Liquorland (Australia) Pty Ltd v Lindsey Cove Pty Ltd

LIQUORLAND (AUSTRALIA) PTY LTD & ORS v LINDSEY COVE PTY LTD & ANOR
[2002] SASC 17
Full Court: Doyle CJ, Martin and Besanko JJ

DOYLE CJ: This is an appeal by leave against a decision of the Licensing Court granting a retail liquor merchant’s licence in respect of premises in a shopping centre at Port Road, Welland. The retail liquor merchant’s licence is provided for by s 37 of the Liquor Licensing Act 1997 (SA) (“the Act”).
The appellants are the holders of hotel licences and retail liquor merchants’ licences in and around the relevant locality. They opposed the grant of the licence. I will refer to them collectively as the objectors. The respondent is Lindsey Cove Pty Ltd (“Lindsey Cove”), the successful applicant. I will refer to it as the applicant.
The persons who control the applicant also control McMahon’s Tavern Pty Ltd (“McMahon”). That company holds a hotel licence in respect of premises known as “Marinelli’s Tavern” which is only about 200 metres from the applicant’s proposed premises and is also on Port Road.
McMahon acquired the licence for Marinelli’s Tavern and the premises in about February 2001. McMahon is in the process of altering the Tavern to increase the space available for gaming machines and to extend the bar and dining facilities. The previous proprietor of the Tavern had a small area for the sale of bottled liquor. The Acting Judge found that the previous proprietor of the Tavern had a “significant business” in the sale of bottled liquor, and about 70 per cent of the hotel takings came from the sale of bottled liquor. The changes to the Tavern which are being made have left no space for an area devoted to the sale of bottled liquor. The Acting Judge’s findings indicate that there was insufficient space at the site to retain an area for the sale of bottled liquor, if other facilities were expanded as proposed.
The Acting Judge made a finding that the Tavern “largely catered” for the public demand for liquor for consumption off licensed premises in the locality. I proceed on the basis that but for the decision by McMahon to provide increased space for gaming, and the consequential decision to increase the space for drinking and dining, with the result that there was no space for the sale of bottled liquor, the application by Lindsey Cove would not have succeeded. The Judge did not so find in terms, but I am confident that that is the position. In short, Lindsey Cove could not have satisfied the Court that premises existing in the locality “do not adequately cater for the public demand for liquor for consumption off licensed premises and the licence is necessary to satisfy that demand”, as required by s 58(2) of the Act, had the Tavern continued to provide a bottle shop equal to that which existed there previously.
There is one other preliminary point to be noticed. Before the Licensing Court, and before us, matters have proceeded on the basis that the Court is entitled to have regard to the fact that the same persons control Lindsey Cove and McMahon. I proceed on that basis. In my opinion that is the appropriate way to proceed, having regard to the issues which arise. On occasions I will refer to Lindsey Cove and McMahon together as “the applicants”.
Mr Anderson QC, counsel for the objectors, submits that even if Lindsey Cove was able to satisfy the requirements of s 58(2) of the Act, the Licensing Court should have refused to grant the licence in the exercise of the discretion which it has under s 53(1) of the Act. Section 53(1) provides:
“53. (1) Subject to this Act, the licensing authority has an unqualified discretion to grant or refuse an application under this Act on any ground, or for any reason, the licensing authority considers sufficient (but is not to take into account an economic effect on other licensees in the locality affected by the application).”
He submitted that because Lindsey Cove was able to satisfy the requirements of s 58(2), only because of McMahon’s decision to stop providing facilities for the sale of bottled liquor, the Court should exercise its discretion against the grant. That is the issue that arises for decision.
The grant of leave to appeal
A Judge of this Court granted leave to appeal pursuant to s 27(1) of the Act. He granted leave on the ground of appeal that raised the exercise of the Court’s discretion. He refused leave on grounds that challenged the Acting Judge’s finding that the applicant had satisfied the requirement of s 58(2).
In the Notice of Appeal the objectors sought leave to appeal on those further grounds. Mr Anderson proposed to deal with that application on the hearing of the appeal. In proceeding in this way the objectors failed to comply with the requirements of the Supreme Court Rules. Having sought leave from a single judge as required by r 94.01(A), the objectors were entitled by r 94.02 to make a further application to the Full Court for leave. But r 94.03 requires that application to be made in writing, and to be considered privately by the Full Court. While it may often be convenient for the Full Court dealing with the grounds on which leave has been granted to consider whether leave should be granted on further grounds, that will not always be so. The procedure stipulated by the Rules should be followed. The members of the Court dealing with the further application privately can decide whether to deal with it privately, or whether to refer it to the Full Court dealing with the grounds on which leave has been granted.
However, it was sensible for the Court to deal with the further application for leave at the outset, rather than adjourn the hearing. The Court did so.
Having heard Mr Anderson in support of the application for leave, and Mr Walsh QC for the applicant, the Court refused leave to appeal on all grounds dealing with the Acting Judge’s assessment of the evidence. The Court permitted Mr Anderson to put submissions attacking the Acting Judge’s finding as to the relevant locality and submissions supporting a ground of appeal to the effect that the Acting Judge should have considered the matter on the basis that Marinelli’s Tavern was in fact capable of meeting the relevant demand, even though McMahon was not proposing to do so.
Having heard full submissions, I would refuse leave to appeal on the further grounds on which the objectors sought leave to appeal. The issues proposed to be raised are largely questions of fact. In my opinion there is no error of law in the Judge’s approach to the issue of locality. Nor, on what I have heard, does it appear that he made any error of fact. The significance to be attributed to the decision by McMahon not to continue to provide facilities for the sale of liquor for consumption off the premises at the Tavern can be adequately dealt with in considering the ground on which leave has been granted.
Accordingly, I proceed on the basis that the only issue before the Court is the question of whether the Licensing Court erred in failing to exercise its discretion to refuse the application.
The facts and the Court’s findings
It suffices to focus on facts relevant to the exercise of the discretion.
The immediate and wider locality is a long established suburban area to the north-west of the city of Adelaide. There is a number of hotels and bottle shops in and adjacent to the locality. However, as the Acting Judge found, a number of busy roads passing through the locality and the adjacent area had a significant impact on the shopping habits of people in the locality, and on ease of travel in and adjacent to the locality. These matters, and the evidence that the Acting Judge heard from persons who previously bought bottled liquor from Marinelli’s Tavern, provided a firm basis for the Judge’s finding that Lindsey Cove had made out a basis under s 58(2) of the Act for the grant of the licence.
On the evidence the proposed bottle shop will be of a good standard.
Evidence was led from a number of people living in the locality who wanted to buy bottled liquor. The facilities at Marinelli’s Tavern, when they existed, by and large were capable of meeting the local demand, as the Acting Judge found. There was evidence from the previous owner of the Tavern to the effect that many of his customers for bottled liquor were people who had come from European countries, or whose parents had. The Tavern had stocked a range of liquor tailored to their demand for the sale of bottled liquor. As I have already noted, in my opinion there was a clear case for the grant of a retail liquor merchant’s licence in the locality, and the relevant facilities no longer being available at Marinelli’s Tavern, it is not surprising that the Judge found that the requirements of s 58(2) were met in respect of the proposed premises.
The Acting Judge noted that when McMahon acquired the Tavern, it paid a price that reflected the fact that the previous owners had obtained an approval to install 39 gaming machines. The machines had not yet been installed. The previous owners had proposed to retain the bottle shop at the Tavern, after the gaming machines were installed. McMahon made a decision, based on commercial considerations, to increase the space available for gaming. Section 15(4)(e) of the Gaming Machines Act 1992(SA) provides that a gaming machine licence is not to be granted unless the Commissioner is satisfied
“(e)that the size of the proposed gaming operations on the premises would not be such that they would predominate over the undertaking ordinarily carried out on the premises ……..”
This provision may have played a part in McMahon deciding that it should expand the bar and dining facilities at the Tavern. And it was that decision, or the two decisions in combination, which led to the conclusion that McMahon would no longer provide a bottle shop at the Tavern.
As I understand the evidence a decision was made that the best return from the premises would be gained by devoting the available space to gaming machines, bar and dining facilities, and by ceasing to devote space to the sale of bottled liquor for the sale off the premises.
I gather that the previous owner’s plan to install gaming machines and to retain a bottle shop was practicable. I proceed on this basis, while accepting that the renovations now underway will produce better and more attractive gaming facilities, drinking and dining facilities.
The Acting Judge also proceeded on the basis that the controllers of McMahon had no intention to resume the sale of bottled liquor at Marinelli’s Tavern, and that there would be no bottle shop at the Tavern “in the foreseeable future.”
The Licensing Court decision
The submission to the Licensing Court and to the Full Court treated Lindsey Cove and McMahon as a single entity, on the basis that the same persons controlled each company. As I have said, I consider that was appropriate.
The submission to the Licensing Court was that by their decision to discontinue the bottle shop at Marinelli’s Tavern, the applicants had created a situation in which an existing demand was not adequately catered for. It was submitted that to allow an applicant to establish a basis for the grant of a licence in this way could result in the undue proliferation of licences, that the applicants should not be rewarded with the grant of a licence for their decision to decline to use the existing hotel licence to meet an existing public demand, and that the applicants were defeating the intention of the Act.
The Acting Judge rightly rejected a number of the submissions advanced. He said that the hotel licence was not being split, and that is clearly right. A new licence was sought. He found that the prospect of a hotel and a retail liquor merchant’s licence being close to each other, and possibly competing, was not something that was “inherently evil and contrary to the objects of the Act.” Again I agree. There are places where this occurs already. On the evidence before him, there was no reason to think that any competition would get to the point at which the standards of service provided to the public would be seriously lowered. The Acting Judge said that the applicants had not created the demand for liquor which they now sought to meet. That is clearly right. The demand was an existing one. The issue was the circumstances which led to that demand not being met. The Acting Judge found that the grant of the application would not “amount to granting the applicants a commercial reward from having deprived the public of a service.” He took the view that if the licence were granted, the services provided to the public in the locality would, overall, be better than they were before. There would be improved gaming, drinking and dining facilities at the Tavern, and an improved bottle shop at Welland Plaza. He noted that each venture involved “a significant investment and no doubt some commercial risk”, and that competition between the two businesses was likely to result in the value attached to the respective licences being affected, possibly downwards.
I consider that no criticism can be made of these findings and conclusions.
The final part of the Acting Judge’s reasons was as follows:
“6.To the extent that precedents are set in this Court I have no concern if a subsequent application on indistinguishable facts is granted. It follows that I do not accept that the grant of this application will lead to applications that would result in an undesirable proliferation of licences.”
For those reasons the Judge declined to exercise his discretion by refusing the grant of the licence.
The discretion
I have already set out the statutory provision that confers a discretion on the Court. It is well established that the discretion is a very wide one. In support of that proposition, it suffices to refer to the reasons of King CJ in Waiata Pty Ltd v Lane (1985) 39 SASR 290 at 293-294. In his reasons in that case King CJ made the point that the legislative history showed that the predecessor of the present provision had been created as a means of protecting the public interest, when local option polls and memorials were abolished as a means of protecting the public interest in relation to the sale of liquor. He said (at 294):
“When this is appreciated, it can be seen that at least one purpose, and without doubt the primary purpose, for which the discretion is conferred, is the protection of that general public interest, which is to be distinguished from the public need or demand for liquor facilities, in the number, type, location and standard of liquor outlets and in the conditions under which they are to be permitted to operate. The s. 61 discretion is the means by which the Licensing Court is enabled to promote the shaping and development of an orderly and harmonious system of liquor facilities designed not only to meet the public need for liquor facilities but also to protect the wider public interest in the preservation of the community from adverse social effects.”
He then went on to outline the basis on which the discretion is to be exercised (at 294-295):
“The language of the section enables the Court to exercise the discretion on grounds or for reasons which commend themselves to the Court and irrespective of the grounds which may be relied upon by the parties to the proceedings. These grounds or reasons include any proper principles or policies which the Court has developed for the attainment of the purposes of the Act. Such principles or policies may relate to the undue proliferation of licences or of certain types of licences. They may relate to the promotion and maintenance of a suitable balance between the various types of liquor facility available in a locality. The Court is authorized by s. 6b to inform itself in any manner in which it sees fit and that includes informing itself by reference to its own records and its own knowledge of liquor facilities which have been granted or promised by the Court and to the previous history of proceedings relating to particular premises. The Licensing Court must act judicially, but there is an unmistakeably administrative element in its task of promoting, encouraging and maintaining a system of liquor facilities to meet the public need for liquor facilities and the wider community interests.”
Subject to some comments which I will make in a moment, I consider that what King CJ said is still appropriate, and that nothing in s 3 of the Act, setting out the objects of the Act, conflicts with what he said.
In short, the discretion must be exercised for a purpose consistent with the Act, and to advance or to maintain principles and policies found in the Act, or which the Court in its experience finds appropriate or necessary in the proper application of the Act. On the other hand, the Court must be careful not to use the discretion as a basis for imposing views about what is desirable, unless those views are firmly linked to the principles on which the Act operates or is administered.
It is also appropriate to bear in mind that the Act does not regulate the sale and supply of liquor as closely as did the earlier legislation which King CJ considered. Market forces are given greater scope than they were under earlier legislation. The only classes of licence for which it is now necessary to prove a need or an unmet demand are the hotel licence and the retail liquor merchant’s licence. For all other classes of licence Parliament has decided that the forces of competition should regulate the market, the scrutiny of the Court being confined to the fitness of the applicant, the standard of the premises, the impact of the proposed business on adjoining premises and the obtaining of any other necessary statutory approvals: see ss 56, 57. Under earlier legislation some emphasis was given to the undesirability of the proliferation of licences, or the undue proliferation of licences, and to the concept of “undue competition and economic waste.” These matters are all referred to in Waiata. Considerations like this are given less scope under the Act as it now stands. That is not to say that they are to be disregarded in relation to the hotel licence and retail liquor merchant’s licence. Licences of those classes are to be granted only if there is a need for the grant of a licence. In other words, Parliament has substituted the Court’s assessment of the public need or demand for the operation of market forces in determining whether such a licence is to be granted.
Thus, the proof of need under s 58 of the Act remains an important measure of the public interest in relation to the grant of a hotel licence or the grant of a retail liquor merchant’s licence. Ordinarily, such a licence cannot be granted unless s 58 is satisfied.
What underlies the retention of s 58 in relation to these two classes of licence? Hotels provide a range of facilities for the public, although the facilities that they are now obliged to provide are significantly reduced compared with earlier times: see FACAC Pty Ltd v Talbot Hotel Group Pty Ltd & Anor [2001] SASC 445. It is the obligation to provide certain facilities to the public which, in part, supports the conclusion by Parliament that a new hotel licence or retail liquor merchant’s licence should be granted only if there is a proved need. The element of protection that s 58 provides to existing licensees is intended to encourage them to provide facilities that the public want, by providing an element of protection against competition. I consider that s 58 also reflects the conclusion that there should not be undue or unnecessary proliferation of hotel or retail liquor merchant’s licences, but only so many as are required to meet the needs of the public. Another underlying idea behind s 58 may be that the consumption of alcoholic liquor is associated with certain social problems, and for that reason the number of premises at which the public may consume liquor (other than with meals) or purchase liquor for consumption off the premises should be limited, and that there should be continuing supervision of the manner in which those premises are conducted.

Clearly enough, the discretion conferred by s 53 should be used to refuse an application for a hotel licence or retail liquor merchant’s licence if the grant of an application would be contrary to the elements of the legislative scheme that I have just identified. For example, if the grant of the licence could lead to a situation in which licences are granted even though existing premises are capable of catering for the public demand, or if licences are granted in circumstances likely to lead to existing premises failing to meet the obligation of licensees to satisfy existing public demand. But at the same time the Court must be careful not to use the discretion simply to provide protection to existing licensees (as the concluding words of s 53(1) make plain), and the discretion must not be used to enforce a vague notion or imprecise fear that the grant of a licence will result in the undue proliferation of licences. Nor should the discretion be used to defeat an applicant simply because the applicant has made a shrewd commercial decision.
The exercise of the discretion
Having said all that, what are the factors in the present case that might have caused the Acting Judge to exercise his discretion against the grant of the licence?
The Tavern previously provided facilities that adequately catered for the public demand in the locality for liquor for consumption off licensed premises. The public demand is now not adequately catered for. It is not adequately catered for because the applicants decided in their own financial interests to provide gaming machines in a way that meant they no longer had space for a bottle shop. It can be said that the applicants have chosen not to use their hotel licence to cater for the public demand in the locality. One would expect the Court to be hesitant to grant a retail liquor merchant’s licence to an applicant who holds a licence that could be used to meet the relevant demand, but does not because the applicant chose not to so use its existing licence. To grant a licence in such a case is to condone a choice not to make full use of a licence, and to decline to meet an existing demand.
In enacting s 58, Parliament surely did not contemplate that the relevant demand would be one not adequately catered for because of a commercial decision by the applicant to use existing licensed premises in a manner that left the applicant unable to cater adequately for the relevant public demand. This case is not a case in which, speaking practically, McMahon could not adequately cater for the public demand for liquor for consumption off the premises. McMahon decided that it would get a better return from expanding the gaming, bar and meal facilities at the expense of the facilities for the sale of liquor for consumption off the Tavern premises.
I consider this is a matter that was capable of enlivening the discretion to refuse the application.
In saying this I do not overlook the fact that McMahon will provide improved facilities for gaming, the consumption of liquor on the premises and dining. It might be said that the provision of gaming facilities is nothing to do with the hotel licence. However, I consider that to be too narrow an approach. Hotels are intended to be places where the public go for relaxation and for entertainment. That entertainment can take many forms, including such things as casual conversation and live music. If members of the public want to use gaming machines in hotels, the Act does not provide a basis for criticising a licensee for providing those facilities, whatever one may think about the social desirability of gaming machines.
The public demand that the applicants established is a genuine demand, it is not in any sense artificial. The public interest suffers to the extent that that demand is not met. The grant of the application will mean that the demand will be met in the locality.
Refusing the application means that the public demand will not be met, unless someone else applies for a retail storekeeper’s licence at or near Welland Plaza. Someone may do so, but no confident judgment can be made about that. If someone else does so, and the application is granted, the end result will be the same as proposed by the applicants, that is, a hotel and a bottle shop close by. The only difference will be the identity of the licence holder.
In that connection I can see no reason why, if an application were made by another person, the Court should refuse to grant the licence in the exercise of its discretion. It would not be appropriate to deny to the public a facility for which there is a proven need simply because an existing licensee is not adequately catering for that demand. It is one thing to refuse to grant a licence to an applicant who is failing to cater for an existing public demand that could be met using the applicant’s existing licence, but another thing to refuse to grant a licence to a different applicant to meet a public demand that another licence holder could meet but is failing to meet. In the latter situation it seems to me, balancing considerations of proliferation and public demand, that the balance comes down in favour of granting a licence so that the public demand will be met.
Would the grant of the proposed licence set an undesirable precedent? If the licence is granted other holders of licences for which need must be proved, the hotel licence and the retail liquor merchant’s licence, might decide to stop meeting an existing demand, with a view to applying for and obtaining an additional licence to meet that demand. If this were to occur, in all likelihood it would occur in situations in which the holder of a hotel licence fails to meet an existing demand for the sale of liquor for consumption off the premises, with a view to obtaining the grant of a retail liquor merchant’s licence. If this did occur it could lead to an increased number of retail liquor merchant’s licences, and to undue or excessive competition, particularly if licences close to each other ultimately end up in different hands. That could in turn lead to a further failure to provide the range of facilities at existing licensed premises that existing licensees are entitled to provide and should be providing in the public interest. But to some extent this could also happen if an existing licensee were simply to fail to meet a public demand, and a competitor enters the local scene because of that failure. And it cannot be assumed that the public interest would suffer. The competing licensees might react by differentiating their products in some way, or by differentiating the quality of the service offered.
So an undesirable precedent could be set, but it is difficult to say how great is the risk that the precedent would be invoked, and it is difficult to predict the consequences of the precedent being followed.
Did the Court err?
I consider that the Acting Judge did err. He appears to have disregarded, or to have viewed with no concern, the possibilities that I have identified. I consider that he took too narrow a view of the scope of the discretion. I consider it was wrong to say that there was no cause for concern if “a subsequent application on indistinguishable facts is granted.” I say that because I consider that the decision at least sets a precedent for the grant of a retail liquor merchant’s licence on the basis of a public demand for liquor not adequately catered for because the applicant chose not to provide facilities for the sale of liquor off the premises at other licensed premises under its control. As well, the decision could lead to the public interest suffering in the manner identified by me.
Accordingly, the exercise of the discretion requires further consideration. This Court is as well placed to exercise the discretion as is the Licensing Court, because the exercise turns on broad issues of principle. In the interests of expedition it is appropriate for this Court to exercise the discretion.
It does not follow from my conclusion that the Acting Judge erred, that the discretion should be exercised adversely to the applicant. It is a matter of weighing up the matters that I have identified.
I consider that what has occurred here is contrary to the scheme of the Act. It is contrary to the scheme of regulating the grant of hotel licences and retail liquor merchant’s licence by reference to a proved need and a demand not adequately catered for. It is contrary to that scheme in that the applicants could meet the local demand, but have made a commercial decision not to do so. There is a demand not adequately catered for only because of that decision. What has happened is contrary to the notion that Marinelli’s Tavern should provide for the public the facilities a hotel is intended to provide, if there is a demand for them, as there is. I emphasise that I do not reflect in any way on the bona fides of the applicants. They made what is, no doubt, a sensible commercial decision from their point of view. But the consequences have adverse implications for the administration of the Act.
A decision to grant the licence may set an undesirable precedent for the grant of further retail liquor merchant’s licences to applicants who choose not to meet an existing demand that they are able to meet using a licence that they hold.
I consider that they are solid reasons for the exercise of the discretion adversely to the applicants. I recognise, and have not ignored, that this means that the public demand in the locality will not be adequately catered for. I have taken account of that in coming to my conclusion. I have been influenced by the consideration that the issue which arises here is one which calls for a cautious approach. If an undesirable precedent is set, the Licensing Court will be left to cope with the effects of that precedent.
For those reasons I consider that the appeal should be allowed, the decision of the Licensing Court should be set aside, and that there should be an order that there be substituted a decision refusing to grant the licence sought.
There is one other aspect of the matter that I mention. It may be, in light of the demand in the locality for liquor for consumption off the Tavern premises, that the Licensing Court should have refused its approval of the alterations to the Tavern, since those alterations involved a decision not to cater for that demand. However, it is now too late for the Licensing Court to revisit that decision.
MARTIN J: I agree that the appeal should be allowed for the reasons given by the Chief Justice.
BESANKO J I agree that the appeal should be allowed, the decision of the Licensing Court should be set aside and that there should be an order that there be substituted a decision refusing to grant the licence sought. I agree with the reasons of the Chief Justice.

[2002] SASC 17

22 February 2002