Merchant & Anor v REGINA

Factual and Procedural Background

Permission to appeal was sought by two former employees of Company A, a major bank: the Appellant, a former US dollar interest rate derivatives trader, and the Appellee, who worked on the bank's cash desk handling daily benchmark rate submissions. They, along with a third individual, were convicted in the Crown Court following a trial for conspiracy to defraud related to manipulating the US dollar benchmark interest rate known as LIBOR.

The Appellant was sentenced to six years' imprisonment and the Appellee to four years. A co-defendant who had pleaded guilty was also involved. Two other co-defendants awaited retrial, leading to reporting restrictions on the appeal arguments. The Appellant sought permission to appeal both conviction and sentence; the Appellee sought permission to appeal conviction only. The third co-defendant did not renew an appeal application after initial refusal.

The court granted permission for the Appellant to appeal conviction on two specific grounds but dismissed the appeal on conviction overall. Permission to appeal sentence was granted and the sentence was reduced from six to five years. The Appellee's renewed application for permission to appeal conviction was refused.

Legal Issues Presented

1. Whether the judge's directions to the jury on the elements of conspiracy to defraud, particularly concerning the legal interpretation of the LIBOR question and the requirement for genuine submissions, were correct.
2. Whether the admission of a co-defendant's guilty plea as evidence affected the fairness of the trial and the rights of the Appellee.
3. Whether the sentence imposed on the Appellant was appropriate, considering harm, culpability, and mitigating factors.

Arguments of the Parties

Appellant's Arguments

• The judge conflated factual falsity with the defendant's intention in directions on the LIBOR question, leading to an incorrect legal approach.
• The earlier Court of Appeal decision in a related case was wrongly decided.
• The judge improperly withdrew factual issues from the jury and failed to give proper directions on key elements of the offence, such as agreement, victim identification, and unlawful means.
• The Appellant was not dishonest because requests to alter LIBOR submissions were common and done openly within the bank’s systems, and adjustments within a permissible range could not be false.
• The Appellant challenged the legal duty owed by the bank when answering the LIBOR question, arguing that no duty to provide a genuine or honest assessment existed.
• The sentencing judge mischaracterised the harm caused, failed to consider mitigating factors adequately, and ignored comparative sentences.

Appellee's Arguments

• The admission of the co-defendant’s guilty plea was appropriate and did not unfairly prejudice the Appellee’s trial.
• It was submitted that the plea did not prove the Appellee’s guilt and the jury were properly directed on this point.
• The Appellee argued for a direction that the conviction of the co-defendant could be challenged, which was not given.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
R v H [2015] EWCA Crim 46	Established that submitting a LIBOR rate requires a genuine and honest assessment; it is impermissible for the submitter's assessment to be influenced by commercial interests.	The court upheld this precedent as correctly decided and applicable, rejecting the Appellant's challenge to its legal reasoning and confirming the duty owed by submitters to provide genuine assessments.
R v K [2005] 1 Cr App R 25	Guidance on careful drafting of indictments and crafting particulars of offence.	Referenced to emphasize the importance of precise indictment drafting in complex conspiracy cases.
R v Smith [2007] EWCA Crim 2105	Considerations on admissibility of convictions and the potential adverse effect on fairness if a conviction proves too much.	Applied to assess whether admission of co-defendant's guilty plea unfairly prejudiced the Appellee; court concluded it did not.
Edgington v Fitzmaurice (1885) 29 Ch D 459	Legal principle that statements of a person's current belief or intention can be statements of fact.	Supported the court's view that the truth or falsity of a LIBOR submission depends on the submitter’s genuine belief or intention.
Property Alliance Group Ltd v Royal Bank of Scotland plc [2016] EWHC 3342 (Ch)	Considered implied representations relating to LIBOR in contractual claims.	The court determined this precedent did not assist the Appellant’s submissions regarding the criminal duty to submit genuine LIBOR rates.

Court's Reasoning and Analysis

The court carefully analysed the legal duty owed by submitters of LIBOR rates, confirming that a genuine and honest assessment was required under established precedent. It rejected the Appellant’s argument that the LIBOR question required only a permissible range of rates without regard to intention or belief, affirming that statements about belief or intention can constitute facts and thus be true or false.

The court considered previous rulings by a commercial judge and the Court of Appeal, specifically the approach in R v H, as correctly decided and applicable. It emphasised the necessity of precise jury directions tailored to the facts of each trial, but found that the directions given were sufficient and did not withdraw factual issues improperly.

Regarding the indictment, the court noted some redundancy in wording but concluded that the judge’s approach to addressing certain elements under dishonesty was appropriate in the context of the trial. The safety of the conviction was affirmed as the jury must have found deliberate disregard of the proper basis for LIBOR submissions.

On the issue of the co-defendant’s guilty plea, the court held that its admission did not unfairly prejudice the Appellee, who was able to challenge the prosecution’s case independently. The absence of a reverse burden direction was not deemed to have rendered the conviction unsafe.

On sentencing, the court accepted the trial judge’s assessment of harm as involving a wider market impact beyond direct losses, supported by expert evidence. It acknowledged additional mitigating factors not previously considered, including personal circumstances affecting the Appellant and his family, leading to a reduction in sentence by one year.

Holding and Implications

The court granted permission to appeal conviction on two grounds for the Appellant but ultimately DISMISSED the appeal against conviction, affirming the safety of the conviction. Permission to appeal sentence was granted and the sentence was REDUCED from six years to five years' imprisonment.

The Appellee’s renewed application for permission to appeal conviction was REFUSED.

The decision confirms the legal principle that LIBOR submissions must be genuine assessments and that dishonesty in such submissions can constitute conspiracy to defraud. It also clarifies procedural considerations regarding admission of co-defendant pleas and appropriate jury directions in complex financial crime trials. No new precedent was established, but existing authorities were affirmed and applied to the facts.