Neil Williams of Rahman Ravelli considers the clarification of the test for dishonesty in R v Barton and Booth  and its implications for complex fraud prosecutions.
Those, like Serious Fraud Office Director Lisa Osofsky, who believe the issue of identification sets the bar too high when it comes to proving corporate criminal liability may find some comfort in the recent case of R v Barton and Booth .
In April, the English Court of Appeal (Criminal Division) in R v Barton and Booth  affirmed that the test for dishonesty should be judged by referring to the standards of society rather than to the understanding of those standards by the defendant. The case’s clarification of the law on dishonesty could see more prosecutions brought for complex frauds. This is because, in theory at least, it makes it more straightforward to obtain the conviction of a corporate, its senior figures or its employees if they are charged in cases where fraud (or other dishonesty offences) charges are brought.
The Court of Appeal’s Ruling on Dishonesty
The Court of Appeal in Barton ruled that the correct test for dishonesty is that established by the Supreme Court in Ivey v Genting Casinos  meaning that the test for dishonesty set out in R v Ghosh  no longer applies.
Under the Ghosh test, two limbs had to be satisfied:
- The jury had to decide whether “according to the ordinary standards of reasonable and honest people what was done was dishonest’’, and
- If so, the jury had to then consider whether the defendant “himself must have realised that what he was doing was by those standards dishonest’’.
Ivey v Genting Casinos , however, saw the Supreme Court decide that there should be no requirement to establish the second part of the Ghosh test. A prosecution now only has to prove that what was done was dishonest objectively. This has been confirmed in the case of Barton, which involved the owner of a nursing home who defrauded residents once he had persuaded them to let him control their finances. The decision in Barton has established that the test for dishonesty to be applied by the jury is now more straightforward. The Barton case’s confirmation of the Ivey test of dishonesty means there is now a greater scope for conviction than previously. Now, there is no defence for an individual who believes their conduct was not dishonest if that conduct falls below the standards of honest members of society.
The Court of Appeal’s decision in Barton also makes it clear that if the prosecution is to succeed in proving the offence of conspiracy to defraud, there has to be a dishonest agreement that has within it an element of unlawfulness in either its object or its means. The defendant has to act with an intention to prejudice another's rights – but, if carried out, the agreement does not necessarily have to include the commission of a substantive offence.
Implications of the Case
As a case, Barton has both confirmed what constitutes dishonesty and clarified what needs to be established to prove a conspiracy to defraud. When it comes to complex fraud cases, both of these developments could make prosecutions more straightforward.
The test for dishonesty may have particular impact regarding individuals in complex financial cases, as a defendant’s defence that he was working in accordance with, for example, standard market practices will now be subject to the arguably more objective standards of a jury – or “contemporary standards of honesty’’ as they were referred to In Ivey.
Judgements made public in the wake of the SFO’s failure to convict three Barclays executives of fraud in relation to fundraising in Qatar shed some light on precisely why it is difficult to successfully prosecute large companies in complex fraud cases. But Barton does at least establish how such companies’ individuals can be held to account.
This, in turn, may prompt companies to act to reduce the possibility of them being held criminally liable for the acts of their senior figures. Carrying out detailed risk assessments, adopting new procedures or revising existing ones, ensuring staff are trained to deal with risks and putting in place ways for suspicions of wrongdoing to be reported are all essential means of reducing the risk of financial crime – and the accompanying individual or corporate liability.
This article was also featured on Lexology.com.
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