HKSAR v. FAN CHUN KEUNG

HCMA417/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO.417 OF 2005

(ON APPEAL FROM ESCC 4328 OF 2004)

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J U D G M E N T

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1. The appellant was convicted after trial of two charges of ‘Breaching Condition imposed under the Dutiable Commodities Ordinance’, contrary to sections 46(1) and 46(3) of the Dutiable Commodities Ordinance, Cap. 109.  He was sentenced to a fine of $5,000 each.  He now appeals against the convictions.

Parties

2. The appellant was D3 at trial.  The charges he was convicted of were Charges 3 and 4 in the charge sheet.  The rest of that document was made up of two charges of ‘Managing a Vice Establishment’, contrary to section 139(1)(b) of the Crimes Ordinance, Cap. 200.  Of these, each of the other co-defendants in the case (D1 and 2) was convicted of one (D1 on his own plea).

Charges

3. This is how the charges read —

Charge 1

“[D1], you are charged that between the 2^nd day of June 2004 and the 18^th day of June 2004, both dates exclusive, inside Club Versailles, 1/F, 9-13 O’Brien Road, Wan Chai, in Hong Kong, you managed the said place which was kept as a vice establishment.”

 Charge 2

“[D2], you are charged that on the 18^th day of June 2004, inside Club Versailles, 1/F, 9-13 O’Brien Road, Wan Chai, in Hong Kong, you managed the said place which was kept as a vice establishment.”

Charge 3

“Fan Chun-keung, you are charged that between the 2^nd day of June 2004 and the 18^th day of June 2004, both dates exclusive, inside Club Versailles, 1/F, 9-13 O’Brien Road, Wan Chai, in Hong Kong, being the holder of a liquor licence in respect of the premises, contravened a condition lawfully imposed under the Dutiable Commodities Ordinance, namely condition 7 of the liquor licence which stated ‘The licensee shall not permit any person to occupy or use any portion of the premises for any immoral or illegal purpose’.”

Charge 4

“Fan Chun-keung, you are charged that between the 2^nd day of June 2004 and the 18^th day of June 2004, both dates exclusive, inside Club Versailles, 1/F, 9-13 O’Brien Road, Wan Chai, in Hong Kong, being the holder of a liquor licence in respect of the premises, contravened a condition lawfully imposed under the Dutiable Commodities Ordinance, namely condition 8 of the liquor licence which stated ‘The licensee shall not permit any common prostitutes or reputed thieves to assemble or remain on the premises’.”

4. On appeal, the respondent applies for me to amend the dates in Charges 3 and 4 to “the 18^th day of June 2004”, pointing out the fact that by nature, the offence in question is not a continuous offence.  This I do pursuant to section 27 of the Magistrates Ordinance, Cap. 227 having satisfied myself that had the date been so confined at trial, it would not have affected the appellant’s defence.  There being very little cross-examination on prosecution witnesses, the thrust of the defence case was first, there was insufficient evidence to infer guilt and second, the conditions imposed were ultra vires.  The appellant himself called no evidence.

Facts and findings

5. There is no better way to summarize the facts and to present the magistrate’s findings than by reproducing parts of the latter’s oral reasons —

“The prosecution adduced eight witnesses.  PW1, PC59103 and PW2, PC34317 posed as customers and paid visits to this Club Versailles on three occasions, namely on 2 June, 8 June and also 18 June 2004.

On 2 June, the manager of the club arranged a total of 11 girls for PW1 and PW2 to select.  There were two kinds of charges.  First was a table charge of $500 for girls to sit with PWs for a period of two and a half hours.  Second was a ‘yuk gum’ of $1,000 per girl.  At the end of the evening on 2 June, PW1 and 2 took the girls to Victoria Villa nearby, obviously for the purpose of having sex, although both PWs avoid actually having sex with the girls with some excuses.

The situation on 8 June and 18 June is more or less the same as what happened on 2 June.  I will therefore not — I will not repeat the evidence of these two other visits — the evidence of these two witnesses’ visits.

PW2 gave similar evidence as PW1, and again I will not repeat his evidence.

PW3, PC52251, together with PW4, PC49115, PW5, PC49414 and PW6, PC58338 posed as customers and visited this club on 18 June 2004.  They were received by the 2^nd defendant who introduced himself as Kenny Chan.  The 2^nd defendant asked PWs what kind of girls they like, and suggested to them that all the girls were from the North, explained to them that the table charge was $500, minimum room charge $1,000.  D2 also introduced girls on various occasions.  You took four girls into the room in the first round, another four girls in the second round, and finally one girl in the third and another girl in the fourth round.  D2 also suggests to the PWs to take the girls out to make love, and you said that ‘yuk gum’ was $1,000.  You also recommend Victoria Villa.  You collected $100 from each of the girls as admission fee.

PW4, 5 and 6, again they gave similar evidence as PW3, and therefore I will not repeat their evidence.

…

Although there is no clear explanation of what ‘yuk gum’ is, it is clear from the circumstantial evidence that ‘yuk gum’ refer to charge for sexual services.  That’s the only inference I can draw from the evidence.

D2 testified that he had no relationship with this club.  You said you only brought customers there and you earn a commission from the customers’ spending in this club.

On 18 June, at around 9.50 pm, you came across PW4 to 6 in the lobby of the club.  You arranged a room for them.  You explained to them the minimum room charge being $1,000.  You ordered one dozen of beer for the PWs.  You said it was PW4 who requested you to introduce girls in the club to him.  As a result, you took eight to 10 girls into the room for PWs to pick.  You sand and played with the PWs during most of the next one hour forty-five minutes before police conducted their raid.  You denied collecting any monies from the girls.  You said — you said you only collected drink coupons from them.  You said it was PW4 who mentioned this Victoria Villa.  You denied saying the girls in the club were from the North, nor you had ever mentioned any ‘yuk gum’ or such — or ever suggesting to PWs to take these girls to have sex.

…

The 3^rd defendant elects to remain silent.  This is your right.

I will now deal with D2’s evidence.  I found D2 far from truthful and honest.  In the beginning of your evidence you tried your best to keep a distance from this club.  You said you didn’t work in this club.  You wasn’t employed by this club.  You even said you had no relationship with this club at all.  However, it is clear from evidence that when you introduced yourself to PWs, you handed them a name card, which clearly indicated you being a staff of this club.  Furthermore, there is employee record, also suggesting that you were employed as a staff of this club.  The record says you were as a business manager.  This record of course is hearsay.  However, it indicates a close relationship between you and the club.  You agreed you explained the room charge to PWs.  You arranged a room for them.  You placed order for beer for the PWs.  All these indicate — all these are indicative that you worked in this club.

Evidence also clear that there were a substantive number of girls gathering around in the lobby of this club.  And you introduced these girls to the PWs.  These girls were taken into PWs’ room in batches, allowing PWs to pick the right girls, and then the rest would leave the room.  If needed, you would take one batch of girls after another into the room for PWs to select until all PWs got the girls of their choice.

It’s clear from evidence that the girls — the girls themselves had no choice.  It is clearly a one-way traffic, that is, the PWs chose their girls, but not the other way round.  This is contrary to the common understanding of what a social gathering is.  This case is perfectly clear that the 2^nd defendant introduced these girls to PWs for them to select and to have sex, upon payment of the charge.  It is therefore crystal clear that these girls were working as prostitutes and you were arranging prostitute for customers like PWs.

Was this an isolated incident on 18 June 2004?  Evidence suggests that it was clearly not an isolated incident.  Similar situations occurred on 2 June and on 8 June, involving different managers and different batches of girls.  I am therefore satisfied beyond doubt that this Club Versailles was used wholly and mainly as a vice establishment on 18 June, and the 2^nd defendant was clearly participating in the management of this club.  There was ample evidence that there was a degree of continuity of this club being used as a vice establishment.  I am therefore satisfied beyond doubt that this club was kept as a vice establishment.

I have considered all the evidence of all the PWs.  I found them — I found their evidence supporting each other’s in material aspects.  I found them all truthful and honest.

Now, I will deal with D3’s case.  D3, you were the licensee of this club.  Attached to this licence were a number of conditions, including conditions 7 and 8.  There had been thorough discussion as to whether the Liquor Licensing Board was ultra vires in imposing these conditions.  After considering the relevant provisions and authorities I have found it is within the jurisdiction of the Board to impose these conditions.

As to mens rea of D3, applying the case HKSAR v Wong You Wan & others, MA508/2001, I found this an irresistible inference that immoral services offered by the girls inside this club was part of the system in which this club operated.  And D3, you being the licensee, must have the knowledge of the system and permitted the immoral activities.

The same applies to the breach of condition 8, that is, there is an irresistible inference that these girls were common prostitutes, and they assembled and remained in this club, and it was part of the system in which this club operated.  And therefore D3, you being the licensee, must have the knowledge of this system and you permitted these common prostitutes to assemble and remain in your club.  Had you done anything to make sure these two conditions were complied with?  Clearly nothing.

After considering all the evidence, I found the 2^nd defendant guilty of the 2^nd charge and the 3^rd defendant guilty of the 3^rd and the 4^th charge.”

6. In his written statement of findings, prepared solely for the appeal of D3 (the present appellant), the magistrate reiterated that —

“… after considering all the evidence, I was satisfied beyond doubt that this Club Versailles was kept as a vice establishment on all these occasions and these girls were working as prostitutes.”

7. Besides, he added —

“… [a]pplying the case R. v Li Kin Wai & Another [1985] 1 HKC 249, I was satisfied beyond doubt that these girls in question were indeed ‘common prostitutes’.”

Grounds of Appeal

8. Counsel for the appellant has raised a total of nine grounds.  They can be divided into two parts with Ground 9 being the general one that “in all the circumstances the convictions are unsafe and unsatisfactory”.

9. Grounds 1, 2, 3, 6, 7 and 8 are all related and to some extent overlap —

“1.  The learned magistrate wrongfully found :

(a) that the premises were being kept as a vice establishment, and,

(when the 3^rd defendant was not charged with this offence)

(b) all the girls were working as ‘common prostitutes’.

2.   The learned magistrate wrongly rejected the submissions made de bene esse on behalf of the 2^nd defendant, by the 3^rd defendant’s counsel, that :

i. the prosecution had not properly led evidence about the premises,  its use, size and the number of rooms thereat, the number of. customers using the premises on a lawful basis, to justify a  conviction against the 2^nd defendant of ‘keeping a vice establishment’;

ii there was insufficient evidence to establish that ‘these girls were working as prostitutes’ when the only evidence led about girls being introduced to the officers on one occasion, and not the same girls on a second or repeated occasion, to justify the conclusion that ‘these girls’ were prostitutes.  The girls had paid admission fees to the club as had other visitors, and whether they were mainland girls or not they had a right to be on the premises.  R. v. Morris-Lane 1985;

iii. and/or ignored the submissions made in respect thereof.

3.    That as the learned magistrate found against the 2^nd defendant had managed a vice establishment :

a    the 3^rd defendant knew inferentially that the premises were being ‘kept’ as a vice establishment, and therefore he knew the premises were being so ‘occupied’ or ‘used’; mens rea is required in circumstances such as these.  There was simply no evidence the 3^rd defendant knew of these activities;

b.   when there was no evidence in fact of such alleged ‘occupation’ at all for illegal or immoral activities, as occupation connotes some permanent alteration or exclusive possession of part of the premises, and adaptation of the premises for use as a vice establishment, and no evidence was brought by the prosecution about this;

c.   when the only evidence of ‘user’ was that there were alleged to be short oral conversations about assignations being made on the premises for the girls to ‘be taken out’ and the fee therefore.  The police officers and the girls sat together for quite some time on each occasion lawfully singing, drinking and playing innocent games with no suggestion of lewdness involved;

d.   such alleged illegal or immoral user did not relate to ‘the condition’ of the premises at all, a large part of the activities were perfectly lawful;

e.   when there was no evidence at all as to the alleged proportionate occupation or use such as would be necessary in a vice establishment case;  R. v Lam So Chun MA 600 of 1996;

f.    when the evidence was that the lewd or sexual acts took place off the premises; there was no suggestion any sexual acts took place in the premises at all;

g.   there was no evidence that the 3^rd defendant was in the rooms at all during the visits of the police officers when they were making their assignations.

…

6.   The learned magistrate erred in finding that the prosecution had proved ‘beyond doubt’ that the 3^rd defendant had the necessary elements for mens rea to commit the offences by ‘permitting’ :

a.   the premises ‘to be occupied or used for immoral or illegal purposes;

b.   ‘common prostitutes’ to assemble or remain on the premises; when there was inadequate evidence to support such findings.

7.   The learned magistrate made fundamental errors in his approach in apparently drawing irresistible inferences against the 3^rd defendant.

8.   There was no evidence or no credible evidence called at the trial to support these inferences and/or to separately support his findings in that :

a.    failed to make a distinction between the evidence as against D2 and as against D3;

b.    wrongfully held the 3^rd defendant (apparently or inferentially) did nothing to comply with the conditions of the licence when there was no or no credible evidence to support such a finding;

c.    wrongfully found that the defendant breached condition 7 and condition 8 of the liquor licence conditions, when there was no basis or proper basis for such findings.”

10. In my judgment, there is nothing at all to these grounds.

11. When the magistrate made reference to his finding that Club Versailles was kept as a vice establishment in his write-up for this appeal, he was referring to the “system” in which the club was operated and the evidence that went to support that finding in his oral reasons.  That this is so is borne out by the fact that his write-up is virtually depletive of anything evidential.  I am satisfied that the magistrate had not introduced any irrelevant consideration into his deliberation of the appellant’s case.

12. Based on the evidence before the magistrate, I am also satisfied that the girls concerned were “common prostitutes”.  Given how they were paraded in front of the officers for selection, the mention of “yuk gum” (‘flesh money’ and common parlance of definite meaning within the local Cantonese-speaking community) and the fact that all the girls selected ended up engaging themselves sexually with the officers, I do not see how there could be any different conclusion.  The fact that all the girls paid an admission fee makes no difference.  It only goes to show that they worked independently, and that the fee was some kind of agency fee.

13. I should add that in coming to the above conclusion, I have given R.v. Morris-Lowe [1985] 1 WLR 29 due consideration, the case referred to by the appellant.  It was decided there that while a single act of paid lewdness renders a woman a prostitute, it does not make her a “common” one, the point being there was no evidence of such ‘commonness’ in the girls in the present case.

14. Morris-Lowe must, however, be understood in its proper context.  It involved a charge of “procuring for common prostitution” whereas the only thing the defendant did was procure, by false pretence of a masseuse job on offer (a reward), single acts of “relief massage” by three unsuspecting ladies who thought they were attending a job interview.  It should, therefore, come as no surprise that the English Court of Appeal went the way they did.

15. In my judgment, the only relevance of Morris-Lowe lies in the definitive part of its holding, i.e. there is “common prostitution” when a woman is “prepared for reward to engage in acts of lewdness with all and sundry or with anyone who might hire her for that purpose”.  This is perfectly consistent with the decision relied on by the magistrate : Li Kin Wai & Another (ibid) where “common prostitutes” was construed to mean women selling their bodies “indiscriminately” or “promiscuously” (and where it was also held that the word “common” does not denote frequency).

16. Applying the above decisions to the present case, I have not the slightest doubt that the girls in question were “common prostitutes”.  It matters not there was no direct evidence that any of them would work more than once.  Even if one disregards the irrelevance of frequency (Li Kin Wai & Another), and stick to the “with all and sundry” test (Morris-Lowe), that would still be the only reasonable conclusion.  Only “common prostitutes” would allow themselves to be picked by strangers in a parade.

17. Moving on, the lack of evidence on such matters as the size of the club, the number of rooms it had and the number of customers entertaining lawfully does not trouble me.  Insofar as the appellant is concerned, I have no task dealing with the validity of the convictions on ‘Managing a Vice Establishment’ (while not suggesting for a moment that they should be called into question).  The allegations against the appellant were simply that he permitted people “to occupy or use any portion of the premises for any immoral or illegal purpose” (condition 7), or prostitutes and thieves “to assemble or remain on the premises” (condition 8).

18. Such allegations bring the consideration of the appellant’s case outside the ambit of the case law on user and occupation in vice establishment charges.  Given such allegations, I do not see how permitting prostitutes to remain in one room and not other rooms, or pimps and prostitutes to use one part of the club and not other parts, would render the appellant not in breach of his conditions.  Given what transpired before the officers took the girls out, I do not see how the absence of actual lewdness inside the club would take the situation out of condition 7.  There is no basis to suggest that a single lapse is not a breach and that only recurring lapses would so constitute.  None of the cases put forward by the appellant is authority for any such views.

19. Finally, I am satisfied that the magistrate was right to impute knowledge on the part of the appellant.  I am aware that the appellant was not present in the club on any of the three occasions.  I have been told that two of these occasions were Fridays and Friday was the appellant’s day off.  I have taken into account every submission made on the appellant’s behalf.  My conclusion remains, however, that the appellant having knowledge is the only reasonable inference.

20. On this, I refer to the “system” that the magistrate found to be operating.  The evidence for such a finding was overwhelming.  To suggest otherwise is to say, unrealistically, what the officers experienced over three visits was fortuitous; or what happened, happened only to them and not the other customers; or what happened, happened only in their room and not the other rooms.  It is an affront to common sense to suggest that such a “system” could be in place without the appellant’s knowledge; or that D2 and other associates of the club would repeatedly engage in the kind of activities they did hoping or trusting the appellant would not find out.  Note also that under condition 4 of the licence, the appellant had a personal duty to supervise the premises, and that there was no evidence either from him or any other source to show he had done anything to ensure the compliance of conditions 7 and 8.

21. I should add that any complaint about the magistrate not distinguishing the evidence against D2 and the appellant is invalid.  The magistrate was entitled to look at the evidence as a whole covering all three visits.  He was so entitled even if the date in Charges 3 and 4 had been confined to 18 June 2004 at trial (see paragraph 4 above).  The same evidence would have been admissible as direct evidence against D2 and as background and direct evidence against the appellant.  That is my judgment.

22. I turn now to Grounds 4 and 5 —

“4.  The learned magistrate erred in holding that the conditions issued by the Liquor Licensing Board were not ultra vires and that the Board had validly attached conditions to the licence.

5.   The magistrate ought to have found that :

a.  the Board directly had no delegated powers to impose them as conditions, when the power to issue regulations regulating ‘the use of the premises’ was vested in the Chief Executive in Council, pursuant to section 6(1)(o) of Cap. 109, and not the Board;

b.  accordingly the Board’s purported exercise of sub-delegated powers were without the Carltona Principle;

c.  there should have been a power of express delegation to impose conditions on the licence under regulation 6(n) of Cap. 109 which there is not, the only power to attach conditions is to be found in section 7(1) of Cap. 109;

d.  the conditions were void as they were not imposed in accordance within the provisionsof the Dutiable Commodities Ordinance Cap. 109; Wong kam Kuen v. Tela CACV 41/2003.”

23. As I understand it, the logic of these combined grounds goes as follows.

24. There is no specific section in the Dutiable Commodities Ordinance that creates the Liquor Licensing Board. It was set up, circuitously if one may put it, through section 6(1) which empowers the Chief Executive in Council to make regulations for, amongst many other things, “the issue, suspension and revocation of liquor licences and the establishment of a board for the purpose of issuing liquor licences and the functions, powers and procedure of that board” (section 6(1)(n)).

25. This is to be contrasted with the Commissioner for Customs & Excise who is vested upfront with a general discretion to grant licences, with or without conditions (section 7).  The Chief Executive in Council also is specifically empowered to make regulations “regulating the premises in respect of which a liquor licence is granted” (section 6(1)(o)).

26. Given the above legislative regime, conditions of the kind in question can only be imposed by the Commissioner for Customs & Excise as an ancillary exercise to the granting of a licence, or made the subject matter of some regulation passed by the Chief Executive in Council.  The Carltona Principle requires that there be no sub-delegation to the Liquor Licensing Board without the Ordinance giving it express powers to do so.  Any condition imposed against that principle must be ultra vires.

27. That, I believe, is the long and short of the appellant’s contention.

28. In my judgment, there is nothing to these grounds either.

29. The long title of the Dutiable Commodities Ordinance makes it clear that it is an ordinance “to amend the law relating to the taxation and control of liquors, tobacco, hydrocarbon oil, methyl alcohol and other substances, for providing for the licensing of certain dealings in liquors and for purposes connected therewith”.  In other words, liquors and liquor licences are but a couple of areas under its purview.  There are many others.

30. Section 7 granting the Commissioner for Customs & Excise the discretion in respect of licences clearly points to the other areas, as is made out by section 7(1) which provides that this discretion is “subject to the provisions of the Ordinance”.  As regards the Chief Executive in Council, it is true that the Ordinance has chosen to empower it to make regulations “regulating the premises in respect of which a liquor licence is granted” (section 6(1)(o)), but it has also chosen to empower it to make regulations for “the issue, suspension and revocation of liquor licences and the establishment of a board for the purpose of issuing liquor licences and the functions, powers and procedure of that board” (section 6(1)(n)).  There is no confusion within the legislative regime as to where the powers are distributed.

31. Going a step further, the wording of section 6(1)(n) is, in my judgment, wide but explicit enough for the Liquor Licensing Board to be empowered to impose conditions of the kind in question.  I do not see what else the “power” of a board set up for issuing liquor licences can mean, particularly when “functions” and “procedure” are separately mentioned.  I also note that according to section 40(2)(b) of the Interpretation and General Clauses Ordinance, Cap. 1 where an ordinance confers power to grant a licence, such power “shall include power to impose reasonable conditions subject to which such licence … may be granted”.

32. While on the subject of reasonableness of conditions, I should add that I disagree with the appellant’s suggestion that conditions 7 and 8 are too loosely worded to be viable.  Given that knowledge is essential for a breach to occur, condition 7 in effect requires a licence-holder to expel individuals whom he knows to be working prostitutes and preying thieves, either of which are subject to the strictest proof, as is clear from the present case.  Ceteris paribus, the same goes for condition 8.

Judgment

33. The appeal is dismissed.