Giving up the Ghosh - Nobody cares what you think!
A factual summary and practical overview of the judgement in Ivey (Appellant) v Genting Casinos (UK) Ltd t/a Crockfords (Respondent)  UKSC 67 on appeal from  EWCA Civ 1093.
On Wednesday 25 October 2017, the legal world pricked up its ears as Lord Hughes, Lady Hale, Lord Kerr, Lord Neuberger and Lord Thomas unanimously issued a landmark judgement which (finally) puts the test for dishonesty in criminal and regulatory proceedings in line with civil proceedings.
In summary, the facts of the case concerned a world renowned professional poker player, Phil Ivey, who "won" a staggering £7.7 million from playing the card game 'Punto Banco' at the Crockfords Casino in Mayfair, London (owned by Genting Casinos (UK) Ltd) on a single night of gambling in August 2012. Before handing Mr Ivey his "winnings", as is usual practice, Crockfords undertook an investigation, which included the review of audio enabled CCTV footage.
The outcome of the investigation was that Mr Ivey had "won" the money by adopting a technique called "edge-sorting". In short, what that meant was that Mr Ivey was able to (admittedly skilfully) identify a card by examining its edge. In particular, Mr Ivey was able to differentiate all 7, 8 and 9 cards from the rest of the deck. The aim of 'Punto Banco' being that the winner of the hand has a combined number of 9 or closest (although a combined number of 10 or more resulted in 10 being deducted, making a 10 a score of 0, and 11 a score of 1 etc). Mr Ivey's role in the game was to bet either on the banker (Banco) or the player (Punto - which need not have been an actual person) winning the hand. Therefore, Mr Ivey knowing that a player had a 7, 8 or a 9 as part of their hand placed him at an advantage when placing his bet.
In order to execute his technique, Mr Ivey used two females – one who was a willing accomplice and the other, the croupier, who was not. The accomplice's role was to communicate with the croupier in Cantonese and trick her into handling the cards in a particular way to make Mr Ivey's ability to differentiate between them easier. This was done by requesting that the croupier use a particular deck and rotating the cards on the pretence that Mr Ivey was superstitious – something which casinos invariably accept.
Having identified Mr Ivey's use of the edge-sorting technique, Crockfords took the bold decision to refuse him his "winnings", on the grounds that he had cheated which breached an implied term of gambling (returning his initial £1 million stake). It was Mr Ivey who issued a civil claim to recover the money and the case entered the court system.
In short, Crockfords' defence to Mr Ivey's claim was that he was not entitled to it due to his edge-sorting technique amounting to cheating – a breach of an implied term of gambling.
The issue for the court to determine was whether he had cheated within the meaning of section 42 of the Gambling Act 2005 (which makes cheating a criminal offence). If the court determined that Mr Ivey had cheated, then he would not have been entitled to the £7.7 million. Mr Ivey was unsuccessful in his initial claim and on appeal to the Court of Appeal.
At each stage, the court accepted that Mr Ivey had been "factually frank and truthful" about what he had done. However, his defence asserted that his use of the edge-sorting technique was "legitimate gamesmanship" which placed him in the position of an "advantage player". Mr Ivey took the view, therefore, that as he did not consider his technique to have been dishonest to the standards of the reasonable and honest person, he had not cheated.
In their ruling, the Lord Justices said that Mr Ivey’s trickery with his accomplice and the croupier amounted to "positive steps to fix the deck" which, in a game reliant upon random delivery of the cards, constituted cheating. This focussed the court's attention on the legal definition of dishonesty and it was apparent that the "unprincipled divergence between the test for dishonesty in criminal proceedings and the test of the same concept when it arises in the context of a civil action" needed to end.
In civil cases, the test for dishonesty was set out by Lord Hoffman in Barlow Clowes International Ltd v Eurotrust International Ltd  UKPC 37 as being the only objective. Namely, that the court need not concern itself with the defendant's own standard of dishonesty.
The previous law was enshrined in the case of R v Ghosh  EWCA Crim 2 a case which concerned a surgeon making claims for work he did not undertake. The Court ruled that a two stage test ought to be applied before a finding of dishonesty could be made out:
- Limb 1: The jury must 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;
- Limb 2: If it was dishonest by those standards, then the jury must move on to consider whether the defendant himself must have realised that what he was doing was by those standards dishonest.
These became known as the objective and the subjective tests.
In the case of Ghosh, it was accepted both that the reasonable and honest person would have considered his actions to have been dishonest and that he himself would have known that his actions were dishonest. As such his appeal failed and the conviction remained.
As a result of Ghosh, over the next 35 and a half years, judges directed juries to acquit defendants if (having already satisfied themselves of limb 1), they could not be satisfied that the defendant knew themselves that their actions were dishonest by the standards of a reasonable and honest person. It was not sufficient for a defendant to say "I knew other people would think it dishonest, but I didn’t", it had to be the case that the defendant did not know that a reasonable and honest person would consider their actions dishonest. In many cases, the jury was able to satisfy itself that it was obvious that the defendant knew a reasonable and honest person would consider their conduct dishonest – take, for example, jumping over the barriers at a train station to avoid paying the fare. However, difficulties occurred when the conduct of the defendant was not so obvious – such as in the case of Boggeln v Williams  1 W.L.R 873 where the defendant was convicted of abstracting electricity.
The difficulty with the required subjective element of Ghosh was that verdicts depended on the defendant's own particular standards of what was and what was not regarded as dishonest. As a result, the Ghosh test favoured the defendant by offering them an extra layer of protection at trial. For prosecutors, the alleging of dishonesty had to be carefully considered and often it was a guessing game as to how much credibility the jury would afford the defendant's account. For the prosecutor, the need to satisfy a jury that the defendant "must have known" that their conduct was dishonest was a challenging task.
In his judgment, Lord Hughes adopted the test applied by Lord Hoffman in Barlow Clowse and determined, at para 74 that:
"…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 Hoffman in Barlow Clowse. 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."
This means that, 12 years after Lord Hoffman's judgement in Barlow Clowse, the civil, criminal and regulatory spheres are finally in tune with one another, albeit still with very different standards of proof.
However, despite seeming simple at first glance, it cannot be said that the case of Ivey has transformed the test for dishonesty into a solely objective one. There still remains the ability for the fact-finder to determine what the defendant's actual state of mind was at the time of the conduct – for example, the foreign visitor failing to pay his bus fare as he mistakenly believed that public transport is free in the UK. It was made clear by the Lord Justices that situations such as that would not satisfy the Ivey test for dishonesty as he did not possess the dishonest state of mind against which his actions would be judged by a reasonable and honest person.
Impact on the professional regulatory sector
The world of regulatory law has a tendency to adopt whichever bits of the civil and criminal procedures best suit it at a particular time. For example, Ghosh - the criminal test for dishonesty - was relied upon, however, both limbs only needed to be proved to the lower civil standard before a finding against the registrant was made.
The unity which Ivey now offers is going to be largely welcome across all sectors. However, from a defence standpoint, life has just got that little bit harder.
Overnight, the ability for a registrant to rely on their own standards of what is and what is not dishonest has been eradicated. Committees will be directed to ignore any suggestion by the registrant that they did not think what they were doing was dishonest.
Regulators will now have an added sense of security when considering whether to allege dishonest conduct as it will no longer be a guessing game as to the committee's assessment of the registrant's credibility. Save for the registrant's state of mind being borne out (removing any suggestion that their conduct was the result of a genuine mistake – as per the foreign visitor analogy), if the reasonable and honest person would consider the registrant's conduct to be dishonest, then the committee would be directed to make such a finding. As such, for those currently undertaking investigations and determining charges (pre and post IC), it is likely that complaints which would otherwise not have resulted in a finding of dishonesty now do. This will lead to a rise in the number of dishonesty cases being brought and ultimately being proven.
Registrants and their representatives must now tread very carefully. The impact of Ivey is immediate and so, in cases where allegations have already been drafted and submissions made on behalf of the registrant, real consideration must be had as to whether a defensible case under Ghosh remains defensible.
Due to the level of seriousness with which regulators treat dishonest registrants, the inevitable knock-on effect to a rise in dishonesty allegations being proven, is a rise in the number of registrants being struck-off.
In light of this, the real effect of Ivey is that – more than ever - all regulated professionals are urged to act with the utmost level of honesty and integrity. Regulators will be as keen as ever to make out an allegation of dishonesty and the new test makes it easier to prove.