Just Liquor [2012] NZLLA 897 (9 August 2012)

Last Updated: 23 August 2012

[2012] NZLLA PH 897

IN THE MATTER of the Sale of Liquor Act 1989

AND

IN THE MATTER of an application by JUST LIQUOR LIMITED pursuant to s.41 of the Act for renewal of an off-licence in respect of premises situated at Unit 4, Richmond Centre, 4 Egmont Street, New Plymouth known as “Just Liquor”

BEFORE THE LIQUOR LICENSING AUTHORITY

Chairman: District Court Judge J D Hole
Member: Mr P M McHaffie

HEARING at NEW PLYMOUTH on 30 July 2012

APPEARANCES

M A Sherriff – for applicant
Mr M Clearwater – New Plymouth District Licensing Agency Inspector – in opposition

RESERVED DECISION OF THE AUTHORITY

Introduction

[1] This decision relates to an application for the renewal of an off-licence issued to Just Liquor Limited (granted in decision [2010] NZLLA PH 1422 dated 1 December 2010).

[2] No objections were lodged to the application. The Police report raised no matters in opposition. However, the District Licensing Agency Inspector, Mr Clearwater, opposed the application in his statutory report dated 9 February 2012. In that report he stated that he was not satisfied that the applicant “is a fit and proper entity”.

[3] Section 45 of the Act sets out the criteria to which the Authority must have regard when considering applications for the renewal of off-licences. These include the suitability of the licensee and the manner in which the licensee has conducted the sale and delivery of liquor pursuant to the licence. In addition there is the over-arching requirement to take into account the object of the Act of reducing liquor abuse as set out in s.4 of the Act. In this case, the Inspector questioned the suitability of the licensee.

A public hearing

[4] A report filed under s.43 is not an objection for the purposes of s.106(1) of the Act (see: C D and G Driessen NZLLA 914-915/2005). Accordingly there is a discretion vested in the Authority as to whether it should determine the application on the papers or convene a public hearing under s.106(1). By memorandum dated 30 March 2012 the applicant submitted that the application should be dealt with on the papers. This was opposed by the Inspector. By letter dated 19 April 2012 the parties were informed that a public hearing was necessary and timetabling directions were made.

[5] On 28 June 2012 (as confirmed in a minute dated 29 June 2012) the parties were informed that the Authority had reviewed its file and remained satisfied that a public hearing was necessary.

[6] At the commencement of the hearing on 30 July 2012 the applicant again sought to have the application granted on the papers without a public hearing. The Authority declined the application confirming the reasons stated on 29 June 2012. In addition it stated that the Inspector had raised valid concerns relating to the applicant’s suitability and an alleged cavalier attitude to regulatory requirements indicating that non-compliance with the Act could occur. Of these, the most important matter was the breach of assurances given by the applicant more particularly referred to in paragraph [9]. This was a matter that needed to be tested at a public hearing.

[7] This issue, and others, were aired at the public hearing. Whilst ultimately the application for the renewal of the off-licence is being granted, nevertheless the public examination of, in particular, the breach of assurance was essential to satisfy the Authority as to the applicant’s suitability.

History

[8] When the original application for the off-licence was heard, the directors of the applicant were Sandeep Sharma and Manpreet Walia. Mr and Mrs Walia held 50 percent of the shares in the applicant and Mr Sharma’s company held the other 50 percent of the shares.

[9] In its decision on the application ([2010] NZLLA PH 1422) the Authority expressed its concern as to the inexperience of Mr and Mrs Walia. However, its doubts were allayed because of the experienced Mr Sharma’s involvement in the applicant. The Authority stated (inter alia):

“The Authority is satisfied that so long as Mr Sharma remains involved in the licensee, then the applicant meets the criterion of suitability. However, if Mr Sharma should fail to be engaged in the business on a virtual full time basis (as he undertook) then his failure would place the licensee in breach of assurances given to the Authority (by Mr Sharma as a director). No doubt the Inspector would seek cancellation of the licence in these circumstances”.

[10] In June 2011 Mr Sharma and Mr Walia reached a stage where they were no longer able to work together. They agreed to hold an auction to see who would buy the other out. Mr and Mrs Walia purchased the balance of the shareholding.

[11] Mr Sharma resigned as a director of the company on 28 June 2011. By letter dated 30 June 2011 Mr Sharma advised the Inspector that he had ceased to be involved in the licensee. On 6 July 2011 by letter the licensee notified the Authority of the change in shareholding. This was within 10 working days as required under s.225 of the Act. No application pursuant to s.225B of the Act was made either by the Police or the Inspector.

[12] On or before 6 July 2011 Big Barrel Enterprises Limited acquired 51 percent of the shares in the licensee. Palwinder Singh and Avtar Singh (directors of Big Barrel Enterprises Limited) were appointed as additional directors of the licensee.

[13] In two recent decisions, the Authority has raised doubts as to the suitability of Big Barrel and its directors Palwinder and Avtar Singh. On 19 July 2011 the Authority issued its decision Poonam Enterprises Limited [2011] NZLLA PH 698. In that decision the Authority concluded at paragraph [26]:

“A significant period of time needs to elapse before Big Barrel Group Limited is able to satisfy the Authority of its credentials”.

[14] A second attempt was made to establish a bottle store on the same site as the Poonam decision refers. This time the applicant was Big Barrel Enterprises Limited and the decision is referred to as Big Barrel Enterprises Limited [2012] NZLLA PH 124. That decision revolved around the suitability of the applicant. At paragraph [29] the Authority wrote:

“The directors of the applicant have had chequered careers with statutory compliance since setting up their first off-licence in 2003. Adverse comments were made concerning them by the Authority in Padda Enterprises Limited decision of 2009. They are partly responsible for the deficiencies affecting Sanhu Brothers Limited’s Havelock North store in December 2010. Their judgement in promoting the recent Poonam application has been found wanting. On the other hand, there has been a distinct improvement in statutory compliance since 2009, relationships with the Hawkes Bay authorities seem excellent, and the applicant’s employment of Mr Hunt as a consultant is reaping beneficial results. ................”

[15] Paragraph [32] of the decision sets out the fundamental reasons that the Authority declined that application for an off-licence:

“With such a short history of redemption following serious misconduct, continued poor judgement, a difficult site and all the demands of the rapid expansion, this applicant faces real difficulties in satisfying the Authority that it has at the present time the requisite suitability to hold a licence in respect of the Levin premises. Individually, some of these concerns may seem insufficient reason to justify an adverse suitability finding. However it is the whole picture that needs to be considered.”

The Opposition

[16] In his evidence the Inspector summarised his opposition. He noted; and the Authority comments, as follows:

• [a] The applicant engaged in loss leading during the first month of its operation. There was evidence that this might have occurred; although it was not conclusive. In any event it was clear that at the time of the incident Mr Sharma was the only person in the applicant involved in stock purchases. There is no suggestion that it has occurred since July 2011.
  
• [b] It failed to complete notifications within the required time under s.225 of the Act. This relates to a change in directorate and shareholding which occurred in December 2010. The applicant became licensee on 3 March 2011. Accordingly the s.225 of the Act notification should have occurred by 17 March 2011. It was only after the Inspector’s prompting that the requisite notification occurred on 10 April 2011, some 16 days late. In the circumstances a waiver in terms of s.111 of the Act is granted as the omission was not wilful. It is noted that the omission occurred before the involvement of Big Barrell Enterprises Limited.
  
• [c] It appointed Manpreet Walia as a general manager when his General Manager's Certificate was obtained in breach of s.118 of the Act. Upon cross examination it transpired from an examination of notations on the application form that the Palmerston North District Licensing Agency (which issued the certificate) was satisfied that no breach of s.118 of the Act had occurred.
  
• [d] It failed to honour a solemn assurance to the Liquor Licensing Authority that its experienced director and manager, Mr Sharma, would stay with the company and that the removal of Mr Sharma was in breach of an assurance given to the Authority.
  
• [e] Finally, the Inspector referred to the Poonam and Big Barrel decisions mentioned in paras [13] and [14].
  

[16] Of the various matters raised by the Inspector, only those mentioned in para[15] (d) and (e) require further consideration.

Authority’s decision and reasons.

Applicant’s Suitability

[17] The most compelling evidence of the applicant’s suitability comes from the fact that with Big Barrel Enterprises Limited having acquired a 51 percent shareholding in the licensee in July 2011, the applicant has operated in an exemplary fashion. Further, since 2008 Big Barrel Enterprises Limited and its subsidiaries do not appear to have committed any breaches of their statutory obligations. (Realistically the 2010 incidents arising out of an associated company in Havelock North should not be taken into account as effectively that business (which is no longer associated with the Big Barrell group of companies) was being operated by a third party at the time). R G Shelton LLA PH 191/06 recognises the obvious to the effect that in respect of a renewal application, the manner in which the business has operated during its “probationary” period is relevant to the assessment of suitability. There is no vacuum; rather there is a history to consider. Finally, in this context, the Authority is required to have regard to that history by s.45 (c) of the Act.

[18] The second important piece of evidence relating to the applicant’s suitability was the professed willingness of the directors (especially of Big Barrel Enterprises Limited) to listen to and take the advice of both their liquor licensing consultant and their counsel when engaging in activities with Sale of Liquor ramifications. There was no evidence that this was done at the time the breach of undertaking occurred. Poor judgement in respect of the sale of liquor can result in an adverse suitability finding. That the directors of Big Barrel Enterprises Limited have recognised the need for such advice and are prepared to listen to it has assisted the Authority in reaching its favourable suitability finding.

[19] The two effective stumbling blocks to a positive assessment of suitability in this case arise from the breach of the undertaking referred to in para [9] and the comments made by the Authority in the Poonam decision referred to in para [14].

The Undertaking

[20] The Authority draws no distinction between an assurance and an undertaking. If, in the course of evidence a witness states that something will happen or not happen (as the case may be), the Authority treats that statement as an undertaking regardless as to whether the word “undertakes” is used or not. The assurance referred to in decision [2010] NZLLA PH 1422 was given both by Mr Sharma and by Mr Sharma on behalf of the company. Mr Sharma’s resignation on 28 June 2011 caused that undertaking to be breached. Generally, a breach of an undertaking given by a licensee to the Authority will result in cancellation of the licence. This is particularly so (as here) if the Authority has relied on that undertaking in reaching its decision

[21] In this case, however, the Authority’s position is tempered by three factors. First, neither the Inspector nor the Police took any action in respect of the assurance’s breach in terms of s.225B of the Act. The Inspector took no action because he thought that the application of the graduated response model was appropriate. In other words, he decided to ignore the breach and see how the applicant performed with its new cornerstone shareholder. This was a course that was open to the Inspector. However, in taking such a course he made it difficult for himself when, at this hearing, he then asked the Authority to act in respect of the undertaking’s breach; particularly with the applicant having operated the premises after the breach of undertaking in an exemplary fashion.

[22] Second, this issue needs to be considered in the light of the reason that the undertaking was required by the Authority. The Authority was not satisfied that Mr Walia at that time had the ability to operate the business on his own. It was important that he had a strong and suitable partner. Mr Sharma seemed to have the requisite qualifications. Unfortunately, Mr Walia and Mr Sharma were unable to work together. Big Barrel Enterprises Limited and its directors were thought to have the requisite qualifications to fill the void left by Mr Sharma. This has proved to be the case.

[23] Third, the evidence of Mr Walia established from his perspective that he and the Inspector were experiencing communication problems. This does not absolve the applicant from its obligation to obtain a release of the undertaking before removing Mr Sharma. However, to some extent it explains the reason that the undertaking was ignored

Poonam Decision

[24] The two Levin decisions must be read in the context in which they were given. In Poonam the applicant was extremely inexperienced and the Authority was not satisfied on the evidence that there was adequate and suitable support systems in place to enable it to grant the application. In the latter case, the Authority was not satisfied that the applicant was capable of dealing with the problems created by the site. Certainly, there were other reasons given in the decisions but suitability must always be considered in the context of a particular case: See Page v Police and Anor (unreported HC Christchurch AP84/98 24 July 1998) per Panckhurst J.

[25] The Authority appreciates that it previously indicated that quite some time should elapse before it would be satisfied as to the suitability of Big Barrel Enterprises Limited. That statement must be tempered in the light of the fact that the applicant has had its licence for roughly 18 months and that since July 2011, with the active involvement of Big Barrel Enterprises Limited, has operated the business in compliance of its statutory obligations.

[26] As indicated at hearing, the application for the renewal of the off-licence is granted.

DATED at WELLINGTON this 9th day of August 2012

B M Holmes
Secretary

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