The Sale and Supply of Alcohol Act 2012 (the “Act”) introduced a new enforcement protocol into the alcohol licensing regime to address consistent and serious offending. 

The protocol is essentially a “three strikes and you’re out” sanction which empowers the Alcohol Regulatory & Licensing Authority (“ARLA”) to cancel alcohol licences and manager’s certificates.  The protocol has not yet been tested before ARLA, but over the coming years it will have a serious impact on a number of licensees in New Zealand.

This article is confined to a discussion of ARLA’s ability to cancel licences, although we note that there are similar provisions that apply to the cancellation of manager’s certificates.

Breaches of the Act Generally

If a Police constable or licensing inspector believes that a licensee has committed an offence under the Act, both have the ability to lodge an application to ARLA to suspend or cancel the relevant licence.  Once received, ARLA will set down a date for a public hearing to determine the application.  These types of applications are very common and most often result in suspension orders. 

However, if the Police or licensing inspector allege that the particular offence committed by the licensee was one of the offences listed in section 288 of the Act, and ARLA finds that the licensee did in fact commit that offence, that finding also amounts to what the Act calls a ‘negative holding’.

Section 288 Offences

The serious offences listed under s 288 of the Act that will result in a negative holding are:

  • Offences relating to the irresponsible promotion of alcohol;
  • Selling or supplying alcohol on or from licensed premises to a person who was under the purchase age;
  • Allowing alcohol to be sold or supplied on or from the premises to a person who was under the purchase age;
  • Selling or supplying alcohol to a person after licensed hours; and
  • Selling or supplying alcohol to an intoxicated person.

Of the above list, the most common offence to appear before ARLA in an enforcement application is the sale or supply of alcohol to minors.  The Police regularly run sting operations (called ‘controlled purchase operations’) throughout the country to test licensees’ age verification procedures.  The Police organise for minors to accompany them and to attempt to purchase alcohol from a variety of licensed premises without carrying any identification.  If a particular premises sells or supplies alcohol to the minor, the Police will advise the seller that they have committed an offence and will later lodge an enforcement application with ARLA.  If the Police are successful in that subsequent application, the consequent finding will constitute a negative holding.

Importantly, any historic breaches of the equivalent provisions of the previous governing legislation, the Sale of Liquor Act  1989 (“SoLA”), do not amount to negative holdings under the current Act.  However, a breach under SoLA would still have implications for that licensee.  For example, were that licensee to commit a further offence under the current Act, ARLA would take any previous breaches into account when determining an appropriate penalty.  The more breaches committed by the licensee, the harsher the penalty that would be imposed.

Cancellation of Licences – Three Strikes

Section 289(1) of the Act states that if a licensee has incurred two negative holdings relating to the same premises and then commits a third s 288 offence, all in respect of the same premises and within a three year period, then the Police or licensing inspector must make an application to ARLA for cancellation of the licence.

Section 289(2) states that if ARLA makes three negative holdings, all in respect of the same licensee, the same premises and within the last three years, then it may make an order to cancel the licence.

In Hamblett v Dahua Supermarket Central Limited1,  ARLA spoke of its willingness to impose harsher penalties on licensees in order to enforce proper standards of conduct throughout the country.  So, unless there are exceptional mitigating circumstances, it is likely that ARLA will exercise its new power to cancel a licence upon making a third negative holding.

In that case, ARLA cancelled an off-licence where the licensee had failed three separate Police controlled purchase operations, even though two of those failures had occurred under SoLA.  ARLA held that there were systemic failures leading to sales to minors, that neither the licensee nor the manager had the intent nor the will to comply with the provisions of the Act, and that it wished to prevent these persons from offending on a permanent basis.  In making the order that it did, ARLA also noted that:2

… had the previous failed controlled purchase operations been the subject of section 288 (et seq) of the Act, the Authority in each of these cases would have been obliged to have imposed cancellation.

We disagree that the Act imposes an obligation on ARLA to cancel a licence after three negative holdings.  However, section 289(2) gives ARLA the jurisdiction to do so and, given its willingness in recent times to impose harsher penalties on licensees, it is likely that ARLA will exercise this jurisdiction.

Significantly, section 289(4) states that a decision by ARLA to cancel a licence cannot be appealed against to the High Court.

Other Effects of Cancellation

Section 292 places restrictions upon licensees who have had an alcohol licence cancelled by ARLA.  Any such licensee will be unable to obtain a licence in respect of the same premises for 5 years from the date of cancellation. 

While there is nothing in the Act to prevent that licensee from applying for a new licence in respect of a different premises, every licence application is referred to the Police who then have 15 working days to file a report.  It is very likely that the Police would oppose such an application on the grounds that the licensee has a history of offending under the Act. 

As another example, if the relevant licensee was an incorporated company, and some of its directors or shareholders incorporated a new company and applied for a licence under the new company’s name, the Police would look behind the corporate veil, see that the individuals involved were affiliated with the licensee, and would oppose the new application. 

Police opposition in these situations would not necessarily be fatal to the respective applications.  However, it would likely result in a public hearing, which then creates cost and uncertainty for the applicant.

Any licensee or manager facing enforcement action that could give rise to a negative holding should obtain urgent legal advice.

Further information