Henwood v Dalziell-Kernohan HC Hamilton CIV 2010-419-983 [2010] NZHC 2295 (17 December 2010)

Last Updated: 31 December 2010

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

_{CIV-2010-419-983}

BETWEEN BENJAMIN HAMIORA HENWOOD Appellant

AND JAMES ROBINSON DALZIELL- KERNOHAN

First Respondent

AND ROSS HENDERSON Second Respondent

Hearing: 5 October 2010

Appearances: S A McKenna for Appellant

J M O'Sullivan for Respondents

Judgment: 17 December 2010

_{JUDGMENT OF COOPER J}

This judgment was delivered by Justice Cooper on

17 December 2010 at 12.30 p.m., pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:

Solicitors:

Norris Ward McKinnon, Private Bag 3098, Hamilton

Almao Douch, PO Box 19173, Hamilton 3244

Copy to:

S A McKenna, PO Box 19342, Hamilton 3244

HENWOOD V DALZIELL-KERNOHAN AND ANOR HC HAM CIV-2010-419-983 17 December 2010

[1] On 7 July 2010 the Liquor Licensing Authority (“the Authority”) heard three applications made under the Sale of Liquor Act 1989 (“the Act”). They were:

a) an application by the appellant for renewal of the on-licence in respect of the premises situated at 131B Victoria Street, Hamilton, known as “Pie Lab”; and

b) an application by the police to suspend or cancel Pie Lab’s on-licence;

and

c) an application by the police pursuant to s 135 of the Act for the suspension or cancellation of the general manager’s certificate issued to Mr R G B Estuye.

[2] In its decision delivered on 20 July 2010, the Authority

a) suspended Mr Estuye’s general manager’s certificate for 31 days, commencing from 27 July; and

b) refused the application for renewal of the on-licence, with effect from

Wednesday 18 August; and

c) declined to suspend or cancel the existing on-licence, while noting however, that grounds to suspend or cancel the on-licence had been made out.

[3] Mr Henwood has appealed pursuant to s 138 of the Act against the

Authority’s decision declining the application for the renewal of the on-licence.

The Authority’s decision

[4] The Authority summarised some of the evidence that it heard at [12] of its decision:

[12] Much of the evidence adduced by the Police was not contested. Accordingly, there is no necessity to set it out at length. In summary, there was evidence that on at least 10 occasions between 1 July 2009 and 21 July

2010 red vomit was present in the toilet or main floor area of the bar and of patrons staying for short periods of time (between three and 20 minutes)

consuming shots. In addition, there was evidence that intoxicated patrons

have been found on the premises from time to time. In addition there was evidence that there was a lack of a full range of alternative refreshments such

as low alcohol beer and soft drinks and that food was not displayed at all

times. In this latter regard, it seems that this complaint usually related to when the premises opened between 10.00 pm and 10.30 pm and that food appeared shortly thereafter. The food was described by one witness as being the sort of food that one might find in a service station. One of the video clips showed a patron eating (probably) a pie out of a paper bag.

[5] The Authority said that an attempt had been made by Mr Henwood and Mr Estuye to deny that most patrons were present at the premises for only a short period of time. It accepted that some of the patrons might have remained on the premises for a reasonably lengthy period, however, it noted that most patrons stayed relatively close to the bar and thought it clear from Mr Henwood’s evidence that between 30 and 35 per cent of all sales related to “shots”.

[6] The Authority referred to a considerable amount of evidence of vomit both close to the bar and in the toilets. Mr Henwood admitted that the hygiene of the premises had needed improvement and the Authority accepted that there had been an improvement in the cleanliness of the premises in more recent times.

[7] The Authority recorded Mr Henwood’s evidence about the way in which the business had developed, from the initial period when only food was sold. An on- licence was obtained to meet the demand of patrons for beer. As the years progressed, the nature of the business had changed, food becoming relatively unimportant and the sale of liquor predominating. There was a demand for shots by the younger patrons, and those were supplied. According to Mr Henwood, frequently the patrons would move from bar to bar in the central business district of Hamilton and because they were only in the premises for a short period of time there were always difficulties in determining whether they were inebriated. He asserted that there was a policy against the serving of intoxicated persons or allowing them to become intoxicated, but could not deny that the quick consumption of shots could result in intoxication. Mr Henwood mentioned intentions in the future to provide

booths containing seats, which had so far not eventuated. At the time of the hearing, there was a possibility of installing gaming machines, but the regulatory procedures for that had not been completed.[1]

[8] The Authority recorded evidence given by Mr Henwood as follows:

I also admit on reflection we have not helped with contributing to reducing alcohol abuse – but I honestly don’t believe we have added to the problem – we just haven’t helped reduce it.

Next we accept that while our selling emphasis is on “shots” they are often a quick fix so if we continue to emphasise or promote them, we could well be promoting rapid consumption of alcohol. This was not our intention. We felt we were running with what the market dictated and were endeavouring to keep pace with other premises.

We also believe that there is an element of the saying “if you can’t beat them

– join them”. You can go to the off-licence and purchase a pack of 12 shots for $20 and there are often even better bargains than this ...

We do not believe we have actually allowed people to become intoxicated but in having predominantly strong shots we were not helping with the issue we believe other bars created. We also believe that much of the vomiting issues made us a rubbish tip for those already intoxicated – and we need to change this ...

We are changing our services so that our patrons have other options. In a serious effort to move forward we have taken advice and have removed the emphasis as a “shots” bar.

[9] The Authority said it was unrealistic for Mr Henwood to ask it to ignore his past conduct as licensee. It could not do so having regard to the application for suspension or cancellation of the existing on-licence, and s 22(c) of the Act required it to have regard to the manner in which the licensee had conducted the sale and supply of liquor pursuant to the licence. It accepted that in recent times real efforts had been made to keep the bar and toilets clean. However, it noted that vomit was not a simply a matter of hygiene: it was also evidence of the presence of intoxicated persons on the premises. It said:

Whether these persons became intoxicated on the premises or whether they were already intoxicated when they arrived is irrelevant. Section 168 of the Act makes it an offence to allow any intoxicated persons to remain on licensed premises. In any event, it is difficult to escape the conclusion that many of the persons vomiting on the premises did so because of the way in

which liquor was served and consumed on the premises. The vomit and its red colour (being the same as the food colouring used in the preparation of some of the shots) confirms that shots of liquor have been consumed by young persons quickly.

[10] The Authority accepted evidence given by a Dr Hearn, the Manager Strategy and Research at ALAC[2] who referred to speed drinking, characterised by the service of shots, facilitating rapid intoxication. It was Dr Hearn’s evidence that most of the patrons at Pie Lab engaged in “vertical drinking”, the practice of standing up in a bar to drink. That usually meant that alcohol would be consumed without accompanying food, and the absence of anywhere to put down a glass. The Authority commented

that the patrons in Pie Lab did engage in vertical drinking; they had little choice but to do so because historically there had been virtually nowhere to sit. The Authority summarised his evidence as having been that:

If one adds together the service of shots; plus speed drinking; plus poor sanitation; plus indifferent food; plus relatively shabby and small premises with a lack of seating; and then adds young patrons: the result is a problem in terms of liquor abuse.

[11] The Authority concluded on the evidence that the environment in the premises had encouraged liquor abuse and that Mr Henwood had admitted as much.

[12] It expressed itself in critical terms about a lack of action to provide booth seating and gaming machines, the latter suggested by the appellant with the intent that the average age of patrons would increase. While accepting that Mr Henwood had made attempts to bring about some changes in the operation of the premises, particularly in relation to their cleanliness, overall it was not satisfied that Mr Henwood had proved to be a suitable licensee or that it was likely he would achieve an improvement in operation of the premises in the foreseeable future. Consequently, it refused the application for renewal of the on-licence. It held that, while the grounds for cancellation of the on-licence had been made out, it was not desirable to make any order under s 132(6) of the Act because of the refusal to renew the on-licence. Essentially, as a result of its decision, there would simply be no on- licence to suspend or cancel.

[13] Section 138 of the Act provides that every appeal is by way of re-hearing. However, both parties sought to adduce further evidence at the appeal. Although Mr McKenna initially argued against the respondent’s application, in the end both he and Ms O’Sullivan accepted that the affidavits both parties sought to file should be read, subject to submissions both counsel made that the affidavit evidence sought to be relied on by the other party would be of limited value.

[14] I agreed to receive the further affidavits, one by the appellant sworn on

27 September 2010, and affidavits relied on by the respondents sworn by Stephen Balmer and Aaron Alderton on 15 September and by Ross Henderson, the second respondent, on 28 September. The Court has “full discretionary power” to receive further evidence under s 138(8) of the Act.

[15] Mr Balmer is employed in the gambling compliance unit of the Department of Internal Affairs and said in his affidavit that an application had been received to place nine gaming machines at the Pie Lab’s premises, but that a licence could not be issued under the Gambling Act 2003 because of the Authority’s refusal to renew the liquor licence.

[16] Mr Alderton is a police officer in charge of the tactical response unit in Hamilton. Mr Alderton said that he had visited the Pie Lab premises over 50 times in the last year. Based on his observations, it was his evidence that the Pie Lab was a venue to which people went to “ ‘load up’ on cheap shots before going to a better bar to dance and socialise”. It was his opinion that the toilets had often been neglected and were in a poor state of maintenance, and he said that on two occasions that he could recall vomit had been found in the men’s toilet. He considered that there had not been any change in the drinking patterns and behaviour of clientele since July

2010.

[17] Mr Henderson is employed by the Waikato District Health Board, as a health protection advisor. He deposed that, as a consequence of his position with the Health Board he is familiar with approximately 900 premises with club or on-

licences. He said that Pie Lab was the only bar of which he was aware whose business had been dominated by customers making very brief visits to the premises for the purpose of the rapid consumption of shots. He said that he had visited the premises at about 12.10 a.m. on 11 September 2010, having noted that the central business district of Hamilton was relatively quiet at that time. He was at Pie Lab for about five minutes during which time there were about 20 patrons. He described a queue which formed at the bar, the patrons leaving the premises once they had arrived at the top of the queue and obtained and consumed shots. In an area of the premises where tables and chairs had been set up, there were no customers present. He attached photographs showing customers crowded around the bar area. He observed:

Nothing I observed at the Pie Lab on 11 September caused me to conclude that the general nature of the operation of the premises had changed from being dominated by customers making brief visits to the premises for the purchase and rapid consumption of drinks at the bar.

[18] The appellant’s own affidavit of 27 September attached an amended price list which he said had been implemented since the hearing before the Authority. The result of the change was that Pie Lab’s prices were now higher than those of their competitors. Mr Henwood also exhibited a DVD containing surveillance footage of five incidents recorded on 26 June, 7 August, and 11 and 16 September 2010. These incidents were relied on as showing respectively a customer forcing himself to vomit; a person who entered the premises, used the toilet, vomited and left; a customer smuggling drinks into Pie Lab, drinking them in the toilets and vomiting; a man entering the premises, drinking in the toilet and leaving the premises; a man entering the premises, urinating on the toilet floor and leaving. Mr Henwood said that since the hearing before the Authority he had observed many people entering Pie Lab just to use the toilets and then leave. He attributed that to a very busy neighbouring licensed premises whose customers have to queue to use the toilets. He also referred to the provision of increased numbers of chairs in the premises.

[19] Clearly, Mr Henwood’s affidavit was sworn in an attempt to deal with some of the issues which were of concern to the Authority.

[20] Mr McKenna challenged the Authority’s conclusion that the licence had been conducted in a manner that had encouraged the excessive consumption of alcohol. His premise was that since every bar sells shots, and that is not prohibited by the Act or any conditions of the appellant’s licence, it would be necessary to show that the appellant had done something out of the ordinary in respect of the way shots had been sold that had tended to promote excessive alcohol consumption. Mr McKenna submitted that in assessing that issue, price and the strength of the shots being sold were the most relevant considerations.

[21] He referred to evidence that Pie Lab does not sell the cheapest shots in Hamilton and that it had in any event changed the range of shots sold so as to reduce the range. As to the strength of the shots sold Mr McKenna argued on the basis of an acknowledgement by Mr Henderson in cross-examination before the Authority that one particular shot which had been the focus of evidence had a much lower alcohol content than contended by Mr Henderson in his evidence-in-chief. Mr McKenna submitted that the fact that the particular shot was proved not to be the highly potent drink that it had been made out to be must “strike to the very heart of this matter”.

[22] Mr McKenna also referred to evidence given by Dr Hearn that the layout, furnishing and activity reported at Pie Lab was similar to speed-drinking bars in the United Kingdom. Mr McKenna submitted that this was an irrelevant consideration and simply provided a prejudicial tag on a common and accepted practice, namely the sale of shots.

[23] On the issue of poor sanitation, Mr McKenna acknowledged that the appellant’s record in terms of sanitation and hygiene was not good. However, he pointed out that by the time of the hearing before the Authority, issues concerning vomit in the toilets and bar, and rubbish in the yard of the premises had been resolved to the satisfaction of Ms Pearson, the Hamilton City Council environmental Health Officer, who gave evidence at the hearing. Mr McKenna submitted that, in the circumstances, the appellant’s record of poor sanitation was not of itself grounds

to revoke the appellant’s licence. He criticised the Authority’s statement that vomit was not simply a matter of hygiene but was also evidence of the presence of intoxicated persons on the premises. In this respect, he referred to the DVD footage that I have earlier discussed which he said demonstrated that the presence of vomit should not be regarded as evidence either of the presence of intoxicated people at the premises or that there had been excessive alcohol consumption at Pie Lab.

[24] Mr McKenna criticised the Authority’s description of the premises as “shabby” claiming that it was simply a matter of opinion and arguing that the quality of the paint on the walls and the state of decoration of the premises had no bearing on the rate at which patrons consumed alcohol. He noted that there was no evidence of aggressive behaviour at the premises and submitted that that was a factor that the Authority had overlooked in coming to its conclusion that there had been excessive alcohol consumption on the premises.

[25] Mr McKenna also submitted that the Authority’s reference to lack of seating was irrelevant, submitted that there was nothing unusual about the age of the Pie Lab patrons and nothing to suggest that the business had actively promoted itself to younger patrons.

[26] Mr McKenna argued that cancellation of the appellant’s licence would not be fair and reasonable and would be out of proportion to any proven mismanagement. He contrasted the situation at Pie Lab with that discussed in another decision of the Authority in Dalziell-Kernohan v Mitchell Rentals Ltd[3] in which the licensee had run an “all you can drink” promotion but the licence had only been suspended for a period of seven days. Mr McKenna submitted that cancellation of the appellant’s licence would not contribute to the reduction of alcohol abuse; shots would be available at low price in other premises and patrons would simply drink elsewhere.

Since there was no evidence of any alcohol-fuelled violence or alcohol related harm connected to Pie Lab, it was wrong to conclude that cancellation of the licence would reduce alcohol-related violence.

[27] Mr McKenna complained that the Authority had not considered other options including the imposition of conditions such as conditions banning sale of shots at certain times, restricting “vertical drinking zones”, or restricting the strength of drinks sold. Any concerns over the manner in which alcohol had been sold at the premises could be addressed by appropriately worded conditions.

Discussion

[28] I have already referred to the summary that the Authority gave of the evidence adduced by the police about finding red vomit in the toilet or main floor area of the bar and about patrons staying for short periods of time consuming shots. The Authority also referred to the evidence that intoxicated patrons were present on the premises from time to time. The evidence was not discussed in detail, but it is apparent from the record that the evidence on which the Authority relied included evidence from Sergeant Dalziell-Kernohan, and Constables McDonald, Carson and Elvy.

[29] Constable McDonald was present at the premises in plain clothes on Sunday

19 July 2009 at about 2.33 a.m. There were 20 to 30 patrons there, most of whom were observed standing at the bar. Whilst waiting to make himself known to the duty manager, the Constable observed a male walking towards the bar being supported by another, the former being in an extremely intoxicated state and swaying from side to side. It was necessary for him to take hold of the bar to remain standing. Whilst holding onto the bar he slipped and had to be caught by his friend so as not to fall. Both men were served a shot by Mr Estuye, who was the duty manager. Constable McDonald observed that whilst he was being served, the extremely intoxicated patron had one arm over the bar holding on to it, in an attempt to prevent himself from falling backwards. The Constable observed the intoxicated male consume the shot, and fall towards the floor when he was again caught by his associate. Constable McDonald informed Mr Estuye that he intended to take action in respect of a breach of the Sale of Liquor Act. The intoxicated patron remained in the bar, staggering and falling into other patrons. It was only when the Constable remonstrated with Mr Estuye that the intoxicated patron was removed.

[30] Constable Carson referred to being present at the premises at 2.10 a.m. on

13 February 2010. He observed an intoxicated patron. On checking the toilets he could see no evidence of fresh vomit but saw what he described as “cunks of old vomit”. Returning to the premises at 2.35 a.m., Constable Carson observed the intoxicated person leaving the premises. By that stage he was “heavily intoxicated” and unable to speak coherently.

[31] Plainly then, there was evidence of intoxicated persons being permitted to enter the premises, remain in the premises and purchase alcohol there.

[32] Sergeant Dalziell-Kernohan gave evidence of having visited the premises on New Years Eve 2009. He observed red vomit all over the toilet walls and floor in one of the cubicles, and remnants of vomit in the bowl of the urinal. He returned to the premises about half an hour later and noticed a trail of vomit leading toward the toilet area. In the toilet there were two women, one of whom had obviously just vomited. He returned to the premises on 25 February 2010 at about 10.30 p.m. in the presence of a police photographer. A photograph was taken of the door into the toilet which, together with the surrounding wall area, was splattered with a pink liquid material. He described the smell in the toilets as “appalling”.

[33] Constable Elvy gave evidence of having been at the premises on 20 May

2010 at about midnight. On entering the premises he noticed pools of vomit on the floor in front of the bar area. He noticed a male Caucasian customer run to the bathrooms with a hand over his mouth. He followed him into the bathroom area. Once in the bathroom, the customer vomited several times into the hand basin and down his clothing. The Constable spoke to Mr Estuye who was again the duty manager. When advised of the patron vomiting in the bathroom and referred to the vomit on the floor, Mr Estuye effectively asserted that the vomit may have come from just one person and invited the Constable to “take it to Court then we’ll see what happens”. Constable Elvy returned to the premises just after 1.00 a.m. on

22 May. When he entered the toilet area he saw vomit dripping from the urinals onto the floor as well as what appeared to be urine. He was cross-examined on these incidents to ascertain whether he could give direct evidence that the customers whose actions he described had actually consumed liquor on the premises. He was

not able to do so, but in my view the evidence would have justified an inference that they had and in any event the evidence showed that intoxicated persons had been on the premises.

[34] Sergeant Dalziell-Kernohan also gave evidence of having observed patrons on “numerous occasions” coming into the premises, purchasing multiple numbers of shots, and leaving the bar once those had been consumed, after spending about 20 minutes in the bar. There was also evidence that Pie Lab promoted itself on the internet as “NZ’s best and only shot bar” and that their $4.00 shots were “NZ’s best shots at NZ’s lowest prices”. Mr Henwood’s recent affidavit indicates that there has been a change in the pricing policy, but the evidence just referred to was the evidence before the Authority. There was also evidence that 30 to 35 per cent of its sales were shots, and that there was very limited seating and that it was not arranged in a manner conducive to encouraging patrons to stay.

[35] I am satisfied that there was ample evidence before the Authority which justified its conclusions on the contested issues of fact. The overall picture painted was of premises where there was an emphasis on the sale of shots, the shots were quickly consumed by patrons who appeared to have come there for that purpose. There were intoxicated persons present, the state of the toilets was from time to time affected by vomit and it is implausible to suggest that the vomit would have been attributable largely to persons who had become intoxicated at other premises and merely gone to Pie Lab to vomit.

[36] The Authority is an experienced body, well able to assess evidence of the kind that was called in this case. It also had the advantage of actually seeing and hearing the witnesses in question and listening to their cross-examination. Nevertheless, in accordance with the decision of the Supreme Court in Austin,

Nichols & Co Inc v Stichting Lodestar[4] I have made my own assessment of the

matter and have found no reason to differ from the view that the Authority took.

[37] I accept Ms O’Sullivan’s submissions that the operational failings, were amply demonstrated on the evidence. This justified the Authority taking the view

that the on-licence should not be renewed. It was not necessary in the circumstances for it to deal with the issue of cancellation, which assumed some prominence in Mr McKenna’s argument. The Authority did not cancel the licence. Rather, having properly considered the matter under s 22 of the Act, it decided that the licence should not be renewed. I do not consider that approach can be criticised. In the circumstances, the evidence that was adduced by both parties about the activities of the premises since the Authority’s decision was not strictly relevant. However, the affidavits filed on behalf of the respondents dealing with the more recent operation of the premises indicate that the emphasis on the sale of shots and speed-drinking appears to have remained.

Result

[38] The appeal is dismissed. The respondents are entitled to costs calculated in accordance with category 2, band B.

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[1] In his affidavit of 27 September 2010, filed in this Court, Mr Henwood stated that the necessary gaming licence could not be obtained because of difficulties with the liquor licence.

[2] The Alcohol Advisory Council of New Zealand.

[3] Dalziell-Kernohan v Mitchell Rentals Ltd Decision No. PH 1488/2009, 22 December 2009.

[4] Austin, Nichols & Co Inc v Stichting Lodestar [2008] 2 NZLR 141.