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17 January 2018

No smoke without fire: revisiting the Crown exemption rule

When is the Crown bound by a statute that does not expressly refer to it? This was the question that arose for consideration by the Supreme Court in R (on the application of Black) v Secretary of State for Justice [2017] UKSC 81 (see the judgment here). 

The judgment

The appellant, a serving prisoner, sought judicial review of the Secretary of State’s refusal to provide prisoners at HMP Wymott with access to the NHS’s Smoke-free Compliance Line. This freephone telephone line is designed to enable anyone to draw breaches of the ban on smoking in enclosed public places and workplaces in England and Wales to the attention of enforcement authorities. The refusal to provide the appellant with access to the Compliance Line was made on the basis that Part 1 of the Health Act 2006 (which brought the ban into force) did not bind the Crown. The claim succeeded at first instance (before Singh J), but the Court of Appeal (Lord Dyson, McCombe LJ and Richards LJ) allowed the Secretary of State’s appeal.

In a unanimous judgment, the Supreme Court dismissed the appeal. They refused to revisit the presumption, stated in Province of Bombay v Municipal Corporation of the City of Bombay [1947] AC 58 and Lord Advocate v Dumbarton District Council [1990] 2 AC 580, that a statutory provision does not bind the Crown, save by express words or “necessary implication” (the “Crown exemption rule”). The Court found that the presumption is so well established that many statutes will have been drafted and passed on the basis that the Crown is not bound.

The Court went on (at paragraph [36]), to set out several propositions that constitute the rule, before applying them to the case at hand. The Court found that, although there were indications that, before the 2006 Act was passed, the prison service expected to be subject to the smoking ban, there were powerful indicators in the language of the 2006 Act that the Crown was not bound. First, the statute did not say that the Crown was bound. Second, in legislation with comparable structures and enforcement powers, there are provisions dealing with how the Act is to apply to the Crown, such as the Health and Safety at Work etc Act 1974. Third, there is a provision in section 23 of the 2006 Act binding the Crown in relation to Part 3, which deals with the Supervision of Management and Use of Controlled Drugs, as well as a provision in section 10 of the Smoking, Health and Social Care (Scotland) Act 2005 binding the Crown for the Scottish equivalent to the smoking ban. Therefore the silence on the point in Part 1 of the 2006 Act implies that that Part does not bind the Crown.

Commentary

In Black the Supreme Court did not conclude that the Crown cannot be bound by the smoking ban, but rather that the 2006 Act does not provide for the Crown to be bound. One of the principles explained by the Court in its judgment is that the Crown exemption rule is one of statutory interpretation, rather than a strict immunity from liability.

It is a rule that, nonetheless, raises a number of questions for debate.

First, it may be argued that the Crown exemption rule renders the law less accessible: without legal training anyone reading the 2006 Act might reasonably assume it binds the government. In consequence, there may be a danger that the issue of whether a particular law should bind the Crown may not receive the prominence it deserves.

Second, the rule might be considered to make the law less certain. Without it, it would be unnecessary to ask a Court to determine whether there was a “necessary implication” that the Crown was bound (a task that would perhaps have been harder and less certain in Black, had there been no reference to the Crown in the equivalent Scottish provisions or other Parts of the 2006 Act).

Third, it may be considered surprising to some that, where there is no express provision, the starting point is a rule of statutory construction that has the effect that legislation does not apply to Crown servants. As the Supreme Court noted (see paragraph [33] of the judgment), Paul Craig has highlighted that the Crown exemption rule is not always in the mind of the parliamentary draughtsperson, such that where the rule is not contemplated, the Crown could be exempt from provisions that were intended to apply universally. For example, the Offences Against the Persons Act 1861 contains no provision relating to the Crown: strict application of the rule might be argued to have the result that Crown servants are not committing offences if, in the course of their duties, they commit one of the offences contained within that Act.

At present, there is no difficulty with Parliament adding a provision to any Act to make it bind the Crown (indeed this is given as a justification for upholding the rule), but it could equally easily add explicit exemptions where desirable. In the circumstances, and given the considerations noted above, it might be argued that the latter approach is preferable and more in keeping with democratic norms.

It is, of course, easy to see why certain laws should not bind the Crown. Soldiers need to be able to carry guns without obtaining a licence from their local constabulary, for example. In the case of the smoking ban, a key part of the statutory scheme is a regime of inspection and enforcement. It is plainly undesirable that local government officials should have a right to enter and inspect all government buildings – in the context of this case, for example, arriving at a high security prison and demanding to inspect the premises.

It is also sometimes unnecessary for laws to bind the Crown. The Government had already voluntarily introduced smoke-free offices, and there is no suggestion that breaches of the rules by civil servants were being tolerated. Even in the prison context, plans for entirely smoke-free prisons (including the residential areas or cells) are well underway.

However, it is open to question whether these justifications for Crown exemption bear on what should be assumed where a statute does not contain a provision on Crown application.

It is noteworthy that Lady Hale suggested (at paragraph [35]), that there is a strong case for Parliament to clarify the rule in primary legislation. Regardless of any view of the merits of the Crown being exempt from certain legal provisions, it might be considered a positive step for the clarity of UK law, to have a short provision simply stating: “Unless otherwise provided, all Acts bind the Crown.” The transitional provisions would be slightly more complicated: naturally it could only apply to subsequent statutes, not to previous legislation that was based on the opposite assumption. But what about later statutes amending earlier Acts, or later statutes which say they must be read with a prior statute since together they create a comprehensive code? Which rule of interpretation then applies? Should such a provision ever be introduced, the Office of Parliamentary Counsel would have an unenviable task.

This post was drafted by Alex Du Sautoy and Vincent Scully, both pupil barristers at 6KBW.

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Righting another ‘wrong turn’? Dishonesty in Ivey v Genting: Part II

In this second of two posts (the first can be found here), the criticism of the Ghosh test is considered, together with a brief outline of the concept of dishonesty in the civil cases and some reflections on the future application of Ivey in practice.

The trouble with Ghosh

The decisions in Feely and Ghosh attracted a good deal of academic criticism, among others: D.W. Elliott, “Dishonesty in Theft: A Dispensable Concept” [1982] Crim LR 395; E. Griew, “Dishonesty: The Objections to Feely and Ghosh” [1985] Crim LR 341;  K. Campbell, “The Test of Dishonesty in Ghosh” [1994] 43 CLJ 349.

The essential criticisms were these:

  1. The cases did not actually provide a definition of dishonesty. Instead the jury (or magistrates) were left to give “dishonesty” whatever meaning they thought fit, having regard to prevailing social mores.  By consequence the test was not a legal one but depended on the moral views of the jury.  Moreover, simply because “dishonesty” was an ordinary English word, it did not follow that the jury should be given an uncontrolled discretion over its meaning and application.
  2. The concept of dishonesty had become a central positive feature in offences of property when it should more properly function as a negative feature, controlling liability that would otherwise arise in respect of prima facie unlawful conduct.
  3. The cases created the possibility that some persons would be acquitted on facts not differing in any material respect from those upon which other persons would be convicted.
  4. The cases assumed that juries and magistrates in England and Wales were culturally homogeneous with known and shared standards.  However, the object of the criminal law was to protect property rights and disrespect for those rights abounded – no such shared values could properly be relied upon.
  5. The cases mistook the meaning of dishonesty (a legal concept) with standards of behaviour (an ethical one).
  6. The test risked more trials as defendants had little to lose by pleading not guilty and hoping that the dishonesty element was not made out.
  7. The second limb of the Ghosh test in particular allowed the accused to escape liability where he had made a mistake of fact as to contemporary standards of honesty.  That was no proper reason for excusing criminal liability in the context of property offences – nor did such a concept operate elsewhere in the criminal law.  The Ghosh test attached too much weight to the opinion of the defendant at the expense of the rights of the victims of property offences and the criminal law does not ordinarily excuse individuals who believe that their conduct would be acceptable to others.

Wider concerns

The Ghosh test was also heavily criticised by the Law Commission.  In “Fraud and Deception (Law Commission Consultation Paper No. 155, 1999)” the academic critique of the Ghosh test was found to be compelling (at paragraph 5.28).  It was noted, among other things, that the only apparent function of the second limb of the Ghosh test was to allow a defendant to escape liability on the basis of mistake of fact about what the standards of dishonesty were among the general public: that is to say, a defendant’s misunderstanding of the moral beliefs held by the rest of society provided a basis for an acquittal.

Interestingly, however, in its later report, Fraud (Law Com No. 276, 2002), the Law Commission softened its criticism of the Ghosh test and expressed the view that its application in practice was “unproblematic” (paragraph 5.18).

It is notable in this regard that the Fraud Act 2006 came to be passed on the basis of the law as it stood in Ghosh – criticism and allSome have raised whether, in this context, the decision in Ivey might be considered judicial activism.

Though the position in other common law jurisdictions was not considered in Ivey, it is interesting to reflect that leaving the concept of dishonesty to the uninstructed view of the jury was rejected in Australia only a couple of years before GhoshR v Salvo [1980] VR 401.

In Salvo, the defendant (a used car dealer) sold a car to K, taking from K another car in part exchange.  Salvo then sold the car received from K.  He then discovered that K had no title to sell the car and was put to the expense of perfecting the title of the vehicle.  He then decided to repurchase the car he had sold to K using a worthless cheque.  His conviction for dishonestly obtaining the vehicle (by falsely representing that the cheque would be honoured) was quashed on appeal on the basis that a claim of right is a defence to a charge of obtaining.  The three judges considered the concept of dishonesty and the majority (Murphy and Fullager JJ;  McInerney J dissenting) rejected the approach in Feely while McInerney J held that Feely was rightly decided.  Fullager J found that dishonesty was not a word to be left to the jury on the basis of its ordinary meaning but, rather, meant “with disposition to defraud i.e. with disposition to withhold from a person what is his right”.  The decision in Salvo was followed in Brow [1981] VR 783 and Bonello [1981] VR 633.

Concerns about “dishonesty

Perhaps alive to these criticisms, it is apparent that the senior judiciary had been concerned for some time before Ivey about the concept of dishonesty in the criminal law and, further, an apparent divergence with civil law, especially in relation to dishonest assistance in breach of trust.

In Starglade Properties Ltd v Nash [2010] EWCA Civ 1314, Leveson LJ added a “note of concern” to his judgment if it was the case that “the concept of dishonesty for the purposes of civil liability differed to any marked extent from the concept of dishonesty as understood in the criminal law”.  He noted that the point was apt to be considered by the Court of Appeal (Criminal Division) (at [42]).

Subsequently, a five-judge Court of Appeal heard the case of R v Cornelius [2012] EWCA Crim 500 in which the issue as formulated between the parties included the correctness of the Ghosh test.  Ultimately it proved unnecessary to examine Ghosh.  It may be a matter of interest however, that the position adopted by the respondent Director of Public Prosecutions was that the Ghosh test was wrong and ought to be abandoned in favour of the test applicable in civil proceedings, as articulated by Lord Nicholls in Royal Brunei Airlines Snd Bhd v Tan [1995] 2 AC 378.

The civil cases in overview

In Royal Brunei Airlines Snd Bhd v Tan [1995] 2 AC 378, Lord Nicholls held that dishonesty was the necessary and sufficient condition of liability in cases of dishonest assistance in breach of trust.  The test of dishonesty, in such cases, was an objective one (at page 389).  To the extent that dishonesty required a subjective element, it was to be derived from the fact that it described a type of conduct assessed in the light of what a person actually knew at the time of the breach.  It was not to be found (as in Ghosh) in what a reasonable person would have known or appreciated about that conduct.  Put another way, as Lord Nicholls expressed the test, a person’s knowledge of a transaction or conduct had to be such as to render his participation contrary to normally acceptable standards of honest conduct;  it did not require that he should have had reflections about what those normally acceptable standards were. 

The decision of the Privy Council in the Royal Brunei Airlines case was considered by the House of Lords in Twinsectra v Yardley [2002] 2 AC 167.  In Twinsectra a majority (Lord Slynn of Hadley, Lord Steyn, Lord Hoffman, Lord Hutton; Lord Millett dissenting) held that a finding of liability was only permissible, where following the application of a combined subjective and objective test, dishonesty was established – a Ghosh type test.  However, the decision in Twinsectra Ltd. was explained by the Privy Council three years later in Barlow Clowes International Ltd (in Liquidation) and others v Eurotrust International Ltd [2006] 1 WLR 1476.  In that case it was decided that the test whether a person was consciously dishonest in providing assistance in breach of trust required him to have knowledge of the elements of the transaction which rendered his participation contrary to ordinary standards of honest behaviour, but did not require him to have reflections on what those normally acceptable standards were.  This approach appears to have been followed by Arden LJ in Abu-Rahmah and another v Abacha and others [2007] 1 Lloyd’s Rep 115, the Court of Appeal (Pill, Rix and Arden LJJ) and in Starglade (supra).

In broad summary, the combined effect of the cases in the civil law was that a finding that the defendant was dishonest need only involve an assessment of his participation in the light of his knowledge of the facts of the transaction.  It is this test which now forms the test of dishonesty for the purposes of the criminal law.

The approach for juries following Ivey

The approach as set out in Ivey that the criminal law ought to follow what was said by Lord Nicholls in Royal Brunei Airlines, would seem both principled and of practical merit.

As to what constitutes this test, and how it is to be approached in criminal trials, it may be of assistance to highlight two passages in the civil authorities in particular concerning the extent to which the factual circumstances (including the characteristics of the defendant) may be taken into account.

In Royal Brunei, Lord Nicholls made plain (at page 393):

…. when called upon to decide whether a person was acting honestly a court will look at all the circumstances known to the [defendant] at the time.  The court will also have regard to personal attributes of the [defendant], such as his experience and intelligence, and the reason why he acted as he did.

In Starglade Properties Ltd, the Chancellor summarised the effect of what Lord Nicholls had said in the following way (at paragraph 25):

There is a single standard of honesty objectively determined by the court.  That standard is applied to specific conduct of a specific individual possessing the knowledge and qualities he actually enjoyed.

In sum, the task for the jury is first to find the facts:  what did the defendant do and with what possible intention, belief or other state of mind that is relevant to the offence charged?  The second task is to decide whether the defendant was acting as an honest person would in the circumstances, applying their standards as ordinary and reasonable people.

Concerns addressed?

In conclusion it is perhaps interesting to reflect that, while some of the more trenchant criticisms of Ghosh have been addressed by Ivey (viz. a defendant’s ability to escape liability based on his misunderstanding of prevailing moral standards), the importation into the criminal law of the test in Royal Brunei is not without potential difficulty.

Dishonesty” remains a concept left to the jury which is undefined (save by reference to their own standards) and subject to potentially widespread variation.  Two defendants may still experience different outcomes before different juries on identical facts.  The concept of honesty among a jury drawn from Southwark may differ markedly from those among a jury drawn from Tunbridge Wells.

More significantly perhaps, “dishonesty” remains a central feature in property offences, as opposed to a limiting factor, controlling liability in respect of prima facie unlawful conduct.  This is worthy of particular attention in cases of conspiracy to defraud where the parameters of what constitutes unlawful conduct are strikingly wide, namely:  an agreement to pursue a course of conduct which risks prejudice to the economic interests of a third party.

In circumstances where the operation of basic capitalist economies routinely and inevitably risks economic prejudice to a third party, “dishonesty” forms the crucial ingredient which engages the stigma of the criminal law.  Whether it is right that this is a matter which should be left to a jury as a test of fact, or morality, as opposed to a concept which is a matter of law is perhaps a matter which requires further scrutiny.  The alternative would seem to risk, in effect, the creation by stealth of a generalised property offence of dishonesty – a matter on which Parliament has repeatedly declined to legislate.

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Righting another ‘wrong turn’? Dishonesty in Ivey v Genting: Part I

This blog has previously featured a summary of the landmark judgment in Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67 and a post examining the dishonesty test now to be applied in criminal proceedings. Our analysis continues with two in-depth posts. In this, Part I, the background to the decision in Ivey is examined, along with a consideration of the Ghosh test and its operation in practice.  In Part II, the academic criticism of Ghosh is discussed together with a brief account of the concept of dishonesty in the civil cases, and some reflections on the future application of Ivey in practice.

The issue

The case concerned a professional gambler who sued a casino for his winnings at a game of Punto Banco (£7.7 million). The issues arising before the Supreme Court included whether the concept of cheating at gambling necessarily required ‘dishonesty’ and, if so, what the proper test for dishonesty would be in the circumstances, namely the test applicable in civil or criminal proceedings.  As Lord Hughes explained, the test of dishonesty in civil proceedings was whether the conduct was dishonest by the ordinary standards of reasonable and honest people (an objective test); the test in criminal proceedings, (pre-Ivey) was the two-limbed Ghosh test, namely: (i) whether the conduct was dishonest by the ordinary standards of reasonable and honest people; and, if so, (ii) whether the defendant knew his conduct was dishonest by those standards (an objective subjective test).

The judgment

In the event, Ivey was decided on the basis that dishonesty formed no part of the concept of cheating.  Accordingly, on one view, the discussion of dishonesty in the judgment might be said to be obiter and confined to the circumstances of a civil action.  The better view, however, would seem to be that the judgment represents the current state of the criminal law on dishonesty and that the two-limb test in Ghosh has been overruled.  Certainly that was the view expressed by the President of the Queen’s Bench Division in DPP v Patterson [2017] EWHC 2820 (Admin) (at [16]):  “It is difficult to imagine the Court ofAppeal preferring Ghosh to Ivey in the future.”

The judgment was the unanimous decision of a Court which included the President, future President, and the former Lord Chief Justice (Lord Neuberger, Lady Hale, Lord Kerr, Lord Hughes and Lord Thomas).  The position on any future appeal to the Supreme Court is, to that extent, predictable and it is notable that Lord Hughes expressed himself in unambiguous terms: “directions based upon [Ghosh] ought no longer to be given” (at [74]).

It follows that the directions as formulated in the current edition of the Crown Court Compendium: Part I Jury and Trial Management and Summing Up (February 2017) (pp 8-16 to 8-19) would appear to have been superseded. There is no longer a requirement for any jury to consider the subjective state of mind of a defendant as to whether his conduct was dishonest or not.

Following Ivey, the entirety of the test of dishonesty in the criminal law is now objective.  Juries are to be directed accordingly on a straightforward question: was the defendant’s conduct dishonest by the ordinary standards of reasonable and honest people?  Whilst answering that question may take account of all the circumstances, as the jury find them to be (including the defendant’s state of knowledge, belief or suspicion), a defendant’s own evaluation of his conduct no longer forms part of the test.

Righting another wrong turn?

In abandoning the Ghosh test the Supreme Court has taken another step to clarify certain areas of doctrinal debate arising from decisions of the House of Lords and Privy Council in the early 1980s.  Ivey sits alongside the seminal decisions in G v R [2003] UKHL 50, resolving controversy as to the proper test of recklessness following R v Caldwell [1982] AC 341; and R v Jogee, ‘righting’ a wrong turn in the test for parasitic accessorial liability derived from Chan Wing Siu v The Queen [1985] AC 168).

The genesis of the controversy surrounding the Ghosh test can be traced at least to R v Feely [1973] QB 530.  Feely concerned the manager of a betting shop who took £30 from the till for his own purposes.  This was contrary to his instructions, but he had a right of set-off for this amount in respect of money owed to him by his employer, so his employer was not placed at any financial risk.  His conviction of theft was quashed because the trial judge had removed the issue of dishonesty from the jury.

The Court of Appeal decided that it was for the jury to determine whether what the defendant did was dishonest applying the current standards of ordinary decent people.  This test was a notable departure from the test under the old law of larceny (prior to the Theft Act 1968) – which left the concept of ‘fraudulently’ as a matter for the judge – and from the practice envisaged by the drafters of the 1968 Act, in which the concept of dishonesty was expected to play only a minor role.

As a result of Feely, the criminal law relating to property offences changed significantly:  it was now for a jury to decide on what constituted dishonesty by reference to the prevailing moral standards and whether the defendant had transgressed those standards.

In a number of cases that followed it was held that the jury were required to take into account not only the prevailing moral standards but also the defendant’s own opinion on whether he acted honesty:  R v Gilks [1972] 1 WLR 1341;  Boggelin v Williams [1978] 1 WLR 873;  R v Landy [1981] 1 WLR 355.

This approach to dishonesty was disapproved in R v McIvor [1982] 1 WLR 409, where, in order to avoid the implications of the earlier decisions, it was held that in a case of conspiracy to defraud a different test was to be applied.

It was against this background that the Court of Appeal came to consider Ghosh.

The Ghosh test

In Ghosh, the Court of Appeal (Lord Lane CJ, Lloyd and Eastham JJ) held that in determining whether the prosecution has proved that a defendant was acting dishonestly involved a two-stage objective-subjective test.  Lord Lane CJ stated (at paragraph 1064D):

… a jury must first of all decide whether according to the ordinary standards of reasonable and honest people what was done was dishonest.  If it was not dishonest by those standards that is the end of the matter and the prosecution fails.

If it was dishonest by those standards then the jury must consider whether the defendant himself must have realised that what he was doing was by those standards dishonest.  In most cases, where the actions are obviously dishonest by ordinary standards, there will be no doubt about it.  It will be obvious that the defendant himself knew that he was acting dishonestly.  It is dishonest for a defendant to act in a way which he knows ordinary people consider to be dishonest, even if he asserts or genuinely believes that he is morally justified in acting as he did. 

By introducing such a test, which looked first to the standards of reasonable and honest people and then to the defendant’s own state of mind, the Court of Appeal attempted a compromise.  On the one hand it modified the objective test, as set out in Feely, which some considered to be overly harsh, but it avoided the purely subjective approach of Gilks, which some considered to create a thief’s charter.

As to when the direction was to be given requiring a jury to apply the test in Ghosh, the Court of Appeal clarified the position in R v Price (1989) Cr App R 409:

… it is by no means in every case involving dishonesty that a Ghosh direction is necessary.  Indeed in the majority of such cases, of which this was one, it is unnecessary and potentially misleading to give such a direction.  It need only be given in cases where the defendant might have believed that what he is alleged to have done was in accordance with the ordinary person’s idea of honesty.

Put another way, Price made clear that the Ghosh test was in fact only to be applied by juries in circumstances where the second limb of the test arose for consideration, namely the defendant’s evaluation of whether his conduct was aligned with general standards of morality.

It is right to note that in practice, the Ghosh direction is now most frequently given in cases involving complex financial frauds.  In such cases it has commonly been a live issue whether, for example, a trader in esoteric financial instruments believed that what he or she was doing was dishonest by the standards of ordinary people given the conduct in which he or she engaged was widespread within the industry.

Part II will be published next week.

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How now to spot dishonesty

What place a defendant’s state of mind following the Supreme Court decision in Ivey v Genting [2017] UKSC 67?

Until Mr Ivey challenged the refusal of the Genting Casino to pay the £7.7 million he had won at Baccarat using an edge-sorting technique that he called legitimate and they called cheating, a defendant charged with an offence of dishonesty would have had a fairly good idea how a jury considering her conduct would have decided whether it had been dishonest. Since 1982, when the locum surgeon Mr Ghosh was convicted of claiming fees for operations undertaken by others, the jury would have asked itself not only whether the conduct was dishonest by the standards of reasonable and honest people (amongst whom they would have included themselves), but whether the defendant realised that ordinary honest people would consider the behaviour to be dishonest. Since the Supreme Court concluded that Genting’s categorisation of Mr Ivey’s conduct was the correct one and took the opportunity to look again at how a jury ought to spot dishonesty, a defendant’s position on the face of it has changed. But how much?

The Supreme Court was keen to remove a defendant’s own realisation that reasonable and honest people would consider her conduct dishonest from the equation. It was concerned that this could place a defendant with a warped view of the world in a better position than one in touch with contemporary morality. However, the Court did not in the process make the actual state of mind of a defendant irrelevant. Its relevance is to the state of knowledge as to the factual context of her conduct. As Lord Hughes identified (at para.60), taking the example of a person accused of travelling on a bus without paying, if they genuinely believe that public transport is free then there is objectively nothing dishonest about not paying. Similarly (taking the facts of the pre-Ghosh decision in Feely [1973] QB 530), if an employee takes money from the till, knowing that this is not permitted but intending to pay it back the next day, the objective assessment of his conduct in terms of dishonesty will differ from another employee who takes from the till without making any attempt to repay.

Whilst it could be argued that the dishonesty issue that the Supreme Court had to resolve in Mr Ivey’s case was not the question of whether the test described by Lord Lane CJ in Ghosh [1982] QB 1053 was correct, it could equally be argued (as Lord Hughes observed at para.55) that Lord Lane had not been required to devise his two part test in order to address whether it was dishonest to claim for work others had done as Mr Ghosh had. Moreover, it would be brave to suggest that the unanimous and unequivocal rejection of the Ghosh test should not be followed. As Sir Brian Leveson observed in DPP v Patterson [2017] EWHC 2820 (Admin), “it is difficult to imagine the Court of Appeal preferring Ghosh to Ivey in the future” (at para. 16).

In any event, the Supreme Court has taken the opportunity to restate the test for dishonesty that has generally been applied by courts and juries, namely by reference to her state of knowledge of the factual context of her actions judged against the assessment of reasonable persons.  For example, the Crown Court Compendium [8-6] recognises that it has been “unusual” to address the second Ghosh question.  Moreover, this is an approach that juries have already been applying in all manner of other contexts, such as whether someone’s claim to be acting in self-defence was reasonable, or whether their knowledge or belief was genuine by reference to whether it was reasonable.

And so, the answer in reality and in most cases to the question of how now to spot dishonesty is much as it was before, dependent on the assessment of the jury as to whether it was dishonest in their eyes in the circumstances that the defendant was in.

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Alex Du Sautoy
Alex Du Sautoy
27 October 2017

Landmark Supreme Court dishonesty ruling

The Supreme Court has overturned the long-standing Ghosh test for establishing dishonesty in criminal proceedings.

Case summary: Ivey v Genting Casinos (UK) Ltd t/a Crockfords [2017] UKSC 67

Background

The Appellant, Mr Ivey was a professional gambler who wished to sue the respondent company, an owner of casinos. In August 2012, Mr Ivey had deployed a technique called ‘edge-sorting’ when playing Punto Banco (a type of Baccarat) at one of the Respondent’s casinos. It was common ground that the technique had improved the Appellant’s chances and he had won £7.7 million over the course of a number of days. The casino declined to pay Mr Ivey the winnings, claiming that ‘edge sorting’ amounted to cheating. Mr Ivey’s claim was that it was not cheating but a legitimate technique.

It was uncontroversial throughout litigation that it was an implied term of the contract for betting between the parties that neither of them would cheat. To the extent Mr Ivey had cheated, he would have been in breach of that implied term and unable to recover his “winnings”.

At first instance, Irwin J found that Mr Ivey was a professional gambler who described himself as an “advantage player”, viz. one who, by a variety of techniques, sets out to reverse the advantage held by the house and to play at odds which favour him. The judge accepted that he was genuinely convinced that what he did was not cheating. The question arising, however, was not whether Mr Ivey thought of it as cheating, but whether it was as a matter of fact and law. The judge concluded that it was, and so did the majority of the Court of Appeal.

Judgment

Lord Hughes gave the unanimous judgment of the Court. It was found that the definition of cheating must be the same for the implied term as for section 42 of the Gaming Act 2005, which makes cheating at gambling an offence. The Supreme Court observed that certain forms of cheating do not involve dishonesty, just as certain forms of deception do not constitute cheating. The Court found that the judge’s conclusion, that Mr Ivey’s actions amounted to cheating, was unassailable, and that it was not necessary to make an additional finding on whether the conduct of Mr Ivey amounted to deception. Nonetheless, the Supreme Court went on to consider whether, if dishonesty were an essential element, such an additional element would be satisfied in this case.

Dishonesty test

The Supreme Court considered the leading authority of R v Ghosh [1982] QB 1053, and the directions to juries which have been derived from that case in determining whether there has been ‘dishonesty’ for the purpose of any offence, namely that a jury is to apply a two stage test:

  1. Was the conduct complained of dishonest by the standards of reasonable and honest people?
  2. If so, did the defendant realise that ordinary honest people would consider his behaviour to be dishonest?

The Supreme Court identified six problems with the second limb of the Ghosh test in particular:

  1. The more warped the defendant’s standards of dishonesty, the less likely it is that he will be convicted of dishonest behaviour. As it was put in Smith’s Law of Theft 9th ed (2007), para 2.296: “…the second limb allows the accused to escape liability where he has made a mistake of fact as to the contemporary standards of honesty. But why should that be an excuse?”
  2. The test is not necessary to preserve the principle that dishonesty, and especially criminal responsibility for it, must depend on the actual state of mind of the defendant. Innocent mistakes, such as genuinely believing that all public transport is free, are already covered by the first limb. In determining the honesty or otherwise of a person’s conduct, one must ask what the defendant knew or believed about the facts affecting the area of activity in which he was engaging.
  3. It is a test that jurors and others often find puzzling and difficult to apply.
  4. It has led to an unprincipled divergence between the test for dishonesty in criminal proceedings and the test for dishonesty in civil proceedings.
  5. It represented a significant departure from law before the Theft Act 1968, when there is no indication that such a change was intended.
  6. The decision was not compelled by authority. The better view of the pre-Ghosh cases is that the preponderance of authority favoured the simpler rule that, once the defendant’s state of knowledge and belief has been established, whether that state of mind was dishonest or not is to be determined by the application of the standards of the ordinary honest person.

The Supreme Court concluded that these considerations provide convincing grounds for holding that the second leg of the test does not correctly represent the law, and that directions based upon it ought no longer to be given. They held that the correct test of dishonesty is that set out by Lord Nicholls in Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 and by Lord Hoffmann in Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37. The test to be applied by a jury in determining dishonesty should therefore be as follows:

  1. To ascertain the actual state of the defendant’s knowledge or belief as to the facts.
  2. Determine whether the conduct was honest or dishonest by applying the standards of ordinary decent people.

There is no requirement that the defendant must appreciate that what he has done is, by the standards of ordinary decent people, dishonest. If dishonesty were an additional legal element in cheating at gambling, the Supreme Court concluded, it would in this case have been satisfied by the application of this new test.

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