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 the character but ought to have known it in all of the circumstances. Accordingly in the circumstances of this case (that is, where the offender admits that he ought to have known) the existence of actual knowledge is an aggravating factor. The prosecution accepted that actual knowledge of the character of the information was an aggravating factor and that it bore the onus of proving that factor to the standard of beyond reasonable doubt.
A trial of issues, at which both parties called evidence, was conducted between 25 and 29 May 2015. The primary purpose of the trial of issues was to determine the question of knowledge, but evidence was led that was also more generally relevant to the offender's culpability and subjective personal circumstances.

The charges

The charges to which the offender has pleaded guilty are as follows:
(1)Between 27 November 2012 and 1 December 2012 at Perth in the State of Western Australia [the offender] contravened section 1043A(1)(d) of the Corporations Act and thereby committed an offence against section 1311(1) of the Corporations Act in that [he], being possessed of information that was not generally available, but which if it were generally available, a reasonable person would expect to have a material effect on the price or value of Division 3 financial products, namely shares in Northern Star Resources Ltd and [he] knew or ought reasonably to have known that such information was not generally available, and that if it were generally available a reasonable person would expect it to have a material effect on the price of NST shares, [he] procured another, namely Farris Corporation Pty Ltd, to dispose of 582,862 NST shares held on the account of Farris Corporation;
(2)Between 27 November 2012 and 1 December 2012 at Perth in the State of Western Australia [the offender] contravened section 1043A(1)(d) of the Corporations Act and thereby committed an offence against section 1311(1) of the Corporations Act in that [he], being possessed of information that was not generally available, but which if it were generally available, a reasonable person would expect to have a material effect on the price or value of Division 3 financial products, namely shares in Northern Star Resources Ltd and [he] knew or ought reasonably to have known that such information was not generally available, and that if it were generally available a reasonable person would expect it to have a material effect on the price of NST shares, [he] procured another, namely Farris Corporation Pty Ltd, to dispose of 167,138 NST shares held on the account of Farris Corporation.
As is evident, the two charges are in identical terms other than that they relate to different numbers of shares. Initially the offender placed an order on 27 November 2012 for the total number of 750,000 shares to be sold. That order was partially completed on 28 November 2012 in that 582,862 shares had been sold by the close of trading that day. On the morning of 29 November 2012 the offenders spoke to his broker and instructed that the balance of the shares were to be sold that day. This additional instruction accounts for the separate charges, however essentially the charges relate to a single course of conduct.

The facts

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 STAR
13.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; and
f.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.
INVESTMET
17.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; and
e.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 STAR
Mr Farris's knowledge of insider trading prohibitions
27.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 Events
33.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; and
e.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; and
e.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; and
e.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; and
e.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; and
e.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 Information
Mr Farris's possession of inside information relating to the Sell Down
85.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; and
ii.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; and
ii.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; and
b.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 offences
88.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.

Prosecution evidence

Michael George Fotios

Mr Fotios is the Executive Chairman of Investmet. That company was incorporated around 2006 with a view to using it as a vehicle to invest in resource and exploration projects. In early 2009 Investmet acquired a shareholding in Northern Star.
In 2012 the board of Investmet consisted of Mr Fotios, the offender, Alan Still, Stephen Mann and Wayne McGrath. Mr Fotios and the offender had been appointed as directors to the board of Northern Star as a reflection of the interest that Investmet had in that company.
In November 2012 a strategy weekend was held by the board and senior employees of Northern Star at the Smiths Beach Resort, Yallingup. Mr Fotios and the offender attended. An informal meeting occurred at which Mr Fotios, the offender, Mr Chris Rowe and Mr Bill Beament were in attendance. Mr Fotios said that later in that meeting there was a discussion about the possibility of some members of the board selling their shares. Mr Fotios said that the offender was present at the beginning of the meeting but that he left at some point because he was assisting with post‑function drinks. He could not recall whether the offender was present during the discussion about selling shares.
Sometime later, on 26 November 2012, Mr Fotios attended a meeting at Azure Capital. The purpose of the meeting was to investigate the possibility of a sell down of shares. In effect that meant a reduction in the shareholding held by Investmet in Northern Star. The meeting took place in the morning and in attendance were Mr Fotios, the offender, John Poynton and John Toll from Azure and, for a brief time, Andrew Frazer, an adviser from Morgan Stanley Brokers.
Mr Fotios did not have any distinct recollection of arranging the offender's attendance at the Azure meeting. However, he said that it was always good in these sorts of corporate meetings to have two people in attendance. He believed that he would have discussed the offender attending the Azure meeting at some time after the Smiths Beach meeting.
Mr Fotios said that the discussion at the Azure meeting related to the best way to conduct a sale of shares by directors. There was some mention of the total number of shares that would be sold. This was in the range of twenty to thirty million shares in total. Northern Star shares were trading at about $1.40 at the time and there was discussion regarding how a sale close to the market price could be obtained. There was also discussion regarding potential vendors, being Mr Beament, Mr Rowe and Investmet. Mr Fotios did not recall the offender doing much of the talking but he said that he and the offender were really there to listen. He could not recall what the offender's demeanour was like at the meeting and did not recall whether the offender asked any questions. He did not recall anything unusual about the offender at that meeting.
Later the same day Mr Fotios was present at a meeting at his offices in Balcatta. The offender and Mr Rowe were in attendance. There was a discussion about the board composition of Northern Star. In particular, there was an issue raised as to whether Investmet should still have two board members given that it had already reduced its shareholding. That reduction in shareholding had occurred in February of that year. There had also been a capital raising by Northern Star at around the same time that had diluted Investmet's percentage holding. There was a suggestion that Investmet should only have one director on the board and as to who that should be. Mr Fotios said that the offender was pragmatic about this and the fact that the board needed to increase its independence.
In cross‑examination Mr Fotios accepted that at the Azure meeting the discussion was in regards to Mr Beament, Mr Rowe and Investmet selling shares because that is what had been discussed earlier at the Smiths Beach meeting. He had no recollection of any discussion at that earlier meeting regarding the offender selling any of his shares. However, Mr Fotios was aware that the offender had been wanting to sell shares for some time. This intention had been expressed as early as the beginning of 2012. He was also aware that the offender had previously applied to Mr Rowe for approval to sell shares. He was aware that that approval had been denied. He said that the offender had been 'somewhat frustrated about not being able to sell some of his shares because of that process'. The process referred to was one whereby directors of the company were obliged to obtain approval from the chairman before selling their shares. Mr Fotios understood that this frustration was because the offender wanted to sell shares because he had medical and tax bills to pay. Despite this, Mr Fotios had no recollection of there ever being a discussion with the offender regarding him participating in the sell down.
Mr Fotios said that the offender later stepped down from the board of the companies in which he was involved after questions were raised regarding his trading. He said that this was something the offender did not resist and resigned because it was in the best interests of all.

Wayne James McGrath

Mr McGrath is Executive Chairman of the Wyllie Group, a group of companies that have an interest in Investmet. In 2012 Mr McGrath was a non‑executive director of Investmet. Sometime before Christmas 2012 Mr McGrath had a conversation with the offender in which the offender said words to the effect 'I heard you aren't very happy with me' and 'You don't know the full story, I had approval'. In response Mr McGrath said, 'You are a director; you should know what the rules are' and 'You should get legal advice and go to ASIC hat in hand'.

Samuel Boyd Williams

Mr Williams is a private client advisor with Hartleys, a stockbroking firm. In 2012 he had a colleague at the firm named David Hainsworth. The offender was Mr Williams' client at the firm. The offender's account was held in the name of a company, Farris Corporation Pty Ltd. He spoke to the offender on a daily basis regarding the buying and selling of shares on his account.
On 29 October 2012 Mr Williams sent an email to the offender which stated 'There is a lot of off screen buying in your stock. It's very strong'. The offender responded by email later the same day saying 'Many thanks Sam. If I could (sic) anybody on the board who has balls to sign off, I will sell some!!!!!!!'.
At 9.34 am on 9 November 2012 the offender sent an email to Mr Williams stating:
Good morning Sam, Greetings from the second weather capital of the world, cold as, grey as, and pissing down all day.
Mate could you confirm for me that I have in Farris Corp 1,000,000,000 KEY for sale at 3.5 cents. Please sell HUM at 3.5 cents plus if you can HAHA Holding 55.942 (haircut). What is the appetite for GMD at 9 cents as I hold 225,000? Plus cancel my order to buy 200,000 GMM at 4 cents. Sam could you give me an idea if I sold my NST at say (sic) what would the cost be??
With thanks
Regards
Peter
Mr Williams responded a short time later advising the offender in respect of Northern Star that:
If you were to sell I would do it as per past orders 0.3% INSTO brokerage on that size?
The email also responded to the other enquiries and instructions given by the offender in respect of other shares. The response in respect of Northern Star is an indication that if the offender was to sell all of his shares in that company the brokerage rate would be reduced due to the size of the order. Mr Williams said that the value of the shareholding in Northern Star at that time was in excess of $1 million. There was then a further exchange in regard to the sale of shares in GMM. (That chain of emails is exhibit P4).
At 4.17 pm on 27 November 2012 the offender sent an email to Mr Williams (to which was attached a signed authority to sell Northern Star shares) which read:
Hi Sam. I will let you manage this sell down for me tomorrow so let us discuss price. Best regards, Peter (exhibit P1, page 16).
Mr Williams said that shortly after that email he had a conversation with the offender concerning the sale of his Northern Star shares. The offender instructed Mr Williams to sell 750,000 Northern Star shares on the account of Farris Corporation at an average price of $1.50. Mr Williams provided no advice in respect of this trade. He said that due to the large number of shares being sold there was a possibility that he would not be able to sell all of the shares in one day without affecting the market price. Accordingly, it was anticipated that the shares would be sold over several days. Whilst this was not specifically discussed with the offender, Mr Williams said that this was commonplace for orders of this size and something that had been discussed with the offender in regards to trading in the past. Mr Williams recorded the offender's instructions in a record of advice (exhibit P5).
Mr Williams was due to travel overseas late the following day so he made arrangements for a colleague, Mr Hainsworth, to complete the working order in his absence. At 2.19 pm on 28 November Mr Williams sent an email to the offender advising him that 582,862 Northern Star shares had been sold that day at an average price of $1.535026. This produced net proceeds after brokerage of $892,740.25. The balance of shares remaining on the open working order was $167,138 shares. Mr Williams said that he had spoken to Mr Hainsworth regarding completing the order and provided Mr Hainsworth's contact details. Later that evening the offender responded by email stating:
Many thanks Sam. Have an excellent break and look forward to seeing you on your return. Best regards, Peter (exhibit P1, page 45).
The following day Mr Hainsworth sent an email to Mr Williams stating that the working order had been completed on that day.
In cross‑examination Mr Williams confirmed that he had been the offender's stockbroker for eight years and continued in that capacity. He agreed that the offender had never done or said anything which had caused him to doubt the offender's honesty. He said that the offender had been clear about wishing to sell his Northern Star shares since mid 2012. He had told Mr Williams that he had previously sought the consent of the Northern Star chairman and that consent had not been forthcoming. Mr Williams said that the offender's instructions permitted him to sell over or above $1.50 provided that $1.50 was achieved as the volume weighted average price. No timeframe was specified by the offender to complete the order however the signed authority from the chairman of Northern Star was valid for five days.

Stephen James Mann

Mr Mann was a director of Investmet in 2012. He said that the board met on an informal basis each fortnight. In 2012 the company held a large parcel of shares in Northern Star. Mr Mann also owned some shares in that company in his superannuation fund.
On or about 24 November 2012 Mr Mann received a telephone call from the offender. The offender was very agitated and upset. The offender told Mr Mann that he had made an application to Northern Star for approval for him to sell a parcel of shares and had not received that approval. The offender then said words to the effect 'I'm at the point where I'm going to sell them regardless'. Mr Mann said that by this time he understood that the meeting at Azure had occurred and the board of Investmet had made a decision to sell down its parcel of Northern Star shares (ts 103). Mr Mann said that the offender also said that he would be selling his shares because it would not 'matter because I won't be a director in the near future' (ts 104).
Mr Mann said that the offender was upset because he had been asked to resign as a director of Northern Star. Mr Mann said that since Investmet's shareholding in Northern Star had been reduced it was no longer entitled to have two representatives on the board and the offender had been asked to resign leaving Mr Fotios as the sole representative. Mr Mann told the offender that 'regardless of whether he received approval to sell shares, it would be inappropriate for him to sell any shares with the information that Investmet was negotiating for the sale of a large parcel of shares' (ts 105). Mr Mann said that the offender may have responded to this but that his recollection was that he was not really listening to anything he said. He seemed very focused on his intention to sell his shares and did not seem to be taking in much of what Mr Mann said to him.
On the morning of 30 November 2012 Mr Mann attended the annual general meeting of another company at Royal Perth Golf Club. He saw the offender there prior to the meeting and spoke to him about Investmet. Mr Mann said that the first words he spoke to the offender were 'Please tell me you didn't sell any shares'. He asked this because he was concerned following the conversation with the offender that had occurred some days earlier. Mr Mann said that he was aware that in the intervening period Investmet had negotiated the sale of a parcel of its Northern Star shares. He said that the offender responded by saying 'Yes I did. I woke up this morning and I felt sick' (ts 107). Mr Mann then recommended that the offender seek legal advice.

Christopher Kenneth George Rowe

Mr Rowe was the Chairman of Northern Star in 2012. Some years earlier Investmet took a share interest in Northern Star which enabled Northern Star to acquire of a gold mine. Investmet had representatives on the board of Northern Star. In 2012 these were Michael Fotios and the offender.
Northern Star had a share trading approval process. The process was that if an officer or director wished to sell shares that they owned they had to make a formal request to trade which could be approved by the chairman (exhibit P7). Mr Rowe said that there were three areas of concern that had to be reviewed when an application was made by an officer of the company to sell shares. These were whether there was any technical matters or information relating to the company's activities that were not public knowledge, whether there were any financial results that had not yet been released to the market and whether there were any statutory blackout periods. Accordingly, if an application was received Mr Rowe would speak to the company's chief financial officer, chief executive officer and the company secretary, each of whom had responsibilities for those areas. If an application was approved the permission to trade was valid for five business days. If the trade was not concluded within that period of time the officer would need to make a further application. He said that if the situation changed after an approval had been given then it was up to the officer concerned to ensure that the trade did not proceed (ts 120).
In February 2012 there was a decision made by Northern Star that resulted in the placement of a large number of shares. This placement was handled by Azure Capital. On 16 February 2012 a meeting of the board of Northern Star was held at Azure Capital. The offender was in attendance at that meeting. A decision was made at that meeting for the company to offer 45 million shares at 90 cents per share. This offer was to be made to a number of investment funds in order to raise capital. It was agreed that the company should apply for its securities to be placed in a trading halt on Friday, 17 February 2012. The reason for that was that an issue of shares in these circumstances was price sensitive and trading needed to be halted to allow the transaction to take place and the market to absorb the information (ts 122) (exhibit P8).
In November 2012 a corporate planning strategy week was held by Northern Star at Smiths Beach Resort in Yallingup. It was attended by directors and employees of the company. A board meeting of Northern Star was held during that week and was followed by a more informal meeting in one of the rooms. Mr Rowe said that Mr Beament, Mr Fotios, Mr Farris and himself were present at that informal meeting. One of the issues discussed at the informal meeting was the structure of the board. Mr Rowe said that there were complaints from major shareholders that the board was not sufficiently independent because Investmet was over‑represented. There were two possible solutions; increase the number of directors on the board or for one of the offender or Mr Fotios to resign. Another issue discussed was personal shareholdings. Mr Rowe said that this discussion may have been triggered by the fact that the offender had, on a couple of occasions, requested permission to sell shares in the company. Mr Rowe had been unable to give approval on those occasions and the offender had indicated to him that he still wanted to trade as and when he was able to. Mr Fotios then made a comment that it might be an appropriate time for Investmet to consider selling down a significant portion of its holding in the company. Mr Rowe believed that this was the first time that there was any discussion about Investmet selling down its shares. He said that he believed that the offender was present at this time although it was Mr Fotios who led the discussion. Mr Beament and Mr Rowe then said that if Investmet was going to sell down its shares that each of them wished to participate in an organised sell down. The offender was non‑committal in relation to the matter, although there was no formality as to who would participate in the sell down at that point (ts 125).
On 23 November 2012 Mr Rowe sent an email to Mr Fotios, Mr Beament and the offender. The email referred to a number of complaints received from major shareholders regarding the composition of the board and the over‑representation of Investmet. He referred to a letter from one major shareholder indicating an intention to vote against the re‑election of the offender. He then said:
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 (exhibit P1, page 8).
Mr Rowe said that at that stage he assumed that everyone would be selling together, but this had not yet been confirmed. He said that there was no reason why the offender could not have been part of the sell down.
Mr Rowe said that he then received a telephone call from the offender who was angry at the proposal to change the board and the likelihood that he would not be reappointed as a director. He accused Mr Rowe of not consulting properly with the other directors. Mr Rowe explained the rationale for the change to the board and disputed that there had been inadequate consultation. He set these points out in a further email to the offender (exhibit P9).
Mr Rowe said that after the Smiths Beach meeting he noticed that the offender's behaviour became erratic. He was very angry and that continued up to the morning of the annual general meeting of Northern Star on 30 November 2012. It was very clear to Mr Rowe that the offender thought that he was going to have to leave the board of Northern Star and that was very upsetting to him.
Mr Rowe was aware of the meeting of 26 November 2012 at Azure but he did not attend it. Those discussions were led primarily by Mr Fotios and Mr Beament. Mr Rowe had indicated to them that he was interested in being part of the sell down but left those negotiations to Messrs Fotios and Beament.
Mr Rowe also received an application from the offender to sell some of his Northern Star shares on 26 November 2012. In accordance with his usual practice, Mr Rowe spoke to the managing director, chief financial officer and company secretary of Northern Star regarding the application. He asked each of them whether there was anything that they knew that would preclude him from signing off on the application. Each of them said that there was no problem and he therefore signed the document. Mr Rowe said he was not sure how far the proposal discussed at the Azure meeting had progressed. He knew that the discussion had been in regard to the sell down of a significant proportion of the Investmet shares together with shares to be sold by himself, Bill Beament and the company's exploration manager. He believed at that stage that the offender was probably not going to be part of the sell down transaction (ts 130).

When asked why, in those circumstances, he had signed the request for trading approval for the offender, Mr Rowe said:
It was my view that there was no reason, at the time that I signed that, that would preclude him from selling shares. Unless there was something that he was aware of that would put him in a position where he shouldn't trade, he was cleared to trade … I believed at that point in time there was nothing that … would have prevented him trading that was market sensitive.
When asked about what had been discussed at Azure, Mr Rowe said:
Well at that point in time, it was a discussion was going on. It was by no means certain that there was going to be a sale on that day or what the price might be or what it might - to be honest, I didn't give a great deal of consideration to that. Mr Farris was a director of Investmet and I had assumed would be entirely up to date with what Investmet were and were not going to do in relation to that.
He said that as a director of Investmet the offender would have more information on the progress of the discussions with Azure than he had (ts 130 ‑ 131).
On the evening of 28 November 2012 Mr Beament sent a draft of an announcement to be made to the Stock Exchange regarding the sell down and changes to the board. That same evening the offender responded to Mr Beament saying 'I understand the need for this press release relating to the sell down' but complaining that a reference to him as having resigned was not correct. He stated 'at this point you and the board do not have my resignation but I approve on (sic) the balance of the press release'. Mr Rowe responded and apologised for the reference to the offender resigning. Mr Rowe acknowledged that there had never been any suggestion that the offender would resign 'but rather that given the sell down by Investmet and yourself coupled with the adverse response by institutions and shareholder representative groups as to what they see as a majority of non‑independent directors and an over‑representation of Investmet (even before the sell down), that you were not going to stand for re‑election'. Mr Rowe said that the reference to the offender also selling down shares was made because he understood that the offender was intending to sell down separately (ts 133) (exhibit P1, pages 51 ‑ 52). The offender's response to this email will be referred to later.
In cross‑examination Mr Rowe confirmed that on 24 August and 7 October 2012 the offender had applied for approval to sell Northern Star shares (exhibits D4 and D5). Those applications had not been approved, in the case of the October request because the company shares were in a blackout period due to the release of the Northern Star quarterly financial results.
Mr Rowe accepted in cross‑examination that it was possible that the offender was not present at the Smiths Beach informal meeting when changes to the board and a sell down of shares was discussed.

Defence evidence

Peter Charles Pritchard Farris

The offender was born on 1 January 1945 and was the fourth eldest in a large family. He lived at home until he was aged 20 when he was drafted into the army. Home life was unhappy as his father was largely absent but when present was aggressive and distant.
The offender attended school to third year high school. He later completed his high school education in New South Wales when he was in the army. He was first married in 1968 and that marriage ended in divorce in 1991. He commenced another relationship in July 2000 and married his present wife in May 2008.
When first conscripted into the army the offender was stationed at Puckapunyal Training Battalion in Victoria. He stayed there for approximately 12 weeks before being posted to the School of Physical Training in North Head, Sydney. In April 1966 he was posted to the Army Apprentice School in Balcombe, Victoria. He remained there for the balance of his first two years. After a period of leave in Perth he resigned for a further period in the army, having achieved the rank of Sergeant. In early 1968 he returned to the Army Apprentice School for about three months before being posted back to Puckapunyal where he was placed in charge of physical training. He remained there for three months before being posted back to the Physical Training Section at North Head where he stayed until the end of his service in 1971. He then returned to Perth.
The offender said that during the period of his army service there was a number of incidents of abuse, both verbal and physical. The first incident occurred at Puckapunyal when he was a recruit. He said that the mail would be delivered at early morning roll call and that every time his name was called out his mail was thrown at his feet. On one occasion a corporal spat on a letter and threw it at his feet.
The next incident was again during training as a recruit. The offender said he was doing exercises on vertical ropes and was verbally abused by the instructor and told to hold his position until he received rope burns to his hands and legs. He said there were many other occasions during training sessions when he was singled out by the instructor to do penalties which involved running up a hill whilst loaded with heavy weights.
The offender said that the next incident also occurred at a training session when he was instructed to hang from a bar and raise his legs. Two other recruits were not able to perform the exercise and the offender asked the instructor to go easier on them. Two other instructors were then ordered to take the offender to a tent nearby. The offender was ordered to the floor to do press ups whilst one of the instructors placed a boot on his back and pressed down. He was then ordered to roll over and do abdominal raises. He says that he was kicked to the right side of his head, in the back and to his left hip. As he rolled to the floor he was also kicked in the groin and stomach. The instructors then screamed at him that they would break him and left the tent. The offender spoke to the platoon sergeant about what had occurred, but he showed little interest. He says that since that time he has suffered intermittent extreme pain in his shoulder and hip. He says that he also has a dull ache in his right ear. He takes medication to deal with the pain.
The offender said that there were further incidents after initial training when he was transferred to Balcombe. He said one incident occurred when a soldier came into a room in which he and others were watching television. The soldier was screaming and being disruptive. The offender asked him to leave and the soldier 'went mad and threatened to kill me'. The offender was disturbed by this and unable to sleep that night. During the night the same person came into his room with a rifle in his hands and leaned over his bed. The offender ordered the man to leave the room, which he did.
In addition to pain, the offender said that he had other effects as a result of the abuse. He said that he could not hear people properly at times and that his memory can also be extremely poor. He said that he needed to be very cautious when driving and at times cannot fathom how to walk down stairs. This has left him with agitation and suppressed anger.
In the early 1990s the offender was feeling depressed and having difficulty working. His mood was variable and he often felt upset or angry. He felt that he needed help and consulted a psychologist. He also spoke to his general practitioner and was referred to Dr Risbey in 2005. Subsequently he saw a counsellor, Mr Christopher Semmens, in late 2006. Later he was referred to another psychiatrist, Dr James Fellows‑Smith, who he continues to consult.
In November 2012 the offender saw newspaper articles regarding the establishment of the Defence Abuse Response Taskforce (DART). He also recalled seeking the Defence Minister making an apology on the television. The relevant newspaper articles were tendered and have dates of between 26 and 28 November 2012 (exhibit D9). The offender said that on seeing these articles he felt extremely angry regarding his own army experiences. He subsequently contacted the DART and finally submitted an application for compensation in November 2013. That application was later granted.
The offender said that after his return to Perth following his army service he was engaged in the real estate industry between 1972 and 2005, other than for a period in the early 1990s where he did not work due to depression. In 1995 he was diagnosed with prostate cancer. He received successful treatment but the cancer returned in early 2001. He then undertook some alternative treatment therapies before travelling to the United States in late 2005 for proton beam therapy, a treatment not then available in Australia. That treatment was successful and there has been no subsequent return of the cancer. On his return to Australia following his treatment the offender became involved in efforts to bring the proton therapy to this country. He contributed to that and other charitable efforts involving the Cancer Council and the Children's Hospital. He also assisted with the Men's Advisory Network.
The offender met Mr Fotios in the early 1990s and they developed a friendship. He became a director of Investmet in late 2008 at the invitation of Mr Fotios. This led to him becoming a director of other companies, including Northern Star. He had not previously been a director of a publically listed company. He undertook a five day course with the Australian Institute of Company Directors in late 2008 or early 2009.
In August 2012 the offender decided to sell some shares that he held in Northern Star. At this time he had medical bills, a small overdraft, a small private loan and a car loan that he wanted to pay off. He and his wife were also looking to purchase a property in the south of the State. They had made an offer on a property around mid October. Accordingly in August 2012 he spoke to Mr Rowe regarding selling some of his Northern Star shares. At that time he owned approximately one million shares and his initial proposal was to sell 300,000 of them. An application on 28 August 2012 (exhibit D10) to sell 300,000 shares was not approved. The offender again sought approval on 23 October 2012 (exhibit D11). Again that application was not approved.
In October 2012 the offender went on holiday with his wife to Bali. He said that the amount of work that he received from different companies, including Investmet and Northern Star, during this period was relentless. He received requests by email to participate in decisions regarding the companies.
In November 2012 he travelled to the United States with Mr Karl George, the managing director of Whotune Music Group Ltd, a company owned by Investmet. That travel was between 2 and 14 November 2012. On return he said he was exhausted and suffered badly from jetlag and sleep deprivation. He said that this badly affected his memory. He had experienced the same effects previously when he travelled overseas. Due to these adverse effects he considered not attending the Northern Star retreat at Smiths Beach. He was concerned about driving and feeling agitated.
The offender said that he had limited memory of the Smiths Beach retreat. He said that he did remember attending the board meeting of Northern Star but he did not recall being involved in an informal discussion afterwards concerning whether there would be changes to the board of Northern Star or the selling down of share interests. He said that he had been nominated to organise the food and drinks for a function following the formal meeting and had been occupied with those duties.
As regards the meeting at Azure Capital on 26 November 2012, the offender said that he recalled attending that meeting with Mr Fotios but had no recollection of what was discussed. He also recalled attending a meeting later that day with Mr Fotios and Mr Rowe in the boardroom of Investmet in Balcatta. He had a detailed memory of that second meeting. He said that Mr Rowe opened by saying that he wanted to discuss the offender's resignation from Northern Star. The offender said that he would consider that and Mr Fotios then said that he would consider resigning too. Mr Rowe seemed surprised by this. The offender then told Mr Fotios that it would not be good for both of them to stand down and that Mr Fotios' knowledge of geology was imperative for the success of Northern Star and that he should defer leaving until the following year. The offender said that Mr Rowe asked him whether he still wished to sell his shares and he agreed that he did. He said that he then left the office, collected an application form, filled it in and handed it to Mr Rowe. He said that he told both Mr Fotios and Mr Rowe that once he had sold the stock he would call them. He identified the signed application form (exhibit P1, page 17) that he completed and that was signed by Mr Rowe.
The offender said that the reason why the application was for 750,000 shares was that he was told by his accountant that 250,000 of his one million shareholding was still subject to full capital gains tax so he decided not to sell those. This was because he had not held the 250,000 shares for over one year. Those shares had been issued to him as part of an incentive option by Northern Star.
The offender said that he rang Mr Rowe the following morning regarding selling his shares. He said that he had not made a final decision at this stage about not continuing as a director of Northern Star. He did not make a final decision not to stand for re‑election until sometime on Thursday, 29 November 2012. He said that during the conversation on Tuesday morning Mr Rowe told him that he had signed off on the authority to sell. He had several further telephone conversations with Mr Rowe that day chasing up the signed authority. There was some difficulty with emails and the authority was later faxed to him. He then gave instructions to his broker, Mr Williams, to sell the shares. The shares were sold over two days, Wednesday and Thursday.
The offender said that he was never invited to participate in the sell down organised by Azure Capital. When he gave instructions to Mr Williams to sell the Northern Star shares he did not turn his mind to what he knew about the proposed sell down. He said that he did not appreciate that the information regarding the sell down was not generally available to persons who might invest in Northern Star shares. He said that he also did not appreciate that a reasonable person might expect that information to have a material effect on the price or value of Northern Star shares.
The offender said that he spoke to Mr Rowe on Thursday morning at the meeting of another company and told him that he had sold his shares and would not be standing for re‑election. On the following morning, prior to attending a number of annual general meetings, including that of Northern Star, the offender was at home when he looked at the ASX announcements for that day on his computer. He saw the announcement from Northern Star that Investmet and a number of the directors had sold shares. He said that his reaction to that was disbelief because he 'had never put together the two different situations with me selling and them selling' (ts 188). He said that he had no recollection of what they were doing until he read the announcement and it had reminded him that they must have done what they were talking about doing, that is selling their shares. He then had concerns that his sale of shares had not been 'correct' or 'moral'. He said that this was:
[B]ecause I understood that the rules of trading was that if there was information that was not public it was not correct for me to sell, and I felt compromised, not understanding they actually were selling. I didn't understand fully the technical side of it. It just didn't feel moral to me (ts 188).
He agreed that later that morning he saw Mr Mann who asked him whether he had sold his shares. He said that when he confirmed this he felt quite sick about it.
The offender said that he subsequently sought legal advice and resigned from the boards of Investmet and other companies. He said he did this because he could not do his job and was totally exhausted. On the advice of his lawyers he placed the proceeds of the sale of the shares into a separate account (see bank statement, exhibit D12). The offender said that when he received the Northern Star chairman's approval to sell the shares he had believed that it was okay to sell them.
In cross‑examination the offender agreed that a letter to him from ASIC advising him of the investigation was dated 1 February 2013. This was the same day that he opened an account into which the proceeds of the sale of the shares were later deposited. However, he denied that receipt of the letter was the reason he opened the bank account, saying that he had already set the money aside before that time. He agreed however that the investigation was one of the reasons why he stepped down as a director from the various companies connected to Investmet.
The offender was asked in cross‑examination why he was stunned and traumatised after reading the announcement on the morning of 30 November 2012. He said that prior to that time he had had no memory of the proposal to sell down Northern Star stock but when he read the announcement he remembered that the directors had been considering that. He maintained that he had no memory of the potential sell down by directors of Northern Star at any time between 26 and 30 November 2012.
In cross‑examination it was pointed out to the offender that at paragraph 85 of the admitted facts he had specifically admitted being in possession of the relevant information at the time he placed his order to sell 750,000 Northern Star shares at 4.17 pm on 27 November 2012. That information was that Investmet and several directors of Northern Star were considering participating in a sell down of shares, that there had been a meeting to discuss that sell down at Azure Capital on 26 November 2012 and that, subject to confirmation from the vendors, 40 million Northern Star shares were to be offered for sale at a minimum price of $1.40 per share on 28 November 2012. The questioning then proceeded as follows:
So can I ask you this, Mr Farris, that on 27 November 2012 at 4.17 pm, did you know that Investmet and several directors of NST were considering participating in a sell-down of shares that they held in NST?---Counsel, I did not remember at the time at all.
No. Did you know that at that time?---Yes. I did.
So when you say you can’t – you don’t remember it, are you saying you don’t remember now?---No. At the time, I just didn’t call upon that information when I made my decision to do what I was doing.
At 17 minutes past 4 in the afternoon on 27 November 2012, did you know that Investmet and several of its directors – of – directors of NST were considering participating in a sell-down of shares that they held in NST. Did you know that?---Yes. I did.
When did you forget it?---I’m not sure I understand your question.
Well, you’ve told his Honour that you have no memory of it. When did you forget it?---My intention was to - - -
No, Mr Farris. When did you forget it?---I had forgotten at that time.
When at 4.18 pm?---That’s right.
So one minute later?---No. I never considered to begin with when I placed that order.
But you knew it?---Yes. I did.
What do you mean by you didn’t consider it?---It just never came into any thoughts I had whilst I was doing what I was doing at all.
It didn’t influence your decision?---No.
The second piece of information is – can you see at paragraph B – that at a meeting on 26 November 2012, at the offices of Azure Capital Limited – and you can read the rest?---Yes.
You told his Honour that you don’t recall going to that meeting?---No. I did go to the meeting.
Do you recall what happened during the meeting? Don’t look at the document, Mr Farris. Do you recall what happened during the meeting?---We went there to discuss the sale of stock on behalf of the directors of Northern Star.
When Mr Penglis asked you about that this morning, you said you had no memory of what was discussed during that meeting, didn’t you?---I knew why I was there but when I left I was struggling for what I may have learnt in that room at the time.
So you knew that you were discussing a potential sell-down. Is that right?---Yes.
You knew that you met to discuss the sell-down of shares in NST?---That’s correct.
You knew that?---I knew what that meeting was for. Yes.
But you knew that’s what was discussed?---I have no great clarity on it but I knew it was discussed. Yes.
No. You knew it was discussed, didn’t you?---Yes. It was.
And when did you forget it?---I don’t necessarily think I forgot I just didn’t remember it when I needed to.
When did you need to remember it?---Preferably, before I even signed a document to sell my Northern Star stock.
But you’ve admitted that on 27 November, the day after the meeting, at 4.17 pm, that you possessed it, didn’t you?---That’s correct.
You knew it at 4.17 pm on the 20 – correct?---Yes.
What do you mean you forgot it?---It’s not so much forget. I never took that into consideration. I just did not put my mind to it at the time of doing what I was doing.
Paragraph C - - -?---Yes.
When you gave the order to Mr Williams, did you know that?---I’m not so sure that detail but I believe I did.
What makes you believe you did?---Well, I was at the meeting.
Well, turn the page over. Do you see the further details of that information?---Do you mean - - -
(i) and (ii), do you see that?---85(i) and (ii)?
Yes. Do you see that?---Yes.
Did you know that information as at 4.17 pm on 27 November?---I lack a little bit of clarity on it but I accept that I did.
What do you mean you lacked a “bit of clarity on it”?---I’m not perfect on the numbers of $1.40 or 40 million.
Well, you’ve admitted it, Mr Farris, that you knew it?---Yes.
What do you mean you don’t – what do you mean now that you don’t have clarity on it?---I know they were going to sell down but you asked me did I remember the numbers - - -
Yes?---- - - and I do not, specifically.
I’m not asking you now. I’m asking you on 27 November 2012 at 4.17 pm did you know that information?---Yes.
And so what happened on the 27th then?---I’m not sure what your question is.
Well, did you forget it?---I didn’t take that into consideration when I placed my order to sell.
Right. And that’s your position, is it? So that you knew these pieces of information, yes?---That’s correct.
But you didn’t take them into consideration when you sold?---I didn’t put my mind to it, I didn’t consider it, not at all (ts 201 - 203).

The offender was asked how he could reconcile his claim of not being able to remember the information at the time he placed the order with his receipt of the email from Mr Poynton of Azure Capital on the previous day, that is 26 November 2012. That email was sent to the offender at 12.54 pm that day. It reads:
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 forty 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.
Cheers John.
The offender responded to this email at 1.59 pm in the following terms:
Thanks John. We are meeting Chris at 2.30 and I am not sure yet whether Michael has spoken to Bill. Regards Peter.
The offender said that he had no recollection of either receiving Mr Poynton's email or sending a response. He did however have a detailed memory of the meeting that took place with Mr Rowe about half an hour after he sent the response (ts 207 ‑ 208).
The email exchanges on 28 and 29 November 2012 regarding the sell down documents and the ASX announcement were also put to the offender in cross‑examination. These emails were referred to earlier in regard to the evidence of Mr Rowe. The final email in one chain is from the offender to Mr Rowe on 29 November 2012 at 6.46 am it reads as follows:
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 director's 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 that Chris and I will wait till the sell down is complete, moneys paid and some formal announcement of John Fitz' appointment may be 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. Best regards, Peter. PS See you at the Target AGM Chris.
Again, the offender said he had no memory of this email (exhibit P1, page 51). He accepted that the purpose of the announcement was to inform the market of the sell down of the shares to ensure that all people trading in the shares were on a level playing field. He said that he knew that Investmet was involved in the sell down but it was not something that he took an interest in (ts 213). However, he accepted that reference to the 'finer detail' of the sell down documents in the email meant that it was likely that he had seen those documents. He said that he mentioned Mr Fotios resigning in the context of the sell down because he was 'being awkward' and 'point scoring' with Mr Rowe. The implication was that he was pointing out to Mr Rowe that one of the consequences of the sell down would be not only the offender leaving the board but also Mr Fotios, an outcome that was not considered desirable by anyone. He referred to the concept of materiality because he considered that it was material that Mr Fotios may be leaving the board.
In regard to whether he had read the sell down documents, it was pointed out to the offender that he had received an email from Mr Fotios at 1.00 pm on 28 November 2012 attaching the documents. One of the documents was a placing agreement which was marked 'Confidential - Not for Redistribution'. By this agreement Investmet and a number of other entities associated with Mr Fotios, Mr Beament and Mr Rowe agreed to sell 45 million shares in Northern Star (exhibit P1, pages 22 and 24 ‑ 31). The offender accepted that information regarding the selling down of a large portion of the shares of a publicly listed company was information likely to influence people to decide whether to buy or sell shares (ts 220). However, he claimed that he had no memory of receiving the email or reading the documents, notwithstanding that they related to Investmet, a company of which he was a director.
Another of the documents attached to the email was a due diligence questionnaire. The second question contained in the questionnaire was as follows:
Please confirm that the vendors are not aware of any material change in the management, operations and financial positions and prospects of, or shareholding in, Northern Star Resources or any of its subsidiaries (together the 'group') (other than the shareholding changes resulting from this placing).
It was put to the offender that in his email to Mr Rowe of 6.46 am on 29 November 2012 when he referred to the possibility of Mr Fotios not continuing as a director that his use of the words 'vendors' and 'material' were references to clause 2 of the due diligence questionnaire. The offender denied this, saying that his email was 'just my own expression' (ts 221). He said it was merely a coincidence that he had used the word 'material' in quotation marks.
The email sent to Mr Rowe at 6.46 am was approximately half an hour before the offender spoke to the broker, David Hainsworth. He was then asked:
The email on page 51, half an hour before you spoke to your broker, Mr Hainsworth, indicates that you knew the sell-down was imminent. Correct?---That’s correct.
You knew, as at quarter to 7 in the morning, that no-one else outside NST or Investmet knew anything about a sell-down, didn’t you?---Yes.
And you knew the potential sell-down at that price would be something that would be likely to influence people who buy and sell shares in a decision to buy or sell shares - - -?---Yes.
- - - at the time you spoke to your broker?---Correct (ts 225).
The offender was also asked about an email that he sent to Mr Beament at 7.14 am on 29 November 2012. This email also concerned the announcement to the market. The email reads:
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 likely 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 31 Dec 2012. Cheers Peter.
The offender conceded that at the time he sent this email he knew that the sell down was imminent. This email was sent approximately one minute before speaking to the broker, Mr Hainsworth. He was asked whether there was any connection between the information contained in his email and speaking to the broker:
You got on the telephone to Mr Hainsworth, didn’t you?---That’s correct.
And you told him that you would like the order to be completed by the end of the day, didn’t you?---That’s correct.
Why?---I had done so well, I didn’t see it as any reason to stay on the market forever for a few cents and I pretty well had that behaviour of tidying up orders in a shorter period of time. I never hung out for a final dollar.
It had nothing to do with the fact that the - - -?---Pardon?
It has nothing to do with the fact that the - - -?---No.
- - - sell-down was imminent?---No.
It had nothing to do with the fact that you knew less than a minute beforehand that the sell-down was going to take place very quickly?---No.
It had nothing to do with the fact that you knew that the sell-down would be for approximately $1.40 per share?---No.
You had nothing to do with the fact that you knew that the sell-down was for 45 million shares?---No. It did not.
What was the price that you had given Mr Williams instructions for selling at? $1.50?---I think that’s correct.
750,000 shares that you sold. Correct?---Yes.
If they had been sold at $1.40, how much would have stood to lose?---I had no idea at the time.
$75,000?---As I said, I never, ever thought about losing, winning, anything.
So the fact that you got on the telephone to Mr Hainsworth within a minute of sending the email to Mr Beament, at page 53, and told him that you would like your shares – the balance – to be sold by the end of that day was pure coincidence, was it?---Yes. It was. The market was higher than that figure and I thought that it would be quite reasonable to tidy up the sell order.
It had nothing to do with the fact that you knew that you had information that only the people on NST board and Investmet knew?---No. It did not.
Well, you knew, didn’t you, that information, that you’ve admitted – on 29 November before you sold, you knew that Joe Bloggs in the street couldn’t see that information, didn’t you?---Yes. I did.
No-one could readily observe that information, could they?---That’s correct.
And you knew that?---I did.
And, on 29 November 2012 at 7.14, when you sent the email to Mr Beament, you knew that if that information had been able to be observed readily, that it would be likely to influence people who commonly bought shares. Correct?---That’s correct.
And when by influence likely to influence them in making a decision about whether to buy or sell shares?---It could have. Yes.
It would have been likely to, wouldn’t it?---Yes.
And that’s – and I think you agreed with me before that’s obvious, didn’t you?---I would accept that that’s quite a reasonable assessment in the marketplace.
And when you gave the instruction to Mr Williams, on the 28th, to sell - - -?---The 27th.
- - - 27th?---Yes.
- - - you also knew that the information that you had admitted possessing was not readily observable?---That’s correct.
And you also knew – so at the time you gave the instructions to Mr Williams you knew that if it had been able to be seen or perceived readily that it would have been likely to influence someone who invested in shares. Correct?---Yes.
And it would have been likely to have influenced them in a decision about whether to buy or sell shares in NST?---That’s correct (ts 226 - 228).
Following the completion of the offender's cross‑examination his counsel sought an opportunity to read the transcript before being called upon to re‑examine. An adjournment was granted to the following morning for this purpose. On resumption the next day counsel stated that he did not seek to re‑examine the offender.

William Murray Shean

Mr Shean was called as a character witness. He has known the offender since they were children and they worked together for several years in the late 1970s in a real estate firm. In 1985 Mr Shean worked with the offender in his business and remained there until 2005. He described the offender as fair and generous.
Mr Shean and the offender also socialised together. Mr Shean was aware that the offender had spent some time in the army and was aware that there had been some issues regarding bullying and that the offender had 'suffered emotionally' as a result. It appeared to Mr Shean that the offender 'carried a bit of anger about it' (ts 91).
In regards to the offender's character, Mr Shean said that he was respectful, well controlled, caring and fair.

Lance Cecil Risbey

Dr Risbey is a psychiatrist practising in Bunbury. The offender was referred to Dr Risbey by his general practitioner in 2006. Dr Risbey saw the offender on two occasions only, 23 January and 31 January 2006.
The offender told Dr Risbey that the reason for the referral was that he had been talking with some ex‑army mates and when asked whether he suffered post‑traumatic stress disorder had suddenly burst into tears. He provided a history to Dr Risbey which included an account of his army service.
Dr Risbey concluded that the offender was a man with an obviously high intellect and an outwardly confident manner. The offender was insightful into his vulnerabilities and, whilst he harboured a sense of resentment about the injustice of army barstardisation he 'seemed to be suffering more of a sense of loss than a diagnosable psychiatric disorder as such'. Dr Risbey went on to say:
There were some suggestions that there may possibly be a sub‑syndromal post trauma state but at this stage any such possible condition did not simply cause any clinical significant morbidity. He seemed to be a person who was still growing emotionally, and was addressing loss issues, although he may need some counselling help to resolve the emotional aspects of these losses.
Dr Risbey concluded that the offender could experience more significant symptomology in the future and in that event may need a psychiatric review (exhibit D2).
Although Dr Risbey had no further contact with the offender, he was asked in 2015 to provide further details of the history provided by the offender in 2006. Relying on his notes from the time, Dr Risbey provided a letter (exhibit D3) that set out a number of bullying incidents that the offender said had occurred during his army service. These included being forced to carry weights as a form of punishment and being singled out by a trainer for verbal and physical abuse. Dr Risbey stated that:
Whilst there was a history of a degree of stress in the army, in the form of verbal and even physical abuse as stated above, I did not elicit any of the key symptoms of post traumatic stress disorder (which I did look for) such as an excessive hyper arousal, involving hyper vigilance and/or an exaggerated startled response (indicators of a heightened state of 'flight or fight'). Similarly there was no history of nightmares, nor of intrusive recollections of those events.
In any case, whilst 'barstardisation' is a psycho social stressor it is not usually considered sufficient to constitute a criterion for a traumatic event (which would have to be catastrophic, life threatening or otherwise inducing extreme helplessness).
Later in his letter Dr Risbey did state:
Whilst there was no clear history of any traumatic experiences in his military service, and therefore it did not appear to be a need for a large number of sessions than two sessions in order to thoroughly assess him, it is frequently the case in many of those with military experiences (especially those with a trauma history) that a greater number of sessions is needed to form an accurate diagnosis. It is my experience that, in those circumstances, military service personnel often benefit, as does their assessment, from multiple consultations over an extended period of time, in order for them to gradually disclose all relevant information.

Susan Mary Patricia Farris

Mrs Farris is the wife of the offender. They met in July 2000 and married on 20 May 2008. She said that her husband was a man of high integrity who she had never known to do anything dishonest.
Mrs Farris said that she was aware of her husband's army experience. She said that he became distressed whenever there was a programme on television or an article in the newspaper that referred to a military lifestyle. On these occasions he could become flushed, teary and emotional. He also had nightmares and on occasion would gorge on food or over indulge on alcohol without apparent understanding of what he was doing.
Mrs Farris said that in about September 2012 there was an announcement regarding the DART. Her husband's reaction was that he started to prepare a submission to that Task Force. She said that this restimulated memories and caused him distress. His personality changed and he became very insular. He became preoccupied with his army experiences and pursuing some form of justice.
Mrs Farris said that her husband had always had a memory problem. This was exacerbated by jetlag, stress or illness. She said that the most extreme example of this was when he returned from the United States in 2005 after cancer treatment. He failed to recognise her or recall her name when she met him at the airport, which she found very upsetting. She also said that towards the latter part of 2012 his ability to process information or follow instructions was impaired. She gave an example of his inability to assemble a piece of furniture. She said this was unusual as he was normally a very manually adept person. Another example was that in mid 2012 when collecting an award on behalf of Northern Star he was unable to find words of acceptance and cried which appeared inappropriate and strange.
Mrs Farris said that she and the offender had discussions in mid 2012 regarding him selling shares in Northern Star. She said that whilst there was no pressing need to do so, the sale of the shares presented an opportunity to clear some debt and to assist with the purchase of a property at Quindalup.
Mrs Farris said that when her husband returned from the United States in mid November 2012 he was badly affected by jetlag and also visibly unwell. She said that he had been battling bronchitis on and off for a number of months but did not want to go to the doctor. She said he looked appalling and was not sleeping properly. She was concerned enough to ask him whether it was necessary for him to attend the Northern Star meeting at Smiths Beach. He assured her that it was and that he would cope.
Mrs Farris was aware that in the week following the Smiths Beach meeting her husband received approval to sell his Northern Star shares and proceeded to do so. She said that on the Friday morning after the shares had been sold she and her husband were in bed having a cup of tea whilst he was reading the ASX announcements. She said that he read the announcement regarding the sell down of the Northern Star shares and was 'flabbergasted'. He said words to the effect of 'how could they do that. They know I sold my shares. Why have they done that. I'm compromised'. He then made several telephone calls and within a week discussed with her his intention to set aside the proceeds of the sale of his shares (ts 247).

Christopher Gerard Semmens

Mr Semmens is a clinical psychologist who the offender has consulted on a number of occasions since 7 December 2006. He saw the offender for nine consults between 7 December 2006 and 18 April 2007. The most recent series of consults was nine sessions between 20 January 2013 and 21 March 2013. Mr Semmens provided two reports which were tendered in evidence (exhibits D14 and D15).
In his report of 26 May 2015 (exhibit D15) Mr Semmens concluded that the offender satisfies the DSM.V criteria for the diagnosis of post traumatic stress disorder (PTSD). He said that this condition was caused by abuse whilst in the army, in particular threats of serious injury. He referred to the effects of the disorder in the following terms:
Mr Farris seems to go well with his life holding down important and responsible positions and operating competently. There are times in his life when he feels very challenged emotionally and at these times he appears to be adversely affected in a number of domains including his cognitive functioning and his behaviour. Essentially what occurs to Mr Farris at these times is that his physiological system goes into survival mode.
The particular features of such a survive mode of functioning include a systemic orientation towards reaction time and accompanying deficit in critical thinking, judgment, problem‑solving and organised thought. The brain is operating more from the areas of the mid brain and the brain stem with a corresponding deficit to the functioning of the fore brain. The fore brain is required for the optimum performance of constructive thought. In this state it can be expected that Mr Farris would be operating at very much below his optimum capacity for mental functioning and his judgment and memory would be compromised.
Factors that could be seen to precipitate the condition of being adversely affected in this way would be those that affected Mr Farris when he returned from the USA in November 2012. Those factors at that time were the conditions of jetlag and significant fatigue. These conditions would diminish his conscious control of his state of mind - something that he has relied upon to keep the manifestations of traumatic stress at bay.

Defence submissions - knowledge

Defence counsel said that possession of the relevant information and the mental element that that applies was admitted. The point of dispute was knowledge that the information possessed a particular quality. It was said that the offence requires knowledge of particular qualities of the information. There was said to be a distinction between what a person knows at a particular time and what the person may be consciously aware of at that time. What was in dispute was whether the offender had the relevant knowledge in the sense of being consciously aware of it at the time he placed the order.
It was submitted that Ch 2 of the Criminal Code (Cth) applies to the offence by virtue of s 1308A of the Corporations Act. Section 5.3 of the Criminal Code provides that a person has knowledge of a circumstance if he or she is aware that it exists or will exist in the ordinary course of events. Reference was made to an obiter comment by Fullerton J in R v Selim [2007] NSWSC 362 that:
The definition of knowledge in section 5.3 of the Criminal Code eschews belief and imposes a more exacting standard of conscious awareness [26].
Defence counsel acknowledged that Selim was a case involving a charge of procuring another to destroy evidence required for judicial proceedings contrary to s 39 of the Crimes Act 1914 (Cth). The quoted comment was made in the context of contrasting the Criminal Code (Cth) provision with the position under the Queensland Criminal Code, where a belief as to a state of affairs is sufficient to establish knowledge in respect of a similar offence. The issue in the present case is not whether the offender had a belief falling short of actual knowledge, but rather whether he had actual knowledge at the relevant time.
The construction advanced by defence counsel was also said to be supported by the Criminal Code (Cth) - A Guide for Practitioners (Commonwealth Attorney‑General's Department, Ian Leader‑Elliott, March 2002 at page 65) which states:
Knowledge is a complex concept and the definition appears to have been intended to restrict its application to instances where the individual was conscious, at the time, of the circumstances or anticipated results of conduct. The definition is clearly intended to deny recourse to the discredited common law concept of 'wilful blindness', which was sometimes taken to be equivalent to knowledge. It appears to go further, however, imposing a requirement that the offender be aware of the circumstances or results of conduct. Conscious awareness is not usually a necessary element of knowledge. The Code appears to restrict, to some extent, the range of meaning which knowledge has in ordinary usage: No‑one is consciously aware, at any given time, of all they know at that time. Blunders and accidents occur, not infrequently, because information known to the individual was not consciously recalled at the critical moment. There is an evident link, in this respect, between the Chapter 2 concepts of knowledge and recklessness, both of which require proof that the offender was aware of circumstances or results or the risk of their existence at the critical moment.
Defence counsel acknowledged that a different view is advanced in Principles of Federal Criminal Law (2nd ed 2010, Odgers page 57) which states:
The Macquarie Dictionary defines 'aware' to mean 'cognisant or conscious' of something. That raises a difficult question - is it sufficient that the person poses knowledge of something (for example the circumstance in section 149.1 that a person 'is a public official') in the sense that the person has at some time been informed of it, without being conscious of it at the relevant time? Leader Elliott considers the definition imposes a requirement of 'conscious and awareness' so that the information must be 'consciously recalled at the critical moment'. However, the contrary view would be that it is sufficient if the person possesses the information (in the sense that it could be recalled) without any requirement that it be actually recalled at the critical moment. Taking section 149 as an example, it is difficult to see why the person alleged to have committed the offence of obstructing a Commonwealth public official should have to be consciously aware at the time of the obstruction that the person obstructed is such an official. What should be sufficient is that the alleged offender possessed the information, not that it was actually brought to mind at the time of the obstruction.
Defence counsel also referred to the sentencing remarks of Porter J in The Queen v Gay (Unreported, TasSC, 23 August 2013):
The plea was entered and accepted on the basis that the offender ought to have known that the information was price sensitive and hence ought not to have gone ahead, not that he knew of the nature of the information and was conscious that he should not have sold the shares. Plainly enough, the offender placed as he was with his knowledge and skills, ought to have adverted to the nature of the information.
However, defence counsel acknowledged that the issue agitated in this case was not at issue in Gay because the offender in that case was sentenced on the basis that he did not know the relevant nature of information, but ought to have known it.
Defence counsel submitted that the answers given by the offender in cross‑examination were consistent with him accepting that he possessed knowledge of the relevant information but that he did not bring it to mind, and therefore was not consciously aware of it, when he placed his order to sell. This interpretation was said to be consistent with the evidence of how the offender responded to reading the announcement on the morning of Friday, 30 November 2012. Mrs Farris' evidence of his shock and surprise were said to be powerful evidence that it was only at that time that the offender appreciated the significance of the information he possessed. Counsel submitted that this interpretation was also consistent with the fact that the trading occurred openly; there was no attempt by the offender to conceal what he was doing and nothing which suggested that he knew what he was doing was wrong. He was encouraged in this view by being granted approval to sell his shares by the chairman of Northern Star. Defence counsel also noted that there was unchallenged evidence that the offender had wanted to sell his shares for some time and that that desire was separate and distinct from anything that was contemplated by Investmet in regard to the selling down of its shares.

Relevant law - trial of issues

The nature of a trial of issues was referred to by Buss JA in Medan v The Queen [2011] WASCA 142:
A plea of guilty to an offence necessarily involves an admission by the offender of each of the elements of the offence, including all of the essential facts necessary to constitute the offence. A plea of guilty does not, however, constitute an admission of all of the facts stated in the Crown's depositions or witness statements. It is necessary for the sentencing judge to evaluate the facts, consistently with the plea, to determine the offender's culpability and decide upon an appropriate sentence. Accordingly, it is always open to an offender who has pleaded guilty to apply for a trial of issues in relation to any facts relevant to the sentencing outcome that are not the essential facts necessary to constitute the offence. See Law v The State of Western Australia [2009] WASCA 193 [25] - [34] (Buss JA, McLure & Pullin JJA agreeing) [78].
The legal principles governing a trial of issues are well settled. The facts found by the court for the purpose of sentencing must be consistent with the findings of guilt - in this case by means of the plea of guilty entered by the offender. To the extent that facts consistent with the finding of guilt are contested, they must be proved by the calling of evidence. Where the contested fact is aggravating the prosecution bears the onus of proof and must prove the fact beyond reasonable doubt: R v Olbrich [1999] HCA 54; (1999) 199 CLR 270; R v Storey [1998] 1 VR 359 and Law v The State of Western Australia [2009] WASCA 193.

Relevant law - insider trading

Section 1043A(1) of the Corporations Act provides as follows:
(1)Subject to this Subdivision, if:
(a)a person (the insider) possesses inside information; and
(b)the insider knows, or ought reasonably to know, that the matters specified in paragraphs (a) and (b) of the definition of inside information in section 1042A are satisfied in relation to the information;
the insider must not (whether as principal or agent):
(c)apply for, acquire, or dispose of, relevant Division 3 financial products, or enter into an agreement to apply for, acquire, or dispose of, relevant Division 3 financial products; or
(d)procure another person to apply for, acquire, or dispose of, relevant Division 3 financial products, or enter into an agreement to apply for, acquire, or dispose of, relevant Division 3 financial products.
A failure to comply with s 1043A is an offence by virtue of s 1311 the penalty for which is provided for in sch 3. The maximum penalty for such an offence is, in the case of an individual, imprisonment for 10 years or a fine the greater of either 4,500 penalty units or, if the court can determine the total value of the benefits that have been obtained, three times that total value or both imprisonment and a fine.
Section 1042A contains a number of relevant definitions. They are as follows:
In this Division:
…
generally available, in relation to information, has the meaning given by section 1042C.
information includes:
(a)matters of supposition and other matters that are insufficiently definite to warrant being made known to the public; and
(b)matters relating to the intentions, or likely intentions, of a person.
inside information means information in relation to which the following paragraphs are satisfied:
(a)the information is not generally available;
(b)if the information were generally available, a reasonable person would expect it to have a material effect on the price or value of particular Division 3 financial products.
material effect, in relation to a reasonable person’s expectations of the effect of information on the price or value of Division 3 financial products, has the meaning given by section 1042D.
procure has a meaning affected by section 1042F.
Section 1042D provides for the circumstances in which a reasonable person would take information to have a material effect on price or the value of shares. That section provides as follows:
For the purposes of this Division, a reasonable person would be taken to expect information to have a material effect on the price or value of particular Division 3 financial products if (and only if) the information would, or would be likely to, influence persons who commonly acquire Division 3 financial products in deciding whether or not to acquire or dispose of the first‑mentioned financial products.
Section 1042F provides for the meaning of the term 'procure'. It states:
(1)For the purposes of this Division, but without limiting the meaning that the expression procure has apart from this section, if a person incites, induces, or encourages an act or omission by another person, the first‑mentioned person is taken to procure the act or omission by the other person.
(2)Subsection (1) does not limit the application in relation to provisions in this Division of:
(a)section 6 of the Crimes Act 1914; or
(b)section 11.1, 11.2, 11.2A, 11.4 or 11.5 of the Criminal Code.
Section 1308A provides that subject to the Act, ch 2 of the Criminal Code (Cth) applies to all offences against the Act. Chapter 2 of the Criminal Code provides for the general principles of criminal responsibility. Section 3.1 of the Code provides that an offence consists of physical elements and fault elements. A physical element may be conduct, a result of conduct or a circumstance in which conduct, or a result of conduct, occurs (s 4.1). A fault element may be intention, knowledge, recklessness or negligence (s 5.1). Section 5.3 provides that 'a person has knowledge of a circumstances or a result if he or she is aware that it exists or will exist in the ordinary course of events'. Section 5.6 provides:
(1)If the law creating the offence does not specify a fault element for a physical element that consists only of conduct, intention is the fault element for that physical element.
(2)If the law creating the offence does not specify a fault element for a physical element that consists of a circumstance or a result, recklessness is the fault element for that physical element.
In regard to the offence based on s 1043A(1), s 1043A(3) provides that paragraph (1)(a) is a physical element, the fault element for which is as specified in paragraph (1)(b). No provision is made for the physical elements in paragraphs (1)(c) and (1)(d) (which include, relevantly, procuring the disposal of shares), accordingly, because those elements consist only of conduct the default fault element is intention (s 5.6(1) of the Criminal Code). Section 5.2 of the Code provides that a person has intention with respect to conduct if he or she means to engage in that conduct. The effect of this is that the fault element relevant to possession is knowledge that the information is price sensitive and not generally available. The fault element relevant to procuring the disposal of shares is that the person intends, that is means, to engage in that act.
The elements of the offences in this case are as follows:
(1)That the offender possessed information.
(2)That the information was not generally available.
(3)That the information would, or would be likely to, influence persons who trade in shares in deciding whether or not to acquire or dispose of shares in Northern Star.
(4)That the offender knew, or ought reasonably to have known, that the information was not generally available.
(5)That the offender knew, or ought reasonably to have known, that the information was likely to influence persons who trade in shares in deciding whether or not to acquire or dispose of shares in Northern Star.
(6)That the offender procured another person, namely Farris Corporation, to dispose of shares in Northern Star.
The term 'possesses' is not defined in s 1042A. Accordingly that term should be interpreted as having its ordinary meaning. A person possesses a physical object if he has dominion or control over it and either knows or has a belief as to its nature. In the case of something intangible like information it is sufficient to establish that a person possesses information to prove that they know it: R v Hannes [2000] NSWCCA 503; (2000) 158 FLR 359 [227] ‑ [230].
In the context of s 1043A it is important to distinguish between the knowledge required to establish possession and the knowledge of particular characteristics of the information referred to in s 1043A(1)(b). That is, to distinguish between the physical element and the relevant fault element attaching to it. It is conceivable that a person may possess, that is know of, information and yet not appreciate that the information is not generally available or that it is price sensitive.

Application of the law to this case

The offender did not dispute that he possessed inside information. Information can include matters relating to the intentions or likely intentions of others. Information regarding the proposal by Investmet and others to sell down a large parcel of shares was information within the meaning of s 1043A. That information was that there was to be a sell down by Investmet and several directors of Northern Star of 40 million Northern Star shares at a minimum price of $1.40 per share. Accordingly his knowledge of that information is not disputed. Nor is it disputed that that information was not generally available at the time that the offender procured the sale of his Northern Star shares or that the information was price sensitive.
Some of the evidence related to whether the offender possessed the information at the time he placed the order to sell. Evidence of Mr Semmens and Dr Fellows‑Smith appeared to be directed to the possibility that the offender had not comprehended or had forgotten the information regarding the sell down that had been conveyed at the Azure meeting on the morning of 26 November 2012 and in emails that followed thereafter. The offender also gave evidence that at the time he placed the order he did not bring to mind that information. Insofar as such evidence suggested that the offender did not possess the information it is inconsistent with his plea of guilty and his express admission that he possessed the information. Both in evidence and in submissions the different aspects of knowledge required by s 1043A were conflated.
An offence against s 1043A does not require that it be shown that there was any causal connection between possession of the information and the decision to sell the shares. It may be that a person who commits the offence has some legitimate reason for wanting to sell his shares and the fact that he is in possession of information which gives him an advantage over other participants in the market is not material to his decision. Motive or use are not elements of the offence, though they may be relevant to sentence.
The effect of s 1043A is to create a class of persons who by reason of their possession of inside information are prohibited from trading: Mansfield v The Queen [2012] HCA 49; (2012) 247 CLR 86 [1]. If a person possesses information, that he knows is not generally available and is price sensitive, the prohibition on trading will apply whether or not he consciously brings to mind that information and its nature at the time he makes a decision to trade in shares. The reason for the alternative between 'knows' and 'ought to know' is not to deal with lapses of memory or a failure to recall the true nature of the information possessed but to deal with the situation where a person possesses inside information and fails to appreciate that it is not generally available or price sensitive where the objectively available circumstances should have led them to that conclusion.
If an offender possesses inside information it does not matter that he was not consciously aware of that information when placing an order. A person possesses information that is in his memory even when he is not consciously thinking of it. The knowledge element in s 1043A(1)(b) relates to the act of possession not to the point of sale. It requires that the person know or ought to know that the information he possesses has a certain quality. That is, the person is aware or ought to be aware that the information is price sensitive and not generally available at the time he acquires it or at some point thereafter and before he trades.
It is clear from the structure of s 1043A(1) that the element of knowledge relates to the circumstance of possession. The elements of possession and knowledge follow sequentially and are then separated from the element of disposal by the words 'the insider must not'. This structure is consistent with an interpretation that once possession and specific knowledge of the nature of the information is established the prohibition on disposal applies. This construction is put beyond doubt by the fact that s 1043A(3) provides that the fault element in s 1043A(1)(b) is the fault element for the physical element of possession. Accordingly, even assuming that knowledge requires awareness, it would be sufficient to meet that requirement that the offender had an awareness that the information he possessed was not generally available and was price sensitive prior to placing his order. The section does not require that he bring the information and its nature to mind at the precise point in time that the order is placed. That conclusion is further reinforced by the fact that the charges in this case allege that the offender procured the sale of shares between 27 November 2012 and 1 December 2012.

The defence submission that the element of knowledge requires that the offender be consciously aware of the nature of the information that he possessed at the moment in time that he placed orders to sell shares is misconceived. For the reasons I have stated such an interpretation is inconsistent both with the structure of s 1043A and its purpose. It would be all too easy for a person charged with such an offence to claim that they had other reasons for wishing to sell their shares and did not consciously bring to mind the nature of the information that they possessed. Whilst a person might still be convicted in such circumstances on the basis that they ought to have known, the ease with which they could avoid the more serious form of the offence reinforces the interpretation I have reached.
As I have noted earlier, that is not to say that use of the information or motivation in selling are not relevant to sentence. A person who sells shares in order to unfairly take advantage of inside information is clearly more culpable than a person who, whilst prohibited from trading because of the information he possesses, has other legitimate and pressing reasons for selling his shares. The outcome may be the same but the level of moral culpability is different. It may be difficult to determine after the event what motivations a person had and their claims in that regard have to be treated with caution. But there can be some objective indicators - the existence of other reasons to trade, when the decision to trade was made and whether there were any efforts to conceal the fact of trading. The state of mind of the offender at the relevant time may also be relevant.

Factual findings

The offender is a man of prior undisputed good character. He is described by those who know him well as honest and as having high integrity. That is typical of those who commit offences of this nature. However, I have taken that evidence into account in considering the likelihood that the offender would deliberately act in a dishonest way or seek to take an unfair advantage of others.
The offender had a good understanding of the insider trading prohibition. He was able to explain in evidence why such trading was unfair. He had some experience and training in the duties and obligations of a director of a public company. Also, significantly, he knew that a placement of shares by Northern Star in February 2012 had resulted in a trading halt following its announcement. His response when it became apparent he had engaged in insider trading, of admitting what he had done and preserving the proceeds, is indicative of his understanding (at least at that time) of the wrongfulness of his conduct.
I accept the evidence of the offender and his wife (and others) that in the period immediately prior to 26 November 2012 he was stressed due to heavy work commitments and associated international travel. This had an adverse effect on his physical and mental health. I also accept that he suffers from PTSD and that around this time he suffered some re‑traumatisation as a result of announcements regarding the DART. However, in assessing the impact of those factors all of the available evidence needs to be considered.
Whilst PTSD can result in episodes of cognitive impairment, including adverse effects on memory, there is no objective evidence that the offender was suffering such effects at any particular time during the relevant week. As Dr Fellows‑Smith noted, the effects of PTSD are not consistent and other than when suffering a re‑traumatisation event a person with PTSD may otherwise function in an effective and rational manner.
Dr Fellows‑Smith said that in his opinion the offender was suffering a re‑traumatisation event at or around the time of the Azure meeting on 26 November 2012 and that this would likely have caused him not to understand the information he received. Dr Fellows‑Smith was not treating the offender at that time and his opinion was based entirely on information he has received from the offender. It is noteworthy that he relies on a trigger factor that was not referred to by the offender in his evidence. In any event, emails received and sent by the offender following the Azure meeting are inconsistent with the suggestion that he was significantly cognitively impaired. The email sent by Mr Poynton at 12.53 pm that day set out in succinct and easily understood terms what was proposed. The offender's response to that email clearly indicates that he did understand that proposal and intended to discuss it further with those involved.
I am unconvinced that the offender was suffering temporal lobe epilepsy at the time. Testing in that regard several years later has been inconclusive. The symptoms referred to by Dr Fellows‑Smith were observed by him relatively recently. Most of those symptoms depend upon an account by the offender and do not appear to be definitive (for example nausea). The only objective test administered by Dr Fellows‑Smith was a test of short‑term memory, which also does not seem to be determinative. In any event, as I have noted, possession of the information is not disputed and the evidence of emails contradicts any significant mental impairment at the relevant time.
In regard to the dispute over whether the offender was present at the Smiths Beach meeting when there was a discussion regarding a change of directors and a possible sell down of shares by Investmet, I am unable to be satisfied that the offender was present at that time. Whilst Mr Rowe could recall those matters being discussed he could not say with certainty that the offender was present. The offender said that he did attend the informal meeting but that he was called away to make arrangements for a social function that was to follow. For this reason I would conclude that the offender came into possession of the information at or about the time of the Azure meeting.
It is clear that the offender did attend the Azure meeting on the morning of 26 November 2012 and that the sell down proposal was discussed at that meeting. The evidence does not indicate that the offender played a particularly active part in that meeting but it is unlikely that he was disinterested as the proposal related to the sell down of a very large parcel of shares owned by Investmet, a company of which he was a director. This evidence, however, needs to be viewed in the context of emails and meeting that occurred later that day.
The meeting with Mr Rowe and Mr Fotios and emails regarding the Stock Exchange announcement show that the offender was particularly concerned about whether he would retain his board position on Northern Star. I prefer the evidence of Mr Rowe and Mr Fotios regarding that meeting to that of the offender. His detailed and self‑serving account of what he says occurred is not only inconsistent with the evidence of the others who were present but is impossible to reconcile with his claims to have no recollection of the Azure meeting earlier that day and the intervening emails. The number of Investmet representatives on the Northern Star board was, of course, related to the sell down. Investmet had already reduced its shareholding earlier that year and, as Mr Rowe noted, concerns had been raised by other shareholders that the board was not independent and that Investmet was over‑represented. That position would only be reinforced by the further proposed sell down by Investmet. Notwithstanding this, it is clear that the offender was reluctant to resign and felt that he could retain his position by suggesting that Mr Fotios (who Mr Rowe was keen to retain because of his skills as a geologist) would also leave. In this context, the offender's failure to express interest in participating in the sell down with the other directors is explicable. It would seem that he held some hope of retaining his Northern Star directorship until sometime on Thursday, 29 November 2012.
I accept the evidence of the offender and his wife that he had wished to sell some of his shares some months earlier to meet financial obligations. This is confirmed by the fact that he made applications to the Northern Star chairman to sell parcels of shares. The fact that he made another application and received approval in the week of 26 November 2012 is relevant insofar as it shows that he was not seeking to conceal the fact that he intended to sell. However, the approval could not reasonably have been seen to be an indication by Mr Rowe that there was no other legal impediment to selling. Any approval by Mr Rowe could only relate to information known to Northern Star. As he pointed out, he was not present at the Azure meeting and any decision by the offender as to whether he was in possession of inside information that prevented him from selling was one that only he could make.
The email to Mr Poynton following the Azure meeting compels a conclusion that the offender possessed information regarding the sell down proposal and knew its true character. This was confirmed by the offender in cross‑examination when he admitted that he knew the information was not generally available and was price sensitive. That evidence was specific and unambiguous. There was no attempt to qualify or explain his answers in re‑examination. Whether he brought that knowledge to mind when he placed the order with Mr Williams the following day is not to the point. He possessed inside information and prior to placing the order he knew that that information was not generally available and was price sensitive.
However, even if it was necessary to establish that the offender was consciously aware of the nature of the information at the time he placed the order, I am satisfied to the requisite standard that he was. Given the significance of the matters discussed at the Azure meeting, the emails that followed, the short time interval involved and the number and value of the shares that the offender was selling, there is no reasonable possibility that he was not consciously aware of the nature of the information at the time he placed the order. However, for reasons that I will now come to I conclude that the offender acted despite his awareness of the information, not because of it.
There are a number of factors which indicate that the offender did not appreciate the wrongfulness of what he was doing, however that is different to not having knowledge of the nature of the information. In this regard I note, and accept, the evidence that the offender made no attempt to conceal the sale of his shares, he obtained written approval to sell the shares from the Northern Star chairman, used his usual broker and share trading account and did not seek to deny that he had sold his shares when confronted by Mr Mann on the morning of 30 November 2012. I accept Mr Mann's evidence in regard to that conversation. I also accept Mr Mann's evidence of his telephone conversation with the offender on the afternoon of 27 November 2012 in which the offender expressed frustration at not being able to previously sell his shares and an intention to do so before the forthcoming Annual General Meeting of Northern Star on 30 November 2012. I accept that Mr Mann told him not to do so, although the offender did not seem to be really listening at that point.
On 28 November 2012 the offender received the sell down documents as attachments to an email sent by Mr Fotios at 1.00 pm. The documents were clearly marked 'confidential'. Whilst the offender said he had no recollection of reading them, I am satisfied that he did. That is established by an email he sent the following day, which I will refer to shortly.
Later on 28 November 2012 the offender received an email from Mr Fotios regarding the numbers of shares being disposed of in the sell down proposal. That evening he also received an email from Mr Beament attaching the draft ASX announcement. The draft announcement described the sell down in clear terms and also referred to the consequential change to the board of directors. I am also satisfied that the offender read the draft announcement. This is established by the email he sent at 8.54 pm.
The following morning the offender sent an email to Mr Rowe which referred to the possibility of Mr Fotios leaving the board and that, having read the 'finer details' of the 'sell down docs', this was a 'material' matter that could be used against the vendors. This email establishes that the offender had read the sell down documents and understood them. Far from being cognitively impaired, the offender had a keen appreciation of his own position and how he could use the 'finer details' of the proposal to his own advantage. His evidence that the email does not reflect an understanding of the documents and that his use of the words 'vendors' and 'material' was merely coincidental, was entirely lacking in credibility.
A further email was sent by the offender to Mr Beament at 7.14 am in which he sought amendments to the draft ASX announcement. This email reflects an understanding on his part that the sell down was imminent. One minute later the offender telephoned Mr Hainsworth and instructed him to complete the sale of his Northern Star shares that day. It is inconceivable that at that time he was unaware that the announcement of the sell down was imminent and that it was information likely to affect other people in deciding whether to buy or sell shares. The offender conceded this in cross‑examination, though he denied it was the cause of his instruction to Mr Hainsworth.
In my view the offender made a very significant error of judgment at the time he placed the order and very likely failed to appreciate the full consequences of what he was doing. His reaction of shock on the Friday morning when he saw the announcement was a realisation of the magnitude of what he had done rather than surprise that the sell down had gone ahead. It is inconceivable that the offender could have been surprised given his attendance at the Azure meeting, the emails he had received from Mr Poynton, Mr Rowe and Mr Beament and his receipt of the draft announcement and sell down documents. It is apparent from his emails to Mr Rowe and Mr Beament that he read the draft announcement and sell down documents and understood them sufficiently to make specific comments regarding their contents.
It is likely that the failure of the offender to appreciate the wrongfulness of what he was doing was affected by his anger at being forced from the Northern Star board, his frustration at being previously denied permission to sell shares when he needed to, and also by fatigue and stress, including stress related to the DART announcement. I accept that the offender did not set out to unfairly take advantage of insider information, rather he gave in to his existing desire to sell his shares in circumstances where he should not have done so. That may reduce his moral culpability but it does not affect the fact that the evidence compels a conclusion that the offender sold his shares at a time when he possessed inside information which he knew was price sensitive and not generally available. I find that knowledge proven beyond reasonable doubt.