Cellarsoft Limited, re [2002] NZLLA 427 (20 August 2002)

Last Updated: 7 April 2010

Decision No. PH 427/2002

IN THE MATTER of the Sale of Liquor Act 1989

AND

IN THE MATTER of an application by CELLARSOFT LIMITED for an off-licence pursuant to s.29 of the Act in respect of premises situated at Level 14, 152 Quay Street, Auckland, known as "Cellarsoft.com"

BEFORE THE LIQUOR LICENSING AUTHORITY

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

HEARING at Auckland on 6 August 2002

APPEARANCES

Mr A P Crabb – for applicant
Sergeant M J Lopdell – New Zealand Police – in opposition
Mr D W Sara – Auckland District Licensing Agency Inspector – in opposition

RESERVED DECISION OF THE AUTHORITY

Introduction

[1] This is an unusual and important application for an off-licence. It is unusual because it relates to a new business whereby sales of wine are facilitated between buyers and sellers over the internet. Sales are initiated through the company's website. It is an important issue because the growing use of the internet for retail purposes, will inevitably lead to similar types of applications.

The Application

[2] Cellarsoft Limited is a private company incorporated in February 2001. Stuart Gordon Parker is one of four directors of the company. The company began as an idea for the trading over the internet by collectors of fine wines. The business plan was produced by Mr Parker at the hearing. It outlines how the business, through the web site, is to be operated.

[3] The company has installed a website under the name www.cellarsoft.co.nz. Individuals must register with the site to become a member of Cellarsoft. Membership is free, and is not restricted to New Zealand. One cannot trade in wine without being a member. Upon becoming a member, each collector must list the wines he or she has in his or her cellar. Details such as tasting notes, country, region, appellation, vintage, cellaring and price details are then listed. This information is accessible by other members.

[4] Members who wish to purchase wine, may do so by two methods:

• [a] Having browsed through the website, they may make an offer to purchase through the website. The offer is e mailed to the owner for acceptance or refusal.
  
• [b] Members may sell their wine by auction. This method is organised by Cellarsoft. It runs like a normal auction in that there may be a reserved price for the wine. The seller defines the length of the auction. Bids are then called for from other members.
  

[5] In either case, once the terms have been agreed by the parties, Cellarsoft will issue an invoice to the purchaser. He or she will be required to pay a buyer’s premium to Cellarsoft. A packing slip is then sent to the seller. That is the first time that the parties are introduced to each other. The parties then handle all shipping and settlement details between themselves. Cellarsoft regards itself as an agent or facilitator for each sale. It neither handles, nor stores, any liquor. Its web site contains the following statements:

"CellarSoft accepts a role as an intermediary in transactions between the parties using the site. The involvement of CellarSoft is limited to ensuring the legality of the transaction as per the Sale of Liquor Act 1989 and its amendments.

CellarSoft will not be a party to any contract between users, and denies any warranty, guarantee or other endorsement of products purchased through the CellarSoft service, or the trustworthiness of other parties."

[6] The best description of the company might be that it is a commission agent. Mr Parker confirmed that the website had been established. The newspaper article about the new venture, indicated that the site has been in existence for some months. No sales have yet taken place. The company has applied for, and obtained an Auctioneer's Licence.

[7] When the company filed its application, it showed the address of the proposed licensed premises as its website www.cellarsoft.co.nz. It was (not unnaturally) advised by the District Licensing Agency, that a web site was not a physical site as anticipated by the Act. Accordingly it nominated its registered office as the proposed licensed premises. The registered office of the company is a firm of solicitors occupying level 14, 152 Quay Street, in central Auckland. The company was able to produce the landlord's consent, and certificates that the proposed use of the premises was a permitted activity under the Resource Management Act 1991, and that the use of the premises met the requirements of the NZ Building Code.

[8] However, it was revealed in evidence that the premises would never be used for the storage or delivery of wine. Further, that there was no lease or sub-lease of the premises. The only reason that the site had been nominated, was to satisfy the requirements of the Act, that there be some form of physical premises. We understood that the computer which would play a significant part in the business, was not located at the registered office of the company.

[9] Mr Crabb submitted that the company was concerned that having spent a considerable amount of time and resources developing the venture, it might at a later date be the subject of a complaint, and have to have the website closed down. The company wished to feel secure in going forward with the new business without breaking the law, or being perceived to be doing so.

The Opposition by the Police and District Licensing Agency Inspector

[10] Because of the unusual features of the application, both the Police and the District Licensing Agency Inspector raised a number of issues. The Police were concerned with policing the licence if it was granted. The Inspector took the view that sales of wine would be made under the Act. He questioned whether an off-licence was necessary. Both reporting authorities were also concerned about the question of tenure. Accordingly the matter was set down for a public hearing.

[11] At the hearing Sergeant Lopdell reiterated the Police concern about lack of tenure. The Authority has held that tenure is a fundamental issue in obtaining a licence. See Flaxmere Café & Casino Limited LLA 401/2001. Sergeant Lopdell noted that the sale of liquor was said to be the principal business of the company. He questioned how a business which had the sale of liquor as its principal business, could take place in legal chambers. He submitted that any sale of wine between one member and another would technically be illegal, as the seller had no licence under the Act. In those circumstances, he suggested that the company would be a party to an illegal sale.

[12] Mr Sara, the Auckland District Licensing Agency Inspector, submitted that as the company was a party to the sales of liquor over the internet, it required a licence. However, he argued that because the company had no lease of the premises, and did not sell liquor from the premises, an off-licence could not be granted.

Decision

[13] Section 6(1) sets out the underlying principle of the Act as follows:

The sale of liquor to the public or any member of the public requires a licence.

[14] Herein lies the first of many problems faced by Cellarsoft. Any sale made by any of its members to another member technically requires a licence. We appreciate that an individual sale by one citizen to another is unlikely to attract attention or sanction. However, any pattern of trading could well do so. As it is presently constituted, there is nothing that Cellarsoft can do to ensure the legality of the transactions. We accept that sales made by overseas members would not be governed by the Act. The fact that people are members of Cellarsoft will not change their status as members of the public. After all, membership is free.

[15] Furthermore, by facilitating such sales, Cellarsoft could well be a party to each transaction. Section 180 of the Act provides that if proceedings are taken under the Act, it is not necessary to prove that money has passed or that liquor was consumed so long as:

the Court is satisfied that a transaction in the nature of a sale actually took place or that any consumption of liquor was about to take place.

[16] Part II of the Act deals with off-licences. Section 29 provides:

(1) An off-licence shall authorise the holder of the licence to sell or deliver liquor on or from the premises described in the licence to any person for consumption off the premises.

(2) The holder of an off-licence may arrange for delivery to be made by the maker, importer, wholesaler, or distributor of any liquor from the premises of the maker, importer, wholesaler, or distributor; and, in any such case, the liquor shall be deemed for the purposes of this Act to have been delivered by the holder of the off-licence from the premises described in the licence.

(3) An off-licence also authorises the complimentary supply of liquor by way of sample on the premises to which the licence relates.

[17] This section clearly demonstrates that a physical premises is required. It is the place at which liquor is sold, and the place from which liquor is delivered. It is the place where free samples can be tasted. It is true that subs.(2) provides that the holder may arrange for deliveries direct from a distributor, maker, or importer to another address. In the latter case, it would still be envisaged that there be a physical office at which staff would be present to take orders and arrange deliveries. An example of such an off-licence can be found in paragraph [47] of the High Court decision of Salmon J in Michael John Lopdell v Spotless Services Ltd High Court Auckland AP 11 –SW/02. The decision was delivered on 3 July 2002.

[18] Support for the argument that there must be a physical premises can be obtained from s.36 of the Act. This section sets out the types of premises in respect of which an application may be granted. The section refers to hotels, taverns, manufacturers, supermarkets, and grocery stores. In our view, it is perfectly clear that in all cases, the premises which are described are physical premises where sales activity takes place. The section provides:

(1) Except as provided in subsections (2) and (5) of this section, an off-licence shall be granted only –

(a) To the holder of an on-licence in respect of a hotel or tavern, in respect of the premises conducted pursuant to that licence; or

(b) To the holder of a club licence, being a club that is entitled under paragraph (i) or paragraph (j) of section 30(1) of this Act to hold an off-licence, in respect of the premises conducted pursuant to that licence; or

(c) In respect of premises in which the principal business is the manufacture or sale of liquor; or

(d) In respect of –

(i) Any supermarket having a floor area of at least 1000 square metres (including any separate departments set aside for such foodstuffs as fresh meat, fresh fruit and vegetables, and delicatessen items); or

(ii) Any grocery store, where the Licensing Authority is satisfied that the principal business of the store is the sale of main order household foodstuff requirements.

(2) The Licensing Authority or District Licensing Agency, as the case may be, may grant an off-licence in respect of other premises if the Licensing Authority or District Licensing Agency as the case may be, is satisfied, in a particular case, -

(a) That, in the area in which the premises are situated, the sale of liquor in premises of a kind described in paragraph (c) or paragraph (d) of subsection (1) of this section would not be economic; or

(b) That the sale of liquor would be an appropriate complement to the kind of goods sold in the premises.

(3) Nothing in subsection (1) or subsection (2) of this section shall authorise the grant of an off-licence in respect of –

(a) Any service station or other premises in which the principal business is the sale of petrol or other automotive fuels; or

(b) Any shop of a kind commonly known as a dairy.

(4) Nothing in subsection (2) (b) of this section shall authorise the grant of an off-licence in respect of any supermarket or grocery store, or any other premises on which the principal business is the sale of food or groceries.

[19] It is accepted that the applicant company could obtain an off-licence in respect of premises in which the principal business was the sale of liquor. However, there is no such premises. It will also be noted that pursuant to s.52 of the Act, an off-licence may be granted to the holder of an auctioneer's licence. However, such a licence only authorises the holder to sell liquor by auction in the course of business as an auctioneer.

[20] Any doubt that the premises must be a physical premises, is removed on a reading of s.48 of the Act. Pursuant to that section, a sign setting out the hours of operation must be attached to the exterior of the premises so as to be easily read by persons immediately outside the principal entrance to the premises. Furthermore, a copy of the licence and of the conditions of the licence, must be attached to the interior of the premises, so as to be easily read by persons entering through the principal entrance.

[21] In considering an application for an off-licence the Authority is directed by s.35(1) to have regard to certain matters. One of these matters is

(c) The areas of the premises, if any, that the applicant proposes should be designated as restricted areas or supervised areas:

[22] We appreciate that the Sale of Liquor Act 1989 was passed by Parliament well before internet trading began. However, we note that some internet trading in liquor is currently being undertaken. In those cases, the sellers already hold an off-licence. They are using the internet for marketing purposes. If sales are made over the internet then the holder of the off-licence will sell or deliver liquor on or from its physical premises described in the licence.

[23] In this case, the nominated physical premises cannot be used for sampling; or be used for selling liquor; or be used as a place where liquor is delivered from; or be designated. It would make a mockery of the law if a sign showing the opening hours, and a copy of the licence were displayed on the exterior and the interior of the legal offices. The absence of tenure is minor compared with the other legal hurdles faced by the company.

[24] There is no provision in the Act for a website to be the premises, on or from which, the holder of an off-licence can sell or deliver liquor. In summary, the applicant company is unable to mount a sustainable argument that it is entitled to be granted an off-licence. Pursuant to s.36(1)(c) there is no premises in which the principal business is the sale of liquor.
[25] We regret that we cannot offer the company the security it is seeking. Pursuant to s.98 of the Act the Authority is required to send to the Minister a report on the workings of the Act, and the desirability or otherwise of amending it. We have not yet been persuaded that it is desirable to amend the Act, to overcome the difficulties faced by the company.

[26] For the reasons given, the application must therefore be refused.

DATED at WELLINGTON this 20th day of August 2002

Judge E W Unwin Mr J C Crookston
Chairman Member

cellarsoft.doc