Supreme Court Plays Wild Card to Cash in Ghosh’s Dishonesty Chips

For the last 35 years, the criminal courts have relied on a two-part test established in the case of R v Ghosh [1982] QB 1053 to determine whether an individual had behaved dishonestly. The Ghosh test contains an objective and subjective limb. The first limb considers whether reasonable and honest people would characterise the defendant’s actions as dishonest. The second limb considers whether the defendant realised that reasonable and honest people would characterise their actions as dishonest.

Dishonesty – the Ghosh test

In most cases it was not necessary to explain the term to the jury at all. Where an assessment of dishonesty has been needed, the fact-finding tribunal (such as juries and magistrates) are not usually directed as to the definition of dishonesty generally, except to be reminded that the word bears its original meaning. In those cases where the defendant asserted their belief that their conduct would be considered honest, however, the fact-finding tribunal would be asked to consider the following:

• Would the defendant’s act be considered dishonest by reasonable and honest people?

If the answer is yes

• Did the defendant realise that their act was subjectively dishonest according to those normative standards?

If the fact-finding tribunal answered both questions in the affirmative, then dishonesty had been proven. If the answer to one of the limbs of the test or to both limbs was negative, then the defendant’s behaviour would not be regarded of having been dishonest.

The facts at issue

The Ghosh case concerned a medical practitioner who was convicted for receiving payments for work undertaken by others. However, the Supreme Court overruled the Ghosh test, in the civil case of Ivey v Genting Casinos UK Ltd (t/a Crockfords Club) [2017] UKSC 67, ruling that the subjective limb of the Ghosh test did not correctly represent the law.

In the Ivey case, the appellant was a professional gambler. He convinced an unwitting croupier working in the respondent’s casino to deal playing cards in such a way that the appellant gained an advantage. This allowed him to win around £7.7 million from the casino. Upon realising what had happened, the casino refused to pay out. The appellant asserted that cheating involves dishonesty, that he did not consider his actions to be cheating and so the second limb of the Ghosh test had not been met.

The court accepted the appellant’s evidence as being frank and truthful, but held that “the question which matters is not whether Mr Ivey thought of it as cheating but whether in fact and in law it was”. Accordingly, the court ruled that the Ghosh direction should no longer be given. In its place, the court ruled that in relation to dishonesty, the test should be an objective one as established by Nicholls L.J. in the civil law case of Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 and Hoffmann L.J. in Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37):

“Although a dishonest state of mind is a subjective mental state, the standard by which the law determines whether it is dishonest is objective. If by ordinary standards a defendant’s mental state would be characterised as dishonest, it is irrelevant that the defendant judges by different standards. The Court of Appeal held this to be a correct state of the law and their Lordships agree.”

The court’s reasoning

Lord Hughes referred to the example used by Lane LCJ in Ghosh itself, of the individual who arrives in England from a country where public transport is free and, on his first day here, he gets off without paying the bus fare. Although “his mind is clearly honest” remarked Lord Hughes, “his conduct, judged objectively by what he has done, is dishonest. It seems to us that in using the word ‘dishonestly’ in the Theft Act 1968, Parliament cannot have intended to catch dishonest conduct in that sense, that is to say conduct to which no moral obloquy could possibly attach”. In other words, the test is whether the individual was dishonest by the objective standards of ordinary, decent people. The court made it clear, however, that the test for dishonesty naturally requires the fact-finding tribunal to consider what the individual subjectively knew about the facts. If the individual’s mental state is considered to be dishonest by ordinary standards, it is irrelevant that the individual viewed their actions by different standards.

The Supreme Court’s reasoning for rejecting the second limb of Ghosh was that the more “warped” the defendant’s own standards of honesty are, the less likely he would be able to appreciate that his conduct was dishonest by ordinary standards. Accordingly, the law should not excuse those who make a mistake about contemporary standards of honesty, since one of the main purposes of the criminal law is to set acceptable standards of behaviour.

By adopting the civil definition of dishonesty into criminal law, the court has ended what Lord Hughes called 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”. The question of dishonesty should now be determined by all criminal, civil and regulatory fact-finding tribunals in accordance with the test adopted in Ivey.

Dishonesty going forward

While it is no longer sufficient for defendants to argue that they assumed that their actions were not dishonest according to their own interpretation of the standards of honest and reasonable people, they can still assert a genuine belief that their actions were honest because of a mistaken belief as to the true facts. The prosecution must still prove their case according to the criminal standard of proof, or ‘beyond reasonable doubt’, however, the actions of defendants will now be judged objectively. Defendants can no longer rely on the fact that they did not realise that their actions were and would be characterised as dishonest. The burden on the prosecution to show dishonesty, therefore, is likely to be less heavy going forward.

MCT impact

Candidates sitting the MCT in January 2018 (and beyond) are reminded that unless otherwise stated in advance, they are expected to apply the law as it stands on the date of the assessment.

Let’s now look at a sample question which is focussed on the topic discussed in the post.

Fact pattern

A man who comes from a country where public transport is free. On his first day London he travels on a bus. He gets off without paying. He never had any intention of paying.

Which option best describes the legal situation?

A. To determine the honesty of his conduct, the jury must ask what they know or believe about the facts affecting the area of activity in which he was engaging.

B. To determine the honesty of his conduct, the jury must ask what they know, or the man believed about the facts affecting the area of activity in which he was engaging.

C. To determine the honesty of his conduct, the jury must ask what they believe, and the man knew about the facts affecting the area of activity in which he was engaging.

D. To determine the honesty of his conduct, the jury must ask what he knew or believed about the facts affecting the area of activity in which he was engaging.

E. To determine the honesty of his conduct, the jury must ask what he objectively knew or believed about the facts affecting the area of activity in which he was engaging.

Suggested solution

The best answer is D – To determine the honesty of his conduct, the jury must ask what he knew or believed about the facts affecting the area of activity in which he was engaging. According to Lord Hughes in Ivey v Genting Casinos UK Ltd (t/a Crockfords Club) [2017] UKSC 67, the man portrayed in the fact pattern would avoid conviction by the right application of the first (objective) limb of the test established in the case of R v Ghosh [1982] QB 1053. To determine whether the man was dishonest by the objective standards of ordinary, decent people, the fact-finding tribunal must consider what the man subjectively knew or believed about the facts. The man’s behaviour is objectively judged, in the context of the man’s mental state. In order to decide whether this visitor was dishonest by the standards of ordinary people, it would be necessary to establish his own actual state of knowledge of how public transport works. Because he genuinely believes that public transport is free, there is nothing objectively dishonest about his not paying on the bus. Hence, the best answer is D.

Statute; rule; constitution: Section 2 Fraud Act 2006.

Case law: Ivey v Genting Casinos UK Ltd (t/a Crockfords Club) [2017] UKSC 67; Ghosh [1982] QB 1053.

Updates to the MCT course

Updates containing case law together with other important new laws that have recently come into force (not discussed in this article) will be available to download on our MCT Online Training System later this week.

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