A restaurant with more gamblers than eaters found itself before the liquor licensing review panel in August, denying it was a mini casino. Steve Kilgallon observed the match.
At the Aroha Restaurant in West Auckland there was a lot of love for the pokie room, and much less for the food.
Once inside its double doors, you could turn left for the poker machines, or right for the restaurant: and all the evidence suggested most headed left.
Liquor inspectors kept close surveillance on the Glen Eden diner, and counted the numbers. Those that turned up just to play the pokies regularly outweighed those who wanted a $25 plate of sizzling black pepper chicken.
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The pokies did so well that it’s understood inspectors even briefly worried about some punters using them to ‘wash’ money (they quickly dismissed that theory).
They saw an Armourguard truck turn up to deliver the gaming machine float, and studied turnover figures for the pokies they described as “so disturbingly high that the principal use of the premises can only be described as a mini casino.”
So when Aroha’s liquor licence came up for renewal, the inspectors objected. To keep its restaurant licence, the primary business had to be food. There was no argument that there was cutlery, tablecloths and menus. So when is a restaurant not a restaurant?
When there’s an objection, that means a liquor licensing hearing, at which a panel of three decides whether to award a new licence, or decline one – which effectively closes the business, because it can no longer sell alcohol.
The Aroha’s hearing was in the splendid semi-circular council chamber in Henderson, west Auckland, in August. It started late because the chair, retired judge Bernard Kendall, couldn’t find a parking spot.
Hearing documents were handed out, then John Young, the lawyer for restaurant owner Raymond Peng, apologetically snatched them back from those in the public gallery. All two of us.
Young briefly argued for the public to be excluded, on the grounds he didn’t want to disclose commercially sensitive figures about his client’s business. I don’t own a Chinese restaurant or plan to. Nor did the guy sitting next to me.
Instead, it was agreed that when any figures came up, everyone would read those bits in their heads, which led to some unusual silences.
However, a well-placed industry source had already told me the Aroha was understood to turn over around $50,000 per week, or $2.6m a year, through its gaming machines. The business would likely be paid around $8000 to $9000 a week in commission on that revenue. That was big money for a suburban site, the source said. Technically, the law says these commissions are meant to be “neutral” – just covering the owner’s costs to host the machines. Nobody, of course, believes that.
The inspectors, of course, had those figures, thanks to an OIA request to Internal Affairs, and were stunned by them.
The law, Young rightly pointed out, was vague on how you actually defined whether it was a restaurant. In this case, everyone was mostly arguing about revenue streams. Young said a lot of licensees didn’t know that was an issue: “It can be a shock to them.”
Everyone agreed that the restaurant looked like a restaurant, and it served meals and sold takeaways. But how much was it really making from all that?
The inspectors didn’t know. Licensing inspector Marieta Mcleod had first asked for the revenue figures back in November 2018, a month after the last licence expired.
She asked again in December, when Raymond Peng told her his accountant was on holiday. Again in January and February. Exasperated, she asked the district licensing committee to demand the accounts be produced. Instead, the DLC sent a note saying that the delay “may well be a consideration regarding suitability (for the licence)”.
This panel, however, decided that there was no “direct” evidence Peng had refused to hand over the accounts.
On March 20, the accountant delivered some numbers. They weren’t sent on. Why not? Raymond Peng had perched nervously in the cheap seats and left his wife Irene to do the talking, and she looked flummoxed. “I’m not quite sure,” she said. “I sought advice before submitting to council.” Asked again, she said: “I left everything to my lawyer.”
Her lawyer had an eloquent answer which involved the accounts being complex and wanting to get them presented exactly as the inspector wanted.
In May, Mcleod filed her report without the numbers, apologising for the “extraordinary delay” caused by this stoush. It said food sales were “at best ancillary” to gaming and recommended the licence shouldn’t be renewed because of the gaming, and the unsuitability of the applicant because he hadn’t co-operated.
At this point, if you were as big a gambler as the Aroha’s clientele, you’d be betting on the inspectors to win – they’d certainly put in the work. Five different inspectors made 16 visits to the restaurant over 15 months. On all but one of them, there were more pokie players than diners – and on several, the restaurant was empty and the 18-machine gaming room full, or close to full. Police also made three routine visits, and reported a “minimal amount of patrons eating and a larger number in the gaming area”.
Other evidence included an ATM and a coin weighscale (from when the bar had older, coin-operated machines), photos of self-trespassed punters lining the office walls and that Armourguard truck, whose arrival was “not indicative of how a normal restaurant operates”.
Eight days before the hearing, eight months after they were requested, and four months after they were prepared, the mystery accounts appeared – and amid the silences – seemed surprisingly rosy. Gaming revenue had dropped 31 per cent from the second half of 2018 to the first half of 2019 and food had now overtaken it. Young said this was a significant and sustainable change.
Mcleod’s report said the delays were a “stalling tactic” so the owners could get the venue’s figures in order before the hearing.
Young, sorrowfully, said the inspector had a “cynical” attitude. Yes, he said, disclosure had not “been as soon as she [Mrs Peng] would have liked.” But, really, “rather than cynicism … the applicant should be applauded.”
For change had happened. A large ‘gaming lounge’ sign had been removed from outside; $10,000 spent on building an internal wall between the pokie room and the restaurant, trading hours had been cut from 9am-1am to 11am to 11pm, and money spent on Chinese social media marketing. The Pengs had also reached an unprecedented agreement with the North and South gaming trust to cap commission at 95 per cent of the food revenue.
Panel member Ken Taylor piped up. As part of the panel’s research, he’d eaten there and the food was so good and so plentiful, he’d had to take some away.
The tide had turned. Those in the know say Young is the most experienced liquor licensing lawyer around. He shouldn’t have tried his opening gambit to exclude the public, for his was a performance to be witnessed, and by more than two people (although by the end, the crowd had doubled).
He duly turned licensing inspector Mcleod inside out. Yes, she accepted that food sales were now up and gaming revenue down. Yes, the changes were positive. Yes, they reflected positively on Peng’s suitability to hold the licence. She was on the ropes, and Young lined up the killer punch. Was it indeed a restaurant? A long pause. Yes, said McLeod. “I revisit the view that the premises are not trading as a restaurant.”
That was it, as far as the panel was concerned. Normally, decisions can take up to two months. This one was delivered orally right after the meeting: licence renewed for three years. The formal written decision was handed down this month. The inspectors are considering an appeal.
Maybe nobody wanted an early lunch. But at 11am on Tuesday this week, the patrons were turning up at Aroha for only one reason. Over a 20-minute spell, 10 people arrived at 4038 Great North Rd. Two made a delivery and went again.
The other eight turned left and headed for the pokies. Inside, the pokie room was heaving. At the bar, two blokes were drinking handles. But the restaurant tables were empty.