An Appeal from a Notice of Proposal by the Registrar of Alcohol, Gaming and Racing, to Refuse to Renew a Liquor Sales Licence under the Liquor Licence Act, R.S.O. 1990, c. L.19
Between:
UFO KTV Inc. o/a UFO KTV
Appellant
-and-
Registrar of Alcohol, Gaming and Racing
Respondent
And an Appeal from a Notice of Proposal by the Registrar of Alcohol, Gaming and Racing to Refuse to Transfer a Licence under the Liquor Licence Act, R.S.O. 1990, c. L.19
Between:
2544335 Ontario Inc. o/a or intending to o/a MYST KTV
Appellant
-and-
Registrar of Alcohol, Gaming and Racing
Respondent
REASONS FOR DECISION AND ORDER
Adjudicator: Patricia McQuaid, Vice-Chair
Appearances:
For the Appellants: Noel Gerry, Counsel
For the Respondent: Rena Khan, Counsel
Heard in Toronto: April 12, 19, June 12, 13, 14 and 26, 2018
REASONS FOR DECISION AND ORDER
BACKGROUND
1This is a hearing before the Licence Appeal Tribunal (the “Tribunal”) arising out of two Notices of Proposal issued by the Registrar of Alcohol, Gaming and Racing under the Liquor Licence Act, R.S.O. 1990, c. L.19 (the “Registrar” and the “Act”, respectively). The first Notice of Proposal dated October 20, 2017 proposes to refuse to renew the liquor sales licence (licence number 0815710) issued to UFO KTV Inc. o/a UFO KTV (“UFO”). The second Notice of Proposal, also dated October 20, 2017, issued by the Registrar under the Act, proposes to refuse to transfer that licence held by UFO to 2544335 Ontario Inc. operating or intending to operate as MYST KTV (“MYST”). Both Notices of Proposal were amended on February 2, 2018. To a significant extent, the Notices of Proposal mirror each other both in terms of the sections of the Act on which the Registrar relies and in the particulars, the allegations and the dates on which the alleged violations occurred.
2In each of the Notices of Proposal, the Registrar has cited section 6(2)(d) of the Act as the basis for his actions. Section 6(2)(d) states as follows.
(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;
The Registrar then cited particulars supporting his reliance on s. 6(2)(d) – a lengthy list of alleged violations of various sections of the Act or of Ontario Regulation 719/90 made under the Act (the “Regulation”).
3By Order of the Tribunal dated March 15, 2018, the two appeals were joined, to be heard together, on consent of the parties.
4The hearing took place over six days between April 12 and June 26, 2018. The Tribunal heard from 13 witnesses. An interpreter, Jianhui Lin, was present throughout the hearing, assisting in translation for the principals of the two appellants, Yiqiang Xue (UFO) and Jeffrey Lian (MYST). After closing submissions were made June 26, 2018, the parties provided additional written submissions, received on July 10, 2018.
5My findings with respect to each of the alleged violations will apply to each of the Notices of Proposal, reflecting the manner in which both counsel presented evidence and made submissions on each incident and alleged violation.
6After carefully considering the evidence and submissions, I direct the Registrar to carry out the Notice of Proposal to refuse to renew the liquor licence of UFO KTV Inc. operating as UFO KTV Inc. (licence number 0815710). As a result of this decision, the Notice of Proposal to refuse to transfer that licence to 2544335 Ontario Inc. operating or intending to operate as MYST KTV is moot. Reasons for my decision follow.
Preliminary Matters
7As noted, both Notices of Proposal were amended on February 2, 2018. The incidents cited in the Amended Notices of Proposal, and the alleged violations arising from those incidents, took place between October 29, 2016 and August 20, 2017. At the hearing, Registrar’s counsel attempted to introduce evidence relating to events which occurred on September 20 and October 20, 2017 and include these as alleged violations in this appeal despite them not being included in the February 2018 amendments. The first notice to the appellants that these dates could be in issue at the hearing was through the evidence of the first of the Registrar’s witnesses, Alcohol and Gaming Commission of Ontario (“AGCO”) Inspector, Helen Giorgoudakis, on April 12, 2018.
8I disallowed this evidence on the basis that it was unfair to the appellants to permit evidence of these alleged violations to be heard and for the Tribunal to make any findings with respect to them. The principle of procedural fairness requires that parties have sufficient notice of all of the allegations against them before the onset of the hearing, to permit them to respond to those allegations The Registrar had sufficient time to include these dates and allegations prior to February 2018 amendments to the Notices of Proposal and failed to do so. Adequate notice was not given to the appellants.
EVIDENCE AND ANALYSIS
9As stated above, the evidence and analysis of the particular allegations of the Act or Regulation relied upon by the Registrar will be dealt with by me in this decision in the manner presented by Counsel for the Registrar; she called evidence on each of the allegations for each incident date. I have reviewed and analyzed that evidence chronologically, as set out below. Further, to provide context for the evidence, it is important to note that the licensed establishment is a karaoke bar. The total licensed capacity is 225 persons. Within the space there are 17 karaoke rooms, as well as a bar area. Each of these spaces has a maximum licensed capacity assigned to it. Each room is identified by a number and/or letter. A licensee is required to adhere to the licensed capacity of each room.
January 22, 2017
10On this date, the Registrar alleges that at approximately 3:06 a.m. when AGCO Inspectors McFadden and Hubbard attended for a routine inspection under the Act, the signs of service and consumption of liquor had not been cleared, contrary to section 29 of the Regulation. In this instance, section 29 requires that the signs of service and consumption be cleared within 45 minutes after 2 a.m.
11The inspectors observed 13 Heineken bottles containing varying amounts of beer in one room and in another room, they saw three pitchers of beer on a table. Mr. Xue was present that evening and in his testimony, he acknowledged that he and his staff had not finished clearing the rooms. He stated that it had been an unusually busy evening and as a result, they were unable to clear all signs of service by 2:45 a.m. UFO concedes that this violation occurred.
12Therefore, I find that a violation of s. 29 of the Regulation occurred on January 22, 2017.
January 28, 2017
13The Registrar alleges three violations on this date; specifically, s. 41(1) of the Regulation – that UFO failed to inspect a piece of identification of a person apparently under the age of 19 prior to selling or serving liquor to that person; s. 30(4) of the Act - that UFO permitted a person who appeared to be under 19 to have or consume liquor in the licensed premises; and paragraph 50(c) of the Regulation, that UFO failed to ensure compliance with the Fire Protection & Prevention Act (the “FPPA”).
14Inspectors McFadden and Nguyen attended on this date for a compliance inspection, arriving at approximately 1:24 a.m. They went into room A3 which was occupied by two patrons – a male and a female. The inspectors observed that both patrons appeared to be young; the male, in particular, appeared youthful to them, based on his appearance and dress. There were nine bottles of Budweiser beer on the table, five of which were full. Inspector Nguyen testified that he asked the male for identification. The patron said he had no identification, but that his birthdate was June 23, 1998, making him 18 years old. He also stated that he had been drinking Budweiser beer. The female provided her driver’s licence which showed her to be 19 years old. The female helped the inspectors with translation when they spoke to the male.
15The inspectors testified that they then spoke to a server who stated that she asked the female for identification, but did not ask the male.
16S.L., one of the servers working at UFO that evening, testified that he delivered nine bottles of Budweiser to room A3. The order had been placed at the UFO front counter. S.L. testified that there were six or seven people in A3 when he delivered the beer. He stated that he checked the identification for each of them and they were all of legal drinking age; he recollected that they were all over 20 years old. S.L. also testified that the same people were in room A3 all night. S.L. did not speak with the inspectors as he was working in the kitchen when the inspectors were present.
17Mr. Xue was working that evening as well. He was adamant that he too had been in room A3 and that the seven patrons in the room were served food and Budweiser beer. He testified that his staff check the karaoke rooms every 20 minutes. At no time was a minor identified as being in the room. He stated that if a minor is present, staff either put a sign on the door which states that there is a minor in the room and/or stating that no alcohol is to be served to that room. In addition, staff is to pay close attention to who enters or leaves the room.
18Mr. Xue stated that it simply was not possible that a minor was in the room, yet the inspectors found otherwise at 1:24 a.m. At that time, there were two people in the room, not seven. Both the inspectors and the server were consistent in their evidence that nine bottles of Budweiser were in the room. Mr. Xue testified each time they ordered beer they would either order six or 12 beer. Yet there was no evidence from a server that the room had been served more than once. Others may have been in the room earlier, with the two patrons that the inspectors spoke to, and it is possible that identification of some of those patrons was checked. However, the Tribunal weighs the evidence on the balance of probabilities, not possibilities. On the evidence before me, I find that a minor, the male patron, was in the room.
19I accept the inspectors’ evidence that the male patron did not have identification. Further, I found that it is more probable that if the male patron had identification, valid or otherwise, he would have produced it to the inspectors as it was against his interest to disclose to them that he was underage and had been consuming beer. He appears to have candidly provided this information to the inspectors; he could have just as easily stated that he was 19. If he had been asked for identification by staff, this would have disclosed that he was underage which would have, according to Mr. Xue, triggered a sign on the door to that effect.
20Based on the evidence, I find that UFO failed to inspect a piece of identification of a person under 19 prior to serving liquor to that person contrary to s.41(1) of the Regulation.
21Flowing from the same facts, the Registrar alleges a breach of s. 30(4) of the Act. This section of the Act states:
No licensee or employee or agent of a licensee shall permit a person who appears to be under nineteen years of age to have or consume liquor in the licensee’s licensed premises.
As noted by counsel for the Registrar, the word ‘permit’ in the context of the Act has been considered by the Courts: 1213963 Ontario Limited (Sin City Bar and Eatery) v. Ontario (Alcohol and Gaming Commission) 2009 ONCA 323. This decision (referred to as Sin City) established that ‘permitting’ the prohibited action- here the having or consuming of liquor by a person under 19 - must be found to have taken place and that the licensee knew or ought to have known about it.
22The inspectors testified that the male patron, who was underage, told them that he had consumed beer. Appellants’ counsel submits that this was hearsay evidence and unreliable, given that it was information given to the inspectors by the patron with the assistance of the other patron as translator. Hearsay evidence is permissible at the Tribunal. In terms of its reliability, I must weigh it against the bald assertion of Mr. Xue that this could not have happened. When the inspectors went to the room, there were two patrons in the room though both S.L. and Mr. Xue stated that there were seven at some point in the evening. The inspectors saw nine bottles of beer, five had been at least partially consumed (which was not disputed by UFO). This latter fact causes me to accept the inspectors’ evidence that the male had been consuming liquor. Further, had UFO asked for the male patron’s identification, staff, like the inspectors, would have known that he was underage, satisfying the second prong of the Sin City test.
23I therefore find that UFO was in breach of s. 30(4) of the Act on January 28, 2017.
24Police Constable (P.C.) Niko Dimitrakopoulos of York Regional Police also attended UFO on January 28th, with the AGCO inspectors. While there, P.C Dimitrakopoulos went into the kitchen area to ensure that the fire exits there were not blocked. He testified that he observed two large industrial black garbage bags as well as a yellow industrial mop and bucket in front of, thus blocking, the emergency exit in the kitchen area. He stated that he advised the cook that the exit should not be blocked. On cross-examination, the officer stated that these items were not leaning against the door, but were close enough to it to block it though he could not estimate the distance.
25Mr. Xue did not deny that there was a bucket and mop in the vicinity of the exit or that there was a garbage bag there, though he stated that the bag was not heavy and was easily moved.
26The particular section of the FPPA cited here requires that a means of egress (this emergency exit) be maintained in good repair and free of obstructions. Unfortunately, there were no pictures in evidence depicting the exit area. Weighing the evidence, I am not satisfied that the officer’s testimony establishes that the exit was blocked. He did not indicate whether the bag was full, heavy and hard to move, thereby creating an actual obstruction to movement, for example. It is more likely that these two items may have been placed, in the moment, in the vicinity of the door, but there is insufficient evidence to conclude that they were blocking the exit in violation of FPPA and the Fire Code.
March 9, 2017
27The Registrar alleges that UFO again breached s. 41(1) of the Regulation – that UFO failed to inspect a piece of identification of a person apparently under the age of 19 prior to selling or serving liquor to that person; s. 30(4) of the Act - that UFO permitted a person who appeared to be under 19 to have or consume liquor in the licensed premises. On this date, AGCO Inspectors Hubbard and Nguyen attended the premise for another routine liquor licence inspection. They arrived at 10:24 p.m.
28The inspectors went into room A6 where there were five female patrons. They saw seven empty shot glasses on a table. The first patron they spoke to said that she was 19 years old and that a staff person had checked her identification when she arrived. However, she told the inspectors that she could not give them any identification because she had given her identification to a friend who had left. This patron stated that her friends were drinking only water. The inspectors could not verify the contents of the shot glasses, but smelled the contents of one glass and stated it smelled like Soho – a lychee liqueur.
29The inspectors questioned the other patrons who they thought were youthful in appearance. None of the women had identification. Three of them gave their age verbally as 18 and stated that they had been drinking tequila shots and/or lychee liqueur. They stated that their friend who was 19 years old had ordered the drinks before they arrived.
30A staff person provided the inspectors with the bill for the room. It showed that the bill was ‘opened’ at 9:34 p.m. and closed at 10:52 p.m. Twelve tequila shots and one Soho liqueur were served to the room. The server, Y.L., testified. She confirmed that alcohol was served to the room but that she checked the patrons’ identification and that all were born before 1998 and therefore were of legal drinking age. Mr. Xue also testified. He was adamant that UFO’s policy of checking identification was followed. If there were minors present, they would not allow liquor in the room. He himself arrived at around 10 p.m. and would have checked all of the rooms and the identification of patrons in the rooms. If a minor was in the room, he wondered if they used an improper means, like a fake ID, to gain entry.
31I am left again with the documented and specific evidence of the inspectors weighed against the general evidence of UFO staff and Mr. Xue as to what would or should have been done. There is no denial of the fact that when the inspectors attended there were minors in the room or that 12 tequila shots had been served within the previous hour. Approximately fifty minutes after the drinks were served, inspectors noted that seven shot glasses were empty. If in fact identification had been checked, which would have resulted in minors being identified, UFO policy would have required that a sign be put on the door indicating that or that no alcohol be served. There is no evidence that a sign was posted and there is evidence of alcohol service to the room.
32Therefore, on a balance of probabilities, I accept the evidence of the inspectors and find that UFO failed to inspect a piece of identification for the patrons who appeared to be younger than 19 years prior to serving alcohol (s. 41 of the Regulation) and that contrary to s. 30(4) of the Act, these patrons consumed liquor in the premises.
March 11, 28 and 29, 2017 – s. 55(2) of the Regulation
33The Registrar alleges that on March 11, 28 and 29, 2017, contrary to s.55(2) of the Regulation, UFO did not post the sign, in a conspicuous place that was visible from the exterior of the premises, indicating that its liquor licence was under suspension. UFO was serving a 30-day liquor licence suspension, effective March 10, 2017 at 11 a.m. to April 9, 2017 at 2 a.m.
34On March 11th, at approximately 12:37 a.m. Inspector Giorgoudakis attended at the premises to ensure that the suspension placard was posted in accordance with the Act. The main entrance doors are double doors. They were both open which meant that the wording on the placard which was posted on the inside of one of the doors was not visible to the public. Only the back side of it was visible. The placard is bright yellow and gives the details of the suspension: the length and the reasons for the suspension. The inspector spoke to Mr. Xue and advised him that when the door on which the placard was affixed was open only the back side of it could be seen, and that the public must be able to read the front which indicates the details of the suspension. Visibility of that information is required by the Act.
35Inspector Giorgoudakis attended again on March 28 and 29, at 8:10 and 8:23 p.m. respectively. On those dates, Mr. Lian was present and appeared to be the person in charge. The inspector testified that on both dates, the door on which the placard was affixed was open with the result that the suspension details were not visible to the public.
36In submissions, UFO admits that on each of these dates the door was open so that placard was facing the wall and was not displayed outward to the public. Mr. Xue and Mr. Lian stated, however, that the door had been closed earlier, satisfying the s. 55 (2) requirement. On March 28th, the inspector spoke to Mr. Lian and explained that the door had to be closed to make the placard details visible to passersby. Mr. Lian testified that on March 29 when the inspector arrived he had been washing the floors which was why the door was open.
37I accept that the placard was conspicuously posted on the door, but with the door open (as shown in Exhibits 6,7 and 8 – photographs taken by the inspector), it is clear that the details of the suspension were not visible to the public. While the March 11 occurrence may have been considered a mistake or lack of understanding on the part of UFO, the fact that the same situation was encountered on two subsequent occasions after inspectors had explained the signage requirements makes that position less credible. The inspector testified that on her inspections there were no signs of alcohol service; UFO was compliant with the suspension in this regard. However, the evidence clearly shows that at the time of the inspections on March 11, 28 and 29, 2017, UFO was in violation of s. 55(2) of the Act.
March 11, 2017 - s. 43 of the Regulation
38The Registrar alleges that on March 11, 2017, UFO failed to ensure that the licensed capacity was not exceeded contrary to s.43 of the Regulation; specifically that in room V3 which has a licensed capacity of 30, inspectors counted 46 persons.
39Inspector Giorgoudakis testified that she and Inspector Anderson both did a count of the room. She counted 46 persons and he counted 47. When a licensee is cited for overcrowding, the Registrar will use the lower of the counts. Mr. Xue did not dispute the number of people in the room. However, in his testimony, he stated that because the licence was under suspension and no liquor was being served he did not think there was an overcrowding issue under the Regulation. Counsel for the appellants submitted that when the licence is under suspension the overall capacity as set on the occupancy permit issued by the Town of Markham applies, not the licensed capacities for each room as set out on the liquor licence as determined by the local fire department.
40I do not accept that argument. Section 43 refers to the number of persons “to which the licence applies”. The licence to sell liquor is suspended for a period of time, but remains in place; it is not cancelled. The premises continue to be a licensed premises and the licensee does not cease to be a licensee with all the duties and obligations under the Act and regulations. By UFO’s reasoning, for example, section 45(2) of the Act which states that it is a condition of the licence that a licensee facilitate an inspection relevant to the licence would not be applicable during a suspension. UFO could refuse entry, for example, or refuse to produce a liquor licence for inspection. Likewise, s. 45(2) of the Regulation, which states that a licence holder shall not permit a person to sell or consume a controlled substance on the premises would not be applicable. Neither is a logical consequence of a liquor licence suspension.
41If there was some confusion on Mr. Xue’s part regarding the impact of the suspension, he does not appear to have raised that at the time of this inspection. He may not have intentionally violated s. 43 of the Regulation, but the count was clear. Room V3 exceeded the licensed capacity on March 11th. I find that UFO was in breach of s. 43 of the Regulation.
March 31, 2017
42The Registrar alleges that patrons were permitted to hold and consume controlled drugs or substances in the licensed premises, contrary to s, 45(2) of the Regulation. The liquor licence was still under suspension on this date. The appellants admit that narcotics were found on the premises, in room V3, but deny that they permitted a person to hold or consume them.
43Several uniform York Region Police officers attended at the premises on March 31 at 12:31 a.m. P.C. Woodstock and P.C. Wong testified. P.C. Woodstock stated that they attended to do a compliance check. He entered room V3, the largest room in the premises. A D.J. was playing and the lights were dimmed, though he could see. As he entered the room, he observed a male who appeared disoriented and he then saw some white powder residue around his nose. This caused him to suspect drug use. P.C. Woodstock asked the D.J. to turn down the music so that he could talk to the patrons. The male he first observed went to the back of the room and he watched as the male threw something behind the speaker which he later determined was a plastic bag containing 13g of ketamine. The police seized this as well as a 'dime bag’ of suspected cocaine. The male was arrested for possession of a controlled substance.
44P.C. Woodstock also testified that, using his flashlight, he observed several other patrons with white powder around their noses. There were 13 patrons in the room. He also made note of straws that had been cut to a short length, with powder in them, on the table and on the floor, he observed a large amount of Kleenex. P.C. Woodstock testified that in his experience, these are all paraphernalia associated with ketamine use. The officer had no recollection of speaking to Mr. Xue about what was found in the room.
45P.C. Wong testified that he spoke to the patrons in Mandarin and advised everyone present that they were under arrest for possession of drugs. The patrons were moved into different rooms to be searched. Additional police officers were called in to assist; six officers in total were present. P.C. Wong stated that he saw signs of service of food and beverages on the table. He did state that drug use was not immediately apparent when he entered the room until he saw the male with white powder residue around his nose from a distance of a couple of feet.
46Several of the UFO staff present on March 31 testified, as well as Mr. Lian. Y.L. stated that she served the room and entered every 15-20 minutes to check if patrons needed food or drinks. She estimated that she would have been in the room for perhaps a minute each time. She testified that she was probably in the room six or eight times before the police arrived. She did not turn the lights up when she entered nor did she inspect the room. Y.L. stated that she did not see any signs of drug use.
47Another server, B.M., also served food to the room, every 20 to 30 minutes. Food was placed on the table and garbage was collected.
48Mr. Lian testified that as acting manager that evening, he was in room V-3 three or four times, for 1 to 2 minutes per visit, before the police arrived. He testified that he saw no one using drugs or any drug paraphernalia as described by the officers. He recalled the police arriving and saw them go into room V-3, but he did not know what they were doing. He stated that the police did not attempt to speak with him, suggesting that there was a language barrier. That may have been the case though in his evidence, P.C. Wong did state that he was speaking in Mandarin with the patrons so presumably could have communicated with Mr. Lian as well.
49In submissions, Registrar’s counsel referred me to the decision in Sin City that consideration must be given when weighing the evidence to what the licensee ‘knew or ought to have known” regarding the prohibited activity. She submitted that the police officers’ evidence regarding the visibility of the drug use should be preferred and that I should question the credibility of the appellants’ witnesses.
50The apparent complacent approach by staff is concerning. The evidence is that the room was dimly lit, but there was sufficient light that staff could efficiently (in about one minute) deliver food and drinks as well as clear garbage from the table and around the room. While the actual drug use may have been surreptitious, the appellants’ testimony that no one saw any straws or the abundance of Kleenex is not credible, even if I take into account their brief presence in the room. Further, despite the fact that there were at least six officers in the premises and one can surmise a fair bit of activity as they processed the patrons for arrest, Mr. Lian seemed to do nothing to learn what was going on. Appellants’ counsel submitted that the patrons could have started their drug use just as the police arrived, but the evidence about cut straws with powder residue and the quantity of Kleenex suggests otherwise. While that is a possibility, I must weigh the evidence on the balance of probabilities. I find that it is more likely than not that the drug use had been ongoing for some time when the police arrived.
51That being said, I am prepared to find that there may have been a lack of awareness about ketamine use and the indicia of use such that the second part of the Sin City test has not been met – the ‘knew or ought to have known” component. Therefore, I do not find a violation of s. 45(2) of the Regulation on March 31, 2017. However, March 31, 2017 presented itself as an opportunity for the appellants to educate themselves. It appears that they did not do so.
April 16, 2017
52The Registrar alleges that patrons were permitted to hold and consume controlled drugs or substances in the licensed premises, contrary to s 45(2) of the Regulation. Again, the appellants admit that drugs were found on the premises, but deny they permitted a person to ‘hold or consume contrary to s. 45(2)”. The Registrar also alleges that the licence holder, or its manager, failed to maintain control over the activities permitted to occur on the premises contrary to s. 45.2 of the Regulation.
53Both P.C. Woodstock and P.C. Wong attended, arriving at approximately 11:23 p.m. with another officer, P.C. Yee. Again they entered room V3, which was dimly lit. Music was playing. P.C. Woodstock testified that he immediately observed a female patron in the back corner of the room pick up a glass plate and run toward the bathroom. He saw what he believed to be a large quantity of ketamine on the plate. He seized the plate from the patron and arrested her. P.C. Woodstock stated that he observed cut straws and what he believed to be ketamine powder on the table. He also observed white powder around the nostrils of several of the patrons. Police also found a bag of ketamine in a box in the room and a bag of marijuana above the TV which was mounted on the wall.
54There were 27 patrons in the room. All the patrons were arrested for possession of a controlled substance and again the officers called in for additional assistance to process the patrons. A total of ten police officers attended and they were there until 1:23 a.m. P.C. Wong testified that he spoke to the patrons in Mandarin, reading the caution to them and advising them of their right to counsel.
55Employees S.L and Y.Q.L. testified that they both served room V3, as did several other staff. S.L. testified that he was in the room four to five times. He did not take orders from the patrons, but delivered food and cleared plates. Y.Q.L. estimated that she had been in the room seven or eight times before the police arrived, to take orders, spending between 30 seconds to one minute in the room each time. She estimated that there may have been 17 patrons in the room. The witnesses testified that they saw no signs of drug use.
56Mr. Lian and Mr. Xue were both present that evening and both had been in room V3 between two and four times before the police arrived and saw no signs of drug use. Mr. Xue testified that he loathes drug use and that if he saw any signs if it, he would ask patrons to leave. He stated that he attempted to speak to the police about the incident that evening but was told to “step aside”.
57I note that the officers suggested in their evidence, as did respondent’s counsel in submissions that staff attempted to warn patrons of the arrival of police by yelling into each room. The evidence was not persuasive on that point and I have given it no weight.
58However, the facts are that just two weeks after the events of March 31st, police attended at the premises again and found evidence of drug use in room V3. However, Mr. Lian and the servers stated that despite being in the room every 15 to 20 minutes they saw absolutely no signs of drug use. Even if I accept that evidence, the logical inference is that after March 31, 2017 the appellants (specifically Mr. Xue and Mr. Lian) made no effort to educate themselves. There was no evidence of any follow up with police to inquire what they should be alert to. It would not have been an insignificant event to have six police officers (on March 31) attend the premises to make numerous arrests. I agree with the submission made by respondent’s counsel that one would expect increased vigilance by the appellant, given what took place on March 31st. The appellants admit that there were drugs found on both dates. The fact that on April 16th they assert they saw nothing strongly suggests a wilful blindness to their obligations as a licensee or at best, a passive approach to fulfilment of their responsibilities under the Act. It is incumbent upon a licensee to not only be aware of their duties under the Act but to take proactive steps to meet those obligations.
59Based on the evidence before me, I find that a violation of 45(2) of the Regulation on this date.
60The Registrar has also alleged that the UFO failed to ensure that it, or a manager, maintained control over the premises and the activities that were permitted to occur on the premises contrary to s. 45.2 of the Regulation. As noted above, one would expect increased vigilance by the appellant, given what took place on March 31st .There was no evidence of that. Staff testified to doing what they had always done in terms of checking in with patrons to see that they had what they wanted. This was not a situation in which one of the patrons was surreptitiously consuming drugs; all of the patrons in the room were arrested. There was little, if any, oversight of the activities in the room, based on the appellants’ evidence. I therefore find a violation of s.45.2 of the regulation on April 16, 2017.
May 7, 2017
61The Registrar alleges that on May 7th, UFO failed to ensure that the licensed capacity was not exceeded, contrary to s. 43 of the Regulation; specifically that in the main floor – bar area which has a licensed capacity of 6, inspectors counted 15 persons. This area, as depicted in Exhibit 10, a photograph of the area, is comprised of a bar with stools (three stools are shown in the photo) and a more expansive foyer area with an L-shaped couch on a raised platform. This whole area is the means of egress and ingress into the various karaoke rooms. Everyone must pass through this area.
62The AGCO inspectors counted eight patrons around the bar and seven people on the couch. There is no dispute that the licence profile reads: “6- Main Floor: Bar Area”. What is disputed is whether this includes the area where the couch is located. I agree with the appellants’ counsel’s submission that it is not clear that the licensed capacity of six persons applies to the entire foyer area, especially given the specific reference to the “Bar Area” on the licence profile. However, the count of eight in the bar area was not challenged. Given that a plain reading of the licence document shows that the area was licensed for six, I must find that the UFO was two persons over capacity which is a violation of s.43 of the Regulation.
63The Registrar also alleges a violation of s. 40 of the Regulation on this date. Section 40 requires that a licence holder and any person involved in the sale and service of alcohol, and including persons providing security services, have completed the approved training courses, which in this instance means successful completion of the Smart Serve course.
64AGCO inspectors determined that the security person working that evening did not have a Smart Serve certificate. The security person was the employee of the security company that was contracted to provide security services from time to time. The appellants do not dispute that the security person was not Smart Serve-certified, but Mr. Xue stated that he did not know that it was his responsibility to check for it, given that this was not his employee. Inspector Giorgoudakis testified that she advised both Mr. Xue and Mr. Lian that it was the licence holder’s obligation to ensure all persons working are Smart Serve certified, regardless of whether they are their employees. She also advised the security person that he needed the certificate if he was working in a licensed establishment.
65Though a breach of this section may seem to be an administrative oversight in this instance, it is nevertheless a contravention of s. 40 of the Regulation.
May 19, 2017
66The Registrar alleges that there was a violation of both s. 40 and 43 of the Regulation on this date. Regarding the latter, Inspector Giorgoudakis attended and in room V1 counted 27 people. The room has a licensed capacity of 20. Mr. Lian and Mr. Xue were both present. The appellants concede that the room was overcrowded by seven persons. I therefore find a violation of s. 43 of the Regulation.
67Inspector Giorgoudakis also noted that the same security person was working as had been there on May 9th. He had not obtained a Smart Serve certificate. Again, the appellants submit that he was not their employee and they cannot be faulted for relying on a licensed security company, whom they trusted, to supply them with appropriately trained guards. While this may have been a credible response on May 7th, it is not on May 19th. They had been told just 12 days before that it was their obligation to ensure that the security guard was Smart Serve certified, regardless of who his actual employer was.
68I therefore find a violation of s. 40 of the Regulation.
August 20, 2017
69The Registrar alleges that the appellants again breached s. 41(1) of the Regulation – that they failed to inspect a piece of identification of a person apparently under the age of 19 prior to selling or serving liquor to that person and s. 30(4) of the Act - that they permitted a person who appeared to be under 19 to have or consume liquor in the licensed premises. In addition, the Registrar alleges that they failed to retain records of the sale of liquor for the premises contrary to s. 54(1)(b) of the Regulation.
70Inspectors Giorgoudakis and Ng attended the premises at approximately 12:30 a.m. for a compliance inspection. They did a walk through the premises and then entered a karaoke room. There was no number on the door to the room. There were seven patrons in the room - two females and five males. There were 18 bottles of beer (both Coors and Budweiser) on the table, four or five of which were partly full. The inspectors requested identification from the patrons because they appeared youthful to them. None of the patrons had identification.
71The first male they spoke to said that he had arrived just five minutes before the inspectors entered. He said he was 18 years old. The second male, who was also underage said he was not drinking and had also just arrived. The other five patrons told the inspectors their respective birthdates. They were all at least 19 years old, though none had a physical piece of identification with them.
72Again, staff testified that all protocols for checking identification had been followed. I accept the evidence that the two patrons who were underage had just arrived and had not been served alcohol. If I accept that staff would have asked for identification, there was likely no opportunity for staff to have done so before the inspectors arrived to the room. However, the other five patrons had been served. It is hearsay evidence that these patrons told the inspectors that they had no identification (and therefore could not have had identification inspected by staff), but in this instance, given that the inspectors accepted that, despite their youthful appearance, these patrons were of legal drinking age, there was no reason for them not to produce identification if indeed they had some. I find that it is more probable that they had not been asked to produce identification of inspection prior to be served liquor and therefore there was a violation of s. 41 of the Regulation.
73The focus of s. 30 is to ensure that persons under the age of 19 are not served or permitted to consume alcohol. It is generally regarded in the jurisprudence to be a serious violation of the Act. Regarding s. 30(4) there is no evidence that the two patrons who were minors were served or consumed alcohol. It is not disputed that the others, who were 19 years old, were served and consumed alcohol. They may have appeared youthful in appearance; however, unlike the other incidents before me in this appeal, the evidence proffered by the inspectors and accepted by them was that these five patrons were of legal drinking age. On these particular facts, I do not find a violation of s. 30(4) of the Act.
74Inspector Ng asked to inspect the liquor receipt for this room. The bill produced by Mr. Lian that evening only listed food. Mr. Lian’s evidence about the evening was at times confusing, suggesting that in fact minors had been identified as being in the room and there was to be no alcohol service to the room (though the minors told the inspectors that they had just arrived before 12:30 a.m. and the food receipt indicates the order was placed at 10:11 p.m.) and that the delivery of 18 beer to the room had been intended for a different room. He testified that the server who was working for the first time that evening got the room numbers mixed up. Subsequently, he provided a receipt for the other room which showed both food and the service of 23 bottles of beer.
75Inspector Ng testified that Mr. Lian did seem upset with staff that evening and based on Mr. Lian’s testimony it appears that things may not have been running smoothly that evening. However, the explanation provided as to the mix up between the rooms and the two receipts does not make sense when one considers the fact that the receipt which does include beer was for 23 Coors Light beer, yet 18 (Coors and Budweiser) were in the room. It is a possibility that five beers had been consumed between approximately 10:30 p.m. and 12:30 a.m., but that does not explain the fact that the inspectors saw Budweiser beer as well as Coors in the room.
76The failure to have the record for sale of beer to the room may have been an administrative error, but given that I do not accept Mr. Lian’s explanation regarding the receipts, I must find that there was a breach of s. 54(1)(b) of the Regulation on August 20, 2017.
Section 16 of the Liquor Licence Act
77In addition to the various incidents as set out above, the Registrar also alleges that contrary to s. 16 of the Act, liquor was kept for sale, offered for sale and sold under the authority of a licence without the licence being transferred despite a prescribed change to the licensee. This allegation relates to the sale or proposed sale of the business from UFO to MYST.
78Devin Sookdeo is the manager of liquor licensing at the AGCO. He testified that the AGCO first received a liquor sales licence transfer application from UFO and MYST on January 23, 2017. The application was returned to MYST which is the applicant because there were outstanding violations against the current licensee, UFO. The application was re-submitted and ultimately accepted by the AGCO on April 11, 2017. The transfer application review takes some time so an “authorization to contract out the sale and service of alcohol” is often issued by the AGCO pending its decision on the transfer. This allows the transfer applicant (MYST) to operate and sell and serve alcohol during the transfer process. The document explicitly includes an acknowledgement that both the current licence holder (UFO) and the transfer applicant are responsible for the operation of the establishment and for any violations of the Act and regulations that may arise during the period of the authorization. The authorization to contract out was issued on May 31, 2017.
79The Registrar’s concern is that the documents provided by the appellants included an agreement of purchase of sale for the business, for $170000, dated October 29, 2016 with a closing date of November 1, 2016. This suggests that the appellants delayed almost three months before filing the transfer application, with MYST presumably operating the establishment in that time, unbeknownst to the Registrar.
80The evidence from Mr. Xue and Mr. Lian was that despite the wording in the agreement of purchase and sale, the sale has not been consummated. Mr. Sookdeo acknowledged that the Registrar has no evidence that the deal actually closed. Inspector Giorgoudakis testified that during her attendance at the premises on May 19, 2017, Mr. Lian told her that he was making the lease payments, had paid for the business and was under the impression that he was the ‘owner’. There is some confusion on the evidence then as to whether the sale has actually closed, but even if it had closed in May 2017 as inferred from the inspector’s evidence, that would not put the appellants in breach of s. 16. They made their initial application to transfer in January 2017. The Registrar was notified of the proposed change at that time.
81Further, the evidence from the various inspections shows that Mr. Lian does not appear to have been present at the establishment until March 2017. Mr. Xue continued to be present at least through to May 2017. Given Mr. Xue’s evidence that he wanted to sell the business so he could return to China and devote his time to care for his wife who is ill, the fact of his continued presence at UFO weighs against a finding that the sale closed in November 2016.
82Therefore I do not find a violation of s. 16 of the Act.
Section 6(2)(d) of the Act
83The Registrar states, with respect to both UFO and MYST that the past or present conduct affords reasonable grounds for belief that they will not carry on business in accordance with the law and with integrity and honesty. In the case of UFO, he asserts that the liquor licence should be not be renewed and in the case of MYST this would support a refusal of the transfer of a licence to it.
84As noted by both counsel in the matter before me, if I uphold the Notice of Proposal to refuse to renew UFO’s liquor licence there is then no licence to be transferred to MYST. Appellants’ counsel has submitted that it is within the Tribunal’s jurisdiction to order something less than a revocation if appropriate, and approve the licence transfer with or without conditions. He has proposed a lengthy set of conditions for my consideration.
85At the end of her closing submissions after calling extensive evidence to support findings on each of the violations alleged on each of the 11 incident dates and suggesting I make those findings, respondent’s counsel urged that the evidence about each of those violations need not be analyzed piece by piece and found individually to meet some threshold of proof (presumably the balance of probabilities).
86It is well-settled law that when considering s. 6(2)(d) of the Act the Tribunal can and should look to the totality of the past conduct and not just to an applicant’s compliance with the regulatory laws in issue: Registrar, Alcohol and Gaming Commission of Ontario v. 751809 Ontario Inc. operating as Famous Flesh Gordon’s, 2013 ONCA 157. The facts in Famous Flesh were such that the Registrar was not relying upon specific alleged violations of the Act and Regulations. The Court of Appeal did not need to turn its mind to the standard of proof for those allegations which are indeed only allegations until proved in evidence, nor was there a suggestion that the standard of proof of specific allegations of violations of the Act or Regulations is different when contained within a Notice of Proposal which also relies upon s. 6(2)(d) versus when they are cited as the only allegations within a Notice of Proposal. To suggest that there are different standards of proof for an allegation of a violation of s.45(1) of the Regulation depending on how the Registrar chooses to craft the Notice of Proposal is incongruous and not supported by the reasoning of the Court of Appeal in Famous Flesh.
87Here, based on the extensive evidence, I have found violations of the Act and Regulations by UFO on January 22, 28, March 9, 11, 28, 29, April 16, May 7, 19 and August 20, 2017. These encompass some that could be considered more administrative in nature, such as the violation of s. 40 of the Regulation, and some that could be considered more serious, such as the violations of s. 45(1) of the Regulation and s. 30(4) of the Act.
88The fact that there were repeated violations of the same provisions within an eight month period is concerning. Increasing this concern is the fact, as disclosed in the evidence, that UFO has a prior disciplinary history which resulted in the 30 day suspension in March 2017. That suspension resulted from an admission by UFO to violations between December 2015 and November 2016 which included sections 41(1) and 43 of the Regulation and s. 30(4) of the Act, which were also allegations made and violations found in this appeal. Prior to this suspension, UFO agreed to a monetary penalty as a result of violations of s. 41(1), 43 and 45.2 of the Regulation and s. 30(4) of the Act. These violations arose on one date, June 20, 2015.
89When I consider then the totality of UFO’s conduct, it reveals conduct that is ongoing despite disciplinary action taken by the Registrar. Measures taken against UFO for specific deterrence have had no apparent effect. The pattern that emerges is either one of a licensee studiously ignoring its obligations under the Act or a licensee content to remain blissfully ignorant of its obligations. Neither is acceptable. The fact that in March 2017 just prior to starting a 30-day suspension, when one would anticipate UFO may have had heightened vigilance, the inspectors found minors in the premises consuming alcohol and that in May 2017 inspectors were still finding overcrowding, leads me to conclude that meaningful awareness of his responsibilities and efforts to meet those obligations is beyond Mr. Xue. I therefore conclude that there are reasonable grounds for belief that UFO will not carry on business in accordance with the law and with integrity and honesty and uphold the Registrar’s refusal to renew the liquor sales licence of the licence is appropriate in the circumstances.
The Transfer Application
90I am cognizant of the impact of this decision to uphold the refusal to renew the UFO liquor licence on Mr. Lian’s plan to operate the licensed premises: there is no licence to transfer to MYST. His counsel submitted that it would be unfair to Mr. Lian to quash that plan by refusing to renew the licence; instead I should considering imposing a lengthy suspension with an order that at the end of the suspension period, Mr., Xue no longer be involved in the business in any way. Mr. Lian testified that he has taken steps to rectify some of the problems such as installing windows in the doors to the karaoke rooms and improving the lighting. He also stated that a compliance plan would articulate requirements to diligently inspect identification and ensure that rooms with minors present not be served alcohol. Further, he would agree to a strict set of conditions.
91I have considered counsel’s submissions. If Mr. Lian was new to the operation of this particular business, his plan might carry more weight and may have persuaded me to renew the UFO licence and impose a lengthy suspension on UFO thereby giving Mr. Lian ‘a chance’ in the manner proposed by his counsel. While I agree with his counsel that Mr. Xue was not the best mentor, Mr. Lian was also present throughout the spring of 2017 when serious violations have been found to have occurred. He, like Mr. Xue, did not make any apparent effort to educate himself at that time, and for Mr. Lian this was a critical time, a time when, as Mr. Sookdeo noted, most transfer applicants do their utmost to ensure compliance. As Respondent’s counsel submitted, perfection is not required of a transfer applicant, but Mr. Lian ought to have been aware as early as January 2017 when the transfer application was returned to him because of the outstanding violations, that matters such as service to minors, inspection of identification and overcrowding were issues that needed to be addressed. Yet it is only now that he appears to have turned his mind to these issues. Mr. Lian’s proposed compliance plan is simply too little too late and I am not persuaded given what has occurred at the premises while he has been involved that the plan would be effectively carried out.
CONCLUSION
92Based on the evidence and submissions, I have found the following violations by UFO and/or MYST as follows:
- On January 22, 2017 - a violation of s. 29 of the Regulation
- On January 28, 2017 – a violation of s. 41(1) of the Regulation and s. 30(4) of the Act.
- On March 9, 2017 – a violation of s. 41(1) of the Regulation and s. 30(4) of the Act.
- On March 11, 28 and 29, 2017 – a violation of s. 55(2) of the Regulation
- On March 11, 2017 – a violation of s. 43 of the Regulation
- On April 16, 2017 – a violation of s. 45(2) and 45.2 of the Regulation
- On May 7, 2017 – a violation of s. 40 and 43 of the Regulation
- On May 19, 2017 – a violation of s. 40 and 43 of the Regulation
- On August 20, 2017 – a violation of s. 41(1) and 54(1)(b) of the Regulation.
93Based on the evidence and submissions, I find that UFO and/or MYST did not breach the Act or Regulation as alleged by the Registrar, as follows:
- On January 28, 2017, there was no violation of s. 50(c) of the Regulation
- On March 31, 2017, there was no violation of s. 45(1) of the Regulation
- On April 20, 2017, there was no violation of s. 30(4) of the Act.
- The appellants did not breach s. 16 of the Act.
94Having made the findings and considering the totality of the evidence, I find that UFO’s past conduct affords reasonable grounds for belief that it will not carry out business in accordance with the law and with integrity and honesty.
ORDER
For the reasons set out above, I order the Registrar to carry out the Amended Notice of Proposal to Refuse to Renew a liquor sales licence dated February 2, 2018. As a result, the appeal of the Amended Notice of Proposal to refuse to transfer a licence, also issued on February 2, 2018 is moot and that matter is concluded.
LICENCE APPEAL TRIBUNAL
___________________________
Patricia McQuaid, Vice-Chair
Released: October 3, 2018