R v Rivkin Case: Analysis of Insider Trading Offence under Corporations Act

CORPORATION LAW
Corporation Law

CORPORATION LAW 1
Introduction
This report is the study of the case R v Rivkin [2002] NSWSC 1182: 198 ALR 200; 45 ACSR
366. The leading judgement has been given by the Court of Appeal and this case had taken a
lot of media attention. This case was the first case for the offence of insider trading. The
Decision of the New South Wales Court of Criminal Appeal inspects many aspects of the
insider trading offence. In this case, the duties have been breached the laws of the
Corporations Act. The corporation’s management such as directors, managers and officers
are bound to follow the laws of the Corporations Act and its breach can affect the
corporations in many ways. The Court views and the decision given by the court will be
analysed in accordance with the Corporations Act. The impact and relevance of the Case on
the Australian Companies will be discussed in this report.
Case Introduction
It is the first case of insider trading and it becomes the landmark case in this area of the
insider trading. Mr Rivkin wished to sell a house in the eastern suburbs of Sydney and
instructed a real estate agent. Mr Gerard McGowan showed his interest in purchasing the
house for that he approached Mr Doff who was the operations manager of the Rivkin Group
of Companies. He had the wish to make a conditional offer, as he wants to sell his business.
He informed Mr Rivkin that he is trying to merge the Impulse Airlines and Qantas and
waiting for the approval of Australian Competition and Consumer Commission. MC Gowan
was told by Mr Rivkin that ACCC will not approve the merger. Mr Gowan told Mr Rivkin
that approval still pending and now the information of this deal possessed by Mr Rivkin so he
cannot trade in the Qantas shares. Mr Rivkin has given the seven-day conditional contract to
buy the property. In few hours, Rivkin order to buy the 50,000 Qantas shares and they sold
for the profit of $2,664.94. Rivkin Investments has the sole director Mr Rivkin with an 11%
shareholding interest. On that day, only the trading halt has been coming in the Qantas shares,
then a joint statement has come out of Impulse Airlines and Qantas that they had come in a
virtual or contract merger but actually the contract they had entered into was a merger of the
two companies. There was suddenly a rise in the price of Qantas shares and this rise was
during when Rivkin Investments had bought and then sold the Qantas shares. Therefore, the
Rivkin has been found to be in the contravention of the duties of the Corporations Act. He
has been found for giving misleading statements and with that dishonest count and the failure

CORPORATION LAW 2
in achieving the responsibilities that as the director. Section 184 and some other laws of the
Corporations Act has been found to be in the major contravene in this case. The case has
described by the following reasons that have been found to be in the breach of the laws of the
Corporations Act (State Library, 2018)
Duties Breached
This Rivkin had been found to be in the contravention of the duties of the Corporations Act.
He has been found for giving misleading statements and with that dishonest count and the
failure in achieving the responsibilities that as the HIH director. Section 184 of the
Corporations Act has been found to be in the major contravene in this case. Section 184 says
that use of the information, position is the criminal offence (Rodriguez, 2016). The case has
described by the following reasons that have been found to be in the breach of the laws of the
Corporations Act. Mr Rivkin has also been found to be in the contravention of the section
1002G (2) of the Corporations Act, 2001 that now has been replacing by the new laws in the
provisions of Division 3 of Part 7.10. Mr has done trading and done purchase and sales of the
Qantas shares by the Rivkin investments as the benefit of the information he possesses from
Mr Gowan. The laws of the Corporations Act any act that that is done in good faith will not
be liable but Mr Rivkin had not worked in the good faith of the Companies. Mr Rivkin also
misused his position as he was the only director with the shareholding of 11% and he has the
duty towards the Corporation not to misuse his position to benefit himself or the Corporation
with the wrong acts. Mr Rivkin had been found to be in the breach of the sections of the
Corporations Act Thus Mr Rivkin has misused the information and given a misleading
statement. Mr Rivkin knows the information he possessed was not generally available from
the information and it was expected by him that it would give a material effect on the shares
of Qantas. It has been found from the certain evidence that the information he possesses and
the source of information from the facts found that he has breached certain laws of the
Corporations Act (Barker, 2018).
Court Decision
This case of Rivkin of the trading regulation was of a long viewed and so it was very difficult
to judge this case and the decision has resolved some important questions. The case decision
was against the Rivkin and it is an appeal in the NSW Court of Appeal that is upheld by the
Court. The issue of the source of information that is the form parts of itself on this the lawyer