Cheating is cheating no matter what differing standards you hold yourself to.

Following the Supreme Court’s recent decision in Ivey (Appellant) v Genting Casinos (UK) Ltd t/a Crockfords (Respondent) [2017] a defendant in a fraud case can no longer rely on the argument that he thought what he was doing was acceptable. If you have been dishonest within the reasonable person’s concept of dishonesty, you’re out. That’s the principle that the Supreme Court wanted to bring home as it effectively merged the civil and criminal tests for dishonesty.

This landmark case re-formulates and simplifies the 35 year old test for dishonesty in theft and fraud cases set down by the court in R v Ghosh [1982]. The Ghosh case created a two-stage test for criminal dishonesty, which looked at:

  • whether, according to the ordinary standards of reasonable and honest people, what was done was dishonest (objective test); and
  • if so, whether the Defendant knew what he was doing was, by those standards, dishonest (subjective test).

Ivey has removed the second subjective limb of the test and created a more objective test for dishonesty.

Facts:

Ivey, a professional gambler, brought a civil claim against a London casino for winnings that were not paid out to him. The casino stated that they had not paid out the winnings because they had been obtained through cheating.

Ivey had attended the casino and persuaded the croupier, on the premise that he was superstitious, to turn the cards in a particular way if she considered them to be good or not. What the croupier did not realise is that this meant Ivey could take advantage of the very slight differences in the pattern on the long edge of each card once it had been rotated. This allowed him to determine whether a card would be of interest to him. He then asked the croupier to re-use the same pack of cards. The use of a machine shuffler ensured that the cards were re-shuffled without rotating any of the cards. Ivey finished his night with winnings of around £7.7m.

The question for the court was whether Ivey had “cheated” under section 42 of the Gambling Act 2005, which is a criminal offence. If he had, it would be a breach of an implied term in the gambling contract between him and the casino that neither would cheat, meaning he could not claim his winnings.

The High Court held that Ivey’s actions constituted cheating. The decision was appealed and the case referred to the Supreme Court.

Decision:

Ivey argued that he could not be found to have cheated because the second limb of the Ghosh test had not been satisfied. This was because he himself believed that what he was doing was “legitimate gamesmanship” and not dishonest.

The Supreme Court’s main objection to the second limb of the Ghosh test was the “warped” outcome that the less a defendant’s standards conform to those of reasonable and honest people, the less likely they are to be held criminally responsible for their actions. One of the purposes of criminal law is to set the standards of acceptable behaviour, not to excuse those who do not conform to those standards.

The subjective element of the criminal test in Ghosh also diverged from the objective test in civil actions. The Supreme Court said that it makes no logical sense for the definition of dishonesty to differ in criminal and civil actions, there is no one test for dishonesty whether the case was civil or criminal, although different standard of proof applied.

The Supreme Court decided that the new two-stage test, following the decisions in Royal Brunei Airlines v Tan and Barlow Clowes International Limited, to be applied is:

  • what was the actual state of the individual’s knowledge or belief as to the facts? and
  • was the individual’s conduct objectively dishonest by the standards of ordinary decent people?

It is, therefore, no longer a requirement for the prosecution to prove that a defendant knew or believed his actions to be dishonest for his conduct to be found dishonest by the court (the second limb of Ghosh).

The appeal was therefore dismissed.

Comment:

Whilst there is still a subjective element to this new test, it is rooted in facts, not conception of right or wrong. The court referred back to the example used in Ghosh itself, of the foreigner who comes from a country where public transport is free and, on his first day here, fails to pay a bus fare. Due to his subjective state of mind as to the facts, i.e. his belief that public transport is free (limb 1 of the new test), his conduct cannot objectively be said to be dishonest (limb 2 of the new test). We can contrast that with the Ivey case, where it was common ground that the parties’ contract for gambling contained an implied term that neither party would cheat (limb 1 of the new test). On that basis, Ivey’s conduct was objectively dishonest (limb 2 of the new test); it did not matter whether Ivey thought his conduct was dishonest or not.

The removal of the second limb of the Ghosh test may have a significant impact on criminal fraud cases where it has, in the past, been notoriously difficult to successfully prosecute when dishonesty is involved in the offence; it may now be easier for the Crown to secure a criminal conviction. Of course, there is the dangerous potential that this new test will criminalise genuine mistakes but we will have to wait and see how it is put into practice.

There are other associated areas on which this decision may impact, for example (i) insurance policies that refer to dishonest conduct according to criminal standards of dishonesty; and (ii) professional disciplinary procedures.

Whilst the full impact of this landmark decision is yet to be seen, the simplified test may well mean that we see an increase in criminal fraud cases being pursued. It might not, therefore, be long before we see how the test is implemented in other factual circumstances.