Armstrong v Karara Holdings Limited and Clearwater [2003] NZLLA 800 (29 October 2003)

Last Updated: 23 January 2012

Decision No. PH 800/2003 –
PH 801/2003

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 060/OFF/18/2001 issued to KARARA HOLDINGS LIMITED in respect of premises situated at 135 Office Road, Christchurch, known as “Merivale Fresh Choice”

AND

IN THE MATTER of an application pursuant to s.135 of the Act for suspension of General Manager’s Certificate number GM060/1111/2002 issued to LUKE MATTHEW CLEARWATER

BETWEEN JOHN FRANCIS ARMSTRONG
(Police Officer of Christchurch)

Applicant

AND KARARA HOLDINGS LIMITED

First Respondent

AND LUKE MATTHEW CLEARWATER

Second Respondent

BEFORE THE LIQUOR LICENSING AUTHORITY

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

HEARING at CHRISTCHURCH on 13 October 2003

APPEARANCES

Sergeant J F Armstrong – NZ Police - applicant

Mr M A Kyne – agent for first and second respondents

Mr M Ferguson – Christchurch District Licensing Agency Inspector - to assist

RESERVED DECISION OF THE AUTHORITY

Introduction

[1] Before the Authority are two matters for determination. The first is an application to suspend an off-licence issued to Karara Holdings Limited in respect of a supermarket situated at 135 Office Road, Christchurch known as “Merivale Fresh Choice”.

[2] The ground for the application is that the licensed premises have been conducted in breach of s.155 of the Act. Section 155 prohibits the sale or supply of liquor to minors.

[3] The second application is for the suspension of a General Manager’s Certificate issued to Luke Matthew Clearwater. 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 on Thursday 27 February 2003, a sixteen-year old female volunteer was able to purchase a bottle of Chardonnay from a check out operator at the supermarket. Mr L M Clearwater was the manager on duty at the time the sale was made. He had been granted his General Manager’s Certificate on 30 October 2002.

[5] On behalf of both respondents, Mr M A Kyne accepted the statements of the minor and the Police Sergeant as being an accurate account of what had happened. The Authority gives full credit for this co-operative attitude, which not only saved the volunteer from being questioned, but also reduced the hearing time of the applications. Actions such as these, illustrate an intention to acknowledge mistakes, learn from them, and move forward. The Authority was requested to take into account a number of mitigating circumstances, in assessing the appropriate sanction to be imposed if considered desirable. In particular Mr Kyne referred to the significant changes which have since been implemented in terms of staff training, and the management of the premises.

The Background Facts

[6] On 7 May 2002, the Authority issued a decision concerning the first respondent. The decision, (J F Armstrong and anor v The Brougham Tavern Limited and others LLA PH 216-229/2002) referred to a controlled purchase operation on 13 December 2001. On that day a 15½ year old female was able to purchase a bottle of wine from “Merivale Fresh Choice”. The Authority suspended the off-licence for five days. The first respondent joined with others in appealing the decision to the High Court. In a decision dated 8 July 2002, the appeal was allowed. However, leave was granted for a further appeal to the Court of Appeal against the decision of the High Court. On 13 June 2003, the Court of Appeal granted the appeal, and the original decision was re-instated.

[7] During the extended appeal process, a further controlled purchase operation was conducted by staff from the Police and the Christchurch Community and Public Health. Two 16 year-old volunteers visited nine off-licensed premises to test the willingness of the staff to sell liquor to minors. All nine premises were targeted because, either they had failed earlier controlled purchase operations, or were the subject of a public complaint. At no less than seven of the nine premises, sales were made without identification being requested. It is not clear whether both volunteers attempted purchases of liquor at all nine premises.

[8] “Nicola” was born on 10 June 1986. On Thursday 27 June 2003, she had just turned 16. On that day, she entered the “Merivale Fresh Choice” supermarket in Merivale Mall. She uplifted a bottle of “Matthew Lang Chardonnay” valued at $6.99, and took it to a check-out counter. The operator had called for the supervisor in respect of a transaction concerning a customer who was in front of “Nicola”. By the time the supervisor arrived, “Nicola’s” bottle had been scanned. The checkout operator had said “Hello”. The supervisor took a quick look at “Nicola”, and without saying a word, put the key into the system to clear the prompt, and the wine was sold.

[9] Some five minutes later, the second 16 year-old volunteer attempted to make a sale at a different checkout of the same premises. On this occasion, the sale was declined.

[10] The manager on duty at the time was Luke Matthew Clearwater. As stated above, he had held his certificate for eight months. There is no evidence as to where he was at the time or why the offence occurred when he was on duty. The checkout supervisor who had permitted the sale was charged in the District Court. She received diversion.

The Respondents’ Submissions

[11] Both the company and Mr Clearwater accepted that a minor had been sold liquor, and that the sale should not have taken place. As far as the company was concerned, the supervisor had for some reason failed to adhere to its strict procedures.

[12] At the time of the sale, the company believed that it had ensured that all checkout operators had received full training. This training involved asking for identification for anyone thought to be under the age of 25 years. Furthermore, as soon as alcohol was scanned, the screen automatically flashed a reminder prompt to enter the date of birth. The checkout operator was also entitled to refer the matter to a supervisor. Failure to follow company procedures, was regarded as serious misconduct which could lead to dismissal.

[13] Unfortunately, at the time of the incident, the on-duty supervisor was temporarily absent receiving medical attention for a bleeding nose. The stand-in supervisor was clearly not as diligent as she should have been. According to Mr Kyne, the incident highlighted some deficits in the company procedures, particularly staff training.

[14] The position is that now, no checkout operator is allowed to process a liquor sale without supervisor intervention. The supervisor is required to oversee each sale, and approve the key/card action at the point of sale. Each operator now signs an operators’ sheet acknowledging that they fully understand, and are aware of the Point of Sale Manual in relation to sales of liquor and tobacco. A similar document is signed after training has been received. The company now carries out random testing to check its staff’s willingness to sell without identification. The ratio of supervisors to checkout operators has been reduced to 1 to 5. The number of certificated managers has been increased.

[15] Mr Kyne referred to the fact that the great majority of sales in a supermarket are not alcohol related. Because of this, staff have a very limited opportunity to interact with the customers, as opposed to bar staff in a hotel or bar. Mr Kyne submitted that a checkout operator might deal with an average of 250 customers per shift, and may only sell liquor to four or five of those customers during that time. They therefore lacked the advantage of obtaining experience in assessing age and state of sobriety.

[16] Consequently, he acknowledged that the type of training which was in place, was ineffective in relation to patron observation. A different emphasis was needed. Mr Kyne said that his company had now reviewed the way that checkout operators were trained. It had been found that a culture existed for some young people. Some did not have the confidence to ask for age identification. Others felt uncomfortable about doing so, as they were more subservient than their peers. Some of the operators experienced difficulty in maintaining a level of focus for a nine-hour shift.

[17] The company offered to make a donation to Youthline as a public acknowledgement of its host responsibility, and proactive governance. Mr Kyne reminded us of the substantial financial penalty which would be felt by the company if the off-licence was suspended. The Authority received no information on the financial impact of the previous suspension, although we accept that it may well have been significant. Nevertheless in Meads Brothers Limited v Rotorua District Licensing Agency [2001] NZCA 386; [2002] NZAR 308 the Court said:

“Most restrictive licensing controls will have an economic impact on licensees which sometimes will be substantial. That is a normal incident of a system of reasonable control of liquor abuse.”

Decision

[18] By accepting the evidence, both respondents acknowledged that the grounds in the applications had been established. The premises were operated in breach of s.155 of the Act. The next issue then is whether it is desirable that suspension orders should be made. That issue as always, should reflect the seriousness of supplying liquor to minors, and the potential for liquor abuse.

[19] In other decisions we have set out the reasons why we regard the sale of liquor to minors as an incident of liquor abuse. The reasoning received tacit approval from the High Court in The Mill Liquorsave Limited v Grant David Verner Wellington High Court CIV-2003-485-874 18 August 2003.

[20] In that case His Honour Mr Justice Gendall made the following comments:

“The suspension and other provisions of Part VI are designed to enforce sound management of licensed premises. They can be disciplinary as well as regulatory in nature. Consequences of sanctions imposed upon a licensee may well be punitive. The question is whether a need to deter other licensees is an appropriate consideration for the Authority to take into account in the exercise of its discretion. Counsel argued that in this case it was not an appropriate consideration because it did not promote the objects of the Act, which included establishing a reasonable system of control over the supply of liquor and reducing its abuse. But that object is a nationwide system aimed at general control through the Authority and Licensing Agencies and other mechanisms so as to further the objects of the Act ...

I have no doubt at all that deterrence (i.e. to “discourage” others) from selling to minors, as well as special deterrence to the licensee before the Authority, is a relevant consideration and squarely within the objects of the Act. A reasonable system of control of the supply of liquor includes the need to be able to secure compliance with licence conditions and the law through the exercise of discretionary disciplinary powers specifically given to the Authority by Parliament. If it could not suspend a licence given to a corporate body where a “fault” or breach of the Act was that of a manager, its powers of control over licensed persons or bodies could be rendered nugatory or severely curtailed.....

In my view the phrase “licensing end” is no more than shorthand for “advancing the purposes of the legislation” which places liquor licensing and enforcement largely in the hand of the Liquor Licensing Authority. General deterrence of other licensees from breaches of the law, where there are general concerns of an increasing degree of access by underage persons to liquor often through direct purchases from licensees, is a factor or consideration which squarely falls within a legitimate licensing end or aim to be considered by the Authority when exercising its discretion to suspend a licence or not ... “.

[21] As always, the most difficult task faced by the Authority is to assess a period of suspension which is both reasonable and reflective of the misconduct. This is a company which did not take the first controlled purchase operation very seriously. The reporting agencies were criticised for conducting the test purchases. That attitude has now changed. Mr Kyne submitted that the company might be dealt with in the same way as Woolworths (New Zealand) Limited had been dealt with in the original decision referred to in paragraph [6] of this decision. However, in that case, we sought to give more credit to the company which had made the greater effort when responding to the operation. The point needs to be made that there are about 7000 off-licences currently in existence in this country. The vast majority seem to be able to cope with the requirements of the Act. As was stated by Gendall J in The Mill Liquorsave Limited (supra), recognition of those who comply with the law can encourage adherence to the law. It is of more than passing interest that the companies which either did not do well in the first controlled purchase operation, or about whom there have been complaints, did not do well on the second controlled purchase operation either.

[22] The Court of Appeal in Christchurch District Licensing Agency Inspector and another v Karara Holdings Limited and others (CA 178/02, 13 June 2003) has reminded us that in exercising our discretion we must avoid being heavy handed. We accept such a duty, and we have been careful to distinguish between those licensed premises which sell liquor only, and those (such as supermarkets and restaurants) where the sale of liquor is not the primary business being conducted. We assume that where the core business of any company is not the sale of liquor, the company will have weighed up the advantages and disadvantages of maintaining an off-licence. Having made that decision, the company must then accept the obligations which go with the licence. The company may gain a privilege, but in doing so, it will assume a relatively straightforward responsibility, coupled with a potential liability, if it takes that responsibility too lightly.

[23] In the above decision, the Court of Appeal described the period of suspension for five days as “a moderate period” in paragraph [12], and “a short period” in paragraph [47]. We believe that any period of suspension should reflect the activity which led to the suspension. A controlled purchase operation by its nature will not lead to liquor abuse. All it does is point to such a possibility. We take the view that all suspensions which follow such operations, should be moderate. We have said before that we regard sales to minors in an on-licence situation as potentially more destructive. If there is actual liquor abuse then the sanction will be greater. If there is clear managerial irresponsibility, that will be reflected in the period of suspension. Credit will always be given where it has been established that efforts have been made to ensure that there will be no repetition of the conduct leading to the suspension. We have always tried to distinguish between premises where the core business is the sale of liquor, and premises where the sale of liquor is an ancillary service. In the latter case, any suspension will not mean that the business has to close.

[24] In this case, we accept the company’s expressions of concern and acknowledgement of fault. We note the contrast with the company’s attitude at the last hearing. It is a pity that it has taken the two controlled purchase operations to bring about the required change, especially as the drinking age was lowered nearly four years ago. In our view, taking into account the previous period of suspension, an appropriate period of suspension in this case is ten days. As was stated in Sarah Jane Reynolds v Mikano Limited and another LLA PH 738-739/2003 a reasonable discount should be given to reflect a co-operative if not remorseful attitude. In that case and in others, we have taken the view that 30% of the sanction is fair. For that reason we propose to suspend the off-licence for seven days. The offer to make amends, although appreciated would, in our view, be likely to lead to a bidding contest.

[25] As mentioned, we did not hear from Mr Clearwater. At the time of the operation, he had recently been trained to uphold the law and the conditions of the licence. He was the person charged by the Act with leading staff by example, although he seemed quite young to carry such a responsibility. In the original decision, we declined to suspend the certificates of managers who were present on the premises but did not make sales, although we indicated that this would not be seen as a precedent. We said that strong reasons would have to be advanced for us not to impose suspensions on managers who had not exercised the control expected of them.

[26] The manager 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. Mr Clearwater not only failed that challenge, but has been unable to give any rational explanation for doing so.

[27] For the reasons we have given we make the following orders.

1. Off-licence 060/OFF/18/2001 issued to Karara Holdings Limited is suspended for seven days from 6.00 am on Sunday 16 November 2003 to 6.00 am on Sunday 23 November 2003.
   
2. General Manager’s Certificate GM6644/02 issued to Luke Matthew Clearwater will be suspended for three weeks from Sunday 16 November 2003.
   

DATED at WELLINGTON this 29th day of October 2003

Judge E W Unwin Mr J C Crookston
Chairman Member

Merivale Fresh Choice.doc(afw)