Tasmanian Supreme Court rules against DPP’s bid to impose $3,000,000 pecuniary penalty order against ex-Director of Gunns.

Director of Public Prosecutions (Cth) v John Eugene Gay [2015] TASSC 15 (20 April 2015)


Consideration of whether the gross “benefit” derived encompasses the total realised value of the shares, or only the “profit” yielded as a result of the illegal sale.


This was an application following the defendant’s conviction of insider-trading by the DPP under the Proceeds of Crime Act 2002 (Cth)(POCA) to have him pay to the Commonwealth a pecuniary penalty in the amount of in excess of $3,000,000. That amount representing the “gross benefit” he was said to have derived from the offending.

The defendant was a former director and chairman of the Gunn’s Board. In that capacity, he had access to, and was found to have used, price sensitive information not available to the market. With that information it was found that instructed his broker to sell shares in Gunns which grossed him an amount of in excess of $3,000,000.


As to the central issue, Estcourt J adopted the reasoning of MacCallum J in AFP v Fysh (2013) 224 ACrimR 523 in which her Honour concluded that the relevant ‘benefit’ derived cannot on a plain reading of the POCA also include the initial investment made by the defendant – that amount should be, as her Honour observed at [53] “...deducted from the proceeds of the sale of shares in determining the benefits derived from the illegal activity”. Estcourt J agreed and further distinguished from the present case ‘drug’ matters where the whole of the purchase/sale price will be the relevant benefit. Here, his Honour said, initial purchase of the securities was in no sense prohibited unlike in the case of the purchase and sale of narcotics.

The significance of this decision is that absent any appellate treatment of this issue to date, we now have two superior Court who have both concluded that at least in cases of insider trading, the “benefit” – for the purposes of assessing the pecuniary penalty – is not to include the initial purchase price of the securities.

5 May 2015

Luke Chapman
6 St. James’ Hall Chambers
P: +61 2 9236 8600 II E: luke.chapman@stjames.net.au II www.lmrchapman.com

The contents, current as at the date of publication, is for reference purposes only. It do not constitute legal advice and should not be relied upon.