Ghosh is dead, long live the new king: Ivey

The Supreme Court in Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67 has taken the opportunity to restate the test for dishonesty in criminal and civil proceedings. In this case, the Supreme Court considered an appeal arising out of a claim against a casino in respect of what the appellant (Ivey) alleged were his Baccarat winnings (£7.7m) that the casino had declined to pay.

The appellant had not denied using a technique called edge-sorting and argued that it was reversing the edge that the casino had to play at odds which favour the player in lawful ways. He denied cheating. The judge at first instance accepted that the appellant was genuinely convinced that what he had done was not cheating, but went on to find that, nevertheless, the appellant had cheated at the game and held that there had been a breach of the implied term of the contract between him and the casino accordingly.

The majority of the Court of Appeal had upheld this judgment but, in a dissenting opinion, Sharp LJ indicated that he would have allowed the appeal on the basis that what the appellant had done could not be cheating unless the statutory offence had been committed and, as a necessary ingredient, dishonesty, as defined in the seminal case of R v Ghosh [1982] 2 All ER 689, was demonstrated.

The case came before the Supreme Court and offered it a long-awaited chance to challenge Ghosh. In deciding the substantive appeal, the Supreme Court held that there was no reason to doubt that the term ‘cheating’, in the context of gaming / gambling activities, carried the same meaning when considering an implied term not to cheat in a casino contract and when considering the statutory offence of cheating under the Gambling Act 2005, s 42. It went on to find that, although most cheating in the gaming/gambling context will involve something which the ordinary person would describe as dishonest, this is not invariably the case and that, in ordinary language, cheating need not involve deception (as GA 2005, s 42(3) recognises).

The Supreme Court could have stopped there but it did not. It went on to consider the concept of dishonesty as an element of a criminal offence. In doing so it took the opportunity to tear up the two-pronged test established in Ghosh and replace it with the test established by Lord Nicholls in Royal Brunei Airlines Sdn Bhd v Tan [1995] UKPC 4 (24 May 1995) and by Lord Hoffmann in Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37.

Although strictly obiter, Lord Hughes set out the new test at para [74]:

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.’

From now on, the same test for dishonesty applies in the context of both civil and criminal cases and the only difference in the application of this test as between these two legal worlds is the standard of proof.