Regina v Fysh (No 3)

[2012] NSWSC 1390

Supreme Court

New South Wales

Medium Neutral Citation:	Regina v Fysh (No 3) [2012] NSWSC 1390
Hearing dates:	2,5 November 2012
Decision date:	22 November 2012
Before:	McCallum J
Decision:	Publication of reserved reasons for refusing application for directed verdicts
Catchwords:	CRIME - particular offences - insider trading - no case submission - whether Crown had adduced evidence upon which a jury could convict - materiality of alleged inside information - whether evidence so lacking as to require jury to speculate
Legislation Cited:	Corporations Act 2001 (Cth)
Cases Cited:	Doney v R [1990] HCA 51; (1990) 171 CLR 207 Hannes v DPP (No 2) [2006] NSWCCA 373 R v Fysh [2012] NSWSC 1266 R v Fysh (No 2) [2012] NSWSC 1340 R v Rivkin [2004] NSWCCA 7
Category:	Procedural and other rulings
Parties:	Regina Stuart Alfred Fysh
Representation:	Counsel: D Staehli SC and J Single (Crown) B Walker SC and I Pike SC (accused) Solicitors: Commonwealth Director of Public Prosecutions (Crown) Gilbert & Tobin Lawyers (accused)
File Number(s):	2011/15688
Publication restriction:	None

Judgment

1. HER HONOUR: Stuart Fysh stood trial before me with a jury on four counts of insider trading contrary to sections 1043A(1)(c) and 1311(1) of the Corporations Act 2001 (Cth). On 6 November 2012, I rejected a submission made on his behalf after the close of the Crown case that there was no case to answer. I reserved my reasons, so as not to detain the jury.

1. The no case submission was based on two discrete grounds. On 7 November 2012, I published my reasons for rejecting the application insofar as it was based on the first ground, which related to the element of the offence that requires the Crown to prove that the accused possessed the alleged inside information: see R v Fysh (No 2) [2012] NSWSC 1340. It was necessary to publish those reasons at that time, since they were required for the purpose of counsel's closing addresses.

1. These are my reserved reasons for rejecting the application insofar as it was based on the second ground, which related to the element of the offence often referred to in shorthand as "materiality". That element requires the Crown to prove that, if the information allegedly possessed by the accused were generally available, a reasonable person would expect it to have a material effect on the price or value of the relevant shares: 1042A of the Corporations Act. That test is satisfied if (and only if) the information would, or would be likely to, influence persons who commonly acquire Division 3 financial products in deciding whether or not to acquire or dispose of the relevant shares: see s 1042D of the Act.

Basis for the application

1. For convenience, the description in my previous judgment of the basis for the application is partly repeated here.

1. The four charges against the accused arise from his undisputed acquisition of two parcels of shares in Arrow Energy N/L (counts 1 and 2) and, six months later, two parcels of shares in Queensland Gas Company Ltd (counts 3 and 4).

1. Section 1043A prohibits the acquisition of relevant shares if a person (referred to in the section as the insider) possesses "inside information". That term is defined, and the terms that define it are further defined, in the Act.

1. In advance of the trial, the Crown provided particulars of the alleged inside information for each count. The particulars relied upon in respect of counts 1 and 2 (the Arrow counts) are the same. Those particulars are set out in a document now marked MFI 3. Similarly, the particulars relied upon in respect of counts 3 and 4 (the QGC counts) are the same. Those particulars are set out in a document marked MFI 4.

1. In my earlier judgment I explained my reasons for accepting the accused's submission that those particulars are, in each case, to be taken as a whole and in combination, such that it is the combined effect of the matters set out which constitutes the alleged "inside information" (Fysh (No 2) at [9] to [22]). The significance of that determination for the purpose of the element of possession of the alleged inside information was the need to direct the jury that they had to be satisfied that the accused possessed all of the information set out in the relevant particulars, taken in combination, except any part of the information that they considered made no real difference to the substance of that information.

1. As acknowledged on behalf of the accused, that determination has a corollary for the purpose of the element of the materiality of the alleged inside information. The accused's contentions acknowledged, and indeed drew support from, the proposition accepted by the Court of Criminal Appeal in Hannes v DPP (No 2) [2006] NSWCCA 373 at [573] to [580] that, where the alleged inside information has separate "limbs", the jury does not have to be satisfied that each individual limb would be likely to have a material effect on the share price. The test is whether, considered as a combination, that body of information was material. The present application must be determined in that context.

1. There were four grounds for the contention that there was no evidence to go to the jury on the element of materiality. First, as to MFI 3, it was submitted that the alleged "information" fundamentally misstates the information conveyed by the evidentiary material relied upon by the Crown. It was further submitted that, in any event, that material was derived from publicly available information already priced by the market.

1. As to the submission that MFI 3 fundamentally misstates the information conveyed by the Crown's evidence, the focus of the argument was on particular (d) of MFI 3, which states:

The Team identified Arrow and QGC as the only companies that conducted pure CSG businesses in Australia and that, while the Team rated the "value proposition": and "Portfolio Fit" of both companies as "M&A opportunities" with BG Group to be substantially the same, it rated the "Availability/Doability" of Arrow much higher than that of QGC.

1. Mr Pike SC, who argued this ground on behalf of the accused, submitted that, properly characterised, the slide presentation on which counts 1 and 2 were based did not identify any particular opportunity, let alone any particular target companies, whereas the alleged "inside information" relied upon by the Crown suggested that the opportunities presented to the board had been narrowed down to two, being Arrow and QGC. The question whether the material contained in the slides presented by Mr Maxwell should be understood to convey the information specified in MFI 3 raises issues of analysis, inference and nuance of meaning. As I stated in Fysh (No 2) at [28], these issues should be left to the jury.

1. Much of the argument that followed on this issue in effect invited me to determine the issue of materiality, notwithstanding the acceptance on behalf of the accused that that is an issue of fact for the jury.

1. Thus in a written outline of submissions in support of the no case application, the accused collected a series of references to places in the evidence in which it was established that it was known to the market that BG was interested in obtaining LNG in the Asia Pacific region; that as to opportunities in Australia in relation to CSG generally and CSG to LNG in particular, BG was playing "catch up" compared with its competitors; that the market for corporate activity in respect of Australian CSG companies was "hot", with Arrow having been publicly identified as a target and that the slide presentation was prepared from publicly available information.

1. The second ground for the application related to MFI 4, as to which a similar submission was put. It was submitted on that basis that there was no material on which the jury could rely to conclude that an announcement in early December 2007 of the possibility of a deal between QGC and BG (taking the information in MFI 4 at its highest) would or would be likely to influence in the relevant sense, given what the market already knew.

1. With great respect to Mr Pike, in my view the submission overlooked the principles which must be applied by a trial judge in determining a no case application. In particular, as stated by the High Court in Doney v R [1990] HCA 51; (1990) 171 CLR 207, if there is evidence, even if tenuous or inherently weak or vague, which can be taken into account by the jury and that evidence is capable of supporting a verdict of guilty, the matter must be left to the jury for its decision. The submissions on behalf of the accused as to the element of materiality in the present case in my view focussed on aspects of weakness in the Crown case but did not establish to my satisfaction an absence of evidence capable of supporting a verdict of guilty.

1. Next it was submitted that the evidence in the Crown case as to the increase in the share price of QGC at the time of the announced deal in early February 2008 provided no basis for the jury to conclude materiality in relation to the earlier information set out in MFI 4. That submission must be assessed in the context that the evidence was not objected to as being irrelevant. It was admitted by consent.

1. In Rivkin [2004] NSWCCA 7, the Court of Criminal Appeal rejected a ground of appeal on the basis that evidence of a later share price increase had been wrongly admitted. The learned trial judge in that case admitted the evidence but gave careful directions as to the caution with which the jury should approach that issue. That approach was approved by the Court of Criminal Appeal: at [186] to [205].

1. It follows upon a proper analysis in my view that the evidence is relevant, and capable of being taken into account by the jury. The accused's submissions served to emphasise the importance of careful direction on that issue, but do not provide the foundation for a no case submission.

1. Finally, it was submitted that the expert opinion evidence of Mr Dreyfus provided no basis for conclusions as to the materiality of the alleged inside information. It was submitted that Mr Dreyfus's evidence was so heavily qualified by reference to matters that he either did not or could not consider as to render them of no utility whatsoever.

1. Even if that were so (which I do not accept) it would not follow that there is no evidence on materiality to go to the jury. The jury is not obliged to accept the evidence of Mr Dreyfus. Further, there is no rule which says that the Crown cannot prove materiality without the evidence of an expert.

1. For the reasons explained in my first judgment in this trial, I consider that the test as to whether the alleged inside information would be likely to influence persons who commonly acquire division 3 financial products in deciding whether or not to acquire or dispose of shares in Arrow is one which draws on matters of common sense well within the province of the jury, albeit one as to which specialised knowledge might also be brought to bear: R v Fysh [2012] NSWSC 1266 at [8] - [11].

1. Ultimately, in my assessment, the submissions put as to the evidence of Mr Dreyfus amounted to matters that might be put with some force to the jury but which do not mandate the conclusion that there is no case for the accused to answer.

1. I was satisfied that there was evidence in the Crown case from which the jury could comfortably be satisfied beyond reasonable doubt as to the materiality of the alleged inside information in both MFI 3 and MFI 4. Accordingly, I rejected that ground of the application.

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Decision last updated: 22 November 2012