Environmental / Resource Management

Key Licensing Decision for Supermarkets

Christchurch Medical Officer of Health v J & G Vaudrey Limited (& Ors) [2015] NZHC 2749

The High Court has released a decision clarifying the role of District Licensing Committees (DLCs) in describing single area conditions in supermarkets, but aspects of the decision may lead to uncertainty for future applicants.

The Sale and Supply of Liquor Act 2012 (the Act) brought into force a much more comprehensive regime for applications for and renewals of alcohol licences than its predecessor, the Sale of Liquor Act 1989. One of the key changes for supermarkets and grocery stores is that all licence applications and renewals are subject to a 'single-area condition', which limits the display and promotion of alcohol to a certain area or areas within the premises. This new condition was introduced for the purpose set out in section 112(1) of the Act:

"...to limit (so far as is reasonably practicable) the exposure of shoppers in supermarkets and grocery stores to displays and promotions of alcohol, and advertisements for alcohol."

This appeal examined the role played by a DLC in describing the single-area condition in a licence application or renewal.

Key Findings

The High Court decision provideed a comprehensive overview of the provisions in the Act relating to single-alcohol areas. The key findings were:

  1. the role of the DLC in describing a single-alcohol area is an evaluative one, and it has the power not just to accept or reject a proposed single-alcohol area, but also to describe a single-alcohol area different to that proposed by the applicant;
  2. there is no natural justice obligation on the DLC to notify the parties of their decision in advance or allow them an opportunity to respond, provided that the decision has a foundation in legitimate evidence before the DLC, and the parties have had an opportunity to respond to that evidence; and
  3. section 117 confers the DLC with a broad power to impose further conditions, provided those conditions are reasonable and consistent with the Act.

Background

The first and second respondents, J & G Vaudrey Limited (Vaudrey) and Bond Markets Limited (Bond), applied to the Christchurch DLC ("CDLC") for off-licences for their respective New World supermarkets, operated under franchise agreements with Foodstuffs.

The Vaudrey application was unopposed, and was decided by the CDLC on the papers. However, in granting the application, the CDLC excluded from the application a wine display cabinet at one end of the wine display, on the grounds that this cabinet was contrary to the purpose set out in section 112(1) of the Act.

The Bond application on the other hand, was opposed. Following a hearing at which several different options for the single-alcohol area were discussed, the CDLC released its decision, imposing a single-alcohol condition that was said to be a compromise between the proposal advanced by Bond and the concerns raised by other submitters.

Both parties appealed the single-alcohol area aspects of the licensing decisions to the Alcohol Regulatory and Licensing Authority (ARLA). In granting the appeals, ARLA held that the CDLC had breached natural justice by making a decision that was not founded in evidence, and in coming up with its own proposal, the CDLC wrongly departed from all submitted proposals.

ARLA also examined the key provisions of the Act relating to the single-alcohol area in order to clarify the role that the DLC can play in describing and imposing conditions on the single-alcohol area. Their key findings were as follows:

  1. The only conditions which may be imposed under section 112 relate to the location of the single alcohol area and its composition. ARLA concluded there is nothing in sections 112 to 114 of the Act that authorises the imposition of conditions which are not specifically mentioned in those sections;
  2. Section 113 of the Act sets out a number of restrictions to the location of the single-alcohol area. ARLA concluded that the effect of section 113 is that a single alcohol area can be anywhere in the supermarket except in the prohibited areas set out in section 113;
  3. The role of the CDLC is to accept or reject the application. It cannot impose conditions which would make it an altogether different application, and therefore, in describing the single-alcohol area, the CDLC is confined to describing the single-alcohol area set out in the applicant's plan, or rejecting the application on the grounds of non-compliance.

The Christchurch Medical Officer of Health appealed the decision to the High Court to resolve the key two legal issues arising from ARLA's decision:

  1. The scope of the DLC's role and obligations in describing a single-alcohol area, including the extent of its power to impose conditions or modify the single-alcohol area as proposed in the licensing application; and
  2. The relevance of the principles of natural justice to decisions made by the DLC.

The Role of the DLC in Describing a Single-alcohol Area

The High Court concluded that the role of the DLC is an evaluative one, requiring the decision-maker to make a merits-based determination of the application. In the context of imposing a single-alcohol area on applications by supermarkets and grocery stores, this evaluative exercise requires the DLC to:

  1. be satisfied that the proposed area is a single area;
  2. be satisfied that the proposed area complies with the restrictions as to location set out in section 113 of the Act; and
  3. consider whether the proposed plan limits, so far as is reasonably practicable, the exposure of shoppers to displays and promotions of alcohol. In this regard, the High Court held that it is the role of the DLC, not the applicant to describe the single-alcohol area. This means that the DLC's role is not limited to simply accepting or rejecting the plan put forward by the applicant, its role extends to describing an area that it considers complies with the above criteria after hearing all evidence and submissions, even if that area differs from that proposed by the applicant.

The Court agreed that there is no power under sections 112 to 114 to impose general conditions, but concluded that the DLC does have the power to do so under section 117 of the Act. The Court held that section 117 confers on the DLC the power to impose any further conditions which are reasonable and are not inconsistent with the Act. In making that assessment, the DLC will need to consider whether a risk or benefit has been identified, the extent to which a condition will adequately address that risk or benefit, and the proportionality of the condition. An absolute prohibition, or a condition that will only marginally address the risk or benefits identified is unlikely to be considered reasonable.

Natural Justice

The Court disagreed with ARLA's finding that it was contrary to natural justice for the DLC to describe a single-alcohol area that differed from the applicant's proposal. It held that the principles of natural justice will be met if the applicant and any other parties have the opportunity to be heard and present their case. There is no general obligation on the decision maker to disclose what they are minded to decide or to allow a response prior to issuing a decision, provided that the decision made:

  1. has a proper evidential foundation;
  2. is made on the basis of evidence legitimately before the decision-maker; and
  3. where the decision-maker wishes to take fresh evidence into account, the parties have an opportunity to comment and respond to that evidence.

Practical Implications of the Decision

The High Court's finding that the decision maker can describe a single alcohol area which differs from that proposed by the applicant will inevitably have practical implications for applicants, particularly when the application relates to a new supermarket or grocery store. This is because of the way in which the alcohol licensing system relates to the applicant's other obligations under the Building Act 2004 (Building Act) and the Resource Management Act 1991 (RMA).

Pursuant to section 100(f) of the Act, an applicant must provide a certificate to the DLC that the proposed use of the premises meets the requirements of the Building Act and the RMA. This effectively means that the applicant, where required, must obtain resource consent and building consent prior to applying for an off-licence. Part of that process involves the submission of site plans, which would include equipment relevant to the placement of the single-alcohol area, including external refrigeration and air conditioning.

Given the expense involved in obtaining those consents, applicants will be concerned about the implications if the DLC decides to alter the proposed single-alcohol area from that proposed and included in those consent applications. This could potentially create a great deal of uncertainty and increase the commercial risks involved in the process.

The Court did have regard to those practical concerns, but considered that the implications on the resource or building consent process would be a matter that would be relevant to the proportionality or reasonableness of any conditions imposed. The Court held that the practical realities could not take precedence over the primary task of interpreting the legislation based on parliamentary intention.

The Court observed that the practical issues raised by the broader interpretation of the DLC's role could be mitigated to some extent by informally liaising with reporting agencies and the DLC before completing the building and resource consent proposals. However, while this may be sage advice to enable applicants to identify potential issues in advance, it does not and cannot completely alleviate the added uncertainty that will follow from the High Court's decision, and may well leave applicants feeling very uneasy.

At the time of writing we understand that it is likely that the supermarket interests will appeal the High Court decision.

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The contents of this publication are general in nature and are not intended to serve as a substitute for legal advice on a specific matter. In the absence of such advice no responsibility is accepted by Brookfields for reliance on any of the information provided in this publication.

 

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