Dishonesty and cheating in gambling contracts

09 November 2017

L_clarke

The UK Supreme Court recently handed down its decision in the case of Ivey (Appellant) v Genting Casinos (UK) Ltd t/a Crockfords (Respondent). The Supreme Court upheld the English Court of Appeal's decision to dismiss Mr Ivey’s claim for £7.7m worth of winnings withheld by a London casino five years ago.

Mr Ivey had arranged to play a private game of punto banco - a form of baccarat - at the Crockfords casino in Mayfair, along with a fellow gambler, Cheung Yin Sun. Over two days in August 2012, Mr Ivey deployed a highly specialist technique called edge-sorting which had the effect of greatly improving his chances of winning.

Edge-sorting involves identifying minute differences in the patterns on the back of playing cards and exploiting that information to increase the chances of winning. Firstly Mr Ivey and Ms Sun set up the conditions which enabled him to win. Then, later that evening and the following day, over the course of some hours, he won approximately £7.7m. The casino declined to pay, taking the view that what he had done amounted to cheating and returned Mr Ivey’s original stake of £1m to him. His case was that it was not cheating, but deployment of a perfectly legitimate advantage.

Finding:

The five Supreme Court Justices considered:

  • the meaning of the concept of cheating at gambling
  • the relevance of it to dishonesty; and
  • the proper test for dishonesty if such is an essential element of cheating.

The Justices subsequently agreed unanimously that the “judge’s conclusion, that Mr. Ivey’s actions amounted to cheating, is unassailable.”

The Supreme Court found it was essential that punto banco remained a game of pure chance with neither the casino nor the player being able to beat the randomness of the cards that were dealt. Lord Hughes noted, "What Mr Ivey did was to stage a carefully planned and executed sting."

In reaching this decision the Supreme Court noted the following points:

  • The question which matters is not whether Mr Ivey thought of the act as cheating but whether in fact and in law it was.
  • On the facts of the case, there was clearly deception of the dealer into doing something which appeared irrelevant, but was in fact highly significant and enabled Mr Ivey to win when he should not have done.
  • Dishonesty is itself primarily a jury concept, characterised by recognition rather than by definition.
  • Although the great majority of cheating will involve something which the ordinary person (or juror) would describe as dishonest, this is not always the case. When, as it often will, the cheating involves deception of the other party, it will usually be easy to describe what was done as dishonest. It is, however, perfectly clear that in ordinary language cheating need not involve deception, and section 42(3) of the Gambling Act 2005 recognises this.
  • If, contrary to the findings of the Supreme Court, it had been necessary to establish dishonesty as a necessary component of a finding of cheating then the correct test to apply was that established in Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 and Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37 by Lord Hoffman, namely:

“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.”

In reaching this conclusion, the Supreme Court Justices rejected the existing test for dishonesty in criminal proceedings as set out in the case of R –v- Ghosh [1982] QB 1053, which required that a defendant must have realised that ordinary honest people would regard his behaviour as dishonest.

In conclusion, the Supreme Court held that cheating in gambling does not require dishonesty as one of its legal elements. In doing so they have clearly stated the test that should be applied to considering the issue of dishonesty in both criminal and civil proceedings.

A copy of the Supreme Court’s Judgment can be found here https://www.supremecourt.uk/cases/docs/uksc-2016-0213-judgment.pdf

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