive director on 8 August 2008;c.Stephen James Mann, appointed as a non‑executive director on 8 October 2008;d.Mr Farris appointed as a non‑executive director on 8 October 2008; ande.Wayne James McGrath appointed as a non-executive director on 11 July 2011.19.Investmet invested in Northern Star in 2009 and assisted in its acquisition of the Paulsens Gold Mine.20.As at 19 September 2011, Investmet was Northern Star's largest shareholder with 65,536,900 ordinary shares accounting or 18.77 per cent of issued capital.21.On 21 February 2012, Northern Star raised $45 million through a placement of 50 million shares at $0.90.22.On the same day, Investmet sold 24.7 million Northern Star shares and on 22 February 2012 it sold a further 801,000 Northern Star shares. These sales occurred at $0.90 per share as part of an institutional placement.23.These transactions were conducted at a discount of 8.2 per cent to the 30 day volume weighted average price of Northern Star shares at that time, being $0.98 per share.24.In particular, the sale on 21 February 2012 was conducted at a discount of 17 per cent to the previous trading day closing price and the sale on 22 February 2012 was conducted at a 7 per cent discount to the closing price on 21 February 2012.25.These sales were part of Investmet's strategy to reduce the size of its shareholding in Northern Star.26.As at 28 September 2012, Investmet was Northern Star's second largest shareholder with 40,035,900 ordinary shares accounting for 9.44 per cent of issued capital.INSIDER TRADING RELATING TO NORTHERN STARMr Farris's knowledge of insider trading prohibitions27.Through his education and employment Mr Farris was at all relevant times aware of the legal prohibitions against insider trading in Australia.28.In addition, Mr Farris was aware as part of his directorship at Northern Star that if he wanted to trade in securities of Northern Star he must abide by the Company's Share Trading Policy and its approval procedures and obtain signed written consent to trade from the Chairman. This applied to all holdings, whether direct or indirect.29.As a director of Northern Star, Mr Farris was bound by Northern Star's share trading policy which in part stated, 'Directors, officers and employees who wish to trade in Company securities must first have regard to the statutory provisions of the Corporations Act dealing with insider trading'.30.On a number of occasions in or about the period late July 2012 to 19 November 2012, Mr Farris discussed his desire to sell part of his indirect shareholding in Northern Star with the directors of Northern Star.31.These discussions resulted in Mr Farris submitting the following formal requests to trade to Northern Star's Chairman, Mr Rowe:a.On 24 August 2012, Mr Farris submitted to Mr Rowe a request to sell 300,000 fully paid ordinary shares held by Farris Corporation; and b.On 7 October 2012, Mr Farris submitted to Mr Rowe a request to sell 500,000 fully paid ordinary shares held by Farris Corporation. That request stated, 'Chris I have delayed selling for some time due to directors request but now require approval to sell if all is clear'.32.On both occasions, Mr Rowe did not provide Mr Farris with written consent to trade. The reasons given to Mr Farris by Mr Rowe for both refusals included:a.There was an active blackout period;b.Northern Star's quarterly activities report was yet to be released; and c.There was unannounced material information in the Northern Star Board's knowledge in relation to Northern Star's proposed joint venture with Fortescue Metals Group.Summary of Events33.All times in this document are in Western Standard Time (WST).34.As at 27 November 2012, Mr Farris held 999,998 shares in Northern Star, Mr Farris did not trade in the securities of Northern Star from 1 January 2012 until the Relevant Period.35.On Wednesday 14 November 2012 at 7.30am, Investmet held an informal board meeting attended by Michael Fotios, Stephen Mann and Wayne McGrath.36.It was the regular practice of the Investmet board to meet every second Wednesday morning for breakfast to discuss projects that were underway as well as potential new projects. Mr Farris did not attend this particular meeting.37.The next day, Thursday 15 November 2012 at 3.38 pm, Mr McGrath sent an email to Mr Fotios, Mr Mann and Mr Farris, attaching the informal notes of the meeting that he took. The informal notes of the meeting state, inter alia, 'Mike talking to Azzure re Book Build for Investmet shares circa $1.40'. On Thursday 15 November 2012, at 3.48pm Mr Farris responded with an email saying: 'Thanks'.38.During the afternoon of Monday, 19 November 2012, there was a Board Meeting of Northern Star held at Smith's Beach in Western Australia's South‑West region as part of a company strategy week away from the office.39.After the board meeting there was a discussion that took place regarding the issue of 'Personal shareholding'. In attendance and or participating at this discussion were Mr Farris, Bill Beament, Chris Rowe and Mr Fotios, and they discussed the issues of Northern Star directorships, the possibility of a sell down by Investmet and the possibility of Northern Star directors also participating in the sale of their holdings of Northern Star shares, ('the Sell Down').40.On the morning of Tuesday 20 November 2012 Wayne McGrath, director of Investmet and also Executive Chairman of the Wyllie Group, received a phone call from Mr Fotios in which Mr Fotios told Mr McGrath that Azure Capital and Morgan Stanley were working on selling down half of Investmet's NST holdings for a price of about $1.40‑$1.45 per share and that he felt the deal would happen fairly quickly.41.On the basis of the information Mr Fotios conveyed to Mr McGrath about the Sell Down, Mr McGrath instructed the Chief Operating Officer of the Wyllie Group to cancel a sell order the Wyllie Group had in the market on Northern Star shares.42.Mr McGrath cancelled his order because he considered the information provided by Mr Fotios ‑ namely that Investmet were looking to sell half of its holdings in Northern Star fairly quickly and that the price discussed was $1.40‑$1.45 ‑ to be price sensitive.43.On the evening of Thursday 22 November 2012, Mr Fotios called Stephen Mann. Mr Fotios told Mr Mann that he and Mr Farris had a meeting scheduled with Azure Capital on the coming Monday, 26 November 2012, to talk about the possibilities of Investmet selling down some Northern Star shares and doing a book build.44.At the time of Mr Mann and Mr Fotios's telephone conversation, Mr Mann's self‑managed superannuation fund had an existing sell order in the share market for 100,000 shares in Northern Star. As a result of the telephone conversation Mr Mann had with Mr Fotios, Mr Mann telephoned his broker at Hartleys the following morning and cancelled the existing sell order for Northern Star shares held in his superannuation fund. Mr Mann cancelled his order because he considered it to be a prudent thing to do as a director of Investmet given that Investmet was likely to sell a significant portion of its shares.45.On Friday 23 November 2012, at 10.22 am Mr Rowe sent an email to Northern Star Board members, Mr Fotios, Mr O'Connor, Mr Farris and Mr Beament. In the email, Mr Rowe stated, 'As we are now looking at Investmet and Peter selling down along with Bill, myself and Jason, we need to look hard at whether merely adding another independent is enough, hence our discussion as to whether Investmet might reduce its representation to one director'.46.The 'Peter' that is being referred to in the email is Mr Fams and the 'Jason' that is referred to is Jason Boladeras, who was the Exploration Manager of Northern Star at the time.47.On Monday 26 November 2012 a meeting was held at Azure Capital, attended by John Poynton, John Toll (both of Azure Capital), Mr Farris and Mr Fotios, where, among other things, the coordinated sell down of Northern Star shares by Investmet and Northern Star directors - such as Mr Beament's and Mr Rowe's and Mr Fotios' holdings was discussed.48.Andrew Frazer is a Senior Financial Adviser/ Institutional Dealer with Morgan Stanley. Andrew Frazer attended the Azure meeting briefly towards the end, and agreed to go and test the market in regards to what price and in what volumes institutional investors were prepared to buy NST shares.49.A generic price of somewhere between the market price and a 10 per cent discount was talked about. Handwritten notes of the meeting record that selling volumes of approximately 45 million shares was discussed at a possible share price of $1.40.50.There was also a discussion during the meeting, lead by Mr Fotios that it would be best if the Sell Down occurred before the Northern Star Annual General Meeting scheduled for Friday, 30 November 2012. The reason for this was so that the Northern Star board could discuss the Sell Down with shareholders and answer their questions in regards to it.51.On Monday 26 November 2012 at 12.53pm John Poynton sent an email to Mr Farris, copied to Mr Fotios. In the email Mr Poynton says: 'Hi Peter, Sorry to cut you off. Chatted to Frazer...We are standing by for numbers from Chris and Bill...and commission rate they are prepared to pay. Stock to be offered into the book build is a minimum of 40 million shares (can be more, you just need to advise me) at the amended minimum price of $1.40. Confirming, going live Wed pm Perth time'. In this email 'Chris' is a reference to Mr Rowe, and 'Bill' is a reference to Mr Beament.52.At 1.59 pm the same day, Mr Farris replied to Mr Poynton. In that email Mr Farris said: 'Thanks John, We are meeting Chris at 2.30 and I am not sure yet whether Michael has spoken to Bill, Regards Peter'. The 'Chris' being referred to is Mr Rowe.53.At 2.30 pm that day, Mr Farris and Mr Fotios met with Mr Rowe. Mr Rowe discussed with Mr Fotios and Mr Farris concerns that had been raised by institutional investors about the lack of independent directors on the Northern Star board. The composition of the Northern Star board was discussed and the possibility of Mr Farris no longer being a Director of Northern Star was also discussed. During these discussions Mr Fotios stated that he was prepared to resign from the Board of Northern Star. Mr Farris and Mr Rowe both persuaded Mr Fotios not to resign at that time. No decision was made regarding Mr Farris' directorship in Northern Star.54.On Monday, 26 November 2012 during the course of trading during the day, the Northern Star share price:a.opened at $ 1.55 per share;b.reached a high of $1.585 per share;c.reached a low of $1.53 per share;d.closed at $1.545 per share; ande.the Market Volume Weighted Average Price of Northern Star shares was $1.555834.55.On Tuesday, 27 November 2012, in the afternoon, Mr Mann received a phone call from Mr Farris. During that conversation Mr Farris expressed his frustration at the Northern Star Board for having previously declined to grant him clearance to trade/sell his Northern Star holdings. Mr Farris told Mr Mann that he had been trying to sell his Northern Star shares for four months but still hadn't received consent to trade. Mr Farris stated that he had been pushing for the consent and was very upset about it being refused. Mr Farris's conversation with Mr Mann was in furtherance of Mr Farris having previously expressed his frustrations to Mr Mann about obtaining consent to trade. He told Mr Mann that he was going to sell his stock anyway as he (Farris) would not be a director by the time of the upcoming Northern Star Annual General Meeting on 30 November 2012, and that they could all go and get stuffed.56.In the course of that telephone conversation Mr Mann told Mr Farris that even if Mr Farris obtained consent to trade he could not sell any stock at that point in time.57.Mr Mann was aware that Mr Farris had attended the meeting with Azure Capital about the Sell Down and therefore believed him to be involved in the plan to sell a large parcel of Investmet's stock at a discount to the current market price.58.On Tuesday, 27 November 2012, Mr Rowe counter signed Mr Farris's request to trade authorisation, which was signed and dated by Mr Farris 26 November 2012. In signing Mr Farris's clearance to trade, Mr Rowe performed his usual trade clearance checks, which include checking with Mr Beament, Mr Parry, the Chief Financial Officer of Northern Star, and Ms Brown, the Secretary of Northern Star as to whether there were any up and coming financial issues or mining or drilling results or if Northern Star was in a blackout period, which would have precluded him from signing the form.59.At 4.03 pm on 27 November 2012, Mr Rowe faxed a signed share trading clearance form for Mr Farris to Investmet's office.60.At 4.17 pm on 27 November 2012, Mr Farris phoned Hartleys' broker Sam Williams to place an order to sell 750,000 NST shares at a target sell price of $1.50. At this time the market was closed. Mr Williams advised Mr Farris that he would begin putting his order to market the next morning when the market opened. Mr Farris also emailed Mr Williams his signed clearance to trade.61.Mr Williams was scheduled to fly to London in the evening of 28 November 2012, and so he informed Mr Farris that fellow broker, David Hainsworth, would be assisting to finalise any trading that needed to occur to fill Mr Farris's order on Thursday 29 November 2012.62.At 5.58 pm on Tuesday, 27 November 2012, Mr Fotios forwarded to Mr Farris an email sent by him to Mr Rowe earlier that day. The email attached a request for trading clearance signed by Mr Fotios and dated 27 November 2012 for clearance for the following shareholders to sell the specified number of shares: Delta Resource Management Pty Ltd - 7 million shares, Investmet - 22 million shares, and Mr Fotios - 2 million shares. As per, Northern Star's share trading policy, once a clearance is granted to trade, the trade must be executed within five days.63.On Tuesday 27 November 2012 during the course of trading during the day, the Northern Star share price:a.opened at $ 1.545 per share;b.reached a high of $ 1.58 per share;c.reached a low of $1.54 per share;d.closed at $1.57 per share; ande.the Market Volume Weighted Average Price of Northern Star shares was $1.56058.64.On Wednesday 28 November 2012, at 7.00 am when the market opened, Mr Farris's sell order for Northern Star started being executed in the market. A total of 582,862 NST shares were sold throughout the course of the day in 16 separate transactions at prices ranging from $1.51 to $1.57 by 1.10 pm. These transactions were executed in the market at the discretion of Mr Farris's broker, Mr Williams throughout the day, as a result of Mr Farris's order to sell 750,000 shares. The total value of the 582,862 Northern Star shares disposed of by Mr Farris on 28 November 2012 was $894,708.61. Mr Farris's trading accounted for 22.37% of the volume of NST traded on that day.65.On Wednesday, 28 November 2012 during the course of trading during the day, the Northern Star share price:a.opened at $ 1.57 per share;b.reached a high of $ 1.57 per share;c.reached a low of $ 1.51 per share;d.closed at $ 1.545 per share; ande.the Market Volume Weighted Average Price of Northern Star shares was $1.530881.66.On Wednesday, 28 November 2012, at 1.00 pm, Mr Fotios sent an email to Mr Farris, Mr Mann, and Mr McGrath titled, 'FW: NST - Block Execution Documentation'. In the email he stated, 'Gents, Documentation from Morgan Stanley for your review. I am also expecting a covering term sheet from Azure as an overarching document and will circulate as soon as it's received. NST is completing the questionnaire and Hilary is reviewing, so that doc has been left with Bill to approve for sign off...'.67.The email sent by Mr Fotios attached three documents: the NST - Placement Agreement ‑ November 2012, the NST - Due Diligence Questionnaire - November 2012, and NST ‑ Morgan Stanley Fee Schedule - November 2012. The first document, titled, 'PLACING AGREEMENT Placing of [45,000,000] fully paid ordinary shares in NORTHERN STAR RESOURCES LTD (NST AU)' was marked 'Confidential - Not For Redistribution'. The second document titled, 'Due Diligence Questionnaire' was marked, 'Strictly Private and Confidential'. The third document was titled, 'Placing Agreement Schedule of Fees' and was marked, 'STRICTLY PRIVATE AND CONFIDENTIAL'.68.On Wednesday, 28 November 2012 at 1.24 pm, Mr Fotios sent an email to Mr Farris. The email stated, 'FYF, and attached a document titled, 'Request for Prior Written Clearance to Trade in Company Securities'. The form was signed by both Mr Rowe and Mr Fotios and showed that Mr Fotios and his associated entities had clearance to sell Northern Star shares as follows: 'Delta Resource Management Pty Ltd - 7,000,000 FPO shares, Investmet Limited - 22,000,000 FPO shares, Michael George Fotios <Michael Fotios Family A/C> - 2,000,000 FPO shares'. As per Northern Star's Share Trading Policy, the transaction must be made within five days of clearance being signed.69.At 6.01 pm on Wednesday 28 November 2012, Mr Beament sent an email to Northern Star Board members Mr Rowe, Mr Fotios, Mr O'Connor, and Mr Farris which stated: 'Hi Guys, Just shooting out for my birthday dinner with the family. Attached is the first draft for the restructuring announcement. Need to get a final draft to Morgan's by 8am in the morning'.70.The draft Northern Star announcement attached in Beament's email was titled: 'Northern Star poised for next chapter of growth following sale by cornerstone investor'. It stated, 'Northern Star Resources (ASX: NST) today announces that it has entered the next phase of its growth and development with the Company's biggest shareholder and members of the Board agreeing to sell a combined 10 per cent stake in the WA gold miner to a group of institutional investors, including London-based resources specialist BlackRock Investmet, the private investment syndicate led by Northern Star Director Michael Fotios, has sold 31 million shares, reducing its stake in the Company from 10 per cent to 5 per cent.Northern Star Managing Director Bill Beament has sold 10 million shares, representing 40 per cent of his holding and Chairman Chris Rowe has sold 4 million shares, leaving him with xxx million shares.The transactions, which were conducted by Morgan Stanley at $1.40 a share, will see Blackrock become a substantial holder in Northern Star with a 9.3 per cent stake. The remainder of the stock was placed with leading Australian institutional investors. As part of Investmet's disposal, its representative, Peter Farris has resigned as Non‑executive Director of Northern Star. Mr Fotios will remain a Non-executive Director of the Company, being Investmet's sole representative on the Board'.71.At 2.18 pm on Wednesday, 28 November 2012, Mr Farris received an email from Mr Williams confirming the sale of 582,862 of the 750,000 shares at an average price of $1,535.72.At 7:42 pm the same night, Messrs Beament, Rowe, O'Connor, Fotios and Farris received an email from Ms Brown, attaching the final results of the Northern Star AGM proxy voting. The proxy votes were 60.5% in favour of Mr Fams's reappointment as a director at the Northern Star AGM.73.On Wednesday 28 November at 8.54 pm Mr Farris replied to Mr Beament by email, stating, 'Hi Bill, Just got in and by chance checked my emails. I understand the need for this press release relating to the sell down but I have not resigned from the board and as yet it has only been a brief discussion with Michael and Chris. I have heard nothing from you or Peter O'Connor even though Peter and I chatted about the new board candidates. Once again we appear less than cohesive with an important decision and at least there should be or should have been proper discussion on the strategy or resignations for both Michael and I into the near future and beyond. At this point you and the board do not have my resignation but I approve on the balance of the press release. Cheers Peter'.74.The same evening, at 9.12 pm Mr Farris sent an email to Mr Rowe, Mr O'Connor and Mr Fotios outlining his intentions to 'keep them all in the loop' regarding his comments to Mr Beament on the press release required for the sell down.75.On Thursday 29 November 2012 at 6.47 am Mr Farris sent an email to Mr Rowe and Mr Fotios. The email stated, 'Good Morning Chris, It will be best to discuss my situation as we never concluded our discussions when Michael you and I met. We as I understood were to have a final discussion today as to what we would release taking into consideration that Michael was planning to go also and neither you or I actually expected this. I believe from a directors position encouraging Michael to stay is absolutely correct and when I read some of the finer detail with your sell down docs it could have been used against the vendors as I think it is 'material'. My thoughts are Chris that I will wait till the sell down is complete, monies paid and some formal announcement of John Fitz's appointment maybe late next week is completed. At the same time I will formally advise the board that I will be stepping down from the board at the end of December'.76.On Thursday 29 November at 7.14 am, Mr Farris sent an email to Mr Beament. The email stated, 'Good morning Bill, Please remove all reference re myself and this press release. There has been no final discussions on my situation with Chris or anyone else and at this moment it is highly [sic] I will be re elected to the board and on completion of the sell down and payment to Investmet I will consider standing down which may be effective as of the 31st of Dec 2012. Cheers, Peter.'77.On Thursday, 29 November at 7.15 am Mr Farris and Hartleys broker David Hainsworth spoke on the telephone in relation to Mr Farris's sale of Northern Star shares. Mr Farris stated that he like the order to be completed by the end of the day.78.On Thursday, 29 November 2012, after Mr Hainsworth and Mr Farris's conversation, Mr Farris's sell orders for NST started being executed in the market. The balance of Mr Farris's sell order of 750,000 NST, namely a total of 167,138 NST shares, were traded throughout the course of the morning in 7 separate transactions at prices ranging from $1.535 to $1.545. The separate transactions were put on the market at the discretion of Mr Hainsworth. The total value of the 167,138 NST shares disposed of by Mr Farris on 29 November 2012 was $256,772.04. Mr Farris's accounted for 10.93% of the volume of Northern Star shares on that day.79.Mr Farris and Mr Hainsworth spoke on the telephone at around 11.43 am on Thursday 29 November 2012. Mr Hainsworth advised Mr Farris that the balance of his Northern Star shares sell order had completed.80.On Thursday, 29 November 2012 during the course of trading during the day, the Northern Star share price:a.opened at $1.54 per share;b.reached a high of $ 1.54 per share;c.reached a low of $ 1.52 per share;d.closed at $1.53 per share; ande.the Market Volume Weighted Average Price of Northern Star shares was $1.531899.81.On Friday 30 November 2012 at 6:10:59 am, before the market opened, Morgan Stanley Australia Limited, executed a special crossing of 37,000,000 Northern Star shares at $1.35 per share for a total consideration of $49,950,000.82.On Friday, 30 November at 6:39:08 am Northern Star released an announcement, 'Northern Star set for next phase of growth following sale by cornerstone investor'. The announcement stated in part, 'Northern Star Resources (ASX: NST) today announces that it has entered the next phase of its growth and development with the Company's biggest shareholder and members of the Board agreeing to sell a combined 10 per cent stake in the WA gold miner to a group of leading institutional investors.Investmet, the private investment syndicate led by Northern Star Director Michael Fotios, has sold 18.1 million shares, reducing its stake in the Company from 10 per cent to 5 per cent. In conjunction Mr Fotios has reduced his associated entities by 7.4 million shares. Northern Star Managing Director Bill Beament has sold 8.2 million shares, representing approximately one third of his holding, and Chairman Chris Rowe has sold 3.3 million shares, leaving him with approximately 4 million shares'.83.On Friday 30 November 2012:(a)During the course of trading during the day, the Northern Star share price:a.opened at $ 1.3 7 per share;b.reached a high of $ 1.40 per share;c.reached a low of $ 1.325 per share;d.closed at $1.355 per share; ande.the Market Volume Weighted Average Price of Northern Star shares was $1.36456.(b)The change in closing share price for Northern Star from 29 November 2012 to 30 November 2012 was a $0,175 decrease in price, representing an 11.44 per cent reduction.84.On 30 November 2012 at 11.00 am the Annual General Meeting for Pegasus Metals Limited (Pegasus AGM) was held at the Royal Perth Golf Club. Mr Mann and Mr Farris both attended the Pegasus AGM. Mr Farris arrived at 10.30 am for morning tea prior to the meeting with shareholders. At the Pegasus AGM, Mr Mann said to him, 'Tell me you didn't sell any shares'. The reference to shares being Northern Star shares. Mr Farris told Mr Mann that he had sold. Mr Mann then told Mr Farris that he was 'crazy or 'an idiot'. Mr Farris then said to Mr Mann that when he woke up that morning he felt sick about it. Mr Mann then told Mr Farris to obtain legal advice about his trading in Northern Star shares.Inside InformationMr Farris's possession of inside information relating to the Sell Down85.As at 4.17 pm on 27 November 2012 when he placed his order to sell 750,000 NST shares at a target price of $1.50 with his broker, Mr Farris possessed the following information concerning NST shares that was not generally available and, if it were generally available, a reasonable person would expect it to have a material effect on the price or value of NST shares:a.Investmet Ltd (Investmet) and several directors of NST were considering participating in a sell down of shares that they held in NST;b.At a meeting on 26 November 2012 at the offices of Azure Capital Limited (Azure) between the accused and Michael Fotios (as directors of Investmet), John Poynton and John Toll (of Azure), and Andrew Frazer (of Morgan Stanley) met to discuss the sell down of shares in NST.c.Subject to Azure receiving confirmation from potential vendors who were participants in the sell down of the number of shares to be offered for sale as part of the sell down and the commission rate that they were prepared to pay to Azure or other advisers:i.a minimum of 40 million NST shares were to be offered for sale at a minimum price of $1.40 per share; andii.the shares would be offered for sale on 2 November 2012 via a book build. (the Relevant Information)86.As at 7.15 am on Thursday 29 November when he had a telephone conversation with Hartleys broker Mr Hainsworth concerning the ongoing execution of his sell order, Mr Farris possessed further information concerning NST shares that was not generally available and, if it were generally available, a reasonable person would expect it to have a material effect on the price or value of NST shares, namely:a.Investmet Ltd (Investmet) and several directors of NST were considering participating in a sell down of shares that they held in NST;b.At a meeting on 26 November 2012 at the offices of Azure Capital Limited (Azure) between the accused and Michael Fotios (as directors of Investmet), John Poynton and John Toll (of Azure), and Andrew Frazer (of Morgan Stanley) met to discuss the sell down of shares in NST.c.Subject to Azure receiving confirmation from potential vendors who were participants in the sell down of the number of shares to be offered for sale as part of the sell down and the commission rate that they were prepared to pay to Azure or other advisers:i.a minimum of 40 million NST shares were to be offered for sale at a minimum price of $1.40 per share; andii.the shares would be offered for sale on 29 November 2012 via a book build.d.Investmet and several directors of NST were anticipating selling a total of approximately 45 million shares, at a price of $1.40 per share, in the sell down.(Amended Relevant Information)87.On 28 and 29 November 2012 when he disposed of 750.000 NST shares Mr Farris knew that the Relevant Information and Amended Relevant Information that he possessed:a.was not generally available; andb.if it were generally available, a reasonable person would expect it to have a material effect on the price or value of NST shares.Total investments made, and savings generated, as a result of Mr Farris's offences88.As a result of Mr Farris' conduct as described in paragraphs [85] and [86];•financial products relating to NST with a total value of $1,151,480.65 were disposed of by Mr Farris between 28 and 29 November 2012 at an average price of $1.5353;•After the public announcement to the market of the Sell Down on 30 November 2012, the opening price that Northern Star shares commenced trading was $1.37. This compared to a closing price the previous day of $1.53 and represented a fall in value of 10.46%. Accordingly, by selling 750,000 NST shares prior to the Sell Down and its announcement Mr Farris avoided a loss of value on these shares of $123,975.