Dishonesty In Complex Fraud Claims

• Published date: 09 July 2020
• Subject Matter: Litigation, Mediation & Arbitration, Criminal Law, Trials & Appeals & Compensation, White Collar Crime, Anti-Corruption & Fraud
• Law Firm: Mayer Brown
• Author: Mr Alistair Graham and Chris Roberts

The Court of Appeal has confirmed that the new test for dishonesty that is now applied in civil cases in England and Wales applies equally in criminal cases. Whilst this was generally understood to be the case following the Supreme Court's decision in a civil case, the decision in Barton & Booth v R¹ ("Barton") has helpfully confirmed the position in a criminal context.

Previously the prosecution had to prove both that the accused's actions were dishonest according the standards of reasonable and honest people - the objective element - and that, if the accused was dishonest to those standards, that they realised their actions were dishonest according to those standards - the subjective element. Now, there is no subjective element. No longer will a defendant be able to argue their innocence because they did not realise their actions were dishonest. This clarification has implications for criminal cases of serious fraud, where successful prosecutions of individuals have been thin on the ground.

Background - Ghosh and Ivey

For 35 years the approach to dishonesty was governed by the 1982 Court of Appeal decision in R v Ghosh.² In that case the test for dishonesty was articulated as follows:

"a jury must first of all decide whether according to the ordinary standards of reasonable and honest people what was done was dishonest. If it was not dishonest by those standards, that is the end of the matter and the prosecution fails.

If it was dishonest by those standards, then the jury must consider whether the defendant himself must have realised that what he was doing was by those standards dishonest."³

However in 2017 the Supreme Court considered this test again in the case of Ivey v Genting Casinos Ltd t/a Crockfords⁴ ("Ivey"), a civil claim in which Mr Ivey was accused of cheating at a version of baccarat called punto banco by using a technique called "edge sorting" - a technique of which nobody at the casino was apparently aware. The casino argued that there was an implied term in the contract between the casino and Mr Ivey that neither party would cheat, and that "edge sorting" was cheating, thereby breaching the implied term.

The Supreme Court had to consider whether cheating involves dishonesty; and whether the test for dishonesty was as set out in Ghosh. If cheating did involve dishonesty, then if the Ghosh test applied Mr Ivey would not be liable - as he genuinely did not realise that his actions would have been considered dishonest.

The Supreme Court agreed with the first instance judge that Mr Ivey had been cheating⁵ which therefore breached the implied term in the gambling contract between the parties that...