City Trendy Limited, re [2009] NZLLA 468 (5 May 2009)

New Zealand Liquor Licensing Authority

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City Trendy Limited, re [2009] NZLLA 468 (5 May 2009)

Last Updated: 27 April 2010

Decision No. PH 468/2009

IN THE MATTER of the Sale of Liquor Act 1989

AND

IN THE MATTER of an application by CITY TRENDY LIMITED pursuant to s.31 for an off-licence in respect of premises situated at 759 Colombo Street, Christchurch, known as “7-11 Convenience Store”

BEFORE THE LIQUOR LICENSING AUTHORITY

Chairman: District Court Judge E W Unwin
Member: Dr J Horn

HEARING at CHRISTCHURCH on 23 April 2009

APPEARANCES

Ms Linda Lin – on behalf of 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] On 3 October 2008 we declined an application for an off-licence in respect of a convenience store situated at the Wellington Airport. For the reasons given in our decision we stated that we were no longer prepared to issue off-licences for convenience stores. The decision is reported under The Woodward Group Limited LLA PH 1415/2008. We set out below some of the relevant comments:

“[42] However, our research shows that in 2000 and 2001, the Authority had not just agreed to re-define ‘main order household foodstuffs’. It is apparent that it had also been persuaded to broaden the definition of a grocery. In 2000 it began to issue ‘on the papers’ grocery style off-licences to “Star Mart” premises. In the decision of Caltex New Zealand Limited and another LLA PH 1082-1083/2000 the following comments were made:

“In the 10 years since the passage of the present Act, the parameters have changed. In our view the ‘convenience store’ should be added to supermarkets, groceries and superettes as premises from which wine and beer can be sold, with only the traditional small corner dairy being excluded. We do not want to impose a restrictive definition of what is and what is not a dairy by reference to the size of premises in terms of square metres ...”

[43] With the benefit of hindsight, it seems that this decision to allow a convenience store to be classified as a grocery was a turning point in the off-licence industry. There has since been a proliferation in the number of off-licences being granted to convenience stores that have portrayed their businesses as scaled down supermarkets, when in fact some of them were nothing more than ambitious dairies.

[44] Considering that the law in relation to the interpretation of statutes was amended on 1 November 1999, the decision to apply such a liberal construction was even more surprising. On the above date, the Acts Interpretation Act 1924 was replaced by the Interpretation Act 1999. Previously the interpretation of statutes was governed by s.5(j) of the former Act as follows:

Every Act, and every provision or enactment thereof, shall be deemed remedial, whether its immediate purport is to direct the doing of anything Parliament deems to be for the public good, or to prevent or punish the doing of anything it deems contrary to the public good, and shall accordingly receive such fair, large, and liberal construction and interpretation as will best ensure the attainment of the object of the Act and of such provision or enactment according to its true intent, meaning and spirit.

[45] As from 1 November 1999 the replacing section 5(1) reads:

The meaning of an enactment must be ascertained from its text and in the light of its purpose.

[46] Although it has been accepted that the established jurisprudence under the old Act continues to apply, it seems to us that it is necessary to look first at the text, and then ensure that the meaning ascertained from that text does not offend against the statute’s purpose. It seems to us that Parliament had declared that it was no longer appropriate to adopt a fair large and liberal construction and interpretation of any statute. Put in another way, statutes should be interpreted on the basis that the words should bear their plain and ordinary meaning provided that any resultant interpretation did not offend against the statute’s object. The proliferation of small off-licensed stores throughout the country illustrates what can happen when legislation is interpreted liberally.

[47] An argument could be mounted that when one examines the Sale of Liquor Act’s objective, the reduction of liquor abuse might well be encouraged if the number and type of off-licences nationally was reduced. However, it is not our intention to rely on this provision in declining this application. What can be said is that the adoption of a strict interpretation of the wording in s.36 will not offend against the purpose of the Act. On the other hand, the adoption of a liberal approach could do so.

[48] In this case the meaning of the words in s.36(1)(d)(ii) are crystal clear. We can only grant an off-licence under that section to a grocery. That is the very first element that must be established to our satisfaction. The Act does not say ‘grocery or convenience store.’ Once an applicant has established the bona fides of the type of premises it must then show that the grocery’s principal business is the sale of main order household foodstuffs. It is of interest that the Sale and Supply of Liquor and Liquor Enforcement Bill currently before Parliament continues to use the same wording.”

[51] In summary, therefore, and after careful consideration, we consider that the Authority’s earlier decisions to issue off-licences to convenience stores were 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.

[52] 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.”

[2] Against that background we come to consider an opposed application for an off-licence. The application is to be determined under s.36(1)(d)(ii) of the Act. In other words we may only grant the off-licence if we are satisfied that the store is a grocery store, the principal business of which is the sale of main order household foodstuff requirements. The premises are located in Colombo Street in Christchurch and the application follows the purchase of an existing business. The sole issue is whether the company is able to satisfy us as to the above requirement.

[3] The applicant is a private company in the name of City Trendy Limited (hereafter called the company). The company’s sole director and shareholder is Ms Linda (Yan) Lin. Her company entered into a contract to purchase the existing business in August 2008. The business began trading two months later under the name of “7-11 Convenience Store”. On 8 October 2008 the company obtained a temporary authority to trade under the base licence. This licence allows for trading between 7.00 am and 11.00 pm daily. These are the same hours requested in the application.

[4] When she filed her application, Ms Lin was asked to describe the principal purpose of the business. She wrote “Food Premises – Dairy G3”. Public notification attracted no objections. On the other hand both the Police and the District Licensing Agency Inspector reported in opposition to the licence being granted. The Police referred to the size of the premises as well as current case law. In his report the Inspector noted our decision in The Woodward Group Limited and submitted that the business did not derive its principal income from the sale of main order household foodstuffs.

[5] There are no concerns about the company’s suitability to hold a licence. The store has a total area of more than 200 square metres and is one of the cleaner and better presented of many similar stores that we have visited. Because the company has not been trading for long, there were no certified accounts as required by regulation 8(2)(j) of the Sale of Liquor Regulations 1990. However, the company presented a computer-generated printout of its purchases from a wholesaler. The Inspector was able to draw certain conclusions from the data that was provided.

[6] The off-licence was originally granted following a public hearing that took place in Christchurch on 15 August 2000. The application was brought by a company called Kasha Limited. It had been opposed by the Police and by Mr M Ferguson, the District Licensing Agency Inspector. At that time the business was trading in the name of “Seven to Eleven”, and was described as an inner city convenience store. In its decision, the Authority (as it was then constituted), stated that the application had been set down for a public hearing to give the objectors an opportunity to address the issue of whether this relatively new breed of shop was a dairy or a grocery store.

[7] In what is an extraordinary licensing co-incidence, the Authority decided that the time had come to accede to the pressure that was mounting from convenience stores. In its decision known as Caltex New Zealand Limited and Kasha Limited LLA PH 1082-1083/2000, it said:

“In the year 2000 it is appropriate that we move on from the somewhat restrictive definition of “main order household foodstuff requirements” spelt out by the Authority in Douglas Oliver Corporation Limited (supra) in 1990 as “items the majority of New Zealand families purchase once a week from either a supermarket or a grocery.”

[8] The Authority then went on state that in its opinion it was time to add convenience stores to supermarkets, groceries and superettes as being appropriate businesses that could be granted a licence to sell beer, wine and mead. It made the very remarks that we quoted in The Woodward Group Limited decision set out in paragraph [2] above.

[9] Nearly nine years later, the same business under new ownership has found itself the subject of a revision of the very principles that led to its being granted a licence in the first place. One of the few consistencies between then and now, is Mr Ferguson the Inspector. In 2000 he argued that the business was a modern dairy rather than a grocery store. He made the same argument before us at the hearing of the present matter.

The Application

[10] Ms Lin came to New Zealand from China in 1998. Her background in China was primarily in the electronics industry. After serving as an interpreter in this country, she worked as a sales and marketing manager. In 1993 she commenced her career in real estate. She was supported by two of her employees at the hearing. One of them argued that the business would have to close down without a licence to sustain it.

[11] Ms Lin explained that her company had followed all the rules in making its application. She pointed out that the premises were situated in a transitional commercial zoning that allowed for high-density businesses. She confirmed that during the last nine years, she was unaware of any difficulties that had been experienced by the premises, particularly as they closed at 11.00 pm. She contended that the business was therefore unlikely to contribute to the type of liquor abuse that occurred in the city after midnight. She suggested that the real problem lay with premises that opened on a 24-hour basis and sold such lines as RTDs.

[12] Ms Lin pointed out that a minimum of two members of staff were employed from 7.00 pm for the night shift to ensure better control of the way that liquor was sold and supplied. She contended that the store provided a service for staff from the surrounding offices as well as overseas tourists. She said that her peak time was between 5.00 pm and 6.30 pm as people (including tourists) rushed to buy foodstuffs on their way home.

[13] Ms Lin thought that the majority of customers who purchased liquor were tourists. In particular she noted that the tourists appreciated being able to purchase a single can or bottle of beer rather than a half dozen or a dozen as is required in a supermarket. She noted that some tourists took their purchase straight across the road to the Post Office to send the item overseas. For that reason she thought that she was in a good position to promote quality New Zealand wines.

[14] Ms Lin considered that the sale of liquor represented about 15% of the shop's turnover. She said that in October 2008 she had confirmed the purchase of the business, and had paid a premium price for the goodwill that had included the right to sell wine and beer for consumption off the premises. At that time she had been unaware of any changes in the way the Act was being interpreted.

[15] Ms Lin added that it was only in December 2008 that she became aware that there was a problem with the issue of the licence. She stated that she was hoping to expand the business by moving up a floor to provide more grocery lines. She pointed out that in the current recession the business was facing a potential loss of 15% of turnover. She argued that any reduction of revenue would place the viability of the business at risk. She was concerned that we might be applying the new rules contained in the Bill currently before Parliament. Ms Lin was adamant that the business was a grocery.

The District Licensing Agency Inspector

[16] Mr Martin Ferguson has been an Inspector with the Christchurch City Council since 1999. He opined that the business was not a grocery store and therefore not entitled to hold a licence. He referred to our recent decisions in The Woodward Group Limited (supra) as well as M K Devereux Limited LLA PH 1532/2008. He noted that in the latter decision we had defined main order household foodstuffs in this way:

“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”.

[17] Mr Ferguson had earlier asked Ms Lin for certified accounts showing the percentage of turnover that was derived from the sale of main order household foodstuffs. Ms Lin had responded by noting that the previous owner had not broken down the returns from the six to seven thousand categories that were available in the shop. After discussing the issue with her accountant, she advised that providing the required turnover would be very difficult if not impractical at this time.

[18] As an alternative, Ms Lin provided a computerised breakdown of items purchased from her main suppliers. The first list comprised 27 pages with a little less than 1000 separate items. Seven and a half pages comprised confectionery items only. Five of the pages referred to liquor items. Mr Ferguson is to be thanked for his work in analysing the figures. The total cost of all items purchased was just under $30,000. Of that amount, the cost of liquor was $6817.11 or 24.38% of total. This was about the same as the cost of cigarettes and tobacco. Mr Ferguson established that the total cost of all main order household foodstuffs was $2,989.98, or 10.69% of total purchases. This figure increased to 14.14% if liquor was removed from the equation.

[19] Ms Lin produced another schedule that was said to include all purchases made between November 2008 and January 2009. The figures included items purchased from other suppliers. The total cost of the goods amounted to $125,874.93. Mr Ferguson carried out a further analysis. He established that according to the latest list, main order household foodstuffs were slightly less than tobacco at 18.62%. Liquor sales amounted to 15.89% of total. When liquor was removed from the equation the total cost of groceries amounted to 22.15% of total. It is noted that included in the list under the heading of groceries were such items as nappies, toilet paper, stationary, razor blades, pet foods, toilet paper, and sanitary requirements. These and other non-main order food items were excluded from the calculations.

[20] Mr Ferguson had visited the store a few days previously. He contended that the number and range of household food items was small and limited. He stated that in his opinion there was only one or two of most of the items on display with only selected products in larger quantities. He noted that the price of the goods was at the upper end of the spectrum. He argued that this was consistent with this type of shop which caters for people who shop for convenience or in response to an impulse to purchase, as opposed to those who buy in bulk, or who are price conscious when purchasing main order household foodstuffs. He considered that meat, fruit, and vegetables were almost completely absent.

The Police

[21] Sergeant A J Lawn gave evidence that in Christchurch the three regulatory agencies operated in a collaborative environment which, he argued, gave a clear and uniform approach to the industry. He advised that the Police relied on the evidence given by Mr Ferguson. He submitted that the majority of the goods in the store were not purchased for consumption in a household as part of that household’s main order foodstuff requirements. He noted that on a nation wide basis, the grocery style premises were among the worst offenders in terms of sales to minors, and suggested that reducing the number of liquor outlets would go some way to promoting the Act’s objective.

The Authority’s Decision and Reasons

[22] Despite the sincere pleas made on behalf of the applicant we must apply the law. If we were able to decide the case on sympathy or any similar emotion then it may be that a licence would be granted. However, we (the company and ourselves), are governed by s.36 of the Act. This section describes the types of premises in respect of which off-licences may be granted. The relevant parts of the section read:

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

(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

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

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

[23] Over a period of time we have reached the conclusion that the way in which certain premises have been licensed must stop. Not only is the licensing of convenience stores contrary to the terms of the Act, but applicants have included in the percentage figures items that do not qualify. They have a different perception of the meaning of main order household foodstuffs. Up until recently we have been inclined to accept such figures at face value. The reality is that a large number of convenience stores have joined the bandwagon and obtained licences, which should not have been granted in the first place. Given the price at which the liquor is sold, it is astonishing to find turnover percentages in liquor of up to 20 per cent of total turnover.

[24] There is no question that these premises are well lit, bright and attractive. There are obvious advantages in having such a store for the passing pedestrian traffic. The issue is whether we have been satisfied that people go to the store primarily to purchase their main order household food requirements. Quite clearly that is not the case.

[25] The decision of Jay and H Company Limited LLA PH 155/2001 is the normal guideline for determining the principal business of a store. However, it needs to be born in mind that the decision was written in order to determine whether the store was a dairy or a grocery store. In a modern context asking such a simple question can lead to difficulty. For example it is possible to reach the answer that if the business is not a dairy it must be a grocery store. However, the store might be neither.

[26] Modern dairies and general stores carry such a large range of products that sometimes it is not possible to categorise them. They may be convenience stores or general stores or superettes or takeaways or markets. In the current context, it is preferable to focus on whether a particular store is a grocery. Nevertheless, the decision is helpful in assessing the principal business of a store. The Authority (as it was then constituted), 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."

[27] Applying the above criteria to this case we comment as follows:

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

[28] We have not received the turnover figures but the Inspector has analysed the purchasing figures. In our view his analysis was fair to the company. The results are quite consistent with our observation of the premises. In other words the majority of items that are sold are not groceries. The business is a convenience store. It even trades under the name “7-11 Convenience Store”.

(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).

[29] There is a significant range and variety of products but most of them are not foodstuffs. The majority of the items are there for the convenience of passing pedestrians and tourist. To suggest that the majority of items in the store are foodstuffs that are taken home for preparation and consumption is quite unrealistic. We doubt that the company could ever achieve the type of grocery business that was anticipated by Parliament when it passed the legislation. In our view there would be no demand for such a business on that site. It would be quite uneconomic.

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

[30] Given the locality, the size of the premises is quite adequate to be classified as a grocery store. But it could also be classified as a convenience store.

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

[31] The lay out of the premises is not significant. It is a narrow but long building. There are baskets available for the use of the customers.

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

[32] We took time to view the premises. The business did not look like a grocery store and it did not seem like one either. Our observations tended to confirm the list of products referred to above. We note that the store was described as a convenience store by its outside advertising. We were surprised to find three outside advertisements promoting the sale of liquor. On the other hand the business is well run and provides a good service. However, and despite the plea from Ms Lin, we are not prepared to make an exception.

[33] In summary, we were not satisfied (and that is the test), that this business is a grocery store, the principal business of which, is the sale of main order household foodstuff requirements. Subject to the company’s appeal rights, and assuming its ability to obtain a temporary authority, we confirm that this decision will come into effect on 1 August 2009, to enable the company to sell its stock.

DATED at WELLINGTON this 5th day of May 2009

Judge E W Unwin
Chairman

7-11Convenience Store.doc