THE QUEEN v. WONG KWOK SUN

1987, No. 942

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H E A D N O T E

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Forgery of a document - intent to defraud - insurance company's interests prejudiced.

IN THE SUPREME COURT OF HONG KONG

(Appellate Jurisdiction)

MAGISTRACY CRIMIMAL APPEAL NO. 942 OF 1987

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J U D G M E N T

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1. The appellant was convicted of forgery of a document, with intent to defraud, contrary to section 72(1) of the Crimes Ordinance, Cap. 200.

2. The appellant was a representative of the Manufacturers Life Insurance Group (the company). He sold life insurance policies, the premiums for which were payable directly to the company, or by means of a direct debit authorisation (autopay). A cash dividend was payable, in certain circumstances, to policy holders.

3. In June, 1986, Mr. Poon Sui-man took out a policy with the company through the appellant, which was due to expire in April, 1987. Mr. Poon did not intend to renew it and he advised the company to this effect by letter.

4. In consequence the appellant telephoned, and then came to see, Mr. Poon to find out why he did not want to renew. Mr. Poon told him that, according to the renewal notice, the premium for the ensuing year would be $6,630, while the dividend accruing for the past year was only $315, which was payable only if the premium for the second year was paid in full. He did not think this was fair.

5. The appellant asked Mr. Poon to do him a favour. He asked him to renew the policy for a further one month only. This would not only qualify Mr. Poon for the dividend, it would ensure that a 'lapsed record' would not appear in the books until the following year. This would, in some way, be beneficial to the appellant, though Mr. Poon was not clear whether the appellant would receive a reward. Since only a few hundred dollars were involved, he agreed to oblige the appellant. He eventually received the dividend cheque on 26th May.

6. On 22nd April he signed a form agreeing to pay premiums monthly instead of annually. This is the only document he signed. He asked the appellant if he should pay this final premium by autopay. The appellant said a cheque would do, so Mr. Pooh wrote a Hong Kong Bank cheque for $597 in favour of the company, which he gave to the appellant and which was subsequently cleared.

7. The appellant then asked him for the number of his bank account. Mr. Poon thought this must be because the appellant was not sure whether a cheque would cover the situation, or whether it had to be paid by autopay. He gave him the number of his savings account in the China and South Seas Bank.

8. On 2nd May the bank notified him that an autopay signature did not match his authorised signature. He visited the bank and was shown an autopay form, which he had not signed. It is not disputed that Mr. Poon's name was signed by the appellant. Mr. Poon was asked to sign the form by the bank but he refused. However he did not take any action, because he had not suffered any loss. The form was returned by the bank to the company's bank.

9. On 29th May Mr. Poon was again called to the bank. He was again shown the autopay authorisation, which was in the same terms and with the same signature; the only difference was that this time a bank account number had been added. It authorised the payment of $597 monthly, commencing on 14th June.

10. Mr. Poon rang the appellant the same day and asked him why the company was trying to draw on his account. The appellant said it was to save time. Mr. Poon told him that he was going to tell the police and, in spite of the appellant's protests, this is what he did.

11. Mr. Poon was asked in cross-examination if he would have signed an autopay form on 22nd April if the appellant had asked him to do so. His reply was, "If he said it was a rule of his Company I would sign, but I would not have given him the cheque". That makes sense.

12. A representative of the company was called for the prosecution. He explained the autopay system, whereby the form was sent by the company to the Hongkong Bank for onward transmission to the policy holder's bank.

13. He also explained the meaning of 'lapsed record'. If a premium is overdue, a notice to that effect is given to the agent. If it becomes 40 days overdue, a notice is sent to the customer. If there is a positive response within a specified period, the policy will continue in force without the insured having to undergo a further medical check-up.

14. He confirmed that the annual dividend was payable on payment of the 13th monthly premium, but - surprisingly - was unable to say in what circumstances the agent would get commission. He said the agent did not become personally liable on overdue premiums.

15. It was admitted that the appellant went to Waterfront Police Station after hearing that Mr. Poon had made a report to the police. It was also admitted that he there made two voluntary statements under caution.

16. This is what he said in the first statement:

"I did sign this name 'POON Sui-man' at the 'Direct Debit Authorisation'. Reason : (1) wanted to continue the insurance premium for the client POON Sui-man. This 'Direct Debit Authorisation' with a forged signature would, according to my knowledge, be rejected due to the wrong signature, and would not cause any loss to the client. As a matter of fact, the client POON Sui-man had had his first year's premium expired. If he carried on to pay the 13th premiun, he would get the bonus for the first year. On the 19th day of May, I also applied to the company to distribute the first year's bonus to the client POON Sui-man. A signed 'Direct Debit Authorisation' was one of the terms for the transferrance of annual premium to monthly premium.

I know that it was wrong for me to do so. It was only for the sake of earning a living. It is because the insurance company was very strict with the continuation of premium. I had done so because I did not want the client to suffer any loss."

17. The second cautioned statement followed 30 minutes later in these terms:

"I did sign 'POON Sui-man' at the 'Direct Debit Authorisation'. The reason why I had done so was to maintain a good record for the 'Lapse Record' and to make the first year's premium bonus available to the client.

As a matter of fact, the client POON Sui-man had had his first year's premium expired. The first year's premium bonus would be distributed to him if he paid the 13th premium and a 'signed' 'Direct Debit Authorisation'. But I did not inform the client what I had done. That was my fault.

According to my knowledge, if the signature on the 'Direct Debit Authorisation' did not match with the record of the bank, the (authorisation certifiate) would be sent back to the insurance company by the bank staff for a re-signature. And I did not have any intention to again sign the 'Direct Debit Authorisation'.

I had also applied to the company on the 19th day of May for the first year's premium bonus to the client POON Sui-man. You can enquire with Mr. Poor to see if he had received the bonus or not.

I had done so for the purpose of earning a living and out of the principle that I did not want the client to suffer any loss."

18. The appellant gave evidence in terms similar to his statements to the police, but with some, perhaps significant, differences.

19. On hearing that Mr. Poon did not intend to renew his policy, the appellant went to see him on 22nd April. Mr. Poon explained that he had no further need of insurance cover, because he had paid the last instalment on his flat. The appellant pointed out that that was no reason to discontinue his policy; now he could buy a larger flat and he should treat the insurance as savings, on a monthly basis.

20. According to the appellant, Mr. Poon agreed. It was arranged that he should pay his premiums monthly and he signed the form authorising monthly, instead of annual, premiums (Ex. P3). He wrote the cheque for $597 (Ex. D2), representing the thirteenth premium and drawn on the Hongkong Bank. The appellant told him that succeeding premiums would be paid monthly through autopay and asked him for his bank account number. Mr. Poon gave him the number of his China and South Seas Bank savings account. The appellant did not have an autopsy authorisation form with him and he told the appellant he would make arrangements for him to sign one later.

21. It was only at this stage of the conversation, according to the appellant, that the question of the 1986 dividend was raised. The appellant explained that he would qualify for the $315 dividend on payment of the thirteenth month premium. Mr. Poon was dubious, because the policy stated he would qualify only if two years premiums were fully paid up. The appellant reassured him that this was the case only if premiums were paid annually. He told Mr. Poon he would guarantee his dividend, which would be paid in about 10 days. If not, he could cease paying monthly premiums.

22. A few days later, at the end of April, the appellant called Mr. Poon and told him that he wanted him to sign the autopay form. Mr. Poon said he was busy until mid-May. The appellant said he would be on holiday then, but suggested they meet for half an hour. Mr. Poon said this was difficult and asked if there was any other way. The appellant said he could post him the form to sign, but it would be two weeks before he received it back and, since it took 6-8 weeks to process, the June autopay date would be missed.

23. Mr. Poon then suggested that the appellant sign the form. He said that if he signed his Chinese name in block letters - which was different from his specimen signature - the bank would spot the difference and ask him to rectify the signature. I think the appellant must have meant to tell the court that Mr. Poon suggested signing in Chinese characters, instead of his usual Roman script.

24. The appellant said he would notify him if he decided to do that. Mr. Poon also enquired about his dividend and the appellant said he would attend to it immediately. This he did. He admits he forgot to do it after the 22nd April conversation, in spite of his guarantee to Mr. Poon.

25. The appellant realised two days later that he would not be able to get to Mr. Poon's office in Tsuen Wan - a surprising piece of evidence considering the appellant lives in Mei Foo Sun Chuen - and decided to adopt Mr. Poon's suggestion. He therefore wrote his name in Chinese characters on the autopay form (Ex. P1). He did not know how Mr. Poon usually signed his name in Chinese characters, but he was aware of his English signature from his application form. He then submitted the form for processing without any intention of defrauding anyone.

26. He did not however notify Mr. Poon, as he had promised to do, because he was busy, and he failed to reach him by telephone. Then, on 4th May, he started his holiday.

27. The appellant was on holiday for most of May. On 18th May he received a memorandum from his administration office confirming that the policy holder was now on a monthly premium basis and that the next premium was due, by autopay, on 14th June. (Ex. D3). For some unexplained reason the amount stated as the new premium is $586 not $597. The appellant immediately reapplied for the 1986 dividend.

28. On 29th May the appellant received a call from Mr. Poon complaining that the autopay form had been submitted twice, but he had still not received his dividend. He was angry and accused the appellant of cheating him. He said he was going to report him to the police. The appellant attempted to mollify him, but he did not know whether the dividend had yet been approved he was not in the office that day. In fact it was paid on 27th May.

29. The defence called the company's Branch Manager, Mr. Shum Wai-char, the appellant's supervisor. He said the appellant was very honest and his performance, during the 5½ years under his command, had been excellent. He confirmed that the appellant had been on leave during May.

30. He was asked in cross-examination if the company approved of an agent signing an autopay form in the name of the customer. He said it was not allowed.

31. On this evidence the magistrate, not surprisingly, found that Mr. Poon was telling the truth and that the appellant was not. Mr. Poon had no motive to lie. His evidence reads confusingly in parts, but on the salient points he is firm and clear. The appellant's story, on the other hand, is unlikely at best and the magistrate rejected it.

32. His conclusion, accordingly, was that Mr. Poon had not authorised, or consented to, the use of any signature on the autopay form, nor had he given any authority, express or implied, for any direct monthly deduction from any bank account in his name. 'There was ample evidence to justify this finding.

33. In his Statement of Findings the magistrate went on to say:

"I was satisfied and so found as fact the Appellant well knew at the material time he had deceived the Company into believing the signature on the form exhibit P1 was genuine and that he was dishonest in so doing; it being a regulation of the Company that an agent is not allowed to sign a direct debit authorisation form on behalf of the customer in the customers name. I was also satisfied that where in exhibit 4(a) the Appellant said... 'I know that it was wrong for me to do so. It was only for the sake of earning a living,'; he was admitting a belief on his part of an advantage to himself by reason of the forged signature. A like admission he was to make in the final paragraph of exhibit 5(a)."

34. Mr. Wong, for the appellant, submits there may have been an intent to deceive, but there was none to defraud. There was no prejudice to the policy holder, the banks or the company. By signing the autopay form in Chinese characters, the appellant showed a clear intention that it should not be accepted as genuine.

35. As Mr. Wong emphasises, it is important to distinguish intention from motive. The latter is irrelevant to criminal culpability, but is frequently useful as a pointer to intention. The appellant's motive may have been to sell more insurance and thereby gain additional commission for himself. It may also have been to avoid a lapsed record.

36. On the facts found by the magistrate it is not possible that the appellant intended the China and South Seas Bank to honour the autopay form and pay the June premium to the company. Had that been his intention, he would have copied Mr. Poon's romanised signature, which he had used on his insurance application form and which was more likely to have been his authorised signature than the Chinese characters the appellant actually used.

37. That being the case, the appellant can only have intended that the form be processed by the company and that it should be sent to the applicant's bank. He must have realised that, at that stage, Mr. Poon would be apprised of the situation and he would have to confront him and explain his action. The question is whether such an intention necessarily involves fraud.

38. Mr. Wong submits that the magistrate has failed to distinguish intent to defraud from intent to deceive. In R. v. Moon⁽¹⁾ it was held it is a misdirection to equate an intent to defraud with an intent to deceive. The magistrate's finding was that the appellant dishonestly deceived the company, but fraud may be implicit in his finding.

39. To defraud is dishonestly to prejudice, or take the risk of prejudicing, another's right, knowing that you have no right to do so. It is no defence that the person taking the risk did not desire to cause prejudice, or even foresee that it was probable. Defrauding is not confined to causing economic loss and extends to causing someone to do something he would not otherwise have done, or to refrain from doing something he would otherwise have done. But there must be a risk of prejudice to some person. R. v. Welham⁽²⁾.

40. In R. v. Hodgson⁽³⁾ the defendant altered a diploma of the Royal College of Surgeons to make it appear it had been granted to him. It was not shown that he forged the diploma for any purpose other than inducing others to believe that he was a surgeon. It was held that, in spite of the clear intent to deceive, the defendant had no intent to defraud.

41. But in Welham Lord Denning said:

"If a drug addict forges a doctor's prescription so as to enable him to get drugs from a chemist, he has, I should have thought, an intent to defraud, even though he intends to pay the chemist the full price and no one is a penny the worse off."

42. In R. v. Sinclair⁽⁴⁾ James J, giving the judgment of the Court of Appeal, said at page 623:

"The criticisms of the summing up in respect of the direction as to fraud this court finds to be ill-founded. The judge directed the jury as to the duties of a director in regard to company assets. He properly directed the jury as to the difference between the normal business risks taken honestly and the dishonest risk deliberately taken with knowledge that there was no right to take such risk. He properly left it to the jury to decide upon which side of the line the conduct of the appellants fell:'... as that conduct in any one of these cases where fraud is alleged gone over the mark, over the limit from legitimate business risk from legitimate business dealings, it may be, putting other people temporarily at a disadvantage, but nevertheless honest."

43. Were the company's rights at risk of prejudice? It was not liable to pay out in the event of the insured's death: the policy holder had not authorised payment of the premium. Counsel for the Crown suggests that the company's books would have been distorted, albeit only for a short time, as a result of the false signature. That is true, but is it prejudice?

44. If the company had false figures in its books, as a result of the appellant's action, I think it must follow that there was prejudice. If the company had realised that its liability under Mr. Poop's policy ceased with the payment of the May premium, as represented by the cheque for $597, it might have disposed of its financial resources differently. That is a risk of prejudice to the company's rights and one that the appellant had no right to take. His action was dishonest.

45. There is therefore no need to consider whether the bank's or Mr. Poon's rights were also prejudiced. The offence of forgery is proved. The appeal is dismissed.

(1) 52 CAR (1968) 12

(2) (1960) 44 CAR 124

(3) (1856) Dean & B3

(4) (1968) 52 CAR 618