"I admire your luck, Mr…?" "Bond, James Bond."
In 007's very first film appearance, Sean Connery wins a game of Baccarat before he goes on, against the odds, to save the world from nuclear destruction. A recent Supreme Court decision (Ivey v Genting Casinos (UK) Ltd t/a Crockfords  UKSC 67) recounted scenes that would not be out of place in the latest spy drama. Except this time the winner was not so lucky.
A poker champion attempted to turn the odds of winning a game of Baccarat in his favour, and against the casino's, through a process called "edge-sorting". Unfortunately for him, his actions were considered by the country's highest court to be cheating. In reaching its view, the Court also redefined what it means to be dishonest in criminal law, a concept that had gone unchallenged for the previous 35 years.
Place your bets
In July 2017, Phil Ivey was inducted into the World Series of Poker Hall of Fame. Five years earlier, working with fellow professional gambler Cheung Yin Sun, Mr Ivey played Punto Banca at Crockfords Casino in Mayfair. Punto Banco is a card game of pure chance, played against the house, but where the odds of winning are slightly, but crucially, in the house's favour. “Edge-sorting” is where gamblers can spot the small differences in the edges of the cards created as part of the manufacturing process, for example where slightly more of the pattern is visible on one edge of the cards when the cards are machine cut. Someone who is very observant can spot these differences as the cards are dealt.
Mr Ivey and his accomplice managed to dupe the dealer at their table in the casino into rotating the high value cards so that they displayed a different edge to all the other cards, claiming they wanted those particular cards rotated due to being superstitious. The dealer was unaware of the real reason behind what Mr Ivey and his accomplice were up to. The two started placing larger and larger bets, ending up with winnings of £7.7m. After the event the casino conducted an investigation to work out what had happened. They withheld the winnings and refused to pay them over, though they did refund Mr Ivey’s original stake of £1m.
Raising the stakes
When Mr Ivey pursued his claim to the winnings through the courts, he asserted that what he had done was not cheating, that instead he had just used a variety of techniques to improve the odds in his favour. The judge who first heard the arguments found that Mr Ivey was truthful in what he said and that Mr Ivey clearly did not believe that he had cheated, but that this did not matter as in the court’s view Mr Ivey’s conduct still involved cheating. As such, Mr Ivey had breached his contract with the casino and the casino did not have to pay over the winnings. As described by the Court, what Mr Ivey and his accomplice did was a “carefully planned and executed sting”.
The Supreme Court went on to re-examine what is required for a person to be found to be dishonest. Most acquisitive criminal offences, such as fraud and theft offences, include reference to the concept of dishonesty, though the statutes do not define what is meant by the term. The guidance provided to juries on dishonesty was previously set out by the House of Lords in the 1982 case of R v Ghosh and has been applied for the last 35 years.
This dealt with dishonesty as a two strand test: first whether the jury considered that the conduct of the defendant in question was dishonest by the standards of ordinary reasonable and honest people. This was the objective aspect of the test. If the answer to that question was yes, then the jury had to go on to consider whether the defendant realised that ordinary honest people would regard his or her behaviour as dishonest. If the jury did not consider that it had been proven that the defendant realised that their conduct was dishonest by the standards of ordinary honest people, then the defendant was entitled to be acquitted.
Dishonesty – subjective or objective?
It is very common for defendants in fraud cases to claim that they did not realise that what they were doing was dishonest. The case of Tom Hayes, who was convicted in 2014 of manipulating the Libor interbank interest rate, is a case in point. Libor is used to set the rates for mortgages and loans worth billions. Such loans are traded between banks in a similar way to shares or foreign currency. The Libor rate is set through a series of major banks making submissions to the British Banking Association (BBA) as to the interest rate that their bank could borrow at on the interbank market. If traders could alter the rate that was being submitted by their bank then they could give themselves an advantage in their trading activity. All a trader like Tom Hayes needed to do was to influence the rate submitted by their bank to the BBA regarding what their bank could borrow at, either pushing the rate higher or lower depending on the trader’s trading position.
During a three-month trial, Tom Hayes admitted what he had done in attempting to manipulate the rate, but a large part of his case was that it was not dishonest as lots of Libor traders were doing the same thing. He argued that he should be judged by what he understood was honest and dishonest in the context of what he knew and understood from his job as a bank trader and that he should not be measured by the objective criteria of everyday people. Although he failed to persuade the jury at his trial that he did not consider that what he had done was dishonest, a lot of court time could have been saved if the new Supreme Court test had been applied to his case.
Dishonesty test shaken and stirred
The Supreme Court has now changed the guidance which they believe should be given to juries on dishonesty, making it only an objective test. By so doing, they have made the prosecution of the particularly complex fraud offences, like those involving Hayes and other bank traders, potentially considerably easier. The jury will still be required to identify what the defendant knew or believed at the time, but are then required to determine whether in all the circumstances, including in light of the defendant’s knowledge or belief, the conduct was by the standards of reasonable and honest people, dishonest.
Although Ivey is a civil case, because of the emphatic way in which it deals with the dishonesty test, the criminal courts are likely to follow this new guidance. By so doing, there will be a consistent approach to dishonesty within the civil and criminal court. Armed with a new test for dishonesty, the job of prosecutors in pursing complex fraud cases will become markedly easier. That could well lead to a more aggressive stance being taken by prosecutors in pursuing the more complex and challenging fraud prosecutions.