HKSAR v. TSOI YAN WAH, STELLA

DCCC 1126/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 1126 OF 2015

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Reasons for Verdict

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1.  The defendant faces one charge of fraud, and my decision on the charge is that the defendant will be discharged from that charge and acquitted. My reasons will be as follows.

2.  The defendant was an insurance agent for Manulife (International) Limited.  In 2010 to 2011 she arranged for the 1st prosecution witness to purchase three investment-linked insurance policies for an outlay of over HK$1.5 million during that period.

3.  Essentially, PW1 says these policies were mis-sold to her by false representations made by the defendant.  Those false representations form the particulars of the offence of the fraud as charged. They are that the defendant would accede to a request to issue an investment-linked insurance policy by Manulife Limited with a single premium of HK$1.5 million.  Having issued that insurance policy, which is not in accordance with the instructions of PW1, the defendant now falsely represented to PW1 she had to make a monthly payment of a premium of $25,000 for a year before the insurance policy could be changed to another one.  The third false representation is that the amount of money paid by her - that is, by PW1 - to Manulife in a total of HK$1.5 million was the total premium she was liable to pay for the investment-linked insurance policy.

4.  This was done, it is said, with intent to defraud, and PW1 was induced to pay this 1.5 million for the purchase of three insurance policies which are particularised, resulting in benefit to herself but in prejudice to PW1.

5.  I note at the beginning that the evidence of PW1 was that the policy was not to be an insurance policy.

6.  The defendant’s case is that PW1 is either entirely mistaken about the documents that it was shown that she signed, or she is simply being untruthful about them for her own reasons.  It is said by the defence that the documents that she has now admittedly signed speak for themselves.  The alleged false representations were not made and could not have been made reasonably or rationally, given the nature of the documents themselves, which are obviously insurance policies and, on their face, which give full details of the ongoing commitments under them.

7.  The issue presented to me at this trial was therefore one of credibility.  Can the prosecution rely on PW1’s evidence to a criminal standard to prove the alleged false representations?  I note there is no other evidence capable of meeting the criminal standard of proof available to the prosecution to assist them in proving their case against the defendant.

8.  PW1’s evidence was that she met the defendant in 2007.  They had become friends, good friends, engaging in social activities together.  She knew that the defendant worked for Manulife.  PW1 had in the past bought mutual funds and had about 1.5 million invested.  She said she had an income of $25,000 per month given to her by her husband.  PW1 decided to sell her mutual funds and then to buy mutual funds with Manulife, and she asked the defendant.

9.  The defendant then introduced a colleague who was an investment adviser, who told her about which funds to buy.  The evidence shows that this was a man called Bruce.  He could have been of great assistance, but he was not called by the prosecution or by the defence.

10.  She said she had - the word she used was “probably” - told the defendant she wished to invest HK$1.5 million.  She said she mentioned to the defendant she wanted to do this on a one‑off basis. She said this occurred at the end of 2009.  The defendant told her they would open an account first.  She said the account was opened around the beginning of 2010 at a meeting at a restaurant in Langham Place.  The defendant brought along a credit card machine and asked for 50,000 to open the account.  This was done by use of a Visa card.

11.  Within one month of making the payment, the defendant brought documents to her home.  PW1 said that they said a monthly contribution was involved, that being the $25,000.  PW1 said it was not suitable, as she wanted a one-off investment.  The defendant at this point is allegedly supposed to have said that the policy was already made out; it could not be altered.  If it was cancelled, the money would be lost, but if PW1 made the contribution for one year, then it could be changed to a one‑off investment.

12.  The document signed was an application for an insurance policy.  It could not be that the policy would have been made at that stage.  She said she trusted the defendant and signed the document, and that signature was made at the defendant’s office.

13.  In August of that year, she signed further documents at the defendant’s office.  They were, she said, in preparation for cancelling the autopayment for the first policy, and she had signed some blank forms.  She had been offered a rebate.  The defendant said if she had $1.5 million worth of investment, then $300,000 would be given to her, but the defendant told her not to tell anyone as it was wrong.  It was to be $300,000 cash, and PW1 said she was very happy.

14.  240,000 was paid by the defendant to her in cash.  The defendant said, when asked why there was only 240,000, that a further 50,000 would be credited to her Manulife account.

15.  PW1 continued to write cheques for the investment.  There was a cheque for 450,000, and 620,000; the cash bonus was also reinvested, with a payment of 125,000 to Manulife.  There were further cheques paid for 150,000 and 70,000.  This was to complete the investment of 1.5 million.  When all was totalled, she had invested 1.8 million, and this was all for buying mutual funds.

16.  She said she did receive notices from Manulife, but one of them was a penalty notice, so she went to Customer Services to complain.  She found out that instead of a one‑off investment, she had made an annual contribution of 1.5 million in respect of three insurance policies, and when she complained, she received copies of these policies.

17.  Evidence was also called by the prosecution to show that the defendant had earned $427,500 in commission for the sale of those three insurance policies.  There was also a bonus of $376,064.39.  PW4 also confirmed that Manulife did not pay rebates.  Evidence was also called to show that the defendant had paid 240,000 in cash to PW1.  This does not appear to have been disputed.

18.  The bulk of the written evidence consists of the insurance policies and payments and bankers’ affirmations.  This was all agreed, as was the fact the defendant had a clear record.

19.  Also read into the evidence were the conclusions of a Dr Ng Po-king, a forensic scientist who analysed the signatures on the documents associated with the application for insurance policies and other matters associated with them.  Dr Ng made certain observations.  Before certain of the signatures had been executed, it appeared there had been erasures.  He also found discrepancies in writing attribution such as fluency, rhythm, hesitation and retouching.

20.  His conclusions, however, were somewhat tentative.  He said that signatures he had looked at at 1 and 10 and 4-8, the signatures were, he said, probably not written by the same person, thus not permitting a factual conclusion to be reached to a criminal standard without the existence of some other supporting or corroborating evidence.

21.  In respect of the other signatures in other questioned documents, he reached the conclusion that, and he quotes, and said: “I am of the opinion that a common authorship between the questioned signatures and items 2 and 3 and the control signatures could neither be,” in his words, “confirmed nor eliminated.”

22.  Thus there is no conclusion to a criminal standard can be reached by Dr Ng.  I found his evidence, at the end of the day, was of little assistance to the court in reaching any factual conclusion, and certainly could not be used to reach any factual conclusion adverse to the defendant given the standard the burden of proof requires.

23.  The defendant did not give or call any evidence save for the agreed fact that she was of a clear record.  The defence case was advanced by way of cross-examination and submission.

24.  The prosecution must, of course, prove its case beyond all reasonable doubt.  The burden remains on the prosecution at all times.  In order to prove the offence, the prosecution must prove that the defendant acted by consent, by deceit, and with intent to defraud, and in doing so she had induced another person, in this case, PW1, to commit an act or make an omission which resulted in benefit to another person or prejudice or a substantial risk of prejudice to any other person.

25.  Were PW1 to be accepted, certainly the groundwork or the basis for such a conclusion could be reached.  The prosecution case was opened on the basis that PW1 was duped by the defendant by reason of the false representations alleged in the charge; that the defendant had somehow translated the HK$1.5 million she wanted to be placed into a mutual fund into buying and paying for the first year’s premiums on insurance investment policies.  The defendant’s motivation apparently, so the prosecution says, was to receive a substantial payment of commission and bonus.

26.  It is also said the defendant gave a rebate to PW1 which was not permitted by the company, which illustrated the deceitful nature of the transactions.  Furthermore, it is said the forensic evidence showed suspicious activity in respect of some of the signatures and supported PW1’s evidence that there were a number of signatures on the documents which were forgeries, although the allegation that the signatures on the applications for the two later insurance policies were forgeries was not pursued by the prosecution in light of PW1’s evidence.

27.  It was said that PW1’s evidence should be accepted, and this proved the elements of the offence of fraud.

28.  The defence submission was quite simple.  It was that PW1’s evidence, on whom the prosecution entirely relied, was simply not credible, and even if there were elements of credibility, they could not be relied upon to the criminal standard of proof.

29.  PW1 had said in evidence repeatedly that she only ever wanted a mutual fund arrangement, yet had signed up to these three insurance policies.  The defence said PW1 was a woman who had worked in the commercial world as a secretary for most of her career and must have been aware of the nature of the documents that she admittedly signed.  There was nothing on the face of any of these documents to suggest the transactions were not above board.  The documents were absolutely clear they were insurance policies, that monthly contributions were required, and they said so on their face.  They were formulated, even on PW1’s evidence, on the basis of discussion with financial advisers in the company, signed at the company’s office, subject to a cooling-off period and inquiries from the company, Manulife, to ascertain if PW1 fully understood the nature of the commitment that she had entered into.

30.  It was said in the light of this, it is simply inconceivable that the defendant could have fraudulently obtained PW1’s agreement to sign these documents.  It would have been extremely reckless on her part if she had made the representations given the level of surveillance and inquiry by the company and the advice issued by the company to PW1 before she signed any documents.

31.  Furthermore, PW1 also continued to make payments when she had said she had become aware it was not a one‑off mutual fund investment. It was said PW1 had been rather evasive about her financial position.  Her evidence against the defendant was based on the fact that she said she had an income of $25,000 per month from her husband, which would mean it would be inconceivable that she would commit herself to an investment of $1.5 million a year, yet bank statement evidence from her for other reasons showed payments of up to $50,000 per month for which it can be undisputed she had given at least four different explanations as to their origin.

32.  The defence now say that she had not told the truth about how the account with Manulife had been opened.  She had in fact named a beneficiary for the insurance policies, and that must have made her aware that they were insurance policies.

33.  It also emerged in evidence the person called Bruce had played a significant part in the initial discussion when the kind of policy to be entered into was discussed.  It was said that in all, PW1’s evidence, taken as a whole, was insufficient to reach a state of certainty as to what had happened at all, and the case must fail.

34.  The prosecution case naturally stands and falls on the reliability of the evidence of PW1.  There is no other evidence available that could, to a criminal standard, discharge the burden of standard of proof at a criminal trial.

35.  In support of PW1, it may be said that the policies she entered into do not seem the best investment by her given her stage of life and her professed income, were we to accept the income that she told us.  The three policies involve substantial yearly investments for a period of up to 15 years.  Secondly, the rebate given to her is inexplicable within the framework of Manulife’s investment policies, yet the defendant, on the face of the evidence I have heard, undoubtedly paid this money to her.  I note that there was an allegation that this payment was for another matter.  It was a payment made by one friend to another, and that PW1 denied that it was for the performance of medical work.

36.  In examination-in-chief, the victim, PW1, has spoken of a transaction that appeared to be exclusively between herself and the defendant, yet later she conceded that the actual policies or the applications had been derived as a result of discussions between herself and financial advisers at Manulife, in particular the person called Bruce.  There had been a financial analysis.  Secondly, the applications had been signed at Manulife’s offices in the presence of other persons.  Thirdly, the applications which were signed were quite obviously for insurance policies as they required a beneficiary.

37.  It is my view that PW1, despite what she had said to me, could not at any stage during the process have been under the illusion that she was buying a mutual fund unless she wilfully disregarded all the other surrounding circumstances.  This could not have been a one-off purchase, and it was not; but when she says she believed this to be a one-off purchase, at a minimum, she must be incorrect.  This of itself means that the false representations contained certainly in the first particular of the indictment cannot properly be evidenced by her testimony, and this would also mean, in my view, that the second false representation cannot also be supported by her testimony.

38.  For these false representations to have been made and accepted, they would have to have gone alongside the financial analysis, which we have not seen, and the terms which we do not know.  But this would necessarily include the nature of the products she was buying.  The physical document that she signed did also on its face completely contradict her understanding of what she said she signed.

39.  I noted the document she did sign contained a complete schedule of the payments to be made and the penalties for failing to make the payments.  On the face of this, it seems to me more than unlikely the defendant could have falsely represented that the payments would only continue for one year and that the document could be replaced within that period.  This would completely contradict the actual application document that had been signed.

40.  As I said, it is possible PW1 signed under false premises, but unlikely.  I have to be certain that the false representations particularised were made and acted on.  I do not find the evidence permits that degree of certainty in respect of these false representations.

41.  Similarly, I note for the false representation in (iii) it is subject to the same observations.  It is alleged that the 1.5 million premium was the full premium for one policy.  This again is contrary to the physical applications that were signed by PW1.

42.  I said earlier that I had noted the contents of the forensic scientist’s report.  However, in order for this conclusion to have helped PW1, it must satisfy the level of proof required in a criminal case, and it cannot do so.

43.  I also note in reaching these conclusions the payment of the rebate, which does implicate both the defendant and also PW1 in an unusual transaction, and one that should not have been permitted by the company or by any of the documents signed.  However, I find that in this case it simply serves to complicate matters, as PW1’s evidence on this matter also I did not find to be credible.

44.  In summary, I find that PW1’s evidence was not consistent with the uncontested evidence from the documentation she signed and the clear terms of those documents.

45.  At the conclusion of any trial I must be in a state of certainty as to the facts and as to the conclusions.  I find that I cannot reach that level of certainty on the evidence presented in this case.

46.  For those reasons, the defendant must get the benefit of any doubt in respect of my factual conclusions, and for those reasons, the defendant must be acquitted.