The hearing of the proceeds of crime proceeding against John Gay has been deferred following a decision by Eastcourt J in the Supreme Court of Tasmania on 20 April 2015 regarding the basis upon which any penalty ought to be calculated. To read the decision, please click here.

The proceeding by the Commonwealth DPP follows Gay’s conviction for insider trading in August 2013 after the disposal by him of over 3 million Gunns shares between 2 and 10 December 2009, whilst in possession of ‘price sensitive’ information that was not available to the market. The share sales at this time provided Gay with gross proceeds of $3,095,260.06. In the proceeds of crime proceeding, the DPP seeks an order that Gay pay the Commonwealth a pecuniary penalty in a sum to be determined by the Court under the Proceeds of Crime Act 2002 (Cth). The DPP argued that the penalty should be $3,095,260.06, being the total amount that Gay obtained from the impugned share sales.

After considering relevant authorities, Eastcourt J had no difficulty in concluding that the value of the benefit derived from the unlawful sale by Gay of shares purchased lawfully, must involve bringing into account the cost price of the shares as against the gross proceeds of their sale. He applied the decision of the Supreme Court of Western Australia in Mansfield v DPP (2007) 33 WAR 227, where the Court of Appeal considered that the benefit gained from the offence of insider disposal of shares was to be valued as the difference between the price that was achieved on the sale of the shares and that which he would have achieved had the inside information been generally available (or the market been fully informed). Eastcourt J noted that Mansfied dealt with the very question raised in the Gay proceeding and should be adopted.

Eastcourt J adjourned the hearing to hear further argument and evidence on the following two alternative approaches to calculating penalty which the Court is now required to consider:

  1. the amount of profit (if any) made by Gay, calculated by deducting the cost price of the shares from the price for which the shares were sold; or
  2. the difference between the price that Gay achieved on the sale of the shares and that which he would have achieved had the market been fully informed by reason of the inside information being generally available (adopted in Mansfield).