Oh my Ghosh: Court of Appeal confirms change to the test for criminal dishonesty
This does not come as any great surprise. Last year the Supreme Court proposed (albeit strictly obiter) in Ivey that the test in Ghosh should no longer be followed in establishing criminal dishonesty. Ivey was a civil case and dishonesty was not in issue. Nevertheless, Lord Hughes took the opportunity to propose that the Ghosh test is no longer appropriate.
The Court of Appeal has now clarified in Barton that Lord Hughes’ opinion amounted to a direction from the Supreme Court. Consequently, the test he proposed in Ivey should be adopted.
The test in Ghosh included both an objective and a subjective element. However, the test proposed in Ivey dispenses with the subjective limb in Ghosh. The test is now an objective one:
- Firstly, the actual state of the individual’s knowledge or belief as to the facts must be ascertained. This is a subjective analysis of a defendant’s state of mind.
- Once the actual state of the defendant’s mind has been established, the question of honest conduct is to be determined “by applying the (objective) standards of ordinary people”.
Importantly, Lord Hughes emphasised in Ivey that “there is no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest.” The subjective analysis in step one will not excuse a defendant who claims that they did not understand their behaviour was dishonest.
This confirms that the criminal test for dishonesty is now the same as that in a civil context, as provided in Barlow Clowes International Ltd v Eurotrust International Ltd.
The removal of the subjective element of the Ghosh test constitutes the removal of a significant evidential and legal burden for prosecutors. Accordingly, it is possible that the new test for dishonesty could precipitate an increased number of prosecutions for criminal dishonesty offences, such as fraud, as prosecutors will no longer need to prove that a defendant knew that their actions were dishonest by objective standards.
The removal of the subjective protection afforded by Ghosh will also apply in a corporate context and could have an impact on corporate prosecutions for fraud and other dishonesty offences. Prosecutors will no longer need to prove that senior management actually understood their actions to be objectively dishonest in relation to such offences, removing at least one prosecutorial hurdle. However, whilst this may be of some assistance, the “identification principle” applicable to corporate prosecutions continues to pose significant challenges in securing corporate convictions. Confirming the objective test for criminal dishonesty will not provide an immediate solution to those challenges.
Co-authored by trainee solicitor, James Reid