M & S Hart Limited and Hart, re [2009] NZLLA 210 (9 March 2009)

New Zealand Liquor Licensing Authority

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M & S Hart Limited and Hart, re [2009] NZLLA 210 (9 March 2009)

Last Updated: 28 January 2010

Decision No. PH 210/2009 –
PH 211/2009

IN THE MATTER of the Sale of Liquor Act 1989

AND

IN THE MATTER of an application by M & S HART LIMITED pursuant to s.31 of the Act for an off-licence in respect of premises situated at 205 Pohutukawa Avenue, Ohope, known as “Ohope Four Square”

AND

IN THE MATTER of an application by MATTHEW NORMAN HART pursuant to s.118 of the Act for a General Manager’s Certificate

BEFORE THE LIQUOR LICENSING AUTHORITY

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

HEARING at TAURANGA on 2 March 2009

APPEARANCES

Mrs S A Hart – on behalf of applicant
Mr M N Hart – applicant for General Manager’s Certificate
Mr I P Major – Whakatane District Licensing Agency Inspector – in opposition
Mr G R Butler – objector – in opposition

RESERVED DECISION OF THE AUTHORITY

Introduction

[1] Before the Authority is an opposed application for an off-licence as well as an opposed application for a General Manager’s Certificate. The off-licence application is to be determined under s.36(1)(d)(ii) of the Act with consequential restrictions on the type of liquor that can be sold. There are three 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 business is not a convenience store. The final issue is whether the company 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 M & S Hart Limited (hereafter called "the company"). The company’s shareholders are Matthew Norman Hart, his wife Sheree Ann Hart, and their family trust. Mr M N Hart is the company’s sole director. Mr and Mrs Hart purchased the store in Ohope in July 2008. At that time the business was a superette with its main source of income being the sale of rolled (cone) ice creams. Ohope has 2,800 permanent residents. The Harts noted that there were no supermarkets and saw an opportunity to provide this service. Accordingly they purchased the superette, removed the ice creams, and re-branded the business as “Ohope Four Square”.

[3] As part of the franchise agreement, the company was required to apply for an off-licence. Under the agreement the “Four Square” franchise issues a brochure each week and expects that customers will be able to purchase the specials that are advertised in the brochure at any Four Square branch. These specials may include the sale of certain brands of beer or wine. Accordingly the off-licence application and the application for a General Manager’s Certificate were filed with the District Licensing Agency on 12 June 2008.

[4] There are no concerns about the company’s suitability to hold a licence. Nor are there concerns about the proposed trading hours. The company sought to sell beer and wine between 7.00 am and 8.00 pm daily. It is not proposed to designate the store and the display of liquor will be limited by the available space. Included with the application was a certificate from the Whakatane District Council issued under s.31 of the Act. The certificate confirmed that the proposed use of the premises as an off-licence retail shop, meets the requirements of the Resource Management Act 1991.

[5] The Police did not oppose the application. Mr Paul Major is the District Licensing Agency Inspector for the Whakatane District Licensing Agency. He confirmed that the closest supermarket was in Whakatane, some seven kilometres from Ohope. He stated that the proposed hours of operation fell within the hours recommended by the District Council in its liquor policy.

[6] In December 2008, the Inspector received trading figures for the five-month period from July to November 2008. He noted that the accounts had not been certified as required by the Sale of Liquor Regulations 1990. He observed that the ‘Grocery’ items ranged from 59.24% to 66.71% of total sales each week. However he said that there was no list of what had been included under this category. He therefore highlighted all non-main order household foodstuffs in the stock list. He proceeded to work out the retail value of these items to conclude that only about 41.90% of weekly sales were true grocery items.

[7] Mr Major believed that he had been quite liberal with his assessment and therefore concluded that the application should be opposed. There was some confusion about whether bread and milk should be included in the figures as such items are also sold in dairies. We are in no doubt that such items must be included in the assessment of "main order household foodstuff requirements".

[8] The Inspector was aware that Four Square brand stores had traditionally been classified as grocery stores under the Act and issued with off-licences. Mr Major calculated the retail floor space by reference to the plan that had been provided. He reached the conclusion that the retail space was in the vicinity of 122 square metres. This calculation confirmed his view that the business was more in the nature of a dairy or convenience store.

[9] Mr Major had no objection to Mr Hart’s application for a General Manager’s Certificate particularly as Mr Hart had previous experience controlling licensed premises. However, he suggested that the grant of the certificate should await the outcome of the off-licence application. If the substantive application was declined he reasoned that the application for a manager’s certificate could not be sustained, as Mr Hart would not have any employment in the hospitality industry.

[10] Public notification attracted two letters of opposition, both of which were signed by Mr Grant Butler, a local resident of Ohope. One of the letters was written on his behalf, and the other on behalf of his business. Mr Butler’s concerns related to the lack of off-street parking and loading bay facilities. He argued that such activities were currently being allowed on a public reserve. He believed that the reserve was therefore being used to facilitate the sale of liquor contrary to the Council’s bylaws about liquor on reserve land.

[11] The Inspector contended that the objection had no status because Mr Butler had failed to address the criteria set out in s.35(1) of the Act. He advised Mr Butler accordingly but arranged for copies of the letters to be sent to the Council’s planning department. On 3 July 2008, the planning team leader for the District Council wrote to Mr Butler pointing out that the original shop and house had been constructed under a building permit issued in 1966. Subsequent building permits had since been issued to allow for extensions to the existing buildings, as well as the erection of a separate bottle shop next door to the subject premises.

[12] Accordingly, the Council planner contended that the businesses had been lawfully established. He reasoned that when the premises had been built there had not been any requirement for on site parking or a loading bay. He suggested that both businesses had existing use rights, and confirmed that a Resource Management Certificate had been issued. He stated that the Council was the owner of the reserve. He concluded by advising Mr Butler that any issues about the use of the reserve for parking and loading were not resource management matters, but should be addressed separately to the Council as the owner of the reserve.

The Applications

[13] Mrs S A Hart is a chartered accountant. She advised that the Ohope community had two dairies serving the community. She stated that she was unaware of any Four Square supermarket (or grocery) that had been declined an off-licence. She confirmed that the company’s product range included fresh fruit and vegetables as well as fresh meat, hot roasted chickens and bulk foods. She noted that turnover had risen by at least 50% since conversion of the store to a grocery. She believed that this was purely due to the decision to re-brand the style and nature of the business.

[14] Mrs Hart gave evidence that a Foodstuffs representative had been asked to measure the size of the store. His calculations came to 139.63 square metres of retail space and 96.19 square metres of storage making a total of 235.82 square metres. We had no reason to doubt those figures, and accept that it has been policy to include storage space given the need to have good storage space for any well run grocery. She advised that Foodstuffs had designed the store layout.

[15] Mrs Hart produced her assessment of the store’s percentage of "main order household foodstuff requirements". She used the weekly turnover from 29 December 2008 to 22 February 2009. The figures are generated directly from the “Foodstuffs” database. She commenced her calculations by reference to the computer print out for groceries, which showed a weekly percentage of turnover of between 55 and 59%. She had then deducted all non-grocery items using the test set out in our decision in the name of M K Devereux Limited LLA PH 1532/2008 in which we attempted to define such items as follows:

“However, we believe that even in a modern context main order household foodstuffs that are purchased from a grocery, are those food items that the majority New Zealand families purchase to take home for preparation and consumption. They will generally not include impulse purchases of food items such as confectionery.”

[16] By deducting all non-food items and confectionery and hot drinks, Mrs Hart ended up with a figure of 51.17% of groceries as a percentage of the weekly turnover. She believed that she had been conservative in her assessment. Her workings were impressive and we felt that there was no need for an independent audit. Indeed Mr Major had no hesitation in accepting her figures. The percentage of non-food items and convenience products was surprising to us, but was confirmed when we took a view of the premises. The true nature of the business will be a matter that needs to be kept under review

The District Licensing Agency Inspector

[17] Mr Paul Major has been a Liquor Licensing Inspector with the Whakatane District Licensing Agency since July 2003. As stated above he was prepared to accept Mrs Hart’s findings at their face value. He was unable to fully demonstrate how he had reached his own assessment. Given the research undertaken by Mrs Hart he was prepared to accept that his own calculations might have been in error. Mr Major accepted that the Four Square brand stores had traditionally been issued with grocery style off-licences.

The Objector

[18] Mr Grant Butler was good enough to attend the hearing. He is a past Chairman of the Ohope Community Board and was a Councillor with the Whakatane District Council. As he pointed out this was his first opportunity to voice his concern about the way the Council was ignoring what he described as the "Plantation/Volkner reserve area". He stated that his main concerns related to the fact that the reserve was being used for commercial purposes such as off-street car parking and a loading bay. He considered that the Council had not considered these issues when it agreed to grant the Resource Management certificate. He argued that there was a potential for a breach of the Council’s bylaws concerning the sale and supply of liquor on reserve land.

[19] As had been previously pointed out by Mr Major these concerns do not address the criteria set out in s.35(1) of the Act. The criteria that are listed below are the only matters on which an objection can be based.

35 Criteria for off-licences

(1) In considering any application for an off-licence, the Licensing Authority must have regard to the following matters:

• (a) The suitability of the applicant:
• (b) The days on which and the hours during which the applicant proposes to sell liquor:
• (c) The areas of the premises, if any, that the applicant proposes should be designated as restricted areas or supervised areas:
• (d) The steps proposed to be taken by the applicant to ensure that the requirements of this Act in relation to the sale of liquor to prohibited persons are observed:
• (e) Whether the applicant is engaged, or proposes to engage, in –
  • (i) The sale or supply of any goods besides liquor; or
  • (ii) The provision of any services other than those directly related to the sale or supply of liquor, --

and, if so, the nature of those goods or services:

(f) Any matters dealt with in any report made under section 33 of this Act.

[20] The company is entitled to rely on the certificate supplied by the Council. In those circumstances we asked that a copy of the submission made by Mr Butler be referred to the Council for comment.

The Authority’s Decision and Reasons

[21] As stated above, the issue in this case is the interpretation of s.36 of the Act. This section describes the types of premises in respect of which off-licences may be granted. An off-licence can only be granted to a grocery store, where the Licensing Authority is satisfied that the principal business of the store is the sale of main order household foodstuff requirements. The Act specifically provides that nothing in the section shall authorise the grant of an off-licence to any shop of a kind commonly known as a dairy.

[22] We refer to our recent decision in “The Woodward Group Limited” LLA PH 1415/2008. In that decision we indicated that we would no longer issue a licence to any premises that was a convenience store as follows:

“In summary therefore, and after careful consideration, we consider that the Authority’s earlier decisions to issue off-licences to convenience stores was contrary to the correct interpretation of the Act, and should no longer be regarded as good law. The current application illustrates the point that the Authority’s relaxed interpretation of a grocery store in 2001, has led to unrealistic expectations that inappropriate businesses could qualify for a grocery-style off-licence.

This ‘line in the sand’ decision means that no new off-licences will be issued where the business is plainly a convenience store and not a grocery (as in this case). It is time to return to a principled approach based on what is stated in the relevant section, and not on what commentators might think was intended by Parliament.”

[23] The test to determine the principal business of the store was set out in an earlier decision of Jay and H Company Limited LLA PH 155/2001. In that decision the Authority stated:

"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."

[24] We deal with these criteria separately.

The Turnover Percentages Produced in Accordance with Regulation 8(2)(j)

[25] The figures that were produced at the hearing were sufficiently authentic and probative not to warrant a call for them to be certified. Mrs Hart had carried out thoughtful research in assessing the main order household foodstuffs that are sold in the store. The company may have to produce further figures on renewal. It is to be hoped that Foodstuffs will change the software to ensure that only the items that conform to the definition are included under the grocery category.

The Number and Range of the Items Available

[26] There are a large number of grocery items in this shop. In our view the range of such items is reflected in the turnover figures.

The Size of the Premises

[27] We considered that the retail space was quite adequate for a grocery. The company needs to be aware of the possibility that the Sale and Supply of Liquor and Liquor Enforcement Bill, currently before Parliament, could be amended to provide for an even larger minimum area before an off-licence can be granted.

The Layout of the Premises

[28] There are trolleys available. There is ample shopping space. The shop is brightly lit, and there is no outdoor advertising of the type that might be found in a dairy.

A View of the Premises

[29] The view that we took of the premises was conclusive. The business is a “Four Square” grocery store of the kind we believe the Parliament intended should be entitled to the grant of an off-licence. While there are many items associated with the nearby beach, there is still an emphasis on the supply of household food items. It could not be said that the business was a dairy. A future concern will be to ensure that the shop continues to be a grocery and does not become a convenience store.

[30] For the reasons expressed, the company has satisfied us that it meets the criteria. 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.

[31] The hours of trading will be:

Monday to Sunday 7.00 am to 8.00 pm

[32] 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. We suspect that the Inspector may waive his appeal rights to allow the licence to issue. 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.

[33] The applicant’s attention is drawn to ss.48 and 115(3) 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.

[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.

[34] Mr Hart fulfils the criteria set out in s.121 of the Act. His application for a General Manager's Certificate is granted. The certificate may issue at the same time as the off-licence.

DATED at WELLINGTON this 9th day of March 2009

Judge E W Unwin
Chairman

Ohope Four Square.doc