R v Jacobson (Ruling No 2)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

CRIMINAL DIVISION

S CR 2011 0054

THE QUEEN

MERVYN JACOBSON

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JUDGE:	KAYE J
WHERE HELD:	Melbourne
DATE OF HEARING:	4 August 2014
DATE OF RULING:	8 August 2014
CASE MAY BE CITED AS:	R v Jacobson (Ruling No 2)
MEDIUM NEUTRAL CITATION:	[2014] VSC 368

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CRIMINAL LAW – Two counts of conspiracy to contravene s 1041A of Corporations Act 2001 (Cth) – 33 counts of contravening s 1041A of Corporations Act – Joinder of counts in one indictment – Severance – Admissibility of previous dealings as context evidence – Whether previous dealings admissible as tendency evidence – Cross-admissibility of evidence as context or tendency evidence – Elements of offences.

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APPEARANCES:	Counsel	Solicitors
For the Crown	Mr J Rapke QC and Mr C Winneke	Solicitor to the Director of Public Prosecutions (Commonwealth)
For the Accused	Dr J Wilson QC and Mr A Burns	Markotich Lawyers

HIS HONOUR:

The accused is charged, on indictment, with two counts of conspiracy to take part, and 33 substantive counts of taking part, in transactions, which had, or were likely to have, the effect of creating or maintaining an artificial price for trading in financial products, contrary to s 1041A of the Corporations Act 2001 (Cth). The trial of those charges has been fixed for hearing on 8 September next. The accused applies to have the two charges of conspiracy heard separately to the 33 substantive charges.

Three issues have arisen for determination before trial. Those issues are:

(1)The accused applies to have the two charges of conspiracy heard separately to the 33 substantive charges.
(2)The accused objects to the admissibility of a series of transactions, which are referred to as the “NOLT” transactions, which took place in the period preceding the events that are the subject of charge 1 on the indictment.
(3)A question has arisen as to the correct formulation of the elements of the charges, and, in particular, as to the proper characterisation of the “fault” element, which the prosecution is required to prove.

The charges

The charges arise from a series of transactions, in which shares were purchased in Genetic Technologies Limited (“GTG”) between 16 May 2006 and 2 November 2006.

Charge 1 on the indictment alleges that the accused, between about 16 May 2006 and 31 October 2006, conspired with Geoffrey Newing (his son-in-law) and Tamara Newing (his daughter) to take part in transactions, consisting of purchases of shares in GTG on the Australian Securities Exchange (“ASX”), which were likely to have the effect of creating an artificial price, or of maintaining at a level that is artificial a price, for trading in securities of GTG on the ASX (“the first conspiracy”).

Charges 2 to 34 on the indictment each allege that, on various dates between 14 September 2006 and 29 September 2006, the accused took part in transactions, consisting of purchases of specific quantities of shares in GTG on the ASX which had, or were likely to have, the effect of creating an artificial price, or of maintaining at a level that is artificial a price, for trading in securities of GTG on the ASX.

Charge 35 on the indictment alleges that the accused, between 27 September 2006 and 2 November 2006, conspired with Rocco Musumeci and Tamara Newing to take part in transactions, consisting of purchases on the ASX of ordinary shares in GTG, which were likely to have the effect of creating an artificial price, or maintaining at a level that is artificial a price, for trading in securities of GTG on the ASX (“the second conspiracy”).

Corporations Act 1041A

Section 1041A of the Corporations Act 2001 (Cth) provides:

“A person must not take part in, carry out (whether directly or indirectly and whether in this jurisdiction or elsewhere):
(a)a transaction that has or is likely to have; or
(b)two or more transactions that have or are likely to have;

the effect of:
(c)creating an artificial price for trading in financial products on a financial market operated in this jurisdiction; or
(d)maintaining at a level that is artificial (whether or not it was previously artificial) a price for trading in financial products on a financial market operated in this jurisdiction.”

Section 1311(1) of the Act provides that a person who does an act or thing that the person is forbidden to do by or under a provision of the Act is guilty of an offence.

Background

At the time of the offences, the accused held in excess of 150 million ordinary shares in GTG, which represented 41.45 per cent of the issued share capital in that company. On 18 March 2005, the accused had exercised 49 million options to purchase shares in GTG at 20 cents per share. In order to finance that purchase, he entered into a Lending and Borrowing Facility with Opes Prime in the sum of $11.4 million (approximately). As security for that facility, the accused lodged shares in GTG with a trustee. Under the terms of the facility, Opes Prime was entitled to make margin calls on the accused, requiring him to provide further security. Those calls were to be calculated according to a loan to value ratio of 25 per cent, which was based on the daily closing price of GTG shares.

Subsequently, on 15 May 2006, the accused entered into two Securities and Borrowing Agreements with Chimaera Capital Limited, by which he increased his total borrowings to in excess of $14 million. The facilities provided by Chimaera operated in a similar manner to the facility provided by Opes Prime, except that the loan to value ratio, in respect of the Chimaera Facilities, was 30 per cent.

Essentially, the fundamental allegation made by the prosecution, in each of the charges on the indictment, is that the accused was either involved in, or was a party to, the making of bids to purchase shares in GTG at prices, which were designed to maintain the closing market price of GTG shares at a level, which would avoid the need for the accused to provide further security to Opes Prime and Chimaera under their finance facilities. In particular, the prosecution alleges that the accused was involved in, or was a party to, the making of late bids for the purchase of GTG shares at or about the time of the close of the daily share market, which were designed to support the closing price of the shares in GTG at the required level.

For the purpose of the present application, it is necessary to set out the facts, alleged by the prosecution, in a little detail. In doing so, I shall rely on the facts alleged in the detailed summary opening filed by the prosecution.

The prosecution case commences with a number of transactions by Tamara Newing (“Tamara”) between 18 April 2005 and 25 July 2005, by which she purchased GTG shares through a National Online Trading Account (“NOLT”).

The prosecution alleges that, during that period, Tamara placed a total of 96 bids for GTG shares via NOLT on the ASX trading platform. Pursuant to those bids, a total volume of 1,064,282 GTG shares were purchased on the NOLT account. Those acquisitions represented four per cent of the total volume of GTG shares traded, but represented 24 per cent of all price increases in GTG shares, and 58 per cent of all “late” price increases in GTG shares, during that period. The prosecution alleges that the accused was a party to those purchases. They are not alleged as part of the overt acts of the conspiracy charged in count 1. Rather, the prosecution contends that evidence in relation to those transactions is admissible as necessary background or context evidence to the transactions encompassed by the charges. It also contends that the evidence is admissible as evidence of a tendency by the accused to participate in transactions in GTG shares for the purpose of creating, or maintaining, an artificial price in those shares. Accordingly, the prosecution has served a notice of tendency evidence, in respect of the NOLT transactions, under s 97(1)(a) of the Evidence Act 2008.

On 15 June 2005, due to concerns that Tamara’s trading might be manipulating the GTG share price, NOLT removed the “straight through trading” facility from her account, which had allowed her to trade directly from the computer without any active involvement by the broker. As a result, all trades placed by Tamara through the account were reviewed by a NOLT operator. Subsequently, on 6 January 2006, NOLT, by a letter, advised Tamara that, due to the nature of her trading activity, NOLT would decline to act on any instructions by her with respect to trading in GTG shares.

As indicated above, count 1 charges the accused with conspiring with Tamara and Geoffrey Newing (“Newing”), between 16 May 2006 and 31 October 2006, to take part in transactions to purchase GTG shares contrary to s 1041A of the Corporations Act. The share purchases in question were made through Richard Wade, a stockbroker employed by ABN AMRO Morgans Limited (“ABN AMRO”). It is alleged that in February 2006, Newing requested Wade to accept instructions to acquire shares in GTG at prices that would support closing prices for GTG shares, with a view to minimise margin calls being made pursuant to the loan agreements, to which the accused was a party. Shortly before Newing spoke to Wade, a margin call had been made by Opes Prime on the accused in the amount of $406,000.

On 9 February 2006, Palamine Pty Ltd (“Palamine”), a company associated with Newing, commenced trading in GTG shares through the ABN AMRO account. Subsequently, on 5 May 2006, Opes Prime made a further margin call on the accused requiring payment of $241,000. On 6 May, Newing sent to the accused a facsimile referring to the “… need to find a workable solution re the current margin lending facility”. Following that facsimile, there were a number of telephone calls between the accused and either Newing, or a person at the Williams Road home, in which he and Tamara then resided. It is in that context that, on 15 May 2006, the accused entered into the two further Securities and Lending Borrowing Agreements with Chimaera, to which I have referred.

On the same date, 15 May 2006, the accused placed an order to purchase 120,000 GTG shares at 35 cents through Clive Henley, who was a client advisor employed by the stockbroking firm Tolhurst Noall. At the time at which the accused placed that order for the purchase of those shares, the price for GTG shares was 33 cents. The purchase of those shares at that price by the accused would have had the effect of causing the closing price of GTG shares to rise to 35 cents per share. However, shortly after the accused made that bid, a seller entered the market offering to sell his shares at 33 cents. Immediately after that offer, the accused amended his bid for shares to 150,000 shares at 35 cents, in order to sustain a closing price of 35 cents per share. The trading of shares by the accused through Tolhurst Noall, on that day, is not relied on by the prosecution as an overt act of the first conspiracy, but, rather, as background or context evidence, or as tendency evidence, which, it is submitted, is relevant to the charges on the indictment.

The prosecution alleges that the essence of the conspiracy, alleged in charge number 1 on the indictment, is contained in a facsimile, which Newing sent to the accused on 16 May 2006. The relevant parts of the facsimile are in the following terms:

“On the assumption that funding comes through tomorrow or the next day that can be used to acquire shares, you need the most appropriate structure to use these funds and manage the market plus also meet all the statutory requirements of the ASX and ASIC … . While you no doubt have alternatives I would put the following forward for you to consider:
·You gift funds to Tammy to enable her to pay down some of the Williams Road mortgage. This gets the funds into someone’s hands who can then buy shares at arm’s length and without the funds being seen as a loan from you which could potentially create disclosure requirements.
…
·Tammy can then draw down the mortgage and acquire shares in GTG. The basis of her share purchases would be an arm’s length and see her sit in the market and acquire shares at a fixed price. Tammy would watch the shares daily and maintain a floor price. …

The benefits of this arrangement are as follows:
(1)Funds are not seen as a loan by you to someone else for the purpose of buying shares on your behalf.
(2)You have someone watching the market all day who is based in Australia and not charging brokerage other than online brokerage which is minimal.”

On 17 May and 18 May 2006, Chimaera advanced the sum of $1,900,000 to the accused pursuant to its loan facility with him. Between 18 May 2006 and 5 July 2006, the accused caused six deposits to be made into the bank account of Tamara, totalling $1,400,000. On 24 July, he advanced to her a further sum of $150,000. On 4 September, he advanced her a further sum of $50,000. The prosecution alleges that those funds were paid to Tamara for the purpose of purchasing GTG shares in her own name and in the name of Palamine.

Between 16 May 2006 and 2 August 2006, Newing gave to Wade, or approved, nine open orders for the purchase of GTG shares. The open orders authorised, in total, the acquisition of 3,565,000 shares. As agreed between Newing and Wade in February 2006, the open orders were filled by way of smaller bids, placed onto the Stock Exchange Automated Trading System (SEATS), as and when Wade was instructed, primarily by Tamara, but also from time to time by Newing. Initially, the orders were made for the purchase of GTG shares in the name of Palamine. On 19 May, Wade was instructed to purchase the shares in the name of Tamara. On 22 May, at Newing’s direction, Tamara instructed Wade to revert to purchasing GTG shares through the Palamine account. In June 2006, Newing instructed Wade that any further purchase of shares should be made through a nominee account established by ABN AMRO. It is alleged that the purpose of registering the shares against the nominee account was to conceal Palamine’s trading (and holdings) in GTG shares.

On 31 October 2006, after the market closed, a member of ABN AMRO’s compliance department informed Wade that the Australian Securities and Investments Commission (“ASIC”) had been making inquiries in relation to the trading in GTG shares by Newing, Tamara and Palamine. On the following day, Tamara contacted Wade to place a bid for GTG shares. Wade advised Tamara that he could not do that, as there was an investigation into his dealing in GTG shares. On 3 November 2006, Wade resigned his position at ABN AMRO. As a result, the trading in shares by Tamara and Newing, through ABN AMRO, ceased.

The prosecution alleges that during the period of the first conspiracy, some 200 bids were made by Tamara and Newing for the purchase of GTG shares. On 44 occasions, bids on behalf of Palamine’s and Tamara’s accounts were entered onto SEATS, in circumstances where Palamine or Tamara had an existing bid in the market that was the priority bid. Those two accounts, held with ABN AMRO, participated in the last trade in GTG shares on 40 days (or 33.3 per cent) of the days on which trades occurred. Of those trades, 30 resulted in a price increase for GTG shares.

Pursuant to the bids placed on behalf of Palamine and Tamara, 355 trades were executed on SEATS during the period of the first conspiracy. A total of 3,248,900 GTG shares were purchased in the names of Tamara and Palamine. The total market value of the shares so purchased was $1,117,119. Those purchases represented 34.68 per cent of all price increases, and 46.53 per cent of all late price increases, of GTG shares during the period alleged in count 1. The prosecution relies on those purchases as overt acts of the conspiracy alleged in count 1.

Counts 2 to 34 of the indictment allege a number of purchases of GTG shares by the accused through Rocco Musumeci, who was then an employee of the stockbroking firm Bell Potter at its Wollongong office. The transactions took place between 14 September 2006 and 29 September 2006.

In the period leading up to those transactions, Bell Potter had been recommending GTG shares to those of its clients who were seeking speculative shares. In August 2006, the accused visited the Bell Potter office in Wollongong, and gave a presentation to some Bell Potter clients, relating to GTG shares. On 14 September 2006, the accused telephoned Musumeci from the United States of America, and discussed with him a proposal to open an account with Bell Potter for an American company called XY Inc, which the prosecution alleges, was owned and controlled by the accused. As a result of that discussion, Musumeci opened an account in the name of XY Inc.

Each of counts 2 to 34 relate to purchases of shares in the name of XY Inc by Musumeci on specific instructions given to him by the accused. The prosecution alleges that the accused’s intention, in giving those instructions, was to create or maintain an artificial price for GTG shares, which was above the then market price of those shares. In particular, it is alleged that, during the period of 14 September to 27 September, Bell Potter, acting on the accused’s instructions, engaged in trading on behalf of XY Inc that was responsible for 71.32 per cent of the volume of all GTG shares traded, 44 per cent of all price movements in GTG shares, and 27.3 per cent of all late price movements in GTG shares, during that period. On 26 occasions, bids on behalf of XY Inc were entered into SEATS while the XY Inc had an existing bid in the market that was the priority bid, and on those, and other occasions, XY Inc also had other existing bids that were not the priority bids, or had multiple bids in the market.

The prosecution alleges that the second conspiracy, charged in count 35, commenced on 28 September 2006. On that date, the accused, who was then in Colorado, had a telephone conversation with Tamara, who was in Victoria. Immediately after that conversation concluded, the accused telephoned Musumeci. He advised Musumeci that he wanted Musumeci to take orders from Tamara, as she had an understanding of what he wanted to achieve, and she was better placed with the time difference to speak to Musumeci. The accused provided Musumeci with Tamara’s mobile telephone number, and instructed him that Tamara was to be the primary contact for any purchase inquiries. He also told Musumeci that, if he could not contact Tamara, and if the matter was urgent, then he could contact the accused on his mobile telephone.

Following that telephone conversation, Musumeci commenced to take instructions from Tamara in respect of the purchase of shares in GTG on behalf of XY Inc. Initially, Musumeci spoke to Tamara by telephone. However, from approximately 2 October 2006, Tamara told Musumeci that she preferred that they communicate by way of email, otherwise she would ask him to inform her, by way of “SMS”, the market details relating to the market depth and the last trade price. In general, when Musumeci provided those details to Tamara, he would ask her to provide her trading instructions, and Tamara would then respond with a further SMS message relaying those instructions.

During the period of the second conspiracy alleged in charge 35, and pursuant to instructions given to Musumeci by Tamara, 74 separate bids for GTG shares were placed on behalf of XY Inc. Consequent upon those bids, a total of 133 trades were executed on the SEATS. As a result, 1,905,416 GTG shares were purchased in the name of XY Inc, for a total market value of $667,210. Those purchases represented 39.64 per cent of the volume of GTG shares traded, 61.9 per cent of all price increases in GTG shares, and 89.96 per cent of all late price increases in GTG shares, during the period of the alleged conspiracy.

On 22 November 2006, Musumeci and Symes (another employee of Bell Potter, Wollongong) were informed by a member of Bell Potter head of compliance that Bell Potter had received notification from the ASX and/or ASIC relating to the trading by XY Inc. Two days later, Musumeci was suspended from Bell Potter, and Symes was instructed to place no further orders on behalf of XY Inc. On 11 December, Musumeci’s employment with Bell Potter was terminated.

The prosecution alleges that the total trading, on behalf of Palamine and Tamara through ABN AMRO, and on behalf of XY Inc through Bell Potter, during the period 14 September to 2 November 2006, reflected in charges 1 to 35, represented:

(a)53.1 per cent of the volume of GTG shares traded.
(b)75.6 per cent of all price increases for GTG shares.
(c)94.1 per cent of all late price increases for GTG shares.

In addition, of the 36 trading days during that period (14 September to 2 November 2006), one of those accounts participated in the last trade of the day on 28 occasions (with 22 of them resulting in a price increase in GTG shares).

Submissions – severance and admissibility

It is convenient, first, to deal with the submissions relating to the application by the accused to sever the indictment, and the objection on behalf of the accused to the admissibility of the “NOLT” transactions.

In their written submissions, counsel for the accused commenced by outlining, in some detail, the history of the proceeding, and, in particular, the changes which had been made to the formulation of the charges brought against the accused.

That history, as described in the submissions, is as follows.

The first set of charges, laid by charge and warrant dated 10 December 2008, charged the accused with fourteen counts relating to the NOLT transactions, 191 counts alleging contraventions by the accused of s 1041A for taking part in transactions involving the purchase of shares in GTG through ABN AMRO from 18 May to 27 September 2006, and 114 counts alleging contraventions by the accused of s 1041A for taking part in transactions involving the purchase of shares in GTG by XY Inc through Bell Potter between 14 September and 2 November 2006. On 28 February 2011, the Crown filed an indictment, containing one count alleging a conspiracy between the accused, Tamara and Geoffrey between 16 May and 27 September 2006 to take part in transactions in breach of s 1041A in relation to the ABN AMRO share purchases, one count of conspiracy between 27 September and 2 November 2006 between the accused, Newing and Musumeci to take part in transactions in breach of s 1041A arising out of the Bell Potter share dealings, and 39 counts alleging that the accused took part in transactions in breach of s 1041A between 14 September and 27 September 2006 in relation to share purchases through Bell Potter in that period. In response to an inquiry made on behalf of the accused, the Crown, by letter dated 10 March 2011, stated that it did not intend that the NOLT transactions be the subject of charges brought against the accused. Finally, on 20 December 2013, the prosecution filed an amended indictment which comprises the current indictment against the accused.

Having provided that background, counsel for the accused, in their written submissions, proceeded to contend that the evidence concerning the NOLT transactions is not admissible as tendency evidence under s 97 of the Evidence Act 2001. Counsel submitted that the evidence does not contain the necessary “underlying unity” or “pattern of conduct” described by the Court of Appeal in its recent decision in Velkoski v The Queen.[1]
[1][2014] VSCA 121.

In response, counsel for the prosecution filed written submissions, to which I shall shortly refer, in which they explained that the primary basis, upon which it was contended that the evidence as to the NOLT transactions, and the Tolhurst transactions, is admissible, is that those transactions constituted the necessary and relevant background to the transactions which are the subject of the charges on the indictment. In oral submissions, Mr Burns, who appeared with Dr J Wilson QC on behalf of the accused, accepted that, on that basis, the evidence as to the NOLT transactions would be relevant background evidence relating to the first charge on the indictment. He submitted, however, that the probative value of that evidence, as background evidence, is outweighed by its prejudicial effect, and that therefore it should be excluded under s 137 of the Evidence Act. Mr Burns further submitted that the evidence as to the NOLT transactions, is not relevant in relation to the offences alleged in charges 2 to 35 on the indictment.

In their written submissions, counsel for the accused, having outlined the history of the charges brought against the accused, and the objection to the admissibility of the NOLT evidence, then referred to the well-known observations of the High Court in R v Hoar[2] criticising use by the prosecution of a charge of conspiracy where substantive charges are available to the prosecution. Counsel also referred to the decision of the Queensland Court of Appeal in R v Moore[3] and the decision of the Court of Criminal Appeal of New South Wales in R v Mok.[4] The written submissions on behalf of the accused then referred to s 195 of the Criminal Procedure Act 2009, and, based on that provision, contended that the indictment should be severed, so that the charges alleging substantive offending (counts 2 to 34) should be heard separately to the two charges alleging conspiracy (charge 1 and charge 35).
[2](1981) 148 CLR 32.
[3][1988] 1 Qd R 252.
[4](1987) 27 A Crim R 438, 443.

In the course of discussion during oral submissions, Mr Burns accepted that there is a necessary connection between, and relevance of, the dealings which are the subject of counts 2 to 34 with the conspiracy alleged in count 35. On that basis, he submitted that charge 1 of the indictment should be heard separately to charges 2 to 35. In the course of further discussion, Mr Burns submitted that the evidence relating to the ABN AMRO dealings, which are the subject of count 1, would not be admissible as background evidence relating to the Bell Potter dealings, which are the subject of charges 2 to 35. In particular, he submitted that the ABN AMRO dealings were not sufficiently similar to the Bell Potter dealings, in that the ABN AMRO dealings took place through Tamara Newing, whereas the dealings in count 2 to 34 constituted transactions entered into directly by the accused with the broker, Bell Potter.

Mr Burns submitted that as the evidence on charge 1 is not relevant to, and admissible on charges 2 to 35, the joinder of charge 1 with charges 2 to 35 would involve prejudice to the accused, which could not be allayed by an appropriate direction by me to the jury. He submitted further that, if the NOLT evidence were admitted in relation to count 1, but not in relation to counts 2 to 35, the joinder of count 1 with counts 2 to 35 would involve additional unfair prejudice to the accused.

In response, Mr J Rapke QC, who appeared with Mr C Winneke on behalf of the prosecution, submitted that the evidence relating to the NOLT and Tolhurst Noall dealings is admissible, on the basis that it provides the necessary context and background to the transactions which are the subject of the 35 charges on the indictment. Similarly, he submitted that the evidence in respect of each charge on the indictment is cross-admissible in relation to the transactions which are the subject of the other charges, because the evidence on each charge forms part of the necessary background and context in which those transactions took place.

In particular, Mr Rapke submitted that each offence shared an identical underlying motive, and was part of an ongoing undertaking by the accused to manipulate the price of shares in GTG, where necessary, in order to avoid, or minimise, margin calls being made on him under the Opes Prime and Chimaera Capital loan agreements. He submitted that the position of the Crown, as set out in the summary of the prosecution opening, is that the accused was engaged, with the assistance of Tamara and Newing, and the sharebrokers Wade and Musumeci, in an ongoing enterprise, that commenced in March 2005 and concluded in November 2006. That enterprise was directed to maintaining the price of shares in GTG at levels which obviated the need for the accused to provide further security to Opes Prime and Chimaera in accordance with the terms of the loan agreements which he had executed with them.

Mr Rapke further submitted that the transactions possessed a number of common features. They were carried out in the same background, namely the large borrowings by the accused from Opes Prime and Chimaera, both loans were margin loans, the trading in GTG shares was funded by the accused or by companies in which he held a controlling interest, the trading was conducted in order to create or maintain the GTG share price at a particular level, and the purchases of GTG shares occurred at times, and in amounts, that were designed to have an impact on the price of the shares on the ASX.

Mr Rapke further submitted that the NOLT transactions, in 2005, were part of the necessary background to understanding the financial imperative on the accused to enter into the transactions, which are the subject of the first conspiracy. In the absence of that evidence, he contended, the jury would be left with an incomplete and misleading picture of the circumstances which led to the creation of the first conspiracy. In particular, in the absence of the evidence relating to the NOLT transactions, there would be a vacuum in the evidence as to whether the accused had done anything to support the market price of GTG shares during 2005, at a time when the price of those shares had deteriorated dramatically. The jury would thus be left with the unresolved question as to why the accused, apparently suddenly, felt the need to intervene to support the price of GTG shares in 2006, at a time when the price of those shares had relatively stabilised, albeit at a low level.

Mr Rapke submitted that although the evidence of the NOLT transactions and the Tolhurst Noall dealings, might be admissible, and the evidence on each charge might be cross-admissible, as evidence of tendency under s 97 of the Evidence Act, the prosecution relies on that evidence principally to establish the context and background to the charges in the manner I have just described. He accepted that, if the evidence were admitted on the primary basis contended for by the prosecution, he would not seek to rely on it for the purposes of establishing a tendency of the accused to act in a manner contrary to s 1041A of the Corporations Act.

Mr Rapke submitted that, as the evidence on each charge is admissible in relation to each other charge, the charges on the indictment should not be severed. He submitted that s 195 of the Criminal Procedure Act 2009 does not apply in this case. In particular, none of the overt acts, alleged in respect of the conspiracies charged in count 1 and count 35, are charged as substantive offences in counts 2 to 34 on the indictment. Accordingly, the indictment does not contain a charge of conspiracy to commit an offence, and another charge alleging the commission of that offence, for the purposes of s 195 of the Criminal Procedure Act. He further submitted that it was appropriate for the prosecution to characterise the conduct of the accused, in respect of the share purchases by Tamara through ABN AMRO, and the share purchases by Tamara through Bell Potter, as conspiracies in charges 1 and 35. Thus, he submitted that this is not the type of case, to which the High Court referred in R v Hoar, and in which the prosecution had available a relevant substantive offence which could have been charged against the accused instead of a charge of conspiracy.

Legal principles – joinder of charges

I do not understand the accused to have contended that the 35 charges, brought against him, were invalidly joined in the same indictment. Rather, the application by the accused for severance of those counts is made pursuant to s 193 and s 195 of the Criminal Procedure Act 2009. Nevertheless, it is useful, first, to briefly consider the principles that apply to the joinder of two or more counts in the same indictment.

Section 159(3)(c) of the Criminal Procedure Act 2009 requires that an indictment must comply with Schedule 1. Rule 5(1) of Schedule 1 provides that an indictment may contain charges “for related offences” whether against the same accused or different accuseds. Section 3 of the Act defines “related offences” to mean offences “that are founded on the same facts or form, or are part of, a series of offences of the same or a similar character.”

In that way, the rules, which govern the joinder of separate charges in the one indictment, are expressed in the same terms as Rule 2 of the Sixth Schedule of the Crimes Act 1958, which governed that topic before the introduction of the Criminal Procedure Act.

The principles, applying to the joinder of charges in the one indictment or presentment, have been the subject of a number of authorities. It is not necessary, for the purpose of this ruling, to rehearse them in detail. The underlying approach to joinder was explained by Winneke P in R v Renzella.[5] In that case, his Honour rejected a submission that, in order that charges be validly joined in the one presentment, there must be complete “cross-admissibility” of the evidence on each count. His Honour stated:

“It must be remembered that what is now to be found in Rule 2 of the sixth schedule to the Crimes Act was introduced into our statute law, as similar rules have been introduced into the statute law of other states, to overcome the rigidity which once existed in criminal pleadings, largely as a consequence of the distinction drawn by the law between felonies and misdemeanours. The flexibility which was designed to be introduced by the joinder rules would be, in my view, to a large extent set at nought if the rules were to be hedged about with inflexible principles of the type contended for by the applicant in this case.”[6]

[5](Unreported, Supreme Court of Victoria – Court of Appeal, Winneke P, 7 August 1997 (BC9703681).

[6]Ibid [10]-[11]).

In R v Gregory (No 1),[7] Whelan J summarised the relevant principles which apply for the joinder of separate charges in the one presentment. Those principles were applied by T Forrest J in R v Magnus (No 1).[8] In Gregory, Whelan J stated (I shall omit the cases referred to by his Honour):
[7][2009] VSC 358, [13].
[8][2011] VSC 340, [10].

“The applicable legal principles were not the subject of significant controversy before me. They are as follows:
(1)The rule is to be given a liberal interpretation consistent with the policy underlying it, namely, to enable the joinder of charges which may be properly and conveniently dealt with together.
(2)Both the law and the facts should be taken into account in deciding whether offences are similar or dissimilar.
(3)In order for there to be a series of offences of a similar character there has to be some nexus between the offences.
(4)It is not necessary that the offences exhibit close similarities. Not infrequently in cases of commercial fraud, it is enough that offences or groups of offences have a common genesis or are otherwise linked and associated by commonality of parties or transactions.
(5)Two offences can constitute a ‘series’.
(6)A difference in time between offences might mean that what could otherwise be considered a series has become fragmented over time so as not to deserve that description.”

In support of the fourth principle, Whelan J referred to (inter alia) the decision of the Court of Appeal in R v Heinze.[9] In that case, Nettle JA (with whom Callaway and Eames JJA agreed) noted:

“It is true that the two groups of offences [charged against the applicant] were not the same offences and it is true that in some senses they did not exhibit a great many common characteristics. But it is not always necessary that different offences exhibit close similarities before one may say that they are or form part of a series of offences in the relevant sense. Depending on the sort of case, and not infrequently in cases of commercial fraud, it is enough that offences or groups of offences have a common genesis or are otherwise linked and associated by commonality of parties or transactions.”[10]

[9][2005] VSCA 124.

[10]Ibid [48].

In R v McLean,[11] Tadgell JA (with whom Phillips CJ and Batt JA agreed) quoted, with approval, the joint judgment of McPherson JA and Lee J in R v Collins ex parte Attorney-General,[12] in which their Honours stated:

“For offences to be ‘founded on the same facts’ they must have a ‘common factual origin’ … But that is a phrase which is not to be narrowly construed. In particular, it is not necessary for the offences to have arisen contemporaneously or to involve precisely the same facts. All that is necessary is for them to be traceable, either in time, place or circumstance, to common events … .”
[11][2000] VSCA 217, [25].
[12][1996] Qd R 631, 637.

Legal principles - severance

As I have stated, the accused does not contend that the joinder of the charges is contrary to the provisions of the Criminal Procedure Act 2009. Clearly, the transactions, that are the subject of each charge, had a common genesis, namely, the exercise by the accused of the options to purchase a large parcel of GTG shares in March 2005, the Opes Prime and Chimaera Capital loan agreements, the decline, in 2005, of the price of GTG shares, and the consequent exposure of the accused to margin calls pursuant to those loan agreements. Rather, the application by the accused for severance of the charges on the indictment is made pursuant to s 193(1) and (3) and s 195 of the Criminal Procedure Act 2009. Those sections provide:

“193(1) If an indictment contains more than one charge, the court may order that any one or more of the charges be tried separately.

…
193(3)The Court may make an order under subsection (1) or (2) if the Court considers that—
(a)The case of an accused may be prejudiced because the accused is charged with more than one offence in the same indictment; or

…
(c) For any other reason it is appropriate to do so.

…
195.Despite s 193, if an indictment contains a charge of conspiracy to commit an offence and another charge alleging the commission of that offence, the court must order that the charge of conspiracy be tried separately from the other charge, unless the court considers that it would be in the interests of justice to try those charges together.”

As I have stated, in their written submissions counsel for the accused submitted that, as the indictment contained two counts of conspiracy, and 33 counts of substantive offending, the indictment should be severed pursuant to s 195, so that the charges alleging substantive offending should be heard separately to the charges alleging the two conspiracies. They made that submission on the basis that the two conspiracy charges alleged offences committed by the accused contrary to s 1041A of the Corporations Act, while the 33 substantive counts alleged contraventions by the accused of that provision.

In my view, that submission misconceives the effect of s 195 of the Criminal Procedure Act. In order that that section apply, the charge of conspiracy must allege an agreement to commit the same offence which is also the subject of a separate charge, contained in the same indictment, alleging “that” offence. In the present case, the prosecution does not allege, by its notice of overt acts, that any of the transactions, which are the subject of the substantive charges in counts 2 to 34 of the indictment, constitute overt acts of either conspiracy alleged in counts 1 and 35 of the indictment. It is true that count 1 and count 35 each allege a conspiracy to commit an offence contrary to s 1041A of the Corporations Act, and that counts 2 to 34 of the indictment each allege substantive offences committed by the accused against that provision. However, that is not sufficient for a conclusion that the indictment contains a charge of conspiracy to commit an offence, and another charge alleging commission of “that” offence. In other words, it is not sufficient that the indictment contains a charge of conspiracy to commit an offence, and another charge alleging commission of an offence of the same kind. Rather, in order that s 195 apply, it is necessary to demonstrate that the indictment contains a charge of conspiracy to commit an offence, and another charge alleging commission of the same particular offence.

That construction of s 195 is supported by the background in which that provision was enacted. Section 195 of the Criminal Procedure Act is, with one irrelevant exception, identical to s 372(3A) of the Crimes Act 1958, which it replaced. Section 372(3A) of the Crimes Act was inserted by the Crimes (Conspiracy and Incitement) Act 1984. By that time, there was a body of judicial authority which deprecated the practise, by the prosecution, of combining, in the one presentment, a count of conspiracy to commit a particular offence, with a further count or counts alleging commission of the same offence. That practise gave rise to the almost intractable difficulty of a judge explaining to a jury that evidence, which might be admissible against the accused on the conspiracy charge, because of the operation of the “co-conspirator” rule, may not be used by the jury in determining the substantive charge.

In R v Griffiths,[13] the accuseds were charged with one count of conspiracy, and 24 substantive counts. Those substantive counts were said, by the prosecution, to be selected as examples of the overt acts by various members of the conspiracy.[14] The issue before the Court of Criminal Appeal related to the question whether the first count alleged a number of different conspiracies, rather than one conspiracy. However, the court took the opportunity to criticise the combination, in the same presentment, of the charge of conspiracy with a number of counts, alleging substantive offences, which were also alleged to be overt acts of that conspiracy. In particular, the court stated:

“The practise of adding what may be called a rolled up conspiracy charge to a number of counts of substantive offences has become common. We express the very strong hope that this practise will now cease and that the courts will never again have to struggle with this type of case, where it becomes almost impossible to explain to a jury that evidence inadmissible against the accused on the substantive count may be admissible against him on the conspiracy count once he is shown to be a conspirator.
We do not believe that most juries can ever really understand the subtleties of the situation. In our judgment, except in simple cases, a conspiracy count (if one is needed at all) should be tried separately to substantive counts. The danger of not doing so becomes startlingly clear in this case where it is now admitted without argument that in two counts upon which the appellant Bishop was convicted, there was literally no receivable evidence at all against him, the evidence being entries in Griffiths’ books of account, evidence in the conspiracy count once Bishop is brought into a conspiracy, but not evidence upon which he can be brought into the conspiracy.”[15]

[13][1966] 1 QB 589.

[14]Ibid 593.

[15]Ibid 594.

Similar views were expressed by members of the Court of Criminal Appeal of Queensland in R v Moore.[16] In that case, a presentment, alleging a conspiracy between the accused and another person, also alleged a number of substantive counts against the accused. Six of the overt acts, alleged against the accused in respect of the conspiracy, were matters that were the subject of counts alleging substantive offences in the indictment. McPherson J (with whom Kelly SPJ and Macrossan J agreed) stated:

“The disadvantages of conspiracy charges, and the dangers of injustice inherent in combining such a charge in one indictment with charges of substantive offences, have frequently been stressed both here and in England. One of the principal risks of injustice springs from the difficulties of identifying for the jury the evidence admissible only on the count of conspiracy and of effectively isolating it from the substantive offences being tried. The distinction between statements admissible as original evidence to prove conspiracy, but inadmissible as hearsay evidence to prove the truth of facts asserted in those statements, is one which, in my experience is, seldom capable of being adequately explained to jurors encountering such conceptions for the first time.”[17]

[16][1988] 1 Qd R 252.

[17]Ibid 261-2.

It is for those reasons that I do not consider that s 195 of the Criminal Procedure Act applies to the present application. Rather, the application to sever the presentment is to be determined by reference to s 193(3) of that Act. Nevertheless, the point may be somewhat academic. For, regardless of whether s 193 or s 195 apply, the critical question is whether the joinder of the substantive counts, with the counts of conspiracy, in the one indictment, would cause unfair prejudice to the accused. If no such prejudice does exist, then, pursuant to s 195, it would, in any event, be in the interests of justice to hear all of the counts together. I say that because, as I shall demonstrate, there is a clear connection between each of the counts, and the background to those counts.

The question, whether the joinder of the counts alleging in conspiracy, with the counts alleging substantive offences, would result in prejudice to the accused, depends substantially on the issue whether the evidence on each of the charges might be cross-admissible in respect of the other charges. It is that question that has principally informed the approach of courts to the issue of severance, under s 193 of the Criminal Procedure Act, and under its predecessor, s 372 of the Crimes Act.

In De Jesus v R,[18] Gibbs CJ referred to his earlier judgment in Sutton v R,[19] in which his Honour had stated that, in that case, it had been accepted by counsel for the prosecution that where an accused was charged with a number of sexual offences, those charges should not be tried together if the evidence on one count is not admissible on the other count or counts. Gibbs CJ then stated:

“This is a general statement, not limited to sexual cases, and so viewed I respectfully agree with it. Sexual cases, however, are peculiarly likely to arouse prejudice, against which a direction to the jury is unlikely to guard. For that reason, I adhere to the view which I expressed in Sutton v R.”

[18](1986) 61 ALJR 1.

[19](1984) 152 CLR 528, 531.

In R v Papamitriou,[20] Winneke P, having referred to De Jesus and Sutton, stated:

“… it seems to me to remain a sound approach in cases such as the present for the trial judge, in exercising the discretion given by s 372(3), to determine whether the evidence of the several complainants is cross-admissible, because such a determination will ‑ in most cases ‑ be a powerful factor influencing the discretion. The capacity to ensure a fair trial for the accused must always be the dominant consideration governing the exercise of the discretion; and the more complainants there are whose evidence is not admissible in the trials affecting other complainants, the more difficult it will be for adequate directions to be given by the trial judge to avoid prejudice occurring to the accused. To that extent, the views expressed by the High Court in De Jesus and Sutton … will remain influential in this State.”[21]

[20](2004) 7 VR 375.

[21]Ibid 388 [27].

That statement of principle, by Winneke P in Papamitriou, has been adopted on a number of subsequent occasions by the Court of Appeal, and is regarded as the guiding principle in determining applications for severance.[22]
[22]See for example CGL v DPP [2010] VSCA 26, [8] (Maxwell P, Buchanan and Bongiorno JJA); Velkoski v The Queen [2014] VSCA 121, [64] (Redlich, Weinberg and Coghlan JJA).

Legal principles – context and background evidence

The prosecution submits that the evidence of the NOLT transactions, and the Tolhurst Noall dealings, is admissible, and that evidence on each charge is cross-admissible in respect of the other charges, principally on the ground that that evidence is part of the necessary context to, or background of, the conduct of the accused which is alleged in each charge.

At common law, it is well recognised that background or context evidence may be admissible, notwithstanding that it might reveal other wrongdoing by an accused, where the evidence is relevant to the issues under consideration in the particular case. Thus, in cases of murder, evidence of the nature of the antecedent relationship between an accused and the victim may be admissible in respect of issues such as intention or motive, self-defence or accident.[23] In such cases, the courts have admitted the evidence on the basis that, in the absence of that evidence, the jury would be required to consider the case in a vacuum, divorced from the underlying relationship between the accused and the victim, in the course of which the death of the victim occurred.[24] Similarly, in cases involving sexual offences, the previous relationship between the accused and the complainant, involving sexual misconduct by the accused to the complainant, may be admissible (inter alia) to provide a realistic context to the evidence by the complainant about the specific incidents alleged against the accused. In R v Beserick,[25] Hunt CJ stated that one basis upon which such evidence is admissible is:

“… in order to place the evidence of the offence charged in a true and realistic context, in order to assist the jury to appreciate the full significance of what would otherwise appear to be an isolated act occurring without any apparent reason.”

[23]See Wilson v The Queen (1970) 123 CLR 334; R v Anderson (2000) 1 VR 1, [30], [34] (Winneke P); R v Frawley (1993) 69 A Crim R 208, 220, 222 (Gleeson CJ).

[24]R v Wilson, 344 (Menzies J); R v Frawley, 218.

[25](1993) 30 NSWLR 510, 515.

Such evidence has not been confined to cases involving sexual offending, or offences of violence. For example, in R v Flavel,[26] the accused was charged with importing into Australia a commercial quantity of cocaine. The prosecution alleged that the relevant consignment of drugs was imported on a yacht by the accused in the company of an accomplice called Meggett. The New South Wales Court of Appeal held that the trial judge was correct to admit evidence of previous trans-Atlantic yacht voyages in which Meggett and the accused had taken part, during which the accused would have become aware that Meggett, and other associates, were importing drugs. That evidence was held to be admissible on the basis that it was relevant to establish the knowledge of the accused that, on the voyage which was the subject of the charge, the yacht was being used for the purpose of trans-Atlantic runs involving the importation of cocaine.[27]
[26][2001] NSWCCA 227.
[27]Ibid [15]-[16]; see also Harriman v The Queen (1989) 167 CLR 590, 595-6 (Brennan J), 602-3 (Dawson J), 609-10 (Toohey J), 614 (Gaudron J), 628, 634 (McHugh J); R v Quach [2002] NSWCCA 519, [72].

In R v Quach,[28] the accused was charged with trafficking a commercial quantity of heroin on 2 May 2000. The prosecution alleged that the accused supplied the consignment of heroin to Phuong Tan Le in exchange for a large sum of money. The prosecution case was based on a tracking device which indicated that Le’s vehicle had stopped at the rear of the accused’s house, and, on being intercepted, was found to have a large quantity of heroin in it. A subsequent search of the accused’s premises uncovered a cache of bank notes totalling approximately $780,000. At the trial, the trial judge admitted evidence of 11 previous intercepted telephone calls between the accused and Le which took place between 19 April and 29 April 2000. Those telephone intercepts disclosed that the accused and Le had been involved in previous drug dealing transactions on various occasions before 2 May 2000. The Court of Appeal held that the trial judge was correct in admitting the evidence to demonstrate that the previous relationship between the accused and Le concerned the trafficking of drugs. Sully J (with whom Spigelman CJ and James JJ agreed) stated:

“In such a trial setting, it seems to me that the evidence of the eleven intercepted telephone conversations was relevant and admissible in order to show such a relationship between the appellant and Le as would establish that it was no mere series of unfortunate coincidences that began with a flurry of telephone conversations about drugs; caused Le to drive from Melbourne to Sydney overnight to a destination in Sydney that was practically on the appellant’s door-step; and that found Mr Le shortly thereafter on his way back to Melbourne in possession of 5.9 kilograms of heroin; and found the appellant, at the same time, in possession of an enormous sum of money in bank notes, … the total amount of such money equating strikingly to the current market value of that 5.9 kilograms of heroin.”[29]

[28][2012] NSWCCA 519.

[29]Ibid [72].

In some cases, evidence of previous events involving the accused has been admitted on the basis that those events form a “connected series of events” of which the facts charged form part.[30] Although, ordinarily, those cases involve incidents occurring on the same day, in close connection with each other. However, the same principles have been applied to circumstances in which the previous events occurred sometime before the events that are the subject of the charges. In R v MacFarlane,[31] the accused was a former policeman, who was a member of the Licensing Branch. He was charged on indictment that on a date between July and September 1985 he corruptly agreed to receive regular payments of money on account in order to protect intending offenders from detection and punishment. At trial, evidence was adduced, without objection, that for the previous 20 years, members of the Licensing Branch had been guilty of similar corrupt practices. On appeal, it was contended on behalf of the accused that the evidence ought not to have been admitted, and the trial had miscarried as a result. The Queensland Court of Appeal rejected that ground of appeal. The Court held that the evidence was relevant to explain how the corrupt agreement, alleged against the accused, reached the level of operational efficiency alleged by the prosecution witnesses. Ambrose J stated:

“In my view it [the evidence] went further than mere evidence of the corrupt disposition of some members of the police force. A significant factor explaining the agreement alleged was it seems to me the development of corrupt practices by some members of the police force over a long period of time so that by the time they were experienced enough to occupy positions of power and control in the operational activities of the Licensing Branch they were known by the people concerned with their appointment and their stationing to have both the required propensity and experience necessary to keep the corrupt arrangement on foot by pretending only to perform the duties which they were required to perform in return for significant sums of money received by them corruptly.”[32]

[30]O’Leary v R (1946) 73 CLR 566, 577 (Dixon J); See also 575 (Latham CJ), 576 (Rich J).

[31][1993] 1 Qd R 202.

[32]Ibid 227; see also at 205 (Williams J); see also R v Byrnes; R v Hopwood (1996) 20 ACSR 260, 287.

It is well established that background and context evidence, of the kind which I have described, is admissible under s 55 of the Evidence Act 2008, where it is relevant to the issues in the trial.[33] In such cases, the courts have taken care to differentiate such evidence, and the basis upon which it is admitted, from evidence admitted under s 97 of the Evidence Act as “tendency evidence”.[34]
[33]See Conway v R (2000) 172 ALR 185, [97], [101]; R v Adam [1999] NSWCCA 189, [26]-[30]; R v Quach [2002] NSWCCA 519, [72]; FDP v The Queen [2008] NSWCCA 317, [37]; WFS v The Queen [2011] VSCA 347, [38] (Robson AJA).
[34]Conway v The Queen, [97]; R v Flavel [2001] NSWCCA 227, [15]; FDP v The Queen, [39]; R v Quach, [39] (Spigelman CJ), [68] (Sully J); Jacara Pty Ltd v Perpetual Trustees WA Ltd (2000) 106 FCR 51, 67 [67].

It is also well established that evidence as to the context, in which an alleged offence occurred, is not confined to transactions that occurred before the date of the offence, but may also include transactions and events which occurred after the date of the offence. In particular, evidence as to subsequent events or transactions has been held to be admissible to demonstrate that the offence charged was part of an ongoing and continuing business or endeavour involving the accused, or an ongoing relationship between the persons who are alleged to be involved in the particular offence.[35]
[35]See R v Rhodes [1899] 1 QB 77, 84 (Wills J); Martin v Osborn (1933) 55 CLR 367, 400–1 (Evatt J); R v Hopper [2005] VSCA 214, [79]–[88] (Vincent and Nettle JJA, Osborne AJA); R v VN (2006) 15 VR 113, 124–5 [41] (Redlich JA); R v Gregory (No 2) [2009] VSC 509, [80]–[85] (Whelan J).

In general, some caution is exercised in admitting evidence as to subsequent events. Ordinarily, it is required that those events be closer in time to the date of the offence than previous events. Generally, subsequent events are accorded lesser weight than previous events in establishing the relevant context or background to the offence as charged.[36]
[36]R v Gregory (No 2), [81]; R v Beserick (1993) 30 NSWLR 510, 523 (Hunt CJ at CL).

In R v Hopper,[37] the Court of Appeal was concerned with the question of admissibility of subsequent uncharged sexual acts between the accused and the complainant as part of the relationship between them, and as evidence of the context to the offence as charged. In holding that the subsequent acts were relevant to establish that the offence as charged occurred in the context of an ongoing sexual relationship between the complainant and the accused, the Court of Appeal stated:

“The context of an event is usually comprised as much by the circumstances that follow as by those that precede it and that is particularly so where the conduct in question is a sexual relationship. Common sense and ordinary human experience are enough to dictate that an understanding of sexual activity occurring in the course of a sexual relationship may be informed as much by what follows the subject activity as by what goes before it.”[38]

[37][2005] VSCA 214.

[38]Ibid [83].

In considering the admissibility of background or context evidence, it is important to bear in mind that the evidence is not admitted simply because it provides some form of context or background to the evidence that is the subject of the charges. Rather, the evidence is admitted where it is demonstrated that it is sufficiently relevant to any of the issues which are at large at the trial in the proceeding. In the terms of s 55 of the Evidence Act, the evidence must, therefore, have the capacity to rationally affect the assessment of the probability of the existence of a fact in issue in the proceeding. Further, the probative value of that evidence must outweigh any danger of unfair prejudice to the accused arising from the admission of the evidence.[39]
[39]Evidence Act 2008, s 137.

Legal principles ‑ tendency evidence

In submitting that evidence as to the NOLT transactions and the Tolhurst dealings is admissible, and that the evidence, on each charge of the indictment, is cross-admissible in respect of the other charges on the indictment, Mr Rapke also relied on the proposition that that evidence constituted “tendency” under s 97(1) of the Evidence Act 2008.

Section 97(1) provides that evidence of (inter alia) a “tendency” that a person has or had may be admissible to prove that a person has or had a “tendency” to act in a particular way, or to have a particular state of mind, provided that the court considers that the evidence, either by itself or having regard to other evidence to be adduced by the prosecution, will have “significant probative value”. Section 101(2) provides that tendency evidence about an accused may only be adduced by a prosecution if the probative value of that evidence “substantially outweighs” any prejudicial effect that that evidence might have on the accused.

Evidence as to a tendency of an accused person to act in a particular way is, in effect, a species of circumstantial evidence. Unlike “coincidence” evidence, which is admissible under s 98, tendency evidence, alone, does not prove any particular fact in issue. Rather, it is a foundation for an inference that an accused either had a particular state of mind, or acted in a particular way, in respect of the circumstances which are under consideration in the particular case. In other words, tendency evidence, as circumstantial evidence, is directed to the probabilities of the accused performing a particular act, or having a particular state of mind, alleged by the prosecution.[40]
[40]R v Cittadini [2008] NSWCCA 256, [22]-[23] (Simpson J, with whom McClellan CJ at CL agreed); R v PWD [2010] NSWCCA 209, [59]-[63] (Beazley JA, Buddin J and Barr AJ).

In determining the admissibility of evidence as tendency evidence, it is necessary, first, to identify specifically the evidence which is relied on, and, particularly, the fact or matter, which the prosecution seeks to prove, and to which the tendency evidence is directed.

Since the introduction of the Evidence Act in Victoria, there have been a large number of decisions by the Court of Appeal in relation to the admissibility of tendency evidence, particularly in cases alleging sexual offences. Those decisions have expressed, in different terms, the principles and tests which need to be applied in determining the admissibility of evidence which is sought to be adduced under s 97 of the Evidence Act. In addition, during the same time, differences have emerged between the approach adopted by the Victorian Court of Appeal, and the approach adopted by the New South Wales Court of Appeal, in relation to the admissibility of evidence under s 97 of the Evidence Act.

In their recent joint judgment in Velkoski v The Queen,[41] Redlich, Weinberg and Coghlan JJA considered, in detail, the legion of authorities, both in this State and in New South Wales, relating to s 97. Their Honours concluded that in order that evidence be admissible under s 97, it must possess “… sufficient common or similar features with the conduct in the charge in issue so as to demonstrate a pattern that cogently increases the likelihood of the occurrence of that conduct”.[42] In particular, their Honours stated:
[41][2014] VSCA 121.
[42]Ibid [3].

“[169]Neither tendency nor coincidence evidence requires proof, as a condition of admissibility, of ‘striking similarity’. Nor should a trial judge ask whether it would be ‘an affront to common sense’ to withhold evidence of that kind from the jury. Such expressions, taken from the common law, are unduly restrictive when it comes to the construction of the relevant provisions of the Evidence Act.
…

[171]The features relied upon must in combination possess significant probative value which requires far more than ‘mere relevance’. In order to determine whether the features of the acts relied upon permit tendency reasoning, it remains apposite and desirable to assess whether those features reveal ‘underlying unity’, a ‘pattern of conduct’, ‘modus operandi’, or such similarity as logically and cogently implies that the particular features of those previous acts renders the occurrence of the act to be proved more likely. It is the degree of similarity of the operative features that gives the tendency evidence its relative strength.”[43]

[43]Ibid [169], [171].

Thus, the critical question which must be addressed, in respect of proposed tendency evidence, is whether there are sufficient common or similar features between the evidence to be adduced in respect of the different accounts so as to demonstrate or reveal a pattern of conduct or modus operandi which was common to the two sets of counts. In considering that question, the greater the degree of specificity with which the similarities can be identified, the more likely it is that the evidence will be probative of the relevant tendency to act in a distinctive way or to do acts of a distinctive kind.[44] Conversely, the greater the degree of generality with which the similarities are identified, then the more difficult it is to demonstrate that the evidence in question has a significant probative value.[45]
[44]CGL v DPP [2010] VSCA 26, [40].
[45]CGL [40]; GBF v DPP [2010] VSCA 135, [31].

Conclusions on severance and admissibility

It is convenient to deal with the submissions relating to admissibility and severance by, first, considering the submissions made by the parties in relation to severance, without taking into account the effect of the NOLT and Tolhurst transactions. I shall then consider the admissibility of the NOLT and Tolhurst transactions, and whether the evidence, in relation to those transactions, affect the issues relating to severance.

As I stated, the principal contention by counsel for the accused, in their written submissions, in support of the application to sever the indictment, relied on two main propositions. First, it was submitted that the prosecution had substituted two conspiracy charges (in counts 1 and 35) for the substantive charges originally contained in the first set of charges brought against the accused. Secondly, it was submitted that, as a matter of principle, it is inappropriate for the prosecution to bring a charge of conspiracy against an accused, where the prosecution is able to allege a substantive charge.

The first premise in that argument involves an overly simplistic analysis of the charges brought against the accused. In the first set of charges laid against the accused, the prosecution case was, and since then has remained, that the accused is criminally responsible for the transactions in GTG shares conducted by Tamara and Newing through ABN AMRO between 18 May and 31 October 2006, and by Tamara through Bell Potter between 28 September and 2 November 2006. Although the first set of charges alleged that the accused “took part in” transactions that were contrary to s 1041A of the Corporations Act, the prosecution alleged that the accused participated in those transactions pursuant to a joint criminal enterprise between himself and, in the case of the ABN AMRO dealings, Tamara and Newing, and, in the case of the Bell Potter transactions, Tamara. The prosecution did not allege that a new or different joint criminal enterprise was constituted in relation to each transaction. Rather, it alleged that there was one overarching agreement between the accused, Tamara and Newing relating to the ABN AMRO transactions, and between the accused and Tamara, in relation to the Bell Potter transactions.

The first indictment did substitute two charges of conspiracy for those substantive charges. However, although the legal characterisation of the criminal responsibility for the accused, in relation to those charges, was thus altered, in each case the prosecution continued to rely on the proof of an underlying agreement involving the accused, pursuant to which the relevant transactions took place.

In that way, this case is different to the cases, discussed in the authorities, in which the prosecution has brought a charge of conspiracy, in circumstances in which the prosecution could have charged the accused directly with the commission of the offence which is the subject of the alleged conspiracy. It is those cases which have been the subject of criticism by the courts, including in the often quoted passage from the judgment of the High Court in R v Hoar.[46] In this respect, I note that the prosecution in this case does not derive any evidentiary benefit by charging the accused with conspiracy, rather than relying on the principles relating to joint criminal enterprise. The “co-conspirators rule”, by which the prosecution is entitled to rely on the acts and declarations of parties, other than the accused, to the conspiracy[47] is equally applicable to cases in which the prosecution relies on the principles of pre-concert or joint criminal enterprise.[48] It would therefore have been equally applicable to the charges originally laid against the accused.
[46](1981) 148 CLR 32, 48; see also R v Mok (1987) 27 A Crim R 438, 443; R v El Kotob (2002) 4 VR 546, 555-557 [38]-[43] (Vincent JA).
[47]Ahern v R (1988) 165 CLR 87.
[48]Tripodi v R (1961) 104 CLR 1, 7 (Dixon CJ, Fullagar and Windeyer JJ).

For those reasons, I do not accept the submission, made on behalf of the accused, that the two charges of conspiracy, pleaded in counts 1 and 35, have been inappropriately brought against the accused, and that, therefore, those charges should be heard separately to counts 2 to 34, in which substantive charges have been alleged against the accused.

As the authorities, to which I have already referred, make clear, the principal issue, which governs an application for severance, concerns the cross-admissibility of evidence on the charges brought against the accused. On that basis, the question of the possible severance of charges 2 to 34 from charge 35 admits of a simple answer. The evidence, admissible in relation to charges 2 to 34, is clearly relevant and admissible in relation to charge 35. In the absence of the evidence relating to charges 2 to 34, the evidence relating to charge 35 would be heard in a vacuum, artificially removed from the facts which were necessarily connected with that evidence, and directly antecedent to it.

In its summary opening, the prosecution alleges that the conspiracy, the subject of charge 35, commenced on 28 September 2006, when the accused telephoned Musumeci, and told him that he wanted Musumeci to take orders from Tamara “ … as she had an understanding of what he wanted to achieve and she was better placed for the time difference to speak to Rocco … “. By the response filed on his behalf, the accused admits the contents of that part of the prosecution opening. Thus, it is common ground that, on that date, the accused instructed Musumeci to take instructions from Tamara to purchase shares in GTG, in order to achieve the same purpose as that to which the accused’s previous dealings with Musumeci, which were the subject of charges 2 to 34, had been directed. In that way, the trading, which is the subject of charges 2 to 34, and which took place between 14 September and 28 September, is essential to a proper understanding of the conspiracy alleged in charge 35.

If the jury is satisfied, beyond reasonable doubt, that the trading by the accused in GTG shares, alleged in charges 2 to 34, was for the dominant or sole purpose of maintaining or creating an artificial price in those shares, that conclusion would be an important factor in favour of a finding by the jury that the accused’s direction to Musumeci, on 28 September, was directed to the same purpose. Similarly, if the jury is not satisfied, beyond reasonable doubt, that the dealing between the accused and Musumeci, during the period of 14 September to 28 September, was for such a purpose, that lack of satisfaction would militate against a finding by the jury that the direction, which the accused gave to Musumeci on 28 September, to receive instructions from Tamara, was for such a purpose.

It is for those reasons that, in the course of argument, Mr Burns accepted that the evidence, admissible against the accused on charges 2 to 34, would be admissible in respect of charge 35. Accordingly Mr Burns conceded that it would be difficult for him to persist with the submission on behalf of the accused that charges 2 to 34 should be heard separately from charge 35.

In the end, the primary submission made by Mr Burns was that charge 1 should be severed, and heard separately, from charges 2 to 35 on the indictment. In making that submission, Mr Burns accepted that the evidence, relating to charge 1, is relevant as background and context evidence in relation to the transactions, which are the subject of charges 2 to 35. However, he submitted that the probative value of that evidence is outweighed by its potential prejudicial effect, and that accordingly it should be excluded under s 137 of the Evidence Act 2008.

In my view, the evidence as to the ABN AMRO transactions, which are the subject of charge 1, is relevant and admissible as background and context evidence in respect of the transactions that are the subject of charges 2 to 34, and the transactions that are the subject of the conspiracy alleged in charge 35. Conversely, I am satisfied that the evidence relating to the transactions alleged in counts 2 to 35 would be admissible and relevant to the conspiracy alleged in charge 1, although, to the extent to which that evidence is retrospective, it would be accorded less weight.[49]
[49]R v Beserick (1993) 30 NSWLR 510, 523 (Hunt CJ at CL).

There is a demonstrable connection between, and common features with respect to, each of the transactions that are the subject of the charges. The background and origin to count 1, and to counts 2 to 35, comprise the exercise by the accused of the options to purchase a large quantity of shares in GTG in March 2005, the entry by him into the margin loan agreements, the substantial decline in the price in GTG shares, and the margin calls made by Opes Prime and Chimaera. The transactions, that are the subject of the charges, are closely connected in terms of date. The period of the conspiracy, alleged in charge 1, encompasses the dates of each of the transactions, alleged in charges 2 to 34. The period of the conspiracy alleged in the first charge overlaps, by one month, with the period of the conspiracy alleged in charge 35.

The transactions, that are the subject of each of the charges, all involve share purchases in GTG that were funded by the accused, or by XY Inc, in which he held a controlling interest. They were all undertaken at the direction of the accused (counts 2 to 34) or at the direction of Tamara or Newing (counts 1, 35), his daughter and son-in-law.

I am also satisfied that the evidence is capable of establishing a degree of interconnection between the trading, that is the subject of count 1, and the trading, that is the subject of counts 2 to 35. That interconnection is illustrated by some examples given by counsel for the prosecution in their written submissions. They include the following:

(a)On 14 September 2006, which date falls within the period of the conspiracy charged in count 1, and which is the date of the transactions alleged in counts 2 to 7, the accused bought 242,584 GTG shares in the name of XY Inc (including an order at the close of trading tailored to raise the priority ask from 35 cents to 35.5 cents). On the same date, Tamara purchased 5,000 GTG shares in the name of Palamine, which caused the share price to increase from 34 cents to 35 cents, and she also purchased 5,000 shares through her Etrade account, as the last trade of the day, which caused the GTG share price to increase from 35 cents to 35.5 cents.
(b)On 18 September 2006, which date falls within the period of the conspiracy charged in count 1, and which is also the date of the transactions the subject of counts 9 to 13, the accused purchased 199,500 GTG shares in the name of XY Inc (including the last trade of the day). On the same day, Tamara purchased 5,000 GTG shares in the name of Palamine, which caused a price increase from 34.5 cents to 35 cents.
(c)On 20 September 2006, which date falls within the period of the conspiracy charged in count 1, and which is the date of counts 18 and 19, the accused telephoned Tamara at 10.59 am. He then telephoned Musumeci at 11.09 am. According to Musumeci, the accused instructed him to place an order to purchase 50,000 shares at 35 cents, followed by an order to purchase 10,000 shares at 35.5 cents five minutes before the close of the market. On the same day, Tamara, on behalf of Palamine, purchased 5,000 shares at 35.5 cents (causing a price increase from 35 cents to 35.5 cents) and, in the last trade of the day, the accused (through Musumeci) purchased 10,000 shares for 35.5 cents, thus setting the closing price for GTG shares at 35.5 cents.
(d)On 22 September 2006, which date falls within the period of the conspiracy charged in count 1, and which is the date of the transactions alleged in counts 20 to 25, the accused bought 149,497 GTG shares in the name of XY Inc (one of the trades being the last trade of the day). On the same date, Tamara, in the name of Palamine, purchased 5,000 GTG shares at 36 cents, causing the share price to increase from 35.5 cents to 36 cents. She also sold 30,000 GTG shares through her Etrade account. Those transactions were interspersed by a number of contacts between Tamara and Newing, the accused and Musumeci, Tamara and the accused, and Tamara and Wade.
(e)On 4 October 2006, which date falls within the conspiracies charged in counts 1 and 35, Tamara, at 3.04 pm, instructed Musumeci to purchase 10,000 GTG shares at 34.5 cents, then at 3.45 pm to purchase 50,000 shares at 35 cents, and then to purchase 5,000 shares at 35.5 cents before the close of the market. Musumeci entered a bid for 50,000 GTG shares at 35 cents in the name of XY Inc, increasing the share price from 34.5 cents to 35 cents. Subsequently, Palamine placed a bid for 5,000 shares at 35.5 cents, again increasing the GTG share price from 35 cents to 35.5 cents. That was the last trade of the day. Tamara then sent Musumeci an email, stating that there was no need to spend any more, “unless something changes”.

Each of the transactions, which are the subject of the charges on the indictment, involved the purchase of shares in GTG funded by the accused, or by a company in which he held the controlling interest. The prosecution alleges that those transactions were all undertaken on behalf of the accused, and for the benefit of the accused. The prosecution will also seek to prove that each of the transactions had the effect of increasing the price in GTG shares to a level which avoided the requirement for the accused to provide further security or funds pursuant to margin calls made under the loan agreements with Opes Prime and Chimaera. Thus, ultimately, the prosecution case is that, throughout the period of the charges (and indeed for a period antecedent to that) the accused, with others, embarked on a scheme to support the price of shares in GTG on the ASX, in order to obviate the necessity to provide further shares or other security pursuant to those margin calls.

In those circumstances, in my view, if the jury is satisfied, beyond reasonable doubt, of the guilt of the accused on charge 1, that finding would be relevant to the jury’s determination of the question of the guilt of the accused on charges 2 to 35 on the indictment. That is, if the jury is satisfied, beyond reasonable doubt, that the accused, in May 2006, entered into an agreement, and remained a party to such an agreement, to maintain the price of GTG shares in order to avoid margin calls on his loan agreements, that finding would be relevant and admissible as background evidence to the transactions directly engaged in by the accused, through Musumeci, and that are the subject of charges 2 to 34 on the indictment, and to the transactions that are the subject of the conspiracy charged in count 35.

In particular, as I have already stated, it is common ground that on 28 September 2006, the accused instructed Musumeci to take orders from Tamara, “ … as she had an understanding of what he wanted to achieve … “. In that context, clearly, the trading by Tamara in GTG shares through ABN AMRO, and the role of the accused in the trading by her in those shares, is directly relevant to an inquiry into the nature of the trading, which was envisaged to be the subject of the instruction given by the accused to Musumeci on 28 September 2006. If the jury is satisfied, beyond reasonable doubt, that the accused and Tamara, since May 2006, had been parties to a conspiracy by which Tamara purchased shares in GTG in order to artificially maintain the price of those shares, the jury would be entitled to conclude that the instruction given by the accused to Musumeci, on 28 September, to take instruction from Tamara, was directed to the same purpose.

For those reasons, I am satisfied that the evidence, which is admissible on charge 1, is admissible, as evidence of the context and background to the transactions which are the subject of charges 2 to 35. I am also satisfied that the evidence on charges 2 to 35 is admissible as background and context evidence in relation to charge 1, although, as I stated, to the extent to which the evidence on those charges is subsequent to the matters constituting the conspiracy alleged in charge 1, it would be accorded lesser weight.

In their submissions, counsel for the prosecution contended that the evidence on each of the counts is also cross-admissible as tendency evidence pursuant to s 97 of the Evidence Act. However, Mr Rapke accepted that if the evidence is admissible as context or background evidence, the prosecution would not seek to rely on that evidence, also, as evidence of tendency pursuant to s 97. In my view, that concession, by Mr Rapke, is correct. The evidence, which I have discussed, is more properly characterised as evidence that provides the necessary context and background to the charges on the indictment. As the authorities, to which I have referred, make clear, it is important, in such cases, to preserve the distinction between background evidence and tendency evidence. The use of the evidence, on each charge, as tendency evidence in respect of the other charges, would unnecessarily complicate the proceeding. Accordingly, I shall give the jury directions to the effect that the evidence is not relied on, and may not be used, to establish any tendency or propensity on behalf of the accused to indulge in the conduct alleged in the indictment. Similar directions are commonly given in criminal trials, and in particular in trials involving sexual offences, and the experience of the law is that juries are astute to observe and adhere to such directions.

The evidence, which is to be adduced in respect of count 1 and count 35, will include a number of statements by Tamara to the relevant sharebroker (Wade in the case of count 1, and Musumeci in the case of count 35) that reveal that her intention, in respect of particular dealings, was to ensure that the price of GTG shares was maintained at a particular level. That evidence is probably admissible under s 66A of the Evidence Act 2008.[50] It appears that there are only two instances of communications by Tamara, to other persons, that reveal the possible implication of the accused in Tamara’s attempts to support the price of GTG shares at a particular level. They consist of an email by Tamara to Newing dated 22 September 2006, and an email by Tamara to Musumeci dated 5 October 2006. In each case, I shall direct the jury that that evidence is only directly admissible in respect of the particular charge to which the evidence relates. Accordingly, I do not consider that the joinder of the conspiracy counts together, or with charges 2 to 34, will involve prejudice to the accused.
[50]See also R v Walton (1989) 166 CLR 283.

In those circumstances, I am satisfied that the evidence on each charge is cross-admissible as background and context evidence in relation to each other charge on the indictment. I am also satisfied that any prejudice to the accused, arising from the joinder of the charges, may be suitably offset by an appropriate direction given to the jury, in the usual terms, that namely, first, that the jury must give separate consideration to each charge on the indictment, and, secondly, that the jury must not indulge in “tendency” or “propensity” reasoning. For those reasons, I do not uphold the application made on behalf of the accused to sever the indictment.

Admissibility of the NOLT transactions

Having reached that conclusion, I now return to the question of the admissibility of the NOLT transactions.

It is common ground that the background to the transactions, that are the subject of each of the charges in the indictment, commences with events that occurred in 2005. In particular, it will be relevant, and necessary, for the prosecution to lead evidence as to the exercise by the accused of the options to purchase GTG shares in March 2005, the execution by him of the loan agreements with Opes Prime and Chimaera Capital, the subsequent fall in the market price of GTG shares, the margin calls made upon the accused in 2005, and the aggregation of the three loans by the accused in January 2006. All that evidence is a necessary precursor to the transactions, that are the subject of each of the charges in the indictment.

In that context, there is, I consider, sufficient evidence, referred to in the prosecution opening, and which was also the subject of evidence from Tamara and Newing on the voir dire, which is capable of supporting a conclusion that from April 2005 Tamara embarked on a course of dealing in GTG shares through the NOLT facility with the specific purpose of maintaining the closing price of those shares above a specific level. There is also evidence that the accused was complicit in those dealings. Therefore, for the purposes of this ruling, there is sufficient evidence on which the prosecution might rely to establish a criminal enterprise between Tamara and the accused, commencing in early 2005, by which Tamara engaged in purchases of GTG shares in order to maintain the price of those shares above a specific level.

That evidence is relevant for two reasons. First, it is relevant background and context evidence to the transactions that are the subject of the charges on the indictment. In particular, the evidence of the NOLT dealings provides a background to the approach by Newing to Wade in early 2006, and the share purchases made by Newing and Tamara, through Wade, commencing in February 2006. Secondly, as Mr Rapke pointed out, the evidence as to the margin loan agreements with Opes Prime and Chimaera in 2005, and the evidence as to the subsequent decline during 2005 in the price of GTG shares, will raise the question as to what steps were taken by, or on behalf of, the accused in order to meet the substantial margin calls made upon him in 2005, particularly by Opes Prime. In the absence of evidence as to the NOLT transactions, there would be a vacuum of evidence in relation to that issue.

Accordingly, it is clear that the evidence as to the NOLT transactions has specific probative value in the case. I agree with Mr Burns that the probative value of the NOLT transactions is more substantial in relation to the ABN AMRO transactions, that are the subject of charge 1, than in relation to the Bell Potter transactions, that are the subject of charges 2 to 35, and that commenced in September 2006. Nevertheless, the relevance of the NOLT transactions to each of those charges is not insubstantial.

On the other hand, I am satisfied that there is a significant risk of unfair prejudice to the accused, if the evidence of the NOLT transactions were admitted in evidence. The evidence as to the NOLT transactions involves the proof of serious criminal offending by the accused, with the complicity of Tamara, commencing in early 2005. The NOLT trading by Tamara was quite unsophisticated and blatant. She persisted in that trading, notwithstanding two conversations with NOLT representatives, in which she was warned, in clear terms, that she was thereby breaching ASX rules. Those conversations were recorded. The evidence as to the trading, and the evidence of the recorded telephone conversations between the NOLT representatives and Tamara, would, I apprehend, have a dramatic effect on the jury’s perception of the prosecution case against the accused. This is particularly so, as, necessarily, the narrative, relating to the charges, would commence with the evidence relating to those dealings.

Certainly, it is not uncommon, particularly in cases involving sexual offending, for evidence of uncharged criminal acts to be admitted in relation to a case against an accused. The courts do recognise that, in those cases, juries are astute to adhere to directions given to them as to the purposes for which the evidence is admitted, and as to directions given as to how the evidence must not be used. As I stated, in the present case, I am confident that appropriate directions can be given to the jury, to that effect, in relation to the admissibility of the evidence on each particular charge in relation to the other charges on the indictment. However, I have less confidence that such directions would be efficacious in the case of the NOLT evidence for two reasons. First, as I stated, the evidence relating to the NOLT transactions is quite blatant, and it necessarily arises at an early stage in the narrative. Secondly, the NOLT transactions are somewhat removed, in point of time, from the transactions that are the subject of the charges on the indictment. As such, there might be a greater temptation for a jury to indulge in propensity reasoning in relation to the NOLT transactions. There is thus a risk that the evidence, if admitted, would have an unfair effect on the jury’s perception of the evidence relating to the charges greater than its probative value.

On the present state of the evidence, I am satisfied that the prosecution case could proceed coherently in the absence of evidence relating to the NOLT transactions. Certainly, in the voir dire, both Tamara and Newing each stated that Wade was engaged to act as their sharebroker, because Tamara’s NOLT facility had been terminated. However, Mr Rapke has informed me that Tamara will not be called to give evidence, and the Crown has not yet decided whether Newing will be called as a witness. In those circumstances, it is appropriate to consider the issue of the admissibility of the NOLT transactions on the basis that neither of them will be called to give evidence. In his witness statement, Wade did not state that either Tamara or Newing referred to the NOLT transactions, or to the cancellation of the NOLT facility, when he was engaged by Newing in February 2006. Rather, in his statement, Wade said that Newing, who was a close friend of his, approached him to assist in maintaining the GTG share price. According to Wade, Newing told him that one of Tamara’s brothers had a loan account, and that that brother needed to support the share price of GTG, in order to avoid having to meet margin calls made under it.

The resolution of the issue of the admissibility of the NOLT evidence involves an assessment, at this preliminary stage, of the probative value of the evidence with the potential of that evidence to occasion unfair prejudice to the right of the accused to a fair trial. As I stated, the evidence is clearly relevant and admissible, to establish the necessary context and background to the charges on the indictment. In particular, as Mr Rapke has submitted, there would be a vacuum in the evidence as to the response by the accused to the original falling of the price in GTG shares in 2005, shortly after the accused had entered into the loan agreements with Opes Prime and Chimaera Capital. Thus, the evidence would have specific probative value. However, as I have already stated, there is, I consider, a significant danger that the evidence, if admitted, might have an unfair prejudicial effect on the case of the accused.

I have found the question of the balance between the probative value of the evidence on the one hand, and its potential prejudicial effect, difficult to resolve. However, the charges against the accused are serious. The right of the accused to a fair trial is of primary importance. With some hesitation, I am satisfied that the probative value of the NOLT evidence is outweighed by the danger of unfair prejudice to the accused, which might not be sufficiently offset by an appropriate direction given by me to the jury. Accordingly, I am obliged to refuse to admit the evidence pursuant to s 137 of the Evidence Act.

That ruling is, of course, subject to the issues that might arise in the trial. In particular, if the defence sought to take advantage of the vacuum in the evidence, relating to the accused’s response to the dramatic decline in the share price in GTG shares in 2005, it might be necessary to revisit this ruling.

The Tolhurst Noall transactions

In their written submissions, counsel for the accused did not address the question of the admissibility of the Tolhurst Noall transactions. In his oral submissions, Mr Burns focused on the admissibility of the NOLT transactions, and did not deal, specifically, with the Tolhurst Noall dealings.

In any event, I am satisfied that the evidence as to the Tolhurst Noall transactions is relevant and admissible. Those transactions, taking place from 15 May 2006, were part of the background to, and connected with, the dealings by Tamara with ABN AMRO, which commenced shortly after that date. They are also relevant as background context evidence to the transactions that are the subject of charges 2 to 35. The evidence as to the Tolhurst Noall dealings is confined and limited. It lacks the prejudicial impact of the evidence relating to the NOLT transactions. The evidence as to the Tolhurst Noall dealings occurred sometime after the commencement of the narrative which is part of the prosecution case. In those circumstances, the admission of that evidence would involve considerably less prejudice to the accused than the admission of the evidence relating to the Tolhurst Noall transactions. I consider that any residual prejudice to the accused could be suitably offset by an appropriate direction given to the jury in relation to the evidence. Accordingly, I am not satisfied that the probative value of the evidence is outweighed by the danger of unfair prejudice to the accused arising from the admission of that evidence. On the contrary, I am satisfied that the probative value of the evidence substantially outweighs any risk of prejudice to the accused. Accordingly, the evidence as to the Tolhurst Noall transactions is admissible.

The elements of the offences

The issue between the parties, relating to the elements of the offences charged against the accused, resolved in the course of argument.

The issue arose from the question of the relationship between the decision of the High Court in DPP (Commonwealth) v JM[51] and s 5.6 of the Criminal Code Act. The prosecution position is that, for the purpose of Division 5 of the Criminal Code Act, an offence against s 1041A of the Corporations Act involves two “physical” elements, namely: first, the conduct of an accused in taking part in, or carrying out, a transaction in respect of shares; and, secondly, an element consisting of a circumstance or a result, namely, the requirement that that transaction had or was likely to have, the effect of creating or maintaining an artificial price for trading in the shares on the financial market. Thus analysed, s 5.6(1) of the Criminal Code would require the proof of intention as the fault element in relation to the first physical element, and s 5.6(2) of the Code would require the proof of recklessness as the fault element relating to the second physical element.
[51][2013] HCA 30.

On the other hand, the position on behalf of the accused is that, as a result of the decision of the High Court in DPP v JM, an offence against s 1041A of the Corporations Act involves one element, namely conduct, consisting of intentionally taking part in, or carrying out, a transaction relating to the purchase of shares with the sole or dominant purpose of setting or maintaining the price of those shares at a particular level.

In this case, the prosecution relies on the decision of the High Court to prove that the transactions, in which the accused allegedly took part, had, or were likely to have, the effect of setting or maintaining an artificial price in GTG shares. In particular, the prosecution proposes to prove its case by establishing that the sole or dominant purpose of those transactions, by the accused, was to maintain the price of GTG shares at a level which either avoided or reduced his liability to meet margin calls under the loan agreement with Opes Prime and Chimaera Capital. In those circumstances, the prosecution realistically recognises that, if its analysis of the elemental composition of the offence created by s 1041A of the Corporations Act were applied to this case, there would be a necessary inconsistency between the conduct element (taking part in a transaction with the sole or dominant purpose of setting or maintaining an artificial price for GTG shares) and the fault element (being reckless as to whether the transaction had that effect). As a result, it is common ground that, for the purposes of this trial, the elements of an offence against s 1041A of the Corporations Act should include the following:

(1)The accused intentionally took part in or carried out a purchase of GTG shares on the Australian Securities Exchange.
(2)The sole or dominant purpose of the accused, in taking part in or carrying out that purchase, was to set or maintain the price of GTG shares at a particular level.

Conclusion

For the reasons that I have set out in this ruling, I summarise the conclusions that I have reached as follows:

(1)I do not accept the application on behalf of the accused to sever the indictment. Each of the charges on the indictment will be heard together.
(2)Pursuant to s 137 of the Evidence Act 2008, I refuse to admit the evidence as to the NOLT transactions, as the probative value of that evidence is outweighed by the danger of unfair prejudice to the accused.
(3)The evidence of the Tolhurst Noall transactions is relevant and admissible in relation to each of the charges on the indictment.
(4)As discussed with counsel in the course of oral submissions, for the purposes of this trial, the elements of the offences charged under counts 2 to 34 of the indictment will include the following:
(i)the accused intentionally took part in the purchase of GTG shares on the Australian Securities Exchange which is the subject of the charge.
(ii)the sole or dominant purpose of the accused, in taking part in that purchase, was to set or maintain the price of GTG shares on the ASX at a particular level.

[2014] VSC 368

8 August 2014