R v Y
[2023] NZHC 3101
•3 November 2023
INTERIM ORDER SUPPRESSING NAME AND IDENTIFYING PARTICULARS OF THE DEFENDANT AND CONNECTED PERSONS, R, F AND S UNTIL FURTHER ORDER OF THE COURT. PERMANENT ORDER SUPPRESSING DETAILS OF THE DEFENDANT’S SON’S ILLNESS. IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CRI2022-004-645
[2023] NZHC 3101
THE KING v
Y
Hearing: 3 November 2023 Appearances:
B H Dickey and A D Luck for the Crown
JCL Dixon KC, HMZ Lanham and H Smith for the Defendant
Judgment:
3 November 2023
SENTENCE OF GAULT J
Solicitors / Counsel:
Mr B H Dickey, Barrister, Auckland
Mr A D Luck, Meredith Connell, Office of the Crown Solicitor, Auckland Ms C F Brooke, Financial Markets Authority, Auckland
Mr JCL Dixon KC and Ms HMZ Lanham, Barristers, Auckland
Mr S Holden, Mr H Smith and Ms S Patel (defendant’s instructing solicitor), Chapman Tripp, Auckland
R v Y [2023] NZHC 3101 [3 November 2023]
[1] Y, you appear today for sentence after being found guilty by a jury on one charge of insider conduct – advising or encouraging another person to sell shares – an offence under the Financial Markets Conduct Act 2013.1
[2] I did not enter a conviction at the end of your trial pending a possible application at sentencing. It is now accepted that a conviction should be entered, and I do so.
[3] I will begin by setting out the facts of your offending before explaining the approach I am required to take in sentencing. I will then select a starting point for your offending, and finally adjust that starting point based on your personal circumstances to determine the end sentence.
Facts of the offending
[4] The facts of your offending arise out of your involvement with Pushpay Holdings Limited (Pushpay). Pushpay specialises in electronic donation technology for church organisations with significant business in the United States and was, at the relevant time, a listed company on the NZX and ASX.
[5] You were involved with Pushpay from an early stage. At the relevant time in 2018, you were the [REDACTED]. Your family’s investment entities held a [REDACTED] shareholding in Pushpay. You were [REDACTED] regularly attended Pushpay Board meetings. You enjoyed the confidence and trust of the Board and senior executives, particularly on financial markets matters. [REDACTED]
[6] In April 2018, Pushpay’s co-founder and director, Mr Eliot Crowther, told a small number of Pushpay directors and senior executives, including you, that he intended to resign from his roles at Pushpay and would in that event sell shares in Pushpay (I will refer to this as “the Information”). Mr Crowther held just over a nine per cent shareholding in Pushpay, the sale of which Pushpay considered should be managed through a company led confidential process.
1 Financial Markets Conduct Act 2013, ss 243(1)(a) and 244. The maximum penalty is a term of imprisonment not exceeding five years and/or a fine not exceeding $500,000.
[7] At that time, your sister’s family trust, the F B Y Family Trust (the Trust), held approximately [REDACTED] million shares in Pushpay, approximately [REDACTED] per cent of the company’s shares. Pushpay shares were the Trust’s major asset.
[8] Also in [REDACTED] 2018, you relinquished your interest as a discretionary beneficiary of the Trust and your father resigned as a trustee (replaced by R), leading to substantial product holding notices on [REDACTED]. However, I am not satisfied beyond reasonable doubt that these changes in the Trust occurred because of the Information.
[9] Also around this time, your family accountant was looking to retire as a trustee of the Trust. His proposed replacement was F.2
[10]In an email you sent on 3 May 2018, addressed to R and F, you wrote:
I have spoken to [S] and she has provided the following priorities to me to forward to you.
Can I suggest you speak with her to confirm, her mobile number is [REDACTED]
‐Replace [X] as trustee with [R]
‐Realise [REDACTED]m PPH shares at $4.00+, in order to do this brokerage accounts need to be set up (Craigs Investment Partners is responsible for the largest flows, followed by FNZC), Sarah can help with the administration
‐Retire Y Ltd debt (approximately $2.7m)
‐Make a personal distribution to [S] (approximately $6.5m to repay [Y]
~$4.0m, retire ANZ debt ~$1.5m, home and car purchases ~0.9m and sundry costs $0.1m)
‐Make a distribution to [REDACTED] in a form to be discussed (approximately AU$8.5m)
‐Make a series of low risk property investments through Centuria Capital Pty Limited (approximately $3.5m)
‐Seed the trust account in order to support distributions of $3,000 per week and other expenses such as school fees and travel (approximately $0.3m for one year)
2 His appointment as trustee took effect on 8 May 2018.
…
Any questions please email me and copy in all recipients.
[11] By sending this email, you advised or encouraged the trustees to sell approximately [REDACTED] million Pushpay shares, and you intended to advise or encourage the trustees to do so. I doubt you were merely an administrative conduit for your sister’s instructions. However, I am not satisfied beyond reasonable doubt that you advised or encouraged the trustees to sell because of the Information.
[12] At the time of the 3 May email, you held the Information, and you knew you held the Information.
[13] You understood that sale of Mr Crowther’s shares would be by way of a bookbuild at a six to seven per cent discount from the market price of the shares before the share price recovered to be at or near the original price. However, I am not satisfied beyond reasonable doubt that your plan was to front-run, that is, for the Trust to sell shares at the higher price before the Information became available to the market and then repurchase shares during the dip in the market price.
[14]As of 3 May 2018, the Information was:
(a)material information relating to Pushpay; and
(b)not generally available to the market.
[15] You knew that the Information was material information. Given the jury’s verdict, your actions cannot be characterised as merely careless in this sense.
[16] Subsequent to your 3 May 2018 email, and following an introduction from you, R established a brokerage account with Craigs Investment Partners and began selling the Trust’s Pushpay shares.
[17] Between 15 and 30 May 2018, R sold [REDACTED] million of the Trust’s Pushpay shares in seven transactions at prices between $3.96 and $4.26 per share, for total gross proceeds of [REDACTED] million. On at least one occasion, Craigs reported to you on a sale transaction. Your partner helped the Trust with the administration.
[18] Although the Pushpay Board received regular updates on major sales of the company’s shares from or on behalf of [REDACTED], the updates relating to the trustees’ sales were referenced in the trustees’ personal names without indicating that they were sold on behalf of the Trust. You did not disclose that to the Board. However, I am not satisfied beyond reasonable doubt that you engaged in dishonest concealment.
[19] On 30 May 2018, you emailed your sister telling her that $6.5 million had been transferred to her personal account to cover $6,285,000 worth of payments that she had outstanding. From that, you received $4 million from the sale proceeds. Although this was variously described as a loan and a gift, I am not satisfied beyond reasonable doubt that it was properly characterised as a gain from your insider conduct.
[20] The selldown of Mr Crowther’s Pushpay shares occurred by way of a bookbuild which was announced to the market after Pushpay shares entered a trading halt on 18 June 2018. The selldown occurred the next day, on 19 June 2018. Mr Crowther’s entire shareholding sold at a clearing price of $4.04 per share.
Approach to sentencing
[21] In terms of my approach to sentencing,3 I will first set a starting point which reflects the nature and circumstances of your offending, having regard to its aggravating and mitigating features. I will then adjust that starting point – up or down
– to take into account any aggravating and mitigating factors personal to you.
[22] I must have regard to the purposes and principles of sentencing as set out in the Sentencing Act 2002.4 The relevant purposes of sentencing in your case include:
3 Following the two-stage approach set out by the Court of Appeal in Moses v R [2020] NZCA 296, [2020] 3 NZLR 583 at [46].
4 Sentencing Act 2002, ss 7 and 8.
(a)To hold you accountable for the harm done to the community – that is, to the integrity of New Zealand’s financial markets;
(b)to promote a sense of responsibility for, and acknowledgement of, that harm; and
(c)to denounce your conduct and deter you and other persons from committing the same or a similar offence – given the detrimental effect such offending has on the market and the difficulty in detecting it.
[23] These purposes are aligned with the main purposes of the Financial Markets Conduct Act 2013 which are to:
(a)promote the confident and informed participation of businesses, investors, and consumers in the financial markets; and
(b)promote and facilitate the development of fair, efficient, and transparent financial markets.
[24] I must also consider the gravity of your offending, your degree of culpability, and the seriousness of this type of offence. Finally, I must keep in mind the need for consistency between sentences for similar offending, and the need to impose the least restrictive sentence that is appropriate in the circumstances.
Starting point
[25] I turn to the starting point for your offending. There is no guideline sentencing judgment for insider conduct. Indeed, this is only the second such case in New Zealand. Given that, and the degree of regulatory alignment between New Zealand and Australia, counsel have also referred me to Australian cases.
[26] I first explain the approach to my factual findings. When referring to the facts of your offending, I indicated my further factual findings because I must sentence you on the basis of the proved facts implied in the jury’s finding of guilt,5 and I may accept as proved any aggravating fact disclosed by the evidence at trial or agreed.6 In this context, proved means proved beyond a reasonable doubt. Aggravating facts are those which justify a greater penalty than might otherwise be appropriate for the offence. Features inherent in the offence are of course relevant but they are not properly characterised as aggravating facts unless they are present to an extent that goes beyond what is inherent.
[27] Mr Dickey, for the Crown, submits the appropriate starting point for your offending is in the range of two to three years’ imprisonment. Your counsel, Mr Dixon KC, submits that when your proven conduct is identified, a starting point of community detention or a fine is justified.
Aggravating factors
[28] Mr Dickey submits that your offending was aggravated by the following three factors:
(a)a gross breach of trust and confidence: the Crown says that you were trusted by Pushpay to manage the process of selling down Mr Crowther’s stake in the company given your role and financial expertise, and you exploited this trust;
(b)the extent of the gain: the Crown says that while it is not possible to determine the extent of the gain with specificity, it was between
$209,000 and $1.93 million depending on the counterfactual sale price, not taking into account the $4 million you received from the sale proceeds; and
5 Sentencing Act 2002, s 24(1)(b). See also R v McCord [2007] NZCA 312 at [22].
6 Section 24(1)(a).
(c)harm caused to the reputation and integrity of the market: the Crown highlights that victims of insider trading are not merely those who participate on the other side of each share transaction but the investing community at large, who lose confidence in the efficiency and integrity of the market for public securities.
[29] Mr Dixon submits the Crown’s starting point relies on aggravating factors that I have not accepted were proved beyond reasonable doubt. It is correct that I have not accepted that material aspects of the Crown’s summary of facts in the sentencing submissions were proved beyond reasonable doubt. However, those unproved allegations are not directly reflected in the three aggravating factors relied on by Mr Dickey. In any event, I assess your culpability by reference to the following aggravating factors.
(a)First, breach of trust. You were a true insider of a substantial listed company. You were a high-ranking and trusted officer of Pushpay and obtained the Information directly through your role. You were a professional in financial markets matters. Even though you did not trade personally or disclose the Information itself, your advice or encouragement to sell while knowingly in possession of the Information still amounted to a serious breach of trust.
(b)Secondly, the very substantial amount involved. You advised or encouraged the sale of approximately [REDACTED] million Pushpay shares at a price of $4.00+. This was large scale trading. The total gross proceeds of sale were approximately [REDACTED] million. I accept, however, this reflected the Trust’s very substantial profit on the initial purchase price. The Trust’s alleged gain depends on frontrunning or needing to sell immediately after the bookbuild, neither of which were established.
[30] Harm caused to the reputation and integrity of the market is very relevant, but it is an inherent component of the offence of insider trading rather than necessarily an aggravating factor. Even so, in this case, the harm caused to the integrity of the market is greater given your position as a true insider of Pushpay and the substantial amount involved in the trade.
[31]I accept, however, that in other respects, the offending proved was less serious:
(a)First, it involved a single act of advising or encouraging even though its effect was a series of sale transactions.
(b)Secondly, although the Information was material, its effect during the period of an anticipated bookbuild sale was likely within two per cent of the so-called materiality threshold for a company with Pushpay’s share liquidity and volatility.
(c)Thirdly, as I have said, you did not advise or encourage the trustees to sell because of the Information.
(d)And finally, the $4 million you received from the sale proceeds is not properly characterised as a gain from the insider conduct.
[32] These features significantly reduce your culpability. Overall, I consider your culpability in the range of seriousness for insider conduct lies somewhere between low and moderate.
[33] Mr Dickey refers to six previous decisions – the one New Zealand sentencing for insider trading to date,7 and five Australian cases.8
7 Financial Markets Authority v Honey [2017] NZDC 12793.
8 R v Hannes [2002] NSWSC 1182, (2002) 173 FLR 1: The defendant was a merchant banker who, while on leave, inspected certain documents during late night visits which led to him acquiring information regarding a friendly takeover of TNT. He exploited that information and purchased TNT shares, making a profit of more than AUD $2 million although this was frozen by Court order. He was sentenced to a term of two years and two months’ imprisonment and a fine of
$100,000.
R v O’Reilly [2010] VSC 138: The defendant was a non-executive director of a company with a 25 per cent shareholding in a listed issuer. He traded on inside information, making a profit of AUD $29,000. He pleaded guilty and was sentenced to 10 months’ imprisonment with an order to be released immediately upon his own recognisance in the sum of $500 to be of good behaviour for a period of 18 months, and fined $30,000. The Court said that general deterrence must ordinarily assume significant weight; that while insider trading is rarely committed by those with a criminal history, the offender’s character and antecedents remain relevant; and the gravity of the offending will depend on factors such as the position of the accused, (a true insider will be viewed more seriously), whether elaborate steps have been taken to disguise, the amount invested, anticipated gain and impact upon any specific victim.
Khoo v R [2013] NSWCCA 323, (2013) 237 A Crim R 221: The appellant was an investment banker. In the course of his employment, he learned of insider information which he supplied to two friends who made profits of over AUD $100,000. He was charged with four counts. The New South Wales Court of Criminal Appeal imposed a sentence of one year and 11 months’ imprisonment, characterising his offending as serious tipping. The Court said there should be no distinction between insider trading and tipping offences in the sense that offenders should expect to go to jail.
R v Joffe [2015] NSWSC 741, (2015) 106 ACSR 525: An associate analyst procured his co- defendant friend to acquire securities whilst in possession of inside information. The analyst did not personally gain but the friend’s gain was approximately AUD $182,000. The analyst was sentenced to two years and three months’ imprisonment (accumulated). The friend was sentenced to two years’ imprisonment (accumulated). Both were subject to release forthwith on recognisance upon giving security of $1,000 on condition of good behaviour.
Xiao v R [2018] NSWCCA 4, (2018) 96 NSWLR 1: The appellant was Managing Director of a subsidiary of a larger Chinese corporation. He exploited material information he obtained while preparing investment opportunities for the parent company. Over a large number of trades, he made a personal profit of approximately AUD $1.5 million. He faced two charges, in respect of two pieces of inside information. The New South Wales Court of Criminal Appeal imposed a sentence of seven years’ imprisonment (accumulated), taking into account a guilty plea discount of 15 per cent.
[34]Mr Dixon refers to some additional Australian cases.9
[35] In the one New Zealand case, Financial Markets Authority v Honey, the defendant pleaded guilty to one charge of insider conduct for disclosing inside information and advising the third party to sell. The third party sold shares for just over $50,000 saving approximately $6,450 based on the end market price on the day of the announcement.10 Judge H M Taumaunu accepted that any form of insider conduct seriously undermined the integrity of New Zealand’s listed markets.11 He noted that it affects the interests of investors and has a flow-on effect in terms of the confidence that the public, and particularly the investing community, has in New
9 R v Dalzell [2011] NSWSC 454, (2011) 83 ACSR 407: The defendant was a Senior Manager in KPMG’s Financial Advisory Services Division. Through his position he learned of insider information and subsequently exploited that information by purchasing shares. Following detection, he sold the shares at a loss. The Court imposed a sentence of two years’ imprisonment but “to be served by way of intensive correction in the community” rather than being imprisoned. R v O’Brien [2011] NSWSC 1553, (2011) 91 ACSR 374: The defendant was a trustee of a superannuation fund which purchased shares in a company for which he was involved in a possible takeover. The relevant beneficiary was the defendant’s mother and the amount invested was AUD
$174,700, with a profit of approximately AUD $54,700. The defendant faced four charges, facing a maximum penalty of 10 years’ imprisonment in respect of one charge and five years’ imprisonment in respect of the other three charges. The Court viewed the objective seriousness of the offences at the lower end, considered that the period of imprisonment for each offence should be two years’ imprisonment served concurrently, and considered in the circumstances that a custodial penalty was not appropriate. The sentence of imprisonment was ordered to be served as intensive correction in the community.
R v Glynatsis [2013] NSWCCA 131, (2013) 230 A Crim R 99: The respondent was an employee who traded in shares and other financial securities relating to companies for which his employer held confidential information. Some of the trading was done in his own name and some in the names of relatives, for their benefit. Approximately AUD $371,000 was invested, realising a profit of approximately AUD $23,800 for the offender and AUD $26,300 for his relatives. The appellant faced nine charges in total. The New South Wales Court of Criminal Appeal allowed the appeal, sentencing the respondent to cumulative periods of imprisonment of 15 months for the first five charges, and another 12 months for the latter three charges. The Court directed that the respondent be conditionally released after 12 months’ imprisonment.
Director of Public Prosecutions (Vic) v Lindskog cited in Khoo v R [2013] NSWCCA 323, (2013) 237 A Crim R 221 at [93]-[94]. The offender purchased shares in a company with which he held confidential information about possible takeovers. The offender was charged with four offences, purchasing approximately AUD $172,000 resulting in a profit of approximately AUD $25,000. The Court imposed a AUD $15,000 fine on the first charge and 12 months’ imprisonment on the latter three charges but directed that the offender be immediately released on a recognisance release order to be of good behaviour for 18 months.
10 The defendant was employed as insights and analytics manager at Eroad, which had been listed on the NZX in August 2014. Through his role at Eroad, the defendant sent a text message to a third party showing a photograph of Eroad’s financial performance in the US market, followed by messaging stating that Eroad’s US sales were not doing too well and that it was “time to sell up, confidential obviously”. The third party sold 15,000 Eroad shares at $3.41 on 24 September 2015, prior to release of information about Eroad’s lower sales to the market on 28 September 2015. On the day of the announcement, Eroad shares ended at $2.98, and then fell to $2.60 at the end of the trading week on 2 October 2015. On 1 October 2015, the defendant sent the third party a text saying, “I hope you sold”.
11 Financial Markets Authority v Honey [2017] NZDC 12793 at [33].
Zealand’s financial markets.12 The Judge considered that the aggravating features of the offending were the defendant’s gross breach of trust and the detrimental effect his offending had on the integrity of the financial markets.13 As I have indicated, I interpolate that the latter is inherent albeit the extent of the effect will depend on the nature of the offending.
[36] Judge Taumaunu also referred to Australian cases and accepted that the principle of general deterrence is emphasised as the primary sentencing purpose and that those Australian cases confirm the expectation that insider conduct should normally lead to sentences of imprisonment.14 He also said that the Australian and UK cases illustrated the general point that anyone who engages in insider conduct, whether it be tipping or insider trading, should expect to go to prison or, at least, that the starting point should be one of imprisonment.15 The Judge explained that the rationale is so that the general message of deterrence can be reinforced with a view towards ensuring and promoting public trust and confidence in the integrity of New Zealand’s financial markets.16
[37] In that case the Judge adopted a starting point of 12 months’ imprisonment,17 noting that the defendant did not personally benefit from his disclosure to the recipient.18
[38] Mr Dickey submits your case is more serious given your higher level of trust and the amount involved. I agree those aggravating factors are substantially more serious than in Honey. However, your culpability is significantly reduced, as indicated, given the other mitigating factors identified.
12 Financial Markets Authority v Honey [2017] NZDC 12793 at [33].
13 At [34], albeit in the context of assessing the gravity of the offending for the purposes of an application under s 106 of the Sentencing Act 2002.
14 At [34].
15 At [40].
16 At [40]-[41].
17 At [43]. Having regard to the defendant’s personal factors and guilty plea, the end sentence was six months’ home detention.
18 At [45].
[39] Counsel agree that the Australian insider trading cases referred to are helpful in terms of identifying relevant factors and the purpose of assessing culpability. But counsel disagree as to whether the Australian cases support the Crown’s proposition that convictions for insider conduct will typically attract sentences of imprisonment.
[40] New Zealand’s insider conduct regime is similar to that in Australia.19 However, there are important distinctions in relation to sentencing. First, the equivalent Australian offence is subject to a higher maximum penalty.20 Some of the Australian cases cited relate to conduct when the maximum penalty was 10 years rather than five years. I understand it is now 15 years’ imprisonment. Secondly, sentencing in Australia does not involve our two-stage approach beginning with setting a starting point.21 As Mr Dickey acknowledges, the fact that the Australian cases do not identify a discrete starting point complicates any attempt to use those decisions as comparators. In addition, some of the Australian cases cited imposed suspended sentences albeit this too may have reflected personal circumstances or guilty pleas. I also accept Mr Dixon’s submission that the Australian cases cited – or at least most of them – involved more serious proved offending.
[41] Even so, the Australian cases do emphasise the importance of general deterrence and I accept the Crown’s submission about the importance of deterrence. As has been said in the New South Wales Court of Criminal Appeal:22
The acquisition or disposal of financial products by people having the unfair advantage of insider information is criminalised because it has the capacity to unravel the public trust which is critical to the viability of the market. It is, as previously observed by this Court, a form of cheating. The fact that people of otherwise good character and compelling personal circumstances are tempted to engage in such conduct emphasises the need for the clear deterrent that insider traders should expect to go to gaol.
19 Corporations Act 2001 (Cth).
20 The maximum was increased from five to 10 years’ imprisonment in 2010 and then to 15 years’ imprisonment in 2019 in the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 (Cth), sch 3. See also Corporations Act 2001 (Cth) sch 3.
21 The Australian approach to sentencing, referred to as “instinctive synthesis”, is to identify all the factors relevant to a sentence, to discuss their significance and then to make a value judgement as to what the appropriate sentence is given all the factors of the case. Only at the end of that process does the Court then identify a sentence: Markarian v R [2005] HCA 25, (2005) 228 CLR 357 at
[51] per McHugh J. This approach was recently reaffirmed by the High Court of Australia in Stanley v Director of Public Prosecutions (NSW) [2023] HCA 3 at [59] per Gordon, Edelman, Steward and Glesson JJ.
22 R v Glynatsis [2013] NSWCCA 131, (2013) 230 A Crim R 99 at [79] per McCallum J.
[42] Given my view of your culpability, as indicated, and having regard to the cases cited, I adopt a starting point of 18 months’ imprisonment.
Personal aggravating and mitigating factors
[43] I now adjust that starting point for aggravating and mitigating factors personal to you.
Previous conviction
[44] You have one previous conviction under s 59(1)(c) of the former Securities Act 1978. This was a representative charge for your role as promoter in relation to investment statements for a [REDACTED] scheme operated by a company in which you were a director, Y Limited (Y Ltd). The documents addressed the performance of Y Ltd’s [REDACTED] funds by comparing their unit price performance against that of other funds. However, none of the documents disclosed that the performance of Y Ltd’s [REDACTED] funds had been inflated by two acquisitions of shares at an undervalue. The effect of this conduct meant that Y Ltd’s [REDACTED] funds appeared to be outperforming their competitors even though without the undervalue transactions, the scheme’s relative performance would have been last and second to last in the Growth and Conservative, and Balanced Funds, respectively. You pleaded guilty and were fined $112,500.
[45] The Crown says that you are now before the Court for a further breach of financial markets legislation. In the absence of any insight or remorse, and given the importance of deterrence, Mr Dickey submits that this warrants an uplift of at least 10 per cent.
[46] Mr Dixon, while acknowledging your conviction for a strict liability offence in 2011, submits that a minor discount is available for your good character and rehabilitative prospects. I have received and read a number of character references which indicate your personal qualities and generosity as well as your business skills.
[47] I accept that your Securities Act conviction was for a less serious offence,23 was, as the sentencing Judge said, motivated significantly by your desire to ensure that investors did not suffer a loss, and that it related to conduct between [REDACTED]. In these circumstances, I decline to impose an uplift for this previous conviction, but despite your character references I consider that conviction clearly counts against a discrete discount for previous good character.
Personal mitigating factors
[48] In relation to your rehabilitative prospects, I accept Mr Dixon’s submission that the pre-sentence report is premised on a view of the facts of your offending that does not reflect my findings. Even so, it indicates that you did not express any remorse and assesses you as presenting a moderate risk of re-offending. I consider that overstates the risk, but I accept Mr Dickey’s submission that there is an apparent lack of remorse for, and insight into, your offending.
[49] Mr Dixon seeks a discount given the effect of the Financial Markets Authority’s protracted investigation on your mental health. The rationale is not criticism of the investigator but the effect on you.24 You were notified of the investigation in the second half of 2020. You were interviewed in November 2020, and then had no contact from the regulator until you were charged in February 2022. Mr Dixon refers to the evidence of Dr Goodwin, a consultant psychiatrist, from last year in support of your name suppression application and a recent letter from Mr Reeves, a clinical psychologist. I accept that the proceeding has been stressful for you and that it has affected your mental health. However, that is largely not the effect of delay. I consider that no discrete discount is warranted for delay.
23 Securities Act 1978, s 59(1), the maximum penalty was limited to “$300,000 and, if the offence is a continuing one, to a further fine not exceeding $10,000 for every day or part of a day during which the offence is continued”.
24 Financial Markets Authority v Honey [2017] NZDC 12793 at [65]-[66]; and R v Joffe [2015] NSWSC 741 at [117].
[50] I turn to your personal background and family circumstances. You are 47 years old. You studied commerce at university. Following graduation, you helped your father in the successful family investment business. You still work for that business. You have very supportive parents and siblings as well as your own partner of 15 years. Together, you have three young children aged four, two and 14 months.
[51] Mr Dixon seeks a discount on compassionate grounds given that your youngest child has recently been diagnosed with [REDACTED]. The Crown acknowledges that a discount would be available on compassionate grounds.
[52] Mr Dixon submits that the coming months will be particularly trying for your family, that the sad reality is [REDACTED].
[53] As Mr Dixon submits, the Supreme Court has indicated that tragic family circumstances unrelated to the offending can justify a compassionate reduction in sentence, but the crucial importance of deterrence requires that the reduction be a modest one – in that case it was 17 per cent.25
[54] Mr Dixon also refers to the Supreme Court’s recent confirmation that a discount is available where a child has a secure attachment with a defendant,26 and two recent Court of Appeal decisions.27 These reflect the uncontroversial proposition that the Courts take into account the welfare of affected children in sentencing.28 How much weight such attachment can be accorded depends on the circumstances. In the Supreme Court case referred to, a discount was available, in part because the relationship was linked to the defendant’s rehabilitative prospects.
[55] Here, Mr Reeve’s letter stated that your children exhibit signs of secure attachment. Mr Reeve appropriately acknowledged that he is a treating, rather than assessing, clinician but I accept he is well placed to assess this attachment. However,
25 Jarden v R [2008] NZSC 69, [2008] 3 NZLR 612 at [14]-[15].
26 Philip v R [2022] NZSC 149, [2022] 1 NZLR 571 at [52]-[53]. See also Milne v R [2023] NZCA 491 at [56].
27 Milne v R [2023] NZCA 491 and Sweeney v R [2023] NZCA 417.
28 At [50]-[52] and Sentencing Act 2002, s 8(h) and (i).
as the Crown submits, in your case the secure attachment is not linked to your rehabilitative prospects.
[56] In any event, I consider that a reduction for any sense of loss on the part of your children if you were imprisoned should be considered together with a compassionate reduction so as to avoid double counting. Taking these factors together, I consider that a reduction of approximately 20 per cent or four months’ imprisonment is appropriate.
[57] That reduces the starting point of 18 months’ imprisonment to 14 months’ imprisonment.
[58] Accordingly, it is open to the Court to consider a sentence other than imprisonment. I need to consider whether to impose a less restrictive sentence giving effect to the purposes and principles of sentencing set out in ss 7 and 8 of the Sentencing Act 2002.
[59] I have emphasised the importance of deterrence in relation to insider conduct offending. However, a sentence of home detention can serve the important principles of denunciation and deterrence as well. It is a serious sentence. Taking into account your immediate family’s current circumstances, which I have addressed, I consider that a sentence other than imprisonment is appropriate.
[60] Mr Dixon submits that the mandatory conditions of home detention and community detention mean there is no guarantee that you will be able to attend your son’s non-urgent medical appointments and travel internationally with your family to explore medical options, nor any guarantee you could spend time away from the home with your family to create happy memories, particularly for your older children, before your [REDACTED]. Accordingly, he submits both forms of sentence – that is, home detention and community detention – would be disproportionately severe sentences in your unique circumstances.
[61] The mandatory home detention conditions provide for absences from the offender’s residence with the approval of the probation officer.29 An offender can leave New Zealand with the prior written consent of a probation officer. The mandatory community detention conditions provide for absences from the curfew address during the curfew period with the approval of a probation officer (and subject to conditions imposed) on humanitarian grounds.30 Again, an offender can leave New Zealand with the prior written consent of a probation officer. As Mr Dickey submits, the Court is entitled to proceed on the basis that a probation officer considering a requested absence would exercise that discretion reasonably and humanely. I therefore do not consider that either sentence would be disproportionately severe in your circumstances.
[62] Stepping back, I consider the purposes for which your sentence is being imposed can nevertheless be achieved by a less restrictive combination of sentences than a sentence of home detention. Therefore, home detention should not be imposed.31 Community detention is also a restrictive sentence given the imposition of a curfew period, but the extent of the restrictions can be customised to fit your unique circumstances on humanitarian grounds. It enables you to work during the day as well as attend medical appointments and other family commitments. Also, in your case electronic monitoring may not be necessary, but community detention enables the probation officer to require it to monitor compliance.32
[63] I consider that a maximum sentence term of six months’ community detention is necessary, with a curfew period from 9:00 pm to 6:00 am seven days a week.
[64] I also consider that a fine is necessary to meet the relevant purposes of sentencing which I have outlined. Having regard to the total penalty to be imposed, including the period of community detention, and your ability to pay, I consider a fine of $100,000 is appropriate.
29 Sentencing Act 2002, s 80C(3)(c).
30 Section 69E(2)(d).
31 Section 15A.
32 Section 69E(1)(e).
Result
[65]Y, please stand.
[66] For your offence of insider conduct, you are sentenced to six months’ community detention, with a curfew period from 9:00 pm to 6:00 am seven days a week at the curfew address set out in the pre-sentence report dated 25 September 2023, and a fine of $100,000.
[67]I make an order suppressing details of your son’s illness.
[68]Please stand down.
Gault J
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