Great Outcomes Limited [2002] NZLLA 665 (26 November 2002)

Last Updated: 31 January 2012

Decision No. PH 665/2002

IN THE MATTER of the Sale of Liquor Act 1989

AND

IN THE MATTER of an application by GREAT OUTCOMES LIMITED pursuant to s.31 of the Act for an off-licence in respect of premises situated at 18 Kenny Road, Remuera, Auckland, known as “Great Outcomes Limited”

BEFORE THE LIQUOR LICENSING AUTHORITY

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

HEARING at AUCKLAND on 20 November 2002

APPEARANCES

Mr J H Wiles – for applicant
Mr G S Whittle – Auckland District Licensing Agency Inspector – in opposition

RESERVED DECISION OF THE AUTHORITY

Introduction

[1] This is an opposed application for an off-licence. The applicant wishes to sell liquor as part of a gift hamper business. The application is brought on the basis "that the sale of liquor would be an appropriate complement to the kind of goods sold in the premises."

[2] The sole basis for the opposition is whether the sale of food is the principal business of the premises. If it is, then pursuant to s.36(4) of the Act, the Authority is precluded from having jurisdiction to issue such a licence.

[3] In a decision dated 10 December 2001, known as Lopdell v Deli Holdings Limited AP 97/01 (High Court Auckland), Randerson J concluded that s.36(4) of the Sale of Liquor Act 1989 precluded the grant of an off-licence to premises on which the principal business was the sale of food or groceries. The ruling applied whether or not the business or the premises, were similar in nature to a supermarket or grocery-store.

The Application

[4] Great Outcomes Limited is a private company owned by Giles David Clive Potter, and his wife, Sonya Mary Potter. Mr Potter is the sole director. The company is a business consultant offering a range of commercial services. Mr Potter carries out such work from an office in downtown Auckland.

[5] Recently, the company decided to branch out into the sale of corporate gift hampers, some of which would contain bottles of wine or other forms of liquor. The expectation for the business is that the hamper business sales will represent about 20% of total revenue. It is intended that the business will be operated by Mrs Potter from her home in Remuera. The basement of the home is to become the area where the products would be stored and packed. There would be no public access to the basement, and all orders would be by mail and phone.

[6] Mrs Sonja Mary Potter was the manager of the hamper department at Fortnum & Mason plc in London for a period of five years. Judging by the brochure which she has produced, we have no doubt that the business will be well received. The Authority is more than satisfied that off-licence sales of liquor would be an appropriate complement to the kind of goods which are to be sold in the hampers.

[7] There are no problems with the suitability of the applicant company. As indicated above, there will be no retail sales at all. Nor are there any resource management issues concerning the use of the basement, a consent having been granted on 13 September last. In terms of the criteria to be considered under s.35 of the Act, the application would normally be granted an off-licence on the papers. However s.36(4) of the Act prevents this Authority from issuing an off-licence for complementary liquor sales, where the sale of food or groceries is the principal business on the premises.

[8] Mrs Potter pointed out that the packaging was an important feature of each hamper. Part of the marketing of the hampers, required that the packaging or some item in the hamper, could be retained as a useful commodity. For some of the proposed hampers shown in the brochure, over 50% of the contents were non-food items including the packaging. Some of the hampers contained porcelain and decorations apart from the basketware or containers. However, it was clear that the contents of each hamper really depended on the wish of the individual customer.

[9] Mr J H Wiles argued that the business itself was not about the sale of food. It was the sale of composite gift packages or hampers which happened to include food. We note that the New Shorter Oxford Dictionary defines a ‘hamper’ as:

“... a large basket or wickerwork packing-case with a cover, used especially, for packing or transporting food, drink, etc.”

[10] In an effort to ensure that a licence could be granted, Mrs Potter gave an undertaking that the food content of the hampers would not exceed 50%. In this way it was felt that the company might be able to overcome the constraints of the Act. The undertaking read:

“I, Sonja Mary Potter, shareholder and manager of the applicant company, Great Outcomes Ltd., undertake to use my best endeavours to ensure that the total value of non-food items including alcohol, packaging and other gift items will exceed 50% in proportion to foodstuffs in relation to overall hamper sales.”

[11] As can be seen, the undertaking is a qualified one. When the undertaking was referred to the District Licensing Agency Inspector he expressed the view that a licence granted on the basis of such an undertaking would be impossible to enforce.

The Opposition

[12] Mr G S Whittle referred to the original application. It was stated that the sale of liquor would not be the principal purpose of the business. The principal purpose of the business was described as:

“Packing gift hampers in which alcohol may be included.”

[13] He noted that the breakdown of anticipated revenue was:

Packaging materials $ 2,860

Non-perishable food products $11,680

Wine etc. $12,255

[14] Given the relative or likely disparity between the retail values of the food products and the wine, the figures could be misleading. Nor was it clear whether perishable food products might be sold. Mr Whittle submitted that the corporate hamper business was mainly concerned with sale of food items as depicted in the application. With regret, he felt unable to support the application in the light of the recent decision from the High Court.

Conclusion

[15] Section 36 of the Act seeks to describe the types of premises in respect of which off-licences may be granted. Since the whole section needs to be looked at it is now set out in full:

36. Types of premises in respect of which off-licences may be granted---(1) Except as provided in subsections (2) to (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 any 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.

[16] It seems clear to us that this is the sort of business which logically should have an off-licence. Liquor abuse issues are almost non-existent. Nevertheless, we are bound by the judgment of the High Court.

[17] In our Annual Report to Parliament for the year ended 30 June 2002 we made the following remarks:

3.3 An example of inconsistency in licences has also been highlighted by another Auckland High Court decision being Deli Holdings Limited AP 97/01. A number of mixed businesses and food/pizza outlets have been granted off-licences pursuant to s. 36 (2) (b) of the Act. The above decision relates to s. 36 (4) – (Inability to grant such a licence to premises on which the principal business is the sale of food or groceries.)

3.4 The High Court held that no off-licence can be granted to such premises in the future. This ruling while undoubtedly correct in law, appears to be contrary to the Supplementary Order paper introduced to the House on 23 May 1989. The original aim was to ensure that no grocery could be granted an off-licence under the complementary provisions of s. 36 (2) (b) of the Act. We would recommend the deletion of the words “or any other premises on which the principal business is the sale of food and groceries” from s. 36 (4) of the Act. This would still prevent supermarkets and groceries from obtaining back door access to the whole range of liquor, and at the same time ensure that specialist businesses such as delicatessens, could sell liquor as an appropriate complement.

[18] Accordingly, while we have sympathy for the position in which the applicant finds itself, we have not been satisfied that the sale of food from the premises is not the principal business to be conducted. It seems to us that any attempt to limit the quantity and value of the food items would be artificial.

[19] We note that percentages of sales can be used by the Authority when trying to establish the principal business of any venture. For example Regulation 8(2)(j) of the Sale of Liquor Regulations 1990 requires an applicant for an off-licence in respect of a grocery store to advise:

“Particulars of the principal business of the store, including evidence and certified accounts showing the percentage of turnover that is derived from the sale of main order household foodstuffs.”

[20] However, percentage of turnover is but one of the ways in which the Authority determines what the principal business is. We have already commented on the disparity between retail values of wine and food. The number of items in each hamper would clearly show food as being the major component. As we have already stated, the applicant carries the onus of satisfying us that the principal business to be conducted in the basement of Mrs Potter’s home is not the sale of food. The company has been unable to do this and accordingly the application must be refused.

[21] As we have subsequently pointed out to Mr Wiles, if the sales were made from the company’s office in Auckland in accordance with the Sale of Goods Act 1908, then it seems to us, that the principal business of the company from those premises would clearly be the consultancy work carried out by Mr Potter. Mrs Potter could still carry out the storage and packing of the hampers from her basement. Should the office warrant an appropriate resource management certificate, then it may well be that an off-licence could be granted by the District Licensing Agency. Such a result would certainly be in keeping with the company name.

DATED at WELLINGTON this 26th day of November 2002

Judge E W Unwin Mr J C Crookston
Chairman Member

GreatOutcomes.doc(nl)