Lopdell v Cigar Limited [2002] NZLLA 705 (17 December 2002)

Last Updated: 29 December 2011

Decision No. PH 705/2002 –

PH 707/2002

IN THE MATTER of the Sale of Liquor Act 1989

AND

IN THE MATTER of an application pursuant to s.132 of the Act for cancellation or suspension of on-licence number 007/ON/143/98 issued to CIGAR LIMITED in respect of premises situated at 419-423 Parnell Road, Auckland, known as "Cuba”

AND

IN THE MATTER of an application pursuant to s.135 of the Act for suspension of General Manager's Certificate number GM 007/952/00 issued to ANDREW JAMES FORDHAM

BETWEEN MICHAEL JOHN LOPDELL

(Police Officer of Auckland)

Applicant

AND CIGAR LIMITED

First Respondent

AND ANDREW JAMES FORDHAM

Second Respondent

AND

IN THE MATTER of an application by CIGAR LIMITED pursuant to s.18 of the Act for renewal of an on-licence in respect of premises situated at 419-423 Parnell Road, Auckland, known as “Cuba”

BEFORE THE LIQUOR LICENSING AUTHORITY

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

HEARING at AUCKLAND on 9 December 2002

APPEARANCES

Senior Sergeant M J Lopdell – New Zealand Police – for applicant and in
opposition to application for renewal
Mr D W Sara – Auckland District Licensing Agency Inspector – in opposition to
application for renewal
Mr D J Neutze - for respondents and applicant for renewal

RESERVED DECISION OF THE AUTHORITY

Introduction

[1] Before the Authority are three applications. The first application is brought by the Police pursuant to s.132 of the Act. It is for the cancellation or suspension of an on-licence in respect of the premises situated in Parnell, Auckland, known as "Cuba”. The licence is held by Cigar Limited, a private company owned by Patrick Martin Chandulal and Jonathan Olsen.

[2] The second application is also brought by the Police. It is brought pursuant to s.135 of the Act, and is for the suspension of a General Manager's Certificate issued to Andrew James Fordham.

[3] The third application is by Cigar Limited for the renewal of its on-licence. This application is opposed by the Police, and the District Licensing Agency Inspector. The basis for the opposition is the argument that the current application for cancellation or suspension of the licence, needs to be resolved prior to any grant of renewal, particularly on the issue of suitability.

[4] The grounds to cancel or suspend the on-licence are:

(a) That the licence has been conducted in breach of ss.130, 165, 172A and 171 of the Act:

(b) That the licence has been conducted in breach of the conditions of the licence:

(c) The conduct of the licensee is such as to show that it is not a suitable person to hold the licence.

[5] The allegations in support of those grounds, were that the company had traded in the early hours of the morning of Anzac Day contrary to the provisions of s.117 of the Sale of Liquor Amendment Act 1999. Further that the company had failed to notify the appointment of its manager. Finally, that the company has been trading as a tavern, in breach of the terms and conditions on which the licence was issued.

[6] The ground for the application to suspend the manager’s certificate issued to Andrew James Fordham are:

"That the manager has failed to conduct the licensed premises in a proper manner."

[7] The allegations in support of this application were largely the same as for the application in respect of the on-licence. In Mr Fordham’s case, the underlying inference was that he was the duty manager at the time the premises traded unlawfully on Anzac Day.

The Background Facts

[8] On 4 September 1998, the Authority issued the present on-licence to Cigar Limited. The premises at 419-423 Parnell Road had previously been licensed as a restaurant known as "The Cathedral Restaurant and Bar". The Authority’s decision was dealt with "on the papers" because there was no opposition. The general nature of the business was recorded as being a restaurant. In its decision, the Authority stated:

"The applicant intends to sell liquor not only to any person who is present for the purpose of dining, but also to any other person who is present on the premises. Nevertheless the applicant portrays the main part of the business as being the promotion and sale of food of a range and style detailed in a sample menu submitted. On that basis we accept that the premises will remain within the definition of a restaurant as defined in s.2 of the Act and that the sale of liquor will not be the principal business ...

We point out that should the conduct of the business become other than as portrayed in the application, or should the manner of operation bring it to the attention of the enforcement authorities, it will be open to them to lodge an application pursuant to s.132 of the Act for variation, cancellation or suspension of the licence."

[9] Cigar Limited had been incorporated by Patrick Martin Chandulal and Varick Neilson. Mr Neilson was a well known chef at the time. The menu which was submitted with the application, reflected his interest in good food. Patrons were to be offered over a dozen dishes including Bluff or Nelson oysters, sweet chilli prawns or prawns in garlic butter sauce, lamb cassoulet on mash potatoes, and a Heineken battered white fish fillet with pomme frites and tatare. The cheapest item was a seven piece Asian deli selection and dipping sauce, priced at $5.50. The most expensive item was the Bluff oysters at $38.50 a dozen. The set up of the restaurant was a little unusual, as there was to be a lounge area with leather couches surrounding an open fireplace. In addition there were to be high tables and chairs, together with a bar area. There was no formal dining space. The theme was attuned to Cuban cigars, which were available for purchase.

[10] Although "Cuba" has a fully equipped kitchen, it is quite clear that the emphasis on food has diminished over the years. Mr Neilson left the business in 2000. From that time the emphasis on the sale of liquor has grown, at the expense of both the variety and quality of food on offer. Mr Chandulal acknowledged that over the four years that "Cuba" had been trading, the sale of food was never higher than about 15% of total turnover. It seems that initially there was less demand for quality food than had been anticipated. Mr Chandulal confirmed that the business sold on average between 120 and 150 dishes a week. These were mainly for the Asian deli selection, and nachos.

[11] The Police sought discovery of turnover percentages pursuant to s.4C(1) of the Commissions of Inquiry Act 1908. These showed that for the years ended 31 March 2002, the percentage of sale of food was 5%. The sale of tobacco made up a further 8%, and the remaining 87% was from the sale of liquor. Although Mr Neutze argued otherwise, it is an inescapable conclusion that the premises had gradually changed from the original concept as outlined in the original application. It could not be seriously argued that the premises were not being used "principally for the provision to the public of liquor and other refreshments". These words are taken from the definition of a tavern in s.2 of the Act.

[12] The on-licence was duly renewed for a further three years on or about September 1999. There was no opposition either from the Police or the District Licensing Agency. However, at the time Parliament was debating the Sale of Liquor Amendment Act 1999. A number of significant changes were made to the way liquor was sold in New Zealand. Pursuant to s.13 of the Amendment Act, all on-licences granted after 1 April 2000 would contain the following condition:

It is a condition of every on-licence granted in respect of a hotel or tavern that no liquor is to be sold or supplied on Good Friday, Easter Sunday, Christmas Day, or before 1 pm on Anzac Day to any person other than –

(a) Any person who is for the time being living on the premises whether as a lodger or an employee of the holder, or otherwise; or

(b) Any person who is present on the premises for the purpose of dining.

[13] Section 117 of the same Act provided that all on-licences in force prior to 1 December 1999 would have a similar condition. The relevant part of the section reads:

(1) On and from the commencement of this section, an on-licence in force immediately before the commencement of this section has effect as if –

(b) The licence contained a condition prohibiting the sale and supply of liquor before 1 pm on Anzac Day.

[14] The considered wisdom is that this little known section was passed to ensure that there was consistency with the operating days of those hotels and tavern licences which were already in existence when the amendment was passed. It seems however, that due to a drafting error, the amendment not only covered all hotels and taverns, but all restaurants, night-clubs and entertainment centres as well. According to the strict letter of the law, if "Cuba" was trading with a restaurant style licence, it was required to be closed on Anzac Day prior to 1.00 pm, because its licence had been issued prior to the amendment. If it was trading with a tavern style licence, it could only be open prior to 1.00 pm on Anzac Day if patrons were present "for the purpose of dining."

[15] In the early hours of Anzac Day 25 April 2002, members of the Police and Licensing Inspectorate made a number of checks on various on-licences in the Auckland City to check compliance with the Act. At about 12.17 am Senior Sergeant M J Lopdell and Mr D W Sara visited "Cuba". At that time they were unaware that it was trading with a restaurant style licence. They noted that the premises were full with standing room only. Well over 100 patrons were present. There was steady service of liquor, and no evidence of food being consumed. In their opinion, the premises were trading as a tavern. Most of the kitchen was disused. There were six dirty dinner plates and six bowls on various benches. Some of the bowls contained remnants of sour cream.

[16] Mr Andrew James Fordham was identified as the duty manager. He produced the licence which made no mention of trading on Anzac Day, and which allowed sales to casual drinkers. The licence reads:

"Cigar Limited is authorised to sell and supply liquor, on the premises situated at 419-423 Parnell Road, Parnell, Auckland for consumption on the premises to any person who is present on the premises for the purpose of dining; or any other person who is present on the premises."

[17] The conditions of the restaurant style licence include:

"(b) Liquor may be sold only on the following days and during the following hours; on such days and during such hours as the premises are being operated as a restaurant but not other than on the following days and during the following hours: Monday to Sunday 7.00am to 3.00am the following day.

(c) Food shall be available for consumption on the premises at all times when the premises are open for the sale of liquor in accordance with the menu submitted with the application for a licence or variations of the menu of similar range and standard."

[18] Mr Fordham said that he had been told by his employer that the licence entitled Cuba to trade on Anzac Day because of the casual drinking provision. He said that they were trading in their normal way and intended to close at 3.00 am. Mr Fordham presented a menu which consisted of a cheese board, Asian deli, wedges, nachos, french fries and chocolate brownies. There were two items which were contained in the original menu presented in 1998. These were the Asian deli selection and the cheese board. It will be noted that this was in direct breach of condition (c) of the licence referred to in paragraph [18]. The evidence was that there was also a large sign over the bar which reads:

"Hungry? CUBA has a great selection of food available – ASK AT BAR."

[19] Senior Sergeant Lopdell confirmed that notice of Mr Forham’s appointment had never been sent to the Police, or the District Licensing Agency. He acknowledged that although he had visited the premises from time to time, he had never lodged a complaint with the licensee concerning the manner of trading. It seems to us that with the large number of licensed premises in Auckland, there are insufficient resources within the Police and the District Licensing Agency, to carry out an audit on all licensed premises. Provided a licensed premises does not come to the attention of the enforcement agencies, it may, as in this case, be in breach of the conditions of its licence and carry on undetected. On 21 May last the Police received a notice of appointment for Mr Fordham. However, Mr Fordham had commenced work as the manager in January 2001.

[20] Mr Fordham obtained his manager’s certificate in September 2000. He recalled that when carrying out his training, Hospitality Management Consultants had stressed the importance of the terms of the licence. Prior to commencing work with "Cuba", he had worked at premises in the Viaduct. He carefully noted that Cuba’s licence had no restrictions about trading on Anzac Day. On the other hand he appears to have missed the conditions restricting the trading hours to the time when the premises was being operated as a restaurant, and ensuring that there would be a variety of good food on offer.

[21] Mr Forham stated that no staff are specifically employed in the kitchen. The bar persons are trained to produce the food in accordance with the menu. They used the microwave, the top grill, and the deep fryer. On the night in question, his staff had produced about 35 dishes consisting mainly of Asian delis, fries, wedges and nachos. We note in passing that such food is much more likely to be found in a tavern than a restaurant. Nevertheless, Mr Fordham argued that because food was available for consumption, the premises were being operated as a restaurant. He has since left his employment with "Cuba".

[22] As we said in our latest report to Parliament:

"It has become apparent that the present definition of “restaurant” in s.2 of the Act is not specific enough in distinguishing this type of operation from other premises trading pursuant to on-licences. A restaurant is presently defined as “any premises in which meals are regularly supplied on sale to the public for consumption on the premises.”

We have noted that a few licensed premises which have a "restaurant" style licence, have changed the style of the premises, while still maintaining that they are operating a restaurant, because they are regularly supplying meals. The fact that the meal may consist of snack food appears to be irrelevant."

[23] Mr Robin Graeme Poole is a non-sworn member of the New Zealand Police. He noted that the application for renewal dated 28 August last, purported also to be a notice required under s.225 of the Act advising of changes to the company shareholding and directorate. This notice is required to be given to the Secretary of the Authority within ten working days after the board becomes aware of the change to which it relates. The evidence was that Mr Jonathan Olsen had become a director and shareholder on 1 April 2002. Mr Olsen has operated a number of businesses, but this is his first venture into a licence owning company. He was surprised and dismayed that doubt had been cast on the suitability of the company, as he believed that it had always traded within the terms of the law and the conditions of the licence.

[24] Mr Chandulal has had nearly ten years experience in the hospitality industry. Judging by the references produced, he is well respected as a member of the industry. He confirmed that the company has taken a number of remedial steps since the suspension/cancellation application was filed. The quality and variety of dishes on the menu have been increased and enhanced. The current menu is now more in keeping with the original application. He confirmed that "Cuba" advertises in the Dining Out Guide. The advertisement describes "Cuba" as a Cigar Emporium and Cocktail Lounge. The business has been a member of the Restaurant Association, and its membership is still current.

[25] Mr Chandulal commenced investigating changing to a tavern in late 2001. He consulted a planning company, and in March 2002, he commissioned Traffic Planning Consultants Limited to prepare a traffic report for a proposed resource consent application to operate a tavern from the site in Parnell Road. The application for consent was lodged on 12 June 2002, and granted on 16 August 2002. Mr Colin Grant Hardacre is a senior consultant with Planning Network Services Limited. He confirmed that as soon as the s.9(1)(e) certificate has been received, he has instructions to make an application for a tavern licence.

The Respective Submissions

[26] Mr Neutze submitted that the premises had never been the subject of any proceedings by the Police or the District Licensing Agency. They could therefore not be described as "problem premises" as discussed in M J Lopdell v Audiophile Bar and Café Auckland High Court, 18 February 2002. In that case Paterson J concluded:

"There is no inconsistency, in my view, in treating non-problem premises differently from problem premises when considering the objects of the Act."

[27] He also submitted that the breach of s.117 of the Amendment Act was created by ignorance. Furthermore, any confusion had been aggravated by the wording on the licence which did not prevent trading on Anzac Day. He referred us to our comments in S.I.E.Holdings Limited LLA PH 383-384/2002. In that case we said:

"The Act places considerable emphasis on the conditions of a licence. It insists that the licence be placed in a prominent place in the licensed premises. It provides for strict enforcement if any of the conditions are broken. For those reasons alone, all licences should be accurate and reliable. It is our view that licensees should be able to rely on them.”

[28] In that case, and in the more recent case of Dispensary Bar Limited LLA PH 681-685/2002, the Authority determined to decline the applications for suspension because, in each case, inter alia, the respondents had relied upon the wording in their respective licences. Mr Neutze argued that there had been no breach of the conditions of the licence. He suggested that it would be wrong to rely on the fleeting observations of witnesses at 12.15 am. It was his submission that any restaurant was likely to have minimal dining at that time of night.

[29] Mr Neutze referred to the decision of K & J Fraser Ltd v D Major & others and the Auckland District Licensing Agency Auckland High Court AP 113-IM/01 23 November 2001, in which Chambers J referred to the definition of a restaurant in the Auckland District Plan. With respect, the issue in this case is whether the conditions of the licence have been broken. The licence made it clear that liquor could only be sold when the premises were being operated as a restaurant. To suggest that premises are being operated as a restaurant when chips, nachos and Asian delis are available, and the percentage of food sales to total turnover is 5%, finds little favour with us.

[30] In his closing submissions, Senior Sergeant Lopdell referred to the systemic failures to notify the appointment of the manager within the statutory time period. The same argument applied to the failure to notify the termination of three other managers. He submitted that s.165 of the Act had been breached, partly because of the sales made on Anzac Day, and technically because Mr Fordham’s appointment had not been legally notified.

[31] It was the Police argument that on Anzac Day, the premises were not trading as a restaurant. The kitchen was not staffed, and no dining whatsoever was taking place. Senior Sergeant Lopdell argued that based on the figures which had been supplied, the condition of the licence had been breached for some time. Furthermore, it was contended that the food which was available had no relation to the menu items submitted with the original application. Finally, Senior Sergeant Lopdell argued that Mr Fordham with his experience, should have known better than to allow trading on Anzac Day or in breach of the conditions of the licence.

Authority’s Conclusion and Reasons

[32] From the comments we have made thus far, it should be clear that we are satisfied that the grounds specified in ss.132(3) and 135(3) have been established. In the case of the licensee, there were the procedural breaches of ss.130 and 172A of the Act. (Failure to notify appointment of manager). Mr Chandulal accepted responsibility for the omission, and it has since been rectified. We saw the breaches as nothing more than honest mistakes or lapses. There was nothing sinister behind the procedural flaws. The lessons have been learnt. In our opinion it would be undesirable to make further orders, or adjourn the applications to give the licensee the opportunity to remedy such matters.

[33] Equally we were satisfied that ss.171 and 165 had been breached. (Allowing persons on licensed premises outside licensing hours, and unauthorised sale and supply). The breaches came about because of the 1999 amendment to the Act. It is accepted that it was unlikely that Parliament intended to prevent restaurants from trading on Anzac Day. Furthermore, the licence did not contain any provision restricting trading in this way. Although it is a well known legal maxim that ignorance of the law is no excuse for committing an offence, in this case, we are satisfied that the making of a suspension order would not be desirable. The licensee has taken steps to ensure that the style of licence will be altered. This will mean that in future, no such trading will be possible unless patrons are present for the purpose of dining.

Given current trading, this seems unlikely.

[34] We accept Sergeant Lopdell’s argument that there is also a technical breach of s.165 of the Act, because of the non-notification of Mr Fordham’s appointment. However, for the reasons stated in paragraph [33], it would not, in our opinion, be desirable to make orders for suspension.

[35] However, we take an entirely different view of the breach of the conditions of the licence, and to some extent, the licensee’s conduct. It is quite clear to us that these premises have been trading as a tavern almost since they began. In our view, what has happened to these premises is serious. Were we to have found that the course of conduct had been deliberate or underhand, we would have had no hesitation in considering cancellation. It needs to be stressed that in this case we found no evidence of "mal fides".

[36] As stated above, there has been little or no compliance with the terms on which the original licence was issued. The main part of the business has not been the promotion and sale of a range and style of food depicted in the menu which was produced. The sale of liquor has become the principal business. In this case, the evidence of the witnesses has been corroborated not only by the figures, but the licensee’s decision to convert to a tavern.

[37] In Leftfield Sports Café Limited v The Police AP 67-SW01 Auckland High Court 31 October 2001, His Honour Justice Rodney Hansen was confronted with an argument about the use of turnover figures. He said at paragraphs 21 to 24:

"Contrary to Mr Wiles’ submissions, I consider evidence of revenue from various sectors of the business is highly relevant in building that picture. It provides an objective measure of the business generated on the premises and some guide therefore to the use to which they are being put ... in this case the turnover figures are consistent with the anecdotal evidence given by Police witnesses ... I do not understand the Authority to have treated the turnover figures as conclusive but as confirming the overall picture which emerged from the evidence ... Although members of the public may well be attracted to the premises by the dancing and other entertainment on offer, it is clear that the consumption of alcohol is the primary and unifying activity when they are there."

[38] Although we accept that the Act’s definition of a restaurant means "any premises in which meals are regularly supplied on sale to the public for consumption on the premises", we do not accept that this can be the regular supply of wedges, nachos, french fries and the like. We accept that these items qualify as "food" in terms of the criteria in s.14(5)(b) of the Act. They will satisfy the Act’s requirements for on-licensees to make provision for the supply of food. However, we are no longer prepared to accept the argument that such items may constitute a meal for the purpose of establishing whether premises are being operated as a restaurant. To suggest that "Cuba" was being operated as a restaurant in these circumstances, flies in the face of common sense.

[39] In this case, there had also been a complete failure to comply with the provision of food in accordance with the menu submitted. In making these findings, we re-iterate that we have been unable to detect any conscious attempt to circumvent the law. We have taken into account, that the licensee made a conscious decision prior to the filing of the applications to put its house in order by applying for resource consent, and in due course applying for a new licence. We are also prepared to accept that there were no liquor abuse issues. Nevertheless, conditions on a licence are not imposed without reason. Had the Authority known that the range and quality of food was not going to be maintained, the probability is, that the original licence would not have been granted. We believe that it is desirable to make an order for suspension. The period of time will be reduced to take into account the above matters.

[40] In the case of Mr Fordham, we have taken the view that although he was the manager, when the breaches occurred, he took over in January 2001 when the premises were already functioning. He then took his instructions from his employer. The Police concerns were mainly focused on his management of the premises on Anzac day. We have already stated our views on how such trading came about. For those reasons, we do not believe it desirable to make orders affecting his certificate.

[41] So far as the renewal is concerned, we are prepared to renew the licence but only for a limited period, to ensure that the application for a new tavern style licence is carried through. Accordingly, we make the following orders.

(a) On-licence 007/ON/143/98 issued to Cigar Limited is hereby suspended for one week from 6.00 am on Monday 13 January 2003 to 6.00 am on Monday 20 January 2003.

(b) The application for suspension in respect of Mr A J Fordham is refused.

(c) The above on-licence issued to Cigar Limited is renewed for one year to 4 September 2003.

DATED at WELLINGTON this 17th day of December 2002

Judge E W Unwin Mr J C Crookston
Chairman Member

Cuba.doc(nl)