United States: Oh My Ghosh! A New Test For Dishonesty In Criminal Law…

Last Updated: November 13 2017
Article by Kevin Roberts and James Lloyd

In a case brought before it by a professional gambler, on 25 October 2017 the Supreme Court cast the die for the second limb of the test for dishonesty, originally set out in R v. Ghosh [1982],1 to be overturned.

Background

The case of Ivey v. Genting Casinos (UK) Ltd t/a Crockfords [2017]2 concerns a certain Mr. Ivey and his accomplice, Ms. Sun, using a method known as 'edge-sorting' to gain an advantage over the casino whilst playing Punto Banco, a variation of Baccarat.

Mr. Ivey, a self-described 'advantage player', devised a way of gaining the upper hand by using inconsistencies in how the playing cards had been manufactured to identify the high-value cards, simply by observing the backs of them.

This was only possible because certain manufacturers produce cards that are printed slightly asymmetrically or with slight variations on their backs but which nevertheless fall within narrow tolerances specified for manufacture.

Mr. Ivey began by playing his hand with the first shoe of cards, which allowed him to set up his scheme for identifying the high-value cards. Ms. Sun convinced the croupier to rotate certain cards so as to bring Mr. Ivey 'better luck' – this was a key element in their game plan as it ensured that all the cards that were of value to Mr. Ivey would be turned a particular way, making them easy to identify by their inconsistent backs. As a result, the accuracy of his bets increased sharply.

Once the shoe of cards had run out, the cards had to be re-shuffled so they could be re-used. Mr. Ivey requested that this be done by machine so as to prevent the croupier from rotating any of the cards he had set-up. The casino agreed.

Over the course of the night between 20 and 21 August 2012, Mr. Ivey and Ms. Sun were able to win just over £7.7 million before their luck ran out and the casino insisted on changing the shoe of cards. Nobody at Crockfords had heard of 'edge-sorting' before.

The casino refused to pay Mr. Ivey and Ms. Sun their winnings because, after reviewing CCTV footage of the evening, they were able to identify Mr. Ivey's method and called his bluff.

The Ghosh test for dishonesty

The test for dishonesty set out in Ghosh had two limbs:

  1. whether the conduct complained of was dishonest by the lay objective standards of ordinary, reasonable and honest people; and
  2. whether the defendant must have realised that ordinary, honest people would so regard his behaviour.

The second limb was subjective and was intended to protect those who committed what was objectively a dishonest act, but did not realise they were doing so.

The Supreme Court decision

The Supreme Court did not sit with a full house; instead only five judges decided the case. Nevertheless, they went all-in and unanimously agreed with Lord Hughes, who gave the judgment.

Lord Hughes set out six reasons for why he considered that the second limb of the Ghosh test for dishonesty was no longer valid:

  1. It may lead to situations where, the more warped the defendant's standards of honesty are, the less likely it is that he or she will be convicted of dishonest behaviour (paras. 58 & 59);
  2. It was considered necessary in order to give proper effect to the principle that dishonesty must depend on the actual state of mind of the defendant – however, this is not so (para 60);
  3. It set a test that jurors and others often found difficult to understand and apply – the idea that something that is dishonest by ordinary standards can become honest just because the defendant thinks it is may often not be an easy one for jurors to grasp (para 61);
  4. The test for dishonesty is inconsistent between criminal and civil matters (paras. 62 & 63);
  5. It represented a significant departure from the pre-Theft Act 1968 law, despite there being no indication that such a change had been intended (para 64); and
  6. Case law did not, on the whole, support the view taken in Ghosh and instead preferred the simpler view that whether a person's state of mind was dishonest should be decided by applying the standards of the ordinary and honest person (paras. 65 to 73).

At para 60 of the Supreme Court decision, Lord Hughes cites the Court's reasoning in Ghosh as to why the second limb of the test was needed. The Court explained that it was needed in order to protect people who do something that is objectively dishonest, but they do not believe that others would consider it to be dishonest. The example given was that of a man who comes from a country where public transport is free, and when in the UK he travels on a bus without paying.

Lord Hughes disagreed with this reasoning on the basis that the man in that situation would inevitably escape conviction by the application of the objective first leg of the Ghosh test. He said that 'in order to determine the honesty or otherwise of a person's conduct, one must ask what he knew or believed about the facts affecting the area of activity in which he was engaging.'

Lord Hughes concluded at para 74 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 be given.' He went on to say that:

'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 . . . .  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'.

The Court held that, because Mr. Ivey had taken steps to fix the deck, he had indeed been dishonest.

Consequences of the decision

This new simplified test for dishonesty puts another ace up the prosecution's sleeve and follows a growing trend of stacking the odds in their favour. It seems that in future it will be easier for prosecutors to convict people for fraud and other related criminal offences, and it is possible that the number of convictions will rise as a result.

This client alert was co-authored by James Colautti, a Trainee Solicitor in our London office.

Footnotes

1 QB 1053

2 UKSC 67

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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