How far can a board go?

The House of Lords decision in Stewart v Perth and Kinross Council has implications for conditions attached to liquor licences that seek to control price-promotion offers of drink

The Journal, October 2004, page 44

It is rare for cases involving the humdrum world of licensing to reach the Palace of Westminster. In the case of liquor licensing, this has happened only once in the currency of the Licensing (Scotland) Act 1976. That case (Caledonian Nightclubs Ltd v City of Glasgow Licensing Board 1996 SCLR 639) featured a fairly substantial proposed nightclub development. While it did little to advance licensing jurisprudence, one could at least readily see why the parties found the huge expense of taking a case to London to be worth the risks.

Eyebrows have been raised at the background to the latest House of Lords licensing case, featuring the activities of a secondhand dealer in Perth and Kinross. A first glance at Stewart v Perth and Kinross Council (2004) 28 SLLP 32 might tempt the reader into thinking that the case turned on its own facts; however, it may prove to have an important bearing on the types of controls which some licensing boards are seeking to impose now, even in advance of the proposed reforms.

A power for what purpose?

Mr Stewart had for some years held a secondhand dealer’s licence in connection with his used car sales business. The licence was issued under the Civic Government (Scotland) Act 1982. Section 24 of this Act permits the licensing authority to attach conditions to a licence, requiring the keeping of records in relation to the dealer’s stock in trade. These conditions may include provision as to the information to be included in these records, their form, the premises where they are to be kept, and the period for which they are to be kept.

Perth and Kinross Council imposed conditions which required a dealer inter alia to carry out a pre-sale inspection of vehicles being offered for sale, to prepare an inspection report and to make that inspection report available to any prospective purchaser. Mr Stewart had breached these conditions, apparently over a long period of time. The authority refused to renew his licence. The reason given was that he was no longer a fit and proper person to hold a licence, because of his persistent breach of the conditions attached. Mr Stewart petitioned for judicial review. He was unsuccessful in the Outer House. His appeal was successful, although Lord McCluskey dissented. The McCluskey view was that as the statute was intended as a piece of consumer protection, the conditions complained of were entirely in accordance with the purpose of the Act.

A freedom still fundamental

The majority view of the Inner House was upheld in the House of Lords. Their Lordships took the view that freedom of contract between parties is fundamental, and can be interfered with only if Parliament has permitted this in the clearest terms. Lord Rodger said that the Act could not be interpreted “as conferring on the licensing authority an implied power to attach a condition that would interfere with the parties’ freedom to settle the terms of the contract by which the dealer will sell, and the customer will buy, a car. If Parliament had intended licensing authorities to have that power, it would have said so expressly – as in the case of taxi fares under section 17”.

Some licensing boards are now seeking to use price control to address the perceived dangers of price promotions in the sale of alcohol. One can have every sympathy with attempts to stamp out deep discounting schemes which would seem to encourage irresponsible drinking, e.g. promotions advertising “all you can drink for £10”. The licensed trade will reply that price promotion is an integral part of any retail activity from time to time. The Nicholson Report accepted that some forms of discounting were perfectly acceptable. The major difficulty occurs in deciding where the line should be drawn. Some boards have required a minimum pricing scheme as a prerequisite of obtaining an extension of permitted hours. Another board has prohibited the lowering of prices for any part of a day as a means of preventing so-called happy hours, and has threatened not to renew the licence of anyone failing to comply.

Standing the decision in Stewart, some or all of these practices may come under scrutiny in the courts. It is known that some major players are taking legal advice. Watch this space.

Tom Johnston, Partner, Young & Partners, Business Lawyers, Dunfermline and Glenrothes