The Buck Stops Here - Supreme Court Rules Against Compensation For Liquor Licensees -

Article by Tom Young and Louise Bell

A recent Supreme Court decision may rule out any future claims for compensation by liquor licensees who have suffered financial loss as a result of allegedly negligent decisions by the Office of Liquor and Gaming Regulation (OLGR). This case concerned a decision by the Chief Executive of the OLGR (Chief Executive) to refuse applications to renew extended hours permits in relation to two Surfers Paradise nightclubs and a subsequent application for compensation in relation to those decisions.

Until 31 March 2004 Meshlawn Pty Ltd and Surfers Paradise Rock and Roll Café Pty Ltd (Licensees) conducted nightclubs until 5am under extended hours permits. On 18 March 2004 the Chief Executive refused applications by the Licensees to renew the extended hours permits which would enable them to trade after 3am from 1 April 2004 (Decisions). The Licensees then appealed the Decisions to the Commercial and Consumer Tribunal (Tribunal). Prior to the Tribunal's hearing of the appeal, the Chief Executive and Assistant to the Commissioner of Police no longer opposed the grant of extended hours permits, provided "a lockout condition from 3am" was imposed. On 13 August 2004, the Tribunal granted the extended hours permits to the Licensees subject to a lockout condition being imposed.

In Meshlawn Pty Ltd and Surfers Paradise Rock and Roll Café Pty Ltd v The State of Queensland and Helen Ringrose as Chief Executive of the Liquor Licensing Division [2009] QSC 215 the Licensees claimed damages against the Chief Executive and her employer (the State of Queensland) for losses they alleged to have suffered as a result of not being able to trade between 3am and 5am from 1 April 2004 until 13 August 2004. The particulars of the alleged breach of duty by the Chief Executive included that the Chief Executive failed to:

read the comments and objections from the Local Government and the Assistant Commissioner of Queensland Police, and the Licensees' responses thereto
make enquiries of the Acting Executive Director of OLGR, Executive Director of OLGR and Manager, Licensing Administration, as to the evidentiary basis for the objections and comments
ascertain the attitude of the OLGR's investigating officers in respect of the applications for extended hours permits
ascertain whether there was any comparative analysis of non-compliance or laxity on the part of other late-night venues in the vicinity, or evidence as to the level of misconduct associated with other premises in the vicinity
enquire as to the two liquor infringement reports referred to by the investigators' comments in a briefing note
have regard to the OLGR's assessment that patron behaviour at the Licensee's premises was generally considered good, with clear evidence of Responsible Service of Alcohol commitment, and
ascertain if there was evidence of a clear relationship between alcohol related street offences and the operation of the Licensees' premises , and decided the Licensees' applications without the matters referred to above.

It was also alleged that the Chief Executive breached her duty by refusing permits when there was insufficient evidence to do so and where there was no evidence of liquor infringement reports against the relevant premises.

The Licensees pleaded that they suffered a loss, including alleged reduction in the capital of their businesses, in the sum of $1,632,325 and $1,150,952 respectively.

Overview of Liquor Act

In order to determine whether the Decisions were made in breach of a duty of care, Applegarth J considered the "first point of reference" was the relevant statutory regime and in particular section 121A of the Liquor Act 1992 (Qld) (Act). Applegarth J was of the opinion that:

"...s 121A is part of a statutory regime that is principally concerned with the welfare of the community, not the welfare and protection of applicants for extended hours permits".

Applegarth J said that the grant of an application to renew a permit did not arise as a matter of right upon satisfaction by the applicant of stated criteria, or in the absence of proof by the police or the council of their objections. Applegarth J was of the view that although the Chief Executive had to have regard to matters, including police and council objections, the ultimate decision in relation to an application was on its merits and so as to achieve the Act's purposes. In relation to the purposes of the Act, Applegarth J stated:

"The terms of s 121A....is contained in an Act which principally exists to serve the public interest, rather than protect the interests of members of a specific group or class, at once distinguishes this case from cases in which a statute exists for the protection of a class of individual of which the plaintiffs are members."

This is a surprising finding considering that the objects of the Act include:

"to facilitate and regulate the optimum development of the tourist, liquor and hospitality industries of the State having regard to the welfare, needs and interests of the community and the economic implications of change" and

"to provide a flexible, practical system for regulation of the liquor industry of the State with minimal formality, technicality or intervention consistent with the proper and efficient administration of this Act".

Negligence

The Licensees pleaded that the Chief Executive "owed a duty of care in the exercise of her functions under the Act in respect of the renewal of the extended hours permits to take reasonable care to avoid foreseeable risk of interest to the plaintiffs". The threshold issue in relation to the negligence claim was whether the Chief Executive owed the Licensees a duty of care to take reasonable care to avoid foreseeable risk of injury to them. Applegarth J's examination of the terms, scope and purpose of the Act led him to conclude that it did not create a relationship between the Chief Executive and the class of persons of which the plaintiffs were members (applicants for renewal of extended hours permits), that displayed sufficient characteristics to impose a common law duty of care. Applegarth J stated that:

"...the power conferred on the Chief Executive was not conferred for the protection of applicants for permits and the proper exercise of the power may be inimical to their private interests."

Applegarth J also considered that the vulnerability of the Licensees to economic loss as a foreseeable result of an unfavourable decision by the Chief Executive was insufficient to establish a duty of care. Applegarth J noted that vulnerability was a feature of a statutory regime that conferred permits of limited duration on licensees and also conferred a broad discretionary power upon the Chief Executive to not renew those permits. However, Applegarth J was of the view that the vulnerability was ameliorated by a statutory appeal to an independent tribunal stating:

"The recognition of a duty of care in the case would be inconsistent with the statutory regime that addresses the interests of aggrieved applicants by conferring upon them a statutory right of appeal."

In summary, it was found that the duty of care argued by the Licensees was not consistent with the terms, scope and purposes of the Act. Applegarth J concluded that the Licensees did not establish that the Chief Executive owed to them the duty of care which they alleged and the negligence claims failed.

Public Misfeasance

The Licensees also claimed that the Chief Executive committed the tort of misfeasance in public office on the basis that she exceeded her powers and was aware of "the shortcomings in the evidence provided to her about the matters that she was required to consider under s 121A of the Act". Applegarth J accepted the Chief Executive's evidence that in making the Decisions she relied on the information and advice contained in briefing notes. These briefing notes provided an analysis of the Local Government's submission in relation to the renewal application and the police objection to the renewal. Applegarth J found that the briefing notes did not suggest that the incidents were unsubstantiated and the Chief Executive's conduct in making the Decisions was reasonable in the circumstances. Applegarth J declined to find that the Decisions were invalid, unauthorised or malicious and the Licensees thereby failed to prove the elements of misfeasance in public office.

Implications

This decision is now under appeal. If the decision of Applegarth J is upheld, the Queensland courts may be unlikely to allow a claim for compensation in relation to a negligent decision by the Chief Executive in response to an application for an extended hours permit. This will, however, depend upon how widely this case is interpreted and whether it will apply to decisions which do not involve former section 121A and further beyond to decisions by the Chief Executive which do not relate to extended hours permits. Considering that no duty of care was found to be owed by the Chief Executive to applicants for renewal of extended hours permits and the high threshold for public misfeasance claims, this decision may limit the avenues for compensation which are available to licensees for losses they suffer as a result of negligent decisions by the Chief Executive. Whether this finding encourages good decision making and policy in public office is debatable. Should not government decision makers be accountable in the same way as others in the community?

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.

The Buck Stops Here - Supreme Court Rules Against Compensation For Liquor Licensees

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