Most fraud offences require dishonesty
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A large number of offences fall within the definition of fraud for the purposes of the new failure to prevent fraud offense.Almost all of them involve dishonesty.
Assessing allegations of fraud requires knowing how English law defines dishonesty. For example, can someone be dishonest if they genuinely thought that they were doing nothing wrong? What if they thought they were acting in accordance with ‘market practice?’
Understanding the legal standard for dishonesty will assist businesses to design and implement safeguards to prevent fraud from occurring within their business.
Test for dishonesty
Until 2017, to prove that someone had acted dishonestly in theft or fraud cases, the jury had to find that the defendant’s conduct was dishonest by the standards of ordinary, reasonable people; and the defendant appreciated that what he or she did was dishonest by the standards of those ordinary, reasonable people.
This is no longer the correct test.
The current test is based on obiter comments of Lord Hughes in the civil supreme Court case of Ivey v Genting Casinos (UK) Ltd. The alleged dishonesty centred on Phil Ivey,a professional gambler,using a technique called “edge-sorting” while playing Punto Banco (a form of baccarat) at a casino in London. Edge-sorting involves identifying tiny, asymmetrical patterns on the backs of playing cards to determine their face value. Ivey, with the help of an accomplice, persuaded the croupier to rotate certain cards under the guise of superstition, thereby arranging the deck so he could distinguish high-value cards from low-value ones.
He won GBP7.7 million. The casino refused to pay out,arguing that Ivey had cheated by manipulating the game in a way not intended by the casino and that his conduct was inherently dishonest. Ivey, however, maintained that edge-sorting was a legitimate advantage play and did not consider his actions to be cheating or dishonest.
The Supreme Court ultimately found that Ivey’s conduct amounted to cheating and was dishonest by the standards of ordinary decent people. Importantly, Ivey’s own belief that he was not cheating was considered irrelevant.
Lord Hughes said that the jury must consider: (1) what was the actual state of the individual’s knowledge or belief as to the facts at the time of the allegedly fraudulent act; (2) taking account of that, was the act dishonest by the standards of ordinary, decent people?
Note that the test therefore no longer explicitly referred to having to show that an individual appreciated that what they did was dishonest.
Barton and Booth v R
The Ivey test technically remained non-binding for the English courts given it was only obiter. Though, the Ivey test was later held to be binding in Barton and Booth v R and is now the undisputed test for dishonesty.In Barton and Booth, the Court of Appeal (Criminal Division):
endorsed the test in Ivey, finding that dishonesty should be assessed “by reference to society’s standards rather than the defendant’s understanding of those standards”.
said that there should still be an emphasis on the subjective elements of dishonesty: “all matters that lead an accused to act as he or she did will form part of the subjective mental state,thereby forming a part of the fact-finding exercise before applying the objective standard… [and] may include… the experience and intelligence of an accused”.
What did the accused know or believe?
The current test thus relies on applying the standards of ordinary and decent people to the facts as the accused knew or believed.