The Supreme Court has held that the correct test for dishonesty is whether or not the defendant's conduct is dishonest by the objective standards of ordinary reasonable and honest people: Ivey v Genting Casinos (UK) Ltd t/a Crockfords [2017] UKSC 67. Albeit that the Court did not need to rule on the point, the judgment would remove the second limb of the previous two-phase objective and subjective test for dishonesty as set out in R v Ghosh [1982] QB 1053. The Court also concluded that the tests for dishonesty in criminal and civil proceedings should be the same.

Background

Mr Ivey (a professional gambler) used a highly specialist technique called "edge-sorting" to improve his odds of winning at Punto Banco Baccarat (a game of chance). This technique relies on the fact that there are slight differences in the pattern on the back of certain playing cards. Over the course of the game, Mr Ivey and his accomplice directed a croupier to rotate cards which had already been revealed in a certain manner so that he could more accurately guess the value of the card when they were shuffled, placed face down and the deck was used to play again. The croupier was entirely unaware of the motivation behind Mr Ivey's request that the cards be oriented in a certain way. Over the course of two days in 2012, Mr Ivey won just over £7.7 million using this technique.

After reviewing the CCTV, Genting Casinos' investigators spotted what Mr Ivey had done and refused to pay him his winnings on the grounds that the game had been compromised. Both parties agreed that there was an implied term that neither party to the game would cheat. Genting Casinos argued that Mr Ivey had breached this implied term and, as such, was not entitled to his winnings. Mr Ivey sued, arguing that "edge-sorting" was "legitimate gamesmanship" and not cheating.

At first instance, Mitting J held that the implied term had been breached and Mr Ivey was not entitled to his winnings. The majority of the Court of Appeal dismissed Mr Ivey's appeal, agreeing that the technique amounted to cheating.

Decision

The Court unanimously held:

  • Dishonesty is not a necessary legal element of cheating in the context of games and gambling. Although some forms of cheating will involve deception, this is not always the case – the Court gave the (perhaps surprising) examples of purposefully tripping up an opponent, deliberately wasting time or intentionally knocking over a table to force a hand of cards to be dealt again as instances of cheating which are not (in the Court's opinion) necessarily dishonest.
  • The proper test for dishonesty is whether or not the defendant's conduct is dishonest by the objective standards of ordinary reasonable and honest people. As such, the two-limbed test from R v Ghosh (which, in addition to the test set out above, required the jury to assess whether, subjectively, the defendant realised that ordinary, honest people would regard his behaviour as dishonest) is no longer good law. The Court noted that this subjective test previously meant that "the less the defendant's standards conform to what society in general expects, the less likely he is to be held criminally responsible for his behaviour."

In the case at hand, the Court held that "edge-sorting" amounted to cheating on the basis that Mr Ivey had taken positive steps to fix the deck, having staged "a carefully planned and executed sting." He had therefore breached the implied term not to cheat, and was not entitled to his winnings. As such, the only question requiring the Court's attention was whether dishonesty was an essential legal element of cheating (which was answered in the negative); the Court nonetheless took the opportunity to revisit the test for dishonesty in criminal proceedings on the basis that there had been a deception of the croupier and that this could potentially be dishonest. The Court identified a number of serious problems with the second limb of the rule adopted in R v Ghosh, including that:

  • It had the unintended effect that the more warped a defendant's standards of honesty, the less likely that he would be convicted of dishonest behaviour;

  • It set a test which jurors and others often found "puzzling and difficult to apply";

  • It led to an unprincipled divergence between the tests for dishonest in criminal and civil proceedings.

The test as set out in Ivey is as follows:"When dishonesty is in question, the fact-finding tribunal must first ascertain (subjectively) the actual state of the individual’s knowledge or belief as to the facts… When once his actual state of mind as to knowledge or belief as to facts is established, the question whether his conduct was honest or dishonest is to be determined by the fact-finder by applying the (objective) standards of ordinary decent people.”It should be noted that although there is no longer any subjective test as to whether or not the defendant's conduct was dishonest, the jury must still consider, subjectively, what the defendant's knowledge of the wider situation was: what did the defendant know or believe "about the facts affecting the area of activity in which he was engaging"? The Court used the hypothetical example of a visitor to England who fails to pay a bus fare because he believed public transport was free, as it was in his imagined home country: "Because he genuinely believes that public transport is free (i.e. knowledge of the wider situation), there is nothing objectively dishonest about his not paying on the bus (i.e. his specific conduct)." This subjective assessment of a defendant's knowledge will be of continued importance in circumstances where a defendant had insufficient information about a general situation to understand the impact of his conduct.

Analysis

It is interesting that this decision affecting the test for dishonesty in criminal cases should come in the context of a civil action. As a result of the decision in civil proceedings, the test for dishonesty in criminal and civil matters is now the same, the Court holding that "it would be an affront to the law if [the meaning of dishonesty] differed according to the kind of proceedings in which it arose." Although the burden and standard of proof will continue to differ between criminal and civil proceedings, it is now the case that "if by ordinary standards a defendant's mental state would be characterised as dishonest, it is irrelevant that the defendant judges by different standards" (Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37; [2006] 1 WLR 1476).

Although the effect in criminal cases remains to be seen, it is possible that the decision will generally be welcomed by prosecutors as, by removing one limb of the dishonesty test, arguably it reduces the hurdles to conviction. An alternative view is that the revised test may reflect a reality that jurors who had struggled with "the idea that something which is dishonest by ordinary standards can become honest just because the defendant thinks it is," may have in practice simply rejected the evidence that a defendant did not view himself as dishonest.

The ruling affects a number of offences which require a prosecutor to demonstrate the presence of dishonesty, including the prosecution of crimes often seen in a corporate context such as fraud, conspiracy to defraud, money laundering and cheating the public Revenue. The removal of the reference to a defendant's personal standards of honesty may have most impact in cases in a particular industry, with defendants unable to rely on R v Ghosh to argue that they mistakenly but honestly believed that conduct was consistent with standards of their business peers. The Court noted: "There is no reason why the law should excuse those who make a mistake about what contemporary standards of honesty are, whether in the context of insurance claims, high finance, market manipulation or tax evasion."

The Court cautioned against any attempt to define dishonesty, deferring to the jury as to whether conduct may be construed as dishonest or not. It provided little guidance as to how defendants (and indeed, society in general) can learn more about what "contemporary standards of honesty" are. While the judgment noted that the purpose of the criminal law is to "set the standards of behaviour which are acceptable", such standard setting will, therefore, continue to be by means of the judgment of conduct after the event.