In this landmark case, the Supreme Court provides guidance on how cheating within a betting and gaming context is to be assessed and makes fundamental changes on the wider legal definition of dishonesty.
Phil Ivey is a professional gambler and is recognised as one of the world's pre-eminent poker players. Gentings Casinos UK Limited owns and operates a number of casinos including one based in Mayfair called the Crockford Club.
In August 2012, Ivey 'won' over £7.7 million playing Punto Banco, a variant of Baccarat at the Crockford Club. Unbeknownst to the casino, Mr Ivey, with the assistance of another gambler, had utilised a technique called edge-sorting which involves distinguishing between cards by examining irregularities on the backs of those cards.
Mr Ivey, feigning superstition, convinced the croupier to rotate a number of cards, allowing his accomplice, who was skilled in the art of edge-sorting, to identify cards of a certain value. This gave Mr Ivey a notable advantage over the house and contributed to him 'winning' the monies. Following a review of visual recordings of the game played, the casino became aware of Mr Ivey's actions. They refused to pay out the 'winnings' on the basis that Mr Ivey had cheated and that this breached an implied term within the contract that governed the play in question.
Mr Ivey accepted that he had engaged in edge-sorting but disputed that this amounted to cheating, stating instead that this was simply legitimate 'advantage play'. Mr Ivey's argument was rejected by both the High Court and the Court of Appeal. However, whilst the Court of Appeal found that Mr Ivey had cheated, there was a lack of unanimity in the views expressed by the judges which led to a further appeal being launched in the Supreme Court.
The statutory offence of cheating at gambling is created by section 42 of the Gambling Act 2005, which provides that a "person commits an offence if he (a) cheats at gambling, or (b) does anything for the purpose of enabling or assisting another person to cheat at gambling" and that "cheating at gambling may, in particular, consist of actual or attempted deception or interference in connection with…the process by which gambling is conducted”.
The representatives for Mr Ivey made the case that:
(a) The test for cheating within the implied term of the contract between Mr Ivey and Gentings must be the same as that within section 42 of the Gambling Act 2005.
(b) This test incorporates an essential element of dishonesty.
(c) In determining whether a person has acted dishonestly, one must apply the two stage test that was established in the criminal case of R. v Ghosh (1982), this being:
(i) Was the conduct in question dishonest by the lay objective standards of ordinary, reasonable and honest people? and
(ii) If the answer to the above question is yes, did the relevant person realise that ordinary honest people would regard his/her actions as falling short of these standards?
It was argued that, given that Mr Ivey held the belief that edge-sorting was a part of legitimate gamesmanship, the second limb of the Ghosh test was not satisfied, which in turn meant that Mr Ivey had not acted in a dishonest fashion and therefore could not have been cheating.
Mr Ivey's argument was rejected by the Supreme Court who upheld the decision that he had cheated.
The Court did not consider it to be appropriate to formulate a prescriptive definition of cheating but stated that it will normally involve a deliberate act designed to gain advantage in play which is objectively improper given the rules of a game in question. It was stated that whilst the concept of "honest cheating" was an improbable concept, it did not follow that dishonesty formed an integral part of cheating. In this instance, Mr Ivey had taken positive steps to mislead the croupier and this gave him an advantage that only he was aware of and was not normally associated with the game Punto Banco. Accordingly, it was found that Mr Ivey's actions amounted to cheating irrespective of how he viewed his actions at the time.
Notwithstanding the fact that the Supreme Court found that dishonesty was not a necessary element of cheating, the Court also took this opportunity, in obiter, to refine the legal definition of dishonesty and rectify what it considered to be significant flaws within the Ghosh test. This was essentially done by removing the second limb of the test (which requires a Court to take into account the subjective state of the person's belief). The Supreme Court's main complaint regarding this element of the test was that it gave rise to the inequitable and illogical scenario whereby the more warped a person's standards of honesty, the less likely it was that her/she would be found to have acted dishonestly. The Supreme Court made clear that this amended legal test for dishonesty was to have universal application within the English Courts stating that "there can be no logical or principled basis for the meaning of dishonesty to differ according to whether it arises in a civil action or a criminal prosecution".
From an industry perspective, this ruling provides useful guidance regarding what constitutes cheating under the Gambling Act 2005. This should send a message to those who have been partaking in edge-sorting or similar practices going forward whilst also assisting operators in confronting such behaviour. However, one must bear in mind that the Court did not set out a prescriptive definition of cheating and made it clear that each case is to be considered on its individual merits. It was recognised that there is a fine line between cheating and general gamesmanship meaning that in some instances, there will still be plenty of room for debate.
The amendment to the legal test of dishonesty will have far ranging implications both within the betting and gaming sector and beyond. This is because the concept of dishonesty is central to a number of civil causes of action and criminal offences, including fraud. Therefore the lowering of the threshold should make it simpler and easier for entities that have been subject to by dishonest behaviour to seek redress.