HKSAR v. CHAN CHING KEUNG AND ANOTHER

HCMA314/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO.314 OF 2006

(On Appeal From KCCC541 OF 2006)

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J U D G M E N T

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1. The first appellant appeals against his conviction after trial by Mrs Adriana Tse in the Magistracy in respect of two charges of managing a vice establishment, contrary to section 139(1)(b) of the Crimes Ordinance, Cap. 200 and the 2^nd appellant appeals against his convictions, after a joint trial with the 1^st appellant, in respect of two charges of breaching conditions imposed under the Dutiable Commodities Ordinance, Cap. 109 and the sentences of six months' imprisonment, ordered to be served concurrently, imposed in respect of each charge.

The charges

2. The four charges concern premises known as “L and G Karaoke” nightclub, situated at Shop L on the Ground and First Floors of Buckingham Building, 317-321 Nathan Road, Kowloon.  Charges 1 and 2 alleged that on 25 October and 11 November 2005 the 1^st appellant managed those premises, which were kept as a vice establishment.  Charges 3 and 4 alleged that on 25 October and 11 November 2005 the 2^nd appellant, being the holder of a liquor licence in respect of those premises, breached a condition imposed under the Dutiable Commodities Ordinance, namely that the licensee shall not permit any person to occupy or use any portion of the premises for any immoral or illegal purpose.

The prosecution case

3. It was an admitted fact that at all material times the 1^st appellant was an employee and the 2^nd appellant the licensee of the “L and G Karaoke” nightclub.  It was not in dispute that the 1^st appellant took part in the management of that nightclub.

4. The main thrust of the prosecution case lay in the evidence of two undercover police officers who visited the premises on the two dates in question, namely 25 October and 11 November 2005.  They were DPC 58292 (PW1) and DPC 33730 (PW2).  On the first occasion they had been on the premises for about 1-1/2 hours, from about 11:35 p.m. to 1 a.m.  On the second occasion they had arrived at about 7:16 p.m. and their uniformed colleagues had entered the nightclub premises at about 9 p.m.  They testified of conversations inside rooms within the premises provided for the use of customers that they had on each of those occasions with the 1^st appellant in which, on the first occasion, he had explained the charges and services offered by hostesses at the premises, after which he had provided them with hostesses.  On the second occasion he asked them if they wished to take out hostesses for sexual intercourse and reminded them of the related charges.  Once again, the 1^st appellant introduced hostesses to both officers.

5. PW1 testified that on 25 October 2005 the hostess to whom he had been introduced by the 1^st appellant had touched his inner thigh near his penis repeatedly and suggested a hotel to which they could go which would be safer when they “banged”.  PW2 testified that on that date the hostess to whom he had been introduced had used her hand to touch his penis and asked him if he wished to go out and take a room.

6. Of the events of 11 November 2005 PW2 testified that whilst in one of the rooms reserved for customers the hostess to whom he was introduced by the 1^st appellant had used her hand to touch his penis and asked him if he wished to take her out.  At a later stage, a light came on inside the room at the corner of the door, after which the hostess told him that the police were on the premises for a licence check.  He marked that light on photograph exhibit P8 (34).

7. PW1 testified that the 1^st appellant had introduced him to a hostess and said :

“This one you get 'ice fire' for free with fucking.”

That hostess had touched his penis with his hand and asked him if he wished to go out later saying :

“We could go to the hotel on the second floor to bang.  'Ice fire' would be given free of charge.”

Later, PW1 went with that hostess to the hotel on the second floor.  As they left the nightclub he met the 1^st appellant who responded to his indication that he would pay the bill later by saying :

“Well in the case don't fuck so long.”

In the hotel room that PW1 took with the hostess the latter took a bath returning naked when she asked the officer if he wished to have “ice fire” treatment.  Shortly afterwards, other police officers entered the room.

8. In cross-examination, both officers denied suggestions made to them that the 1^st appellant had never spoken to them about the provision of sexual services from hostesses.  Both officers said that the premises were laid out as a typical karaoke bar.  PW1 accepted that each of the rooms within the premises had transparent inlaid window and that there were television and karaoke sets inside the two rooms in which he was taken.  He said that there were other people inside the premises, but he did not know if they were staff or customers nor did he know what they were doing.  While he had heard music he did not hear any singing.

9. PW2 said that there were notices on the walls of the rooms in which he was taken and they were similar to the notices exhibited as D1-3.  Those notices containing the admonition “All staff is forbidden to provide any immoral services to customers inside the premises”.  He agreed that he had heard the sound of music coming from some of the rooms.

10. DSPC 17138 testified that on 11 November 2005 over 70 people, including the 1^st and 2^nd appellants, had been arrested in the premises.  It was an admitted fact that the 72 persons, other than the 1^st and 2^nd appellants, had been arrested by police in the premises on the evening of 11 November 2005.

The defence case

11. The 1^st appellant did not avail himself of his right to give evidence, but the 2^nd appellant gave evidence.  He testified that he was a married man of 52 years of age, who had never been convicted of any criminal offence.  He was the licensee of the premises and had been since April 1998.  He said that the nightclub occupied an area of about 5000 ft².  The liquor licence, exhibit P7, contains an endorsement for dancing and stipulates that no more than 224 persons were permitted to be on the premises at any one time.  A sketch of the premises, exhibit P9, depicts the premises as divided into 30 separate rooms.

12. The 2^nd appellant was on the premises at the time the uniformed police officers arrived at about 9 p.m. on 11 November 2005.  It was at the request of the police that all the lights in the premises were turned on.  After he and 1^st appellant had been arrested and, notwithstanding the 1^st appellant's denial of having offered sexual services to the undercover police officers, the 2^nd appellant testified that he had dismissed both the 1^st appellant and the hostesses provided to the undercover officers on 11 November 2005.  He did so out of concern to maintain the liquor licence for the premises.

13. The 2^nd appellant testified that the premises had been open for eight years and had complied with the various rules and regulations under which they were permitted to operate.  Prior to being employed prospective staff were warned that they were not permitted to do anything immoral on the premises.  The employee cards maintained in respect of each employee contained an acknowledgement by each employee of that condition of employment (see exhibits P2-4).  At any given time the premises employed two managers whose duties included patrolling the premises to ensure that staff complied with the conditions of employment.  In doing so they patrolled the premises looking inside the individual rooms every 10 to 20 minutes.  He too patrolled the premises on the same basis.

14. The 2^nd appellant explained the basis on which customers were charged for the company of hostesses.  $4.50 and $6.10 were charged to customers, respectively for the day and night-time tickets.  40 tickets per hour were charged.  If customers left the premises with a hostess they were charged at the rate of 50 tickets per hour.  There was no flat fee of $500 for taking a hostess from the premises.

15. The 2^nd appellant accepted that a light bulb, one of which had been turned on in the room in which PW2 was at the time of the arrival of the uniformed police party on 11 November 2005, was present in each of the karaoke rooms and were controlled centrally.  However, he denied that they were used to warn hostesses of the arrival on the premises of police officers.  They were there to be used when the rooms were cleaned.  He denied that he was aware of vice activities that occurred on the premises.

The 1^st and 2^nd appellants' grounds of appeal against conviction

16. By Ground 1 of the additional grounds of appeal against conviction it is submitted on behalf of the appellants that :

“The Learned magistrate made an error in law in finding that the premises were used 'wholly or mainly' in connection with the organization or arranging of prostitution.”

Ground 2 concerns the 2^nd appellant only and is that :

“The Learned magistrate erred in finding the 2^nd appellant failed to take all reasonable steps to comply with the licensing conditions.”

The 2^nd appellant's grounds of appeal against sentence

17. It is submitted on behalf of the 2^nd appellant that the sentence imposed on him was “manifestly excessive and wrong in principle.”

Statement of Findings

18. Having reviewed the evidence adduced in the trial in her Statement of Findings the magistrate went on to determine of the prosecution witnesses :

“The evidence from all PWs was clear and direct.  PW3 and PW4's evidence was not in dispute, PW1 and PW2 were unshaken under cross-examination.  I found all PWs to be honest and credible.  I accept their evidence.”

In contrast, the magistrate stated of the 2^nd appellant :

“I did not believe D2.  His evidence was evasive, illogical, ludicrous and self contradictory.”

Thereafter, the magistrate set out examples from the testimony of the 2^nd appellant and evidencing those conclusions.

19. The issue identified in Ground 1 of the grounds of appeal against conviction, namely whether or not it was proved that the premises were “wholly or mainly used as a vice establishment” was a matter canvassed before the magistrate and addressed by her at length in her Statement of Findings.  At paragraph 83 she said :

“83. The only issue in the present case is whether the Nightclub waskept 'wholly or mainly' as a vice establishment.  In respect of this issue, counsel referred me to HKSAR v Wong Ming Chu HCMA 1127/2004; HKSAR v Cheng Sung Hin HCMA 498/1985; HKSAR v Yeung Mi Ling HCMA 1024/2005 and HKSAR v Mang Mun Kuen HCMA 1049/2005.  Since Counsel's arguments are set out clearly in pages 3 to 8 of the written submissions, I do not propose to repeat them here.  I have of course, considered the submissions and the cases cited very carefully.

84. Counsel pointed out that the facts of the present case are almost identical to those in Wong Ming Chu.  Counsel also pointed out that the facts in Mang Mun Kuen were very different from the present case and that particular case is of very little assistance in the present case.  He urged the Court to adopt the reasoning in Wong Ming Chu.

85. I agree that the layout, equipment and advertisement of the Nightclub were similar to those in Wong Ming Chu.  The nightclub was not a 'seedy' operation divided into cubicles with bed and washing facilities equipped with condoms.  There were no usual hallmarks of a vice establishment.

86. However, it was clear from the Judgment that the Hon. Mr Justice Pang was saying that the conviction in Wong Ming Chu was unsafe and unsatisfactory because the magistrate had failed to consider relevant evidence.  The learned Judge did not say that premises which look like a karaoke nightclub and do not bear the hallmarks of a seedy operation can never be a vice establishment.  To the contrary, he stated, at paragraph 16 of his Judgment that 'It would be very difficult and, indeed, impossible for the court to devise a precise mathematical formula to determine what constitutes wholly or mainly in the definition.  One must look at the evidence in each case in order to resolve this issue.' 

87. Further, I note that there are a number of differences between the facts in the cases cited and those in the present case.

88. In Wong Ming Chu, Cheng Sung Hing and Yeung Mei Ling,the Court found that there was positive evidence which demonstrated an innocent user of the premises.  In the present case, PW1 and PW2 stated that they had heard no singing in the Nightclub.  Exhibit D4 suggested that there were other customers in the Nightclub on both occasions.  There was no evidence as to what those customers were doing inside the rooms.

89. In Wong Ming Chu, Cheng Sung Hing and Yeung Mei Ling, the conversations in relation to the provision of sexual services all took place inside individual rooms.  In the present case, D1 spoke to PW1 about sexual services outside the room when PW1 was leaving with Ching Ching.

90. In the cases cited, there was no suggestion that any lighting would be turned on in a police licence check.  In the present case, the evidence indicated that a light bulb inside each of the rooms would be turned on upon the arrival of the police.

91. In Wong Ming Chu, Cheng Sung Hing and Yeung Mei Ling, the appeals were allowed because the Court of First Instance found that the magistrate had failed to consider whether the premises were used wholly or mainly as a vice establishment.

92. It is clear from the line of cases that the layout, equipment and advertisement of the premises are only some of the factors which have to be considered in deciding whether the premises were kept mainly or wholly as a vice establishment.  They are not the only factors to be considered.  No single factor is conclusive.  The whole of the evidence must be examined carefully.

20. Thereafter, the magistrate went on to examine the evidence in light of that approach.  In particular, she noted : 

“94. According to the evidence the Nightclub was not used for sexual intercourse, it was merely used to make arrangements for the same.  Customers were taken to nearby hotels for the sexual intercourse.  It was hence not surprising that no paraphernalia, such as condoms or pornographic videos were found inside the Nightclub.

95. There was nothing special about PW1 or PW2.  For all intents and purposes they looked like ordinary customers.  D1 only met PW1 and PW2 for the first time on 25.10.2005  As far as D1 was concerned, PW1 and PW2 were strangers.  There was no reason why D1 should give them special treatment.  Despite that, D1 offered to make arrangements for prostitution services for PW1 and PW2 as soon as they met.  The offer was repeated when PW2 asked for the bill on 25.10.2005 and upon PW1 and PW2's arrival at the Nightclub on 11.11.2005.  It was clear that the offer of sexual services was made persistently, even to new customers.

96. Although the Nightclub was advertised as a karaoke and was equipped for the same, neither PW1 nor PW2 heard anyone singing during their 2 visits.  The 4 hostesses touched PW1 and PW2 intimately whilst they were chatting and watching television.  The fact that music was heard is no indication of innocent user.  Exhibits D4A & B do not cast any doubt on the prosecution's case.  The fact that only a minority of the customers took the hostesses out does not mean that offers of prostitution were not made to those other customers. 

97. There were large glass panels on the door of each room.  Anyone walking past the rooms could see what was happening inside clearly if they cared to take a look.  D2 and 2 managers (including D1) were on duty and were supposed to supervise the operation of the Nightclub.  Despite that, the 4 hostesses introduced by D1 openly and persistently touched the private parts of PW1 and PW2 inside the rooms.  Piu Shuet continued to touch PW2 in that manner even after PW2 removed her hand.

98. On 11.11.2005, when PW1 was leaving the Nightclub with Ching Ching, D1 referred to the sexual services openly outside the room.

99. A light bulb was installed above the door of each and every room.  There is no dispute that these light bulbs were lit whenever there was a police raid.  There was no logical or reasonable explanation for these lights.  According to PW2 the light bulb was suddenly lit.  Piu Shuet then told him that there was a police licence check and she left the room.  PW2 subsequently discovered that his colleagues had arrived.  In the light of the evidence, the only and irresistible inference is that these lights served as a warning of the police raid to the occupants inside the rooms.  There was no reason for such warning if the activities inside the rooms were legitimate.

100. Counsel argued that D1 might be on a whim of his own when he offered sexual services to PW1 and PW2.  I find that inherently improbable.  If D1 and some of the girls were merely acting on a whim of their own, they would not be so open about the sexual services.”

21. In the result, the magistrate concluded by finding in respect of Charges 1 and 2 :

“101. …. I have no doubt that the Nightclub was kept wholly or mainly as a vice establishment.  There is no dispute that D1 took part in the management of the nightclub.  I found that the prosecution has proved Charges 1 and 2 beyond all reasonable doubt. ….”

22. Of Charge 3 and 4 against the 2^nd appellant the magistrate made reference to the above conclusions she had reached about the activities that have taken place on the premises on 25 October and 11 November 2005, to the role of the 2^nd appellant and such steps as were taken by him.  She said at paragraph 102 :

“102. …. there is no dispute that immoral activities took place inside rooms 8 and 10 of the Night club.  I have rejected D2's evidence.  Apart from posting notices on the walls of the Nightclub and the employee card, there is no evidence of any other steps taken by D2 to prevent immoral services being provided in the Nightclub.  There was no evidence to indicate that the notices were enforced.

102. Counsel argued that Exh D4 demonstrated that the escort service only accounted for a very small part of the Nightclub's business.  That is wholly irrelevant to charges 3 and 4.  'Wholly and mainly' are not elements of these charges.

103. As I have already mentioned above, there was no logical or reasonable explanation for the light bulbs in the rooms.  Although other persons could look into the rooms and see what was happening clearly, the hostesses behaved consistently in a lewd manner.  D1 also spoke about the sexual services openly.  D2 also admitted under cross-examination that the Nightclub would not approve of escort arrangements for the sole purpose of providing sexual services.  The only and irresistible inference is that D2 was aware of the immoral services and he had condoned the same.”

The reasons for sentence

23. In her Reasons for Sentence in respect of Charges 3 and 4 the magistrate said, at paragraph 115 :

“…. D2 was clearly aware that sexual services were being provided and he had condoned in the same.  In effect, D2 has permitted the Nightclub to be used as a vice establishment.  This is much more serious than the case of an absent licensee who was merely negligent.  This warrants an immediate custodial sentence.  I note that D2 took no part in introducing services to customers.  In the circumstances, I adopted a starting point of 6 months for each charge in respect of D2. ….”

Submissions made on behalf of the 1^st appellant in respect of Charges 1 and 2

24. Mr Midgley, on behalf of the 1^st appellant, reminds the Court of the provisions of section 117(3) of the Crimes Ordinance, Cap. 200 in respect of a “vice establishment”.  Section 117(3) provides that :

“Premises, vessel or any place shall not be treated as a vice establishment purposes of this Part unless –

(a) the premises, vessel or place are or is used wholly or mainly by two or more persons for the purposes of prostitution; or

(b) the premises, vessel or place are or is used wholly or mainly for or in connection with the organizing or arranging of prostitution.”

It is emphasised that the relevant issue is not the activity of the defendant in a particular case, but the use to which the premises are put.

25. In oral argument, Mr Midgley accepted that the magistrate was entitled to accept the evidence of the two police undercover officers and to find that on both 25 October and 11 November 2005 the 1^st appellant used the premises to organise or arrange prostitution with the respective hostesses.  The matter in issue is whether or not the evidence established that on both days those premises were used 'wholly or mainly' for or in connection with the organizing or arranging of prostitution.

26. Mr Midgley submits that in this case the magistrate erred in concluding that the evidence supported an irresistible inference that the premises were wholly or mainly used for vice.  In particular, he submits that the magistrate erred in finding that the light bulb installed at the doorway of each of the rooms and operated centrally was evidence that was indicative of guilt.  It is submitted that there was nothing sinister in this lighting.  On the contrary, it is suggested it was perfectly normal lighting used in commercial premises when cleaning was necessary.

27. It was submitted that the magistrate failed to give any or sufficient weight to aspects of the evidence that suggested that the premises were in fact operated merely as a karaoke establishment.  In support of that submission, it was asserted that the evidence established that :

(i) the premises had the appearance and related facilities of a karaoke establishment;

(ii) the premises had been regularly inspected by the authorities over a period of eight years during which time nothing amiss had been found;

(iii) the staff and, for that matter, customers were warned that no immoral activities were permitted on the premises;

(iv) at the time of the arrests made by the police on 11 November 2005 no fewer than 72 persons other than the two appellants had been arrested at the premises of the nightclub, only two of whom were hostesses who had offered sexual services to the undercover officers that evening;

(v) no paraphernalia related to sexual activity was seized at the premises; and

(vi) the accounting records of the L and G Karaoke nightclub, exhibit D4, evidenced a very low ratio of tickets issued by hostesses in respect of “escort hours”, namely money from customers for time spent with hostesses off rather than on the premises.  On 25 October 2005, of the 17,560 tickets issued, only 660 were in respect of escort hours and on 11 November only 160 tickets were in respect of escort hours out of a total of 8,003 tickets.

28. Finally, Mr Midgley invited the court to note that the particulars of both Charges 1 and 2 made reference to the premises as Shop L on the ground floor and Shops 1-20 on the first floor.  Of that he invited the court to consider, in the context of the issue of whether or not the premises were 'wholly or mainly' used in connection with the organising or arranging of prostitution, the fact that no evidence had been adduced of any activity on the ground floor.

Submissions made in support of the 2^nd appellant in respect of Charges 3 and 4

29. Of the averment in the particulars of Charges 3 and 4 that the 2^nd appellant, as licensee, contravened Condition 7 of the liquor licence issued in respect of the premises, namely that “The licensee shall not permit any person to occupy or use any portion of the premises for any immoral or illegal purpose.”  Mr Midgley accepts the term “ permit” is to be construed in accordance with the approach identified in the speech of Lord Nicholls in the House of Lords in The Vehicle Inspectorate v. Nutall [1999] 1 WLR 629 at 631B-C :

“'Permitted' is a word commonly found in the statutes creating criminal offences.  Its meaning depends on the context.  Its meaning for instance, may be confined to 'allowed' or 'authorised'.  Or it may be wider and embrace 'failed to take reasonable steps to prevent'.”

Mr Midgley accepts that it is the latter and wider meaning of the term that applies to the offences alleged in Charges 3 and 4.

30. It is Mr Midgley's submission that on the evidence adduced at trial the magistrate was not entitled to find that the 2^nd appellant had permitted the breach of Condition 7 of the licence either on the basis, as the magistrate found, that the 2^nd appellant knew of the immoral services and condoned the activity or on the basis that he had not taken reasonable steps to prevent it.

31. Of the magistrate's rejection of the evidence of the 2^nd appellant and the characterisation of that evidence as “evasive, illogical, ludicrous and self contradictory”, Mr Midgley submits that one of the examples cited by the magistrate in support of that determination is itself logically unsound.  At paragraph 80(3) of the Statement of Findings the magistrate stated that she found the 2^nd appellant's explanation “illogical and self-contradictory” that, out of his concerns in respect of the licence of the premises, he had dismissed only the 1^st appellant, together with the two hostesses involved in the events of 11 November and not the hostesses alleged to have been involved in the events of 25 October 2005, the difference being that the hostesses involved on 11 November 2005 had been arrested and charged by the police.  Mr Midgley suggests that evidence was perfectly logical : if the police had not bothered to arrest and charge the other hostesses for their alleged behaviour why should he, as licensee, dismiss them?

32. In addition, Mr Midgley complains that although the magistrate had stated simply that she did not believe the 2^nd appellant it is clear that the all embracing statement could not be accurate because the 2^nd appellant testified that he had posted warning notices in the various karaoke rooms in the premises and the magistrate found that there were such notices in those rooms. 

33. Of the magistrate's finding at paragraph 102 of the Statement of Findings, in respect of the issue of the steps taken by the appellant to prevent a breach of Condition 7 of the licence, that :“Apart from posting notices on the walls of the nightclub and the employee cards, there is no evidence of any other steps taken by D2.”  Mr Midgley contends that is simply not accurate in light of the evidence of the 2^nd appellant that he had patrolled the premises every 10 to 20 minutes looking in to the various karaoke rooms, to which evidence the magistrate had made specific reference at paragraph 65 of her Statement of Findings.

34. Of the rejection by the magistrate of exhibit D4, namely the records of the hourly tickets of hostesses issued in October and November 2005, as “ wholly irrelevant” to Charges 3 and 4 Mr Midgley complains that the magistrate was in error because that evidence, illustrated the very small percentage of the time hostesses worked outside the premises and was relevant to the reasonableness of the steps taken by the 2^nd appellant to prevent breaches of the conditions on the licence.  It was submitted that if only infrequently did hostesses leave the premises with customers then the problem of immoral behaviour within the premises as part of attempts to entice them into accepting the services of hostesses for prostitution was less likely to be a problem for the licencee.

35. Noting that the magistrate had found in terms that the 2^nd appellant was :“aware of the immoral services and he had condoned the same.” Mr Midgley submitted that there was insufficient evidence for the magistrate to have drawn that inference properly.  In this context, he repeated his submissions in respect of the centrally operated light bulbs located in each of the karaoke rooms contending they were for the purpose of illumination for cleaning and not a warning system, indicating the arrival of the police to hostesses.

The submissions of the respondent

The 1^st appellant's appeal against conviction of Charges 1 and 2

36. Ms Chan submits that the magistrate was entitled to infer that the premises were used 'wholly or mainly' for the purposes of prostitution having regard to the evidence that :

(i) the 1^st appellant described the sexual services available from hostesses at the premises immediately to the two undercover officers, albeit that on 25 October 2005 that was the first time that they had visited the premises;

(ii) on the occasion that PW2 were leaving the premises with the hostess on 11 November 2005 the 1^st appellant had spoken openly in terms of the prospective sexual intercourse that the officer was to enjoy with the girl;

(iii) four of the hostesses had immediately and persistently engaged in lewd acts and conversation with the two undercover officers after they had been introduced to them;

(iv) the hostesses conducted themselves in a lewd way towards the officers notwithstanding that there were windows to the rooms in which they were through which that conduct might be observed; and

(v) there was a bare light bulb by the inside of doorway of each of the karaoke rooms, which light was centrally operated, together with the fact that on 11 November 2005 that light bulb was activated centrally at time of the arrival of police on the premises causing the hostess who was in the room with PW2 to tell him that the police had arrived for a licence check and to leave the room herself.  The context of that evidence is the evidence that earlier that hostess had continually touched the officer's penis asking him if he wished to take her out.

37. Ms Chan submits that in having regard to the appropriate inferences to be drawn from the evidence the magistrate had considered specifically the evidence from which inferences of 'innocent user' of the premises might be drawn properly :

(i) the magistrate acknowledged that by its layout, equipment and advertising the premises had the appearance of a karaoke club and there were no usual hallmarks of a vice establishment; (paragraph 85)

(ii) of the fact that no pornographic videotapes or condoms had been found in the rooms the magistrate had said that was not surprising given that the nightclub was used to make arrangements only for prostitution after which customers were then taken to nearby hotels for sexual intercourse to take place; (paragraph 94)

(iii) of the fact that music had been heard in the premises by the two undercover officers in the magistrate said that “is not positive indication of innocent user” having noted that although the premises were a karaoke club they had heard no singing; (paragraph 96)

(iv) of the suggestion that the 1^st appellant and some of the hostesses had behaved as they had done on a whim of their own the magistrate said she found that inherently unlikely given the open way in which they have conducted themselves; (paragraph 100) and

(v) of the evidence in the accounting records, exhibit D4, that only a small minority of the tickets issued were issued in respect of 'escort hours' on 25 October and 11 November 2005, the magistrate had said that did not mean that offers of the services of a prostitute had not been made to those other customers. (paragraph 96)

38. Of the fact that on 11 November 2005, 72 people had been arrested within the premises by the police Ms Chan accepted that there was no evidence at all of whom these persons were: their sex, their status, namely whether they were customers or staff, or their location and activity at time the police entered the premises.  Although the prosecution had led evidence of the discovery at the premises of employment cards of the two hostesses who had been in the company of the officers that evening they did not adduce into evidence any other employment cards or otherwise lead evidence to identify any other members of staff present on that occasion.  Similarly, Ms Chan accepted that although the 2^nd appellant gave evidence he was not cross-examined at all about the sex, status, location or activities of any of the persons present while the officers were present on the premises on 25 October and 11 November 2005.

39. Ms Chan submitted that in some of the cases in which judges dealing with similar appeals had not being satisfied of the ingredient of the offence of whole or main user there had been positive evidence of innocent user.  Here, she says, there was no such positive evidence.

The 2^nd appellant's appeal against conviction of Charges 3 and 4

40. Ms Chan submits that, for the reasons articulated in paragraph 104 of the Statement of Findings, the magistrate was entitled to find, as she did, that the 2^nd appellant knew of the immoral activities conducted on the premises on 25 October and 11 November 2005 and condoned them.  There the magistrate relied, in effect, on her findings that :

(i) the centrally operated light bulb by the doorway to each of the rooms was a warning system to the hostesses of the arrival of police on the premises;

(ii) the open and persistent lewd behaviour by the hostesses towards the two undercover police officers on 25 October and 11 November 2005 was conducted openly and was subject to being viewed by anyone through the windows to the karaoke rooms;

(iii) the 1^st appellant had spoken openly within the nightclub premises to PW1 outside the privacy of the karaoke rooms about the sexual services he was about to receive from the hostess; and

(iv) the 2^nd appellant had acknowledged that he was aware that the hostesses might engage in sexual activity having been taken from the premises by customers notwithstanding his assertion that to do so would be contrary to his instructions.

Furthermore, Ms Chan submits that the magistrate was entitled to reject the evidence of the 2^nd appellant, that he knew nothing of any vice activities conducted on the premises, and to do so for the reasons that she articulated in her Statement of Findings.

A consideration of the submissions made in respect of the conviction of the 1^st appellant on Charges 1 and 2

41. There is no doubt that there was abundant reliable evidence in the testimony of the two undercover police officers, PWs 1 and 2, upon which the magistrate was entitled to rely in finding that on 25 October and 11 November 2005 the 1^st appellant had used the premises of the nightclub in connection with or for the purposes of organising or arranging prostitution.  Indeed, Mr Midgley does not seek to argue otherwise.  The single issue that arises is whether or not the magistrate was entitled to find that on those occasions the premises of the nightclub were used 'wholly or mainly' for that purpose.

42. I accept that the phrase 'wholly or mainly' applied to user applies to the premises itself and not merely to the activities of the 1st appellant.  Like the magistrate I have been referred to multiple authorities where the application of the phrase has being considered in the particular circumstances established in the case from which the conviction was being appealed.  However, clearly it is to the unique matrix of evidence established in the particular case to which regard must be had. Thus, although the undisputed evidence in this case is that the premises were set out as one might expect to find a large karaoke nightclub, licensed to sell alcohol and permit dancing, and the fact that no paraphernalia associated with some vice establishments, namely pornographic videotapes and condoms, were found in individual rooms or in the possession of hostesses that, as the magistrate found, is not determining of the issue.  The magistrate's finding that this was not surprising, given that the premises were used for organising or arranging prostitution in sexual intercourse to be performed in a nearby hotel, is entirely consistent with the evidence and with common sense.

43. By contrast, in my judgment that the magistrate was perfectly entitled to find that the centrally controlled bare light bulbs installed the in each of the karaoke rooms by the doorway and used in the room in which PW1 was with a hostess on 11 November 2005 at the time of the arrival of the premises of the uniformed police served as a warning to the occupants of the room of the arrival of the police.  Indeed, on 11 November 2005 that is exactly what that hostess told PW1 when the light came on, after which she left the room.

44. Furthermore, the evidence that the 1^st appellant had offered hostesses to perform sexual services to the two undercover police officers on their first visit to the premises on 25 October 2005, they being total strangers, and his subsequent blunt language to them on 11 November 2005 about the available sexual services offered by the hostesses, together with the open and persistent lewd conduct of the hostesses was clearly evidence to which the magistrate was entitled to have regard in respect of the issue of whether the premises were used 'wholly or mainly' for or in connection with organising or arranging prostitution.  It was cogent evidence in that respect.

45. However, there was undisputed evidence that was relevant to a consideration of 'innocent user' of the premises and that was the evidence of the two undercover officers of the presence of other persons on the premises on both 25 October and 11 November 2005, the evidence of the patronage of customers on the premises to be inferred from the accounting records, exhibit D4, together with the admitted fact that on the latter occasion after the arrival of the uniformed police officers 72 persons, not including the 1^st and 2^nd appellants, had been arrested.  Who were these persons and what were they doing?

46. PW1 testified in cross-examination that there were other people inside the nightclub, but said that he was not sure whether they were staff or customers; moreover he did not know what they were doing inside the premises and, accordingly, could not exclude the possibility that they were engaged in legitimate activities (see paragraph 24 of the Statement of Findings).  PW2 testified in cross-examination that he had heard some music coming from some of the rooms within the premises, but said that he did not know what the main activities in the nightclub had been on the two occasions when he had been present (see paragraph 45 of the Statement of Findings).

47. Such attempt as was made by the prosecution to put before the magistrate evidence of the identity, location and activity of those persons present on the premises on 11 November 2005 came to nothing when it became apparent that the DSPCC 17138 (PW3), who had arrived with the party of uniformed officers apparently led by Inspector Lui, was unable to give first-hand evidence of how many of the persons were staff as opposed to customers.  Notwithstanding, his inability to give that specific evidence no evidence was led from him or anybody else about the sex of these persons, their location or activity at the time of the arrival of the police party.  Although the staff employment cards of two of the hostesses were exhibited, as exhibits P3 and P4, no other such cards were exhibited in respect of other employees. Finally, although the 2^nd appellant gave evidence of his presence on the premises on both 25 October and 11 November 2005 no evidence was led from him, either in evidence in chief or in cross-examination, of the number, sex, identity, location or activity of those persons present on the premises on those dates, in particular at the time of the arrival of the uniformed police party.

48. In the defence case accounting records relevant to the issue of tickets in respect of time spent by the hostesses with customers was led into evidence as exhibit D4.  From those records it is to be inferred that there were customers present on the premises on both 25 October and 11 November 2005.  On 25 October 2005, 16,900 'table' tickets were issued.  They were charges made of customers for the company of hostesses on the premises.  At the rate of 40 tickets per hour, that being the evidence in respect of the rate charged given by two undercover officers and the 1^st appellant, that represents a total charge of more than 400 hours of the time of hostesses that day.  From the slightly less than 8,000 table tickets issued on 11 November 2005 it is to be calculated that slightly less than half that total number of hostess hours was charged that day.

49. That the magistrate was aware of the potential significance of the evidence of the presence of other persons on the premises on the two dates in question is evidenced by her reference to that evidence in the context of what she described as the “positive evidence which demonstrated innocent user of the premises” in the factual situations arising in the cases considered on appeal in HKSAR v. Wong Ming Chu, HCMA1127/2004; R v. Cheng Sung Hin, HCMA498/1985 and HKSAR v. Yeung Mei Ling, HCMA1024/2005.  Of the evidence in the present case, she said (see paragraph 88) :

“PW1 and PW2 stated that they heard no singing in the Nightclub.  Exhibit D4 suggested that there were other customers in the Nightclub on both occasions.  There was no evidence as to what those customers were doing inside the rooms.”

50. It is an ingredient of the offence that it be proved that the impugned conduct was committed in a vice establishment.  Proof that premises were a vice establishment, in the context of this case, requires proof that those premises were used “wholly or mainly for or in connection with the organisation or arranging of prostitution”.  Of course, it is for the prosecution to prove all the ingredients of the offence.  They may do so by pointing to evidence adduced in either the prosecution or defence case.

51. In my judgment, having regard to the undisputed evidence of the nature of this relatively large karaoke establishment, together with the fact that it had been operated without previous prosecutions for eight years and the inferences to be drawn from the accounting records, exhibit D4, of the use of the premises by customers on 25 October and 11 November 2005 notwithstanding the cogent evidence that the 1^st appellant was using the premises on those dates for the purposes of or in connection with organizing or arranging prostitution, the evidence of the presence of other persons, albeit unparticularised and unspecific, raises a real doubt as to whether or not the premises were being used 'wholly or mainly' for the impugned purpose on the two dates in question.  In particular, the presence of as many as 72 persons, other than the 1^stand 2^nd appellants, on the premises at the time of the arrival of the uniformed police officers at about 9 p.m. on 11 November 2005 cried out for explanation by the prosecution.  Given that an inspector together with other uniformed officers conducted a licence check on the premises that evening and that 72 persons were arrested the prosecution must have had available to them information as to their sex, status, location and activity at the time of the arrival of the police officers and it beggars belief that such evidence was not led at trial.  Without that evidence the magistrate could merely state the obvious (see paragraph 88) :

“There was no evidence as to what those customers were doing inside the rooms.”

52. In the result, in my judgment the magistrate was in error when she concluded that she was satisfied that the premises were used wholly or mainly as a vice establishment.  Accordingly, I quash the 1^st appellant's convictions on Charges 1 and 2 and set aside the sentences of 12 months' imprisonment.

A consideration of the submissions made in respect of the 2^nd appellant's convictions on charges 3 and 4

53. Clearly, on the available evidence the magistrate was entitled, as she did, to find that the 1^st appellant, the second couple of hostesses on 25 October and the two hostesses provided to the undercover officers on 11 November 2005 had behaved in an immoral way on those dates.  The matter at issue, was whether or not the 2^nd appellant had permitted that conduct.

54. Of Mr Midgley's contention that the magistrate's statement, that she did not believe the 2^nd appellant and rejected his evidence, cannot be taken at face value I am satisfied that there the magistrate was rejecting only the evidence of the 2^nd appellant that was in issue.  The fact that notices were posted in the karaoke rooms was not an issue.  The 2^nd appellant's evidence that he and the managers patrolled the premises of the nightclub every 10 to 20 minutes to ensure no immoral behaviour took place was in issue.  I am satisfied that, read in context, the magistrate's reference, at paragraph 80(10), to that evidence and the evidence of the open and persistent lewd behaviour of the hostesses inside the karaoke rooms but obviously visible through the windows to those outside was a rejection of the 2^nd appellant's evidence of his regular patrols of the premises.  Clearly, that is why the magistrate stated in that subparagraph :

“If D2 and the managers had patrolled the nightclub and looked into the rooms, they would have seen the girls touching the private parts of PW1 and PW2.”

55. There is more force in Mr Midgley's other specific complaint that the magistrate erred in characterising, at paragraph 80(3) of her Statement of Findings, the 2^nd appellant's explanation for having dismissed the 1^st appellant and the two hostesses provided by him to the officers on 11 November 2005 but not the two hostesses provided by him on 25 October 2005 as “illogical and self-contradictory”.  The 2^nd appellant's explanation was simple : he dismissed those persons arrested and charged by the police.

56. It had been the evidence of PW1 that on his return to the nightclub premises from the hotel, after the hostess with whom he was had been arrested, he had not seen present in the premises any of the four hostesses the 1^st appellant had provided to them on 25 October 2005.  Although the magistrate was entitled to take into account, as she stated she did at paragraph 80(4), the fact that the 2^nd appellant had given contradictory evidence as to whether or not he had questioned one of the hostesses concerned with events of 25 October 2005, nevertheless it appears that none of those hostesses was arrested or charged.  Whilst the 2^nd appellant's evidence might have been adduced in a self-contradictory way it had a certain logic to it : he dismissed those employees that the police had arrested and charged.  Nevertheless, I am satisfied that, for the other reasons given by the magistrate in paragraph 80, she was entitled to reject the 2^nd appellant's evidence in respect of material matters that were in issue, in particular his denial that he was well aware of the vice activities in the nightclub.

57. Mr Midgley's submissions in respect of the magistrate's rejection of the inferences to be drawn from the accounting records, exhibit D4, that only a small part of the business and earnings of the nightclub were derived from charges to customers for escort hours in respect of hostesses taken from the premises as being 'wholly irrelevant' have some force.  However, such relevance as they had was primarily to the issue of due diligence.  Obviously, they are of less relevance to the situation of the 2^nd appellant knowingly allowing the immoral behaviour on the premises.

58. In my judgment, the magistrate was fully entitled to conclude that the 2^nd appellant was aware of the immoral services and that he condoned that activity.  The 2^nd appellant was on the premises on both occasions.  In his evidence, he described the circumstances of the arrival of the police and the turning on of the lights, in particular the bare bulb light by the doorway of each of the karaoke rooms.  As I indicated earlier, I am satisfied that the magistrate was entitled to find that that system served as a warning to the customers and the hostess in the karaoke rooms of the arrival of the police.  At paragraph 104 of the Statement of Findings the magistrate has listed what I am satisfied are powerful and cogent reasons for finding that the 2^nd appellant permitted the breach of condition seven of the licence :

“…. There was no logical or reasonable explanation for the light bulbs in the rooms.  Although other persons could look into the rooms and see what was happening clearly, the hostesses behaved persistently in a lewd manner.  D1 also spoke about sexual services openly.  D2 also admitted under cross-examination that the Nightclub would not approve of escort arrangements for the sole purpose of providing sexual services.”

59. I am satisfied that there are no merits in the 2^nd appellant's grounds of appeal against conviction.  Accordingly, the 2^nd appellant's appeal against conviction in respect of Charges 3 and 4 is dismissed.

A consideration of the 2^nd appellant's appeal against the sentences imposed in respect of charges 3 and 4

60. Neither of the parties has referred the court to any authorities relevant to sentencing the 2^nd appellant, as a licensee of licensed premises, for permitting a breach of Condition 7, namely a prohibition on the use of premises for any immoral or illegal purpose.  The maximum penalty for an offence, contrary to section 46(1) of the Dutiable Commodities Ordinance, Cap. 109, provided by Schedule 2 is a sentence of 12 months' imprisonment and a fine at Level 6.

61. Clearly, the magistrate was correct in determining that the gravity of the offence committed by the 2^nd appellant was greater because he permitted the breach of the condition with knowledge of the impugned activity and, as the magistrate determined, condoning that conduct.  His culpability was not merely a failure to take reasonable steps to prevent the breach of the condition.

62. Relevant to a consideration of the appropriate sentence is the fact that the 2^nd appellant had been licensee of these premises for eight years, during which time there had been no breaches of the conditions under which he held the licence.  The 2^nd appellant is 52 years of age, a married man with a family.  He has never been convicted of any criminal offence in Hong Kong.

63. Although the magistrate makes no specific mention in her Reasons for Sentence of the fact that that the 2^nd appellant was of previous good character, in the sense of not having been convicted of criminal offences before, that had been his evidence to which she adverted in her Statement of Findings and to which evidence Mr Midgley had referred in mitigation.

64. Having regard to all the circumstances, I am satisfied that the sentence of six months' imprisonment imposed in respect of each of Charges 3 and 4 is manifestly excessive.  Accordingly, I quash those sentences and in their place impose sentences of 2 months imprisonment suspended for 2 years on each charge. Those sentences are to be served concurrently .

Conclusion

65. In the result, the 1^st appellant's appeal against conviction in respect of charges 1 and 2 is allowed, those convictions quashed and the sentences set aside.

The 2^nd appellant's appeal against conviction is dismissed, but his appeal against sentence is allowed to the extent indicated.