Registrar, Alcohol and Gaming Commission Ontario v. 1642849 Ontario Ltd., 2008 CanLII 16821

ALCOHOL AND GAMING COMMISSION OF ONTARIO

IN THE MATTER OF The : Liquor Licence Act, R.S.O. 1990, c. L.19, as amended

B E T W E E N:

Registrar, Alcohol and Gaming Commission Ontario

Registrar

-and-

1642849 Ontario Ltd. O/A Atherley Arms Hotel

Licensee

DECISION

Panel: Guy Maurice, Board Member S. Grace Kerr, Board Member

Decision Date: March 5, 2008

Hearing Location: Orillia, Ontario

Alcohol and Gaming Commission of Ontario 90 Sheppard Avenue East, Suite 300 Toronto ON M2N 0A4 Phone: (416) 326-0366 Fax: (416) 326-5566 Toll Free In Ontario: 1-800-522-2876 Website: www.agco.on.ca

Appearances

Registrar, Alcohol and Gaming Commission ) Phillip Morris, Representative 1642849 Ontario Ltd., Licensee ) Noel Gerry, Representative

Authorities

473954 Ontario Ltd. v. Ontario (Registrar of Alcohol and Gaming), [2001] O.J. No. 5315 (QL)

Commercial Tavern, [2006] O.A.G.C.D. No. 580

Allegations

1. A hearing into a Notice of Proposal number 15181 dated May 7, 2007 to revoke liquor licence number 10559 (the “Licence”) issued to 1642849 Ontario Ltd. (the “Licensee”), operating as the ATHERLEY ARMS HOTEL, (the ‘Atherley Arms’ or ‘the establishment’), 2 Creighton Street, Ramara Township, Orillia, Ontario, L3V 1A8, on the basis of alleged violations of subsections 35(1), 41(1), 45(1) and 45(2) of Ontario Regulation 719/90 (the “O.Reg”) made pursuant to the Liquor Licence Act (“LLA”) and of subsection 30(4) of the LLA was held on October 1, 2, 4 and 5, 2007 in Orillia, Ontario.

Decision

2. The Board FINDS the Licensee breached subsection 30(4) of the LLA and subsections 35(1), 45(1), and 45(2) of the O.Reg. The Board DISMISSES the alleged breach of subsection 45(2) of the O. Reg. on February 10, 2006 and the alleged breach of subsection 41(1) of the O. Reg on February 16, 2007. Our reasons follow.

Preliminary Matters

3. An order to exclude witnesses was made on consent.

4. On the second day of the hearing, Mr. Morris brought an oral motion for disclosure pursuant to an undertaking to produce complete employment records of various staff members by July 31, 2007 given at the pre-hearing of this matter. He narrowed his request during argument to seek copies of employee files for seven specified individuals, as well as any other employees who would be providing evidence with respect to the following dates: February 10, April 13 and 26, May 12, June 23, September 16, October 10 and 17, November 22 (all of the year 2006) and February 16, 2007.

5. In response, Mr. Gerry argued that the license holder does not keep such records per se but, none the less, on September 17, 2007 he produced a series of documents responsive to the request to the Registrar. He took issue with the basis of the request and argued that, while the documentation was delivered late, the timing of its delivery would not prevent Mr. Morris from engaging in an effective cross-examination.

6. After considering the arguments the Board found there had not been compliance with the undertaking to provide employment records of persons in the employ of the establishment on the dates it is alleged certain breaches of the LLA occurred. The Board takes seriously both orders and undertakings made at the Pre-hearing Conference and notes that full disclosure is foundational to the hearing process. The documentation requested was relevant to the matters at issue in this hearing. The Board ruled that the Registrar’s representative was entitled to all documents as requested and ordered they be produced forthwith.

7. On October 3, 2007, Mr. Morris withdrew the Registrar’s allegations with respect to violations occurring at the establishment on April 12, 2006.

Registrar’s Evidence

8. The Registrar’s first witness, Detective David Glass, is employed as an undercover officer with the Drug Enforcement Section, Ontario Provincial Police (“OPP”). In October, 2005, he was part of an OPP investigation into street level drug trafficking in the Orillia area, named Project ‘Long Time Coming’. He testified that the members of that project received information that drug trafficking occurred at the Atherley Arms; as such, it was identified for investigation.

9. Detective Glass attended at the Atherley Arms on a total of 49 occasions as part of his undercover investigation; twelve times in October, November and December 2005 and the remainder spread over January through August and, finally, in October 2006.

10. Over the course of these attendances several persons sold Detective Glass controlled substances as defined by the Controlled Drugs and Substances Act (“CDSA”) on various occasions. Of these persons, Michelle (“Shelley”) Belbeck, Christina Fisher, Jo-Anne Spieran, Dusteen Gilchrest, Steve Bright and Dave Wareing were, at the relevant times, employed by the Atherley Arms. Others, Chris Smith, Paul Rafter, Nelson Fraser and James Cumpson, were regular customers of the establishment.

11. Controlled substances were sold to Detective Glass on the dates and in circumstances described as follows:

• February 10, 2006 – Detective Glass attended at the Atherley Arms between 8:40 p.m. and 10:30 p.m. He told James Cumpson, a ‘fellow patron’, he wanted “a halfer” (a half gram of cocaine). Mr. Cumpson said that he could have a look around, left the table where they were sitting and approached Dave Wareing, who was working the bar. Mr. Cumpson and Mr. Wareing did a “hand-to-hand exchange”, although Detective Glass did not and could not see exactly what was exchanged between these men. When Mr. Cumpson returned to Detective Glass’s table he said words to the effect that he already “had it” and the price was $40. He gave that amount to Mr. Cumpson who then said he would be going to the hotel’s men’s washroom. Detective Glass followed him there and Mr. Cumpson gave him a baggy containing a half a gram of cocaine.

• April 13, 2006 – Detective Glass attended at the establishment between 3:40 p.m. and 5:50 p.m. Initially, he tried to purchase a half a gram of cocaine through Jenna, a waitress and bartender. Jenna told him “there’s not enough”, that she might be able to ‘do a ball’ (that is, 1/8^th^ ounce or 3.5 grams), and that it would “take a little while” but she would look and see what she could do. Jenna did not produce anything to Detective Glass. Later, when James Cumpson and Dave Wareing arrived at the hotel, Jenna directed Mr. Wareing’s attention to Detective Glass. The undercover officer testified that, while sitting at a table at the back of the hotel, near the men’s washroom area, he gave Mr. Wareing forty dollars and Mr. Wareing produced a white, chunk substance, cocaine, which was wrapped in sandwich wrap.

• April 26/27, 2006 – Detective Glass attended at the Atherley Arms from 11:00 p.m. until 12:10 a.m. He approached Christina Fisher, a waitress at the hotel that evening, and asked her for two Vitamin E’s (Ecstasy tablets). She produced an orange plastic container from her fanny pack and handed it to him. It contained 6-8 tablets and he shook two from it. She called them ‘purple DDD’s’. Detective Glass paid Ms. Fisher $16.00 for the tablets; she put the money into her personal pouch rather than mingling it with the hotel’s float monies she also carried. This transaction occurred at or around the hotel’s bar.

• May 12, 2006 – Detective Glass was at the Atherley Arms from 6:00 p.m. until 7:00 p.m. While there, he was asked by Nelson Fraser and Wayne, both patrons of the hotel, if he wished to purchase some cocaine. The initial transaction took place in the men’s washroom area of the hotel. Nelson and Wayne directed him into one of the stalls where he found about 1/3 to a half gram of cocaine on the back of the toilet. Upon returning to their seats, Mr. Fraser handed Detective Glass a micro-baggy under the table containing cocaine and Detective Glass gave Mr. Fraser forty dollars.

• June 16, 2006 – Detective Glass was present at the establishment from 2:58 p.m. until 4:49 p.m. He asked Christina Fisher, a waitress that day, if he could purchase ten Ecstasy tablets from her. She produced a white container, for which he gave her $80.00. [Upon analysis by the OPP laboratory, it was determined that, in fact, the container held 7 Ecstasy and 3 methamphetamine (“speed”) tablets.] The transaction with Ms. Fisher occurred at the hotel’s bar.

• October 10, 2006 – Detective Glass initially contacted Shelley Belbeck on October 5, 2006 and asked if she was interested in bartering her product (a ‘ball’ of cocaine) for discounted liquor, which he was selling. He was not in the establishment when he made the call; he does not know where she was when she took her call on her cell phone. She indicated that she was receptive to the proposal; the ‘trade’ was arranged for the following Friday, October 10, 2006. On that day, the undercover officer attended at the establishment between 9:25 p.m. and 9:40 p.m. and Ms. Belbeck approached him directly as he walked in. She asked for two cases of liquor, and gave him the keys to her vehicle. While Detective Glass was putting the cases into the back of Ms. Belbeck’s SUV, which was located in the parking lot of the establishment, she approached him and gave him a micro-baggy of cocaine (3.5 grams) in chunk form. After re-entering the establishment, Detective Glass gave Ms. Belbeck’s keys back to her in the presence of the ‘thin manager’ (he did know his name). He asked Ms. Belbeck if this manager was interested in taking discounted liquor; she said ‘no’ as it would not be prudent because they felt they were being ‘watched by the liquor inspectors’.

• October 17, 2006 – Detective Glass again contacted Shelley Belbeck beforehand to ask if they could conduct another transaction similar to the October 10, 2006 exchange. He was not in the establishment when he made the call; he does not know where she was when she took his call to her cell phone. Ms. Belbeck said she would be working at the Atherley Arms until 2.00 a.m. Upon arriving at the establishment in the evening hours of October 17th, he encountered the ‘thin manager’ in the bathroom, and asked if he was interested in purchasing liquor. The ‘thin manager’ answered that he ‘understood’, but would not take any as he was being watched closely by ‘ex-employees’. Ms. Belbeck and Detective Glass again met in the parking lot of the establishment; this time, he put one case of discounted liquor into her vehicle and retrieved a micro-baggy (an 8-ball or 3.5 grams) of cocaine from her.

• Detective Glass has not returned to the establishment since.

12. None of the conversations or transactions between him and staff or patrons of the Atherley Arms were done covertly or with any concern that the conversations were being overheard. An “open, conversational” tone, which Detective Glass described as “never excessively loud or whispering” nor “muffled or discreet”, was used during the transactions. That management might hear did not appear to be an issue.

13. He used “extremely common” terminology while seeking to effect the drug and discount liquor transactions that “anyone with street savvy” would understand. The terms he used were ones that the “owner of an adult entertainment establishment or a vice cop” would understand.

14. Detective Glass testified that he noticed “a transition” in the establishment during the period of his undercover operation. When he attended there on March 9, 2006, he noted some alterations including the following: internal memos posted behind the bar were removed, the dancers were required to fill out time sheets, the managers wore dress shirts, and the kitchen had been opened and was operating. He later learned these changes coincided with a change in ownership on or about March 3, 2006 to the new owner and current Licensee, 1642849 Ontario Ltd., its principal being Mr. Bert O’Mara. He believed that these changes related to profitability issues and had no bearing on the drug activities in the establishment.

15. When he visited the establishment on August 17, 2006, Detective Glass noticed additional, more significant changes had taken place. Specifically, the area where the lap dancers performed had been enclosed, most of the previous staff had been fired, the seating configuration in the area around the bar had been altered, the music was quieter, managers were wearing tuxedo shirts, and the staff working behind the bar was now weighing the liquor bottles. Michelle (Shelley) Belbeck, Christina Fisher, Jo-Anne Spieran and Peter Stanton, all staff members whom Detective Glass had come to know, had been ‘let go’ by Mr. O’Mara.

16. The OPP drug laboratory determined that all the drugs obtained by Detective Glass in the course of his undercover investigation at the Atherley Arms were controlled substances as defined in the CDSA.

17. In cross-examination, Detective Glass testified that he started working with the Drug Enforcement Unit of the OPP about five years ago. While selected for the position based on the basis of a “resume and interview” process, over time he has also taken various courses related to undercover work. Detective Glass is a Bill C-24 designated officer.

18. Detective Glass testified that ‘persons of interest’ and ‘targeted establishments’ were determined by the undercover operation team at or around the time the operation began in mid-October, 2005. Although the hotel was a target, its owners and managers were not. For the purpose of his undercover work, Detective Glass adopted the name of ‘Dave Sanderson’ as well as the identity of a work crew member, which he hoped would allow him to move around town and develop familiarity and visibility with the targeted persons/establishments. The first time that ‘drug talk’ came up at the establishment was on October 19, 2005 when ‘Johnny’, a patron sitting beside him, offered to share a marijuana cigarette. By mid January 2006, he felt accepted by the community and began to experience more success at purchasing controlled substances in the Atherley Arms and other targeted establishments.

19. During the April 13, 2006 transaction, it took only “a second” for Mr. Wareing to hand the package to Detective Glass. He, in turn, quickly concealed it. The detective acknowledged the possibility that management was unaware of the transaction.

20. As regards the April 26, 2006 transaction, Detective Glass testified that it was possible to the ‘untrained eye’ that he was simply retrieving ‘tic tacs’ from Ms. Fisher.

21. The May 13, 2006 transaction occurred “in seconds”. He did not know if anyone noticed it although Peter, a bartender or waiter, was standing by the table where the sale/exchange of controlled substance occurred.

22. Detective Glass kept the container that contained the controlled substances he purchased from Ms. Fisher on June 23, 2006. He acknowledged that, if anyone had been watching the transaction, they would only have seen her handing him what looked like a kind of candy container.

23. The actual exchange of liquor for drugs with Ms. Belbeck took place in the parking lot of the Atherley Arms on October 10, 2006, but the conversation in which Detective Glass asked her to ‘exchange stolen liquor for drugs’ occurred during a cell phone conversation he had had with her earlier. He did not know where she was when that phone call took place.

24. Detective Glass met Dusteen Gilchrest in or around mid-November, 2005, and she became an important conduit for his drug transactions. For example, she introduced the undercover officer to Paul Rafter, Dave Wareing, James Cumpson, and Steve Bright. Detective Glass did not know when Mr. Bright’s employment was terminated, but knew that Mr. Bright subsequently obtained employment with another establishment of interest to the undercover operation. For a period of time Mr. Bright was working for both establishments.

25. Music was generally playing when Detective Glass attended at the Atherley Arms, but it was not continuous.

26. In re-examination, Detective Glass testified that there was a “comfort level” for people trafficking controlled drugs and substances at the Atherley Arms.

27. Detective Constable Dale Dixon has worked for 20 years with the OPP. For the years 2002-2006 he has been seconded to the Alcohol and Gaming Commission (“AGCO”) as an investigator and has attended with AGCO inspectors at liquor licensed establishments.

28. Detective Constable Dixon attended at the Atherley Arms on September 16, 2006 with Inspector Owen for a compliance inspection. They arrived at approximately 1:45 a.m. Mr. Paul Trask was the manager on duty. The Detective Constable noticed an individual towards the rear of the hotel, near the men’s washroom area, who staggered from there over to the ATM machine, where he proceeded to have difficulty keying in the numbers. Detective Constable Dixon suggested to Mr. Trask that this person should be asked to leave as, in the officer’s opinion, this patron was intoxicated. This individual was ejected from the hotel without argument from Mr. Trask.

29. That same night, he encountered a male patron in the hotel’s washroom who asked him if he could buy ‘dope’ from him. The patron had a beer with him and, in the officer’s opinion, appeared to be intoxicated. Finally, Detective Constable Dixon noticed a young woman near the bar who was dancing by herself in an uncoordinated fashion, holding a beer in her hand. He did not speak with her.

30. In cross-examination, Detective Constable Dixon stated that he did not know if Mr. Trask had previously seen the patron who tried to use the ATM machine in the establishment.

31. Detective Constable Dixon acknowledged that he and Inspector Owen were unlikely to be taken for drug dealers.

32. Detective Constable Dixon attended the Atherley Arms with Inspector Owen on November 22, 2006 for a compliance inspection, arriving at approximately 9:00 p.m. The door to the kitchen area, which is to the right of the establishment’s main doors, was open. From that vantage point, Detective Constable Dixon observed that there was no kitchen staff and that no food was being prepared. He did not enter the kitchen. Mr. Gerry Belliveau was the manager on duty. He told Detective Constable Dixon and Inspector Owen that, if the patrons wanted something to eat, they could bring it in themselves. Detective Constable Dixon also observed a small cabinet holding snacks (e.g. chocolate bars), but “nothing of any substance”.

33. In cross-examination, Detective Constable Dixon acknowledged that he did not go into the kitchen to verify what he observed from the establishment’s main foyer.

34. At around 12:30 a.m. on the morning of February 16, 2007, Detective Constable Dixon attended at the Atherley Arms with Inspector Owen to conduct a compliance inspection. A youthful-looking male, who appeared to be under the age of 19, was present in the establishment. Mr. Gerry Belliveau, the manager on duty that night, told Detective Constable Dixon that the youth’s age had been verified. This was later confirmed by another staff member, Ms. Brown. Neither employee said that the youth had not been served liquor. He asked the youth to produce identification and the youth stated that he had none. He told the officers his name and address as well as his date of birth, that is, March 31, 1987. Detective Constable Dixon testified that he believed the youth had been drinking as he could smell alcohol on the youth’s breath. Since he had no identification, Detective Constable Dixon asked the youth to leave, which he did.

35. On February 17, 2007, Detective Constable Dixon conducted a police check, and unearthed a driver’s license registration with the same name and address as given by the youth but with a March 1, 1988 birth date. If correct, the youth was only 18 years of age. Detective Constable Dixon mailed the youth an offence notice for ‘consuming underage’.

36. In cross-examination, Detective Constable Dixon stated that he did not know how long the youth had been in the establishment, or if he had previously attended at other establishments. He conceded that it was possible the youth could have consumed alcohol elsewhere than the establishment. Detective Constable Dixon encountered the youth at another establishment the same night/early morning. The youth produced two credit cards for the officer. The officer agreed that he had not searched the youth’s wallet, although he had the power to do so, and that it was conceivable that the youth had other identification in the wallet.

37. The final witness on behalf of the Registrar was Inspector James Owen. He has been with the AGCO since 1999, and was a police officer for eleven years before that with the Metropolitan Toronto Police Force.

38. Inspector Owen arrived at the establishment at approximately 1:45 a.m. on September 16, 2006. While checking the men’s washroom near the front door, he saw two males, each carrying a beer in the unlicensed area. He immediately spoke with Mr. Paul Trask, the manager on duty, about the removal of liquor from licensed areas. Mr. Trask immediately took the glass from one patron but allowed the other to walk out of the establishment while still holding and drinking from the bottle of beer.

39. Outside of the washroom, Inspector Owen also saw a male who showed signs of intoxication; he was “glassy-eyed, had very slurred speech, and was very unsteady on his feet”. Inspector Owen spoke to this patron who told him that he had been at the establishment for four hours and was “drunk”. The patron asked if he could buy some “pot” or “angel dust” from the Inspector. The Inspector said “no” to both requests. He noticed that the patron “could not even focus his eyes” and he could “smell beer on his breath”. Mr. Trask and Detective Constable Dixon were standing beside Inspector Owen when the requests to purchase illegal substances were made. Mr. Trask asked this person to leave, which he did. Later on, Inspector Owen noticed the patron come back into the establishment accompanied by another fellow who showed signs of intoxication. The two left and re-entered the establishment several more times during Inspector Owen’s attendance. While the barman, Ricky Cerrutti (phonetic) followed these men around, he never removed them from the establishment.

40. Inspector Owen also noticed a female patron near the main bar who was dancing and, at the same time, was holding and drinking from a beer bottle. A male patron would hold her from time to time. The Inspector could hear the female’s slurred speech. He also heard the male say to her, “Not now, Liquor Inspector.” Inspector Owen did not take the beer bottle from the female patron.

41. Inspector Owen also noticed a male, about 25 years of age, who was “staggering, glassy-eyed, and drinking from a beer bottle”. This fellow attempted to use an ATM machine located near the men’s washroom. Inspector Owen observed him having trouble focusing on the machine, fumbling with his hands as he tried to obtain money from the machine, and falling off the stool located in front of the machine.

42. In cross-examination, Inspector Owen agreed that he did not identify himself to the patrons as a liquor inspector, although Detective Constable Dixon told them he was a “police officer”.

43. Inspector Owen attended again at approximately 9:50 p.m. on November 22, 2006. There was no security on duty, so he asked the bartender, Renee Gilles, if he could see Mr. Gerry Belliveau whom, he understood, was the new manager of the Atherley Arms. When Mr. Belliveau arrived a few minutes later, Inspector Owen asked him for identification, but Mr. Belliveau was not able to produce anything: Mr. Belliveau had no driver’s license, no credit cards, or anything to identify himself with him, although he verbally gave Inspector Owen the same address in Toronto as Mr. Trask previously had given the Inspector as his own.

44. Other than the bartender, there was only one other staff person in the establishment, a male who identified himself as Kenneth Sailor and who was manning the DJ booth. Mr. Belliveau said that all of the staff had quit.

45. Inspector Owen noticed that the establishment’s kitchen was closed and that no “light meals” were being prepared. He asked Mr. Belliveau if any food was available to the patrons and was shown a glass case which contained chocolate bars and gum. He was told that the cook quit last week.

46. In cross-examination, Inspector Owen explained that he asked Mr. Belliveau for identification because he suspected that he was not who he said he was. He acknowledged that he could not say for certain that there was no food in the refrigerators of the establishment as he did not go into the kitchen and did not open the refrigerators.

47. On February 16, 2007, Inspector Owen attended at the establishment in his AGCO uniform at approximately 12:30 a.m. While speaking with Mr. Gerry Belliveau, he saw a male, white, approximately five feet and eleven inches and 160 pounds, with short, brown hair, with facial acne, and wearing a baseball cap and snowmobile jacket, sitting at an area in the establishment known as ‘pervert row’ together with three other males. This person had a part empty glass in from of him that looked like “Coke or something.” He appeared very young, and Inspector Owen suspected that he was underage. He asked who had checked this person’s identification and Mr. Belliveau told him, “the bartender”. Inspector Owen asked Mr. Belliveau to obtain the youth’s identification again so that he could check it himself. Mr. Belliveau brought him over to Inspector Owen and Detective Constable Dixon. The male pulled out his wallet and told them that he had no identification. Inspector Owen could smell liquor on the male’s breath. The male gave his name and address, and a birth date of March 31, 1987. He told the Inspector that he had walked straight into the establishment and that his friend had purchased a drink for him. At that point, Mr. Belliveau asked him to leave. He and his three companions became very belligerent although, ultimately, all four of them left the establishment.

48. Inspector Owen spoke with the bartender, Heather Brown, who told him that she had asked all four for identification and served them “rye and Cokes” and “rye and ginger ales”. In cross-examination, Inspector Owen confirmed that he never seized Mr. Barker’s “glass of Coke” or did anything to smell or test it. He acknowledged he did not ask to see the wallet to confirm the claim of no identification and that his only ‘direct’ knowledge of the male’s actual date of birth was provided to him by Detective Constable Dixon.

Licensee’s Evidence

49. Mr. Bert O’Mara was the only witness called on behalf of the Licensee. He is the sole officer and shareholder of 1642849 Ontario Ltd. which he has operated as the Atherley Arms Hotel) since March 3, 2006, having applied for and obtained a new liquor license from the AGCO for this establishment. Previously, Mr. O’Mara was employed by the Toronto Police Service as a Detective/Sergeant. After “28 years and one month” with the Toronto Police Service, Mr. O’Mara retired from police work in 2001. In the interim, before becoming the owner of the establishment, Mr. O’Mara operated a licensed private investigative/security guard business.

50. Mr. O’Mara does not personally manage the establishment. Mr. Gerry Belliveau was hired as a manager on a full-time basis starting March 3, 2006. Mr. Paul Trask started as a part-time Manager on March 3, 2006 and became full-time in December, 2006. The managers’ duties are to ensure that the establishment complies with all laws and regulations.

51. The consumption and/or sale of controlled substances by patrons are absolutely not tolerated in the establishment. He told his management this, both at the time he took over the business and over the course of running it. If any such behaviour is noticed, the server is to report it to the manager who, in turn, is to eject the offending individual.

52. The employment of staff members allegedly involved in the sale of controlled substances was terminated and/or their final pay period was as follows:

• Jennifer (Jenna) Holm-Laurson – July 15, 2006
• Steven Bright – July 22, 2006
• Dusteen Gilchrest – July 29, 2006
• Jennifer Howlett – August 12, 2006
• Peter Stanton – August 12, 2006

53. Shortly after taking over the business he hired Mr. Stanton, whom he thought had maturity, as a bartender and manager to oversee the establishment’s business and regulatory matters, and to keep Mr. O’Mara apprised of same. In Mr. O’Mara’s opinion, Mr. Stanton either did not or failed to do so and, as a result, his employment was terminated. At the time of the hearing, Mr. Stanton was suing Mr. O’Mara for wrongful dismissal.

54. Mr. O’Mara learned Ms. Gilchrest was the girlfriend of a member of a motorcycle gang. He thought this affiliation would impact negatively upon his business and decided to terminate her employment.

55. Ms. Christine Fisher drank while on duty. She was cautioned but continued with this behaviour. As a result her employment with the Atherley Arms was also ended.

56. Ms. Michelle (Shelly) Belbeck was hired in May 2006. Her employment with the establishment continued until Mr. O’Mara learned of her arrest on criminal charges related to OPP’s undercover operation in Orillia. Ms. Belbeck did not appear to be part of the original clique. Therefore, she was kept on, a decision Mr. O’Mara now regrets.

57. Mr. O’Mara testified that he had no knowledge or information that Ms. Gilchrest or Mr. Stanton were associated with illegal activities or involved in the sale or consumption of narcotics.

58. Mr. O’Mara testified that, while he is “familiar” with Nelson Fraser, James Cumpson and Dave Wareing, he does know them to be patrons of his establishment or “otherwise”.

59. The establishment also has a policy regarding minors: anyone under the age of 25 years is required to produce identification.

60. As regards over-service, the establishment’s policy is that it is “not to be done”. Mr. O’Mara told the Board that all of these policies are relayed to the staff.

61. In cross-examination, Mr. O’Mara confirmed that in the last 18 years of his employment with the Toronto Police Service his detective work related to “the grey areas of the Criminal Code”, that is, pornography, child pornography, sexual exploitation, and prostitution. Specifically, his focus was to uncover occurrences of crimes in relation to these prohibited activities in strip clubs. Between his retirement from policing and commencing his involvement with the establishment, Mr. O’Mara acknowledged that he was also involved as a part-owner of a business operating under the name “Whisky A-Go-Go”, which was a strip club owned by the nephew of a licensee for whom he gave expert evidence at a liquor licence hearing.

62. Mr. O’Mara told the Board that he gave direct operational control of the establishment to Mr. Belliveau and Mr. Trask. He initially said that he knew these men through the industry from their work at other bars. After further questioning by Mr. Morris, Mr. O’Mara acknowledged he knew that Mr. Belliveau and Mr.Trask were managers at Bunnies, which was suspected of being a front for a prostitution operation. He assisted in the Bunnies investigation and testified at the AGCO hearing brought to revoke Bunnies’ licence. Mr. O’Mara also acknowledged that Mr. Belliveau had managed an establishment, named Goddess, located next door to Bunnies and used in conjunction with Bunnies. Mr. O’Mara testified he never asked either Mr. Belliveau or Mr. Trask why the Bunnies’ and Goddess’ licenses were revoked notwithstanding his awareness of the police concerns about them. Mr. Belliveau was asked about having any prior convictions and told Mr. O’Mara that he only had one dated CCC conviction involving impaired driving. Mr. Trask told Mr. O’Mara that he had no Criminal Code of Canada or Liquor Licence Act record.

63. Mr. O’Mara kept no record of his attendance at the establishment after acquiring it in early March 2006. He bought 100% of the shares for $10,000 and, since then, has invested another $20,000 on things such as stocking the bar with liquor, electrical work and changing some walls.

64. Mr. O’Mara testified that he does not keep records for any length of time of actual hours his staff worked. He does not have written policies with respect to ‘over service’ of alcohol, ‘service of youths’, ‘use/sale of narcotics’ on the premises, and so on. All such policies are relayed verbally to the staff by Mr. O’Mara and/or his managers.

Registrar’s Submissions

Subsection 45(2) of the O. Reg

65. Constable Glass, an undercover OPP officer posing as a labourer, attended at the licensed premises as part of an undercover investigation into street level trafficking of cocaine and crack cocaine in the Orillia area from October, 2005 until November, 2006. The evidence shows drug dealing and drug use at the establishment was open and rampant. Patrons smoked marijuana outside the back door of the establishment and talked openly at the bar about selling drugs. Constable Glass openly talked to staff members, Dusteen Gilchrest and Jo-Anne Speiran in the bar about purchasing cocaine. Between January 18, 2006 and March 3, 2006, Constable Glass was at the Atherley Arms on 36 occasions and made one drug purchase.

66. On March 3, 2006, Mr. Bert O’Mara took over the ownership and operation of the establishment. Constable Glass observed changes in the establishment as a result of the new management, but which had no bearing on the drug activity taking place at the establishment. Between March 3, 2006 and August 17, 2006, Constable Glass was at the Atherley Arms on 29 occasions and made 6 drug purchases on-site and one purchase off-site, the latter starting with a conversation at the bar.

67. On August 17, 2006, Mr. O’Mara brought in new staff. He also posted two doormen at the doorway, had staff begin to weigh the liquor and enclosed the kitchen. The lap dance area was also enclosed, making it more difficult to monitor illegal activity from a central point. These changes had more to do with attracting a new clientele than any response to ongoing drug dealing in the establishment.

68. After August 27, 2006, the undercover operation was wound down and Officer Glass attended the premises on only four more occasions. On two of those occasions, he sold allegedly stolen liquor for drugs to Shelley Belbeck, who had been newly hired by Mr. O’Mara. The transactions took place in the parking lot but started in the premises.

69. The Registrar urges that the evidence supports a finding that the licensee permitted a person, often his staff, to hold, offer for sale, sell, distribute and consume controlled drugs or substances being ecstasy, marijuana, cocaine and methamphetamines in the licensed premises between March and August, 2006, contrary to subsection 45(2) of the O.Reg. He further argues that the conversations regarding the transactions were open, that the transactions themselves evidenced a comfort level in trafficking in cocaine and other drugs in the establishment, and that experienced drug dealers would not engage in transactions with management at the table, as happened on May 12, 2006, unless confident there would be no problem.

70. The Registrar also argues that on October 10, 2006 and again on October 17, 2006, the Licensee breached subsection 45(2) of the O. Reg by, at a minimum, permitting the offering of controlled drugs for sale in the licensed premises.

71. Mr. O’Mara does not deny that drug use and trafficking took place. He did not call a single staff member or manager to explain why they could not see or hear what Constable Glass testified was open and obvious to anyone with any street savvy. Mr. O’Mara’s testimony did not withstand the scrutiny of cross-examination, as follows:

• Mr. O’Mara testified that, after taking over its ownership, he was at the Atherley Arms 4-5 times a week. Officer Glass, who visited the premises 33 times between March and October, 2006, never saw Mr. O’Mara there. Inspector Owen attended at the establishment at least 25 times. He only met Mr. O’Mara once, at a meeting called by the Inspector. Mr. O’Mara did not and could not provide any records to show if or when he attended at the establishment. There were no records to show how he disciplined his staff, why he fired them, or when they worked;
• Mr. O’Mara was forced to admit that he knew Trask and Belliveau were managers at ‘Bunnies’ which had been the subject of a criminal investigation in which he had participated while a police officer.

72. Given the notorious connection between his managers and Bunnies, Mr. O’Mara’s decision to hire Trask and Belliveau, and then give them total control over his new business into which he has invested money raises serious questions about Mr. O’Mara’s ability to run the establishment properly in the future.

September 16, 2006

73. Inspector Owen testified that he saw four drunken patrons in the establishment on September 16, 2006. The Registrar submits that Mr. Trask only removed one patron because the Inspector told him the man was drunk and had tried to purchase drugs from him. That patron later re-entered the premises. The evidence establishes the Licensee breached subsection 45(1) of the O. Reg on this occasion.

November 22, 2006

74. On this day there was no kitchen staff in the establishment. The only food available was chocolate bars and gum. The Registrar submits the evidence establishes the Licensee was in breach of subsection 35(1) of the O. Reg.

February 16, 2007

75. Inspector Owen observed a male, who appeared to be very young in the establishment. The bartender on duty, Heather Brown, admitted to Inspector Owen that she served the patron and his friends, rye and Cokes or rye and gingers. The next day, Constable Dixon determined the youth was only 18 years of age.

Licensee’s Submissions

Subsection 45(2) of the O. Reg

February 10, 2006

76. The Licensee became licensed for the premises on March 3, 2006, and did not have possession of the premises or any involvement in its operations prior to that date. The licence holder cannot be found in breach of any incidents prior to March 3, 2006.

April 13 and 26, 2006; May 12, 2006; June 23, 2006; and October 10 and 17, 2006

77. On the facts the Licensee submits that it did not permit a breach of subsection 45(2) of the O. Reg on any of these dates. Further, with respect to the October incidents the alleged transaction did not occur on the premises or in areas under the Licensee’s exclusive control.

78. The narcotics transactions were only detectable by a highly-experienced and well-trained undercover drug investigator, who had taken several months to penetrate the drug subculture in Orillia, and who engaged in the transactions himself. The drug transactions could not have been detected by either Mr. O’Mara or his managers. It would be a mischaracterization of the evidence if the Board were to conclude the transactions were conducted so openly as to infer that the licence holder permitted them. Rather, the proper inference is that the conversations were conducted in conversational tone because there was no one situated close enough to overhear them other than the intended participants. Further, the conversations took place in a licensed establishment with music and the din of conversation in the background. There is no evidence anyone in management overheard any drug conversation or witnessed the actual provision of narcotics. The actual transactions were quick and concealed. Under these circumstances the licence holder cannot be found to have either expressly permitted such activity or failed to take adequate steps to prevent such activity.

79. Furthermore:

• With respect to the April 13, 2006 allegation, the placing of money on the bar could reasonably be interpreted by an onlooker as the act of paying a bar tab;
• With respect to the April 26, 2006 allegation, the act of handing over the tic tac container could be reasonably interpreted by an onlooker just as it appeared: the supplying of breath mints. Furthermore, the act of handing Christina Fisher money could reasonably be interpreted by an onlooker as the payment of a bar tab;
• With respect to the May 12, 2006 allegation, there is no evidence that Peter Stanton witnessed the exchange and nothing in the evidence, such as verbal statement or physical sign of acknowledgement, suggests that he may have. Constable Glass surmised that Mr. Stanton was “comfortable” with the transaction taking place yet never gave any evidence to suggest that Mr. Stanton even witnessed it;
• With respect to the June 23, 2006 allegation, the handing over of the candy container could reasonably be interpreted by an onlooker just that, that is, the provision of candy. Furthermore, the payment of money by Constable Glass to Christina Fisher could reasonably be interpreted as the payment of a bar tab;
• With respect to the October 10, 2006 and October 17, 2006 allegations, the arrangements were made by telephone, the transactions occurred inside a vehicle outside the establishment, and only ‘liquor’ was discussed inside the establishment. There is no evidence to suggest that Mr. Gerry Belliveau had knowledge of the transaction. He did not acknowledge Ms. Belbeck when she said that he was ‘okay’ as Constable Glass returned her car keys. He did not engage in any other conversation with Ms. Belbeck or Constable Glass or take any other action to suggest that he had knowledge of the transaction that had just transpired or that he even heard Ms. Belbeck or that he understood her meaning, if he did hear.

80. The licence holder could not have done anything to prevent these incidents. Furthermore, most of the employees engaged in the illicit activities were considered unsuitable for employment and were dismissed within four months of Mr. O’Mara taking over ownership of the establishment.

81. While the licence holder concedes that Mr. O’Mara knew Mr. Belliveau and Mr. Trask had worked for an ungovernable licensee, besides a single, seriously dated impaired driving conviction, the men had not been convicted of any CCC or LLA offences. Neither man had drug convictions or a history of drug use. The evidence does not support a conclusion that either man failed as managers because they had worked for a “scofflaw” seven years ago.

82. Neither Mr. Trask nor Mr. Belliveau was the focus of the Bunnies investigation. Other than being briefly referred to in the AGCO’s decision in that matter, Mr. O’Mara had no further involvement with either man resulting directly from that investigation.

83. The licence holder requests that the Board dismiss the subsection 45(2) allegations.

Subsection 45(1) of the O. Reg

84. The evidence in respect of this allegation was inconsistent and is insufficient to establish a breach. Specifically, the Licensee argues that:

• Constable Dixon indicated that he and Inspector Owen immediately encountered the man referred to as “Drunk #4” in the washroom, while Inspector Owen testified that he was the last alleged intoxicated person that he and Constable Dixon encountered and it was outside the washroom;
• Inspector Owen testified that Constable Dixon actually operated the bank machine for Drunk #4, when Constable Dixon simply testified that he observed the individual having trouble entering the numbers;
• Inspector Owen was very unclear as to the sequence of encounters with alleged intoxicated persons and, in cross-examination, indicated that “so many people were going in and out”;
• None of the officers could testify as to what was actually said by the persons identified as Drunk #1, #2 and #3, although they testified that each one had slurred speech;
• Officer Dixon, while ultimately indicating that he had an independent recollection, his evidence was generally uncertain and lacked sufficient detail; and,
• Both officers testified that they had never met any of the alleged intoxicated persons before that night and thus had no knowledge of their prior demeanour.

Subsection 30(4) of the LLA and Subsection 41(1) of the O. Reg

85. The licence holder submits that the evidence in respect of alleged breaches of section 30(4) of the LLA and section 41(1) of the O.Reg is insufficient to warrant a finding under either section.

86. The licence holder argues that there is no evidence to contradict the evidence of both Inspector Owen and Constable Dixon that the waitress on duty, Heather Brown, had insisted on examining the alleged young person’s identification. As such, she exercised proper due diligence. Furthermore, Constable Dixon, who has the power of search, failed to search the young person or his wallet for identification, even though he had heard Ms. Brown insist that proper identification had been produced. Neither officer gave any evidence to suggest that Ms. Brown should have been disbelieved; they chose not to follow up.

87. There is insufficient evidence that alcohol was served to the alleged minor at this establishment. Inspector Owen indicated that there was a part-empty glass on the table of “Coke or something”. Constable Dixon testified that he smelled alcohol on the alleged minor’s breath, and admitted that it could have been consume prior to the man’s arrival at the establishment. Neither officer actually saw the alleged minor consume alcohol in the premises.

88. Constable Dixon did not testify that the person with whom he spoke by telephone the next day admitted to being 18 years old. Rather, he said that he spoke to the person and indicated to him that he would be serving him with an offence notice. Inspector Owen testified that Constable Dixon told him that the alleged minor admitted to being 18 year old. This is double hearsay, and is thus completely unreliable and should not be considered. Furthermore, the alleged minor was not present at the hearing to give evidence on behalf of the Registrar and, without the alleged double hearsay admission, there is no evidence connecting the two individuals other than Officer Dixon’s suspicion that they are one and the same person.

Subsection 35(1) of the O. Reg

89. The licence holder submits that the officers did not take any steps to search the kitchen area to determine if sufficient food was present for the preparation of light meals and that the evidence is insufficient to establish the offence.

Registrar’s Reply

90. The Registrar’s representative took issue with the Licensee’s characterisation of the facts and proposed conclusions. In particular Mr. Morris notes there is no evidence that the narcotics transactions were only detectable by a highly trained, undercover drug investigator. Further, the evidence suggests there was no effort made to hide the drug transactions and conversations from the managers. Subsection 45(2) is engaged because the discussion of illegal liquor for drugs took place inside the establishment and the actual transaction took place of the parking lot of the licensed premises and involved the licensee’s staff member and a police officer acting as a patron.

91. In the Registrar’s submission, the employment records are relevant for two reasons: first, to substantiate Mr. O’Mara’s claims as to why the staff was let go; and secondly, to substantiate that Mr. O’Mara was even at the establishment or ever took a hand in running it. Furthermore, since neither Mr. Trask or Mr. Belliveau were called as witnesses, the Board is left with the evidence that Mr. O’Mara hired two managers from an establishment he had just been investigating both as a brothel and as a fraud upon the AGCO as to who was the real owner. That evidence shows that these managers, and not Mr. O’Mara, ran the establishment while staff, the disk jockey, and patrons were dealing and using drugs in the premises. When questioned about his relationship with the managers, Mr. O’Mara was evasive and not credible.

92. The Registrar states that there is no inconsistency between the Registrar’s witnesses concerning the subsection 45(1) allegations. Both witnesses were consistent as to the sequence of events, the only uncertainty was with respect to the number of times certain individuals left and re-entered the establishment.

93. It is not double hearsay but Constable Dixon’s direct evidence that he did a police check on a driver’s licence for the same name and address of the minor which showed the individual to be 18 years of age.

94. Finally, in the Registrar’s submission, given that the lights in the kitchen were out and that Mr. Belliveau responded that patrons could bring something in, no search of the kitchen was required.

Analysis and Findings

Breach of subsection 45(1) of O. Reg - September 16, 2006

95. The Board must determine whether the licence holder ‘permitted drunkenness’ on the licensed premises on this date, contrary to subsection 45(1) of the O. Reg. Detective Constable Dixon and Inspector Owen both gave detailed and credible evidence of the signs and symptoms of alcohol intoxication in the four patrons. The Board accepts their evidence.

96. The Licensee questions the sequence of encounters by the officers with the drunken patrons and what those patrons may have said to the officers. He also quarrels with some minor detail in terms of what may or may not have been done to assist the drunk who was attempting to operate the bank machine. Finally, he claims that Officer Dixon’s testimony was ‘generally uncertain and lacked sufficient detail’. The Board does not accept these arguments. The licensee was not present at the establishment on the night in question. Furthermore, he chose not to call either the bartender who was working that evening or the manager in charge of the establishment to give evidence to refute the officers’ testimony.

97. Therefore, the Board finds the four patrons identified by the officers were drunk at the establishment on September 16, 2006.

98. Next, the Board must determine whether the Licensee permitted the drunkenness in the establishment in each case. The patron need not become intoxicated in the premises before a finding of a breach of subsection 45(1) can occur. Drunkenness simpliciter is a breach of the regulation (see 473954 Ontario Ltd (Wilder’s and the Zoo) supra). Even if these patrons entered the establishment already intoxicated (which the Board does not accept or find), the Licensee or the staff member designated to be in charge of the establishment should have, at the first reasonable opportunity, assessed and removed any person appearing to be intoxicated promptly and appropriately. There is an onus on all Licensees to, at all times, not only prevent but also to deter drunkenness on their premises (see Commercial Tavern supra).

99. In this case, the officers’ evidence is that the manager took no steps to remove intoxicated patrons from the establishment until requested by the officers. Further, the Board accepts the evidence that some of the drunken patrons, once asked to leave, were able to re-enter the premises several times. All of this establishes that the establishment’s response was not only inadequate to the problem of drunkenness that existed on the premises that night, but also that the licence holder did not have sufficient security measures in place to deter drunkenness on its premises. The Board follows the principles enunciated in the Commercial Tavern case in coming to these conclusions.

100. Based on the evidence and for all of the reasons described above, the Board FINDS a breach of section 45(1) of the O. Reg occurred on September 16, 2006.

Breach of subsection 35(1) of O. Reg – November 22, 2006

101. By law, the licence holder is responsible for ensuring that light meals are available for sale to patrons on the licensed premises when liquor is being served. In this case, the Board accepts the evidence of Detective Constable Dixon and Inspector Owen who testified that, although they did not enter into the kitchen, from their vantage point at the establishment’s main entrance they could see into it. They saw no kitchen staff and no food being prepared notwithstanding the establishment was open for business and patrons were being served alcoholic beverages.

102. This evidence is supported by Mr. Gerry Belliveau’s statement that, besides the bartender, there was only one other staff person in the establishment as, “All of the staff had quit”, and “The cook quit last week”. Finally, when asked if any food was available to the patrons, Mr. Belliveau showed the officers a glass case or cabinet containing only chocolate bars and gum and told them that if the patrons wanted something to eat they could bring it in themselves. The Licensee was not present on the night in question and did not tender any evidence to counter that of the officers.

103. There is thus sufficient and credible evidence for the Board to find that on November 22, 2006, light meals were not available for sale to patrons on the licensed premises and that, as such, the Board FINDS the Licensee has breached subsection 35(1) of the O.Reg.

Breaches of subsection 30(4) of the LLA and subsection 41(1) of the O.Reg – February 16, 2007

104. Detective Constable Dixon conducted a police check of driver’s licences for the name and address of the young person who had been in the establishment on February 16, 2007, learned that the individual was 18 years of age, and mailed him a ticket for underage drinking. Although not a certainty, there is a reasonable probability that the person named on the driver’s licence and the person who identified himself to Detective Constable Dixon and Inspector Owen at the establishment was the same person and therefore only 18 years old. In Mr. Belliveau’s presence, Ms. Brown admitted to Inspector Owen that she had served and sold the young man and his friends, “rye and Cokes or rye and gingers”. Neither Mr. Belliveau nor Ms. Brown was called to give evidence to refute this testimony.

105. The Board accepts the officers’ evidence and finds that the person Detective Constable Dixon and Inspector Owen encountered in the establishment, whom Detective Constable Dixon later spoke with by telephone and to whom he mailed the summons, were one-and-the-same person, that is, an underage youth. The Board also finds that this youth had been served alcohol in the establishment. Therefore, the Board FINDS the Licensee breached subsection 30(4) of the LLA.

106. Another issue is whether the licence holder failed to inspect a piece of identification of a person apparently under the age of nineteen years prior to selling or serving liquor to that person. In his submissions, the Registrar said that it was not asking for a finding under subsection 41(1) of the O. Reg. In any event, Inspector Owen testified that the bartender on duty that night, Heather Brown, told him that she asked the youth for identification prior to serving the youth, and his friends, alcoholic beverages. Inspector Owen did not question or challenge what the bartender told him in this regard. Given the Registrar’s position and the fact that the evidence is insufficient to sustain a finding that there has been a breach of this section of the legislation, the Board DISMISSES the alleged breach by the establishment of subsection 41(1) of the O.Reg.

Breaches of subsection 45(2) of the O. Reg - February 10, 2006

107. The numbered company, 1642849 Ontario Ltd., did not hold the licence and was not otherwise in a position to control or manage the to the Atherley Arms Hotel on February 10, 2006. Therefore the Board DISMISSES the alleged breach of subsection 45(2) alleged to have taken place on February 10, 2006.

Breaches of subsection 45(2) of the O. Reg - April 13 and 26, May 12, June 23, and October 10 and 17 (all of 2006)

108. The Board found Detective David Glass’s evidence to be credible. It was fairly presented, adequately detailed, and withstood cross-examination. The undercover officer’s evidence as to the transactions involving controlled substances at the establishment on April 13 and 26, May 12, June 23, and October 10 and 17 (all of 2006) is set out in great detail above. The Licensee tendered no evidence to contradict Detective Glass’s testimony. Mr. O’Mara was not present at the establishment on the dates in question and has no evidence to provide with respect to the illegal transactions Detective Glass described.

109. The Board does not accept that some of the illegal transactions could ‘reasonably’ have been interpreted by on-lookers as more innocent activities, such as the paying of a bar tab or the provision of candy. The Licensee did not tender any evidence to support what thus amounts to pure conjecture on its part. The illegal transactions took place openly at the establishment. Language was used that would have been commonly understood by the owner of an adult entertainment establishment as well as his managers who were experienced in working at such establishments. In addition, Detective Glass testified some of the persons involved in these transactions were subsequently convicted for drugs offences in the criminal courts (e.g. Shelley Belbeck). All in all, the evidence supports the Board’s conclusion and finding that Detective Glass was able to and did conduct the purchase and sale of controlled drugs and/or substances on the premises or in the adjacent areas under the exclusive control of the licence holder on each of the above-mentioned dates.

110. The Licensee argues that the establishment’s parking lot is not an “adjacent area under (its) exclusive control”. The Board rejects this argument. Viewing each October 2006 transaction as a whole and within context, the Board finds that the actual physical exchange of alcohol and drugs, which took place in the establishment’s parking lot, represented only a small part of the participants’ dealings. Significant portions of the transactions occurred in the premises that clearly are under the Licensee’s exclusive control. At least some of the discussions regarding the exchange between Ms. Belbeck, a staff member, and the undercover officer, acting as a patron, took place inside the establishment and while she was on duty. Other parts of those discussions took place in front of and/or involved a management person (i.e. the ‘skinny manager’), again inside the establishment. Again, while inside the establishment and while Ms. Belbeck was on duty, she gave the officer the keys to her vehicle, which was parked in the establishment’s parking lot, so he could put the liquor into it. That parking lot is available for use and is used by its patrons and staff.

111. On the facts of this case, therefore, the Board finds that the parking lot is an extension of the establishment and was under its exclusive control, and that Ms. Belbeck used it as the final place for the alcohol-for-drug transactions that had largely been effected inside the establishment. Alternatively, the Board finds that the physical exchanges of alcohol for drugs which took place in the parking lot were only a minor component of Ms. Belbeck and Officer Glass’s overall dealings on October 10^th^ and 17^th^.

112. The essence of the Licensee’s argument, however, is that notwithstanding the fact that these transactions involving controlled substances occurred, it did not breach subsection 45(2) of the O. Reg because it did not ‘permit’ the holding, sale, offering for sale, selling, distributing or consumption of a controlled drug or substance, as defined in the CDSA as required for a finding. The Licensee argues that to find otherwise would place an unfair and impossible burden of due diligence upon it since the drug transactions that have been identified took an experienced undercover drug officer many months to effect. The Board does not agree.

113. First, the Board believes that the law regarding a potential breach of subsection 45(2) of the LLA is or ought to be similar to that as established for breaches of subsection 45(1) of that legislation, that is, that the holding, sale, offering for sale, selling, distributing or consumption of a controlled drug or substance as defined in the CDSA in a licensed establishment simpliciter can constitute a breach of the regulation. The finding that there has been holding, sale, etc. of controlled drugs and/or substances in a licensed establishment is a serious lapse in a licence holders’ responsibilities. Thus, the Board’s ruling alone in paragraph 109 above could suffice for a finding that this licensee breached the provisions of subsection 45(2) of the O. Reg. But there are more factors the Board has taken into consideration in this case to conclude that this licence holder permitted all or some of activities prohibited by this regulation, as follows.

114. First, the problem of narcotics in this establishment was extensive when assessed using several measures of pervasiveness: it involved the establishment’s staff as well as its patrons; it occurred openly and throughout many areas of the establishment (i.e. at the bar, on the bar floor, at the bar, in the washrooms, in the parking lot); it took place on several occasions over many months following the date the licensee took over the operation of the establishment (with specific narcotic transactions being established by the evidence to have occurred from April until mid-October, 2006, the latter date coinciding with Detective Constable terminating his undercover operation).

115. Additionally, the Board holds that Mr. O’Mara, as the owner and operator of the establishment, either knew or ought to have known that the activities prohibited by subsection 45(2) would or were likely to occur at his establishment for the following reasons:

• The type of establishment: Mr. O’Mara knowingly purchased a bar that features adult entertainment (i.e. strippers);
• The experience levels of the owner and/or the persons charged with the management and control of the establishment in the owner’s absence:
  • Mr. O’Mara was a police officer for over 28 years; more particularly, he was a ‘vice’ squad officer for the last 18 years of his work with the Toronto Police Service. His experience would and should have alerted him to the sorts of potential problems which might occur at an establishment such as the one he acquired and which the legislation seeks to prevent and deter via subsection 45(2) of the O. Reg;
  • Mr. O’Mara, as a vice squad officer, participated in project ‘Northern Greed’ to a sufficient level and degree that he knew or ought to have known that the two managers he hired for his establishment, Mr. Trask and Mr. Belliveau, had previously been managers of an establishment (Bunnies) which had its licence revoked because criminal activities (i.e. prostitution) were undertaken there and because that establishment had perpetrated a fraud upon the AGCO as to who was its real owner. The Board did not believe Mr. O’Mara when he testified that he simply knew Mr. Trask and Mr. Belliveau from “other bars” and that he did not ask either of them why Bunnies’ licence had been revoked. His evidence also was evasive and changed over time in response to questioning relating to the hire of these two men as his managers; he told the Board first that he was unaware of their past involvement with Bunnies and, later, that he had no concerns that these men had previously been managers at that establishment. Mr. O’Mara showed, at best, poor judgment or wilful blindness in hiring these managers. At worst, he demonstrated an undue lack of regard for his responsibilities as a licensee when he told the Board that he did not have any concerns about their past record and when he gave these men the degree of control, which the evidence establishes he gave them, over his business. Mr. O’Mara was rarely present at the establishment and left the day-to-day control over its operations to these two gentlemen.
• Specific actions taken: Mr. O’Mara testified that in the first months of taking over the business he terminated the employment of several staff members. In one instance, he said it was because that person was associated with someone belonging to a motorcycle gang and that this association would impact negatively upon his business. Mr. O’Mara did not provide adequate employment records to substantiate his claims as to why the staff was let go; he testified that he risked wrongful dismissal lawsuits in terminating these employees for various reasons but, in all cases, “without cause”. The Board does not believe it likely that Mr. O’Mara would have taken such a risk. It is not coincidental that all of the staff terminated had also been engaged in the sale of controlled substances to Officer Glass. The Board finds that it is more likely that their termination confirms that Mr. O’Mara was probably aware (or had been made aware by his managers) of the staff persons’ illegal behaviours as regards the sale, etc. of controlled substances in the establishment.

116. The Board is not saying that, in general, former police officers who become owners of licensed establishments will be held to a higher standard than other licence holders. However, in this case, the Board is satisfied that Mr. O’Mara, as principal of the licence holder of this establishment, was or ought to have been aware of the real potential for the subsection 45(2) prohibited activities to occur on the premises.

117. As a result of this conclusion, and in keeping with the test established in Commercial Tavern with respect to subsection 45(1) of the O.Reg, the licence holder must show that it has taken reasonable steps to prevent and/or deter the behaviours prohibited by subsection 45(2) from occurring on its premises. Mr. O’Mara urges the Board to conclude that that he did not ‘permit’ the activities prohibited by that section because the sale of narcotics was not tolerated or condoned in any way as a matter of the establishment’s policy, since neither he nor his managers were implicated in the transactions, and as it took an experienced undercover officer a number of months to pierce the drug sub-culture at the establishment. Notwithstanding their surface appeal, these arguments do not exempt the licence holder from having breached the provisions of the legislation. Certainly, while having a policy, preferably written, against such activities is a positive endeavour and to be encouraged, it is insufficient in and of itself to constitute the ‘prevention’ and ‘deterrence’ that is required of licensees. The evidence must also show that such a policy has been enforced: this means that those in control of the establishment have taken reasonable steps and made reasonable efforts in a timely and on-going fashion to put the policy into effect. This was not done or did not occur in this case.

118. In fact, shortly after acquiring the establishment, Mr. O’Mara took steps to ‘wall in’ the area where the adult entertainment took place in his establishment, thereby making it easier to hide, and conversely, less easy to detect illicit activities, such as those identified in subsection 45(2) of the O. Reg. The Board acknowledges that Mr. O’Mara tried to make and clearly did effect some changes to the establishment after taking over its ownership. The Board concludes, however, that other than the termination of the employment of various staff members, the changes made were directed towards improving the establishment’s financial prospects, and not towards rooting out and preventing the sorts of transactions that Detective Glass was able to undertake there. Even if the changes made were intended, either in whole or in part, to be prophylactic and deterrent in nature, the evidence shows that the management controls were inadequate in as much as the subsection 45(2) prohibited activities continued even after the changes had been put in place.

119. Also, Mr. O’Mara’s evidence alone is insufficient to establish the establishment’s policy against subsection 45(2) behaviour, and the actions it took in furtherance of that policy. Specifically, he testified that he delegated the day-to-day control and management of the establishment to Mr. Trask and Mr. Belliveau. While neither one is implicated in the illegal behaviours that Detective Constable Glass encountered, critically, neither Mr. Trask nor Mr. Belliveau was called to testify at the hearing. Their evidence could have both confirmed Mr. O’Mara’s testimony that the “consumption and/or sale of narcotics by patrons is not tolerated or condoned” and established what reasonable steps, if any, they, on behalf of Mr. O’Mara and the establishment, took to implement that policy. In the total absence of such important evidence, the Board can only and does, in fact, draw a negative inference against the Licensee, that is, that the evidence of Mr. Trask and/or Mr. Belliveau would have contradicted that given by Mr. O’Mara.

120. Accordingly, the Board FINDS the Licensee breached subsection 45(2) of the O.Reg on April 13 and 26, May 12, June 23, and October 10 and 17 (all of 2006).

Conclusion

121. For these reasons, the Board FINDS a breach of subsection 45(1) of the O. Reg occurred on September 16, 2006. The Board also FINDS a breach of subsection 35(1) of the O. Reg occurred on November 22, 2006. Further, the Board FINDS a breach of subsection 30(4) of the LLA occurred on February 16, 2007. As well, the Board FINDS that breaches of subsection 45(2) of the O. Reg occurred on April 13 and 26, May 12, June 23, and October 10 and 17 (all of the year 2006). The Board DISMISSES the alleged breach by the Licensee of subsection 45(2) of the O. Reg on February 10, 2006. Finally, the Board DISMISSES the alleged violation of subsection 41(1) of the O. Reg on February 16, 2007.

122. The Board invites written submissions on penalty from the respective parties. The Registrar’s representative shall serve and file written submissions within fourteen (14) days of the date of this decision. The Licensee’s representative shall have ten (10) days to serve a file a written response. Registrar’s representative may serve and file any reply within five (5) days of receipt of the Licensee’s response. All submissions are to be filed with the Manager, Hearings Department, Alcohol and Gaming Commission at the address on the front page of this decision in accordance with the Board’s Rule of Practice.

DATED AT TORONTO THIS 5^TH^ DAY OF MARCH, 2008

S. GRACE KERR, BOARD MEMBER GUY MAURICE, BOARD MEMBER