HKSAR v. FAN MING-KEI, ANTHONY AND ANOTHER

CACC 319/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 319 OF 2015

(ON APPEAL FROM DCCC NO. 4 OF 2015)

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J U D G M E N T

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Hon Lunn VP (giving the Judgment of the Court) :

1.  With the leave of McWalters JA, granted on 27 July 2016, the 1^st and 2^nd appellants each appeal against their convictions after trial on 28 August 2015 by District Court Judge Yiu of four separate charges of fraud, contrary to section 16A of the Theft Ordinance, Cap. 210 (“the ordinance”) and against the sentences of imprisonment imposed on them on 16 September 2015 in respect of all four charges, which each of them faced, of 20 months and 14 months’ imprisonment respectively. The judge ordered that all of the sentences for each of the appellant’s sentences were to be served concurrently.

The Charges

Charges 1-4: the 1^st appellant

2.  The 1^st appellant faced four charges of fraud, Charges 1, 2, 3 and 4, in relation to four different policyholders.  The Particulars of Offence of each charge were the same, save as to the date, the policyholder and insurance policy number.  The Particulars of Offence of Charge 1 stipulated:

“ FAN Ming-kei, Anthony, on or about the 28^th day of March 2012, in Hong Kong, by deceit, namely by falsely representing to AU YEUNG Sheung-kim that the insurance policy numbered 8310290 was taken out with Convoy Financial Services Limited as his insurance intermediary and the said FAN Ming-kei, Anthony as the financial consultant for the said insurance policy numbered 8310290 and with intent to defraud, induced the said AU YEUNG Sheung-kim to commit acts or make omissions which resulted in benefit to the said FAN Ming-kei, Anthony or prejudice or substantial risk of prejudice to the said AU YEUNG Sheung-kim, namely, to take out the said insurance policy numbered 8310290 with Zurich International Life Limited.”

3.  In its written opening the prosecution said of the resulting benefit to the 1^st appellant: [1]

“ As a result of selling these 4 policies, D1 was paid commission of $475,317.96 by GET via the bank account of GET Consulting Company Ltd.”

4.  Of the prejudice or substantial risk of prejudice to the four policyholders, the prosecution asserted in its written opening: [2]

“ ...they believed they took out the policies via Convoy and D1 was all along their handling TR. The four policyholders did not know that their respective Policies 1 to 4 were taken out via GET nor did they know D2. The four policyholders would not have taken out their policies if they knew that the handling agent was D2, TR of GET, instead of D1 of Convoy.”

Charges 5-8: the 2^nd appellant

5.  The 2^nd appellant faced four charges of fraud, Charges 5, 6, 7 and 8, in relation to each of the four policies.  The Particulars of Offence of each charge were the same, save as to the date, the policyholder and insurance policy number.  The Particulars of Offence of Charge 5 stipulated:

“ LAI Kwok-hing, on or about the 30^th day of March 2012, in Hong Kong, by deceit, namely by falsely representing to Zurich International Life Limited (“Zurich”) that the said LAI Kwok-hing had fully explained the contents of the Investment-Linked Assurance Scheme-Applicants’ Declarations in relation to insurance policy numbered 8310290 to AU YEUNG Sheung-kim and with intent to defraud, induced the said Zurich to commit acts or make omissions which resulted in benefit to the said LAI Kwok-hing or prejudice or substantial risk of prejudice to the said Zurich, namely, to approve the insurance policy numbered 8310290 in favour of the said AU YEUNG Sheung-kim and release the commission to GET Wealth Management Limited.”

6.  Of the prejudice to or substantial risk of prejudice to Zurich, in its written opening the prosecution said: [3]

“ Believing that the policies were genuinely taken out via GET and D2 was the handling TR, Zurich approved all 4 policies and released the associated commissions totalling $608,127.39 to GET. Had Zurich known that D2 did not meet with and explain the policies of the four policyholders, Zurich would not have approved those policies and subsequently released commissions to GET.”

7.  In its written opening the prosecution did not stipulate the alleged benefit to the 2^nd appellant.

The trial

8.  There was no dispute that the 1^st appellant was an agent of Convoy Financial Services Limited (“Convoy”) employed as a consultant pursuant to a contract for services and the 2^nd appellant was employed by GET Wealth Management Limited (“GET”) as a Distribution Director.  Convoy and GET were registered with the Hong Kong Professional Insurance Brokers Association (“PIBA”) and the Hong Kong Confederation of Insurance Brokers (“CIB”) respectively.  The 1^st appellant was registered with the PIBA as a Technical Representative (“TR”) of Convoy and the 2^nd appellant was registered with the CIB as a TR of GET.

9.  Convoy and GET each had broker agreements with Zurich International Life Limited (“Zurich”) personally, pursuant to which they promoted investment-linked insurance policies of Zurich.  In return, they received commissions at agreed rates from Zurich on the execution of policies.  Those commissions were shared with the TRs who sold the policies. 

10.  Zurich required the TR promoting their insurance products to interview and explain the insurance product to the applicant and to assist him or her to complete an Insurance Application Form (“the Application Form”) and a Financial Needs Analysis Form (“the Analysis Form”) with true and correct information.  The handling TR was required to declare on the Application Form and the Analysis Form that he had completed the forms with the applicant. 

The prosecution case

The 1^st appellant

11.  The prosecution case was that the 1^st appellant had falsely represented to each of the four policyholders stipulated in the Particulars of Offence of Charges 1-4 that their respective insurance policies with ZurichweretakenoutwithConvoyasinsuranceintermediaryand the 1^st appellant as the handling Technical Representative (TR).  However, the policies were in fact taken out with GET as intermediary and the 2^nd appellant as the handling TR.  The four policyholders testified that they did not know their policies were taken out through GET and the 2^nd appellant, and that they would not have taken them out if they had known that was the case. 

12.  Zurich was unaware of what had taken place and issued the policies and paid commissions to GET, the company by which the 2^nd appellant was employed.  Zurich would not approve an application if it knew that the named TR in an application was not the handling TR responsible for the insurance policy.[4] Then, the policies were transferred from GET to Convoy.  GET agents earned a higher share of the commission from Zurich than Convoy agents.  As a result, the 1^st appellant earned $111,839.60 [5] more than he would have received in commission if the four policies have been processed through Convoy.

The 2^nd appellant

13.  It was the prosecution case that the 2^nd appellant represented falsely to Zurich that four policies were taken out through GET, with the 2^nd appellant as the handling TR.  In the documentation submitted to Zurich, the 2^nd appellant misrepresented that he had explained the contents of each of the policies.  Furthermore, he declared falsely that he had gone through the Analysis Form with the respective policy holders.  The 2^nd appellant had not done so.  Acting on those representations, namely that the policies were issued through GET with the 2^nd appellant as handling TR, Zurich approved the policies and paid commissions to GET to a total of $608,127.39.   Zurich would not have approved the policies or paid the commissions, save for the misrepresentations.

The 2^nd appellant’s out-of-court statements

14.  Also, the prosecution relied on out-of-court statements made by the 2^nd appellant. First, in statements to ICAC officers when he was arrested and cautioned [6] and, secondly in a subsequent video recorded interview. [7]  The 2^nd appellant admitted that he represented falsely to Zurich that he was the handling TR of the four policies and that he had explained the contents of the policies to the four policyholders.  In fact, he had not done so. 

Special issue

15.  The prosecution adduced evidence from two ICAC officers in response to the challenge made on behalf of the 2^nd appellant to the admissibility of the written record in the ICAC officer’s notebook of the oral statements made by the 2^nd appellant in response to having been arrested and cautioned in the early morning of 5 November 2013 and to his subsequent video recorded interview.

16.  Senior Investigator Wong Kwok Kay testified that, at 06:54 hours on 5 November 2013, he arrested the 2^nd appellant at the latter’s home on suspicion that he had offered advantages to the 1^st appellant as a reward for transferring business from Convoy to GET.  Then, he gave a Notice to Persons in Custody, which enumerated 11 rights of such a person, to the 2^nd appellant.  The 2^nd appellant was invited to read it and, having done so, signed the form which bore the time 06:54 hours. [8]  With his consent, the 2^nd appellant was permitted to make several telephone calls to his supervisor, so that he could request that his supervisor get him a lawyer.  The 2^nd appellant was unsuccessful, although he left a message.

17.  In response to having been cautioned, the 2^nd appellant made replies which he recorded in his notebook.  Then, at 07:40 hours the 2^nd appellant signed that record, it having been read to him by Senior Investigator Wong.  At 07:45 hours the 2^nd appellant was escorted by car to ICAC Headquarters, which they reached at 08:15 hours.  During the journey, the 2^nd appellant spoke on his telephone to someone about obtaining a lawyer.

18.  At ICAC Headquarters, with his consent, the 2^nd appellant made another telephone call to his supervisor in connection with his request that he get him a lawyer.

19.  Between 08:33 and 09:27 hours he conducted a video recorded interview under caution of the 2^nd appellant.  At an early stage of the video recorded interview, the 2^nd appellant confirmed that he had been allowed to make a telephone call to his supervisor to seek his help in getting a lawyer.  However, the 2^nd appellant confirmed that up to that moment no arrangement had been made with a lawyer.[9]　　The 2^nd appellant confirmed that, nevertheless, he was willing to participate in the video recorded interview. [10]

The defence case

1^st appellant

20.  The 1^st appellant did not give or call evidence in the defence case.  His case, as put in cross-examination and in submissions, was that the four policyholders could not have failed to notice the name of GET printed on the documents they had signed. The judge was invited to note that three out of four of them eventually took their business with him to GET, even after the ICAC investigation.  It was submitted that the policyholders were not misled because the 1^st appellant was in fact in charge of their policies [11].  Issue was taken that the 1^st appellant intended to deceive.  After submission of the application forms and the Analysis Form, there remained many other steps which made concealment of the reality difficult.

2^nd appellant

The special issue

21.  The 2^nd appellant testified in the special issue, in which objection was taken to the admissibility of the written record in the ICAC officer’s notebook of the oral statements made by the 2^nd appellant in response to having been arrested and cautioned in the early morning of 5 November 2013 and to his subsequent video recorded interview.

22.  The 2^nd appellant testified that he had been arrested at his home in the early morning of 5 November 2013, but he had not been cautioned then. [12]  He was “Very shocked and not comfortable.” [13]  He wished to have a lawyer present.  Having been allowed to contact his supervisor, Leung Wai Hon, he asked him to contact a lawyer.  Whilst he was in a motor car being escorted to ICAC headquarters, he received a call from a lawyer, who said another lawyer would come to meet him.  He told the caller the address of the ICAC headquarters, to which he was being taken.  At ICAC headquarters, he had been told to turn his telephone off, that he did not need a lawyer and that the questions were simple.  He did not know that he had the right to have a lawyer present at any questioning of him by ICAC officers.  He continued to feel confused.  He felt helpless and very nervous during the video recorded interview.

The general issue

23.  The 2^nd appellant did not give or call any evidence in the defence case on the general issue.  It was submitted on his behalf that not only did Zurich not suffer any prejudice but also the 2^nd appellant did not receive any benefit for his role in events by way of commission. 

Reasons for Verdict

The special issue: the 2^nd appellant

24.  In his Reasons for Verdict, the judge determined:[14]

“ ...the notebook entry and the interview were all made voluntarily by D2 and there is no other reason to exclude it. These are all admissible evidence.”

25.  In reaching that determination, the judge said that he found that the ICAC investigators, Wong Kok Kay (PW7) and Chow Nim Yan (PW8), who testified to dealing with the 2^nd appellant from the time of his arrest in the early morning of 5 November 2013 up and until the completion of the video record of interview, to be “truthful and reliable witnesses.”  Having noted that the 2^nd appellant had been permitted to contact lawyers throughout and that, as was apparent from the video record of interview, it was the 2^nd appellant who decided to proceed without a lawyer, the judge determined that it was not a case “where access to lawyer was refused.” [15]  Of the questioning of the 2^nd appellant, the judge said that he:

“ ...did not see it being so unfair as to render the interview involuntary nor should I exercise my discretion to exclude it.”

26.  Of the 2^nd appellant’s evidence, the judge said: [16]

“ I do not believe his evidence that no right had been explained to him nor was (?) that no caution had been administered. Clearly he was also all along allowed to use his phone to contact his lawyer as he wished.”

27.  Having determined that the 2^nd appellant had not told “the whole truth to the court”, the judge said that he rejected his evidence.

The general issue

The 1^st appellant

28.  The judge reviewed the evidence of each of the four policyholders in turn, noting their evidence that they had signed material documents to which other information had been added subsequently and that some of the documents contained the name of GET and its company chop.

29.  Of the evidence of the four policyholders, the judge said “they are all telling the truth and did trust D1.” [17]  Having noted that the documents were lengthy, the judge went on to say:

“ it is thus more than understandable for the policyholders to rely on their agent to complete and go through the form.”

30.  In contrast, he said that from a close examination of the form now “...one may easily find that the responsible financial professional was D2 instead of D1, GET instead of Convoy.” [18]

31.  Having noted that it was the evidence of the four policyholders that “...they were being misled or deceived” and that they would not have taken out the policies if they known that Convoy was not involved, the judge said “the prejudice to their rights and choices were thus obvious.” [19]

32.  In the result, he concluded: [20]

“ ...the facts were crystal clear that D1 must have falsely represented and with intent to defraud each and every policyholders PW2 to PW5 that their policies were taken out with Convoy but in reality it was with GET as intermediary, and that D2 was the respective financial consultant instead of D1 as stated in the forms.”

33.  Finally, he noted that by the arrangement of using GET as the intermediary after which the 1^st appellant received his commission from them, rather than the direct payment of the commission to Convoy, the 1^st appellant “has earned $100,000 or more... by his deceit.” [21]

2^nd appellant

34.  Of the combined effect of the answers that the 2^nd appellant had made having been arrested and in the subsequent video record of interview, the judge said that the 2^nd appellant: [22]

“ ...admitted that he helped D1 to submit the policies while he did not complete any questionnaire nor financial analysis form with the respective four policyholders. He was the marketing director responsible for making sure all the policies were clean cases and yet he filed all these policies in his name as financial consultant with GET while in fact he was not, and also knowing that D1 had yet joined GET.”

35.  Of the evidence that the 2^nd appellant had not even seen Mr Au Yeung, the policyholder stipulated in the Particulars of Offence of Charge 1, the judge noted that the 2^nd appellant had:

“ nevertheless signed on the declaration while he knew that he must go and meet the client first (though PW2 was not even his client).”

36.  Of the 2^nd appellant’s account in the video recorded interview that he had met the three other policyholders, the judge said “...they were also not his clients.”  Of that account, he said it was a “bare assertion”, which had “not been repeated under oath and had not been tested under cross-examination.” [23]

37.  In the result, the judge concluded of the 2^nd appellant that he: [24]

“ ....had falsely represented to Zurich that he had fully explained the assurance scheme - Applicant’s Declaration in relation to each and every respective policyholder PW2 to PW5 and with intent to defraud Zurich to accept the information contained to approve the said policies, which would certainly prejudice the right of Zurich to assess and approve, and further to have released commission to GET.”

38.  Of the issue of whether or not any benefit accrued to the 2^nd appellant, having noted that in his out-of-court statements the 2^nd appellant had denied receipt of any benefit, the judge said: [25]

“ It could also hardly be imagined that while all such policies were taken out with D2 as named financial consultant, why would he not earn any commission at all.”

Reasons for sentence

39.  In sentencing the 1^st and 2^nd appellants, the judge noted that they were aged 39 and 37 years respectively and were both married men with no previous criminal convictions.  He noted that the 1^st appellant worked for Convoy from 2002 until 2012 when he joined GET and that the 2^nd appellant had been working in the insurance industry since 2004 and in 2014 had been promoted to the position of Chief Distribution Officer in GET.  Further that his employers were willing to re-employ him after trial.

40.  Of the gravity of the offence, the judge said: [26]

“ Fraud is a serious offence. The present case is akin to conspiracy to defraud where the interests of Zurich and policyholders were much at stake. Without D1’s initiation and D2’s active participation, the plot would not have been able to be carried through.”

41.  The judge went on to say: [27]

“ ...the serious nature was not merely reflected by the monetary gains but the underlying protection concerning greater insurable interest to the policyholders would have been adversely affected.

With the falsity of information filled in the application form, the validity of the policy would be much questioned.  It could not be said that there was no loss to theclient.”

42.  Of the culpability of the 1^st appellant, having noted that he had “...misled his clients to sign on various documentation, leaving some blank spaces, whereupon false information was filled in” [28], the judge said “it was clearly a breach of trust scenario as against his client” [29]. Furthermore, he noted that the apparent benefit to the 1^st appellant had been shown.

43.  Of the culpability of the 2^nd appellant, the judge said of the documentation which he signed that he “knew full well that these were all false when he signed.” [30]  Of benefit to the 2^nd appellant, the judge said:

“ ...it was hard to believe that he had no interest at all. Even if so, the synergy effect as he admitted, i.e. the indirect business gain and expansion was still there.”

44.  In respect of the conduct of both appellants the judge said that the “integrity of the system and insurance business was put at risk.” [31]

45.  Having determined that the serious nature of the offence and the fact that the appellants were convicted after trial rendered the making of a Community Service Order unsuitable, the judge determined that the appropriate sentences to impose on the 1^st and 2^nd appellants were two years’ imprisonment and 18 months’ imprisonment respectively.

Sentence

46.  However, stating that he had regard to the fact that the 1^st appellant had offered to make full restitution, which order the judge had declined to make, that three out of the four policyholders were still prepared to do business with him and that both he and the 2^nd appellant had no previous criminal convictions, the judge sentenced the 1^st appellant to 20 months’ imprisonment on each of Charges 1-4 and the 2^nd appellant to 14 months’ imprisonment on each of Charges 5-8, which sentences he ordered to be served concurrently.

Grounds of appeal against conviction

The 1^st appellant

47.  By the first ground of appeal against conviction, Mr Egan submitted that the four policyholders, stipulated in the Particulars of Offence of the four charges, were not proved to have been the victims of fraud.  None of them were prejudiced or suffered any loss, as the premiums and policy terms by Zurich were the same, whether issued through Convoy or GET.  He submitted that the policyholders were incorrectly identified as the victims of fraud in the charges.  If there was a victim, it was Convoy.  It had lost the commission it would otherwise have earned, if not for the fact that the policy was issued through GET. 

48.  As a result, he submitted that the prosecution had failed to prove one of the constituent elements of the offence, namely that the deceit induced the victim to do, or not to do, a particular act.  There must be a causal link between the deception and the course of action followed by the victim which leads to the prejudice. [32]  He invited the Court to note that the Law Reform Commission expressed the view that “It would be a defence to our proposed offence to show that the deception did not cause the victim to act as he did.” [33]  In all material respects the proposed offence was the same as the offence created ultimately by section 16A of the Theft Ordinance.  Here, the four policyholders were issued with the same policies, acting through the 2^nd appellant and GET, as they would have been issued if they had acted through the 1^st appellant and Convoy.  They acted as they did because of representations to them by the 1^st appellant as to the quality of the insurance product, not because he acted for them through Convoy.

49.  By the second ground, Mr Egan submitted that the judge failed to give sufficiently adequate reasons for the conviction of the 1^st appellant rendering it unsafe and unsatisfactory.  The judge was under a duty to analyse the evidence and give reasons for his determinations.  The basis on which the judge convicted the 1^st appellant was not apparent from the Reasons for Verdict.  He had not demonstrated that he had properly understood or appreciated the evidence and the verdict was not readily comprehensible.[34]

The 2^nd appellant

50.  By the first ground of appeal against conviction, Mr McGuinniety submitted that the judge erred in drawing inferences adverse to the 2^nd appellant, contrary to his out-of-court statements, that he derived financial benefit from his role in the scheme.  No evidence had been produced at trial from anyone at GET on the issue.  The 2^nd appellant was merely an agent of GET and not part of the management, which would receive some financial benefit as a result of any benefit derived by GET.

51.  By the second ground of appeal, it was submitted that the judge erred in finding that the video recorded interview was voluntary and not lacking in such unfairness as to engage the residual discretion.  The judge failed to properly consider that the 2^nd appellant had been denied his right to see a lawyer, in that he had been afforded insufficient time to contact and speak to a lawyer.  Further, the questioning of the 2^nd appellant in the interview was oppressive.

52.  By the third ground of appeal, it was submitted that the judge had erred in that he had not considered the issue of dishonesty in the 2^nd appellant.  Dishonesty was a necessary part of deceit.

The respondent’s submissions

The 1^st appellant

53.  For the respondent, Mr Ned Lai invited the Court to note that section 16A(1) of the Theft Ordinance provides that the deceit need not be the “sole or main inducement” that induced another person to commit an act, which results in benefit to any other person or prejudiced or a substantial risk of prejudice to any person other than the person making the representation.

54.  He submitted that the four policyholders had all testified that they would not have signed the application form if they had known that it was being processed through the 2^nd appellant and GET, rather than through the 1^st appellant and Convoy.

55.  Of the adequacy of the reasons for verdict, Mr Lai submitted that the judge had addressed the matters canvassed by each of the appellants and raised at trial and provided a reasoned analysis for his determinations.

The 2^nd appellant

56.  Of the issue of proof of dishonesty in the 2^nd appellant, Mr Lai pointed to the fact that the 2^nd appellant had represented in the application forms submitted by the four policyholders that “the financial needs analysis and risk profile questionnaire had been completed with the applicant.” They had not.  Furthermore, he represented in the Analysis Forms submitted by the four policyholders that he was their financial consultant and intermediary. He was not.  He had made a declaration that he had “... fully explained the contents of the Applicant’s Declarations to the Applicant.”  He had not.

57.  Mr Lai submitted that the judge was entitled to rule admissible the 2^nd appellant’s video recorded interview and his acknowledgement of the written record of his earlier oral statements after caution and arrest, having determined that they had been made voluntarily.  The 2^nd appellant had been permitted to seek to engage a lawyer but, having failed to do so, nevertheless had indicated that he was willing to participate in the video record of interview.

58.  Finally, Mr Lai accepted that the judge’s statement that it could “hardly be imagined” that, given that he was named as financial consultant on the application forms, the 2^nd appellant “would ...not earn any commission at all” was a finding of fact to that effect.  He said that, having regard to the evidence that the 2^nd appellant, as a TR / financial consultant / intermediary of GET, was entitled to a percentage of the commission earned by GET and paid by Zurich on a policy issued by the latter on acceptance of an application form, the judge was entitled to make that finding.  He acknowledged that in his out-of-court statements the 2^nd appellant had consistently denied receiving any such commission.  But, he invited the Court to note that the judge had said of those assertions, that they were “not adopted under oath and tested under examination.”  On the other hand, he acknowledged that no evidence had been adduced from GET on that issue.

Grounds of appeal against sentence

The 1^st appellant

59.  In his grounds of appeal against sentence, Mr Egan submitted that the sentence of 20 months’ imprisonment was manifestly excessive.  The judge was wrong to exclude all sentencing options other than an immediate custodial sentence.  The judge failed to give sufficient weight to the 1^st appellant’s clear record, his positive good character, that three out of four of the policyholders were still prepared to use the 1^st appellant as their insurance agent, and that restitution, although offered, was not ordered as it was deemed too difficult to do so by the judge. 

The 2^nd appellant’s submission

60.  In his grounds of appeal against sentence on behalf of the 2^nd appellant, Mr McGuinniety submitted that the judge wrongly elevated the offence to a more serious one, namely a conspiracy to defraud. Further, he said that the judge was in error to call for a Community Service Order Report and then reject it as a suitable option despite a favourable report.  The six criteria [35] for making a Community Service Order had been satisfied by the 2^nd appellant.

61.  For the same reasons advanced in the appeal against conviction, Mr McGuinniety submitted that, in stating of the 2^nd appellant that “it was hard to believe that he had no interest at all”, the judge erred in having regard for purpose of sentence to the benefit accruing to the 2^nd appellant for his role in processing the applications by the four policyholders.  There was no benefit.

The respondent’s submissions

62.  At the invitation of the Court, Mr Lai addressed some of the issues arising in respect of sentence.  He invited the Court to note that the judge had found of the serious nature of the offence that it was “a premeditated and calculate plan”.  Further, that the judge said it “was not merely reflected by the monetary gains but” the underlying protection concerning greater insurable interests of the policyholders would have been adversely affected.

63.  Mr Lai acknowledged that the judge had not dealt with the assertion made by the 2^nd appellant in his out-of-court statements that he conducted himself as he did, at the direction of his superior in GET, namely Thomas Leung.

A consideration of the submissions

64.  Sub-sections (1) and (2) of Section 16A of the Theft Ordinance, provide that:

“ (1) If any person by any deceit (whether or not the deceit is the sole or main inducement) and with intent to defraud induces another person to commit an act or make an omission, which results either-

(a) in benefit to any person other than the second-mentioned person; or

(b) in prejudice or a substantial risk of prejudice to any person other than the first-mentioned person,

the first-mentioned person commits the offence of fraud and is liable on conviction upon indictment to imprisonment for 14 years.

(2) For the purposes of subsection (1), a person shall be treated as having an intent to defraud if, at the time when he practises the deceit, he intends that he will by the deceit (whether or not the deceit is the sole or main inducement) induce another person to commit an act or make an omission, which will result in either or both of the consequences referred to in paragraphs (a) and (b) of that subsection.”

65.  Subsection (3) provides, inter alia, that:

“benefit” ... means any financial or proprietary gain, whether temporary or permanent;

“deceit” ... means any deceit (whether deliberate or reckless) by words or conduct (whether by any act or omission) as to fact or as to law, including a deceit relating to the past, the present or the future and a deceit as to the intentions of the person practising the deceit or of any other person;

“prejudice” ... means any financial or proprietary loss, whether temporary or permanent.”

Did the deceit of the 1^st appellant induce the acts of the four policyholders?

66.  The 1^st appellant was known to all four policyholders as an agent of Convoy.  There was no evidence that he made any explicit representation to any of the four policyholders that the policies for which they applied successfully to Zurich were made through him and Convoy.  Nor had the 1^st appellant informed his clients that the policies were to be processed through GET with another person being their financial consultant.  In those circumstances there was clearly an implicit representation by the 1^st appellant that, as in all their past dealings with him, Convoy would be processing their applications and he would be their representative. 

67.  Of what it was that induced the four policyholders to act as they did, namely signing the documentation by which the application was made to Zurich and the resulting documentation when the documents were incomplete and/or without reading them properly, the judge said: [36]

“ In fact, the witnesses had in common that they are all telling the truth and did trust D1, no doubt the policy application form and the Financial Needs Analysis Forms were lengthy upon which a wide range of information needed to be filled in, it is thus more than understandable for the policyholders to rely on their agent to complete and go through the form. Further, there were also full of small prints in the content where one must find it easily to miss out something had it not been specifically pointed out to them.”

68.  Having determined that Mr Au Yeung was an “architect and highly educated”, the judge said of his evidence: [37]

“ On the face of it one may wonder why he would have missed all these prints or details. However, one must understand the background circumstances, D1 was no new friend to him, D1 was his insurance agent, he was familiar with Zurich product and had made purchase previously, there was no reason why he would not repose trust on D1. In fact there were a lot of documents to go through, Mr Au Yeung signed in a rush, not just on one page but numerous places to append signature. Mr Au Yeung also confirmed that when he signed, a lot of information was not entered. Therefore, given such background, there was ample reason to miss or not to have noticed the name of GET.”

69.  Mr Au Yeung testified that in about 2000 he had invested in a Friends Provident policy through a company called Alpha Global.  However, its business closed and he transferred the policy to Convoy, where Mr Nelson Ng was his agent.  He could not remember the date of the transfer.  He took out another policy through Mr Nelson Ng, this time with Zurich.  Then, in 2011/12, Mr Nelson Ng left Convoy.

70.  Two or three months before he signed the application form, dated 28 March 2012, for the issue of a policy by Zurich he met the 1^st appellant, who gave him his business card bearing the name Convoy.  He had been prepared to sign the application form and related documentation, which was incomplete, and without reading it properly because he trusted the 1^st appellant and Convoy. [38]

71.  Of the fact that he had signed the Analysis Form in which the 2^nd appellant had been described as the Intermediary [39], the following interchange ensued with counsel for the prosecution: [40]

“ Q. ... Have you seen that page do you recollect?

A. I didn’t see this.

Q. Have you ever received a copy of this form?

A. No, I did not.

Q. And just for completeness, it says, “Declaration by intermediary,” when you signed this form, which company did you think you were signing it for?

A. With Convoy.

Q. And which intermediary did you think you were dealing with or was your financial adviser?

A. Anthony Fan.”

72.  Of the trust he reposed in Convoy, Mr Au Yeung explained that when Alpha Global closed his investment was standing at a loss, which was the position when Mr Nelson Ng took over for him at Convoy.  Of his success with the fund, he said: [41]

“ ...after he had taken over, my fund started to break even and then later I even earned a little bit. That’s why I trusted Convoy.” [Italics added.]

73.  In explaining why, in September/October 2012, he had declined the 1^st appellant’s request that he transfer his policies to the new company which he said that he was joining after he left Convoy, Mr Au Yeung said:[42]

“ Because I still trusted Convoy I did not transfer.”

Subsequently, Mr Au Yeung said that, following the closure of Alpha Global “...I did not trust those small companies.”

74.  In his oral submissions, Mr Egan said that the fact that the 1^st appellant was acting as the agent of Mr Au Yeung through Convoy was irrelevant to Mr Au Yeung, as was evidenced by his answer to a question posed of him in cross-examination by Mr McGuinniety for the 2^nd appellant: [43]

“ Q. Whether it was a Mr Ng or a Mr Fan or a Mr Lai, or anybody else, it didn’t really matter to you too much so long as the documents were sorted out and you didn’t waste too much time messing around with them?

A. Yes.”

75.  However, that answer was put in context by an interchange with Mr Au Yeung in re-examination: [44]

“ Q. ...basically the question went something like this, that effectively, you were in a rush to get things done and you were sorting out yourretirement matters and it wouldn’t really matter if Mr Fan or Mr Lai or Mr A, B or Mr C or anybody had given you documents to sign, you would have just signed them. Now, was there something special about Mr Fan that if a complete stranger had come along and asked you to just sign here, there, wherever, that you would have accepted that?

A. Because at that time he was representing Convoy and I trusted Convoy.

Q. Didn’t you trust Mr Fan at that stage?

A. I trusted him at that stage...
...because all along I believed he was representing Convoy.”

76.  Mr To Ming Yin testified that he first met the 1^st appellant in about 2002.  At that time the 1^st appellant was working for Convoy, as was stated on a business card the 1^st appellant gave him.  Subsequently, he transferred some policies that he had taken out with another broker to the 1^st appellant for management.  He was happy with the performance of both the 1^st appellant and Convoy. [45]

77.  Mr To said that he signed the application form, dated 28 March 2012, for the issue of a policy by Zurich, at the instigation of the 1^st appellant.  He did not read the form in detail because he trusted the 1^st appellant completely. [46]  Of the issue of by whom he expected the application to be processed, the following interchange ensued in his evidence-in-chief: [47]

“ Q. Who did you expect this application form to be processed through, which brokerage?

A. Convoy.

Q. Were you told anything different other than it would go through Convoy? Were you told anything different from that?

A. No.”

78.  In that context, he said that if he had known that the application was to be processed through a broker whom he did not know, namely GET, and an agent whom he did not know, namely the 2^nd appellant, he would not have proceeded with the policy, “because I signed the application form based on my trust of Mr Fan.” [48]

79.  Of the information contained on the form at the time that he signed it in various places, he said: [49]

“ I am very sure that no information had been filled in when I signed the form.”

Now, he saw that the form mis-stated his annual income as being $1.8 million, whereas it was $960,000 per annum. [50]

80.  Mr To said that he signed the Analysis Form in similar circumstances, having been given it by the 1^st appellant. [51]  Now, he saw that the form stated his monthly income incorrectly as being $150,000. [52]  It was not the case, as asserted in the statements in the Analysis Form, that the 2^nd appellant was his intermediary. [53]  In that context, he said that he felt “I was misled and I was deceived.” [54]

81.  Madam Chow Suk Han said she was the proprietress of a drugstore which she operated together with her husband.  She first met the 1^st appellant, whom she knew worked for Convoy, in 2005 when he came to discuss insurance with her husband.  In the event, the policy was taken out in her name.  The 1^st appellant was in regular contact with her husband about insurance matters thereafter.

82.  In 2012, Madam Chow signed an application form, dated 28 March 2012, to take out an insurance policy in her name with Zurich.  The 1^st appellant, who still worked for Convoy, came to the drugstore where she signed the forms. [55]  None of the handwritten information was on the form at that time, it being blank in that respect. [56] She signed because she trusted the 1^st appellant. [57]  He did not mention that the policy was to be taken out with a company other than Convoy, with whom she thought the policy was being taken out. [58]  Now, she saw that her income was incorrectly stated as being $880,000, whereas she earned between $30,000 and $40,000 per month.  Of the fact that the form stated that the financial professional was the 2^nd appellant, she said: [59]

“ When this policy was taken out I did not know Lai Kwok-hing. It was taken out through Anthony.”

Lai Kwok Hing had not, as was asserted, completed the Analysis Form with her.

83.  In that context, when asked what she would have done, if she had known that her business was to be placed with another company and with an agent whom she did not know, Madam Chow said: [60]

“ I would not have signed it. I would have asked my agent, as it was not him.”

Later, she said “I was deceived.” [61]

84.  Of the fact that GET Wealth was described in the Analysis Form as her broker, Madam Chow said that had she noticed that assertion: [62]

“ I would have asked Anthony why there were such names and such company because the insurance policy was taken out through Convoy and it was Anthony who followed it up on.”

85.  Dr Fung Man Keung testified he had taken out insurance policies through Mr James Wong of Convoy with Zurich in 2006 and 2007.  In 2010, Mr Wong advised him that he was leaving Convoy.  In February 2012, he received an e-mail from the 1^st appellant who, having informed him that his account was under his management, said that he wished to review the portfolio and change the fund allocation.  Dr Fung said that at that time he was content with his dealings with Convoy. [63]

86.  In April 2012, they met and the 1^st appellant gave him his business card in the name of Convoy.  He agreed to the suggestion of the 1^st appellant to utilise monies available in the second policy taken out with Zurich to open a new policy and he signed the application form in the company of the 1^st appellant. [64]  In addition to signing the application form he filled information as to his occupation and job title, although not the other manuscript additions to the form.  A lot of the form was blank. [65]

87.  Dr Fung said that now he saw that the 2^nd appellant was described in the form as his financial consultant and reference was made to GET Wealth.  At the time he signed the form, he knew neither of them nor had he seen those references.  The following interchange ensued with counsel for the prosecution: [66]

“ Q. So who do you think you took this policy out with at that time?

A. All along of course I thought it was with Convoy.

Q. And the salesman?

A. Mr Fan.”

88.  Of his prime reason for taking out the policy through the 1^st appellant and Convoy, Dr Fung said: [67]

“ A. Well I have been a client with Convoy since 2006. To my understanding Convoy is a well-known company and a trustworthy company.

Q. So you used the word “trustworthy”, did you trust Convoy?

A. Yes, I trust Convoy.

Q. And at that stage, did you trust the representative of Convoy which was in this case Mr Fan, did you trust him at that time?

A. I trusted the employee of Convoy.  On the business card he gave me it stated Deputy Director, I thought he was a senior staff member of the company.”

89.  In that context, when asked what he would have done, if he had noticed the 2^nd appellant had been described as his financial professional on the application form, Dr Fung said: [68]

“ Certainly I would have asked Mr Fan why it was the case.”

He added, that certainly he would not have signed the form in those circumstances.

Conclusion

90.  It is abundantly clear from the evidence of the four policyholders, accepted by the judge, that they understood at the time that they signed the Application forms and completed the Analysis Forms that the 1^st appellant and Convoy were to act as their agent or broker.  That was the clear implicit representation of the 1^st appellant.  He omitted to tell them anything to the contrary.  In consequence of that dishonest, deceitful representation they were induced to act as they did.

91.  The judge was entitled to find, as he did, that:

“ ...D1 must have falsely represented and with intent to defraud each and every policyholders PW2 to PW5 that their policies were taken out with Convoy but in reality it was with GET as intermediary, and that D2 was the respective financial consultant instead of D1 as stated in the forms.”

Prejudice or risk of substantial prejudice to the four policyholders

92.  The judge noted that the four policyholders all testified that they had been misled or deceived into making the applications that were made in the names of the 2^nd appellant and GET and that they testified that “had they known such arrangement or discovered that it was not with Convoy, they would not have entered into the policies.”  Of that, he determined: [69]

“ ...the prejudice to their rights and choices were thus obvious.”

93.  No doubt, the obvious prejudice to which the judge had adverted was the fact that, unknown to them, the four policyholders had applied for and entered into policies with Zurich which would be managed by persons wholly unknown to them, namely the 2^nd appellant and GET and not by the 1^st appellant and Convoy.

Benefit to the 1^st appellant

94.  As the judge noted, the benefit to the 1^st appellant was that he received commission payments from GET in respect of the four policies of $475,317.96.  If the policies have been processed through Convoy, the 1^st appellant would have received commission payments of $363,478.36.  Again, as the judge noted the additional benefit to the 1^st appellant was an extra commission payment of “$100,000 or more... by his deceit.” [70]

Adequacy of the Reasons for Verdict

95.  The concerns expressed by McWalters JA [71], in granting bail to the 1^st appellant, pending the hearing of his appeals, as to the precise nature of the allegation of deceit and how it was alleged to have induced the acts of the four policyholders were relied upon by Mr Egan in support of his submission as to the adequacy of the reasons for verdict.　　However, this Court now has the benefit, not available to McWalters JA, of a full transcript of the trial and the written submissions in the closing address of counsel for the 1^st appellant.

96.  So, for example, as discussed earlier, it was made clear at trial that the alleged deceit was not by an explicit representation but by an implicit representation that the ongoing relationship between the four policyholders, the 1^st appellant and Convoy subsisted and by the 1^st appellant omitting to state otherwise.  It was in that context, that the judge referred to the evidence of the four policyholders of the conduct of the 1^st appellant in their dealings with him in respect of their policies, which he determined to be a false representation with intent to defraud by the 1^st appellant [72], namely: [73]

“ ... that they were being misled or deceived by D1, they all said had they known such arrangement or discovered that it was not with Convoy, they would not have entered into the policies the prejudice to the rights and choices were thus obvious.”

97.  Although the judge did not refer specifically to the provisions of section 16A of the ordinance, those findings clearly satisfied the requirements of section 16A(1) and (2) in respect of the elements of a deceit with intent to defraud which induces another to commit an act which results in prejudice or a substantial risk of prejudice to that person.  Similarly, the judge’s finding satisfied the elements of deceit in the 1^st appellant, as defined by section 16A(3) of the ordinance, namely conduct by way of omission to inform the four policyholders that the policies were not being taken out through him and Convoy.  Clearly, that conduct was dishonest.  Of the element of benefit in the commission of the offence, the judge noted that the 1^st appellant had received an aggregate payment of $475,317.96 from GET in respect of the four policies and that the payment was over $100,000 more than he would have received had the policies been taken out through Convoy.[74]

98.  Having made all of those findings, the judge determined that all the charges had been proved against the 1^st appellant.

99.  A significant feature of the submissions advanced in the closing submissions made on behalf of the 1^st appellant, both in writing and orally, concerned the testimony of all four policyholders, that they were unaware of the references to the 2^nd appellant and GET in the documentation advanced in support of their applications.  It was submitted, in effect, that their evidence was not to be accepted.  They had signed Application forms and Analysis Forms in which, at least in their final form, contained references to the 2^nd appellant as their respective financial professional.  The front page of the Analysis Form was in the name of GET together with its Chinese name.  Eleven of the fourteen pages of the written submissions addressed that issue in respect of the four policyholders in turn.

100.  For his part, in accepting the evidence of the four policyholders “that they are all telling the truth and did trust D1” [75], the judge addressed those submissions at some length.[76]  So, for example, in respect of Mr Au Yeung, the judge said: [77]

“ Mr Au Yeung signed in a rush, not just on one page but numerous places to append signature. Mr Au Yeung also confirmed that when he signed, a lot of information was not entered. Therefore, given such background, there was ample reason to miss or not to have noticed the name of GET.”

101.  In respect of To Ming Yin’s evidence, that he had not noticed references to GET in the documentation which he signed in its incomplete form, the judge said that it was his evidence that he would not have trusted the 1^st appellant “had he known that GET was in place.”  As evidencing that degree of trust, the judge went on to note “...when D1 joined GET, PW3 transferred all policies from Convoy to GET in November 2012.” [78]

102.  Similarly, the judge accepted the evidence of Madam Chow, as to the fact that the names of GET and the 2^nd appellant were on the documentation that she signed, that “she had not heard of these names at all.” [79]

103.  In accepting the evidence of Dr Fung, the judge determined that his evidence, in respect of the letter dated 15 June 2012 addressed to Zurich stating that he wished to transfer my “servicing agency” to the 1^st appellant “of Convoy” in respect of policy “Vista 3 numbered 8357294”, was not inconsistent with his out-of-court statement: [80]

“ ...as PW5 did also mention, it was the only time he had been asked to sign for that purpose and he could now tell the circumstances in court when asked specifically.”

104.  In making those findings, the judge was addressing the criticism made by counsel for the 1^st appellant in his closing submissions of the evidence of Dr Fung and, in particular, what was said to have been the “biggest problem with him”.[81]  As is apparent from Dr Fung’s evidence, the judge was entitled to accept his explanation why he was able now to “tell the circumstances in court when asked specifically”.

105.  The policy number referred to in the letter was the policy number stipulated in the Particulars of Offence of Count 5, in respect of which Dr Fung had signed on the Application form and Financial Analysis Form.  Although the letter bears the date 15 June 2012, it is to be noted that the date on the chop impression made on the letter in the name of Zurich states the date of receipt as being 4 September 2012.

106.  In his evidence-in-chief, Dr Fung said of the circumstances in which he had come to sign the letter dated 15 June 2012: [82]

“ I have a little recollection that one day Mr Fan called me and said that my insurance policy had not yet transferred to him. He asked me to write a letter to make the transfer. At that time I thought it was my previous policy with James Wong that had not yet been transferred to him. At that time I was too busy that I did not prepare a letter. I remember that I asked Mr Fan to draft a letter for me to sign. Then in a later stage, I don’t recall the date, he took the letter to me and asked me to sign.”

Dr Fung went on to explain: [83]

“ Well because I didn’t know my policy number and I didn’t know which policy it was.”

107.  In cross-examination, Dr Fung agreed that in his statement to the ICAC, dated 19 August 2014, he had said that he could not remember “...the reason and the purpose of signing this letter” [84], although he acknowledged that he had been told by ICAC that the policy number stated on the letter related to the policy relating to the application form he had signed, which was the subject of ICAC’s enquiries.

108.  In his explanation for the difference between his recollection in evidence and the out-of-court statement, Dr Fung said: [85]

“ Well, because at that time I was thinking about why I signed this document related to the policy 8357294, the $260,000 insurance policy. Then I suddenly recalled that Anthony Fan had called me, saying that some insurance policy had not been transferred to him. But he did not specify that it was the policy 8357294. I recalled that when -- I recall when he asked me to do the transfer I thought it was about the previous policy, that is the one with a lump sum of $800,000.”

109.  For the reasons that we have given, we are satisfied that the appeal of the 1^st appellant must be refused.

The 2^nd appellant

The admissibility of the out-of-court statements

110.  In ruling admissible the notebook entry of the 2^nd appellant’s answers, having been arrested and cautioned at his home on 5 November 2013, and the video record of interview conducted of him later that morning, the judge said of the evidence of the two ICAC officers of those events, that they were “truthful and reliable witnesses.” [86] By contrast, he said of the evidence of the 2^nd appellant that he did not find him to be “... telling the whole truth to the court and his evidence on special issue shall be rejected.” [87]  In particular, he said: [88]

“ I do not believe his evidence that no right had been explained to him nor was that no caution had been administered. Clearly he was also all along allowed to use his phone to contact his lawyer as he wished.”

111.  In making those findings, the judge alluded to the complaint made by Mr McGunniety that there was no pressing need to conduct the interview and, given that the ICAC officers knew that the 2^nd appellant had asked to contact a lawyer, there was no reason not to wait for a lawyer before commencing the video record of interview.

112.  Of that submission, the judge said: [89]

“ ...the fact was that D2 was all along allowed to make phone call to engage a lawyer as he wished but as from what the video can tell, it was D2 who elected to proceed without a lawyer present. It was simple not a case where access to lawyer was refused.”

113.  The judge’s finding that the video recording evidenced the fact that the 2^nd appellant elected to proceed with the video record of interview in the absence of a lawyer is borne out by the transcript of that interview.  First, the 2^nd appellant assented to the suggestions that he had been arrested and cautioned at his home earlier that morning.  Then, the following dialogue ensued: [90]

“ A. Well, you, this morning, also you were told that, you could find a lawyer.

C. Yes.

A. Right. Then I also let you call your supervisor to inform him. Is that right? Who did you inform this morning?

C. Er, Mr. LEUNG Wai-hon (transliteration).

A. Okay. So when you called him, (you asked) him to, I mean, you, what did you ask him to do for you?

C. Er, I told him to help me find a lawyer.

A. Okay, then did he help you find a lawyer?

C. Er, yes.

A. Uh, then you have been making several phone calls to arrange (to engage) a lawyer.

C. Yes.

A. Uh, but then until this moment the arrangement has not been made, right?

C. Er, at this moment no.”

114.  Of the notebook entry made of the 2^nd appellant’s statement in answer to caution, the following dialogue ensued: [91]

“ A. Okay, (noise) er, well, er, then we also, in your home, er, then yes, then you, said you yourself had something regarding this, the reason for the arrest of you, and the allegation, (you) had something to say.

C. Right.

A. Yup, then for what you said, our colleague also, well, immediately, recorded (it) on her notebook.

C. Yes.”

115.  Then, the 2^nd appellant having been given a copy of the ‘Notice to Persons in Custody’ said to have been given to him at his home earlier that morning, the following dialogue ensued: [92]

“ A. Then do you need to read again [C: Orr!] the rights that you’re entitled to? (noise) Well, just now, (I) also asked you, because you, er, have not reached a lawyer yet.

C. Yes.

A. Then you were asked whether you were willing to take part in this video-interview.

C. Mm, mm.

A. Yup, then you, how did you respond to me just now?

C. Yes, (I’m) willing to.

A. Okay. Then please confirm that this copy, this copy is yours, yup. (noise)

C. Yes.

A. This one is also, this one, this copy is also yours. (It) should be the copy of the re-record (mentioned) just now. So I, you clearly understand the rights that you’re entitled to?

C. Right.

A. Is that right? Well, so we’ll record this interview in the form of video. [C: Yup] So do you agree that we con-, er, record this interview in the form of video?

C. (I) agree.”

116.  The ‘Notice to Persons in Custody’ enumerated 11 rights of which items 2 to 6 concerned lawyers.  Those rights included the right to:

“ (2) at any time, make private telephone calls to, or communicate in writing or in person with a solicitor or barrister;

(4) have a solicitor or barrister present during an interview with ICAC.”

117.  Of the notebook entry and the notice, the judge said: [93]

“ ...it was clearly signed by D2 confirming that he understood the content and that was an accurate record, likewise the notice had also been duly signed by him.”

118.  It is to be noted that towards the end of the interview, which lasted 55 minutes, having asked to go to the washroom, the 2^nd appellant agreed to continue the interview when told the interviewer would finish in one or two minutes.  Then, after six substantive questions, which the 2^nd appellant answered with denials of suggested misconduct, the interview was ended.

119.  Earlier, in his recitation of the evidence, the judge noted of the evidence of Senior Investigator Wong:

“ When asked in court the reason why (he had?) not waited for the lawyer before the interview, Wong said sufficient time had been given from 6:50 to 8:30 am and D2 also agreed to do so without the lawyer (as also recorded in the interview; counters 31-42 & 65-70) Wong further said that D2 was also all along allowed to use his phone and Wong also denied deliberately refusing D2’s access to his lawyer.”

120.  We are satisfied that the judge was entitled to determine that, his rights having been made known to him and the 2^nd appellant having exercised his right to contact a lawyer on several occasions, the 2^nd appellant nevertheless elected to proceed without a lawyer being present at the video record of interview.

Unfair questioning

121.  Of the suggestion that the interview was rendered unfair by the fact that some of the questions were leading, the judge said: [94]

“ I did not see it being so unfair to D2 rendering the interview involuntary nor should I exercise my discretion to exclude it.

In fact, after viewing the interview, I did not find it anywhere unfair to D2, D2 remained calm and was able to answer all questions smoothly and freely.”

122.  As an example of what was contended was unfair questioning, the judge referred to the question at counter #666.  In context, the 2^nd appellant had agreed that he had not conducted the Risk Tolerance questionnaire in respect of Dr Fung, notwithstanding that he signed a declaration to that effect, and had gone on to confirm that he had not done the risk evaluation of the other three policyholders as well.  Then, the 2^nd appellant was asked and answered: [95]

“ A. ...You didn’t do (that) either. So, at the time when you signed this name, did you know that you were actually giving a false and incorrect statement?

C. Er, actually, well, now I, I can’t recall very clearly about this signature, but (I) am sure that (this) was signed by me.”

123.  With respect to the judge, his determination that the question was “unsatisfactory” is difficult to understand.  The proposition that the statement was incorrect followed inexorably from the 2^nd appellant’s answers in the record of interview.  At issue, was whether or not he knew that to be the case.  The officer was entitled to pose that question.

124.  Finally, having determined that the out-of-court statements were made voluntarily, the judge said that there was “no other reason to exclude it”.  There were no reasons to exercise his discretion to exclude the otherwise admissible evidence.

Conclusion

125.  We are satisfied that there is no merit whatsoever in this ground of appeal.

Dishonesty

126.  Of the 2^nd appellant’s admissions in out-of-court statements as to his role in respect of the Application forms and the Financial Analysis Forms submitted to Zurich in the names of the four policyholders, the judge said: [96]

“ D2 admitted that he helped D1 to submit the policies while he did not complete any questionnaire nor financial analysis form with the respective four policyholders ... he filed all these policies in his name as financial consultant with GET while in fact he was not, and also knowing that D1 had yet joined GET.”

127.  Then, the judge rejected the 2^nd appellant’s assertion that he had signed the documents in a pile, without knowing what he was signing: [97]

“ This assertion could hardly be the truth, not only was he specifically asked to help assisting D1 so that he must have known which policy was in question, but also he himself as a trainer, he would not have missed out the nature of document that he was going to sign.”

128.  Of the element of deceit in the 2^nd appellant’s conduct, the judge said: [98]

“ D2 was never the agent or financial consultant to PW2 to PW5 but D2 had nonetheless put his signature there to say and pretend that he had completed with them the Financial Forms while the facts were that D2 did not.”

129.  Next, the judge determined:

“ All in all, D2 had falsely represented to Zurich that he had fully explained the assurance scheme - Applicant’s Declaration in relation to each and every respective policyholder PW2 to PW5 and with intent to defraud Zurich to accept the information contained to approve the said policies, which would certainly prejudice the right of Zurich to assess and approve, and further to have released commission to GET.”

130.  Obviously, although the judge did not state so in terms, that was a finding that the 2^nd appellant had acted dishonestly.  Further, the judge found that the 2^nd appellant had so acted intending to induce Zurich to act to its prejudice.  In ground 1(iv) of his Amended Perfected Grounds of Appeal against Conviction, Mr McGuinnety said that no issue was taken “with regard to prejudice having been caused to GET”.  No doubt, that was a typographical error, given that the Particulars of Offence of each of the charges make it clear that the party concerned was Zurich.  In any event, we are satisfied that the judge’s finding was unimpeachable.

Benefit to the 2^nd appellant

131.  Of the issue of whether or not any benefit had enured to the 2^nd appellant, the judge noted that the 2^nd appellant had insisted in his out-of-court statements that he had received “no commission nor benefit from so doing”.  However, of the weight to be attributed to that assertion, the judge said that they were “...not adopted under oath nor was tested under examination.”

132.  Then, the judge said: [99]

“ It could also hardly be imagined that while all such policies were taken out with D2 as named financial consultant, why would he not earn any commission at all.”

133.  Next, the judge said of the 2^nd appellant’s video record of interview:

“ ...those admitted by D2 in his interview (429-433) when asked whether he expected any commission by assisting D1, D2 said so at the very early stage and the boss also said if Fan (D1) comes, there will naturally be more business, then the business may possibly expand and this is the synergy effects, that there will be more people when such a well-known person joining the company and there will naturally be much commission.” [Italics added.]

134.  In fact, the following was the dialogue: [100]

“ Q. Mr Leung asked you to help.. Mr Fan to submit his policies.

A. Yup.

Q. Then did you discuss the commission issue?

A. He didn’t talk about commission with me.

Q. (He) didn’t talk about commission with you. Well, as youhave been in this industry for so long, you should know that for all the policies you acquired, (you) depend on earning the commission.

A. That’s correct.

Q. So, at that time when he requested you to do it in such a way, at that moment, you were thinking, well, well, in your mind, did you have any expectation that a commission would be allocated to you? Or you already, I mean, assume your boss would definitely give you the commission?

A. Er, at that very early stage, er [ICAC officer Mm.] the boss, er, said, er if General Fan comes there will naturally be more businesses.

Q. Mm.

A. When there will naturally be more (businesses), then, er, maybe, when it comes to the time that the (business) may possibly expand, that means, well, this, this is the synergy effects.

Q. Mm.

A. That is, there will be more people, when there is such a well-known person joining the company, [ICAC officer Mm] there will naturally be much commission.

Q. Mm.

A. So, the boss said, er, he didn’t talk about commission with me, [ICAC officer Mm] then it was confirmed later that, er, there would be no commission.”

Payment of commission

135.  It not having been disputed, the judge found by reference to the commission statements, in respect of the four policies taken out by the four policyholders the subject of Charges 1 to 4, that an aggregate of $608,127.39 had been paid by Zurich to GET and that an aggregate of $475,317.96 had been paid by GET to the 1^st appellant as commission. [101]

136.  Mr Lai acknowledged that there was no direct evidence of any payment of monies to the 2^nd appellant for his role in participating in the submission of the four Application forms and the related Financial Analysis Forms of the four policyholders to Zurich.

137.  We are not satisfied that, on the basis of the 2^nd appellant’s answer, “Er, at that very early stage, er [ICAC officer Mm.] the boss, er, said, er if General Fan comes there will naturally be more businesses” the judge was entitled to conclude of the 2^nd appellant that he was agreeing that “at the very early stage” he expected a commission for assisting the 1^st appellant.  The 2^nd appellant’s answer appears to have been one sentence, interrupted by the ICAC officer, not two sentences.  At all events, it is clearly, at best, ambiguous and that ambiguity is to be resolved in favour of the 2^nd appellant. There was no evidence of any “financial or proprietary gain” to the 2^nd appellant. [102]  In the circumstances of this case, we are satisfied that the uncertain, future possibility of commissions deriving from increased business as a result of the 1^st appellant joining GET is not to be regarded as a benefit.

138.  In the result, with respect to the judge, we are satisfied that he fell into error in determining that the 2^nd appellant benefited from his misconduct.  It being an error in respect of an element of the offence it was a material error.

Proviso

139.  At the hearing, we invited Mr Lai and Mr McGuinnety to address the Court on the consequences to the safety of the conviction of the 2^nd appellant on Charges 5 to 8 in the event that the Court determined that the judge’s finding that the 2^nd appellant benefited from his misconduct was made in error.  Mr Lai pointed out that there were two limbs to the elements of the events described in section 16A(1), namely (a) benefit; or (b) prejudice or substantial risk of prejudice.  He submitted that the conviction was to be sustained by the judge’s finding in respect of the second limb, relating to prejudice.  For his part, Mr McGuinnety submitted that the finding in respect of benefit was an important adverse finding against the 2^nd appellant which impacted on the safety of the conviction, so that it was not appropriate to apply the proviso.

Conclusion

140.  We are satisfied that the judge’s error in finding that the 2^nd appellant benefited from his misconduct in those charges does not and did not impact on the safety of the judge’s findings in respect of the element of prejudice to Zurich.  In those circumstances, disregarding the judge’s findings in respect of benefit, nevertheless the convictions are to be sustained on the judge’s findings in respect of prejudice.  Accordingly, it is not necessary to have recourse to the proviso.

141.  In the result, we refuse the appeals against convictions of both the 1^st and 2^nd appellants.

Sentence

142.  The judge was correct to describe fraud as a serious offence.  More particularly, the circumstances of the commission of the offences by the 1^st and 2^nd appellants were serious.  The 1^st appellant betrayed the trust reposed in him by the four policyholders in order to trick them into signing incomplete documentation which, when completed and submitted to Zurich, contained false information.  On the basis of that information, Zurich acted to its prejudice in issuing policies and making payments of commission to GET, from which the 1^st appellant benefited significantly.  The 2^nd appellant played an important role in the scheme by lending his name and signature to the documentation which was submitted to Zurich, asserting falsely that he was the agent of the four policyholders and that, inter alia, he completed the Analysis Form with them.  He had not.

143.  Having delivered his Reasons for Verdict on 28 August 2015, the judge said that he determined the commission of the offences was serious.  He refused a request made on behalf of the 1^st appellant that he order the preparation of a Community Service Order suitability report.  He said that he was not persuaded that was a suitable option for sentence.  On the other hand, he was persuaded to order such a suitability report in respect of the 2^nd appellant, although he said that he still had in mind a custodial sentence.  In particular, he warned the 2^nd appellant that, even if the report was positive, he was not bound by such a recommendation.  The judge ordered background reports to be prepared by a probation officer for each of the appellants.

144.  In the result, the judge identified the appropriate sentences to be imposed on the 1^st and 2^nd appellants as 2 years and 18 months’ imprisonment respectively.  Having regard to all the mitigating factors, including the fact that they were both of the “clear record”, the judge imposed sentences of 20 months and 14 months’ imprisonment respectively.

145.  We are satisfied that the judge was correct to distinguish in sentence between the two appellants to reflect their respective culpability.

146.  The 1^st appellant was the driving force behind the enterprise and he benefited by receiving an aggregate payment of $475,317.96 as his commission from monies paid by Zurich to GET.  As we have found, the judge erred in having regard to the factor of benefit enuring to the 2^nd appellant.

The 1^st appellant

147.  In all circumstances, we are satisfied that the sentence of 20 months’ imprisonment imposed on the 1^st appellant was entirely appropriate.

The 2^nd appellant

148.  The fact that the 2^nd appellant claimed that he had acted under orders from his supervisor to act as he did was addressed in the probation officer’s report: [103]

“ In the very beginning, the Accused stated that he just took the orders from his supervisor during that time and had not intended to cheat anyone, not to mention that he did not get any benefit from the present offence. On counselling and his deep reflection during the detainment, the Accused finally realised he did make mistakes and commit crimes. He could have refused to sign the documents involved for he knew that it violated both the internal guidelines and the law.” [Italics added.]

149.  For current purposes, on the basis that the 2^nd appellant’s evidence was true, namely that he was asked to participate in the scheme by his supervisor, nevertheless it was open to him to refuse to participate, given that it was obviously contrary to the company’s practices and contrary to law.

150.  The judge having erred in having regard to the factor of benefit to the 2^nd appellant in the commission of the offences of which he was convicted, it falls to this Court to sentence afresh. 

151.  The gravamen of the 2^nd appellant’s culpability lies in the false assertions that he made to Zurich in respect of the four application and analysis forms that, as their respective relevant financial professional, he had completed those forms with the prospective applicants.  In fact, he had not done so.

152.  In the declaration contained in each of the application forms the 2^nd appellant asserted:[104]

“ I declare that, to the best of my knowledge and belief, the information given is true and shall form the basis of the proposed contract with Zurich International Life Limited. I declare that the financial needs analysis and risk profile questionnaire have been completed with the applicant.”

153.  In the declaration contained in each of the analysis forms the 2^nd appellant asserted:[105]

“ I hereby declare that the information contained in the financial needs analysis form above is an accurate and complete record of the information provided to me by the proposed policyholder (s).”

154.  Clearly, the 2^nd appellant must have realised that the declarations required of him in the forms submitted to Zurich were regarded by the latter as matters of importance in approving the applications, issuing policies and making payments of commission to GET.  Nevertheless, he was prepared to lend his name to the forms submittedtoZurichonawhollyfalsebasis.  Noinformation whatsoever had been provided to him by the proposed policyholders.  Furthermore, he had not completed any financial needs analysis and risk profile questionnaires with any of the applicants.

155.  There is no dispute that materially false information was contained in those forms.  For example, Mr Au Yeung’s income was described falsely as being $1,080,000 annually[106] or $90,000 per month[107], whereas it was then $60,000 per month.[108]  Mr To’s income was described falsely as being $1,800,000 annually[109] and $150,000 per month[110], whereas it was $80,000 per month.[111]  Madam Chow’s income was described falsely as being $880,000 annually[112] and 73,333 per month[113], whereas her income was between $30,000 and $40,000 per month.[114]  Finally, Dr Fung’s income was described falsely as being $880,000 annually [115] and $66,666 per month [116], whereas it was around $600,000 annually.[117]

156.  In our judgment, notwithstanding the fact that the 2^nd appellant had no prior criminal convictions and there was no evidence that he had benefited directly from his participation in the four conspiracies, only the imposition of an immediate custodial sentence would properly reflect his culpability.  In all the circumstances we are satisfied that the appropriate sentence to be imposed on the 2^nd appellant is 10 months’ imprisonment.

Conclusion

157.  In the result, we refuse the appeal against sentence of the 1^st appellant.  We allow the appeal against sentence of the 2^nd appellant, quash the sentence of 14 months’ imprisonment and in its place impose a sentence of 10 months’ imprisonment.