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 of Ontario
Registrar
-and-
2030308 Ontario Inc. operating as or intending to operate as
Shoeless Joe’s Stouffville
Licensee
DECISION
Panel: S. Grace Kerr, Board Member Alex McCauley, Board Member
Decision Date: December 10, 2009
Hearing Location: Toronto, Ontario
Alcohol and Gaming Commission of Ontario 90 Sheppard Avenue East, Suite 300 Toronto, Ontario 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 ) Richard Kulis, Representative
2030308 Ontario Inc., Licensee ) Milco Dimoski, on his own behalf ) and on behalf of the Corporate ) Licensee
Allegations
- A hearing into Notice of Proposal number 17367 dated July 15, 2009 to revoke liquor licence number 811365 (the “Licence”) issued to 2030308 Ontario Inc. (the “Licensee”), operating as SHOELESS JOE’S STOUFFVILLE, 5892 Main Street, Stouffville, Ontario, L4A 2S8, on the basis that the Registrar has reason to believe that the Licensee would be disentitled to a licence under section 6 of the Liquor Licence Act (the “LLA”) was held on October 30, 2009 in the City of Toronto.
Preliminary Matters
Milco Dimoski is a shareholder, officer and director of the Licensee. He appeared on his own behalf and on behalf of the Corporation and waived the right to legal representation.
The corporate licensee is in debt to the Ontario Ministry of Finance for outstanding Retail Sales Tax receipts. The Registrar alleges that the licence holder, because of the outstanding debt, cannot reasonably be expected to be financially responsible in the conduct of its business and that the liquor licence should be revoked pursuant to section 6 (2)(a) of the LLA.
In an Order dated November 10, 2009 the Licensee was ordered to remit to the Ministry of Revenue any and all provincial sales taxes owing, including any penalties and interest, due for the September 2009 and each subsequent month thereafter as the remittances fall due, until such time as the Board has rendered its final decision regarding this matter.
Registrar’s Evidence
Douglas Stirrup is a Field Collection Officer with the Ministry of Finance for the Province of Ontario and has been so employed since 1994.
The witness stated that as of October 29, 2009 the corporate licensee’s known debt to the Ministry of Revenue for outstanding sales tax remittance was $75,799.52. This amount included interest and penalties. He stated that there were four returns not yet filed for June, July, August and September of 2009. These returns may affect the debt owed.
The debt in question was referred to the collections office of the Ministry of Revenue in July 2007, but the problems of non-compliance extend back to September 2005.
There have been efforts to collect the outstanding debt from the Licensee. These efforts included phone calls, letters and meetings between the Ministry and Mr. Dimoski and his accountant, Mr. Richmond. The Ministry tried to garnish the business’s bank account, but found that its account no longer belonged to the numbered corporation identified on the Licence; rather, the business account is held by a different numbered company.
The witness explained that when sums of money are remitted it is applied to the outstanding arrears unless the party remitting specifically requests that the remittance be applied to specific periods.
A statement showing the current debt of the corporate licensee owing to the provincial Minister of Revenue was entered as Exhibit #1. It displays the activities on the file and the funds remitted. There have been efforts to clear the debt since September 30, 2005 but the debt has again accumulated along with interest and penalty charges to where it is now at $75,799.52.
It was the view of the witness that the vendor has demonstrated that he cannot be financially responsible and able to remit the Retail Sales Tax funds paid to the corporation in trust.
In cross-examination, the witness stated that when funds are received they are applied to the total outstanding return and any credit balance is applied to the next oldest return.
He stated the collections branch is concerned about recovering the outstanding debt.
Licensee’s Evidence
Mr. Dimoski is the principal of the company.
He explained that he has had a number of difficulties since taking over the business in October, 2006. A fire caused the closure of his business for several months. Construction in front of his business caused loss of sales and the recession has dealt him another financial blow.
He has attempted to sell the business but has had no viable offers.
He has attempted to have the franchise owner take over and that has not been received positively by the franchisor.
The last payment he made to the Ministry of Revenue for outstanding Retail Sales Tax was in August 2009 in the amount of $14,000, which he took from his personal account, not the business.
In cross-examination, the witness stated he had no funds left with which to pay down the debt.
When asked about the legal entity of the company that holds the bank account which made it impossible for the Ministry of Finance to garnishee the account, he stated his accountant would speak to that matter.
Stephen Richmond is the accountant for the corporation and also for Mr. Dimoski personally. As well, Mr. Richmond has a vested interest in the licensed business as he is owed money.
He explained how the sales tax debt had accumulated despite the hard work of Mr. Dimoski to run the business successfully.
Mr. Richmond stated that, subsequent to the Licensee obtaining its Licence, a new corporation was set up to hold the business’s bank account. This corporation, and the business account it holds for the Licensee, were set up without the knowledge of the Alcohol and Gaming Commission of Ontario or the Ministry of Finance.
Mr. Richmond acknowledged that he received back a General Security Agreement over the assets of the restaurant to secure the money he loaned the business. When asked by the Board, he admitted that he was aware that this move precluded creditors such as the Ministry of Finance having legitimate legal access to these assets.
In cross-examination, the witness stated that the licensed corporation, 2030308 Ontario Inc., has an additional Goods and Services Tax (“GST”) debt of $50,000.
The landlord for the licensed establishment is owed approximately $162,000 for rent.
Registrar’s Submissions
Mr. Kulis submitted that the debt is undisputed. The Licensee is not financially responsible, perhaps not in a personal sense, but overall.
It is difficult, if not impossible, for the Licensee to get a buyer for the business under the circumstances.
There is no prospect of the debt being retired and in reality it will only increase.
The Licensee is asking for a three to four month window but the prospects of retiring this debt are slim to non-existent.
The liquor licence should be revoked immediately pursuant to section 6 (2)(a) of the LLA.
The Licensee chose not to make submissions.
Decision
The debt owed to the Ministry of Finance is $75,799.52 (“the debt”). This is not refuted by the Licensee. The problems began back in 2005. There have been no substantial attempts to pay down the debt to the Ministry since 2007.
The Licensee admits he has no money left either in the business or in his personal account. The corporation also owes money for rent to the landlord in the amount of $162,000. On top of that, the business has a debt to the Federal government for outstanding GST in the amount of $50,000.
Further, it must be remembered that the PST funds are collected by the Licensee in trust for the government as remitted by the citizens of the Province. Failure to remit them, as has happened in this case, is a serious breach of the Licensee’s financial responsibilities.
The Board is also concerned the assets of the company have effectively been made judgment proof to the Ministry. The creation of a second corporation created greater confusion and uncertainty regarding the finances of the licensed corporation. Important to the Board’s decision, these arrangements have also prevented the Ministry of Revenue from garnishing the business’s revenues on account of the debt. Additionally, the assets of the business are unavailable to the Ministry towards retiring the debt, having been secured in favour of Mr. Richmond. It is not necessary for the Board to decide whether these steps were taken deliberately or unintentionally; rather, the evidence confirms that in both instances the actions were taken without notifying the Registrar (or the Ministry) at times when the debt was outstanding and growing.
Given the length of time and amount of these several-fold financial constraints, the Licensee’s suggestion that he could turn things around in three to four months is not reasonable.
All of these factors go to the heart of, or reflect negatively upon the financial responsibility of the Licensee. For all of these reasons, the Board therefore concludes that, having regard to the Licensee’s position, it cannot reasonably be expected to be financially responsible in the conduct of its business.
As a result of this circumstance and for similar reasons, the Board believes that the liquor licence of 2030308 Ontario Inc. should be immediately revoked as a result.
The Board ORDERS that liquor licence number 811365 issued to 2030308 Ontario Inc., operating as SHOELESS JOE’S STOUFFVILLE, 5892 Main Street, Stouffville, Ontario, L4A 2S8 be immediately REVOKED.
DATED AT TORONTO THIS 10^th^ DAY OF December , 2009
_______________________________ _________________________________
S. GRACE KERR, BOARD MEMBER ALEX MCCAULEY, BOARD MEMBER