In an enormously important decision handed down yesterday, Ivey v. Genting Casinos
(UK) Ltd t/a Crockfords[1], the Supreme Court signalled the end of what has been the standard Ghosh[2] direction, given to juries in criminal cases where dishonesty is in issue. The second, subjective, limb of that direction, which the Supreme Court held did not correctly represent the law, has required a jury to ask, once it is satisfied that the proven conduct was dishonest by the ordinary standards of reasonable and honest people, whether the defendant must have realised that conduct was dishonest. By contrast, the position in civil cases, as endorsed by the Privy Council in Barlow Clowes International Ltd v. Eurotrust International Ltd, is that ‘although a dishonest state of mind is a subjective mental state, the standard by which the law determines whether it is dishonest is objective. If by ordinary standards a defendant’s mental state would be characterised as dishonest, it is irrelevant that the defendant judges by different standards.’[3]
The differing test for dishonesty in civil and criminal cases
An intended effect of Ivey is to bring into alignment the test for dishonesty in civil and criminal cases by removing the requirement that the defendant in criminal proceedings realises that what s/he is doing is dishonest. Indeed, the Supreme Court held in Ivey that, ‘there can be no logical or principled basis for the meaning of dishonesty (as distinct from the standards of proof by which it must be established) to differ according to whether it arises in a civil action or a criminal prosecution’[1]. Ivey is also likely to spread to professional regulatory proceedings which, whilst being civil in nature, have applied the Ghosh direction. The anomalous situation was noted by Mr. Justice Mostyn in Kirschner v. General Dental Council[2] in which he observed that ‘the position needs to be conclusively clarified by the higher appellate courts or by legislation’[3]. In Starglade Properties Ltd v. Nash[4], a case of dishonest assistance, Lord Justice Leveson said of the divergent approaches taken by the civil and criminal courts that ‘at some stage the opportunity to revisit this issue should be taken by the Court of Appeal (Criminal Division)’, thereby indicating that it was the criminal, rather than the civil, test, which should be addressed. It appears that the Supreme Court has used this gambling contract case as an opportunity to do so, given that ‘such an opportunity is unlikely to occur in a criminal case whilst Ghosh remains binding on trial judges throughout the country… and there is some doubt about the freedom of [the Court of Appeal (Criminal Division)] to depart from Ghosh in the absence of a decision from this court.[5]’
The house always wins
The media reports of the case have focused on the large amount of money at stake (£7.7m) and the high profile of the appellant, who is a professional gambler. The method by which Mr. Ivey at least thought he had won the money, by using a technique called ‘edge-sorting’ in the game of punto banco, is undoubtedly fascinating and is set out in some detail in Lord Hughes’ judgment.
The appeal was brought no doubt on the basis of the dissenting judgment in the Court of Appeal of Lady Justice Sharp, who took the view that cheating necessarily entailed dishonesty, and the applicable test for dishonesty was that in Ghosh. The ratio of the Supreme Court’s judgment in Ivey is that ‘edge-sorting’ amounted to cheating (which breached an implied term in the parties’ contract for betting) and that cheating does not necessarily entail dishonesty (however defined). That was enough to dispose of the case in the casino’s favour. The wider status of Ivey is therefore subject to the caveat that the definition of the correct test for dishonesty was not necessary for the decision, so what the Supreme Court said on that topic was strictly obiter. That said, in the light of the observations by Leveson LJ and Mostyn J and the clear suggestion by the Supreme Court in Ivey that directions based on Ghosh should no longer be given, it is likely that criminal and regulatory tribunals will feel bound by it.
The impact of the decision in criminal cases
The impact of Ivey is limited in the sense that the Ghosh direction is not necessary in all criminal cases where dishonesty is an element of the offence. The direction need only be given in cases where the defendant subjectively ‘might have believed that what he is alleged to have done was in accordance with the ordinary person’s idea of honesty’[6]. So, in a straightforward case of theft by shoplifting, no defendant could possibly believe that knowingly leaving a shop without paying for goods was honest by the standards of ordinary people and so no Ghosh direction needs to be given.
Undoubtedly, though, the decision that Ghosh is no longer good law will have a wide-ranging effect because not only is dishonesty an essential element in a number of offences under the Theft Act 1968, most notably theft itself, but also offences under the Fraud Act 2006 and others. Indeed, the issue of dishonesty, and particularly the defendant’s own awareness of it, were central issues in a recent case of conspiracy to defraud arising from the LIBOR price-fixing scandal in which the Court of Appeal proceeded on the basis of Ghosh being the correct test[7].
The wrong turn in 1982
So why did the Supreme Court hold that Ghosh, decided over 30 years ago, amounted to a wrong turn in the law? Essentially, it held that the Court of Appeal in that case had made an attempt to reconcile what it wrongly thought were two inconsistent strands of judicial thought concerning the necessity of a subjective element in the test for dishonesty. In fact, properly analysed, the cases that were taken in support of the proposition that the subjective element was required did not quite say that[8]. Those authorities in fact say that in a case where a false representation is alleged, it must be proved that the defendant subjectively knew or was reckless as to whether the representation was false. That proposition is consistent with the general (but not universal) principle in the criminal law that a defendant is to be judged according to the subjective state of his/her knowledge or belief. That uncontroversial principle applies, as the Supreme Court noted, in a case where self-defence is relied upon as a defence to an allegation of violence[9]. The ‘other’ line of cases preceding Ghosh are to the effect that, although a defendant’s state of knowledge and belief must be assessed subjectively, the issue whether, on the basis of the facts found proved, including that subjective state of knowledge and belief, the defendant acted dishonestly is a matter for the court to assess objectively[10]. Accordingly, Ghosh was wrongly decided in that there was only ever one line of cases on the issue and they did not require what has become the second, subjective limb[11].
The Ghosh test has been applied faithfully in all manner of cases, without demur from Parliament, since 1982. It captures the ‘Robin Hood’-type criminal – the outlaw – who, while sincerely believing that what he was doing was not dishonest, would be well aware that members of the public as a whole would disagree; it does not allow defendants to set and apply their own standards of honesty entirely. It is hard to see, therefore, what public policy objection there could be to the Ghosh test. In addition, however, to the unjustified departure from existing authority, and the unwarranted divergence from the test applied in the civil law context, the subjective test has the perverse effect that the more warped the defendant’s standards of honesty are, the less likely s/he is to be convicted. That is to say, if a defendant has such a bizarre conception of dishonesty that s/he genuinely does not believe that conduct which a court has deemed dishonest, even, for example, having found that the defendant knew s/he did not have permission to do something, s/he will be acquitted. There may be justification for such an approach, given that fixing a defendant with a finding of dishonesty is a serious mark of society’s condemnation. The number of defendants who ‘unjustly’ benefitted from Ghosh is likely to be limited. An example was given in Ivey of the case of R v. Gilks[12] in which the defendant thought he would try his luck before the jury with the argument that, although he knew he was not entitled to retain £100 he had been wrongly given at the betting shop, bookmakers were ‘fair game’ and he ought not to be criminally liable. The jury did not agree, even though the generous Ghosh direction had been given.
A matter of policy
Conversely, there are sound public policy reasons for capturing those defendants who not only fall within but do not share society’s parameters of dishonesty, provided they are only convicted on the basis of the facts as they subjectively knew or believed them to be. Further, there is of course inherent value in correcting wrong steps taken in the law, and ensuring, as far as is possible, consistency between the criminal and civil law. The essence of the Supreme Court’s reasoning can be found at paragraph 74, which states:
“These several considerations provide convincing grounds for holding that the second leg of the test propounded in Ghosh does not correctly represent the law and that directions based upon it ought no longer to be given. The test of dishonesty is as set out by Lord Nicholls in Royal Brunei Airlines Sdn Bhd v Tan and by Lord Hoffmann in Barlow Clowes: see para 62 above. 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. The reasonableness or otherwise of his belief is a matter of evidence (often in practice determinative) going to whether he held the belief, but it is not an additional requirement that his belief must be reasonable; the question is whether it is genuinely held. 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. There is no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest.”
It is of some interest as to whether Mr. Ivey would have been found to have been dishonest on the application of that test, given that the judge at first instance, Mr. Justice Mitting, found that he had given truthful evidence and that he was genuinely convinced that ‘edge-sorting’ was not cheating. On that basis, Sharp LJ would have found in his favour. But applying the correct, objective test to the facts, including the state of Mr. Ivey’s knowledge and belief, as found by Mitting J, his conduct would, even if he did not appreciate it, amount to dishonesty[13].
We can therefore expect a new (or, more accurately pre-1982) approach to the way juries, magistrates and regulatory tribunals direct themselves as to dishonesty. If a defendant who previously would have relied on a Ghosh direction is convicted without one, s/he cannot now expect the Court of Appeal to uphold an appeal on that basis.
By Jack Walsh
[1] At [63]
[2] [2015] EWHC 1377 (Admin)
[3] At paragraph [9]
[4] [2010] EWCA Civ 1314 at [44]
[5] At [63]
[6] R v. Ronald Price (1990) 90 Cr. App. R. 409 at 411
[7] R v. Hayes [2015] EWCA Crim 1944
[8] Principally R v. Waterfall [1970] 1 QB 148 and R v. Royle [1971] 1 WLR 1764.
[9] At [66], referring to R v. Williams [1987] 3 All ER 411
[10] See [57(6)] and [65], referring to R v. Feely [1973] QB 530 and R v. Greenstein [1975] 1 WLR 1353
[11] Even R v. Landy [1981] 1 WLR 355 which, on the face of it, supports the existence of the subjective element, properly analysed only supports the subjective assessment of the defendant’s knowledge and belief.
[12] [1972] 1 WLR 1341
[13] See [75]
