Dan Murphy’s, proper purposes and political donations

Today’s Northern Territory News has a front page story revealing that “liquor giant Dan Murphy’s will take on the NT government in the federal court in a bid to open a store in Darwin”.

Like another current controversy featured here concerning CLP government interference in public service appointments, this story also raises important questions about government probity, transparency and accountability. However it relates to actions by the new Gunner Labor government rather than the CLP.

Just before Christmas the new government rushed through amendments to the Liquor Regulations imposing a 400 m² limit on the trading floor area of all takeaway liquor outlets. Coincidentally or otherwise, national Woolworths subsidiary Dan Murphy’s was about to lodge a development application for its first liquor outlet in the Northern Territory, and it had a proposed trading floor area of 1200 m² (in accordance with its nationwide standard business model). Also coincidentally or otherwise, no existing takeaway liquor outlet has a trading floor area of more than 400 m². Moreover, it appears that interests associated with existing takeaway liquor outlets donated at least $50,000 to the Northern Territory Branch of the Australian Labor Party before last year’s election.

We can only speculate at this stage on what the grounds of Dan Murphy’s Federal Court challenge will be, but it may be worth making an educated guess even at this early stage. I suspect that they will challenge on bases including that the government’s decision to promulgate the amended regulations was void as an abuse of power in administrative law. It may be argued that the decision was taken for an improper purpose, namely for anti-competitive protectionist reasons rather than to further any of the objects of the Liquor Act.

In that regard, it has been claimed that while there is evidence that the number and location of liquor outlets may have a significant effect on the level of alcohol consumption and abuse, there is no evidence at all that the size of the trading floor of itself has any effect on the level of consumption or abuse. Assuming that to be the case, Dan Murphy’s may well have a reasonable argument that the amended regulations were imposed for improper protectionist purposes. Moreover, given that the amended regulations do not impose any limit on the size of the storage area behind the trading floor, they are unlikely to have any effect on the price either (in themselves anyway). Any liquor outlet will still be able to stock as much alcohol as it likes, but will only be able to display limited quantities of that stock to the public. It would need to restock the display shelves frequently as stock runs out.

Dan Murphy’s also isn’t applying for an additional liquor license, instead it is seeking to transfer an existing Woolworth-owned license from Stuart Park to the proposed new premises near the Darwin airport and Bunnings. Dan Murphy’s may conceivably capture business from existing liquor outlets, because it stocks a very wide range of product at a competitive price and its outlet will be in a convenient location that most Darwin residents pass several times per day. But that effect in itself would highlight an improper purpose in terms of the expressed objects of the Liquor Act, which include “tak[ing] into account the public interest in the sale, provision, promotion and consumption of liquor” and “facilitat[ing] a diversity of licensed premises and associated services for the benefit of the community.”

In some ways the facts of this matter remind me of another Northern Territory case decided by the High Court way back in 1981, namely R v Toohey; Ex parte Northern Land Council. It is one of the leading authorities on the administrative law “improper purpose” review ground.  Garth Nettheim summarised the facts:

Acting under the Planning Act 1979 (NT), the Administrator of the Territory made regulations which, inter alia, purported to treat as a town an area of some 4,350 square kilometres around Darwin. This area included most of the land in the Peninsula which was subject to the Kenbi Land Claim lodged by the Northern Land Council under the Aboriginal Land Rights (Northern Territory) Act 1976(C’th ). The planning regulation, if valid, would have the effect of preventing the Aboriginal Land Commissioner from hearing the claim for the reason that (for the most part) he may hear claims only to ‘unalienated Crown  land’ (s. 50 (1) (a) ) which, under s. 30), is defined so as not to include land in a town.

The Everingham CLP government argued that the regulations were a valid exercise of its powers under the Act in that they were for the purpose of providing for the future growth of Darwin. One problem with that argument was that the area reclassified as a town was several times the area of the city of greater London. It is of course a city of some 10 million people whereas Darwin at the time had a population of around 60,000. Moreover, when the Court ordered discovery of the documents relevant to the government decision it became apparent that the actual purpose was to frustrate the Kenbi Land Claim and had nothing at all to do with the future growth of Darwin. Will the document discovery process show that the Gunner government undertook any research at all into the effects of the Dan Murphy’s model on alcohol consumption and abuse?

Another possible ground that Dan Murphy’s might rely on to challenge the amended regulations is that they breach the guarantee of freedom of interstate trade found in section 92 of the Australian Constitution. A little like the improper purpose ground in administrative law discussed above, this constitutional ground may apply where government passes a law with a significant protectionist effect in the sense that it favours local traders over interstate ones in a manner which is not “appropriate and adapted” to a legitimate public purpose (in this case protecting the community from the damage caused by excessive consumption of alcohol). Assuming that there really is no evidence that a larger trading floor has any effect on alcohol consumption or abuse levels, this ground may well be worth arguing.

However, although a larger trading floor in itself might not have an effect on consumption or abuse levels, it may well be that the overall Dan Murphy’s business model of stocking a very large range at keen prices in a very convenient location would in fact enable them to sell alcohol at a lower price than their competitors and would increase the overall level of alcohol consumption in Darwin.  Presumably that is the very purpose of their business model, and also why their competitors are trying to prevent them from coming to the Territory.

While the competitors’ motives are clearly crassly anti-competitive, that doesn’t mean that the NT government is necessarily acting for an improper purpose or that its regulations are not “appropriate and adapted” to a legitimate purpose. There is certainly very clear evidence that lower alcohol prices do have a marked effect on consumption levels, and the Territory’s alcohol consumption levels are certainly much higher than the rest of Australia and cause much greater damage to health, crime levels and a range of other adverse effects that are very much the legitimate business of government.  Although it’s far too early to be certain, my best guess is that Dan Murphy’s Federal Court challenge probably will not succeed.

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