Monday, June 11, 2018
New Test of Dishonesty
Until recently prosecutors have had to prove dishonesty by first proving that the defendant’s actions were dishonest by the standards of ordinary, reasonable and honest people and secondly that the defendant would recognise that their actions would be regarded as such. The first limb was objective – is what the defendant did dishonest? - and the second subjective – did the defendant recognise that what they were doing was dishonest? In its ruling in Ivey v Genting Casinos  UKSC 67 the Supreme Court ruled that it was no longer necessary for the prosecution to prove the second part.
The case concerned card turning in a game of Punto Banco on 20th and 21st August 2012. Mr Ivey and an associate used a specialist technique called ‘edge sorting’ by which Mr Ivey convinced croupiers at Crockfords, an exclusive casino in Mayfair, to turn cards around so that high value cards had their edges all lined up in the same direction. Mr Ivey was then able to read intricate patterns on the back of the cards to recognize which of the cards were of high value. He made £7.7m in this outing and the casino refused to pay his winnings. Mr Ivey sued stating that his actions were pure gamesmanship and not cheating.
Lord Hughes (with whom Lord Neuberger, Lady Hale, Lord Kerr and Lord Thomas agreed) used the case as opportunity to address the law of dishonesty, as set out in R v Ghosh  QB 1053, and in so doing removed the second limb from the test:
‘Just as convincing himself is frequently the stock in trade of the confidence trickster, so the capacity of all of us to persuade ourselves that what we do is excusable knows few bounds…There is no reason why the law should excuse those who make a mistake about what contemporary standards of honesty are, whether in the context of insurance claims, high finance, market manipulation or tax evasion… it is an important, even crucial, function of the criminal law to determine what is criminal and what is not; its purpose is to set the standards of behaviour which are acceptable. As it was put in Smith’s Law of Theft 9th ed (2007), para 2.296: “… the second limb [of the dishonesty test] allows the accused to escape liability where he has made a mistake of fact as to the contemporary standards of honesty. But why should that be an excuse?”’ (Ivey v Genting Casinos  UKSC 67 per Lord Hughes at pp 59)
In place of the old two limbed test, Lord Hughes offered a new and singular test for dishonesty:
‘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.’ (Ibid, per Lord Hughes at pp 74)
What this means is that the court will now decide what it is the defendant believed and then will determine whether the defendant’s actions are dishonest by the standards of ordinary, reasonable and honest members of society. The second limb of the test has been removed. The defendant must no longer realise that ordinary reasonable and honest people would see his behaviour as dishonest. In short, the defendant can no longer use his own standards or what he understands the standards of society to be as a defence. The impact of this change is evident even in the case of Ivey v Genting Casinos. In this case the trial judge had determined that Mr Ivey genuinely believed he was not cheating and therefore would not be found to be dishonest under the old test. However now, under the new test introduced by Lord Hughes, Mr Ivey’s ‘conduct was, contrary to his own opinion… [still] dishonest’ (Ibid, per Lord Hughes at pp 75).
The Impact on Fraud Cases
It is often the case in fraud trials that the conduct is agreed and the only issue contested is dishonesty. The reduction of the test of dishonesty to one limb arguably makes matters simpler for the prosecutor as it makes dishonesty easier to prove. The shift towards a largely objective test may result in more convictions for dishonesty offences, as the prosecution no longer has the burden of proving that the defendant appreciated how their conduct would be regarded by others.
However, while a defendant’s beliefs as to their honesty are now side-lined, this does not render all subjective belief irrelevant. Such belief is still relevant in so far as the objective test must be applied to the beliefs that the defendant actually holds. This is easiest to see this is by way of an example. Take for instance a foreigner who travels by bus in England without paying because all public transport in his home country is free and he does not realize that he is expected to pay here. Under the new test the court would have to determine his actual, genuine beliefs and then ask itself objectively whether, given those beliefs, the conduct was honest or not. The foreign traveler who honestly believes public transport is free would not be dishonest because the court would consider his state of knowledge of how public transport works. Therefore, though the test is now simpler for prosecutors a defendant can still use their subjective understanding of the facts as part of their case.
What is evident is that the impact of the changed test will depend greatly on the facts of a particular case. For example, a case where the change in test has had an effect is DPP v Vicky Patterson  EWHC 2820 (Admin). This case was one of theft which has the same test for dishonesty as fraud. In this case Sir Brian Leveson stated that the Magistrates who had decided the case had been wrong in principle to find that there was no case to answer. The decision had been made using the original test and was based in part on the fact that the complainant had said in evidence that he did not know whether the Ms Patterson had been dishonest. It was found that this statement, in addition to being irrelevant for separate reasons, related to the second limb of the test which no longer represented the law. It would have to be decided again by a bench that considered Ms. Patterson’s understanding of the circumstances alone and thereafter assessed her actions objectively.
Conversely there are cases where the effect of the change is expected to be less pronounced. For instance, fraud by false representation where the defendant uses another person’s stolen bank card. Under the previous test, this person would have difficulty persuading a jury that they believed that it was acceptable by society’s standards to act as they had done. Under the new test the jury would assess what the defendant’s knowledge and beliefs were – for instance that they knew the bank card was not their own and that they did not have permission to use it -and then objectively determine that the action taken was dishonest.
The impact of the changed test will vary across cases and specific facts, however what is clear is that the new and more streamlined test for dishonesty will make prosecuting fraud easier in principle and as such if you are charged with fraud it may be essential that you obtain expert legal advice as soon as possible. Quentin Hunt is specialist in fraud and financial crime and can be contacted for a no obligation conversation about any ongoing case or investigation.