Serious and Complex Fraud cases and the Test for Dishonesty

Olliers’ Head of Serious Crime Matt Corn looks at the Test for Dishonesty which is at the heart of any fraud allegation.

At Olliers we deal with complex fraud allegations brought by The Serious Fraud Office, HMRC, Trading Standards and of course the police. In recent months we have defended people charged with pension fraud, fraudulent trading by an individual and his company, fraud by false representation, Investment fraud and other complex financial investigations.

Given the often vast expense that the prosecuting authorities will go to bringing these cases to trial, in response we take a meticulous detailed approach to the presentation of the defence case.

Sometimes these complex, voluminous cases are extremely difficult for juries to follow with volumes of documents to sift through, with topics previously unfamiliar to them and financial and other business terms being referred to in great detail.

Ultimately however, regardless of the complexity of the case, at the heart of any fraud case whether it is a substantive allegation or more commonly a conspiracy is the issue of dishonesty. The jury has to consider whether the defendant or his company has acted dishonestly in for example, making a representation, or in making a gain for himself at the detriment of another. The jury might have to consider whether a particular investment scheme was dishonest or whether a company’s business practices were dishonest. Even after months of evidence being called, without the jury being sure of dishonesty there can be no conviction of the defendant.

The old test for dishonesty

For many years in the criminal courts the legal test for dishonesty in theft/fraud cases which was left to the jury to consider in all such cases was that set out in the case of R v Ghosh [1982] EWCA Crim 2 which introduced a two-stage test for dishonesty for a jury to apply:

1. Firstly, the jury must consider whether the conduct complained of was dishonest by the objective standards of ‘ordinary reasonable and honest people.’ If the answer is no that disposed of the case in favour of the defendant. He or she would be acquitted. However, if the answer is yes, the jury had to go on to consider:
2. Secondly, whether the defendant must have realised that ordinary honest people would regard his behaviour as dishonest. Only If the answer to that question was also yes would the defendant fall to be convicted.

Problems with the Ghosh test for dishonesty

Whilst this test stood for many years as the standard in criminal cases, there were problems with it from the perspective of the prosecution as they had to prove both the above ingredients. Also, as the courts were later to observe, essentially, the less the defendant’s own standards conformed to society’s expectations, the less likely the defendants were to be found guilty. In other words, if the jury was not sure that the defendant realised that ordinary, honest people would regard his or her conduct as dishonest, the defendant would be found not guilty.

The new test for dishonesty – Ivey v Genting Casinos

Matters only changed some 35 years later. In a civil case in 2017 the Supreme Court settled the objective test for dishonesty. This was the case of Ivey v Genting Casinos (UK) [2-17] UKSC 67.

In that case, the Supreme Court disapproved the 2 stage Ghosh test and held that the correct test was:

• What was the defendant’s actual state of knowledge or belief as to the facts
• Was his or her’s conduct dishonest by the standards of ordinary decent people.

This new test of course means that the prosecution no longer has to prove the second limb of the second limb of Ghosh. It does however still require the jury to consider the defendant’s state of knowledge or belief having regard to the evidence it hears.

Whilst the law has been clarified in this regard, an issue remains as to whether this new test for dishonesty could potentially criminalise certain normal business practices. If under the old Ghosh test, a defendant argued that his or her company’s pattern of conduct is the ‘norm’ for a particular industry or business, this may no longer be available as a defence if the court takes the view that it is a dishonest practice by the standards of ordinary decent people.  

In 2020, there was an interesting case which sought clarification on whether the Supreme Court’s test on civil actions really was applicable in criminal cases and thus replaced the Ghosh test.  

R v Barton and Booth 2020

In R v Barton and Booth 2020, the defendants appealed their convictions on the basis that the Judge was wrong to apply the Ivey test instead of Ghosh because the Supreme Court’s determination in Ivey was made ‘Obiter’ meaning it was said in passing and was therefore not binding.

In what became a very significant judgement, the Court of Appeal held that in Ivey the Supreme Court had changed the common law approach to precedent in the criminal courts by stating that the approach to dishonesty in Ivey was now the correct approach and that this should be followed in preference to Ghosh.

Ivey remains the correct approach to dishonesty

As a consequence of this, Ivey remains the correct approach to the issue of dishonesty in the criminal courts.

In practice, for juries, they must still consider all the facts in the case, including the defendant’s knowledge or belief in the facts, before deciding whether the defendant’s behaviour is dishonest by the standards of ordinary reasonable people. 

It is a subtle but effective change in the law. It requires the jury to consider the defendant’s behaviour according to their own standards of what is honest or dishonest and does not require them to consider whether the defendant appreciated that people would find their behaviour dishonest.

Hayes and Palombo

Following Barton, in 2024 Hayes and Palombo a complex case involving interest rate rigging, resulted in the Court of Appeal refusing the appeals against conviction but allowing the defendants to apply to the Supreme Court for permission to appeal based on there being a point of law of general public importance. We await the outcome of the Supreme Court’s decision and whether any issue concerning the dishonesty test arises.

In short, despite the complexities in cases we specialise in, such as conspiracy to defraud, at the very heart of the jury’s consideration must be the issue of dishonesty. It is important when preparing the defence case, even when addressing as we always do, each and every piece of evidence from Banking records, tax documentation, company brochures and the like that the key element we are interested in ultimately is whether the defendant was dishonest. Unless the jury are sure he or she was, according to the above test in Ivey, the defendant should be found not guilty.

Contact Olliers Solicitors – specialist fraud lawyers

If you or your company face investigation or prosecution in relation to an allegation of fraud please contact us. We have offices in both London and Manchester and our specialist team of fraud lawyers can advise and represent you in relation to your case.