Big Barrel [2011] NZLLA 698 (19 July 2011)

Last Updated: 29 August 2011

[2011] NZLLA PH 698

IN THE MATTER of the Sale of Liquor Act 1989

AND

IN THE MATTER of an application by POONAM ENTERPRISES LIMITED for an off-licence pursuant to s.31 of the Act in respect of premises situated at 150 Oxford Street, Levin, known as “Big Barrel Wholesale Liquor Levin”

BEFORE THE LIQUOR LICENSING AUTHORITY

Chairman: District Court Judge J D Hole
Member: Ms J D Moorhead

HEARING at LEVIN on 4 July 2011

APPEARANCES

Mr R B Hunt – on behalf of applicant
Senior Sergeant W Roy – NZ Police – to assist
Miss L M Roiri – Horowhenua District Licensing Agency Inspector – to assist

Objectors

Mr McGregor Scott by his agent S J Devorns
Mr G Good
Ms M K Edwards
Mr L MacDonald

RESERVED DECISION OF THE AUTHORITY

Introduction

[1] This decision relates to an application for an off-licence by Poonam Enterprises Limited. The proposed premises are situated at 150 Oxford Street, Levin. The premises are in the course of construction. They are situated next to a former service station. On the other side of the service station there are the premises of the Horowhenua District Council. Beyond the Horowhenua District Council is located a “Super Liquor” off-licence store.

[2] It is intended that the applicant will lease the premises for a term of six years with two rights of renewal of six years each.

[3] Whilst the application indicated the applicant intended to sell liquor from Monday to Sunday from 9.00 am to midnight each day, the application was amended to provide for hours of 9.00 am to 11.00 pm each day.

[4] There are two directors of the applicant namely, Kishore Hiro Wadhwani and Poonam Wadhwani. Each of the directors of the applicant has a 50 percent shareholding in the applicant.

[5] The application attracted 34 objectors. Included was a petition signed by 34 persons.

Criteria

[6] Section 35 of the Act sets out the criteria applicable to an application for an off-licence. In terms of this application, only two of the matters set out in s.35(1) are relevant. These are the suitability of the applicant; and the days on which and the hours during which the applicant proposes to sell liquor.

[7] The amended hours are consistent with other off-licences in Levin. Whilst at least one objector complained about the proposed hours, generally his objection was more relevant to suitability.

Case for applicant

[8] There were two witnesses for the applicant.

[9] Kishore Hiro Wadhwani, one of the two directors and shareholders of the applicant indicated that he currently lives in Napier. The other director and shareholder is his mother.

[10] Mr Wadhwani was born in India. He has spent the last 20 years living and running businesses in Dubai. He states that his businesses have included two retail shops and a recruitment agency. They have been very profitable. Neither he nor his mother have any experience in the liquor industry. He stated that in April 2010 he visited New Zealand with his mother. He met his cousin Palwinder Singh who is a director of the Big Barrel Group Limited. Big Barrel Group Limited is a liquor franchisor. After locating the Levin premises, Big Barrel Group Limited on behalf of the applicant, obtained resource consent for the premises. It also dealt with this application for an off-licence. This was done as the directors of the applicant had returned to Dubai to sell their businesses and settle their affairs.

[11] Until Mr Wadhwani gains some experience in the liquor industry, it is intended that the Big Barrel Group Limited will provide qualified duty managers, offer Mr Wadhwani liquor licensing training, and generally run the business.

[12] Mr Wadhwani’s lack of knowledge of the proposed business was obvious.

He did not know what the paid up capital of the applicant was. He said that it was intended to invest approximately $700,000 in the proposed business. He conceded that he had no knowledge of the liquor industry. He did not know what the object of the Sale of Liquor Act was. He had no comprehension of his obligations under the Act. He was unable to describe the socio-economic dynamics of the area in which the business is to be situated. He did not know where the franchisor intended to source its liquor. He had made no estimate of the projected profit for the first year of operation and he had no idea of the pricing structure for products. He acknowledged that a security guard would be necessary on Wednesday, Thursday and Friday nights to stop under-aged or intoxicated persons entering the premises. He thought that the duty manager might well be able to be the security guard. (The reference to under-aged and intoxicated persons indicated that he did have a smattering of knowledge of his obligations in terms of the Act; but this was not enough to overcome the overall impression of ignorance).

[13] Palwinder Singh is the joint director and shareholder of the Big Barrel Group Limited. It has a total of nine franchised off-licences in four different cities. All the premises in its group use the same business model and are run profitably. A franchise agreement has been agreed between the Big Barrel Group Limited and the applicant and it is intended that this will be executed if an off-licence is obtained. Significantly, the proposed franchise agreement makes no reference to the initial arrangements as deposed by both Mr Singh and Mr Wadhwani.

[14] The overall impression given by Mr Singh was that initially the Big Barrel Group Limited will provide hands-on assistance to the applicant until such time as the applicant’s director has obtained a General Manager's Certificate and is able to operate the business satisfactory.

[15] A considerable amount of Mr Singh’s evidence related to the operation of the Big Barrel Group Limited. Initially it was known as “Wholesale Liquor” and operated in Hawkes Bay. Since October 2010 it has operated under its new name and has endeavoured to create a new culture pertaining to off-licences. It has endeavoured to create points of difference between its franchisees and other off-licences. These points of difference include the sale of a larger range of product including some exotic liquor acquired from overseas. In addition, it proposes to conduct whisky and wine tastings and similar activities.

The objectors

[16] Generally, the objectors concentrated on matters which are not relevant to this enquiry. Little attention was paid to s.35(1) of the Act and accordingly in terms of s.32(3) of the Act most objections must be regarded as being irrelevant. Nevertheless, two of the objectors, namely Mr Good and Mr MacDonald noted that the applicant had failed to establish its suitability for holding an off-licence.

Decision of Authority and reasons

[17] The applicant’s suitability is the sole issue for consideration. In practical terms, this means the suitability of its directors and shareholders.

[18] When considering the issue of suitability, the comments of Pankhurst J in Page v Police (unreported) HC Christchurch AP 84/98, 24 July 1998 are relevant. Pankhurst J stated:

“Section 13(1)(a) provides that the applicant for an on-licence must demonstrate his or her suitability. In other words what is required is a positive finding. That implies an onus on the applicant to demonstrate suitability. Such suitability is not established in a vacuum but in the context of the particular case: For example, the place, the intended business (here in a difficult central city location), the nature of the business itself, the hours of operation and the intended activities, provide the basis for the assessment of the individual.” (Page 8, para 38).

[19] The agent representing the applicant conceded that neither director of the applicant had any experience in the liquor industry. He recognised Mr Wadhwani’s lack of knowledge of a licensee’s obligations under the Act. However, he submitted that the Authority was entitled to take into account the support to be provided to the applicant by Big Barrel Limited.

[20] Mr Singh is a director in Big Barrel Group Limited. He was a director of Padda Enterprises Limited when both he and Padda Enterprises Limited received some unfavourable comments from the Authority in Hunt v Padda Enterprises Limited and Singh [2009] NZLLA 288. That decision is dated 26 March 2009 and refers specifically to an incident which occurred on 18 October 2008 where Padda Enterprises Limited was held to have sold a 700 millilitre bottle of ‘Jagermeister’ spirit (having an alcohol content of 35 percent) to a 15 year old boy. At the time Mr Singh was the duty manager but was not on the premises. In evidence, the 15 year old boy told the Authority that he had obtained fake identification. He said that he had purchased liquor from “Wholesale Liquor” (Padda Enterprises Limited) from July to October 2008 on between 10 and 15 occasions. He stated that he was only asked for identification on three or four occasions. The evidence of the 15 year old boy was accepted by the Authority in preference to that of the directors of Padda Enterprises Limited. In that case there was also an allegation that Padda Enterprises Limited had been selling RTDs at significantly lower prices than its competitors. At paragraph 35 of the decision the Authority stated:

“In our view, selling liquor to minors is one of the worst forms of encouragement of liquor abuse. In the current case the sale to the minor on 18 October 2008 was aggravated by the absence of the duty manager, Mr Palwinder Singh. As set out in s.115(3) of the Act the person whose name is displayed is to be treated as the manager at that time. The situation is further aggravated by the fact that the minor had been sold liquor on several previous occasions. He was effectively able to purchase liquor from this source whenever he wished. The high alcohol content of the ‘jagermeister’ purchased is a further cause for concern. This is one of the worst cases of liquor abuse involving sales to a minor that has come before us. It is to be noted that it did not arise out of a controlled purchase operation.”

At paragraph 38 of the decision the Authority stated:

“We accept that the company has taken some important steps to ensure that there is no repetition. On the other hand if the company intends to discount its products, then it must expect to be targeted by young people. It needs to be properly focused at all times. We were not impressed with the company’s cavalier attitude to the appointment of managers, and its clumsy attempts to evade responsibility.”

[21] Whether Big Barrel Group Limited is a new company or whether it is Padda Enterprises Limited under a new name is irrelevant. Mr Singh has been a director throughout. His conduct as described in the decision of 26 March 2009 left much to be desired. His evidence was that Big Barrel Group Limited has only been operating under its new name since October 2010. It does not have a long track record and its operation is tainted by what occurred in October 2008 as described in the Padda Enterprises Limited decision. The fact that it now employs a liquor licensing consultant is indicative of a new approach to liquor licensing matters. However, this, too, is a recent development and only time will tell as to its effectiveness.

[22] The Authority was asked to accept that the operation of Big Barrel Group Limited is quite different from that described in the Padda Enterprises Limited decision. That may be so; but the Authority notes the evidence of Mr Good to the effect that the site of the proposed premises is in a low socio-economic area. Any discounting of products that may occur will undoubtedly prove attractive to the young people who live in that area. Whilst location per se is not a relevant factor, it becomes relevant when considering the overall suitability of an applicant.

[23] There are other disconcerting features incidental to this application. The sort of control to be exercised by Big Barrel Group Limited in respect of the proposed operation is derived first from the proposed franchise agreement. That franchise agreement can be assigned by the franchisor at will. Thus, such control as might be exercised by the franchisor could disappear very quickly. The Authority noted that Big Barrel Group Limited has entered into a franchise arrangement in respect of one of its stores with another franchisor and it is not inconceivable that a change of ownership of Big Barrel Group Limited could occur in the foreseeable future.

[24] It is also significant that the training process for a new franchisor as outlined in the proposed franchise agreement is not to be implemented in this case. The franchise agreement requires that training be undertaken by a franchisee before the commencement of the franchise. In this case, such training as will occur will only happen after the operation has commenced.

[25] As indicated previously, the applicant’s experience in the liquor industry is nil. On its own, the applicant is unable to establish its suitability.

[26] It relies upon the support which it may or may not obtain from Big Barrel Group Limited. For the reasons given in this decision, that support is regarded by the Authority as of doubtful value. Amongst other things, a significant period of time needs to elapse before Big Barrel Group Ltd is able to satisfy the Authority of its credentials.

[27] The Authority is not satisfied that the applicant has proved is suitability.

[28] Accordingly, the application for the off-licence is refused.

DATED at WELLINGTON this 19th day of July 2011

M Langworthy
Deputy Secretary

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