Supreme Court rewrites the law on dishonesty

The Supreme Court has handed down judgment in the Ivey v Genting Casinos case, concerning whether Mr Ivey had cheated by using a complex technique to give him an advantage in a game of Punto Banco Baccarat, at which he won £7.7m. While the case may seem to be of interest primarily to casino high rollers, it contained a major development for the criminal law, overturning 35 years of established authority on the test for dishonesty. This was a surprise, as the Court decided the test for whether someone cheated in gambling did not involve a finding of dishonesty, but went on to consider the criminal law on dishonesty regardless, seeing a need for change.

Mr Ivey was found to be an honest witness who explained fully the technique he had adopted in order to help him beat the house. Importantly, the judge at first instance found that he was truthful when he said that he did not consider what he had done to be cheating by the standards of ordinary people. This was a civil trial, but under the established test for dishonesty in criminal trials (the Ghosh test), had there been a criminal trial and the jury accepted that Mr Ivey did not believe what he did was dishonest by the standards of ordinary people, that would be sufficient to prevent them from convicting him.

The Ghosh test discredited

The test for dishonesty that has been applied since 1982 is the two stage test set out by the Court of Appeal in R v Ghosh:

1. Was the conduct complained of dishonest by the standards of ordinary and reasonable people (the objective test), and
2. If so, must the defendant have realised that ordinary people would consider his conduct dishonest (the subjective test).

Only if both parts of the test were satisfied would the defendant be found to have acted dishonestly.

In Ivey, the Supreme Court stated that the second leg of the test in R v Ghosh does not correctly represent the law and directions based upon it ought no longer to be given to juries. The test for dishonesty is therefore now wholly objective. If a jury finds that a person’s conduct was dishonest by ordinary standards, it will be no defence for the defendant to show that he did not realise others would view it as dishonest.

The Supreme Court’s reasons for making this change include the fact that jurors can find the two stage test confusing, but also that it has the unintended effect that the more warped the defendant’s standards of honesty are, the more likely they would be to be acquitted. The Court also noted that the Ghosh test had never been adopted in civil cases requiring dishonesty, such as in claims for dishonest assistance. This had led to an unprincipled distinction in the meaning of dishonesty depending upon whether proceedings were civil or criminal.

What effect will this have?

In many criminal cases there is no need for the jury to apply the second limb of the test for dishonesty as the defendant denies either the conduct alleged, or that it was dishonest by ordinary standards. If the person had no understanding that they were doing something wrong, that would still not be considered dishonest by ordinary standards. An example might be someone taking something they believed to be a free sample, when in fact it had to be paid for. The defendant’s state of mind will therefore still continue to be relevant to the new objective test for dishonesty.

However, where the conduct alleged to be dishonest takes place in the context of a technical business activity of which ordinary people have little experience, the question of whether the defendant understood that others would view his actions as dishonest often arises. If many participants in a business activity view certain conduct as acceptable, that can lead people to believe that such conduct is accepted more widely by society.

This is why Ivey is likely to have significant implications for white collar crime cases. Indeed, the judgment makes express reference to not excusing “those who make a mistake about contemporary standards of honesty …. in the context of insurance claims, high finance, market manipulation or tax evasion”. It will be in these sorts of cases, where people are working within a specific and technical context unknown to the ordinary person, that the old Ghosh test would normally have been relevant.