Registrar, Alcohol and Gaming Commission of Ontario v. Thorold Winery Ltd O/A R. DiFruscia Winery, 2009 CanLII 69677

ALCOHOL AND GAMING COMMISSION OF ONTARIO

IN THE MATTER OF The:

Liquor CONTROL Act, R.S.O. 1990, c. L.18, paragraph 3(1)(E)

B E T W E E N:

Registrar, Alcohol and Gaming Commission of Ontario

Registrar

-and-

Thorold Winery Ltd O/A R. DiFruscia Winery

Licensee

DECISION ON FINDINGS

Panel: David C. Gavsie, Chair, AGCO

Brian J. Ford, Board Member

Decision Date: October 28, 2009

Hearing Location: Niagara Falls, Ontario

Alcohol and Gaming Commission of Ontario

90 Sheppard Avenue East, Suite 300

Toronto, Ontario M2N 0A4

Phone: (416) 326-0366

Toll Free In Ontario: 1-800-522-2876

Fax: (416) 326-5566

Website: www.agco.on.ca

Appearances

Registrar, Alcohol and Gaming Commission ) Joyce Taylor, Representative

Thorold Winery Ltd, Licensee ) Edward Tonello, Representative

Allegations

1. A hearing into Notice of Proposal (“NOP”) number 16855 dated November 20, 2008 to suspend the Authorization to Operate an On-site Grape Winery Retail Store (the “Authorization”), issued to Thorold Winery Ltd (the “Licensee”), operating as R. DIFRUSCIA WINERY, 75 Ormond Street South, Thorold, Ontario, L2V 4V7, manufacturer’s licence number 17644, on the basis of alleged violations of condition 10 of the Authorization and subsections 3(1)(a) and 3(1)(c) of Regulation 659/00 (“O.Reg 659”) under the Wine Content and Labelling Act, 2000 (the “WCLA”), was held on March 5 and May 8, 2009 in the City of Niagara Falls.

Decision

2. After considering all the evidence and submissions the Board FINDS the Licensee breached condition 10 of the Authorization and subsections 3(1)(a) and 3(1)(c) of O.Reg. 659 under the WCLA. Reasons follow.

Preliminary Matters

3. The Board ordered the exclusion of witnesses on consent of the parties.

4. Ms Taylor submitted the Alcohol and Gaming Commission of Ontario (“AGCO”) Authorization for an Ontario Grape Winery On-Site Retail Store dated February 21, 2005, to R. DiFruscia Winery, which was entered as Exhibit # 1.

Registrar’s Evidence

5. Sheila Gayman is a store and winery auditor with the Liquor Control Board of Ontario (“LCBO”). Ms Gayman explained the LCBO routinely did compliance audits on wineries. She explained that the audits are done on behalf of the AGCO through a Memorandum of Understanding.

6. Ms Gayman explained that the audit consisted of checking sales records, existing inventory and tank blending records. Ms Gayman stated that wine sold in Ontario as Ontario wine (not VQA) could be imported but had to contain at least 30% Ontario wine.

7. The audit verifies all wine made at the previous audit, existing inventory, adds in new wine and wine from Ontario Grapes or imported wine, if allowed. Sales and any disposals are subtracted. The results are compared with the physical count at the time of the audit.

8. Ms Gayman advised the Board that audits are arranged so that they accommodate the schedule of the winery. She also stated that they are flexible and will change an audit date if staff are not available for a valid reason. There are two scheduled audits a year.

9. Ms Gayman noted for the Board that there are 158 manufacturers of wine in Ontario.

10. Ms Gayman stated that sales records for a winery can be made up of written and/or computer records. Blending records are taken by recording what is in a tank by virtue of the records attached to the tank. Blended wines must contain 30% Ontario grapes (wine).

11. VQA wine is made of 100% Ontario grapes. Ms Gayman stated DiFruscia does not produce VQA wine.

12. Ms Gayman stated that the tank records show what went into a particular tank. Generally Ontario grown grapes arrive in the fall during the harvest, but imported grapes can come anytime. Sometimes it comes as juice, as concentrate or as finished wine.

13. She explained a check is made to see where the product came from and if from Ontario, from which farm it was purchased. Ontario grapes are purchased from the Grape Growers Marketing Board. Imported wines are purchased with the authority of the AGCO and Customs and Excise Canada. The amount and the point of entry are identified as well.

14. Ms Gayman stated that an audit was done on October 21, 2008 covering the period was for April 7, 2008 to October 21, 2008. She prepared the audit report. The audit was set up in advance. At the time she was with Mr. John O'Brien, a store auditor who was in training for winery audits.

15. During the audit it was found that the sales records were accurate. However there were no blending records available. As a result, they were unable to verify that there was the prescribed 30% of Ontario content.

16. Ms Gayman stated they were told on October 21^st that the blending records were not available but that they would be produced on October 22, 2008. Mr. O'Brien returned on October 22, 2008 but the records were still not available.

17. Ms Gayman stated that when they asked about the records they were told the lawyer for DiFruscia had the documents.

18. Ms Gayman stated Mr. O'Brien and Mr. John Davis, an LCBO Auditor, returned to the winery on October 23, 2008 and were shown a book that had the tank number and the amount of wine in the tank. However the information and documentation they were looking to indicate the amount blended, contents and percentages, was not available and not provided to the auditors.

19. Ms Gayman stated the blending or tank records should contain enough information to allow the auditors to know if the winery was using imported wine and would also show movement between the tanks and new Ontario wine with the grape growers’ information.

20. Ms Gayman stated the volume of sales should show that 25% of the total annual volume of sales at the one-site retail store is primarily fermented at the site of the retail store however the audit revealed that there was no fermentation of any grape product for the WCLA year 2007. Therefore the store was not compliant.

21. Ms Gayman was not part of the walk through that looked at the inventory in the tank rooms. Mr. O'Brien did the review of inventory in the tank room.

22. Ms Gayman stated the Inventory Summary, entered as Exhibit #3, covered the period of August 1, 2007 to April 6, 2008.

23. John O'Brien is a store and winery auditor with the LCBO, having started winery audits in November 2007. He visited the DiFruscia Winery on October 20, 2008 with Ms Sheila Gayman to conduct an audit.

24. Mr. O'Brien did a physical inspection with Chris Muelli, an employee of the winery, on October 21, 2008. There were no records available.

25. Mr. O'Brien verified what was in each tank by what was listed on the label on the tank. This gave him an indication of the type and quantity of the wine in a particular tank. He made notes of what each tank contained (Exhibit #7).

26. As an example, Mr. O'Brien stated the label on Tank #1 indicated only that it contained 10,000 litres of red wine though it did not indicate what type. He had to ask for that information. He was told that it contained a blended merlot. The labels on the tank only indicated whether the wine in the tank was red or white. As to the amount of wine in a tank he had to read the glass gauge on the tank that shows the number of litres in the tank.

27. Mr. O'Brien stated that some tanks did not have gauges at all. They were just large plastic containers.

28. Tank # 11 was a large plastic pail which contained 13,000 litres of red merlot blend; however there was no number on the tank, no gauge and no indication of what was in the tank.

29. Mr. O'Brien stated there were also two 200 litre pails of white wine though he did not know what kind. He also noted that there was one 4,400 litre pail of chardonnay, having obtained the type of wine from Mr. Muelli. None of the pails had any label on them as to what they contained.

30. Mr. O'Brien stated that Ms Gayman was in charge of the audit and she prepared the report.

31. Mr. O'Brien went back on October 22, 2008 to obtain the inventory and blending records (book). However he was told that the lawyer had the book. He was not shown any records on that date.

32. On October 23, 2008, he and Mr. Davis went back to DiFruscia and were shown a receipt from Fernick Farms for 420 bushels of white grapes (Exhibit #8). When asked if he was ever shown tank records, Mr. O'Brien said he had never seen tank records for Difruscia Winery. The only record he saw was a book containing information as to the tank number and amount in the tank; it had no information as to blending.

33. Under cross-examination, Mr. O'Brien stated he had been in training for 11 months and had done 20 audits at wineries before October 8, 2008.

34. Mr. O'Brien also reiterated that the book he was shown only had information as to the tank number and the amount in the tank.

35. Mr. O'Brien was asked about Tank # 9 and he stated the tank only contained juice. When asked if it was fermenting he stated that he was not told that it was.

36. On re-direct, Mr. O'Brien was asked what type of juice was in the tank and he said he did not know nor did he care.

37. Michael Roberts is an auditor with the LCBO and has been one since 1994. Mr. Roberts was shown Exhibit # 9, and Audit report for August 1, 2007 to April 6, 2008 and asked if he recognized it. He replied that he signed it so he must have prepared it.

38. The audit report for the period of August 1, 2007 to April 6, 2008 stated that there were no tank, blending, or bottling records available. He also noted in the report that there was a lack of cooperation from the winery staff. The report noted the date of the audit as April 7, 2008.

39. Mr. Roberts clarified for the Board the comment was made because of the inability to get records for him. He tried to get them and made numerous phone calls to do so.

40. Mr. Roberts stated the visit to the winery had been booked in advance through a brother-in-law of the owner. He stated that he was told the sales records were available.

41. Mr. Roberts remembered Chris (Chris Muelli) only by his first name. Mr. Muelli was not able to show him any records with respect to bulk and blending records and that he did not see them at any time after that. There were no bottling records either. Mr. Roberts clarified that the bulk records refers to tank records.

42. Mr. Roberts stated that he stamps any records that he has seen, usually directly to the right or directly under the last line. The stamp has his initials, MGR, and the letters IAS (Internal Audit Service). He also noted that all auditors have a stamp.

43. Mr. Roberts stated he, Ms Gayman, and Mr. Davis are the principal auditors and that Mr. O'Brien is in training.

44. Mr. Roberts went back to the winery on April 10, 2008 and Mr. Muelli was unable to get the records from the brother-in-law for him. He noted that Mr. Muelli is the only person he deals with and that he was very cooperative. The uncooperative remark, he reiterated, was to do with the lack of records. However Mr. Roberts said that the sales records were satisfactory.

45. Under cross-examination, when Mr. Roberts was shown a brown covered book labeled “#9714” and asked if he had seen it before, he replied that he may have but could not recall seeing it.

46. Mr. Roberts clarified that it was the son-in-law not the brother-in-law with whom he dealt.

47. On re-direct, Mr. Roberts stated if there was no blending during the audit period he would need the bottling records to verify what was going on. He also needed to see if there was any bulk buying as well. He stated, “I need records to determine what is going in and out of the tanks.”

Licensee’s Evidence

48. Rocco DiFruscia is the owner of DiFruscia winery, is 81 years old and has lived in Thorold since 1951. He has been in the grape and juice business from 1968 to the present. He sells juice and grapes for home made wine at his retail store.

49. Mr. DiFruscia has lived over his grocery store since 1978 or 1980.

50. Mr. DiFruscia obtained a licence for the manufacture of wine and retail sale of wine.

51. Mr. DiFruscia stated that Chris Muelli has been his bookkeeper for approximately 20 years. His son-in-law, David Glencross, also did the books for a time and helped in the store.

52. Mr. Glencross started helping with the books when Mr. Muelli became sick. He also helped in the winery, but Mr. DiFruscia stated that he no longer does.

53. Mr. DiFruscia does remember the LCBO auditors coming to his establishment but he does not remember when.

54. On cross-examination, Mr. DiFruscia stated that when Mr. Muelli could not keep the records because he was sick, his son-in-law kept the books.

55. Mr. DiFruscia stated he sells wine in 750 millilitre (“ml”) bottles and 16 litre pails.

56. He reiterated that Mr. Muelli and Mr. Glencross were supposed to keep the records.

57. The Board notes that Mr. DiFruscia was somewhat confused when answering question regarding recordkeeping. This confusion can be attributed to his age and his understanding of English.

58. William Longo, was born in St. Catharines and served on the Thorold Town Council in 1976 and was the Mayor of Thorold for nine years and a Regional Councillor for three terms.

59. Mr. Longo stated he has known Mr. DiFruscia for a long time, since 1978, and sees him occasionally throughout the year. He stated the Mr. DiFruscia sells grapes and juice in the fall and also operates a winery.

60. Mr. Longo stated that Mr. DiFruscia has a sterling reputation in the community and is a real asset to the community. He works hard in the community and supports it in many ways. He is a very giving person.

61. Mr. Longo stated that in his dealings with Mr. DiFruscia, Mr. DiFruscia’s honesty and integrity have been above reproach. Mr. DiFruscia is a very honest and truthful person who has invested considerably back into the City of Thorold. He is a pillar of the community.

62. David Glencross is married to Mr. DiFruscia’s daughter. Mr. Glencross moved to St. Catharines in 2005 and helped out in Mr. DiFruscia's store in Thorold. The store is described as a grocery store and winery. Mr. Glencross stated the store is the core of Mr. DiFruscia business. He also noted that his father-in-law lived above the store.

63. Mr. Glencross stated that Mr. DiFruscia ran the winery himself and only brought in seasonal people to help out. He also pointed out that Mr. DiFruscia works 12 hours a day, seven days a week, at the store and winery.

64. Mr. Glencross worked at the winery out of an obligation to his father-in-law. He helped out as needed and was not paid. He started at the store and winery in September 2005.

65. In 2005 when he started helping at the store, Mr. Muelli was helping his father-in-law with the record keeping with respect to the sales and AGCO/LCBO records. Mr. Muelli worked for his father-in-law as his bookkeeper. During that time period Mr. Muelli was sick and was in and out of the business as he could not handle a full work load. Mr. Muelli handled all of the paper work.

66. During this period, Mr. Glencross started to help out with the monthly reports and sales of the business. He had no previous experience in this area, however Mr. Muelli gave him some guidance in keeping the records.

67. Mr. Glencross spent most of the time keeping records of the tanks and bulk wine. He maintained a book on volumes for each tank and if the wine was moved where it went i.e. to bottles.

68. Mr. Glencross made entries in a book and he was the only one who used that particular book. No one else made entries. He kept track of the transfer of wine from tank to tank. He also recorded the movement of all bulk wine.

69. Mr. Glencross kept records until August 2007. In August 2007 he got a job and would go back and assist from time to time. He recorded about 20 movements of wine over the period of two years. He also noted that Mr. DiFruscia did not bottle a lot of wine.

70. Mr. Glencross stated Mr. Muelli was getting better in August 2007 and started to be at the winery more often and that he himself could not be there on a day-to-day basis. He gradually withdrew from working at the winery and store.

71. Mr. Glencross stated there was no official passing off to Mr. Muelli of information with respect to the records he kept during the previous two years. After August 2007 he did not record the bulk movement of wine and he did not inform Mr. DiFruscia that he was not keeping the records. He assumed Mr. DiFruscia knew he was not keeping the records.

72. Mr. Glencross eventually told the owner when he learned about the problems. He kept the book with the records that he recorded with him and did not leave it with Mr. DiFruscia.

73. Mr. Glencross stated that there was no office at the store or winery and no place to store documents and he felt the documents were safer with him. If they were needed they could get in touch with him.

74. Under cross-examination, Ms Taylor asked Mr. Glencross about the entry in his records (Exhibit #10), noting “Tank 1, Cap 10 K” at the top of the page. She also noted on Feb 2/05 there was a notation of “+6200 L” (litres) and that on May 14/06 there was a notation of “-5004 L” and also “-178” (destroyed ) leaving + 1,196 L (litres).

75. Ms Taylor asked what the notations meant and Mr. Glencross responded it was a record of the wine moving in and out of the tank.

76. Mr. Glencross stated the last entry was on September 3, 2006. There were no measurements between September 3, 2006 and August 2007. Ms Taylor noted it was the same for all tank numbers 1 through 10 and Mr. Glencross agreed.

77. Mr. Glencross stated his father-in-law was a very hard working person, spending long hours in the store and winery. However he did not spend much time on paper work nor did he have the patience for it.

78. Mr. Glencross stated that he father-in-law directed all the operations. He gave direction as to what wine was moved from tank to tank. Mr. Glencross relied on his father-in-law to tell him what he was doing regarding the movement of wine. If he was not told he had no way of knowing.

79. Mr. Glencross started the book when he took over from Mr. Meulli who had previously been keeping records. He then said he got a full time job in 2007 and was not around the store and winery on a regular basis.

80. Mr. Glencross was asked about Exhibit #11 which was a loose sheet from Exhibit #10. He stated that the sheet was not in his hand writing.

81. Mr. Glencross knew how much wine was in each tank and he could estimate how much was left after bottling by counting the number of bottles.

82. With respect to the amount of spillage, he relied on his father-in-law to inform him of that amount. He stated his father-in-law would tell him that he had bottled and that Mr. Glencross would then go and count the bottles and pails of wine and estimate what was left in the tank.

83. Mr. Glencross stated that his father-in-law would transfer wine between tanks, did not keep track of what he had done and that it would be up to Mr. Glencross to figure it out.

84. When asked about Exhibit # 4, which is a copy of an application to import wine in bulk, which shows that there was 18,927 litres imported. Mr. Glencross stated that they only received 16,542 litres.

85. When questioned with respect to Exhibit # 5, entitled “Bulk Wine Reconciliation,” he stated that Poly 1 had 8,271 litres of new California Cabernet Sauvignon and Poly 2 had 8,271 litres of new California Cabernet Sauvignon as well. He stated that the California Cabernet Sauvignon was purchased to be used to blend wines. He further stated that the blending had to be a 70% to 30% (Ontario) blend.

86. Mr. Glencross does not know what happened to the California Cabernet Sauvignon.

87. Mr. Glencross stated in response to a question with respect to the 2008 audit, that he was not there for the audit.

88. Mr. Glencross reiterated his father-in-law (Mr. DiFruscia) did not do paperwork nor did he check his work as he had confidence in Mr. Glencross.

89. Mr. Glencross was questioned about Exhibit #12A and Exhibit # 12B. He responded that Exhibit #12B was in his hand writing and was a page from the black book, Exhibit # 10. He further stated that Exhibit # 12B showed what was bottled. It was an inventory sheet.

90. When Mr. Glencross was asked what were the calculations on the right side of the paper, Exhibit # 12B, he stated he did not know what they were.

91. In response to questions about Exhibit # 12A, Mr. Glencross stated that he was not sure what the figures on the sheet were. He stated that the reference “T 13, 500 L W” was Tank 13, 500 litres of white wine. He stated that he did not know when the notations were made.

92. When asked where the records were kept, Mr. Glencross stated that his father-in-law did not have an office at the winery. He stated he only had a file cabinet and that is where he kept the black book. He clarified that the book was sometimes in the cabinet and sometimes with him.

93. Mr. Glencross stated that sometimes his father-in-law looked at the book but not always.

94. Mr. Glencross stated that after the fall of 2007 he was not keeping track of what was being done at the winery.

95. In response to Board questions, Mr. Glencross stated he started records in February 2005.

96. Mr. Glencross stated that Mr. Muelli was there from time to time during the period that he kept records. Mr. Muelli did the record keeping for the audit periods and had showed him how to do LCBO paper work.

97. Mr. Glencross did LCBO reports, AGCO reports and bookkeeping for the grocery store.

98. Christopher Muelli lives in Thorold and went to Niagara College where he took hotel food services and accounting. Mr. Muelli has been working for Mr. DiFruscia since 1985.

99. Mr. Muelli stated the business was a grocery, grapes and grape juice business when he first started. Over time, the store got bigger and went into the winery business in April 2005.

100. Mr. Muelli stated the DiFruscia winery is a one man show run by an 81 year old man (Mr. DiFruscia) who works 13 1/2 hours a day, seven days a week.

101. Mr Muelli stated after the winery started he filled out monthly reports for the AGCO and LCBO, noting that Sheila Gayman helped him out. Mr. Muelli has known David Glencross since 1985.

102. Mr. Muelli stated that Mr. Glencross moved to the Thorold area in 2005 and started helping out. At the time Mr. Glencross was looking for a job.

103. Mr. Muelli became ill around 2005 and was diagnosed with cancer in 2006. He was not well for most of 2005 and was not up to doing the job at DiFruscia. During the time of his illness he appreciated Mr. Glencross’ help.

104. Mr. Muelli stated at first Mr. Glencross helped in the grocery business with the bills and inventory, while he did the more complicated paper work. Mr. Muelli stated Mr. Glencross phased out of the work in September 2007 when he got a day job.

105. From 2005 through to August 2007, Mr. Muelli did not show up at work regularly as he was undergoing chemotherapy treatments. He was also going through some family problems during this period. He got better in the fall of 2008.

106. Mr. Muelli stated when Mr. Glencross left nothing was done and Mr. Muelli unfortunately assumed Mr. Glencross would continue after August 2007. Mr. Muelli stated that Mr. Glencross helped out periodically with the crushing of grapes. However Mr. Glencross never told him he was not doing the books anymore.

107. Mr. Muelli, in response to a question about the relationship between Mr. Glencross and Mr. DiFruscia, stated he was not sure if there was a falling out between the two.

108. Mr. Muelli stated there was no blending done between August 1, 2007 and April 6, 2008 and there were no blending records between April 7, 2008 and October 20, 2008.

109. M. Muelli stated there was one blending at the end of September 2008. The blend was 30% Ontario wine added to the California Sauvé purchased from the U.S.

110. Mr. Muelli was shown Exhibit #8 (the receipt from Fernick Farms) showing the purchase of 420 bushels of white grapes dated October 6, 2006, which he stated were blended with the Cabernet Sauvé grapes purchased in 2006. The blending took place in 2008.

111. He was then shown Exhibit # 4, an application to import wine in bulk, which was put into tanks and topped off with Ontario wine. He stated the wine associated with Exhibit # 4 was blended with the grapes associated with Exhibit # 8.

112. Mr. Muelli stated Ms Gayman asked for the blending records on October 20, 2008. They were not produced at the time as they had been misplaced. They were produced to Mr. Davies and Mr. O'Brien three days later on October 23, 2008.

113. When asked what records were produced, he stated he produced the invoice, Exhibit # 4, and the receipt from Fernick Farms, (Exhibit # 8), and told Mr. O'Brien and Mr. Davies the grapes went into Tanks 11 and 12. Ontario grapes were added to the California Cabernet Sauvignon. He then said that they added 30% to the poly tank.

114. Mr. Muelli stated the LCBO inspectors knew what wine was in the poly tanks and he said they were satisfied that it was 30%.

115. When asked about the period between August 1, 2007 and April 6, 2008, Mr. Muelli stated that Mr. Roberts showed up on April 6, 2008 and that it was explained to Mr. Roberts that some bottling was done. The wine was put in bottles and pails in November 2007. He explained it to Mr. Roberts and he stamped the book.

116. Mr. Muelli was shown Exhibit # 6, bottling records, and explained the entry was made in November 2007. It shows there were 2,100 red bottles (750 ml) of wine bottled and 250 16 litre pails of white bottled and a further 180 16 litre pails of red.

117. These records were shown to Mr. Roberts and he was fine with them according to Mr. Muelli. Mr. Muelli also stated that between August 1, 2007 and April 6, 2008 there was no blending done.

118. Mr. Muelli stated there were no tank records for the period Aug. 1, 2007 and April 6, 2008. He did not keep any records and assumed that Mr. Glencross did, but he learned that he had not.

119. Mr. Muelli stated that Exhibit # 3 shows an apparent shortage of 25,125 litres however it is in fact an excess. Mr. Muelli stated he made an error. On Exhibit # 7, Tank 6 showed 13,000 litres of merlot when it in fact was not wine but juice. The other error was that there were two poly tanks with 4,400 litres of red which have been referred to as new.

120. Exhibit # 3 should have been reduced by 13,000 litres as it was juice and not wine according to Mr. Muelli. He stated there was an error in calculation.

121. Mr. Muelli stated the white grapes (Exhibit # 8) were added to Poly 1 and Poly 2 were not calculated and that, plus the 13,000 litres of juice, accounts for the apparent shortage problem.

122. Under cross-examination, Mr. Muelli was asked to show where in Exhibit # 13 there were errors made and he stated it does not show errors.

123. When shown Exhibit # 8, the Fernick Farms receipt for 400 bushels of white grapes plus 20 bushels, and asked when the grapes were crushed and who crushed the grapes, he stated he did not know.

124. Mr. Muelli stated grape juice is kept cold and he doesn't know what happens to it. He also stated that the wine maker is Mr. DiFruscia and that he decides what goes into tanks and when.

125. Mr. Muelli stated Mr. DiFruscia's brother and other family members help out.

126. Mr. Muelli only keeps records. Mr. DiFruscia tells him what is done and then he records it. He started keeping records in October 2008. Mr. Muelli started his own book of records because Mr. Glencross wanted to keep his book.

Registrar’s Submissions

127. In her written submissions, Ms Taylor submitted that this hearing is all about tracking wine throughout the wine-making process in accordance with the WCLA. It is the Registrar’s position that the Licensee failed to keep proper records to show the movement, racking, processing, blending and bottling of wine during two audit periods covering August 1, 2007 through to October 20, 2008.

128. The evidence before the Board is that the Licensee had tank records maintained by Mr. Glencross up to approximately August 2007. The LCBO, on behalf of the Registrar of the AGCO, conducted audits at the Licensee’s winery on August 1, 2007, April 7, 2008 and October 21, 2008. The audit period for each audit ended on the day before the audit was conducted. Mr. Muelli prepared the tank records that were used for the October 21, 2008 audit. One issue before the Board is whether there were tank records between August 1, 2007 and October 20, 2008. It appears to be the Licensee’s contention through the presentation of the evidence that such records were not necessary in order to track the movement of wine throughout the processing that took place during this period. It is the Registrar’s position that these records were clearly required pursuant to O.Reg 659/00 under the WLCA and that there was a considerable amount of processing and movement done by Mr. DiFruscia in respect of his wine which he did not record.

129. In order to clearly display the magnitude of the problems with the Licensee’s records, Ms Taylor prepared a table showing what was in each of the Licensee’s bulk tanks at four relevant periods of time. The first column shows the final tank information found in Mr. Glencross’ records, (Exhibit # 10), which he maintained to August 2007. The second column shows the tank information from the August 1, 2007 LCBO audit and the third column shows the tank information from the April 7, 2008 LCBO audit. This information is taken from the second page of Exhibit # 5, entitled “Bulk Wine Reconciliation.” The fourth column shows the tank information found in Mr. Muelli’s records, but does not take into account any entries after October 20, 2008. This information is taken from Exhibit # 15. All amounts are shown in litres.

Tank	David Glencross	LCBO July 31/07	LCBO April 6/08	Christopher Muelli
1	4,800 merlot	4,800 merlot	10,000 rose blend	10,000 merlot
2	10,000 merlot	10,000 red blend	10,000 red blend	10,000 merlot
3	2,679 merlot	2,676 red blend	10,000 white blend	10,000 merlot
4	13,000 merlot	13,000 red blend	Nil	13,000 merlot blend
5	13,000 merlot	13,000 red blend	Nil	13,000 merlot blend
6	13,000 merlot	13,000 red blend	13,000 rose blend	Nil*
7	13,000 merlot	13,000 red blend	13,000 white blend	12,000 chardonnay blend
8	10,251 white	2,841 white blend	13,000 red blend	4,000 merlot blend
9	8,182 red	10,000 red blend	8,000 red blend	Nil
10	13,125 “new wine red”	13,125 red blend	10,000 red blend	19,000 cabernet sauv.
11	8,271 Calif cab sauv	8,271 Calif cab sauv.	10,000 red blend	13,000 cab sauv blend
12	8,271 Calif cab sauv	8,271 Calif cab sauv	10,000 red blend	13,000 cab sauv blend
13	4,750 white	4,750 white blend	Nil	Nil (“personal”)
14	Nil	Nil	Nil	2,200 white
15	Nil	Nil	Nil	2,200 red
Total Bulk Wine	122,329	116,734	107,000	121,400

*Note: Exhibit 15 shows 13,000 litres merlot blend, however Mr. Muelli testified that this was incorrect and that the tank contained juice, not wine.

136. The evidence has shown that there were no records of bulk wine movements kept by the Licensee between August, 2007 and October, 2008, when Mr. Muelli prepared his records in anticipation of the LCBO audit on October 21, 2009. (The records were actually shown to the LCBO auditors on October 23, 2008.)

137. For the Licensee’s apparent contention that these records were unnecessary, then the entries for each bulk wine tank in each of the four columns would be same across the row for the particular tank. For example, for Tank 1, the statement “4,800 merlot” should appear in all four columns spanning the audit periods, not just the first two. This is clearly not the case. As is shown in the table above, it is clear that there was considerable movement of wine between tanks and removal of wine from the bulk storage during this period of time. Mr. DiFruscia testified that he moved wine in order to rack it, he moved wine in order to remove sediment, and for other steps in the process of the wine before bottling. All of these movements, be they for racking or processing or bottling, were required to be recorded in the tank records, but the evidence shows that Mr. DiFruscia did not keeps these records during the relevant time period.

138. Looking at movements out of the tanks, on a tank by tank basis, we see the following:

Tank 1: 10,000 litres of rosé wine was removed from this tank between April 6, 2008 and October 20, 2008.

Tank 3: 2,676 litres of red blend was removed before April 6, 2008 and subsequently 10,000 of white blend was removed before October 20, 2008.

Tank 4: 13,000 litres of red blend was removed between August 1, 2007 and April 6, 2008

Tank 5: 13,000 litres of red blend was removed between August 1, 2007 and April 6, 2008

Tank 6: 13,000 litres of red blend was removed between August 1, 2007 and April 6, 2008, and 13,000 litres of rosé blend was subsequently removed after April 6, 2008 but before October 20, 2008

Tank 7: 13,000 litres of red blend was removed between August 1, 2007 and April 6, 2008 and 1,000 litres of white/chardonnay blend was removed after April 6, 2008 but before October 20, 2008

Tank 8: Overlooking the discrepancy between Mr. Glencross’ records and the LCBO audit records from the same period, 2,841 litres of white blend was removed between August 1, 2007 and April 6, 2008 and 7,000 litres of red blend was subsequently removed after April 6, 2008 but before October 20, 2008

Tank 9: 2,000 litres of red blend was removed between August 1, 2007 and April 6, 2008 and a further 8,000 litres of red blend was removed after April 6, 2008 but before October 20, 2008

Tank 10: 3,125 litres of red blend was removed between August 1, 2007 and April 6, 2008

Tank 13: 4,750 litres of white blend were removed between August 1, 2007 and April 6, 2008

139. Total movements out of bulk tanks over this period of time totals 116,392 litres of wine removed without any records. There is no information respecting when the removals took place, where the wine was moved to – whether it was moved to another tank for racking or processing or whether it was bottled. Of all the wine removed, 23,000 litres of rosé blend wine is completely unaccounted for. This wine completely disappears between April 6, 2008 and October 20, 2008 – a time period when, according to the Licensee, there was no bottling taking place.

140. The Licensee testified that there was one bottling in November 2007. During the November 2007 bottling, there were 2,100 750 ml bottles of red wine bottled, which accounts for 1,575 litres of red wine. There were 180 16L pails of red wine bottled, accounting for a further 2,880 litres of red wine. And there were 250 16L pails of white wine bottled, accounting for another 4,000 litres of white wine. Total litres of wine bottled in November 2007: 8,455 litres.

141. The movement into the bulk tanks during this time period are as follows:

Tank 1: a minimum of 5,200 litres of wine before April 6, 2008 and 10,000 litres of merlot before October 20, 2008**

Tank 3: 10,000 litres of white blend before April 6, 2008 and 10,000 litres of merlot before October 20, 2008

Tank 4: 13,000 litres of merlot blend was added between April 6, 2008 and October 20, 2008

Tank 5: 13,000 litres of merlot blend was added between April 6, 2008 and October 20, 2008

Tank 6: 13,000 litres of rosé blend were added before April 6, 2008

Tank 7: 13,000 litres of white wine were added between August 1, 2007 and April 6, 2008

Tank 8: 13,000 litres of red blend added between August 1, 2007 and April 6, 2008

Tank 10: 9,000 litres of cabernet sauvignon added between April 7, 2008 and October 20, 2008+

Tank 11: 1,729 litres of wine added between August 1, 2007 and April 6, 2008. A further 3,000 litres of wine added between April 7, 2008 and October 20, 2008

Tank 12: 1,729 litres of wine added between August 1, 2007 and April 6, 2008. A further 3,000 litres of wine added between April 7, 2008 and October 20, 2008

Tank 14: 2,200 litres of white wine between April 6, 2008 and October 20, 2008

Tank 15: 2,200 litres of red wine between April 6, 2008 and October 20, 2008

**Ms Taylor has given the Licensee the benefit of the doubt and assumed that the 4,800 litres of merlot became part of the 10,000 litres of rosé that was in the tank on April 6, 2008. Otherwise, the removal of another 4,800 litres of merlot and the addition of another 10,000 litres of rosé is not accounted for.

+Ms Taylor has also given the Licensee the benefit of the doubt and assumed that the 10,000 litres of “red blend” from April 6, 2008 became part of the 19,000 litres cabernet sauvignon that was in the tank in October 2007. Otherwise the removal of another 10,000 litres of red blend and the addition of another 19,000 litres of cabernet sauvignon is not accounted for.

142. In respect of both summaries, to give the Licensee the benefit of the doubt, Ms Taylor assumed that for Tank 2 the references to “merlot” and “red blend” as set out in the different records, all refer to the same wine, although the Licensee’s records do not indicate that this wine was blended, while the LCBO’s records do.

143. Respecting Tanks 11 and 12, these tanks contain the cabernet sauvignon wine imported by the Licensee from California in April 2007. This wine was required to be blended with at least 30% wine from Ontario grape products, in accordance with section 2(2) of O.Reg 659. The Licensee’s evidence, through Mr. Muelli, was that the California wine was blended in September 2008. However, a comparison of the available records show that over 1,700 litres of wine was added to each of Tanks 11 and 12 between April 7, 2008 and October 20, 2008. Furthermore, there are no blending records showing how many litres of which wine, from which grapes, stored in which bulk tank was added to these tanks on which date during each of the two relevant periods of time. A receipt for 420 bushels of white grapes in 2006 is not a blending record. Therefore, the Licensee breached condition 10 of the Licensee’s Winery Retail Store Authorization, as the Licensee did not provide the blending records, which the LCBO auditors required on behalf of the AGCO, in order to conduct their audit for the AGCO.

144. Furthermore, a receipt for 420 bushels of white grapes purchased in 2006 is not a record of the quantity of grape product produced from grapes grown in Ontario. According to Mr. Muelli, these grapes were fermented in 2008 however, there is no record of the grape product (namely wine) produced from these Vidal grapes, purchased in 2006. This is a breach of section 3(1)(a) of O.Reg 659, as there is no record which specifies what grape product was produced from the Ontario Vidal grapes, nor is there any record of where that grape product was kept during the audit periods.

145. It is also the Registrar’s position that the 420 bushels of white wine grapes cannot account for the volume of wine that was blended with the California cabernet sauvignon. The Ontario Vidal grapes were purchased in October 2006. Exhibit 10, which is Mr. Glencross’ records, do not show any increase of anything in the area of 9,548 litres of white wine (the total amount added to Tanks 11 and 12) during the period from October 2006 to April 2008. The only “new wine” which was acquired in that period was in Tank 9 and was red wine, not white. If the Fernick Farms grapes were indeed fermented into the Ontario wine added to Tanks 11 and 12, then it had to have come into existence during this period, because by April 6, 2008 over 3,400 litres of that wine had been added to the California wine. However, the few records that are available do not support this theory. Mr. Glencross’ records go up to August 2007. Grapes from the 2006 harvest would likely have been fermented by August 2007. Yet there is no record of any increase by anything close to 10,000 litres of Ontario white wine in Mr. Glencross’ records during this period of time. And there are simply no records at all from August 2007 to April 2008. Therefore on a balance of probabilities, it is unlikely that any wine from the Fernick Farms grapes was blended with the California wine and there is no record of any other Ontario wine being blended with the California wine. This is in breach of section 2(2) of O.Reg 659.

146. There is also the further mystery of what happened to approximately 2,385 litres of California cabernet sauvignon. Exhibit 4 shows that 18,927 litres was imported, but only 16,452 litres ever appear in the bulk wine records. If this wine was not blended until September 2008 (for which there is no record), what happened to the other 2,385 litres that was imported? There is no evidence that this missing wine was blended with any Ontario wine, or wine from Ontario grape product.

147. Respecting the bottling records, the Licensee stated that it only bottled once during the audit periods, in November 2007. The Licensee claims that Exhibit # 6 is the bottling records. However, there is nothing in Exhibit # 6 which states that these are bottling records. Michael Roberts, who commenced the audit of April 7, 2008, testified that he reviewed the records on the opposite side of the page which were the sales records. He testified that he stamped that page because he reviewed it. However, Mr. Roberts testified that he was never shown this page as the bottling records and he did not stamp it. Even if this had been shown to Mr. Roberts, there is nothing to indicate what dates the bottling took place. Was all of the bottling done on one day? Was it done over a series of days? Was the white bottled on a different day from the red? Were the pails bottled at the same time as the 750ml bottles? None of this information can be gleaned from the meager record that constitutes Exhibit # 6.

148. Furthermore, there is a lot of wine which left the bulk storage area and which was not subsequently accounted for. There are 23,000 litres of rosé blend wine that was present on April 6, 2008, but had disappeared by October 20, 2008. There is nothing to account for the disappearance of this wine from the winery. There are no bottling records and there are no transfer records showing the bulk movement of wines or cased goods between wineries.

149. In Tank 7, 13,000 litres of merlot became 12,000 litres of chardonnay blend between July 31, 2007 and October 20, 2008. While this period covers the bottling that took place in November 2007, those “records” still only account for a total of 8,455 litres of wine, of which only 4,455 litres was red wine. This is a far cry from the 13,000 litres that were in Tank 7 at the beginning of these audit periods. Another 7,000 litres of red blend left Tank 8 between April 6, 2008 and October 20, 2008. While at the same time 8,000 litres of red blend disappeared from Tank 9 after April 6, 2008.

150. Between July 31, 2007 and April 6, 2008, 4,750 litres of white wine disappeared from Tank 13, even though the Licensee’s bottling records show that only 4,000 litres of white were bottled. The missing litres of white wine are equivalent to 1,000 bottles of wine. Another 2,676 litres of red blend / merlot was removed from Tank 3 and replaced with 10,000 litres of white blend during this period. From Tanks 4 and 5 a total of 26,000 litres of red blend was also removed. Just looking at the bulk wine totals, between August 2007 and April 6, 2008, the Licensee’s total bulk wine dropped by 9,734 litres or 15,329 litres, depending on whether one uses the LCBO numbers from August 1, 2007 or Mr. Glencross’ numbers which he testified were accurate to August 2007.

151. As the Licensee maintains that 8,455 litres are accounted for from the bottling “records” of November 2007, this leaves at least 1,279 litres of wine that left the bulk wine storage without a bottling record (using the LCBO numbers), or 6,874 litres of wine that left the bulk wine storage without a bottling record (using Mr. Glencross’ numbers). 1,279 litres of wine equals approximately 1,705 bottles of wine. This is not an insignificant amount. Therefore, it is the Registrar’s position that the Licensee is also in breach of condition 10 of the Winery Retail Store Authorization by failing to provide the bottling records for the relevant audit periods from August 1, 2007 to April 6, 2008 and April 7, 2008 to October 20, 2008.

152. It is the Registrar’s position that the evidence of Mr. Glencross and Mr. Muelli was largely hearsay. They did not make any of the wine, they did not process any of the wine, they did not make any of the decisions respecting the wine and were not present during the bottling. The person who really knows what went on is Mr. DiFruscia and he did not give any evidence respecting what did take place during these time periods. It is the Registrar’s position that the Board must take into account that most of the Licensee’s evidence was hearsay in assessing what weight to put on that evidence.

153. In summary, this Licensee’s records do not provide any approaching the information that is required. The records are at best in disarray and at worst non-existent. As the winemaker, the owner of the winery and the person who, by all accounts, actually does the majority of the labour involved in the winemaking, it was Mr. DiFruscia’s responsibility not only to ensure that someone was keeping the records, but to keep them himself if his staff member cannot be present when he does the racking, processing, blending or bottling. He knew that he had to keep track of his bulk wine containers, how many of them and how much wine is moved on which date, but he failed to do so. Having failed to do so, it is the Registrar’s submission that findings in accordance with the NOP are warranted respecting all of the allegations.

Licensee’s Submissions

Background

The Winery

154. The winery began business operations on April 1, 2005. LCBO witnesses testified that it has small sale volume, perhaps the smallest in Ontario. Mr. Muelli, Mr. DiFruscia’s bookkeeper of 25 years, testified that all audits previous to the NOP passed successfully, the most recent being July 31, 2007, a fact supported by the NOP that alleges infractions commencing August 1, 2007.

Rocco DiFruscia

155. The Licensee principal, Rocco DiFruscia, age 81, is a one-man operation who works without staff, lives alone in a building that houses his grocery store and winery. He has lived and worked in Thorold since the early 1950’s, including his present location for more than 20 years. Bill Longo, the former mayor of Thorold and councillor in the Regional Municipality of Niagara, Rocco’s son-in-law, Mr. Glencross and Mr. Muelli testified that Mr. DiFruscia is hard-working and without previous trouble with the law.

Chris Muelli

156. Age 57, married with two children, born in Thorold and spent most of his life in that general area. As Mr. DiFruscia’s bookkeeper since 1985, he assumed on a part-time basis, all responsibility for the winery administration, i.e., the “paperwork”. About August 2005 health and family issues began to debilitate him from performing his work at the winery. For the following two years he was somewhat able to maintain blending, sales and bottling records while Mr. Glencross maintained tank records. About September 2007 Mr, Meulli’s health and family issues somewhat subsided, thereby enabling him to spend more time attending to winery administration.

David Glencross

157. Age 44, married with two children, born in the St. Catharines area, in 2005 he moved with his family from Ottawa to St. Catharines. While looking for employment, he began to assist his father-in-law, Mr. DiFruscia, in operation of the grocery store and winery. Mr. Glencross was not officially employed, had no fixed hours or duties, received no compensation, but informally assisted while seeking employment. About the time of Mr. Glencross’ said commencement of involvement with his father-in-law, Mr. Muelli became somewhat debilitated as aforesaid, and unable to fulfill all of his administrative duties of the winery.

158. Without any specific agreement or ceremony, between August 2005 and September 2007 Mr. Glencross assumed responsibility for the winery task that Mr. Muelli described as the least difficult and the least time-consuming, namely, keeping “tank records”, i.e., tracking the flows of wine among the various tanks and containers. About September 2007 Mr. Glencross obtained employment and, again without agreement or ceremony, began to wind down his involvement in the winery until he was for the most part uninvolved, although he occasionally returned to render small assistance. About September 2007 Mr. Glencross assumed that Mr. Muelli was resuming keeping tank records, although there was no specific discussion or understanding between them on such matter.

159. When Mr. Glencross began to wind down his involvement with the winery in September 2007, he took with him his “black book” (Exhibit # 10) wherein he kept his tank records. He took such book with him, rather than leave it behind, for several reasons: it contained personal information, he suspected that it could be misplaced at the winery and he could and would readily deliver it to the winery upon request.

August 1, 2007 to April 6, 2008: no tank records

160. The Licensee admitted this infraction.

161. From commencement of winery business on April 1, 2005 until approximately August of that same year, Mr. Muelli attended to maintaining tank records. As explained above, about August 2005 health and family issues debilitated Mr. Muelli from continuing to fulfill all of his winery duties. Fortuitously, at the same time Mr. Glencross moved from Ottawa to St. Catharines and, while seeking employment, used his spare time to assist at the winery. Without formal agreement or ceremony, Mr. Muelli withdrew from keeping tank records, the least difficult and time demanding of winery administrative functions, and Mr. Glencross drifted into filling that vacuum.

162. Mr. Glencross testified that in his two years of keeping tank records, there were only approximately 20 movements, most of them occurring in the initial few months of him keeping such records; the last movement was December 2006, meaning that there was no movement at all in the last nine months that Mr. Glencross kept tank records.

163. About September 2007, stabilization of Mr. Muelli’s health and family issues enabled him to spend more time discharging his administrative winery duties that he had previously retained himself, namely, blending bottling and sale records. He assumed that Mr. Glencross will continue keeping tank records notwithstanding that Mr. Glencross had by that time secured employment and had less spare time on his hands. It was understood by all, that keeping tank records was a simple task with very little time required because there was very little movement. Meanwhile, Mr. Glencross assumed that Mr. Muelli’s said stabilization enabled him to resume the task of keeping tank records.

164. The failure of the winery to keep tank records for eight months between August 1, 2007 and April 6, 2008 is attributable to a mutual misunderstanding: Mr. Muelli and Mr. Glencross each assumed that the other was keeping to tank records. Mr. Muelli testified that during these eight months there was one wine movement which prevented, in part, a red flag going up. This void proves the old adage: a dog with two masters starves to death.

August 1, 2007 to April 6, 2008: no blending records

165. Mr. Muelli also testified in the four year history of this micro-winery there have been only two blendings: at the beginning of 2005 and in September 2008. As stated above, the audit on July 31, 2007 approved all compliance prior to that date. Between August 1, 2007 and April 6, 2008 there was no blending. Accordingly, there can be no record of blending during such eight months unless he can be said that a blank page constitutes a record. Mr. Muelli testified that he explained the above to the LCBO inspectors.

August 1, 2007 to April 6, 2008: no bottling records

166. As stated above, the audit on July 31, 2007 approved all compliance prior to that date. Between August 1, 2007 and April 6, 2008 there was one bottling, in November 2007. Those bottling records were shown to LCBO inspector Mr. Roberts in April 2008 and he stamped his approval (Exhibit # 6).

April 7, 2008 to October 20, 2008: no blending records

167. Mr. Muelli testified that on October 23, 2008 he produced to Mr. Davis and Mr. O’Brien Exhibit # 8, showing the 25% Ontario content and was blended with the following wine purchase from California (Exhibit “4”). Such blending occurred in the previous month, September 2008. Mr. Muelli added that the actual Ontario content was more than 30%. Mr. Muelli also testified that Mr. Davies expressed satisfaction and that he considered this particular item closed.

168. In summary, the May 29, 2009 written submissions on behalf of the Registrar are wanting in several ways.

• They create issues outside the parameters of the NOP. For example, page 7 complains of the absence of record of purchase of Vidal grapes in 2006, a date that precedes audit in question and was approved by previous audit.
• They create issues that have no evidentiary foundation and were not put to the Licensee’s witnesses who thereby would have had an opportunity to explain satisfactorily and conclusively. For example, page 8 refers to 23,000 litres of a rosé blend that were present on April 6, 2008 but “disappeared” by October 20, 2008.

179. There are no policy guidelines or regulations that set the standard for records that are required to be kept. It is submitted that the records that were kept were presented, and although such records are kept manually and not sophisticated, they are adequate and have been previously approved in bi-annual audits.

Registrar’s Reply

Tank Records

180. To address Mr. Tonello’s submissions on the failure to keep tank records, Ms Taylor addressed his statement at the end of those submissions that “a dog with two masters starves to death.” If the winery had indeed been a partnership between Mr. Glencross and Mr. Muelli, that adage might have been appropriate, and the position taken by Mr. Tonello might be understandable. But what is completely missing from Mr. Tonello’s submission is the principal of his business, Rocco DiFruscia. Mr. DiFruscia is the owner, the winemaker, the directing mind behind this winery and the man who performs most of the labour involved in the making of the wine.

181. The fact remains that it was not Mr. Glencross’ or Mr. Muelli’s responsibility to ensure that the appropriate records were maintained, it was Mr. DiFruscia’s responsibility. The fact that these two gentlemen may have each assumed that the other was keeping these records is not a mitigating factor in this proceeding, as neither of them has any ownership interest in the winery and neither of them was involved in the winemaking. It was Mr. DiFruscia who was filling and emptying the tanks without keeping records. It was Mr. DiFruscia who was not keeping track of what he was doing with what wine from each tank. And it was Mr. DiFruscia’s responsibility to ensure that what he was doing was recorded, be it by Mr. Glencross or Mr. Muelli, or by himself, if neither Mr. Glencross nor Mr. Muelli were around when he was doing the racking, blending, bottling or filtering.

182. In reading Mr. Tonello’s submissions it would almost appear as if Mr. DiFruscia had nothing to with the operation of the winery, when the evidence showed that he is clearly the directing mind who runs the entire operation. And it is quite striking that there is no explanation of what Mr. DiFruscia was doing during the approximately 14 months of time when records were not kept, to make sure that the records that he is responsible for maintaining were in fact maintained.

Blending Records

183. The movement of over 1,700 litres of wine into each of the tanks containing the California cabernet sauvignon makes it clear that blending did take place between August 1, 2007 and April 6, 2008. There are no records of that blending.

184. There are also no records respecting the 2,385 litres of California wine that was imported by the winery but did not make it into Tanks 11 and 12. It is clear that this wine was not kept separate from any other wine, as there were no records of any tank containing that amount of wine in the bulk tank records, and there is no evidence respecting what this wine was blended with, or when.

185. The absence of records respecting the first blending with the California cabernet sauvignon wine in Tanks 11 and 12 and the absence of records respecting the missing 2,385 litres of California red wine are clear violations of section 3(1)(c) of O.Reg 659, as there is no complete processing record for this wine between August 1, 2007 and April 6, 2008.

186. There was also no blending records respecting the blending that Mr. Muelli testified took place in September 2008. A receipt from the purchase of grapes in 2006 is not a blending record for the blending that Mr. Muelli states took place in September 2008. There were no records tendered during the course of the hearing which could be considered to be a “blending record.”

187. The failure to have complete processing records for this wine between April 7, 2008 and October 20, 2008 is a further breach of section 3(1)(c) of O.Reg 659.

188. The Licensee is required to comply with these regulations because the Licensee uses imported grapes and grape products.

Bottling Records

189. Mr. Roberts testified that he was not shown any bottling records during the course of his audit. His stamp is not on Exhibit # 6. He was shown the page facing Exhibit # 6 in the book, which he did stamp, as those were the sales records for the previous period. There is nothing on Exhibit # 6 to indicate that these are bottling records and Mr. Roberts did not recognize them as such when they were presented in evidence to him. Furthermore, the records do not account for all of the wine that had to have been bottled during the period from August 1, 2007 to April 6, 2008. Approximately 30,000 litres of red wine was removed from the bulk storage area during this period of time (computed by adding the removals and subtracting the additions of red wine to the various tanks between the two audits) and the Licensee’s “bottling record” only accounts for 4,455 litres of the wine that disappeared from bulk storage. No records were provided to show what happened to the other 25,000+ litres of red wine. It is the Registrar’s position that this clearly shows that the Licensee’s “bottling record,” if the Board is prepared to accept it as such, was at best, inaccurate.

190. Respecting the matters that Mr. Tonello states were not put to the Licensee’s witnesses to explain, those matters were clearly evident in the documentary evidence tendered by the Registrar, which were disclosed at the outset of the proceedings to the Licensee. Once the Registrar has submitted the evidence showing the discrepancies to the Board, it is the Licensee’s responsibility to provide any explanations for the discrepancies that are set out in the Registrar’s documentary evidence. It is not for the Registrar to elicit explanations for all of the discrepancies from the Licensee’s witnesses, particularly when the Licensee’s own disclosure was not made in a timely manner and the Registrar was continually forced to deal with new documents and new explanations for the discrepancies through the course of the hearing.

191. Therefore, it remains the Registrar’s position that findings in accordance with the NOP are warranted respecting all of the allegations.

Analysis/Reasons/Findings

192. The Board carefully reviewed the evidence and submissions of counsel.

193. Paragraph 4(b) of the NOP states the Licensee contravened subsection 3(1)(a) of O.Reg 659 which states as follows:

3(1) A winery that uses imported grapes or grape product in the manufacture of wine shall make, keep and immediately submit to the Alcohol and Gaming Commission of Ontario upon request,

(a) a record of the quantity of grapes grown in Ontario, grape product produced from such grapes, other domestic grapes and grape product from such domestic grapes acquired by the winery and the times of acquisition.

199. It is clear that this was not done. Although requested by the LCBO inspectors, during their inspections of the winery no records showing that Ontario grape products were used for the production of wine were produced. Ms Gayman testified that no such records were produced to them during their inspection for the audit conducted on October 21, 2008, for the audit period April 7, 2008 to October 21, 2008.

200. Further, Mr. O'Brien, who assisted on the inspection of October 21, 2008, stated the only thing that he was shown was a receipt from Fernick Farms (Exhibit # 8) showing the purchase of 420 bushels of white grapes. He did not see any blending records or any documentation showing that this product had been made into wine.

201. Mr. Muelli, who kept the records for the Licensee, stated there were blending records and that the receipt of the grapes purchased from Fernick Farms (2006) (Exhibit # 8) was a record of blending. However he could not show any records as to when this product was made into wine, in which tank it was stored or when it was blended.

202. The Board does not accept the assertion by Mr. Muelli that the receipt from Fernick Farms constitutes a blending record. It is simply a record of the purchase of 420 bushels of white grapes.

203. No evidence was put forward by the Licensee as to when this product was made into wine and when it was blended. The Board also notes that evidence showed that the Licensee also purchased large quantities of grapes both foreign and domestic for resale to customers through his retail store. The records required to be kept by the Licensee were not done.

204. Therefore, the Board FINDS that the Licensee did contravene subsection 3(1)(a) of O.Reg 659.

205. Paragraph 4(c) of the NOP alleges that the Licensee contravened subsection 3(1)(c) of O.Reg 659, which reads as follows:

206. (1) A winery that uses imported grapes or grape product in the manufacture of wine shall make, keep and immediately submit to the Alcohol and Gaming Commission of Ontario upon request,

(c) tank records and racking orders for all brands of wine that set out a complete processing record up to and including packaging.

206. The Registrar's evidence is that there were no tank or blending records for the winery from August 2007 through to October 2008.

207. Ms Gayman provided clear evidence that no blending or tank records were produced during an audit done on October 21, 2008, for the audit period of April 7, 2008, to October 21, 2008. She stated Mr. O'Brien, who assisted in the audit, returned on October 22, 2008 and the records were still not available.

208. Mr. O'Brien gave evidence that when he conducted the inspection on October 20, 2008, he was shown a record that recorded the tank number and that it contained red wine. He noted that the record did not indicate what type of wine it contained or if it was blended. The tank record only indicated whether it was white or red.

209. When he inspected the tanks he noted that some had no indication as to what was in the tank. As an example, he stated Tank #11 contained 13,000 litres of red merlot blend, however there was no number on the tank, no gauge and no indication of what was in the tank.

210. Mr. O'Brien testified that he was never shown tank records, the only record he saw was a book containing information as to the tank number and the amount in the tank; it contained no information as to blending.

211. The evidence of the Registrar is also that there were no bottling records shown to the LCBO inspectors for the audits of April 7, 2008 and October 20, 2008.

212. Mr. Roberts testified he conducted the audit on April 7, 2008 for the audit period August 1, 2007 to April 6, 2008 and during that audit he was not shown any tank records, blending records or bottling records.

213. The Licensee, through his Representative, admitted that there were no tank records for the period of August 1, 2007 until April 2008.

214. The Licensee disputes that there were no tank or blending records between April 7, 2008 and October 20, 2008.

215. Mr. Muelli stated that the white Ontario grapes purchased in 2006 (Exhibit # 8) were in fact a record of blending.

216. The Board does not accept Mr. Muelli's assertion that the receipt of grapes purchased from Fernick Farms is proof of a record of blending. Furthermore, as there is no supporting evidence with regard to the fermentation and storage of the product between the purchase date in 2006 and the alleged blending. The Board notes that there are in fact no records of the actual blending.

217. The evidence before the Board does not support the contention of the Licensee that there were tank and blending records kept between April 7, 2008 and October 20, 2008. The only evidence presented to the Board as bottling records was Exhibit # 6, which was a handwritten sheet of paper with “No. 2007” written across the top. The sheet contained two columns. Written above one was the word “RED” and below the word Red, the number 750. The second column had “16L” at the top. The two columns contained numbers and the sheet looked like a rough work sheet with other numbers written on it that had no relation to anything.

218. The sheet did not indicate if the amount pertained to a specific kind of wine nor did it show the date on which the events took place other than “No. 2007,” which was written on the top of the sheet.

219. The Board finds that the Licensee did not personally pay attention to record keeping and instead relied on Mr. Muelli. Mr. Muelli however testified that he could document only what he was told by the Licensee as he was the only one who moved wine between tanks and did the blending and bottling.

220. The Board finds that there were no tank records or racking for the audit period of August 1, 2007 to April 6, 2008.

221. Therefore, the Board FINDS that the Licensee did contravene subsection 3(1)(c) of O.Reg 659.

222. Condition 10 of the authorization states, “The Winery will maintain and furnish to the AGCO upon request, reports in a form required by the AGCO showing accurately all information specified respecting the sale of Wine and from the Wine-Store and any other information which the AGCO may from time to time require.”

223. In view of the Board’s findings above that the auditors requested certain information from the Licensee, which he was unable to provide, the Board therefore finds that the Licensee breached this condition as well

224. The Board FINDS that the Licensee breached condition 10 of the Authorization.

Conclusion

225. For the reasons given, the Board FINDS the Licensee breached condition 10 of the Authorization and subsections 3(1)(a) and 3(1)(c) of O.Reg. 659 under the WCLA.

226. The Board invites written submissions on penalty from the respective parties. The Registrar’s representative shall serve and file written submissions within seven (7) days of the date of this decision. The Licensee’s representative shall have seven (7) days to serve and file a written response. Registrar’s Representative may serve and file any reply within three (3) 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 Rules of Practice.

DATED AT TORONTO THIS 28^th DAY OF October , 2009.

DAVID C. GAVSIE, CHAIR, AGCO BRIAN J. FORD, BOARD MEMBER