New Zealand: Royal Hotel and license suspensions - three strikes, but not out

Last Updated: 16 November 2016
Article by Jonathan Scragg

Most Read Contributor in New Zealand, August 2019

The Alcohol Regulatory and Licensing Authority (Authority) has recently issued its decision in Elliott v Black Cat Hotels Limited [2016] NZARLA PH 381-382. The Authority elected to suspend rather than cancel an on-licence and associated manager's certificate under the "three strikes" provisions of the Sale and Supply of Alcohol Act 2012 (Act). This is the first time an application to cancel an on-licence under these provisions has been made since the Act came into force.


The Royal Hotel had failed two controlled purchase operations (CPO) within a period of just over 12 months. The first failed CPO resulted in the only certified duty manager for the premises having her manager's certificate suspended by agreement for 28 days. The second failed CPO resulted in the suspension of the hotel's on-licence for 24 hours. This second failure also amounted to the second holding under the Act for the duty manager.

A short time later, the on-licence was again suspended for 48 hours as the licensee had allowed persons to be on the licensed premises outside the permitted trading hours, contrary to the Act.

The Police applied to determine whether a negative holding could be established for both the on-licence and the duty manager in relation to the second failed CPO and whether the on-licence ought to be cancelled and the manager's certificate suspended.

The Authority found a negative holding was established for both the licensee and the duty manager; with the result that together these suspensions constituted three negative holdings for the on-licence and two negative holdings for the duty manager.

The Act provides the Authority may cancel a licence if it is established the licensee has received three negative holdings within a period of three years (section 289), but must cancel a manager's certificate if a duty manager has received three negative holdings within a period of three years (section 290).

Determination by the Authority

The Police submitted the Royal Hotel is in a "risk area" with the largest concentration of on-licenses in the Nelson Bays area, and considered it important there is a high level of co-operation between licensees and the Police.

Although the Police did not consider the Royal Hotel to be a "problem premises", the lack of co-operation from the hotel, namely, calls and messages going unanswered, offers of training not taken up, and failing to follow advice, all contributed to the Police's view that there was no other choice but to apply to cancel the on-licence. A further concern held by the Police was the hotel employed only one duty manager, who was overworked and as such increased the risk of errors occurring.

Before the Authority, the hotel and duty manager accepted they had been overly complacent, however, they submitted the breaches had not been wilful. It was submitted for the Royal Hotel that the cancellation of the on-licence would be disproportionate to the breaches that had occurred, given they were spaced apart and did not signify any deliberate behaviour, nor did any actual alcohol-related harm flow from the breach, for example intoxication or disorder.

The Authority noted each application must be considered on its own merits, but also observed that it was guided by the following four factors:

  • the public interest sought to be achieved by cancellation;
  • the gravity of the offending;
  • the consequences of the cancellation; and
  • whether the consequences are out of proportion to the gravity of the offending.

The Authority referred to the legislative history of the Act, and cited the Law Commission's view that a licence and manger's certificate ought to be automatically cancelled following three negative findings. The Law Commission had considered the sale and supply of alcohol to minors to be particularly harmful in this regard.

The Authority was mindful of the severity of supplying alcohol to minors, however, the Authority recognised the gravity of this particular offending was low, given there was no direct flow on effect in terms of alcohol-related harm arising from any of the incidents. This is a departure from previous decisions of the Authority in which the sale of alcohol to minors has been held to be the ultimate form of liquor abuse.

The Authority contrasted the circumstances of this particular case with other cases where premises were managed in a way to encourage alcohol abuse (for example, to increase alcohol sales). It was acknowledged by the Authority the primary reason for the Royal Hotel's failings was due to the complacency of management, including by the use of transient staffing arrangements, and reflected the closely held nature of the business (a husband and wife operation). The Authority was satisfied the hotel now clearly understood that the operation of the premises needed to change.

The Authority afforded the hotel and the duty manager credit for their acceptance and co-operation in coming to agreed suspensions with respect to the two negative holdings. The Authority also placed weight on the impact that cancellation of the licence would have on the family run business i.e. there would be significant implications beyond for the licensee itself, given the nature of the family run operation, coupled with the fact the licensee is only four years into a 20 year lease.

Ultimately, the Authority chose to exercise its discretion, in large part due to the lack of deliberate or wilful conduct by the licensee, and determined that a 10 day suspension of the on-licence was more appropriate than cancellation.

With respect to the manager's certificate, given the second CPO failure was only the second negative holding for the duty manager, the Authority declined to cancel the manager's certificate, but suspended the certificate for 56 days.

In both cases, the Authority gave a "final warning" and said that any ongoing complacency and any further negative findings would almost certainly result in immediate cancellation of either the on-licence or the manager's certificate.


The Authority's decision involving the Royal Hotel should serve as notice to all licensees that the "three strikes" provisions of the Act are in force. Further, that the Authority has begun to hear cancellation applications, and that although the Authority is yet to cancel a licence on a "third strike", licensees guilty of wilful misconduct, or gross ongoing complacency in their operations, are at risk of the loss of their licence.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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