OORAA Lounge Inc. o/a OORAA Lounge v. Registrar of Alcohol and Gaming, 2015 CanLII 26077

Licence Appeal Tribunal

DATE: 2015-05-12

FILE: 8625/LLA ; 8626/LLA

CASE NAME: 8625;8626 v. Registrar of Alcohol and Gaming

Appeal from the Notice of Proposal of the Registrar of Alcohol and Gaming under the Liquor Licence Act, R.S.O. 1990, c. L. 19 - to Refuse to Transfer a Licence

OORAA Lounge Inc. o/a OORAA Lounge Appellant

-and-

Registrar of Alcohol and Gaming Respondent

ORDER

ADJUDICATOR: D. Gregory Flude, Vice-Chair

APPEARANCES:

For the Appellant: Pradeep Chand, Counsel

For the Respondent: Rena Khan, Counsel

Heard in Toronto: July 8 & 9 and October 29, 2014 and April 15, 2015

REASONS FOR DECISION AND ORDER

OVERVIEW

1The Registrar seeks to revoke the licence of the Appellant, OORAA Lounge Inc. pursuant to the provisions of Liquor Licence Act, R. S. O. chap L. 19 (the “Act”). The Parties prepared an Agreed Statement of Facts and the Appellant, OORAA Lounge Inc., admitted all of the allegations in Notice of Proposal number 20206 dated January 30, 2014. The hearing on that Notice of Proposal proceeded solely on the issue of the appropriate sanction.

2Also, before the Tribunal is an appeal of Notice of Proposal 20212, also dated January 30, 2014 wherein the Registrar refused to transfer the liquor sales licence from the Appellant to 2201052 Ontario Inc. The 220 corporation is owned by one of the officers and directors of the Appellant, OORAA Lounge Inc. Should the Tribunal find that the appropriate sanction for the Appellant is revocation of its licence, then the appeal against the refusal to transfer becomes moot as there is no licence to transfer. Should the sanction be something less than revocation, the Appellant advises that it still seeks to transfer the licence.

3The Tribunal finds that the liquor licence of OORAA Lounge Inc. should be revoked. In light of this finding, there is no need to deal with the appeal of the transfer of the licence to 2201052 Ontario Inc. as it is moot.

EVIDENCE ON LIABILITY

4The Tribunal will refer to the Agreed Statement of Facts throughout these reasons so, for ease of reference, it is set out verbatim:

A. Independent Legal Advice

The Licence Holder acknowledges that the Licence Holder has consulted with a legal representative and has obtained independent legal advice prior to entering into this Agreement.

B. Agreed Facts

The Licence Holder and Registrar’s Counsel agree to the following:

1. On November 16, 2013 at approximately 5:08 a.m. there was an intoxicated male patron inside the licensed establishment. The male consumed Ketamine and alcohol while at the licensed establishment. Ketamine is a drug which is typically used in nightclubs and other venues which feature dance music.

2. Further that, on November 16, 2013 there was widespread and open drug use at the licensed establishment which was clearly visible to security and staff. Glass vials with residue from the drug Ketamine was [sic] found littered throughout the establishment.

3. Further that, Glass [sic] vials with residue from the drug Gamma-Hydroxbutyric (“GHB”) also known as a “date rape drug” was [sic] also found in the establishment. This drug is a clear liquid which is tasteless and odourless. The drug ethylenedioxymethamphetamine or MDMA also known as “Ecstasy” and “Molly” was also located on a table in the licenced establishment.

4. Further that, on November 16, 2013 at approximately 5:08 a.m. the signs of service and consumption of alcohol were still present in the licensed establishment.

5. On November 23, 2013 at approximately 4:17 a.m. there was an intoxicated male patron who was sleeping in the licensed establishment. The male patron admitted to consuming both drugs and alcohol at the establishment.

6. Further that, a male patron standing in full view of staff was about to openly “snort” Ketamine. The male was stopped and arrested by police. The male patron had drug residue on his nostrils and clothing.

7. Further that, several empty glass vials with drug residue in them was [sic] found on the floor throughout the establishment.

8. On December 21, 2013, at approximately 4:30 a.m. three males were involved in a drug trafficking [sic] in the men’s washroom in the presence of security staff. After being advised of the incident from police and inspectors, the licensee responded: “it’s just a weed deal”.

9. On January 1, 2014, at approximately 4:20 a.m., inspectors and police delivering a suspension placard to the establishment found two males “snorting” Ketamine in the men’s washroom in the presence of security staff. The males were arrested by police. During the arrest one of the males smashed a glass vial of Ketamine onto the floor.

10. On January 1 1, 2014 at approximately 4:10 a.m. there was an intoxicated male patron inside of the licensed establishment.

11. On January 18, 2014 two male patrons openly “snorted” Ketamine inside of the establishment. Both males were arrested by police.

12. On the above noted dates the licensee failed to maintain control over the premises including control over the activities that were permitted to occur on the premises as there were no measures in place to prevent the illegal activities outlined above.

13. Based on the facts in paragraphs 1 through 12 the licence holder admits to violations of subsection 6(2)(d) of the Liquor Licence Act and subsection 45(1), 45(2), section 29 and 45.2 of Ontario Regulation 719/90 under the Liquor Licence Act.

PRELIMINARY MATTERS

5In his closing submissions, counsel for the Appellant made the puzzling submission that the Tribunal should not give weight to the Agreed Statement of Facts. This submission arises out of a motion the Appellant brought at the October 29, 2014 hearing day to set aside the Agreed Statement of Facts. By the time the motion was initiated, the Appellant had elected to call no evidence on liability and the liability issue had already been determined. The hearing had proceeded to the sanction phase and the Registrar had already presented evidence going to that issue.

6The Agreed Statement of Facts had been drafted by the first counsel appearing on behalf of the Appellant and by counsel for the Registrar over a one and a half day period and the Appellant had independent legal advice. The Tribunal denied the Appellant’s motion and the hearing was adjourned until April 15, 2015 to hear evidence on sanction.

7While counsel for the Appellant was at pains to repeat his disagreement with the Tribunal’s ruling on the motion when the hearing reconvened on April 15, 2015, the Tribunal heard the remaining evidence on sanction advanced by the Registrar. On motion by the Appellant, the Tribunal excluded the evidence of two witnesses who were to testify about alleged occurrences at the Appellant’s premises at some point after the date of the Notice of Proposal. The Appellant called no evidence.

8The Tribunal finds no merit in the Appellant’s submission that little weight should be given to the Agreed Statement of Facts. Having agreed to the facts with the Appellant prior to the hearing, the Registrar called no evidence in support of the allegations in the Notice of Proposal. To call into question the reliability of the Agreed Statement of Facts at such a late date works a severe prejudice on the Registrar who agreed them in good faith with the Appellant’s legal representative at the time and tailored its case accordingly. The Agreed Statement of Facts is the sole of evidence before the Tribunal with respect to the Appellant’s actions. The Tribunal assigns full weight to the factual admissions without diminution because the Appellant’s current counsel would have approached the hearing differently had he been retained at the outset.

APPROPRIATE SANCTION

9In paragraph 13 of the Agreed Statement of Facts, the Appellant admits:

Based on the facts in paragraphs 1 through 12 the licence holder admits to violations of subsection 6(2)(d) of the Liquor Licence Act and subsection 45(1), 45(2), section 29 and 45.2 of Ontario Regulation 719/90 under the Liquor Licence Act.

The Registrar submits that the appropriate sanction is revocation. The sanction of revocation triggers a consideration of ss 6 and 15 of the Act. The applicable provisions state:

6. (1) A person may apply to the Registrar for a licence to sell liquor.

(2) 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;

15. (1) The Registrar may issue a proposal to revoke or suspend a licence to sell liquor or refuse to renew such a licence for any ground under subsection 6 (2), (4) or (4.1) that would disentitle the licensee to a licence if the licensee were an applicant or if the licensee has contravened this Act, the regulations or a condition of the licence.

10Thus, the Appellant has admitted that its past conduct affords reasonable grounds for belief that it will not carry on business in accordance with law and with integrity and honesty. Section 23of the Act accords the Tribunal discretion to direct the Registrar to carry out the proposal or not and, if not, to impose such conditions as the Tribunal deems appropriate in the circumstances.

11In addition to the conduct admitted above, the Appellant has faced previous disciplinary action for breaches of the Act, including permitting an intoxicated person to be in the bar, narcotic use in its washrooms and removal of liquor from the premises and its consumption in an unlicensed area. When the facts relating to the previous infringement are considered together with the facts admitted in this hearing, they establish a picture such that the Tribunal must conclude that the Appellant is not serious about compliance with its statutory obligations. The chronology is instructive.

12On May 11, 2013 and June 1, 2013 patrons were observed removing liquor from the licensed premises. Also on May 11, 2013, two patrons were found using narcotics in the men’s washroom in the presence of a staff member. An intoxicated male was found in the Appellant’s premises on July 20, 2013 at 4:07 a.m. These allegations led the Registrar to issue Notice of Proposal number 20128 dated November 7, 2013 proposing to suspend the Appellant for fourteen days. Following negotiations between the principals of the Appellant and the Registrar, the parties arrived at a settlement on November 20, 2013 whereby the Appellant admitted the allegations and agreed to a seven day suspension to be served from January 2, to January 9, 2014.

13It is not unreasonable to expect a conscientious licensee faced with the Registrar’s Notice of Proposal to take steps to remedy its shortcomings. Indeed, the Tribunal heard evidence from two security witnesses that they had been asked to provide assistance to the Appellant in cleaning up its operation. While the dates of that assistance were vague, the evidence disclosed that when issues of blatant drug use on the premises were brought to the attention of the Appellant and its security staff, nothing was done other than dispense with the services of the outside security company.

14Other than hiring and then ignoring the advice of an outside security company, the Appellant took no steps to improve matters. In fact, the Agreed Statement of Facts indicates that during the whole period while the Appellant was negotiating for a seven day suspension through to the period it served the suspension, drug use and breaches of the Act were ongoing at the premises. Incidents occurred on November 16 and 23, 2013, right around the time when the negotiations were taking place. During the period just before the introduction of the suspension, on December 21, 2013 and January 1, 2014 drug deals took place in the men’s washroom in the presence of security staff. On the later date, inspectors had attended at the premises to serve the placard to be posted advising of the suspension.

15The suspension was served between January 2 and January 9, 2014. On January 11 there was an intoxicated person inside the premises. On January 18, 2014 two person openly snorted Ketamine. Clearly the threat of suspension or its enforcement had no impact on the Appellant’s operation. In fact, during the December 21, 2013 incident when drug trafficking was found to be taking place on the premises, a representative of the Appellant responded to police and inspectors on being told about it: “It’s just a weed deal.”

16In Big Ed’s Tap and Grill (Re), 2007 CanLII 15749 (ON AGC), the Board of the Alcohol and Gaming Commission identified that the purpose of the Act is “to ensure public safety… This Tribunal accepts that analysis as a succinct summation of the aims of the legislative scheme. In that case, there was frequent drug dealing on the premises orchestrated by the licensee’s son. The licensee testified that he had taken charge of the operation and imposed a zero tolerance policy. The Board was satisfied that the licensee knew or ought to have known of the drug dealing and ordered the Registrar to revoke the licence.

17In a similar vein to the Big Ed’s case is the Board’s decision in 1642849 Ontario Ltd. (Atherley Arms Hotel) (Re), 2008 CanLII 16821 (ON AGC) where, despite evidence that staff members who were perpetrators of illicit drug transactions had been terminated and new managers hired, the Board was of the view that revocation was the appropriate penalty. In the current case, there was no evidence of changed management style. The only sign that the Appellant had accepted some measure of responsibility for its actions was that it entered into an Agreed Statement of Facts that greatly shortened the hearing. While this action is to be commended it cannot, by itself, overcome the very damning facts in this case.

18It is clear from the cases that specific and general deterrence favours revocation in cases where management turns a blind eye to drug use and drug dealing. The Tribunal has considered alternatives, such as a long suspension of 60 or 90 days or so with conditions. In favour of this approach is the admissions made by the Appellant. Had there been evidence of a change of management style and increased security it may well have been the case that the Tribunal would have adopted this approach. There is no such evidence. What evidence there is suggests that the Appellant has been given a chance to improve its performance when it was given a seven day suspension. It chose to squander that chance even while it was negotiating it, such that the Tribunal has no confidence that the Appellant will learn the appropriate lesson from being given another chance.

ORDER

19After carefully considering the evidence and submissions of the Parties, the Tribunal directs the Registrar to carry out Notice of Proposal number 20206 dated January 30, 2014 and immediately revoke liquor licence number 810481 issued to OORAA Lounge Inc.