Wednesday, November 1, 2017

UK Court Says Dishonesty Not An Essential Element of Cheating


In a judgment given on October 25, 2017, five justices of the Supreme Court of the United Kingdom held unanimously that dishonesty was not an essential element of the civil tort of cheating. 


In Ivey v. Genting Casinos (UK) Ltd t/a Crockfords [2016] UKSC 67, the Supreme Court upheld the decision of Mr. Justice Mitting of the Queen’s Bench Division of the High Court of Justice.  Lord Hughes wrote the decision for the court (Lord Neuberger, Lady Hale, Lord Kerr and Lord Thomas all agreed). 


The facts giving rise to this case are unique.  The claimant is Phillip Ivey, an American professional gambler.  Mr. Ivey widely acknowledged to be one of the world’s best poker players.  He also plays blackjack, craps, roulette and baccarat.  At issue in this case is a variant of baccarat known as Punto Banco.


How to Play Punto Banco


The facts of this case are not in dispute.  Punto Banco is not a game of skill.  It is played with eight decks of cards, 416 cards in total, which are dealt from a shoe - face down by a croupier.  The croupier deals cards in a sequence from which no deviation is permitted to two positions on the table in front of her marked “player” (the Punto) and “banker” (the Banco), hence the name of the game.  The croupier deals one card to player, one to banker; a second card to player and a second to banker.  In some circumstances, she must deal one further card either to player or to banker or to both.  The basic object of the game is to achieve, on one of the two positions, a combination of two or three cards which when added together is nearer to nine in total than the combination on the other position.  Aces to nine count at face value, ten to king inclusive count as zero.  Any pair or trio of cards adding up to more than ten, requires ten to be deducted before the total count, thus four plus five equals nine but six plus five (which equals eleven) equals only one in the game. 


The gambler (or "punter" as they are known in the UK) bets before any card is dealt and can bet on player or banker.  It is possible to bet on a tie.  The house edge in Punto Banco is 1.24% if player wins and 1.06% if banker wins.


Before play begins, the cards are cut to eliminate a proportion of the shoe from those to be played.  Traditionally, seven cards out of the 416 in the shoe were cut, but some casinos routinely eliminate more.




On August 20 and 21, 2012, Mr. Ivey played fifteen shoes of Punto Banco at Crockfords Club in London.  He was aided by another professional gambler, Cheung Yin Sun (“Ms. Sun”).  Mr. Ivey won just over ₤7.7 million.  There is no dispute that he used a technique known as edge-sorting to achieve that win.


A deck of playing cards is manufactured in order to present a uniform appearance on the back of the card.  The backs of some cards are, however, not exactly uniform.  In casino games in which the orientation of the back of the card may matter, the casino attempts to use cards in which the backs and the edges are indistinguishable.  Edge-sorting is possible when the manufacturing process causes tiny differences to appear on the edges of the cards so that for example the edge of one long side is marginally different from the edge of another long side.  In some cases the machine which cuts the card leaves very slight differences or patterns which are visible on long edges of the cards.  Manufacturers assert that this is not a defect but is within a contractually specified tolerance of 0.3 millimetres.  Before a card is dealt from the shoe, it sits face down at the bottom of the shoe displaying one of its two long edges.  It is possible for a sharp-eyed person sitting close to the shoe (like Mr. Ivey), to see which long edge it is.  The information thus gained is only useful to the gambler if he knows or has a good idea of what card it is. 


Cards with a face value of seven, eight and nine are high value cards.  If the gambler knows that when the first card is dealt whether it is a seven, eight or nine, always to player, is a seven, eight or nine, he will know it is more likely than not, that the player will win.  If it is not one of those three cards, he will know that it is more likely than not that the banker will win.  Such knowledge will give the gambler a long-term edge of about 6.5% over the house.  Three conditions must occur before the gambler can gain that knowledge:  (1)  the same shoe of cards must be used more than once; (2) cards with a face value of seven, eight or nine must be turned through 180 degrees by comparison with all other cards; and (3) when reshuffled no part of the shoe must be rotated.  Step two is the process known as edge-sorting. 


If the casino realizes that the seven, eight and nine cards are being turned, it will take simple steps to avoid giving the gambler an advantage.  It is therefore essential for edge-sorting to work that the croupier does not realize that the seven, eight or nine cards have been deferentially sorted.  Two people can rotate the cards – the gambler or the croupier.  If the gambler touches the cards, most casinos, including Crockfords, will not permit that shoe to be reused.  Therefore, for edge-sorting to work at Crockfords, it is essential that the croupier is persuaded to rotate the relevant cards without her realizing why she is being asked to do so.  Casinos routinely play on quirky and superstitious behaviour by gamblers.  It is in the casinos’ interest that gamblers should believe that a lucky charm or practice will improve their chance of winning.  Consequently, a wide variety of requests by gamblers, particularly those willing to wager large sums, like Mr. Ivey, are accommodated by casinos.


Ivey’s Gambit


All of the games of Punto Banco that Mr. Ivey and Ms. Sun played were captured on CCTV, contemporaneously with audio recording.  The moment they persuaded the croupier, Kathy Yau, to rotate the cards was as 9:00 p.m. on August 20, 2012. 


Mr. Ivey began the Punto Banco game by betting modestly by his standards – between ₤4,000 to ₤75,000 per bet.  He was losing.  At 8:56 p.m. he requested a new shoe of cards.  At 8:57 p.m., Mr. Ivey asked the senior croupier overseeing the game, “If I win, can I say I want the same cards again?”, to which the senior croupier replied yes “because he was not bending them”.   Mr. Ivey had avoided touching the cards from either the first or second shoe onwards.  At that point, Justice Mitting describes in detail the video proceedings at the Punto Banco table captured by the CCTV.  Mr. Ivey and Ms. Sun persuaded the croupier to cut only seven cards from the end of the shoe.  Ms. Sun persuaded the croupier to turn the cards in a particular way in order to “change her luck”.  They then persuaded the croupier to keep the same shoe because they had won with that shoe.  The cards were reshuffled by a machine but the croupier did not rotate them before they were shuffled.  Mr. Ivey increased his betting so that the average stake was never less than ₤149,000.  By the end of the game he had won just over ₤7.7 million.  He was provided with a receipt for that amount and told it would be wired to him.


Crockfords’ Investigation


Crockfords’ practice when any large win by a gambler occurs is to conduct an investigation to determine how it happened.  Its investigation determined that Mr. Ivey had been edge-sorting, which he later freely admitted.  Accordingly, Crockfords did not pay Mr. Ivey his winnings but refunded him his stake of ₤1 million.  Mr. Ivey sued Crockfords for his winnings.


Trial Decision


The casino denied liability on, among other grounds, that there was in implied term that Mr. Ivey would not cheat and that term had been broken. 


Justice Mitting held that if Mr. Ivey had cheated then he would not be entitled to recover his winnings.  He also found that in the UK there was a “complete dearth of authority on cheating at common law, at least in the civil context".  In addition, there was a dispute among gaming experts as to whether edge-sorting does or does not amount to cheating.  Experts were called by both parties. 


Mr. Ivey described what he and Ms. Sun did as “legitimate gamesmanship”.  While the trial judge was not satisfied that the edge-sorting amounted to deception of such a kind as to vitiate the gaming contract, he held that it was deception nonetheless.  Mr. Ivey and Ms. Sun succeeded in persuading the casino staff not to depart from their usual practice of humouring high stakes gamblers by acceding to a request which in their view did not affect the outcome of the game.  But it did. 


The fact that Mr. Ivey did not see himself as cheating was not determinative of the issue.  The trial judge held that what he did amounted to cheating because:  (1)  he gave himself an advantage throughout the play of the sixth and subsequent shoes by knowing or having a good idea whether the first card was or was not a seven, eight or nine; (2)  he did so by using the croupier as his innocent agent by turning the seven, eight and nine cards differentially; and (3) he did so in circumstances in which he knew that she and her superiors did not realize the consequence of what she had done at his instigation. 


Accordingly, the judge found that Mr. Ivey had converted a game of essentially pure chance into a game in which his knowledge was greater than that of the croupier and greater than that which he would reasonably have expected it to be. 


Accordingly, the judge found that conduct that amounted to cheating for the purposes of civil law and it was immaterial that the casino could have protected itself against the cheating by simple measures.


The Appeal


Mr. Ivey appealed this decision to the Supreme Court.  The court dismissed his appeal and agreed with the trial judge.  In doing so, it held that it was necessary to determine whether cheating necessarily involves dishonesty.  It held that the answer was no.  Mr. Ivey had argued that he had not been dishonest, he had just simply engaged in “advantage play”. 


The court rejected that argument.   It held that cheating's essentials normally involve a deliberate act designed to gain an advantage in the play which is objectively improper given the nature, parameters and rules of the game.  The Court of Appeal agreed with the trial judge’s conclusions that Mr. Ivey’s action amounted to cheating.  It held that it is an essential element of Punto Banco that the game is one of pure chance, with the cards delivered entirely at random and unknowable by the gamblers or the house.  The court held that what Mr. Ivey did was "to stage a carefully planned and executed sting".  The key factor was arranging of the several packs of cards in the shoe differentially sorted so that Mr. Ivey would not know whether the next card was a high or low value one.  However, he had gained the knowledge through the unwitting but directed actions of the croupier, tricking her into thinking that what she did was irrelevant.  The court found that what Mr. Ivey did was much more than observe the cards.  He took positive steps to fix the deck.  That conduct, in a game which depends on random delivery of unknown cards constituted cheating.  While it was cleaver and skillful and must have involved what the court referred to as “remarkably sharp eyes”, it cannot alter that truth.     


After a detailed review of the law, the court held that the facts of the case did not arise to the legal element of dishonesty.  However, it was incorrect to suggest that the trial judge’s findings that Mr. Ivey was truthful when he said that he did not regard what he did as cheating amounted to a finding that his behaviour was honest.  It was not.  It was a finding that he was, in that respect, truthful.  A dishonest person may sometimes be truthful about his dishonest opinions.  The court held that the better conclusion was that Mr. Ivey’s conduct was, contrary to his own opinion, cheating and was, contrary to his own opinion also dishonest. 

However, the court also held that dishonesty was not an essential element of the civil tort of cheating in the sense that there was no requirement that a defendant must appreciate that his conduct was dishonest.




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