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Legal Minds

19 March 2018 / by / in

Impact of Ivey v Genting the definition of Dishonesty in the Civil and Criminal Sphere

On 25 October 2017 the Supreme Court handed down its judgment in Ivey v Genting Casinos Ltd [2017] UKSC 67. In a highly relevant obiter observation the court addressed its collective mind to the appropriate test for dishonesty in both civil and criminal proceedings. Specifically, it tackled the knotty question of whether there should in fact be any difference between the two jurisdictions. It concluded most emphatically that there should not and in doing so effectively overruled the long established test applied in criminal trials as set out in the case of R v Ghosh 1982 QB 1053 (the Ghosh test).

The critical change was to remove the so-called second limb of the Ghosh test which required a jury – having already determined that the behaviour of the defendant was objectively dishonest “according to the standards of ordinary decent people” – to then engage in further mental gymnastics and determine whether this particular defendant knew that his behaviour was dishonest according to those standards. This, so the Supreme Court ruled, was unnecessary and led to the perverse scenario whereby the defendant’s perception of what might be construed as dishonest could in a given case supplant what society generally would consider to be the case.

Civil Cases

The Supreme Court effectively re-stated the objective test for dishonesty in the civil jurisdiction to be as defined by Lord Nicholls in Royal Brunei Airlines Sdn Bhd v Tan (1995) 2 AC 78. However, in some civil cases there had been some confusion as to whether Ghosh was the applicable test. Ivey appears now to have dispelled any such notion.

In an administrative court decision Krishnan v GMC (2017), HHJ Sycamore (sitting as a High Court Judge) ruled that:

“… the first stage (objective) Ghosh test is not the same as the second stage (objective) Ivey test. The objective test in Ghosh had to be applied without reference to the actual state of mind as to knowledge or belief as to facts of the individual concerned”.

“[The Panel] mistakenly proceeded by applying the objective Ghosh test and in those “circumstances … it is inappropriate … to determine whether the MPT wrongly applied the first limb of the Ghosh test as the “cross appeal”/judicial review has also been superseded by Ivey and is therefore academic …”

In a further GMC case before the Administrative Court, Mr Justice Sweeney observed that:

“Equally, as to the consideration of dishonesty, and given that the common law always was what it is now recognised to be, I have applied the judgment of the Supreme Court in Ivey” ( GMC v Rayachaudhuri EWHC 3216 (Admin) 2017).

In an appeal against the imposition of a penalty for alleged duty evasion the First-Tier Tribunal (Tax) found that the Ivey decision had “unified the principles for civil and criminal cases” (Ahmed v Revenue & Customs). This practice was followed by J M Connell in applying Ivey in a further tax tribunal decision (Maddison v Revenue & Customs).

In Ramasamy v SRA (2018) EWHC 117 (Admin) Lord Justice Lindblom sitting in the Administrative Court observed that in determining the issue of dishonesty in disciplinary proceedings against a solicitor the regulator had applied the wrong test (i.e. the Ghosh test) and that in fact the test as now expounded in Ivey was more appropriate.

In another SRA case (Wingate & Evans v SRA 2018 EWCA Civ 366) Lord Justice Jackson sitting in the Civil Division of the Court of Appeal approved the application of Ivey to such proceedings and concluded, having considered the relevant authorities, that:

Let me stand back from the kaleidoscope of the authorities and consider what the law now is. Honesty is a basic moral quality which is expected of all members of society. It involves being truthful about important matters and respecting the property rights of others. Telling lies about things that matter or committing fraud or stealing are generally regarded as dishonest conduct. These observations are self-evident and they fit with the authorities cited above. The legal concept of dishonesty is grounded upon the shared values of our multi-cultural society. Because dishonesty is grounded upon basic shared values, there is no undue difficulty in identifying what is or is not dishonest”.

In Chancery, HHJ Pelling has noted in Pensions Regulator v Payae Ltd & others [2018] EWHC 36 (Ch):

It is now clear that the test for dishonesty is the same in all civil and criminal proceedings where such an allegation is made….For dishonesty to be established it is necessary first to establish (subjectively) the knowledge or belief of the person concerned as to the relevant facts and then to determine (objectively) whether the person’s conduct was honest by applying the standards of ordinary decent people”.

In Razumas v Ministry of Justice [2018] EWHC 2015 (QB), Mrs Justice Cockerill in considering the appropriate test to be applied when assessing “fundamental dishonesty” in pleading a civil claim under s.57(1) Criminal Justice and Courts Act 2015 observed “Dishonesty is to be judged according to the test set out by the Supreme Court in Ivey”.

Criminal Cases

In DPP v Patterson (2017) EWHC 2820 (Admin), Sir Brian Leveson observed that whilst Ghosh remained settled law, until such time as the matter was once again before the Court of Appeal he felt that:

“Given the terms of the unanimous observations of the Supreme Court expressed by Lord Hughes, who does not shy from asserting that Ghosh does not correctly represent the law, it is difficult to imagine the Court of Appeal preferring Ghosh to Ivey in the future”.

This is hardly surprising given that Lord Justice Leveson had previously observed in the Starglade Properties Case in 2010 that the different tests for dishonesty applied in the civil and criminal spheres “required attention”.

In the criminal sphere the closest that the Court of Appeals has come to explicitly endorsing the overruling of Ghosh is in the recent decision of R v Pabon (2018) EWCA Crim 420. Lord Justice Gross in considering an appeal against conviction of a Libor trader observed that in the trial the judge had given the standard Ghosh direction on dishonesty. In the intervening period the Ivey decision had effectively abolished the second limb of Ghosh and thus:

“It is therefore apparent that the jury were directed, on the key issue of dishonesty, on a basis more favourable to the Appellant than if he was tried today”.

This is a clear indication (if any were needed) that the Court of Appeals does not consider that the standard Ghosh direction should now be given and that Ivey is the settled law. It can only be a matter of time before this is set in stone by a more definitive ruling in an appropriate case. In the meantime judges are now giving the Ivey, not the Ghosh, direction to juries. In one recent case the judge even called the jury back to re-direct them after they had retired.

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Steve is a highly experienced criminal lawyer specialising in white collar and business crime for over 25 years. He has defended in cases brought by the Serious Fraud Office (SFO), HM Revenue and Customs, Department of Business Innovation and Skills (BIS), the Economic Crime Unit (ECU), NHS Counter-Fraud Service and the Crown Prosecution Service (CPS).