R v Sansom - [2018] NZHC 542

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CRI-2017-004-004038

[2018] NZHC 542

THE QUEEN

v

HAMISH MARK SANSOM

Hearing: 19 March 2018

Appearances:

N Williams and M Gatland for the Crown

D P H Jones QC and H Drury for the Defendant

Judgment:

19 March 2018

Reasons:

27 March 2018

REASONS JUDGMENT OF HINTON J

[re legal issue at commencement of trial]

Counsel/Solicitors:
Meredith Connell, Auckland
D P H Jones, Queens Counsel, Auckland

R v HAMISH MARK SANSOM [2018] NZHC 542 [19 March 2018]

[1] Before the Crown opened in this jury trial, I ruled on what was considered to be an important point for the trial, that on a charge of insider conduct, the Crown does not have to prove a causal connection between the possession of inside information and a trade.

[2]These are my reasons.

Background

[3] Mr Sansom faces one charge of insider conduct under s 241(1) and s 244 of the Financial Markets Conduct Act 2013 (the Act).

[4] The particulars recorded in the charging document are that after receiving from Jeffrey Honey an MMS containing an internal and confidential ERoad Limited report entitled “US Sales – Executive Summary” and an accompanying text message stating “US sales not doing to we’ll, (sic) time to sell up? Confidential obviously”, Mr Sansom sold 15,000 ERoad Limited shares at $3.41.

[5] Mr Jones QC, for Mr Sansom, signalled as part of the defence case that Mr Sansom was already intending to sell his ERoad shares and there is no causal connection between the Honey MMS/text and the trade by Mr Sansom.

[6] The Crown position is that there is no requirement for it to prove a causal connection between the information described in the particulars of the charge and the defendant’s trading. The Crown says it would therefore not amount to a defence if Mr Sansom were able to establish that he was already intending to sell his ERoad shares.

Analysis

[7]Sub-part 2 of part 5 of the Act is headed “Insider Trading” with a subheading

Insider Conduct Prohibited. Section 240(1) of the Act states:

240 Prohibition on insider conduct

(1)A person must not do any of the things set out in any of sections 241(1), 242(1), and 243(1) if the person is an information insider of the listed issuer.

[8]The relevant prohibition in this case is s 241 of the Act which states:

241 Information insider must not trade

(1)An information insider of a listed issuer must not trade financial products of the listed issuer.

…

(3)In this subpart and subpart 3, trade-
(a)means acquire or dispose of; but
(b)does not include acquire, or dispose of, by inheritance or gift.

[9] Under s 241(1), once a person is an information insider, as defined in s 234 (ie someone who has material information relating to the listed issuer that is not generally available to the market and the person knows or ought reasonably to know…

Grounds of appeal

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

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

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

Consideration

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

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

Continue reading R v Sansom

Details

AGLC: R v Sansom [2018] NZHC 542
Case: [2018] NZHC 542
Decision Date: 19 March 2018

CaseChat Overview and Summary

In the case of R v Sansom, the defendant, Hamish Mark Sansom, was charged with insider conduct under sections 241(1) and 244 of the Financial Markets Conduct Act 2013. The particulars of the charge were that Mr Sansom sold 15,000 ERoad Limited shares after receiving an internal and confidential report from Jeffrey Honey, which contained information that was not generally available to the market. The defendant's defence was that he was already intending to sell his ERoad shares and there was no causal connection between the information received and his decision to trade. The court was required to determine whether the Crown needed to prove a causal connection between the possession of inside information and a trade, in order to establish a charge of insider conduct under the Act.

The court found that there was no requirement for the Crown to prove a causal connection between the possession of inside information and the decision to trade. The court relied on the plain reading of the relevant provisions of the Act, which did not include any requirement for the Crown to prove a causal connection. The court also referred to relevant case law and commentary, which supported the conclusion that the prohibition on insider conduct applied regardless of whether the person consciously used the inside information in making a trading decision. The court rejected the argument that the market fairness rationale behind the legislation required a causal connection between the information advantage and the sale, as this was not supported by the plain meaning of the words used in the Act.

The court found that the plain reading of the relevant provisions of the Act was supported by the market fairness rationale upon which the legislation was based in part. The court noted that the rationale was directed at preventing an insider having an information advantage not derived from research or analysis of publicly available information, and was not part of the rationale that the person with inside information must be proved to have relied on it. The court also noted that requiring the Crown to prove a causal connection would seriously undermine enforcement of the insider trading prohibitions, as it would be exceedingly difficult to prove actual reliance on the information received. The court concluded that the provisions as drafted were workable and avoided the complexities inherent in proof of motivation or influence.

The court found that an offence against section 244 of the Financial Markets Conduct Act 2013 did not require proof of a causal connection between possession of inside information and the decision to sell shares. Correspondingly, it would not amount to a defence for Mr Sansom to establish that, prior to receiving the information described in the particulars of the charge, he was already intending to sell his ERoad shares, or that his decision to sell was uninfluenced by the information received.

Orders