Kotecha and Whittle v Mega Trade (AKL) Limited and others [2009] NZLLA 130 (19 February 2009)

Last Updated: 27 January 2010

Decision No. PH 130-133/2009

IN THE MATTER of the Sale of Liquor Act 1989

AND

IN THE MATTER of applications pursuant to s.132 of the Act for suspension of on-licence number 007/ON/453/2008 issued to MEGA TRADE (AKL) LIMITED in respect of premises situated in the Basement Level, 239 Queen Street, Auckland, known as “B B Club”

AND

IN THE MATTER of an application pursuant to s.135 of the Act for suspension of General Manager's Certificate number GM/007/798/08 issued to HUI LI

AND

IN THE MATTER of an application pursuant to s.135 of the Act for suspension of General Manager’s Certificate number GM/007/552/07 issued to GRACE CHANG

BETWEEN SEEMA KOTECHA

(Auckland District Licensing Agency Inspector)

AND GARY SELWYN WHITTLE

(Police Licensing Administrator of Auckland)

Applicants

AND MEGA TRADE (AKL) LIMITED

First Respondent

AND HUI LI

Second Respondent

AND GRACE CHANG

Third Respondent

BEFORE THE LIQUOR LICENSING AUTHORITY

Chairman: District Court Judge E W Unwin
Member: Mr P M McHaffie

HEARING at AUCKLAND on 9 February 2009

APPEARANCES

Mrs S L Noble – Auckland District Licensing Agency Inspector – on behalf of applicant
Mr G S Whittle – NZ Police – applicant
Mr D G Scott – agent for respondents

RESERVED DECISION OF THE AUTHORITY

Introduction

[1] There are effectively four applications for consideration by the Authority. The premises that are the subject of two of the applications, are situated in Queen Street in the Auckland Central Business District. The business is a substantial karaoke bar with 23 separate karaoke rooms. It trades under the name of “B B Club”. The on-licence was issued to Mega Trade (Akl) Limited (here after called "the company") on 5 July 2007. The licence permits trading at any time on any day but only when the premises are being operated as a karaoke entertainment venue.

[2] Miss Seema Kotecha was a District Licensing Agency Inspector with the Auckland City Council. On 17 November 2008, she filed an application for the suspension of the company’s on-licence as well as an application for the suspension of a General Manager’s Certificate held by Hui Li. The documents were also filed in the name of Mr Gary Whittle although he was not a signatory. Copies of the applications were sent to the respondents on 17 November 2008.

[3] The application for the suspension of the licence contained the following allegations:

• (a) That the licensed premises have been conducted in breach of the following provisions of the Act:
  

Section 165 - Unauthorised sale or supply of liquor

Section 169 - Sales of spirits otherwise than in a glass

Section 172A - Licensee’s offences in respect of manager

[4] The particulars in support of the allegations referred to a compliance visit made to the premises on 16 October 2008. During the visit it was noted that the company was advertising bottles of spirits for sale. The duty manager was Ms Hui Li. She advised the Inspectors that the bottles were sold on the condition that each bottle was held by the staff at the bar. The customer was then served liquor from the bottle at a maximum of 200 millilitres at a time. The unfinished bottles were labelled and held under lock and key for subsequent use by the purchaser.

[5] In one of the karaoke rooms, the Inspectors observed two one-litre jugs that contained tea in which 200 millilitres of Chivas Regal whisky had been mixed. It was also noted that there were two “vomit basins”, one in the hallway, and the other in the ladies’ toilet. The duty manager was alleged to have confirmed that these “vomit basins” were there in case patrons were unwell when they visited the premises. At an earlier visit an assurance had been given that the “vomit basins” were decorative only, and were needed to retain the company’s status as a five-star karaoke business.

[6] The suspension application confirmed that there had been an earlier visit on 24 June 2008. At that time the duty manager had been warned that the licence did not permit spirits to be sold otherwise than in a drinking vessel of a capacity not exceeding 500 millilitres.

[7] The second application was filed in respect of Ms Hui Li’s General Manager’s Certificate. Ms Li was granted her certificate on 7 July 2008. The application was filed in the joint names of Miss Seema Kotecha from the Auckland District Licensing Agency and Mr Gary Whittle from the Police. However Mr Whittle did not sign the application and may well have been unaware that it had been filed. This is not a practice that we would recommend.

[8] The application to suspend the manager’s certificate was brought on the ground that Ms Li was the duty manager at the time of the visit on 16 October 2008. It was alleged that Ms Li had failed to conduct the licensed premises in a proper manner. The same particulars were alleged. In other words it was contended that the business was selling full bottles of spirits to customers, and that the licensee had installed “vomit basins”, and had signs to that effect.

[9] On 22 December 2008, Mr Whittle filed two more enforcement applications. The first application was for the suspension of the company’s on-licence. The application was based on the following grounds:

That the licensed premises have been conducted in breach of the following provisions of the Act:

Section 165 - Unauthorised sale or supply of liquor

Section 169 - Sales of spirits otherwise than in a glass

[10] The allegations were based on a visit made to the premises by the Police on 19 December 2008. On this occasion it was alleged that customers in one of the karaoke rooms had been drinking jugs of tea laced with Chivas Regal whisky. In addition cigarette butts had been found in the room indicating that patrons had been smoking.

[11] The second application filed by Mr Whittle was for the suspension of a General Manager’s Certificate issued to Ms Grace Chang. The application was brought on the basis that Ms Chang was the duty manager at the time of the visit on 19 December 2008. The application alleged that she had failed to conduct the licensed premises in a proper manner. The application relied upon the same particulars relating to the Police visit made on 19 December 2008.

[12] The applicants’ case was built on the fact that the company had effectively received two warnings but had continued to trade illegally by selling spirits by the bottle. The first warning was given on 24 June 2008. The second warning resulted from the visit made on 16 October 2008, and was followed up by the filing of the suspension applications. The allegation was that the company continued to trade illegally and this was confirmed on 19 December last.

[13] Mr D G Scott appeared as agent for the respondents. He conceded that it was not legal to sell spirits by the bottle but argued that the Police had accepted that there was little chance of liquor abuse, if the bottle was held by the licensee, and the supply of spirits was carefully monitored thereafter. Effectively he submitted that the practice of selling spirits by the bottle had been unofficially sanctioned by the Police. However, there was no evidence on the point, although it is noted that the Police did not oppose renewal of the licence following the visit made to the premises in June 2008.

[14] Mr Scott stressed that the company was mindful of its responsibilities and did its best to comply with the Act. He contended that the company ensured that there would be no liquor abuse by carefully monitoring the amount of spirits being supplied to the customers. He pointed out that he had not received disclosure from the District Licensing Agency Inspector but did not seek an adjournment. He challenged the right of Mrs S L Noble to appear on behalf of the first applicant, but withdrew his challenge when Mrs Noble produced her warrant of appointment as an Inspector.

The Enforcement Applications

[15] Mrs S L Noble has been with the Agency for three years and is currently the Team Leader. She had discussed the sale of bottles of spirits at inter-agency meetings and had obtained a legal opinion about the practice. She argued that the sale of spirits by the bottle was in breach of s.154A of the Act although she accepted that no such claim had been made in the enforcement applications.

[16] Mrs Noble was a member of the group that had visited the premises on 16 October 2008. She said she was present for about 45 minutes. She recalled introducing herself to Ms Li, the duty manager. Ms Li explained that she was fairly new to the job. Mrs Noble noted the range of spirit bottles on display behind the counter. She produced photographs of the various bottles with labels showing the names of the owners. She also produced photographs of the menus showing that the sale of Jack Daniels, Jim Beam, tequila, vodka, Chivas Regal, and Johnnie Walker Black Label could be purchased for between $55 and $65 for 150 millilitres, and $70 and $80 for 200 millilitres. The menu also displayed the price of the above spirits by the bottle, ranging in value from $150 to $180 a bottle. Two other brands could be purchased for $420 a bottle. It was noted that the purchase of a bottle entitled the customer to two complementary jugs of beverages.

[17] Mrs Noble visited one of the karaoke rooms. She said that the room smelt of alcohol. She noted that there were two jugs of tea in the room. It was explained that the patrons had purchased 200 millilitres of Chivas Regal, and this had been added to the tea. She was unable to tell the strength of the alcohol in the tea. Mrs Noble confirmed that Ms Grace Chang arrived during the visit. Ms Chang was the senior of the two managers. Ms Chang appeared to acknowledge that the practice of selling bottles of spirits was inappropriate, and stated that she would remove the bottles and no longer display them for sale.

[18] Mrs Noble also noted the "vomit basins". These were duly photographed. Both had signs in Chinese. The signs were translated by Ms Li the duty manager. Ms Li was clear that the basins were to be used for receiving from the mouth. Ms Li explained that sometimes customers came in having had too much to drink, and needed to be sick. Mrs Noble saw two such basins. She was unable to investigate the men’s toilet but suspected that there was one there also.

[19] Mr G S Whittle is a Licensing Administrator with the Police and has held that role since April 2008. He gave evidence that he visited the premises on 24 June 2008, after receiving the company’s renewal application. He spoke with a Ms Pu Chi Lo. He noted the presence of “vomit basins” and was advised that these were necessary for the company to retain its status as a five-star karaoke bar. He also spoke to Ms Lo at length about the sale of spirits in vessels larger than 500 millilitres, and advised her that it was illegal to sell spirits in a glass larger than a capacity of 500 millilitres. On the other hand it was explained to him that each bottle was retained behind the bar and the contents were poured from the bottle into a glass when requested by the customer. By not opposing the renewal application Mr Whittle could have signalled a tacit acceptance of the practice.

[20] Mr Whittle became aware of the applications lodged by Miss Kotecha in November 2008. He visited the premises again on 19 December 2008 at about 11.45 pm. In one room he found two one-litre jugs containing tea, both of which smelt strongly of whisky. He said that there were 10 cigarette butts in the room and it was obvious that patrons had been smoking. With Mr Scott’s consent, a photograph of the butts was produced after the hearing had concluded.

[21] Mr Whittle spoke with Ms Grace Chang who was the duty manager. She explained that the people in the room had ordered two jugs of green tea at a cost of $40, and 150 millilitres of Chivas Regal whisky at a cost of $65. In addition they had ordered 12 bottles of Heineken beer at a cost of $84 and food to the value of $57. The total account that was produced was $300. The indication from the account was there were as many as 15 patrons present in the room. Both Mr Whittle and Mrs Noble acknowledged that there had been no signs of liquor abuse or other breaches of the Act. Neither had returned to the premises since filing the enforcement applications. Mr Whittle confirmed that the company did not feature significantly in the Police Alco-link statistics.

The Company’s Response

[22] Mr Scott called two witnesses. The first was Ms Pu Chi Lo, the company’s general manager. Ms Lo has held a General Manager’s Certificate since November 2007. She was involved with the company’s original application for an on-licence, including discussions with the Police. She said that there had been no changes made in the way the business was operated since it opened for business in 2007. She confirmed that there were a number of signs confirming that no smoking was allowed inside the premises, including notices in each of the 23 karaoke rooms.

[23] Ms Lo explained that the reason for the “vomit basins” was in order to retain the company’s status as a top class karaoke business. She contended that such items were considered to be an important part of the karaoke business in mainland China. She stressed that the New Zealand items were ornamental, although the evidence indicated that the basins were connected to the plumbing system. However, she denied that they had ever been used. She stated that the signs explaining their purpose had recently been removed.

[24] Ms Lo confirmed that Ms Hui Li was on duty on the night of 16 October 2008. She said that Ms Li’s understanding of the English language was marginal. Ms Lo said that Ms Li had left her employment for personal reasons. She had made a full statement to the company and this was produced. In her statement Ms Li confirmed that she had explained how the bottles of spirits were retained by bar staff, after they had been sold to a customer. She accepted that she was aware of the custom to pour a shot of spirits into the green tea that was served. Ms Li also acknowledged that she had told the Inspectors that the basins were to vomit in. She said “As far as I knew, the vomit basin is just for vomiting in and we couldn’t have sold excessive amount of liquor, let alone to intoxicate the customers or make them vomit. Furthermore I had never seen any customer vomit into it”.

[25] Ms Lo advised that since the visits, the menu had been altered so there was no advertising of the sale of spirits by the bottle, although the company continued to sell bottles to its customers. In other words sales now take place without advertising on the basis that customers are aware that they can make a purchase if they so wish. Ms Lo produced copies of extracts from the company’s daybook about the visits made by the Inspectors and the Police on 16 October and 19 December 2008. She stressed that the company experienced no problems with intoxicated patrons, or under-age patrons, or smoking on the premises. Although she is the general manager she appeared to be unaware of the enforcement applications lodged by the Inspector in November 2008. On the other hand she was aware of the custom that customers liked to pour shots of spirits into the one litre jugs of green tea.

[26] Ms Grace Chang also gave evidence. She accepted that she was responsible for the day to day running of the business when she was on duty. She stated that she had never seen anyone intoxicated on the premises. She denied any suggestion that the company permitted smoking on the premises. She argued that each of the rooms would be visited by members of the company’s staff at least once every 30 minutes. She said that the average use of a room was between two and three hours and that there was no video surveillance of the interiors of the 23 rooms. She stated that she was aware of the enforcement applications lodged in November 2008.

The Authority’s Decision and Reasons

[27] Section 169(1) of the Act reads as follows:

Every person commits an offence and is liable to a fine not exceeding $2,000 who, being the licensee or a manager of any licensed premises or an employee of the licensee, sells or supplies any spirits to any person, for consumption on the licensed premises, otherwise than in a drinking vessel of a capacity not exceeding 500 millilitres.

[28] The section could not be more straightforward. Apart from Mr Scott’s submissions, there was no evidence that the Police had unofficially accepted that the practice of keeping the bottles behind the bar, and serving the spirits in smaller glasses was somehow acceptable. Furthermore we note that we have already confirmed the illegality of this particular custom in Bryce Robert Law v Titanic Limited and another LLA PH 680-681/2004. In that case we said:

"[59] We reject the submission that there was not a breach of s.169 of the Act. It was clear from the evidence that there was a practice of selling Chivas Regal whisky to customers in either 750 or 500 millilitre bottles. The labelling of the bottles with the customer’s name was confirmation of the practice. There was a clear inference that such a sale had taken place on the occasion of Constable Ferguson’s visit. Ms Kim admitted as much to Constable Ferguson. Selling spirits in a bottle directly to a customer is a clear breach of s.169 of the Act. A bottle is not a “drinking vessel”. It is a container. Section 5 of the Interpretation Act 1999 provides that the meaning of an enactment “must be ascertained from its text and in light of its purpose.” It also provides that the meaning of an enactment may be ascertained from indications in the enactment such as headings to Parts and sections as well as tables of contents, preambles, and so on.

[60] The heading to the section clearly used the term “glass” which was also the term used in an equivalent section in the 1962 Act. It reads “Sale of spirits otherwise than in a glass.” The Working party on Liquor Report (Laking Committee) October 1986 at page 156 also used the term “glass”. The intention of the section is clear. A glass is not a bottle of spirits. The purpose of the enactment is contained in s.4 of the Act, which will be referred to in full shortly, but can simply stated as “contributing to the reduction of liquor abuse.” The intention of s.169 of the Act, when measured against the object of the Act, is to prevent the sales of spirits in a bottle because a bottle of whisky for consumption in a bar is a form of liquor abuse. Hence there was a breach of s.169 of the Act."

[29] We agree with Mrs Noble that the practice of selling spirits in bottles for consumption on the premises would also constitute a breach of s.154A of the Act. Any sale of a bottle of spirits for consumption on the premises, would in our view be likely to encourage persons on the premises, to consume alcohol to an excessive extent. It may well be that the company was concerned to ensure that the contents of the bottle were supplied in a careful and supervised way. However what happens behind the closed door of the 23 rooms cannot be adequately supervised, no matter how careful the management may be. The presence of the cigarette butts showed that the company cannot properly monitor what happens in the rooms.

[30] The same argument applies to the consumption of the contents of the bottle. There can never be adequate supervision. In addition, the company is aware that customers like to pour the contents of the shot glass into the one litre jug of tea. By selling spirits in this way the company is a party to a further breach of s.169 of the Act.

[31] In summary, the practice of selling spirits in a bottle is unlawful and must cease forthwith. The company had admitted to making sales in this way despite our earlier ruling, and despite the warnings. We have taken into account that in this case there was no evidence of an actual sale of a bottle of spirits, although it is quite clear from the photographs and the admissions that the practice was widespread. There was ample evidence of the customers being allowed to pour spirits into a container larger than that allowed by law.

[32] People who come to live in this country must accept the law as they find it. In this case the law prevents them from continuing with practices that they have been allowed to indulge in, in their country of origin. On moving to New Zealand they are required to follow New Zealand law, and in particular the emphasis on reducing liquor abuse. We repeat that selling bottles of spirits in an on-licence will stimulate and encourage the abuse of liquor. We can only achieve the Act’s objective if everyone complies with the Act.

[33] It follows from the foregoing that on 16 October and 19 December 2008, the licensed premises was conducted in breach of ss.165 and 169 of the Act. In both cases the respective duty managers failed to conduct the premises in a proper manner. However, we are unable to make any finding that the company allowed the premises to be operated in breach of the smoke-free legislation. It is still unclear why the company required the installation of “vomit basins”, but we understand that there are no longer signs to this effect. Quite clearly such items show improper management of licensed premises in a New Zealand context.

[34] We believe that it is clearly desirable that sanctions are imposed against the company and the two managers. Put in another way, to do nothing would not be appropriate, given the warnings received by the company and members of staff, and given that the Authority’s previous decision on the topic. In our view the message should have been well understood. As stated earlier, selling spirits otherwise than in a glass represents one of the more serious forms of encouragement of liquor abuse. It is quite inappropriate in the New Zealand licensing context.

[35] In the decision of Christchurch District Licensing Agency Inspector v Karara Holdings Limited [2003] NZCA 96; [2003] NZAR 752, the Court of Appeal stated as follows:

“This indicates that the function of s.132 is to enable the Licensing Authority to enforce sound management of licensed premises. Its particular role is to enable the Licensing Authority to secure management compliance by licensees, through enforcement steps, in those cases brought before it by the Police or District Licensing Agencies where it appears there have been breaches in licensing standards which are reflected in the grounds for applying for and making orders under s.132.”

[36] It is important that managerial compliance is secured in this case. There should be no further misunderstanding. Accordingly, and for the reasons stated, we make the following orders:

• [a] On-licence number 007/ON/453/2008, issued to Mega Trade (Akl) Limited, is suspended for seven days from 8.00 am on Monday 9 March 2009 to 8.00 am on Monday 16 March 2009.
  
• [b] General Manager’s Certificate number GM/007/798/08 issued to Hui Li is suspended for 21 one days from Monday 9 March 2009.
  
• [c] General Manager’s Certificate number GM/007/552/07 issued to Grace Chang is suspended for 28 days from Monday 9 March 2009.
  

DATED at WELLINGTON this 19th day of February 2009

Judge E W Unwin
Chairman

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