Hi
FYI here is what I did to resolve:
running gpg.exe and gpg-agent.exe as Administrator and XP mode....
gp-agent:
set service Priority to REALTIME
Disabled Windows UAC virtualization.

Thanks aheinecke and dkg.
I havent been able to replicate the fault using the command line (using the exact same command and options that our program is calling)
however our R&D dept have,
The next time it fails and we can replicate it we will try the --homedir fix and see if thats it.
Its the same user in the program and command prompt so we dont think its a certificate issue.