Midas Liquor Centre Limited, re [2009] NZLLA 463 (29 April 2009)

New Zealand Liquor Licensing Authority

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Midas Liquor Centre Limited, re [2009] NZLLA 463 (29 April 2009)

Last Updated: 24 April 2010

Decision No. PH 463/2009

IN THE MATTER of the Sale of Liquor Act 1989

AND

IN THE MATTER of an application by MIDAS LIQUOR CENTRE LIMITED pursuant to s.31 of the Act for an off-licence in respect of premises situated at 224 Hobson Street, Auckland, known as “Midas Liquor Centre”

BEFORE THE LIQUOR LICENSING AUTHORITY

Chairman: District Court Judge E W Unwin
Member: Ms J D Moorhead

HEARING at AUCKLAND on 14 April 2009

APPEARANCES

Mr D G Scott – agent for applicant
Miss A L Marsh – Auckland District Licensing Agency Inspector – in opposition
Mr G S Whittle – NZ Police – in opposition
Mr J W Gilfillan – objector

RESERVED DECISION OF THE AUTHORITY

Introduction

[1] On 28 May 2008 we issued a decision in the name of General Distributors Limited LLA PH 712/2008. In that decision we refused an application by a supermarket to operate a full off-licence in respect of premises that the applicant proposed would be sited within the supermarket footprint. The application was based on the ‘store within a store’ concept. In other words the applicant proposed to provide a separate adjunct to the supermarket with a separate entrance. The application was said to be a test case. In other words this was the first application before the Authority to establish a bottle store within a supermarket.

[2] Against that background we have before us an opposed application for an off-licence made pursuant to the provisions of s.36(1)(c) of the Act. Midas Liquor Centre Limited (hereafter called the company) seeks to establish a stand-alone bottle store within the physical footprint of a Korean supermarket in Hobson Street in Auckland. The principal business of the proposed store will be the sale of liquor. The original application was filed with the Agency on 14 October 2008 and was received by the Authority on 2 March 2009.

[3] At the time of the application the company’s shareholders were David Hong and his wife Myung Joo Chung. Mr Hong was the sole director. It was proposed that the new business would trade under the name of “Midas Liquor Centre”. The business was to have its own Eftpos terminal and till. The company requested that the store be designated as supervised. The original trading hours that were nominated were between 7.00 am and 3.00 am the following day.

[4] Opposition to the application was received from the Police. This was based on the proposed trading hours. The Police indicated that if the trading hours were amended so that the business closed at 12.00 midnight the opposition would be withdrawn. We understand that the company then agreed to restrict its hours. However, on 25 February 2009 the Police wrote a further letter following a visit to the premises. In that letter reference was made to the Korean supermarket directly adjacent to the premises. The Police indicated that both businesses were to be owned by Mr David Hong. Therefore they indicated that the application was now opposed.

[5] The application attracted two public objections. The first objection was from Mr J W Gilfillan who described himself as a neighbour. His objection was dated 4 November 2008 although he had been in contact with the Agency two days earlier. The letter of objection was posted on 4 November 2008 and was received three days later. The closing date for objections was 29 October 2008 that is within 10 working days after the first advertisement on 14 October 2008, Monday 27 October being Labour Day a public holiday. Accordingly the objection was received seven working days after the closing date.

[6] Nevertheless Mr Gilfillan was sent a letter acknowledging his ‘letter of objection’. In his objection Mr Gilfillan referred to other liquor outlets in the area. He objected to the proposal on the ground that another liquor outlet that was open 140 hours a week would increase the adverse impact on the community that the community was presently experiencing from the current outlets.

[7] The second objection was received from Mr D M Parker on 10 November (eight working days after the closing date). Mr Parker referred to the anti-social behaviour generated by so many off-licences as well as the potential impact of an additional licence. Mr Parker did not appear at the hearing to support his objection and consequentially his objection has very little probative value. At any event the objection was received out of time and no waiver was sought.

[8] There was a delay in the report from the District Licensing Agency Inspector. She visited the site four times while the stores were being refurbished. She was advised that the company was having difficulty in obtaining a final Building Compliance Certificate. This was apparently because the compliance certificate applied to both the supermarket and the bottle store. The building work was covered by the one permit. During her last visit with the Police she became concerned at the lack of clear definition between the bottle store and the supermarket. In particular she noted a door between the two businesses that could be used by the public.

[9] The Inspector wrote a report dated 26 February 2009. She confirmed that the proposed trading hours had been reduced and that the opening times were now from 7.00 am to 12.00 midnight. She noted that the Police objection had therefore been satisfied. However, she referred to the letter since received from the Police in which concerns had been raised about the lack of separation between the supermarket and the bottle store.

[10] Mr D G Scott acts as the agent for the company. He argued that the objections had been filed out of time and did not address the criteria set out in s.35 of the Act. He submitted that such objections had been overruled by the Agency. He said that once the Police objection was satisfied it had been assumed that the licence would issue as soon as the final Building Compliance Certificate was received. He argued that he had received an email from an Agency Inspector dated 11 December 2008 in which it was suggested that her report was awaiting the final certificate in order to issue the licence.

[11] Mr Scott was critical of the “eleventh hour” opposition from the Police particularly as nothing had changed since the application had been lodged. He argued that the Police had not filed their opposition within the 15 working days specified by the Act and therefore their subsequent letter should be ignored. He noted that had a final Building Compliance Certificate been issued in December 2008 the licence would have been granted. He wrote to the Authority on 25 March 2009 contending that the company had been unfairly prejudiced by the delay and asked that the licence be issued on the papers. This we were not prepared to do.

The Application

[12] Mr David Hong gave evidence. He confirmed that a final Building Compliance Certificate was expected within the next two weeks. He stated that as at the day of the hearing he had become the sole director and shareholder of Midas Liquor Centre Limited and that his wife was now the sole director and shareholder of Midas Trading Limited. This latter company was the owner of the Korean supermarket or superette. This business is currently trading under the name of “Big-Mart”.

[13] Mr Hong explained that his wife’s company had subleased the bottle store to Mr Hong. The sublease was dated the same day as the date of hearing. The document was one page. It simply recorded that there would be a sub-lease for six years from 14 April 2009 and confirmed the proposed rental. It had clearly been produced to overcome Police concerns about the lack of commercial separation between the two businesses. Although Mr Hong said that he had too many businesses the clear intention behind the recent company changes was to try and show a separation of ownership of the two businesses.

[14] Mr Hong confirmed that he and his wife had started a similar business in Wakefield Street in Auckland. He has sold the bottle shop for which he had obtained a full off-licence. Furthermore this bottle shop was located within the footprint of the Korean supermarket. He stated that the new owners of the bottle store had been able to obtain a full off-licence with the same type of set up as was proposed for Hobson Street. His wife continued to operate the supermarket in Wakefield Street as well as the one in Hobson Street.

[15] Mr Hong maintained that the door between the bottle store and the supermarket would always be closed and would only be used to allow the people working in the bottle store to go to the toilet. In that case they would lock the front door on to Hobson Street. He confirmed that the supermarket was open from 9.00 am to 12.00 midnight. He acknowledged that one of the products that would be sold from the bottle store was soju, the Korean rice based wine with a high alcohol by volume content.

The District Licensing Agency Inspector

[16] Ms Anita Marsh is a Licensing Inspector with the Auckland City Council. She produced a number of photographs which graphically showed the two premises and the connecting door. She gave evidence that when driving past the premises she noted an advertising sign saying “Liquor” at the bottom of a large sign advertising that “Big-Mart” was open. The inference was that the premises were open to sell liquor as well. Staff agreed to cover up the word liquor. She advised that the supermarket was currently unlicensed.

[17] Ms Marsh acknowledged that if a Building Compliance Certificate had been issued in December 2008 she would probably have issued the licence. She believed that she had contacted the objectors to say that their objections were out of time. However, she seemed unsure whether Mr Gilfillan had been notified. We note an e-mail dated 23 December 2008 from Ms Marsh to Mr Gilfillan. Ms Marsh confirmed with Mr Gilfillan that his objection had been received out of time but that she had referred to it in her report. She said that since December 2008 she had been made aware of our decision in General Distributors Limited (supra) and was therefore unsure whether a licence could be issued.

The Police

[18] Mr Gary Selwyn Whittle is a Licensing Administrator employed by the Police. He has previously been a Liquor Licensing Inspector for 12 years. He confirmed that when he visited the premises he noted that the proposed bottle store was within the footprint of the building that housed a large Korean supermarket. He accepted that the principal entrance was separate and faced onto Hobson Street. On the other hand he referred to the door at the rear of the premises that leads into the supermarket.

[19] Mr Whittle was concerned that the two businesses were intertwined by common shareholders for each company. He also noted that there was no separate lease for the bottle store. He therefore submitted that the application was in breach of ss.36(4) and 37(3) of the Act and was an attempt to overcome the decision in General Distributors Limited (supra).

The Objection

[20] Mr J W Gilfillan received a notice of the hearing and took the opportunity to appear. He had difficulty in establishing the time frames particularly as he noticed the standard (but undated) notice affixed to the outside of the premises as required by s.31(4) of the Act. He referred to his original objection concerning the rubbish generated by the sale of liquor as well as the anti-social behaviour that is often caused by over consumption. He was particularly concerned about the proliferation of liquor outlets in a neighbourhood that the Council was encouraging people to reside in.

The Authority’s Conclusion and Reasons

[21] Before embarking on our decision it is necessary to determine the status of the objector and the Police. So far as Mr Gilfillan is concerned he satisfied us that he lived close enough to the proposed premises to have a greater interest in the proceedings than the public generally (s.32(1) of the Act). We considered that the content of his original objection was valid in that it referred to the fact that the company proposed to trade for 140 hours each week. However, in his evidence the trading hours were not mentioned. We observe that in making a decision on a new licence the number of existing licensed premises in the area is not a matter that we can take into account.

[22] We accept that Mr Gilfillan could have been confused by the wording in the undated notice affixed to the window of the property. However, this notice clearly states that he must file his objection within 10 working days after the first publication of the application. Given that Mr Gilfillan had 10 working days in which to file his objection and given that his objection was filed seven working days too late it seems to us there is no room to manoeuvre. We are unable to issue a waiver under s.111 of the Act. We think that Agencies need to be more pro-active in making decisions about whether or not objections are to be accepted. We believe that they should make such decisions on the information available to them and advise objectors and an applicant accordingly.

[23] The next preliminary issue concerns the Police. They filed an adverse report within the prescribed period. However, their concerns were met and the objection was effectively withdrawn. In many cases the application might then have been granted on the papers. However, in this case there was a delay caused by the lack of the final Building Compliance Certificate. The realisation that the proposal might offend against the legal principles that had been established in a previous decision resulted in a Police change of mind. On the other hand the Inspector has no time restriction on when her report has to be filed. Mr Scott referred to our decision in Clutha Licensing Trust LLA PH 277-278/2001. He submitted that the decision was a precedent for refusing to admit evidence brought by the Police when their objection to the renewal of an on-licence had been filed late.

[24] However, we believe that the decision was governed by its own facts. We based our ruling on s.23(2)(b) of the Act that we could not change the conditions of a licence on a renewal except in response to a report from one of the monitoring agencies. Because the report was late and the Police were seeking a reduction in hours we deemed the evidence inadmissible. However, we neglected to refer to ss.106(4) and 108(b) of the Act. These provisions not only give the Police the right to be present at hearings but in most cases to call examine and cross examine witnesses. Therefore we believe that the Police were entitled to appear and voice their concerns.

[25] It seems to us that the present case is on all fours with the decision in General Distributors Limited (supra). It centres on determining Parliament’s intentions. In our view the language about granting an off-licence to supermarkets and grocery stores is unequivocal. For example there is to be no connection between service stations and off-licence sales. Dairies are not permitted to hold an off-licence. Supermarkets and grocery stores will only be authorised to sell wine, mead and beer. The provisions under which an off-licence may be granted are set out as follows:

(1) Except as provided in subsections (2) and (5) of this section, an off-licence shall be granted only –

(a) To the holder of an on-licence in respect of a hotel or tavern, in respect of the premises conducted pursuant to that licence; or

(b) To the holder of a club licence, being a club that is entitled under paragraph (i) or paragraph (j) of section 30(1) of this Act to hold an off-licence, in respect of the premises conducted pursuant to that licence; or

(c) In respect of premises in which the principal business is the manufacture or sale of liquor; or

(d) In respect of –

(i) Any supermarket having a floor area of at least 1000 square metres (including any separate departments set aside for such foodstuffs as fresh meat, fresh fruit and vegetables, and delicatessen items); or

(ii) Any grocery store, where the Licensing Authority is satisfied that the principal business of the store is the sale of main order household foodstuff requirements.

(2) The Licensing Authority or District Licensing Agency, as the case may be, may grant an off-licence in respect of any other premises if the Licensing Authority or District Licensing Agency, as the case may be, is satisfied, in a particular case, -

• (a) That, in the area in which the premises are situated, the sale of liquor in premises of a kind described in paragraph (c) or paragraph (d) of subsection (1) of this section would not be economic; or
  

(b) That the sale of liquor would be an appropriate complement to the kind of goods sold in the premises.

(3) Nothing in subsection (1) or subsection (2) of this section shall authorise the grant of an off-licence in respect of –

(a) Any service station or other premises in which the principal business is the sale of petrol or other automotive fuels; or

(b) Any shop of a kind commonly known as a dairy.

(4) Nothing in subsection (2) (b) of this section shall authorise the grant of an off-licence in respect of any supermarket or grocery store or any other premises on which the principal business is the sale of food or groceries.

(5) This section applies subject to sections 51 and 52.

[26] Section 37(3) of the Act is also relevant. That section provides that it will be a condition of every off-licence granted under s.36(1)(d) of the Act, (i.e. supermarkets and grocery stores) that the only liquor that can be sold is beer, mead or wine.

[27] The business owned and operated by Ms Myung Joo Chung was described as a Korean supermarket although we doubt that it would qualify for a supermarket style off-licence. The file indicates that the size of the premises is below 1000 square metres. On the other hand the business is clearly a grocery store or superette. We believe that the issue of an off-licence to sell wine, beer and mead would be automatic. The issue is whether the grant of a full off-licence to the separate area would frustrate Parliament’s intention.

[28] In the General Distributors Limited decision (supra) we were very concerned about the precedent that would be set and the consequences that would follow. Our opinion was that if supermarkets or grocery stores were allowed to create a ‘store within a store’ concept then the idea would not just be copied by other supermarkets but also the large number of convenience stores (or ambitious dairies) that had portrayed themselves as scaled down supermarkets. In practice every large grocery store could have two licences. The argument was that such a proliferation of off-licence outlets within food stores could well result in harm to the population.

[29] While there may well be a similar situation in Wakefield Street that does not make the grant of this application inevitable. Two legal wrongs do not make a right. They simply compound the problem. The principle that can be gleaned from the Act is that granting an off-licence to a supermarket to sell spirits is contrary to the intent of ss.36 and 37 of the Act. Thus the question is whether the company has been able to achieve separation of the two businesses. The question of separate or common ownership is in our view no longer particularly relevant. In the General Distributors Limited decision (supra) we stated that there was nothing to prevent the holder of a supermarket style off-licence from owning and operating a full bottle store licence.

[30] We were fortunate in being able to take a view of the premises. In our opinion the company has not been able to achieve the physical degree of separation necessary to separate the businesses. We would go further and state that such separation is impossible when the two businesses are located in the same building and have so much in common. In this case the front wall of the building advertises both grocery items and spirits. Both entrances are a few feet from each other. While we accept that the door will be closed and only used by staff the fact of the matter is that there is a link between the two businesses. All the efforts made by the company to show commercial independence between the two businesses cannot hide the fact that they are associated with each other.

[31] It is our view that the establishment of a stand-alone bottle store within the Korean supermarket footprint would lead to the inevitable conclusion that the Act had been liberalised further to allow supermarkets the right to market and sell all types of liquor. Furthermore any decision to grant a licence in these circumstances would create a precedent that would be immediately followed by others.

[32] In the General Distributors Limited decision (supra) we said that any ‘store within a store’ proposal should be allowed very sparingly and only when the Agency or we were satisfied that granting a licence would not offend against the object or intent of the Act.

[33] When considering an application for an off-licence there are certain criteria to which we must have regard. These criteria are contained in s.35(1) of the Act. Basically the company fulfils the majority of the criteria. There are no concerns about its suitability. There was no opposition to the proposed hours of trading now that they have been reduced. For our part we would have thought that hours between 9.00 am and 10.00 pm were reasonable for an initial licence. Such hours can always be amended on renewal assuming no adverse reports. There was no challenge to the company’s ability to deny access to prohibited persons.

[34] What needs to be considered is whether the company (or an adjacent business) is engaged in the sale of any other goods beside liquor and if so the nature of those goods. We must also have regard to the reports from the Police and the District Licensing Agency Inspector. In a case such as this we need to look at the bigger picture.

[35] We believe that any proposal to establish a bottle store within the footprint of a building that hosts a supermarket must be examined with great care in case the provisions of the Act are circumvented or frustrated. In to-day’s current climate it is important not to interpret the Act in a way that will tend to defeat the will of Parliament. The Act specifically prevents supermarkets and grocery stores from being allowed the privilege of selling liquor other than wine, mead or beer. That is a statement of intent that needs to be respected. The onus is on the company to achieve the type of physical and temporal separation that allows no possibility of misunderstanding.

[36] In our view the company has been unable to achieve realistic separation. We believe that it would undermine the Act’s integrity (as well as Parliament’s intention) to allow a bottle store to be established within the footprint of a Korean supermarket. A grant of an off-licence in these circumstances would in our opinion create a precedent fraught with licensing problems and practical difficulties. In other words the company is seeking the same type of outcome that General Distributors Limited had applied for. While we accept that in the Christchurch case the proposed liquor store was off a foyer inside the main doors the legal principles are exactly the same.

[37] The corollary of this argument is that the building with its two associated businesses should be entitled to sustain one licence. This would be a grocery style licence with consequential restrictions on the type of liquor that may be sold. The presence of the supermarket means that spirits, RTDs and soju cannot be sold from this site. If either company wishes to sell beer, wine and mead from the premises it can apply to do so on the basis of the lack of separation of the two businesses. The company must of course decide how to reconfigure the shop fit-out. In such a scenario the application should clearly be made in the name of the company that is conducting the grocery or supermarket business.

[38] To put the matter in a legal perspective the company has been unable to satisfy us that we should not have regard to the reports from the Inspector and the Police under s.35(f) of the Act. It has been unable to satisfy us that we should overlook the fact that an associated business under the same roof is engaged in the sale of groceries under s.35(e)(i) of the Act. And finally the company has been unable to satisfy us that the business is not part of or associated with the supermarket and therefore subject to the provisions of s.37(3) of the Act.

[39] Accordingly and for the above reasons the application is refused.

DATED at WELLINGTON this 29th day of April 2009

Judge E W Unwin
Chairman

Midas Liquor Centre.doc