Stird Potential Ltd v Roycroft

[2019] NZHC 429

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-1875

[2019] NZHC 429

BETWEEN

STIRD POTENTIAL LIMITED

Appellant

AND

RICHELLE ANGELINE ROYCROFT

Respondent

Hearing:	13 February 2019
Counsel:	T Greenwood for Appellant A R Govind for Respondent
Judgment:	13 March 2019

JUDGMENT OF WHATA J

This judgment was delivered by me on 13 March 2019 at 4.00 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date: ………………………….

Solicitors:           Greenwood Law, Waiheke Island

Auckland Council – Legal Services

STIRD POTENTIAL LIMITED v ROYCROFT [2019] NZHC 429 [13 March 2019]

Introduction

[1]    Stird Potential Limited (SPL) appeals against a decision of the Alcohol Regulatory and Licensing Authority (the Authority) to suspend SPL’s off licence for the unlawful sale of alcohol to an underage person.

Key issues

[2]    While multiple grounds are raised by the appellant, with the benefit of argument, there are two key issues to resolve:

(a)Did Mr Harris Clark take all reasonable steps to verify the age of the customer? And, if not;

(b)Did the Authority reasonably reach a conclusion that it should impose the order?

Background

[3]    On Thursday, 25 January 2018, Mr Harris Clark, an employee of SPL, sold a bottle of “Rekorderlig” cider to a person aged 15. On Mr Clark’s evidence:

(a)He assessed the customer as potentially underage;

(b)He requested her ID and attempted to enter her birthdate into SPL’s computer age verification system;

(c)He did not enter her age correctly on his first attempt;1

(d)He re-entered her age, this time correctly and waited for a response;

(e)He says a blank screen then appeared and he was baffled by this;

1      There is some dispute in the evidence as to whether he completed this first entry, but that dispute is not germane to the appeal.

(f)At that time, there was a queue of customers waiting to be served so he decided to accept that she was over 18 and completed the sale accordingly without further checking her age.

[4]    Mr Harris Clark was not cross-examined on the truthfulness of this account. But Mr Rock Evans, a representative of the supplier of the age verification system, said that there was nothing to show from their records that the age verification system malfunctioned. He said, however, in evidence before me that there was equally nothing to show it did not malfunction. Relevantly, he also said that usually a red alert page would be triggered if the customer was aged as under 18.2 He also accepted that there had been prior incidents of their computer system producing blank screens. This evidence was corroborated by one of SPL’s senior employees.

[5]    There was also evidence before the Authority that SPL staff were trained to always use the age verification system when they suspected the customer is underage. In evidence before me, one of the duty managers, Mr Baker, emphasised that this was done because SPL had been previously sanctioned on an occasion when a staff member inadvertently miscalculated the age of the customer.

[6]    There is an added relevant background factor. Mr Baker was designated the task of duty manager on the day of the underage sale. He had, however, left the premises at the time of the sale. Before leaving, he put up the name of a senior staff member as the duty manager but neglected to inform her of such. That staff member therefore did not appreciate that she had been assigned that role until after the underage sale took place. There was therefore no active supervision by a duty manager at the time of the sale.

Decision of the Authority

[7]    The Authority reviewed the evidence in some detail. It accepted that Mr Harris Clark may have been confronted by a blank screen. Nevertheless, it observed:

[74] While Mr Harris Clark may not have the benefit of the age verification warning when he first scanned the alcohol, this is of no consequence as he started the transaction over, rescanning the cider. It is at this point when the

2      See pages 38 and 39 of the transcript.

age identification screen did come up that Mr Harris Clark should have re- entered the volunteer minor’s birth date rather than simply pressing the “accept” button.

[8]The Authority added:

[75]      As such this was a situation … where there was an intentional and deliberate sale. While Mr Harris Clark thought that the customer looked underage and asked for identification, which is to be lauded, he nonetheless did not act on the information available to him in the form of a volunteer minor’s passport, or on his own instinct. Nor did he rely on the age verification screen which prompted him to enter the customer’s age of birth. Mr Harris Clark said he was baffled as to why the screen went down and that there were customers to be served…that does not justify non-compliance with the requirements of the Act.

[76]      This is not a situation … where Mr Harris Clark believed on reasonable grounds that the age verification system had reliably checked the customer’s date of birth and approved the sale. Put simply, if that were the case, the sale would not have proceeded. Notwithstanding that the system “crashed” prior to the transaction being completed, the evidence is that the age verification did what it was supposed to do. It provided a prompt to the seller about the customer’s age. Unfortunately, that prompt was not heeded. It is precisely these kinds of circumstances at which training should be targeted, or continued to be targeted as the case may be.

[77]      Accordingly, it cannot be said that Mr Harris Clark’s actions, and therefore the licensees’ actions, are free of wrongdoing. It follows that an absence of fault defence is not made out. While counsel for the respondent did not refer to the defences in s 239(6) and (7), for the avoidance of doubt, the Authority notes that it has not been established that Mr Clark reasonably believed that Caitlyn was not under the purchase age (per sub (6)) or that her age was verified by the age verification system (per subs (7)).

[9]As to sanction, the Authority stated:

[85]      Finally, the authority sees nothing in the application by the Inspector that prevents the authority from determining this application on its merits. This is a regulatory application. This is not a criminal application pursuant to s 239(2) of the Act for which conviction might ensue.

[86]      The Authority is in no doubt that the sale of alcohol to minors is a very serious offence. In Baldwin (Police) v Harris NZLLA 581-585/95, the Authority said:

“The proven sale of liquor to minors, especially to minors under the age of 18, is one of the most serious challenges that can be made to the suitability of a licensee or manager, …”

[87]      Baldwin was a decision under the 1989 Act. More recently in respect of the current Act, the Authority said in Miklos v Shen [2015] NZARLA PH 285 that:

“It is clear that by virtue of the provisions contained in the Act (s 4 and ss 288 to 290) that the Authority is mandated by Parliament to take a more vigorous approach to breaches of this Act and the penalties it imposes, including cancellation of licences and certificates.

This view is supported by the Minister who moved the first reading of the Bill, then known as the Alcohol Reform Bill in Parliament, the Honourable Simon Power (2010 668 NZPD 15251):

This is a large Bill, but its objects are simple. It zeros in on alcohol- related harm, crime, disorder, and public health problems, especially where our young people are concerned…”

[10]   The Authority also noted that this is the second instance where the appellant has come to the attention of the Authority. In the first instance, the Authority suspended the first respondent’s off licence by consent for a period of five days, following a failed CPO on 26 January 2017. That order attracted a holding for the purposes of ss 288 and 289 of the Act. Having regard to the previous breach, a ten- day suspension was then handed down.

Jurisdiction

[11]   This is an appeal by way of rehearing.3 I have a discretion to allow further evidence. I did so in respect of Mr Baker, by consent. In terms of relief (if any), I may confirm, modify or reverse the decision appealed against. My decision is final and binding on all parties.

Process

[12]   At the hearing before me I invited submissions on the interface between findings of breach, sanction and negative holdings, three of which may lead to cancellation of a licence on application by the police. It transpires that both parties agreed that a finding of breach, in this case, constituted a negative holding. I therefore did not pursue this issue further.4 This submission process, however, brought the second issue into focus.

3      Sale and Supply of Alcohol Act 2012, s 161.

4      The Authority’s guidelines refer to “suspension” as a prerequisite to a negative holding. Nothing I say here bears on the correctness of that guideline. Detailed consideration was not given to that issue.

The statutory frame

Object

[13]The object of the Act is:

(1)The object of this Act is that—

(a)the sale, supply, and consumption of alcohol should be undertaken safely and responsibly; and

(b)the harm caused by the excessive or inappropriate consumption of alcohol should be minimised.

(2)For the purposes of subsection (1), the harm caused by the excessive or inappropriate consumption of alcohol includes—

(a)any crime, damage, death, disease, disorderly behaviour, illness, or injury, directly or indirectly caused, or directly or indirectly contributed to, by the excessive or inappropriate consumption of alcohol; and

(b)any harm to society generally or the community, directly or indirectly caused, or directly or indirectly contributed to, by any crime, damage, death, disease, disorderly behaviour, illness, or injury of a kind described in paragraph (a).

Method of control

[14]This object is implemented at s 239 of the Act which states:

239Sale or supply of alcohol to people under purchase age on or from licensed premises

(1)A licensee or manager of any licensed premises who sells or supplies alcohol, or allows alcohol to be sold or supplied, on or from the licensed premises to any person who is under the purchase age commits an offence.

(2)A person who is not a licensee or a manager of any licensed premises who sells or supplies alcohol on or from the licensed premises to any person who is under the purchase age commits an offence.

…

(3)Subsection (2) applies despite any liability that may attach to the licensee or any manager in respect of the same offence.

[15]   It is common ground that the offence is a strict liability offence unless absence of fault is proven. What is meant by absence of fault in the present context was not argued at any length. I nevertheless adopt the threshold promoted by Mr Greenwood, and laid out by Barker J in Police v Starkey.5 In that case, the defendant had been prosecuted for breach of the Local Elections and Polls Act 1976. An element of the breach involved publication of “untrue” statements. This element, if proven, attracted strict liability, subject to an absence of fault defence. Barker J canvassed the leading authority about the proper threshold for absence of fault. He observed it often carried two slightly different meanings: (a) total absence of fault, including reasonable mistakes or, (b) absence of negligence or all reasonable care. The Judge concluded:6

I therefore conclude that, although "total absence of fault" may prima facie seem a higher standard than "reasonable care", the two are synonymous, and refer to the objective standard of the reasonable person. It is important to bear this in mind when applying the Millar test.

[16]   I respectfully agree. The standard of “all reasonable care” is the threshold for the purpose of assessing whether SPL breached s 239.

Power to sanction

[17]   The process and power to sanction for proven breach is set out at Subpart 9 of the Act. Section 280 relevantly states:

280Variation, suspension, or cancellation of licences other than special licences

(1)Any constable or any inspector may at any time apply to the licensing authority for an order—

(a)varying or revoking any condition of a licence, other than a special licence, imposed by the licensing authority or a licensing committee, or imposing any new condition (relating to any matters specified in section 110(1), 116(1), or 117(1)); or

(b)suspending the licence; or

(c)cancelling the licence.

(2)       …

5      Police v Starkey [1989] 2 NZLR 373. See also Pyramid Trucking Ltd v New Zealand Police [2017] NZHC 613 at [31].

6      At 379.

(3)The grounds on which an application for an order may be made are as follows:

(a)that the licensed premises have been conducted in breach of any of the provisions of this Act or of any conditions of the licence or otherwise in an improper manner:

(b)that the conduct of the licensee is such as to show that he or she is not a suitable person to hold the licence:

(c)that the licensed premises are being used in a disorderly manner so as to be obnoxious to neighbouring residents or to the public.

(4)       …

(5)If the licensing authority is satisfied that any of the grounds specified in subsection (3) is established and that it is desirable to make an order under this section, it may, by order,—

(a)vary or revoke any condition of the licence imposed by the licensing authority or a licensing committee: or

(b)impose any new condition (relating to any matter specified in section 110(1), 116(1), or 117(1)); or

(c)suspend the licence for such period not exceeding 6 months as the licensing authority thinks fit; or

(d)cancel the licence.

(6)Instead of making an order under subsection (5), the licensing authority may adjourn the application for any period it thinks fit to give the licensee an opportunity to remedy any matters that the licensing authority may require to be remedied within that period.

[18]There is a further power at s 285 to suspend or cancel a manager’s certificate.

[19]   While initially a matter of dispute, it is also now common ground (and I agree) that the Authority has a discretion to decline to make the orders sought by an applicant. In this respect, the Authority has guidelines for the exercise of this discretion. Those guidelines include the following statement:

[4]        On that basis the Authority has resolved to update its penalty guidelines to reflect this shift. As in the past, where the parties seek to negotiate outcomes that might be acceptable to the Authority, it is desirable that the Authority indicates what periods of suspension it considers might be reasonable given aspects of the misconduct in question.

Guidance from previous cases

[5]        With the passage of time, some principles can be gleaned from previous decisions of the Authority and the Courts, which are considered by the Authority when assessing a period of suspension. These include:

·Suspensions may need to deter other licensees from similar misconduct (per Mill Liquorsave Ltd v Grant David Verner Wellington High Court CIV-2003-485-874)

·Licensed premises that sell liquor only can be distinguished from premises where the sale of liquor is an ancillary service in that a suspension in the former case will mean the premises will close (as pointed out in Christchurch District Licensing Agency Inspector v Karara Holdings Ltd and ors (CA 178/02))

Aggravating factors

·Where there is actual liquor abuse then the sanction will be greater. If there is clear managerial irresponsibility that will be reflected in the period of suspension (per Karara).

Mitigating factors

·Efforts made to ensure no repetition of conduct which led to the suspension will be taken into account (Karara again)

[6]        The Authority, in the exercise of its discretion, continues to adhere to the principle that the imposition of a penalty will vary according to the nature of the activity undertaken in each instance.

[20] The guidelines then refer to commonly acceptable norms for first breaches. The Authority’s application of the guidelines in this case is addressed below at [30].

Issues

[21]   As foreshadowed above, with the benefit of argument, two key issues require resolution:

(a)Did Mr Harris Clark take all reasonable steps to verify the age of the customer? And, if not;

(b)Did the Authority reasonably reach a conclusion that it should impose the order?

Did Mr Harris Clark take all reasonable steps to verify the age of the customer?

[22]   Mr Greenwood contends Mr Harris Clark took reasonable steps to identify the age of the customer, namely:

(a)Asked for, received and inspected a customer’s passport; and

(b)Carefully and correctly entered the date of birth into the age verification system; and

(c)Based on no previous problems with the age verification system, he relied on it to display the usual warnings on screen and block the transaction from being processed if the customer is underage.

(d)Mr Harris Clark had simply mistakenly concluded the age verification had reliably verified that the customer was old enough to purchase alcohol.

[23]   Mr Greenwood further submitted that the Authority effectively approached the issue of reasonableness based on absolute liability, that is, the decision by Mr Harris Clark to simply override the age verification system meant that he was in breach of the law. Yet, he says, the evidence supported a finding that the age verification system did intermittently malfunction and, in a perfect world, that training would have addressed this issue but, in all the circumstances, it was not unreasonable for the appellant not to have done so. The nature and timing of the malfunction were then said to be exceptional circumstances justifying an exercise of the Court’s discretion, if a liability is found, not to impose any sanction.

[24]   I am unable to agree  with  Mr  Greenwood  about  the  reasonableness  of  Mr Harris Clark’s actions. I accept Mr Harris Clark took reasonable steps to verify the customer’s age and that he was thwarted from doing so by a malfunction – the screen went blank. But his next step, a default to a “do nothing” approach in terms of age verification when confronted by a blank screen, does not meet the threshold test of all reasonable care. He should have repeated the age verification exercise or, as the

Authority suggests, exercised some judgment about whether a person with a passport birth date of 2002 was over 18.

[25]   Furthermore, accepting for present purposes that Mr Harris Clark honestly believed that the age verification system had in fact verified the customer as 18, his belief was nonetheless unreasonable. The evidence of Mr Rock-Evans was that in order for the system to verify the age of the customer, a red or blue screen appears – red for under age, blue for over age. This evidence was not challenged and, accepting that Mr Harris Clark was properly trained in the use of the verification system, he knew this or reasonably ought to have known this.

[26]   For completeness, approaching the assessment of reasonableness in this way does not unduly elevate the test of reasonableness to one of total absence of fault as Mr Greenwood contends. Honest mistake goes to culpability, but it is not a proxy for reasonableness. Reasonableness is assessed by reference to the totality of the circumstances, including whether the person infringing s 239 reasonably ought to have known better.

[27]   I therefore dismiss the appeal based on the Authority’s assessment of strict liability.

Did the Authority reasonably reach a conclusion that it should impose the order?

[28]   Mr Govind, in written submissions in advance of hearing, anticipated a challenge to the exercise of discretion. As noted, these submissions were supplemented after the hearing. In summary, he submitted:

(a)This is a case of an intentional and deliberate sale warranting a sanction

– the employee entered an invalid date of birth, which resulted in the system logging it as a null date and entering the date of birth on the passport and when this did not work, the employee bypassed the age verification process.

(b)There was no evidence that a malfunction occurred.

(c)This is the second time the appellant has failed a CPO.

(d)This failed CPO occurred within a year of the earlier incident.

(e)Alcohol being sold to minors is a very serious breach and offence.

(f)Mr Harris Clark, under cross-examination at the Authority hearing, accepted that he knew that the minor was under age.

(g)Mr Baker accepted under cross-examination that the screen had gone blank once in the last six months, however, the appellant took no steps to implement training around this issue.

(h)The staff member who authorised the sale did not hold a branch manager certificate. He was given authority to bypass sales.

(i)The on-duty certified manager was not present at the checkout at the time of the CPO and Mr Harris Clark did not hold a manager’s certificate, contrary to the preference previously expressed by the Authority.7

(j)The Object of the Act “is to enforce the proper standards of conduct by licensees of their licenced premises in the public interest.”8

Assessment

[29]   As stated by the Supreme Court in McGrath, it is the responsibility of this Court exercising supervisory jurisdiction to ensure that legislative conditions are fulfilled.9 The Court assumes a similar role in the context of criminal appeals against an exercise of discretion to discharge an offender without conviction.10 That responsibility is no less in the context of the present appeal. This Court is obliged to

7      Payne v General Distributors Limited [2016] NZARLA 77.

8      Citing Christchurch District Licencing Agency Inspector v Karara Holdings Ltd [2003] NZAR 752 at [40]-[41].

9       McGrath v Accident Compensation Corporation [2011] NZSC 77, [2011] 3 NZLR 733 at [31].

10      Weidemann v R [2018] NZCA 381, [2018] NZFLR 707.

assess the objective reasonableness of the decision by the Authority to impose a sanction under s 280(5).

[30]   The Authority’s decision, on its face, segues from the finding of breach to the imposition of sanction. At the point of the decision dealing with sanction, there is no express consideration given to the peculiar circumstances of the offending in this case, including Mr Harris Clark’s honest belief that the computerised checking system had approved the customer’s age. While unreasonable, his honest belief is a factor that should expressly have been considered when deciding to impose a sanction. It is not a matter to be inferred from the balance of an otherwise careful decision. The apparent failure to do so is also contrary to the Authority’s guidelines which state that “the imposition of penalty will vary according to the nature of the activity undertaken in each instance”. I assume, for present purposes, this includes a decision not to impose a penalty. If not, it is something that should be rectified.

[31]   I turn then to examine this issue afresh. I commence by acknowledging that the object of the Act is that alcohol consumption should be undertaken safely and responsibly and that the harm caused by inappropriate consumption of alcohol should be minimised. The strict liability nature of the offending is a clear indication of the limited tolerance to be afforded to breaches of the present kind. But Parliament clearly conferred a discretion on the Authority to impose sanction. It is to be inferred from this that there will be cases where the breach, while objectively unreasonable, does not require sanction. An honest mistake accompanied by good faith compliance with clear systems designed to avoid breach might well qualify.

[32]Mr Greenwood made three strong points in favour of no sanction (in short):

(a)Mr Harris deployed the age checking system;

(b)Bypassing a malfunctioning system was not inherently unreasonable; and

(c)The training systems were to a high standard.

[33]   I have nevertheless come to the view that sanction was appropriate in this case. Had this been a case where Mr Harris Clark was properly supervised at the time of the incident, then I would have hesitated to impose sanction. His error was clearly an honest, human one, compounded by apparent systems error. But the absence of active supervision by a duty manager tips the balance in favour of sanction. The sale of alcohol to underage persons cannot be left to employees who are unqualified or insufficiently experienced to cope with situations  such  as  that  which confronted Mr Harris Clark.

[34]   I wish to add one further observation. Three negative holdings provide jurisdiction to cancel the licence to sell. While it will be entirely a matter for the Authority, the facts of the negative holding in the present case do not, in my view, provide strong grounds for cancellation.

Outcome

[35]   Mr Harris Clark, while honestly mistaken, did not take all reasonable steps to verify the age of the customer. The Authority, however, did not appear to fully turn its mind to the issue of sanction. Examining that issue afresh, I am satisfied that sanction is justified. There being no appeal against the terms of sanction, the appeal is dismissed. To the extent that costs are in issue, the appellant while unsuccessful overall, has had some measure of success. Costs will lie where they fall.