Xiao v R

[2018] NSWCCA 4

Court of Criminal Appeal

Supreme Court

New South Wales

• Summary available
• Amendment notes

Medium Neutral Citation:

Xiao v R [2018] NSWCCA 4

Hearing dates:

24 July 2017

Date of orders:

05 February 2018

Decision date:

05 February 2018

Before:

Bathurst CJ; Beazley P; Hoeben CJ at CL; McCallum J; Bellew J.

Decision:

1. Grant the applicant leave to appeal against sentence.

 

2. Appeal allowed.

 

3. Quash the sentences imposed on the appellant on 11 March 2016 and in lieu thereof impose the following sentences:

 

(a) In respect of Charge 1 having regard to the scheduled offence, the appellant is sentenced to a term of imprisonment of 5 years commencing on 12 January 2014 and expiring on 11 January 2019.

 

(b) In respect of Charge 2 the appellant is sentenced to a term of imprisonment of 5 years and 6 months commencing on 12 July 2015 and expiring on 11 January 2021.

4. In accordance with s 19AB(1) of the Crimes Act 1914, fix a single non-parole period of 4 years and 6 months, such non-parole period will expire on 11 July 2018.

Catchwords:

CRIMINAL LAW – appeal – sentencing – whether error in assessment of objective seriousness of offences – whether error in having regard to certain matters as aggravating features of the offending – whether error in declining to take into account utilitarian value or benefit of the applicant’s guilty pleas notwithstanding that the applicant was being sentenced for federal offences – whether error in not taking into account evidence the applicant would experience more onerous custody by reason of the fact he is a foreign national – whether error in not sentencing in accordance with s 19AB(1) of the Crimes Act 1914 – whether sentences imposed are manifestly excessive – whether justifiable sense of grievance by reason of the sentence imposed upon co-offender

Legislation Cited:

Commonwealth Places (Application of Laws) Act 1970 (Cth) s 4
Corporations Act 2001 (Cth) ss 1043A, 1311,
Crimes (Sentencing Procedure) Act 1999 (NSW) ss 21A, 22
Crimes Act 1914 (Cth) ss 16A, 16B, 16BA, 17A, 19AB, 19AH
Crimes Legislative Amendment Act (No 2) 1989 (Cth)
Criminal Appeal Act 1912 (NSW) s 6
Criminal Code (Cth) s 11.2A
Criminal Law (Sentencing) Act 1988 (SA) s 10
Penalties and Sentences Act 1985 (Vic)
Proceeds of Crimes Act 2002 (Cth)
Sentencing Act 1995 (WA) ss 7, 8

Cases Cited:

AB v R [2013] NSWCCA 160
AB v R [2014] NSWCCA 339
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) (2009) 239 CLR 27; [2009] HCA 41
Application under s 37 of the Crimes (Sentencing Procedure) Act 1999 (No 1 of 2002) (2002) 56 NSWLR 146; [2002] NSWCCA 518
Bahar v The Queen (2011) 45 WAR 100; [2011] WASCA 249
Barbaro v The Queen (2014) 253 CLR 58; [2014] HCA 2
Bugmy v The Queen (1990) 169 CLR 525; [1990] HCA 18
Cabell v Markham (1945) 148 F (2d) 737
Cameron v The Queen (2002) 209 CLR 339; [2002] HCA 6
Clarke v R [2015] NSWCCA 232
Coco v The Queen (1994) 179 CLR 427; [1994] HCA 15
Commissioner of Taxation of the Commonwealth of Australia v Consolidated Media Holdings Ltd (2012) 250 CLR 503; [2012] HCA 55
Commonwealth Director of Public Prosecutions v Afiouny [2014] NSWCCA 176
Daniel v R [2008] NSWCCA 15
Director of Public Prosecutions (Cth) v De La Rosa (2010) 79 NSWLR 1; [2010] NSWCCA 194
Director of Public Prosecutions (Cth) v Gow (2015) 252 A Crim R 573; [2015] NSWCCA 208
Director of the Public Prosecutions (Cth) v Thomas [2016] VSCA 237
DPP v Fabriczy (2010) 30 VR 632; [2010] VSCA 334
Dwyer v Calco Timbers Pty Ltd (2008) 234 CLR 124; [2008] HCA 13
Eriyo v R [2015] NSWCCA 16
Filippou v The Queen (2015) 256 CLR 47; [2015] HCA 29
Green v The Queen; Quinn v The Queen (2011) 244 CLR 462; [2011] HCA 89
Greenland v State of Western Australia [2017] WASCA 83
Handlen v The Queen; Paddison v The Queen (2011) 245 CLR 282; [2011] HCA 51
Hartman v R [2011] NSWCCA 261
Hili v The Queen; Jones v The Queen (2010) 242 CLR 520; [2010] HCA 45
Jimmy v The Queen (2010) 77 NSWLR 540; [2010] NSWCCA 60
Johnson v The Queen (2004) 78 ALJR 616; [2004] HCA 15
Kamay v The Queen (2015) 47 VR 475; [2015] VSCA 296
Khoo v R [2013] NSWCCA 323
Lam v R [2014] NSWCCA 50
Lee v NSW Crime Commission (2013) 251 CLR 196; [2013] HCA 39
Lee v R [2012] NSWCCA 123
Linggo v R [2017] NSWCCA 67
M v The Queen (1994) 181 CLR 487; [1994] HCA 63
Markarian v The Queen (2005) 228 CLR 357; [2005] HCA 25
Moody v French (2008) 36 WAR 393; [2008] WASCA 67
Moore v R [2016] NSWCCA 185
Moss v R [2016] NSWCCA 242
Postiglione v The Queen (1997) 189 CLR 295; [1997] HCA 26
Power v The Queen (1974) 131 CLR 623; [1974] HCA 26
R v Blewitt (unreported, NSWCCA, Lee, Yeldham and Grove JJ, 3 December 1987)
R v Bond (1990) 48 A Crim R 1
R v Bugeja [2001] NSWCCA 196
R v Bulger [1990] 2 Qd R 559
R v Curtis (No 3) [2016] NSWSC 866
R v Dalzell [2011] NSWSC 254
R v De Leeuw [2015] NSWCCA 183
R v De Silva [2011] NSWSC 243
R v Dodge (1988) 34 A Crim R 325
R v Draoui (2008) 101 SASR 267; [2008] SASC 188
R v Fysh (No 4) [2012] NSWSC 1587
R v Glynatsis [2013] NSWCCA 131
R v Gray [1977] VR 225
R v Hannes [2002] NSWSC 1182
R v Harman (1989) 1 Qd R 414
R v Harrington (2016) 11 ACTLR 215; [2016] ACTCA 10
R v Huang (2000) 113 A Crim R 386; [2000] NSWCCA 238
R v Joffe; R v Stromer [2015] NSWSC 741
R v Kijurina [2017] NSWCCA 117
R v Kilic (2016) 259 CLR 256; [2016] HCA 48
R v Lamella [2014] NSWCCA 122
R v Morton [1986] VR 863
R v Nguyen; R v Pham [2010] NSWCCA 238
R v O’Brien [2011] NSWSC 1553
R v O’Donoghue (1988) 34 A Crim R 397
R v Paull (1990) 20 NSWLR 427
R v Place (2002) 81 SASR 395; [2002] SASC 101
R v Saleh (2015) 257 A Crim R 212; [2015] NSWCCA 299
R v Shannon (1979) 21 SASR 442
R v Sharma (2002) 54 NSWLR 300; [2002] NSWCCA 142
R v Thomson; R v Houlton (2000) 49 NSWLR 383; [2000] NSWCCA 309
R v Zhu [2013] NSWSC 127
Siganto v The Queen (1998) 194 CLR 656; [1998] HCA 74
SZTAL v Minister for Immigration and Border Protection (2017) 91 ALJR 936; [2017] HCA 34
The Queen v Slater (1984) 36 SASR 524
Thiess v Collector of Customs (2014) 250 CLR 664; [2014] HCA 12
Tyler v The Queen (2007) 173 A Crim R 458; [2007] NSWCCA 247
Wat v R [2017] NSWCCA 62
Weininger v The Queen (2003) 212 CLR 629; [2003] HCA 14
Wong v R (2001) 207 CLR 584; [2001] HCA 64

Category:

Principal judgment

Parties:

Hui (Steven) Xiao (Applicant)
Crown (Respondent)

Representation:

Counsel:
T Game SC / S Buchen (Applicant)
S McNaughton SC / R Ranken / T Prince (Respondent)

  Solicitors:
Jeffreys Lawyers (Applicant)
Commonwealth Director of Public Prosecutions (Respondent)

File Number(s):

2015/256909

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Common Law - Criminal

Citation:

[2016] NSWSC 240

Date of Decision:

11 March 2016

Before:

Hall J

File Number(s):

2015/256909

HEADNOTE

[This headnote is not to be read as part of the judgment]

During 2010 and 2011, the applicant was the managing director of Hanlong Mining Investment Pty Ltd, which was a subsidiary of a Chinese corporation, Sichuan Hanlong Group Co Ltd. The role of the applicant was to identify possible opportunities for investment for Sichuan Hanlong in the mining industry. Both Bannerman Resources Ltd and Sundance Resources Ltd had been identified as investment targets for Sichuan Hanlong in 2010. During the first half of 2011, the applicant was involved in the preparation of potential takeover offers for both companies.

In July 2011, Sichuan Hanlong decided to make takeover offers for both Bannerman and Sundance. Due to his involvement in the preparation of the takeover offers, the applicant became aware of this decision shortly after it was made. The applicant then used his wife’s trading account and the trading account of a company he owned and controlled to purchase financial products in Bannerman and Sundance prior to the announcement of the takeover offers on the Australian Stock Exchange. The applicant also entered into an agreement with Mr Bo Shi Zhu which provided that Mr Zhu would purchase financial products in Bannerman and Sundance for the benefit of the applicant and several others, using funds borrowed from a related entity of Hanlong Mining. Following the announcement of the takeover offers on the Australian Stock Exchange, the applicant made a profit on each investment.

The applicant was charged on indictment with committing an offence under s 1043A(1)(d) and s 1311(1) of the Corporations Act 2001 (Cth) for procuring another person to acquire financial products while possessing inside information (the procurement offence), and with entering into an agreement to commit an offence under s 1043A(1)(d) and s 1311(1) of the Corporations Act 2001 (Cth) (the joint commission offence). The applicant pleaded guilty to both charges prior to committal. The applicant was sentenced to an overall term of imprisonment for 8 years and 3 months with a non-parole period of 5 years and 6 months.

The issues on appeal were:

1.   Whether the sentencing judge erred in assessing the objective seriousness of the offences (Grounds 1 and 2);

2.   Whether the sentencing judge erred by declining to take the utilitarian value or benefit of the applicant’s guilty plea into account (Ground 3);

3.   Whether the sentencing judge erred by not taking into account evidence that the applicant would experience more onerous custody by reason of the fact that he is a foreign national (Ground 4);

4. Whether the sentencing judge erred by not sentencing the applicant in accordance with s 19AB(1) of the Crimes Act 1914 (Cth) (Ground 5);

5.   Whether the sentences imposed were manifestly excessive (Ground 6); and

6.   Whether the applicant has a legitimate sense of grievance by reason of the sentence imposed upon his co-offender, Mr Bo Shi Zhu (Ground 7).

The Court (Bathurst CJ, Beazley P, Hoeben CJ at CL, McCallum and Bellew JJ) held, granting leave to appeal against sentence and allowing the appeal:

Objective seriousness of the offences (Grounds 1 and 2)

(i)   It is unnecessary to consider whether R v O’Donoghue (1988) 34 A Crim R 397 and the cases following it were wrongly decided. The appeal can be disposed of favourably to the applicant without resolving this question: [124].

R v O’Donoghue (1988) 34 A Crim R 397; AB v R [2014] NSWCCA 339; Clarke v R [2015] NSWCCA 232; R v Kijurina [2017] NSWCCA 117; Greenland v State of Western Australia [2017] WASCA 83, referred to.

(ii) The sentencing judge did not err by finding that the offending conduct was “carefully planned and premeditated”. Whether an offence was planned involves matters of degree, the comparison being between a level of premeditation of criminal conduct and a response which is spontaneous, ill-considered or opportunistic. The offences in the present case could not on any view be said to fall within the latter category: [107].

Moore v R [2016] NSWCCA 185, approved.

(iii) The sentencing judge did not err by finding that the applicant attempted to “conceal his involvement in procuring illegal trades” by “utilising various accounts as a form of disguise”. It was open to the sentencing judge on the evidence to make this finding: [125].

(iv) The sentencing judge did not err by having additional regard to the applicant’s “attempts to conceal his involvement in procuring illegal trades” as an “aggravating” feature of the offending. Section 16A of the Crimes Act does not specify a series of aggravating and mitigating factors. Rather, it prescribes a number of matters required to be taken into account in imposing a sentencing that is appropriate in all the circumstances of the case. The sentencing judge did not treat the offence as more serious merely because of the procurement of the trades: [134]–[135].

Wong v R (2001) 207 CLR 584; [2001] HCA 64; Weininger v The Queen (2003) 212 CLR 629; [2003] HCA 14, considered.

(v) The sentencing judge did not err in the manner in which the use of the loan to finance the trading was taken into account. The sentencing judge did not take the actual fact of the loan into account as a separate aggravating factor. The sentencing judge only had regard to the loan as an aggravating factor to the extent that it increased the amount available to be invested and evidenced a breach of trust: [143]–[144].

(vi) The sentencing judge did not err by finding that the offending in the joint commission offence was more serious merely because it involved “joint commission” liability. The sentencing judge was not embracing such a broad proposition. The sentencing judge found that that the offending in the joint commission offence was more serious because it involved the borrowing of funds from a related company and a consequent breach of trust: [149].

(vii) The sentencing judge did not err by finding that the seriousness of the joint commission offence was elevated because it was “a serious and continuing disregard… of the law” and of the applicant’s “fiduciary and other trust obligations… aggravated by the extent to which he was the dominant party”. It was open to the sentencing judge on the evidence to make this finding: [154]–[155].

(viii) The sentencing judge did not err by having multiple regard to the applicant’s concealment of his identity by making purchases not in his own name or to the fact that the loan to finance the purchases was drawn from a related party of Hanlong Mining. There was no impermissible double counting: [162]–[164].

Significance of the utilitarian value of guilty plea in sentencing (Ground 3)

(ix) Section 16A(2)(g) of the Crimes Act 1914 (Cth) requires a court to taken into account the utilitarian value of a guilty plea when considering the fact that a person has pleaded guilty to an offence: [269]–[278].

Tyler v The Queen (2007) 173 A Crim R 458; [2007] NSWCCA 247, not followed.

Director of Public Prosecutions (Cth) v Thomas [2016] VSCA 237, followed.

Cameron v The Queen (2002) 209 CLR 339; [2002] HCA 6; R v Place (2002) 81 SASR 395; [2002] SASC 101; R v Sharma (2002) 54 NSWLR 300; [2002] NSWCCA 142; Moody v French (2008) 36 WAR 393; [2008] WASCA 67; R v Draoui (2008) 101 SASR 267; [2008] SASC 188; Bahar v The Queen (2011) 45 WAR 100; [2011] WASCA 249; Barbaro v The Queen (2014) 253 CLR 58; [2014] HCA 2, considered.

(x)   The decision of the High Court of Australia in Cameron v The Queen (2002) 209 CLR 339; [2002] HCA 6 does not preclude this approach: [249]–[253], [274].

Director of Public Prosecutions (Cth)vGow (2015) 252 A Crim R 573; [2015] NSWCCA 208; Director of Public Prosecutions (Cth) v Thomas [2016] VSCA 237, approved.

Cameron v The Queen (2002) 209 CLR 339; [2002] HCA 6, considered.

(xi) It is desirable that the discount which is to be given for a guilty plea is specified by the court. However, there is no obligation on the sentencing judge to do so, and a failure to do so does not of itself amount to error: [280].

Cameron v The Queen (2002) 209 CLR 339; [2002] HCA 6; R v Place (2002) 81 SASR 395; [2002] SASC 101; Markarian v The Queen (2005) 228 CLR 357; [2005] HCA 25, considered.

(xii) The sentencing judge erred by not having regard to the utilitarian value of a guilty plea when considering the fact that the applicant had pleaded guilty to the offences: [281].

Significance of evidence that applicant would experience more onerous custody as a foreign national in sentencing (Ground 4)

(xiii) The sentencing judge may have erred by not taking into account evidence that the applicant would experience more onerous custody by reason of the fact that he is a foreign national. However, it is unnecessary to consider whether this error was material, since it is necessary to resentence the applicant in any event: [288].

Section 19AB(1) of the Crimes Act 1914 (Cth) (Ground 5)

(xiv) Section 19AB of the Crimes Act obliges the Court to fix a single non-parole period when a person is convicted of two or more federal offences at the same time and the aggregate sentence to be imposed exceeds three years. There was no reason to suggest the sentencing judge did not adopt this approach: [297].

Hili v The Queen; Jones v The Queen (2010) 242 CLR 520; [2010] HCA 45, referred to.

Manifest excess in sentencing (Ground 6)

(xv) It is unnecessary to consider this ground, since it is necessary to resentence the applicant in any event. However, the sentence would have been found to be not manifestly excessive: [299], [368].

R v Zhu [2013] NSWSC 127; Kamay v The Queen (2015) 47 VR 475; [2015] VSCA 296, considered.

Legitimate sense of grievance due to co-offender’s sentence (Ground 7)

(xvi) It is unnecessary to consider this ground, since it is necessary to resentence the applicant in any event. However, in resentencing the applicant, the principle of parity requires that a lesser sentence be imposed on the applicant than was imposed by the sentencing judge: [299], [385].

Postiglione v The Queen (1997) 189 CLR 295; [1997] HCA 26; Jimmy v The Queen (2010) 77 NSWLR 540; [2010] NSWCCA 60; Green v The Queen; Quinn v The Queen (2011) 244 CLR 462; [2011] HCA 89; Lam v R [2014] NSWCCA 50, referred to.

Judgment

1. THE COURT: Hui (Steven) Xiao (the applicant) was charged on an indictment with the following federal offences:

Seq 1:    That between about 4 July 2011 and about 15 July 2011 at Sydney in the State of New South Wales and elsewhere, you:

(a)   procured Xike Hu to acquire relevant Division 3 financial products, being 266,500 contracts for difference (“CFDs”) relating to Bannerman Resources Ltd (“Bannerman”) and 6,700,000 CFDs relating to Sundance Resources Ltd (“Sundance”), in 35 separate transactions; and

(b)   procured Market Star Limited to acquire relevant Division 3 financial products being 1,320,000 shares in Sundance, in three separate transactions,

while you possessed inside information, being information that was not generally available, and which, if that information was generally available a reasonable person would expect it to have a material effect on the price or value of the relevant Division 3 financial products, and being information which you knew, or ought reasonably to have known:

(i)   was not generally available, and

(ii)   if it was generally available, a reasonable person would expect it to have a material effect on the price or value of the relevant Division 3 financial products.

contrary to s 1043A(1)(d) and s 1311(1) Corporations Act 2001 (Cth).

Seq 2: That between about 6 July 2011 and about 15 July 2011 at Sydney in the State of New South Wales and elsewhere, you entered into agreements with Bo Shi Zhu (“Zhu”) to commit offences, being the contravention of sections 1043A(1) and 1311(1) of the Corporations Act 2001 (Cth), and offences of the same type were committed in accordance with the agreements, namely Zhu procured Wingatta Pty Ltd to acquire relevant Division 3 financial products, being 1,252,753 shares in Bannerman and 10,112,154 CFDs relating to Sundance, in 27 separate transactions, while Zhu possessed inside information, being information that was not generally available, and which, if that information was generally available a reasonable person would expect it to have a material effect on the price or value of the relevant Division 3 financial products, and being information which Zhu knew, or ought reasonably to have known:

was not generally available, and

if it was generally available, a reasonable person would expect it to have a material effect on the price or value of the relevant Division 3 financial products.

contrary to s 1043A(1)(d) and s 1311(1) Corporations Act 2001 (Cth) with s 11.2A Criminal Code (Cth).

2. For convenience, we will describe the charge the subject of the first count as the procurement offence, and the charge the subject of the second count, as the joint commission offence.

3. The applicant entered pleas of guilty at the Local Court prior to committal. In addition, the following admitted offence was taken into account pursuant to s 16BA of the Crimes Act 1914 (Cth) (the Gold Pattern offence):

“Between about 1 July 2011 and 8 July 2011

The defendant procured Gold Pattern International Ltd to acquire relevant Division 3 financial products, being 1,316,327 CFDs relating to Bannerman, in 37 separate transactions, while the defendant possessed inside information, being information that was not generally available, and which, if that information was generally available a reasonable person would expect it to have a material effect on the price or value of CFDs relating to Bannerman, and being information which the defendant knew, or ought reasonably to have known:

(i)   was not generally available, and

(ii)   if it was generally available, a reasonable person would expect it to have a material effect on the price or value of CFDs relating to Bannerman.

contrary to s 1043A(1)(d) and s 1311(1) Corporations Act 2001 (Cth).”

4. The charges were rolled-up charges, the procurement offence involving 38 trades contrary to s 1043A(1)(d) of the Corporations Act, and the joint commission offence involving 27 trades. The offence taken into account, pursuant to s 16BA of the Crimes Act, involved 37 trades.

5. On 11 March 2016, the sentencing judge sentenced the applicant for the procurement offence to a term of imprisonment of six years commencing on 12 January 2014 and expiring on 11 January 2020, consisting of a non-parole period of three years and nine months, expiring on 11 October 2017.

6. In respect of the joint commission offence, the applicant was sentenced to a term of imprisonment of seven years commencing on 12 April 2015 and expiring on 11 April 2022, consisting of a non-parole period of four years and three months, commencing on 12 April 2015 and expiring on 11 July 2019.

7. The sentencing judge imposed an effective overall sentence of imprisonment of eight years and three months, commencing on 12 January 2014 and expiring on 11 April 2022, with an effective overall non-parole period of five years and six months. The applicant seeks leave to appeal against those sentences.

Background to the offences

8. The summary below is taken from the agreed statement of facts tendered at the hearing.

9. The applicant at the time of the offences was the Managing Director of Hanlong Mining Investment Pty Ltd (Hanlong Mining), a subsidiary of a Chinese corporation, Sichuan Hanlong Group Co Ltd (Sichuan Hanlong). He was appointed Managing Director in June 2009. In September 2010 he was appointed as Chief Executive Officer of another Australian subsidiary of Sichuan Hanlong, Hanlong Resources Ltd (Hanlong Resources). The principal activity of Hanlong Mining was to seek overseas investment opportunities in the mining industry on behalf of its parent company.

10. At the time of the offences the applicant had experience in trading in various financial products including shares and contracts for difference (CFDs). The manner in which CFDs operated was not explained in the Agreed Statement of Facts but it appears to be common ground that they are derivatives mirroring the performance of (in this case) shares. In essence a CFD is a contract between a buyer and a seller to exchange the current value of the share and its value at the end of the contract. If the difference is positive, the seller pays the buyer, if negative, the buyer pays the seller. The advantage (or disadvantage) is it allows persons to speculate on price movements without needing to purchase the underlying asset. This could lead to significant profits on a relatively small outlay. Conversely, it can lead to significant losses: see also the explanation of CFDs in Hartman v R [2011] NSWCCA 261 at [15]-[16].

11. The applicant’s role as Managing Director of Hanlong Mining was to identify possible opportunities for investment in the mining industry for Sichuan Hanlong. The employees of Hanlong Mining received instructions from the applicant. In particular, Bo Shi Zhu (Mr Zhu) reported to him, although on some occasions he reported directly to the Vice-President of Sichuan Hanlong, Mr Huanjun Kang (Mr Kang) and its Chairperson, Mr Han Liu (Mr Liu) on the authorisation of the applicant.

The Procurement Offence

12. The procurement offence involved trading of CFDs in Bannerman and CFDs and shares in Sundance.

Bannerman

13. Sometime prior to June 2010, a decision was made that the Sichuan Hanlong Group acquire an interest in an Australian-based uranium mining company. Bannerman was such a company. Between September 2010 and July 2011, Mr Zhu with some consultation with the applicant, prepared or assisted in the preparation of an investment strategy with respect to Bannerman.

14. In August 2010, the applicant and Mr Zhu met with the Chief Executive Officer and Chief Financial Officer of Bannerman to discuss a joint venture but the negotiations did not proceed. Further discussions took place between representatives of the companies relating to a friendly takeover of Bannerman, but the negotiations failed.

15. On about 12 or 13 March 2011, the share price of Bannerman fell dramatically, following the disaster at the Fukushima Nuclear Power Plant. Further negotiations concerning a proposed takeover eventuated, culminating in Mr Peter Freeman, an advisor to Bannerman, telephoning Mr Zhu whilst he was at Sichuan Hanlong’s office in Chengdu, China, with Mr Liu and the applicant, suggesting if Hanlong Mining put a proposal to Bannerman of close to a dollar per share, it would be seriously considered.

16. On 20 April 2011, the Board of Sichuan Hanlong met in Chengdu. The applicant and Mr Zhu were present at that meeting. Bannerman was identified as an immediate takeover target.

17. On around 27 June 2011, Hanlong Mining’s corporate advisor, Gresham, recommended to Mr Peter Mansell, the Chairperson of Hanlong Mining, a strategy to bid $0.612 for 70% of Bannerman’s shares. The advice was forwarded to Mr Zhu who discussed it with the applicant.

18. The applicant claimed he was told by Mr Liu (the Chairperson of Sichuan Hanlong) that he, Mr Liu, was keen to take over Bannerman. On 1 July 2011 there was a meeting between the applicant, Mr Zhu, Mr Bo Yang (Mr Yang), the Chief Financial Officer of Hanlong Mining, and Mr Nelson Feng Chen (Mr Chen), the Chief Operating Officer. A conditional offer of $0.612 per share for 70% of the company was agreed upon, the applicant expressing the view he thought Bannerman was worth 80 cents per share.

19. The applicant claimed that on 4 July 2011, he received further instructions from Mr Liu, and then told Mr Zhu to amend the proposal to a 100% acquisition. A conditional proposal offering to acquire 100% of Bannerman at $0.612 per share through a scheme of arrangement was forwarded to Bannerman on 9 July 2011.

20. Between 1 and 8 July 2011, the Bannerman share price ranged between $0.27 and $0.39, the closing price on 8 July being $0.385 per share. The takeover offer was announced on 11 July 2011, prior to commencement of trading on the Australian Stock Exchange (ASX). The opening price was $0.495 per share, representing a 28.6% increase on the last trading price prior to the announcement. The share price reached a daily high of $0.515 per share and closed at $0.475 per share.

21. On 30 March 2011, a share trading account had been opened by the applicant in the name of his wife Ms Hu (the Hu trading account). The account was controlled and operated by the applicant to the exclusion of Ms Hu.

22. On 4-5 July, the applicant procured 11 separate orders on the Hu trading account for a total of 265,000 Bannerman CFDs, reflecting an underlying share price of between $0.29 and $0.31 per share. The total investment outlay was $31,303 with an underlying leveraged exposure of $79,828.

23. On 11 July, following the takeover announcement, the applicant disposed of the CFDs at prices reflecting between $0.475 and $0.485 per share, resulting in a gross profit of $48,277.

24. At least from 1 July 2011, the applicant was aware Hanlong Mining was going to make a conditional offer to acquire at least 70% of the shares in Bannerman at a price of $0.612 per share. It was agreed that to the knowledge of the applicant the information was not generally available and was price sensitive.

Sundance

25. Sundance is an Australian-based international iron ore company which by August 2010 was a formal investment target of Hanlong Mining. In September 2010, Hanlong Mining engaged Bank of America Merrill Lynch (Merrill Lynch) to advise on how best to achieve the acquisition of 100% of the shares in Sundance.

26. From September 2010, the applicant and Mr Zhu worked with Mr David Wood of Merrill Lynch towards the acquisition. An attempt to acquire a position in Sundance was initially unsuccessful, although between 23 February and 20 April 2010, Hanlong Metals Limited, a subsidiary of Hanlong Resources, had purchased call options in Sundance, giving it an entitlement to 3.8% of the issued capital.

27. On 17 March 2011, following further protracted negotiations, Hanlong Mining acquired 16.1% of the issued capital of Sundance, from an entity described as the Talbot Group. The price was $0.44 per share.

28. On 20 April 2011, the applicant and Mr Zhu gave a presentation concerning Sundance to the board of Sichuan Hanlong. Although no final decision was reached, the preferred option which emerged following the meeting was a full takeover of Sundance.

29. On 16 May 2011, Sundance and Hanlong Mining entered into a confidentiality agreement, which enabled Hanlong Mining to conduct due diligence on Sundance.

30. About early to mid-June 2011, Mr Zhu took responsibility for the Sundance due diligence. On 11 July 2011, the applicant and Mr Zhu attended a meeting with Mr Liu, Mr Kang and two junior employees of Sichuan Hanlong. Following the meeting Mr Liu instructed the applicant and Mr Zhu to draft a proposal letter to Sundance for a 100% takeover at 50 cents per share.

31. On 14 July 2011, Mr Zhu drafted a conditional proposal, and on the 15 July 2011, discussed it with the applicant and sent it to Mr Liu for approval. That evening the conditional proposal was sent to Sundance offering to acquire 100% of the company at 50 cents per share through a scheme of arrangement. The proposal was reported to the ASX on 18 July 2011.

32. Between 11 and 15 July 2011, the share price of Sundance ranged between $0.35 and $0.405 per share. When trading resumed following the announcement on 18 July 2011, the opening price was $0.50 per share reaching an intra-day high of $0.515 and closing at $0.49 per share.

33. Between 13 and 15 July 2011, the applicant procured 24 orders on the Hu trading account to acquire 6,700,000 Sundance CFDs at prices reflecting between $0.345 and $0.405 per share, for a total investment outlay of $713,619 with an underlying leveraged exposure of $2,571,250. On 18 July, the applicant procured seven orders to dispose of the CFDs at prices reflecting between $0.48 and $0.50 per share. The underlying leveraged exposure had increased to $3,239,320 resulting in a gross profit of $668,070.

34. The applicant owned and controlled a British Virgin Islands company, Market Star Limited (Market Star). On the 29 April 2010, that company opened a share trading account in the name of Market Star with Coutts & Co Ltd in Singapore. The account was controlled and operated by the applicant.

35. Between 13 and 15 July 2011, the applicant placed three separate orders on the Market Star trading account to acquire a total of 1,320,000 Sundance shares at prices between $0.35 and $0.395 per share for a total investment outlay of $476,600. The shares were disposed of the day that trading resumed, at a price of $0.48 per share, resulting in a gross profit of $157,000.

36. The agreed facts stated that from around 11 July 2011, the applicant knew of the conditional offer to acquire 100% of the Sundance shares for $0.50 per share, knew that the information was not publically available and that it was price sensitive.

The Joint Commission Offence

37. In about June or July 2010 the applicant told Mr Zhu that Mr Liu was supportive of officers at Hanlong Mining co-investing in securities of companies in which Hanlong Mining was considering acquiring in interest.

38. Around December 2010 the applicant reached an agreement with Mr Zhu, Mr Chen and Mr Yang to invest in a joint fund for profit. That month, Mr Yang on the instructions of the applicant, set up a company in Hong Kong called Golden Stone Partners Limited (Golden Stone). On 6 January 2011 a wholly owned subsidiary, Wingatta Pty Limited (Wingatta), was incorporated in Australia. Its sole shareholder was Golden Stone and the director was a junior employee of Hanlong Mining.

39. On 13 January 2011 Mr Zhu caused Wingatta to set up a share trading account and CFD trading account (Wingatta share trading accounts).

40. During January 2011, the following funds were transferred to Golden Stone and then to Wingatta, from companies incorporated in the British Virgin Islands with bank accounts in Hong Kong, individually set up and controlled by each of the offender, Mr Zhu, Mr Yang, and Mr Chen:

1. A$700,000 from the applicant;

2. A$300,000 from Mr Zhu;

3. A$300,000 from Mr Yang; and

4. A$100,000 from Mr Chen.

41. On 15 March 2011, the applicant invested a further $100,000 in Wingatta.

42. The co-investors agreed that the distribution of profits from the Wingatta investment would be according to the proportion of the initial investment, the applicant 53.3%, Mr Zhu 20%, Mr Yang 20% and Mr Chen 6.7%. It was agreed that Mr Zhu would be responsible for all investment decisions.

43. Between January 2011 and 30 June 2011, Wingatta incurred losses of approximately $1.2 million dollars on its investments.

44. Shortly after the meeting on 1 July 2011, to which we have referred to in [18] above, the applicant, Mr Zhu, Mr Chen and Mr Yang discussed the losses incurred by Wingatta and Mr Zhu’s investment decisions were criticised. Mr Yang told Mr Zhu he had to make up the lost money. The applicant and Mr Zhu agreed that since Hanlong Mining would soon submit a takeover offer for Bannerman, they could use that as an opportunity to get the money back. It was also agreed that since there were insufficient funds in Wingatta, Mr Yang should contact Sichuan Hanlong to obtain a loan of $1,000,000 from Hanlong Mining, to enable Wingatta to acquire Bannerman financial products. Mr Yang arranged for a loan of $1,000,000 to be transferred from a related entity of Hanlong Mining to Wingatta. It was recorded as a loan to Wingatta in the books of Hanlong Mining.

45. Between 6 and 8 July 2011, in accordance with that agreement, Mr Zhu procured 18 orders on the Wingatta share trading accounts to acquire 1,252,753 Bannerman shares at prices between $0.32 and $0.39 per share, a total investment of $456,105. The applicant’s share was $243,104. Mr Zhu caused the shares to be disposed of on 11 July 2011, when trading resumed after the takeover announcement, at prices between $0.42 and $0.5035 per share, resulting in a gross profit of $97,958 of which the applicant’s share was $52,211.

46. On 13 July 2011, after the meeting in relation to Sundance, to which we have referred to in [30] above, and Mr Liu giving approval to make a takeover offer, the applicant and Mr Zhu agreed money remaining in Wingatta and the proceeds from the Bannerman shares should be used to buy Sundance financial products.

47. In accordance with that agreement, Mr Zhu between 13 and 15 July procured nine separate orders to acquire 10,112,154 Sundance CFDs at prices reflecting between $0.355 and $0.40 per share, for a total investment outlay of $1,011,125 (with an underlying leveraged exposure of $3,849,814) of which the applicant’s share was $538,977.

48. On 18 July, Mr Zhu procured six orders on the Wingatta trading account to dispose of the CFDs at prices reflecting between $0.465 and $0.50 per share. The underlying leveraged exposure in respect of those CFDs had increased to $4,940,077 resulting in a gross profit of $1,090,262 of which the applicant’s share was $581,109.

The Gold Pattern Offence

49. On 20 December 2010, Mr Luo, an employee of Hanlong Resources in Hong Kong, informed the applicant of details of a bank account in the name of Gold Pattern International Ltd (Gold Pattern) with Hong Kong Shanghai Banking Corporation (HSBC). On 7 February 2011, a trading account in the name of Gold Pattern was opened with IG Asia. The agreed facts record that the applicant was closely associated with Gold Pattern, the Gold Pattern HSBC bank account and the Gold Pattern trading account.

50. Between 1 and 8 July 2011, there were 37 separate orders on the Gold Pattern trading account to acquire 1,367,327 Bannerman CFDs at prices reflecting between $0.285 and $0.375 per share, for a total investment outlay of $282,034 (reflecting an underlying leveraged exposure of $424,061). On 8 July 2011, there were two orders disposing of 100,000 CFDs at a price reflecting $0.385 per share. The gross profit was $9,950.

51. On 11 July 2011, after the takeover announcement, the remaining CFDs were disposed of by 18 separate transactions, at prices reflecting between $0.475 and $0.51 per share. The underlying exposure on these remaining CFDs had increased from $395,511 to $591,708, resulting in a gross profit of $196,196.19. Thus the total gross profit was $206,146.

52. Although the agreed facts do not expressly say so, it is evident from the admission of the offence that the applicant procured the Gold Pattern transactions.

Subsequent Events

53. On 21 July 2011, ASIC commenced an investigation into the trading. On 5 September 2011, ASIC obtained ex parte orders preventing the applicant from leaving the country.

54. In an interview with ASIC the applicant denied he controlled the Hu trading account.

55. On 17 November 2011, the Supreme Court made orders permitting the applicant to travel to China to complete a doctoral thesis exam at Wuhan University of Technology. He was required to return by 26 November 2011. In breach of the order, the applicant failed to return, informing ASIC he was suffering from high blood pressure as a result of failing his doctoral thesis, which prevented him from taking long flights. Subsequent enquiries by ASIC revealed that he had not attended the university to complete his thesis, and that in 2012 he travelled on a number of international flights.

56. ASIC also ascertained that in 2012 the applicant changed his name to Jiayi Xiao and obtained employment under that name as Managing Director of a financial services firm in Hong Kong.

57. In July 2012, Ms Hu sent her son to live with her parents in Harbin, China. On 22 June 2013, she divorced the applicant, had her passport returned and left for China.

58. Proceedings were commenced against the applicant on 1 November 2013. On 12 January 2014, the applicant was arrested in Hong Kong and held in custody from that date. Following a contested extradition hearing, he was extradited to Australia. He arrived in Australia on 10 October 2014 and has remained in custody since his arrival.

The Subjective Circumstances

59. It is convenient to deal with the applicant’s subjective circumstances when dealing with the reasoning of the sentencing judge.

The Sentencing Judgment

60. The sentencing judge summarised the facts surrounding the offences and the events which occurred subsequently, and noted the maximum penalty of ten years was the highest available in the Corporations Act, which he stated was an indication of how seriously the legislature treats such offence. He also noted that the maximum penalty had been recently doubled from five to ten years. He also emphasised that the offence was not a victimless one, having the capacity not only to undermine the integrity of the market, but also give rise to a lack of confidence in the commercial world generally. He noted that the amounts involved and the profits obtained in the present case were substantial.

61. His Honour stated that the objective gravity of the offences could be determined by reference to the applicant’s position as Managing Director of Hanlong Mining, the steps he took to disguise the transactions, the amounts invested and the anticipated gain. In that context the sentencing judge noted that the applicant’s role included direct involvement in the takeover offers. He said the fact that he was aware that he was improperly using highly sensitive and confidential information for his own personal gain was a matter of particular importance in assessing the objective gravity of the offences. It may be said that the use of price sensitive information, being an element of the offence, is common to all insider trading cases. However the sentencing judge emphasised that the breach of trust that occurred, in the present case, elevated the objective gravity to a very high level.

60. The sentencing judge noted that profit was a relevant matter to be taken into account in assessing the seriousness of the offence, but the better indication of criminality was the size of the transactions, best assessed by the amount of money invested or placed at risk.

61. The sentencing judge noted, referring to a decision of the Victorian Court of Appeal in Kamay v The Queen (2015) 47 VR 475; [2015] VSCA 296, that profit will loom large in the sentencing exercise, where it is a result of relatively small investments in highly leveraged financial products in order to obtain disproportionally large profits.

62. The sentencing judge stated that the circumstances in which the profits were made was a relevant factor. He stated the knowledge of the imminent takeover offers increased the objective seriousness of the offence.

63. The sentencing judge emphasised the importance of general deterrence, noting that it had been observed in previous cases that the “real bite” of general deterrence only takes hold when a custodial sentence is imposed.

64. The sentencing judge concluded that the offences were serious examples of this type of offence for the following reasons:

1. the charges both involved rolled-up charges, involving multiple episodes of criminal conduct;

2. the charges involved the use of highly confidential information in relation to takeover offers, for the applicant’s own benefit and in gross breach of trust;

3. the evidence established that the applicant possessed and controlled highly material insider information that was not generally available to the market and was fully aware that his conduct was wrong, dishonest and contrary to law;

4. the applicant was a signatory to a confidentiality agreement in relation to the negotiations with Sundance, and was party to the discussions concerning similar arrangements in relation to Bannerman;

5. there were 65 separate contraventions;

6. the offences were carefully planned and premeditated;

7. the information was of a high quality;

8. the applicant invested large sums of money in excess of $2.2 million;

9. the leveraged nature of the CFDs assisted in the making of substantial profit;

10. the applicant made a personal profit of approximately $1.5 million; and

11. the motivation was personal greed.

67. The sentencing judge stated that these matters placed the objective seriousness of the offences in the high range of seriousness for such offences.

68. In relation to the Gold Pattern offending, the sentencing judge stated that the principles to be applied were those set out in the Attorney General’s Application under s 37 of the Crimes (Sentencing Procedure) Act 1999 (No 1 of 2002) (2002) 56 NSWLR 146; [2002] NSWCCA 518 at [38], stating that although the sentence was only for the principal offences, part of the process of taking into account scheduled offences is to impose a sentence longer than would otherwise be the case. He said there were two elements to be considered: personal deterrence and the community’s entitlement to exact retribution for serious offences.

69. The sentencing judge dealt with a number of the matters required to be taken into account by s 16A(2) of the Crimes Act.

70. In relation to s 16A(2)(c), he accepted that the offending could not be regarded as a single course of conduct, as it involved distinct personal trading as well as a separate joint criminal enterprise.

71. In relation to contrition (s 16A(2)(f)) and the applicant’s plea of guilty (s 16A(2)(g)), the sentencing judge stated that the fact that the offender entered a guilty plea, may itself be evidence of contrition, but that it must be taken into account having regard to other relevant matters, including the strength of the Crown case, and the fact that the offender had not expressed any contrition or remorse. The sentencing judge stated that on his assessment, the Crown case was a very strong one.

72. The sentencing judge stated that the utilitarian discount identified in the guideline judgment in R v Thomson; R v Houlton (2000) 49 NSWLR 383; [2000] NSWCCA 309 (“R v Thomson & Houlton”) did not apply to federal sentencing. However, he then proceeded to state that one significant matter relevant to the extent of any reduction in sentence, was the timing of the pleas and whether they were entered at the first available opportunity.

73. The sentencing judge stated that there was no obligation for there to be any specific quantification of a discount for a guilty plea. He stated that the pleas could be taken as some indication of acceptance of responsibility and the fact that they were entered at any early stage was an important factor. He stated however, that the pleas had to be evaluated in the overall context which included the applicant’s failure to return from overseas in breach of the court orders, prior to the charges being laid. The sentencing judge concluded that the guilty pleas had “moderate significance”, as distinct from them being at the highest level of significance for the purpose of sentence discounting.

74. In relation to deterrence, the sentencing judge referring to s 16A(2)(j) and (ja) of the Crimes Act, concluded that the applicant’s conduct required both general and specific deterrence.

75. In dealing with the matters referred to in matters s 16A(2)(m) of the Crimes Act, the sentencing judge noted that the applicant had no prior convictions in Australia and no known criminal record overseas.

76. The sentencing judge noted that the applicant was 36 years of age at the time of the offending and was an experienced corporate executive. He noted that as a general principle, some limited recognition could be given to the position of a foreign national serving a sentence of imprisonment due to language difficulties, but stated that the applicant plainly had a reasonable command of English and there was no evidence of specific hardship he would suffer as a result of being a foreign national in prison.

77. In considering the applicant’s circumstances, the sentencing judge declined to put any weight on what the applicant had told a consulting psychologist Mr Dimet as to his stress and anxiety, as it was hearsay material, not supported by any evidence from the applicant.

78. The sentencing judge noted that the applicant had not provided any cooperation with the authorities, in contrast to Mr Zhu who had cooperated with ASIC in relation to his own offences prior to charges being laid, had agreed to provide further assistance and had consented to a pecuniary penalty in respect of the benefits obtained from his offending.

79. The sentencing judge noted there was no evidence from the applicant as to his remorse or contrition, again contrasting the position of the applicant with that of Mr Zhu. However, having regard to the report of Mr Dimet and the content of testimonials from his former wife and grandparents, the sentencing judge was prepared to accept that the expressions he made to those people, indicating contrition, had been made genuinely and he stated that he proposed to take them into account, in determining the appropriate sentence.

80. The sentencing judge stated he considered the applicant’s prior good character to be relevant in determining the appropriate sentence and took it into account particularly on the issue of specific deterrence.

81. In relation to parity with the sentence imposed on Mr Zhu, the sentencing judge noted that Mr Zhu was 27 at the time of the offence, whilst the applicant was 36. He rejected the submission that Mr Zhu was equally involved in the negotiations which led to the offers being put to Bannerman and Sundance, that Mr Zhu was responsible for the investments and the applicant was not the dominant figure in the operation. The sentencing judge said that the statement of agreed facts showed that although the applicant and Mr Zhu worked together, Mr Zhu regularly sought the applicant’s approval on actions Mr Zhu had taken or proposed to take. In relation to Bannerman, he referred to the fact that Mr Zhu passed on to the applicant proposals made by Bannerman and that following instructions from Mr Liu the applicant instructed Mr Zhu to amend the Bannerman proposal.

82. The sentencing judge referred to a number of disparities in the facts, which needed to be taken into account in considering the question of parity. They included the respective positions of the applicant and Mr Zhu at Hanlong Mining, and their relative positions in the chain of reporting. He referred to the fact that in sentencing Mr Zhu, he had taken into account the fact that he had been subjected to a poisonous work culture, which involved the applicant.

83. The sentencing judge concluded that the applicant was the dominant figure in the Wingatta offending and that Mr Zhu had a lesser role, although he was the person who executed the trades. He noted that the applicant’s share of the Wingatta investment in Bannerman and Sundance was $782,081 and the profit was $633,320 compared with Mr Zhu’s total investment of $333,563 and profit of $305,074.

84. The sentencing judge also noted that the applicant had invested a further $1,221,522 in Bannerman and Sundance and obtained a profit of $873,347, whilst Mr Zhu had invested a further $49,098 and obtained a profit of $67,430. He noted that on two earlier occasions with previous employers, Mr Zhu had been involved in breaches involving investments totalling $70,393 and a total profit of $83,370.

85. The sentencing judge concluded that the applicant’s role in the Wingatta offending was significantly more serious than that of Mr Zhu and his subjective circumstances significantly less compelling. He also said the additional offence of the applicant taken into account was more serious than Mr Zhu’s offences.

86. The sentencing judge accepted uncontroversially that the pre-sentence custody from 12 January 2014 should be taken into account.

87. The sentencing judge accepted that the analysis undertaken by Mr Dimet demonstrated that the applicant had reasonably good prospects of rehabilitation.

88. The sentencing judge considered that there was a very real possibility that the applicant’s prospects of employment would suffer the consequences of his criminal offending, stating it was not to be assumed that reputation within the business community is necessarily confined to this country. He stated in these circumstances, some weight should be given to his likely disqualification from managing an Australian corporation and the real prospect he will suffer from the loss of his career and professional reputation. The sentencing judge said he made allowance for these matters in determining the sentence.

89. The sentencing judge considered that there had to be some accumulation of the sentences. He stated that whilst the offending took place only over a period of two weeks, it was made up of a great many individual contraventions committed with actual knowledge of the illegality. He said the offending was to be distinguished from cases in which, on the basis of some aberration or lack of judgment, a single contravention has occurred.

90. His Honour considered, in accordance with s 17A(1) the Crimes Act, that there was no alternative to a custodial sentence and noted that in accordance with s 19AB(1), it was necessary to set a single non-parole period. He stated that while the level of expenditure and profit in relation to Count 1 exceeded that of Count 2, he considered Count 2 was more serious, showing continuing disregard by the applicant of both his fiduciary and trust obligations and was aggravated by the extent to which he was the dominant party. He said that the use of the loan was a serious aggravating factor. He further stated that the principle referred to in DPP v Fabriczy (2010) 30 VR 632; [2010] VSCA 334 at [16] (“Fabriczy”), that the element of concert makes the offence of conspiracy more serious than that of an individual acting alone, applied in relation to a joint commission offence under s 11.2A of the Criminal Code.

91. In the circumstances, the sentencing judge imposed the sentences to which we have referred above.

The Grounds of Appeal

92. The applicant relied on the following grounds of appeal:

Ground 1: The learned sentencing judge erred in his assessment of the objective seriousness of the offences. In particular, his Honour did so by:

1. finding that the offending conduct was “carefully planned and premeditated”;

2. finding that the applicant attempted to “conceal his involvement in procuring illegal trades”, by “utilising various accounts as a form of disguise”;

3. the manner in which the use of the loan to finance the trading was taken into account;

4. in respect of count 2, finding that the offending was more serious because it involved “joint commission” liability;

5. finding that the seriousness of count 2 was elevated because it was “a serious and continuing disregard… of the law” and of the applicant’s “fiduciary and other trust obligations… aggravated by the extent to which he was the dominant party”;

6. having multiple regard to overlapping features of the offending.

Ground 2: The learned sentencing judge erred by having additional regard to the following matters as “aggravating” features of the offending:

7. the applicant’s “attempts to conceal his involvement in procuring illegal trades”; and

8. the use of the loan to fund the Wingatta offending.

Ground 3:

9. The learned sentencing judge erred by declining to take the utilitarian value or benefit of the applicant’s guilty pleas into account, notwithstanding that the applicant was being sentenced for federal offences.

10. The reduction to the applicant’s sentences by reason of his guilty pleas was inadequate.

Ground 4: The learned sentencing judge erred by not taking into account evidence the applicant would experience more onerous custody by reason of the fact that he is a foreign national.

Ground 5: The learned sentencing judge erred by not sentencing the applicant in accordance with s 19AB(1) of the Crimes Act 1914.

Ground 6: The sentences imposed on the applicant are manifestly excessive.

Ground 7: The applicant has a legitimate sense of grievance by reason of the sentence imposed upon his co-offender Bo Shi Zhu for the “Hanlong Mining Offending”.

The Relevant Legislation

93. Before considering the parties’ submissions, it is convenient to set out the relevant provisions of the Crimes Act concerning the sentencing of federal offenders.

“16A Matters to which court to have regard when passing sentence etc. — federal offences

(1)   In determining the sentence to be passed, or the order to be made, in respect of any person for a federal offence, a court must impose a sentence or make an order that is of a severity appropriate in all the circumstances of the offence.

(2)   In addition to any other matters, the court must take into account such of the following matters as are relevant and known to the court:

(a)   the nature and circumstances of the offence;

(b)   other offences (if any) that are required or permitted to be taken into account;

(c)    if the offence forms part of a course of conduct consisting of a series of criminal acts of the same or a similar character — that course of conduct;

(d)    the personal circumstances of any victim of the offence;

(e)    any injury, loss or damage resulting from the offence;

(ea)   if an individual who is a victim of the offence has suffered harm as a result of an offence — any victim impact statement for the victim;

(f)   the degree to which the person has shown contrition for the offence:

(i)   by taking action to make reparation for any injury, loss or damage resulting from the offence; or

(ii)   in any other manner;

(fa)   the extent to which the person has failed to comply with:

(i) any order under subsection 23CD(1) of the Federal Court of Australia Act 1976; or

(ii)   any obligation under a law of the Commonwealth; or

(iii) any obligation under a law of the State or Territory applying under subsection 68(1) of the Judiciary Act 1903;

about pre-trial disclosure, or ongoing disclosure, in proceedings relating to the offence;

(g)   if the person has pleaded guilty to the charge in respect of the offence — that fact;

(h)   the degree to which the person has co-operated with law enforcement agencies in the investigation of the offence or of other offences;

(j)   the deterrent effect that any sentence or order under consideration may have on the person;

(ja)   the deterrent effect that any sentence or order under consideration may have on other persons;

(k)   the need to ensure that the person is adequately punished for the offence;

(m)   the character, antecedents, age, means and physical or mental condition of the person;

(n)   the prospect of rehabilitation of the person;

(p)   the probable effect that any sentence or order under consideration would have on any of the person’s family or dependants.

…

19AB When court must fix non‑parole period

(1)   Subject to subsection (3), a court must fix a single non-parole period in respect of a federal sentence or federal sentences if:

(a)   a person is convicted of a federal offence, or of 2 or more federal offences at the same sitting; and

(b)   the court imposes the sentence or sentences on the person; and

(c)   either or both of the subparagraphs apply:

(i)   any of the sentences is a federal life sentence;

(ii)   the sentences, in the aggregate, exceed 3 years; and

(d)   when the court imposes the sentence, or sentences, the person is not already serving or subject to a federal sentence.

(2)   Subject to subsection (3), a court must fix a non-parole period in respect of all federal sentences a person is to serve or complete if;

(a)   while the person is in prison and is serving or subject to a federal sentence, the court imposes a further federal sentence on the person; and

(b)   the result is that the person is to serve or is to complete:

(i)   a federal life sentence; or

(ii)   federal sentences the unserved portions of which, in the aggregate, exceed 3 years; and

(c)   when the court imposes the further federal sentence, the person is not already subject to a non-parole period or recognizance release order in respect of a federal sentence.

Non‑parole period not appropriate

(3)   A court may decline to fix a non‑parole period under this section if:

(a) the court is satisfied that a non‑parole period is not appropriate, having regard to:

(i) the nature and circumstances of the offence or offences; and

(ii) the antecedents of the person; or

(b) the person is expected to be serving a State or Territory sentence on the day after the end of the federal sentence, or the last to be served of the federal sentences, as reduced by any remissions or reductions under section 19AA.

(4) If the court declines to fix a non‑parole period, the court must:

(a) state its reasons for so declining; and

(b) cause the reasons to be entered in the records of the court.”

94. It is well established that, except to the extent stated in s 16A and 16B of the Crimes Act (and elsewhere in Pt 1B), general common law principles, and not peculiarly local or State statutory principles of sentence, are applicable. The common law principles give content to the statutory expression in s 16A(1) “of a severity appropriate in all the circumstances of the offence” and some of the expressions used in s 16A(2): Johnson v The Queen (2004) 78 ALJR 616; [2004] HCA 15 at [15] (“Johnson”); Hili v The Queen; Jones v The Queen (2010) 242 CLR 520; [2010] HCA 45 at [25] (“Hili v The Queen”).

Grounds 1 and 2

95. Grounds 1 and 2 of the Grounds of Appeal assert errors by the sentencing judge in his assessment of the objective seriousness of the offence. Each of the grounds contains various subparagraphs, stating that in reaching his conclusion, he erred in making various findings and taking certain matters into account (Ground 1), and in having regard to certain matters as aggravating features of the offending (Ground 2).

Ground 1(a): The sentencing judge erred in finding that the offending conduct was “carefully planned and premeditated”

The applicant’s submissions

96. The applicant referred to the fact that in a number of paragraphs in his sentencing judgment the sentencing judge made findings to the effect that the careful planning and premeditation increased the objective seriousness of the offences. He referred to the sentencing judge’s statement that the profits made were a result of a “planned and strategic exploitation of his position of trust”, that there was “significant planning of the enterprise”, that the applicant’s high level of confidence arose by reason of his “carefully planned and premeditated conduct” and the offences were thus “serious examples” of insider trading.

97. The applicant submitted he possessed the inside information in relation to Bannerman from about 1 July 2011 and, in relation to Sundance, from around 11 July 2011, although the proposal was not finalised until 15 July.

98. The applicant submitted that the trading took place immediately after the acquisition of the inside information and the products were disposed of in the following days. He submitted that the trading was a short term opportunistic play based on recently acquired information.

99. In these circumstances the applicant submitted the statement of facts did not support a reasonable finding that the offences were carefully planned or premeditated. He submitted pre-existing accounts were used to conduct the trades, there was no deliberate interspersing of gains and losses or unrelated trades to create a false impression and that there was no encryption. He submitted that in those circumstances the degree of planning did not go beyond that which is an inherent or common characteristic of insider trading offences. He submitted that while it was open to the sentencing judge to have regard to the value of the inside information and breach of trust, these matters did not provide a proper basis for an additional finding that the offences included a strategic or careful degree of planning.

The Crown’s submissions

100. In dealing with Grounds 1 and 2, the Crown emphasised the assertion of insufficient or excessive weight attributed to an issue does not itself establish error. However, it was submitted the sentencing judge did not err in the weight he gave to each of the issues raised by Grounds 1 and 2.

101. The Crown submitted that although there was some difference of opinion in this court concerning challenges to findings of fact made by a sentencing judge, the orthodox approach was that set out in R v Kijurina [2017] NSWCCA 117 at [88], namely that the applicant must demonstrate the finding was not open on the evidence.

102. The Crown submitted that it was open to the sentencing judge to find that the offence was carefully planned and premeditated. The Crown submitted the agreed facts showed that the applicant had been closely involved in the takeover negotiations for over 11 months, knew precisely when the takeover offers would be made, agreed with his co-investors they should exploit the materiality and confidentiality of the inside information as a way of recouping the Wingatta losses, agreed to obtain a $1,000,000 loan for the purpose of the trading and to acquire leveraged CFDs to maximise profit based on the high quality information in his possession, decided to use accounts in the names of other persons and wager a large amount of money. The Crown pointed particularly to the meeting of 1 July 2011 as demonstrating the conduct could not be described as spontaneous, ill-considered or opportunistic, citing Moore v R [2016] NSWCCA 185 at [75] (“Moore v R”).

103. The Crown submitted that the time period between the acquisition of the information and trading whilst finalising the takeover highlighted the degree of planning. It was submitted the applicant acted immediately because there was only a narrow window of opportunity. It was submitted that the intensity of his trading in those circumstances highlighted his understanding of the high quality of the inside information and the opportunity for immediate profits.

104. The Crown contended that the applicant did not set up separate accounts as he already had trading accounts which were not directly linked to his name. He submitted the fact that there was no interposition of trading gains or losses was irrelevant in the case of a true insider, whose trading in his or her own name would be inherently suspicious. The Crown submitted that no encryption was necessary as the co-investors were working in the same office.

105. The Crown submitted that the sentencing judge did not find that Wingatta or the other trading accounts were established for the purpose of the insider trading, but rather the portion of the judgment relied upon in support of this submission (para [70]) simply said that Wingatta was set up as an investment vehicle. The Crown submitted it was appropriate to have regard to the quality of the information and the breach of trust to find that the offending was planned.

106. The Crown further submitted that it was incorrect to say that the planning did not go beyond that which is an inherent or common characteristic of insider trading offences. The planning was submitted to go far beyond what might be regarded as inherent or at the lowest level for this type of offence (Wat v R [2017] NSWCCA 62 at [44]) or common for an offence of this type (AB v R [2013] NSWCCA 160 at [31]).

Consideration

107. As Basten JA pointed out in Moore v R at [75], whether an offence was planned involves matters of degree, the comparison being between a level of premeditation of criminal conduct and a response which is spontaneous, ill-considered or opportunistic. The offences in the present case could not on any view be said to fall within the latter category.

108. The agreed facts show that shortly after the meeting of 1 July 2011, to which we have referred in [18] above, it was agreed between the co-investors that they would seek to recoup the Wingatta losses by utilising information about the Bannerman takeover offer, obtaining a loan for that purpose. The loan was obtained and CFDs were acquired, first by the applicant through his various trading accounts on 4 and 5 July, whilst the Wingatta trading took place between 6 and 8 July, the trading thus taking place in the week leading up to the announcement of the offer, and involving a considerable number of separate trades. Unsurprisingly, the applicant and Wingatta immediately realised their profit by disposing of the CFDs when the offer was announced on the ASX.

109. Similarly, the Sundance trades involved a considerable number of trades taking place shortly prior to the announcement of the takeover offer. Once again the profit was realised immediately after the offer was announced on the ASX. None of this trading could be described as spontaneous or opportunistic.

110. It is correct, as the applicant pointed out, that pre-existing accounts were used. However, the use of such accounts, none with a direct connection to the applicant, further supports the proposition that the offences were carefully planned. Contrary to the applicant’s submission, in our opinion, planning of this nature goes well beyond what could be described as an inherent or common characteristic of insider trading offences.

111. This ground of appeal has not been made out.

Ground 1(b): The sentencing judge erred in finding that the applicant attempted to “conceal his involvement in procuring illegal trades” by “utilising various accounts as a form of disguise”.

The applicant’s submissions

112. The applicant submitted that he was clearly associated with each of the trading accounts. He submitted that the agreed facts showed that the Market Star account was held by the applicant’s personal company, the Hu account was in the name of his wife, and the applicant was the lead investor in the joint investment fund which traded through the Wingatta account.

113. The applicant pointed out that it was not alleged the accounts were opened in contemplation of the offences, but rather were established well before the offending conduct. He pointed out it was not stated in the agreed facts that the trading accounts were used as a form of disguise or concealment. He submitted that inferences adverse to the applicant could only be drawn if proved beyond reasonable doubt, and other explanations could be excluded, such as taxation benefits that might result. He also submitted that the finding relied on the assumption that the accounts were perceived as a form of disguise, notwithstanding the applicant’s clear connection with each of the account holders.

The Crown’s submissions

114. The Crown identified the following matters as relevant to the issue:

1. the applicant as managing director of Hanlong Mining was a true insider;

2. the applicant was an experienced trader and operated a number of share and CFD trading accounts in his own name;

3. the applicant signed a confidentiality agreement with Sundance and discussed the need for one with Bannerman; and

4. the applicant knew that he possessed information about the takeover which was price sensitive and not generally available.

115. The Crown submitted that under these circumstances the decision to use trading accounts in the name of other people could only be an attempt at concealment.

116. The Crown submitted the trading accounts were not closely associated with the applicant in the sense that their connection with him was obvious. It was pointed out that the Hu account was in the name of the applicant’s wife and the applicant denied any involvement with it. The Crown submitted that the Market Star and Wingatta accounts had no identifiable link to the applicant, pointing out the opaque corporate structures that are a feature of British Virgin Island companies.

117. The Crown submitted that the alternative tax benefit hypothesis raised by the applicant was not raised in the court below and was not the subject of any evidence.

Consideration

118. In R v O’Donoghue (1988) 34 A Crim R 397 (“O’Donoghue”), Hunt J (at 401) stated an appeal to this Court is not by way of rehearing and error will only be demonstrated if there is an error of law, or if there is no evidence to support a particular finding, or the evidence is all one way, or if the judge has misdirected himself or herself. Significantly, he stated the Court has no power to substitute its own findings for those of the sentencing judge, save in those very narrow circumstances. Carruthers and Wood JJ agreed with his Honour (at 406).

119. Although no written submissions were directed to this point, senior counsel for the applicant submitted that the decision in O’Donoghue has been generally followed in this Court: see, for example, AB v R [2014] NSWCCA 339 at [44]-[63] where the authorities were extensively reviewed by Simpson J (as her Honour then was) with whom Meagher JA and Wilson J agreed; R v Kijurina [2017] NSWCCA 117 at [88] per Price J, Hoeben CJ at CL and Lonergan J agreeing.

120. By contrast in Clarke v R [2015] NSWCCA 232 Basten JA stated that the reasoning in O’Donoghue should be approached with caution for a number of reasons: [2015] NSWCCA 232 at [25]-[33]. His Honour reached the following conclusion (at [34]):

“[34]   In some circumstances, factual findings will themselves involve an evaluative judgment, of a kind similar to the exercise of a discretionary power. No doubt the appellate court should exercise restraint in interfering with such findings. However, if the court is satisfied that the sentencing judge made a mistake with respect to a particular factual finding, which was material to the exercise of the discretionary power, the court should identify error and then enter upon its own consideration of the appropriate sentence.”

121. Hamill J agreed with Basten JA whilst noting that what was said by his Honour was contrary to a substantial line of authority in this Court: at [133]-[134]. The third member of the bench, Garling J, took a contrary approach: at [97]-[99].

122. The applicant submitted the correct approach was that suggested by the Western Australian Court of Appeal in Greenland v State of Western Australia [2017] WASCA 83. In that case it was held that because the sentencing judge was required to be satisfied of the fact in question beyond reasonable doubt, the approach to be taken by an appellate court on a conviction appeal laid down in M v The Queen (1994) 181 CLR 487; [1994] HCA 63 at 492-495, namely, whether the finding was reasonably open, should be adopted in considering the findings made by the sentencing judge. That approach has been held to apply in an appeal in respect of a judge alone trial: see Filippou v The Queen (2015) 256 CLR 47; [2015] HCA 29 at [12].

123. In reaching the conclusion of concealment in the present case, the sentencing judge was in effect drawing an inference from the agreed facts. The powers to review such a finding will depend upon the nature and scope of the particular statutory appeal for which the legislature has provided: Dwyer v Calco Timbers Pty Ltd (2008) 234 CLR 124; [2008] HCA 13 at [40].

124. No argument was directed to the scope of an appeal against sentence granted by s 6(3) of the Criminal Appeal Act 1912 (NSW). Further, as will appear subsequently in this judgment, the appeal can be disposed of favourably to the applicant without deciding whether O’Donoghue and the cases which followed it were wrongly decided. In these circumstances, consistent with the preponderance of authority in this Court, we propose to adopt the approach in that case in dealing with the factual challenges raised in the appeal.

125. In the present case there was evidence to support the sentencing judge’s findings. In relation to his personal trading, the applicant chose to use accounts which were not in his name and which were not directly linked to him. This provides a sufficient evidentiary basis in the O’Donoghue sense to justify the finding. Similarly, the structure of Wingatta, which was not directly linked either at shareholder or management level to any of the co-investors, provides evidence on which such a finding could be based in the case of the Wingatta trading. However, as will be seen, it is a matter on which we have placed very little weight in resentencing the applicant.

126. In these circumstances, this ground of appeal has not been made out.

Ground 2(a): Concealment of procurement as an aggravating factor

The applicant’s submissions

127. The applicant submitted that the alleged concealment was not post-offence conduct, but was rather an aspect of the conduct that constituted the offences. He submitted the use of third parties was the act of procurement in each count and was an element of the offences and thus could not be taken into account as an aggravating factor.

128. The applicant further submitted that as “attempts of concealment” had already been taken into account as an aspect of objective seriousness or moral culpability, the sentencing judge erred in giving additional weight to those circumstances as an aggravating factor.

The Crown’s submissions

129. The Crown accepted that trading through third party accounts was a physical element of the procuring offence but submitted that the use of “obscure corporate entities registered in the British Virgin Islands” and a family member using a different last name was a different, more serious form of procurement.

130. The Crown submitted that the attempt of concealment was in the sentencing judge’s view relevant to a number of factors including an awareness of wrongdoing and the degree of planning involved. It follows, it was submitted, that the reference to an attempt of concealment, as an “aggravating feature of the case” was appropriate.

Consideration

131. The sentencing judge stated at [74] that the applicant’s attempt to disguise his criminal activities by utilising various accounts was evidence of a guilty state of mind, stating (at [103](3)) that the applicant knew his conduct was wrong, dishonest, and contrary to law. He also said his attempted concealment was an aggravating factor.

132. It does not seem to us that the sentencing judge was stating the offence was aggravated merely because of the procurement of third parties to do the trade. As the applicant pointed out, procurement is an element of the offence under s 1043A(1)(d) of the Corporations Act and could not be an “aggravating” factor.

133. What the sentencing judge said aggravated the offences, was the deliberate concealment by the applicant of his involvement in the trading. That fact goes beyond simply procuring the trades by a third party and was a matter the sentencing judge was entitled to take into account in evaluating the seriousness of the offence. He was entitled, if not bound, to take such matters into account in considering the nature and circumstances of the offence for the purpose of s 16A(2)(a) of the Crimes Act.

134. In considering what were described by the sentencing judge as aggravating features, it is important to bear in mind that unlike, for example, s 21A(2) and (3) of the Crimes (Sentencing Procedure) Act 1999 (NSW), s 16A of the Crimes Act does not specify a series of aggravating and mitigating factors. Rather, it prescribes a number of matters required to be taken into account in imposing a sentencing that is appropriate in all the circumstances of the case. Those factors, as was pointed out in Wong v R (2001) 207 CLR 584; [2001] HCA 64 at [71] (“Wong v R”), are very diverse, without any guidance given as to how they are to be accommodated. Ultimately the task for a sentencing court is to frame a sentence taking all those factors into account, to the extent they are relevant and known to the court: Wong v R at [71]-[75].

135. In these circumstances, whilst it may be appropriate to speak of a particular aspect of the offence as aggravating it, in the sense of making it more serious, it is important to bear in mind there is no specific provision in the Act to treat certain matters as aggravating and others as mitigating. As noted by the plurality in Weininger v The Queen (2003) 212 CLR 629; [2003] HCA 14 at [22], it is “to invite error to present every question for a sentencer who is assessing a matter which is to be taken into account as a choice between extremes, one classified as aggravating and the opposite extreme classified as mitigating”. In any event, as we have indicated, it does not seem to us that the sentencing judge treated the offence as more serious merely because of the procurement of the trades.

136. The second aspect of this ground entailed a submission that the sentencing judge had already taken the concealment into account in assessing objective seriousness. In our opinion, the sentencing judge treated concealment as not only a fact which made the offences more serious, but also as evidence of the applicant’s knowledge of the criminality of his conduct. He was entitled to take into account the actual concealment and the knowledge of the applicant in considering the overall seriousness of the offence. There was, in our opinion, no double counting.

137. It follows that this ground has not been made out.

Ground 1(c): The manner in which the loan was taken into account

Ground 2(b): Use of the loan as a “serious aggravating factor”

The applicant’s submissions

138. The applicant submitted that the loan was taken into account by the sentencing judge in the following manner:

1. it was a highly unusual and irregular arrangement and the intention to use the loan to fund the trading was an aggravating factor to be taken into account on sentencing;

2. the loan was a “demonstration both of a high-handed mentality in the offender whilst acting in gross breach of his position of trust and as to the level of criminality involved”;

3. the loan funds counted towards the quantum of investment in the illegal trades.

139. The applicant accepted that the sentencing judge was entitled to have regard to the loan as conduct engaged in to increase the investment amount, and arguably as reflective of the breach of trust. He submitted that he was not entitled additionally to have regard to the use of the loan as a serious aggravating factor.

316. The sentencing judge found the motive was not personal profit but to minimise losses made by his associate, Ms Chen (at [116]).

317. The sentencing judge noted that Mr Zhu’s knowledge at the time was that “insider trading was the wrong thing to do” and his acknowledgment in cross-examination that it was contrary to company policy, dishonest and involved a conflict of interest (at [123]).

318. The sentencing judge found the receipt of the insider information was by chance, although its use represented an intentional and serious breach of trust. The sentencing judge stated the conduct occurred without any mitigating circumstances (at [125]). However, he stated he regarded it as falling within the lower range of offences of this nature (at [126]).

319. The third offence, described as the Hanlong Mining Offending, involved five transactions. Three of these were transactions were solely for his own benefit. The first was procuring Ms Chen to acquire 30,000 Bannerman CFDs on 8 July 2011, the second procuring Ms Zhao to acquire 56,740 Bannerman CFDs on 8 July 2011 and the third procuring Ms Chen to acquire 450,000 Sundance CFDs between 13-15 July 2011. The CFDs were disposed of after the takeover announcements. The total outlay in respect of these transactions was $40,098.89. The profit on disposal amounted to $67,430.10. The other two transactions involved the Wingatta transactions, the subject of Charge 2 against the applicant.

320. The findings by the sentencing judge in relation to the incorporation of Wingatta were broadly the same as those in the agreed statement of facts in the present case. However, there were a number of differences. The first was there was an express finding that the co-investors engaged in conduct which had the effect of concealing their interest in Wingatta. However, it can readily be inferred that the structure described in the Statement of Facts in the present case would have this effect.

321. The second and more significant difference is that in Mr Zhu’s case there was a finding that the applicant and Mr Zhu decided, without authority from Sichuan Hanlong, to make the takeover offer for Bannerman, expecting it not to be accepted and for the purpose of enabling them to engage in insider trading in an attempt to recoup losses incurred by Wingatta. It is quite different from the Agreed Statement of Facts in the present case, in which it was recorded that the applicant claimed Mr Liu instructed the takeover offer to be made in circumstances where Hanlong Mining’s corporate advisor had recommended a bid for 70% of the company at $0.612 per share.

322. The primary judge described the conditional proposal put to Bannerman as involving a serious abuse of position by both the applicant and Mr Zhu, although of the two men he said the applicant must be regarded as the principal person responsible for the proposal being put forward. He emphasised that the proposal was formulated for the predominant purpose of enabling the applicant and the other co-investors to engage in insider trading following the announcement of the proposal. He emphasised, however, that Mr Zhu was not being charged with market manipulation offences. Further, the sentencing judge found in the Zhu proceedings that the victims included counter-parties who traded after the takeover announcement and did so unaware that the offer was disingenuous. In contrast to that case, in the present case, there was no finding that the takeover was unauthorised or that consequential trading was carried out on a false premise.

323. In sentencing Mr Zhu the sentencing judge referred to a number of matters which he said worked in Mr Zhu’s favour. The first was the early pleas of guilty which the judge said entitled him to the maximum discount on sentence, namely 25%. The second was that he was a comparatively young man of good character prior to the commission of the offences.

324. The third matter was what the sentencing judge described as a highly unusual work environment at Hanlong Mining which did not establish and enforce appropriate standards of integrity and the prohibitions against insider trading. The sentencing judge noted that the applicant, who was the Managing Director, was described as a domineering personality who exerted a powerful negative influence on others. He stated he took into account what he described as a poisonous work culture.

325. So far as the subjective circumstances of Mr Zhu were concerned, the sentencing judge noted he was a young man with a five year old son and second child due in July 2013. He described him as a loving and supporting husband.

326. The sentencing judge accepted there were disadvantages in his background and that the events leading to him being charged and the events flowing from the charges had been traumatic to him, his wife and other family members. He noted that a consultant psychiatrist stated it was likely that he suffered from bipolar disorder and required regular mental health reviews and treatment.

327. The sentencing judge stated he took into account that his guilty pleas may mean that he had no re-employment prospects in the finance industry.

328. The sentencing judge described Mr Zhu’s contrition and remorse as substantial, assessed his prospects of reoffending as remote and stated that he had good rehabilitation prospects.

329. The sentencing judge stated he did not consider the offender’s level of maturity and expertise diminished the need for general deterrence.

330. The sentencing judge took into account the fact that Mr Zhu had consented to an order to pay the sum of $371,348.20 under the Proceeds of Crimes Act 2002 (Cth) and had paid that amount. In addition to the discount of 25% for facilitating the course of justice, the sentencing judge discounted his sentence by a further 10% for future assistance.

331. In the circumstances, the sentencing judge imposed the following sentences of Mr Zhu:

“(i) In respect of the offences committed by you between 6 November 2006 and 23 November 2007, whilst employed by Caliburn Partnership Pty Ltd, contrary to s 1043A(1)(d) and s 1311(1)(a) of the Corporations Act 2001 (Cth), I sentence you to a term of imprisonment of six months to commence on 15 February 2013 and to expire on 14 August 2013.

(ii) In respect of the offences committed by you between 21 January 2008 and 9 July 2010, whilst employed by Credit Suisse Management (Australia) Pty Ltd, contrary to s 1043A(1)(d) and s 1311(1)(a) of the Corporations Act 2001 (Cth), I sentence you to a fixed term of imprisonment of three months to commence on 15 February 2013 and to expire on 14 May 2013.

(iii) In respect of the offences committed by you between 17 July 2010 and 29 September 2011, whilst employed by Hanlong Mining Investments Pty Ltd, contrary to the provisions of s 1043A(1)(d) and s 1311(1)(a) of the Corporations Act 2001 (Cth), I sentence you to a term of imprisonment of two years to commence on 15 May 2013 and to expire on 14 May 2015. I direct that you be released on 14 May 2014 at the expiration of 12 months of that sentence on a recognisance that you be of good behaviour during the balance of the term upon your giving security in the sum of $1,000 without surety.”

The applicant’s submissions

340. The applicant submitted that he had a legitimate sense of grievance when his sentences were compared to those of Mr Zhu. He acknowledged that there were differences in the objective and subjective considerations which justified a more severe penalty in his case. However, he submitted the following matters meant it was not legitimately open to impose such a markedly disparate sentence:

1. Mr Zhu was deeply involved in the Wingatta offending. He was involved in establishing the bank account, trading accounts and personally performed the trading activities.

2. Mr Zhu stood to gain a meaningful share of profits and stood to benefit from the $1,000,000 loan.

3. The single rolled up charge contemplated additional trading in Bannerman and Sundance for his personal benefit.

4. Mr Zhu held a senior position in Hanlong Mining.

5. Mr Zhu committed previous insider trading offences.

341. Senior counsel for the applicant emphasised that Mr Zhu received a 25% discount for his plea, submitting it was not clear what discount was given to the applicant. He submitted that although Mr Zhu was under the applicant in the employment hierarchy, the two of them were involved in the transactions together.

342. Senior counsel for the applicant submitted that even if the distinctions drawn by the sentencing judge were accepted, the parity issue did not go away. In that context he submitted that the sentencing judge was incorrect in stating that the applicant was the dominant figure in the Wingatta trades. He submitted that contrary to the decision in O’Donoghue, this Court should draw its own inference on this question as distinct from determining whether the inference drawn by the sentencing judge was available on the evidence. As will be seen it is unnecessary to resolve this issue.

The Crown’s submissions

343. The Crown submitted that the disparity was not unjustifiable or without due proportion. It was submitted that Mr Zhu was only involved in the Wingatta offending with the agreement of the applicant, which highlighted his subordinate role.

344. The Crown acknowledged Mr Zhu stood to gain a share of the profits but submitted again, his role was subordinate to the applicant. The Crown also acknowledged that Mr Zhu held a senior position with Hanlong Mining but submitted he only held that as a result of being recruited by the applicant.

345. The Crown submitted the rolling up of the charges does not prevent the total criminality being assessed. It was submitted that other than limiting a finding of good character, Mr Zhu’s involvement in less serious offending with previous employers had limited significance in sentencing for the Hanlong Mining offences.

346. The Crown submitted of greater significance was the evidence Mr Zhu gave in the sentencing hearing which was largely accepted. His evidence included the dominant role the applicant played. The Crown accepted that the sentencing judge’s findings in that case, whilst irrelevant when it came to sentencing the applicant, formed a basis for significant disparity.

347. The Crown also pointed to Mr Zhu’s willingness to plead guilty before charges had been laid which was said to be in stark contrast to the applicant’s steps to frustrate the investigation and prosecution.

Consideration

348. The offences were serious examples of offences of this nature. The trading involved taking advantage of the knowledge the applicant acquired in his position as Managing Director of the company in relation to takeovers for which he had responsibility. It involved in these circumstances a breach of trust, particularly as in relation to the Wingatta trading, it extended to the use of funds borrowed from a related company of the company.

349. It is important however, in considering this issue, to bear in mind that the applicant has not been charged with any offence relating to misuse of his position of a Director of Hanlong Mining so he cannot be punished for such an offence. However, that does not seem to us to preclude taking into account the fact that the actions of the applicant involved a significant breach of trust.

350. The amounts involved in the transactions were substantial, both as to the amounts invested and the profits earned. Further, the trading took place making use of leveraged instruments which had the potential to generate significant profits for relatively small outlays. Although the trading was not risk free, as there would always be some uncertainty how the market would respond to the conditional takeovers which were made, the risk of loss was minimised by the possession of the inside information.

351. Contrary to the applicant’s submission, we do not think the seriousness of the offences was lessened by reason of the fact that they took place over a relatively short period of time. The trading took place over the time the information remained price sensitive. Once that period had expired, there was no further opportunity to trade.

352. Unlike the sentencing judge, we do not think the concealment increased the seriousness of the offence to any significant extent. It is a common consequence of insider trading that the investor will seek to conceal the trades. Further, it is not a case where new trading accounts were used or where any steps beyond using the accounts in question were used to conceal the offences.

353. We accept that some account must be taken of the applicant’s prior good character. However, generally it is only persons with good character who are able to commit offences of this nature.

354. In this context, the importance of general deterrence must be emphasised. These are not victimless crimes. At a micro level they involve trading on what is presumed to be an open market in circumstances where one party has confidential information unknown to his or her counterparty which will generally involve the counterparty acting to his, her or its disadvantage. At a macro level the financial affairs of this country depend, to a significant extent, on the integrity of the stock market. Trading is not confined to professional investors. Many persons, corporations and their superannuation funds trade on the basis that they are dealing on an informed and open market. Trading of the nature of that involved in the present case undermines the integrity of the market, and if not prevented would lead to a loss of confidence in the ability of people to invest in listed companies on an informed basis. It is for this reason that the offences are regarded as serious, as evidenced by the maximum penalty of 10 years imprisonment.

355. Although, as we have pointed out below (at [357]), there is some evidence that the applicant appreciates the seriousness of his offences and is remorseful, there remains a need for personal deterrence.

356. In sentencing the applicant it is also necessary to take into account the fact that he is a foreign national and as a result his time in custody would prove more onerous. In an affidavit filed in the appeal he stated he had not seen his children, his parents or grandparents since he was arrested over three years ago and his children did not always wish to speak to him by telephone. He also expressed concerned that by the time he is released his grandparents will have died. It is necessary to take these matters into account, although limited weight should be given to them as the applicant should have been aware that detection of the offences would inevitably result in a term of imprisonment in this country. Further, the applicant, according to the undisputed findings of the sentencing judge, has a reasonable command of the English language.

357. The sentencing judge accepted the applicant had reasonably good prospects of rehabilitation. We are prepared to proceed on the same assumption. Further, in the affidavit filed by him on the appeal, he has stated that he has reflected on his offences and that he is remorseful and sorry for his conduct. He further indicated in that affidavit he did not contest Proceeds of Crime Act proceedings resulting in $501,910 being forfeited to the Australian Federal Police on 10 September 2016, an amount of $72,813 being ordered to be forfeited at an earlier date. Those proceedings had not been finalised at the time the sentencing judge handed down his judgment.

358. As the sentencing judge stated, the Gold Pattern offending is to be taken into account in accordance with the principles in Attorney General’s Application under s 37 of the Crimes (Sentencing Procedure) Act 1999 (No 1 of 2002) (2002) 56 NSWLR 146; [2002] NSWCCA 518 (see [68] above). Although the principles in that case were stated in relation to state offences, they have been held to apply in relation to federal sentencing: see, for example, R v Nguyen; R v Pham [2010] NSWCCA 238 at [72]; R v Lamella [2014] NSWCCA 122 at [48].

359. The sentencing judge stated that in his opinion the Wingatta offending was the more serious, involving a breach of trust and fiduciary obligations aggravated by the fact the applicant was the dominant party. We agree that is correct, but only marginally so. As the sentencing judge pointed out, the applicant’s share of the Wingatta investment and his share of the profit was less than his investment and profit from his personal insider trading. Further although we are prepared to accept the applicant was the dominant party in the venture in the sense described at [155] above, the agreed facts demonstrate that Mr Yang was insisting Mr Zhu make up the Wingatta losses and it was Mr Yang who in fact arranged the loan. Further the agreed facts state that Mr Zhu and the applicant agreed to use the Bannerman takeover as an opportunity to recover the funds (see [44] above), and each of them agreed to use the proceeds after the Bannerman trading to invest in Sundance. That level of planning and the related company borrowing does make the offence somewhat more serious.

360. We have considered the cases to which the Court was referred which it was submitted showed the sentences were manifestly excessive (Hartman v R [2011] NSWCCA 261; Khoo v R [2013] NSWCCA 323; R v Curtis (No 3) [2016] NSWSC 866; R v De Silva [2011] NSWSC 243; R v Fysh (No 4) [2012] NSWSC 1587; R v Hannes [2002] NSWSC 1182; R v Joffe; R v Stromer [2015] NSWSC 741; R v Zhu [2013] NSWSC 127). It must be borne in mind that the cases referred to can do no more than provide a yardstick against which to consider a proposed sentence and do not establish an upper or lower limit to the range of sentences to be imposed: Director of Public Prosecutions (Cth) v De La Rosa (2010) 79 NSWLR 1; [2010] NSWCCA 194 at [303]-[305], cited with approval in Hili v The Queen at [54].

361. In the present case, apart from the decision of the Victorian Court of Appeal in Kamay, none of the cases referred to are of any assistance in determining the appropriate sentence in the present case. It is not necessary to deal with all of them. Of these, Hartman v R [2011] NSWCCA 261 dealt with offences which at the time carried a maximum penalty of five years imprisonment. The applicant in that case pleaded guilty to nineteen charges of insider trading and six charges of communicating inside information. A number of other offences were also taken into account on a Form 1. The offences involved personal trading, and giving information to an associate who executed the trades. Prior to sentence the applicant had consented to the forfeiture of the profit of $1,575,949.43. The applicant was sentenced to an aggregate term of imprisonment of four and a half years with a non-parole period of three years. On appeal the sentence was reduced to a total of three years with a single pre-release period of 15 months.

362. The applicant in that case pleaded guilty at the earliest opportunity and offered considerable assistance to the authorities. Further, he presented a strong subjective case. He was a relatively young, junior employee, and the activities were effectively “front running” his employer’s decisions to acquire and dispose of securities. The facts bear little resemblance to the present case.

363. Similarly, in R v Curtis (No 3) [2016] NSWSC 866, the offender was sentenced to a period of imprisonment of two years, for one offence of conspiracy to commit an offence of insider procuring, with release on recognizance after 12 months. The lower maximum penalty of five years imprisonment applied, and although unlike his co-offender Hartman, the offender did not plead guilty or provide assistance to authorities, it was necessary for the Court to nevertheless observe the principle of parity, namely, the (post-discount) sentence of 18 months imprisonment imposed on the co-offender Hartman for the “tipping” offences committed by him which related to Mr Curtis’ offending.

364. In Khoo v R [2013] NSWCCA 323 (“Khoo”) the applicant, whilst an employee of the Royal Bank of Canada, provided insider information derived by him during the course of his employment in the Investment Banking team of the Bank, to associates who acquired financial products on the basis of the information. The applicant was charged with four counts, two of which carried a maximum penalty of five years and two of ten years. The amount invested totalled $307,400, the profit earned being $110,217. The applicant pleaded guilty and gave some limited assistance to the authorities. The applicant was said to have a strong subjective case. He was sentenced to a term of imprisonment of one year and 11 months, with an order that he be released on recognisance after the expiration of 14 months. The Court of Criminal Appeal held that the sentence was not manifestly excessive. Once again, that case bears limited resemblance to the present case.

348. In R v De Silva [2011] NSWSC 243, the offender was similarly involved in effectively “front-running” his employer’s decision to acquire particular securities, and the lower maximum penalty of 5 years imprisonment applied. The lower maximum penalty similarly applied in R v Hannes [2002] NSWSC 1182 and R v Fysh (No 4) [2012] NSWSC 1587.

349. In the course of his judgment in Khoo, R S Hulme J, with whom the other members of the Court agreed, summarised a number of cases involving contravention of the insider trading provisions (at [86]-[93]). It is unnecessary to repeat that summary but it shows that these cases, R v Dalzell [2011] NSWSC 254, R v O’Brien [2011] NSWSC 1553 and R v Glynatsis [2013] NSWCCA 131, bear little resemblance to the present case and provide no assistance in resentencing the applicant. With the exception of Kamay and R v Zhu [2013] NSWSC 127, the same may be said of the other cases to which we were referred. R v Zhu [2013] NSWSC 127 is dealt with in relation to parity at [370]-[384] below.

350. The applicant submitted that the sentence imposed was the highest sentence imposed for an offence of this nature. He invited the Court to compare it with the sentence imposed and affirmed in Kamay which he said was a more serious offence and for which a lesser sentence was imposed. Two things may be noted. First, Kamay does not set an upper boundary for the sentence. It is a decision which may be taken into account as a yardstick and to ensure consistency in federal sentencing: Hili v The Queen at [54]-[57]. Second, there are significant differences between the present case and Kamay. They are summarised in both the applicant’s submissions and those of the Crown and it is unnecessary to repeat them. Some of them tend to suggest the offence is more serious and others not. Thus for example, the applicant was holding a senior management position whilst Mr Kamay, although he held the title of Associate Director, was a 25 year old who was only recently appointed to his position. On the other hand, the profit made by Mr Kamay from a relatively small investment amount was substantial. Importantly, Mr Kamay pleaded guilty at the earliest opportunity and provided far greater assistance to the authorities than did the applicant.

351. In these circumstances had it been necessary to decide the matter, we would not have concluded the sentence, apart from the question of parity, was manifestly excessive. The conduct was serious and persons who engage in it for the purpose of making substantial profits can expect severe penalties.

352. So far as the plea is concerned, the applicant is entitled to a discount for the utilitarian value of his plea of guilty. It seems to us in the circumstances of the present case that it is immaterial whether the discount is described as being given for facilitating the course of justice or for its utilitarian value. Although the plea was entered at the Local Court, the extent of the discount is lessened by the fact it was only entered following the applicant’s departure to Hong Kong and his failure to return in breach of the Court’s order necessitating a contested extradition proceeding. In these circumstances we would allow a discount of 15% for the plea.

353. So far as parity is concerned, Mr Zhu’s trading both on his own behalf, and on behalf of Wingatta in Bannerman and Sundance Securities, was charged as one offence. In addition, he was charged with the two earlier offences.

354. The principles concerning parity are well established. As was pointed out in Postiglione v The Queen (1997) 189 CLR 295; [1997] HCA 26 at 301 (“Postiglione”), equal justice requires that as between co-offenders there should not be a marked disparity of sentence which gives rise to a justifiable sense of grievance, and if there is, the sentence should be reduced notwithstanding that it is otherwise appropriate and within the permissible range of sentencing options.

355. It is not necessary for the principle to operate that the co-offenders are charged with the same offence: Jimmy v The Queen (2010) 77 NSWLR 540; [2010] NSWCCA 60 at [201]-[203]; Green v The Queen; Quinn v The Queen (2011) 244 CLR 462; [2011] HCA 89 at [30] (“Green”). It is important that if there is a relevant difference between the co-offenders, due allowance should be made for this factor, as different sentences may reflect different degrees of culpability or different circumstances: Postiglione at [301]; Green at [30]-[32].

356. As was pointed out in this Court in Lam v R [2014] NSWCCA 50 at [42], an appellate court should be cautious in determining whether an offender has a justifiable sense of grievance because of different sentencing outcomes where the same judge has sentenced both offenders and had regard to their differing criminality and different subjective circumstances. That does not mean, however, that where an appellate court comes to the view that a co-offender, objectively speaking, has a legitimate sense of grievance, it should not intervene.

357. In the present case, Mr Zhu after a discount of 25% for his plea, was sentenced to a term of imprisonment of six months for the offences whilst he was employed by Caliburn and three months for the offence committed whilst employed by Credit Suisse. The sentences were wholly concurrent (see [339] above).

358. In relation to the offence committed whilst employed by Hanlong Mining, Mr Zhu was sentenced to a term of two years accumulated for a period of three months on the earlier offences. Thus, his total period of imprisonment prior to release on recognisance was 15 months.

359. We do not think it is of particular significance, in considering the principle of parity, that Mr Zhu’s personal trading and the Wingatta trading was the subject of a single charge whilst the offences were separately charged in the case of the applicant. However, there were a number of matters which warranted a more severe sentence being imposed on the applicant.

360. First, the trading undertaken by the applicant was far more extensive. In addition, his share of the Wingatta investment and the profit he derived from it was considerably greater than that of Mr Zhu.

361. Second, as we have indicated the applicant was a far more experienced executive than Mr Zhu. He occupied a senior position and was nine years older.

362. Third, the applicant was, as his Honour found, the dominant figure in the transactions. We have expressed the reasons why that conclusion was correct in dealing with Ground 1(e) (see [155] above). However, as we indicated in dealing with that ground, Mr Zhu was on the material before the Court a willing participant. He executed the trades and not only traded on the Wingatta account but sought to profit for himself in separate trading. In relation to the Wingatta trading, the agreed facts show that there was an agreement between the applicant and Mr Zhu to obtain the loan from Wingatta to trade in the Bannerman financial products to enable Wingatta to recoup its trading losses.

363. Fourth, in sentencing Mr Zhu the sentencing judge found that he had been exposed to a poisonous work culture at Hanlong Mining. Against this it must be remembered that Mr Zhu had engaged in insider trading during the course of his employment with two previous employers where there was no suggestion of a poisonous work culture. The first of these involved trading of some significance over a period of three months. As the sentencing judge said in relation to that offence, the objective gravity was significant.

364. Fifth, in sentencing the applicant, the Gold Pattern offending, which involved another significant breach of the insider trading provisions, was taken into account.

365. Sixth, there is no doubt that Mr Zhu had a significantly stronger subjective case than the applicant (see [333]-[338] above).

366. Seventh, Mr Zhu cooperated with the authorities and consented to an order to pay $371,348.20 under the Proceeds of Crimes Act and paid that amount. In respect of his pleas of guilty and future cooperation he was awarded a 35% discount on sentence. It should be noted, however, that in the applicant’s most recent affidavit he indicated he had consented to the forfeiture of a significant amount under the Proceeds of Crime Act.

367. Against these matters it must be remembered that Mr Zhu was sentenced on facts which in one respect were significantly more serious than those on which the applicant was sentenced, namely, that in the case of Mr Zhu it was an agreed fact that the Bannerman takeover offer was made without authority, for the purposes of profiting by insider trading, and that as a result persons who traded after the ASX announcement did so in ignorance of the fact that the offer was disingenuous.

368. Taking all these matters into account the principle of parity requires a lesser sentence be imposed on the applicant than was in fact imposed by the sentencing judge. However, having regard to the serious nature of the offences, the sentence must not be such as to amount to an affront to the administration of justice: Green at [33].

369. As we indicated, we would allow a discount for the plea of 15% in respect of each offence. Although the securities and inside information the subject of the two charges related to the same corporations, there needs to be a measure of accumulation to reflect the different nature of the offences.

370. In these circumstances, we would impose the following sentences:

1. In respect of Charge 1, a term of imprisonment of 5 years commencing on 12 January 2014 and expiring on 11 January 2019.

2. In respect of Charge 2, a term of imprisonment of 5 years and 6 months commencing on 12 July 2015, expiring on 11 January 2021.

388. The total overall sentence we would impose is thus a period of 7 years.

389. In accordance with s 19AB(1) of the Act, we would fix a non-parole period of 4 years and 6 months, that in our opinion being the minimum period which justice requires the applicant serves in prison: Power v The Queen (1974) 131 CLR 623; [1974] HCA 26 at 628; Bugmy v The Queen (1990) 169 CLR 525; [1990] HCA 18 at 531, 536; Hili v The Queen at [40]-[41].

Conclusion

390. In the result we would make the following orders:

1. Grant the applicant leave to appeal against sentence.

2. Appeal allowed.

3. Quash the sentences imposed on the appellant on 11 March 2016 and in lieu thereof impose the following sentences:

1. In respect of Charge 1 having regard to the scheduled offence, the appellant is sentenced to a term of imprisonment of 5 years commencing on 12 January 2014 and expiring on 11 January 2019.

2. In respect of Charge 2 the appellant is sentenced to a term of imprisonment of 5 years and 6 months commencing on 12 July 2015 and expiring on 11 January 2021.

4. In accordance with s 19AB(1) of the Crimes Act 1914, fix a single non-parole period of 4 years and 6 months, such non-parole period will expire on 11 July 2018.

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Amendments

06 February 2018 - Coversheet - add T Prince (Respondent)

[93] add (c) (d) and (e) in quotation

[193] change view to review

[223] change [46] to [47]

[227] change Legislative to Legislation

[295] change amendable to amenable

Decision last updated: 06 February 2018