Supreme Court New South Wales Medium Neutral Citation: R v Hull [2016] NSWSC 634 Hearing dates: 17 March 2016 Date of orders: 03 June 2016 Decision date: 03 June 2016 Jurisdiction: Common Law Before: Davies J Decision: (a) in respect of Count 1 on the indictment I sentence you to a period of imprisonment of six months commencing 3 June 2016 and expiring 2 December 2016; (b) in respect of Count 2 I sentence you to a period of imprisonment of ten months commencing 3 September 2016 and expiring 2 July 2017; (c) in respect of Count 3 and taking into account the offence on the s 16BA schedule I sentence you to a period of eleven months commencing 3 December 2016 and expiring 2 November 2017. (d) I order that you be released after serving a period of seven months imprisonment upon giving security by way of recognisance in the sum of $1,000 to be of good behaviour for a period of 18 months commencing on 2 January 2017. Catchwords: CRIMINAL LAW – sentence – insider trading offences – guilty pleas – offences assessed below the midrange of seriousness – offender as tippee – offending over a five month period – three different target companies – substantial investments - early pleas and co-operation with law enforcement agencies – effect of sentence on family of offender - exceptional circumstances demonstrated – wife's serious mental health issues – offender not an Australian citizen and liable to deportation – remorse demonstrated – strong subjective case - sentence of imprisonment warranted Legislation Cited: Corporations Act 2001 (Cth) Court Suppression and Non-publication Orders Act 2010 (NSW) Crimes Act 1914 (Cth) Migration Act 1958 (Cth) Proceeds of Crime Act 2002 (Cth) Cases Cited: Director of Public Prosecutions v Zhuang [2015] VSCA 96 DPP (Cth) v Gregory [2011] VSCA 145; [2011] 34 VR 1; 211 A Crim R 147 Kamay v R [2015] VSCA 296; (2015) 109 ACSR 611 Khoo v R [2013] NSWCCA 323; (2013) 237 A Crim R 221 Markovic v The Queen [2010] VSCA 105; (2010) 200 A Crim R 510 R v Glynatsis [2013] NSWCCA 131; (2013) 230 A Crim R 99 R v Hartman [2010] NSWSC 1422; (2010) 81 ACSR 121 R v Jones [2004] VSCA 68 R v Pogson, Lapham & Martin [2012] NSWCCA 225; (2012) 82 NSWLR 60 R v Richard [2011] NSWSC 866 R v Scook [2008] WASCA 114 R v Zerafa [2013] NSWCCA 222; (2013) 235 A Crim R 265 Sabra v R [2015] NSWCCA 38 Category: Principal judgment Parties: Crown Michael William Hull Representation: Counsel: L Crowley (Crown) T Game SC & S Buchen (Offender) Solicitors: Commonwealth Director of Public Prosecutions (Crown) James Wheeldon Solicitor (Offender) File Number(s): 2014/110592 Judgment 1. On 6 November 2015 Michael William Hull pleaded guilty to three counts of insider trading as follows: 1. Between about 8 September 2010 and 11 October 2010 at Sydney in the State of New South Wales, acquired relevant Division 3 financial products, namely securities, being 29,713 shares in Mac Services Group Ltd, whilst in possession of inside information concerning Mac Services Group Ltd that was not generally available, being information which if it were generally available a reasonable person would expect to have a material effect on the price or value of the financial products, and being information which the defendant knew or ought reasonably to have known: (i) was not generally available; and, (ii) if it were generally available, a reasonable person would expect it to have a material effect on the price or value of the financial products. contrary to sections 1043A(1)(c) and 1311(1) of the Corporations Act 2001 (Cth) (Law Part Codes 47861 and 48355). 2. Between about 16 December 2010 and 20 December 2010 at Sydney in the State of New South Wales, acquired relevant Division 3 financial products, namely securities, being 60,000 shares in Giralia Resources NL, whilst in possession of inside information concerning Giralia Resources NL that was not generally available, being information which if it were generally available a reasonable person would expect to have a material effect on the price or value of the financial products, and being information which the defendant knew or ought reasonably to have known: (i) was not generally available; and, (ii) if it were generally available, a reasonable person would expect it to have a material effect on the price or value of the financial products. contrary to sections 1043A(1)(c) and 1311(1) of the Corporations Act 2001 (Cth) (Law Part Codes 47861 and 48355). 3. Between about 1 February 2011 and 9 February 2011 at Sydney in the State of New South Wales, acquired relevant Division 3 financial products, namely securities, being 320,000 shares in Jabiru Metals Ltd, whilst in possession of inside information concerning Jabiru Metals Ltd that was not generally available, being information which if it were generally available a reasonable person would expect to have a material effect on the price or value of the financial products, and being information which the defendant knew or ought reasonably to have known: (i) was not generally available; and, (ii) if it were generally available, a reasonable person would expect it to have a material effect on the price or value of the financial products. contrary to sections 1043A(1)(c) and 1311(1) of the Corporations Act 2001 (Cth) (Law Part Codes 47861 and 48355). 1. In relation to Count 3 Mr Hull asks for a further offence to be taken into account on a schedule pursuant to s 16BA of the Crimes Act 1914 (Cth) as follows: Between 7 January 2011 and 31 January 2011 the defendant acquired relevant Division 3 financial products, namely securities, being 320,000 shares in Jabiru Metals Ltd, whilst in possession of inside information concerning Jabiru Metals Ltd that was not generally available, being information which if it were generally available a reasonable person would expect to have a material effect on the price or value of the financial products, and being information which the defendant knew or ought reasonably to have known: (i) was not generally available; and, (ii) if it were generally available, a reasonable person would expect it to have a material effect on the price or value of the financial products. 1. The maximum penalty for count 1 on the indictment is imprisonment for five years or whichever is greater of a fine amounting to 4,500 penalty units and three times the total value of the benefits that have been obtained and are recently attributable to the commission of the offence or both. The maximum penalty for each of the other counts is imprisonment for 10 years with the same pecuniary penalty. 2. The offences are contrary to s 1043A(1)(c) of the Corporations Act 2001 (Cth). The facts of the offending 1. Mr Hull holds a Bachelor of Accounting Science and a Post Graduate Diploma in Accounting. 2. At the time of the offences Mr Hull had worked in corporate finance advisory services and funds management for approximately 10 years. From December 2004 until June 2006 he worked in the mergers and acquisitions team at ANZ. He subsequently worked at ABN AMRO and then from April 2008 to 30 September 2011 he was employed by Infrastructure Capital Group Limited (ICG) (formerly known as ANZ Infrastructure Services) in the role of Associate Director. 3. In December 2004 Darren Wayne Thompson also commenced employment with ANZ and worked together with Mr Hull for a number of years. Mr Thompson remained at ANZ until he joined Credit Suisse (Australia) Limited in 2007. Between May 2007 and September 2011 Mr Thompson was employed by Credit Suisse Management Australia as vice president in the Investment Banking Department (IBD) in Sydney. 4. After Mr Thompson joined Credit Suisse, he and Mr Hull remained close friends, maintaining frequent contact through emails, regular lunchtime runs, social gatherings of their families and occasional weekend camping trips. 5. ICG manages Australasian infrastructure investments on behalf of large institutional investors. Mr Hull's role at ICG involved assessment and analysis of listed infrastructure funds and investment committee recommendations, as well as analysing complex financial models for investment purposes and negotiating terms for potential new investments. In his previous roles at ANZ Infrastructure Services and ABN AMRO he was involved in profiling takeover opportunities, valuation work, and managing acquisitions and divestments. 6. As a condition of his employment with ICG Mr Hull was required to comply with policies set out in the company's Corporate Governance Manual (the Manual), including the Code of Conduct (The Code). The Code refers to a Staff Trading Policy, and the requirement by staff to comply with provisions designed to prevent insider trading. 7. As a result of these policies Mr Hull had a general understanding of the legal prohibitions against insider trading. 8. Credit Suisse is a global financial services company operating three global divisions; private banking, investment banking, and asset management. It has offices located in Sydney, Melbourne and Perth. 9. The IBD provides advice to corporate clients of Credit Suisse in a range of services including corporate transactions such as mergers and acquisitions, divestments, equity and debt raisings, initial public offerings and schemes of arrangements. The IBD also "pitches" to prospective or current clients. A pitch involves giving a sales presentation to a client or potential client, which provides an overview of a company or a particular industry or a proposed transaction, with the aim of securing a '"mandate" to advise the client and act on their behalf. 10. Mr Thompson's employment within the Sydney office of Credit Suisse predominantly involved him working on proposed transactions relating to public companies listed on the Australian Securities Exchange (ASX). Some of these proposed transactions which, if sufficiently advanced and publicly announced, had potential to affect materially the price or value of financial products including securities relating to the company or companies involved. 11. As a vice president in the IBD Mr Thompson was a senior support person on deal teams led by a Credit Suisse director or managing director who had the relationship with the client. Mr Thompson was part of the mergers and acquisition team within the IBD and was known for his technical expertise in public market transactions. He was involved in preparing and reviewing formal documentation for proposed corporate transactions, and undertaking financial modelling and valuations. As a senior member of a deal team he frequently engaged directly with clients and other third party advisors relating to proposed corporate transactions, and routinely acquired and had access to highly confidential information about proposed corporate transactions. 12. At all material times Mr Hull knew that Mr Thompson was employed within the IBD at Credit Suisse. By virtue of Mr Hull's employment experience in the finance industry (particularly in investment banking) and his own role at ICG, he had an understanding of the type of advisory services that the IBD of Credit Suisse provided and Mr Thompson's role. Mr Hull understood that Mr Thompson routinely had access to information that was likely to include inside information because of his role at Credit Suisse. 13. Mr Hull and Mr Thompson often communicated about aspects of their work, including Mr Hull actively inquiring about significant matters Mr Thompson was working on. 14. Mr Hull has been an active investor in the stock market since 2004 and in his own estimation is a knowledgeable and experienced investor. In November 2005 he opened a share trading account with E*Trade Australia Securities Ltd (E*Trade) in the names of Michael Hull and his wife, Catriona Hull, being account number 3097662 (Hull trading account No. 3097662). On 26 May 2008 he opened a further share trading account with E*Trade in the names of Michael Hull and Catriona Hull, being account number 3722226 (Hull trading account No. 3722226). The Hull trading account No. 3722226 was the main share trading account through which he conducted trading during the period from June 2008 to 3 June 2011. 15. At all material times Mr Thompson was aware that Mr Hull invested in the stock market. During their lunchtime runs Mr Hull and Mr Thompson regularly discussed the share market, potential investment ideas, performance of particular shares or sectors, and sought each other's views on particular stocks. Count 1: Acquisition of shares in The Mac Services Group Limited 1. Mr Hull's acquisition of five separate parcels of shares in Mac Services is the subject of Count 1 on the Indictment. 2. In March 2010 Credit Suisse was verbally mandated by Mac Services Group Limited (Mac Services) to act as its advisor in relation to the possible sale or joint venture of its business (the Mac Services Transaction). At that time three separate parties, including Oil States International Inc. (Oil States), had shown an interest in either entering a partnering arrangement at both the project and corporate level with Mac Services, taking a stake in the business of Mac Services, or an outright purchase of the company. 3. Shortly after being verbally engaged by Mac Services, Credit Suisse formed a deal team, consisting of staff largely from the IBD. The proposed Mac Services Transaction was known within Credit Suisse as ''Project Mars" and ''Project Angus". Despite the initial interest shown in Mac Services by potential parties in March 2010, there was little progress made by any of these parties over the ensuing five month period to further a transaction. 4. In late August 2010 Mac Services received a confidential non-binding cash offer from Oil States for all the shares in Mac Services. At this time Credit Suisse was verbally engaged to assist Mac Services in evaluating the offer from Oil States and to act as its financial advisor. Following receipt of the offer from Oil States, Mr Thompson, while not a member of the Project Angus deal team, was called upon to provide advice to the deal team on specific aspects of the transaction given his expertise in public company mergers and acquisitions. 5. On 1 September 2010 Mr Thompson assisted in drafting the scope section of an engagement letter for Credit Suisse and Mac Services, and advised on aspects of a confidentiality deed between Mac Services and Oil States. Mr Thompson also became aware at this time of an indicative announcement date for a completed transaction of 5 October 2010. 6. At about 12.45 pm on 2 September 2010 Mr Hull and Mr Thompson met for a lunchtime run. During this run, or at some other time before 8 September 2010, Mr Thompson said to Mr Hull words to the effect of: "Take a look at MAC Services'' and '"this stock is worth a punt.'' 1. On 3 September 2010 Mr Thompson received a copy of a non-binding offer letter from Oil States to Mac Services dated 2 September 2010 to review and comment. The Oil States offer letter referred to a cash offer of up to $3.60 per Mac Services share to all Mac Services shareholders subject to certain contingencies, and that the transaction would be implemented either through a takeover or scheme of arrangement. 2. Other than reviewing the offer letter in early September 2010 Mr Thompson had little if any input into the transaction for the remaining weeks of September 2010. During this period due diligence was performed on Mac Services by Oil States and negotiations between the parties continued. 3. On 8 September 2010 Mr Hull placed an order for 7,500 Mac Services shares at $2.90. The order was only partially filled on this day with 2,213 being acquired. The remaining balance of the order was cancelled on 27 September 2010 at 8.16am. 4. Thereafter on 24, 28 and 30 September 2010 he placed orders to buy in total 15,000 Mac Service shares for $3.20 a share. 5. In the meantime, on 27 September 2010 he met with Mr Thompson for a lunchtime run. 6. In late September/early October 2010 Mac Services received a revised indicative offer from Oil States of $3.70. 7. On 1 October 2010 Mr Thompson was requested to review a draft scheme implementation deed between Mac Services and Oil States, setting out the terms of the proposed scheme of arrangement. Mr Thompson had no further involvement in the transaction after providing feedback on the draft scheme implementation deed at this time. 8. Between 8 September 2010 and 1 October 2010 Mr Hull, through a number of separate transactions, acquired a total of 17,213 Mac Services shares at prices between $2.90 and $3.20 for a total consideration of $54,418. 9. On 4 October 2010 the Hull and Thompson families met for a children's birthday party. 10. On 5 October 2010 Mr Hull placed an order to acquire 5000 Mac Services shares at $3.15. The order did not immediately fill. 11. On 7 October 2010 he met Mr Thompson for a lunchtime run. 12. At 2.35pm on 7 October 2010 Mr Hull placed an order to acquire 7500 Mac Services shares at $3.20. This order was not immediately filled. At 3.17pm on 8 October 2010 he amended the 5 October 2010 order to acquire 5000 Mac Services shares at $3.20. Again this order did not fill immediately. At 1.27pm on 8 October 2010 he amended the 7 October 2010 order to acquire 7500 Mac Services shares at $3.21. This order also did not fill immediately. Two further amendments between 3.57pm and 4.26pm to $3.23 and $3.21 respectively also did not result in a trade. 13. Finally, following further amendments to both the 5 October 2010 and 7 October 2010 orders, each order traded on 11 October 2010 at $3.24 and $3.25 respectively. 14. Altogether he purchased 29,713 Mac Services shares at prices of between $2.90 and $3.25 for a total consideration of $94,992.70. 15. On 15 October 2010 Mac Services issued a public ASX announcement, classified as "price sensitive", entitled "The Mac Services Announces $3.90 Per Share Recommended Proposed Acquisition by Oil States International" (the 15 October announcement) in which it was stated that Oil States proposed to acquire all of the shares in Mac Services for $3.90 cash per share (less any dividends declared or paid by Mac Services after 15 October), which represented a premium of 16.4% to the closing price of Mac Services shares on 14 October 2010 or a premium of 21.6% to the 30 day VWAP of Mac Services shares up to 14 October 2010. 16. When trading in Mac Services shares on the ASX resumed following the 15 October announcement the opening price of Mac Services shares was $3.84 per share representing an increase of approximately $0.49 (or 14.63%) from its closing price of $3.35 on 14 October 2010, the last trading day prior to the announcement. 17. On 18 October 2010 Mr Hull sold his entire holding in Mac Services at $3.85 per share for $114,395, realising a gross profit of $19,402.35. Count 2: Acquisition of shares in Giralia Resources NL 1. Mr Hull's acquisition of nine separate parcels of shares in Giralia is the subject of Count two on the Indictment. 2. Giralia Resources NL was an Australia iron ore explorer whose ordinary fully paid shares traded on the ASX up until 6 April 2011. 3. On 12 December 2010 Giralia Resources NL (Giralia) retained Credit Suisse to advise on strategic and financial planning matters specific to an offer from Atlas Iron Limited (Atlas), an emerging iron ore producer and explorer, to takeover Giralia (the Giralia Transaction). As at 12 December 2010 an in-principle agreement had been reached between Giralia and Atlas on a proposed transaction. 4. The Giralia Transaction was given the code name "Project Farm" by Credit Suisse to maintain confidentiality of the transaction. Information about the Giralia Transaction was restricted within Credit Suisse to members of the Project Farm deal team. On 12 December 2010 the Credit Suisse manager of the transaction advised Mr Thompson of the Giralia Transaction. 5. On the following day Mr Thompson travelled to Perth with other members of the deal team and met with representatives of Giralia to assist in progressing the transaction and discuss the terms and conditions of the offer received from Atlas, including the indicative offer price. Between 13 December and 14 December 2010 he attended various meetings concerning the proposed transaction and reviewed transaction documentation, such as draft implementation agreements, pre-bid agreements and the transaction timetable. 6. By Tuesday, 14 December 2010, an announcement of the Giralia Transaction was imminent. In an email from Mr Thompson to Mr Brett Jolly of Credit Suisse on 14 December 2010 he stated "we are hoping to announce next Monday". 7. At about 12.45 pm on 16 December 2010 Mr Hull and Mr Thompson met for one of their regular lunchtime runs. During the course of the run Mr Thompson said to Mr Hull words to the following effect: "Giralia is a good opportunity. Giralia has the infrastructure to get its deposits up and is an attractive target. " 1. As a result of that conversation on returning to his office after his run Mr Hull placed an order to acquire 10,000 Giralia shares at $2.96 at 1.34pm and 5,000 Giralia shares for $2.95 per Giralia share at 1.37pm. Both orders traded between 1.34pm and 2.27pm following amendments of the bid prices. This was the first occasion he had purchased Giralia shares. 2. On 16 December 2010 at 2.29pm he also placed a further order to acquire 5,000 Giralia shares at $2.95 per share. As the bid price entered by him was below the existing market price for Giralia shares the order was not filled. On 17 December 2010 his unfilled order for 5,000 Giralia shares was executed. On the same day he also acquired an additional 20,000 Giralia shares. 3. On 20 December 2010 at 11.25am he acquired a further 10,000 Giralia shares. 4. Between 16 December 2010 and 20 December 2010 he acquired 60,000 Giralia shares for a total consideration of $179,265.27. 5. On 21 December 2010 at 10.15am Giralia and Atlas jointly issued a public ASX announcement, classified as "price sensitive", entitled "Recommended Takeover Offer For Giralia by Atlas" (the 21 December Announcement), in which it was stated that Giralia and Atlas had signed a Bid Implementation Agreement for an off-market takeover bid by Atlas for all of the shares in Giralia at an implied offer price of $4.57, which represented a premium of 52.9% to the closing price of Giralia shares on 20 December 2010 and a premium of 53.5% to the 1 month VWAP of Giralia shares to 20 December 2010. 6. When trading in Giralia shares resumed following the 21 December announcement the opening price of Giralia shares was $4.11, representing an increase of $1.18 (or 39.5%) from its closing price of $2.99 on 21 December 2010, the last full day of trading on the ASX prior to the 21 December announcement. 7. Based on the opening price of Giralia following the 21 December announcement Mr Hull's holding in Giralia was valued at $250,200.00 representing a notional gross profit of $70,934.74. 8. On 1 March 2011, as a result of the takeover he received 90,000 Atlas shares in consideration for his 60,000 Giralia shares. On 5 April 2011 he sold 25,000 Atlas shares at $3.87 per share for $96,750, realising a gross profit of $46,954.09 on those shares. The notional gain on the remaining unsold 65,000 Atlas shares was $114,930.64. 9. On 22 December 2011 he acquired a further 10,000 Atlas shares at $2.70 per share. On 18 June 2013 he sold 50,000 Atlas shares at $0.75 per share, realising a substantial loss. As at 10 March 2016 Atlas shares have a share price of $0,025 per share. The remaining 25,000 Atlas shares are presently valued at $625. He made a substantial loss in relation to this trading activity. Count 3 and Section 16BA Schedule: Acquisition of shares in Jabiru Metals Limited 1. Mr Hull acquired 13 separate parcels of shares in Jabiru Metals Limited. The acquisition of seven of those parcels between 7 January 2011 and 31 January 2011 are the subject of the offence listed on the s 16BA Schedule. The subsequent six acquisitions between 1 February 2011 and 9 February 2011 are the subject of Count three on the Indictment. 2. Jabiru was an Australian resources company whose ordinary fully paid shares traded on the ASX up until 22 June 2011. In or around August 2010 representatives from the IBD of Credit Suisse in Sydney approached Independence Group NL to discuss the possibility of Independence acquiring Jabiru ("the Jabiru Transaction"). On 10 November 2010 Credit Suisse was engaged by Independence to act as its exclusive financial adviser and broker with respect to Independence's proposed acquisition of Jabiru. 3. Shortly after being engaged for the proposed transaction Credit Suisse assigned a deal team to work on the Jabiru Transaction. The Jabiru Transaction was treated confidentially by Credit Suisse and given the code name "Project Kangaroo". Information about the Jabiru Transaction was restricted within Credit Suisse to members of the Project Kangaroo deal team. 4. By early December 2010 Mr Thompson had become a member of the Project Kangaroo deal team working on the Jabiru Transaction. From this point and until 9 February 2011 Mr Thompson was involved in discussions with Independence's advisors, and drafting and reviewing formal documentation for the Jabiru Transaction such as a bid implementation agreement, pre-bid terms sheets, draft ASX announcements and drafts of confidentiality agreements between Independence and Jabiru. 5. On 8 December 2010 Mr Hull and Mr Thompson met for a regular lunchtime run. During the course of the run Mr Thompson said words to Mr Hull relating to JML to the following effect: "It's worth a punt on Jabiru." 1. On 13 December 2010 at 9.29am Mr Hull entered an order to acquire 40,000 Jabiru securities at $0.55 per share. As the bid price he entered was below the existing market price for Jabiru shares the order remained unfilled. 2. On 20 December 2010 preliminary discussions took place between executives from Independence and Jabiru regarding a potential transaction involving both companies. 3. On 21 December 2010 at 12.36pm he amended the bid price of his existing (unfilled) order to acquire 40,000 Jabiru shares by raising the bid price from $0.55 to $0.59, which was still below the existing market price for Jabiru shares and the order remained unfilled. 4. On 22 December 2010 and 24 December 2010 Mr Hull and Mr Thompson spoke on the telephone for 4 minutes and 6 minutes respectively. 5. On 24 December 2010 confidentiality agreements were signed by Independence and Jabiru, respectively, to allow due diligence on Jabiru. 6. On 7 January 2011 at about 12.45pm Mr Hull met with Mr Thompson for one of their regular lunchtime runs. At 1.38pm, after returning to his office following his run, Mr Hull amended his existing unfilled order to acquire 40,000 Jabiru shares by raising the bid price from $0.59 to $0.655. His order to acquire 40,000 Jabiru shares executed later that day. This was the first occasion he had purchased Jabiru shares. 7. At 1.40pm on 7 January 2011 he placed a further order to acquire 40,000 Jabiru shares at $0.65 per share. The order traded in full later that day. At 2.50pm on 7 January 2011 he entered an order to buy an additional 50,000 Jabiru shares at $0.64 per share. As his bid price was below the existing market price for Jabiru shares the order was not filled. The order traded in full on 10 January 2011. 8. On 11 January 2011 at 11.02am he placed an order to acquire 30,000 Jabiru shares for $0.625. The order traded in full that same day between 11.47am and midday. 9. On 13 January 2011 at 12.29pm he placed an order to acquire a further 60,000 Jabiru shares for $0.645. The order was not filled on this day. 10. On 20 January 2011 at 12.26pm he amended the order he originally placed on 13 January 2011 by increasing the price from $0.645 to $0.65. The order subsequently traded in full a short time later between 12.28pm and 12.29pm. 11. On 21 January 2011 at 10.15am he placed an order to acquire a further 50,000 Jabiru shares at $0.63. The order traded in full on this same day at 11.13am. 12. On 11, 18, 20 and 24 January 2011 Mr Hull and Mr Thompson met for a run at around 12.45pm. 13. On 28 January 2011 they met at their usual time of 12.45 pm for a lunchtime run. Later that day at 3.25pm Mr Hull placed an order to acquire 50,000 Jabiru shares at $0.61 per share. As the bid price was below the existing market price the order did not trade until 31 January 2011. 14. On Tuesday 1 February 2011 at 12.25pm he sent an email to Mr Thompson titled "Cricket Sunday" inviting him to participate in a social game of cricket. Mr Thompson responded by email a short time later stating (in reference to the Jabiru Transaction): "Definitely keen to play - presuming I am not in Perth stitching up this deal". At 3.06 pm on 1 February 2011, Mr Hull and Mr Thompson had a 6 minute telephone conversation. At 3:25pm Mr Hull placed an order to buy 28,662 Jabiru shares at $0.605 per share. The order was executed later that day. 15. On 2 February 2011 and 4 February 2011 Mr Hull met Mr Thompson for lunchtime runs. After returning to his office following his run on 4 February 2011 Mr Hull made his largest single daily purchase of Jabiru shares when he acquired 150,000 shares in two separate transactions for a total consideration of $98,750. The orders were placed between 1.28pm and 2.09pm. 16. On Sunday 6 February 2011 Mr Thompson and Mr Hull played in a social cricket match. 17. On 7 February 2011 at 6.10am Mr Thompson flew to Perth for the transaction. 18. On 7 February 2011 at 9.11am Mr Hull amended the bid price of his existing unfilled order for 50,000 Jabiru shares (which had been placed at 3:42pm on 4 February 2011) by raising the bid price from $0.65 to $0.655 per Jabiru share. The amended order subsequently traded in full on 7 February 2011. 19. At 10:36am on 7 February 2011 he placed an order to buy an additional 51,338 Jabiru shares. 20. At 9.25am on 8 February 2011 he placed an order to purchase a further 40,000 Jabiru shares at $0.655. Later that day at 1.47pm he amended the order price to $0.66. The order traded in full at 11.18am on 9 February 2011. This was the last order placed by him to acquire Jabiru shares. 21. Between 1.39pm on 7 January 2011 and 9 February 2011 he acquired 640,000 Jabiru shares for a total consideration of $413,073.59. 22. On 9 February 2011 at 5.26pm Jabiru and Independence jointly issued a public ASX announcement, classified as "price sensitive", entitled "Independence Group Announces Recommended Takeover of Jabiru Metals" ("the 9 February Announcement"), in which it was stated that Jabiru and Independence had signed a Bid Implementation Agreement for an off-market takeover offer by Independence for all of the issued and outstanding shares in Jabiru at an implied offer of A$0.961 per Jabiru share, which represented a 44.5% premium to the closing price of Jabiru shares on 9 February 2011 and a 50.2% premium to the 1 month VWAP of Jabiru shares to 9 February 2011. 23. When trading in Jabiru shares resumed following the 9 February announcement the opening price of Jabiru shares was $0.855, representing an increase of $0.19 (or 29%) from the closing price on the ASX prior to the announcement. Based on the opening price of Jabiru shares following the 9 February Announcement Mr Hull's holding in Jabiru was valued at $547,200, representing an unrealised profit of $134,126.41. 24. On 14 June 2011, as a result of the takeover offer Mr Hull received 80,000 Independence shares in consideration for his Jabiru shares. Between 7 April 2011 and 5 April 2012 he sold 25,000 Independence shares at prices between $4.20 and $6.85 per share for $141,815.87, and realised a gross profit of $12,730.37 on those shares. 25. The value of the remaining unsold 55,000 Independence shares when valued at the closing price of Independence shares on the ASX on 31 March 2011 (date used by Independence to calculate the Jabiru shares for the takeover) was $362,450. The notional gain on this parcel of shares was $78,461.91. The total realised profit and notional gain was $91,192.28. 26. He subsequently bought and sold further parcels of Independence shares. The price of Independence shares on 10 March 2016 was $2.99 per share. If the remaining 55,000 shares relevant to this count were sold at this price, he would realise an overall loss in excess of $100,000. Additional Aspects of Mr Hull's trading 1. During the period from 27 May 2008 to 3 June 2011 the Hull E*TRADE trading account no. 3722226 held up to 37 different securities in its share portfolio at any one time. 2. During that period two of the top five investments made through that account were Mr Hull's acquisitions of securities in: a. Jabiru - valued at $413,073.59; and b. Giralia - valued at $179,265.27. 1. The total amount invested by him in Jabiru, Giralia and Mac Services shares referrable to the counts on the indictment was $483,381.56. He invested an additional $203,950.00 in Jabiru in respect of the matter on the s. 16BA schedule. 2. His investment in Jabiru was the largest investment he made in any one stock while his acquisition of Giralia shares was his fourth largest single investment in the period May 2008 to June 2011. 3. On 1 November 2010, prior to acquiring shares in Jabiru and Giralia, he sent an email identifying stocks in the coal, gold and iron ore sectors which were on his watch list. The stocks identified did not include any of the securities which he subsequently went on to acquire on the basis of the information received from Mr Thompson. 4. In each case, possession of the inside information was a significant consideration in Mr Hull's decision to acquire the relevant securities, along with his own research and assessment of the stock. 5. His purchasing of shares in Mac Services, Jabiru and Giralia resulted in a total gross realised profit of $79,086.81 on those shares. 6. Based upon the information given to him by Mr Thompson, the total realised and unrealised profits (excluding subsequent actual or unrealised losses) was approximately $272,479.36. Sentencing considerations 1. I now deal with the relevant matters to be taken into account for the purposes of s 16A(2) of the Crimes Act. Section 16A(2)(a) and (b) – nature and circumstances of offending and other charges 1. The circumstances of the offending have been set out earlier. Senior Counsel for Mr Hull argued that the offences should be seen as falling at the lowest end of objective seriousness for offences of this kind. That was because Mr Hull was the tippee rather than the person breaching trust in providing the information, the information provided was vague and unspecific, it could not be said that he knew that the information was inside information as opposed to the position that he ought reasonably have known that it was, that the conduct was opportunistic, that he did not take steps to conceal the transactions and that ultimately he made a significant overall loss in relation to the trading activity. 2. I do not agree. It may be accepted that a person in his position as a tippee should be regarded as less culpable than the person who breaches trust. However, the offending in the present case was systematic and prolonged over a five month period. Whilst what was imparted to him might be relatively non-specific in terms of what would happen in the target companies or to their share price, the information was quite enough in the circumstances of the relationship between Mr Thompson and Mr Hull to give a clear indication to Mr Hull that he ought to act to purchase shares in the named target companies. The timing of the contact between the two men and the purchase of the shares in each case is also significant. Further, the amounts invested totalling a little over $685,000 were considerable. The realised profit of $79,086.81 might have been relatively small but the extent of any profits or losses is governed by matters other than the amount of the investment and is of less significance in determining objective seriousness. 3. As the Crown submitted, this was not a one-off use of information which might place the matter in the lowest category of offending. Moreover, Mr Hull's motivation was financial profit, albeit for himself and his family. 4. I consider the offending is below the mid-range of seriousness but not at the lowest end. In that regard, I take into account the offence constituted by the matters on the s 16BA schedule but I note that there appears to have been a somewhat arbitrary split between the first period in which shares in Jabiru were purchased prior to February 2011 with the balance being the offence of Count 3 of the indictment. I also take into account that the three counts on the indictment and the offence on the s 16BA schedule are all rolled-up offences. Section 16A(2)(d) and (e) – victims and damage 1. Cases such as R v Hartman [2010] NSWSC 1422; (2010) 81 ACSR 121 at [45] and Kamay v R [2015] VSCA 296 at [45] have stressed that insider trading should not be seen as a victimless crime, and that the integrity of the market is damaged causing loss to other persons. Section 16A(2)(f) – contrition 1. Although Mr Hull did not give evidence at the sentencing hearing I accept from his guilty pleas, his co-operation with the authorities (dealt with in the next section) and from what I have read in the medical reports and references that he is remorseful for his wrongdoing. Section 16A(2)(g) and (h) – plea and co-operation 1. Mr Hull was charged by Court Attendance Notices with 67 offences on 9 April 2014. On 12 May 2015 he was committed for trial on 63 of those offences after a contested committal hearing. The matter was first listed in the Arraignments List in this Court on 5 June 2015. After a number of subsequent appearances in the Arraignments List he pleaded guilty on 6 November 2015 to the three counts on the indictment and asked that the matter on the s 16BA schedule be taken into account. The delay from June to November was occasioned by negotiations in relation to the offences. The pleas of guilty are to be taken into account as recognition of his willingness to facilitate the course of justice. In that regard it is appropriate to consider the issue in conjunction with the matter of his co-operation with law enforcement agencies. 2. He was first interviewed by ASIC officers on 3 August 2011. Although there was an initial reluctance to provide a fully frank account of his offending, in a second interview of the afternoon of that day he made a number of admissions including that he had acquired the shares in the three companies, that his friend Mr Thompson who worked in the investing banking team at Credit Suisse communicated to him confidential, price sensitive information in relation to and ahead of those acquisitions, and that he knew that the relevant information provided by Mr Thompson was inside information. 3. On 4 November 2015 he signed an induced statement and entered into an undertaking under s 21E of the Crimes Act that he would give evidence in any future prosecution of Mr Thompson. The evidence of the relevant officer from ASIC was that some of the information provided, particularly that of Mr Thompson's involvement, was significant and that if Mr Thompson was charged and went to trial Mr Hull would be the only person who could give evidence about the relevant conversations with Mr Thompson. The officer considered further that Mr Hull had made a genuine effort to cooperate fully with ASIC in relation to Mr Thompson, and that he gave full, frank and truthful information in his 2015 interviews. The officer noted that in the 2011 interview Mr Hull made voluntary admissions against interest as to his own involvement. The officer said that absent those admissions ASIC may not have been able to obtain direct admissible evidence to prove Mr Hull's own offending to the criminal standard. It is clear, therefore, that the co-operation in that regard must be regarded as significant. 4. Further, when proceedings under the Proceeds of Crime Act 2002 (Cth) were commenced by the Commissioner of the Australian Federal Police against him, Mr Hull offered to settle the proceedings in a way which was, in substance, accepted by the Commissioner. I have regard, therefore, pursuant to s 320(a) of the Proceeds of Crime Act, to that co-operation. 5. The Crown did not dispute that the plea had been made at the earliest opportunity nor that Mr Hull had made genuine efforts to co-operate fully with ASIC in relation to Mr Thompson. 6. I consider in all the circumstances that a combined discount should be provided of 50% for the plea of guilty and the high order co-operation with law enforcement agencies. Section 16A(2)(j), (ja) and (k) – deterrence and punishment 1. The Crown correctly submitted that the primary sentencing considerations in the present matter should be general deterrence, denunciation and appropriate punishment. Personal deterrence does not seem to me to be a significant consideration. It seems most unlikely that Mr Hull will ever be in the position to commit similar offences again. Moreover, the absence of any prior offending suggests that the commission of any other type of offending is most unlikely. 2. On the other hand, the significance of general deterrence on white collar offenders and offences of the present type has been stressed in a number of cases including DPP (Cth) v Gregory [2011] 34 VR 1 at [53] and R v Pogson, Lapham & Martin [2012] 91 ACSR 420 at [141]. These and other cases such as Khoo v R [2013] NSWCCA 323 at [78] and [79] have emphasised the need for a clear deterrent that insider traders should expect to go to gaol. Section 16A(2)(m) and (n) – the Offender 1. Mr Hull was born in South Africa on 28 November 1974. He is a British citizen with Australian residency status. He met his wife in London in 2001. They returned to Australia in 2004 and married in 2005. They have four children aged 10, 8, 4 and 2. His qualifications and work history were noted earlier. 2. By all accounts he was a hardworking man who devoted himself to his family. References from a number of persons attest to his good character and essential decency. That was, for example, exemplified when he attempted to apprehend a person stealing from motor vehicles near the Art Gallery in Sydney. A letter from the Assistant Deputy Commissioner of Field Operations of the NSW Police demonstrates the gratitude the police felt for his actions in that regard. 3. Mr Hull has suffered from depression since 2009. He initially consulted Richard McBride, a clinical psychologist who treated him in conjunction with his general practitioner. He was medicated on anti-depressants for a period of time and underwent a series of consultations with Mr McBride from August 2009 until May 2010. That depression recurred in August 2011 after he was first interviewed by ASIC for these offences and subsequently lost his job. 4. Dr Bruce Westmore provided two differential diagnoses of major depressive disorder and dysthymic disorder, the former being in the mild to moderate range. 5. His problems in that regard have not been assisted by his wife's own psychiatric problems that led to her being twice admitted to hospital and undergoing electroconvulsive therapy after the birth of their fourth child in November 2013. 6. Although Mr Hull told Dr Westmore, in answer to questions about why he committed the offences, that he felt his state of mind (his depression) affected his capacity to make clear decisions or consider the potential impact of his behaviour, I note that he had recovered enough from his depression by the time of the offences that he had both been off his anti-depressant medication and ceased his consultations with Mr McBride some three to four months earlier. Further, since Mr Hull did not give evidence at the sentence proceedings, I cannot place much if any weight on his statement to Dr Westmore in the circumstances. In that regard, the extended period of offending tells against the explanation. 7. Dr Westmore considered that his risk of reoffending was in the lower range. For that reason, for the reason of the remorse he has shown, and for the fact that he is unlikely ever to be in a similar position again, I consider that his prospects of rehabilitation are high. Section 16A(2)(p) – effect of sentence on the family 1. Before hardship on an offender's family can be considered to be a mitigating factor exceptional circumstances must be shown: Markovic v The Queen [2010] VSCA 105; (2010) 200 A Crim R 510 at [11] and [18]. The view of Beech-Jones J in R v Zerafa [2013] NSWCCA 222 at [109]-[118] urged upon me by Senior Counsel for Mr Hull must be regarded as a minority view. 2. Two matters, considered together, seem to me to provide exceptional circumstances in the present matter. The first is the mental health of Mrs Hull and issues concerning her parents. The second concerns Mr Hull's status in Australia as a person lacking Australian citizenship. 3. As to the first matter, I have read a report from Dr Nicholas Di Ciaccio who has been Mrs Hull's treating psychiatrist since March 2014. He noted that her depressive illness began shortly after the commencement of the Proceeds of Crime Act proceedings against her husband in June 2013. Her condition worsened and peaked in the two months following May 2014 when he was charged. At that time she became extremely stressed, suicidal, infanticidal and required two consecutive hospitalisations and a course of electroconvulsive therapy. Dr Ciaccio said that the factors that contributed to her fragility, which she still has, are both constitutional as well as situational. She has a strong family history of mental illness. A concomitant problem was an extremely debilitating stroke suffered by her father a short time after Mr Hull was first interviewed. 4. Dr Ciaccio concluded in this way: I believe that without the emotional and practical support from her husband Mrs Hull would probably not have maintained her recovery following her serious mental illness. I also think that she very much continues to need her husband's on the ground support in order to continue to function normally. The removal of this support very much increases the probability of Mrs Hull developing overwhelming anxiety and precipitating another debilitating depressive illness. 1. Mrs Hull has very limited other support from family or friends. Her father died on 14 May and the funeral was held two weeks ago. Mrs Hull is, naturally enough, grief-stricken. She says, in an affidavit put forward two weeks ago, that she is terrified of losing her husband as well. In addition, medical evidence put forward for the first time two weeks ago, indicates that her mother needs surgery to have both her hips replaced. The first of these will be done in June 2016 and after a rehabilitation period of about six weeks the other hip will be replaced. This means that Mrs Hull's mother will not be in a position to assist Mrs Hull with the children for some time to come. 2. As unfortunate as the timing of these events is, those circumstances alone would not, in my opinion, have constituted exceptional circumstances. 3. As to the second matter, as noted, Mr Hull was born in South Africa. He has both British and South African citizenship. He is a permanent resident of Australia and possesses a Class BB, Sub-class 155 resident visa. Mrs Hull is an Australian citizen and holds no other citizenship. The four children are Australian born and hold only Australian citizenship. 4. Section 501 of the Migration Act 1958 (Cth) provides: 501 Refusal or cancellation of visa on character grounds Decision of Minister or delegate - natural justice applies (1) The Minister may refuse to grant a visa to a person if the person does not satisfy the Minister that the person passes the character test. Note: Character test is defined by subsection (6). (2) The Minister may cancel a visa that has been granted to a person if: (a) the Minister reasonably suspects that the person does not pass the character test; and (b) the person does not satisfy the Minister that the person passes the character test. Decision of Minister - natural justice does not apply (3) The Minister may: (a) refuse to grant a visa to a person; or (b) cancel a visa that has been granted to a person; if: (c) the Minister reasonably suspects that the person does not pass the character test; and (d) the Minister is satisfied that the refusal or cancellation is in the national interest. (3A) The Minister must cancel a visa that has been granted to a person if: (a) the Minister is satisfied that the person does not pass the character test because of the operation of: (i) paragraph (6)(a) (substantial criminal record), on the basis of paragraph (7)(a), (b) or (c); or (ii) paragraph (6)(e) (sexually based offences involving a child); and (b) the person is serving a sentence of imprisonment, on a full‑time basis in a custodial institution, for an offence against a law of the Commonwealth, a State or a Territory. … Character test (6) For the purposes of this section, a person does not pass the character test if: (a) the person has a substantial criminal record (as defined by subsection (7)); or … (7) For the purposes of the character test, a person has a substantial criminal record if: (a) the person has been sentenced to death; or (b) the person has been sentenced to imprisonment for life; or (c) the person has been sentenced to a term of imprisonment of 12 months or more; or (d) the person has been sentenced to 2 or more terms of imprisonment, where the total of those terms is 12 months or more; or (e) the person has been acquitted of an offence on the grounds of unsoundness of mind or insanity, and as a result the person has been detained in a facility or institution; or (f) the person has: (i) been found by a court to not be fit to plead, in relation to an offence; and (ii) the court has nonetheless found that on the evidence available the person committed the offence; and (iii) as a result, the person has been detained in a facility or institution. Concurrent sentences (7A) For the purposes of the character test, if a person has been sentenced to 2 or more terms of imprisonment to be served concurrently (whether in whole or in part), the whole of each term is to be counted in working out the total of the terms. Example: A person is sentenced to 2 terms of 3 months imprisonment for 2 offences, to be served concurrently. For the purposes of the character test, the total of those terms is 6 months. 1. The effect of those provisions is that if on any single offence Mr Hull is sentenced to a term of imprisonment of 12 months or more the Minister must cancel his visa. Thereafter, under s 501CA of the Act the Minister may revoke the decision to cancel the visa. However, a decision not to exercise the power to cancel a revocation by the Minister is not reviewable. Once Mr Hull becomes an unlawful non-citizen he must be placed in immigration detention until he is granted a visa, deported, or removed from Australia. 2. The situation would be, therefore, that Mr Hull is liable to be removed from his family and eventually this country. Even if Mrs Hull and the children were able to move to Britain or South Africa to be with him there can be no doubt that the effect of that on them would be an exceedingly heavy burden. None of them has known other than life in Australia and Mrs Hull's family all reside here, most in close proximity to her. As mentioned earlier, Mrs Hull's father has recently died. Mrs Hull's desire to support her mother would provide a further reason why moving the family overseas would be emotionally very difficult. 3. The precise effect on sentencing of offenders who might fall within the provisions of s 501(3A) is unclear. It is not necessary to examine the debate contained in a number of judgments of the Victorian and Queensland Courts of Appeal. What is clear, and I take into account, is that the prospect of deportation is a proper matter for consideration, as well as the certainty of cancellation of Mr Hull's present visa, whatever may subsequently happen concerning his status in Australia. 4. In my opinion, such cancellation and prospect of deportation is such a significant matter when taken in conjunction with Mrs Hull's fragile mental health state and her family situation that Mr Hull demonstrates that the effect on his family of a sentence that brought about that result amounts to exceptional circumstances. Delay 1. The authorities are clear that significant delay in concluding the proceedings may result in a substantial discount on the sentence even where the fault lies with an offender. Nothing in the present case suggests that any fault lies with Mr Hull for the delay. 2. The time line is briefly this. Mr Hull was first interviewed on 3 August 2011 when, as noted, he made a number of admissions about the offending. ASIC continued to investigate the matter from that time until 20 December 2012 when a brief was sent to the Commonwealth Director of Public Prosecutions. It was not until 9 April 2014 that Court Attendance Notices were issued to him for 67 offences. The committal took place on 12 May 2015. He pleaded guilty on 6 November 2015 to the three offences on the indictment and asked for the offence now on the s 16BA schedule to be taken into account. The matter was fixed for sentencing proceedings before me on 7 March 2016 but was adjourned on Mr Hull's application for ten days to 17 March. At the present date almost five years have elapsed. Where that delay has resulted in significant stress for an offender or left him to a significant degree in uncertain suspense, the delay will be a mitigating factor on sentence: Sabra v R [2015] NSWCCA 38 at [37] adopting what had been said in R v Scook [2008] WASCA 114 at [57] to [65]. 3. Whilst it may be accepted that investigation of the types of offences charged here might have some complexity the delay was nevertheless considerable. The evidence from Dr Westmore, and from Mrs Hull at the sentence proceedings, together with what is contained in some of the references provided, together point to the level of stress caused by the delay and uncertainty. The matter has been exacerbated by the issue of his being deported hanging over him and his family. Appropriate sentence 1. Section 17A of the Crimes Act requires me to consider all other available sentences before I can be satisfied that a sentence of imprisonment should be imposed. Senior Counsel for Mr Hull submitted that the case was appropriate for either a suspended sentence, a community service order or a referral for an Intensive Correction Order. That was put on the basis of a very low level of culpability and the strong subjective case. 2. I have already determined that the objective seriousness of this matter is not at the lowest level principally because it was an extended course of conduct involving the investment of large amounts throughout that period in three different companies. Further, the charges were effectively rolled up charges involving a large number of transactions. The use of rolled up charges is a matter of considerable advantage to an offender: R v Jones [2004] VSCA 68 at [13]; R v Richard [2011] NSWSC 866 at [65]. 3. I consider particularly in the light of what was said by the Court of Criminal Appeal in Khoo v The Queen and R v Glynatsis [2013] NSWCCA 131 that there is no alternative to a period of imprisonment as the appropriate sentence in the circumstances of this offending. Although I have found that the combination of the family's circumstances when coupled with the prospect of deportation amounts to exceptional circumstances, the consideration of the effect of a sentence on the family is only one of a number of matters to be taken into account. When the offending otherwise requires a period of fulltime custody, as I have found, the finding of exceptional circumstances cannot override that determination although it may, as it does here, influence the length of the sentence. In fixing the periods of imprisonment for each offence I have had regard to the 50% discount for the pleas and assistance and to the considerable delay involved in these matters coming to the Court for sentence. I have also had particular regard to the effect of the provisions of the Migration Act on Mr Hull and his family. There must be a measure of accumulation in respect of the three counts because each involved separate criminality albeit arising from a similar course of conduct. 4. For the purposes of s 16AC of the Crimes Act I indicate that the sentences I would have imposed but for the reduction for co-operation with law enforcement agencies are these: Count 1 – imprisonment for 8 months; Count 2 – imprisonment for 14 months; Count 3 taking into account the matter on the S 16BA schedule – imprisonment for 15 months. 5. Michael William Hull, (a) in respect of Count 1 on the indictment I sentence you to a period of imprisonment of six months commencing 3 June 2016 and expiring 2 December 2016; (b) in respect of Count 2 I sentence you to a period of imprisonment of ten months commencing 3 September 2016 and expiring 2 July 2017; (c) in respect of Count 3 and taking into account the offence on the s 16BA schedule I sentence you to a period of eleven months commencing 3 December 2016 and expiring 2 November 2017. (d) I order that you be released after serving a period of seven months imprisonment upon giving security by way of recognisance in the sum of $1,000 to be of good behaviour for a period of 18 months commencing on 2 January 2017. ********** 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: 20 April 2018