Licensing_trust

Licensing trust

Community-owned company with a government-authorised monopoly

Under New Zealand law, a licensing trust is a community-owned company with a government-authorised monopoly on the development of premises licensed for the sale of alcoholic beverages and associated accommodation in an area. This applies to both on-licence and off-licence sales.

The Invercargill Licensing Trust (ILT) in 1944 was the first such body, and remains the highest profile example. Most other trusts have been small by comparison, but several have now created a jointly-owned management company, Trust House Limited, and the assets and payouts of this are very similar to that of the ILT.

The uniqueness of licensing trusts revolves around:

A responsibility to enhance the well-being of their defined community;
The distribution of (surplus) profits back to their communities;
The provision of good, ‘model’ facilities for the sale of alcohol, the provision of accommodation and meals, and gaming;^{[lower-alpha 1]}
Accountability to the communities who own them.

In addition, there is an inherent responsibility to efficiently operate commercial businesses profitably.

Licensing trusts belong to the family of community enterprises that are part of the third sector,^{[lower-alpha 2]} a hybrid form of organisation that crosses over sectors, a mixture of market orientation and solidarity (community support). They may be defined as businesses whose primary goals are to support the well-being of their community principally through reinvesting profits generated from their trading activities either in the business and/or in support of community activities, rather than being driven to maximise profits.

The only "essential" liquor outlets allowed to stay open during the COVID-19 pandemic were the ones in "Trust" areas where they had a monopoly on liquor sales and local supermarkets could not sell beer or wine.^[1]

History

Emergence of licensing trusts

On 25 September 1943 the voters of Invercargill, by 8,015 votes to 6,342, restored the sale of liquor within the borough. Prohibition had existed for 38 years and the voting, on the face of it, was apparently a clear indication there was a mood for change. But controversy immediately arose. The 60% threshold necessary to achieve change had only been achieved with the overwhelming support (81.5%) of the soldiers’ votes overseas. The ‘domestic’ vote had been similar to the previous triennial polls at 56.8%. There were suggestions that the voting papers of the soldiers should be returned to New Zealand and recounted. But it was found they had been destroyed in the Middle East. While a good deal of inferences were thrown about, and the Prime Minister, Peter Fraser, offered explanations and a report to Parliament, there was no evidence that what had occurred in destroying the papers was anything other than a misunderstanding. Given the circumstances of the soldiers, it was entirely reasonable that they would give overwhelming support.

In Invercargill there was a mood of enthusiasm to start anew, but there were also considerable concerns. In the end because the community could not make up its mind, the Government decided. On 27 March 1944 the Government announced that they intended to pursue legislation that would set up a trust that would be "...a body corporate, for the purpose of providing for the establishment of model hotels in the Invercargill licensing district …in the interests of the public well-being, and of providing for the sale of intoxicating liquor in the district and to provide for the distribution of the profits for public purposes."

The New Zealand parliamentary debates during the introduction of the first licensing trust legislation suggest the New Zealand legislation was based on the British "Carlisle Scheme" that had been established during the First World War on the Scottish border,^[5] but there were also significant differences.^{[citation needed]}. H G R Mason was Minister of Justice from 1935 to 1949 (and again from 1957 to 1960) and responsible for the licensing legislation. He shepherded the licensing trusts acts through Parliament, and was strongly committed to the concept of licensing trust.

The Invercargill Licensing Trust Act 1944^[6] came into force on 17 April 1944. The Masterton Licensing Trust Act followed in December 1947, ^[7] and the Licensing Amendment Act (with provision for a further poll on trust control) ^[8] in 1949.

Trusts established and demised

30 licensing trusts were established, and 18 remained active as of 2017:^[9]^[10]^[11]

More information Date established, Note ...

While not all licensing trusts have survived,^{[lower-alpha 3]} the 19 that continue to actively trade and be involved in their communities held assets in 2008 of NZ$313 million, generated revenue of $357m, profits of $42m, and donated support to their community of $33m.^{[citation needed]} The collective results of the trusts were presented to the Law Commission in October 2009 as part of a submission,^[35] and showed that licensing trusts operate 133 licensed premises which include hotels totalling 890 accommodation units, and such diverse activities as supermarkets, a housing estate, a hydro-electric power scheme, and property portfolios.

Poor management and governance have been identified as the main reasons for the demise of many of the 12 now dissolved licensing trusts.^[10]

Elections and accountability

The functions of a Licensing Trust are specified in Section 305 of the "Sale and Supply of Alcohol Act" of 2012.^[36]

Trustees for each licensing trust are elected by the community every three years at the triennial local government elections. Generally six trustees are elected, but some trusts with a ward system may have up to nine. The elective nature of governance provides accountability and a direct link to the community. However, elections for the position of trustee are often poorly contested.^[37]

Areas do not automatically vote on whether to keep trusts, if they have them, or to establish them if they do not. However, if the trust's board so resolve, or 15% of the electors in a trust area petition for it, a referendum will be held on whether to continue the trust. If 50% of electors vote to abolish it, the trust is disestablished and liquor sales revert to the rules that apply to most of the country.^[38]

The same process allows new licensing trusts to be created upon the petition of 15% of the electors in an area, and this would happen without any further referendum or input from the remaining 85% of electors. However, no new trusts have been established since the liberalisation of liquor laws in 1989.

Lincensing trusts are considered by the Office of the Auditor-General to be "probably the least scrutinised part of the public sector".^[39]

As they are not listed with the Companies Office, the accounts of lincensing trusts are not able to be easily scrutinised by the public, and they have often been late in filing their accounts with the Auditor-General.^[37]

Further, as no central government agency, select committee or local authority has responsibility for monitoring them,^[39] there is no government department to which the public can raise complaints when they have issues with the trusts. The only means through which the public can oversee the trusts is by making a request under the Local Government Official Information and Meetings Act 1987.^[37]