Zep Enterprises Limited, re [2007] NZLLA 242 (19 March 2007)

Last Updated: 5 March 2010

Decision No. PH 242/2007

IN THE MATTER of the Sale of Liquor Act 1989

AND

IN THE MATTER of an application by ZEP ENTERPRISES LIMITED for an off-licence pursuant to s.31 of the Act in respect of premises situated at 681 Ferry Road, Woolston, Christchurch, known as “Woolston Night’n Day Foodstore”

BEFORE THE LIQUOR LICENSING AUTHORITY

Chairman: District Court Judge E W Unwin
Member: Ms P A Ballard

HEARING at CHRISTCHURCH on 27 February 2007

APPEARANCES

Mr P J Egden – for applicant
Mr M Ferguson – Christchurch District Licensing Agency Inspector – in opposition
Sergeant A J Lawn – NZ Police – to assist

RESERVED DECISION OF THE AUTHORITY

Introduction

[1] Before the Authority is an opposed application for an off-licence. The application is to be determined under s.36(1)(d)(ii) of the Act with consequential restrictions on the type of liquor which can be sold. There are two issues to be resolved. The first issue is whether the company has been able to establish that its business is not a shop of a kind commonly known as a dairy. The second issue is whether the applicant has been able to establish that its store can accurately be described as a grocery store where the principal business is the sale of main-order household foodstuff requirements.

[2] The applicant is Zep Enterprises Limited (hereafter called the company). The company’s two directors and shareholders are Bryan Keith Sample and Nikole Jane Sample. They opened the business in August 2006 under the “Night’n Day” franchise. The store was designed and built to incorporate an area for the display of wine and beer. Mrs Sample has held a General Manager’s Certificate for approximately seven years and Mr Sample was granted his certificate in December 2006. There are no concerns about the company’s suitability to hold a licence. The store has an area of over 150 square metres including storage.

[3] The company initially sought trading hours at any time on any day. However by letter dated 4 December 2006, Mr A P Lane, a director of the franchise owner, wrote to the District Licensing Agency Inspector advising that the company had agreed to alter the proposed hours to allow the sale of liquor between 7.00 am and 12.00 midnight seven days a week. The evidence showed that Mr Lane had prepared a second letter in which he made the request conditional on all opposition being removed. However the second letter was not sent and the case proceeded on the basis of the amended hours. If the company wishes to trade with later hours, it will either have to seek a variation or, wait until the licence falls due for renewal in 12 months time.

[4] There was no opposition to the application from the Police or members of the public. The District Licensing Agency Inspector likened the premises to an inner city convenience store (such as a “Star Mart”). He accepted that the Authority had licensed a number of similar inner city convenience stores (see Caltex New Zealand Limited LLA PH 167/2001). However his understanding was that such premises catered for the grocery needs of inner city dwellers and tourists. He took the stance that suburban convenience stores serviced the needs of local residents who might wish to top up on grocery items between major grocery trips to a supermarket. He therefore contended that, absent any service to tourists or inner city dwellers, the premises was not a grocery and was more the equivalent of a suburban dairy, and the application should be refused.

The Hearing

[5] Mrs N J Sample contended that since opening the business they had built up a group of regular customers who preferred to obtain their grocery requirements from their store rather than a supermarket. She said that their customer base was drawn from the immediate and surrounding suburbs many of whom called on their way home from work. She refuted any suggestion that the business was a dairy. She argued that the shop was spacious and well laid out and the figures would show that over 50% of all sales were for main order foodstuff requirements. While she accepted that they sold ice creams, milk shakes and other confectionery, she believed that school children made up a very small part of their customer base.

[6] Mr A P Lane has been retailing in the grocery trade since 1988. His company commenced franchising the “Night’n Day” brand in 1990. He said that the object of the group is to provide consumers with a wide range of fresh and shelf stable products at higher than average prices. He had noticed a number of changes in the industry over the past 10 to 15 years. For example he suggested that as people’s life styles became busier, they experienced less time to shop. He believes that many former groceries had been replaced by large supermarkets and foodstores such as “Night’n Day” shops. He contended that people now shop day to day rather than week to week and they purchase an average of 5-6 items at any one time. He made the point that these days even supermarket sales of what used to be called dry groceries such as flour, sugar, breakfast cereals, tinned food etc., etc., are less than 50% of total turnover.

[7] Mr Lane gave evidence that the franchise has a target client base of the 18-30 age group as well as professional people who are prepared to pay extra for products they require. Typically such people have a high disposable income and place value on their time. Mr Lane advised that there are 25 “Night’n Day” foodstores in the South Island. Of these, 21 hold off-licences. The only exceptions are three that operate within the Invercargill Licensing Trust area and “Woolston Night’n Day Foodstore”.

[8] Mr Lane produced an updated schedule showing sales from “Woolston Night’n Day Foodstore” for the month of October 2006. Each item that is sold is electronically scanned at point of sale and the data is entered in the company’s computer and then automatically sent through to Head Office. A partner of Deloitte in Dunedin had examined the data. He was able to confirm that the percentages assigned to each product classification were accurate. The results show that 55.33% of sales were for items which could be described as main order household foodstuffs. These included:

Grocery Confectionery (large chocolate bars, chocolate boxes and family bags)

Grocery drinks and beverages (1.5 and 2.25 litre soft drinks, 1 and 3 litres fruit juices, coffee, tea, 1 and 2 litre bottled water)

Milk

Gourmet Ice cream and 2 litre tubs

Bread/bakery

Fruit and vegetables

Biscuits and chips – large packs

Delicatessen

Grocery items (i.e. tinned foods, pasta, noodles, sauces, sugar, honey, jam, baking needs, breakfast cereals, eggs, frozen foods and sundry items).

[9] We have not included the precise percentage figures as Mr Lane had earlier claimed commercial sensitivity. However, the products shown in the last item as ‘grocery items’ were in the same percentage range as cigarettes, tobacco and cigars. Mr Lane stated that small units of confectionery had not been included even though many of the items were used for adult and children’s lunches. He denied any suggestion that the product range differed from any “Night’n Day” store based in the city. His evidence was that 95% of the same product range was stocked in all “Night’n Day” stores regardless of their locality.

[10] Mr Lane argued that the following were some of the factors which distinguished “Night’n Day” foodstores from dairies:

• Product range.
  
• High percentage of sales of foodstuffs.
  
• Instore bakeries.
  
• Store layout including separate areas for delicatessen, grocery, bakery, fruit and vegetables.
  
• Provision of shopping baskets.
  
• Smaller range of children’s confectionery.
  
• Bright well lit interiors.
  

[11] Mr M Ferguson is an experienced Licensing Inspector who has been employed by the Christchurch District Licensing Agency for eight years. He acknowledged that the Agency had previously issued licences for premises such as “Night’n Day” foodstores and renewed such licences without objection. However, he considered it was time to review the policy to see whether the legislation was being interpreted correctly. He questioned whether Parliament had intended to licence modern convenience stores or modern dairies.

[12] Mr Ferguson remained unconvinced that the principal business of the store was main order household foodstuffs. He noted that “Night’n Day” foodstores were listed in the Yellow Pages under dairies as well as under supermarkets and groceries although earlier Authority statements indicate that such entries are indicators only. He produced photographs of a dairy of similar size and argued that the dairy had a greater quantity and range of products than “Woolston Night’n Day Foodstore.” He contended that some of the advertising of the subject premises was the same as could be expected from a dairy.

[13] In cross-examination Mr Ferguson conceded that that the business could not properly be described as a dairy. Nevertheless he questioned whether a suburban convenience store which did not cater for tourists or inner city dwellers could be classified as a grocery. He stated that he would not personally visit the store to carry out his weekly grocery shopping.

[14] In his submissions, Mr Ferguson contended that although dairies were not defined in the Act, they were no longer simply places where the public could expect to purchase dairy products and had now become suburban convenience stores where it was possible to buy a wide range of products. He argued that “Woolston Night’n Day Foodstore” served the purpose of a dairy because it was located in the suburbs and had a wide range of products. He suggested that if the business was called “Woolston Night’n Day Dairy” the public would not be confused.

[15] Mr Ferguson submitted that we should only issue licences to groceries that did not meet the size threshold of a supermarket. In other words premises where normal households do their regular bulk food shopping. He acknowledged that the majority of grocery stores that existed in 1989 had been absorbed by larger supermarkets. However, he suggested that the regulatory agencies and the Authority had lost sight of the need to establish what the principal business of each shop was. He argued that once it had been determined that the business was not a dairy it had been assumed that it must be a grocery.

[16] In the case of “Night’n Day” stores he suggested that they were a melding of a number of types of businesses such as a takeaway business, a delicatessen, an ice cream parlour, a bakery, a convenience store, and a sweet shop. He suggested that the principal business of the store was simply the sale of food.

[17] Sergeant A J Lawn is the officer in charge of the Christchurch Liquor Licensing section. Although the Police had not offered an objection to the application he offered support to the submissions made by Mr Ferguson. He argued that over the last 10 years or so, dairies had evolved into convenience stores. He submitted that we should interpret the Act narrowly because grocery stores generally had been shown to be the worst performers in terms of making sales of liquor without requesting identification.

[18] In support of his contention he produced the results of the Pseudo Patrons Survey 2004 which was conducted in the Auckland region by SHORE/Te Ropu Whariki. The aim of the survey is to monitor age verification practices in off-licence premises. Over the three years of the survey between 2002 and 2004 grocery outlets have consistently fared worse than bottle shops or supermarkets.

[19] Sergeant Lawn also referred to two controlled purchase operations conducted in 2004 in which three of the seven premises that failed the operations were “Night’n Day” stores. He suggested that if the licence was to be granted that the closing hour be consistent with stand alone bottle stores.

The Authority’s Conclusion and Reasons

[20] In order to apply a consistent nationwide approach it is necessary to glean assistance from previous Authority decisions. The first and most significant of these decisions is Jay and H Company Limited LLA PH 155/2001. This was a rehearing of an application for an off-licence following an order from the High Court. In that decision the Authority summarised its position relating to a dairy as follows:

“Our earlier much repeated statement that whether any shop is a ‘dairy’ in terms of s.36(3)(b) is a matter of fact for the Authority to determine on case by case remains. In determining the ‘principal business’ of any store we endeavour to apply a broad common sense approach. Consideration includes-

(1) The turnover percentages produced in accordance with Regulation 8(2)(j).

(2) The number and range of the items available. The greater the number and depth of foodstuff items available, the more likely the premise is to be a grocery store in terms of s.36(1)(d)(ii).

(3) The size of the premises. Larger premises are less likely to be categorised as a dairy.

(4) The layout of the premises. The presence of trolleys in multiple rows of goods assist categorisation as a grocery store.

(5) A view of the premises. The evidential weight given by the Authority to a view is usually considerable.

[21] The Authority’s last attempt to define ‘main order household foodstuff requirements’ was in 1990 in Douglas-Oliver Corporation Limited LLA 6/90. It was indicated at that time that such foodstuffs would be easily recognisable by most New Zealand families as the items they purchased on their weekly shopping visits to a supermarket or grocery. However time and circumstances have overtaken this definition. Mr Ferguson referred to normal households but we doubt whether there is such a definable group.

[22] Over the last five years we have heard a considerable amount of evidence relating to consumer buying habits, and changes to the New Zealand diet. It is clear that there is a much greater emphasis on the freshness and nutritional value of food. We believe that Mr Lane was right when he spoke of the changes to people’s life styles necessitating much more regular shopping. The convenience of so many outlets means that customers visit a store when they need something and then return when they need something else.

[23] Although Mr Ferguson argued that the regulating authorities and agencies had become the victim of the ‘logical fallacy’ syndrome, (i.e. if it is not a dairy then it must be a grocery), we do not agree. It seems to us that in each case a serious attempt has been made to establish whether the principal business of each business is the sale of main order household foodstuffs.

[24] We confirm our understanding that ‘principal’ means “main, or first in importance.” If several different businesses are being run in the same grocery store it is not essential for the percentage of main order household foodstuffs to exceed 50% of turnover. The principal business may well comprise 40% of turnover with three other aspects of the store contributing 20% each. These findings were made in another leading decision in which the Authority heard a test case to decide whether a “Star Mart” style of premises could be licensed.

[25] In Caltex New Zealand Limited LLA PH 167/2001 the Authority was satisfied that the business of a “Star Mart” was a type of modern grocery although it was also accepted that it could just as easily be classified as a convenience store. In that decision the Authority said:

“As what might be called “convenience stores” have proliferated, including the “Star Mart” and “City Stop” brands, shopping patterns and hours have changed; not surprisingly so too has the range of goods offered in particular stores. Rather than buying ”once a week” a market for more frequent “convenience” or “impulse” purchases is being met. “Ready to go”, “single item packs” and immediate consumables have, it would appear to the Authority, assumed much greater importance. That being the updated position, we do not find ourselves bound by a position enunciated a decade ago shortly after the Act came into first effect. As directed by s.6 of the Acts Interpretation Act 1999, we seek to apply s.36 to present-day circumstances as they arise.”

[26] Finally, in Pipe v Jay and H Company Limited (High Court Auckland AP 132/SW00 9 February 2001), an argument was developed that any new approach to urban outlets was not relevant to semi-rural activities. This contention was rejected by Robertson J who stated that the Act must enjoy a consistent approach nationwide.

[27] We are grateful to Mr Ferguson for his research and interest and for going to the trouble of seeking to review the apparent proliferation of grocery style off-licences. However, from the foregoing it can be seen that a number of the arguments raised by him have been considered. For example, whether a business is in the inner city or the suburbs the same rules must apply. Convenience stores may be granted an off-licence, if they fall into a modern grocery categorisation, and provided the principal business is the sale of main order household foodstuffs. Such foodstuffs may comprise bulk food shopping but they may also be purchased to create a single meal. And finally, if there is ambiguity, the Act should be applied in a current setting.

[28] With these comments in mind we now apply the criteria in Jay and H Company Limited (supra) to the company’s application:

(1) The turnover percentages produced in accordance with Regulation 8(2)(1).

The quality of the information supplied was of the highest order with the percentages certified by an accountant. It seems to us that there was little room for the figures to be manipulated. From the schedule provided it was quite clear to us that main order household foodstuffs had a larger total percentage than the other (dairy) items including cigarettes, confectionery, magazines, and toiletries. On reflection, it may have given a more informative view of the nature of the business if all stock items (including hardware) had been included.

(2) The number and range of the items available.

Mr Lane produced a list of the stock lines available in all “Night’n Day” stores. There were over 270 items. While we did not have a list of items commonly found in a dairy for comparison purposes, the list confirmed our impression that the business was making an effort to be a ‘one-stop’ store.

(3) The size of the premises.

No exact measurements were available but it was accepted that the entire premises including storage was over 150 square metres. The size of the premises brought them into the middle range category and well ahead of other premises that have been licensed.

(4) The layout of the premises.

There were at least three four rows of goods with baskets available. We gained the impression of a reasonably large, bright, and well laid out store with an absence of clutter and a semblance of a mini market.

(5) A view of the premises.

We had the opportunity of viewing the premises and we were more than satisfied that it was not a shop of a kind commonly known as a dairy. The premises would be unlikely to qualify as a grocery as they used to be known. However, we suspect that such grocery stores are a very rare breed. Taking into account the figures produced and our impression of the business, it would certainly fall into the same category as the “Star Mart” in Caltex New Zealand Limited (supra). We were satisfied that it could be described as a modern day grocery.

[29] Finally, we note that this is the only “Night’n Day” foodstore which is not licensed (excluding those stores in the Trust area). While we are satisfied that the threshold has been reached, we think it would be unreasonable at any event to make an exception of these premises. The company has satisfied us that it meets the criteria. As stated earlier the issue of suitability was not raised. Sergeant Lawn suggested that because of previous difficulties with compliance by “Night’n Day” stores, we should apply a stricter interpretation of the Act. We had no difficulty in following previous Authority rulings and the company is to be commended for its decision only to allow the holders of General Manager’s Certificates to sell liquor.

[30] On the other hand we are proposing to adopt Sergeant Lawn’s suggestion and allow the same trading hours as other off-licence outlets in Christchurch for the first ‘probationary’ year. The company can give consideration to its position on renewal. Accordingly, an off-licence will be granted for the sale or delivery of liquor on or from the premises described in the licence to any person for consumption off the premises. The hours of trading will be:

Monday to Sunday 7.00 am to 11.00 pm

[31] The licence will not issue until the expiry of 20 working days from the date of this decision. That period is the time provided by s.140 of the Act for the lodging of a notice of appeal. The company is not allowed to sell liquor until the licence is issued. A copy of the licence setting out the conditions will be attached to this decision.

[32] The applicant’s attention is drawn to ss.48 and 115 of the Act obliging the holder of the off-licence to display:-

• [a] A sign attached to the exterior of the premises, so as to be easily read by persons outside each principal entrance, stating the ordinary hours of business during which the premises will be open for the sale of liquor; and
  
• [b] A copy of the licence, and of the conditions of the licence, attached to the interior of the premises so as to be easily read by persons entering through each principal entrance; and

[c] The name of the manager. This must be prominently displayed inside the premises so as to be easily read by persons using the premises at all times while any manager is on duty.

DATED at WELLINGTON this 19th day of March 2007

Judge E W Unwin Ms P A Ballard
Chairman Member

Woolston NightnDay.doc