Sara v Gad Holdings Limited [2003] NZLLA 484 (21 July 2003)

Last Updated: 4 June 2010

Decision No. PH 484/2003

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 cancellation of on-licence number 007/ON/321/2000 issued to GAD HOLDINGS LIMITED in respect of premises situated at Basement Level, 166 Queen Street, Auckland, known as "Fu”

BETWEEN DONALD WILLIAM SARA

(Auckland District Licensing Agency Inspector)

Applicant

AND GAD HOLDINGS LIMITED

Respondent

BEFORE THE LIQUOR LICENSING AUTHORITY

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

HEARING at AUCKLAND on 9 July 2003

APPEARANCES

Mr P D Swain – as agent for respondent
Mr D W Sara – Auckland District Licensing Agency Inspector – applicant

RESERVED DECISION OF THE AUTHORITY

Introduction

[1] Before the Authority is an application for cancellation of an on-licence issued to Gad Holdings Limited, in respect of premises situated at 166 Queen Street, Auckland, known as “Fu”. The application is brought by Mr D W Sara an Auckland District Licensing Agency Inspector.

[2] The grounds to cancel the on-licence are:

(a) That the licence has been conducted in breach of s. 151 of the Act. (Sales of liquor by unlicensed person).

(b) That the conduct of the licensee is such as to show that it is not a suitable entity to hold the licence.

(c) That by virtue of changes to the company shareholding, the company is no longer suitable to be the holder of a licence.

[3] The allegations in support of those grounds relate to the discovery by the Inspector that a separate company had been trading with the respondent’s licence. This company contained shareholders and directors previously considered unsuitable by this Authority. Not only had there been trading by an unlicensed company, but also it appeared that a deliberate attempt had been made to circumvent the Authority’s earlier decisions.

The Background Facts

[4] On 27 June 1999, GAD Holdings Limited made application for an on-licence. The three directors of the company were:

Gareth Michael Popham
Anthony Ian House
Daniel John Gibbons

[5] It will be seen that the company name represented the first letter of the christian name of each director. The three directors were also equal shareholders.

[6] The company had purchased a night-club/entertainment business situated in the basement below 166 Queen Street. For the first few months the company relied upon temporary authorities to continue the existing business. The Police have some reservations about Mr Popham because of certain recent convictions. Accordingly, Mr Popham resigned as a director although he continued to be a shareholder. It was established with the Inspector at the time, that Mr Popham would not have any day to day involvement with the company as he had his own gib stopping business.

[7] The on-licence was granted by the Authority on 3 November 1999 after the Police and the District Licensing Inspector had withdrawn their opposition. The licence was subsequently renewed without opposition for three years to 3 November 2003.

[8] In June 2002, an application for a special licence was lodged with the District Licensing Agency in respect of the premises known as “Fu”. However, the application was made by another company called Fu Partnership Limited. This raised some concerns with the Agency, and Mr Popham was called for an interview with the Inspectors.

[9] During the interview Mr Popham stated that a Mr Noel Justin Allen had been approached about putting money into the business. As a result of those discussions, a separate company (Fu Partnership Limited) had been formed. It was the second company which had purchased and sold the liquor and paid the GST.

[10] Mr Popham confirmed that he would immediately attend to the necessary paperwork in order to correct the apparent illegality of the operation. He contacted a barrister skilled in the workings of the Act, and the necessary paper work was completed to ensure that the correct company was utilising the licence.

[11] The evidence shows that Fu Partnership Limited was incorporated on 5 July 1999 several weeks after the application for the on-licence had been lodged. The directors were shown as Noel Justin Allen, Daniel John Gibbons and Daliah Hirsh. Although Mr D W Sara alleged that Mr Popham was a director there is no evidence to support that view.

[12] Mr Noel Justin Allen had appeared before the Authority on 4 August 1997 when he unsuccessfully applied for a General Manager’s Certificate. Mr Allen had previously been found to be unsuitable to hold a licence or a General Manager’s Certificate in 1994 (LLA 1531/94). This was based on a series of allegations of sales of liquor to minors, and general non-compliance with the Act. We understand that Mr Allen had run a licensed restaurant outside the terms of the licence. Apparently Mr Allen had no convictions. In a reserved decision the Authority declined his application, and suggested that he should wait out a five-year period from the last adverse finding of the Authority.

[13] The evidence showed that as from July 2002, Mr N J Allen became a director of Gad Holdings Limited along with Mr Gibbons and Ms Daliah Hirsh. The shareholders were Messrs Popham and Gibbons who owned 50% of the company. The other 50% was owned by Mr N J Allen, and his ex wife Mrs Raewyn Allen, and Ms Daliah Hirsch equally. When the change of shareholding was advised to the Authority, the Authority requested the Agency to advise whether there was reason to apply for cancellation of the licence under s.225B of the Act, on the ground that the company was no longer suitable to hold the licence. It was this request which stimulated the current application.

[14] Mr Sara submitted that from the time the licence was issued in November 1999 to mid 2002, the premises known as “Fu” had been conducted in breach of s.151 of the Act in that all sales of liquor had been made by a company which had no licence to do so. Furthermore, it appeared that a deliberate attempt had been made to place control of the company in the hands of a person who had been declared to be unsuitable. On the other hand he acknowledged that the premises had never come to the attention of the authorities since trading began four years ago.

[15] We accept that at first blush it appears that a serious attempt was made to pass control of one company into the hands of another, in order to hide who was actually profiting from the sale of liquor. However, having heard from Messrs N J Allen and G M Popham, we are satisfied that this was not the case.

[16] Mr G M Popham confirmed that he and his two partners had each invested $30,000 into the venture. When trading under a temporary authority, they wanted to make some improvements but needed more capital. They were eventually introduced to Daliah Hirsch and Raewyn Allen, and Mr N J Allen. Both the women were the shareholders and directors of Amigos Club Limited the operators of a bar in Victoria Street. The bar had been operating since 1995. Mr and Mrs Allen were married, but were separated. They agreed to advance money but did not want to be involved in the day to day operation of “Fu”. The women did not want to be associated with another licence in case any breaches impacted on their licence. Mr Allen held a Public Trainer’s Licence from the New Zealand Racing Conference and did not want this placed in any jeopardy either.

[17] It was agreed that a sum of $30,000 would be advanced by Mr Allen and Amigos Club Limited. The new company was formed. In the meantime, “Fu” was being operated by the three original shareholders. Mr Gibbons was the duty manager, and worked each night. Mr A I House had an office, and he took over the administration matters relating to the business. Mr Popham had no active part in the operation as he was running his gib stopping business. Mr Allen and Amigos Club Limited had nothing to do with the management of the business.

[18] However, in 2001, Mr House left for overseas. Mr Popham became the administration manager. He followed the procedures which had been set up. In other words he banked the takings into the bank account in the name of Fu Partnership Limited. Mr Allen and his ex wife and her partner were required to make further investments into the business and they also purchased the share of Mr House.

[19] Mr Popham admitted that a mistake had been made almost from day one of the operations. He did not believe that the systems error was deliberate on the part of Mr House. He thought that Mr House was trying to ensure that he was protecting everyone’s investment by using the new company as the vehicle for trading. Immediately he became aware of the problem he took steps to ensure that the changes were made. Mr Popham impressed us with his dedication to the business particularly concerning the security of the patrons, and his intention to ensure that the night-club was drug free.

[20] The same could be said of Mr Allen. He has held a Public Trainer’s Licence issued by the New Zealand Racing Conference since 1996. He explained how he and his ex wife and her partner had helped “Fu” get established. They had offered expertise as well as money. Because the two women were successfully operating a bar, they did not want their licence placed in jeopardy. He took no part in the operation or control of the business although he did ask how the business was going.

[21] Mr Allen pointed out that he and Mr Popham and another had combined to form another company which had been granted a licence in Hamilton without objection. Mr Allen acknowledged that there was an inference that the new company had been orchestrated to allow him to become involved through the back door. He categorically denied that inference. As far as he was concerned, he was helping three young men get established in operating a night-club.

[22] After listening to and observing Messrs Allen and Popham our assessment was that they were telling the truth. At first blush the decision to form a new company looked like an attempt to hide Mr Allen’s involvement. However, the explanation which was given, has satisfied us, that it is just as likely that an innocent mistake was made.

Authority’s Conclusion and Reasons

[23] From the comments we have made thus far, it should be clear that we are satisfied that two of the grounds specified in the application have been established. On the other hand, we are not satisfied that the company is no longer suitable to be the holder of a licence by virtue of the change in its shareholding. Indeed it now seems clear that both Mr Allen and Mr Popham have reached that stage when the mistakes of the past can be looked at in a different light.

[24] Equally it is clear that by trading through another company, the premises were conducted in breach of s.151 of the Act. Furthermore, such conduct certainly brings into question the suitability of the company. As has been noted however, we have not been satisfied that such conduct had any sinister connotations. This seemed to us to be an honest mistake or lapse. In our view, 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. We note that there is no suggestion of liquor abuse.

[25] Accordingly, the application to cancel on-licence 007/ON/321/2000 is refused.

DATED at WELLINGTON this 21st day of July 2003

Judge E W Unwin Mr J C Crookston
Chairman Member

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