England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL
CRIMINAL DIVISION

		Royal Courts of Justice Strand London, WC2A 2LL
		2nd May 2012

1. PRESIDENT OF THE QUEEN'S BENCH DIVISION: As we made clear at the outset of this hearing, in the light of the conclusion which we have come, this judgment cannot be reported until after the conclusion of any further proceedings.
2. Introduction
3. The Crown appeals against a terminating ruling made by His Honour Judge Loraine-Smith in the Crown Court at Southwark on 19th January 2012, to the effect there is no case for the respondent, H, to answer, on charges relating to alleged breaches of regulations made under the Export Control Act 2003.
4. In very brief outline, and we shall have to go into the matter in more detail, H is an arms dealer. He is based in York and operates through varies corporate entities. It is said, and so it appears from the documents, that he is a well-known arms dealer of a reputation and respectability and called by bodies such as the United Nations to explain how arms dealing operates.
5. He has a partner in Germany, Kleber, and with that partner he entered into negotiations for the sale of arms by a Chinese company called Jing An Import and Export to representatives of Nigerian purchasers. He and his partner represented Jing An, the Nigerians were represented by two individuals, again through corporate entities, Neil Murray and Brendan Cahill.
6. Under the Export Control Act 2003, legislation enacted as a result of the inquiry conducted by Lord Scott, various orders were made regulating trading activities in arms and other goods. One of these was the The Trade in Goods (Control) Order 2003, often known as "The TIG Order". Article 4 of the The TIG Order prohibited trading activities in the UK related to controlled goods which included arms that were the subject of the arrangements between the Chinese sellers and the Nigerians. It will be necessary to refer to Article 4 in some detail, but before doing so, we should make clear, first of all, that Article 9(2) of The TIG Order makes it an offence for a person to be knowingly concerned in the supply, delivery, transfer or acquisition of any controlled good, with intent to invade any of the prohibitions in Article 4. Secondly, H was charged with two offences under Article 9(2) in relation to his knowing involvement in the movement of arms with intention to evade the prohibition in Article 4.
7. Two issues arose on the submission of no case to answer. The first was: what was the scope of the prohibition in Article 4? Secondly, on the facts: was there a case to answer on intention to evade the prohibition in Article 4?

The scope of Article 4

8. Before turning to the evidence it is necessary to consider the scope of Article 4. Article 4 provides as follows:

"4.—(1) Subject to the provisions of this Order, no person shall—

(a)arrange the transfer of controlled goods from one third country to another third country; or

(b)acquire or dispose, or agree to acquire or dispose, of any controlled goods, where that person knows or has reason to believe that such an acquisition or disposal will or may result in the removal of those goods from one third country to another third country.

(2) Subject to the provisions of this Order, no person shall—

(a)arrange or negotiate; or

(b)agree to arrange or negotiate

a contract for the acquisition or disposal of any controlled goods, where that person knows or has reason to believe that such a contract will or may result in the removal of those goods from one third country to another third country.

(3) Subject to the provisions of this Order, no person shall in return for a fee, commission or other consideration—

(a)do any act; or

(b)agree to do any act

calculated to promote the arrangement or negotiation of a contract for the acquisition or disposal of controlled goods, where that person knows or has reason to believe that such a contract will or may result in the removal of those goods from one third country to another third country.

(4) Paragraphs (1), (2) and (3) apply to any act, or any part of any act, done in the United Kingdom."

9. As the judge pointed out the activities which we have outlined very broadly obviously fell within the scope of Article 4(1)(a) because the involvement of H as an agent would have been the arrangement of the transfer of controlled goods from one Third country, namely China, to another Third country, namely Nigeria. If performed in the United Kingdom there would have been a breach. However, it was made clear at some stage during the proceedings in the Crown Court that the Crown had concluded he could not be charged with an intent to evade that prohibition. That was because the then Department of Trade and Industry (now known as BIS) had provided guidance on the Act which was regrettably wrong.
10. They had stated that in respect of Article 4(1) as follows:

"Where a company or person acting within the UK trades (or agrees to trade) between overseas countries on his or her own behalf principally buying, selling or arranging the transfer across borders of 'Controlled Goods' this is commonly known as trafficking."

It is obvious from the reading of the Article in question that it was not merely concerned with persons who are acting on their own behalf but also with persons who were acting as agents. None of the difficulties that confronted the judge and have confronted us would have arisen had not the Department of Trade and Industry made such an elementary error in their own guidance.

11. We can only say that counsel for the Crown was entirely correct therefore in saying that it was quite impossible to charge him with an intention to evade that prohibition under Article 4(1). Counsel had therefore to consider whether the intention to evade fell within the provisions of paragraphs 2 and 3. They alighted eventually, and we were told this was made clear in the course of the opening, that it was the intention of under Article 4(3) that was relied upon.
12. We would observe at this stage that the indictment itself is not clear that it relates to Article 4(3) and on any further proceedings the indictment would plainly need to be made much clearer. But we do not think that anything turns on this point, because it became clear during the course of the opening and certainly clear to Mr Solley QC who appeared for H that a point that might greatly assist H arose because of the reliance on that paragraph. The point taken was this. Article 4(3) referred only to the arrangement or negotiation of a contract; that meant, it was submitted, that it did not cover anything after the initial negotiation of the contract. It did not cover any assignment; it did not cover any variation or any other consensual act following the initial agreement of that contract.
13. The judge in his ruling accepted that argument. Its significance will become apparent when we turn to the facts. The judge reached that decision by a consideration of the structure of the Article. He attributed to the draftsman of The TIG Order a logical construction of Articles 4(1), 4(2) and 4(3), stating that they covered in reverse order steps preparatory to the negotiation of a contract, the negotiation of the contract and the actual delivery and performance of the contract. He also concluded that the words "arrangement" and "negotiation" had to be read together; they plainly referred to what happened at the outset and to nothing further.
14. We regret that we cannot agree with the construction placed upon this Article by the judge. We conclude that he erred in law. First of all, we cannot attribute any logic to the divisions between 4(1), 4(2) and 4(3). 4(2) and 4(3) overlap to a very considerable extent. It seems to us that what no doubt happened is that these words were taken from various random pieces of legislation and put in without the mind of the draftsman having engaged with what he was trying to do. May be that is unkind, but we do not think that is an unreasonable conclusion, bearing in mind the infelicitous drafting of this particular Order. It is of no particular consequence for the future, save to those who traded in the export of controlled goods during this period because happily the TIG Order has been revoked and replaced by another Order. We are therefore dealing with a matter of historic interest though one of great importance to this defendant and possibly others. We therefore cannot accept that opening premise of the judge.
15. Nor in the second place can we accept the restriction that the judge placed on Article 4(3) to the agreement of the contract at its initial agreement. It is plain that when a contract is varied there is another agreement. It is also plain that when a contract is assigned there is another agreement. It seems to us therefore that the ordinary and plain meaning of Article 4(3) is that it covers not only the first or initial agreement but any subsequent variation or assignment. Plainly, it would cover any new agreement beyond those that happened to be made. We therefore conclude on the point of construction that the judge was in error.

The evidence

16. We therefore turn to consider the evidence in this case. If Article 4(3) had only covered acts up to the conclusion of the contract and not any subsequent variation or assignment, then the question arose as to when the contracts were concluded. The judge found that the contracts were, as best as he could divine from the documents, concluded on 1st April 2006. At that stage in time the Crown could not point to any activity or action taken by H in the United Kingdom. It therefore followed, on the judge's construction of the Article and his finding that the only contract he could discern was one entered into on 1st April 2006, that on the evidence there was no case to answer, because there had been no intention to evade the prohibition in the Article by any act done within the United Kingdom in that period.
17. It is necessary for us to consider the judge's findings on the construction we have put on the Article. But before doing so we wish to make it very clear as to the basis upon which we are proceeding.
18. The evidence before the jury was very limited. The Crown did its utmost to recover documents from H's computer, from overseas countries including China and Germany but they only had had a very small number of documents. The case was therefore opened before the jury by counsel for the Crown on the basis of a very few documents and an events schedule. In opening the case we are entirely satisfied that the way in which the Crown put the case, at that stage not knowing the point Mr Solley QC was going to advance, did not highlight any of the issues which have concerned us; it did not highlight the questions of variation and it did not highlight the question of new contracts. Furthermore, we are constrained to take the view, on what we have been told, that the way in which the case was conducted when the judge came to make his ruling was conducted upon the basis that the judge was asked to look and see whether they were variations of the contracts after the initial date of 1st April 2006, but he was not asked to consider whether there were new contracts.
19. It would seem to us therefore entirely unfair, in this court on an appeal, for the Crown to be able to run a case that there were new contracts made in January 2007 and a new contract by way of assignment in May 2007. The only way in which the Crown can succeed on the appeal is if it satisfies us that the judge was wrong in the view he took. Firstly, as we have said, in relation to the construction of the regulation and secondly, as to the findings that he made in relation to variations. We would not be prepared in this court, at this stage, to allow a case to be run differently; it would not be fair to H. We therefore in reviewing the evidence in this case, although we shall refer to our own views and to what transpired and what appears, we will not decide the case and cannot decide the case on the basis there were new contracts; we can only decide the issue on the appeal in favour of the Crown if there were subsequent variations.
20. We do not underestimate the formidable difficulties that the judge and a jury faced in this case. They were asked to look at a minute fraction of documents that must, without any conceivable doubt whatever, have existed. There would have been detailed contracts, there would have been shipping documents, there would have been letters of credit, there may have been a performance fund - there would be many, many thousands of important documents which would incontrovertibly show the role that H played when contracts were made and when contracts were varied. But the court only has before it limited evidence.
21. The question therefore is: what inferences can be drawn from those documents? We will consider the issue simply on the basis of inferences to be drawn from the documents, without making any inference from the silence of H on this subject. We do so because we do not think it necessary for us to consider that point on this appeal. But there is no doubt, in our experience, that a broker of his undoubted reputation and abilities knows precisely now what happened, knows precisely when these contracts were made and knows exactly where the documents are to be found. Or, if they have been destroyed, why they have been destroyed. This is an ordinary commercial arrangement by a broker. The sums by way of commission are very substantial. The contract values are very substantial. It is inconceivable that there is not a massive array of documentation that would explain, without doubt, what happened and where it happened. We say that for guidance and the future of this case. But we make it clear that what we seek to do is to draw inferences from the documents that are before us, to see whether it can be inferred that there were variations that would fall within Article 4(3) on the construction we have given it.
22. It is common ground that negotiations began in late 2005. It is common ground that there were visits to China in April 2006 and there was an examination of the production facilities for AK47s, massive quantities of ammunition and other small arms. It is clear that Jing An agreed, in respect of the Nigerian purchases, to do all their business through H and his partner, Mr Kleber. It appears from the documents and is a proper inference to be drawn that a number of contracts were entered into on 1st April 2006. Certainly contract 032CD and contract 030CD, the first covering ammunition and ball ammunition and the other covering a different kind of ammunition.
23. It is then not at all clear what happened between then and December 2006.
24. The letter of 7th December 2006 points, in our view, to a number of inferences. First, that H was well aware of the detailed terms of the contracts. It would be inconceivable in any event that he would not be unaware of them because of the role he played in the negotiations. Secondly, that the activity referred to in the letter of 7th December 2006 (because it was found in his computer) plainly occurred in the United Kingdom. Thirdly, the letter refers to initial payments. Because it speaks with the future tense, we can infer that the initial payments had not been made at that stage. It also refers to the provision of the performance bond, for what is referred to as the "Pinimi contract" and refers to an alteration to a contract or an understanding being made.
25. We then turn to what happened in January 2007. It is, in our view, clear from the documents (particularly those at the bundle at page 106 and 107) that agreements were entered into on 29th January 2007. We have considered Mr Solley QC's suggestion that the date referred to on page 106 refers to the date of delivery, but the plain reading of the letter and the letter at page 107, both of which were found on the computer of H, show that they plainly refer to the agreements of 29th January 2007. It would have been open to us to infer plainly that these were new agreements but, as we have said, we would not proceed on that basis but consider whether there were variations. They must at least be variations of the earlier contracts. It appears from looking at the documentation at page 55 and 56, which refer to down payments for the AK47s, the Markov pistols and the ammunition, that it is inconceivable commercially that a down payment stated to be due on 26th January 2007 could relate to a contract that had been entered into in April 2006 unless this amounted at least to a variation, if not to new contract. Furthermore, it is important to bear in mind the commission agreement entered into Beijing by H on 20th January 2007 where the commissions are set out and some of them of very, very substantial amounts (one in excess of $1.3 million) that at least one of those contracts is described as "pending" and another is referred to, for the fifth contract "the terms are to be agreed". That may point strongly, in our view, to a new contract but it at least points to a variation. Again, that is supported by the delivery schedule at page 53, setting out the delivery dates.
26. There then seems to us another very significant point. That is the assignment. It seems to us that the assignment must be characterised as at least a variation. In our judgment, it is more rightly characterised as a new contract. That is supported by a number of documents, some of which were found on H's computer and it is also supported by the new commission agreements.
27. We are therefore quite satisfied, on the facts before us, that it is possible to infer from the documents that there were variations to contracts that were made in April 2006, that there is evidence fit to go before the jury to infer that activities in relation to those occurred in the United Kingdom and that those variations are plainly within the scope of Article 4(3).
28. We therefore conclude that not only was the judge in error on construction, but, if he had considered the point at the basis of the true construction of Article 4(3), he would inevitably have come to the view that there would have been variations. It seems to us that he has erred in law and had he applied the correct test, he could not possibly have come to the conclusion he had come to. The ruling was also a ruling that it was not reasonable for the judge to have made if he had applied the law correctly. We therefore grant leave to appeal against the terminating ruling and allow that appeal.
29. We have also considered the question as to whether it would be fair to order a fresh trial. In considering this matter, we take into account the gravity and seriousness of the alleged conduct. It is a very serious case as it involves the import of massive quantities of arms to Nigeria where there is significant civil unrest. It cannot be in anything but the highest public interest that this case is tried as soon as possible. The crime alleged is grave and serious. It will no doubt carry a heavy penalty on the evidence that is before us.
30. But we have to consider the fairness of allowing the Crown to run a case not merely on the basis of what we have restricted the argument to before us, but whether they can run a case in a fresh trial in which they can assert that there are new contracts made in January 2007 and a new contract by way of assignment in May 2007. In our judgment, there will be nothing unfair in that. First of all, we are going to require the Crown to amend the indictment to make it crystal clear what they are saying; secondly, we are going to require the Crown to provide detailed particulars of its case. Thirdly, we are going to direct that there be a case management hearing. Fourthly, we think it also fair that in the way in which the case is now put, H should have the benefit of being able to put in a new defence statement setting out what his case is once it is made clear what the Crown's case is. His existing defence statement should not be held against him. We think that will ensure the fairness of any subsequent trial.
31. PRESIDENT OF THE QUEEN'S BENCH DIVISION: You must draft the indictment so it follows precisely the wording of Article 4(3). You have nailed your colours to that mast, that mast you must stick to.
32. MR CHAWLA: That can be done without --
33. PRESIDENT OF THE QUEEN'S BENCH DIVISION: The current indictment does not follow that and that is why Mr Solley QC did not see point until you opened it I suspect.
34. MR CHAWLA: My Lord, the case should obviously go back to the Crown Court at Southwark.
35. PRESIDENT OF THE QUEEN'S BENCH DIVISION: There is no objection to Judge Loraine-Smith hearing this I would have thought, if he wants to.
36. MR CHAWLA: I suspect in the first place it ought to go back to the resident judge.