Ivey v Genting Casinos (UK) Ltd t/a Crockfords [2017] UKSC 67: the demise of Ghosh and Twinsectra

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1 Ivey v Genting Casinos (UK) Ltd t/a Crockfords [2017] UKSC 67: the demise of Ghosh and Twinsectra 1. All paragraph numbers, unless otherwise stated, refer to Ivey v Genting Casinos (UK) Ltd t/a Crockfords [2017] UKSC In recent years, the concept of dishonesty in law has caused considerable confusion and uncertainty. In criminal proceedings, the leading authority was R v Ghosh [1982] QB 1053, which set out the following infamous two-stage test: (1) whether according to the ordinary standards of reasonable and honest people what was done was dishonest; and if so (2) whether the defendant himself realised that what he was doing was by those standards dishonest 3. The extent to which Ghosh applied beyond the criminal law has always been unclear. In Twinsectra v Yardley [2002] 2 AC 164, the House of Lords appeared to endorse the Ghosh test for civil proceedings as well. However, Twinsectra was sandwiched by two Privy Council decisions (Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 and Barlow Clowes International Ltd v Eurotrust International Ltd [2006] 1 WLR 1476), both of which apparently endorsed an exclusively objective test for dishonesty. In regulatory proceedings, the confusion was greater still (see Kirshner v The General Dental Council [2015] Med LR 317 [9] [22], where Mostyn J analysed the previous inconsistent case law and called presciently for one single test for dishonesty which applied in all proceedings). 4. Ivey v Genting Casinos (UK) Ltd t/a Crockfords [2017] UKSC 67 has now resolved the debate. By a unanimous judgment given on 25 October 2017, the Supreme Court has ruled that Ghosh itself was wrong and ought no longer to be followed ([74]). The test for dishonesty in all ([63]) legal proceedings is whether, objectively judged, the relevant party s conduct was contrary to the objective standards of ordinary, decent people ([74]): that party s genuine beliefs as to the honesty of her own conduct are no longer definitive (if indeed they ever were).

2 Ivey: the facts and arguments 5. In Ivey, the claimant/appellant, professional gambler Phil Ivey, had played a game of Punto Banco in the defendant s casino. Ivey had employed a technique known as edge sorting, which had given him an advantage over the casino. He did this by falsely representing to the dealer that he was superstitious and thereby manipulating her into turning the cards in a way that allowed him to employ the technique. Ivey won 7.7 million, but upon realising what he had done, the casino refused to pay out ([4] [27]). 6. At trial, Ivey accepted that his contract with the casino included an implied term not to cheat. He further accepted that, if he had cheated, the casino was entitled to withhold his winnings. The central argument thus centred on whether or not he had actually cheated. Mitting J s key substantive conclusions can be summarised as follows: (1) Dishonesty was not a necessary ingredient of cheating; (2) Ivey s conduct objectively constituted cheating; (3) Ivey was genuinely convinced that he is not a cheat. [2014] EWHC 3394 (QB), [45], [50] [51] 7. On appeal, Ivey s key argument was as follows: (1) Dishonesty is a necessary ingredient of cheating; (2) Ivey was not dishonest, since his genuine beliefs about his conduct (as found by Mitting J) negatived the second limb of the Ghosh test; (3) Thus, Ivey did not cheat. ([37]). 8. By a 2-1 majority, the Court of Appeal dismissed Ivey s appeal, rejecting limb (1) of his argument ([2017] 1 WLR 679, ).

3 The Supreme Court judgment 9. The Supreme Court (in line with both lower courts) found that cheating does not require dishonesty, thus rejecting limb (1) of Ivey s argument ([49] [50]). There the appeal could have ended. However, clearly unimpressed with Ivey s reliance on the Ghosh test, their Lordships then assessed limb (2), finding that Ivey actually was dishonest in any event ([75]). Lord Hughes analysis (accepted unanimously by the remaining Justices) is stark, clear and unambiguous: the second leg of the test propounded in Ghosh does not correctly represent the law and 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. ([74]). 10. His Lordship then confirmed the resulting implications: 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. ([74]). 11. Judging Ivey by this test, rather than by Ghosh, the Supreme Court found his conduct to be dishonest ([75]).

4 Discussion 12. Two key points lay at the heart of the Supreme Court s analysis. Firstly, the second limb of the Ghosh test assumed a clear distinction between the party s own moral standards and the objective standards of ordinary honest people. In Ivey, the Supreme Court realised that this distinction was largely one of form only: by definition, if an individual genuinely does not consider conduct dishonest (by his own personal standards), then it probably follows that he does not consider it contrary to the standards of ordinary honest people either ([59]). 13. Secondly, the Supreme Court realised that the first limb of the Ghosh test already involves the necessary subjective analysis. The court need only assess (objectively) the honesty of the party s conduct, provided that it applies that objective assessment to the party s actual (subjective) beliefs. 14. Put another way, the court must first ascertain the party s actual, genuine beliefs and then ask itself objectively whether, given those beliefs, her conduct was honest or not. The Supreme Court persuasively noted that courts/juries already undertake a very similar exercise in cases of self-defence ([66]): in such cases, the tribunal first determines what the party genuinely believed and then objectively assesses whether or not her conduct, given those beliefs, was reasonable and proportionate. 15. The Supreme Court further explained this analysis by applying it to the key example cited in Ghosh to justify the Ghosh test itself. That example was as follows: Take for example a man who comes from a country where public transport is free. On his first day here he travels on a bus. He gets off without paying. He never had any intention of paying. His mind is clearly honest; but his conduct, judged objectively by what he has done, is dishonest. ([60]).

5 16. The court in Ghosh thus concluded that the second limb of the Ghosh test was necessary to save such a man from a finding of dishonesty. However, the Supreme Court realised that, properly understood, the first limb saved that man without any need for the second limb at all: But the man in this example would inevitably escape conviction by the application of the (objective) first leg of the Ghosh test. That is because, 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. In order to decide whether this visitor was dishonest by the standards of ordinary people, it would be necessary to establish his own actual state of knowledge of how public transport works. Because he genuinely believes that public transport is free, there is nothing objectively dishonest about his not paying on the bus. ([60]). Conclusions 17. Ivey is now the leading authority on the definition of dishonesty in any legal proceedings, be they criminal, civil, regulatory, or otherwise. No longer can a party seek to evade dishonesty merely by arguing (as Ivey did) that he genuinely did not consider his conduct dishonest. 18. However, while a party s beliefs as to her own honesty are now clearly side-lined, this does not mean that all subjective belief is now irrelevant. Such belief is still relevant in that the objective test must be applied to the beliefs that she actually held. The relevance of those beliefs will depend on the precise, individual factual circumstances. A man who genuinely believes that UK public transport is free, having come from a country where the same is free, does not act dishonestly. A man who deceives a casino into giving him an advantage in a gambling game by falsely representing superstition, genuinely believing that such conduct is fair game, does ([75]). MICHAEL PATRICK