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Liquor licensing—liability of licensees for the service of liquor to intoxicated patrons involving claims with third parties
Int. J. Hospitality Management Vol. 15, No. 3, pp. 269-282, 1996 Copyright (~) 1996 Elsevier Science Ltd Printed in Great Britain. All rights reserved 0278-4319•96 $15.00 + 0.00
Pergamon
S0278-4319(96)00022-9
Liquor licensing--liabifity of licensees for the service of liquor to intoxicated patrons involving claims with third parties Recent trends in Canada and the United States and their relevance to the Australian jurisdiction Michael S. Simons Hospitality Management Unit, School o f Marketing, University o f N e w South Wales, Australia
This paper assesses the trends in liquor law liability issues in Australia. A n examination o f recent cases in Canada and the United States suggest that the decisions are relevant to Australia. Given the increase in litigation against liquor licensees in Australia, State licensing authorities will be compelled to take stronger measures to ensure compliance in the future. Meanwhile, lawyers will continue to use common law and statutory law actions against licensees to recover damages for their clients. Copyright (~ 1996 Elsevier Science Ltd
Key words:
liquor law negligence
liability common law duty of care
intoxicated patrons
Introduction The purpose of this paper is to examine the trends emerging in liquor law liability in Australia with reference to the obligations and duties of licensees in the service of alcohol to their guests. The paper will assess recent cases from the Canadian and United States jurisdictions concerned with liquor law liability. It is considered these cases are relevant to the Australian jurisdiction given the increase in litigation against licensees in a number of Australian States and Territories. Second, it is arguable that Australian superior courts are moving to a more independent and internationalist approach in judicial interpretation in the wake of M a b o v Q u e e n s l a n d 1992, Vol. 66, A L J R 408. While M a b o was concerned with issues in respect to the land rights of Australia's indigenous aboriginal people and their claims to title prior to the occupation by the British government in 1788, the case demonstrated the High Court's preparedness to adopt a more independent position in its determinations than previously. M a b o is also important because the majority of judges of the High Court (6:1) adopted a number of Canadian and United States superior court decisions in preference to its own previous decisions. The paper will conclude on the note that despite State licensing authorities and industry associations initiating policies to encourage licensees to adopt voluntary codes of conduct in the service of alcohol to intoxicated persons, these policies do not appear to have 269
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substantially diminished the number of incidents occurring at the present time. Consequently, Australian lawyers engaged in the field of licensing law litigation will continue to construct their causes of action based upon common law theories of negligence as well as breach of statutory duty to maximise their client's chances of success before the Courts.
Recent developments in liquor law liability in Australia In all Australian States and Territories legislators apply the doctrine of strict liability to licensees in the service of alcohol to patrons. This means as a matter of law, that licensees are d e e m e d guilty of an offence under the appropriate State liquor licensing legislation, where it is established that the licensee served liquor to an intoxicated person. In some States, for example, there is a statutory defence provided, S 125(4) Liquor Act (NSW), in other States, Victoria and Queensland, no statutory defence exists, S 122(1) (c), $156 (1)(e). The consequence of this legislation is that State Liquor Administration Boards and Commissions have initiated policies encouraging industry organisations such as the Australian Hotels Associations and the Restaurant and Caterers' Association to ensure their members actively discourage the service of alcohol to intoxicated persons and promote a sensible attitude to the service of alcohol (Callen, 1994). However, the established practice of providing light meals and refreshments in all bar areas during trading hours appears not to have reduced the consumption of alcohol by some patrons. Similarly, voluntary codes of conduct initiated by licensing authorities encouraging licensees and bar staff to refuse the service of alcohol to intoxicated patrons continue to have moderate success (Liquor and Gaming Bulletin, 1995). Criticism from sectors of the community who regard alcoholic liquor as a dangerous drug point to some 3000 persons killed or impaired on the road due to alcohol related accidents (The Australian, 1994). Licensees who encourage binge drinking, happy hours, lower prices for women patrons and other marketing ploys are seen as socially irresponsible and unfit to hold a liquor licence (National Guidelines for the Responsible Service of Alcohol, 1993). In some jurisdictions in Canada and the United States the principle of liquor law liability extends to private hosts who, should they continue to serve liquor to intoxicated persons, are themselves liable if their guests are subsequently injured or cause road accidents after leaving the premises. It is considered, therefore, that an examination of liquor law liability issues relating to the service of intoxicated patrons is timely. Within the last four years there has been an increase in the number of cases filed in the courts throughout Australia concerned with licensees serving alcohol to intoxicated persons. Such persons may have assaulted an innocent person in a hotel causing them personal injuries. In other cases the intoxicated person, on leaving the licensed premises, is injured on a roadway by a third party, the driver of a motor vehicle, who fails to see their victim. It is this latter category which offers the challenge for lawyers in establishing the grounds for civil claims base d upon negligence theory as well as breach of statutory duty. In Speer v. Nash (Unreported, Supreme Court of New South Wales Common Law Division per Studdert J, 17 December 1992), the plaintiff received extensive personal injuries including loss of vision to an eye as a result of a violent assault upon him by a person with a beer bottle, in the bar area of a country hotel. The plaintiff's claim for
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damages alleged breach of $125 of the Liquor Act of New South Wales as well as negligence. The Court considered the decision of the High Court in Chordas v Bryant (Wellington) Pty Ltd (91 ALR149) which discussed issues of common law liability and breach of statutory duty. The trial judge in Speer took the view that an analaysis of Chordas would be of little assistance in the present case. H e preferred to base the court's decision on the ground of negligence. Legal authority from the High Court in Hackshaw v Shaw
(1984) A L J R 156 and Australian Safeways Stores Pry Ltd v Zaluzna (1987)162 CLR.479 clearly established the principle that a general duty of care was owed to persons who came on to the premises of another. The principle similarly applied to the facts of the present case; namely that a licensee owed a duty of care to patrons who were on the premises. Speer's case will be referred to again later in this paper. In a second case, Johns v Chevron Hotels Ltd 1995, a law firm on Queensland's Gold Coast, Australia, recently filed proceedings in the Supreme Court of Queensland alleging that a hotel licensee was negligent in continuing to serve an intoxicated patron who, on leaving the licensed premises, was struck down by the driver of a motor vehicle and severely injured. A third case (Regina v Winner, 1994, unreported) occurred in April 1994 in Sydney, Australia. The facts were that a young man was convicted of murder and sentenced to a maximum of 20 years jail. The court heard that the defendant, after consuming a large quantity of alcohol in a hotel, accompanied by his brother stole a vehicle from the hotel's car park. The defendant and his brother proceeded to drive the vehicle on to a highway, crossing two lanes of traffic, deliberately running down the deceased, who was a 16 year old school boy riding a bicycle along the edge of the roadway towards his home (Sydney Morning Herald, 1994). At the time of writing civil proceedings have not as yet been instituted by the family of the deceased. In the State of Victoria, in the last two years, a number of cases have been filed against hotel licensees claiming damages for personal injuries arising out of the service of liquor to intoxicated patrons. The cases have involved incidents similar to the events described earlier in this paper, where an intoxicated person has assaulted an innocent bystander in the bar area of a hotel or on a dance floor set aside in the hotel as a discotheque or night club. Other cases have involved intoxicated patrons leaving licensed premises and being injured on a roadway by a third party. The claims against the licensees have been based on negligence theory as well as alleged breaches of statutory duty under the State's Liquor Act. Most cases have been settled out of court on undisclosed terms, or are currently listed for trial (Liquor Licensing Commission Victoria, 1996).
A review of liquor law liability legislation in Australia Breach of statutory duty The liability of hoteliers in the service of liquor to patrons is primarily a statutory one and can be found in a variety of sections of the Liquor Acts operating in the States and Territories of Australia. It is usual for the principal provisions to be set out under "Conduct on Licensed Premises." An examination of S.125(3) of the Liquor Act 1982 (NSW) provides a useful example of the type of legislation operating in other states. "a person whether or not he is a licensee shall not, on licensed premises, sell or supply liquor to any person who is at the time in a state of intoxication"
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Under this statutory obligation a licensee faces a strict liability test which provides, "where a person is intoxicated on licensed premises, the licensee shall be deemed to have permitted intoxication on the licensed premises unless he proves that he and his employees took all reasonable steps to prevent intoxication on the licensed premises". The effect of this clause is to cast the onus of liability on the licensee or employee to prove that they "took all reasonable steps" not to serve the liquor to the intoxicated person. In other words, there is a reverse onus of proof operating on the licensee to prove he or she was not in breach of the law, rather than for the prosecutor to prove that the licensee breached the relevant section "beyond a reasonable doubt." Palmer rightly points out that the licensee must be able to give clear evidence of a comprehensive system implemented on the premises for the express purpose of prosecuting drunkenness amongst patrons. The learned author suggests that the licensee must provide a process which demonstrates a regular inspection of all bars, constant training of staff requiring them to refuse service to persons nearing a state of intoxication or showing any other signs of disorderly conduct (Palmer, 1992).
Breach of statutory duty and private rights of action The question of whether or not a breach of statutory duty gives rise to a private right of action which may ground a claim for damages based on negligence theory has rarely been considered by the courts in Australia. Negligence is a civil wrong derived from tort law and is a separate branch of law quite independent from contract law and the criminal law. Tort law includes trespass, assault, defamation, intimidation, and false imprisonment. However negligence is by far the most fertile legal action in the last sixty years (Fleming, 1992). Negligence consists in a recognition of a duty of care owed by one person to another, a breach of duty and damage which flows either directly or indirectly from the breach. Negligence requires also that there must be a causal connection, the 'proximate cause', between the breach of duty and the resulting damage sustained by the injured party (Fleming, 1992). Duties may also be prescribed by Statute. Fleming observes, "in practice such an intent is more readily attributable to statutes which prescribe specific rules of conduct for greater safety in industry and other situations where the common law already demands observance of reasonable care" (Fleming, 1992). In effect the statute crystallises the standard of care into a "public duty" for which a licensee in breach of his or her obligation under the statute is liable to a 'penal sanction' such as a fine, suspension or cancellation of licence. The question then is whether the breach of statutory duty grounds a separate and private right of action, or exists only as evidence of a breach of a duty of care under the tort of negligence for which damages are available? The case of Chordas v Bryant (Wellington) Pty Ltd 1988 A L R 149 is one of the few cases reported in the Federal Court of Australia involving dual claims by the plaintiff that the licensee was negligent and in breach of a general duty of care in serving alcohol to an intoxicated patron who injured the plaintiff in the bar of the hotel. The second claim was based on a breach of S 79 of the Liquor Ordinance 1975 (ACT). The court took the view that a breach of statute did not give rise to a private right of action, affirming the High Court's decision in Sovar v Henry Lane [1967] l l 6 C L R 397. The decision was based on a narrow majority of 3:2. It will be stated later in this paper that Chordas may be distinguished on its facts so that in the future as a matter of law superior courts would not be bound to follow it. At the time of writing there is considerable interest
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amongst a number of Australian lawyers in preparing cases for their clients based on the use of negligence theory coupled with a claim for breach of statutory duty. In these cases the lawyers seek to join the licensee, the server of alcohol, as a codefendant in the action together with a third party, for example the driver of the vehicle who caused the plaintiff's injuries. The negligence action against the licensee is crystallised within the licensee's statutory duty not to serve a person visibly intoxicated with liquor whilst on licensed premises. The rationale, at least from the lawyer's point of view, is that a breach of statutory duty demands less of a standard of proof than a negligence action. Proof that a licensee has served alcohol to an intoxicated person is sufficient to ground a claim based upon breach of statutory duty. Negligence, on the other hand, requires the plaintiff to prove "on the balance of probabilities" that the defendant caused the injury alleged. The trend is similar to a series of cases in the Canadian and United States Courts where, in some provinces and states, breach of statute creates a private right of action sufficient for a plaintiff to bring a successful action against a licensee. In other instances the claim may be coupled with a breach of statutory duty as well as negligence. The cases in the following sections have used negligence actions supported by breach of statutory duty against the licensee or server of alcohol. In each case the licensee, in breaching the relevant licensing statute, was guilty of negligence.
Actions for damages based upon a general theory of negligence. The Canadian and United States experience This section of the paper examines recent trends in Canada and the United States where litigation concerning the serving of alcohol is predicated on a general theory of negligence. Such cases are initiated by lawyers representing the injured parties to ensure the innocent victims of road accidents caused by an intoxicated defendant are not left without a party to sue and, despite a counter claim Of contributory negligence, are in a position to recover substantial damages. This type of claim is distinct from the position operating in certain other states in which liability claims are extended through liquor liability statutes. Some readers may regard the intrusion of negligence theory in this area as inappropriate, however the American experience suggests that the defendant who has "the deepest pocket" and is liable under the law, should be joined as a co-defendant in the proceedings.
The Canadian cases In Jordan House v Menow & Honsburger 1973 38 D L R 3rd 105 the Supreme Court of Canada, the question arose as to whether the operator of a hotel was liable for a breach of a duty of care if the patron became intoxicated and was turned out of the hotel to make his way home alone. The patron, while walking on the side of the highway some distance from the hotel, was struck from behind by a motor vehicle, sustaining personal injuries. On the facts of the case it was clear that the patron was well known to the owner operator of the hotel. H e drank in the premises frequently and was known to have a propensity to
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drink to excess and then act recklessly, although ordinarily he was courteous and mannerly. After previous acts of misbehaviour the patron was advised that he would only be served if he was accompanied by a responsible person. On the day of the accident the patron, Menow, arrived with his foreman who departed the bar area of the hotel after a short time, leaving Menow alone. The owner-operator continued to serve him beer past the point of intoxication. Menow was subsequently ejected from the hotel by its employees. Evidence at the trial indicated Menow was put out of the hotel on a dark and rainy night, wearing dark clothing not readily visable to motorists. Approximately thirty minutes after leaving the hotel and after having been picked up and dropped off by a passing motorist, Menow was struck by a vehicle driven by Honsburger. The Court of Appeal's five judges, in dismissing the appeal, affirmed the trial judge's findings that the hotel was vicariously liable for the actions of its employees who were in breach of a common law duty of care not to eject Menow as they did when they knew, or ought to have known, he would be placed in a position of danger for his own personal safety. In his judgement Laskin J said of S 81 "the Liquor Licence Act has no direct application to the facts of the present case--and the trial judge did not attempt to apply it even indirectly as pointing to the standard of care resting upon the hotel. I do not read his reasons as holding that the mere breach of those enactments and the fact that Menow suffered personal injury were enough to attatch personal liability to the hotel, rather as crystalising a relevant fact situation, which because of its authorative source the court was entitled to consider in determining, on common law principles, whether a duty of care should be raised in favour of Menow against the hotel." The judge then detailed various preventative measures which the hotel could have taken to assist Menow. These included a telephone call to his employer, a call to the police and a taxi home. Similar strategies are being adopted by many prudent hoteliers in Australia in the interests of a responsible servers of alcohol policy to the community. Towards the conclusion of this paper the policy initiatives undertaken by industry associations and State and Territory Liquor Administrations will be discussed. In Schmidt v Sharpe et al. (1983) CCLRpl-5, heard before the Ontario Supreme Court the first plaintiff, then aged 16 years, went to the A H Hotel one evening accompanied by his friend, the first defendant S, where both young men drank quantities of beer. Later that night as S was driving the plaintiff home his vehicle left the road at a curve and rolled down an embankment, causing grave injuries to the plaintiff, who had not been wearing his seat belt at the time. The plaintiff became a quadriplegic, paralysed from the chest down, a condition compounded by respiratory insufficiency and a collapsed left lung. According to the headnote of the case, there was cogent evidence that at the time of the accident the defendant S was severely impaired by alcohol. The plaintiff sued the defendant driver S as well as the company which owned and operated the A H hotel, alleging it had been negligent in providing liquor to the defendant S on the premises when he was evidently intoxicated and it knew, or should have known, he was under the legal drinking age, contrary to the provisions of the Liquor Control Act (Ontario). The trial was held before a judge and jury. The jury found that S's negligence was a cause of the plaintiff's injuries, through impairment and inattention. The jury also found that the A H Hotel also had constructive knowledge that S was under age and that consumption of the liquor served would increase his intoxication sufficient to enhance the risk of injury to him or to the person or property of others. The jury apportioned fault as to S at 55%, the
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hotel 15% and the plaintiff 30%, and awarded the sum of $163,000, for which 30% was deducted for contributory negligence. Schmidt's case is significant because the pleadings filed by the plaintiff claiming negligence were formulated on alleged breaches of the provisions of the Liquor Licence Act 1975. This strategy is not unusual in the preparation of pleadings by lawyers, however the finding of fact by the jury is a warning to all hoteliers and staff of the onus of proof they carry in cases of this nature. In response to the allegations by the defendant that the plaintiff caused his own injuries by not wearing a seat-belt and being a passenger in a car driven by an intoxicated person, the trial judge in his judgement stated that the "jury's answers indicate that it found liability on the hotel by reason of its breaches of its obligation by statute" (p. 21). The decision in Jordan House was followed in the later case of Crocker v Sundance Northwest Resorts Ltd 1988 44CCL T 225. The Supreme Court of Canada in reaffirming its view in Jordan House made it abundantly clear to owners and operators of hotels, resort and other licensed premises that their responsibilities are not limited to the physical condition of the premises. The licensee must ensure that only those legally qualified to drink are allowed on the premises and those who are so qualified do not drink to excess. Furthermore licensees carry a heavy onus and duty under the law to ensure intoxicated patrons are not placed in a position where it is foreseeable that such person could suffer injury. In essence it takes the responsibility of the licensee from the "duty to warn" to "the duty to rescue".
Cases from the United States of America The Dram Shop Acts The extension of the theory of negligence to liquor liability cases had its origin in the Dram Shop Acts of the 1870s in the United States. The Statute entitled The Act to Suppress Intemperance, Pauperism and Crime had a social benefit objective. It aimed to discourage licensees "from serving intoxicated persons, and those susceptible to liquor in squandering their money on alcohol rather than providing food and sustenance to the members of their family" (Matalavage v Sadler 2d 39 432 NYS 2d 103 (2 Dep't 1980 in Sherry 1993). The Dram Shop Acts were revised during the Prohibition years of the 1920s-1930s and imposed strict liability on the owners and operators of drinking establishments (Robin, 1991). This statement of law contrasted with the view of the common law that inkeepers were generally immune from liability for the injuries caused by intoxicated patrons. The proposition was based on the premise that the consumption of alcohol and not the serving of it was considered the proximate cause of the injuries. Subsequently Dram Shop Acts were enacted in many other states so that anyone injured by an intoxicated person had the right to seek damages against any person "who shall by retailing spiritous liquor have caused the intoxication of such person". In most states the liability of a licensed vendor is based on establishing that alcohol was served to a customer who was "obviously" or "visibly" intoxicated (Robin, 1991). The courts created the use of negligence principles as the rational and legal framework for imposing statutory liability under the States liquor licensing laws. In most States, this is referred to as D U I (Driving U n d e r the Influence) legislation. Enghagen observes that the service of alcohol is deemed to be the legal cause of such injuries to innocent by-standers in certain circumstances. In some States, it is based on the
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Dram Shop Acts, while in other States it relies upon the general common law theory of negligence (Enghagen, 1991). However in the late 1950s the courts adopted a more liberal interpretation of liquor service liability so that a vendor's sale of liquor may constitute a wilful violation of his duty to persons other than the consumer and be the proximate cause of the injury sustained by a third party creating a right of action at common law against the vendor (Sherry, 1993). Sherry cites the State of New Jersey in 1959 as being the first State to hold a tavernkeeper liable under common law for negligence in serving an intoxicated patron (Rappaport v Nichols 1959 (75 A L R 2d 821) and Sherry (1993, p.695,743-745). In the landmark Californian case of Ewing v Cloverleaf Bowl 20 Cal 3d 3898 572 P 2d 1142 (1978) the original defences used to bar an action at common law, (namely contributory negligence or an assumption of known risk by the plaintiff) were held inapplicable to a claim of reckless misconduct in serving grossly excessive quantities of alcohol to a person who only recently attained the legal drinking age. Sherry states the thrust of the California High Court ruling was that the patron's own intoxication does not, as a matter of law, preclude recovery where the intoxication is deliberately induced by the dispenser's own wilful misconduct. Involuntary intoxication caused by the acts or omissions of the dispenser relegates such defences to questions of fact for the jury to determine. The author suggests that, contributory negligence in this context is synonymous with voluntary intoxication (because) the intoxication is relevant on the issue of liability caused by the dispenser's failure. In other words it is argued that the dispenser's negligence in serving the intoxicated person was the proximate cause of the accident. However since the Ewing decision the Californian Legislature moved to limit liability of bar owners who serve intoxicated persons under section 65 of the Alcohol Beverage Control Law (Sherry, 1993). Liability of owners and servers of alcohol will extend only to intoxicated minors who injure themselves or third parties but not to an adult intoxicated drinker. The latter would be barred from recovery. Most states which previously enacted Dram Shop legislation have adopted a similar approach under the Act since the mid 1980s. Some states however do allow the patron to sue on the basis of the negligence of the licensee, but not based on the Dram Shop Acts. In the New York jurisdiction a comparative negligence rule now operates so as to diminish the amount otherwise recoverable by the amount of negligence attributable to the claimant. (see Brannigan v Raybuck 136 Ariz 513, 667) P2d 213 (1983) Sherry suggests, "the conclusion is inescapable that illegal service of intoxicants to a minor creates civil law liability, not only to injured third persons but in exceptional cases to the intoxicated minor--lack of any evil motive is no defence, and the sanctions can be extremely severe, not only in terms of civil and criminal liability, but more destructively in terms of the ultimate and permanent loss of ones liquor licence" (Sherry, 1993).
Extending the limits of liability beyond the servers of alcohol to third party actions In two cases reviewed by Enghagen, one in Texas the other in California, the Courts took an unprecedented step in extending liability to third parties. In the Texas case the liability was extended to an employer company for the actions of one of its employees who became
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intoxicated during the hours of his employment. The employee was requested by the c o m p a n y ' s supervisor to stop work and return home. In the course of driving on a highway towards his h o m e he collided with another vehicle coming from the opposite direction, causing the death of its two occupants. In the Californian case, liability was extended not to the server of alcohol but to the Oil C o m p a n y whose employee served the gasoline. This case should be of concern to major oil companies as well as their insurers in the United States as well as in Australia. In Otis Engineering Corporation v Clark et al. (1983) heard in the State of Texas in N o v e m b e r 1983 one of the employees of the appellants, R o b e r t Matheson had a known history of drinking during work hours. On the night of the accident both his co-workers and supervisor were aware he had been drinking and that he was in no condition to continue working. After the dinner break the supervisor, Donald Roy, suggested to Matheson he should go h o m e and escorted him to the parking lot. Three miles from his workplace, Matheson was involved in an automobile accident in which he died as well as the two persons in the other car. Expert medical evidence was that Matheson had a blood alcohol reading of 0.26%, an extremely high level. The deceased's husband sued Otis Engineering claiming it was vicariously liable for the actions of Donald Roy the supervisor and therefore negligent in permitting their employee, Matheson, to drive his vehicle. The Court began its analysis from the point of view that one person is under no duty to control the conduct of a n o t h e r - - e v e n if he has the practical ability to exercise such control. H o w e v e r , the court regarded the circumstances of the instant case as exceptional to the general proposition in stating, "You who voluntarily enter an affirmative course of action affecting the interests of another is regarded as assuming a duty to act and must do so with reasonable care". Accordingly the court held Otis, the employer company, legally responsible for the deaths of the two persons caused by its intoxicated employee. The Otis judgement, though law in Texas, was not a unanimous decision by the Court. Four judges dissented from the majority. They said "the sole question is whether an e m p l o y e r is under a duty to control the conduct of an intoxicated off-duty e m p l o y e e ? " The Court concluded that an employer had no such duty, and would be liable only where the e m p l o y e r "created the dangerous situation". It observed, "the dangerous situation being litigated in this case was wholly the product of R o b e r t Matheson. Otis played no part in creating the danger." (Otis et al. ). The second case, O'Toole et al.-v-Carisbad Shell Service Station et al, was heard before the Court of Appeal of California in June 1988. The owner of a service station was found liable for the actions of an intoxicated w o m a n to whom his employee sold gasoline. On the 24 of July, 1983, Christine Eigsti drove her car to the service station to obtain petrol. According to evidence advanced during the trial she was obviously intoxicated. In fact the employees at the service station, whilst selling her the petrol, were aware of the company policy prohibiting sales to intoxicated drivers. They encouraged her not to drive, provided her with 4-5 cups of coffee, talked to her for over an hour and provided m o n e y so she could telephone her m o t h e r to collect her. Shortly thereafter, Eigisti, in driving the car away from the service station struct a motorcycle killing the two w o m e n riders. Enghagen observes that, in the court proceedings, the service station suggested it should be treated as a social host as under Californian law it would not be liable for serving alcohol to guests. H o w e v e r , as the serving of gasoline was one of the causes of the plaintiff's
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injuries (the other being the intoxicated driver) the court concluded that the service station was liable. It said, "Shell's liability derives from an independent source--its furnishing g a s o l i n e - - t o put a known drunk driver in a position where she foreseeably would endanger another" (p.58).
The present position of liquor liability law in Australia In Australia most States and Territories legislation requires that a holder of a liquor licence must not sell liquor to any person who is at the time in a state of intoxication. For example, the State of New South Wales S125 (4) states that "where a person is intoxicated on licensed premises, the licensee shall be d e e m e d to have permitted intoxication on the licensed premises unless he proves that he and his employees took all reasonable steps to prevent intoxication on the licensed premises." The section in 'deeming' the licensee to have sold the liquor to a person allegedly intoxicated casts what is in effect a strict liability duty upon him. (Fleming, 1992) This requirement leaves little room for a licensee to successfully defend the action should a prosecution be initiated by the local police or the State's Director of Public Prosecution. There has been little change to the strict liability requirements of the law in States and Territories legislation as pointed out earlier in this paper. There are no reported cases in official State or Territories law reports of a licensee being joined as a co-defendant in a civil action where a plaintiff has been injured due to a m o t o r vehicle accident. Perhaps this is due to difficulties of proof associated with the fact that the plaintiff has to establish 'on the balance of probabilities' that the licensee breached the duty of care, as well as p r o o f that the conduct of the licensee or his employee in serving alcohol to the accused was the 'proximate cause' of the accident. (see Chordas-v-Bryant 1988 91ALR149) Since 1967 in Australia there is authority from the High Court, that proof of a breach of statute does not ground a civil action for the recovery of damages for personal injuries. Sovar v Henry Pty Limited 116 CLR 397. Sovar was a decision of 3:2. The minority judgement of the Court which included Taylor and Wyndeyer JJ however provide an interesting analysis. " . . . where a statute prescribes in the interests of the safety of members of the public or a class of them a course of conduct and does no more than penalise a breach of its provisions, the question of whether a private right of action also arises must be determined as a matter of construction". Later in his judgement his H o n o u r Mr Justice Taylor observed that, "...it may be said that a provision prescribing a specific precaution for the safety of o t h e r s - - w h e r e the person upon w h o m the duty is laid is, under the general law of negligence bound to exercise due care, the duty will give rise to a correlative private right, unless from the nature of the provision or from the scope of the legislation of which it forms a part a contrary intention appears. I do not of course mean that to say that civil liability merely follows upon criminal l i a b i l i t y . . , c a s e s . . , show that civil proceedings for a breach of such a duty may succeed although penal proceedings are bound to fail". In Chordas v Bryant 1988 91 A L R 149, the Federal Court of Australia (Full Court) adopted the majority's judgement in Sovar's case. In Chordas, the appellant (the plaintiff in the original action) was a patron in the bar of the Wellington Hotel, Canberra, on 15 July
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1983, when he was struck by another patron, King, and sustained personal injuries. The trial judge found that King was "well affected" by intoxicating liquor when the incident occurred but that he was not known to be particularly violent or aggressive before the incident. At first instance, the appellant pleaded negligence on the part of the hotel as occupier and licensee of the premises. In addition he claimed an alleged breach of $79 of the Liquor Ordinance 1975 (ACT) in that the respondent supplied King with liquor when there were reasonable grounds for believing that he was intoxicated--thus giving rise to a personal cause of action against the respondent. The respondent alleged provocation and contributory negligence against the appellant. The Full Court, in a unanimous judgement among its members, dismissed the appeal and, held, (1) a duty lay upon the defendant hotel to take reasonable care to avoid a foreseeable risk of injury to the plaintiff. (2) in extending this duty to cover the actions of third parties, ie patrons of the hotel, the manager should take the appropriate course to protect the safety of his patrons where it is evident that a patron should be supervised, ejected or warned. The appropriate course in a particular case depends on the circumstances of the case. (3) It was not established that the trial judge was in error by failing to find King's intoxication of itself was sufficient for a reasonably prudent hotel manager to take steps to remove him from the bar or reasonably foresee that he might harm another patron. (4) Applying a "but for" test of causation there was no error in the trial judge's decision that the causal connection between the incident and King's consumption of alcohol was not established. (5) A private right of action does not exist for a breach of $79 of the Liquor Ordinance 1975. A breach of statute may be evidence of a breach of a common law duty of care but it will not confer a private right of action for damages resulting from its breach. The court in reaching its decision cited a number of Canadian and American authorities referred to earlier in this paper. In the writer's view the essence of Chordas v Bryant is that the Court was analysing circumstances relating to an alleged assault in the bar area of an hotel. The case turns upon the fact of whether or not the risk of injury to the plaintiff was reasonably foreseeable. There was not, in the Court's view, any necessary connection between the breach of the Ordinance and the injury which King inflicted upon the plaintiff. The Federal Court considered but declined to follow the leading Canadian case of M e n o w v Honsburger referred to earlier in this paper. In Canada it is sound authority for the proposition that a breach of statute may be used as evidence of a breach of the common law by the hotelkeeper to his patrons. This decision was affirmed on appeal in Jordan House v M e n o w & Honsberger (1973) 38 D L R (3d). The Federal Court followed Abela v Giew (1965) 65 SR (NSW) 484 in affirming that a breach of statute does not confer a private right of action for damages resulting from its breach. The Court said Section 79 (of the Ordinance) was enacted in the general public interest, not for the protection of persons who may be injured by the conduct of intoxicated persons. Accordingly the Appeal was dismissed. It is submitted that Chordas may be distinguished on its particular fact situation as as "assault case" and one which is not binding on inferior courts assessing a hotelier's liability for serving an intoxicated person in a third party action for negligent driving. See now Speer & Nash referred to earlier in this paper, where the claim based on breach of statutory duty was not pursued by the trial judge.
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The relevance of the United States and Canadian cases for Australia The Australian courts are not judicially bound by decisions of the United States and Canadian courts which carry only a persuasive authority. However as stated at the outset of this paper in recent years, the High Court of Australia appears to have adopted a more independent and internationalist and approach in its judgements. (see Mabo v State of Queensland (1992) infra). Hence twenty seven years later, the court may be disposed to take a more favourable view of the vigorous minority judgements in Sovar that a breach of a statutory duty creates a private right of action. Alternatively the court may be prepared to clarify the extent to which a breach of statutory duty provides evidence of negligence, thus crystallising the liability of licensees under state statute law. Given the trend in recent licensing law litigation referred to in the last section of this paper, it may be only a relatively short time before a similar case is taken on appeal for final determination. The citation of cases from the United States of America as well as Canada is to illustrate that in the consideration of similar fact situations Australian superior courts, increasingly are prepared to consider the law from other jurisdictions and beyond the shores of Australia giving it a truly international perspective in the later half of the 20th century. In doing so the law in Australia is enriched. A most notable example is the High Court's decision in Mabo. In this case, and in the formulation of its majority judgement the court considered laws from a number of other jurisdictions including Canada and the United States. It is submitted that the Supreme Court of Canada in Jordan House and the Ontario Supreme Court in Schmidt would be two examples of where Australian superior courts may give due consideration to the Canadian authorities.
Implications for licensees The increase in litigation in liquor law liability cases in Australia suggests that licensees are vulnerable to attack not only by the licensing regulatory authorities but also by potential litigants. National guidelines exist for the Responsible Serving of Alcohol. It is a strategy for licensees and their staff to adopt a 'house policy' in the prevention of intoxication on licensed premises. The policy aims to raise the level of awareness, knowledge and job skills in the training of all staff in respect to managing the intoxicated patron, the sale of standard drinks to patrons, providing information about impairment and blood alcohol concentration, safe transport options and strategies to prevent under-age drinking (National Guidelines, 1994). At the same time, licensing authorities have ensured that the penalty provisions in Australia for the supply and purchase of alcohol especially for under age drinkers carries a heavy burden on licensees. These guidelines will only be effective if the licensee recognises it is in his/her best interest to create a 'best practice' environment for staff and patrons with adequate and proper training for all personnel. The service of intoxicated persons by licenses will expose them to the possibility of loss of licence and fines up to $5000 per offence (Liquor Gaming Bulletin, 1995). In the case where the patron is physically injured on leaving the premises, concurrent civil litigation is now likely to ensue so that a successful judgement against a licensee could mean the forced sale of their business and loss of livelihood for the licensee and family to satisfy the damages awarded by a court.
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Conclusion Lawyers currently involved in liquor liability cases are now well aware of the potential use of c o m m o n law and statutory provisions under state and territory legislation to maximise the success of their client's case before the courts. This paper has indicated the extent to which practitioners may utilise existing statutory breaches of the law to mount civil claims for damages. There are risks in all litigation. Should insurance companies, acting for licensees, as the ultimate insurer take the view such litigation represents a new 'cash cow' for lawyers, such insurers will be relentless in establishing before the appellate courts that the plaintiff's negligence was the sole cause of the accident and that damages in the circumstances ought not be awarded. When and if this stage is reached, the enthusiasm for litigation against licensees may well evaporate, like the last drops of vintage wine in an old oak cask!
Acknowledgement--This paper was originally prepared with the assistance of Professor JEH Sherry of the School of Hotel Administration Cornell University during the writer's sabbactical leave in September-October 1994.
References Australian Safeways Stores Pty Ltd v Zaluzna (1987) 162 CLR 479. Brannigan v Raybuck 136 Ariz 513,667 P2d 213 (1983). Callen, C. (1994) Hoteliers See Red over Intoxicated Person Charges, p. 7. Hotel News, Australian Hotels Association (NSW Branch). Callen, C. (1994) Responsible Service--Government Signals end of the Line for Cheap Drinks, p. 6, 7. Hotel News Australian Hotels Association (NSW Branch). Chordas v Bryant (Wellington) 1988 91ALR 149. Crocker v Sundance Northwest Resorts Ltd 1988 44 CCLT 225. Enghagen, L. (1992) New Developments in Liquor Law:Liability Predicated on a General Duty of Care. Hospitality Research Journal 16(4), 53---61. Ewing v Cloverleaf Bowl 20 Cal 3d 3898572. Felming, J. (1992) The Law of Tort p. 103,329. Law Book Company. Hopkinson, E. (1994) Alcohol Responsible Approach Needed. Hospitality Food Service Journal, p. 6. Johns v Chevron Hotels Ltd. 1995 Supreme Court of Queensland, p. 1. Jordan House v Menow & Honsburger (1973) 38DLR (3d) p. 105. Liquor Licensing Commission, Victoria 1996. Liquor and Gaming Bulletin (1995) Liquor Administration Commission NSW p. 1-10. Mabo v State of Queensland (1992) 66 ALJR 408--409, see also the following cases which were cited with approval Calder v AG of British Columbia (1973) SCR 313 ;AG for Quebec v AG for Canada (1921) 1 AC 401 2 406; Johnson v Mclntosh (1823) Wheat 542. The High Court in reviewing its earlier decisions chose to distinguish or disapprove. Williams v AG (NSW) (1913) 16 CLR 404 at 429, 433-435,467 (distinguished); NSW v The Commonwealth (1975) 135 CLR 337 at 438-439, not followed; Williams v AG (NSW) 1913 16CLR 404, at 439; Milirrpum v Nabalco Pty Ltd (1971) 17FLR 141 @152, 244-245,262,272-273, considered and disapproved. McConnell, J. P. and Rutherford, D. G. (1993) Why Innkeepers Go To Court. Cornell Quarterly, p. 23-25. National Guidelines for the Responsible Service of Alcohol (1993) National Centre for Research into Prevention of Drug Abuse (Australia).
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Otis Engineering Corp v Clark 668 SW 2d 307 (Texas) 1983 Shell Service Station 247 Cal. Rptr. 663. (Cal App 4th Dist 1988). Palmer, G. (1992) Liquor Licensing in New South Wales, p. 1036. Law Book Company. Rappaport v Nicholls 1959 (75 ALR 2d 821). Regina v Winner (1995) Sydney Morning Herald. Robin GD (1991) Alcohol Service Liability. What the Courts are Saying. CorneU Quarterly. Schmidt v Sharpe (1983) CCCLR p. 1-5. Sherry, J. F. H. (1993) The Law of Innkeepers, p. 695,709,726. Cornell University Press. Sovar v Henry Lane Pry Ltd 116CLR397,49. Speer v Nash (1992) Supreme Court of New South Wales, p. 10, unreported. Sydney Morning Herald (1994) p. 2. The Australian (1994) p. 4.
Pergamon
S0278-4319(96)00022-9
Liquor licensing--liabifity of licensees for the service of liquor to intoxicated patrons involving claims with third parties Recent trends in Canada and the United States and their relevance to the Australian jurisdiction Michael S. Simons Hospitality Management Unit, School o f Marketing, University o f N e w South Wales, Australia
This paper assesses the trends in liquor law liability issues in Australia. A n examination o f recent cases in Canada and the United States suggest that the decisions are relevant to Australia. Given the increase in litigation against liquor licensees in Australia, State licensing authorities will be compelled to take stronger measures to ensure compliance in the future. Meanwhile, lawyers will continue to use common law and statutory law actions against licensees to recover damages for their clients. Copyright (~ 1996 Elsevier Science Ltd
Key words:
liquor law negligence
liability common law duty of care
intoxicated patrons
Introduction The purpose of this paper is to examine the trends emerging in liquor law liability in Australia with reference to the obligations and duties of licensees in the service of alcohol to their guests. The paper will assess recent cases from the Canadian and United States jurisdictions concerned with liquor law liability. It is considered these cases are relevant to the Australian jurisdiction given the increase in litigation against licensees in a number of Australian States and Territories. Second, it is arguable that Australian superior courts are moving to a more independent and internationalist approach in judicial interpretation in the wake of M a b o v Q u e e n s l a n d 1992, Vol. 66, A L J R 408. While M a b o was concerned with issues in respect to the land rights of Australia's indigenous aboriginal people and their claims to title prior to the occupation by the British government in 1788, the case demonstrated the High Court's preparedness to adopt a more independent position in its determinations than previously. M a b o is also important because the majority of judges of the High Court (6:1) adopted a number of Canadian and United States superior court decisions in preference to its own previous decisions. The paper will conclude on the note that despite State licensing authorities and industry associations initiating policies to encourage licensees to adopt voluntary codes of conduct in the service of alcohol to intoxicated persons, these policies do not appear to have 269
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substantially diminished the number of incidents occurring at the present time. Consequently, Australian lawyers engaged in the field of licensing law litigation will continue to construct their causes of action based upon common law theories of negligence as well as breach of statutory duty to maximise their client's chances of success before the Courts.
Recent developments in liquor law liability in Australia In all Australian States and Territories legislators apply the doctrine of strict liability to licensees in the service of alcohol to patrons. This means as a matter of law, that licensees are d e e m e d guilty of an offence under the appropriate State liquor licensing legislation, where it is established that the licensee served liquor to an intoxicated person. In some States, for example, there is a statutory defence provided, S 125(4) Liquor Act (NSW), in other States, Victoria and Queensland, no statutory defence exists, S 122(1) (c), $156 (1)(e). The consequence of this legislation is that State Liquor Administration Boards and Commissions have initiated policies encouraging industry organisations such as the Australian Hotels Associations and the Restaurant and Caterers' Association to ensure their members actively discourage the service of alcohol to intoxicated persons and promote a sensible attitude to the service of alcohol (Callen, 1994). However, the established practice of providing light meals and refreshments in all bar areas during trading hours appears not to have reduced the consumption of alcohol by some patrons. Similarly, voluntary codes of conduct initiated by licensing authorities encouraging licensees and bar staff to refuse the service of alcohol to intoxicated patrons continue to have moderate success (Liquor and Gaming Bulletin, 1995). Criticism from sectors of the community who regard alcoholic liquor as a dangerous drug point to some 3000 persons killed or impaired on the road due to alcohol related accidents (The Australian, 1994). Licensees who encourage binge drinking, happy hours, lower prices for women patrons and other marketing ploys are seen as socially irresponsible and unfit to hold a liquor licence (National Guidelines for the Responsible Service of Alcohol, 1993). In some jurisdictions in Canada and the United States the principle of liquor law liability extends to private hosts who, should they continue to serve liquor to intoxicated persons, are themselves liable if their guests are subsequently injured or cause road accidents after leaving the premises. It is considered, therefore, that an examination of liquor law liability issues relating to the service of intoxicated patrons is timely. Within the last four years there has been an increase in the number of cases filed in the courts throughout Australia concerned with licensees serving alcohol to intoxicated persons. Such persons may have assaulted an innocent person in a hotel causing them personal injuries. In other cases the intoxicated person, on leaving the licensed premises, is injured on a roadway by a third party, the driver of a motor vehicle, who fails to see their victim. It is this latter category which offers the challenge for lawyers in establishing the grounds for civil claims base d upon negligence theory as well as breach of statutory duty. In Speer v. Nash (Unreported, Supreme Court of New South Wales Common Law Division per Studdert J, 17 December 1992), the plaintiff received extensive personal injuries including loss of vision to an eye as a result of a violent assault upon him by a person with a beer bottle, in the bar area of a country hotel. The plaintiff's claim for
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damages alleged breach of $125 of the Liquor Act of New South Wales as well as negligence. The Court considered the decision of the High Court in Chordas v Bryant (Wellington) Pty Ltd (91 ALR149) which discussed issues of common law liability and breach of statutory duty. The trial judge in Speer took the view that an analaysis of Chordas would be of little assistance in the present case. H e preferred to base the court's decision on the ground of negligence. Legal authority from the High Court in Hackshaw v Shaw
(1984) A L J R 156 and Australian Safeways Stores Pry Ltd v Zaluzna (1987)162 CLR.479 clearly established the principle that a general duty of care was owed to persons who came on to the premises of another. The principle similarly applied to the facts of the present case; namely that a licensee owed a duty of care to patrons who were on the premises. Speer's case will be referred to again later in this paper. In a second case, Johns v Chevron Hotels Ltd 1995, a law firm on Queensland's Gold Coast, Australia, recently filed proceedings in the Supreme Court of Queensland alleging that a hotel licensee was negligent in continuing to serve an intoxicated patron who, on leaving the licensed premises, was struck down by the driver of a motor vehicle and severely injured. A third case (Regina v Winner, 1994, unreported) occurred in April 1994 in Sydney, Australia. The facts were that a young man was convicted of murder and sentenced to a maximum of 20 years jail. The court heard that the defendant, after consuming a large quantity of alcohol in a hotel, accompanied by his brother stole a vehicle from the hotel's car park. The defendant and his brother proceeded to drive the vehicle on to a highway, crossing two lanes of traffic, deliberately running down the deceased, who was a 16 year old school boy riding a bicycle along the edge of the roadway towards his home (Sydney Morning Herald, 1994). At the time of writing civil proceedings have not as yet been instituted by the family of the deceased. In the State of Victoria, in the last two years, a number of cases have been filed against hotel licensees claiming damages for personal injuries arising out of the service of liquor to intoxicated patrons. The cases have involved incidents similar to the events described earlier in this paper, where an intoxicated person has assaulted an innocent bystander in the bar area of a hotel or on a dance floor set aside in the hotel as a discotheque or night club. Other cases have involved intoxicated patrons leaving licensed premises and being injured on a roadway by a third party. The claims against the licensees have been based on negligence theory as well as alleged breaches of statutory duty under the State's Liquor Act. Most cases have been settled out of court on undisclosed terms, or are currently listed for trial (Liquor Licensing Commission Victoria, 1996).
A review of liquor law liability legislation in Australia Breach of statutory duty The liability of hoteliers in the service of liquor to patrons is primarily a statutory one and can be found in a variety of sections of the Liquor Acts operating in the States and Territories of Australia. It is usual for the principal provisions to be set out under "Conduct on Licensed Premises." An examination of S.125(3) of the Liquor Act 1982 (NSW) provides a useful example of the type of legislation operating in other states. "a person whether or not he is a licensee shall not, on licensed premises, sell or supply liquor to any person who is at the time in a state of intoxication"
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Under this statutory obligation a licensee faces a strict liability test which provides, "where a person is intoxicated on licensed premises, the licensee shall be deemed to have permitted intoxication on the licensed premises unless he proves that he and his employees took all reasonable steps to prevent intoxication on the licensed premises". The effect of this clause is to cast the onus of liability on the licensee or employee to prove that they "took all reasonable steps" not to serve the liquor to the intoxicated person. In other words, there is a reverse onus of proof operating on the licensee to prove he or she was not in breach of the law, rather than for the prosecutor to prove that the licensee breached the relevant section "beyond a reasonable doubt." Palmer rightly points out that the licensee must be able to give clear evidence of a comprehensive system implemented on the premises for the express purpose of prosecuting drunkenness amongst patrons. The learned author suggests that the licensee must provide a process which demonstrates a regular inspection of all bars, constant training of staff requiring them to refuse service to persons nearing a state of intoxication or showing any other signs of disorderly conduct (Palmer, 1992).
Breach of statutory duty and private rights of action The question of whether or not a breach of statutory duty gives rise to a private right of action which may ground a claim for damages based on negligence theory has rarely been considered by the courts in Australia. Negligence is a civil wrong derived from tort law and is a separate branch of law quite independent from contract law and the criminal law. Tort law includes trespass, assault, defamation, intimidation, and false imprisonment. However negligence is by far the most fertile legal action in the last sixty years (Fleming, 1992). Negligence consists in a recognition of a duty of care owed by one person to another, a breach of duty and damage which flows either directly or indirectly from the breach. Negligence requires also that there must be a causal connection, the 'proximate cause', between the breach of duty and the resulting damage sustained by the injured party (Fleming, 1992). Duties may also be prescribed by Statute. Fleming observes, "in practice such an intent is more readily attributable to statutes which prescribe specific rules of conduct for greater safety in industry and other situations where the common law already demands observance of reasonable care" (Fleming, 1992). In effect the statute crystallises the standard of care into a "public duty" for which a licensee in breach of his or her obligation under the statute is liable to a 'penal sanction' such as a fine, suspension or cancellation of licence. The question then is whether the breach of statutory duty grounds a separate and private right of action, or exists only as evidence of a breach of a duty of care under the tort of negligence for which damages are available? The case of Chordas v Bryant (Wellington) Pty Ltd 1988 A L R 149 is one of the few cases reported in the Federal Court of Australia involving dual claims by the plaintiff that the licensee was negligent and in breach of a general duty of care in serving alcohol to an intoxicated patron who injured the plaintiff in the bar of the hotel. The second claim was based on a breach of S 79 of the Liquor Ordinance 1975 (ACT). The court took the view that a breach of statute did not give rise to a private right of action, affirming the High Court's decision in Sovar v Henry Lane [1967] l l 6 C L R 397. The decision was based on a narrow majority of 3:2. It will be stated later in this paper that Chordas may be distinguished on its facts so that in the future as a matter of law superior courts would not be bound to follow it. At the time of writing there is considerable interest
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amongst a number of Australian lawyers in preparing cases for their clients based on the use of negligence theory coupled with a claim for breach of statutory duty. In these cases the lawyers seek to join the licensee, the server of alcohol, as a codefendant in the action together with a third party, for example the driver of the vehicle who caused the plaintiff's injuries. The negligence action against the licensee is crystallised within the licensee's statutory duty not to serve a person visibly intoxicated with liquor whilst on licensed premises. The rationale, at least from the lawyer's point of view, is that a breach of statutory duty demands less of a standard of proof than a negligence action. Proof that a licensee has served alcohol to an intoxicated person is sufficient to ground a claim based upon breach of statutory duty. Negligence, on the other hand, requires the plaintiff to prove "on the balance of probabilities" that the defendant caused the injury alleged. The trend is similar to a series of cases in the Canadian and United States Courts where, in some provinces and states, breach of statute creates a private right of action sufficient for a plaintiff to bring a successful action against a licensee. In other instances the claim may be coupled with a breach of statutory duty as well as negligence. The cases in the following sections have used negligence actions supported by breach of statutory duty against the licensee or server of alcohol. In each case the licensee, in breaching the relevant licensing statute, was guilty of negligence.
Actions for damages based upon a general theory of negligence. The Canadian and United States experience This section of the paper examines recent trends in Canada and the United States where litigation concerning the serving of alcohol is predicated on a general theory of negligence. Such cases are initiated by lawyers representing the injured parties to ensure the innocent victims of road accidents caused by an intoxicated defendant are not left without a party to sue and, despite a counter claim Of contributory negligence, are in a position to recover substantial damages. This type of claim is distinct from the position operating in certain other states in which liability claims are extended through liquor liability statutes. Some readers may regard the intrusion of negligence theory in this area as inappropriate, however the American experience suggests that the defendant who has "the deepest pocket" and is liable under the law, should be joined as a co-defendant in the proceedings.
The Canadian cases In Jordan House v Menow & Honsburger 1973 38 D L R 3rd 105 the Supreme Court of Canada, the question arose as to whether the operator of a hotel was liable for a breach of a duty of care if the patron became intoxicated and was turned out of the hotel to make his way home alone. The patron, while walking on the side of the highway some distance from the hotel, was struck from behind by a motor vehicle, sustaining personal injuries. On the facts of the case it was clear that the patron was well known to the owner operator of the hotel. H e drank in the premises frequently and was known to have a propensity to
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drink to excess and then act recklessly, although ordinarily he was courteous and mannerly. After previous acts of misbehaviour the patron was advised that he would only be served if he was accompanied by a responsible person. On the day of the accident the patron, Menow, arrived with his foreman who departed the bar area of the hotel after a short time, leaving Menow alone. The owner-operator continued to serve him beer past the point of intoxication. Menow was subsequently ejected from the hotel by its employees. Evidence at the trial indicated Menow was put out of the hotel on a dark and rainy night, wearing dark clothing not readily visable to motorists. Approximately thirty minutes after leaving the hotel and after having been picked up and dropped off by a passing motorist, Menow was struck by a vehicle driven by Honsburger. The Court of Appeal's five judges, in dismissing the appeal, affirmed the trial judge's findings that the hotel was vicariously liable for the actions of its employees who were in breach of a common law duty of care not to eject Menow as they did when they knew, or ought to have known, he would be placed in a position of danger for his own personal safety. In his judgement Laskin J said of S 81 "the Liquor Licence Act has no direct application to the facts of the present case--and the trial judge did not attempt to apply it even indirectly as pointing to the standard of care resting upon the hotel. I do not read his reasons as holding that the mere breach of those enactments and the fact that Menow suffered personal injury were enough to attatch personal liability to the hotel, rather as crystalising a relevant fact situation, which because of its authorative source the court was entitled to consider in determining, on common law principles, whether a duty of care should be raised in favour of Menow against the hotel." The judge then detailed various preventative measures which the hotel could have taken to assist Menow. These included a telephone call to his employer, a call to the police and a taxi home. Similar strategies are being adopted by many prudent hoteliers in Australia in the interests of a responsible servers of alcohol policy to the community. Towards the conclusion of this paper the policy initiatives undertaken by industry associations and State and Territory Liquor Administrations will be discussed. In Schmidt v Sharpe et al. (1983) CCLRpl-5, heard before the Ontario Supreme Court the first plaintiff, then aged 16 years, went to the A H Hotel one evening accompanied by his friend, the first defendant S, where both young men drank quantities of beer. Later that night as S was driving the plaintiff home his vehicle left the road at a curve and rolled down an embankment, causing grave injuries to the plaintiff, who had not been wearing his seat belt at the time. The plaintiff became a quadriplegic, paralysed from the chest down, a condition compounded by respiratory insufficiency and a collapsed left lung. According to the headnote of the case, there was cogent evidence that at the time of the accident the defendant S was severely impaired by alcohol. The plaintiff sued the defendant driver S as well as the company which owned and operated the A H hotel, alleging it had been negligent in providing liquor to the defendant S on the premises when he was evidently intoxicated and it knew, or should have known, he was under the legal drinking age, contrary to the provisions of the Liquor Control Act (Ontario). The trial was held before a judge and jury. The jury found that S's negligence was a cause of the plaintiff's injuries, through impairment and inattention. The jury also found that the A H Hotel also had constructive knowledge that S was under age and that consumption of the liquor served would increase his intoxication sufficient to enhance the risk of injury to him or to the person or property of others. The jury apportioned fault as to S at 55%, the
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hotel 15% and the plaintiff 30%, and awarded the sum of $163,000, for which 30% was deducted for contributory negligence. Schmidt's case is significant because the pleadings filed by the plaintiff claiming negligence were formulated on alleged breaches of the provisions of the Liquor Licence Act 1975. This strategy is not unusual in the preparation of pleadings by lawyers, however the finding of fact by the jury is a warning to all hoteliers and staff of the onus of proof they carry in cases of this nature. In response to the allegations by the defendant that the plaintiff caused his own injuries by not wearing a seat-belt and being a passenger in a car driven by an intoxicated person, the trial judge in his judgement stated that the "jury's answers indicate that it found liability on the hotel by reason of its breaches of its obligation by statute" (p. 21). The decision in Jordan House was followed in the later case of Crocker v Sundance Northwest Resorts Ltd 1988 44CCL T 225. The Supreme Court of Canada in reaffirming its view in Jordan House made it abundantly clear to owners and operators of hotels, resort and other licensed premises that their responsibilities are not limited to the physical condition of the premises. The licensee must ensure that only those legally qualified to drink are allowed on the premises and those who are so qualified do not drink to excess. Furthermore licensees carry a heavy onus and duty under the law to ensure intoxicated patrons are not placed in a position where it is foreseeable that such person could suffer injury. In essence it takes the responsibility of the licensee from the "duty to warn" to "the duty to rescue".
Cases from the United States of America The Dram Shop Acts The extension of the theory of negligence to liquor liability cases had its origin in the Dram Shop Acts of the 1870s in the United States. The Statute entitled The Act to Suppress Intemperance, Pauperism and Crime had a social benefit objective. It aimed to discourage licensees "from serving intoxicated persons, and those susceptible to liquor in squandering their money on alcohol rather than providing food and sustenance to the members of their family" (Matalavage v Sadler 2d 39 432 NYS 2d 103 (2 Dep't 1980 in Sherry 1993). The Dram Shop Acts were revised during the Prohibition years of the 1920s-1930s and imposed strict liability on the owners and operators of drinking establishments (Robin, 1991). This statement of law contrasted with the view of the common law that inkeepers were generally immune from liability for the injuries caused by intoxicated patrons. The proposition was based on the premise that the consumption of alcohol and not the serving of it was considered the proximate cause of the injuries. Subsequently Dram Shop Acts were enacted in many other states so that anyone injured by an intoxicated person had the right to seek damages against any person "who shall by retailing spiritous liquor have caused the intoxication of such person". In most states the liability of a licensed vendor is based on establishing that alcohol was served to a customer who was "obviously" or "visibly" intoxicated (Robin, 1991). The courts created the use of negligence principles as the rational and legal framework for imposing statutory liability under the States liquor licensing laws. In most States, this is referred to as D U I (Driving U n d e r the Influence) legislation. Enghagen observes that the service of alcohol is deemed to be the legal cause of such injuries to innocent by-standers in certain circumstances. In some States, it is based on the
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Dram Shop Acts, while in other States it relies upon the general common law theory of negligence (Enghagen, 1991). However in the late 1950s the courts adopted a more liberal interpretation of liquor service liability so that a vendor's sale of liquor may constitute a wilful violation of his duty to persons other than the consumer and be the proximate cause of the injury sustained by a third party creating a right of action at common law against the vendor (Sherry, 1993). Sherry cites the State of New Jersey in 1959 as being the first State to hold a tavernkeeper liable under common law for negligence in serving an intoxicated patron (Rappaport v Nichols 1959 (75 A L R 2d 821) and Sherry (1993, p.695,743-745). In the landmark Californian case of Ewing v Cloverleaf Bowl 20 Cal 3d 3898 572 P 2d 1142 (1978) the original defences used to bar an action at common law, (namely contributory negligence or an assumption of known risk by the plaintiff) were held inapplicable to a claim of reckless misconduct in serving grossly excessive quantities of alcohol to a person who only recently attained the legal drinking age. Sherry states the thrust of the California High Court ruling was that the patron's own intoxication does not, as a matter of law, preclude recovery where the intoxication is deliberately induced by the dispenser's own wilful misconduct. Involuntary intoxication caused by the acts or omissions of the dispenser relegates such defences to questions of fact for the jury to determine. The author suggests that, contributory negligence in this context is synonymous with voluntary intoxication (because) the intoxication is relevant on the issue of liability caused by the dispenser's failure. In other words it is argued that the dispenser's negligence in serving the intoxicated person was the proximate cause of the accident. However since the Ewing decision the Californian Legislature moved to limit liability of bar owners who serve intoxicated persons under section 65 of the Alcohol Beverage Control Law (Sherry, 1993). Liability of owners and servers of alcohol will extend only to intoxicated minors who injure themselves or third parties but not to an adult intoxicated drinker. The latter would be barred from recovery. Most states which previously enacted Dram Shop legislation have adopted a similar approach under the Act since the mid 1980s. Some states however do allow the patron to sue on the basis of the negligence of the licensee, but not based on the Dram Shop Acts. In the New York jurisdiction a comparative negligence rule now operates so as to diminish the amount otherwise recoverable by the amount of negligence attributable to the claimant. (see Brannigan v Raybuck 136 Ariz 513, 667) P2d 213 (1983) Sherry suggests, "the conclusion is inescapable that illegal service of intoxicants to a minor creates civil law liability, not only to injured third persons but in exceptional cases to the intoxicated minor--lack of any evil motive is no defence, and the sanctions can be extremely severe, not only in terms of civil and criminal liability, but more destructively in terms of the ultimate and permanent loss of ones liquor licence" (Sherry, 1993).
Extending the limits of liability beyond the servers of alcohol to third party actions In two cases reviewed by Enghagen, one in Texas the other in California, the Courts took an unprecedented step in extending liability to third parties. In the Texas case the liability was extended to an employer company for the actions of one of its employees who became
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intoxicated during the hours of his employment. The employee was requested by the c o m p a n y ' s supervisor to stop work and return home. In the course of driving on a highway towards his h o m e he collided with another vehicle coming from the opposite direction, causing the death of its two occupants. In the Californian case, liability was extended not to the server of alcohol but to the Oil C o m p a n y whose employee served the gasoline. This case should be of concern to major oil companies as well as their insurers in the United States as well as in Australia. In Otis Engineering Corporation v Clark et al. (1983) heard in the State of Texas in N o v e m b e r 1983 one of the employees of the appellants, R o b e r t Matheson had a known history of drinking during work hours. On the night of the accident both his co-workers and supervisor were aware he had been drinking and that he was in no condition to continue working. After the dinner break the supervisor, Donald Roy, suggested to Matheson he should go h o m e and escorted him to the parking lot. Three miles from his workplace, Matheson was involved in an automobile accident in which he died as well as the two persons in the other car. Expert medical evidence was that Matheson had a blood alcohol reading of 0.26%, an extremely high level. The deceased's husband sued Otis Engineering claiming it was vicariously liable for the actions of Donald Roy the supervisor and therefore negligent in permitting their employee, Matheson, to drive his vehicle. The Court began its analysis from the point of view that one person is under no duty to control the conduct of a n o t h e r - - e v e n if he has the practical ability to exercise such control. H o w e v e r , the court regarded the circumstances of the instant case as exceptional to the general proposition in stating, "You who voluntarily enter an affirmative course of action affecting the interests of another is regarded as assuming a duty to act and must do so with reasonable care". Accordingly the court held Otis, the employer company, legally responsible for the deaths of the two persons caused by its intoxicated employee. The Otis judgement, though law in Texas, was not a unanimous decision by the Court. Four judges dissented from the majority. They said "the sole question is whether an e m p l o y e r is under a duty to control the conduct of an intoxicated off-duty e m p l o y e e ? " The Court concluded that an employer had no such duty, and would be liable only where the e m p l o y e r "created the dangerous situation". It observed, "the dangerous situation being litigated in this case was wholly the product of R o b e r t Matheson. Otis played no part in creating the danger." (Otis et al. ). The second case, O'Toole et al.-v-Carisbad Shell Service Station et al, was heard before the Court of Appeal of California in June 1988. The owner of a service station was found liable for the actions of an intoxicated w o m a n to whom his employee sold gasoline. On the 24 of July, 1983, Christine Eigsti drove her car to the service station to obtain petrol. According to evidence advanced during the trial she was obviously intoxicated. In fact the employees at the service station, whilst selling her the petrol, were aware of the company policy prohibiting sales to intoxicated drivers. They encouraged her not to drive, provided her with 4-5 cups of coffee, talked to her for over an hour and provided m o n e y so she could telephone her m o t h e r to collect her. Shortly thereafter, Eigisti, in driving the car away from the service station struct a motorcycle killing the two w o m e n riders. Enghagen observes that, in the court proceedings, the service station suggested it should be treated as a social host as under Californian law it would not be liable for serving alcohol to guests. H o w e v e r , as the serving of gasoline was one of the causes of the plaintiff's
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injuries (the other being the intoxicated driver) the court concluded that the service station was liable. It said, "Shell's liability derives from an independent source--its furnishing g a s o l i n e - - t o put a known drunk driver in a position where she foreseeably would endanger another" (p.58).
The present position of liquor liability law in Australia In Australia most States and Territories legislation requires that a holder of a liquor licence must not sell liquor to any person who is at the time in a state of intoxication. For example, the State of New South Wales S125 (4) states that "where a person is intoxicated on licensed premises, the licensee shall be d e e m e d to have permitted intoxication on the licensed premises unless he proves that he and his employees took all reasonable steps to prevent intoxication on the licensed premises." The section in 'deeming' the licensee to have sold the liquor to a person allegedly intoxicated casts what is in effect a strict liability duty upon him. (Fleming, 1992) This requirement leaves little room for a licensee to successfully defend the action should a prosecution be initiated by the local police or the State's Director of Public Prosecution. There has been little change to the strict liability requirements of the law in States and Territories legislation as pointed out earlier in this paper. There are no reported cases in official State or Territories law reports of a licensee being joined as a co-defendant in a civil action where a plaintiff has been injured due to a m o t o r vehicle accident. Perhaps this is due to difficulties of proof associated with the fact that the plaintiff has to establish 'on the balance of probabilities' that the licensee breached the duty of care, as well as p r o o f that the conduct of the licensee or his employee in serving alcohol to the accused was the 'proximate cause' of the accident. (see Chordas-v-Bryant 1988 91ALR149) Since 1967 in Australia there is authority from the High Court, that proof of a breach of statute does not ground a civil action for the recovery of damages for personal injuries. Sovar v Henry Pty Limited 116 CLR 397. Sovar was a decision of 3:2. The minority judgement of the Court which included Taylor and Wyndeyer JJ however provide an interesting analysis. " . . . where a statute prescribes in the interests of the safety of members of the public or a class of them a course of conduct and does no more than penalise a breach of its provisions, the question of whether a private right of action also arises must be determined as a matter of construction". Later in his judgement his H o n o u r Mr Justice Taylor observed that, "...it may be said that a provision prescribing a specific precaution for the safety of o t h e r s - - w h e r e the person upon w h o m the duty is laid is, under the general law of negligence bound to exercise due care, the duty will give rise to a correlative private right, unless from the nature of the provision or from the scope of the legislation of which it forms a part a contrary intention appears. I do not of course mean that to say that civil liability merely follows upon criminal l i a b i l i t y . . , c a s e s . . , show that civil proceedings for a breach of such a duty may succeed although penal proceedings are bound to fail". In Chordas v Bryant 1988 91 A L R 149, the Federal Court of Australia (Full Court) adopted the majority's judgement in Sovar's case. In Chordas, the appellant (the plaintiff in the original action) was a patron in the bar of the Wellington Hotel, Canberra, on 15 July
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1983, when he was struck by another patron, King, and sustained personal injuries. The trial judge found that King was "well affected" by intoxicating liquor when the incident occurred but that he was not known to be particularly violent or aggressive before the incident. At first instance, the appellant pleaded negligence on the part of the hotel as occupier and licensee of the premises. In addition he claimed an alleged breach of $79 of the Liquor Ordinance 1975 (ACT) in that the respondent supplied King with liquor when there were reasonable grounds for believing that he was intoxicated--thus giving rise to a personal cause of action against the respondent. The respondent alleged provocation and contributory negligence against the appellant. The Full Court, in a unanimous judgement among its members, dismissed the appeal and, held, (1) a duty lay upon the defendant hotel to take reasonable care to avoid a foreseeable risk of injury to the plaintiff. (2) in extending this duty to cover the actions of third parties, ie patrons of the hotel, the manager should take the appropriate course to protect the safety of his patrons where it is evident that a patron should be supervised, ejected or warned. The appropriate course in a particular case depends on the circumstances of the case. (3) It was not established that the trial judge was in error by failing to find King's intoxication of itself was sufficient for a reasonably prudent hotel manager to take steps to remove him from the bar or reasonably foresee that he might harm another patron. (4) Applying a "but for" test of causation there was no error in the trial judge's decision that the causal connection between the incident and King's consumption of alcohol was not established. (5) A private right of action does not exist for a breach of $79 of the Liquor Ordinance 1975. A breach of statute may be evidence of a breach of a common law duty of care but it will not confer a private right of action for damages resulting from its breach. The court in reaching its decision cited a number of Canadian and American authorities referred to earlier in this paper. In the writer's view the essence of Chordas v Bryant is that the Court was analysing circumstances relating to an alleged assault in the bar area of an hotel. The case turns upon the fact of whether or not the risk of injury to the plaintiff was reasonably foreseeable. There was not, in the Court's view, any necessary connection between the breach of the Ordinance and the injury which King inflicted upon the plaintiff. The Federal Court considered but declined to follow the leading Canadian case of M e n o w v Honsburger referred to earlier in this paper. In Canada it is sound authority for the proposition that a breach of statute may be used as evidence of a breach of the common law by the hotelkeeper to his patrons. This decision was affirmed on appeal in Jordan House v M e n o w & Honsberger (1973) 38 D L R (3d). The Federal Court followed Abela v Giew (1965) 65 SR (NSW) 484 in affirming that a breach of statute does not confer a private right of action for damages resulting from its breach. The Court said Section 79 (of the Ordinance) was enacted in the general public interest, not for the protection of persons who may be injured by the conduct of intoxicated persons. Accordingly the Appeal was dismissed. It is submitted that Chordas may be distinguished on its particular fact situation as as "assault case" and one which is not binding on inferior courts assessing a hotelier's liability for serving an intoxicated person in a third party action for negligent driving. See now Speer & Nash referred to earlier in this paper, where the claim based on breach of statutory duty was not pursued by the trial judge.
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The relevance of the United States and Canadian cases for Australia The Australian courts are not judicially bound by decisions of the United States and Canadian courts which carry only a persuasive authority. However as stated at the outset of this paper in recent years, the High Court of Australia appears to have adopted a more independent and internationalist and approach in its judgements. (see Mabo v State of Queensland (1992) infra). Hence twenty seven years later, the court may be disposed to take a more favourable view of the vigorous minority judgements in Sovar that a breach of a statutory duty creates a private right of action. Alternatively the court may be prepared to clarify the extent to which a breach of statutory duty provides evidence of negligence, thus crystallising the liability of licensees under state statute law. Given the trend in recent licensing law litigation referred to in the last section of this paper, it may be only a relatively short time before a similar case is taken on appeal for final determination. The citation of cases from the United States of America as well as Canada is to illustrate that in the consideration of similar fact situations Australian superior courts, increasingly are prepared to consider the law from other jurisdictions and beyond the shores of Australia giving it a truly international perspective in the later half of the 20th century. In doing so the law in Australia is enriched. A most notable example is the High Court's decision in Mabo. In this case, and in the formulation of its majority judgement the court considered laws from a number of other jurisdictions including Canada and the United States. It is submitted that the Supreme Court of Canada in Jordan House and the Ontario Supreme Court in Schmidt would be two examples of where Australian superior courts may give due consideration to the Canadian authorities.
Implications for licensees The increase in litigation in liquor law liability cases in Australia suggests that licensees are vulnerable to attack not only by the licensing regulatory authorities but also by potential litigants. National guidelines exist for the Responsible Serving of Alcohol. It is a strategy for licensees and their staff to adopt a 'house policy' in the prevention of intoxication on licensed premises. The policy aims to raise the level of awareness, knowledge and job skills in the training of all staff in respect to managing the intoxicated patron, the sale of standard drinks to patrons, providing information about impairment and blood alcohol concentration, safe transport options and strategies to prevent under-age drinking (National Guidelines, 1994). At the same time, licensing authorities have ensured that the penalty provisions in Australia for the supply and purchase of alcohol especially for under age drinkers carries a heavy burden on licensees. These guidelines will only be effective if the licensee recognises it is in his/her best interest to create a 'best practice' environment for staff and patrons with adequate and proper training for all personnel. The service of intoxicated persons by licenses will expose them to the possibility of loss of licence and fines up to $5000 per offence (Liquor Gaming Bulletin, 1995). In the case where the patron is physically injured on leaving the premises, concurrent civil litigation is now likely to ensue so that a successful judgement against a licensee could mean the forced sale of their business and loss of livelihood for the licensee and family to satisfy the damages awarded by a court.
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Conclusion Lawyers currently involved in liquor liability cases are now well aware of the potential use of c o m m o n law and statutory provisions under state and territory legislation to maximise the success of their client's case before the courts. This paper has indicated the extent to which practitioners may utilise existing statutory breaches of the law to mount civil claims for damages. There are risks in all litigation. Should insurance companies, acting for licensees, as the ultimate insurer take the view such litigation represents a new 'cash cow' for lawyers, such insurers will be relentless in establishing before the appellate courts that the plaintiff's negligence was the sole cause of the accident and that damages in the circumstances ought not be awarded. When and if this stage is reached, the enthusiasm for litigation against licensees may well evaporate, like the last drops of vintage wine in an old oak cask!
Acknowledgement--This paper was originally prepared with the assistance of Professor JEH Sherry of the School of Hotel Administration Cornell University during the writer's sabbactical leave in September-October 1994.
References Australian Safeways Stores Pty Ltd v Zaluzna (1987) 162 CLR 479. Brannigan v Raybuck 136 Ariz 513,667 P2d 213 (1983). Callen, C. (1994) Hoteliers See Red over Intoxicated Person Charges, p. 7. Hotel News, Australian Hotels Association (NSW Branch). Callen, C. (1994) Responsible Service--Government Signals end of the Line for Cheap Drinks, p. 6, 7. Hotel News Australian Hotels Association (NSW Branch). Chordas v Bryant (Wellington) 1988 91ALR 149. Crocker v Sundance Northwest Resorts Ltd 1988 44 CCLT 225. Enghagen, L. (1992) New Developments in Liquor Law:Liability Predicated on a General Duty of Care. Hospitality Research Journal 16(4), 53---61. Ewing v Cloverleaf Bowl 20 Cal 3d 3898572. Felming, J. (1992) The Law of Tort p. 103,329. Law Book Company. Hopkinson, E. (1994) Alcohol Responsible Approach Needed. Hospitality Food Service Journal, p. 6. Johns v Chevron Hotels Ltd. 1995 Supreme Court of Queensland, p. 1. Jordan House v Menow & Honsburger (1973) 38DLR (3d) p. 105. Liquor Licensing Commission, Victoria 1996. Liquor and Gaming Bulletin (1995) Liquor Administration Commission NSW p. 1-10. Mabo v State of Queensland (1992) 66 ALJR 408--409, see also the following cases which were cited with approval Calder v AG of British Columbia (1973) SCR 313 ;AG for Quebec v AG for Canada (1921) 1 AC 401 2 406; Johnson v Mclntosh (1823) Wheat 542. The High Court in reviewing its earlier decisions chose to distinguish or disapprove. Williams v AG (NSW) (1913) 16 CLR 404 at 429, 433-435,467 (distinguished); NSW v The Commonwealth (1975) 135 CLR 337 at 438-439, not followed; Williams v AG (NSW) 1913 16CLR 404, at 439; Milirrpum v Nabalco Pty Ltd (1971) 17FLR 141 @152, 244-245,262,272-273, considered and disapproved. McConnell, J. P. and Rutherford, D. G. (1993) Why Innkeepers Go To Court. Cornell Quarterly, p. 23-25. National Guidelines for the Responsible Service of Alcohol (1993) National Centre for Research into Prevention of Drug Abuse (Australia).
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Otis Engineering Corp v Clark 668 SW 2d 307 (Texas) 1983 Shell Service Station 247 Cal. Rptr. 663. (Cal App 4th Dist 1988). Palmer, G. (1992) Liquor Licensing in New South Wales, p. 1036. Law Book Company. Rappaport v Nicholls 1959 (75 ALR 2d 821). Regina v Winner (1995) Sydney Morning Herald. Robin GD (1991) Alcohol Service Liability. What the Courts are Saying. CorneU Quarterly. Schmidt v Sharpe (1983) CCCLR p. 1-5. Sherry, J. F. H. (1993) The Law of Innkeepers, p. 695,709,726. Cornell University Press. Sovar v Henry Lane Pry Ltd 116CLR397,49. Speer v Nash (1992) Supreme Court of New South Wales, p. 10, unreported. Sydney Morning Herald (1994) p. 2. The Australian (1994) p. 4.