Case Summaries

Ong Han Ling and another v American International Assurance Company Ltd and others


29 December 2017

Media Summary

High Court Suit No 743 of 2012

Ong Han Ling and another v American International Assurance Company Ltd and others [2017] SGHC 327


1                    In Ong Han Ling and another v American International Assurance Company Ltd and others [2017] SGHC 327, the High Court held that two of the defendants, American International Assurance Company Ltd and its Singapore-incorporated entity (“the AIA defendants”), were vicariously liable to the plaintiffs, an Indonesian couple, for the fraud of one of its insurance agents, Sally Low (“Sally”). Sally had promoted a fictitious life insurance policy to the plaintiffs, named the AIA Thank You Policy, inducing them to remit US$5,060,900 to AIA in November 2002. This policy would guarantee certain returns after a five-year maturity period. She then instructed AIA, ostensibly on behalf of the plaintiffs, to use the remittance to purchase six other policies (genuinely offered by AIA as life insurance policies) in the plaintiffs’ respective names.

2                    In coming to its decision, the High Court examined the insurance business structure of AIA, where agents form an integral part of the company’s business model. It found that in the present case, the relationship between Sally and AIA was capable of giving rise to vicarious liability, and that there was a close connection between Sally’s fraud and her relationship with AIA. Thus, the AIA defendants were vicariously liable for Sally’s fraud and the plaintiffs could recover their losses from the AIA defendants.

Background facts

3                    Ong Han Ling and Enny Ariandini Pramana (“the Ongs”), the plaintiffs, sued the AIA defendants for the fraud of one of its insurance agents, Sally. Sally had promoted a fictitious AIA Thank You Policy guaranteeing certain returns after a five-year maturity period to the Ongs. She forged documents from AIA that led the Ongs to believe that the policy was real and that AIA had approved their application for the policy. The Ongs therefore remitted US$5,060,900 to AIA in November 2002 to purchase the AIA Thank You Policy. Unknown to the Ongs, Sally, ostensibly acting on behalf of them, instructed AIA to instead use the Ongs’ remittance to purchase six AIA policies in the Ongs’ respective names, and handed to AIA policy applications with some containing the Ongs’ forged signatures. In 2004, Sally told the Ongs that their names had been mistakenly used for the AIA policies because of a series of computer crashes at AIA. She assured them that the AIA Thank You Policy was still in force. She then induced them to surrender three of the other AIA policies and return most of the surrender proceeds to AIA through her personally. The Ongs hence gave her sums amounting to S$6,288,058 and US$1,000,000. It was only from January 2008 that Sally’s fraud started to be discovered. The Ongs then recovered some of their money from Sally personally, and sued AIA for the remainder.

4                    The Ongs argued that AIA should be held to the terms of the AIA Thank You Policy that Sally had represented to the Ongs, or alternatively that AIA was vicariously liable for the consequences of Sally’s fraud or was negligent in failing to handle the Ongs’ money. AIA counterclaimed against the Ongs, arguing that Mr Ong was the mastermind of a conspiracy with Sally to defraud AIA. It alleged that the Ongs knew all along that the AIA Thank You Policy was fictitious, had helped to forged documents for the AIA Thank You Policy, and had also been involved in the forgery of their own signatures.


5                    The High Court dismissed the AIA defendants’ counterclaim in conspiracy and found for the plaintiffs against the AIA defendants on the sole issue of vicarious liability. It dismissed the plaintiffs’ other claims against the AIA defendants. It awarded the plaintiffs a judgment sum of S$1,597,250.69 with interest.

6                    It also dismissed the plaintiffs’ claim against the third defendant, Motion Insurance Agency Pte Ltd (“Motion”), who was Sally’s agency manager.

Reasons for the judgment

7                    The High Court dismissed AIA’s counterclaim in conspiracy. It found that AIA’s key witness, Sally, did not prove the Ongs’ complicity to defraud AIA. Sally’s account of the conspiracy, in particular her motivation to conspire with the Ongs, was fanciful and unconvincing. Sally’s testimony was also inconsistent with the objective evidence. In May 2016, after Sally had testified in this trial, she pleaded guilty to charges of cheating the Ongs and was sentenced to eight years’ imprisonment.

8                    The High Court held that AIA was vicariously liable for Sally’s fraud. It noted that the doctrine of vicarious liability was no longer confined to employment relationships, and depended on a two stage test, namely, whether there was a special relationship between the tortfeasor and the defendant such that it is capable of giving rise to vicarious liability, and whether the tortfeasor’s conduct possessed a sufficient connection with the relationship between the tortfeasor and the defendant. For the first stage, the High Court held that regardless of whether Sally was AIA’s employee, she was not an independent contractor, and her relationship with AIA possessed the fundamental qualities that existed in employment relationships. She performed a wide range of tasks on behalf of AIA and was effectively selected, trained, supervised and disciplined by AIA. The High Court also noted that the life insurance industry was regulated in a manner which expected companies like AIA to take responsibility for the management of its agents like Sally.

9                    For the second stage, the High Court held that a sufficient connection existed between Sally’s fraud and her relationship with AIA. As the insurance intermediary, Sally used the practice in AIA to her advantage and benefit. The fact that Sally was a top agent in AIA gave her credence within the company and in her dealings with the staff of AIA. Sally was able to continue her fraud by representing one thing to the Ongs and another to AIA, purportedly always on behalf of the other party, thus inducing both sides to handle the Ongs’ remittance of US$5,060,900 in the manners she intended. The long period of time the fraud was sustained against both parties can be explained by a combination of the close relationship of Sally and the Ongs and AIA’s reliance on Sally’s representations as to the plaintiffs’ instructions.

10                Sally’s fraud, which had spanned years and involved a multitude of lies to the Ongs, comprised forging AIA documents, giving false instructions to AIA purportedly on behalf of the Ongs, withholding policy documents and refund cheques from the Ongs, which were all connected to her functions as AIA’s insurance agent. AIA had allowed and even encouraged its agents, especially its top-performing ones, to develop close relationships with high net-worth policyholders, with little intervention. These agents were given a wide range of responsibilities to act as a one-stop shop to policyholders. AIA’s business model and its reliance on agents, in particular its practices of accepting their agents’ instructions without verification, pre-allocating policy numbers, and allocating excess money into future premium deposit funds for policies, significantly enhanced the risk of Sally’s fraud.

11                The High Court hence held that AIA should be vicariously liable for Sally’s fraud. However, it noted that this outcome did not validate or invalidate AIA’s business model; it was simply that, having placed their agents in such a position to advance the aims of its business enterprise, AIA had to fairly take the risk of its agents’ torts.

12                On the issue of negligence, the High Court held that AIA had breached its duty of care to the Ongs by failing to adduce evidence of safeguards to ensure that their prospective policyholders’ monies to purchase insurance were applied according to their instructions. It noted that given AIA’s reliance on agents, one would expect to see safeguards aimed at training agents to carry out their tasks and monitoring them to see whether they were indeed carried out. AIA was unable to prove that its systems contained any such safeguards. In particular, refund cheques of sizable amounts meant for the Ongs were unpresented because Sally did not pass them on to the Ongs. AIA failed to prove that it had a system in place to follow-up on its instructions to its agents. Despite the breaches, the High Court found that the Ongs could not prove that AIA’s breaches led to their loss.

13                The High Court also dismissed the plaintiffs’ claims against the third defendant, Motion, in vicarious liability and negligence. It held that there was no special relationship between Motion and Sally that was capable of giving rise to vicarious liability. Motion and Sally did not have a contractual relationship. Both worked for and were remunerated by AIA. It also held that Motion did not owe a duty of care to Sally.

* This summary is provided to assist in the understanding of the Court’s judgment. It is not intended to be a substitute for the reasons of the Court.