Ivey v Genting Casinos case has implications for local authorities

Simon Kiely, Sharpe Pritchard

A recent case has seen the Supreme Court Justices overturn more than 30 years of settled law on the legal test for dishonesty. The case of Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67 has redefined the dishonesty test, as had been set out in the case of R v Ghosh [1982] EWCA Crim 2.

Background

When Mr. Ivey walked into a casino in August 2012, he could not possibly have foreseen the implications that a game of Punto Banco would have on the legal landscape relating to fraud, theft and other acquisitive offences. Mr Ivey and his colleague, Ms Sun, cleaned up and won £7.7 million in the space of several hours. The casino refused to pay out, stating that there was an implied term in their relationship not to cheat, and as cheating was a criminal offence, any monies that Ivey may be owed would be the proceeds of crime. Punto Banco is not considered to be a game of skill but one of mere chance.

To increase their likelihood of success, Mr Ivey and Ms Sun had been ‘edge-sorting’; a technique that involves identifying minor manufacturing variations in the edge of a deck of cards and using this knowledge to improve the likelihood of success. At no point during the game did Mr Ivey manipulate the cards in any way. Instead, he intimated that he was superstitious to encourage the croupier to move the cards favourably. All he did was take advantage of a casino which had failed to take steps to protect itself against a player of his capability and he admitted as much in Court; the question which arose therefore was whether what he had done amounted to ‘cheating’ and if so whether his actions were done dishonestly.

Although Mr Ivey was not charged with the criminal offence of ‘cheating’ under s.42 of Gambling Act 2005, when Mr Ivey sued the casino for his winnings, the casino argued that there was an implied term in the contract between Mr Ivey and the casino that he would not ‘cheat’. This was accepted both at first instance in the High Court and on appeal to the Court of Appeal, with Mr Ivey’s claim unsuccessful in both venues. It was further found that in order for Mr Ivey to be found as having ‘cheated,’ the casino would need to prove that he had committed the criminal offence of ‘cheating’ as at s.42 of the Act.

In the Supreme Court, rather than attempting to redefine ‘cheating’ by some other measure, the Justices instead considered whether the offence of cheating under the Act implicitly included dishonesty as an element of the offence and, if so, by what test Mr Ivey’s dishonesty was to be measured. There had been different tests for dishonesty in both the civil and criminal jurisdictions for many years. The Supreme Court were therefore required to consider the judicial approach to the concept of criminal dishonesty as set out in Ghosh.

Ghosh concerned a defendant who had accepted £200 from a bookkeeper who had acted in error. Mr Ghosh submitted that while he would have never accepted the money in error from a grocer, for example, he saw bookkeepers to be fair game because of the nature of their business. He therefore did not recognise the dishonesty of his actions. Giving Judgment, Lane LJ held that, in considering whether Mr Ghosh’s appropriation was dishonest, the jury should have satisfied themselves on the facts that two separate elements were present:

1) The first limb established an objective criterion – that according to the ordinary standards of reasonable and honest people what he had done was dishonest, and

2) If this was the case, the jury must then consider whether the defendant himself realised that what he was doing was, by those ordinary standards, dishonest. This was a subjective test.

Mr Ghosh’s appeal was ultimately dismissed because his actual beliefs and moral code were irrelevant. Instead, the focus of the second limb of the above test was on the defendant’s actual perception of ordinary standards of dishonesty, as considered by other people rather than himself.

In Ivey, the Supreme Court held that the second limb of the test from Ghosh opened up the possibility of acquittals through a defendant’s idiosyncratic perceptions of honesty and that it was therefore to no longer be applied. They found that Mr Ivey had acted dishonestly and therefore had ‘cheated’ contrary to s.42 of the Gambling Act 2005 and dismissed his appeal.

However, there are wider implications caused by this ‘new’ test for dishonesty, which now states that one need only consider whether the act itself could be considered objectively dishonest according to the ordinary standards of reasonable and honest people, which leaves much less scope for a defendant to argue that he truthfully did not believe that his actions were dishonest.

Implications for Local Authorities

This problem will resonate with many prosecuting bodies, including local authorities, as an issue they have faced and understand only too well. The application of the Ghosh dishonesty test filtered into prosecutions under the Fraud Act 2006, such as fraud by failure to disclose information (s.2 Fraud Act 2006), as well as offences under the Prevention of Social Housing Fraud Act 2013.

Whilst the requirement to consider the defendant’s actual perception of the honesty of his actions has not always been a decisive hurdle in bringing a successful dishonesty case against a defendant, there will undoubtedly have been cases where authorities were put off from prosecuting due to perceptible risk of acquittal due to the subjectivity inherent in the previous dishonesty test.

This has been especially common with the fraudulent sub-letting offences under sections 1 and 2 of the Prevention of Social Housing Fraud Act 2013, as when faced with an investigation into such offences, tenants commonly claim that they did not know or even consider what the terms of their tenancy said about subletting when choosing to sub-let their home and claim to have instead been motivated by a need, for example, to quickly raise funds, move to look after family members, or to escape the local area due to conflict or risks to their safety.

The change in the law brought about by Ivey therefore represents a welcome change for local authorities and should encourage and embolden them when considering bringing prosecutions with a strong dishonesty element.

This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published.