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HONESTY IN FRAUD CASES Aziz Rahman explains how the Supreme Court has rewritten how juries should decide dishonesty - and considers what this means for those in business.

3 January 2018

Dishonesty has been re-defined. This is a major development: both for those of us in the legal profession and for those who are accused of fraud.

In every fraud case, whether it is civil or criminal, dishonesty has to be established. It is the only way a prosecution or claimant can win their case.

Until recently, in criminal cases, the way the law determined whether there had been dishonesty involved applying the Ghosh test. It was an approach set down by the Court of Appeal in the case of Ghosh (1982).

The Court of Appeal stated that there were two stages to the test for dishonesty. The first stage involved the jury being directed to decide whether, “according to the ordinary standards of reasonable and honest people what was done was dishonest”. This was based on the assumption that “what was done’’ had already been proven.

If the jury decided that “what was done was dishonest’’, they then had to consider the second stage. This was whether the defendant “himself must have realised that what he was doing was by those standards dishonest’’.

What the Ghosh test did was put a reasonable ordinary man in the shoes of the defendant and ask if what was done was dishonest and whether the person who committed the dishonest act knew they were being dishonest when they committed it.

While it was up to the prosecution to prove dishonesty, the situation dictated that a defence team had to be proactive in showing that the defendant acted honestly, or at least with no dishonesty.

Genting

That test in criminal cases, however, is now history. This is due to the Supreme Court civil case of Ivey v Genting Casinos UK Ltd (t/a. Crawford’s Club) (2017).

It is a case that simplified the test of dishonesty. But it also has implications for anyone charged with fraud.

Mr. Ivey had used a technique called edge sorting in a card game to win £7M in one night at a Mayfair casino. He had asked the dealer to serve the cards so that he could see the edge he wanted to and said he wanted this done because he was superstitious, which wasn’t true. The casino accused him of cheating, would not pay him the £7M and so he sued.

He argued that what he did was not dishonest. The Supreme Court considered the difference between how the civil courts decided dishonesty compared with the criminal courts. In the civil courts, there was no requirement to establish the second part of the Ghosh test - that the accused person must realise that what he was doing was dishonest. All that had to be established was that a person had acted dishonestly.

The Supreme Court decided that the Ghosh test was wrong and that the law needed simplification. As a result, a prosecution now only has to prove that what was done was dishonest objectively. It no longer has to establish that the person acting dishonestly knew that they were being dishonest. The criminal law test of dishonesty is now as straightforward as that in civil law.

Implications

It is likely that a jury will find it easier to understand and apply the new test of dishonesty.

When it comes to business crime, this is likely to mean that there will be more fraud and deception prosecutions. There will not be a change in the sorts of evidence that can be admitted and individual defendants will still be trying to prove that they, individually, were not doing anything they believed at the time was dishonest.

This will involve making sure there is access to all available material. Section 21 of the Police and Criminal Evidence Act gives a person access to all material that may have been seized from their home or work premises by investigators. The Attorney General’s Guidance on Disclosure also lays down clear rules on what the authorities can and cannot do regarding the seizure and search of digital material. Such provisions have to be used to maximum effect by a defence team in a fraud case.

Disclosure

A switched-on defence team will always be looking to use the law on disclosure to obtain access to unused material – material seized by the authorities which they do not intend to use as evidence. Such material can prove vitally important in disproving prosecution allegations.

If the prosecution has failed – for whatever reason – to alert a defence team to such material, a major chance to establish a person’s innocence will be lost. At the time of writing, the Metropolitan Police is conducting a major review after two cases collapsed due to the late disclosure of evidence that could have established a defendant’s innocence long before a trial was scheduled. It is vital, therefore, that the defence takes the initiative when it comes to ensuring access to such material.

Success

The new test of dishonesty is more favourable to the prosecution in fraud cases. A defence team no longer has the ability to rely on the second part of the Ghosh test to disprove the allegation of dishonesty. But this does not mean that a well-managed, robust defence case will not succeed.

For those facing such allegations, they have to make sure they are legally represented by a defence team capable of mounting such a strong defence.

Authors


Azizur Rahman
Senior Partner
aziz.rahman@rahmanravelli.co.uk
+44 (0)1422 346666



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