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

In Z815/2014: Jian Qing Xu (also known as Amy Meng)

1. Pursuant to s.54A(1)(g) and (h) of the Sex Work Act 1994 (the Act) the Tribunal orders that Ms Xu's approval is cancelled with effect from 9 July 2015 and she is permanently ineligible to hold an approval or be a licensee.

In Z816/2014: Xian Yang Meng (also known as John Meng) t/as "Paradise Playmates"

1. Mr Meng is reprimanded pursuant to s.48A(1)(a) of the Act.
2. Mr Meng is to pay into the Fund a penalty in the amount of $65,000 pursuant to s.48A(1)(c) of the Act.
3. The amount payable in accordance with order 2 above is to be paid by 2 September 2015 pursuant to s.48A(1)(3) of the Act.

Note: Pursuant to s.48A(3)(b) and (c) of the Act where the Tribunal has ordered that an amount be paid by a specified date and the amount is not paid by that date, the Tribunal may suspend the licence until the amount is paid and set a final payment date, and if the amount has not been paid by that final date, the Tribunal may cancel the licence. Pursuant to s.48(A)(4) of the Act the Tribunal may suspend or cancel a licence under subsection (3) without giving the licensee a chance to be heard.

1. Effective immediately, there is a condition on Mr Meng's licence that he report to Consumer Affairs Victoria (CAV) at four-monthly intervals as to his use of VEVO (Visa Entitlement Verification Online). The report is to list all workers engaged, or considered for engagement, within the four-monthly reporting period; whether a VEVO search was undertaken; and the results of that VEVO search. The first such report is to be provided to CAV on or before 2 November 2015 and thereafter at four-monthly intervals for a period of two years, the last such report to be provided on or before 2 November 2017.

1. In Director of Consumer Affairs Victoria v Xu and Meng [2015] VCAT 127, I found that there were grounds for taking action under the Sex Work Act 1994 (the Act) against Jian Qing Xu, also known as Amy Meng, and Xian Yang Meng, also known as John Meng.
2. Following those findings, the parties made written and oral submissions about the penalty or disposition to be imposed under sections 48A (licensees) and 54A (approved managers) of the Act respectively.
3. These orders and reasons relate to the disposition.
4. Mr Meng is the licensee of 'Paradise Playmates', a licensed brothel in Seaford. His wife, Ms Xu, is an approved brothel manager and the manager of 'Paradise Playmates'.
5. In December 2013, members of the police and officers of the Department of Immigration and Border Protection found a Chinese woman, LFQ, hiding in a wall cavity.
6. LFQ was working at the brothel as a sex worker in breach of her visa conditions. She had locked herself into the space using a latch on the inside of the door into the wall cavity.
7. The entrance into the wall cavity was in the form of a wall-mounted shelving unit which swung on hinges to function as a door. The bottom of the shelving unit was at about knee height from the floor. Because of its proximity to the door into the room where it was located, when that door was opened, it concealed the entrance into the wall cavity.
8. In relation to the wall cavity, I found that Mr Meng had installed, and Ms Xu had tolerated, the installation of the door into a wall cavity for the purpose of hiding people within the premises.
9. In relation to LFQ, I found that both Mr Meng and Ms Xu had allowed LFQ to work at the brothel in breach of her visa conditions, had not taken reasonable steps at reasonable times to verify that LFQ was not in breach of her visa conditions, and were both reckless as to LFQ's visa status.
10. In Ms Xu's case, I made a finding, on the Briginshaw civil standard, that she had committed an offence under s.245AC of the Migration Act 1958 (Cth).

1. The formal findings, as set out in Director of Consumer Affairs Victoria v Xu and Meng [2015] VCAT 127, were as follows:

In relation to the application for inquiry in respect of Jian Qing Xu (also known as Amy Meng) the Tribunal determines that there are grounds for taking action as follows:

1. Pursuant to section 54(3)(d) of the Sex Work Act 1994 (the Act), an indictable offence punishable by imprisonment for 12 months or more has been committed on premises of which Ms Xu is manager - namely an offence under section 245AC of the Migration Act 1958 (Cth).
2. Pursuant to section 54(3)(c) of the Act, Jian Qing Xu's management of the brothel (Paradise Playmates) is such that it is desirable that action should be taken against her for the following reasons:

(a) She allowed the sex worker LFQ to work at the brothel in breach of LFQ's visa conditions; and

(b) She tolerated the installation of a door into a wall cavity for the purpose of hiding people within the premises.

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

1. 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.
2. After the above findings were made, the parties filed and served written submissions in relation to the orders to be made under sections 48A and 54A of the Act respectively. Under the liberty to apply granted, the respondents also sought a short hearing to make further oral submissions in relation to the orders to be made.

1. Section 48A sets out the orders that may be made by the Tribunal if it is satisfied that there are grounds for taking action against a licensee, such as Mr Meng.
2. Section 54A of the Act sets out the orders that the Tribunal may make if it is satisfied that there are grounds for taking action against an approved manager, such as Ms Xu.
3. Under section 48A, the Tribunal may by order do one or more of the following -
   • Reprimand the licensee;
   • Order the licensee to pay into the fund a penalty not exceeding an amount that is 600 times the value of the penalty unit fixed by the treasurer under section 5(3) of the Monetary Units Act 2004;[1]
   • Impose any condition or restriction on the licence;
   • Require the licensee to enter into an undertaking to perform, or not to perform, certain tasks to be specified in the undertaking;
   • Require the licensee to comply within, or for, a specified time with the requirements specified by the Tribunal;
   • Cancel the licence or suspend the licence for a specified period not exceeding one year;
   • Order that the licensee be ineligible to hold a licence or be an approved manager either permanently or temporarily.
4. Under section 54A, in relation to an approved manager, the Tribunal may by order do one or more of the following -
   • Reprimand the approved manager;
   • Order the approved manager to pay into the fund a penalty of up to $10,000;
   • Impose any condition or restriction on the approval;
   • Require the approved manager to enter into an undertaking to perform, or not to perform, certain tasks to be specified in the undertaking;
   • Require the approved manager to comply within, or for, a specified time with a requirement specified by the Tribunal;
   • Cancel the approval or suspend the approval for a specified period not exceeding one year;
   • Order that the approved manager be ineligible to hold an approval or be a licensee either permanently or temporarily.

What is the purpose and scope of disciplinary orders?

1. The purpose of disciplinary orders is primarily protective: the protection of the public and the maintenance of standards in the particular industry or profession.[2]
2. The Supreme Court observed, in relation to disciplinary orders against estate agents:

If an estate agent is to be disqualified, the purpose which the Tribunal should have in mind is not the punishment of the individual (though it may appear to be a punishment to him) but the importance of protecting the public and the necessity to maintain standards in the conduct of an estate agent's business.[3]

1. The solicitor for the Director submitted that where disciplinary orders are made under the Act, there ought to be an additional consideration, namely the protection of sex workers.
2. I agree with the submission. Several of the objects of the Act, in section 4, refer expressly to the welfare of sex workers -
   • To maximise the protection of sex workers and their clients from health risks;
   • To maximise the protection of sex workers from violence and exploitation;
   • To promote the welfare and occupational health and safety of sex workers.
3. As I noted in Director of Consumer Affairs Victoria v Xu and Meng,[4] the Act is the only licensing Act administered by the Director that includes in its stated objects the protection of those working in the industry.
4. In circumstances where the Act is so overtly concerned with the protection of sex workers, it is reasonable, in my view, to extend the protective considerations to include not only the public but also sex workers.
5. With that protective focus in mind, the Tribunal considers a range of factors including:
   • Whether the person admitted the allegations or other evidence of contrition, insight or remorse;
   • The nature and seriousness of the conduct;
   • Whether there have been other disciplinary findings before or since the conduct in question;
   • Evidence of character;
   • Evidence of rehabilitation;
   • Other mitigating factors such as medical or psychological evidence, family circumstances or financial issues.
6. In assessing what protection may require, the Tribunal takes into account considerations of specific deterrence (deterring the person concerned from further inappropriate conduct) and general deterrence (deterring others who may otherwise be minded to conduct themselves in the same way).
7. Insight and remorse are relevant to assessing the likelihood of repetition of the conduct by the person concerned. The risk of repetition is relevant to specific deterrence. Previous disciplinary findings and evidence of character will also be relevant to assessing how important specific deterrence is in the particular case.
8. The nature and seriousness of the conduct and the likelihood and the consequences of others in the industry engaging in similar conduct is relevant to assessing what is required in the interests of general deterrence.
9. As Ross J observed in Legal Services Commissioner v Brott:[5]

The concept of general deterrence of others by the punishment of an offender is that an understanding that an offence is followed by substantial adverse consequences will prevent others from committing the offence. Related to general deterrence is the proposition that in deciding an appropriate penalty the Tribunal may have regard to the effect which its order will have on the understanding, in the profession and amongst the public, of the standard of behaviour required of solicitors.

1. Although every case is different, the Tribunal will usually consider penalties imposed in similar cases. As the solicitor for the Director noted, however, there do not appear to be any other cases of this kind under the Act - this case appears to be unique.
2. There are some similar considerations in cases involving estate agents but, as noted above, the Act is unique in its overt concern with the health and welfare of workers.
3. It is also unusual in its incorporation by reference of offences under the Migration Act 1958 (Cth).
4. Further, the maximum fine that the Tribunal may impose under the Act is more than 16 times that prescribed by the equivalent provision in the Estate Agents Act1980, (s.28A). Under the Sex Work Act, the Tribunal may order payment to the Fund of a maximum amount of 600 penalty units, which is currently $88,566. Under the Estate Agents Act, the maximum amount is $5,000.
5. Both the Estate Agents Act and Sex Work Act make certain conduct an offence.
6. In the Estate Agents Act, however, most of the offences provide for a financial penalty. Only one is an indictable offence, providing for a term of imprisonment (section 91 wrongful conversion of accounts).
7. By comparison, Part 2 of the Sex Work Act contains seven indictable offences, in sections 5 to 11, and the specified penalties range from five to 15 years imprisonment. A further seven offences have imprisonment as an alternative penalty to a fine.
8. These are relevant differences, in my view, that underline the importance of keeping in mind the purpose and the objects of the Act when considering disciplinary orders.
9. Counsel for the respondents submitted that, as a matter of both logic and fairness, the most punitive power, cancellation, should only be used in a worst-case scenario.
10. With respect to the submission, I disagree.
11. It is well established that the Tribunal's disciplinary function is primarily protective rather than punitive. As Maxwell P observed in Quinn v Law Institute of Victoria Limited,:[6]

Nevertheless, the phrase quoted 'not so much to punish as to protect' underlines the fact that the Tribunal's disciplinary orders are punitive as well as protective. The available sanctions are, by their nature, punitive, and the objectives of specific and general deterrence - which serve the protection of the public - depend on the sanctions having punitive effect.

Critically for present purposes, however, the Tribunal's protective function is paramount. Thus, where there is a choice of sanctions, it is to be expected that the Tribunal will choose that sanction which maximises the protection of the public.

1. Of the orders that the Tribunal may make in disciplinary proceedings, which are civil proceedings, cancellation and disqualification will certainly have the greatest punitive effect. But they are not reserved, in my view, for the worst cases. Imprisonment is the penalty reserved for what might be described as the worst-case scenarios under the Act; such as causing or inducing a child to take part in sex work (section 5) or forcing a person into or to remain in sex work (section 8). If a licensee committed such offences, cancellation would probably be the least punitive of the sanctions they would face.
2. Contrary to the submission, even where the conduct might be described as at the serious end of that which the Tribunal considers in civil proceedings, cancellation may not be appropriate if relevant considerations dictate otherwise.
3. As Cosgrove J put it in Dickens v Law Society[7] cited in Psychology Board of Australia v Garcia:[8]

Even if the practitioner's misconduct be relatively slight, he may yet be struck off, if his capacities and attitude have been revealed to be such that his continuance in practice constitutes a threat to the profession. On the other hand, conduct which is itself more grave in nature, may not warrant striking off, if it is seen as a temporary and explicable departure from the practitioner's own high standards... The order which the committee is called upon to make is that order which, in its opinion, is necessary, and no more than is necessary, to maintain professional discipline and high standards of conduct.

1. Although the observations of Cosgrove J in Dickins were in the context of the legal profession, those observations are relevant to an understanding of the Tribunal's disciplinary function across the range of regulated occupations and professions.
2. In every case, the Tribunal will look to what is necessary to protect the public, and under the Act, sex workers. As observed by Maxwell P in Quinn above, if there is a choice of sanctions, the Tribunal will chose that sanction which maximises protection. As counsel for the respondents submitted, where other disciplinary powers, either individually or in combination, are all that is necessary and no more than is necessary to achieve the required outcome, the Tribunal should not impose a more punitive sanction. But if cancellation is required to protect the public and sex workers and maintain standards then cancellation will be ordered.
3. I agree, however, with counsel for the respondents' submission that the disposition should reflect the findings made. This has relevance to some submissions made by the solicitor for the Director in relation to general deterrence.
4. The solicitor for the Director submitted that it is of the utmost importance to deter brothel owners and managers from installing hidden rooms in their brothels. That is self-evident in my view and I agree. In making the submission, however, the solicitor for the Director made reference to findings of the Inquiry into People Trafficking for Sex Work,[9] reported in 2010, and referred to the importance of immigration raids in bringing women in sexual servitude to the attention of the authorities and other matters to do with sexual servitude.
5. The subject matter of that particular inquiry and the findings made are, naturally enough, of concern to the Director and others.
6. Whatever the potential uses of hidden rooms in brothels may be, however, in this case the hidden room was not used to hide a person working in sexual servitude. The Director did not allege it and there was no evidence of it. This was not a case about human trafficking and the disposition should reflect that.

1. The Director sought the following disciplinary orders:
   • Mr Meng: an order under s.48A(1)(g) of the Act cancelling the licence issued to Mr Meng on 25 August 2009 and an order under S.48A(1)(h) that he be permanently ineligible to hold a licence or be an approved manager;
   • Ms Xu: an order pursuant to s.54A(g) of the Act, cancelling the approval granted to Ms Xu on 22 June 2012, and an order under s.54A(1)(h) of the Act that she be permanently ineligible to hold a licence or be an approved manager.
2. Counsel for the respondents made the following submissions.
3. In relation to Mr Meng, counsel submitted that the cancellation was not required and that the following orders were appropriate:
   • Mr Meng be reprimanded;
   • Mr Meng be ordered to pay a penalty to the Fund. In oral submissions, counsel conceded that the penalty should be significant, probably starting in the mid-range,[10] with some time to pay. Counsel also noted in submissions that under s.48A(3), if the Tribunal imposes a fine, it may order that the amount be paid by a specified date and, if the amount is not paid by that date, the Tribunal may suspend the licence, set a final payment date, and ultimately cancel the licence if the amount has not been paid by the final date. If Mr Meng does not pay the fine, his licence will be cancelled;
   • the Tribunal impose conditions on Mr Meng's Licence or require further undertakings. Suggested conditions included:
     • a condition of Mr Meng's licence that he report to CAV as to his use of the VEVO visa check system at, say, four-monthly intervals;
     • a condition that Mr Meng provide CAV with a practice and procedural manual in relation to the engagement of sex workers and the ongoing supervision of sex workers (i.e. visa and health checks);
     • a condition that Mr Meng's licence be subject to compliance with the manual, buttressed by an undertaking to the Tribunal to comply with the practice and procedural manual, which could itself be subject to approval by CAV.
4. In relation to Ms Xu, counsel for the respondents made submissions as follows:
   • It was conceded that the Tribunal found both grounds 1 and 2 proven against Ms Xu, which puts her in a different and more difficult position in relation to her manager's approval than that of Mr Meng;
   • Nevertheless the Tribunal should not consider cancellation of her approval unless other disciplinary powers are not sufficient to address the concerns of the Tribunal and the public interest. On that basis, there are arguments against cancellation or suspension of her approval;
   • The Tribunal might instead consider that an order that she make a payment into the Fund would meet the needs of specific and general deterrence, although any fine imposed on Mr Meng should be taken into account;.
   • The Tribunal could consider conditions such as a condition that her approval has a restriction that she not engage sex workers and that she adopt and comply with the proposed practice and procedural manual.
5. In the following section of these reasons I will refer in more detail to the submissions made by the parties' legal representatives. I consider next two letters from the respondents.

1. Counsel for the respondents asked that I also take into account personal letters written by Mr Meng and Ms Xu, addressed directly to me and attached to counsel's written submissions. I make the following observations about those letters.
2. In principle, there is no reason why persons facing disciplinary orders should not speak for themselves. It is preferable, however, that they do so by way of oral evidence or signed statements. They should be discouraged from writing personal letters directly addressed to the Tribunal Member.
3. Nevertheless, with the consent of the solicitor for the Director, I have read and considered those letters. They cause a number of difficulties for the respondents, in my view. In both cases, the respondents seek to revisit and re-argue matters of evidence on which findings against them have been made. On most of those matters, for the reasons set out in Director of Consumer Affairs Victoria v Xu and Meng, I did not accept their evidence. I have disregarded those parts of their letters.
4. I have taken into account, however, some of the matters stated by Ms Xu that have some relevance to determining penalty, namely that:
   • Her errors led to the fact that LFQ worked without a permit for which she feels deeply guilty and sad about. She has been feeling sorry for her husband and family;
   • She has one wish only: to operate the business legally and wants to be allowed to continue to do so;
   • They have learnt their lesson and will legitimately run their business. They will not make the same mistake again;
   • Over the past six months, she has suffered tremendous mental pressure and has not been able to sleep well. She has been exposed to the media, including the Chinese media and electronic media and their use of vulgar language and poor coverage have led her to the brink of collapse. She feels she has been punished enough for her mistake.
5. Mr Meng, in his letter, also sought to revisit and reargue the findings made. He also makes a number of statements that are not, in my view, helpful to him:
   • At the time he was making the decision to seek a licence, he knew that there were numerous illegal brothels in Melbourne, even more so than the number of legitimate ones, and it was faster to get your investment back from them. However, he believed that he should engage in legitimate businesses in Australia and that was why he embarked on "this difficult road."
   • In the context of a description of how he treated sex workers well he says: "I have never put any restrictions on any workers, prohibiting them from leaving. I had never had sex with any of the workers".
6. It is not clear why Mr Meng believes he should get credit for choosing not to run an illegal brothel. It is also not clear why he believes he should get credit for not having sex with any of the workers.
7. I take into account the following matters raised by Mr Meng which are relevant to the orders to be made:
   • His business had been inspected on a number of occasions and there had never been a problem with any of the inspections - although I consider below the fact that he had a hidden room in the brothel for most of 2013;
   • He described the effect on his wife - that she had cried a lot, cannot sleep well at night, that she has been deeply affected by the media exposure, especially in the Chinese newspapers.
8. I accept that these proceedings and the consequent media coverage have had an effect on Ms Xu.

WHAT ARE THE APPROPRIATE ORDERS IN RELATION TO MR MENG?

1. As counsel for the respondents noted, there are overlapping circumstances in Mr Meng's case and Ms Xu's case. I will consider those circumstances in the most detail in relation to Mr Meng and distinguish where appropriate between Mr Meng and Ms Xu's conduct.

1. In submissions, counsel for the respondents stated that he did not downplay the seriousness of the two allegations that were found proven out of the four made. He stated that no attempt was made to disguise the findings of the Tribunal as being other than serious breaches of the standard of management expected by the Industry.
2. Counsel submitted that as the adverse findings were limited to mismanagement, however, and the Tribunal dismissed the allegation that he had committed an offence, the conduct can be addressed by conditions on the licence or undertakings or both.
3. It is the case that I did not find that Mr Meng had committed an offence under s.245AC of the Migration Act 1958 (Cth) (Ground 1). I found the statutory ingredients of the offence established but declined to find that Mr Meng had committed the offence because of the way that allegation was put in the Director's alleged grounds for inquiry.
4. The Director alleged that Mr Meng knew that LFQ did not have the right to work. Even though actual knowledge is not required for an offence under s.245AC, and recklessness is sufficient, I was not satisfied that Mr Meng knew that LFQ did not have the right to work. On that basis, and because of the seriousness of the allegation, I declined to find that he had committed the offence as alleged.
5. I was satisfied, however, that Mr Meng allowed LFQ to work at the premises, did not take reasonable steps to verify her work status, and was reckless as to her status, which was the first allegation in Ground 2 that I found proven. The second allegation in Ground 2 that I found proven was that he had installed a door into a wall cavity for the purpose of hiding people within the premises.
6. Those allegations were made and found proven under section 48(3)(d) of the Act - that Mr Meng's management of the brothel is such that it is desirable that action should be taken against him. However, the findings go beyond what would usually be encompassed by 'mismanagement'.
7. I found not only that he had been reckless as to whether or not LFQ was working in breach of her visa conditions, which might be described as an indication of seriously deficient management, but also that he installed a door into a wall cavity for the purpose of hiding people within the premises. The latter represents a finding of a serious, positive act well outside the usual meaning of 'mismanagement'.
8. To describe his conduct as mismanagement does not, in my view, do justice to the gravity of the findings in relation to the creation and installation of the disguised door into the wall cavity, and the purpose of it.[11]
9. I found that the door's design, construction and location in the laundry room and the fact that household items were secured to the shelf, had the effect of concealing that it was a door into the wall cavity.
10. The door had a latch on the inside, enabling it to be locked by persons standing inside it.
11. Although there was no evidence that anyone had directed LFQ to hide in it, she was the only person hiding in it at the time of the inspection and she was the only person at the time in breach of her visa conditions by working in the brothel.
12. As I also found, there is no lawful purpose for creating an entrance to a wall cavity, lockable from the inside, in a brothel, in the absence of a planning permit authorising the licensee to do so.
13. The existence of the room had the potential to thwart a proper inspection of the brothel by inspectors, law enforcement officers, health workers and other social service providers. As the solicitor for the Director submitted, one of the objectives of the Act, in section 4(g), is to ensure that brothels are accessible to such people.
14. In this case, inspectors and other law enforcement officers were only able to locate the hidden room, and therefore locate LFQ because an informer or informers gave them information. An inspection in the previous week had failed to discover the entrance, even though the officers were looking for it. The police members were able to find it only after more detailed information was received.
15. Further, as the Director submitted, the creation of the hidden room endangered the safety of sex workers and anyone else who might use it. It was unfit for human use; it was dark, unventilated and crowded with insulation, electrical cords and trip hazards. Once locked, it could not be opened by anyone on the outside other than by forcing and breaking the latch, as the police had to do on 2 December 2013.
16. Mr Meng's conduct, and separately Ms Xu's conduct in tolerating the creation of the door, posed a direct risk to the wellbeing and safety of workers, contrary to the aim of the Act set out in section 4(h), to promote the welfare and occupational health and safety of sex workers.
17. It was, in my view, breathtakingly irresponsible, foolish and potentially dangerous conduct in direct conflict with express objects of the Act.
18. As the Director submitted, the fact that Mr Meng took the steps required to create a well-disguised entrance into a wall cavity that could be used as a room for people to hide in, raises serious questions about whether the Tribunal can have any confidence in his future conduct.

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

1. As counsel submitted, Mr Meng should not be criticised for defending the proceedings, he is entitled to do so and a number of allegations against him were not sustained. It remains relevant, however, that Mr Meng demonstrated no insight at the hearing into the inadequacies of his conduct or the seriousness of his actions.
2. While the characterisation 'contemptuous' used in the Director's submission goes too far, in my view, I found that he gave inconsistent and wholly implausible evidence which he embellished in running. He was an unimpressive witness and I was not satisfied he understood the seriousness of his conduct. On the other hand, there is no evidence that he has repeated the conduct.
3. Counsel also relied on the absence of any criminal convictions and on character references that were filed.
4. It is the case, that Mr Meng, and Ms Xu, have no prior or subsequent criminal convictions.
5. They have filed character references, but all of those references were filed prior to the Tribunal's findings. Most of those are in the nature of general employment references, and none of them make any reference to or give any indication that the referee was aware of these proceedings.
6. I did however give some weight to the evidence given by Sandra Gibson. Ms Gibson worked for the Inner South Community Health Service until 2014 and has worked with the RhED programme as a support worker and as co-ordinator.
7. RhED (Resourcing health and Education) is a non-government peer-support programme for sex workers which provides information and support services to sex workers and others in the industry.
8. Ms Gibson said that RhED workers had visited the brothel on three occasions, in 2011, 2013 and 2014, and reported positively on the welcome they were given by Mr and Mrs Meng, and their receptiveness to educational resources.
9. Ms Gibson agreed in cross-examination that she did not visit the brothel herself; that RhED is not part of the regulatory framework; that RhED does not have official standing or powers of entry; and that she is not an expert in the prosecution of licensees.
10. Her evidence is of limited relevance in a case where a licensee has contravened the Act by employing an illegal worker and creating a hidden room, neither of which are conducive to the well-being or welfare of sex workers. Nevertheless, I have taken into account her evidence that RhED workers reported positively on their visits.

1. A significant part of the submissions for the respondents focused on what might be the financial impact of cancelling Mr Meng's licence.
2. Counsel submitted that cancellation would mean financial ruin for Mr Meng and Ms Xu: they borrowed against their home to buy the brothel (the building and land); they are in their late 50s and would risk losing what they have achieved in 25 years in Australia.
3. The submission overstated the relevance of financial impact to the decision for the Tribunal and the degree of that impact, in my view.
4. I was not persuaded that there was clear evidence that any cancellation of Mr Meng's licence would mean the loss of the only source of income for him and Ms Xu, or necessarily lead to a capital loss on the property. As was established by enquiries by the parties at my request, cancellation of Mr Meng's licence would not prevent him from leasing or selling the premises to a licensed sex services provider. Counsel also indicated at the hearing on 7 April that Mr Meng had put the property on the market.
5. Although counsel submitted that they risked losing a lifetime of savings built up over many years in Australia, the evidence supported the view that Mr Meng, and Ms Xu, have shown the capacity to run a range of businesses, some more successfully than others, and that Ms Xu, separately, has her own businesses.
6. In any event, as Maxwell P observed in Quinn, the available sanctions are by their nature punitive, and the objectives of special and general deterrence - which serve the protection of the public - depend on the sanctions having a punitive effect.

1. Counsel for the respondents submitted that to bring about the closure of a licensed brothel is not in the best interests of the industry. He submitted that cancellation of Mr Meng's licence will mean that consumers and sex workers will have to go elsewhere; that a loss of a licensed business is a gain to the unlicensed industry and for that reason the cancellation of a licence must be a last resort disposition.
2. No such conclusion can be drawn, in my view. While there are, apparently, more unlicensed brothels than licensed ones, those who use brothels and those who work in them will have the same choice they have had since licensing began, and face the same penalties if they choose unlicensed brothels.[12]
3. It is equally possible that if consumers and sex workers go elsewhere they will go to licensed premises. It is also possible that the business will be continued by a licensed provider under a lease or purchase of the property.
4. It is in the interests of sex workers and the industry in general that licensed service providers and approved managers meet the standards of conduct required by the Act and do not act contrary to its objects.
5. Counsel also submitted that the Tribunal should consider the moderation evident in the sentences handed down by courts in dealing with persons found to have breached the Act and gave three examples:
   • a fine of $10,000 for a man found to be running a brothel under the guise of a massage parlour;
   • a fine without conviction of a woman found guilty of one charge of being an unlicensed sex worker; and
   • a fine of $12,000 without conviction for a licensee found guilty of breaching s.245AB of the Migration Act.
6. As the solicitor for the Director submitted, the last of the three examples would have resulted in automatic cancellation of the licence under the Act in any event. Further, criminal sentencing is not the same as disciplinary orders in business licensing matters. In simple terms, the fact that a person was not sent to jail on being found guilty by a court of an offence related to their business, does not mean that it will be appropriate to allow them to continue in the particular business.
7. General deterrence and, to a lesser extent, specific deterrence mean that cancellation is open to the Tribunal to order, in my view.
8. 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:
   • The Tribunal did not find Mr Meng guilty of the more serious of the allegations concerning LFQ's visa status, namely that he had committed an offence under s.245AC of the Migration Act. This is not to say that I accepted counsel's submission that this was the most serious allegation of the four. Conduct in creating a disguised entrance into a wall cavity for the person of hiding persons, while not a specific offence under the Act, is extremely serious conduct;
   • This was the only occasion on which an illegal sex worker was located on the premises. There have been inspections after the incident in this case and the Director's witnesses confirmed there were no concerns in relation to the operation of the business. I was not prepared to place weight on the fact that inspections in the year prior to the incident had raised no concerns, in circumstances where Mr Meng's evidence was that the door into the wall cavity had been created in early 2013 approximately 10 - 11 months before the inspection which located LFQ;
   • Disposition in relation to Mr Meng and Ms Xu should be considered separately. While Ms Xu was equally involved in the creation of the entrance to the wall cavity, and said in evidence that it was her idea, Mr Meng potentially has less culpability in relation to the engagement of LFQ than Ms Xu, who interviewed her and who failed properly to check her visa status. Mr Meng of course bears responsibility as the licensee but some distinction is appropriate 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.

1. In summary, although cancellation is open, my view is that specific and general deterrence, and through them protection of the public and sex workers and the maintenance of professional standards, would be served by the following combination of orders:
   • Mr Meng be reprimanded;
   • He be ordered to pay a substantial penalty to the Fund which I set at $65,000, above the mid-range to indicate the conduct is in the more serious range for which a fine, rather than cancellation, would be appropriate;
   • I will order that the fine be paid within two months and note the provisions of section 48A(3) and (4) of the Act. If Mr Meng fails to pay the fine within the time specified, his licence may be suspended and a final date for payment set which, if not met, may result in cancellation;
   • There will be a condition on Mr Meng's licence that he report to Consumer Affairs Victoria (CAV) at four-monthly intervals, and for a period of two years, as to his use of VEVO (Visa Entitlement Verification Online). Each report is to list all workers engaged, or considered for engagement, within the four-monthly reporting period; whether a VEVO search was undertaken; and the results of that VEVO search.
2. The condition is warranted, in my view, because it was a matter of some concern to me that even after the incident involving LFQ in December 2013, it took Mr Meng approximately eight months to start using VEVO in earnest.
3. I did not accept Mr Meng and Ms Xu's evidence about the reasons that they had not used VEVO until August 2014 and formed the impression that they had only started using VEVO because the Director commenced these proceedings. In those circumstances, a use and reporting condition provides some protection against the risk that Mr Meng and Ms Xu will not maintain their use of the system.
4. I do not accept the submission of counsel for the respondents that the Tribunal's decision confirms that use of VEVO is not determinative but is best practice. I found that it is not prescribed by the regulations, but it is the Department of Immigration and Border Protection's system, available on its website and is accepted by the Department as meeting the 'reasonable steps' requirement in s.245AC(2).[13]
5. It is clear that VEVO is there to for employers, and others, to use to check the visa entitlements of non-citizens. It is available to employers to use for that express purpose. It provides a reliable method of verifying work entitlements. Employers can rely on the search results in any legal proceedings. It is more than best practice, in my view.
6. I decline to impose a condition on Mr Meng's licence that he provides CAV with a practice and procedural manual and related undertakings. Such a condition may be logistically complicated and would be difficult to state with sufficient clarity to identify a breach. Whether CAV, in consultation with licensees and others, wishes to consider developing such a manual, is a matter for CAV.

WHAT ARE THE APPROPRIATE ORDERS IN RELATION TO MS XU?

1. As counsel for the respondents submitted, a number of the submissions made in relation to Mr Meng also have some weight and relevance to Ms Xu. General deterrence is highly important in both cases, specific deterrence less so in all the circumstances but still a relevant consideration.
2. As counsel conceded, the Tribunal found both grounds 1 and 2 proven against Ms Xu. As counsel quite properly conceded, the findings are serious, and that the finding that she committed an offence pursuant to s.245AC of the Migration Act, puts her in a different and more difficult position in relation to her manager's approval than that of Mr Meng.
3. As submitted by counsel, Ms Xu was not charged in the courts with the offence. If she had been charged and found guilty by a court this would have led to automatic cancellation of her approval under section 53(1) of the Act.
4. The Tribunal's finding is on the Briginshaw civil standard for the purpose of these civil proceedings. Cancellation does not automatically follow the finding.
5. Nevertheless, the Act gives the requirements of the Migration Act prominence and importance. It is clearly relevant and important in the industry that managers take great care in ensuring they do not employ illegal workers. It is not necessary to consider the possibility of sexual servitude to see the potential for exploitation of sex workers who are working illegally in a brothel.
6. General deterrence might well warrant cancellation of Ms Xu's approval on ground 1 alone, in my view. In this case, however, Ms Xu has also been closely involved in the creation of the entrance into the wall cavity. I repeat the observations made above about the nature and gravity of that conduct.
7. I have taken into account that the finding in relation to LFQ's visa status was that Ms Xu was reckless. I did not find that she knew for a fact that LFQ could not work, but her recklessness was nevertheless of a high order.
8. On an evaluation of her evidence, I could not be satisfied that this represented a one-off lapse in meeting usually high standards. I make it clear there was no evidence that Ms Xu had allowed any other worker to work in breach of her visa. In that sense, it was a one-off finding - but I was not satisfied that it represented a departure from otherwise high standards.
9. I remain concerned that Ms Xu and Mr Meng's systems were wholly inadequate and were inadequate for a substantial period of time, which only ended when they began using VEVO consistently in August 2014.
10. I was not persuaded by counsel's submission that it was desirable to allow Mr Meng and Ms Xu, as a husband and wife, to continue to work together.
11. As it transpired, it was a most unfortunate collaboration.
12. Ms Xu started working as manager in 2012.
13. By early 2013, Mr Meng, with her involvement in the decision, had created the entrance to the wall cavity.
14. LFQ began working at the brothel in September 2013 in breach of her visa conditions, after Ms Xu interviewed her, and was found hiding in the wall cavity in December 2013.
15. If anything, it is important that an unrelated and independently minded manager take over from Ms Xu.
16. Such a consequence will be more protective of the workers and the public, in my view, than allowing Ms Xu to continue as manager.
17. I am unable to be satisfied that Ms Xu has insight into the nature and gravity of her conduct. I accept, however, that she is remorseful and that, in simple terms, she wishes she had been more careful.
18. While she sought to take the full responsibility for employing LFQ, and exonerate Mr Meng, I was satisfied that he had responsibility as licensee for the overall management of the brothel, including the system for employing sex workers.
19. To that extent, she should not be singled out, and should not single herself out as entirely responsible for the events and the consequences in this case.
20. I was not persuaded by counsel's submission that cancellation of Ms Xu's approval will have a catastrophic effect on her. She has other businesses and her history shows that she can successfully run other kinds of businesses.
21. Counsel also made it clear in submissions that the business could continue as a financially viable business without Ms Xu, if the Tribunal cancelled her approval.
22. I did not consider it practical to impose conditions of the sort urged by counsel - that her approval be subject to a restriction that she not engage sex workers, which is an integral part of the role of manager, or that she be subject to a condition that she comply with a practice and procedural manual of the sort outlined.
23. In my view, it is necessary and appropriate to cancel Ms Xu's approval and permanently disqualify her from holding a licence or approval. The cancellation will take effect one week from today, to allow time for Mr Meng to make alternative arrangements.
24. I will make orders accordingly.

[1] For the period 1 July 2014 to 30 June 2015, the value of a penalty unit is $147.61: Victorian Government Gazette No S123 Tuesday 15 April 2014. The maximum penalty able to be imposed is therefore $88,566.

[2] Glynn v Denman and Monk [1978] VicRp 36; 1978 VR 349; Mario Inglese and Anor v Estate Agents Board and Anor (Unreported), Supreme Court of Victoria, Murphy J 15 August 1989 at p7.

[4] [2015] VCAT 127 at paras 31 - 36

[5] [2008] VCAT 2399, at para 67

[6] [2007] VSCA 122, at [30]

[7] Unreported, Supreme Court of Victoria, 1981 at pp 15-16,

[8] (Review and Regulation) [2015] VCAT 128

[9] Parliament of Victoria, Drugs and Crime Prevention Committee, Inquiry into People Trafficking for Sex Work, Final Report, June 2010, page 3

[10] As noted above, the Tribunal may order the licensee to pay into the Fund a penalty not exceeding S88,566. In relation to approved managers, the Tribunal may impose a penalty of up to $10,000 (s.54A(c)).

[11] [2015] VCAT 127 at [223]

[12] For example, section 15 of the Act makes it an offence to be found in, entering, or leaving an unlicensed brothel. The penalty for a first offence is 10 penalty units or 1 month imprisonment. Increased penalties apply to second and subsequent offences.