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Ivey v Genting Casinos Pt I: Card Counting and Dishonest Gambling

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About The Author

Connor Griffith (Consulting Editor)

Connor is a law graduate from the University of Nottingham with a particular interest in intellectual property and corporate law. He is currently a trainee solicitor at a large national firm, sitting in the Real Estate department. Outside the law, he enjoys stand-up comedy and moaning about Brexit.

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This article is part of the 'Ivey v Genting Casinos: A Landmark Case' series, edited by Connor Griffith.

The Supreme Court’s decision in Ivey v Genting Casinos [2017] heralds a major change in what constitutes ‘dishonesty’ in criminal law. The unanimous decision, penned by Lord Hughes, is rich with talking points and looks set to transform how a number of key offences are dealt with by the courts. In a two-part series, Connor Griffith examines the reasoning and ramifications of the decision.

Other articles from this series are listed at the end of this article.

The legal concept of dishonesty has long been controversial: a general lack of definition and differences between criminal law and civil law has resulted in a half-hearted approach that has been applied without any certainty or conviction for the past three decades. However, the Supreme Court’s recent judgment in Ivey v Genting Casinos [2017] seems to have finally given dishonesty the attention it needs, uniting the test between different avenues of law and showing displeasure at the previous approach taken by criminal courts.

Though it is too soon to see exactly what the consequences of the judgment in Ivey v Genting Casinos [2017] will be, it is undoubted that its impact will be significant in a multitude of ways. For this reason, discussion of Ivey v Genting Casinos [2017] by Keep Calm Talk Law will take place over the course of two articles: the first will consider the case itself and its effect on the old approach to dishonesty from R v Ghosh [1982], while the second will examine more closely the Supreme Court’s adoption of the approach from the civil law case of Barlow Clowes v Eurotrust International [2005], which itself comes from a highly confused and controversial line of authority.

Edge-Sorting with Ivey

Ivey v Genting Casinos [2017] followed the attempts of professional gambler to recover from Crockfords – a casino owned by the defendants – winnings of £7.7 million that he had accrued during multiple games of Punto Banco Baccarat played on 20 and 21 August 2012. Crockfords had refused to pay the winnings to Phil Ivey, because they believed he and his accomplice, Cheung Yin Sun, had cheated by using a technique called ‘edge-sorting’.

By manipulating the croupier and insisting that a machine shuffler be used so as to not impact the way in which valuable cards were rotated, Ivey was able to spot subtle differences on the edges of the backs of cards, and thereby roughly determine the value of the upcoming cards before they were drawn. He freely admitted at trial that he had used edge-sorting, but refused to accept that what he had done was anything more than legitimately exploiting flaws in the game. In his view, he was fully entitled to his winnings.

A Trick Too Far

The key question before the Supreme Court was whether Ivey, by deploying the edge-sorting strategy, breached a well-established implied term in the contract between players and casinos that the former will not ‘cheat’. This required consideration of Section 42(3)(a) of the Gambling Act 2005 (GA 2005), which provides that ‘cheating’ may:

[C]onsist of actual or attempted deception or interference in connection with the process by which the gambling is conducted.

Ivey alleged that he had not cheated under this definition because it requires an element of dishonesty. He argued that, as he had not been untruthful and had simply been an “advantageous player” partaking in “legitimate gamesmanship”, he had not been dishonest.

In Ivey v Genting Casinos [2014], the High Court found that Ivey genuinely believed in what he was saying – therefore, Mitting J concluded that he could not have been dishonest, and was instead simply being exploitative. Nonetheless, Mitting J was held that cheating under Section 42(3)(a) of the GA 2005 did not necessarily require an element of dishonesty. Therefore, it was concluded that Ivey had breached the implied term not to cheat, despite lacking dishonest intentions, and was subsequently unable to claim his winnings.

A 2-1 majority in the Court of Appeal in Ivey v Genting Casinos [2016] agreed with Mitting J’s judgment. Arden and Tomlinson LJJ held that cheating did not require an element of dishonesty, with Arden LJ specifically stating that dishonesty would be an unnecessary requirement on the grounds that Section 42(3)(a) of the GA 2005 already accounted for ‘deception’. In her dissenting judgment, Sharp LJ held that cheating required dishonesty and described the prospect of cheating without dishonesty (termed “honest cheating”) as “startling”.

Oh, the Hugh(es)-manity!

The Supreme Court’s unanimous decision in Ivey v Genting Casinos [2017] – penned by Lord Hughes– upheld the judgments of Mitting J and Court of Appeal, finding that dishonesty was not a necessary element of cheating. Ivey had therefore breached the implied agreement between player and casino not the cheat, and was not entitled to reclaim his winnings.

In response to Sharp LJ’s concerns about honest cheating, Lord Hughes conceded that while this concept is ‘improbable’ – as it suggests that some cheating may be right rather than wrong – this does not automatically mean that all cheating must attract the description of ‘dishonest’. Indeed, he noted that nothing is added to the legal concept of cheating by the additional element of dishonesty.

Lord Hughes used the example of a runner who trips up one of his opponents – while this would clearly constitute cheating, it could not automatically be considered dishonest. Conversely, it was made clear that it is possible to be dishonest without cheating: for example, if a professional chess player were to convince someone to play a game of chess by falsely telling them they were not proficient at chess, and then proceeding to win the game fairly, this would not be cheating but would certainly be dishonest.

Consequently, the Supreme Court described the conclusion that Ivey’s actions amounted to cheating as ‘unassailable’. Reliance was placed on the fact that while Punto Banco is a game of pure chance – with cards not known by the players or house and intended to be delivered entirely at random – Ivey had “staged a carefully planned and executed sting” that subverted this. It dismissed any argument based on the fact that Ivey had used the croupier to reorganise the cards by observing that this made no difference: the outcome was the same as if he himself had done it. Ultimately, he had taken positive steps to fix the deck that were viewed as ‘inevitably cheating’.

The Death of Ghosh

Criticising the Ghosh Test

Though he concluded that dishonesty was not a necessary aspect of the cheating, Lord Hughes nonetheless seized the opportunity to give his thoughts on the concept of dishonesty in law. Due to the fact that the issue of dishonesty was found to not be of immediate concern in the case, this entire section of the judgment is obiter dictum. Nonetheless, Lord Hughes’ conclusions will undoubtedly have a significant impact on the future of the test for dishonesty and is certainly worthy of detailed consideration.

There is no legal definition of dishonesty. The closest that Parliament has been to defining the concept is in Section 2 of the Theft Act 1968, where it is stated that an appropriation will not be considered dishonest if the defendant believed:

  • They had a right in the law to take the property;
  • They would have had the owner’s consent if the owner knew of the appropriation; or
  • The identity of the owner could not be determined through reasonable steps.

However, a significant refinement to this test was introduced by Lord Lane CJ in the landmark case of R v Ghosh [1982]. This consisted of a two-limbed test:

  • By ordinary standards, would a reasonable and honest person consider himself dishonest in the defendant’s footsteps?
  • Did the defendant realise that what he did was dishonest by those standards?

If the answer to both of these questions is ‘yes’, the defendant will be held to have been dishonest.

The court in R v Ghosh [1982] imposed these two limbs in an attempt to reach a balance between an objective societal view of culpability (covered by the first limb) and a subjective fault-based approach (covered by the second limb). On paper, this seems appropriate. To impose a solely objective approach would remove all consideration of intention and fault of the defendant, whereas to impose a solely subjective approach would – as identified in R v Greenstein [1975] 1 WLR 1353 – bring about a state of affairs in which ‘Robin Hood would be no robber’; a defendant could simply claim that they did not know that anybody would regard what they were doing as dishonest.

However, since its inception, the test from R v Ghosh [1982] has been the subject of much criticism. As Lord Hughes observed in Ivey v Genting Casinos [2017], the test has the unintended effect that

[T]he more warped the defendant’s standards of honesty are, the less likely it is that he will be convicted of dishonest behaviour.

This criticism is absolutely valid: the approach from R v Ghosh [1982] assumes that offenders will share the standards which ordinary honest people set for society as a whole, which is often not the case. Indeed, it was for this reason that Lord Hughes in Ivey v Genting Casinos [2017] stated that:

[T]here is no reason why the law should excuse those who make a mistake about what contemporary standards of honesty are.

Despite acknowledging this criticism, Lord Hughes did not provide a definition of dishonesty. Instead, he accepted the approach espoused by Lawton LJ in R v Feely [1973] QB 530 that the concept is not a matter of law but instead, a question of facts and standards that must be examined by a jury. Lord Hughes was clear: judges ‘do not, and must not, attempt to define it’.

Adopting a New Test

Lord Hughes was nonetheless prepared to accept that, through use of the first limb alone, the objective sought by using both limbs of the test from R v Ghosh [1982] could actually be achieved without the negative consequences of the second limb. Indeed, according to Lord Hughes, the court in R v Ghosh [1982] had, when creating the test, actually misunderstood how to use the first limb.

To justify the imposition of both limbs, the court in R v Ghosh [1982] had used the example of a foreigner who travelled by bus in England without paying because all public transport in his home country was free and he did not realise that he would be expected to pay here. The court argued that preventing future courts from considering the foreigner’s clearly honest mind would not be just; it therefore added a subjective element to the test.

However, in Lord Hughes’ view, this hypothetical foreigner – and all other defendants who have a legitimately innocent mind – would have already been protected by the first limb of the test. This is simply because in order to determine the honesty or dishonesty of a person’s conduct, one must ask what that person knew or believed about the facts affecting the area of activity in which they were  engaging. Therefore, in order to determine whether the foreigner in the R v Ghosh [1982] example was dishonest by the standards of ordinary people, it would be necessary to first establish his own actual state of knowledge of how public transport works.

This makes it incorrect to assume that the conventional objective test of dishonesty involves judging only the defendant’s actions and not their state of knowledge or belief as to the facts and circumstances in which they were performed. Instead, conventional objective test involves objectively judging the standard of behaviour in light of ‘any known actual state of mind of the actor as to the facts’.

In applying this method, Lord Hughes adopted the test of dishonesty that was set out by Lord Nicholls in Royal Brunei Airlines v Tan [1995] and Lord Hoffmann in Barlow Clowes v Eurotrust International [2005], both of which dealt with liability of an accessory to a breach of trust in civil law. Both these cases will be given further detailed consideration in Keep Calm Talk Law’s second article on this topic, but – at their essence – these judgment establish that the test of dishonesty involves asking:

Would an honest objective person, with the defendant’s knowledge, experience and attributes, appreciate that what he was doing was dishonest?

If the answer is ‘yes’, the defendant will have been acting dishonestly. This is not a question of whether the belief was reasonable, but is instead one of whether it was genuinely held.

Whether it is appropriate to adopt an approach from civil law could be questioned: after all, it is an important element of the criminal law that the defendant has the necessary mens rea – in other words, they are aware of their moral wrongdoing – whereas when considering the imposition of civil liability, as Arden LJ noted in Abou-Rahmah v Abacha [2006], it is unnecessary to have regard to the defendant’s views as to the morality of his actions. Nonetheless, Lord Hughes seemed to skirt pass these criticisms by arguing that there is:

[N]o logical or principal basis for the meaning of dishonesty (as distinct from the standards of proof by which it must be established) to differ according to whether it arises in a civil action or a criminal prosecution.

Conclusion

The judgment in Ivey v Genting Casinos [2017] is a landmark judgment that – as Max Walters describes – represents a fundamental change to ‘one of the most basic facets of criminal fraud law’. One noticeable consequence of the decision is that it will be much easier to prove dishonesty, particularly in the case of white-collar crimes: after all, many of these offences are based, sometimes almost entirely, on the concept of dishonesty.

From an analytical perspective, compared to the flawed test in R v Ghosh [1982], the approach adopted from Barlow Clowes v Eurotrust International [2005] is flexible and resilient. By applying one sole requirement for a defendant to appreciate that what they were doing – by an objective standard – was dishonest, the Supreme Court in Ivey v Genting Casinos [2017] has achieved a promising balance between the need to protect those who are worthy and innocent, and the need to prevent exploitation of the definition by others. It allows consideration of a defendant’s subjective opinion of the facts and circumstances where it is genuinely warranted, but in the same breath rejects the aforementioned ‘Robin Hood’ defence that has plagued the concept of dishonesty for decades.

However, all is not rosy: underpinning the new formulation of dishonesty lies a line of authority stooped in disagreement, confusion and uncertainty. Barlow Clowes v Eurotrust International [2005] represents the most significant entry in a list of cases that has caused great debate and discussion of accessory liability for trustees. Indeed, though the test it espouses appears sturdy, it is based on a somewhat weak foundation and – as a subsequent Keep Calm Talk Law article will examine – it could face criticism in years to come.

For now, however, it is fair to conclude that Ivey v Genting Casinos [2017] represents a welcome recognition that the law of dishonesty needed to change. And the signs that it will come to represent a sea-change in the law are promising: it has been applied subsequently by the High Court in General Medical Council v Krishnan [2017] and in DPP v Patterson [2017]. Indeed, in the latter case, Sir Brian Leveson – President of the Queen's Bench Division – noted that while 'observations in Ivey v Genting Casinos [2017] 'were clearly obiter, and as a matter of strict precedent the court is bound by R v Ghosh [1982]', he felt that:

[G]iven the terms of the unanimous observations of the Supreme Court expressed by Lord Hughes, who does not shy from asserting that R v Ghosh [1982] does not correctly represent the law, it is difficult to imagine the Court of Appeal preferring R v Ghosh [1982] to Ivey v Genting Casinos [2017] in the future.

Ideally, future courts will continue to strengthen this legacy.

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Tagged: Contract Law, Criminal Law, Supreme Court, Trusts

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