Applicant v Respondent

1 Since August 2009, Xian Meng has been the licensee of a brothel, Paradise Playmates, located in Seaford. Until July 2015, his wife, Jian Xu, was the approved manager of the brothel. On 2 December 2013, acting on information, members of Victoria Police and officers of the Department of Immigration and Border Protection conducted an inspection of the brothel. They found a Chinese woman, LFQ, hiding in a wall cavity. LFQ had been working at the brothel as a sex worker for approximately one month. She did not have a right to do so and was in breach of her visa conditions. LFQ was taken into detention and shortly thereafter returned to China pursuant to a voluntary deportation.

2 Pursuant to s 245AC of the Migration Act 1958 (Cth) ('Migration Act'), it is an indictable offence punishable by 2 years' imprisonment to allow a person to work in breach of their visa conditions.

3 The Director of Consumer Affairs Victoria ('the Director') applied to the Victorian Civil and Administrative Tribunal ('the Tribunal') pursuant to ss 48 and 54 of the Sex Work Act 1994 ('the Act') seeking a determination of whether there were grounds for disciplinary action to be taken against Mr Meng in his capacity as licensee of the brothel, and Ms Xu in her capacity as the approved manager of the brothel. The Director sought the cancellation of Mr Meng's licence and cancellation of Ms Xu's approval as manager.

4 Following a six day hearing in December 2014 and January 2015, the Tribunal delivered findings and reasons on 5 February 2015 ('Primary Reasons').[1]

5 The Director's application under s 48 of the Act in respect of Mr Meng contains three grounds for taking action against him:

(i) That the Tribunal should be satisfied in accordance with s 48(3)(e) of the Act that an offence had been committed at the brothel, namely a contravention of s 245AC of the Migration Act, of allowing workers (including LFQ) to work at the premises in breach of their visa conditions. In relation to LFQ, the particulars alleged that 'Mr Meng knew that LFQ was working in breach of her visa conditions'[2] ('Ground One');

(ii) That the Tribunal should be satisfied in accordance with s 48(3)(d) of the Act that Mr Meng's management of the brothel was such that it was desirable for action to be taken against him because he allowed LFQ and other woman to work at the brothel in breach of their visa conditions; he installed or tolerated the installation of a door in a wall cavity for the purpose of hiding people in the brothel; and he allowed LFQ to live on the premises ('Ground Two'); and

(iii) That the Tribunal should be satisfied in accordance with s 48(3)(a) of the Act that the use and development of the land for the purpose of the brothel was in contravention of conditions of a permit granted under the Planning and Environment Act 1987 ('Ground Three').

6 In its Primary Reasons, the Tribunal found that Grounds Two and Three were made out. The Tribunal's findings were as follows:

In relation to the application for inquiry in respect of Xian Yang Meng (also known as John Meng) the Tribunal determines that there are grounds for taking action as follows:

1. Pursuant to section 48(3)(d) of the Act, Xian Yang Meng's management of the brothel is such that it is desirable that action should be taken against him for the following reasons:

(a) He allowed the sex worker LFQ to work at the brothel in breach of her visa conditions: and

(b) He installed a door into a wall cavity for the purpose of hiding people within the premises

2. Pursuant to section 48(3)(a) of the Act the use or development of the land for the purpose of the licensed premises was in contravention of a condition of a permit granted under the Planning and Environment Act 1987.[3]

7 Contrary to the Director's submissions in respect of Ground One, the Tribunal was not satisfied for the purposes of s 48(3)(e) of the Act that Mr Meng had committed an indictable offence under s 245AC of the Migration Act of allowing LFQ to work on the premises in breach of her visa conditions.[4]

8 Following a further hearing on penalty, the Tribunal made orders and delivered further reasons on 2 July 2015 ('Penalty Reasons').[5] The Director had sought cancellation of Mr Meng's licence. The Tribunal did not accede to this submission. Rather, it issued Mr Meng with a reprimand, imposed a penalty of $65,000 and placed conditions on his licence that he report to Consumer Affairs Victoria at four monthly intervals as to his use of Visa Entitlement Verification Online ('VEVO').

9 Pursuant to s 148(2) of the Victorian Civil and Administrative Tribunal Act 1998 ('VCAT Act'), the Director seeks leave to appeal on six questions of law from the orders of the Tribunal. The Director contends in respect of the Primary Reasons:

(i) The Tribunal misconstrued its function and/or applied a wrong legal test in failing to be satisfied that Mr Meng had committed an offence under s 245AC of the Migration Act;

(iii) The Tribunal erred in that it was not open to conclude that Mr Meng had not allowed sex workers to work at the brothel in breach of their visa conditions.

In relation to the Tribunal's Penalty Reasons, the Director contends:

(iv) The Tribunal failed to take into account a relevant consideration, namely its finding that the purpose of creating the entrance to the wall cavity was to allow persons unlawfully/illegally on the premises to hide there;

(v) The Tribunal took into account an irrelevant consideration, namely the legal costs which Mr Meng had paid in defending the VCAT proceedings; and

(vi) The penalties imposed were manifestly inadequate.

10 In respect of the first question (whether the Tribunal misconstrued its function and/or applied a wrong legal test), I grant leave to appeal but dismiss the appeal. I refuse leave to appeal in respect of each of the five remaining questions. In each instance there is insufficient doubt attending the question to justify the grant of leave to appeal.

11 Having regard to the issues raised in the current proceedings it is necessary to set out in some detail the legislation which is referred to in the Tribunal's decisions. Section 245AC of the Migration Act provides as follows:

(1) A person (the first person) contravenes this subsection if:

(a) the first person allows, or continues to allow, another person (the worker) to work; and

(b) the worker is a lawful non-citizen; and

(c) the worker holds a visa that is subject to a work-related condition; and

(d) the worker is in breach of the work-related condition solely because of doing the work referred to in paragraph (a).

...

(3) A person commits an offence if the person contravenes subsection (1). The physical elements of the offence are set out in that subsection.

Penalty: 2 years imprisonment.

...

(4) For the purposes of subsection (3), the fault element for paragraphs (1)(b), (c) and (d) is knowledge or recklessness by the first person.

...

12 Pursuant to s 48(1) of the Act the Director may apply to the Tribunal for an inquiry to determine whether there are grounds for taking action under s 48A of the Act against a licensee. Section 48(3) provides, inter alia, there are grounds for taking action under s 48A if the Tribunal is satisfied that -

(a) any use or development of land for the purposes of the licensed business is or was in contravention of a condition of a permit granted under the Planning and Environment Act 1987; or

...

(d) the licensed business has been managed in such a way that it is desirable that action should be taken against the licensee; or

...

(e) an offence under the Drugs, Poisons and Controlled Substances Act 1981 or an indictable offence punishable by imprisonment for 12 months or more has been committed on premises at which the licensee is carrying on business as a sex work service provider; or

...

13 The Director's application for an inquiry relied upon each of s 48(3)(a), (d) and (e) of the Act. For the purposes of s 48(3)(e), the alleged indictable offence was a contravention of s 245AC of the Migration Act.

14 Section 48A(1) and (2) of the Act provides:

(1) In addition to any other powers of the Tribunal under this Act it may, if satisfied that there are grounds for taking action against a licensee under this section, by order do one or more of the following -

(a) reprimand the licensee;

...

(c) order the licensee to pay into the Fund a penalty not exceeding an amount that is 600 times the value of a penalty unit fixed by the Treasurer under section 5(3) of the Monetary Units Act 2004;

(d) impose any condition or restriction on the licence;

(e) require the licensee to enter into an undertaking to perform, or not to perform, certain tasks to be specified in the undertaking;

(f) require the licensee to comply within, or for, a specified time with a requirement specified by the Tribunal;

(g) cancel the licence or suspend the licence for a specified period not exceeding one year;

(h) order that the licensee be ineligible to hold a licence or be an approved manager either permanently or temporarily.

(2) Despite anything to the contrary in subsection (1), the only action that the Tribunal may take solely on the ground set out in section 48(3)(f) is to suspend the licence.

Did the Tribunal misconstrue its function and/or apply a wrong legal test in failing to be satisfied that Mr Meng committed an offence under s 245AC of the Migration Act?

15 An appeal under s 148 of the VCAT Act is not an appeal by way of rehearing. Rather, the proceeding is in the nature of judicial review.[6] The Director seeks leave to appeal from a decision of the Tribunal that it was not 'satisfied' that Mr Meng had committed an offence under s 245AC of the Migration Act. It is important note the limitations which apply in respect of judicial review of a decision which is based on the satisfaction of the decision maker.

16 The Tribunal's jurisdiction to make one or more of the orders prescribed by s 48A is contingent upon the Tribunal being satisfied of one or more of the matters in s 48(3) of the Act. Whether the Tribunal is so satisfied is a question of jurisdictional fact, which is a condition precedent to the exercise of the powers conferred by s 48A.[7] In proceedings in which a decision maker's satisfaction is challenged by way of judicial review, the issue is not whether the decision had the requisite satisfaction in fact, but rather whether that 'opinion or belief is of the kind contemplated by the statute conferring the power'.[8]

17 A decision based upon the satisfaction of the decision maker can be challenged if the decision maker:

(i) acted in bad faith, arbitrarily, maliciously or capriciously;

(ii) formed an opinion that was irrational or illogical;

(iii) took into account irrelevant matters which were not contemplated by the statute or failed to consider matters that it was required to consider; or

(iv) reached a decision which appears so unreasonable that no reasonable authority could properly have arrived at it.[9]

18 In R v Connell; Ex parte The Hetton Bellbird Collieries Ltd (No 2),[10] Latham CJ stated in respect of the requirement of a decision maker to have an opinion or to reach a state of satisfaction:

It should be emphasized that the application of the principle now under discussion does not mean that the court substitutes its opinion for the opinion of the person or authority in question. What the court does do is to inquire whether the opinion required by the relevant legislative provision has really been formed. If the opinion which was in fact formed was reached by taking into account irrelevant considerations or by otherwise misconstruing the terms of the relevant legislation, then it must be held that the opinion required has not been formed. In that event the basis for the exercise of power is absent, just as if it were shown that the opinion was arbitrary, capricious, irrational, or not bona fide.[11]

19 The Tribunal's decision that it was not satisfied that Mr Meng had committed an offence under s 245AC of the Migration Act is set out at [149] - [155] of its Primary Reasons:

1. I have found that Ms Xu committed an offence under section 245AC of the Migration Act, and was in any event in breach of the factual elements of section 245AC.
2. But the allegation made by the Director against Mr Meng under section 48(3)(e) is not particularised as an allegation that Ms Xu committed the offence.
3. The allegation in substance is that Mr Meng committed the offence. The Director alleges that Mr Meng knew that LFQ was working in breach of her visa conditions, rather than that he knew or ought to have known that she was doing so. No allegation is made under Meng Ground 1 that Ms Xu committed the offence. If it had been, I would have been satisfied that Meng Ground 1 was proven.
4. As noted above, the Tribunal may find that a ground is made out, even where the Director may not have proved all the matters set out in the particulars to that ground. Where the allegation is put on one basis alone, however, and depending on the particular case, for reasons of fairness the Tribunal would need to be cautious about finding the ground proven on a different basis, in my view.
5. The Director relies on evidence as to Mr Meng's behaviour during the 2 December inspection, to submit that an inference should be drawn that Mr Meng knew LFQ was working in breach her visa conditions. I discuss that evidence below in relation to Meng Ground 2. In all the circumstances, I was not prepared to draw that particular inference.
6. I am satisfied that Mr Meng allowed LFQ to work at the premises and did not take reasonable steps to verify her work status. A finding would be open, in my view, that he ought to have known of her work status and was reckless, for the reasons given below, but that is not the allegation made under Ground 1.
7. Bearing in mind that an allegation of criminal conduct is in question, I am not satisfied to the required degree that the specific allegations under Ground 1 have been proven.

20 At [151] above, the Tribunal noted the Director's allegation that Mr Meng knew that LFQ was working in breach of her visa conditions 'rather than he knew or ought to have known that she was doing so'. This is a reference to s 245AC(4) of the Migration Act which provides that the fault element for the offence of allowing a lawful non-citizen to work in breach of a work related visa condition is knowledge or recklessness. The Director's application under s 54 of the Act in respect of Ms Xu, alleged a contravention of s 245AC of the Migration Act by reason that Ms Xu knew or should have been aware that LFQ was working in breach of her visa conditions. However, the allegation against Mr Meng was confined to actual knowledge.

21 At [150] and [151], the Tribunal referred to the absence of any allegation by the Director against Mr Meng that, for the purposes of s 48(3)(e) of the Act, an offence had been committed on the premises by Ms Xu, being a contravention of s 245AC of the Migration Act. Section 48(3)(e) of the Act is not limited to offences committed by the licensee who is the subject of the inquiry commenced under s 48. It is sufficient to enliven the provision that a prescribed indictable offence has been committed at the premises by any person. Hence the Tribunal's conclusion that if the particulars of Ground One had included a reference to an offence having been committed under s 245AC of the Migration Act by Ms Xu, Ground One would have been made out.

22 Mr Pizer QC, who appeared with Ms Watson for the Director, submitted that the Tribunal misconstrued its function and applied a wrong legal test when determining whether it had the requisite degree of satisfaction for the purposes of s 48(3)(e) of the Act. The Director's submissions include the following:

1. As the Tribunal's Findings Reasons indicate, the Tribunal - in determining whether it was satisfied that an indictable offence punishable by imprisonment for 12 months or more had been committed on the Premises - confined itself to considering whether the allegations as particularised in the Application were made out.
2. It was not the Tribunal's function only to determine whether the allegations as particularised in the Application were made out. The Tribunal's function, conferred on it by s 48(3) of the Act, was to determine whether it was satisfied of one or more of the matters set out in that provision. The most relevant matter for present purposes is set out in s 48(3)(e): namely, that an indictable offence punishable by imprisonment for 12 months or more had been committed on the Premises.
3. Critically, the Tribunal did not perform the function referred to in the previous paragraph. Thus, by confining itself to determining whether the particularised ground was made out, and not asking itself whether it was satisfied that a relevant indictable offence had been committed on the Premises, the Tribunal misconstrued its function and applied the wrong legal test in exercising its power under s 48(3)(e).
4. This was an error of consequence. Had the Tribunal performed its statutory function (and applied the correct legal test), it had to conclude that the First Ground was made out because of the factual findings it had made.[12]

23 In determining whether it was satisfied that Ground One was proven, the Tribunal confined itself to a consideration of whether the Director had made out the allegation of a contravention of s 245AC of the Migration Act as particularised. The allegation was that Mr Meng knowingly allowed LFQ to work on the premises in breach of her visa conditions (as opposed to being reckless as to whether she was working in breach of her visa conditions). This approach by the Tribunal did not involve any error of law.

24 At [49], the Tribunal concluded that an inquiry under s 48 of the Act is partly inquisitorial. The Tribunal referred with approval to the judgment of Kyrou J (as his Honour then was) in Johnson v Director of Consumer Affairs Victoria[13] ('Johnson') where his Honour, referring to VCAT's powers under the Estate Agents Act 1980 stated:

It may be accepted that, in relation to some aspects of its jurisdiction, the VCAT's role is partly inquisitorial. It may also be accepted that the fact that s 25(1) of the EA Act refers to 'the holding of an inquiry' contemplates that a proceeding under that section will have some inquisitorial features. That is not to say, however, that the scope of the inquiry is 'at large' or that the protections afforded by the adversarial system do not apply.

Consistent with the principles set out at [88] and [89] above, the scope of an inquiry under s 25(1) of the EA Act is determined by the terms of the document that invokes the VCAT's jurisdiction and the subsequent conduct of the parties. Further, any broadening of the initial scope of an inquiry is at all times subject to compliance with the VCAT's obligations to act fairly and in accordance with the rules of natural justice. The notion that the VCAT may follow the evidence called before it wherever it leads should be treated with considerable caution, as such an approach may well lead to error.[14]

25 At [50] of the Primary Reasons, the Tribunal stated:

Although the inquiry is partly inquisitorial, it is not an inquiry at large. For reasons of fairness, the inquiry ought generally to be limited to the grounds for taking action alleged by the Director, as was submitted by Counsel for the respondents. On the other hand, the Tribunal may still be satisfied that there are grounds for taking action even if not all the matters set out as particulars of those grounds are proven.

26 In the present proceedings, the document which invoked the Tribunal's jurisdiction to make orders under s 48A was the application filed by the Director under s 48 of the Act. Relevantly, that document alleged a contravention of s 245AC of the Migration Act by Mr Meng by reason of him knowingly allowing LFQ to work on the premises in breach of her visa conditions. This was an allegation of criminal conduct, subject to the standard of proof as set out in Briginshaw v Briginshaw.[15] At [55], citing Briginshaw, the Tribunal stated that a finding that a person has engaged in criminal conduct '... should not be made lightly - it should not be based on inexact proofs, indefinite testimony or indirect inferences.'

27 Mr Pizer conceded that it would have been open to the solicitor appearing for the Director before the Tribunal to have made an application to amend the particulars of Ground One to allege recklessness.[16] As Ground One involved an allegation of criminal conduct it was consistent with the requirement for the Tribunal to act fairly and to accord natural justice[17] for the Tribunal to hold the Director to the allegation as pleaded.

28 The Director's application under s 48 of the Act alleged that Mr Meng committed an indictable offence, being a contravention of s 245AC of the Migration Act. The mental element of the offence alleged was actual knowledge that LFQ had worked at the premises in breach of her visa conditions. The Director elected to formulate the allegation of criminal conduct based on knowledge rather than recklessness, and made no application to amend. The Director's contention that the Tribunal erred in law by holding the Director to the allegation of actual knowledge is without merit. Mr Pizer was unable to point to any authority in support of the proposition that a court or tribunal falls into legal error by holding a party alleging criminal conduct to the burden of providing the elements of the offence which is alleged.

29 The proceedings in the Tribunal were not a criminal trial of a charge of contravention by Mr Meng of s 245AC of the Migration Act. Nevertheless, the disciplinary process which the Director sought to enliven was contingent upon the finding by the Tribunal that it was satisfied that an indictable offence had been committed on the premises. The criminal trial process is accusatorial in two respects. First, it is for the prosecution to decide what charge is preferred against the accused. Second, the prosecution bears the onus of proof of all the elements of the charge that is laid.[18]

30 Mr Pizer submitted that the Director's written and oral submissions placed Mr Meng on notice that the Director would rely upon the mental element of recklessness.[19] He submitted that the issue of whether Mr Meng was reckless as to whether LFQ was working in breach of her visa conditions was 'in the ring'.[20] Mr Pizer placed particular reliance upon the Director's written submissions before the Tribunal, which included the following:

The Applicant notes that it is open to the Tribunal to find the ground established if it is satisfied that Mr Meng recklessly, rather than knowingly, committed the offence under s 245AC Migration Act 1958.[21]

31 A submission in the same terms was made orally before the Tribunal on 15 January 2015. Mr Pizer submitted that Mr Devlin, who appeared on behalf of Mr Meng both before the Tribunal proceedings and in the current proceedings, did not object to the Director's submission that it was open to the Tribunal to find Ground One proven on the basis of recklessness. This lack of objection is, however, explicable by reason of Mr Devlin proceeding on the same basis as the Tribunal, namely, that the Director should be held to the allegation of actual knowledge. The lack of objection is also explicable by the somewhat muted form of the submission, 'the applicant notes that it is open to the Tribunal to find ...'.[22]

32 A number of factors militate against the conclusion that the Director's submission required the Tribunal to determine Ground One on the basis of both actual knowledge and recklessness. First, the alleged contravention of s 245AC of the Migration Act against Ms Xu was based on both knowledge and recklessness, whereas the allegation against Mr Meng only alleged actual knowledge. Prima facie, the Director turned her mind expressly to the mental element of the offence in respect of both Ms Xu and Mr Meng and decided to frame those allegations differently. Second, Mr Meng's advisers were entitled to prepare and conduct his defence on the basis that the only allegation against him was that he knowingly allowed LFQ to work in breach of her visa conditions. Third, assuming in the Director's favour that the written and oral submissions placed Mr Meng on notice of the allegation of recklessness, this occurred after the completion of the evidence. Whether Mr Meng was reckless as to whether LFQ was working in breach of visa conditions raised different forensic considerations compared to the question of whether he knew this to be the case. Consistent with the observations of Kyrou J in Johnson, if the Tribunal had determined Ground One on the basis of recklessness, absent an amendment to the particulars, a significant question would have arisen as to whether this constituted a breach of the rules of natural justice.

33 The submissions advanced by Mr Pizer sought to place the Director in the same position in which she would have been in had an application been made on 15 January 2015 pursuant to s 127 of the VCAT Act to amend the s 48 application to allege recklessness. No such application was made. Had it been made after the completion of the evidence it would no doubt have been strenuously resisted on the ground that Mr Meng had prepared and conducted his defence of Ground One on the basis that recklessness was not in issue.

34 Assuming in the Director's favour that by reason of the written and oral submissions of 15 January 2015 the issue of recklessness was 'in the ring', it does not follow that the Tribunal fell into error by adopting a cautious approach and holding the Director to the particularised allegations. Assuming that, notwithstanding the failure to amend the particulars of the s 48 application, it may have been open for the Tribunal to have determined Ground One on the basis of recklessness, it does not follow that the Tribunal fell into error by adopting a cautious approach and holding the Director to the particularised allegation of actual knowledge. Mr Pizer did not point to any authority for the proposition that a court or tribunal falls into legal error by holding a party to its pleaded case.

35 At [155], the Tribunal directed itself to the requisite question under s 48(3)(e) of the Act as to whether it was satisfied that an offence under s 245AC of the Migration Act had been committed. In answering this question in the negative, the Tribunal took into account both the allegation of criminal conduct and the specific allegation that Mr Meng knew that LFQ was working on the premises contrary to her visa conditions. The Tribunal was not at large in determining whether it had the requisite satisfaction under s 48(3)(e) of the Act. In doing so, it was subject to both ss 97 and 98(1) of the VCAT Act.

36 Mr Pizer submitted that the Tribunal misconstrued its function and applied the wrong legal test in exercising its power under s 48(3)(e) of the Act by confining itself to determining whether the particularised ground was made out, and not asking itself whether it was satisfied that a relevant indictable offence had been committed on the premises.[23] If this contention is correct, the Tribunal would have fallen into legal error by failing to be satisfied that an offence had been committed on the premises, albeit that the offence was committed by Ms Xu rather than Mr Meng. As noted above at [149], the Tribunal recorded its decision that Ms Xu had committed an offence under s 245AC of the Migration Act by recklessly allowing LFQ to work on the premises in breach of her visa conditions. No submission was advanced on behalf of the Director that the Tribunal erred by failing to be satisfied that there were grounds for taking action under s 48A of the Act against Mr Meng by reason of Ms Xu's contravention of s 245AC of the Migration Act. It is unsurprising that no such submission was advanced. Had the Tribunal concluded that it was satisfied that there were grounds for taking action against Mr Meng under s 48A of the Act based on satisfaction that Ms Xu had committed an offence but in circumstances where the allegations against Mr Meng made no reference to the commission of an offence by Ms Xu, such decision would have been very difficult to reconcile with the Tribunal's obligation to accord Mr Meng natural justice.

37 Presumably the Director makes no complaint about the failure of the Tribunal to rely upon the finding of contravention by Ms Xu, whilst complaining about the failure to make a finding against Mr Meng based on recklessness, because recklessness was raised in the Director's written and oral submissions on 15 January 2015. This demonstrates that the Director's real complaint is not that the Tribunal misconstrued its function and applied a wrong test by not asking itself whether it was satisfied that a relevant indictable offence had been committed on the premises. Rather, the Director's complaint is that the Tribunal fell into error in holding the Director to the particulars of the allegation that Mr Meng knowingly allowed LFQ to work on the premises in breach of her visa conditions. In doing so, the Tribunal did not fall into error.

Did the Tribunal's reasons fail to disclose its path of reasoning?

38 Mr Pizer submitted that the Tribunal's reasons were inadequate because they do not disclose '... why, having acknowledged that it was not bound by the way in which the First Ground was particularised, it concluded, in effect, that it was. Put simply, the reader is left to wonder how the Tribunal reached that conclusion'.[24]

39 Pursuant to s 117 of the VCAT Act, the Tribunal is required to give written reasons for any order it makes other than an interim order. Mr Pizer submitted that s 117 requires the Tribunal to provide reasons that '... make its path of reasoning clear, especially in regard to the important points in the case'.[25]

40 Contrary to the Director's submissions, the Tribunal's reasons clearly disclose the basis upon which it was not satisfied to the Briginshaw standard that Mr Meng knowingly allowed LFQ to work in breach of her visa conditions. The Tribunal's reasoning is disclosed at [149] - [155] of the Primary Reasons which are set out above. In addition, its path of reasoning is also disclosed at [52] - [64] of the Primary Reasons where the Tribunal discusses the application of the Briginshaw standard of proof in respect of serious allegations of criminal conduct. In summary, the Tribunal's path of reasoning involves the following elements:

(i) The allegation that Mr Meng allowed LFQ to work in breach of her visa conditions was an allegation of criminal conduct;

(ii) The allegation of criminal conduct was subject to the Briginshaw standard ('the required standard');

(iii) The allegation having been particularised solely on the basis of actual knowledge by Mr Meng, for reasons of fairness, the Tribunal needed to be cautious if it was to find the ground proven on a different basis to that alleged; and

(iv) As the allegation against Mr Meng was one of criminal conduct the Tribunal could not be satisfied that the specific allegation of knowingly allowing LFQ to work in breach of her visa conditions had been proven to the required standard.

Was it open to the Tribunal to fail to conclude that Ground One was made out?

41 The Director submits that the evidence and other material before the Tribunal allowed only one conclusion, namely, that Ground One had been established. The Director submits that it was therefore not open to the Tribunal to conclude otherwise.[26]

42 The material before the Tribunal included the Director's application under s 48 of the Act. That application alleged actual knowledge on the part of Mr Meng that LFQ was working at the premises in breach of her visa conditions. The Tribunal was not satisfied that Mr Meng had actual knowledge that LFQ was working at the premises in breach of her visa conditions. The Director's contention that the evidence and material before the Tribunal only allowed for the conclusion that Ground One had been established, is not made out.

Did the Tribunal fail to take into account a relevant consideration in determining what sanctions to impose under s 48A of the Act?

43 The Director submits that the Tribunal's Penalty Reasons failed to take into account a relevant consideration, namely, the finding in the Primary Reasons that the purpose of creating the entrance to the wall cavity was 'to enable persons unlawfully in the premises to hide there' or 'so that persons illegally on the premises could hide there'.[27]

44 The Director's application for leave to appeal in respect of this question of law fails for two reasons. First, despite the absence of an express reference in the penalty decision to the 'unlawfully/illegally on premises' finding, there is no warrant for concluding that the Tribunal did not take this finding into account. Second, assuming in the Director's favour that the finding was not taken into account, this does not constitute an error of law. There is neither an express nor implicit obligation under the Act for the Tribunal to have regard to the 'unlawfully/illegally on premises' finding when exercising the penalty discretion.

45 The Tribunal's reasons must be read as a whole and must be considered fairly.[28] Although there is no express reference in the Tribunal's Penalty Reasons to the unlawfully/illegally on premises finding, I reject the Director's contention that the finding was not taken into account. At [80] - [82] of the Penalty Reasons the Tribunal states:

1. General deterrence is highly relevant in this case. As the solicitor for the Director submitted, protection of the public and sex workers requires that other licensees and managers are in no doubt that there will be serious consequences for those who not only allow sex workers to work illegally in a brothel, but also create a hiding space within the brothel for the purpose of hiding persons on the premises.
2. For the reasons above relating to the nature, seriousness and potential consequences of the conduct, it is of the utmost importance that other licensees are deterred from the same conduct.
3. General deterrence alone would warrant suspension or cancellation of Mr Meng's licence, in my view. The same consideration applies to Ms Xu

46 At [80] of the Penalty Reasons, the Tribunal referred in the one sentence to licensees and managers 'who not only allow sex workers to work illegally in a brothel, but also create a hiding space within the brothel for the purpose of hiding persons on the premises'. A fair reading of [80] supports the conclusion that the 'purpose of hiding persons on the premises' includes the purpose of hiding sex workers illegally on the premises.

47 At [78] of the Penalty Reasons, the Tribunal described Mr Meng's conduct in relation to the creation of the hidden room as 'breathtakingly irresponsible, foolish and potentially dangerous conduct in direct conflict with express objects of the Act'.[29] This language supports the conclusion that the Tribunal appreciated and had regard to the seriousness of Mr Meng's conduct in relation to the creation of the hidden room.

48 For the reasons set out above, the premise of the Director's contention that the Tribunal failed to take into account a relevant consideration is not made out. However, even if I had accepted the premise of the Director's contention, I would not have found that the Tribunal failed to take into account a relevant consideration.

49 A failure to take into account a relevant consideration will not constitute an error of law unless a decision maker fails to take into account a consideration which they are bound to take into account.[30] The factors which a decision maker is bound to consider are determined by the construction of the relevant statute. Absent an express statutory requirement, a court will not find the decision maker is bound to take a particular matter into account unless an implication that they are bound to do so is to be found in the subject matter, scope and purpose of the Act.[31]

50 With one exception, the exercise of the disciplinary powers conferred on the Tribunal by s 48A of the Act is unconstrained. The exception is in s 48A(2) which provides that the only action the Tribunal may take solely on the ground prescribed by s 48(3)(f) (where a licensee has been charged but not convicted of certain offences) is suspension of licence.

51 There is no express provision in s 48A of the Act to the effect that the Tribunal is bound to take into account a finding that a licensee has created an entrance to a wall cavity to enable persons unlawfully/illegally on the premises to hide. Thus the question is whether the Tribunal was bound to do so by reason of the subject matter, scope and purpose of the Act. Mr Pizer placed reliance upon the Court of Appeal judgment in Macedon Ranges Shire Council v Romsey Hotel Pty Ltd[32] ('Macedon Ranges'):

As the High Court made clear in Craig v South Australia, and again in Minister for Immigration v Yusuf, an administrative tribunal makes an error of law if it ignores "relevant material" such that its exercise, or purported exercise of power, is thereby affected. Earlier, in Minister for Aboriginal Affairs v Peko-Wallsend Limited, Brennan J said:

The facts to be brought to mind are the salient facts which give shape and substance to the matter: the facts of such importance that, if they are not considered, it could not be said that the matter has been properly considered.

In the present case, community opposition was a salient fact giving shape to the matter of social impact. It was of such importance that the tribunal's failure to address it meant that social impact had not been properly considered.[33]

52 Mr Pizer submitted that the Tribunal's finding that Mr Meng's purpose in creating the wall cavity was to hide persons who were illegally/unlawfully on the premises was a salient fact of such importance that the Tribunal's failure to take it into account meant that the power under s 48A of the Act had not been properly exercised.

53 In Macedon Ranges, the Court of Appeal concluded that s 3.3.7(1)(c) of the Gambling Regulation Act 2003 ('Gambling Regulation Act') required the Victorian Commission for Gambling Regulation to take certain matters into account in approving premises as suitable for gaming. The Court concluded that under the Gambling Regulation Act the power to approve premises as suitable for gaming could only be exercised if the decision maker was satisfied that the net economic and social impact of approval would not be detrimental to the wellbeing of the community of the municipal district in which the premises was located.[34] The Court noted that the Gambling Regulation Act did not specify the matters which the decision maker must consider in deciding whether the 'no detriment test' was satisfied. Thus, the identification of the matters which the decision maker was bound to consider was a matter of implication from the subject matter, scope and purpose of the Act. However, the Court concluded that the 'statutory signposts' were provided by the no net detriment test itself. That test provided that:

1. the likely economic impacts of approval;
2. the likely social impacts of approval; and

1. the net effect of those impacts on the well-being of the relevant community.[35]

54 The Gambling Regulation Act prescribed a no net detriment test which required the decision maker to consider the likely economic and social impact of approval of a premises as suitable for gaming, and the net effect on the wellbeing of the relevant community. It is therefore unsurprising that the Court of Appeal concluded that the Tribunal was bound to take into account evidence relating to community apprehension about the advent of gaming machines. There was a direct nexus between such evidence and the matters which a decision maker was required to consider by the Act.

55 The passage from the judgment of Brennan J in Minister for Aboriginal Affairs & Anor v Peko-Wallsend Ltd[36] cited in paragraph [47] of Macedon Ranges, in no way diminishes the requirement for a party alleging error of law on the ground of failure to take into account a relevant consideration, to establish that the decision maker was bound to take the particular matter into consideration. So much is clear from the sentence which precedes the passage from Brennan J's judgment cited in [47] of Macedon Ranges:

A decision-maker who is bound to have regard to a particular matter is not bound to bring to mind all the minutiae within his knowledge relating to the matter.[37]

56 In Macedon Ranges, the decision maker was bound to apply the no net detriment test. The salient facts which gave shape and substance to the social impact element of that test included evidence of community opposition. There was therefore a direct nexus between the prescribed no net detriment test and the evidence which the Tribunal should have, but did not, consider.

57 If, contrary to my primary finding, the Tribunal did not take into account the finding that a purpose of the wall cavity was to conceal unlawful/illegal sex workers, it does not follow that the exercise of the Tribunal's power under s 48A of the Act has miscarried. The Tribunal made a finding that Mr Meng's conduct in relation to the wall cavity was 'breathtakingly irresponsible, foolish and potentially dangerous conduct in direct conflict with express objects of the Act'.[38] This damning assessment of Mr Meng's conduct was taken into account by the Tribunal at [82] of the Penalty Reasons in concluding that general deterrence would warrant suspension or cancellation of his licence. The Tribunal's exercise of its powers under s 48A of the Act had proper regard to the seriousness of Mr Meng's conduct.

Did the Tribunal take into account an irrelevant consideration?

58 At [106] of the Penalty Reasons, the Tribunal stated that:

I have taken into account, however, a number of the submissions made by counsel on Mr Meng's behalf. The following matters are relevant in this case, in my view:

...

• As counsel for Mr Meng submitted, a substantial fine in addition to the significant legal costs Mr Meng says he has paid can have a significant deterrent effect - it would act as a specific deterrent to Mr Meng as well as deliver a clear message of denunciation to the community and the industry.

59 The Director submits that the Tribunal took into account an irrelevant consideration, namely, that Mr Meng had incurred significant legal costs in defending the proceedings. Mr Pizer submitted that as a matter of statutory construction it was not permissible to have regard to a matter which would undermine the protective regime provided by the Act. He submitted that if the quantum of penalty otherwise payable by a licensee could be reduced by reason of the legal costs in defending proceedings under the Act, this would undermine that protective regime.

60 The Director filed supplementary submissions on 25 November 2015 with the Court's leave. The submissions addressed the contention that the Tribunal took into account an irrelevant consideration when having regard to the legal costs incurred by Mr Meng. The submissions included the following at [2]:

The Director accepts that the VCAT may take into account the legal costs a respondent has incurred in defending a disciplinary proceeding under the Sex Work Act 1994 when determining whether that respondent has the capacity to pay a fine under that Act. But that is not what the VCAT did. Rather, the VCAT took into account the legal costs Mr Meng had incurred - for the purpose of fixing the amount of the fine under that Act - on the basis that incurring those costs "can have a significant deterrent effect".

61 I have no hesitation in rejecting the characterisation of the Tribunal's decision as set out above. Again it is necessary to observe that the Tribunal's decision must be read fairly. The Penalty Reasons do not contain any statement to the effect that the incurring of legal costs can have a significant deterrent effect. Rather, [106] of the Penalty Reasons records the Tribunal's conclusion that 'a substantial fine in addition to the significant legal costs Mr Meng says he has paid can have a significant deterrent effect.' This statement does not disclose any legal error.

62 There are numerous authorities which support the proposition that it is permissible for a court or tribunal to have regard to legal costs incurred by a defendant to penal proceedings when determining the quantum of penalty. In Ponzio v B & P Caelli Constructions Pty Ltd[39] ('Ponzio') the respondent construction company was alleged to have contravened s 187AA of the Workplace Relations Act 1996 (Cth) which prohibited an employer from making a payment to an employee in relation to a period during which the employee was engaged in industrial action. At first instance, the trial judge had refused to impose any penalty. On appeal, Jessup J stated that the fact that the conduct of legal proceedings had been costly to the respondent was a 'conventional' and 'unexceptionable consideration which would favour leniency' when determining the quantum of penalty for a contravention of the Act.[40]

63 Taking account of the costs incurred by a defendant to penal proceedings is consistent with a well established principle that the individual or personal circumstances of a contravener may legitimately be taken into account when determining the quantum of penalty.[41] Personal circumstances include capacity to pay. Capacity to pay may be affected by the quantum of legal costs incurred by a party defending penal proceedings.

64 In order to establish an error of law by reason of the taking into account of an irrelevant consideration, the Director must establish that the Tribunal was bound not to take into account the legal costs incurred by Mr Meng.

65 The supplementary submissions filed by the Director acknowledge a substantial body of Federal Court authority which supports the proposition that 'in the civil penalty context - particularly in the industrial relations area - there are several cases where the Federal Court has found that the amount of costs incurred by a person is relevant to the question of deterrence.'[42] However, the submissions of the Director refer to three judgments of Turner J of the Federal Circuit Court in which his Honour refused to have any regard to legal costs incurred by a respondent to penal proceedings under the Fair Work Act 2009 (Cth).[43] First, the approach of Turner J appears to be directly inconsistent with the Full Federal Court authority of Ponzio referred to above. Second, at its highest, the Director relies upon a line of authority of the Federal Circuit Court. It is of limited persuasive value. On no view does this line of authority support the proposition that the Tribunal was bound not to have regard to Mr Meng's legal costs when considering the quantum of penalty.

Were the penalties imposed by the Tribunal manifestly inadequate?

66 The Director submits that the Tribunal 'had no choice but to cancel Mr Meng's licence'.[44] The Director submits that the reprimand, $65,000 penalty and reporting conditions imposed on Mr Meng's licence were 'so far outside the range of a reasonable discretionary judgment as to bespeak error'.[45]

67 The Director's submission must be rejected for a number of reasons. First, the Tribunal's exercise of the power under s 48A(1)(g) of the Act to cancel a licensee's licence is discretionary. The circumstances in which a licence is automatically cancelled are prescribed by s 47 of the Act. Relevantly, s 47(1)(b) of the Act provides for automatic cancellation when a licensee is convicted or found guilty of an offence set out in Schedule 3 of the Act. Section 245AC of the Migration Act is a prescribed Schedule 3 offence. The Director's submission that the Tribunal effectively had no choice other than to cancel the licence is inconsistent with the discretionary nature of the power conferred by s 48A(1)(g) of the Act.

68 Second, I do not accept the Director's submission that the Tribunal had no choice other than to cancel Mr Meng's licence. The penalties imposed by the Tribunal reflect a careful consideration and balancing of a range of discretionary considerations. The Tribunal considered that cancellation of Mr Meng's licence was 'open' but ultimately concluded that specific and general deterrence, the protection of the public and sex workers, and the maintenance of professional standards would be served by the combination of a reprimand, penalty and reporting conditions. No error is disclosed by this approach.

69 Third, the maximum penalty which can be imposed under s 48A(1)(c) of the Act is $88,000. The Tribunal described the $65,000 penalty as 'above the mid range to indicate the conduct is in the more serious range for which a fine rather than cancellation, would be appropriate'.[46] The penalties imposed by the Tribunal cannot legitimately be described as being so obviously or strikingly inadequate '... such that the appeal court is entitled to conclude there was no proper exercise of the sentencing discretion at all'.[47]

70 The first question of law which raises the issue of whether the Tribunal misconstrued its function or applied a wrong legal test warrants the grant of leave to appeal. However, for the reasons set out above, the appeal is dismissed. The remaining five questions of law do not have sufficient prospects of success to warrant the grant of leave to appeal. The Director's application for leave to appeal must be dismissed. There will be an order that the Director pay the respondent's costs.

[1] Director of Consumer Affairs v Xu und Meng (Review and Regulation) [2015] VCAT 127.

[5] Director of Consumer Affairs Victoria v Xu and Meng (Penalty) (Review and Regulation) [2015] VCAT 984.

[6] Osland v Secretary to the Department of Justice (No 2) [2010] HCA 24; (2010) 241 CLR 320, [18] - [21].

[7] Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611, [130] - [131] (Gummow J); D'Amore v Independent Commission Against Corruption [2013] NSWCA 187; (2013) 303 ALR 242, [71]; Plaintiff M70/2011 v Minister for Immigration and Citizenship [2011] HCA 32; (2011) 244 CLR 144, [57] (French CJ).

[8] Foley v Padley [1984] HCA 50; (1984) 154 CLR 349, 375 (Dawson J, Gibbs CJ and Wilson J agreeing).

[9] R v Independent Broad-Based Anti-Corruption Commissioner [2015] VSC 374, [108] and the authorities cited therein; Buck v Bovone [1976] HCA 24; (1976) 135 CLR 110, [118].

[10] [1944] HCA 42; (1944) 69 CLR 407.

[12] Applicant's outline of submissions dated 8 September 2015, [27] - [30] (citation omitted).

[13] [2011] VSC 595.

[14] Ibid [93] - [94] (citation omitted).

[15] [1938] HCA 34; (1938) 60 CLR 336, 361-362 (Dixon J).

[17] See ss 97 and 98(1)(a) of the VCAT Act.

[18] X7 v Australian Crime Commission [2013] HCA 29, [99] (citation omitted).

[19] Transcript of Proceedings, Director of Consumer Affairs Inc v Meng (Supreme Court of Victoria, S CI 2015 03870, McDonald J, 18 November 2015) T12 LL7-11.

[20] See Kuek v Victoria Legal Aid and Anor [2015] VSC 48, [14] - [16] and the authorities cited therein.

[21] Submissions on behalf of the applicant dated 16 January 2015, 31.

[23] Applicant's outline of submissions dated 8 September 2015, [25.2].

[24] Applicant's outline of submissions dated 8 September 2015, [37] (citation omitted).

[25] Ibid [36] citing Tower Australia Ltd v Filipis [2007] VSC 236, [13].

[26] Applicant's outline of submissions dated 8 September 2015, [42].

[27] Director of Consumer Affairs v Xu und Meng (Review and Regulation) VCAT 127, [238] and [267].

[28] Minister for Immigration and Ethnic Affairs v Wu Shan Liang & Ors (1996) 185 CLR 259, [290].

[29] Director of Consumer Affairs Victoria v Xu and Meng (Penalty) (Review and Regulation) [2015] VCAT 984, [78].

[30] Minister for Aboriginal Affairs v Peko-Wallsend [1986] HCA 40; (1986) 162 CLR 24, 39.

[32] [2008] VSCA 45; (2008) 19 VR 422, [47].

[36] [1986] HCA 40; (1986) 162 CLR 24.

[38] Director of Consumer Affairs Victoria v Xu and Meng (Penalty) (Review and Regulation) [2015] VCAT 984, [78].

[39] [2007] FCAFC 65; (2007) 158 FCR 543.

[41] Ibid [94] (Lander J); see also, for example Grocon & Ors v Construction, Forestry, Mining and Energy Union & Ors (2014) VSC 134, [191]; Director of Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCA 226, [60]; Australian Competition and Consumer Commission v Kingisland Meat Works & Cellars Pty Ltd [2013] FCA 48, [77]; Australian Competition and Consumer Commission v SMS Global Pty Ltd [2011] FCA 855, [68]; Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 2) [2005] FCA 254; (2005) 215 ALR 281, [22]; ASIC v Plymin, Elliott & Harrison (No 2) [2003] VSC 230, [106].

[42] Applicant's supplementary submissions dated 25 November 2015, [7].

[43] See, Fair Work Ombudsman v Ghorbani-Palangi [2014] FCCA 447, [39]-[40]; Fair Work Ombudsman v Revolution Martial Arts Pty Ltd [2013] FMCA 125, [47]; Fair Work Ombudsman v Mildura Battery Company Pty Ltd [2014] FCCA 192, [64].

[44] Applicant's outline of submissions dated 8 September 2015, [77].

[45] Ibid [66] citing Hanks v R [2011] VSCA 7, [22].

[46] Director of Consumer Affairs Victoria v Xu and Meng (Penalty) (Review and Regulation) [2015] VCAT 984, [107].

[47] R v Winter [2006] VSCA 144, [55].