Appeal from the Notice of Proposal to Refuse Transfer dated July 7, 2020 made by the Registrar under the Liquor Licence Act, R.S.O. 1990, c. L.19
Between:
5006576 Ontario Inc. o/a The Lobster Trap
Appellant
and
Registrar, Alcohol, Cannabis and Gaming Regulation and Public Protection Act, 1996
Respondent
DECISION AND ORDER
Adjudicators: Joanne E. Foot, Member Colin Osterberg, Member
Appearances:
For the Appellant: Sean O’Connor, Paralegal
For the Respondent: Elizabeth Maishlish, Counsel
Heard by Videoconference: March 8 and 9, 2021
REASONS FOR DECISION AND ORDER
A. Overview
1The Registrar proposes to deny a liquor licence to 5006576 Ontario Inc. (the “appellant”) based on the conduct of its sole officer, director, and shareholder, Sugevan Kuganesan. The Registrar relies upon Mr. Kuganesan’s criminal record, his lack of honesty and integrity during the application process, and his recent breaches of liquor licencing laws. The appellant has appealed the Registrar’s decision to this Tribunal. We must decide if Mr. Kuganesan’s past conduct provides reasonable grounds for belief that he will not carry on business in accordance with the law and with integrity and honesty.
2Based on all the evidence, we find that there are reasonable grounds. We also find that this case is not an appropriate case to permit registration with conditions. We therefore direct the Registrar to carry out his proposal.
3On September 3, 2019, ownership of the restaurant known as The Lobster Trap, located at 8099 Weston Road, Unit 6, Toronto, was transferred from 1934881 Ontario Inc. to the appellant.
4On January 14, 2020, the respondent received an application to transfer licence no. LSL812926 (the “Licence”) under the Liquor Licence Act, R.S.O. 1990, c. L19 (the “Act”) for The Lobster Trap from its current holder, 1934881 Ontario Inc., to the appellant.
5On July 7, 2020, the respondent issued a Notice of Proposal to Refuse Transfer (the “Notice of Proposal”) refusing to transfer the Licence on the basis that the appellant is disentitled to a licence under s. 6(2)(d) of the Act because the past or present conduct of Mr. Kuganesan affords reasonable grounds for belief that the appellant’s business will not be carried on in accordance with the law and with integrity and honesty.
6The appellant appealed the Notice of Proposal by way of Notice of Appeal dated July 22, 2020.
B. ISSUES
7The Tribunal must decide whether there are reasonable grounds for belief that the appellant will not carry on its business as a liquor licensee in accordance with the law and with integrity and honesty having regard to the past and present conduct of Mr. Kuganesan.
8If the respondent establishes that Mr. Kuganesan’s past behaviour provides reasonable grounds, we must further consider whether to order the transfer of the Licence to the appellant with terms and conditions.
C. LAW
9Under s. 6(2) of the Act, an applicant is entitled to be issued a licence to sell liquor unless one of the criteria listed in that section is present. One criterion in s. 6(2)(d) is that the past or present conduct of the applicant, an officer or director of the applicant, or a person having responsibility for the management or operation of the business of the applicant, affords reasonable grounds for belief that the applicant will not carry on business in accordance with the law and with integrity and honesty.
10The Ontario Court of Appeal, in Ontario (Alcohol and Gaming Commission of Ontario) v. 751809 Ontario Inc. (Famous Flesh Gordon’s), 2013 ONCA 157, described the applicable standard of proof as follows:
The standard of proof provided by s. 6(2)(d) of the Act is that of “reasonable grounds for belief”. As applied to this case, s. 6(2)(d) of the Act required the Registrar simply to show that Mr. Barletta’s past or present conduct provides reasonable grounds for belief that he will not carry on business in accordance with law and integrity and honour. The Registrar does not have to go so far as to show that Mr. Barletta’s past or present conduct make it more likely than not that he will not carry on business as required.
11The Court of Appeal further stated:
The Registrar is entitled to rely on any past or present conduct, whether in the operating of the licensed establishment or not, that affords reasonable grounds for belief that the individual will not carry on business as required by s. 6(2)(d). Past conduct that is not criminal could also provide the necessary reasonable grounds for belief.
D. EVIDENCE AND ANALYSIS
12The evidence presented falls into three categories, each relevant to the test in s. 6(2)(d). These categories, analyzed below, are (a) Mr. Kuganesan’s past conduct of a criminal nature, (b) the false statements made in the liquor licence transfer application, and (c) Mr. Kuganesan’s present conduct regarding compliance with liquor licensing laws.
1. Mr. Kuganesan’s Past Conduct of a Criminal Nature
13Mr. Kuganesan has a relevant criminal history. That history is mostly dated, involving activities which occurred more than ten years ago and, as such, is of somewhat limited relevance. His more recent conviction for driving without a licence is of more concern, as is Mr. Kuganesan’s lack of candour with respect to his criminal history both in his application and before the Tribunal.
14The respondent presented evidence of numerous criminal charges and convictions from 2007 to 2011, including theft, assault, forging credit cards, carrying a concealed weapon, aggravated assault, assault with a weapon, breach of recognizance, dangerous driving, failure to remain at the scene of an accident, obstructing a peace officer, escape from lawful custody, impaired driving, failure to provide a breath sample, and other charges.
15Mr. Kuganesan also has a history of committing numerous provincial offences dating back to 2006, including a 2017 charge for driving without a licence and two minor traffic charges in 2017 and 2019.
16The respondent acknowledges that Mr. Kuganesan’s criminal history is dated. All crimes were committed more than ten years ago. The respondent also acknowledges that a criminal record is not in itself a bar to obtaining a licence to sell liquor.
17The respondent argues some of the charges in the past are indicative of a pattern of committing serious crimes and then trying to escape responsibility. The respondent points to the charges of failing to remain at the scene of an accident, escaping lawful custody, and failure to provide a breath sample, as examples.
18The respondent argues some of the charges involve dishonesty, such as theft and forging credit cards. Some of the charges involve ignoring legal obligations, such as breaching recognizances, obstructing a police officer, and driving without a licence. Others are with respect to crimes of violence and others are alcohol-related, including assault, carrying a concealed weapon, aggravated assault, assault with a weapon, and refusing to provide a breath sample.
19The respondent referred the Tribunal to the decision in John Knight v. Registrar under the Alcohol, Cannabis and Gaming Regulation and Public Protection Act, 1996, 2019 CanLII 101808, in which the Tribunal stated:
At first blush, a criminal record dating back to 1981 with the last entry in 2007 may not be seen as indicative of future behaviour. However, with the exception of a breach of a release condition and the possession of burglary tools, the appellant’s record consists of crimes of dishonesty. This combined with his more recent HTA record for driving while suspended and what I find to be his lack of candor while testifying, goes directly to his preparedness to act honestly and in accordance with the law.
20The respondent also referred the Tribunal to the unreported decision in Carlos Pimentel o/a Carlton Tavern v. Registrar of Alcohol, Gaming and Racing, 2017 10714/LLA, in which the Tribunal found that repeated convictions for impaired driving by the licensee was a serious concern, despite those convictions having occurred at least eight years before his application. In that case, a conviction for breaching a bail term was also considered significant since it spoke to the applicant’s ability to comply with rules and regulations.
21The appellant argues Mr. Kuganesan’s criminal past does not speak to his current character. He says he has changed his life and the last ten years show no indication of continued criminal conduct. Mr. Kuganesan went to school, has been gainfully employed, and can be trusted to carry on his business in accordance with the law and with integrity and honesty. Mr. Kuganesan says he participated in a program about drinking and driving which was required to get his driver’s licence back, and he quit drinking alcohol.
22Magdalena Luczak, Mr. Kuganesan’s former employer and the owner of 1934881 Ontario Inc. which sold The Lobster Trap to the appellant, gave evidence at the hearing. Ms. Luczak met Mr. Kuganesan in December 2017 when she hired him to work in the restaurant. Ms. Luczak said Mr. Kuganesan was a good employee from the start of his employment. He was a hard worker and was very dependable. Ms. Luczak said Mr. Kuganesan helped her catch some employees who had been stealing from her and she developed trust in him over time.
23Ms. Luczak said she had enough trust in Mr. Kuganesan that she regularly gave him cash so he could go to the LCBO and Costco to purchase supplies for the restaurant. She sometimes gave him access to as much as $3,000 in cash or credit cards to make purchases. Despite Mr. Kuganesan’s criminal record, Ms. Luczak has a great deal of trust in him and believes he should be granted a liquor licence.
24In addition to Ms Luczak, we heard from four other character witnesses who know Mr. Kuganesan and had positive things to say about him. They all spoke highly of Mr. Kuganesan’s work ethic and his ability to manage the restaurant. They all said that Mr. Kuganesan would be an excellent ambassador for the liquor industry and that they expect he will comply with the law if granted a liquor licence.
25The character witnesses pointed to Mr. Kuganesan’s compliance with the current COVID-19 protocols as evidence of his willingness to abide by laws and regulations related to his business. Ms. Silva, an employee of the appellant, testified that when an Alcohol and Gaming Commission of Ontario (“AGCO”) representative came to the restaurant and told Mr. Kuganesan that he could not sell alcohol, the alcohol was immediately removed from the premises.
26The witnesses who were aware of Mr. Kuganesan’s criminal past were confident that he is a different person than he was ten years ago and can be trusted with a liquor licence.
27We acknowledge Mr. Kuganesan’s criminal history is, for the most part, related to activities which took place more than ten years ago and there are signs in his life which point to a significant change in behaviour. Mr. Kuganesan stopped associating with the people with whom he participated in criminal activity. He went to school, worked at various jobs, purchased The Lobster Trap, and earned the friendship of people who obviously hold him in high regard.
28However, we are concerned about Mr. Kuganesan’s lack of candour when going through the application process and when testifying at the hearing about his criminal charges. During the application process, Mr. Kuganesan repeatedly failed to provide information related to his criminal past, first by denying it in the initial application and later by minimizing it and attempting to explain it away.
29At the hearing, in answer to a question from the Tribunal, Mr. Kuganesan described the circumstances surrounding one of his assault charges. He said a friend was being attacked by three other men and he tried to intervene. Mr. Kuganesan was arrested when his friend accused him of being one of the assailants. Mr. Kuganesan testified he spent more than a year in jail awaiting trial on that charge when, on the day the trial was supposed to start, his friend told the Court that Mr. Kuganesan was not involved. In our view, that story does not ring true. If it were true, then why was Mr. Kuganesan so reluctant to provide the AGCO with the details? That someone who Mr. Kuganesan describes as a friend, and whom he was trying to rescue from an assault, would let him sit in jail for more than a year for a crime he did not commit and then recant on the day of trial seems incredible. The AGCO heard this story for the first time at the end of the hearing, when it could not investigate the incident to determine its truth. We find that story to be lacking credibility.
30Mr. Kuganesan avoided answering many questions about and minimized his participation in criminal behaviour. This suggests a refusal or reluctance to take responsibility for that conduct.
31Mr. Kuganesan’s criminal history is not, on its own, a bar to obtaining a liquor licence. However, we find that it, when combined with the recent charge of driving without a licence, Mr. Kuganesan’s lack of candour regarding his criminal history, and his resistance to accepting responsibility, while not determinative, is relevant in determining whether Mr. Kuganesan would comply with the law and with honesty and integrity in relation to the operation of The Lobster Trap.
2. The Application Process
32The appellant did not take responsibility to ensure that its application was completed properly and did not discharge its obligation to provide full and accurate information to the Registrar during the application process.
33The appellant initially applied for a new liquor licence rather than a licence transfer. As part of the application, Mr. Kuganesan was required to complete and file a Disclosure Report, in which eight questions were asked related to his history of criminal and provincial offences. The Disclosure Report asked the following question, to which the answer given was “No”:
Have you ever been charged, found guilty and/or convicted of any offence in any jurisdiction? This includes any absolute and/or conditional discharges, withdrawn charges, suspended sentences, convictions, fines or guilty pleas.
Note: This includes ALL federal and provincial offences.
Examples of offences include, but not limited to:
Criminal Code of Canada offences
Highway Traffic Act offences within the past 5 years: such as speeding, driving without a licence, driving without insurance
34The answer which appears on the Disclosure Report is not accurate. Mr. Kuganesan testified that he did not complete the Disclosure Report and that it was completed by Magdalena Luczak, the owner of the company which currently holds the Licence. Ms. Luczak’s company sold The Lobster Trap to Mr. Kuganesan’s company and she was helping him with the application for a liquor licence. Mr. Kuganesan’s evidence on this issue was supported by Ms. Luczak. She expressed significant remorse at the hearing for having answered questions incorrectly in the Disclosure Report and for jeopardizing Mr. Kuganesan’s chances of being granted a liquor licence.
35According to Ms. Luczak, she completed the Disclosure Report by asking Mr. Kuganesan the questions and filling in his answers. She says she mistakenly asked Mr. Kuganesan whether he had any criminal history in the past five years whereas the Disclosure Report requires disclosure of any criminal history. Mr. Kuganesan confirmed this evidence in his testimony.
36We do not find Mr. Kuganesan’s explanation for the inaccurate answer in the Disclosure Report satisfactory for the reasons which follow.
37As part of the application, Mr. Kuganesan signed a Declaration which stated:
By signing below, I/we confirm that I/we have reviewed and authorized the submission of the application described above. I/we have read the Notification statement in the application.
38Mr. Kuganesan agreed he knew the Declaration included the Disclosure Report but said he did not read the Disclosure Report before it was submitted. We can only conclude that either Mr. Kuganesan approved the misrepresentations in the Disclosure Report, or he misrepresented that he had reviewed and authorized application documents before they were submitted. Both conclusions provide reason to believe that Mr. Kuganesan may not act in accordance with the law, or with honesty or integrity in relation to the liquor licence.
39On January 14, 2020, after receiving the appellant’s application for a liquor licence, Frances Antoniou, Eligibility Officer at the AGCO, wrote to the appellant and asked if it would prefer to have the previous owner sign transfer documents, rather than apply for a new licence itself. Ms. Antoniou’s reference to the previous owner clearly shows she was of the understanding she was communicating with Mr. Kuganesan. Ms. Antoniou received a response from The Lobster Trap’s email address agreeing to proceed with a transfer. The email does not indicate anyone other than Mr. Kuganesan was responsible for sending this email.
40On January 30, 2020, Ms. Antoniou received an email from The Lobster Trap email address asking about the progress of the application for transfer. This email indicates it was sent by “Jay”, which is Mr. Kuganesan’s nickname. According to Mr. Kuganesan and Ms. Luczak, it was really Ms. Luczak who sent this email.
41Mr. Kuganesan and Ms. Luczak testified that several of the emails from The Lobster Trap with respect to the application, while appearing to be from Mr. Kuganesan, were actually prepared and sent by Ms. Luczak. Mr. Kuganesan denied reading any, or most, of the emails between Ms. Luczak and Ms. Antoniou despite having access to The Lobster Trap email account and using it for some purposes himself.
42There are two possible conclusions that the Tribunal could draw from these circumstances. First, we could conclude Mr. Kuganesan filled out the application and Disclosure Report himself, and he is now alleging it was completed by Ms. Luczak in order to escape the consequences of having made misrepresentations in the Disclosure Report.
43Second, we could conclude Mr. Kuganesan and Ms. Luczak represented to the AGCO that Mr. Kuganesan completed the application himself and was communicating with Ms. Antoniou in the emails when, in fact, it was Ms. Luczak who completed the application and was exchanging emails with Ms. Antoniou.
44Both conclusions involve dishonesty and a lack of integrity on the part of Mr. Kuganesan in relation to the liquor licence application.
45On March 17, 2020, Ms. Antoniou sent an email to Mr. Kuganesan asking for details of the charges which appear on his criminal record. Mr. Kuganesan responded that the charges were being pardoned and the charges consisted of failing to breathe into a machine due to having difficulty breathing as the result of sleep apnea. Mr. Kuganesan’s email went on to say he pled guilty even though he “did blow under” because he did not understand the consequences the conviction might have on him in the future.
46Mr. Kuganesan’s response was not complete and was not supported by the police information relating to the offence. The appellant presented no evidence in support of his assertion that sleep apnea might prevent a person from using a breathalyser and presented no evidence that he provided that explanation at the time of the offence. We do not consider Mr. Kuganesan’s explanation credible.
47At the hearing, Mr. Kuganesan submitted a letter dated November 17, 2020, which he alleges was sent to the AGCO. The AGCO has no record of having received this letter. The letter lists Mr. Kuganesan’s criminal history and some information about the incidents. The letter denies involvement in some of the incidents for which Mr. Kuganesan was charged and dismisses others as simply his being in the wrong place at the wrong time.
48We do not accept that the letter was delivered to the AGCO at the time alleged. Mr. Kuganesan could not say how the letter was sent. Even assuming the letter was sent, it does not provide the information the AGCO was requesting and mainly contains denials and excuses, rather than details of the events in question or acknowledgement of wrongdoing. The letter does not constitute adequate disclosure and supports the respondent’s position that Mr. Kuganesan was not forthright during the application process.
49In our view, Mr. Kuganesan has acted without honesty and integrity during the application process. He either made misrepresentations in the application, or he misrepresented to the AGCO that he was responsible for completing the application. He evaded questions about his criminal history. At the hearing, he gave various explanations for his criminal charges, some of which the Tribunal has concluded lack credibility. His statements relating to his past criminal history can be fairly characterized as intending to avoid responsibility, explain away past behaviour, blame others, and hide information.
50We find the events surrounding the application to transfer the liquor licence to the appellant and the events which occurred during the application process, provide reason to believe the appellant will not carry on business in accordance with the law, or with honesty and integrity.
3. Breach of Liquor Licensing Laws and Regulations
51The appellant acted contrary to liquor licensing laws and regulations after receiving the Notice of Proposal. He did this in two ways. First, Mr. Kuganesan purchased beer off-licence that he kept for sale at The Lobster Trap. Second, Mr. Kuganesan sold alcohol at The Lobster Trap after the Notice of Proposal was issued refusing to transfer the Licence.
52Pursuant to s. 31 of Regulation 719 under the Act, liquor is not to be kept for sale, sold, or served unless it was purchased by the licence holder under the licence.
53It was Mr. Kuganesan’s evidence that, in the fall 2020, after the Notice of Proposal, he purchased beer at the LCBO which he intended to sell at the Lobster Trap, without using a liquor licence on more than one occasion. He says that he did this because the LCBO would not allow him to purchase beer with a liquor licence. We do not accept this explanation. Licence holders are required to purchase beer under a liquor licence. It was Mr. Kuganesan’s obligation to understand and comply with this requirement.
54It was Mr. Kuganesan’s evidence that he continued to sell liquor at The Lobster Trap in the fall of 2020 after the Notice of Proposal was issued, contrary to s. 5 of the Act. Although the appellant may have had an authorization to contract out, which allows a transfer applicant to operate a licensed premises until the licence is transferred, that authorization expires when the AGCO refuses a transfer. In this case, that was July 7, 2020 when the Notice of Proposal was issued. The appellant argues that once Mr. Kuganesan became aware that he was not entitled to sell liquor in November 2020, he stopped immediately and moved all alcohol to a storage locker. Mr. Kuganesan says he did not understand the rules but once he was advised of those rules he complied. Mr. Kuganesan argues this is an indication that he is prepared to run the business in accordance with the law.
55We do not accept Mr. Kuganesan’s position. It was Mr. Kuganesan’s obligation to understand that the appellant was not entitled to sell alcohol without a liquor licence. We do not accept Mr. Kuganesan’s evidence that he was unaware of this prohibition. Even if this were true, Mr. Kuganesan’s failure to educate himself with respect to this most basic of liquor licensing rules, affords reason to believe that the appellant would not carry on business in accordance with the law.
56The appellant presented evidence Mr. Kuganesan has complied with the COVID-19 regulations as an indication he is prepared to comply with rules.
57The appellant argues the business is thriving under Mr. Kuganesan’s ownership and he is a good ambassador for the sale of liquor. When he was told to stop selling liquor, he did. When he was told the rules, he complied.
58The appellant’s position on this point is untenable. The issue in the appeal is whether there are reasonable grounds for belief the appellant will not carry on business in accordance with the law and with integrity and honesty. The appellant admits Mr. Kuganesan purchased and sold alcohol after being denied a liquor licence in July 2020. It is Mr. Kuganesan’s obligation to know the law and to abide by it. It is not an acceptable excuse to say he did not know the rules, particularly ones as basic as the ones breached in this case.
E. Conclusion
Issue 1: Does the conduct of Mr. Kuganesan afford reasonable grounds for belief that the appellant will not carry on business in accordance with the law and with integrity and honesty?
59It is clear that Mr. Kuganesan has taken significant strides toward becoming a productive and valued member of society. However, we have found that Mr. Kuganesan has not yet taken full responsibility for his past criminal conduct. He has failed to comply with the requests of the regulator to provide details about this past conduct and to ensure compliance with the regulatory regime to which he and his business are subject. For these reasons we do not think that Mr. Kuganesan is ready to operate in a regulated industry where the public interest depends upon being able to trust the registrant to do the right thing, that is, to act in accordance with the law and with integrity and honesty.
60The Tribunal finds the respondent has satisfied its onus of proving that there are reasonable grounds for belief that Mr. Kuganesan, as an officer and director of the appellant and a person having responsibility for the management or operation of the business of the appellant, will not carry on the business in accordance with the law and with integrity and honesty.
61Mr. Kuganesan’s history of criminal activity, his history of breaches of provincial legislation, his unwillingness to be forthcoming with respect to his criminal history, the misrepresentations in his application for transfer, and his recent breaches of liquor licencing laws, all provide reasonable grounds for belief the appellant will not carry on business in accordance with the law and with integrity and honesty.
Issue 2: Having found that Mr. Kuganesan’s conduct affords reasonable grounds for belief that the appellant will not carry on business in accordance with the law and with integrity and honesty, what order is appropriate?
62We have considered whether the consumer protection and public interest purposes of the Act can be accomplished by allowing the Licence to be transferred to the appellant with terms and conditions.
63We do not believe that terms and conditions would be effective in this case. In order for terms and conditions to be appropriate in circumstances such as these, the licensee must be willing and able to comply with the law and to act with honesty and integrity. As noted, Mr. Kuganesan has shown a lack of compliance, honesty and integrity both in the application process and in his testimony before the Tribunal. He has demonstrated an inability or unwillingness to act in accordance with the law by operating the appellant’s business after transfer of the Licence was refused.
64We do not believe that there are terms and conditions we can impose which would allow for licensure but that would also ensure that the Act’s public interest objectives are satisfied.
F. ORDER
65The Tribunal directs the Registrar to carry out the Notice of Proposal to refuse the appellant’s application to transfer the Licence.
LICENCE APPEAL TRIBUNAL
_________________________
Joanne E. Foot, Member
_________________________
Colin Osterberg, Member
Released: April 8, 2021