Patel & Anor, R. v [2009] EWCA Crim 2311

[2009] EWCA Crim 2311Case No 200705049D5; 200804436D5;200806740D5; 200903185D5IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM THE CROWN COURT AT KINGSTON-UPON-THAMES
HHJ NICHOLAS PRICE QC
T20057421; T20057412
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 12 November 2009
Before
THE RT. HON. LORD JUSTICE HOOPERTHE HON. MR JUSTICE TOMLINSONTHE HON. MRS JUSTICE SWIFT
Between
REGINACrown(1) HITENDRA PATELDefendant(2) SHAAN HUSSAINDefendant
MR SANDIP PATEL, MISS FIONA JACKSON and MISS JEMIMA STRATFORD for CrownMR ORLANDO POWNALL QC and MR MARTIN HOWE QC for Hitendra PatelMR ROBIN GRIFFITHS for Shaan HussainHearing Hearing dates : 29 and 30 October 2009
Judgment
[1]On 27 and 28 November 2007 respectively at the Crown Court at Kingston-upon-Thames before HHJ Nicholas Price QC these two applicants pleaded guilty to a two-count indictment which charged Hitendra Patel with two offences and Shaan Hussain with one offence, the latter allegedly committed jointly by the two applicants together. The offence alleged was in each case placing on the market a medicinal product, namely Sildenafil Citrate in tablet form, without holding a Community or United Kingdom marketing authorisation in respect of that product, contrary to paragraph 1 of Schedule 3 to the Medicines for Human Use (Marketing Authorisations Etc.) Regulations 1994, SI 1994 No. 3144. We shall refer to those Regulations hereafter as “the 1994 Regulations”. Under count 1 Hitendra Patel was alleged to have committed the offence between 1 March 2003 and 30 June 2003. The joint offence charged under count 2 was allegedly committed on 12 September 2003.[2]On 11 January 2008 Shaan Hussain was sentenced to a fine of £1,000 in respect of count 2. No application was made for commencement of confiscation proceedings. On 25 July 2008 Hitendra Patel was sentenced to a fine of £500 on the first count and £2,500 on the second count. A confiscation order was made in the sum of £211,604, with a period of three years’ imprisonment set in default of payment within 12 months.[3]Both applicants entered their pleas upon the basis that the court had already ruled that their agreed conduct amounted in law to commission of the offence charged and accordingly that they had no defence. The learned Judge had indeed issued a written ruling on 28 September 2006. That ruling was made at an earlier stage of a complex and lengthy trial in which these applicants and other defendants faced many charges. As it happens the ruling related to charges which were then brought against both applicants under both paragraphs 1 and 2 of Schedule 3 to the 1994 Regulations, which two paragraphs are in markedly different form. By the time of their pleas of guilty with which we are now concerned they faced charges only under paragraph 1 thereof. On a careful analysis it may be open to question whether the learned Judge’s ruling in fact precluded a defence to the count charged jointly, although all parties proceeded upon the basis that it did, and we can understand why that view was taken. Nothing turns on this, not least because we have concluded that the agreed conduct of the applicants which formed the subject matter of count 2 does not amount to an offence even on the construction of paragraph 1 of Schedule 3 urged upon us by the Crown.[4]Both applicants seek permission to appeal against their convictions on the ground that the ruling of the learned Judge on the basis of which they entered their pleas of guilty was wrong in law. The Registrar has referred their applications to the Full Court. At the conclusion of the argument on this point we announced that both applicants would be granted permission to appeal and that their convictions would be set aside, for reasons which we would give in due course. Those reasons we now give.[5]The 1994 Regulations were made under section 2(2) of the European Communities Act 1972, which confers a power on ministers to make statutory instruments “for the purpose of implementing any Community obligation of the United Kingdom” and for other related purposes. Thus the 1994 Regulations were made, and the specific offence under paragraph 1 of Schedule 3 was created, in order to give effect within the UK to certain EC legislative instruments.[6]The relevant EC instruments are listed in paragraphs 1(1)(a) and 1(2) of the 1994 Regulations, although as it happens by the date of the alleged offences the relevant Community provisions had been incorporated within Directive 2001/83/EC of the European Parliament and of the Council of 6 November 2001 on the Community code relating to medicinal products for human use. This Directive, as its title suggests, provides a Community-wide harmonised system of rules governing the production, distribution and use of medicinal products. The essential aim of those rules is, as stated in Recital (2) of the preamble to the Directive, to safeguard public health. However this objective is to be attained by means which will not hinder the development of the pharmaceutical industry or trade in medicinal products within the Community – see Recital (3) of the preamble. By approximation of the relevant national provisions which hitherto contained disparities affecting the functioning of the internal market, that hindrance to trade in medicinal products within the Community is removed.[7]It is apparent therefore that the 1994 Regulations pursuant to which these appellants, as we shall henceforth call them, were charged are concerned with the health of those within the European Community who might become consumers of medicinal products and with the functioning of the internal market in medicinal products. In that latter regard Directive 2001/83/EC refers at the outset, in its first paragraph before the preamble, to Article 95 of the EC Treaty which is concerned with harmonisation of measures to promote the functioning of the internal market.[8]In accordance with established canons of construction paragraph 1 of Schedule 3 to the 1994 Regulations should not be interpreted as creating an offence which extends beyond the scope of the relevant EC instruments or which has the effect of prohibiting acts which the relevant EC instruments do not themselves either prohibit or require the Member States to prohibit.[9]Paragraphs 1 and 2 of Schedule 3 to the 1994 Regulations provide:
“OFFENCES, PENALTIES ETC. Offences 1. Any person who, in breach of the relevant Community provisions or these Regulations, places a relevant medicinal product on the market without holding a Community or United Kingdom marketing authorization in respect of that product, or otherwise than in accordance with the terms of such an authorization, shall be guilty of an offence. 2. Any person who, in the course of a business carried on by him, sells, supplies, manufactures or assembles, or procures the sale, supply, manufacture or assembly of, a relevant medicinal product, or who has in his possession a relevant medicinal product, knowing or having reasonable cause to believe that the product was or is intended to be placed on the market contrary to paragraph 1 shall be guilty of an offence.”
We reiterate that it was under paragraph 1 that the appellants were ultimately charged. Offences

The facts

[10]Both appellants entered a written basis of plea which was accepted by the Crown. We have seen only the basis of plea of Hitendra Patel, but for reasons which will become apparent that is of no consequence. That basis of plea, which we set out in full below, recited that Hitendra Patel had “pleaded guilty on the grounds that the Court has ruled [that] the agreed facts amount in law to ‘placing on market’ and he therefore has no defence”. The agreed facts were not reduced into writing save, to some extent, in the written ruling of the learned Judge. However as we understand it the following was in fact common ground: i) Hitendra Patel was at all material times a registered pharmacist and proprietor of Northcote Pharmacy and Smartway Pharmaceuticals, the latter being a pharmaceutical wholesale dealership and the holder of a wholesale dealer’s licence. ii) Shaan Hussain ran Vuka Pharmaceuticals, a private limited company. Neither Shaan Hussain nor Vuka Pharmaceuticals held a wholesale dealer’s licence. iii) Between February 2003 and September 2003 Hitendra Patel by his company Smartway Pharmaceuticals on six occasions purchased from RiteAid Drugs PVT Ltd, a company based in Karachi, Pakistan, quantities of a medicinal product marketed as Viagra. iv) These products were imported into the UK by Hitendra Patel and came into his possession. v) Viagra is not a generic drug. It is manufactured by Pfizer who hold all relevant manufacturing and marketing authorisations. vi) The products bought by Hitendra Patel from RiteAid were counterfeit, The two counts on the indictment with which we are concerned make no reference to the fact that the medicinal product allegedly placed on the market was counterfeit, purporting to be of Pfizer manufacture when it was not, and this is of no relevance to a proper analysis of the question whether the conduct alleged constitutes an offence under paragraph 1 of Schedule 3 to the 1994 Regulations. although he believed that they were genuine. vii) Between 1 March 2003 and 31 May 2003 on 5 separate occasions Hitendra Patel by Smartway Pharmaceuticals sold to Rajendra Shah, the latter acting by and through his company Metro Pharmacy based in Borehamwood, Hertfordshire, quantities of the ‘Viagra’ imported from Pakistan. Five invoices produced at trial evidenced sales to a value in excess of £200,000. viii) Metro Pharmacy holds a wholesale dealer’s licence. ix) The products supplied from Pakistan were in pots or bottles of 30x100mg tablets. That is the manner in which Viagra is sold in the United States. Viagra is not authorised to be sold in that manner in the European Economic Area, hereinafter the “EEA”, which for the avoidance of doubt includes the UK. In the EEA Viagra is authorised to be sold only in blister packs. x) There is by definition no marketing authorisation for the retail sale within the EEA of counterfeit medicinal products. xi) Metro Pharmacy could not lawfully or consistently with their wholesale dealer’s licence sell the ‘Viagra’ purchased from Hitendra Patel for consumption within the EEA. For the avoidance of doubt this would have been so even if the Viagra had been genuine rather than counterfeit, not least because it was not packaged in a manner authorised for retail sale within the EEA. xii) When concluding his transactions with Metro Pharmacy Hitendra Patel believed that the products sold by him would be exported to the Bahamas. He did not intend that any of the drugs supplied by him to Metro Pharmacy should be sold on the retail market within the EEA. xiii) The products supplied by Hitendra Patel to Metro Pharmacy were in fact sold by the latter to Global Medz Limited, a company based in the Bahamas, and were duly delivered to the Bahamas. xiv) Metro Pharmacy paid Hitendra Patel for the products supplied and property in them together with any form of control over their disposition passed from Hitendra Patel to Metro Pharmacy whilst they remained physically within the EEA. The invoices raised by Metro Pharmacy and issued to Global Medz contained the rubric ‘goods remain the property of Metro Pharmacy Limited until paid in full’. xv) In late June 2003 a private investigator Christopher Long contacted Shaan Hussain who confirmed to him that he was able to offer Pfizer Viagra tablets. A proposed purchase was discussed. On 9 September 2003 Shaan Hussain asked Christopher Long to speak to ‘my partner, Hitesh’. Hitesh is Hitendra Patel. Mr Long telephoned Hitendra Patel who confirmed that the Pfizer Viagra for sale was his and that Shaan Hussain would receive a ‘broker fee’ for arranging the deal. Mr Long and Hitendra Patel agreed to meet on 12 September 2003 in order to inspect the stock. [On 11 September 2003 Hitendra Patel sent an e-mail to Mr Long saying that it would be helpful if Mr Long could ask his customer to bring to the meeting a wholesale dealer’s licence or similar documentation, together with company registration, bank and address details. This e-mail was not it seems before the learned Judge when he made his ruling and apparently no reference was made to it. The e-mail was shown to us on the appeal.] On 12 September 2003 Hitendra Patel met private investigators at the pre-arranged rendezvous. He offered to sell them boxes containing over 20,000 tablets, packaged as Viagra in bottles for the US market. Officers from the Medicines and Healthcare products Regulatory Agency, hereinafter the “MHRA” arrived. The tablets were seized and found to be counterfeit. The Judge’s Ruling[11]At the stage when the learned Judge gave his ruling the appellants, as we have already recounted, faced charges under both paragraphs 1 and 2 of Schedule 3 to the 1994 Regulations. Furthermore they were also charged with conspiracy to place a medicinal product, Sildenafil Citrate, on the market without a market authorisation. Hitendra Patel faced a substantive count, charged it would seem under paragraph 1, in relation to his sales to Metro Pharmacy. The substantive count which they faced jointly, charged it would seem under paragraph 2, alleged that they both placed Sildenafil Citrate on the market on 12 September 2003, the particulars being that they both in the course of a business carried on by them did have in their possession a relevant medicinal product, namely Sildenafil Citrate in tablet form, knowing or having reasonable cause to believe that the product was intended to be placed on the market without holding a Community or United Kingdom marketing authorisation in respect of that product. There were thus three counts.[12]The context of the ruling was an application by Hitendra Patel that these three counts should be dismissed. The application was, as the learned Judge records at paragraph 3 of his ruling, “confined to a discrete point, namely the meaning to be attributed to the phrase ‘placed on the market’”.[13]The argument was presented by Mr Sandip Patel for the prosecution and by Mr Orlando Pownall QC for Hitendra Patel. We intend them no disrespect by recording that we had the advantage, which the learned Judge did not, of the assistance of counsel with specialised knowledge of and experience in the relevant areas of Community Law, Miss Jemima Stratford for the Prosecution and Mr Martin Howe QC for Hitendra Patel. In making that observation we do not overlook that, as is apparent from the ruling of the learned Judge, Mr Pownall made some pertinent albeit unsuccessful submissions concerning the scope of the 1994 Regulations. However the principal point argued on behalf of Hitendra Patel seems to have been that, so far as concerns the sale to Metro Pharmacy, the activity in which Hitendra Patel was engaged was “mere trans-shipment” in which property in the “Viagra” tablets did not pass to Metro Pharmacy at all but directly from Hitendra Patel to Global Medz in the Bahamas. The goods were therefore, so it was argued, for that reason “in transit” and were not “placed on the market” within the EEA. This was a difficult argument to sustain in the face of invoices raised by Smartway Pharmaceuticals and issued to Metro Pharmacy which contained no term to contradict the normal inference that the transaction was intended to effect transfer of title in the goods from seller to purchaser, and invoices raised by Metro Pharmacy and issued to Global Medz which contained an express reservation of title by Metro Pharmacy until payment by Global Medz. Unsurprisingly therefore the argument failed.[14]Mr Sandip Patel for his part placed reliance on what was said to be analogous legislation in which the expression “placing on the market” appears, viz the Food Safety (Live Bivalve Molluscs and other Shellfish) Regulations 1992. Those regulations, which it is now accepted are not in fact analogous and which have a different legislative history, contain an extended definition of placing on the market which reads:
“Placing on the market means … the holding, exposure, display for sale, offering for sale, selling, consigning, delivering or any other associated activities of marketing.”
Those regulations were considered in R v Stone [1998] Env LR 618.[15]The learned

Judge expressed his conclusions thus:

“14. It is urged upon me by Mr Pownall that I should look at whom and indeed where was the ‘ultimate consumer’. I do not accept that it [is] either necessary or a proper interpretation of the legislation. As the primary purpose of any rules for the production and distribution of medicinal products must be the safeguarding of public health there is a strong public policy argument in favour of an extended rather than a restricted meaning to the phrase ‘placed on the market’. I consider that direct parallels can be drawn from the Stone case which also must have at its heart the necessity to protect the health of the consumer. 15. In any event I have come to the conclusion that the pattern of dealing, referred to in paragraphs 4 and 6 above make it clear that this was not ‘mere transhipment’ without transfer of ownership but rather sales between separate legal entities with the necessary transfer of ownership. In those circumstances I consider that the prosecution have established, at this stage at least, that the tablets were ‘placed on the market’.”
As we have already pointed out, it is not clear that the learned Judge in fact embraced the extended meaning although it is plain that he inclined towards it.

The pleas of guilty

[16]Over a year later, after the charges against these appellants had been recast, Hitendra Patel pleaded guilty upon the following basis:
“The basis upon which pleas of guilty were entered by Hitendra Patel on Tuesday 27th November 2007 was as follows: - The defendant believed that the tablets acquired from Rite Care/Rite Aid were genuine Pfizer products. - He believed that they were to be exported to the Bahamas. - He did not believe he was committing an offence nor did he have any reason for such a belief. He has pleaded guilty on the grounds that the court has ruled the agreed facts amount in law to ‘placing on market’ and he therefore has no defence. - He has pleaded guilty at the earliest opportunity as the Crown had hitherto insisted on the defendant pleading guilty to the trademark offences.”
[17]We would observe in passing that it must be rare for a plea entered and accepted on such a basis to be visited with a fine and a substantial confiscation order.[18]As for Shaan Hussain, as we have already remarked we have not seen his basis of plea. It is apparent from our recital of the uncontroverted facts that in relation to the 12 September 2003 incident in connection with which he was charged, no contract of sale was concluded and that, had such a sale been concluded, Shaan Hussain would not have been a party to that contract. Mr Griffiths told us that he understood at the time that Shaan Hussain was pleading guilty upon the basis of joint enterprise. If that is right, it suggests to us that insufficient attention was paid to the fact that no contract was concluded on 12 September 2003 and that the offence was now charged under paragraph 1, rather than, as before, under paragraph 2 of Schedule 3 to the 1994 Regulations. It may be therefore that the “extended meaning” played no part in the thinking which informed the guilty pleas.

The Crown’s approach in the Court of Appeal

[19]However that may be, before us the Crown did not attempt to sustain the convictions on the basis of the “extended meaning”. The Crown did however seek to uphold as correct the learned Judge’s conclusion in paragraph 15 of his ruling. On this basis Hitendra Patel was, Miss Stratford submitted, guilty under count 1 because he had been party to the various contracts of sale pursuant to which property in the medicinal products had passed out of his control and thus into the distribution chain in circumstances where he had no relevant marketing authorisation. It was accepted that on this reasoning Shaan Hussain had committed no substantive offence. After initially flirting with the notion that it might nonetheless be possible to sustain his conviction upon the basis of a joint enterprise pursuant to which he and Hitendra Patel attempted on 12 September 2003 to commit the substantive offence, Mr Patel for the Crown wisely accepted that that would now be an inappropriate approach. In those circumstances the Crown does not seek to uphold the conviction of either Hitendra Patel or Shaan Hussain on count 2 and those convictions must be set aside.[20]That leaves the question whether on the basis of the uncontroverted facts Hitendra Patel is guilty as charged under count 1. In formulating the submission which we have summarised in the preceding paragraph, Miss Stratford contended that the touchstone of liability under the Regulations is control. She submitted that once legal title to the medicinal products passed from Hitendra Patel to Metro Pharmacy, they must be regarded as released into the distribution chain in the UK. Hitendra Patel no longer had any control over the eventual destination of the medicinal products. Unless this approach was adopted, she submitted, it would follow that there would be permitted transactions which would carry with them the risk that the purchaser would without more sell into the retail market, otherwise than in accordance with the terms of a relevant Community or United Kingdom marketing authorisation. Such would undermine the purpose of the Directive to safeguard public health, which is why the Regulations seek to prohibit and to punish the unauthorised release into the distribution chain which is represented by a sale pursuant to which ownership is transferred and effective control lost. Miss Stratford was at first inclined to accept that a sale to a wholesale dealer such as Metro Pharmacy which contained a contractual stipulation that the goods be exported outside the EEA might raise a question of fact as to whether the seller had retained effective control over the destination of the goods. On that footing the ruling of the learned Judge would be unsustainable, although faced with the shortcomings of the remedies available to a seller to enforce such a stipulation, Miss Stratford suggested that perhaps the better view was that effective control of the medicinal product would have been surrendered, and thus the offence committed, even in circumstances where a seller sought the protection of a contractual term as to the permitted destination of the goods sold.

Discussion and Conclusions

[21]Miss Stratford sought support for her submission that control is the touchstone of liability by reference to guidance given in a European Commission Notice to Applicants (Brussels, ENTR/F2/BL D(2002)) entitled “Volume 2A, Procedures for marketing authorisation, November 2005”. At paragraph 2.4.2 of this document under the rubric “cessation of the marketing authorisation if the medicinal product is not marketed” there appears the following:
“For the purposes of the application of Article 24(4) to (6) of Directive 2001/83/EC and Article 14(4) to (6) of Regulation (EC) No. 726/2004, a medicinal product is “placed on the market” at the date of release into the distribution chain. It is the date when the product comes out of the control of the marketing authorisation holder.”
However perusal of the Article to which this comment is directed shows that it can give no guidance in the situation under discussion. Articles 24.4 and 24.5 provide:
“4. Any authorisation which within three years of its granting is not followed by the actual placing on the market of the authorised product in the authorising Member State shall cease to be valid. 5. When an authorised product previously placed on the market in the authorising Member State is no longer actually present on the market for a period of three consecutive years, the authorisation for that product shall cease to be valid.”
Article 24.4 is what is colloquially known as an “use it or lose it” provision. If an actual placing on the market of an authorised product could be achieved in the manner in which the product was dealt with in this case, it is obvious that a marketing authorisation holder could very easily ensure the continued validity of his marketing authorisation without in fact making the product available to consumers within the authorising Member State. This would seem to run counter to the clear intention behind Article 24.4.[22]Attractively though Miss Stratford’s arguments were presented, they are not in our view sustainable. In our judgment they concentrate on the public health aspect of the underlying Directive at the expense of the functioning of the internal market, it being recognised by Recital (3) of the preamble to the Directive, as we have already noted, that the objective of safeguarding public health must be attained by means which will not hinder the development of the pharmaceutical industry or trade in medicinal products within the Community. Moreover the Directive is not as we understand it concerned with transactions which do not involve the EC internal market and which do not affect its establishment or functioning. We note for example that the scope of Directive 2001/83 is provided by Article 2 thereof in these terms:
“The provisions of this Directive shall apply to industrially produced medicinal products for human use intended to be placed on the market in Member States.”
[23]It is in that context that one must read Article 6 of the Directive, that being the provision to which the 1994 Regulations seek to give domestic effect. Article 6 provides:
“No medicinal product may be placed on the market of a Member State unless a marketing authorisation has been issued by the competent authorities of that Member State in accordance with this Directive or an authorisation has been granted in accordance with Regulation (EEC) No. 2309/93.”
It seems to us an unlikely construction of the Regulations that they prohibit transactions which are neither intended to nor have the effect of releasing a medicinal product into a distribution system which leads to its sale to end users within the Community. There is always a risk in any transaction that it may for some reason or other have unintended consequences. A carrier to whom goods are entrusted may for example prove to be dishonest, or to employ dishonest persons in consequence of whose dishonesty goods reach an unintended market. We do not consider that this everyday consideration can justify placing upon the Regulations a construction which would, as we understand it, stultify legitimate trade in pharmaceutical products which the Community instruments do not purport to regulate.[24]It follows that we are not persuaded that the agreed conduct of Hitendra Patel in entering into the five contracts of sale comprised within count 1 of the indictment discloses an offence under paragraph 1 of Schedule 3 to the Regulations. His conviction on that count also must be set aside.[25]We do not consider that this is a suitable occasion on which to essay a definition of what conduct would amount to placing a relevant medicinal product on the market, although we are satisfied at least that the market to which reference is made in the Regulations is a market in which consumers within the EEA can purchase the product. We observe that the expression “placed on the market” is used in many and diverse Community instruments. No doubt the expression may take its colour from the context in which it is used and may not always mean the same thing. We consider that it would be unwise for us to attempt an elucidation of its meaning in this context without knowing a great deal more about the manner in which the pharmaceutical industry conducts its operations both within the Community and in its dealings with those who purchase with a view to supplying markets outside the Community.[26]We do however note that there is a clear contrast between the first and second paragraphs of Schedule 3 to the Regulations. We leave for another occasion the question whether paragraph 1 imports a mental element into the offence, and, if so, of what it consists. Paragraph 2 however clearly imports a mental element, couched in familiar language. Moreover paragraph 2 seems designed to catch activity in the course of a business of the sort here undertaken by both Hitendra Patel and Shaan Hussain where it is known that the ultimate purpose is the placing of a relevant medicinal product on the market otherwise than in accordance with a Community or United Kingdom marketing authorisation, or where the person in question has reasonable cause to believe that that is the ultimate purpose of the transaction. It seems to us that the width of the offence created by the second paragraph of Schedule 3 to the Regulations casts some light upon the proper and likely more narrow ambit of the offence created by the first paragraph thereof. Furthermore it would seem to us that conduct of the sort described in paragraph 2 ought properly to be charged as an offence under that paragraph rather than under paragraph 1. Further than that it is unnecessary to go.

Cited in 1 later judgment