Flevotomos v Independent Liquor and Gaming Authority

The evidence before the Tribunal

1. The following documents were taken into evidence: 1. The statutory declaration made on 18 July 2018 by Samantha Southwell, who at the time was a 'high-risk manager' for Dollhouse (Exhibit A1); 2. The letter dated 1 August 2019 from Mr Timothy Williams, the current licensee, to the Tribunal (Exhibit A2); 3. The affidavit of Mr Williams sworn on 9 May 2019 (Exhibit A3); 4. The affidavit of Mr Williams sworn on 20 June 2019 (Exhibit A4); 5. The statutory declaration made on 18 July 2018 by Mr Williams (Exhibit A5); 6. The bundle of documents (including financial statements of Iguana) and comprising some, but apparently not all, of the documents produced by the Applicants' solicitors to the Tribunal in response to a summons (Exhibit R1); 7. Two volumes of documents lodged with the Tribunal under s 58 of the Administrative Decisions Review Act 1997 (the ADR Act) (the s 58 documents) and one volume of additional documents lodged under s 58 of the ADR Act (the supplementary s 58 documents) (together, Exhibit R2); and 8. The affidavit of Senior Constable Robert Flook of the NSW Police Force, affirmed on 12 July 2019 (Exhibit R3).
2. Counsel for the Applicants objected to various paragraphs or parts of paragraphs of Exhibit R3. I noted that some of Senior Constable Flook's statements were not likely to assist me in reviewing the Authority's decision and, having regard to those comments, counsel for the Respondents did not press certain other portions of Exhibit R3. As a result, the following parts of Exhibit R3 were not read:

• Paragraph 6; the final two sentences of 6; 6; the final two sentences of [9]; the second to seventh sentences of [10]; [11]-[21]; the first three sentences, and the last sentence, of [22]; [24]; and [25].

1. Both Ms Southwell and Mr Williams were cross-examined by counsel for the Respondent. Senior Constable Flook was not required for cross-examination.
2. Affidavits sworn by Mr Flevotomos on 9 May 2019 (filed 10 May 2019) and 20 June 2019 (filed on the same day) were not read.

The statutory basis for the disciplinary action

1. The Authority's disciplinary action was taken under s 141 of the Liquor Act. Order (1) was expressed to be made pursuant to s 141(2)(c)(i), order (2) pursuant to s 141(2)(e), and orders (3) and (4) pursuant to s 141(2)(f).
2. Sections 141(1) and (2), in Part 9 of the Liquor Act, provide as follows: 141 Disciplinary powers of Authority (1) The Authority may deal with and determine a complaint that is made to it under this Part. … (2) If the Authority is satisfied that any of the grounds (other than a criminal organisation associate ground) on which the complaint was made apply in relation to the licensee, manager or close associate, the Authority may decide not to take any action or may do any one or more of the following: (a) cancel the licence, (b) suspend the licence for such period not exceeding 12 months (or, if circumstances of aggravation exist in relation to the complaint, not exceeding 24 months) as the Authority thinks fit, (c) order the licensee or manager to pay, within such time as is specified in the order: (i) a monetary penalty not exceeding 500 penalty units (in the case of a corporation) or 200 penalty units (in the case of an individual), or (ii) if circumstances of aggravation exist in relation to the complaint - a monetary penalty not exceeding 1,000 penalty units (in the case of a corporation) or 400 penalty units (in the case of an individual), (d) suspend or cancel any authorisation or other approval (other than the licence itself) held by the licensee under this Act, (e) impose a condition to which the licence, or any authorisation or approval held by the licensee under this Act, is to be subject or revoke or vary a condition to which the licence or any such authorisation or approval is subject, (f) disqualify the licensee from holding a licence, or from being the manager of licensed premises or the close associate of a licensee, for such period as the Authority thinks fit, (g) withdraw the manager's approval to manage licensed premises, (h) disqualify the manager from being the manager of licensed premises, or from holding a licence or being the close associate of a licensee, for such period as the Authority thinks fit, (i) in the case of a limited licence held on behalf of a non-proprietary association - order that a limited licence is not, for a period of not more than 3 years from the date on which the decision takes effect, to be granted to any person on behalf of the non-proprietary association, (j) disqualify the close associate from being a close associate of a licensee or the manager of licensed premises for such period as the Authority thinks fit, (k) disqualify the close associate from holding a licence for such period as the Authority thinks fit, (l) order the licensee, manager or close associate to pay the amount of any costs incurred by: (i) the Secretary in carrying out any investigation or inquiry under section 138 in relation to the licensee, manager or close associate, or (ii) the Authority in connection with the taking of disciplinary action against the licensee, manager or close associate under this section, (m) reprimand the licensee, manager or close associate.
3. The expression 'criminal organisation associate ground', appearing in subsection (2), is defined in subsection (8) but it is not relevant to the Applicants' circumstances.

The Tribunal's jurisdiction

1. Decisions of the Authority under Part 9 may be reviewed by the Tribunal under the ADR Act: s 144 of the Liquor Act.
2. The Tribunal's task is to decide what the correct and preferable decision is having regard to the material before it: s 63(1) of the ADR Act.

Imposition of licence conditions

1. In August 2014 NSW Police identified that the licensed premises had undergone a change of business model from what was formerly a restaurant/nightclub to an adult entertainment venue providing female strippers performing striptease and podium dancing on a stage in the bar area, and in private rooms. Police wrote to the Secretary of the then NSW Department of Trade and Investment to inform the Secretary of the new business model. The Secretary subsequently imposed the following new conditions on the licence, effective from 30 October 2014:

• Whenever live adult entertainment is provided at the venue the licensee must ensure that there is no physical contact between performers and patrons (the 'Contact Condition');
• Whenever live adult entertainment is provided at the venue the licensee must ensure that all performances must be limited to a defined stage area (the 'Stage Condition');
• Whenever live adult entertainment is provided at the venue the licensee must ensure that when performers leave the stage area they must wear at least a G-string (the 'G-string Condition');
• There is to be no spruiking or touting for business immediately outside the premises or in the near vicinity of the premises (the 'Spruiking Condition');
• Any place within the licensed premises shall not be partitioned to prevent observation of the activity in that place (the 'Visibility Condition').

1. As a licensed venue operating in the Kings Cross area, the premises were also subject to a number of additional conditions by force of the then Part 5A of the Liquor Regulation 2008, including (among others) a condition prohibiting the use of glass drinking vessels on the premises during the 'general late trade period' (the 'Glass Condition'), a condition requiring an around-the-clock incident register (the 'Incident Register Condition'), a condition requiring the preservation and reporting to Police of a crime scene in the event of an act of violence on the premises (the 'Crime Scene Condition'), and a condition requiring comprehensive and accessible closed circuit television (the 'CCTV Condition').

Breaches of the licence conditions

1. The Respondents' written submissions contain at [19] a table (the accuracy of which does not appear to be disputed by the Applicants - Applicants' Reply Submissions at [3]) summarising instances where, during the period from 30 October 2014 (when the conditions set out in [15] were imposed) to 1 December 2017 (when Mr Flevotomos ceased being the licensee), one or more of the licence conditions were breached. They include multiple documented breaches of each of the Contact Condition, the Stage Condition and the G-string Condition, and a handful of documented breaches of the CCTV Condition. There are also multiple instances where the use of illicit drugs by patrons and workers, or the supply of drugs on the premises, are recorded on CCTV.
2. In addition to that, there are earlier documented breaches of the Glass Condition, the Incident Register Condition, and the Crime Scene Condition - all of them during the period when Mr Flevotomos was the licensee. During both periods, covering a period of almost five years during which Mr Flevotomos was the licensee, Mr Flevotomos was repeatedly reminded of his obligations as licensee, was repeatedly issued with penalty notices, and was repeatedly found guilty of the breaches alleged.

Change of licensee, and subsequent compliance with licence conditions

1. On 1 December 2017 Mr Flevotomos was replaced by Mr Williams as licensee. Mr Williams now manages the day-to-day operations of the business. Mr Williams claims, and I accept, that no adverse events have occurred at the premises since he took over management of the licence: Exhibit A4, at [15].
2. In compliance with order (4) made by the Authority in March 2019, Mr Flevotomos resigned as a director of Iguana on 9 May 2019.

The Applicants' submissions

1. The Applicants submit that a licence condition prohibiting Mr Flevotomos from entering the licensed premises or having any involvement whatsoever with the business conducted on the premises, does not serve the objects of the Liquor Act, as specified in s 3: 3 Objects of Act (1) The objects of this Act are as follows: (a) to regulate and control the sale, supply and consumption of liquor in a way that is consistent with the expectations, needs and aspirations of the community, (b) to facilitate the balanced development, in the public interest, of the liquor industry, through a flexible and practical regulatory system with minimal formality and technicality, (c) to contribute to the responsible development of related industries such as the live music, entertainment, tourism and hospitality industries. (2) In order to secure the objects of this Act, each person who exercises functions under this Act (including a licensee) is required to have due regard to the following: (a) the need to minimise harm associated with misuse and abuse of liquor (including harm arising from violence and other anti-social behaviour), (b) the need to encourage responsible attitudes and practices towards the promotion, sale, supply, service and consumption of liquor, (c) the need to ensure that the sale, supply and consumption of liquor contributes to, and does not detract from, the amenity of community life.
2. A licence condition in those terms, they submit, does not facilitate the achievement of any of the objects of the Liquor Act, where those objects are directed to the sale and supply of liquor and the minimisation of harm associated with the misuse and abuse of liquor.
3. The Applicants submit the objects of the Liquor Act have been achieved since at least December 2017 (when Mr Williams became the licensee) without the imposition of a condition in those terms.
4. They submit that, in light of the improved compliance since Mr Williams became the licensee, there is no basis for any concern that Mr Flevotomos' continued attendance on the licensed premises will cause or contribute to the occurrence of further adverse events. They also say there is no reason for Mr Flevotomos to seek to become involved with the day-to-day affairs of the business, since he has resigned as the director of Iguana and has no role at all in respect of the premises, and no financial interest in Iguana.
5. In summary, they submit that the objects and purposes of the Liquor Act are achieved by orders (1), (3) and (4) made by the Authority, and that order (2) (as amended so as to apply only to Mr Flevotomos) is not necessary to ensure the practical effect of the other orders.
6. Before outlining the Respondents' submissions, it is appropriate that I express my disagreement with the Applicants' submission that order (2) would not facilitate the achievement of any of the objects of the Liquor Act. There may conceivably be cases - this is not one of them - in which the documented breaches of a liquor licence concern conditions that have no, or only a tenuous, connection with the supply and consumption of liquor. A case in which the only breaches concerned the Contact Condition, or the G-string Condition, may fall into that category. But where, as here, there have been breaches not only of those two conditions but also breaches of the Glass Condition, the Incident Register Condition and the Crime Scene Condition, and where there have also been occasions when bar staff have been unable to produce RSA (Responsible Service of Alcohol) competency cards, then at least s 3(1)(a) - 'expectations, needs and aspirations of the community' - and s 3(1)(c) - 'responsible development of related industries such as the live music, entertainment, tourism and hospitality industries' - are certainly in play.

The Respondents' submissions

1. The Respondents' submissions detail the many 'criminal offences, licence contraventions and other incidents' that occurred during the period 9 February 2013 to 1 December 2017 and note that they were 'frequent, systemic and egregious': [10] and [19].
2. They criticise Mr Flevotomos' response to the identified shortcomings - such as his statement 'the measures I had implemented partially failed in certain circumstances' (Exhibit R2, Volume 2, Tab 7 at [69]) - as 'scarcely engag[ing] with the gravity and systemic nature of these offences': [12].
3. They also submit at [12] that it is 'unsatisfactory that the Applicants seek to downplay Mr Flevotomos' culpability for the offending by emphasising that there are only 5 offences that he himself was caught observing or committing'. That is a reference to the Applicants' submissions at [30], relying on Mr Flevotomos' affidavits sworn on 9 May 2019 and 20 June 2019, but since those two affidavits were not read in these proceedings, both the Applicants' attempted downplaying and the Respondents' criticism of that attempt go nowhere. I ignore both submissions.
4. The Respondents are sceptical of Mr Flevotomos' various claims at different times, over a period of almost 3 years, that he was 'mortified', 'embarrassed', 'horrified' and 'shocked' when he was confronted with the multiple breaches of licence conditions: [16] and [17]. They submit that even if Mr Flevotomos was oblivious to what was occurring in the club, the frequency of the interventions by the regulators must have put him on notice that he needed to do more to achieve compliance: [18].
5. The Respondents submit that it was no exaggeration for the Authority to state, as it did at [256] of the reasons for the decision under review: The adverse events that have been found by the Authority … establish one of the worst records of regulatory non-compliance that the Authority has encountered in any disciplinary proceedings under Part 9 of the [Liquor] Act.
6. The Respondents submit that the provisions of the Liquor Act that assume critical importance in this matter are those in s 3(1)(a) and s 3(2)(b). They say at [36]: It is consistent with the expectations of the community that premises held out as providing 'adult entertainment' are clearly differentiated from, and prevented from operating as, brothels. It is also consistent with the expectations of the community that licensed premises do not become hotspots for violence, the use of prohibited drugs, and indecent conduct.
7. They submit that order (2), as amended, is necessary to ensure the efficacy of the disciplinary sanctions imposed by the remaining orders. They submit the remaining orders will have limited effect as without order (2) it will be possible for Mr Flevotomos to exert control over the business by virtue of the entrenched authority he has built up over the decades.

Consideration

1. I have no hesitation in accepting the Respondents' characterisation of the many documented contraventions of the Dollhouse's licence conditions as frequent, systemic and egregious. The nature and the extent of the contraventions, which occurred while Mr Flevotomos was the licensee, undoubtedly justify the Authority's decision to impose a monetary penalty on Mr Flevotomos, to impose on him a lifetime disqualification from holding a liquor licence, and to disqualify him from being a close associate of a licensee for 10 years.
2. Those sanctions were decided upon because the Authority satisfied itself that Mr Flevotomos had failed to comply with licence conditions over an extended period of time. Even Mr Flevotomos himself accepts the appropriateness of the sanctions.
3. Like the Respondents, I am sceptical of Mr Flevotomos' claims that he was 'mortified', 'embarrassed', 'horrified' and 'shocked' when he was confronted with the multiple breaches of licence conditions. But whether or not they were his true emotions is somewhat beside the point. He has been removed as the licensee, and will never be reinstated.
4. The responsibility for ensuring compliance with the licence conditions now falls to Mr Williams. There is nothing before the Tribunal to suggest that Mr Williams is incapable of upholding that responsibility; to the contrary, all indications are that during his tenure as licensee, the venue has been fully compliant with all the conditions attaching to the licence.
5. For 17 months - from the time that he took over the licence in December 2017, until Mr Flevotomos withdrew as a director of Iguana in May 2019 - Mr Williams was able to ensure full compliance with the licence conditions, even though Mr Flevotomos continued to attend the premises and had a direct interest in the company running the business. Mr Williams now maintains, and I accept, that he has not observed or been told about a single licensing breach at the premises, either during that 17 month period or since Mr Flevotomos resigned as a director of Iguana.
6. And so the Respondents' argument boils down to this - even though there were no licensing breaches during a 17-month period when (a) Mr Williams was the licensee, (b) Mr Flevotomos continued to attend the premises, and (c) Mr Flevotomos was the director of Iguana, nevertheless order (2) is necessary to guard against the risk that there will be licensing breaches in the future, even in circumstances where factors (b) and (c) are absent.
7. The argument can only be supported by the speculative proposition that Mr Flevotomos wields such influence over Mr Williams that he, Mr Flevotomos, can encourage Mr Williams to turn rogue and ignore his responsibilities - and necessarily lose his livelihood. I do not accept that proposition.
8. Put more simply, I do not accept that Mr Flevotomos' continuing attendance at the licensed premises is likely to increase the risk of non-compliance with licence conditions over the level of risk that would exist if he were prohibited from attending, or that Mr Flevotomos is motivated to 'have any involvement whatsoever with the business conducted' at the Dollhouse - and even if he were, I am confident that Mr Williams has sufficient strength of character, and sufficiently strong survival instincts, to resist any such attempt. Indeed, it is either the case that he has demonstrated as much since December 2017, or that he has never had to do so since the circumstances have not arisen.
9. To the extent that the Respondents are concerned that there is a greater risk of non-compliance once this review proceeding is over and the operation of the Dollhouse is necessarily subject to less scrutiny (a concern I do not share), that would not in any event justify the imposition of a condition that is otherwise not appropriate or necessary.

Decision

1. The Tribunal decides as follows: 1. Order (2) in the decision of the Independent Liquor and Gaming Authority made on 20 March 2019 is set aside. 2. The decision under review is otherwise affirmed.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 September 2019