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 9^th 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.