McGrogan and Singer v Scenic Cellars Partnership Limited [2005] NZLLA 210 (20 April 2005)

Last Updated: 28 February 2010

Decision No. PH 210-211/2005

IN THE MATTER of the Sale of Liquor Act 1989

AND

IN THE MATTER of applications pursuant to s.132 of the Act for the suspension of off-licence number 020/OFF/49/2002 issued to SCENIC CELLARS PARTNERSHIP LIMITED in respect of premises situated at 32 Roberts Street, Taupo, known as “Scenic Cellars”

BETWEEN JAMES McGROGAN
(Police Officer of Taupo)

AND GRANT ALLAN SINGER

(Taupo District Licensing Agency Inspector)

Applicants

AND SCENIC CELLARS PARTNERSHIP LIMITED

Respondent

BEFORE THE LIQUOR LICENSING AUTHORITY

Chairman: District Court Judge E W Unwin
Member: Mr J C Crookston

HEARING at TAUPO on 12 April 2005

APPEARANCES

Sergeant J McGrogan – NZ Police - applicant
Mr G A Singer – Taupo District Licensing Agency Inspector – applicant
Mr R J S Munro – for respondent

RESERVED DECISION OF THE AUTHORITY

Introduction

[1] Before the Authority are two applications for the suspension of an off-licence issued to Scenic Cellars Partnership Limited in respect of premises situated in Taupo, known as “Scenic Cellars”. One application was brought by the Police, and the other similar application was brought by the District Licensing Agency Inspector. Both applications arise from a controlled purchase operation which took place in Taupo on 2 November 2004. The operation was conducted by the Taupo Police, in conjunction with the Taupo District Licensing Agency, and Toi Te Ora Public Health. A total of eleven off-licensed premises were tested by a 17 year-old volunteer. Five of the premises, including the respondent, made sales to the minor.

[2] The business in question is a stand-alone bottle store specialising in fine wines. The premises were the subject of a short suspension order imposed for a similar incident in May 2004 (see Grant Allan Singer and another v Ashtree Holdings Limited and another LLA PH 281-285/2004).

[3] The grounds for the applications for suspension of the off-licence are identical. They are:

• (a) That the licensed premises have been conducted in breach of s.155(1) of the Act. (Section 155(1) prohibits the sale or supply of liquor to minors).
  
• (b) That the licensed premises have been conducted in breach of a condition of the licence. (The condition requires the licensee to ensure that the provisions of the Act relating to the sale and supply of liquor to prohibited persons are observed).
  

[4] There was very little dispute about the facts. The respondent made compelling representations as to how such a mistake had happened. The sale was made by an experienced holder of a General Manager’s Certificate. He attempted to invoke the statutory defence in s.155(4) of the Act, that he believed on reasonable grounds that the volunteer had attained the age of 18 years. There was general acceptance that the teenager looked more mature than her age. It may be that the seller’s decision to make the sale to the volunteer was influenced by her comment that she was 25 years of age.

[5] The premises are not regarded as “problem” premises by the reporting agencies. On behalf of the respondent, Mr R J S Munro made a number of legal submissions as well as representations for leniency, taking into account the factors which brought about the incident, and the many steps taken by management to ensure that the law was respected.

The Background to the Applications

[6] Sergeant James McGrogan is based in Taupo. He submitted that it is now over five years since the drinking age was lowered from 20 to 18. He noted that at the same time, the Act was bolstered to reflect the seriousness of direct supply to minors. He stated that the Taupo Police had become increasingly concerned with youths committing crime while under the influence of alcohol. He contended that youths tended to congregate in groups or at parties, and that fighting, disorder and property damage was often the result.

[7] He contended that the behaviour of the young people had a huge impact on the community, in that drunken youths often found themselves as either victims of assault, or offenders facing a Police prosecution. In his view, residents of the community often had to put up with out of control parties, rampaging youths, and streets littered with broken glass in the morning. Sergeant McGrogan also advised that the Police often received information from concerned parents and youths that underage drinkers had been able to purchase alcohol at off-licences in Taupo. However, “Scenic Cellars” had not been the subject of such calls.

[8] Over the last five years, District Licensing Agencies, the Police, and officers from Regional Public Health have taken a number of initiatives designed at bringing the issue to the attention of those who sell liquor to the public. Among the education methods employed by the agencies, has been the controlled purchase operation. By using this method, the agencies have for the first time, been able to check to see whether licensees were playing their part in reducing liquor abuse. As a consequence of such operations, the number of enforcement applications brought before the Authority has increased significantly.

[9] There was some concern about the fact that by using a volunteer, the Police might have been aiding and abetting an offence. Accordingly, Parliament passed the Sale of Liquor Amendment Act 2004 which received its Royal assent on 5 April 2004. One of the provisions in the Amendment Act was to ensure that the use of under-age volunteers would not create a breach of the Act.

[10] The Taupo Police, the District Licensing Agency, and Toi Te Ora Public Health conducted their first controlled purchase operation in October 2003. Of the 11 premises which were visited, four sold to the volunteer. This operation was used as a warning exercise. The next operation was conducted on 21 November 2003. Eight premises were visited and two made sales to the minor. Suspension orders followed, as well as a general warning published in the local newspaper. On 17 September 2004, the Police sent out a letter to all off-licensees. The letter warned that a further operation would be conducted in the next few months. It also stated that the volunteer if asked their age, might lie and say they were 18. Retailers were advised to request identification and/or refuse the sale if in doubt.

The Controlled Purchase Operation

[11] “Hermione” was the volunteer. She was born in Fiji on 9 June 1987. She was given a briefing, and subsequently handed a set of typewritten operating instructions. These instructions stated that if she was asked her age, she was to lie and say that she was 18. If asked for identification, she was to say that she did not have any. The instructions also stated that she could attempt to convince the sales assistant that she was 18.

[12] On Tuesday 2 November 2004 at 7.15 pm, “Hermione” entered the premises of “Scenic Cellars”. She was aged 17 years and five months at the time. “Hermione” is a reasonably large, tall Fijian girl, with mature features and a youthful face. English is her second language so she speaks hesitantly. She selected a bottle of Lindemans chardonnay wine valued at $9.95, and took it to the checkout. There she was met by Mr Floris Johannes Heijdenrijk. Mr Heijdenrijk immigrated to New Zealand from Holland two years ago. He is a graduate from the Dutch Wine Academy, and has had eight years experience in the sale of liquor in Holland and New Zealand. He holds a General Manager’s Certificate.

[13] The bottle of wine was scanned, and the money handed over. At that time, Mr Heijdenrijk asked “Hermione” if she was from Taupo or from out of town. She told him she was from out of town. He then asked her the question “You are over 25 years of age?” to which she replied “Of course”. Mr Heijdenrijk then said “That’s good – I don’t have to check you for ID”, and “Hermione” answered “No”. The transaction was then completed.

The Respondent’s Reply and Submissions

[14] Section 155(4) of the Act provides:

It is a defence to a charge under subsection (1) or subsection (2) of this section if the defendant proves that the person who sold or supplied the liquor believed on reasonable grounds that the person to whom it was sold or supplied had attained the age of 18 years.

[15] Accordingly, in any criminal trial, a defendant must prove on the balance of probabilities, that he or she believed that the volunteer had obtained the age of 18, and that he or she had reasonable grounds for so doing. It has become accepted that in determining enforcement applications before the Authority, respondents should have a similar opportunity to prove that they were misled into making the sale. In doing so, they must prove that they believed that the volunteer was of age, and that they had reasonable grounds for such belief.

[16] Mr Heijdenrijk said that when “Hermione” said she was 25 he believed her. Her statement confirmed his belief that she was 25 years old. He said he was not personally used to people lying about their age, although he acknowledged that he was well aware of such a practice (particularly in Holland) by young people, in order to purchase liquor unlawfully. He said that he had made a genuine mistake, and considered that he was at a disadvantage in that he did not grow up with a mixture of Maori and Pacific Islanders, and therefore had greater difficulty in assessing their age.

[17] Mr Heijdenrijk was clearly sorry for what had happened. On the other hand, it was obvious that he had misgivings about “Hermione” otherwise why would he ask her about her age? We thought it was significant that the conversation took place after the bottle was scanned and the money handed over. In our view, the grounds on which he based his apparent belief could not be said to be reasonable. The only basis on which he apparently made up his mind was the volunteer’s looks, and her statement to him. After all, what he was confronted with, was exactly the way a minor would go about trying to purchase liquor illegally. It seemed to us to be a convenient way of avoiding asking for identification. In summary, Mr Heijdenrijk did not reach the probative threshold necessary to show that the law had not been breached.

[18] Ms Catherine Ann Langley is one of the three directors of the company. She confirmed that the business caters mainly for an older clientele. She contended that the youth market was not part of the customer target that the business was aimed at. She asked the Authority to note that staff training is conducted on a monthly basis. Ms Langley stated that following the incident on 2 November 2004, the age under which identification must be requested by staff, has been raised to 30, and she produced a copy of the relevant signage. She advised that the company also ran its own “sting” operations particularly at busy times, in order to keep the staff aware of the implications of making mistakes, and ensure that despite pressures of time, the proper checks were being made. Finally, Mrs Langley asked us to note the minimal part played by the licensee in the transaction.

[19] Mr Munro made three legal submissions. In the light of the ultimate decision we intend to make, based partly on his third submission, it may not be strictly necessary to answer them all, but we propose to do so briefly. He firstly argued that s.181 of the Act exempts a licensee from responsibility for any offence committed by a manager. In other words, if the manager has committed an offence by selling liquor to a minor, then the company as licensee, cannot be held accountable for that offence. We accept that this is the case. However, the company is not being directly held accountable for what the manager did.

[20] Section 132 of the Act allows a sanction to be imposed against a licensee if the premises have been conducted in breach of any of the provisions of the Act. In such a case, there need be no fault on the part of the licensee. The issue was specifically argued before Gendall J in The Mill Liquorsave v Grant David Verner Wellington High Court CIV-2003-485-874. This was a similar case where the breach of the Act was the fault of one of the licensee’s managers. His Honour stated:

“[23] I have no doubt at all that deterrence (i.e.to “discourage” others) from selling to minors, as well as special deterrence to the licensee before the Authority, is a relevant consideration and squarely within the objects of the Act. A reasonable system of control of the supply of liquor includes the need to be able to secure compliance with licence conditions and the law through the exercise of discretionary disciplinary powers specifically given to the Authority by Parliament. If it could not suspend a licence given to a corporate body where a “fault” or breach of the Act was that of a manager, its powers of control over licensed persons or bodies could be rendered nugatory or severely curtailed.” (Emphasis ours)

[21] It may well be that the Police and the Inspector would have been unable to establish the second ground of the application. This was that the premises had been conducted in breach of a condition of the licence. The condition of the licence alleged to have been breached, is the direct responsibility of the licensee. Under that condition, the licensee is required to ensure that the provisions of the Act relating to the sale and supply of liquor to prohibited persons (i.e. minors), are observed. In our view the licensee has carried out its responsibility to the law, by the way it trains and instructs its staff. Nevertheless, in normal circumstances, we would have no hesitation in suspending the licence because of the first ground in the application, being the manager’s breach of the Act.

[22] Mr Munro’s second argument must also be rejected. That submission was that there were reasonable grounds for believing that the volunteer was over 18. We have already ruled against the manager on that issue. In his third submission, Mr Munro referred to the question of fairness. He referred to our decision in Kathryn Ann Sykes v D J Barry (1993) Limited and others LLA PH 314-317/2003. In that case, the volunteer had been instructed to lie about his age. We took the view that although illegal sales had been made, it would be undesirable to make suspension orders against the licensee. However, we considered that suspension orders against the managers were appropriate. As will be seen, we agree with Mr Munro’s submission, and the issue of fairness will be discussed in full in our decision.

The District Licensing Agency Inspector

[23] Mr G A Singer is a Liquor Licensing Inspector employed by the Taupo District Council. He was very concerned about the results from the latest controlled purchase operation, and referred to the number of warnings which had been given in the past, including letters and press releases. He produced a copy of the Taupo Central Business District Alcohol Accord, of which the respondent company was a partner. The purpose of the accord was to adopt responsible and quality business practices, particularly where the sale and consumption of liquor is involved, in order to create a pleasant and safe community for residents, workers, customers and visitors alike.

The Authority’s Decision and Reasons

[24] For the reasons already stated, we believe that the licensed premises have been conducted in breach of s.155(1) of the Act. The issue is whether it is desirable to make a suspension order. That requires us to consider how the controlled purchase operation was conducted and what happened. As the Sergeant pointed out, it is not possible to find the perfect volunteer. If he or she presents as being too young, then there will be little point in the exercise. If the volunteer looks older or is made to look older, then questions of unfairness may arise. In this case, the volunteer was not made up, and not dressed to look any older than she was. The main question to be considered was the instruction to lie about her age.

[25] The admissibility of the evidence when a volunteer gives a false age was resolved by the High Court some time ago. In our decision Scott Lyall Taylor v Vadna Enterprises Limited and others LLA PH 61-63/2002, we rejected the evidence of a 15-year-old volunteer who had been instructed to say that he was 18. We believed that the evidence was unfairly obtained, and in part amounted to entrapment. The Police appealed the decision. On 25 July 2002, O'Regan J ruled that the operation could not be characterised as entrapment. In his view, the statement by the volunteer did not amount to active encouragement, persuasion, initiation, instigation or seduction of the respondents to attempt to sell liquor to him.

[26] In his decision he said:

"In my view the conduct of Thomas did not cross the dividing line between permissible and impermissible police behaviour. It is clear the legislature intended that licensees should be required to go further than simply asking an apparently young person what age they are, as is evidenced by the provisions for evidence of age documents, and the 'safe harbour' defence in s. 155(4A) of the Act for a licensee who has sighted an evidence of age document showing that the relevant person is over the age of 18 years.

The way the operation was conducted was a fair replication of the situation which licensees would face in real conditions involving young persons attempting to purchase liquor unlawfully, and fairly put the licensee to the test as to whether their conduct, when faced with that situation, was appropriate and in accordance with both the Act and the licence.”

[27] There are many who argue that deception is precisely the way that youngsters go about acquiring liquor illegally, and that therefore a test where the volunteer lies about his or her age, is a fair test. Indeed in June 2004, the Alcohol Advisory Council of New Zealand (ALAC) produced a comprehensive set of Controlled Purchase Operation Guidelines. The booklet recognised that "CPOs" can be used as an educative tool for retailers and their staff and the wider community (Page 1). The guidelines recommend that requesting the volunteers to falsely state their ages was the preferred option because it was a superior and more realistic test of compliance as it then "requires retailers to meet the statutory standard of sighting an evidence of age document" (Page 8). In passing we note that there is no requirement to sight an evidence of age document. To do so provides a “safe harbour” defence for the seller.

[28] If the reason for the controlled purchase operation is to test, educate, and even deter licensees, and obtain sanctions against the salespersons, then we would be prepared to accept such a proposition as stated above. However, in our view the position becomes much more debateable when the licence can be suspended because of the actions of an employee. We have consistently taken the view that any suspensions of off-licences in respect of incidents where a volunteer encourages any sale by deception, would not be desirable. We think that any suspension of the off-licence in such circumstances would be counter-productive to the establishment and maintenance of the reasonable system of control over the sale and supply of liquor to the public as set out in s.4 of the Act.

[29] In Kathryn Ann Sykes v D J Barry (1993) Limited and others (supra) we made the following comments.

“Under the enforcement provisions of the Act, a licensee can be the subject of a suspension order for breaches committed by the employees of the licence holder. In our view, there will be occasions where this procedure can lead to potential unfairness. The High Court has ruled on the admissibility of evidence obtained by lying about age. It has not ruled on whether it is desirable to make orders for suspension or cancellation following findings based on such evidence. It is our view that any cancellations of the off-licences in respect of the two incidents where “Jacob” told a lie would not be desirable. In respect of both premises, there was no proof of any rumours or complaints or warnings in the past for selling to minors. Both licensees have been subjected to considerable costs following the incidents. We think that any suspension of the off-licence in such circumstances, would be counter-productive to the establishment and maintenance of the system of control over the sale and supply of liquor to the public as set out in s.4 of the Act.

The position will be different for a manager or salespersons. They have the ability to request identification, and make an assessment of the age of the purchaser. They have been given the ‘evidence of age’ tools to test any age claim. In particular a certificated manager has the advantage of training. He or she carries the responsibility under s. 115 of the Act to comply with the Act, and the conditions of the licence”.

[30] In Donald William Sara v Glen Fruin Limited and others LLA PH 837-852/2004 the young volunteer was instructed to say that she was 18. If asked to produce identification, she was instructed to produce her driver’s licence showing that she was actually 17 years and 9 months old. However, the young volunteer decided independently to act as maturely as possible in an effort to persuade the retailers that she was over 18. In dismissing the applications we said:

“In this case, we are more than satisfied that because of the way this particular controlled purchase operation developed, the defence provided for in s.155(4) of the Act applies in respect of the majority of the applications. In respect of the balance of the premises, we believe that any suspension of either the off-licence or the General Manager's Certificate, would be an unreasonable exercise of our jurisdiction, and counter-productive to the establishment and maintenance of a reasonable system of control over the sale of liquor.”

[31] The reason why we believe that there should be no element of deception is that the controlled purchase operation is somewhat artificial. It is a controlled attempt to test the business’ willingness to sell to minors. The relationship between buyer and seller can be influenced and affected by any number of factors. If deception is used and a mistake made by the employee, his or her employment can be terminated. This has happened and is recorded in previous cases heard by the Authority. Some employees are quite traumatised by the experience of having been caught out in such an operation. The relationship between employee and employer is sometimes influenced by whether or not the licence is suspended.

[32] In other words, the consequences for licensee and employee are often very significant. We accept that such consequences need to be measured against the worthy objective of reducing the availability of liquor to minors. A licence suspension may cost a licensee many thousands of dollars. We acknowledge that any financial loss should be measured against the social costs that society absorbs in respect of alcohol related harm experienced by our young people. However, we are uncomfortable with the notion that the sale which leads to the suspension may have been influenced by a conscious effort on the part of the organisers to deceive.

[33] It is obvious that selling liquor to minors has the potential for serious liquor abuse. In a controlled purchase operation there is no such potential because the aim of the exercise is education and deterrence. While pursuant to s.4(2) of the Act, the Authority is required to exercise its jurisdiction, powers and discretions in the manner that is most likely to promote the object of the Act, such jurisdiction must also be exercised against the background of a reasonable system of control. If a policy of deception becomes acceptable nationally, then the question must be asked, what other types of behaviour will be used to encourage the illegal sale? May we then expect the production of false identification documents, and other forms of misleading conduct?

[34] In the present case, the volunteer was advised that in addition to telling a lie about her age, she could attempt to convince the sales assistant that she was 18. There were no guidelines about what such attempts could include. In the present case, for example, the licensee has instituted a number of systems aimed at ensuring that the law is upheld. If the volunteer had told the truth, there would have been no sale. At least the question was asked.

[35] We have consistently taken the view that the only way that standards will be raised in the industry, is if examples are made when the law is breached. We have no difficulty in suspending licences where salespersons are negligent, and the playing field is reasonably level. However, where the odds are consciously altered in favour of the purchaser, as in this case, we would like to send out a clear message. Until the High Court tells us otherwise, it is unlikely that any order against the licensee will follow.

[36] For the reasons we have attempted to articulate, the applications are refused.

DATED at WELLINGTON this 20th day of April 2005

Judge E W Unwin Mr J C Crookston
Chairman Member

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