The Court of Appeal has handed down judgment in a claim brought by Phil Ivey, “the world’s best poker player” in relation to the recovery of £7.7 million worth of winnings from the Crockfords Club casino in London (“Crockfords”).
Mr Ivey is well known professional gambler who has won 10 World Series of Poker Bracelets and one World Poker Tour Title resulting in winnings amounting to millions of dollars and these outside of the considerable private winnings he has earned in casinos around the World. He is reported to have won $16 million in a single game, lasting some three days, against Texan Billionaire Andy Beal.
During the course of 20 and 21 August 2012 Mr Ivey attended Crockfords to play Punto Banco a variation of the card game Baccarat. Punto Banco is a game of chance with no skill or strategy involved as the outcome is determined purely by the cards with no decision making from the player.
Whilst at Crockfords Mr Ivey played 15 ‘shoes’ of Punto Banco, betting up to £149,000 per hand, during which time he won just over £7.7 million.
Following such a large win Crockfords conducted its normal review to establish how it happened and if anything untoward had occurred. Crockfords’ Head of Compliance, Jonathan Duffy, discerned the likely answer by remembering a card trick shown to him by his grandfather in which he was able to successfully determine the card picked by an individual as a result of the difference in the size of the card’s border.
Having reviewed the CCTV footage of Mr Ivey’s play Mr Duffy satisfied himself Mr Ivey was ‘edge-sorting’, a practice possible when the manufacturing process causes tiny differences to appear on the edge of the cards. Skilled players use these differences to their advantage in order to determine what card will be drawn next from the shoe.
Mr Duffy was able to determine this as Mr Ivey had duped the croupier into turning certain cards in the deck, on the basis he was superstitious, such that the correct border would be shown when next it was drawn from the shoe.
It is of note that the manufacturer of the cards used by Crockfords confirmed that the difference in the pattern on the back of the cards was no more than 0.3 millimetres and within the contractually specified tolerance.
Having detected that Mr Ivey was edge-sorting he was notified that Crockfords would not pay him his winnings because the game had been compromised by his actions but that they would return his £1 million deposited stake.
As a result Mr Ivey sued for his winnings.
First Instance Decision
On 8 October 2014, Mr Justice Mitting handed down his first instance decision. For a more detailed description of Punto Banco see paragraphs 4 to 8 of this judgment and for further background see paragraphs 17 to 32.
Crockfords denied liability on the following grounds:
“(1) No game of Punto Banco was in fact played because the premise on which the game proceeds, that the cards will be dealt at random, was defeated because the player knew what the first card of any coup dealt was likely to be before it was turned face up;
(2) There was an implied term that the claimant would not cheat and that term was broken;
(3) The claimant committed the criminal offence of cheating under section 42 of the Gambling Act 2005 by interfering with the game or deceiving the Crockfords’ staff and so is disentitled to found his claim on his own criminal conduct.” 
Mr Ivey admitted the implied term but denied cheating or committing a criminal offence instead asserting that he, at all times, acted lawfully.
In relation (1) above Mitting J did not accept that no game was played as the game was played according to the rules, the cards were dealt in the prescribed sequence and bets paid at the prescribed odds. The case therefore turned on the second and third grounds of Crockfords defence.
In relation to the second of these points, whether or not Mr Ivey cheated, Mitting J described the “dearth of authority on cheating at common law, at least in the civil context” . Mitting J stated he must decide whether Mr Ivey’s conduct was “legitimate gamesmanship” or whether it amounted to cheating.
At  he concluded that when considering the issue of cheating, he agreed with the findings of the Chancellor of the High Court in Starglade Properties Ltd v Nash  EWCA Civ 1314 that “ultimately in civil proceedings it is for the court to determine what that standard is and to apply it to the facts of the case.”
Mr Ivey’s counsel had argued on his behalf that he could not be guilty of cheating as what he had done was not dishonest. Mitting J accepted that Mr Ivey had not acted dishonestly but disagreed that this meant he could not be guilty of cheating. The Judge found that Mr Ivey had given himself an advantage by deceiving the croupier into allowing him to edge-sort the cards thus giving him an added advantage which constituted cheating for the purposes of civil law and therefore his claim failed.
In light of his finding that Mr Ivey had cheated Mitting J did not consider the application of section 42 of the Gambling Act 2005.
Court of Appeal
Mr Ivey appealed the decision of Mitting J. In a split decision the Court of Appeal dismissed the Appeal.
Lady Justice Arden gave the lead judgment in favour of dismissing the Appeal. In doing so she considered two particular submissions advanced on his behalf (i) that a finding of cheating required subjective dishonesty by Mr Ivey; and (ii) the relevance of the fact that events took place between a casino and an advantage player such as Mr Ivey.
In relation to the first submission Arden LJ considered the issue of ‘cheating’ as it related to the admitted implied term which she considered “to do no more than reflect the basic common law rule that a contract to do an unlawful act is not enforceable” . She went on to find that the meaning of “cheat” should follow section 42 of the Gambling Act 2005 (“the Act”) which states:
“(1) A person commits an offence if he —
(a) cheats at gambling, or
(b) does anything for the purpose of enabling or assisting another person to cheat at gambling.
(2) For the purposes of subsection (1) it is immaterial whether a person who cheats —
(a) improves his chances of winning anything, or
(b) wins anything.
(3)Without prejudice to the generality of subsection (1) cheating at gambling may, in particular, consist of actual or attempted deception or interference in connection with —
(a) the process by which gambling is conducted, or
(b) a real or virtual game, race or other event or process to which gambling relates.”
At this point she concluded:
“that interference with the process of the game without proof of dishonesty may be enough to constitute cheating for the purposes of section 42 of the 2005 Act. The question then is: what form of interference qualifies for this purpose?” .
The second submission advance by Mr Ivey was that he was an internationally renowned ‘advantage player’. As such Crockfords would have been well aware that he would seek every mathematical and psychological advantage possible to exploit the weaknesses of the casino. Further Crockfords had a number of opportunities to refuse to accede to Mr Ivey’s requests which were agreed to with reference to senior managers within the casino. This was an issue with Mitting J had considered to be “legitimate gamesmanship”.
Arden LJ agreed with Mitting J that Mr Ivey had cheated stating:
“86. …In my judgment, because of his plan to play using the knowledge obtained from the reorienting of the cards under his direction, those matters amounted to interference with the process by which the game was conventionally played. It was quite different from card-counting which involves memorising where particular cards are.
87. True, the judge found neither dishonesty nor deception. The court has to take into account the fact that these factors were not present, but, as already explained, the 2005 Act does not make dishonesty a necessary ingredient of “cheating” in every situation.”
In effect Arden LJ found Mr Ivey guilty of cheating honestly.
Lady Justice Sharp dissented from the judgment of Arden LJ again highlighting the “dearth” of authority on the issue of “cheating” noting in particular the notorious cricket spot-fixing cases as examples of cheating which were so obvious that no definition was required.
Sharp LJ disagreed with Arden LJ on the basis that:
“Crockfords were in complete control of the procedures by which [Mr Ivey’s] play was conducted, and the gaming equipment used for play, and they had the power to consent to or refuse any requests he made. Accordingly, as a result of Crockfords’ decision to: (a) deal defective cards; (b) comply with his open request to continue using the same deck or decks; (c) orientate some cards while they were turned over; (d) shuffle the cards mechanically and (e) allow the leading edge of the first card in the shoe to be visible before it was dealt, Crockfords allowed Mr. Ivey and Ms. Sun to use the advantage play strategy of edge-sorting and gain a potential advantage as to the likely range of values of the first card in the shoe before that card was dealt. He had done no more therefore than legitimately exploit a chink in the Casino’s considerable armour, which he was quite entitled to do.” 
Further Sharp LJ considered that the meaning of “cheat” for the purposes of the implied term should be the same as that under section 42 of the Act and that the required mens rea of the offence was one of dishonesty. She stated:
“I am bound to say I find the suggestion that someone can be guilty of the criminal offence (in effect) of “honest cheating” at gambling to be a startling one which is not mandated by the language of the statute itself.” 
In the circumstances, given she agreed with the findings of both Mitting J and Arden LJ that Mr Ivey had not acted dishonestly, Sharp LJ said that she would allow the Appeal.
Gambling is a topic which divides many and the issue of advantage play in particular. Where the odds are heavily stacked against the individual in favour of the casino it would appear unjust to prevent a skilled player from legitimately exploiting any weakness in such a highly regulated and monitored environment; one in which such ‘high rollers’ are encouraged and incentivised to play.
Card-counting and edge-sorting increase the odds in favour of the skilled player however considerable risk remains; should a player who has honed his skilled be handicapped any more than any other sportsman who has not practised as much as his opponent?
For these reasons it is perhaps not surprising that a split decision was reached. For what it is worth the author supports Sharp LJ’s conclusions that what Mr Ivey was doing was within the implied terms of his agreement with the casino and that he was simply exploiting a weakness the casino could have shut down at any stage.