COURT FILE NO.: 392/07

DATE: 20080325

ONTARIO

SUPERIOR COURT OF JUSTICE

(DIVISIONAL COURT)

LEITCH R.S.J, LANE AND SWINTON, JJ.

B E T W E E N:

REGISTRAR, ALCOHOL AND GAMING COMMISSION OF ONTARIO

Appellant

• and -

ARENA ENTERTAINMENT INC. operating as CIRCA

Respondent

• and -

WAYNE SCOTT and DON RODBARD

Resident Objectors

Richard E. Kullis and Joyce Taylor, for the Appellant

Thomas G. Heintzman, Q.C. and Eli Mogil, for the Respondent

Mr. Scott and Mr. Rodbard, in person.

HEARD at Toronto: November 15, 2007.

LEITCH, R.S.J.:

[1] This is an appeal by the Registrar of the Alcohol and Gaming Commission of Ontario (the “Registrar”) of the written decision of the Board of the Alcohol and Gaming Commission of Ontario (the “Board”) dated July 27, 2007 approving the application of the respondent for a liquor licence for a facility called Circa at 126 John Street, Toronto, Ontario, subject to a number of conditions.

[2] The Registrar asks that the Board’s order be set aside and that a new hearing before different Board members be ordered.

[3] The respondent opposes the appeal and submits that it should be dismissed.

The Decision under Appeal

[4] The respondent applied for a liquor licence for Circa in August 2006. The shareholders of the respondent are Peter Gatien and Ari Kulidjian. The facility is in Toronto’s Entertainment District and would have a capacity of 2,926 persons.

[5] After considering the application and written objections, on April 30, 2007 the Registrar issued a Notice of Proposal to Review the Application.

[6] The proposal alleged violations of subsections 6(2)(d), 6(2)(e) and 6(2)(h) of the Liquor Licence Act.

[7] Subsection 6(2) of the Liquor Licence Act provides in part as follows:

Subject to subsection (4) or (4.1), an applicant is entitled to be issued a licence to sell liquor except if,

(d) the past or present conduct of the persons referred to in subsection (3) affords reasonable grounds for belief that the applicant will not carry on business in accordance with the law and with integrity and honesty;

(e) the applicant or an employee or agent of the applicant makes a false statement or provides false information in an application under this Act;

(h) the licence is not in the public interest having regard to the needs and wishes of the residents of the municipality in which the premises are located.

[8] The particulars in the Notice of Proposal with respect to subsection 6(2)(h) were objections by residents and a resolution from Municipal Council for the City of Toronto that the issuance of the liquor licence was not in the public interest having regard to the needs and wishes of the residents.

[9] With respect to subsection 6(2)(d) and (e), the particulars related to both Mr. Gatien and Mr. Kulidjian.[^1] Mr. Gatien was an officer, director and a shareholder of two companies, each of which held a liquor licence for nightclubs in New York City that was revoked because of disorderly conduct and drug use in the premises. Mr. Gatien was also convicted of three criminal offences in the State of New York on March 19, 1999 for tax-related charges relating to one of the clubs in New York City.

[10] Mr. Kulidjian is a practising lawyer. He was a shareholder, officer and director of a corporation that held a liquor licence for a venue in Toronto called RoxyBlu. In 2005, the Board suspended the licence for 7 days and 18 days for breaches of the Act and its regulations.

[11] The respondent requested a hearing.

[12] Mr. Scott and Mr. Rodbard, residents in the entertainment district, were made parties to the proceedings. They had expressed their personal opposition to the licence application and represented the King Spadina Residents’ Association.

[13] There was a six day hearing at which fifteen witnesses testified, and ultimately the Board approved the application for a liquor sales licence at Circa subject to a number of conditions.

[14] On the public interest issue, the Board held that the Objectors had not met the onus to deny the licence based on the bona fide needs and wishes of the community. In its view, the Residents’ Association did not sufficiently consider this particular application for its objections to be considered bona fide. It did not negotiate or meet with Arena, or attempt to propose conditions on the licence. Furthermore, no other resident witnesses, objections or petitions were presented opposing the proposal, leaving doubt as to whether the community objection was bona fide. In addition, the Board received many submissions supporting the Application. While the Board was sympathetic to the concerns of City Councillor Adam Vaughan and Inspector Ferguson of the Toronto Police Service about the already overburdened Entertainment District, “it does not consider the imposition of a disguised version of an Interim Control By-Law to be within its jurisdiction” [as previously imposed by the City of Toronto to temporarily bar liquor licenses in Toronto’s Entertainment District]” (Reasons, para. 133).

[15] With respect to past and present conduct, the Board held that previous sanctions or convictions are not prima facie proof that a business would not be operated in accordance with the law. Mitigating factors can be considered. Mr. Gatien was investigated by the police, and the investigator did not recommend that he be denied a licence. Mr. Gatien was candid about his past conduct and appeared highly motivated to run a business with integrity. Mr. Kulidjian was also highly motivated and understood the need for an excellent security team.

[16] The Board approved the application subject to a number of conditions. These included that all employees must agree to a police check as a condition of employment, that all surveillance equipment must be maintained in good working order, and security staffing must be maintained at a minimum ratio of one security staff to 75 patrons.

[17] A stay of the Board’s order was sought once this appeal was made. However, Chapnik J. refused to grant a stay (see Registrar, Alcohol & Gaming Commission of Ontario v. Arena Entertainment Inc. (CIRCA)).

The Standard of Review

[18] Section 11 of the Alcohol and Gaming Regulation and Public Protection Act, 1996, S.O. 1996, c. 26 provides that:

A party to a hearing before the board may appeal to the Divisional Court only on a question of law.

[19] The standard of review on a question of law involving statutory interpretation is correctness (1166134 Ontario Inc. (c.o.b. Nashville North) v. Registrar of the Alcohol and Gaming Commission of Ontario and Pauline Gladstone, [2006] O.J. No. 2567 (Div. Ct.); leave to appeal to the Court of Appeal dismissed).

[20] Whether reasons are adequate is a question of natural justice. This Court has held that where a tribunal’s decision is attacked on the basis of a denial of natural justice, it is not necessary for the court to engage in an assessment of the standard of review (see Gismondi v. Ontario (Human Rights Commission), [2003] O.J. No. 419, at para. 16 (Div. Ct.); Kalin v. Ontario College of Teachers (2005), 75 O.R. (3d) 523 at para. 9 (Div. Ct.); London (City) v. Ayerswood Development Corp., [2002] O.J. No. 4859 at para 10 (C.A.)).

The Issues Raised on this Appeal

[21] The appellant asserted that the Board failed to give adequate reasons for its conclusions and simply repeated the evidence without analysis. As previously noted, on this appeal it is only Mr. Gatien’s past and present conduct that is in issue. The appellant contended that the Board faied to apply the proper test for licence disentitlement because of Mr. Gatien’s past conduct under s. 6(2)(d) of the Liquor Licence Act. Further, the appellant asserted that the Board fail to apply the proper test for licence disentitlement because the licence is not in the public interest having regard for the municipal residents’ needs and wishes under s. 6(2)(h) of the Liquor Licence Act, and the Board improperly relied on and preferred information from non-residents rather than residents, as required by the Liquor Licence Act. Finally, the appellant’s position was that the Board failed to consider all relevant factors.

[22] The appellant’s position is that all errors made by the Board were errors in law, not errors of mixed fact and law.

The Requirement for Reasons

[23] Section 17(1) of the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22, requires the Board to give its final decision and order in writing and give reasons in writing therefor.

[24] The purpose of providing adequate reasons is to explain to the parties the basis of the decision and to permit appellate courts to properly review the decision. The appellant is correct that reasons must reflect consideration of the main relevant factors and must reveal the reasoning process (see Gray v. Ontario (Disability Support Program, Director) (2002), 59 O.R. (3d) 364 (Ont. C.A.) at page 374 citing VIA Rail Canada Inc. v. Canada (National Transportation Agency) (2001), 193 D.L.R. (4th) 357 (F.C.A.) citing Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817 and Northwestern Utilities et al v. Edmonton (City), [1978] 1 S.C.R. 684.)

Decision

[25] I will deal first with the question of whether the Board applied the correct test under s.6 (2)(d) of the Liquor Licence Act, properly considered the relevant evidence related to this issue and provided adequate reasons for its conclusions on this issue.

[26] The appellant contended that the Board failed to address the evidence of Mr. Gagne, a special agent with the United States Drug Enforcement Administration who testified regarding the drug activity at the New York clubs and also failed to deal with the evidence relating to Mr. Gatien’s tax convictions. The appellant submits that this relevant evidence was not discussed, analyzed, commented on, balanced or weighed. Indeed, the appellant’s position is that the Board did not take into consideration this highly relevant evidence of direct importance to the question of whether the applicant will carry on business in accordance with the law and with integrity and honesty, and this failure amounts to an error in law. The appellant’s position is that the Board stated a conclusion, but did not make a qualitative assessment of the entire conduct of the applicant to determine whether the past conduct affords reasonable grounds for belief that he will not carry on business in accordance with the law and with integrity and honesty. Further, the appellant suggests that the Board was erroneously preoccupied with Mr. Gatien’s “good behaviour” since his conviction.

[27] On the other hand, the respondent’s position is that the Board made no errors in law and its reasons are more than adequate, particularly in the context of the legislative regime, which does not place the burden on an applicant for a liquor licence to establish that he will act lawfully despite past conduct.

[28] I am satisfied that the Board applied the proper test in its consideration of the s.6(2)(d) issue, properly considered and weighed all relevant evidence, explained the basis for its decision and indicated why it arrived at its conclusion, thus giving adequate reasons on this issue. The evidence was extensively reviewed with regard to the past conduct of Mr. Gatien. In the Board’s reasons setting out its decision, it was clear that the Board properly considered whether the past and present conduct of Mr. Gatien afforded reasonable grounds for belief that the applicant will not lawfully carry on business with integrity and honesty. The Board also weighed the evidence of all witnesses in reaching its factual conclusions. Although Mr. Gagne was not mentioned by name in this analysis, his evidence was considered and weighed. I agree with the respondent that the summary of the evidence represents the fact-finding exercise undertaken by the Board, and the paragraphs entitled “The Decision” was, in fact, their analysis. Paragraph 121 is significant in its statement that the Board “confined its deliberations to consideration of the credible evidence bearing on the allegations and the sanctions sought by the Registrar.”

[29] In paragraphs 136 to 141, the Board made a number of findings and conclusions. It found that there was no disentitlement to a liquor licence pursuant to s. 6(2)(d) and it noted, amongst other things, that Mr. Gatien was found not guilty of a charge of conspiracy to traffic drugs. It also found that Mr. Gatien successfully operated two clubs in other locations in the United States before he operated the two clubs in New York State. The Board also correctly noted that a criminal conviction or administrative sanction does not disqualify an applicant for a liquor licence. The Board found it highly significant that a detective with the Ontario Provincial Police who had investigated Mr. Gatien for approximately one year reached no conclusions regarding his suitability for a liquor licence and was not prepared to recommend that he be denied a licence. The Board made findings and conclusions with respect to Mr. Gatien’s testimony and found him “forthright, contrite and candid before the Board about his past conduct”, and the Board ultimately concluded he was “highly motivated and committed to running a business in accordance with the law and with honesty and integrity.”

[30] The Board made no error in law in its review of Mr. Gatien’s past conduct and provided adequate reasons.

[31] I will turn next to the issue relating to s. 6(2)(h) of the Liquor Licence Act. This issue relates to the undisputed problems in the Entertainment District of Toronto, which absorbs approximately 55,000 to 60,000 patrons on weekends. The appellant’s position was that the Board erred in law by fettering its discretion in its suggestion that a blanket prohibition was being requested, and it failed to consider the bona fide issue before it. The appellant submitted that there was no analysis of the application on its own merits, and the Board gave no reasoning for its decision, nor did it undertake any analysis to indicate how it came to its decision on the public interest issue. Further, the appellant suggested that the Board improperly considered evidence respecting the uniqueness of Circa (the respondents submit that the venue is more than a nightclub – it is an “innovative, high-end facility” designed to host artistic and cultural events) that was mainly presented by representatives of corporations that were non-residents. Finally, the appellant suggested that the Board improperly imposed fault on the residents.

[32] The respondent’s position was that the Board properly applied the correct test under s.6(2)(h). It did not fetter its discretion. It was entitled to consider the evidence that formed the basis for its conclusions and made no error in its findings.

[33] With respect to the public interest issue, again the legislation articulates the test relating to this issue. The Board correctly set out the relevant principles, noting that the onus is on those objecting to prove, on a balance of probabilities, that it is not in the public interest to issue a licence. In my view the Board applied these principles in the present case. The Board gave reasons for not finding the objections persuasive and its ultimate conclusion that they were not bona fide. The Board found that the objections were not based on Circa’s operations, and instead the objectors had sought “a blanket prohibition of any new nightclubs in the area”. The Registrar took the same position. The Board found this “unreasonable” and provided reasons for that finding. The Board did not find the objections persuasive. The Board considered the evidence in support of the application, and it was proper for the Board to do so. There was no issue taken at the hearing with respect to the residence of those supportive of the application. The Board also was entitled to take into account the evidence that the safety issues raised by the City Councillor and the Inspector with the Toronto Police Service were being addressed.

[34] In my view the Board’s reasons with respect to this issue demonstrate the analysis undertaken by the Board and explain its findings and conclusion.

Conclusion

[35] For the foregoing reasons, the appeal is dismissed. If the issue of costs cannot be resolved brief written submissions may be made within the next 15 days.

Leitch R.S.J.

D. Lane J.

Swinton J.

Released: March 25, 2008

[^1]: There was also an issue raised with respect to Mr. Bristol, the proposed manager of Circa. Mr. Kulidjian will have insignificant involvement in Circa’s operations, and as a result, his past conduct was not an issue on the appeal. Similarly, because Mr. Bristol will not be employed by the respondent if the appeal of his conviction is dismissed, his conduct is also not in issue on the appeal.