Introduction
On 22 June 2011 the Minister for Tourism, Major Events, Hospitality & Racing and the Minister for Arts, George Souris, introduced the Liquor Amendment (3 Strikes) Bill 2011 (the Bill). At the time of preparing this Article, Parliament is currently in recess and while the Bill was supposed to have an “agreed to in principle” reading speech on 22 June 2011, on that day the debate was adjourned. Parliament does not sit again until 2 August 2011.
There is much controversy surrounding the Bill. The NSW hospitality industry and some solicitors have protested loudly to the Minister.
Part 9A, is it “punitive” or “protective”?
As the name of the Bill implies, it introduces into the Liquor Act 2007 (Act), the concept of “3 Strikes”. A new Part 9A will be added to the Act, on the Bill becoming law. The Explanatory Note to the Bill states that Part 9A is to operate “alongside Part 9”.
The existing Part 9 of the Act is headed “Disciplinary Action” and contains grounds for making a “complaint” to the Authority (s.139), the procedure for taking “disciplinary action” by the Authority (s.140) and the Authority’s “disciplinary powers” (s.141).
There has been a long history of disciplinary provisions in the licensing legislation of this State. For a time these provisions of the Act were considered to be “protective” rather than “penal” and that there was no element of deterrence in the decisions of the former Licensing Court (see Bodanski v. Jones (1987) NSW LR 677, Rendale Pty Limited v. Metropolian Licensing Inspector (unreported), NSW Sup CT, Smart J, 17 June 1988 and Director of Liquor and Gaming v. City of Sydney RSL (unreported), NSW Sup CT, Spender AJ, 27 June 1995). However following the commencement of the Liquor and Registered Club Legislation Amendment (Enforcement) Act 1996, the (previous) Liquor Act 1982 was amended to insert s.17A, which clearly provided that the former Licensing Court could take into account factors of deterrence and punishment.
Despite this recent change to the prior Act, the Author is of the view that the current disciplinary provisions of the 2007 Act, are not penal in their operation. The Author’s reasons are:
1. There is no s.17A equivalent in the current Act;
2. There is a separate part of the Act (Part 10) for proceedings to be brought for offences under the Act, which are to be dealt with summarily before the Local Court (s.145);
3. There are also additional penalties that may be imposed by the Local Court, which include powers of suspension, cancellation and disqualification (s.148); and
4. To argue that Part 9 is penal in nature would be contrary to the considerable number of decided cases on the nature of disciplinary proceedings, some of which are quite recent (for example, Sabag v. HCCC [2001] NSW CA 411).
Against this background, one then examines Part 9A, which is to be headed “Disciplinary Action – 3 Strikes”. The proper classification of the scope and purpose of Part 9A is important. Having regard to the discretions that the Director‑General must exercise when making a decision under Part 9A and having regard to the discretion that the Administrative Decisions Tribunal will exercise, in the event of an appeal against a decision of the Director-General, the nature of Part 9A is important to determine. Is it protective or penal? In the Author’s view Part 9A is also protective in nature and not penal.
Incurring Strike 1 & Strike 2
To the casual reader, the parts of the Bill dealing with incurring strikes 1 & 2, appear to be most unfair to the licensee, as well as the owner of the business, the owner of the premises and any mortgagee involved. This is particularly so, when you have regard to the consequences of 3 strikes being incurred – the licence (other than a club licence) is automatically cancelled (s.144C(1)(a)). Club licences are dealt with differently and the sanction of a third strike falls upon the club secretary rather than the licence of the registered club, the club licence remaining in existence (s.133C(3)).
To incur strike 1, a “relevant person”, “is charged with” committing a “prescribed offence”, which is nominated as being the “trigger offence” and within 12 months from the date when the trigger offence is alleged to have occurred, there must be two other prescribed offences, which are alleged to have been committed and charges for those offences have been made (s.144E). So it is necessary that there is something more than an allegation of a prescribed offence, there must be a charge brought in relation to that offence.
A person is taken to be charged with a prescribed offence, if a penalty notice or court attendance notice has been issued (s.114B(2)(a)).
A “relevant person” is the licensee, or an employee, or agent of the licensee (s.144B(1)). This is important to note, as some of the prescribed offences can be committed by persons other than the licensee.
A second strike is incurred if the first strike is in force and a relevant person is “charged with” committing a prescribed offence (again defined as the “trigger offence”) and:
(a) Within 12 months from the first strike coming into force, the trigger offence is alleged to have been committed; and
(b) Another prescribed offence (called the “supporting offence”) is alleged to have been committed and has been charged with that offence, since the first strike came into force; and
(c) Both the trigger offence and the supporting offence are each the same type of offence as one of the offences that caused the first strike to come into force (s.144F(1)).
Also note here that there is an alternate means of incurring a second offence, involving a decision of the Director-General, that a second strike should be incurred. Such a decision can only be made when:
(a) There is a first strike in force; and
(b) A prescribed offence is alleged to have been committed within 12 months of the first strike coming force; and
(c) A relevant person is charged with committing the prescribed offence; and
(d) The Director-General that decides that a strike should be incurred (s.114F(2)(a)‑(d)).
In addition, the Director-General must either be satisfied of the seriousness of the alleged offence, or that a strike should be incurred “in the circumstances” (s.144F(3)(a) & (b)).
Incurring a third strike
A third strike is incurred if:
(a) Two strikes are in force; and
(b) Within 12 months of the second strike coming in force, a prescribed offence “is alleged to have occurred” and [in the Author’s view this is when the Bill substantially changes] the charge has not been withdrawn or dismissed and the Director- General decides that a strike should be incurred “in the circumstances” (s.144G(1)).
Another important change in the Bill, is that before the Director-General decides that a third strike can be incurred, the Director-General must be satisfied that at least six charges have been proven for the prescribed offences that have been alleged (s.144G(2)). In the Author’s view, this is where some aspects of reasonableness and common sense creep into the Bill, but this is too little, too late.
Prescribed offences
Not every offence under the Liquor Act is a “prescribed offence”, due to the exhaustive definition of that term in s.144B(1). Prescribed offences are only ones that are “alleged to have occurred on or in relation to the premises” to which the licence relates, which is open to misinterpretation. In addition, they have to be either:
(a) A breach of a licence condition imposed under Part 9A or under Schedule 4 to the Act;
(b) The offences of “permitting intoxication” or “permitting an indecent, violent or quarrelsome conduct”;
(c) The offences of selling or supplying alcohol to intoxicated persons, which can be also committed by the licensee’s employees or agents;
(d) The offences of permitting the sale or the use or possession of a prohibited drug;
(e) The offences of selling or supplying alcohol to a minor or allowing such supply, which can also be incurred by the licensee’s servants or agents.
Having regard to the serious consequence of incurring a third strike (the automatic cancellation of the licence), it is extremely concerning that all that is required to support strike 1 & strike 2 are offences which are alleged and a charge has been made. It does not matter that the charge is subsequently withdrawn or dismissed. This is the part of the Bill that the Author finds particularly objectionable.
Obvious manifest unfairness
The obvious manifest unfairness in respect of incurring the first two strikes is that they may be incurred when an offence is simply alleged and charged with and it does not matter whether the charge in respect of the offence has been subsequently withdrawn or dismissed (see s.144E and s.144F).
The Director-General should not be a decision maker
It is significant that the decision maker under the Bill is the Director-General of the “Department of Trade and Investment, Regional Infrastructure and Services”. On any appeal the decision maker is the Administrative Decisions Tribunal (s.144J). Absent from the Bill is any reference to the Casino Liquor & Gaming Control Authority, the principal decision maker under the Liquor Act 2007. Is this a “vote of no confidence” by the Minister?
The Author is strongly of the view that it is not appropriate for the Director-General to be a decision maker at all, either under the Liquor Act 2007 or its cognate legislation. The Director-General is responsible for the Office of Liquor & Gaming, which has inspectors. These inspectors have investigative and prosecutorial functions under the legislation and so does the Director-General (for example see Part 4 Casino, Liquor and Gaming Control Authority Act 2007). That being the case, making the Director-General a decision maker under Part 9A or any part of the Act, is to make the Director-General the “prosecutor, judge, jury and executioner” all in one. It ought to be remembered here that charges for prescribed offences under Part 9A, can be brought by the Director-General’s very own inspectors.
In the Author’s view, there should be a clear distinction and separation between those with investigative and prosecutorial functions on one hand, against those with a determinative function, on the other. Unfortunately this is a fundamental flaw in the Act, which is being perpetuated by the Bill.
Watch for the acts of employees
It is not only the licensee’s conduct that is taken into account. When strikes 1 & 2 are incurred, they may be incurred for acts by “a relevant person in relation to a licence”. “A relevant person” is defined by s.144(B)(1) to be an employee or agent of the licensee, or manager (that is to say an approved manager of a corporate licensee).
Pre-purchase due diligence impossible
Nowhere in the Bill can the Author see any provision for a publicly accessible record of how many strikes or alleged offences are building up against a licence. Consider the hapless purchaser who buys a venue, which has already incurred two strikes and the Director-General is in the middle of a determination as to whether a third strike should be incurred. Remember the consequence of that third strike is the automatic cancellation of the licence, a punishment that should not be imposed upon the purchaser.
The giving of notice by the Director-General
Whenever a decision is to be made by the Director-General under Part 9A, notice must be given to the licensee. However, the Director-General is only bound to give a notice to the business owner and the owner of the premises if the Director-General is deciding whether to incur a third strike (s.144I(1)(iii)). Quite frankly, this is too little, too late, particularly regarding the serious consequence of the third strike.
Given the sanction of a third strike, it would appear to manifestly unfair that the owner of the premises is not told until two strikes have already been recorded. In the Author’s view, notice must be given by the Director-General when any strike is incurred.
12 month embargo on the premises
Another unsatisfactory consequence of the third strike being incurred is a 12 month embargo upon the granting of a new licence for the same premises (s.144C(1)(b)). This embargo only applies when the person seeking the reinstatement of the licence was a “close associate” of the business owner in respect of the cancelled licence. The expression “close associate” is defined by s.4(1) Liquor Act, 2007 which borrows its definition from the Casino, Liquor & Gaming Control Authority Act. A landlord will be a close associate, for the purposes of the legislation, if the landlord is entitled to receive a rent which would be considered to be “any other financial benefit or financial advantage from the carrying on of the business” (s.5(2)(b), Casino Liquor & Gaming Control Authority Act 2007). Given that most modern hotel leases contain a percentage of turnover rent clause (to give the landlord the right to veto the transfer of poker machine entitlements by the lessee), these hotel landlords will be close associates and the 12 month embargo will apply to their premises.
A new licence may be impossible to obtain
Even if there is no 12 month embargo on the premises, the application process for a new licence is long, expensive and for a new hotel licence, impossible to obtain. The Author cites the Authority’s one and only determination for a new hotel licence at Ropes Crossing, refused by the Authority on 21 April 2011.
The “kiss of death” to lending by banks
As if economic conditions were not difficult enough at present, for lending by banks to licensed premises, then, in the Author’s view the Bill has just put the “kiss of death” on any further lending. What lending institution in its right mind, will now lend to a licensed business in the circumstances?
Conclusion
Despite protest by industry and the protests by this Author, it appears that the Bill is destined to become law. This is a great mistake for the new Government and new Minister, who as shadow minister for Gaming & Racing, has had a long experience with the jurisdiction.
In the Author’s view, there is no need for the Bill whatsoever. The Act already contains substantial provisions for offences to be brought by the Director-General or the Commissioner of Police. The Local Court has power to cancel a licence under these existing provisions, as did the former Licensing Court, under equivalent provisions in the prior Act. Despite these powers, no licences have been cancelled to the Authority’s knowledge.
In addition, the Authority has its disciplinary powers under Part 9 of the Act and can (in the public interest) disqualify rogue licensees and rogue operators. So why is there the need for the Bill in the circumstances?
Finally, the presumption of innocence has clearly been thrown out the window by the Minister. Strike 1 & Strike 2 can be incurred on an offence simply being alleged in a penalty notice, no matter how spurious it is or how weak the grounds supporting the allegation are. Surely the rule of law in NSW is that a person is presumed innocent until proven guilty?
