Smale v Lake Wines Limited and Horner [2003] NZLLA 266 (17 April 2003)

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Smale v Lake Wines Limited and Horner [2003] NZLLA 266 (17 April 2003)

Last Updated: 7 March 2010

Decision No. PH 266/2003
PH 267/2003

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 suspension of off-licence number 023/OFF/23/2000 issued to LAKE WINES LIMITED in respect of premises situated at 1106 Tutanekai Street, Rotorua, known as "Arawa Wines & Spirits”

AND

IN THE MATTER of an application pursuant to s.135 of the Act for suspension of General Manager’s Certificate number GM/023/122/2000 issued to MICHAEL ROYCE HORNER

BETWEEN JULIE ANN SMALE

(Rotorua District Licensing Agency Inspector)

Applicant

AND LAKE WINES LIMITED

First Respondent

AND MICHAEL ROYCE HORNER

Second Respondent

BEFORE THE LIQUOR LICENSING AUTHORITY

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

HEARING at ROTORUA on 21 March 2003

APPEARANCES

Ms J A Smale – Rotorua District Licensing Agency Inspector – applicant
Mr S J Lance – for respondents
Sergeant R D Blonkamp – NZ Police – to assist

RESERVED DECISION OF THE AUTHORITY

Introduction

[1] Before the Authority are two applications. The first is an application to suspend an off-licence issued to Lake Wines Limited in respect of a stand alone bottle store situated at 1106 Tutanekai Street, Rotorua, and known as "Arawa Wines & Spirits".

[2] The grounds for the application are that the licensed premises have been conducted

(a) In breach of s.155 of the Act. That section prohibits the sale or supply of liquor to minors.

(b) In breach of a condition of its 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.

[3] The second application is for the suspension of a General Manager’s Certificate issued to Mr Michael Royce Horner. The ground for this application is that the manager has failed to conduct the licensed premises in a proper manner.

[4] Both applications arise from the same set of facts. It is alleged that a 17 year old female was sold liquor. The sale was made by Mr Horner, a director of the licensee company. At the time of the sale, Mr Horner was also the duty manager. The sale to the minor was compounded by the fact that no identification was asked for.

[5] The application was opposed on the basis that Mr Horner not only believed on reasonable grounds that the person to whom he supplied the liquor had attained the age of 18 years, but also that he was the victim of a deliberate attempt to divert his attention.

Background

[6] Since the lowering of the drinking age in 1999, the Police, District Licensing Agencies, and Public Health Officers throughout the country, have been concerned with the ease with which young people were accessing liquor. Research showed that there was a percentage of off-licensees who were prepared to sell liquor to minors without checking for acceptable identification.

[7] In May of 2002, the Rotorua District Licensing Agency, the Police, and Toi Te Ora Public Health conducted its first controlled purchase operation in Rotorua. They were shocked and disappointed to find that nine of the eleven premises visited sold liquor to a 17 year old female volunteer, without her being asked for identification. The operation received a large amount of publicity including a front page article in "The Daily News" on 14 May 2002.

[8] On 15 July 2002, a seminar was held at the Council Chambers from midday to 5.00 pm. All off-licensees were invited to attend. At the seminar, it was stated that there would be another controlled purchase operation. It was stressed that there would be zero tolerance, and that any sales to minors would result in an application to the Authority for suspension or cancellation, and the Police stated that they would proceed with prosecutions. Mr Horner attended this seminar.

[9] On Tuesday 10 December 2002, a second controlled purchase operation was conducted. Thirty off-licensed premises were visited. Only four sold to the volunteers. One of the volunteers was a young woman named Sonja. She was born on 7 February 1985, and was aged 17 years and 10 months at the time of the operation. Sonja said that she wore no make-up, her dress and appearance at the hearing was exactly as it was on the day that she entered “Arawa Wines & Spirits”. In response to Mr Lance she said she did not think that she looked any older than she should. In particular her hair had not been altered.

[10] She entered the premises at about 2.28 pm. She uplifted a bottle of wine valued at $10-95, and took it to the counter. She was served by Mr Horner who spoke to her when she was selecting her wine. He did not ask her for identification, nor did he ask what her age was. She paid for the wine with a $20 note. She took her change and left the shop.

[11] Dawn Audrey Meertens who is employed by Toi Te Ora Public Health as a Health Promoter witnessed the sale. She had entered the shop before Sonja. Ms Meertens observed that the Duty Manager’s name displayed was “M Horner”. She started looking around the shop. Mr Horner asked if he could be of assistance. Ms Meertens was having a discussion with Mr Horner when Sonja entered the shop. She walked over to a wine display area. Mr Horner then asked Sonja if he could help her. She declined his help. Mr Horner then continued his discussion with Ms Meertens. Sonja selected a bottle of wine and took it to the counter. Ms Meertens stopped talking while Mr Horner served Sonja. Mr Horner had a brief exchange with Sonja, and completed the sale. At no time did she hear him ask her for identification or how old she was. She acknowledged that there was adequate signage on the dangers of supplying liquor to minors. Mr Lance submitted that because her ‘brief’ had been altered, her evidence was suspect. Notwithstanding a spirited cross-examination, it was our view that Ms Meerten’s integrity and honesty remained intact.

[12] Ms Smale said Lake Wines Limited has two directors, Michael and Judith Horner. They emigrated from South Africa in 2000, where Mr Horner had quite extensive experience in the catering and liquor industry. Mr and Mrs Horner purchased “Arawa Wines and Spirits” the same year. The off-licence was granted on 6 December 2000. Ms Smale wrote in her initial report on the application for the off-licence that she had no doubt as to the applicant’s suitability and she was confident that Mr and Mrs Horner would make good licensees.

[13] Mr Michael Horner said he had a sports business and a catering business in South Africa before coming to New Zealand. The business is a fine wines outlet, and provides fine wines to restaurants. Consequently, they do not stock liquor that appeals to young people. They never have and never will. He said they make sure that everyone working in the shop is mature, and each has a General Manager’s Certificate. He produced two letters from people who had witnessed minors being rejected who had attempted to purchase liquor.

[14] Mr Horner described what happened when Ms Meertens and Sonja entered the shop. He said he observed Sonja as she entered the shop. His assessment was that she was a mature young woman. He based that assessment on Sonja’s physical attributes, the colour of her hair, and the way she walked. He said that he did not ask her for identification, because he believed that she was eighteen. He said he made that assessment when she walked in the door.

[15] Mr Horner alleged that Ms Meertens had distracted him while he was serving Sonja. He claimed that she went behind his counter not once but twice. He said that he was concerned about shoplifting. He said that he had the incident on videotape. When he was asked if he was going to produce it he said that he had shown it to so many people to get their opinion, the tape was now stretched. Instead he produced letters from people who had ventured their opinions on the incident after having seen the tape. It was his opinion that the incident was a set-up. He said that Ms Meertens talked to him while he was making the sale. Both Sonja and Ms Meertens disputed this. Having heard and seen the witnesses we unreservedly dismiss that claim. Mr Horner had made his decision about the maturity of Sonja as she entered the shop. He had the option of asking her for identification. He chose not to do so. While we accept that Sonja was physically mature, it was not possible to make an assessment of her age without making some further inquiry.

[16] Mr Lance said that the design of the premises was not such that it would attract or encourage young people to patronise the business. Mr Horner was not in the business to sell Mississippi Moonshine or any other drinks favoured by young people. He produced photographs that showed there was plenty of signage in the shop regarding the 18+ card and the penalties under the Act for serving liquor to minors. He submitted that it was a one-off sale that was an error by Mr Horner. The young woman was reasonably mature and is now 18 years old. He said that it seemed Mr Horner had been distracted from paying full attention when he made the sale.

[17] He submitted that the incident had had a significant effect on Mr Horner and he had learnt a lesson. He assured the Authority that Mr Horner would be more vigilant in future, and would not be appearing before it again. Mr Lance produced a number of references testifying to Mr Horner’s work in the community, and the responsible manner in which he ran his business. We are bound to say that there was little sign that the incident had had any significant impact on Mr Horner. He seemed to be of the view that he was a victim in the matter. As was remarked in “The Tragedy of Hamlet, Prince of Denmark” by William Shakespeare Act III Scene II: “The lady doth protest too much, methinks.”

[18] Mr Lance suggested that an option for the Authority might be to consider adjourning the application under s.132(7) of the Act to remedy any matters. That time could be used as a testing period. He submitted that suspension would have a financial effect on the business, and he asked that if a suspension was to be imposed that it be imposed in respect of the General Manager’s Certificate and not the licence. In that respect we note that in Meads Brothers Limited v Rotorua District Licensing Agency (High Court, Rotorua M70/00 9 February 2001) Potter J said at paragraph 35:

“In terms of [the object of the Act] the Authority is concerned with controlling the sale and supply of liquor to the public to contribute to the reduction of liquor abuse. Its powers under the Act must be read and construed in that context. The Authority is not concerned with the viability of businesses who elect to trade in the sale and supply of liquor to the public and who therefore bring themselves within the ambit of the Act, require licences under the Act to pursue their trade, and are subject to the conditions that the Authority may impose in terms of the Act. It is likely that every condition imposed will have an impact, positive or negative, on the economic viability of businesses who operate under licences granted pursuant to the Act.”

[19] The Police pointed to the research being carried out by ALAC, and the Alcohol and Public Health Research Unit, to show that more and more young people were consuming alcohol. It was argued that alcohol is a leading aggravator in the commission of youth crime. It was submitted that since January 2002, 63 young people had been processed in Rotorua alone, for driving with excessive breath or blood alcohol levels. It was for that reason that the Police had lodged prosecutions against the seller, whenever minors had been proved to have purchased liquor. In the present case, a prosecution had been lodged against Mr Horner, but the case has yet to be determined.

The ‘Karara’ Decision

[20] Any enforcement action arising out of sale to a minor will inevitably provoke a discussion of the decision of Panckhurst J in Karara Holdings Limited and others v The District Licensing Inspector and others AP 14/02 Christchurch High Court 8 July 2002. In a decision released in the name of Michael John Lopdell v Aussie Pub Company Limited LLA PH 194/2003, we discussed the issues in more definitive terms, accepting that the decision is about to be considered by the Court of Appeal. We adopted with approval the synopsis of the Karara decision by Mr F Pilditch. He reduced the judgment to four main principles as follows:

• Part IV of the Act is intended for situations where the Authority seeks to enforce the management responsibility aspect of the licensing regime;
  
• Orders under s.132 of the Act can be made by the Authority where the Authority considers the orders appropriate to secure a genuine licensing end;
  
• An order for suspension under Part VI of the Act may or may not be punitive and deterrent in nature [but] these ends are not the essential purpose for which the power is conferred;
  
• Immediate resort to s.132 of the Act may be appropriate following a single breach of the Act either in the absence of a prosecution or with a prosecution in tandem. Resort to s.132 of the Act in these circumstances may be appropriate where a breach is so serious or of such a nature that variation, suspension or cancellation of the "holder" licence is necessary.
  

[21] The difficulties for the Authority in the interpretation of the decision include whether a breach of this nature results from a failure of managerial responsibility, whether any order will secure genuine licensing ends, and whether the breach is considered to be "serious". In this case, there has been a prosecution of the seller, and it will be noted that if a conviction had been entered, the case would probably have come back to the Authority at any event pursuant to the provisions of s.132A of the Act. As to genuine licensing ends, one only has to stand in line at a supermarket to notice the impact of the Karara decision. In those circumstances, we see no conflict, in dealing with the matter .

Decision

[22] We take the view that the breach on this occasion was the result of carelessness. Mr Horner may well be right when he states that few minors enter his premises. This can lead to apathy in enforcing the law. Mr Horner was aware of the possibility of the controlled purchase operation. The issue had been well publicised in the newspapers, and he had attended the seminar for licensees following the disappointing result of the first controlled purchase operation. We had the opportunity to see the young woman dressed as she appeared in Mr Horner’s shop. Mr Horner tried to suggest that she had changed her hair colour, and she looked more mature than her age. We were satisfied that her appearance was such that any prudent licensee or manager would ask her for identification. In fact she had been to other premises the same day, and had been asked for identification. As indicated earlier, we were unimpressed with Mr Horner’s attempt to deflect responsibility from himself.

[23] The issue in this case is whether orders should be made. That issue must reflect the seriousness of supplying liquor to minors, when viewed against a background of two factors.

(a) The potential increase of liquor abuse. Although there was no abuse reported in this case, some minors who have purchased liquor unlawfully, have ended up in a hospital, or have become involved in offending.

(b) The 1999 reduction of the legal drinking age from 20 to 18.

[24] This major change of policy was accompanied by a number of other statutory measures. These measures were designed to bolster the detection and enforcement of breaches of the new law. Parliament clearly took the view that the supply of liquor to minors was a very serious liquor abuse issue. It gave the Act the necessary teeth in an attempt to actively discourage those who might be tempted to supply liquor to persons under age. The measures which were enacted included:

(a) Section 2A. The provision of “evidence of age documents”.

(b) Section 132A. The mandatory reporting of certain proven offences (including sales to minors) to the Authority, and a requirement for the Authority to consider whether a public hearing to suspend or cancel the licence is appropriate.

(c) Section 172A. A new offence for licensees who fail to appoint managers, or who fail to ensure that the managers comply with the law.

(d) Section 155(2A). Not only were all penalties doubled for all offences, the penalty for supplying liquor to minors was increased to a maximum of $10,000 (for managers and licensees), and the District Court was given the power to suspend a licence for up to 7 days.

[25] Our views about the impact of these provisions were first expressed in Onehunga Wines & Spirits Co. Limited LLA PH 311-312/2001. As was said in that case:

"Since the age limit was reduced to eighteen, there have been regular concerns expressed throughout the country about the ability of young people to obtain alcohol ... When Parliament reduced the age limit to eighteen it doubled the penalties. It was sending a message to the public that people who breached this aspect of the law must expect rigorous enforcement and severe consequences."

[26] We accept that in the light of the Karara decision (yet to be ruled upon by the Court of Appeal), these comments may be viewed by the Court as unacceptable. Nevertheless, the Authority has signalled that in the area of sales to minors, there will be cancellations and suspensions. The principle that "a licence will be easy to get and easy to lose" was first coined by the authors of "Sale of Liquor", and subsequently quoted by the Authority as far back as 1990 in Douglas-Oliver Corp Ltd [1990] NZAR 411. It has been cited in a number cases since.

[27] We do not accept counsel’s submission that Mr Horner may have been distracted. We remain unsure that a lesson has been learnt although we accept that Mr and Mrs Horner are now more vigilant. Nevertheless, the Inspector herself has spoken very highly of Mr and Mrs Horner.

[28] In exercising our discretion under s.132(6) of the Act, we believe that it is desirable to make orders. Put in another way, if no sanction was imposed, we would not be exercising our discretion in a way envisaged by s.4(2) of the Act:

The Licensing Authority, every District Licensing Agency, and any Court hearing any appeal against any decision of the Licensing Authority, shall exercise its jurisdiction, powers, and discretions under this Act in the manner that is most likely to promote the object of this Act.

[29] At issue then is the length of any suspension. In the original Karara decision LLA PH 216–229/2002, the Authority was confronted by seven applications for suspension following a controlled purchase operation. Four of the licensed premises were supermarkets, and three were taverns with separate bottle stores. For six of the premises, this was the first time they had been apprehended for making illegal sales. The off-licences were suspended for five days.

[30] In Taylor v P H and C A Wheldale LLA PH 79-80/2002, both the on and off-licence were suspended for seven days arising from the sale of one 26 oz bottle of rum to a minor. However in that case, the minor subsequently ended up in hospital with alcohol poisoning.
[31] In South Canterbury recently, the Authority suspended the off-licence for a grocery/supermarket for three days for making two separate sales to minors in controlled purchase operations. However in that case, an agreement had been reached between the respondent and the Police, and the suspension was imposed over the weekend. In another case, an off-licence attached to a tavern was suspended for four days for two separate sales to minors in controlled purchase operations. The references are McCrostie v M J and H R Roper LLA PH 31/2003 and McCrostie v Grant Stevenson Limited LLA PH 48/2003. It is our view that this episode was made worse than either of those cases because a director of the licensee company made the sale.

[32] There have been two recent Rotorua cases involving stand-alone liquor facilities. We have taken the view when making an order for suspension of a liquor off-licence, that there is a clear difference between stand-alone liquor facilities and taverns or grocery/supermarkets. An order for suspension in respect of the first category would have a greater effect than an order for suspension in respect of the second. Hence, in the first case, Aileen Constance Fell, Paul Fell and John Fell as trustees of the Fell Family Trust LLA PH 188-189/2003, the Authority suspended the off-licence for 24 hours, taking into account the Trust’s exemplary record in the industry. It warned that any perceived leniency is unlikely to be repeated. That case was followed by Kintara Holdings Limited where the director of the licensee company had demonstrated his commitment to his legal obligations under the Act, and dismissed the employee making himself liable to a claim in the Employment Tribunal. Consequently, the Authority accepted the Inspector’s recommendation, and adjourned the application for six months to enable the company to undertake an audit of its systems.
[33] Taking into account Mr Horner’s good record in the industry to date, and the fact that this is a stand alone bottle store, we propose to suspend the licence for twenty-four hours, thereby dealing with the matter in the same way as the Fell Family Trust. We considered the question of an adjournment, but have decided against it. This is partly because there are no matters that need to be remedied, and partly because we take the view that applications for suspension are one of the ways in which the object of the Act can be achieved. It is our view that a reduction in liquor abuse cannot be achieved, if the law relating to the sale of liquor to minors is ignored or treated with disrespect. It should be obvious to all that any perceived leniency is unlikely to be repeated.
[34] The feature of this case is that the sale was made by the manager on duty. Mr Horner had little excuse for what had happened. A manager is the person who has benefited from specific training in upholding the law, and the conditions of the licence. He is the person charged with leading staff by example. He carries the responsibility pursuant to s. 115 of the Act, of ensuring compliance with the conditions of the licence, and the provisions of the Act. He failed the challenge. Had he asked either "Do you have identification?" or "Are you 18?" the volunteer was instructed to tell the truth. It is likely that had either question been asked, no sale would have taken place.
[35] Balancing all the competing factors, off-licence number 023/OFF/28/2000 issued to Lake Wines Limited will be suspended for 24 hours from 6.00 am on Wednesday 30 April 2003.
[36] General Manager’s Certificate number GM/023/122/2000 issued to Michael Royce Horner will be suspended for one month from 6.00 am on Wednesday 30 April 2003.

DATED at WELLINGTON this 17th day of April 2003

Judge E W Unwin Mr J C Crookston
Chairman Member

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