HKSAR v. CHUI SHU SHING

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Press Summary (Chinese)

FACC No. 19 of 2016

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 19 OF 2016 (CRIMINAL)

(ON APPEAL FROM HCMA No. 641 of 2015)

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JUDGMENT

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Chief Justice Ma:

1. I agree with the judgments of Mr Justice Ribeiro PJ and Mr Justice French NPJ, and the orders they propose.

Mr Justice Ribeiro PJ:

2. I have read in draft the judgment of Mr Justice French NPJ and respectfully agree with it.  In tandem with the main appeal dealt with by his Lordship, the appellant brought an appeal against an award of costs made against him in favour of the prosecution.  Since the main appeal is allowed, that costs award has in any event to be set aside.  However, this judgment provides the opportunity to address certain questions of principle and practice regarding such awards of costs. 

3. Having been convicted and fined HK$10,000 by the magistrate,[1] the appellant’s appeal to the Court of First Instance was dismissed by Deputy High Court Judge S Chan[2] who ordered the appellant to pay the respondent’s costs to be taxed if not agreed, stating[3] that he found “the appellant’s grounds of appeal weak and without good prospect of success”.

4. Regrettably, that order was made without any prior notice to the appellant.  It had not been sought by the prosecution and the appellant was not given any opportunity to be heard as to whether it should be made nor as to his means to satisfy the award.  This involved an elementary breach of natural justice and a failure to take account of statutory principles regulating the making of costs orders in favour of the prosecution.

5. The appellant sought leave to appeal against the costs award on the substantial and grave injustice ground.  Quite properly, the prosecution stated that it was prepared to concede that the order was erroneously made, subject to the appellant filing evidence as to his means.  An affirmation was duly provided, the appellant deposing to his having net assets of about HK$67,022, a monthly income of HK$13,000 and monthly expenditure of about HK$12,430.  The costs have been taxed in the sum of HK$73,803.33.

6. The Appeal Committee[4] granted leave to appeal against the costs order, directing that the parties file a short Joint Case, to be disposed of on the papers at the hearing of the main appeal.  The Joint Case has duly been filed and save for differences in respect of two matters discussed below, the parties are ad idem and the respondent maintains its concession that the appeal should be allowed and the costs award set aside.  It is right to do so.

7. Costs should not be awarded in favour of the prosecution as a matter of course whenever an appeal against conviction in the Magistrates’ Court fails.  A right of appeal is given by section 113 of the Magistrates Ordinance[5] and convicted persons with reasonably arguable appeals should not be punished or suffer the adverse consequences of a costs award for exercising that right.  Nor should such persons be deterred from exercising that statutory right for fear of possibly unaffordable adverse costs orders. 

8. Section 13 of the Costs in Criminal Cases Ordinance[6] empowers the Court[7]to award costs to the prosecutor where a defendant’s appeal against conviction by a magistrate is unsuccessful only if the judge is satisfied that the appeal was without merit.  Additionally, section 15 lays down principles guiding the exercise of the power as follows:

“In any criminal proceedings-

(a) the costs that may be awarded by virtue of an order shall not be punitive but shall be such sums as appear to a court or a judge reasonably sufficient to compensate any party to the proceedings for any expenses properly incurred by him in the course of those proceedings, including any proceedings preliminary or incidental thereto;

(b) a court or a judge may have regard to any assessment laid before it or him for their assistance by any party to the proceedings of the amount of costs properly so incurred by any such party;

(c) an order as to costs shall be such as a court or a judge considers just and reasonable;

(d) the amount to be paid in pursuance of an order as to costs shall, unless an order for taxation is made under section 20, be specified in that order;

(e) the question of whether or not an order as to costs ought to be made in respect of any expenses properly incurred by any party to the proceedings in the course of the proceedings, including any proceedings preliminary or incidental thereto, may be adjourned until the end of those proceedings;

(f)

a court or a judge may take into account any other order as to costs which has been made in respect of those proceedings.”

9. In order that the right of appeal granted by section 113 be given full effect, the section 13 requirement that the appeal was “without merit” must be understood to mean that the appeal was not reasonably arguable.  It must also be noted that such a finding, though necessary, is not sufficient.  The judge must go on to apply the principles laid down by section 15.  This obliges the court to ensure that any sum awarded is not punitive but only compensatory of properly incurred expenses.[8] It must also ensure that a contemplated award would be “just and reasonable”.[9] 

10. For the court to address these issues, it is obviously necessary for it to have some idea of the magnitude of costs incurred by the prosecutor[10]and in practice, these issues are likely to arise only where the prosecution applies for costs.  It would then be necessary for the appellant to be afforded a proper opportunity to be heard as to whether the order should be made.

11. As the Court of Appeal recognized in HKSAR v Kissel (No 2),[11] the court must have regard to the financial means of the defendant and satisfy itself that any costs order is one that the defendant is able to pay.[12] It would not be just and reasonable to order the appellant to pay costs beyond his or her means.  And such an award might well operate punitively.

12. Turning to the two points on which the parties differ, the appellant first submits that if the court –

“... is minded to make a costs order ‘to be taxed if not agreed’, as opposed to a lump sum costs order, ... the prosecution should be required to serve full details of its costs, or if that is not practicable in the circumstances, a reasonable estimate of its costs, and the appellant should be afforded an opportunity to comment on such costs before the costs order is finalized”. [13]

13. I do not consider such a direction called for. If the prosecution wishes to apply for costs, it can be expected to provide an estimate of the costs it has incurred to enable the court to carry out the section 15 exercise.  Only if the court is satisfied that a contemplated award lies within the unsuccessful appellant’s means and would prima facie be just and reasonable so that it is minded to award the prosecution its costs, would any question of taxation arise.  Taxation would be ordered if the appellant wishes to challenge the reasonableness of particular expenses incurred.  A detailed bill would therefore only be needed when embarking upon the taxation process and not at the earlier stage of deciding whether an award should be made.

14. Secondly, the appellant submits that the Court should state that in principle: “The costs ordered to be paid should not be grossly disproportionate to the fine imposed on the defendant”.  This is a proposition derived from the decision of the English Divisional Court in  R v Northallerton Magistrates’ Court, ex p Dove,[14] where, having considered English statutory provisions (which bear certain material differences from our section 15),[15] Lord Bingham CJ stated:

“While there is no requirement that any sum ordered by justices to be paid to a prosecutor by way of costs should stand in any arithmetical relationship to any fine imposed, the costs ordered to be paid should not in the ordinary way be grossly disproportionate to the fine.”[16]

15. I do not think it necessary or appropriate for this Court to lay down an independent rule in the terms suggested by the appellant.  As Mr William Tam SC submits on the respondent’s behalf, cases may arise where an award would be justified in relation to an appeal involving a small fine (brought perhaps by a wealthy individual or corporation) which is wholly without merit and which might have caused the respondent to incur substantial costs.  The applicable principles are set out in section 15.  If an award of costs is grossly disproportionate to the fine it may, depending on the circumstances, be objectionable as punitive in nature and may not be just and reasonable.

16. For the foregoing reasons, the respondent’s concession was rightly made and, even if the main appeal had not been successful, I would allow the appeal on costs and set aside the Judge’s award in favour of the prosecution.

17. The respondent does not oppose the appellant’s application for the costs of the appeal on costs.[17] I would accordingly order that the appellant have his costs of and occasioned by the costs appeal.  And the appellant’s own costs be taxed in accordance with the Legal Aid Regulations. 

Mr Justice Tang PJ:

18. I agree with the judgment of Mr Justice French NPJ on the main appeal and with the judgment of Mr Justice Ribeiro PJ on the appeal as to costs.

Mr Justice Fok PJ:

19. I agree with the judgment of Mr Justice French NPJ on the main appeal and with the judgment of Mr Justice Ribeiro PJ on the appeal as to costs.

Mr Justice French NPJ:

Introduction

20. Section 5(1) of the Hotel and Guesthouse Accommodation Ordinance (Cap 349) (“HGAO”) makes it an offence to “manage” a hotel or a guesthouse in respect of which neither a certificate of exemption nor a licence has been issued under the Ordinance.  This appeal raises the general question of the proper construction of the term “manage”.  It raises the particular question of whether a supervised front desk employee in a guesthouse business with responsibility for checking guests in and checking them out and some associated duties, can be regarded as managing the guesthouse within the meaning of section 5.

21. The Appellant was convicted, after a trial in the Kowloon City Magistrates’ Court, of an offence against section 5(1).  The particulars of the charge were that on 12 September 2014 at 9/F Buckingham Building, 317-321 Nathan Road, Yau Ma Tei, Kowloon he did manage a guesthouse which did not possess a certificate of exemption or a licence required under section 5(2) of the HGAO, contrary to section 5(1) of the HGAO. 

22. At the time of the alleged offence the Appellant was engaged in his employment as a “Front Office – Management Trainee” at the guesthouse.  He worked under the supervision of another person designated as the “Front Desk Supervisor”.  His duties as found by the Magistrate involved:

1.  Processing check-in formalities for guests, including verification of their identity, collecting rental deposits, providing electronic room keys and relevant information.

2.  Dealing with complaints (an activity not otherwise explained).

3.  Responding to guests’ requests.

4.  Processing check-out formalities, including collection of keys, inquiring about use of additional facilities by guests, inquiring from the room service section about the condition of the room, charging guests for services such as baggage storage and bottled water consumption, refunding the deposit and collecting extra rent for late check-outs, as well as recording the fees charged to the guests. 

The front desk supervisor was Miss Law Mei Kuen.  She had been working at the guesthouse for four months.  When the Appellant encountered any problem at work he would raise it with her and ask her about it.  The Appellant had no discretion over the price charged for the rooms.

23. The Appellant was charged after he checked in an officer of the Office of the Licencing Authority who had presented himself as a pre-booked guest.  The Appellant told the officer that a deposit of $800 was required for the room and received that amount from him.  He was directed by another employee, Miss Ho Ka Hei, to place the deposit together with slips filled out by the officer in a sealed bag and place it in a drawer.

24. The guesthouse consisted of the 9th Floor of an office building divided into a reception area, office, restaurant and 21 rooms.  The Appellant had been appointed under an employment letter to the position of Front Office – Management Trainee.  The letter headed “Hotel Pandora Employment Letter” stated that “The Company Rules and Regulations will fully describe your job duties and benefits”.  The relevant Company Rules and Regulations were not in evidence. The name of “the Company” did not appear although the letter, signed by the Appellant, was counter-signed by another person against the words “Accepted by the Company”.

25. The Appellant appealed to the Court of First Instance but his appeal was dismissed by Deputy High Court Judge S Chan on 4 March 2016.  On 8 November 2016, the Appeal Committee of this Court granted leave to appeal on the following question of law:

“Whether, upon a proper construction of section 5(1) of the Hotel and Guesthouse Accommodation Ordinance, to come within the meaning of ‘any person who … operates, keeps, manages or otherwise has control of … a guesthouse’, a person must have control over the hotel or guesthouse operation as a whole, and not merely be a functionary who is designated to carry out particular tasks of its day to day running.”

Leave was also granted to appeal in relation to costs awarded against the Appellant in the Court of First Instance.  That matter is dealt with in the separate judgment of Ribeiro PJ with which I respectfully agree.

The legislative scheme

26. As was explained by this Court in Tri-View Ltd v HKSAR[18], the HGAO was enacted in 1991 following a number of accidents in substandard hotels and guesthouses.  Its object, as appears from its long title, is “… to provide for the regulation, control and safety of hotel and guesthouse accommodation”.  In particular, as appears from the Second Reading Speech of the Secretary for Home Affairs in 1991, the then Administration proposed a “licensing system be introduced for the purposes of imposing necessary safety requirements and standards for their operation and keeping a comprehensive register of such establishments.”  The system was to be introduced on a phased basis.  Initially the licensing scheme would cover tourist establishments, while certificates of exemption would be issued to others to be brought into the licensing scheme later. 

27. The subject matter of the HGAO is defined in section 2:

“‘hotel’ and ‘guesthouse’ mean any premises whose occupier, proprietor or tenant holds out that, to the extent of his available accommodation, he will provide sleeping accommodation for any person presenting himself who appears able and willing to pay a reasonable sum for the services and facilities provided and is in a fit state to be received.”

The term “presenting himself” is defined non-exhaustively and includes persons presenting “by facsimile, letter, telegram, telephone or any other means”[19].  The definitions are significant.  They describe the nature of the services which are sufficient and necessary to characterise the premises on which they are provided as a hotel or as a guesthouse.  The nature of those services informs the construction of the term “manage” in section 5(1).  The term is not to be construed in the abstract but by reference to its real world application in the HGAO.

28. Section 5 of the HGAO, under which the Appellant was charged, provides:

“Restriction on operating hotel or guesthouse unless exempted or licensed

(1) Any person who on any occasion operates, keeps, manages or otherwise has control of a hotel or a guesthouse in respect of which neither of the conditions indicated in subsection (2) has been satisfied commits an offence and is liable on conviction to a fine of $200,000 and to imprisonment for 2 years and to a fine of $20,000 for each day during which the offence continues.

(2) The conditions referred to in subsection (1) are—

(a) that a certificate of exemption has been issued under section 6 in respect of the hotel or the guesthouse and is for the time being in force; or

(b) that a licence has been issued under section 8 in respect of the hotel or the guesthouse and is for the time being in force.

(3) It shall not be a defence that a person charged with an offence under subsection (1) did not know that neither of the conditions indicated in subsection (2) had been satisfied.”

29. The words “any person” and “any occasion” appearing in section 5(1) indicate that it is not necessary, in order to prove the offence, to show that the defendant is managing the hotel or guesthouse on a permanent or continual basis.  Section 5(1) would cover a person who is a shift manager, a temporary manager or relief manager.  The question in each case is whether at some time and for however long or short a period, the defendant managed the hotel or guesthouse.

30. As appears from what follows, section 5(3) applies to someone who manages the premises for another and specifically for the person who should have obtained the relevant certificate or licence.  The down the line manager can be convicted even if he or she had no idea that there was no certificate or licence.

31. Part III of the HGAO, comprising sections 6 and 7, deals with certificates of exemption.  Such certificates are to be applied for and are issued under section 6.  By section 6(3)(d) such a certificate shall:

“authorize the person in whose name it is issued to operate, keep, manage or otherwise have control of a hotel or a guesthouse for a period of 12 months, or such lesser period as may be indicated therein.”

That subsection indicates that it is the person in whose name the certificate is issued who will operate, keep, manage or otherwise have control of the hotel or guesthouse for which it is issued or at least have ultimate responsibility for its management.

32. Part IV of the HGAO deals with licences.  Consistently with the phased regulation explained in the Second Reading Speech, it appears to impose a more rigorous regime than the certificates of exemption.  As with the case of the certificate, section 8(5)(d) provides that a licence issued under section 8 authorises the person in whose name it is issued “to operate, keep, manage or otherwise have control” of the hotel or guesthouse to which it relates for a period of up to 84 months.  Under section 8(3)(c) the issue of a licence may be refused on the ground that it appears:

“that the operation, keeping, management and other control of the hotel or the guesthouse would not be under the continuous and personal supervision of the person to whom the licence is issued.”

There is no equivalent provision in relation to certificates of exemption.  Paragraph (c) implies that a person may “manage” a hotel or a guesthouse under the supervision of the licensee.  Relevantly for present purposes, it means that a manager for the purposes of section 5 of the Ordinance does not have to be a person with ultimate control of the premises.

33. Where a licence is issued for a period of more than 36 months, it is the licence holder who, under section 8(5A)(c)(ii), must certify annually that the hotel or guesthouse has been operated, kept, managed or otherwise controlled by “the person holding the licence” in compliance with the conditions imposed under section 8(2)(a) on the licence.  A similar obligation is imposed with respect to licence renewals for more than 36 months[20].  Nevertheless, that obligation is consistent with management being undertaken by an employee of the licensee under the supervision of the licensee.

34. Powers of inspection conferred on officers of the Authority extend to require production of any books or documents by any person “taking part in the operation or management of a hotel or a guesthouse”[21].  The term “taking part in …” covers a wider range of people than those who operate, keep, manage or otherwise have control.  It is used in the context of a definition of the scope of the Authority’s investigative powers.  It does not inform the answer to the constructional question before the Court.

35. Section 19 provides for the Secretary to give notice in writing of remedial directions and requires that the notice be served by registered post:

“… upon the person being the operator, keeper, manager or otherwise having control of the hotel or the guesthouse…” (emphasis added)

A similar reference to what might be called the “ultimate manager” appears in section 20(1)(a).

36. Reference should also be made to sections 21(1) and (3) which make it an offence for a person who on any occasion operates, keeps, manages or otherwise has control of a hotel or a guesthouse in respect of which a certificate of exemption or licence has been issued, to do so in contravention of a condition of the certificate or licence or in any premises other than those designated in the certificate or licence or under any name other than the name of the hotel or guesthouse indicated in the certificate or licence.  By sections 21(2) and (4), where a condition of a certificate or licence is contravened, the holder of the certificate or licence is guilty of an offence unless he proves that he did not know and had no reason to suspect the existence of the circumstances giving rise to the contravention and could not by the exercise of reasonable supervision and reasonable diligence, have prevented those circumstances from arising.

37. Those provisions are consistent with the proposition that management for the purposes of the HGAO includes management by an employee or delegate of the licence holder, albeit under his personal supervision. However, section 21(5) provides:

“Where an offence under subsection (1) or (3) is alleged to have been committed, evidence that a defendant did any act in connection with the operation, keeping, management or other control of a hotel or a guesthouse is, in the absence of evidence adduced by the defendant to the contrary, proof that the defendant operated, kept, managed or otherwise had control of a hotel or a guesthouse.”

This rebuttable presumption is consistent with the view of management as involving the exercise of a degree of authority with respect to the premises.  Indeed, it supports that construction.  If merely doing acts in connection with the management of the hotel or guesthouse were sufficient to constitute management, the provision would be unnecessary.

Features of the legislative scheme

38. In summary, the legislative scheme for the certification and licensing of hotels and guesthouses has the following features relevant to the construction of the term “manage”:

1.  Its purpose is the regulation of hotels and guesthouses, using a certification and licensing regime, to ensure compliance with, fire and safety standards.

2.  In furtherance of that purpose, the HGAO effectively prohibits anyone from managing a hotel or guesthouse in respect of which no certificate of exemption or licence has been issued.

3.  While the licence holder is the person responsible for managing the licensed premises, they may be managed by someone else under his personal supervision.

4.  The prohibition effected by section 5(1) therefore extends to management by persons who could and should have applied for a certificate of exemption or licence and to management by persons employed by them to manage the premises.

5.  Persons who do acts in connection with the management of a hotel or a guesthouse do not, on that basis alone, manage the hotel or guesthouse.

The decisions below

39. The Deputy Special Magistrate who convicted the Appellant found the facts as outlined earlier in these reasons.  He found that the Appellant was responsible, at the time of the alleged offence, for dealing with the provision of accommodation — the main service of the guesthouse.  He held that what the Appellant did was “taking an active part in the running of the business as a business something suggesting control.”  His duties were neither menial nor routine. He played a gatekeeping role.  He had “managerial control”.  He did not know that the guesthouse was unlicensed but, by virtue of section 5(3), that was not a defence.  The Deputy Special Magistrate convicted the Appellant of “managing a guesthouse without a certificate of exemption or a licence”.

40. On appeal, Deputy High Court Judge S Chan, found that while the Appellant was doing work of a menial or repetitive nature that did not mean that his work was not of a managerial character.  He agreed with the Magistrate that it was possible to have a person exercise operational control at the front counter. The Magistrate had not interpreted the term “manage’ in an overly loose or broad way. 

Approach to construction

41. The question of law upon which the Appeal Committee granted leave to appeal is one of statutory construction.  Although directed to the entire collocation “operates, keeps, manages or otherwise has control of” the focus must be upon the term “manages” which was said to describe the offending conduct of the Appellant.

42. The long-established approach to statutory construction in Hong Kong involves an integrated consideration of text, context and purpose[22].  That integrated exercise requires a consideration of the ordinary meaning of the words of the provision to be construed[23]. Both parties agree it may also be of assistance in construing a statutory provision to have regard to the construction of the same or similar words in pari materia in other statutes[24]. In this case it may be said, the references to other statutes were of limited assistance – each concerning a different subject matter and serving a variety of purposes.

43. Many statutory texts offer constructional choices in the sense that there is more than one way of reading them.  In some cases the choice is between a broad reading and a narrow reading of a term which covers a range of conduct.  Section 5 of the HGAO is a penal provision.  It presents more than one arguable construction relevant to the question of law before the Court.  A penal consequence may indicate that the narrower of two constructions is to be preferred[25]. There is, however, no hard and fast rule in this respect.  As the Court said in HKSAR v Tse Yee Ping[26]:

“The fact that a statute renders a specified activity criminal is not, however, a reason for giving the definition of the specified activity an artificially narrow meaning. It is merely a reason (although not always a decisive one) for giving the definition the narrower meaning, when it is on a fair reading, otherwise equally capable of having a wider or narrower meaning.”

The text of the HGAO does not support a narrow reading of the term “manage”.  It does not, however, require a reading so broad that it picks up conduct of a purely functional character which is not a manifestation of managerial authority.  To characterise such conduct as “management” for the purposes of section 5(1) is to criminalise conduct that seems at best marginally relevant to the statutory purpose.

44. Beginning with the text, the word “manage”, according to the Oxford English Dictionary, relevantly means “to conduct or carry on (a war, a business, an undertaking, an operation) …”.  It may also mean “to control and direct the affairs of (a household, institution, state etc)”.  It appears in a particular context, namely the collocation “operates, keeps, manages or otherwise has control of”.  The words “otherwise has control of” suggests that the other terms in the collocation are used as species of the genus “has control of”.  A wider context is provided by those provisions of the HGAO previously mentioned which contemplate management as conduct of a kind done by the person to whom a certificate of exemption or a licence is issued, or a person doing similar things under the continuous and personal supervision of a licence holder. 

45. The concept of “manage” according to its ordinary meaning read in the context of the HGAO and having regard to its purpose does not extend to a person who carries out essentially non-discretionary functions under the direct supervision of another on the premises.  Like each of the terms in the collocation, it incorporates the idea of authority over that which is managed. The precise nature and content of that authority will vary according to the circumstances of the case.  As a general proposition, a person manages a hotel or a guesthouse when he or she, in the exercise of an authority assumed by or conferred upon them, carries out the business or undertaking of the hotel.  In the case of a small guesthouse that criterion may be satisfied by a single person who operates the checking in and checking out of guests, the receipt and recording of their payments and the maintenance of the accommodation at the appropriate standard.  It does not matter whether that person is full-time, part-time, temporary, or a relief manager for the purposes of section 5 so long as they are exercising a degree of managerial authority in relation to the conduct of the hotel or guesthouse.  In a colloquial sense, a manager is a person who can answer “yes” to the question “are you in charge here?”

46. That construction allows for the effective operation of the HGAO across a wide range of factual circumstances and ensures that, consistently with its broad language, it applies to the range of persons relevant to its regulatory purposes.

47. The offence created by section 5(1) is a serious one as reflected in the pecuniary and custodial penalties for which it provides.  It should not be taken to apply where the evidence does not show more than that the defendant was processing guests in and out of the premises and fulfilling other functions of an essentially non-discretionary character and working under the immediate supervision of another employee of the business — who was also on the premises.

48. The evidence against the Appellant was simply insufficient to establish that he was managing the premises in the relevant sense.  He carried out functions essential to the conduct of the guesthouse but was not shown to have been clothed with the authority necessary to characterise him as one who was managing the undertaking.  That authority appears to have resided in his front office supervisor.  The essential element of the offence with which the Appellant was charged was not made out.

Conclusion

49. For the preceding reasons, the appeal should be allowed and the conviction of the Appellant set aside.

50. As to costs, I would make an order nisi that the Respondent pay the Appellant’s costs of this appeal, the appeal in HCMA 641/2015 and before the Magistrate in KCS 6648/2015 to be taxed if not agreed.  The order nisi will become absolute in the absence of an application to vary this order, which application should be made by way of written submissions served on the other party and filed within 14 days of the date of this judgment.  The other party may then serve and file any written submissions in response within 14 days thereafter.

Chief Justice Ma:

51. For the above reasons, both appeals are accordingly allowed.  The conviction of the Appellant is set aside.  As to the costs of the main appeal, there will be an order nisi as set out in para 50 above.  As to the costs of the appeal on costs, there will be an order as set out in para 17 above.