SEE YOU IN COURT: AIA has sued the 10 policyholders, saying that they have conspired to exploit a mistake made by the insurer
10 strike it rich with AIA investment policies but...
Give us our $17.7m
No, you're unjustly enriching yourselves
TEN investors thought they struck it rich when their $1.06 million in AIA's investment-linked policies turned a huge profit in 2006.
By Crystal Chan
17 May 2009
TEN investors thought they struck it rich when their $1.06 million in AIA's investment-linked policies turned a huge profit in 2006.
But when they wanted to cash out their paper profit of $17.7 million last August, AIA refused to pay and instead sued them.
In the suit filed in the High Court, AIA is seeking damages from the 10 policyholders, alleging they had conspired to exploit the insurer's mistake in determining the bid prices for allowing them to switch funds.
Both sides have hired high-powered lawyers, with Senior Counsel Quentin Loh of Rajah & Tann representing AIA and Mr Quek Mong Hua of Lee & Lee acting for the policyholders.
The American insurance giant's claim rests on the allegation that it had made a mistake in valuing the funds by using one-day-old bid prices to effect the fund switches.
This had led to the defendants being given a larger share of the funds than what they were entitled.
As a result, AIA is accusing the group of 'unjustly enriching' themselves by $17.7m.
AIA allows policy-holders to switch funds as many times they like. The first four switches in a policy year are free, after which clients must pay $25 for each switch.
Among the 10 defendants are a married couple, MrWong Cherng Yaw, 34, and Madam Junie Tan, 30, who were AIA agents when the investment was made.
The other defendants include their parents and siblings.
AIA claims that they had breached their fiduciary duties and contracts as its agents.
AIA terminated Mr Wong's services on 20 Sep last year, three months after his wife resigned.
While the case has yet to go to trial, two defendants - Mr Wong's mother, Madam Liaw Chong Kiaw, and a close friend, Mr Lim Wee Chee - made an interim application to the court to get AIA to release some monies to them.
They filed affidavits to describe their financial problems as a result of the turn of events.
Mr Lim, a former junior college teacher, said he had invested about $275,000 and was now unable to repay his bank loans and faced bankruptcy.
He said he found it hard to get a job again as a full-time teacher because of his financial situation. He now teaches part-time for a much lower salary.
Madam Liaw invested $130,000, a big portion of her retirement money, and said she faced financial hardship if she could not get the money released by AIA.
In his affidavit, Mr Lim said he and the other policy-holders suffered huge losses in the first few months.
He said he started analysing and observing the performances of the various funds and the markets to which they were linked, then took calculated risks by switching funds to avoid adverse price fluctuations and to ride on positive trends.
Through more than 300 fund switches over two years or so, the defendants were able to make large profits.
During this time, Mr Lim and the other policyholders were able to make partial withdrawals from their policies. It was not mentioned in the court papers how much they withdrew.
Questioned by superior
Then in June 2007, Mr Wong's boss noticed the frequent fund switches and questioned him about them.
Mr Wong explained that he, Mr Lim and the others had switched funds after analysing the markets.
In May last year, Mr Wong was queried again on the same matter by a member of AIA's compliance department. He gave the same reply.
AIA continued to carry out the policyholders' instructions to switch funds.
The investments peaked on 7 Aug last year, with the policies valued at about $18m, giving the holders a paper gain of about $17.7m.
But the next day, when Mr Lim applied for a partial withdrawal, AIA refused.
Mr Wong, Madam Tan and Mr Wong's brother, Shyh Yaw, 37, also faced the same problem.
Their requests to switch funds were also rejected.
AIA later sent them a letter to say it had filed a suit against them.
The trial has been set for October.
While AIA assured the defendants on 19 Sep that the disputed monies would be held in escrow pending resolution of the suit, the global credit crunch has depreciated their initial profit.
By 9 Oct, the total value of their investments had plunged to $11m.
Justice Andrew Ang ruled in favour of the defendants and ordered AIA to pay them the remainder of their principal investment, which came up to about $1m.
AIA is appealing against the order. It will be heard on 22 May.
