Court of Criminal Appeal Supreme Court New South Wales

• Medium Neutral Citation: R v GLYNATSIS [2013] NSWCCA 131
• Hearing dates: 20 May 2013
• Decision date: 07 June 2013
• Before: Hoeben CJ at CL at [1]; Rothman J at [78]; McCallum J at [79]

Decision

Crown appeal allowed.

Sentences passed on the respondent on 12 December 2012 are quashed.

In lieu thereof, the respondent is sentenced as follows:

(a) With respect to each of the insider trading offences contained in Counts 1 to 5 on the indictment, the respondent is sentenced to imprisonment for a period of 15 months, commencing 12 December 2012 and expiring on 11 March 2014.

(b) With respect to each of the insider trading offences contained in Counts 6 to 9 on the indictment, the respondent is sentenced to imprisonment for a period of 12 months, commencing 12 September 2013 and expiring on 11 September 2014.

(c) The Court directs that the respondent be released on 11 December 2013 being the expiration of 12 months of that sentence on a recognisance that he be of good behaviour during the balance of the term, upon him giving a security in the sum of $1,000 without surety.

• Catchwords: CRIMINAL LAW - sentence appeal - insider trading - offending took place over 12 months - sentenced to imprisonment for 2 years to be served by Intensive Correction Order (ICO) - Crown appeal - whether irrelevant matters taken into account on sentence - whether adequate regard had to general deterrence - whether principle of totality observed - whether sentences imposed manifestly inadequate - error identified - need to re-sentence to a term of full time custody.
• Legislation Cited: Corporations Act 2001 (Cth) - ss1043A(1), 1311(1); Crimes Act 1914 (Cth); Crimes (Administration of Sentences) Act 1999 (NSW); Crimes (Sentencing Procedure) Act 1999 (NSW)
• Cases Cited: Pearce v R [1998] HCA 57; 194 CLR 610; R v Bateson [2011] NSWSC 643; R v Dalzell [2011] NSWSC 454; 83 ACSR 407; R v El Kahani (1990) 21 NSWLR 370 at 377; R v McKay [2007] NSWSC 275; 61 ACSR 470; R v Nguyen [2004] NSWCCA 332; 149 A Crim R 343; R v O'Brien [2011] NSWSC 1553; 91 ACSR 374; R v Pantano [1990] 49 A Crim R 328 at 330; R v Pogson; R v Lapham; R v Martin [2012] NSWCCA 225; R v Thomas [1998] 3 VR 188; Regina v Robert Bart Doff [2005] NSWSC 50; 23 ACLC 317; Regina v Shawn Darrell Richard [2011] NSWSC 866; Regina v Zamagias [2002] NSWCCA 17
• Category: Principal judgment
• Parties: Commonwealth Crown - Appellant; Nicholas Glynatsis - Respondent
• Representation: Counsel: Mr R Bromwich SC/Mr R Ranken - Appellant; Mr D Fagan SC/Mr T Saunders - Respondent; Solicitors: Commonwealth Director of Public Prosecutions - Appellant; Cleary Finlay - Respondent
• File Number(s): 2011/395328

Decision under appeal

• Date of Decision: 2012-12-12 00:00:00
• Before: Johnson J
• File Number(s): 2011/395328

JUDGMENT

1 HOEBEN CJ at CL: On 12 December 2012 the respondent was sentenced by Johnson J in respect of nine counts of insider trading, contrary to ss1043A(1) and 1311(1) of the Corporations Act 2001 (Cth). Five of the nine charges were "rolled up" charges involving multiple insider trading transactions. Each offence carried a maximum penalty of imprisonment for 5 years and/or a fine of $220,000.

2 His Honour imposed sentences as follows:

(a) In respect of each of counts 1 to 5 - sentenced to imprisonment for 12 months commencing 12 December 2012 and expiring 11 December 2013.

(b) In respect of each of counts 6 to 9 sentenced to imprisonment for 12 months commencing 12 December 2013 and expiring 11 December 2014.

3 His Honour directed that the sentences were to be served by way of intensive correction in the community. The conditions of that intensive correction order (ICO) were to include the mandatory conditions prescribed by the Crimes (Administration of Sentences) Act 1999 (the CAS Act), the Crimes (Administration of Sentences) Regulation 2008 (the CAS Regulation) and that the respondent was to report on or before 19 December 2012 to the Department of Corrective Services.

4 The gaol sentence of 2 years imprisonment was to be served by way of 768 hours of community service (24 months at 32 hours per month). The Crown has appealed from that sentence on the following grounds:

Ground of Appeal 1 - His Honour erred in assessing the seriousness of the offences by the approach taken to the sums invested, the profits obtained and who was to benefit from the illegal trading in that his Honour:

(a) Erroneously concluded that the respondent's trading on behalf of relatives was a significant factor that operated in his favour (Remarks on Sentence at [161]);

(b) Erroneously placed either equivalent weight or greater weight on the profits obtained rather than greater weight on the sums invested (Remarks on Sentence at [159] and [171]).

Ground of Appeal 2 - His Honour erred by imposing sentences with an aggregate duration of 2 years imprisonment and by directing that those sentences be served by way of intensive correction in the community and thereby:

(a) Failed to give proper effect to the need for general deterrence; and/or

(b) Failed to give proper effect to the principles of totality, having regard to the seriousness of the offending conduct for each of the nine separate offences;

Ground of Appeal 3 - The sentences imposed were manifestly inadequate.

FACTUAL BACKGROUND

5 The respondent was born in January 1983. He obtained a Bachelor of Law and Bachelor of Business Administration degrees from Macquarie University in 2005. He commenced but did not finish a Diploma in Financial Services from Kaplan Professional in 2010.

6 In February 2007 the respondent commenced employment with PricewaterhouseCoopers (PwC) and by July 2009 had become a senior consultant in the Research and Development Section of their Tax and Legal Department. The nine offences for which he was sentenced were committed between November 2009 and 2010.

7 The respondent resigned from PwC in June 2011 following the detection of the offences that are the subject of these proceedings.

8 During his employment at PwC, the respondent had access to a business process and record management system called Documentum, which housed caches of files relating to (amongst other things) PwC's clients and the various projects in respect of which PwC had been retained to provide advice. Unless access to a client file or project stored on Documentum had been specifically limited, all Documentum users had access to that information.

9 The respondent had exclusive use of a laptop, provided to him by PwC which was protected with a username and password unique to the respondent. This laptop contained a program which enabled the respondent to access the Documentum data base and to also automatically save the documents he viewed. It recorded the date and time at which he viewed them.

10 Between November 2009 and November 2010, the respondent accessed confidential PwC documents on Documentum identifying proposed transactions involving PwC clients, such as corporate takeovers which contained inside information, and then shortly afterwards traded in shares and Contracts for Difference (CFDs) which are "derivatives" under the Corporations Act 2001. The respondent had no legitimate work-related reason to access these documents and at all relevant times, he was aware that his actions in accessing them and subsequently trading, contravened various PwC policies and were illegal.

11 The respondent was personally involved in all of the trading, the subject of these proceedings, by placing orders over the internet through either a trading account held with CMC Markets Asia Pacific Pty Ltd in his own name or three separate trading accounts held by relatives (relatives' trading accounts). These were accounts in the names of Michael Glynatsis, his uncle, Irene Glynatsis, his sister, or in the names of Michael Glynatsis and his business partner, Peter Nicola.

12 The respondent traded through his relatives' trading accounts as their agent, although not pursuant to any formal agency agreement. Each of the relatives gave the respondent permission to trade through their accounts and provided him with their user names and passwords for this purpose. Each of the relatives was broadly aware of the respondent trading through their accounts but not of the specific details of each particular trade. All of the trades through the relatives' trading accounts were conducted by the respondent on their behalf and for their financial benefit. It was not alleged that any of the relatives were complicit in the respondent's offences. It was common ground that the respondent did not derive any financial benefit from any trades conducted through his relatives' trading accounts.

13 By way of summary:

(a) Counts 3 and 4 related to trading only on his own account.

(b) Counts 5, 6, 8 and 9 related to trading only on the accounts of his relatives.

(c) Counts 1, 2 and 7 related to trading on both his own account and on those of relatives.

14 The offending involved numerous transactions over a period of 12 months involving the acquisition on his own, or on account of his relatives, of financial products (shares or units or CFDs in respect of shares or units) in eight companies trading on the ASX. Those transactions were rolled up into nine counts on the indictment. The confidential inside information accessed related on all but one occasion to an impending takeover of the relevant company.

15 Count 1 related to Challenger Kenedix Japan Trust (CKT). Between 20 November 2009 and 2 December 2009, the respondent acquired through his own trading account 58,000 CFDs in respect of units in CKT and acquired for his relatives' trading accounts 48,700 units in CKT. The acquisition of the CFDs produced an exposure of $42,950 and the acquisition of the units cost $27,971. On 9 December 2009, after the public announcement of the takeover, the respondent disposed of all of the units and CFDs in CKT for a total consideration of $94,658, which produced a total gross profit of $23,737, made up of $13,600 for the respondent and $10,137 for his relatives.

16 The second count related to Hastings Diversified Utilities Fund (HDF). Between 11 March 2010 and 17 March 2010 the respondent acquired through his own trading account 9,000 CFDs and through one of his relative's trading accounts, 10,000 units in HDF. The acquisition of the CFDs produced an exposure of $11,250 and the acquisition of the units cost $12,250. The takeover did not occur and between 23 March and 8 April 2010 the respondent disposed of all of the units and CFDs in HDF for a total consideration of $23,880, which produced a total gross profit of $380. The transaction produced a loss of $120 for the respondent and a profit of $500 for his relatives.

17 Between 5 May and 7 May 2010 the respondent acquired for his own trading account 40,000 CFDs in respect of units in HDF, which resulted in a total exposure of $51,550. The proposed takeover did not eventuate. On 13 May 2010 the respondent disposed of all of his CDFs in respect of units in HDF, resulting in a gross profit for him of $2,225.

18 The third count related to Brockman Resources Ltd (BRM). On 3 May 2010 the respondent acquired through his own trading account 10,000 CFDs in respect of shares in BRM, resulting in a total exposure of $33,400. The proposed takeover did not take place. On 4 May 2010 the respondent disposed of all of his CFDs in respect of shares in BRM resulting in a gross loss of $4,400.

19 The fourth count also related to BRM. Between 10 May and 13 July 2010 the respondent acquired a total of 31,000 CFDs in respect of shares in BRM, resulting in a total exposure of $90,355. Between 10 May 2010 and 13 September 2010 the respondent disposed of his 31,000 CFDs in respect of shares in BRM, which resulted in a total gross profit for him of $3,851.

20 The fifth count related to Ferrous Limited (FRS). Between 18 May and 6 July 2010 the respondent acquired through his relatives' trading accounts 10,000 shares in FRS. The proposed takeover did not occur. On 24 June and 22 September 2010 the respondent disposed of all of the 10,000 shares in FRS which resulted in a total gross profit for his relatives of $475.

21 The sixth count related to Apollo Gas Ltd (AZO). On 24 September 2010 the respondent acquired through one of his relative's trading accounts 18,300 shares in AZO. On 29 September 2010 the respondent disposed of all of the AZO shares resulting in a gross profit for his relatives of $4,392.

22 The seventh count related to Dominion Mining Ltd (DOM). Between 12 and 19 October 2010 the respondent acquired through his own trading account 11 CFDs in respect of shares in DOM for a total exposure of $31,586. In the same period he acquired through one of his relative's trading accounts 4,300 shares in DOM for a total cost of $12,040. Between 21 October and 3 November 2010 the respondent disposed of all of the shares and CFDs in respect of DOM for a total consideration of $49,519 which resulted in a gross profit of $5,893, comprising $4,164 for the respondent and $1,729 for his relatives.

23 The eighth count related to Caledon Resources Ltd (CCD). Between 22 September and 3 November 2010 the respondent acquired 24,500 shares in CCD through two of his relatives' trading accounts for a total cost of $29,017. Between 9 and 12 November 2010 the respondent disposed of all of the shares in CCD, resulting in a gross profit for his relatives of $9,753.

24 The ninth count related to Exoma Energy Ltd (EXE). The confidential information related to the taking over of various exploration permits. Between 17 and 23 November 2010 the respondent acquired through one of his relative's trading accounts 40,000 shares in EXE for a total cost of $10,000. On 23 December 2010 the respondent disposed of all of the shares in EXE, resulting in a gross loss to his relatives of $600.

25 In relation to all of these transactions, it was common ground that the respondent knew that the insider information in his possession was not generally available and of its impact upon a reasonable person if it were. It was also common ground that the respondent was a "true insider" in that he was in an inside position when he possessed and used inside information and not just an outside recipient of inside information. It was accepted that his conduct was thereby a serious breach of the trust bestowed upon him by his employer.

26 The transactions yielded total gross profits of $50,826 or an overall gross benefit (after deducting losses incurred on some trades) of $45,706. Of that amount, the respondent derived on his own account a gross profit of $23,840 and on account of his relatives, $26,383. This yield was the result of investing a total amount of $371,507.

Sentence proceedings

27 The primary judge made the following findings in relation to the respondent's personal circumstances:

28 He was aged 27 - 28 at the time of the offences and 29 at the time of sentencing. He was unmarried and had no prior criminal history. The respondent gave evidence in the sentencing hearing.

29 In relation to the effect of the offending on the respondent's career, his Honour said:

"117 ... I will proceed to sentence the offender upon the basis that his convictions for these offences will have a terminal effect on his capacity to work as a legal practitioner and in the area of financial advice in the future." (ROS 23)

30 The respondent was born in Greece and came to Australia with his parents and younger sister when he was aged 7. When he was aged 10, his mother left the family and returned to Greece. The respondent had been close to his mother and her departure had an unsettling effect. To some extent, his paternal grandmother filled the void left by his mother. She looked after him in conjunction with his father until he was aged 14.

31 His Honour accepted that the respondent was a hardworking and studious young person, working in his father's fish and chip shop while he was at school. In years 11 and 12, the respondent helped his father run a Greek restaurant in Terrigal. The respondent was successful in his Higher School Certificate and undertook tertiary studies. He continued to work part-time in the family restaurant as a kitchen hand and cook and as a general manager while he was at university.

32 The respondent's father had remarried when the respondent was aged 16 (1999). A daughter was born of that union, who was aged 11 at the time of sentencing. The respondent's father and his second wife divorced in 2009. This resulted in stress and tension across the whole family, culminating in the father's bankruptcy in February 2010, as well as the loss of the family house.

33 The respondent's sister, Irene, confirmed the family's difficulties in 2009. The sentencing judge summarised her evidence as follows:

"125 ... She stated that she and the offender commenced to look for a house for her father and his young daughter to occupy. A place was found in October 2010 with a settlement in December 2010. She confirmed that the offender had placed most of the deposit on the purchase of the house for his father and half sister. This provides some context for the offences committed by the offender in 2010." (ROS 24)

34 Since his resignation from PwC in June 2011 the respondent had done some work as a bar manager, which was work organised by his sister. At the time of sentencing, he was residing with his father and half-sister on the Central Coast. He was working for his father.

35 The sentencing judge had a psychologist's report before him. In November 2011, the respondent was being treated for depression and anxiety. That treatment continued into 2012. The diagnosis was of adjustment disorder and depressed mood. The psychologist noted that initially the respondent had rationalised his behaviour, but as the result of treatment, had come to acknowledge that his actions were illegal. The psychologist thought that the respondent had demonstrated remorse. The psychologist considered the respondent's future prospects to be sound because of his expression of remorse and contrition. He believed that the likelihood of the respondent coming before the Court again was extremely low.

36 In relation to the respondent's personality, the psychologist said:

"128 ... [He] had come to appreciate the fact that he has been depressed for many years dating to childhood, that he had not come to terms with his parents' failed marriage, and that he took on the role of protecting the family name and pleasing his father by excelling academically and caring for his younger sister." (ROS 25)

37 The sentencing judge accepted that the respondent was contrite and remorseful for his actions and had accepted full responsibility for them. His Honour said:

"134 ... Whilst it is the case that he did not give a full account of his actions when they were initially under investigation in 2011, he has readily accepted responsibility for his offences, agreeing to the facts upon which he is to be sentenced which includes an express acceptance that he knew what he was doing to be wrong at the time." (ROS 26)

38 The sentencing judge accepted that the respondent felt a level of pressure to assist his father during the serious financial difficulties which affected him in 2010. His Honour thought this provided some context for the offences. His Honour also accepted that there was in part a desire by the respondent to please those family members on whose behalf he was trading. His Honour noted that the respondent was, however, also obtaining some benefit for himself. His Honour found the respondent to have been a hardworking, young person who did not appear to be someone who had sought to "live life in the fast lane", as sometimes occurs with offenders in this class of crime. His Honour stressed that these findings did not operate as an excuse for the respondent's criminal conduct but provided some context for the exercise of the sentencing discretion.

39 The sentencing judge reviewed why insider trading offences are regarded as a serious form of criminal activity. They served to undermine the integrity of the stock market and were difficult to detect. General deterrence was important to provide a clear disincentive for such offences. Not only did insider trading have the capacity to undermine the integrity of the market, it also had the potential to undermine confidence in the commercial world generally, arising from breaches of trust. His Honour noted that the cases have emphasised the particular gravity of offences by a "true insider" who abuses the office or employment which he or she occupies, to take advantage of information acquired in the course of that employment. His Honour noted that insider trading was not a form of victimless crime but was a form of cheating.

40 The sentencing judge accepted that a 25 percent discount was appropriate because of the early plea of guilty. He took account of the respondent's agreement to an order under s 116 of the Proceeds of Crime Act 2002 (Cth), for payment of $50,826 as evidence of the respondent's co-operation with the authorities. His Honour did, however, note that while the respondent's co-operation was not immediate it commenced at an early point in time and was described by ASIC as being of "significant value".

41 In relation to the respondent's motivation for the offending, the sentencing judge said:

"160 The Crown submitted that the fact that some of the securities were purchased on behalf of the offender's relatives was of no particular importance in this case. The offender had permission from the relatives to access their trading accounts and he did so. Mr Hastings QC submitted that this aspect was of significance in this case.

161 I am satisfied that the trading on behalf of relatives is a significant factor which operates in the offender's favour in this case. For reasons mentioned earlier, it shed some light upon the offender, his thought processes and his family background. I keep in mind as well the existence of clear family financial difficulties affecting the offender's father in 2010 and the various steps which the offender and his sister were taking on his behalf.

162 In raising these matters I am not suggesting that the offender was acting as a form of "white knight", for noble reasons to assist his family in committing these offences. There was an element of personal gain as well." (ROS 31)

42 In relation to the extent of the insider trading, the sentencing judge said:

"158 In each instance the securities were sold yielding total gross profits of $50,826 or an overall gross benefit of $45,706. Of that amount the offender derived, on his own account, a gross profit of $23,840 and his relatives derived a profit of $26,386.

159 It is necessary to keep in mind that the total amount invested was $371,507. This is an important indication of the gravity of the offences: R v Doff at [31] (ROS 30)

...

171 The Crown submits that it is most important that the sum invested by the offender in these offences totalled $371,507, a sum far in excess of the nearest comparative case being the sum of $174,755 in R v O'Brien. I accept that this is a factor to be taken into account on sentence, although it is also important that the gross benefit in this case was the sum of $50,826 with that sum subdivided as between the offender and his relatives. The gross benefit in the case of R v O'Brien was $54,748." (ROS 33)

43 Ultimately, his Honour found that the comparison with other cases while helpful, was not decisive in the sentencing exercise which required that he impose a sentence which was individualised to the particular offender, the context in which the offences occurred and the circumstances of the offences themselves. His Honour said:

"184 I have concluded that no sentence other than a term of imprisonment is appropriate in the circumstances of the case. To impose a lesser sentence would not reflect the seriousness of the offender's crimes, or give proper effect to applicable sentencing principles to which I have made reference.

185 I have had regard to the principles of accumulation, concurrency and totality. I accept the Crown submission that the offender's conduct cannot be treated as a single episode of criminality. There are a number of offences committed over a period of time. I consider that a measure of accumulation is appropriate, although I am satisfied that the total sentence of imprisonment should not exceed two years.

186 In my view, the appropriate sentencing outcome will involve concurrent sentences of imprisonment of 1 year with respect to each of the first to fifth offences, commencing today, 12 December 2012, and expiring 11 December 2013. With respect to the sixth to ninth offences, concurrent sentences of imprisonment for 12 months will be imposed, commencing on 12 December 2013 and expiring on 11 December 2014."

APPEAL

Ground of Appeal 1

44 The Crown submitted that the sentencing judge erred in concluding that the respondent's trading on behalf of relatives was a significant factor that operated in his favour. His Honour's observations in that regard are set out at [41] hereof. In support of that proposition, the Crown relied upon the observation of Whealy J in R v McKay [2007] NSWSC 275; 61 ACSR 470 at [55]:

"... The fact that the beneficiaries on count 2 and, in particulars 1 and 2 of count 3 were family members is of no great warrant; similarly, with count 1, where there was a possible contemplation that Georgia McKay might be the ultimate beneficiary. In all three instances, the position is similar to the offender receiving the benefits of the trades herself (R v IR Hall [No 2] (2005) NSWSC 890 at [86])."

45 The reference to Hall, is a reference to a decision of Kirby J where his Honour said:

"86 I am ultimately concerned with Mr Hall's criminality. In determining that issue, it makes no difference in my view whether Mr Hall held shares personally, or whether they were held by family members. It was clear on the evidence that Mr Hall was the driving force behind The Store of Knowledge Pty Limited. It was a family investment vehicle. His family's interests were his interests. He sought throughout to protect his and his family's interests."

46 The Crown also relied upon R v Nguyen [2004] NSWCCA 332; 149 A Crim R 343 at [55] where Spigelman CJ (with whom Barr and Hoeben JJ agreed) said:

"Ellis DCJ distinguished a number of authorities in this Court on the basis that the offences had been committed by some person with a view to them obtaining monetary gain for themselves. However, personal advantage can take many forms. Greed may be regarded as a less worthy motive than protection of a family member. The latter is no less a form of personal gain to an offender and, often, is a more powerful motive. Protection of the system of criminal justice should not be significantly less vigilant where its perversion is attempted for reason of family ties, rather than the expectation of monetary gain."

47 I am not satisfied that the sentencing judge erred in the way submitted by the Crown. It should be noted that the finding by his Honour was made in answer to the Crown submission at trial that the fact that some of the securities were purchased on behalf of the offender's relatives, was of no particular importance in this case. It was well open to his Honour to reject that proposition on the facts of this case. Moreover, the statements of principle upon which the Crown relies deal with different factual circumstances. In both Hall and Nguyen, there was an identity between the offender and those benefiting from the offence. That was the way that Whealy J characterised the matter in McKay.

48 The situation was quite different in this case. There was no evidence of any identity between the relatives whom the respondent sought to benefit and himself and such was not suggested. The evidence was important as being confirmatory of the context in which the offending occurred, i.e. a misguided attempt to restore his family's fortunes. The distinction between an offence committed for motives of personal greed and committed for the benefit of some other person is real. This is not to say that such a circumstance is exculpatory, rather it can indicate a less serious level of criminality as it did in this case. That having been said, his Honour was well aware of the confounding issue in this case, i.e. that in some of the transactions there was an element of personal gain involved.

49 The effect of what his Honour was saying was that this was an important factor in the appellant's favour. He did not suggest that it was a decisive factor or the most important factor, but it was a factor which needed to be taken into account.

50 The Crown submitted that his Honour erred by giving greater or equivalent weight to the size of the profits obtained from the insider trading when comparing that to the magnitude of the sums invested. The paragraphs of the remarks on sentence which are criticised are at [42] hereof. The Crown submitted that it was clear from these paragraphs that at the very least, his Honour was giving equivalent weight to the amount of profit and the amount invested. The Crown submitted that such an approach was erroneous.

51 In making that submission, the Crown relied on the observations of Barr J in Regina v Robert Bart Doff [2005] NSWSC 50; 23 ACLC 317 at [31] where his Honour said:

"It seems to me that the amount invested is a more important indicator of criminality than the amount ultimately realised from the criminal activity concerned. One would not regard as trivial the criminality of an insider trader who ventured much but lost."

52 The Crown based its submission on the following considerations. The damage to the integrity of the market occurs when the investment is made, regardless of the profit ultimately realised. The profit or benefit ultimately derived from insider trading is often a relatively unimportant indicator of criminality because it is almost invariably determined by chance and events occurring, or failing to occur, after the commission of the offence. Such events are beyond the offender's control.

53 The Crown submitted that the outcome of the trades, the subject of the second, third, fourth and fifth counts, provide good examples of the latter circumstance. The Crown submitted that the profit gained by an insider trade transaction, governed as it is by chance, is a poor and crude indicator of the criminality involved in such offences. It submitted that the criminality ought not be determined to any significant extent by unpredictable chance of this kind. The Crown submitted that the amount invested is a product of design, whether directed to a prospective profit or some other motivation and therefore a superior indicator of criminality.

54 I agree with the Crown's analysis. Clearly profit is a relevant factor and was properly taken into account by his Honour. It could become an important factor if for a comparatively small investment, a very large profit were made. In most situations, however, the better indicator of the extent of the criminality must be the size of the transaction and the best way of assessing that is by reference to the amount of money invested, or placed at risk.

55 Accordingly, while his Honour was correct to take both matters into account as factors relevant to criminality, the more important factor was the total amount invested or put at risk. To the extent that his Honour failed to acknowledge this, he was in error. It is not an error which appears to have significantly influenced the exercise of his Honour's sentencing discretion.

Ground of Appeal 2

56 The Crown submitted that the imposition of a sentence of imprisonment, to be served by way of intensive correction in the community, involved four steps.

(1) A determination as to whether having considered all possible alternatives, no penalty other than imprisonment is appropriate in all the circumstances of the case;

(2) If so, a preliminary determination as to whether such a sentence of imprisonment is "likely" to be for a period of no more than two years, so as to warrant a referral of the offender, pursuant to s69(1) of the Crimes (Sentencing Procedure) Act 1999 (NSW) for assessment as to his or her suitability for intensive correction in the community.

(3) A determination of the appropriate length of the term of imprisonment at the final sentence hearing and;

(4) If, and only if, the overall duration of sentence arrived at is no more than 2 years imprisonment, a determination as to whether the sentence of imprisonment should be the subject of an ICO.

57 In relation to that process, the Crown relied upon the observation of Howie J in Regina v Zamagias [2002] NSWCCA 17 at [23] where his Honour said:

"23 ... Each step requires the court to consider the objective gravity of the offence balanced against the subjective circumstances of the offender, but it is the first of those considerations that will principally determine which of the available sentencing alternatives the court should adopt. This is because at the end of the day the sentence must be commensurate with the seriousness of the crime: R v Geddes (1936) 36 SR (NSW) 554; R v Rushby [1977] 1 NSWLR 594."

58 The Crown submitted that s69 is silent as to the question of concurrent and cumulative sentences and therefore does not require the sentencing judge to consider questions of totality and accumulation at the point of determining whether to refer an offender for assessment. The Crown submitted that a determination under s69(2) that the sentence was likely to be for a period of no more than two years, did not absolve the sentencing judge from the requirement to consider questions of accumulation, concurrency and totality when determining the terms of imprisonment to be imposed prior to determining whether a sentence ought be served other than by way of fulltime imprisonment. The Crown submitted that s69(2) did not permit a sentencing judge to determine the length of imprisonment after he or she had selected the manner in which it was to be served.

59 The Crown submitted that his Honour was required first to fix an appropriate sentence for each offence and then consider questions of accumulation or concurrency, as well as questions of totality. It submitted that it was only after that point, that the manner of serving the sentence, whether by way of home detention, ICO or suspension might properly arise if the sentence arrived at was short enough. The Crown relied upon Pearce v R [1998] HCA 57; 194 CLR 610 at 624 to support that proposition:

"46 Sentencing is not a process that leads to a single correct answer arrived at by some process admitting of mathematical precision. It is, then, all the more important that proper principle be applied throughout the process.

47 Questions of cumulation and concurrence may well be affected by particular statutory rules. If, in fixing the appropriate sentence for each offence, proper principle is not applied, orders made for cumulation or concurrence will be made on an imperfect foundation.

48 Further, the need to ensure proper sentencing on each count is reinforced when it is recalled that a failure to do so may give rise to artificial claims of disparity between co-offenders or otherwise distort general sentencing practices in relation to particular offences." (Emphasis added by the Crown)

60 That statement of principle by the Crown is, of course, unexceptionable. The issue is whether the sentencing judge failed to follow that process in some respect.

61 The Crown submitted that his Honour did not follow that process and as a result, failed to give proper effect to the principles of totality by having regard to the seriousness of the offending conduct in respect of each of the nine separate offences. In that regard, the Crown referred to that which his Honour said at [43] hereof which, the Crown submitted, was the only time his Honour considered questions of cumulation, concurrency and totality. The Crown submitted that his Honour advanced no reasons for the choice which he made.

62 The Crown submitted that his Honour's determination of the terms of imprisonment was unsatisfactory in that he did not indicate the basis on which he imposed an identical term of imprisonment in respect of counts 1 and 5, when the amount of the investment in count 1 ($70,921) was almost 9 times that involved in count 5 ($7,975) and yielded a gross profit of $23,737 that was approximately 49 times the gross profit yielded in respect of count 5. The Crown submitted that similar contrasts could be identified between the sentences imposed in respect of counts 4 and 5, counts 7 and 6, and counts 7 and 9.

63 The Crown's criticism of the sentencing judge's approach on this basis is misconceived. It involves an application of mathematical precision to what is a discretionary decision based on an intuitive synthesis of all the relevant factors to which his Honour referred. It is contrary to remarks in Pearce on which the Crown relied at [59] hereof. Given the similarity in the steps taken by the respondent in relation to each offence, it was well open to the sentencing judge to structure the sentences as he did.

64 The Crown submitted that it was difficult to discern the basis upon which his Honour determined which sentences were to be concurrent and which were to be cumulative. Once again, this was a discretionary exercise on the part of his Honour which was open to him because of the similar nature of the offending.

65 The Crown submitted that his Honour did not have due regard to the fact that most of the offences (counts 1, 2, 4, 5, 7, 8 and 9) were "rolled up" in the sense that they involved more than one illicit trade. Many involved numerous instances of trading over relatively prolonged periods, and some also involved trading by the offender, through both his own trading account and one or more of his relatives' trading accounts. Count 2 also consisted of two separate particulars involving one set of illicit trades in March 2010 and a different set of illicit trades in May 2010.

66 In support of this submission, the Crown relied upon Regina v Shawn Darrell Richard [2011] NSWSC 866 where Garling J observed (at [65]) that offences which are rolled up charges, include more than one episode of criminal conduct, such that necessarily the criminality involved is greater than with a charge involving only one episode of criminal conduct. His Honour said:

"105 The use of rolled up charges by the Crown is a matter of considerable advantage to an offender: R v Jones [2004] VSCA 68 at [13] per Charles JA (Phillips JA and Bongiorno AJA agreeing). The advantage to the offender is that the use of a rolled up charge restricts the maximum available sentence to that prescribed by the legislation for the single offence, rather than the total theoretically available maximum sentence from multiple charges.

106 In this case, the Crown submitted that there was a public interest in presenting rolled up charges. It said that rolled up charges encouraged pleas of guilty and made more efficient the discharge of the Court's workload. It also submitted that presenting the indictment with two rolled charges provided an appropriate available maximum sentence which sufficiently reflected the underlying criminality of Mr Richard's criminal conduct.

107 I acknowledge, as did Charles JA in Jones that a rolled up count can ease the task of a sentencing judge. It does so by limiting the number of separate charges upon which a sentence is necessary and, as a result, limits the range of sentences available.

108 The other reason that there is a benefit to an offender who pleads guilty to a rolled up charge is that, as only one sentence is imposed for all of the episodes of criminality, the sentence in effect represents a complete concurrence of separate sentences which might otherwise have been imposed for those separate episodes of criminality.

109 The fact that here the charges are rolled up charges is a relevant matter to which regard must be had in considering the principle of totality and, in particular, questions of concurrence and accumulation of the sentences to be imposed on the individual charges."

67 The Crown submitted that the significance of the "rolled up" counts in the present case was expressly addressed on sentence, but the sentencing judge did not refer to the issue in his remarks on sentence. It submitted that inferentially, it appears that his Honour did not consider the different extent to which the individual counts encompassed multiple instances of offending when assessing issues of cumulation, concurrency and totality.

68 The agreed facts made it clear that the acquisition of shares, units and CFDs referred to in each count occurred as a result of a number of separate transactions. Accordingly, the whole of the conduct of the respondent, including those transactions, is relevant to the necessity for general deterrence and, in that respect, to the assessment of totality. It is not clear to what extent, if at all, the sentencing judge took account of this other conduct that was "rolled up" in the counts to which the respondent pleaded guilty.

69 The Crown submitted that in relation to the mode of serving the sentences imposed by his Honour, insufficient regard was had to the important principle of general deterrence. The Crown submitted that general deterrence was one of the most important principles to be observed in this area of offending. This is despite the fact that it is not specifically referred to in s16A(2) of the Crimes Act 1914 (Cth).

70 The Crown submitted that there was clear authority to this effect: R v El Kahani (1990) 21 NSWLR 370 at 377; R v Thomas [1998] 3 VR 188 at 200. The Crown submitted that general deterrence was such an important consideration because white collar offences are difficult to detect, investigate and prosecute successfully: R v Pantano [1990] 49 A Crim R 328 at 330. In R v Doff [2005] NSWCCA 119; 54 ACSR 200 the Court (Wood CJ at CL, Adams and Bell JJ) said:

"56 ... We do not, in this respect, suggest that anything other than a stern approach should be taken to offences of insider trading for the reasons earlier identified. It remains a serious offence, and there needs to be a considerable deterrent aspect reflected in order to protect the integrity and efficacy of the market. Those in a position of trust who receive price sensitive information in relation to securities are expected to confirm to exacting standards of honesty, and transgression can normally be expected to lead to custodial sentences as well as to pecuniary penalties."

71 The Crown submitted that his Honour appeared to be overly influenced by the three decisions in which ICO's had been imposed on offenders by the Courts, i.e., R v Bateson [2011] NSWSC 643; R v Dalzell [2011] NSWSC 454; 83 ACSR 407 and R v O'Brien [2011] NSWSC 1553; 91 ACSR 374. The Crown submitted that while the subjective circumstances of the three offenders in those cases and the present respondent were reasonably similar, the objective circumstances, including the number and nature of the insider trading offences varied significantly. The Crown submitted that the objective circumstances of the offending in the present case was more serious than any in those three cases, yet all four offenders received identical aggregate sentences, being the prescribed maximum limit for an ICO.

72 In the appeal, the Crown presented a schedule which set out a comparison of those three cases with the facts of this case. Important points of dissimilarity were that in Dalzell and Bateson only one count was involved, in O'Brien four counts, but in this case nine counts. In Dalzell the offending had taken place over one day, in Bateson over four days, in O'Brien over six and a half months, and in this case over 12 months. In Dalzell and Bateson one company was involved, in O'Brien four companies and in this case, eight companies. In Dalzell and Bateson the amount invested was between $52,000 and $53,000, in O'Brien $203,000 and in this case, $371,000. The Crown submitted that O'Brien represented the outer limit for offences for which an ICO would be appropriate, but that the objective circumstances of the criminality in this case was such as to render an ICO entirely inappropriate.

73 The Crown acknowledged that an ICO represented a substantial punishment. Nevertheless, it noted the observation in R v Pogson; R v Lapham; R v Martin [2012] NSWCCA 225 by McClellan CJ at CL and Johnson J (with whom Price, RA Hulme and Button JJ agreed) at [108] to the effect that an ICO is a punishment that reflects a significant degree of leniency because it does not involve immediate incarceration. The Crown submitted that the practical effect of the ICO in this case, was that the respondent must undertake a minimum of 32 hours community service per month and must seek the permission of the Commissioner or parole authority, if he wished to leave or remain out of the State or Australia respectively. None of the other standard conditions would have any relevance to him (clause 175 of the CAS Regulation). The Crown submitted that such a sentencing outcome did not properly acknowledge the importance of general deterrence.

74 I have concluded that there is considerable force in this submission. While I do not accept that the sentences themselves, their structure and the extent of concurrency and cumulation were not open to his Honour, I do accept the Crown submission that the mode of serving those sentences by way of an ICO does not adequately meet the principle of general deterrence, given the nature of the criminality and its seriousness in this case.

75 I have concluded that the respondent should be re-sentenced by this Court to a term of fulltime custody, because no other sentence will adequately reflect the seriousness of the offences. Given the objective seriousness of the offending and the circumstances of the respondent, the degree of leniency reflected in this ICO, together with a sentence of 12 months for counts 1 to 5, is outside the range of sentences that adequately reflects the need for general deterrence. For that reason, I am also satisfied that a more severe sentence is warranted, which greater severity can be reflected by altering the nature of the sentence to be imposed and the length of the sentence to be imposed for counts 1 to 5. I propose to impose a total sentence of 1 year and 9 months, with appropriate reductions being made for the time that he has been subject to an ICO.

76 I am required to determine the minimum period that justice requires that the respondent spend in custody in accordance with the principles in Hili v R; Jones v R [2010] HCA 45; 242 CLR 520 at [36] - [45]. Having regard to the weight of the mitigating factors set out by the sentencing judge and the unlikelihood that the respondent will ever re-offend, I consider that the minimum term should be 12 months.

77 I would propose the following orders:

(1) The Crown appeal is allowed.

(2) The sentences passed on the respondent on 12 December 2012 are quashed.

(3) In lieu thereof, the respondent is sentenced as follows:

(a) With respect to each of the insider trading offences contained in Counts 1 to 5 on the indictment, the respondent is sentenced to imprisonment for a period of 15 months, commencing 12 December 2012 and expiring on 11 March 2014.

(b) With respect to each of the insider trading offences contained in Counts 6 to 9 on the indictment, the respondent is sentenced to imprisonment for a period of 12 months, commencing 12 September 2013 and expiring on 11 September 2014.

(c) The Court directs that the respondent be released on 11 December 2013 being the expiration of 12 months of that sentence on a recognisance that he be of good behaviour during the balance of the term, upon him giving a security in the sum of $1,000 without surety.

78 ROTHMAN J: I have had the advantage of reading the reasons for judgment of Hoeben CJ at CL, in draft, and, for the reasons given by his Honour, I agree with the orders he proposes. I also agree with the additional comment of McCallum J.

79 McCALLUM J: I agree with the orders proposed by Hoeben CJ at CL and with his Honour's reasons. The acquisition or disposal of financial products by people having the unfair advantage of inside information is criminalised because it has the capacity to unravel the public trust which is critical to the viability of the market. It is, as previously observed by this Court, a form of cheating. The fact that people of otherwise good character and compelling personal circumstances are tempted to engage in such conduct emphasises the need for the clear deterrent that insider traders should expect to go to gaol.

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Decision last updated: 07 June 2013