Date: 2018-02-13

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 Review an Application for a Licence

Between:

2551665 Ontario Inc. o/a Headquarters

Appellant

-and-

Registrar of Alcohol and Gaming

Respondent

-and-

Friends of the Market and the Lowertown Community Association

Added Parties

DECISION AND ORDER

Adjudicator: Marisa Victor, Member

Appearances:

For the Appellant: Garett Schromm, Counsel

For the Respondent: Rena Khan, Counsel

For the Friends of the Market: John Edwards, Agent

For the Lowertown Community Association: Norm Moyer, Agent

Place and Date of Hearing: Ottawa, ON January 9-10, 2018

REASONS FOR DECISION AND ORDER

A. Overview:

1The appellant applied to the respondent for a liquor licence for a planned hair salon/restaurant operating as Headquarters at 113-115 Clarence Street in Ottawa, Ontario. Headquarters began operations in December 2017, without the proposed liquor licence. It is located in the Byward Market area of Ottawa, a historical area in the heart of Ottawa which has a significant number of restaurants, clubs and bars, high-end stores as well as an outdoor food market. The area is a significant tourist attraction but also home to many residents.

2The Liquor Licence Act, R.S.O. 1990, c. L. 19 (the Act) provides an opportunity for the public to submit objections to a liquor licence application.

3The respondent received letters from objectors representing residents of the municipality in which Headquarters is located. As a result, on August 30, 2017 the respondent issued a Notice of Proposal to Review the Application for a Licence to Sell Liquor (the Proposal) on the basis that several objections had been received.

4The appellant appealed the Proposal and requested a hearing before the Licence Appeal Tribunal to determine whether granting a liquor licence is not in the public interest, having regard to the needs and wishes of the residents of the municipality where it is located.

5The objectors, who were made added parties to this appeal, raise concerns about municipal planning and by-laws, an over-abundance of nightclubs in the area, noise complaints and the behaviour of intoxicated persons in their neighbourhood. In particular, they are also concerned that if a liquor licence is granted to Headquarters, it will turn into a nightclub.

6Many members of the public attended the hearing to present their case. Counsel for the respondent took no position on the matter but made submissions in relation to possible licence conditions.

B. ISSUES:

7The issues to be decided are:

a. Is it in the public interest to grant the appellant’s application for a liquor licence, having regard to the needs and wishes of the residents of the municipality in which the premises are located?

b. If the licence is granted, should conditions be attached?

C. RESULT:

8I direct the respondent to approve the application for a liquor licence.

9Conditions will attach to the liquor licence.

D. Issue 1 – it IS in the public interest to grant the appellant’s application for a liquor licencE:

10The added parties, as objectors, have the burden of establishing on a balance of probabilities that it is not in the public interest to grant the appellant’s application for a liquor licence, having regard to the needs and wishes of the residents of the municipality in which the premises are located.

11The added parties represent two different groups:

a. Friends of the Market represents groups of owners of nearby condominium complexes, residents and business owners in the Byward Market area.

b. The Lowertown Community Association (LCA) represents the approximately 12,000 residents who live in Lowertown, a section of Ottawa that includes the Byward Market area.

12Together the objectors brought the following evidence to support their arguments related to public interest:

a. The Byward Market’s city zoning and bylaws as a mixed-use area and that it has seen unsustainable growth in licensed venues, particularly nightclubs and bars;

b. Noise problems that are associated with nightclubs and bars; and

c. The crime levels in the Byward Market area.

13The appellant brought evidence about Headquarters’ business plan as a hair salon/restaurant.

14I will deal with each of these areas of evidence in turn.

I. City zoning and by-laws

15The Friends of the Market (FM) called as their first witness, Matthieu Fleury, the City Councillor whose constituents include those in the Byward Market and Lowertown area of Ottawa.

16Councillor Fleury testified about the following:

a. The Byward Market’s history;

b. The City’s efforts in controlling diversity of uses including a bylaw meant to prevent further proliferations of bars and nightclubs in the area;

c. The City’s by-law and zoning rules which prevent additional nightclubs or bars in the area together with the difficulty in defining the difference between a restaurant and nightclub/bar in some circumstances;

d. That a liquor licence is a lucrative component of many of the businesses in the Byward Market area;

e. That restaurants have obtained liquor licences and then have morphed into nightclub/bars with a different owner; and

f. That there are ten current investigations into nightclubs/bars in the Byward Market area for not respecting the zoning rules and/or transitioning from a restaurant into a bar or nightclub despite zoning.

17Councillor Fleury also expressed that the process of investigating establishments not respecting City zoning was a long process often taking years, and was extremely costly.

18S.J, a past resident and current local business owner, was also called by FM. to testify about market area zoning. She testified that she no longer lives in the Byward Market due to the concerns she testified about. When she purchased her condo the Byward Market area was a mixed-use area but has since seen, in her opinion, unsustainable growth in licensed venues, particularly nightclubs leading to a monoculture of nightclubs and bars in the area. She also testified that the high economic return of licensed venues is pushing up commercial rents and forcing retail stores to leave the area.

19John Edwards, the agent for FM., testified about the large residential population in the area and their proximity to licensed establishments.

20Aydin Kharaghani, the principal owner and operator of Headquarters, testified that his establishment is a merger of an upscale hair salon or spa and a restaurant/coffee shop. He testified that he believed Headquarters satisfies the wants and needs of the residents as it caters to high-end clientele, serves and supports local food and local businesses, and relies on walk-in traffic. He stated that that his other nightclub business was for sale and he was exiting from the nightclub business. He stated that Headquarters complies with local by-law and zoning requirements as a restaurant and not a nightclub or bar, and is in full compliance of local and municipal regulations.

II. Noise problems

21Mr. Edwards also provided evidence that there are more noise complaints in the Byward Market area than anywhere else in Ottawa.

22F.G, who lives nearby, was called to testify by FM. She testified on behalf of herself and the condominium residents in her building and stated that they have had significant problems with noise in the area emanating from nightclubs, in particular Cavali, which is owned by Mr. Kharaghani. She stated that particularly in the summer months, the members of her condominium have difficulty sleeping as there is loud music until the early morning from Wednesday – Sunday. She also testified about the noise complaints she personally made to City by-law officers. She has experienced the inability to enjoy her own terrace due to noise. She had also moved her bedroom in her condominium in an attempt to deal with noise issues.

23J.R, a local resident, testified for the LCA. He also stated that noise in the area was significant, particularly from nightclubs. The bass from nightclubs nearby, including Cavali, keeps him up until 2 or 3 am even though his condominium is further away from the noise than others in his building. He and his wife cannot open windows due to noise. He often hears shouting in the streets. In addition, those waiting for cabs or Uber vehicles speak loudly until 3 am. He said these problems were not as noticeable 10 years ago; now however, the noise is noticeable and they want to move somewhere they can sleep. He has complained to by-law enforcement and has testified in court regarding the noise. In cross-examination, he did agree that the principal of Headquarters had taken some steps to address the noise problems at Cavali.

24Mr. Kharaghani agreed that his other establishment, a nightclub called Cavali, had some noise issues that he has tried to resolve, but that noise from the patio was a difficult problem to solve. With regard to Headquarters, he stated that it currently has two (2) non-commercial speakers installed to provide his clientele a home theatre like atmosphere. The establishment plays café music and there are no plans for it to be turned into a nightclub.

III. Crime levels in Byward Market area

25Mr. Moyer, agent for the Lowertown Community Association (LCA), also testified about crime levels in the Byward Market Area. He presented a slide presentation that he had put together for a presentation to residents in the area. The presentation included crime statistics provided to him from the Ottawa Police community liaison officer. The statistics showed crime levels in the neighbourhood.

26Mr. Edwards testified that the crime statistics show the Byward Market area has higher crime rates than in the rest of the city.

27F.G testified that she had seen increased crime in the neighbourhood. She stated that bars and nightclubs weren’t the main reason, but one of the factors leading to increased gang and drug related activity on the Byward Market area.

28J.R stated that over that last 3 – 4 years he had witnessed an increase in drunkenness and petty vandalism as well as urinating in the streets and in door wells. He had witnessed violent fights and significant public disorder.

IV. Headquarters’ business plan

29Mr. Kharaghani testified that his plans only include running an upscale hair salon/restaurant. He testified about the business plan for Headquarters including:

a. The history and development of Headquarters;

b. Mr. Kharaghani’s plan to exit from the business of running nightclubs to focus on this establishment;

c. The extensive investments he has made into renovating the location including a dividing wall, high-end kitchen, high-end coffee machine; furniture and décor all consistent with application;

d. The plan to include a space to allow for private corporate and wedding events within Headquarters;

e. The provision of alcohol as part of his business model as it is in other salons and coffee shops/restaurants; and

f. The by-law and zoning barriers preventing the operation of a nightclub in the Headquarters location.

V. Analysis

30The appellant has a presumptive right to a licence. The Tribunal must assess whether the added parties’ concerns are supported on an objective basis. If so, I must then determine whether the objectors have met their burden of proving on a balance of probabilities that a licence should not be granted.

31The added parties have raised serious concerns about their neighbourhood, concerns that are obviously troubling not only to those who they represent but also to the City Councillor who represents the entire area. Their main concerns are the perceived over-saturation of licensed establishments in the Byward Market area, and in particular nightclubs and bars which they say bring with problems of noise, rowdiness, and crime.

32As noted during this hearing and in previous decisions, when these problems are in relation to an entire area, and not the particular establishment in question, they do not fall within the purview of this licensing hearing. They are more properly addressed in zoning by-laws and City by-law enforcement.

33None of the concerns raised by the objectors were directly linked to the operation of Headquarters which is now in operation, albeit without a liquor licence. I accept the evidence that the appellant’s salon/restaurant complies with all applicable zoning and municipal by-laws and therefore the establishment is operating in accordance with the law. The appellant has invested significant funds into the establishment and I accept that Mr. Kharaghani has no plans other than the development of the Headquarters business model. There was also no evidence that he had turned restaurants or cafes into nightclubs in the past in violation of zoning or by-laws.

34While there was evidence of noise problems at Mr. Kharaghani’s other nightclub establishment, Cavali, there was no evidence that Headquarters would be a similar establishment. Indeed, a nightclub in the location that Headquarters occupies would be prohibited due to City zoning.

35There was no evidence that the appellant’s patrons will exhibit the behaviour of unruly nightclub patrons. If such behaviour does materialize, there is no evidence that the appellant will not take appropriate steps to deal with it. Indeed, the evidence is that in the past Mr. Kharaghani has taken steps to curb noise at his nightclub when that became a problem.

36With regard to crime levels, again the evidence was not linked directly to the appellant. There was no evidence linking crime and increased licensing of nightclubs or for that matter, and more relevant to this hearing, restaurants, coffee shops or hair salons. The statistical data failed to establish the required correlation.

37The other theme running through the added parties’ evidence and submissions was that denial of a liquor licence would prevent the successful operation of a nightclub at the appellant’s location. The underlying assumption is that once Mr. Kharaghani obtains his liquor licence he will turn his establishment into a nightclub, either himself or through a future sale. It is clear that such a concern, when and if it does occur, should be addressed through City by-laws and zoning.

38As such, I find that the added parties have not established on a balance of probabilities that the issuance of a liquor licence is not in the public interest. I must now determine whether conditions are appropriate under the circumstances.

E. ISSUE 2 – conditions to the liquor licence should be attached:

39FM in their submissions requested the following conditions should a licence be granted:

a. That the liquor licence be tied to the operation of a fine dining establishment or café;

b. That there be reduced hours;

c. That no alcohol be served after 11:30 pm;

d. That the licence be limited to 60 or 70 seats;

e. That there be no liquor licence for the proposed patio; and

f. That the licence be non-transferrable to a new owner.

40The LCA requested the following conditions should a licence be granted:

a. That the hours of operation be limited to the current hours which are 11 am to 7 pm;

b. That the licence be non-transferrable to a new owner; and

c. That whatever decision is made it is unamendable for 10 years.

41The appellant asked for the following:

a. Seat limit to be based on the municipally inspected and approved number;

b. That there be no limitation on hours of operation other than those imposed by the municipality, which also applies to outdoor patios. This is to provide his business with flexibility; and

c. The appellant agreed to a condition to have a sign requesting patrons to be considerate and respectful of neighbours.

42The respondent did not take a position regarding the application, but did make submission on what conditions are enforceable by the respondent:

a. Noise in outdoor areas is under the purview of the respondent and therefore a condition preventing amplified music in or directed at a patio is permissible;

b. The respondent only has one class of licence and does not tie liquor licences to a type of establishment;

c. Signage requesting patrons to be considerate and respectful of neighbours is permissible;

d. The Act specifically allows the transfer of licences except in certain circumstances; and

e. The capacity of a location is determined by municipal licencing agencies.

43I may attach conditions where they are proper to give effect to the purposes of the Act.

44With regard to noise, both F.G. and J.R. testified about the significant noise they have had to deal with in their residence due to other establishments, particularly at night. Secondly, Mr. Kharaghani testified about the difficulties he had in containing noise in his outdoor patio at Cavali. I accept that residents who live close to the establishment should be given more weight than business owners and others who do not reside in the area. Given the concerns regarding noise and the proximity to residential units and that the respondent indicated that outdoor noise is within its purview, I find that it is therefore appropriate to place a noise restriction on the patio.

45As the witnesses testified that their concern with noise is limited to noise at night, I have selected 9 p.m. as the time after which time music on the patio is no longer permitted. There were no submissions as to timing of this condition; however, 9 p.m. seems a reasonable time to prevent night-time noise issues with the patio.

46With regard to a sign asking patrons for respect and consideration of neighbours, both the appellant and added parties were in favour of such a condition. I agree that this condition is warranted.

47There was not enough evidence to support other conditions that were proposed by the added parties, for example requiring reduced hours on the liquor licence. In addition, the Tribunal does not have the power to prevent the transfer of the liquor licence at a future date nor to make this decision un-appealable.

F. ORDER:

48I direct the Registrar to issue the appellant a licence to sell liquor.

49The following conditions shall attach to the licence:

a. There shall be no music on or directed towards the patio after 9 pm;

b. The licensee shall post a sign at each exit, visible to patrons as they leave, informing them to be considerate and respectful of the neighbors by keeping noise to a minimum.