Tom McNeill and Anoushka Warlow consider the test for dishonesty following the Supreme Court’s ruling in Ivey v Genting Casinos  A.C. 391, and how it might be applied when organisations or industries develop their own standards of behaviour.
The Senior Law Lord (as he then was) Lord Bingham of Cornhill was not above quoting Jeremy Bentham’s criticism of judge-made criminal law, which he called “dog-law”, in his 1792 polemic Truth versus Ashurst:
It is the judges (as we have seen) that make the common law. Do you know how they make it? Just as a man makes laws for his dog. When your dog does anything you want to break him of, you wait till he does it, and then beat him for it. This is the way you make laws for your dog: and this is the way the judges make law for you and me. They won’t tell a man beforehand what it is he should not do – they won’t so much as allow of his being told: they lie by till he has done something which they say he should not have done, and then they hang him for it.
Lord Bingham used Bentham’s line in articulating the guiding principle – which is also enshrined within Article 7 of the European Convention on Human Rights – that “no one should be punished under a law unless it is sufficiently clear and certain to enable him to know what conduct is forbidden before he does it; and no one should be punished for any act which was not clearly and ascertainably punishable when the act was done.”
Most dishonesty offences will rarely fall foul of this principle. As Lord Hughes put it in Ivey v Genting Casinos  A.C. 391, “whilst there have undoubtedly (and inevitably) been examples of uncertainty or debate in identifying whether some conduct is dishonest or not, juries appear generally to have coped well with applying an uncomplicated lay objective standard of honesty to activities as disparate as sophisticated banking practices (for example R v Hayes  1 Cr App R 10) and the removal of golf balls at night from the bottom of a lake on a private golf course: R v Rostron  EWCA Crim 2206.”
But how should dishonesty be approached when organisations or entire industries develop their own standards of behaviour which might be alien to the ordinary standards of reasonable and honest people? In both Hayes and Merchant & Matthew, the Court of Appeal found that the standards of the market in which the defendants were operating was irrelevant to the first limb (i.e. to determining the ordinary standards of reasonable and honest people).
As the Court of Appeal put it in Hayes: “The history of the markets have shown that, from time to time, markets adopt patterns of behaviour which are dishonest by the standards of honest and reasonable people; in such cases, the market has simply abandoned ordinary standards of honesty. Each of the members of this court has seen such cases and the damage caused when a market determines its own standards of honesty in this way. Therefore to depart from the view that standards of honesty are determined by the standards of ordinary reasonable and honest people is not only unsupported by authority, but would undermine the maintenance of ordinary standards of honesty and integrity that are essential to the conduct of business and markets.”
Accordingly, the jury had been properly directed that, when applying the first limb, they were not to have regard to evidence including that commercially influenced Libor submissions were commonplace in the industry and practised openly, and that the conduct took place against a backdrop where there were no formal rules for making Libor submissions and where the standards finally imposed by the courts went beyond those expected by the Libor Director of the British Banking Association (a prosecution witness). The Court of Appeal accepted that the standards of the market were relevant and admissible to the second (subjective) limb and, in Hayes, the Court of Appeal noted pointedly that the judge expressly directed the jury to have regard to the market standards and summarised the evidence at length.
Such was the state of the law until October 2017, when the Supreme Court in Ivey v Genting Casinos (a civil case concerning cheating in a casino) ‘clarified’ that the second (subjective) limb in Ghosh does not correctly represent the law and that the correct test for dishonesty is the objective test previously applied in civil law; simply, was the accused dishonest by the objective standards of ordinary decent people. There is, therefore, no longer any requirement that the defendant must appreciate that what he has done is, by the (objective) standards of ordinary decent people, dishonest. As Lord Hughes JSC put it: “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.”
‘Market standards’ do not however cease being relevant altogether: the objective standard still requires that the jury first establish the defendant’s own actual state of knowledge or belief as to the facts. In Ivey v Genting Casinos, Lord Hughes used the example of a man who comes from a country where public transport is free and who, on his first day here, travels on a bus without paying; because he genuinely believes that public transport is free, there is nothing objectively dishonest about his not paying for the bus. There will however be many sectors and industries (and organisations) where questions arise which will be far less clear cut than whether a bus fare is payable.
In the event of a prosecution, there will be difficult questions as to how the jury should approach wider practices when assessing the defendant’s state of mind, as was highlighted in the recent trial of individuals accused of manipulating the Euribor benchmark rate.
The apparent confusion in that case as to how best to guide the jury on the issue may well have contributed to the mixed verdicts delivered, and to the failure of the jury to reach verdicts in relation to three of the defendants. Generally, however, one would expect that there will now be less scope for a jury to give the defendant the benefit of the doubt on the basis that he did not appreciate that particular conduct was improper.
The real practical consequence of these judgments, however, is that long before the point of a prosecution, individuals in whichever organisation or industry they are working will not be able to adopt unchallenged the instructions of their boss, company procedures, or the practices of an entire industry; they will have to ask themselves where the “contemporary standards of honesty” lie, and presumably whistle-blow accordingly, unless prepared to risk running foul of dog-law.
Tom McNeill is a solicitor specialising in corporate crime, financial crime and regulatory enforcement. His expertise includes internal investigations, corporate and director liability, all types of fraud, bribery and money laundering, corporate manslaughter, health and safety, environmental protection, fire safety, trading standards, and Coroners’ inquests. He has conducted privilege-protected internal investigations on behalf of a range of corporate clients in relation to suspected financial crime and following fatal accidents and other serious regulatory breaches.
Anoushka Warlow is a solicitor specialising in corporate and financial crime, principally cases involving international bribery and corruption, commercial fraud, and money laundering. Anoushka advises both individual and corporate clients and has been involved in a number of high-profile domestic and international investigations conducted by enforcement agencies including the SFO, the U.S Department of Justice, HMRC, the FCA and the NCA. She is experienced in dealing with matters involving foreign and cross-border investigations, including requests for mutual legal assistance and extradition.