ONG (aka SIMON ONG) v DEPARTMENT OF INTERNAL AFFAIRS [2023] NZHC 1014

ONG (aka SIMON ONG) v DEPARTMENT OF INTERNAL AFFAIRS [2023] NZHC 1014 [2 May 2023]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECRI-2022-404-491[2023] NZHC 1014BETWEEN HOK LAI ONG (aka SIMON ONG)AppellantAND DEPARTMENT OF INTERNAL AFFAIRSRespondentHearing: 17 April 2023Appearances: C T Patterson and J True for AppellantO Salt for RespondentJudgment: 2 May 2023JUDGMENT OF WOOLFORD JThis judgment was delivered by me on Tuesday, 2 May 2023 at 11:30 am.Registrar/Deputy RegistrarSolicitors: Meredith Connell (Office of the Crown Solicitor), AucklandBlackwells (A Doo), AucklandCounsel: C T Patterson, AucklandJ True, Hamilton[1] In a reserved decision dated 9 November 2022, Judge P Winter found a chargelaid under ss 118(3B) and (5) of the Gambling Act 2003 (the Act) against Hok Lai Ongto be proven.1 Mr Ong now appeals against the finding of guilt.Charge[2] Mr Ong was charged with, on or about 24 November 2015, at Auckland, beinga director of United Hospitality Management Limited (UHML), which operated aclass 4 gambling venue known as Aroha Restaurant and Bar, indirectly received$16,000 from Impact Sport, which was a grant recipient or potential grant recipient.Factual background[3] Mr Ong was a director of UHML trading as Aroha Restaurant and Bar (thepremises) in which gaming machines had been installed. UHML had entered a venueagreement with Infinity Foundation Limited (Infinity) dated 1 April 2015 at whichtime UHML was trading as Happy Japanese Restaurant from the same premises.[4] Infinity was a corporate society as defined in s 4 of the Act that held a class 4operator's licence. Section 31 of the Act provides that class 4 gambling may only beconducted by a corporate society that holds a class 4 operator's licence and a class 4venue licence for the place where the gambling is conducted. The venue agreementdated 1 April 2015 recorded the terms and conditions upon which gaming machineswere to be placed in the premises in anticipation of Infinity applying for a class 4venue licence for the premises. The venue agreement was specified to expire on31 March 2016. Mr Ong had signed the venue agreement "For and on behalf of thevenue operator".[5] Infinity later applied for, and was granted, a class 4 venue licence for thepremises. The earliest venue licence produced in evidence by the sole prosecutionwitness, the Manager Investigations for the Department of Internal Affairs (DIA), wasdated 23 December 2015 and named the premises as the Aroha Restaurant. Thelicence included the following statement:1 Department of Internal Affairs v Hok Lai Ong [2022] NZDC 20398.The authority granted by this licence commences on 24 May 2014 and isassociated with a class 4 operator's licence which expired on 31 October 2015.This class 4 venue licence continues in force pursuant to ss 56(6) and 72(6) ofthe Act. 2[6] The DIA witness stated that from records held by the Department, he wasaware that a class 4 venue licence was issued to Happy Japanese restaurant, effectivefrom 24 May 2014 to 31 October 2015. The DIA witness also said that the DIA issueda temporary amended class 4 venue licence reflecting the name change from HappyJapanese Restaurant to Aroha Restaurant, referring to the class 4 venue licence dated23 December 2015.[7] One further class 4 venue licence was produced in evidence. It was dated5 January 2016. This later licence included the following statement:This licence has been amended. The amendment authority commenced on05 January 2016. The general authority granted for this licence is associatedwith a class 4 operator's licence which expired on 31 October 2015. This class4 venue licence continues in force pursuant to ss 56(6) and 72(6) of the Act.[8] The DIA witness said that the Department issued Aroha Restaurant with thislicence after Infinity had paid the requisite licensing fees.[9] As to the operation of the gaming machines, the prosecution produced aGaming Machine Profits (GMP) Report for the Aroha Restaurant from January 2016to September 2017, which recorded total profits of $4,350,047.89. Of significance,however, is that the monthly profits grew from a low level in January as follows:Jan 2016 $20,286.08Feb 2016 $88,287.93Mar 2016 $120,148.89Apr 2016 $158,901.27Sep 2017 $320,852.342 Section 72(6) of the Act provides:Unless the associated operator's licence is cancelled, suspended, or not renewed, a class 4 venuelicence continues in force after its expiry date if –(a) The corporate society has applied for a renewal before the expiry date; and(b) The application has not been refused.[10] The prosecution did not produce any evidence that gaming machines wereoperative in the premises in 2015, although the DIA witness stated:Q. Can you please comment on whether there was an active licence forAroha as of the date of the 24th of November 2015?A. Yes there was an active licence for Aroha Restaurant, or HappyJapanese as it was probably called at that time, for – the top left of thatdocument is GMV 1207 so game machine venue 1207, the names canchange but that will always be attributed to that specific venue and Ican confirm that was in fact in place, at the time.Q. And that would still have the same venue operator being UnitedHospitality Management Limited?A. Yes that's correct.[11] UHML itself had no licences issued by DIA. It was merely a party to the venueagreement with Infinity dated 1 April 2015. Under the agreement, Infinity was toinstall and operate gaming machines owned by itself at the premises. It was alsoresponsible for maintenance and repairs. UHML was responsible for taking meterreadings on all the gaming machines, collecting all the proceeds from the gamingmachines and banking the proceeds within five days of the weekly reading into adedicated bank account operated by Infinity. Infinity would in turn pay UHML anagreed venue payment.[12] After deduction of authorised expenses, the money banked by UHML wasavailable to Infinity for distribution to the community in the form of grants.Organisations seeking funding for an "authorised purpose" were able to make writtenapplication to Infinity for a grant. Application forms were to be located at the premisesand be available at all times. Such applications had to be sent directly to Infinity andwere not under any circumstances to be given to or accepted by UHML.[13] One of the organisations to which Infinity made regular grants was Sport 4Everyone (S4E), later renamed Impact Sport. S4E was owned by Mr S Done. Mr Ongand Mr Done knew each other. Mr Ong's wife, Ms Cerine Tan, was employed by S4Eas a Chinese community sport liaison officer.[14] Following an examination of S4E's bank account statements, the DIAidentified that a total of $30,270 had been deposited into Ms Tan's bank account byS4E between 24 December 2014 and 23 November 2015. There was also a furthersum of $4,700 in cash that had been deposited into her account on 15 December 2014,when the account was opened.[15] The DIA was able to establish that 11 of the deposits made into Ms Tan'saccount were financed by grant funding from Infinity for the authorised purpose ofpaying S4E's Chinese community sport liaison officer's salary. The officer was at allmaterial times Ms Tan.[16] There were four relatively insignificant withdrawals from the account up until23 November 2015, but for the most part, the payments made by S4E accumulated inthe account until the balance reached $34,481.34 on 23 November 2015.[17] On 24 November 2015, the sum of $16,000 was transferred from Ms Tan'sKiwibank account to the ANZ business bank account of UHML of which Mr Ong wasone of the signatories. The transfer included the reference "Aroha". Internet bankinglogs obtained from Kiwibank revealed additional references "Capital from Simon"and "Investment". The ANZ bank statement recording the deposit had the notation"Capital from Simon". The deposit of $16,000 increased the balance in the bankaccount from $56,755.12 to $72,755.12. On the same day, there were two paymentsmade out of the account. The first payment of $1,035 carried the notation "AucklandConcrete Dr Cut concrete for Bar". The second payment of $8,050 carried thenotation "Unique Constructions UCL Steven Builder Construtor". Then, on thefollowing day, the sum of $19,400 was paid to Precision Autos, apparently to assistwith the purchase of an Audi A4 motor vehicle.[18] The DIA witness gave evidence that S4E's grant applications to Infinity had anabnormally high approval rating from Infinity, its primary source of grants. Theallegation against Mr Ong is that he indirectly received the sum of $16,000 from S4Evia its employee — his wife, Ms Tan. The Judge noted the prosecution case was thatthis money was a kick-back, which had influenced his decision to grant fundingthrough Infinity to S4E.District Court decision[19] After reciting the factual background, the Judge noted Mr Ong's defence thatthe Aroha Restaurant did not become a class 4 venue until 2016. Therefore, as adirector of UHML trading as Aroha Restaurant, he could not be guilty of the offencealleged to have occurred on 25 November 2015 when Happy Japanese Restaurant wasthe class 4 venue on the licence. The Judge then set out the relevant contractualprovisions in the venue agreement and the statutory provisions that applied. The Judgewas of the view that there was no change to the identity of the venue operator. Itremained UHML throughout, but with a change to its trading name. As a class 4venue, Aroha Restaurant occupied the same physical space as Happy JapaneseRestaurant and was the same place used to operate the same class 4 gaming machines.The licence number attributed to the venue operator also remained the same.[20] UHML was therefore the venue operator and Happy Japanese Restaurant theclass 4 venue at the time of the alleged offending on 24 November 2015. Importantly,Mr Ong remained a "key person" of UHML as defined under s 4 of the Act at therequisite time of the offending when Ms Tan transferred the sum of $16,000 intoUHML's business bank account at the ANZ Bank.[21] The Judge concluded:[21] There can be no doubt that the defendant who was at all material timesa director of UHML and a key person, did have a significant influence in themanagement and operation of UHML, which was the venue operator at thattime. The receipt of the sum of $16,000 by UHML and the subsequent use ofthose funds to purchase the motor vehicle for the same amount, that is the sumof $16,000, is a breach of s 118(3B) of the Act. There is no doubt that thetransaction could reasonably be perceived as influencing decisions to be takenon the grant application made in favour of S4E.Grounds of appeal[22] There are two broad grounds of appeal. First, Mr Ong submits the Judge wasin error in finding that at the time of the relevant transaction he was a key person inrespect of a class 4 venue licence. Mr Ong submits that no direct evidence wasproduced at trial that a class 4 venue licence was in place at the time of the relevanttransaction and, further, that no evidence was produced to establish that the relevantvenue hosted any operational gaming machines at the relevant time.[23] Secondly, there was insufficient evidence produced at trial to prove Mr Ongknowingly received money that could reasonably be perceived as influencingdecisions taken or to be taken on applications for grants.Approach on appeal[24] An appeal against conviction following a Judge-alone trial must be allowed ifthe Judge has erred in his or her assessment of the evidence to such an extent that amiscarriage of justice has occurred3 or if a miscarriage of justice has occurred for anyother reason.4[25] "Miscarriage of justice" means any error, irregularity, or occurrence in or inrelation to or affecting the trial that:5(a) has created a real risk that the outcome of the trial was affected; or(b) has resulted in an unfair trial or a trial that was a nullity.[26] There will be a real risk that the outcome was affected when "there is areasonable possibility that a not guilty (or more favourable) verdict might have beendelivered if nothing had gone wrong."6 The appellant does not have to establish "amiscarriage of justice in the sense that the verdict is actually unsafe", but that there isa real possibility that it is unsafe.7[27] A miscarriage is more than an inconsequential or immaterial mistake orirregularity.8 The focus must, therefore, be on the actual, rather than theoretical, effectof any error.3 Criminal Procedure Act 2011, s 232(2)(b).4 Section 232(2)(c).5 Section 232(4).6 R v Sunsuwan [2005] NZSC 57, [2006] 1 NZLR 730 at [110].7 At [110].8 R v Matenga [2009] NZSC 18, [2009] 3 NZLR 145 at [30] and [31].[28] Under s 233 of the Criminal Procedure Act 2011, if the Court allows an appealagainst conviction it must set aside the conviction; and, in the Court's discretion, mayacquit the appellant, direct a new trial be held or make any other order, including noorder, that the Court considers justice requires.Discussion[29] In the prosecution of Mr Ong for an alleged offence under s 118(3B), thefollowing elements must be proved beyond reasonable doubt before he can be foundguilty:(a) Mr Ong was a key person in relation to a class 4 venue licence;(b) He knowingly received money; and(c) The money could reasonably be perceived as influencing decisionstaken or to be taken on applications for grants.Key person?[30] A key person is defined in s 4 of the Act as including, in relation to a class 4venue licence, a person who is a director of a venue operator. The venue agreementbetween Infinity and UHML dated 1 April 2015 specifically named UHML as "thevenue operator". Mr Ong was a director of UHML and signed the venue agreementas a director under the notation "SIGNED for and on behalf of the Venue Operator".The venue agreement was specifically said to expire on 31 March 2016. Therefore, atthe date of the relevant transaction, 24 November 2015, the venue agreement remainedin force.[31] Although the two class 4 venue licences, which were produced are dated23 December 2015 and 5 January 2016, the licence dated 23 December 2015 stated,"the authority granted by this licence commences on 24 May 2014". In addition, theDIA witness said in evidence that as of the dates of 24 November 2015 there was anactive licence for Aroha Restaurant or Happy Japanese Restaurant, as it was probablycalled at the time. He stated, "I can confirm that [the licence] was in fact in place, atthe time".[32] In my view, it is immaterial that the premises changed its name or may havebeen closed for a period for renovations. Similarly, it is immaterial that the gamingmachines may have been inoperative during the period of renovations or that neitherHappy Japanese Restaurant nor Aroha Restaurant appeared on a nationwide list ofclass 4 venues as at 30 September 2015 downloaded from the internet.[33] I agree with the Judge that Mr Ong was a key person. He was a director of avenue operator in relation to a class 4 venue licence.Knowing receipt of money?[34] There is no doubt that the sum of $16,000 was paid into the business bankaccount of UHML on 24 November 2015. It had come from an account in the nameof Mr Ong's wife, G K Tan, which had been opened on 15 December 2014. Between15 December 2014 and 24 November 2015, the only deposits made into the account(apart from a cash deposit of $4,700 to open the account and a little interest) weresalary payments from S4E, which in turn had been paid to S4E as grants by Infinity.[35] There was, however, no direct evidence that Mr Ong knew of the receipt of themoney by UHML. There was no evidence as to the signatory or signatories ofMs Tan's account nor who had entered the reference "Capital from Simon"9 in thebank records.[36] Although Mr Ong was one of two directors of UHML, the bank statementswere addressed to a Taupo address. Mr Ong lived in Auckland. The DIA witness saidhe had obtained information from the ANZ Bank that Mr Ong and his business partneroperated the bank account, but the extent of each partner's involvement was not furtherelucidated. Mr Ong has not been interviewed. His business partner has not beeninterviewed. Nor has Ms Tan. Ms Tan was, however, served with a notice under ss333(1)(a) and (b) of the Act requiring her to provide the DIA with information about9 Mr Ong is known as Simon.her role as Chinese community sport liaison officer for S4E. She was, however, notasked to provide any information about the payment of $16,000 on 24 November 2015.[37] There also appears to be an assumption that the $16,000 payment was used tobuy an Audi A4 the following day. The Judge also seems to have been mistaken whenhe found that the payment to Precision Autos was for the same sum of $16,000. It wasa sum of $19,400, which was paid to Precision Autos from the account, not $16,000.There were also two substantial payments out of the account after receipt of the sumof $16,000 and before the payment of $19,400 to Precision Autos. These twopayments totalled $9,085 and appear to be payments for renovations to the premises("Cut concrete for Bar").[38] Although more could have been done by DIA, in particular, throughinterviewing and taking statements from Mr Ong's associates or by calling witnessesother than the DIA investigations manager, I am of the view that it can reasonably beinferred to a standard of beyond reasonable doubt from all the documentation thatMr Ong knowingly received the money and applied it either for purposes ofrenovations or to purchase an Audi A4 motor vehicle ("Capital from Simon").Could money be reasonably perceived as influencing decisions on grant applications?[39] The second aspect that needs to be proved in relation to the $16,000 paymentis that it could reasonably be perceived as influencing decisions taken or to be takenon application for grants. In his decision, the Judge recorded the prosecution case wasthat the money was a kick-back, which had influenced Mr Ong's decision to grantfunding through Infinity to S4E. There is, however, no suggestion that Mr Ong hadany role in granting funding through Infinity to S4E.[40] The Act is designed to keep the roles of venue operators quite separate fromcorporate societies which distribute profits to community groups through grants.Although venue operators are required to have application forms available in the venuefor patrons, they are prohibited from receiving or accepting application forms. Theyare to be sent directly by applicants to the corporate society.[41] On appeal, counsel for DIA put it in a slightly different way. Counselsubmitted that an outside observer could reasonably perceive that the money Mr Ongreceived might influence decisions taken or to be taken on grant applications byInfinity. That is, the money received by Mr Ong from S4E could create a perceptionthat Infinity would be encouraged to make grants to S4E (in particular, relating toMs Tan) in order that Mr Ong would retain his venue agreement with Infinity.[42] The DIA therefore sees the $16,000 as a kick-back to Mr Ong for maintainingthe relationship with Infinity. Counsel notes the standard to be applied in determiningwhether a reasonable perception of influence existed — whether the payment could,or not would, be perceived by a reasonable person as influencing decisions taken onapplications for grants.[43] Counsel submits that the element does not require proof of an actual quid proquo (or proof of an actual impropriety). In this case, counsel submits that the evidenceestablishes Mr Ong knowingly received money from his wife, Ms Tan, at the end ofthe following transactional history:(a) Mr Ong's class 4 venue (gambling proceeds) → Infinity(b) Infinity (grant funds) → S4E (salary) → Ms Tan ($16,000) → UHML(Mr Ong)[44] Counsel submits as a key person it would be improper for Mr Ong tofinancially benefit from grant funds, particularly when those funds are sourced entirelyfrom Infinity (the same corporate society that holds the class 4 licence for Mr Ong'svenue).[45] I agree. That is, however, a separate offence under s 118(2) of the Act to dealwith such impropriety. It provides:118 Certain persons must not seek, receive, or offer benefitswith improper conditions attached(2) A key person in relation to a class 4 venue licence must not knowinglyreceive or seek money, a benefit, an advantage, privilege, or gift fromthe following persons, if the receipt has an improper conditionattached to it and whether the receipt or condition is direct, indirect,formal, informal, or otherwise:(a) a holder of a class 4 operator's licence:(b) a key person in relation to a class 4 operator's licence.[46] Mr Ong has, however, not been charged under s 118(2), but under s 118(3B).Counsel talks generally about perceptions of conflict in the current case and suggeststhat the money was originally intended for use in the fit-out of Aroha Restaurant.Counsel acknowledges, however, that prima facie there was nothing unusual in themoney paid to S4E, a grant applicant. He goes on to submit however, that the grantapplicant S4E, at this stage, is only one step removed from Mr Ong. If S4E had paidMr Ong directly, a reasonable observer would clearly find a reasonable perception ofimpropriety or conflict of interest in the distribution of grant funds, which wereintended solely for the benefit of the community. In this case, there was another halfstep that occurred in the circle of transactions, in that grant funds were first receivedby Ms Tan, before that money was then transferred to her husband, Mr Ong. Counselsubmits that the addition of this last step does little to distinguish the appearance ofimpropriety or bias to an external observer.[47] The question to be asked, however, is much narrower and is drawn from thespecific wording of s 118(3B) — could Mr Ong's receipt of $16,000 reasonably beperceived as influencing decisions taken or to be taken by Infinity on applications forgrants? The DIA has not produced any evidence that the decision-makers in Infinityeven knew of the payment of $16,000 made by Ms Tan to her husband, Mr Ong.[48] Counsel also acknowledges that there was nothing unusual in the money paidto S4E, a grant recipient, so how could the payment of $16,000 influence decisionstaken or to be taken on grant applications by Infinity? The difficulty in shoehorningthe perceived conflict of interest into s 118(3B) is reflected in the wording of theparticulars set out in the charging document. The particulars state:Being the Director of United Hospitality Management Limited, whichoperated a class 4 gambling venue known as Aroha Restaurant and Bar,indirectly received $16,000 from Impact Sport (formerly S4E), which was agrant recipient or potential grant recipient.[49] The particulars do not refer to Infinity nor to any perception that decision-makers in Infinity may be influenced by the payment of $16,000 when makingdecisions on grant applications. The mere indirect receipt by Mr Ong of $16,000 fromS4E is not an offence under s 118(3B).[50] It appears that this issue was not the focus in the District Court hearing andthere was no extended analysis in the judgment of the requirement. In thosecircumstances and looking at the matter afresh, I am of the view the prosecution failedto prove beyond reasonable doubt that the payment of $16,000 could reasonably beperceived as influencing decisions by Infinity taken or to be taken on applications forgrants.Result[51] The appeal is allowed. The finding of guilty and any conviction entered isquashed. Mr Ong is acquitted on the charge under s 118(3B) of the Act.____________________________Woolford J