HKSAR v. FAN MING KEI ANTHONY

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 4 OF 2015)

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REASONS FOR DECISION

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Introduction

1.  The applicant and one other faced separate charges of Fraud, contrary to section 16A(1) of the Theft Ordinance, Cap 210 and the applicant was D1 on the charge sheet.  He was charged with Charges 1 to 4, being four counts of Fraud in relation to insurance policies taken out with Zurich International Life Limited (“Zurich”).  D2 faced four charges of Fraud, being Charges 4 to 8 on a charge sheet in respect of the same insurance policies.  The charges all arose from the same misconduct. 

2.  Both the applicant and D2 were tried in the District Court before District Judge Yiu (“the judge”) and on 28 August 2015 convicted of their respective charges of fraud.  On 16 September 2015 the applicant was sentenced to 20 months’ imprisonment in respect of each charge with all sentences ordered to be served concurrently.[1] 

3.  The applicant has applied for leave to appeal against both his convictions and his sentences and after filing those applications he has applied for bail pending appeal. 

4.  At the hearing of the application for bail I allowed it and said I would give my reasons for so doing at a later date.  This I now do.

The prosecution case

5.  The prosecution case was that the applicant and D2 were both registered insurance agents working for different brokerage firms.  The applicant worked for Convoy Financial Services Limited (“Convoy”) and D2 worked for GET Wealth Management Limited (“GET”). 

6.  An insurance brokerage firm receives commission from insurance companies for selling their products.  Each insurance brokerage firm will then share the commission received from an insurance company with the insurance agent of the firm, called a Technical Representative (“TR”), who sold the particular insurance product.  The amount of commission that each brokerage firm shares with its TRs may vary. 

7.  The prosecution case alleged that the applicant sold certain products to his clients but arranged for those products to be processed through D2’s brokerage firm as it paid a higher amount of commission to its TRs.  D2 signed on the policies and represented himself to be the person who had dealt with the clients and his firm as having processed the policies.  In due course D2’s brokerage firm received commission from Zurich and the TR’s share of that commission was paid to the applicant.  This gave the applicant $111,839.60 more than he would have received had the insurance policies been processed through his own brokerage firm.

8.  The prosecution case consisted of witnesses from the applicant’s firm and from Zurich and, of course, from the clients of the applicant who purchased the insurance products.

The charges

9.  The applicant and D2 were separately charged with the same offence in relation to the same conduct but the focus of their charges was quite different.  This can best be demonstrated by quoting the Particulars of Offence of charges 1 and 5.  Charge 1 was as follows:

“1^st Charge (against D1 only)

Particulars of Offence

     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.”

Charge 5 was as follows:

“5^th Charge (against D2 only)

Particulars of Offence

     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.”

10.  Thus, it can be seen that the focus of the charges against D2 is the deceit on Zurich to induce it to pay the commission to D2’s firm rather than the applicant’s.  However, the focus of the charges against the applicant is a deceit that is said to have been made by him on his client’s to induce them to purchase the insurance products. 

The evidence

11.  The clients gave evidence that they were not aware that the applicant’s firm was not the brokerage through which their purchases of the insurance products were being processed.  They had no knowledge of D2 and GET.  These names either were not on the documents when the clients signed them or if they were the clients did not notice them.  Two clients said that had they been aware of the true position they would not have purchased the products (PW2 and PW4) and two would have sought an explanation from the applicant (PW3 and PW5).  All trusted the applicant.

The bail application

12.  The bail application is based upon Perfected Grounds of Appeal Against Conviction and Sentence which have been filed and which are said to be reasonably arguable.  It is also made on the basis that the applicant will have completed a substantial part of his sentence before the appeal is likely to be heard and determined.  The earliest release date for the applicant is 6 October 2016.

13.  The legal principles relating to bail pending appeal are well known.  Where an application is made on the time ground it is still necessary for the applicant to demonstrate that the grounds of appeal on which he relies are at least reasonably arguable.  (See HKSAR v Lau Man Kin [2010] 1 HKLRD 336)

The grounds of appeal against conviction and sentence

14.  The Perfected Grounds of Appeal Against Conviction contain two grounds of appeal against conviction and the Perfected Grounds of Appeal Against Sentence contain only one ground of appeal against sentence. 

15.  In his Perfected Grounds of Appeal Against Conviction the first ground of appeal complains that the judge erred in finding that the prosecution had proven that the applicant had acted with intent to defraud the victims, his clients, in that there was no evidence that the applicant “appreciated and intended that his conduct would expose the victim to economic loss or the risk of economic loss.”

16.  The second ground of appeal asserts that the judge’s Reasons for Verdict do not adequately or sufficiently explain why the applicant was convicted and “amount to little more than bare findings of guilt without the required analysis of the evidence and an explanation of the process by which he found that they constituted proof to the criminal standard of each of the elements of the offences charged.”

17.  The ground of appeal against sentence simply complains that the sentence is manifestly excessive as the circumstances reveal more a “sharp business practice” than a fraud and the judge failed to consider alternative sentencing options to imprisonment.

18.  At the hearing of the application Mr Egan indicated he may not wish to pursue ground 1 and, in due course, would be seeking to amend his grounds of appeal.  I granted him leave to do so.

Discussion

19.  This was a straightforward commission fraud in which the true victim was the applicant’s employer, Convoy.  Convoy should have received from Zurich a total commission of $650,067.07 of which it would have paid out $363,478.36 to the applicant.  Zurich was not the usual type of victim in the sense that it suffered no loss as it was content to see its products sold and would have had to pay out the commission in any event.  It was simply deceived into paying the commission to the wrong company.  Indeed, it seemed to have benefited from the fraud on it as the commission it paid GET was less than the commission it would have had to pay Convoy.

20.  Nor were the applicant’s clients the usual type of victim as they agreed to buy certain insurance products and they got what they wanted.  Nevertheless the prosecution case was based on proving that they were victims in that they were deceived by false representations into buying these products.  However, the false representations did not relate, as one would expect in such a situation, to the products or their suitability for the clients, but simply as to the applicant’s employer. 

21.  In order to establish its case the prosecution had to prove that the deceit was practiced by the applicant with intent to defraud and this deceit induced the clients into purchasing the products which resulted in a benefit to the applicant.  The deceit must be dishonest.  (See HKSAR v Ho Ka Keung [2009] 1 HKC 61 for a discussion of the offence.)  By section 16A(2) of Cap 210 a person is treated as having an intent to defraud if he intends by practising the deceit to induce the victim to do an act which results in benefit to the person practicing the deceit or prejudice or a substantial risk of prejudice to the victim.

22.  At the time of hearing this application the transcript of the clients’ evidence was not available and I ordered it to be prepared.  However, the summary of their evidence by the judge in his Reasons for Verdict raises issues of what was the deceit and how was it practised upon the victims.  Was it explicit from something said by the applicant (it appears not) or was it implicit from his conduct, and more especially from his silence and what he did not say? 

23.  Section 16A(2) does not require that for an intent to defraud to be established the deceit has to be the sole or main inducement, but it must still operate as an inducement contributing to the decision by each of the victims to purchase these insurance products.  Was the deceit, in whatever form it took, proven to have operated on the minds of the victims as an inducement to the purchase of these products or were the only reasons the victims bought the insurance products because they trusted the applicant and accepted the representations he made about the products and the benefits to them in purchasing them.  They appear to have assumed that the applicant was selling the products through Convoy because they had no reason to doubt that but did that assumption play any role in their decisions to purchase the products? 

24.  None of these questions are addressed by the judge whose Reasons for Verdict make no mention of the elements of the offence or contains any discussion of how those elements are proven.  After describing the evidence the judge simply says:

“ However, 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.”

25.  He then set out the commission monies paid to GET and those that would have been payable to Convoy in respect of the four policies and concluded:

“In the circumstances, I find that the prosecution had proved all charges against D1 beyond all reasonable doubt and D1 is convicted of Charges 1 to 4 accordingly.”

26.  Because the application is made on the time ground as well as the merit ground, the applicant does not have to surmount the higher threshold of showing that it appears that his appeal would be successful.  All he need do, where the time ground is also engaged, is to show that his appeal is reasonably arguable.[2] I am satisfied that the applicant’s second ground of appeal meets that threshold. 

Conclusion

27.  For these reasons I allowed the applicant bail pending his appeal.

[1] D2 was sentenced to 14 months’ imprisonment on each charge with all of his sentences also ordered to be served concurrently.

[2] See HKSAR v Lau Man Kin [2010] 1 HKLRD 336