Court of Criminal Appeal Supreme Court New South Wales Medium Neutral Citation: Adler v R [2006] NSWCCA 158 Hearing dates: 22 March 2006 Decision date: 18 May 2006 Before: McClellan CJ at CL Sully J Hislop J Decision: By majority: Appeal dismissed Catchwords: CRIMINAL LAW – breaches of the Corporations Act – appeal against sentence - dissemination of false information – dishonesty – failure to discharge duties as a director in good faith and in the best interests of the company – whether evidence to support findings relating to inducement to purchase securities, share price rise and investors' loss – whether adequate weight given to principle of double jeopardy having regard to civil penalty proceedings – application of De Simoni principle – whether punished for an offence for which not convicted – whether sentence reflected objective criminality – whether adequate weight given to guilty plea – whether sentence manifestly excessive Legislation Cited: Corporations Act 2001 (Cth) Crimes Act 1900 (NSW) Crimes Act 1914 Cases Cited: Adler & Anor v Australian Securities and Investment Commission; Williams v Australian Securities and Investments Commission [2003] NSWCA 131; (2003) 179 FLR 1 Australian Securities Investment Commission v Adler [2002] NSWSC 171; (2002) 168 FLR 253; (2002) 41 ACSR 72 Gas v The Queen (2004) 217 CLR 198 Markarian v R (2005) 215 ALR 213 Pearce v The Queen (1998) 194 CLR 610 R v Goward (unreported, NSWCCA 16 October 1998 R v Loiterton [2005] NSWSC 905 R v Thomson (2000) 49 NSWLR 383 R v Thomson [2003] VSCA 164 Rich & Anor v Australian Securities and Investment Commission (2004) 209 ALR 271 Category: Principal judgment Parties: Rodney Adler (Appl) The Crown Representation: COUNSEL: E L Fullerton SC/ M Buscombe (Appl) W Abraham QC/M Wigney (Crown) SOLICITORS: Gilbert & Tobin Lawyers Commonwealth Director of Public Prosecutions File Number(s): 2005/2259 Decision under appeal Court or tribunal: Supreme Court Before: Dunford J File Number(s): 2003/48 Judgment 1. McCLELLAN CJ at CL: On 16 February 2005 the applicant pleaded guilty to an indictment containing the following counts: Count 1 (s 999 count) On 19 June 2000 at Sydney in the State of New South Wales did disseminate information that was false in a material particular and was likely to induce the purchase by other persons of securities, namely ordinary shares in HIH Insurance Limited (HIH) when at the time of disseminating the said information he knew that it was false in a material particular (s 999 Corporations Act 2001 (Cth)). Count 2 (s 999 count) On 20 June 2000 at Sydney in the State of New South Wales did disseminate information that was false in a material particular and was likely to induce the purchase by other persons of securities, namely ordinary shares in HIH, when at the time of disseminating the said information he knew that it was false in a material particular (s 999 Corporations Act 2001 (Cth)). Count 3 ("BTS" count) Between 3 October 2000 and 11 October 2000 at Sydney in the State of New South Wales with intent to obtain for Business Thinking Systems Pty Ltd (BTS) money, namely the sum of $2 million did make and publish statements which he knew to be false in a material particular (s 178BB Crimes Act 1900 (NSW)). Count 4 ("BTS" count) On 29 November 2000 at Sydney in the State of New South Wales, being a director of a corporation, namely HIH, was intentionally dishonest and failed to discharge his duties in good faith in the best interests of HIH in that, having a financial interest in Business Thinking Systems Pty Ltd (BTS), he attended a meeting of directors of HIH which ratified an investment of $2 million in BTS, remained present and participated in the discussion, but failed to disclose adverse information about the investment or information about the financial position of BTS known to him to be relevant to that ratification which he knew should have been disclosed, contrary to s 184(1)(b) of the Corporations Act 2001 (Cth). 1. The maximum penalty prescribed for each of the offences is five years imprisonment and/or in the case of the offences under the Corporations Act a fine of $20,000. 2. The applicant pleaded guilty to the s 999 counts in the Supreme Court on 16 February 2005. On the same day the applicant pleaded guilty in the Local Court to the BTS counts and was committed for sentence. The applicant adhered to his plea to the BTS counts in the Supreme Court on the same day. 3. On 14 April 2005, the applicant was sentenced as follows: In relation to counts 1 and 2, imprisonment for two years and six months concurrent with each other and to commence on 14 April 2005 and expire on 13 October 2007; In relation to count 3, imprisonment for a fixed term of twelve months, such sentence to be wholly concurrent with the sentence imposed on count 4 and to commence on 14 October 2006 and expire on 13 October 2007; and In relation to count 4, imprisonment for three years, the sentence to be partly concurrent and partly cumulative on the sentences imposed on counts 1 and 2 and to commence on 14 October 2006 and expire on 13 October 2009. 1. Accordingly, the overall sentence imposed was imprisonment for four years and six months with a non-parole period of two years and six months. 2. The sentencing judge fixed a single non-parole period in respect of the Federal offences (counts 1, 2 and 4) and a fixed term in respect of the State offence (count 3) having regard to what would otherwise have been the non-parole period for that offence. His Honour indicated that he did this recognising the interplay between the Commonwealth and State sentencing regimes and to avoid possible errors of conflict and confusion in their administration. The facts – s 999 counts 1. The sentencing judge made findings of fact which in relation to the s 999 counts are relevantly as follows: "Over three days in June 2000 the applicant caused Pacific Eagle Equities Pty Limited, (PEE) a company of which the applicant was sole director and secretary, to purchase large parcels of shares, in HIH Insurance Limited using funds that had been advanced to PEE by HIH using a trust known as the Australian Equities Unit Trust. The applicant caused notices to be sent to the Australian Stock Exchange (ASX) in which he was reported as having a 'relevant interest' in the acquired HIH shares. On two consecutive days shortly after the purchase of the HIH shares, the applicant knowingly disseminated false information to a journalist with the Australian Financial Review (AFR) in relation to these share purchases. On the first occasion (19 June 2000 – count 1) the applicant made statements that 'fostered and encouraged' the journalist's mistaken belief (based on the ASX notices) that the applicant, a non-executive director of HIH, had purchased the HIH shares the subject of the ASX notices on his own behalf. The false information disseminated by the applicant was published in the AFR the following day. On the second occasion (count 2) the applicant, having seen the article in the AFR on 20 June, not only chose not to correct the inaccuracies in the article, but also went further and made blatant, direct and 'totally untrue' statements to the effect that he was purchasing the HIH shares with his own money. The substance of the applicant's untrue statements was published in the AFR the following day. The applicant at the time had a prominent media profile as a director and shareholder of HIH and as an experienced, active, successful, and large-scale investor with a diverse array of investment interests. The statements made to the AFR journalist were likely to be reported. The statements were likely to induce others to purchase shares in HIH. It was the applicant's intention in making the misleading statements to induce others to purchase shares in HIH so as to cause a rise in the share price. The HIH share price did rise following the statements – to a high of $1.21 on 11 July 2001. The applicant stood to benefit from a rise in the share price in two ways; the first because it helped to position him as Mr Williams' successor as CEO of HIH; the second being that the applicant held a large parcel of HIH shares the value of which would increase as the share price increased." 1. His Honour summarised the nature and objective seriousness of the s 999 counts in the following way: "The offences are serious and display an appalling lack of commercial morality. The dissemination of false information concerning the real purchaser of the HIH shares and the source of the funds for such purchases had the potential to, and I am satisfied did in fact, distort the market in HIH shares and I have no doubt that the statement "I am putting my money up which shows I believe in the industry" coming as it did from a director of the company with a reputation for shrewd investment, would have induced people, particularly small investors, to purchase HIH shares. Many, if not all, of such people would have lost their money when the company collapsed." 1. The applicant gave evidence during the sentence hearing. As his Honour observed, the applicant's evidence was directed at attempting to explain and justify, at least partially, his actions. These attempts were largely unsuccessful and his Honour rejected most of the applicant's explanations and justifications. The facts – BTS counts 1. His Honour made factual findings in respect of these offences as follows: "The applicant had an effective 35-38.5% interest in a company called Business Thinking Systems Pty Limited ("BTS"). HIH also had an indirect 15-16.5% interest in BTS. In September 2000 BTS was suffering severe cash flow difficulties. A plan by BTS to raise $8 million or $5 million by a capital raising through Foster Stockbroking in the latter part of 2000 was unsuccessful and by October 2000 no funds had been raised. On 29 September 2000 the applicant wrote to Ray Williams of HIH and requested HIH to invest $2 million in BTS. The correspondence contained two materially false statements. (i) BTS was $2.5 million short of funding the capital raising of $5 million (whereas in fact having raised no money it was $5 million short); (ii) The applicant would put in another $500,000 (whereas he had no intention and did not invest any money in the fundraising). On 10 October 2000 the applicant forwarded to Mr Williams at HIH a letter from John Vamos of BTS that falsely acknowledged receipt by BTS of $500,000 from the applicant. Of the $2 million paid by HIH to BTS, $50,000 was paid to the applicant as a brokerage fee for arranging the $2 million investment by HIH and $400,000 was paid to a company (Pacific Mentor Pty Limited) which was owed money by BTS and which the applicant had an effective 70% interest in. The applicant made the false representation about his intention to invest $500,000 so as to improve his chances of getting HIH to invest $2 million. The HIH board met on 29 November 2000 to consider, inter alia, whether to ratify the $2 million investment. The applicant intentionally and dishonestly failed to disclose information relevant to the board's deliberations, including the dire financial position of BTS (it had incurred substantial losses and was effectively insolvent) and his misrepresentations to Mr Williams to obtain the investment in the first place. 1. The sentencing judge summarised the nature and objective seriousness of the BTS counts in the following terms: "The BTS matters are equally serious. They also display a lack of commercial morality and the telling of lies for business purposes, expressly in the case of the third count and by non-disclosure in the case of the fourth count. On top of that, they were offences committed by a director of the company where the company was itself the victim. Directors are not appointed to advance their own interests but to manage the company for the benefit of its shareholders to whom they owe fiduciary duties. Accordingly to obtain money from the company by false representations and then to attend a Board meeting and compound the earlier offence by not disclosing the misrepresentation or the deterioration in BTS' position since the advance, but actively talking it up as a good investment to secure ratification for the transaction, constitutes very serious breaches of the duties of a director. In relation to the misrepresentations the subject of the third count, the offender described them "in a broad sense" as "stupid errors of judgment" in an effort to cut corners. They were not stupid errors of judgment but deliberate lies, criminal and in breach of his fiduciary duties to HIH as a director. The amount of money fraudulently obtained from the company ($2m) was large. " 1. As with the s 999 counts the applicant sought, when giving evidence, to explain and justify his actions in relation to the BTS counts. His Honour rejected these explanations. Civil Penalty Proceedings 1. Prior to the commencement of criminal proceedings against the applicant for the offences contained in counts 1 and 2, the Australian Securities and Investments Commission (ASIC) took civil penalty proceedings against the applicant, a company in which he held an interest, Adler Corporation Pty Ltd, Williams and Dominic Fodera, an officer of HIH, for alleged breaches of the Corporations Act 2001 (Cth). The proceedings were heard and determined by Santow J in ASIC v Adler & Ors [2002] NSWSC 171; (2002) 168 FLR 253; (2002) 41 ACSR 72 and thereafter were considered on appeal by the Court of Appeal: (Adler v ASIC; Williams v ASIC [2003] NSWCA 131; (2003) 179 FLR 1). 2. Santow J made the following orders: (a) The applicant was disqualified from managing a corporation for a period of 20 years; (b) The applicant, Williams and Adler Corporation Pty Ltd were ordered to pay compensation to HIH Casualty & General Insurance Limited of $7,986,402. (c) The applicant was ordered to pay a pecuniary penalty of $450,000. (d) A pecuniary penalty of $450,000 was also imposed against Adler Corporation Pty Ltd. Subjective and mitigating matters 1. His Honour made a number of findings with respect to subjective and mitigating matters. His Honour referred to the testimonials which were tendered which spoke of the applicant as a good and committed husband and father who had given generously to charity and assisted persons in difficulties. At the time of the commission of the s 999 counts the applicant had no prior convictions, but by the time he committed the BTS counts had committed the s 999 counts and the civil contraventions and accordingly his Honour found could not be regarded as a person of good character "in the business sense." 2. The applicant's pleas of guilty to the BTS counts were early pleas, however his pleas to the s 999 counts were not. 3. Whilst his Honour found the applicant to have expressed remorse he also found that remarks made by the applicant during his evidence suggested that he did not really acknowledge to himself the full extent of his wrongfulness in "the business sense." 4. His Honour found that the civil penalty proceedings brought by ASIC which I consider later were only indirectly concerned with the dissemination of false information to the AFR journalist and this aspect of the applicant's conduct played only a small part in the disqualification and no part in the orders for compensation or pecuniary penalty imposed by Santow J. The appeal 1. There are nine grounds of appeal. Ground 1 – in fixing the sentences imposed in relation to counts 1 and 2, being offences alleging a breach of s 999 of the Corporations Act 2001 (Cth), his Honour erred in finding that the false statements made by the applicant induced small investors to purchase shares in HIH and that such investors lost their money when HIH collapsed. There was no evidence to support such findings. 1. The applicant identified error in the passage which I have already quoted from the remarks on sentence (see para [8] above). In particular the findings that the applicant's statements "would have induced people, particularly small investors, to purchase HIH shares. Many, if not all, of such people would have lost their money when the company collapsed" are challenged, and it was submitted that these findings were not open to his Honour on the evidence. 2. The applicant emphasised that there was no evidence tendered to his Honour from investors who said that they had purchased HIH shares because of the statements made by the applicant. It follows that there was no evidence before his Honour that any person suffered loss as a consequence of the statements made by the applicant. 3. The evidence which was before his Honour established that on 15 June 2000, four days prior to the first false statement made by the applicant, HIH had made an announcement to the ASX dealing with concerns expressed in the market concerning the company's capital adequacy, its investments and its business strategy. The evidence indicated that some brokers considered that announcement to be positive in so far as investors in HIH were concerned. The closing price of HIH shares on 15 June was 7 cents higher than the closing price on the day before the announcement leading to the inference that the share price had risen because of that announcement. On 15 June, and the immediate following trading days, the volume of HIH shares traded on the ASX was greater than on 14 June, the day before the announcement. However, trading decreased over each of those days. Accordingly, it was submitted that the announcement of 15 June by HIH was the factor which both positively impacted on the share price and caused an increase in trading volume rather than any statement by the applicant. 4. During the course of the hearing before this Court we were informed by counsel for the applicant that there had been an arrangement between the prosecutor and counsel for the applicant before the sentencing judge that evidence would not be tendered on the issue of whether or not the publication of the false information had caused persons to buy shares and thereafter lose money. Accordingly, it was submitted that the prosecutor carefully chose his words when he submitted to the sentencing judge that "there is a real possibility that Mr Adler's statements did in fact cause people to purchase HIH shares." In response counsel for the applicant said: "One thing is clear. The Crown does not assert, because it has not proved, that the market price was in fact strengthened or that others in fact were encouraged to buy or indeed enter the market as a result. It is that factor, absent from these proceedings, which in my respectful submission distinguishes these proceedings from any of the authorities which my friend advances not by way of analogy I know but by way of background." 1. Notwithstanding this submission being made on behalf of the applicant counsel for the Crown said later: "The Crown case is that there was an intention to get people to buy, and we have made a submission that there was a real possibility that people may have purchased, and in para 9(e) of our submissions today we have drawn attention to the evidence of Mr Adler. He said that it was fair to say that the second article might influence some investors. Now, in para 11 this is directed to a – it is a submission that the misleading – or the false statement did not cause HIH to advance the money." Consideration of ground 1 1. The evidence before his Honour in relation to share trading in HIH revealed that in the days in June, prior to 15 June, the share price had fallen from $1.15 on 1 June to 95 cents on 14 June. Trading volumes varied from a low of 656,935 shares on 2 June to 2, 317,122 shares on 9 June. On 15 June the share price closed at $1.02 and a total of 4,932,662 shares were traded. In my opinion, there being no other explanation provided by the evidence, the applicant's submission that the share price rose at this time in relation to the announcement by HIH is correct. It would be expected that the impact of that announcement persisted for a period of time and this is confirmed by the trading figures. The shares traded again on 16 June and rose 1 cent but only 2,258,193 shares were traded. On 19 June the share price closed at $1.02 and 1,854,953 shares were traded. 2. The publication of the false information provided by the applicant was first made on 20 June. On that day the share price closed 1 cent lower but 3,089,015 shares were traded. On 21 June when the second untrue statement was published in the AFR 3,065,421 shares were traded and the price rose to $1.03. Thereafter the price continued to rise reaching its high point on 17 July 2000. After 21 June the maximum shares traded on any day occurred on 23 June 2000 when 3,723,507 shares were traded and, although trading remained brisk for a few days, it proceeded to decline significantly after that time. 3. Of these matters the sentencing judge said: "Not only were the statements which he made to the journalist, and which were therefore likely to be reported, likely to induce other persons to purchase shares in HIH, but I am satisfied that such was his intention so as to cause a rise in the share price, as in fact it did, rising as high as $1.21 on 11 July 2000 before commencing its final decline." 1. Having regard to the charges his Honour's finding in relation to the applicant's intention could not be challenged. The applicant clearly intended to influence the market in a positive direction. His Honour's finding that the share price rose in the manner which he indicated is also correct. It is merely a reflection of the evidence of the trading in HIH shares which was before him. Furthermore, if as I am satisfied his Honour intended, he has found that the rise in the share price could be related to the information provided by Mr Adler and published in the AFR I am satisfied this is correct. Both the volume of shares traded and the movement in the price, in the absence of evidence of any other explanation, would lead to the inevitable inference that Mr Adler's intention had, at least to some degree, been effected. Although it is apparent that the announcement by HIH on 15 June also impacted on the market its impact had clearly begun to dissipate by the time Mr Adler's statements were published. Having regard to the evidence before his Honour the inference that there was a rise in the share price because of the applicant's remarks was irresistible. 2. It is at a later point in his remarks on sentence that his Honour expressed the view that is challenged in ground 1. In my opinion, having regard to the evidence before his Honour the findings which he made were open. Although corporate and large investors would no doubt have access to a variety of information there could be little difficulty in accepting that small investors would be influenced by stories in the AFR indicating that a well-known investor, shareholder and director of HIH was acquiring substantial shares in the company. Any person who purchased shares after reading the articles in the AFR would have to have sold again before 7 September 2000 if they were to avoid losing money. Whether this happened the evidence does not indicate, although, having regard to the relatively rapid decline in the share price it would seem inevitable that some persons would have held them beyond the short period in which they could have made a profit. 3. It was submitted that before his Honour could have made any of the challenged findings evidence from persons expert in analysing the market would have been required. However, his Honour was not told of any possible evidence and was unaware of the agreement between counsel. His Honour, of course, would not have been bound by any agreement in any event (see Gas v The Queen (2004) 217 CLR 198). In the absence of any other evidence his Honour was required to analyse and make findings having regard to the evidence before him. That evidence, in my opinion, supports all of his Honour's findings except for the finding that "many, if not all would have lost their money when HIH collapsed." Although a finding that some person would have lost money would have been uncontroversial, to identify "many" or "all" as having lost, to my mind, goes beyond a finding which was open on the evidence. 4. However, that finding is not critical to his Honour's assessment of the criminality of the applicant's actions. The criminality is adequately described by the finding that the applicant intended to influence the market and by so doing induced persons to buy shares in HIH, at the same time knowing that his representation was false. Ground 2 – in fixing the sentences imposed in relation to counts 1 and 2, his Honour erred in finding that the false statements by the applicant caused the price of HIH shares to rise. There was no evidence to support such a finding. 1. I have considered the factual matters relevant to this ground of appeal. I am satisfied that having regard to the evidence which was before him his Honour's finding that the share price rose in response to the applicant's false statements was available. Ground 3 – in fixing the sentences imposed in relation to counts 1 and 2 his Honour erred in attributing to the applicant an intention to induce other persons to buy shares in HIH, based upon a finding of a causal link between the false statements by the applicant and the rise in the share price. 1. I have already considered the elements of this ground. I am satisfied that it was open to his Honour to find that the applicant intended his statements to cause the share price to rise and furthermore that it did rise. Ground 4 – in fixing the sentences imposed in relation to counts 1 and 2, his Honour erred in failing to give adequate weight to the principle of double jeopardy having regard to the orders made by Justice Santow in civil penalty proceedings taken against the applicant by ASIC. 1. I have referred in [13] and [14] to the civil penalty proceedings before Santow J. 2. The evidence before the sentencing judge was that the applicant had paid the pecuniary penalty in orders (c) and (d) as well as the amount of compensation in (b). In total the applicant paid $8,886,402 in compliance with the orders made in the civil penalty proceedings. The Crown conceded that there was no likelihood that the applicant would recover any funds from Williams under any right of contribution he might have had against him. 3. In explaining why and how he had paid all of the compensation the subject of order (b) as well as the pecuniary penalties, the applicant gave evidence that at the time he did not have the funds to meet the full amount, and had received advice that he could legitimately go bankrupt as a consequence of the orders that had been made. He gave evidence that in order to make the payments he sold a number of businesses and assets, and borrowed funds. He gave further evidence that "honouring the Court's orders was more important that the value of the money", and that "going bankrupt was not something that sat nicely with him." 4. The sentencing judge considered the relevance of the civil penalty proceedings in his remarks on sentence and expressed the following conclusion: "Those proceedings were only indirectly concerned with the dissemination of false information to Mr Mellish: see [2002] NSWSC 171, 41 ACSR 72 at [151] to [156] and this aspect of his conduct played only a small part in the order for disqualification imposed by Santow J, and no part in the orders for compensation or pecuniary penalty. Nevertheless, some regard must be had to the order for disqualification to avoid any element of double punishment, but only to a very minor degree. It is to his credit that he paid the fine and compensation rather than avoiding it as he probably could have done by transferring assets or declaring himself bankrupt." 1. The applicant submitted that his Honour erred in concluding that the conduct the subject of counts 1 and 2 had "no part" in the making of the order for pecuniary penalty against the applicant. The applicant also submits that his Honour erred in only having regard to the orders made in the civil proceedings "to a very minor degree" when sentencing the applicant. 2. In the judgment of Santow J in which the orders for disqualification, compensation and pecuniary penalties were made, his Honour first considered factual matters of general application. His Honour noted that the civil penalty proceedings concerned nine "transactions" or "episodes" that were said to have given rise to the breaches of the Corporations Act 2001. His Honour noted that those nine "transactions" or "episodes" were grouped into four "sets" of transactions. Two of those "sets" were the $10 million investment into the trust known as the Australian Equities Unit Trust, and the purchase of shares in HIH by the trust, out of part of the $10 million. The conduct that was relied upon in counts 1 and 2 related to the false statements made by the applicant to the effect that he was the purchaser of the shares. 3. From [24] to [28] of his reasons for judgment Santow J set out further findings in relation to the applicant. The applicant emphasized that at [24] his Honour referred to the finding as to the applicant's purpose in buying the shares. It is submitted that although the sentencing judge's finding on that issue was different to that of Santow J's, and is the subject of challenge by the applicant in this application, the fact that both judges had regard to what they found was the applicant's purpose behind the share purchases, when determining penalty, demonstrates the overlap between the two proceedings. At [27] his Honour referred to the findings he had made in his earlier judgment against the applicant concerning false impressions that the applicant had conveyed to financial journalists and the press, and to the market generally through his notices under s 205G of the Corporations Act 2001. It is submitted that these references by his Honour are direct references to the conduct by the applicant encompassed in counts 1 and 2 and, in so far as his Honour had regard to the false impressions conveyed to journalists, focused upon the acts that gave rise to the criminality contained within the offences ie the making of relevant false statements to the journalist Mellish. 4. His Honour's consideration of matters relevant to disqualification begin at [53]. At [58] Santow J set out a number of matters which he took into account in making the disqualification order against the applicant. They include the false impression given to journalists as to the purchase of the shares, what was said to be the applicant's intention in creating that false impression, the false impression given to Mellish as to the source of the money being used to buy the shares, and the fact that the applicant made no attempt to correct the misleading impression given by the press publicity to the statements he had made. It is submitted that these are all matters that the Crown relied upon for proof of counts 1 and 2 and went to the heart of the criminality contained in those counts. 5. His Honour concluded the discussion of disqualification at [12] and then turned attention to matters of compensation concluding that discussion at [124]. Santow J then commences his consideration of matters of penuniary penalty and at [140] and [141] says: "Taking all these matters into account, but particularly the seriousness of the contraventions and the dishonesty apparent in them, I have concluded that pecuniary penalty orders should be substantial. They should reflect that there were in reality four sets of transactions as I have earlier identified. I have sought to apply the totality principle in a way that would act as a personal and general deterrent but is not oppressive, bringing to bear what the High Court has referred to in sentencing as an 'instinctive synthesis' of relevant factors: see Wong v R (2001) 185 ALR 233 at 252, [75]. Thus so far as Mr Adler is concerned, I conclude the aggregate total of the pecuniary penalty orders should be $450,000 and likewise for Adler Group the aggregate of the pecuniary penalty orders should be $450,000. The subsequent arithmetic allocation of those penalty orders between the applicable contraventions (…) unavoidably involves some artificiality but can be done here. I would prefer to characterise each aggregate of $450,000 as operating in practice as a single penalty against each of Mr Adler and Adler Corp for all contraventions as Finkelstein J did in Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd, at [38]. In applying the totality principle, where the penalty is pecuniary, it is clearly not open to me to avoid the problem, just as it was not open to Finkelstein J, by accumulation or concurrency orders. Were I to use the so-called division method, then each contravention would produce the relevant fraction of the total figure. In articulating how that total figure is arrived at beyond the 'instinctive synthesis' earlier referred to, I should simply say this: One might reasonably characterise the circumstances as involving four sets of transactions which unbundled, produces nine in all. Each gave rise to multiple contraventions. An appropriate outcome in totality is to impose pecuniary penalties aggregating as I have done." 1. It was submitted that accordingly when imposing the pecuniary penalty order against the applicant, Santow J, at [140] and [141], must be understood as taking into account all of the findings he had made in relation to the conduct of the applicant summarised earlier in his judgment. 2. Accordingly, it is submitted that a proper reading of Santow J's judgment establishes that his Honour did have regard to the conduct which formed the basis of counts 1 and 2 in fixing the pecuniary penalty imposed upon the applicant. 3. In my opinion, the applicant's submission should be rejected. 4. The close relationship between the civil penalty proceedings under the Corporations Act 2001 and criminal proceedings was acknowledged by the High Court in Rich & Anor v Australian Securities and Investments Commission (2004) 209 ALR 271. In passages in the joint judgment at [32] and in the judgment of McHugh J at [41], [43], [48] to [58] their Honours indicate that the proceedings have many similarities. The factors and matters taken into account in imposing civil penalties under the Corporations Act 2001, are in many instances identical to the factors and matters taken into account when imposing sentence. 5. In Pearce v The Queen (1998) 194 CLR 610 the High Court considered the essential elements relevant when sentencing an offender. In relation to the matter of double punishment the court emphasized that it can only occur where there are common elements in two or more offences for which an offender stands convicted. In the joint judgment of McHugh, Hayne and Callinan JJ their Honours said: "To the extent to which two offences of which an offender stands convicted contain common elements, it would be wrong to punish that offender twice for the commission of the elements that are common … to punish an offender twice if conduct falls in that area of overlap would be to punish offenders according to the accidents of legislative history, rather than according to their just deserts." 1. In the present case the civil penalty proceedings were concerned with contraventions of s 180, 181, 182, 183, 208 and 260A of the Corporations Law in relation to the applicant's involvement with the payment of $10 million to PEE to fund the HIH share purchase and the share purchases themselves. Those provisions concern directors' duties and financial assistance for the purchase of the company's own shares. None of the elements of those provisions overlap in any way with the elements of the offences for which the applicant pleaded guilty in these proceedings. None of those provisions involved proof that the applicant had disseminated false information that was likely to induce others to purchase securities. Santow J was required to consider and make findings in relation to the applicant's conduct which may have been relevant to the matters for which he was sentenced which included background facts relevant to the present proceedings. However, the civil penalty proceedings were directed to an aspect of wrongdoing quite distinct from the wrongdoing addressed by the s 999 counts in the indictment in these proceedings. 2. Similarly, in these proceedings, whilst the facts before the Court included the advancing of the $10 million to PEE and the purchase by the applicant of the shares, those facts were mere background to the focus of the charges, which was on the dissemination of false information that was likely to induce others to purchase securities. 3. I am satisfied that Santow J had regard to the applicant's conduct in disseminating false information for a very limited and defined reason that had nothing to do with punishing the applicant for that conduct. It is true that Santow J accepted ASIC's submissions that these matters were part of a course of "persistent lies and deceit and the associated impropriety" and are included in the summary findings, which are extensive in [58] of his Honour's reasons. However, this conduct and the many other indicia of dishonesty considered by Santow J, were relied upon merely to characterise the nature of the applicant's breach of his duties as dishonest. His Honour took these matters into account, not to punish the applicant, but only in determining the appropriate length of time that the applicant should be disqualified from being a director. 4. When considering the appropriate order for disqualification his Honour, Santow J, had clearly in mind that it was to serve "a public protective purpose." His Honour said this purpose must "clearly be paramount." His Honour furthermore identified that the order should not be disproportionate to the public protective purpose it is intended to serve, for that indeed would be punitive, "it would subvert that public purpose if private interest considerations were to prevail or preclude an order which went no further than necessary to serve that public purpose." [80] 5. When Santow J came to determine the appropriate pecuniary penalty orders he did so, as he was required to do, by consideration of the contraventions which ASIC had charged. After referring to those contraventions and the dishonesty apparent in them his Honour determined the appropriate pecuniary penalty orders. This is apparent from [140] of his Honour's reasons which I have previously set out and the position of that paragraph in the structure of his Honour's reasons. 6. Accordingly, I am satisfied that the sentencing judge was correct when, in his remarks on sentence (see [56]), he identified the fact that the dissemination of false information had played only a minor part in the order for disqualification and no part in the orders for compensation or pecuniary penalty. 7. In having regard to the fact that the applicant had been disqualified by Santow J, in my opinion the sentencing judge appropriately addressed the possibility of double punishment. Ground 5 – in fixing the sentences imposed to counts 1 and 2 his Honour was in error in that he failed to observe the principles in R v De Simoni (1981) 147 CLR 383. 1. The principle in De Simoni was stated by Gibbs CJ in the following terms at 389 and 392: "… the general principle that the sentence imposed on an offender should take account of all the circumstances of the offence is subject to a more fundamental and important principle, that no one should be punished for an offence of which he has not been convicted. … where the Crown has charged the offender with, or has accepted a plea of guilty to, an offence less serious than the facts warrant, it cannot rely, or ask the judge to rely, on the facts that would have rendered the offender liable to a more serious penalty." 1. The applicant had previously been arraigned in the Supreme Court on an indictment which apart from counts 1 and 2 included three counts alleging a breach of s 997 of the Corporations Act 2001 which are commonly referred to as "market manipulation." An essential element of those counts is that the acts charged were carried out "with the intention to induce other persons to buy securities." 2. When sentencing the applicant the sentencing judge, as I have indicated, made findings that the applicant in making the false statements intended to induce persons to buy HIH shares and that this conduct did in fact "distort the market." These findings were concerned with the nature and circumstances of the offence provided by s 16A(2)(a) of the Crimes Act 1914 and were matters which required consideration when sentencing for that offence. They did not constitute an offence for which the applicant was not convicted and did not render the applicant liable to a more serious penalty. It is plain that the sentencing judge's findings were not sufficient to constitute a breach of s 997 which is concerned with the person who carries out two or more transactions with the intention of inducing others to buy securities. That offence has nothing to do with the offence to which the applicant pleaded guilty being the dissemination of false information. 3. There is no merit in this ground of appeal. 4. Grounds 6 and 10 were not pressed. Ground 7 – in fixing the sentences imposed in relation to counts 1 and 2, his Honour was in error in specifying a starting point of imprisonment for a period of 3 years and 6 months, against a statutory maximum of 5 years, as reflecting the objective criminality. 1. The maximum term of imprisonment for the offences in counts 1 and 2 is five years. The applicant emphasised that the offences were unplanned, in the sense that the applicant did not make contact with the journalist in order to have his false statements disseminated to the market. He gave evidence that he had an expectation that he would be contacted by a journalist upon the filing of his notices under s 205G of the Corporations Act but there was no certainty that this would occur. If there had been no journalistic contact the offences would not have been committed. In that sense the offences, although premeditated, were not planned. 2. The applicant also pointed to the fact that although the applicant stood to make a financial gain from his offences this did not occur. In fact he held a significant number of shares in HIH but did not sell them until months after the false statements were made and when the share price of HIH had collapsed. He gave evidence that his total loss as a consequence of that collapse was of the order of $10 million. 3. The applicant referred to the decision in R v Goward, (unreported NSWCCA 16 October 1998) where the offender made a formal statement to the press containing a false assertion that the directors had not sold shares in the company over the previous two months. There was also evidence of Mr Goward's financial benefits obtained as a consequence of the false statements made to the market. Goward was sentenced with a minimum term of 2 years and a non-parole period of 10 months reduced to 8 months on appeal. 4. Reference was also made to the decision of R v Thomson [2003] VSCA 164. In that case the offender was sentenced in relation to three counts under s 999 of the Corporations Act 2001. The false statements relied upon were made by a director in documents seeking funds from investors. The sentencing judge found that less than $100,000 had been subscribed by investors as a result of the false statements. The sentencing judge imposed a term of imprisonment of one year on each count to be served concurrently. His Honour found that the false statements were not made with a deliberate dishonest intent but had been made "with a considerable degree of recklessness." 5. Since the applicant was sentenced Kirby J has imposed sentence in the matter of R v Loiterton [2005] NSWSC 905 in relation to one count under s 999 of the Corporations Act 2001. The offender made a statement which he knew was materially misleading. The statement was contained in a formal announcement to the ASX by the offender who was the Chairman of the relevant company. The announcement suggested that an agreement that the company had entered into would produce $13.5 million in cash for the company at a time when it was in financial difficulty. The offender had taken deliberate steps to conceal the true nature of the agreement from other directors. The statement, being a formal announcement to the ASX, was found by his Honour to have been made by the offender in the hope that it would receive widespread publicity and positively affect the share price. In the proceedings before Kirby J the offender denied he knew at the time that the announcement was misleading, although Kirby J found that he did. Kirby J commenced the computation of sentence at 3 ½ years and imposed a sentence of 3 years after allowing 15% for the plea of guilty. A non-parole period of one year six months was imposed. 6. It was submitted that the objective criminality of Loiterton was greater than that of the applicant. In Loiterton the statement was by a chairman of a public company, was in a formal announcement to the ASX and was made at a time when the company was in financial difficulties. 7. I do not accept the applicant's submission. In the applicant's case the statements which he made were found by the sentencing judge to be "totally untrue", "blatant" and "direct." His Honour found that they were intended to induce persons to purchase HIH shares and drive up the share price. His Honour found that the offences displayed "an appalling lack of commercial morality." 8. In my opinion it is not correct to identify the offences which the applicant committed as unplanned and the sentencing judge did not do so. The applicant conceded that he expected that a journalist would contact him in relation to the shareholder notices. Plainly, as the sentencing judge found, when the applicant made the false statements he did so knowing that it was likely that the statements would find their way into the public domain. This is undoubted in relation to the second statement. In these circumstances it would not be appropriate to describe the offences as unplanned or merely opportunistic. 9. There are always difficulties in endeavouring to identify common elements between offenders when considering an appropriate sentence. This is particularly the case in relation to crimes involving commercial dealings where the nature of the transaction and the manner of commission of the offence can vary considerably. However, I am not persuaded that the facts of counts 1 and 2 are of a lower degree of criminality than the facts in the Loiterton matter. 10. When sentencing in relation to counts 1 and 2 his Honour started with a sentence of three years and six months but provided a discount of approximately 15% to take into account "all aspects" of the applicant's plea. The result of a 15% discount should have been a sentence of imprisonment just short of three years (35.7 months or 2.97 years). Instead, the sentence which was imposed was two years and six months, a discount of just over 28.5%. 11. To my mind a discount of that order was inappropriate. The plea was not entered at the earliest opportunity and to my mind a discount of more than 15% was not appropriate. Accordingly, even if his Honour erred in the starting point, and I am not persuaded that he did, the ultimate sentence imposed was not excessive. 12. I have identified error in his Honour's finding in relation to persons who acquired shares because of the applicant's statements, "many, if not all would have lost their money when HIH collapsed." However, in my opinion that error was not significant in the overall sentence. The applicant's actions motivated by his own personal commercial ambitions and financial aspirations involved criminality of a high order and I am satisfied that no sentence other than that which was imposed was required by law. Ground 8 – in fixing the sentence imposed in relation to count 4, being an offence in breach of s 184(1)(b) of the Corporations Act 2001, his Honour failed to give adequate weight to the applicant's plea of guilty. 1. In relation to both counts 3 and 4, his Honour noted that the proceedings concerning those charges had been "fast-tracked" so that pleas of guilty had been entered by the applicant in the Local Court prior to any formal committal proceedings having been held in that jurisdiction. His Honour correctly described the pleas to counts 3 and 4 as "early pleas." 2. His Honour determined that in relation to "all aspects of the pleas of guilty" to counts 3 and 4 a discount of 25% should be allowed. The applicant now submits that given the fast-tracking of the proceedings in the Local Court, the timing of the pleas, and his Honour's findings as to contrition, a greater discount for the plea of guilty to count 4 should have been allowed. 3. This Court considered the matter of pleas and appropriate discounts in relation to State offences in R v Thomson (2000) 49 NSWLR 383 where it was indicated that, although there would be exceptions, a discount of the order of 25% would be the maximum which may be appropriate. A discount of that order acknowledges all of the matters relevant to the applicant in the present case. That discount was at the very top end of the appropriate range and to my mind no error is revealed. Ground 9 – in fixing the sentences imposed in relation to count 4, his Honour was in error in specifying a starting point of imprisonment of 4 years, against a statutory maximum of 5 years, as reflecting the objective criminality. A sentence of 4 years imprisonment was manifestly excessive in the circumstances. 1. His Honour found that counts 3 and 4 were more serious, "because they directly relate to the performance of the offender's duties and responsibilities as a director". He indicated that the starting point for these counts should be four years discounted by 25% for the plea. 2. The essence of the applicant's submission was that this was not a case where the money that was obtained by the failure to disclose to the Board the true financial position of BTS was used solely for the personal interest of the applicant. BTS was a company in which HIH had an indirect interest. Apart from the amount of $50,000 which was paid to the applicant as a brokerage fee, the balance of $2 million was utilised in paying the legitimate expenses and debts of BTS. One of those debts involved the repaying of a $400,000 loan from Pacific Mentor Pty Ltd, a company in which HIH was a shareholder. However, the applicant also had an interest in Pacific Mentor of effectively seventy percent and stood to gain if the loan was repaid. 3. I have already referred to the sentencing judge's findings in relation to the nature and circumstances of this offence. His Honour found that the failure by the applicant to disclose the dire financial position of BTS and the dishonest manner in which he procured Mr Williams and HIH to make the investment amounted to the telling of lies by non-disclosure. His Honour found that the applicant displayed a lack of commercial morality. The applicant admitted that he put his personal interests ahead of the interests of HIH in order to have the Board ratify the investment. Furthermore, he admitted that he had the opportunity to come forward and talk honestly about the problems facing BTS. His Honour's finding that the applicant dishonestly talked up the investment was clearly open. 4. Notwithstanding these matters by commencing with a sentence of four years his Honour identified the offence as being at the upper end of the spectrum of criminality within the scope of a breach of s 184 of the Corporations Act 2001. When the statutory maximum was five years a starting point of four years was a heavy sentence. To my mind the sentence was excessive. 5. Although his Honour was satisfied that counts 3 and 4 were more serious than counts 1 and 2, I am not persuaded that this is so. In respect of counts 1 and 2 the applicant knowingly provided false information to advantage himself and influence others to take risks by investing in HIH. Counts 3 and 4 involve dishonesty in his dealings with Mr Williams and the Board of HIH with prospective advantage to himself. In each case his conduct was dishonest and intended to induce others to act in a manner which could bring him an advantage. I am satisfied that the criminality was similar and of the same order as that for which Loiterton was sentenced. 6. In my opinion, the appropriate sentence in the circumstances was a starting point of three years and six months which, allowing 25% for the early plea of guilty would give a sentence appropriately rounded of two years and six months. An adjustment should be made to the non-parole period to reflect the reduction in the overall sentence. To my mind that reduction should be to impose a total non-parole period of 2 years and 3 months. The applicant should be re-sentenced accordingly. 7. In my opinion the appropriate orders are: 1. Grant leave to appeal. 2. Dismiss the appeal against sentence in relation to counts 1, 2 and 3. 3. Quash the sentence imposed in respect to count 4. 4. Impose a sentence in respect of count 4 of 2 years and 6 months – to commence on 14 October 2006 and expire on 13 April 2009. 5. Fix a non-parole period of 2 years and 3 months which will expire on 13 July 2007. 1. SULLY J: I have had the privilege of reading in draft the judgment of McClellan CJ at CL. 2. Save only as to ground 9 of the grounds of appeal I agree respectfully with the entirety of what the Chief Judge has written. 3. As to ground 9, I am unpersuaded that this Court is warranted in now interfering with the sentence passed by Dunford J. 4. I agree respectfully with the Chief Judge's proposition that there is a similarity between the objective criminality of the behaviour encompassed by counts 1 and 2 and that encompassed by counts 3 and 4 in that in each of the four instances the applicant's conduct "was dishonest and intended to induce others to act in a manner which would bring him an advantage." 5. It seems to me, however, that the similarity thus described is a very broad and general one, and is apt, if not examined in greater detail, to gloss the real particular criminality of the applicant's dealings with HIH and its Board at the Board's meeting on 29 November 2000. 6. The criminal conduct at which count 4 is aimed does not constitute in practical reality a simple stand alone offence. It constitutes, rather, deliberate fraud causing, and giving ultimate clearance and effect to, a succession of deliberately and intentionally fraudulent acts, namely the materially false statements made to Mr Williams on 29 September 2000, compounded by the sending to Mr Williams on 10 October 2000 of a letter falsely and fraudulently certifying, in effect, payment by the applicant to BTS of $500,000 of the applicant's own money. 7. By this succession of criminal acts, brought successfully to fruition from the applicant's point of view on 29 November 2000, the applicant obtained substantial financial benefit from an advance of $2 million which simple honest dealing by the applicant with an honest and conscientious Board would never in all likelihood have obtained for him. I agree with the strictures of Dunford J as summarised in para [11] of the Chief Judge's reasons. 8. It seems to me that such a state of affairs must entail that the "lack of commercial reality" of which Dunford J speaks is in truth either contemptuously cynical commercial immorality, or contemptuously cynical commercial amorality. On either approach, the count 4 offence was, in my opinion, culpable to a degree that puts it very much towards the top than the mid-point of the relevant sentence range. In such a case I cannot agree the starting point of four years is outside the permissible range. It is a severe sentence passed in punishment of severe criminal fraud. 9. The proper, and the properly resolute maintenance of the commercial integrity of the financial and insurance markets underpins and protects a most significant public interest. The damage done to that integrity by the applicant, a very high profile professional operator in those markets must have been in the very nature of things real and substantial. When all the subjective circumstances have been given their proper place, I cannot accept that the sentence passed by Dunford J is vitiated by the error of an impermissibly high starting point. 10. I would grant leave to appeal. I would dismiss the substantive appeal. 11. HISLOP J: I have read the judgment of McClellan CJ at CL in draft. 12. I agree with what his Honour has written save in respect of ground 9 of the Grounds of Appeal. 13. The maximum penalty for the breach of s 184(1)(b) of the Corporations Act 2001 (Cth) (being the fourth count and the second of the BTS matters) was 5 years imprisonment and/or a pecuniary penalty. The sentencing Judge specified a starting point of 4 years imprisonment for that offence which he discounted by 25% for all aspects of the plea of guilty resulting in the sentence of three years imprisonment. The applicant submitted (ground 9 of the appeal) that such a starting point was manifestly excessive in all the circumstances. I am unable to accept this submission for the reasons which follow. 14. The sentencing judge concluded the offences against s 999 of the Corporations Act 2001 (Cth) were "serious and display an appalling lack of commercial morality." The maximum penalty for those offences was 5 years imprisonment and/or a pecuniary penalty. In determining sentence on the s 999 counts his Honour specified a starting point of imprisonment of 3 and a half years. As the Chief Judge at Common Law has concluded, there was no error by the sentencing judge in this regard. 15. The sentencing judge held the BTS matters were equally serious in so far as they too displayed a lack of commercial morality and involved the telling of lies for business purposes, expressly in the case of the third count and by non-disclosure in the case of the fourth count. His Honour held there was an additional element of criminality involved in the BTS matters. He said: On top of that, they were offences committed by a director of the company where the company was itself the victim. Directors are not appointed to advance their own interests but to manage the company for the benefit of its shareholders to whom they owe fiduciary duties. Accordingly to obtain money from the company by false representations and then to attend a Board meeting and compound the earlier offence by not disclosing the misrepresentation or the deterioration in BTS' position since the advance, but actively talking it up as a good investment to secure ratification for the transaction, constitutes very serious breaches of the duties of director. These findings, in my opinion, were open to his Honour. 1. The sentencing judge also noted that: At the time of the commission of the offences in counts 1 and 2, the (applicant) had no prior convictions and must be regarded as a person of good character; but at the time of the commission of the BTS offences, he had committed the offences the subject of counts 1 and 2 and also suffered the civil penalty proceedings. 1. Reliance was placed by the applicant upon the fact that the money obtained by the failure to disclose to the Board the true financial position of BTS was not used solely for his personal interest. However the sentencing judge specifically referred in his remarks on sentence to the interests of the applicant and HIH in BTS and the manner in which the money paid by HIH was disbursed. It was a matter for his Honour what weight, if any, he attached to those matters. 2. A sentencing judge must weigh all of the circumstances and make a judgment as to what is the appropriate sentence. His judgment is necessarily discretionary. There is no single correct sentence, and judges at first instance are to be allowed as much flexibility in sentencing as is consonant with consistency of approach and as accords with the statutory regime that applies – Markarian v R (2005) 215 ALR 213 at [27]. 3. In my opinion the decision of the sentencing judge to specify a starting point for the s 184(1)(b) offence of 4 years imprisonment was within the discretionary range open to him and no error has been demonstrated. 4. I would make the following orders: (1) Leave to appeal granted. (2) Appeal dismissed. 1. McCLELLAN CJ at CL: By majority, the orders of the court are: 1. Grant leave to appeal. 2. Dismiss the appeal. ********** Amendments 27 October 2015 - corrected case citations in coversheet and paragraph [13] DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 October 2015