Gosh! Where has Ghosh gone?
Ivey (Appellant) v Genting Casinos (UK) Ltd t/a Crockfords (Respondent)  UKSC 67 On appeal from  EWCA Civ 1093
The Supreme Court has today unanimously declared that the second stage of the Ghosh test of dishonesty does not correctly represent the law, and that directions based upon it ought no longer to be given by judges to juries.
Instead, the Court, comprising Lord Neuberger, Lady Hale, Lord Kerr and Lord Thomas, with Lord Hughes giving the judgment, effectively regularised the approach to dishonesty across civil and criminal jurisdictions by adopting a single standard, in a move which will have real repercussions for those accused of dishonesty offences.
The Old Test
Since R v Ghosh  EWCA Crim 2, judges have been required to direct juries, should the point arise, to apply a two-stage test in relation to dishonesty:
- whether the conduct complained of was dishonest by the lay objective standards of ordinary reasonable and honest people; and, if yes
- whether the defendant must have realised that ordinary honest people would so regard his behaviour;
In order for a defendant to be found guilty, a jury needed be sure that the answer to both questions was yes.
The New Test
The new test of dishonesty is not a new test per se, but an importation from the civil sphere.
Per paragraph 74 of Lord Hughes’ judgment, the test to be applied is as set out by Lord Nicholls in Royal Brunei Airlines Sdn Bhd v Tan  2 AC 378 and by Lord Hoffmann in Barlow Clowes International Ltd v Eurotrust International Ltd  1 WLR 1476:
“Although a dishonest state of mind is a subjective mental state, the standard by which the law determines whether it is dishonest is objective. If by ordinary standards a defendant’s mental state would be characterised as dishonest, it is irrelevant that the defendant judges by different standards. The Court of Appeal held this to be a correct state of the law and their Lordships agree.” [pp1479-80]
Lord Hughes’ elaborated further:
“When dishonesty is in question the fact-finding tribunal must first ascertain (subjectively) the actual state of the individual’s knowledge or belief as to the facts. The reasonableness or otherwise of his belief is a matter of evidence (often in practice determinative) going to whether he held the belief, but it is not an additional requirement that his belief must be reasonable; the question is whether it is genuinely held. When once his actual state of mind as to knowledge or belief as to facts is established, the question whether his conduct was honest or dishonest is to be determined by the fact-finder by applying the (objective) standards of ordinary decent people. There is no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest” [Para 74]
The court identified several problems with the second limb of the test, including, for example, the juries’ difficulty following the full Ghosh direction, and the inconsistency between civil and criminal jurisdictions, but the principal justification was “the unintended effect that the more warped the defendant’s standards of honesty are, the less likely it is that he will be convicted of dishonest behaviour” [Para 58]
Interestingly, the court, perhaps displaying a populist touch, aligned the above issue with defences often run by defendants in business crime cases: “there is no reason why the law should excuse those who make a mistake about what contemporary standards of honesty are, whether in the context of insurance claims, high finance, market manipulation or tax evasion” [Para 59].
While the full implications of the new approach cannot yet be ascertained with certainty, what is clear is that the Supreme Court has, with little warning, radically departed from the predominant approach in criminal proceedings.