The Supreme Court in Ivey v Genting Casinos  2 All ER 406 and the Court of Appeal in R v Barton & Booth  EWCA Crim 575 finally synthesised the tests for dishonesty in the civil and criminal courts. However, this has resulted in a much narrower consideration of a defendant’s subjective beliefs and a widening of the basis for conviction – it now includes situations where a defendant may not be fully culpable.
Mr Barton was the owner of a luxury care home where, by all accounts, residents were well cared for, and Ms Booth was his manager. It was alleged that together Mr Barton and Ms Booth ‘groomed’ elderly and wealthy residents, who, while they had the capacity to make decisions about their affairs and apparently entered into transactions willingly, were vulnerable. Complainants were allegedly selected because they did not have any family and Mr Booth and Ms Barton caused them to be isolated from their friends and trusted professional advisers.
Mr Booth and Ms Barton were alleged to have charged fees, provided services, and sold goods, including Rolls-Royce motor cars, to the complainants at vastly over-inflated prices. They also received financial payments, loans, and gifts from the complainants and, soon after their arrival at the nursing home, became beneficiaries of their wills or allowed Mr Barton to assume control of their finances. Mr Barton and Ms Booth’s case was that the complainants willingly gave genuine gifts and made payments for legitimate fees. Ms Booth further contended that she had no dealings with the care home’s or residents’ finances. The overall value of the alleged fraud ran into many millions.
Mr Barton was convicted of four counts of conspiracy to defraud, three counts of theft, one count of fraud, one count of false accounting, and one count of transferring criminal property. Ms Booth was convicted of three counts of conspiracy to defraud. They both appealed their convictions.
The judgment of the five-member Court of Appeal, including the Lord Chief Justice Lord Burnett, was that their convictions were not unsafe. Mr Barton’s sentence of 21 years imprisonment was however found to be manifestly excessive and was reduced to 17 years.
The Court of Appeal found that the test for dishonesty in all criminal cases is same test as applied in civil cases, set out in the obiter comments of Lord Hughes in the Supreme Court case of Ivey, as follows:
- What was the defendant’s actual state of knowledge or belief as to the facts?
- Was the defendant’s conduct dishonest by the standards of ordinary decent people?
This was a departure from the test established by the Court of Appeal in R v Ghosh  EWCA Crim 2 which was as follows:
- Was the defendant’s conduct dishonest by standards of reasonable/honest people?
- If so, did the defendant realise that their conduct was dishonest by those standards?
The Court of Appeal made it clear that dishonesty remains a test of a defendant’s state of mind, knowledge, and belief, to which the standards of ordinary people are then applied. It stated that all matters that led a defendant to act as they did, not just past facts, are relevant and form part of the jury’s fact-finding exercise and can include the experience and intelligence of the defendant. It found that the reasonableness of the defendant’s belief goes to whether they in fact held the belief. The belief need not be reasonable, the question was whether it is genuinely held.
The Court of Appeal in Barton cited with approval Lord Hughes’ explanation of the problems with Ghosh including that the unintended consequence of Ghosh was that the more warped a defendants’ standards of honesty, the less likely that they would be convicted and this was as a test which jurors found puzzling. The Court of Appeal also commented that Ghosh had led to an unprincipled divergent test for dishonesty in criminal and civil proceedings.
The court determining the appeal in Barton was the Court of Appeal. Normal rules of precedent dictate that the Court of Appeal ought to have been bound by its own earlier definition of dishonesty in Ghosh (which could then be appealed to the Supreme Court). The alternative definition of dishonesty offered by a higher court, such as the Supreme Court decision of Ivey, is known as ‘obiter dicta’ because it was not essential to its decision and therefore would not ordinarily create a binding precedent that should be followed.
However, in Ivey, Lord Hughes stated that the second limb of Ghosh ‘does not correctly represent the law and … directions based upon it ought no longer to be given’. In view of this, the Court of Appeal concluded that the Supreme Court had altered the established common law approach to precedent in the criminal courts. The Court of Appeal in Barton concluded that in Ivey, the Supreme Court had found that in certain limited circumstances, obiter dicta of the Supreme Court should be followed, in preference to an otherwise binding authority of the Court of Appeal.
Therefore, where the Supreme Court directs that an otherwise binding decision of the Court of Appeal should no longer be followed and proposes an alternative test to be adopted, the Court of Appeal is bound to follow that direction from the Supreme Court, even though it is strictly obiter dicta.
In Barton the Court of Appeal confirmed though that the modifications to the rules of precedent were confined to cases where all the judges in the appeal in the Supreme Court agree that to be the effect of the decision – as this indicates that the decision is definitive and that any further appeal would be a foregone conclusion and binding. The Court of Appeal also commented that the rules of precedent are there to provide legal certainty but they are capable of flexibility and they are not a code that exists just for its own sake.
Conspiracy to defraud
The case also raised two subsidiary questions about the definition of conspiracy to defraud:
- Whether there is a requirement of unlawfulness or an aggravating feature over and above a dishonest agreement which includes an element of unlawfulness in its object or means.
- Whether the offence meets the requirements of legal certainty under common law and ECHR Article 7.
The Court of Appeal endorsed the definition of conspiracy to defraud given in Scott  3 All ER. The elements of conspiracy to defraud are broadly that there is an agreement by dishonesty to:
- Deprive a person of something which is theirs or to which they may be entitled, or;
- injure a proprietary right.
The Court of Appeal also endorsed the explanation given in Evans  1 WLR 2817 that there must be a dishonest agreement which includes unlawfulness either as to the object of the agreement or as to the means by which it will be carried out. Therefore, it is not necessary to prove an intent to deceive or an intent to cause financial loss, merely that a proprietary right must be injured or potentially injured. From this, the Court of Appeal concluded that a dishonest agreement which includes an element of unlawfulness in its objects or means will suffice and there is no need for an element of unlawfulness or another aggravating feature over and above this.
In Barton, the Court of Appeal stated that the necessary element of unlawfulness was the positive and extensive deceit they used in relation to the complainants with the intention of prejudicing a proprietary right or interest (by obtaining property to which the Appellants were not entitled).
In both Ivey and Barton the courts emphasised that the test for dishonesty remains a subjective one. However, it is clear that the subjective element has been significantly narrowed and the basis of conviction has been widened and now includes situations where the defendant may not be fully culpable. The courts stated that one of the problems with Ghosh was that the more warped a defendants’ standards of honesty, the less likely they would be convicted. This rationale and the rejection of Ghosh indicates that where a defendant genuinely does not realise that their conduct was dishonest, they will be convicted where their conduct is considered dishonest by the standards of ordinary decent people. For example, if a defendant argues that they were guided in their understanding about standards of conduct by say, the employment context in which they were operating, and for this reason, genuinely did not believe that their conduct was dishonest, they would be found guilty where their conduct fell below the standard expected of ordinary people.
The Court of Appeal further stated that all matters that led a defendant to act as they did, not just past facts, are relevant and form part of the jury’s fact-finding exercise and can include the experience and intelligence of the defendant. The question is what are the boundaries of this and what evidence will the defendant be permitted to rely on about their subjective experience, intelligence and understanding. Self-evidently, the defendant will not be permitted to say they did not realise that their conduct was dishonest as this was precisely what has been ruled out. The Court of Appeal gives examples of permitted considerations including the overseas visitor who fails to pay for a bus journey believing it to be free or of the diner or shopper who genuinely forgets to pay before leaving. However, it remains to be seen how this will be developed and what steps the courts will have to take to avoid the jury’s fact-finding slipping back into Ghosh.
This lack of clarity is all the more concerning in relation to the offence of conspiracy to defraud. Despite being heavily criticised for being too nebulous and as offering little guidance on the difference between fraudulent and lawful conduct, conspiracy to defraud is still regularly prosecuted. Very often the context to these allegations is complex and sophisticated commercial arrangements, where the critical element of a defendant’s case is whether their conduct was dishonest. The position is further confused by the definition of conspiracy to defraud set out by the Court of Appeal in Barton. To a jury, the necessary elements of unlawfulness cited by the court – the extensive deceit of the complainants with the intention of prejudicing their proprietary rights – may look an awful lot like dishonesty, rather than unlawfulness.
Finally, in relation to the rules of precedent, the court found that where the Supreme Court directs that an otherwise binding decision of the Court of Appeal should no longer be followed and proposes an alternative test to be adopted, the Court of Appeal is bound to follow that direction from the Supreme Court, even though it is strictly obiter dicta. As a matter of practicality, where there is a clear direction, it is easy to see why it is preferable that judges are not required to ‘direct juries in a way which would necessarily be overturned’. The Court of Appeal confirmed that this amendment to the rules of precedent is confined to cases where all the judges in the appeal in the Supreme Court agree that to be the effect of the decision – as this indicates that the decision is definitive. However, it is surprising that no stipulations were made about the court having heard full argument on the point, which may not necessarily have been the case if the point relied on was obiter dicta.
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