Date: 2021-04-13

File: 12772/CLA

Appeal from a Notice of Proposal to Refuse a Licence pursuant to s. 5(6)(b) and s. 14(1) of the Cannabis Licence Act, 2018, S.O. 2018, c.12 Sched. 2 and Regulations

Between:

D. Michael Goldlist

Appellant

-and-

Registrar, Alcohol, Cannabis and Gaming Regulation and Public Protection Act, 1996

Respondent

AMENDED REASONS FOR DECISION & ORDER

ADJUDICATOR: Jennifer Friedland, Member

APPEARANCES:

For the Appellant: Justin Jakubiak, Counsel

Adam Varro, Counsel

For the Respondent: Elizabeth Maishlish, Counsel

Ashley An, Counsel

Dates & Location of Hearing: December 14, 15, 16, 17, 2020, January 5, 2021

By video

A. OVERVIEW

1This is an appeal of a Notice of Proposal to refuse the appellant’s application for a cannabis retail manager licence (CRM), pursuant to s. 5 of the Cannabis Licence Act, 2018¹ (the Act).

2The respondent, the Registrar under the Alcohol, Cannabis and Gaming Regulation and Public Protection Act, 1996 (the Registrar) has proposed to refuse the appellant’s application on the basis that he is ineligible under s. 5(4)1 of the Act. The Registrar contends that the appellant’s past and present conduct provides reasonable grounds to believe that he won’t, in acting as a retail manager, act in accordance with the law, or with integrity, honesty or in the public interest.

3The Registrar submits that the appellant has misrepresented or misled the Registrar in his application by denying prior involvement in the cannabis industry, and by failing to acknowledge that he is involved in litigation which the Registrar alleges involves claims made against him of “fraud, deceit, misrepresentation, breach of trust or similar conduct.” Though not stated in its Notice of Proposal, the Registrar further contends that the appellant has made a “collateral attack” on the circumstances of a conviction in 2008 for possession for the purpose of trafficking in cannabis by downplaying his culpability for the offence, despite pleading guilty to it. The Registrar submits that the appellant’s explanation for having been found in possession of other drugs at the same time is also unconvincing. The Registrar submits that the information in the appellant’s application and his subsequent explanations disclose a continuing pattern of dishonest conduct which disqualifies him for a licence.²

4The appellant submits that he did not fail to disclose any of the relevant details of his past and current conduct in his application. He disclosed his prior convictions and charges and his current and past litigation, which he denies is based on claims of fraud, deceit, misrepresentation or similar conduct. He further submits that the illegal cannabis dispensary, which the Registrar alleges he was involved with, was not his but was operated by his business partner and another party over his objection and which he endeavoured to close down. He maintains that the drugs in his possession in 2007, which led to his conviction in 2008 for possession for the purpose of trafficking, were for personal use and to share with his girlfriend and sister. He says he pleaded guilty on the advice of his lawyer but accepts responsibility for the offence. The appellant submits that the Act specifically states that a prior cannabis-related drug conviction does not disqualify a person from being licenced under the Act and that he is not ineligible for a licence. The appellant asks me to set aside the Registrar’s proposal and order the Registrar to issue the licence, subject to conditions if I deem conditions appropriate.

B. ISSUE

5The question I must decide is whether there are reasonable grounds to believe that the appellant will not, in acting as a cannabis retail manager, act in accordance with the law, or with integrity, honesty or in the public interest, having regard to his past or present conduct.

C. RESULT

6For the reasons given below, I find that the appellant is, at present, ineligible for a CRM licence, as there are reasonable grounds to believe that the appellant will not, in acting as a cannabis retail manager, act in accordance with the law, or with integrity, honesty or in the public interest, having regard to his past or present conduct.

7However, as detailed below, this decision is based primarily, but not exclusively, on there being outstanding litigation against the appellant which includes allegations of bad faith against the appellant in respect of his business dealings.

8While I do not take issue with his manner of disclosing that litigation, when combined with other difficulties I have with the appellant’s evidence, this outstanding litigation renders him ineligible for a licence at this time.

D. STATUTORY CONTEXT AND LAW

9The sale of recreational cannabis is a regulated industry in Ontario. The legislative framework is set out in the Act and Ontario Regulation 468/18 (the Regulation). The Alcohol and Gaming Commission of Ontario (the AGCO) is responsible for administering the Act and regulation.

10Cannabis may only be sold at an authorized retail store run by a licenced retail operator. Except in some circumstances, each authorized retail store also requires at least one licenced CRM.

Function & Duties of a Cannabis Retail Manager

11Only a licenced CRM or a licenced retail operator can perform the following functions in relation to an authorized retail store:

1. Supervising or managing employees of a cannabis retail store.

2. Overseeing or co-ordinating the sale of cannabis.

3. Managing compliance issues in relation to the sale of cannabis

4. Having signing authority to purchase cannabis, enter into contracts or make offers of employment.

12Sections 18 to 24 of the Act relate to the purchase, sale and distribution of cannabis and related products at a retail store. For example, they govern what products can be sold at a retail store; require that the cannabis sold can only be purchased from the Ontario Cannabis Retail Corporation; limit the amount that can be sold to a customer in a single visit; require all sales to be recorded; prohibit hiring employees under 19 years of age; and set protocols for dealing with unsold cannabis if the retail authorization is revoked, cancelled or not renewed.

13Section 25(3) of the Act requires CRMs to perform their duties in a manner that is consistent with sections 18-24.

14A CRM licence does not attach to a particular store. Once licenced, a retail manager can obtain employment at any authorized store that will hire the licensee.

15A licence is not required to simply work at an authorized store, for example as a “budtender,” though other criteria for employment apply. For example an employee must be 19 years of age or older.

Eligibility

16Section 5(4) of the Act provides that an applicant is not eligible for a retail manager licence in any of the following circumstances:

1. There are reasonable grounds to believe that the applicant will not, in acting as a cannabis retail manager, act in accordance with the law, or with integrity, honesty or in the public interest, having regard to the past or present conduct of the applicant.

2. The applicant has been convicted of or charged with an offence under this Act, the Cannabis Control Act, 2017, the Cannabis Act (Canada) or the regulations made under any of them that is prescribed for the purposes of this paragraph.

3. There are reasonable grounds to believe that the applicant is carrying on activities that are, or would be if the applicant were the holder of a cannabis retail manager licence, in contravention of or not in compliance with a provision of this Act, the Cannabis Control Act, 2017, the Cannabis Act (Canada) or the regulations made under any of them that is prescribed for the purposes of this paragraph.

4. The applicant makes a false statement or provides false information in the application.

5. Any other circumstance that may be prescribed.

17The Registrar relies on the first ground, asserting that the appellant will not conduct himself in accordance with the law, or with integrity or honesty or in the public interest (the “honesty and integrity provision”).

18Subsection 5(5) of the Act addresses the impact of prior cannabis-related drug charges and convictions on the consideration of the honesty and integrity provision.

5(5) Paragraph 1 of subsection (4) does not prevent the issuance of a cannabis retail manager licence to an applicant if the applicant has been convicted of or charged with a prescribed offence under the Controlled Drugs and Substances Act (Canada) in relation to cannabis.

19The prescribed offences under the Controlled Drugs and Substances Act (CDSA) that do not prevent the issuance of a cannabis retail manager licence are set out at s. 5 of the Regulation. These are:

s. 4 (possession of a substance); s. 5 (trafficking, including possession for the purpose of trafficking of a substance); s. 7 (production of a substance); and s. 7.1 (possession, sale etc. for use in production or trafficking).

20The above “exception” is relevant in this case as the appellant was convicted in 2008 of possession for the purpose of trafficking in cannabis. Additionally, he faced a number of other charges in 2007 that do not fall within the above exceptions.

Burden of proof and powers of the Tribunal

21The burden is on the Registrar to prove the facts it relies on in relation to the appellant’s past or present conduct which it says makes him ineligible for a licence. It must prove these facts on a balance of probabilities, which means that I must be satisfied that it is more likely than not they are true.

22In terms of whether those facts then afford reasonable grounds to believe that the appellant will not, in acting as a cannabis retail manager, act in accordance with the law, or with integrity, honesty or in the public interest, this standard is a lower standard than a balance of probabilities, meaning that I do not need to find that it is more likely than not that he will not act in accordance with the law or with honesty or integrity etc.³ At the same time, “reasonable grounds to believe” has to be more than “mere suspicion” and will exist “where there is an objective basis for the belief which is based on compelling and credible information.”⁴ Additionally, there has to be a nexus between the impugned past or present conduct and the ability of the appellant to carry out his duties under the applicable legislation.⁵

23A hearing before the Tribunal is a hearing de novo. This means that I am not required to show deference to the opinion of the Registrar; nor am I constrained to consider only the evidence that the Registrar considered in coming to its opinion.

24The powers of the Tribunal following a hearing are set out in s. 15 of the Act.

15(2) After holding a hearing, the Tribunal may by order,

(a) confirm or set aside the proposal or decision of the Registrar; and

(b) direct the Registrar to take any action specified by the Tribunal that it considers appropriate to give effect to the purposes of this Act.

Discretion of Tribunal

(3) In setting aside a proposal or decision under clause (2) (a), the Tribunal may substitute its opinion for that of the Registrar.

Terms, conditions

(4) The Tribunal may attach such terms to its order, or such conditions to the licence or authorization that is the subject of the hearing, as it considers appropriate.

25While the statute appears to afford the Tribunal with broad discretion following a hearing, I find that this discretion is limited by the wording of section 5(4) of the Act. This provision says that in certain circumstances an applicant is simply “not eligible” for a licence. This wording is different than in many other licensing statutes considered by this Tribunal, most of which provide that a person is entitled to a licence except in certain circumstances. If those circumstances are found, the person is no longer presumptively entitled to a licence, but this does not mean that a licence cannot still issue.

26See for example, the Divisional Court’s decision in Arulappu v. Registrar, Real Estate and Business Brokers Act⁶ wherein the Tribunal found that the appellant’s past conduct afforded reasonable grounds to believe that he would not carry on business in accordance with the law and with integrity and honesty; and that he had made or provided a false statement in an application for registration or for renewal of registration – both of which were circumstances that meant he was “not entitled” to a licence under that Act. The Court held that, notwithstanding the Tribunal’s findings, it was an error for the Tribunal not to have considered whether his licence could still reasonably be renewed with conditions.⁷

27The Cannabis Licence Act, however, does not use the language of entitlement. It uses the language of eligibility, stating that a person is simply not eligible in certain circumstances. Thus if I find there are reasonable grounds to believe that the appellant will not, in acting as a CRM, act in accordance with the law, or with integrity, honesty or in the public interest, he is simply not eligible for a licence. I have no discretion to still grant the licence with conditions.

E. THE EVIDENCE

28The facts on which I have based my decision were presented through documentary evidence as described below and through oral testimony from the following witnesses:

For the Registrar:

a) Officer Pailey, an investigator for the AGCO. She was responsible for looking into the items disclosed in the appellant’s application, including obtaining police occurrence reports and other documents related to the appellant’s previous charges and conviction in 2008 for possession for the purpose of trafficking cannabis. She also conducted two interviews with the appellant by telephone.

b) Detective Constable Louis Whitfield is a member of the Toronto Police Service. He had been monitoring a number of illegal cannabis dispensaries in 31 division, including one that operated out of a building which was owned by a corporation jointly owned by the appellant and his business partner, AG.

c) Jeff Longhurst. He is the director of licensing and registration at the AGCO. He provided context for the legislation and outlined the AGCO’s concerns about granting the appellant a CRM licence.

d) David Trainor, an AGCO investigator. He was called to establish the provenance of certain court documents that the Registrar had expected would go in unchallenged.

29For the appellant, I heard from:

a) The appellant himself; and

b) Michael Litvak, a character witness. He is the father of a long-time friend of the appellant’s. Mr. Litvak is the general manager of a food company, and vice president of the Canadian Spice Association. He is a freemason who finds the appellant responsible and kind-hearted. His high regard for the appellant prompted him to invite the appellant to become a member of his freemason’s lodge. The appellant’s application was approved and he is now a member.

30In terms of documentary evidence, a number of documents were entered on consent. These included the appellant’s application and supporting documents, as well as photos, emails, video clips, and the transcript of the appellant’s guilty plea in 2008 to the offence of possession for the purpose of trafficking cannabis and other items. The appellant did, however, object to the admissibility of certain other documents.

Objection to certain documentary exhibits⁸

31The Registrar sought to submit a number of documents in evidence, to which the appellant objected. These were:

a) Police occurrence reports relating to charges against the appellant in 2007;

b) Court documents relating to current civil litigation between the appellant and his business partner AG; and more specifically:

i) an affidavit sworn by the appellant on June 26, 2018 in relation to the outstanding civil matter;

ii) a transcript of cross-examination of the appellant on September 19, 2019 on affidavits sworn by him in the outstanding civil matter;

iii) a responding factum of the respondent, dated October 10, 2019 for a motion brought within the outstanding civil matter returnable October 17, 2019;

iv) the written endorsement of Justice Penny on the above motion.

32The appellant argued that the police occurrence reports are hearsay and that without an officer to testify to the truth of their contents, they are more prejudicial than probative of any issues in this case. The respondent argued that the reports should go in as they were obtained by Officer Pailey through her investigation and are reliable police records that can be taken for their truth of their contents.

33Section 15 of the Statutory Powers Procedure Act, 1990 (“SPPA”) allows the Tribunal to admit evidence that would not be admissible as evidence in a court. However, tribunals must be aware of the dangers of admitting and relying upon unreliable hearsay.

34With these principles in mind, I allowed the police reports to be admitted notwithstanding that they contained hearsay statements. I found them relevant as forming the basis of one of the interviews that Officer Pailey had with the appellant. Moreover, the appellant’s arrest and charges provide one of the grounds upon which the Registrar proposes to refuse the appellant’s application. Ultimately, however, as I further discuss below, I place little weight on the facts set out in these reports other than where those facts are corroborated by other evidence.

35With respect to the transcript of the appellant’s cross-examination in the civil proceedings, the appellant’s initial objection to the admissibility of this document was on the basis that use of this transcript was prohibited by the deemed undertaking rule in Rule 30.1(3) of the Rules of Civil Procedure. This rule prohibits a party from using evidence obtained during discovery for any purpose other than the proceeding for which it was obtained (with some exceptions). However, during the course of oral argument on this issue, it was discovered that the transcript in question was not from an examination for discovery but rather from the cross-examination of the appellant on affidavits made in support of a motion and were part of the public court record.

36The appellant raised other grounds for objecting to the transcript as well as the other court documents from the appellant’s civil action. The appellant argued that the court documents were not relevant to the proceedings, having been obtained after the NOP was issued; he further argued that it is unfair to force the appellant to testify by putting such documents in when they are not evidence from these proceedings. The appellant further objected to the process by which the respondent was attempting to put in the documents, without calling a witness, without the documents being certified copies, and without any foundation laid as to how they were obtained or by whom.

37The Registrar submitted that the transcript was relevant because it contradicted statements made by the appellant in his application; and that the factum was relevant – not for the truth of its contents but for the fact that it proves certain allegations had been made against the appellant which the respondent says also contradicts information provided in his application. With respect to the affidavit specifically, the Registrar points out that this document was provided in disclosure by the appellant himself and that it does not lie in his mouth to now object to it. The Registrar further argued that it had not anticipated that the appellant was going to object to the admissibility of these documents, given that they were disclosed in advance of the hearing and formed part of a joint book of documents prepared by appellant’s counsel. Counsel for the Registrar stated that had she known there would be an objection to the admissibility of these documents, she would have called the AGCO investigator who had obtained the documents from the courthouse.

38I ruled that I would admit each of the above court documents pursuant to the Tribunal’s broad powers to receive hearsay evidence under s.15 of the SPPA. The parties were invited to make what arguments they would in closing argument as to the weight the documents should be afforded. I found that the documents at issue were potentially relevant given that the appellant had referred to the civil proceedings in his application. As for the timing of when the documents were obtained, this is a hearing de novo and neither the Tribunal nor either party should be constrained to rely only on information that pre-dates the NOP. Moreover, the court documents were alluded to in the further particulars provided on November 9, 2020. I did not find timing to be an obstacle to the admissibility of the documents.

39With respect to the process by which the Registrar sought to simply put the documents in through a witness who, frankly, had no idea how they were obtained (namely, Jeff Longhurst, the AGCO director of licensing), I agree with appellant’s counsel that this is not the correct approach. The SPPA may well allow the admission of hearsay evidence, but absent consent or evidentiary exception, such documents still need to be properly identified and put in through an appropriate witness. That said, in this case one of the items to which the appellant objected was produced by the appellant himself. Moreover, given that the parties had prepared a joint book of documents, it was reasonable for the respondent to assume there would be no objection to the admissibility of these documents and I found it would be unfair to the Registrar were I to exclude them on that basis alone without the Registrar having the opportunity to call a witness to have the documents properly identified.⁹ v

40As a result of my ruling, I required the Registrar to call the witness who had obtained the court documents in order to have them admitted in the usual way and to afford the appellant the opportunity to cross-examine the witness. The appellant was free to waive the attendance of this witness but did not. The witness was cross-examined by the appellant as to his basis for picking and choosing which of the court documents to copy.

F. FACTS

41The appellant is 38 years old. He described that he has been part of the cannabis industry since approximately 2004 when he opened an online “headshop.” The business sold smoking accessories and novelty gifts. He is also 50% owner of MAGG Gifts Inc., which operates two bricks and mortar head shops in Toronto called “The Dragon.” As well, he is part owner of a company that handles the distribution and wholesale of smoking accessories. More recently, the appellant incorporated another smoking accessory shop called Havok Global Smoke but then transferred that corporation to his father. The appellant is also 50% shareholder in 2358013 Ontario Inc (“235”), which owns a property at 282 Eglinton Ave West.

42The property on Eglinton Ave plays a role in this hearing because of an illegal cannabis dispensary that operated out of the second-floor rental unit in this building.

43The appellant is eager to enter the recreational cannabis industry now that it is legal. Originally his intention was to obtain a CRM licence in order to manage Havok Smoke, which had applied for a cannabis retail store authorization. However, for reasons that the parties agreed are not relevant to my decision here, that authorization is also the subject to a proposal brought by the Registrar to refuse authorization.

44The appellant believes he can obtain work as a retail manager at a number of other authorized stores. In particular, he has a prospect of employment at an authorized store just outside of Toronto.

45The appellant’s business partner in MAGG Gifts and in his distribution company is AG, who is also the other 50% shareholder in 235 Ontario Inc – the corporation that owns the Eglinton property. The appellant and AG are currently in litigation against each other. They used to be friends and had been in business together since at least 2011 when they opened their first head shop together. They have since had a falling out, which began around the end of 2017 according to the appellant. By May 2018, they had both attempted to trigger a shotgun clause to buy out the other partner. By the end of June 2018 (in fact on the same day), they had both sued each other over ownership of MAGG gifts. Within that litigation, the appellant also sought the sale of the Eglinton property.

The Appellant’s Prior Involvement in the Cannabis Industry

46The appellant answered “NO” to the following question on his application:

.#8 Have you ever been involved in any capacity in the production, distribution or selling of cannabis and/or products containing cannabis? This question applies to you as:

• an individual;

• a sole proprietor, partner, general or limited partner in a limited partnership, director, officer, shareholder of an entity;

• an individual who has had a direct or indirect interest in an entity.

Involvement in the illegal dispensary at 282 Eglinton Avenue West

47There is no dispute that an illegal cannabis dispensary operated out of one of the upstairs units at 282 Eglinton Ave West.

48One of the Dragon smoke shops also operated out of 282 Eglinton Ave on the first floor. The appellant was regularly at the Dragon premises at this location during the period that the illegal dispensary was known to be operating upstairs.

49It was not clear on the evidence when the dispensary opened. The appellant referenced 2016 at one point. However, Detective Whitfield, the police officer tasked with monitoring illegal dispensaries in that area, testified that its grand opening was in June 2017.

50The appellant acknowledges that he knew about the dispensary and admits that he was initially involved in the planning stages. However, he claims to have abandoned the project once he learned how illegal it was. The appellant says that his business partner, AG, was involved in the operation of the illegal dispensary and had signed the lease on behalf of 235, the landlord corporation. He named another person “Eugene” who he thought was also involved in the illegal dispensary. He initially testified to his belief that rent was being paid from that unit to 235, but then hedged, saying he was not sure if rent was received by 235.

51The transcript of the appellant’s cross-examination on affidavits sworn in the civil litigation against AG contains an admission that the appellant worked at the illegal dispensary “for a few days.” When asked to elaborate on this admission during his testimony at this hearing, he described that it was not for a few days but only a few hours, explaining that he may have been tired when he answered the question to civil counsel. The appellant further described that this brief attendance at the dispensary happened in 2016 or 2017 though he was not sure of the date. He said that AG asked him to watch the store for a few hours when the store was short staffed. This was before they were in conflict. The appellant claimed that he did not sell any product that day and found it very stressful to be there. He said that the experience was, in fact, so traumatic for him that he repressed the memory. That is why he did not remember the event, such as to say “yes” on the application when asked about prior involvement in the sale of cannabis.

52In a passage that the appellant was not taken to in the transcript from the civil litigation, the appellant also references involvement with a medical cannabis facility at that same location that closed down after a couple of weeks.¹⁰ I put limited weight on that admission, given that he did not have the opportunity to respond to it; and it is potentially consistent with his admission that he was involved at the “planning stages” with this dispensary. Yet it is also a statement made under oath that undermines his claim to have had no prior involvement in the industry.

53On May 31, 2018, the appellant took steps to “evict” the illegal dispensary. He testified that he went with his father and a friend, intending to enter the unit using the passcode that he thought would be the one that AG previously used and which he knew back when they were friends. When the passcode did not work, he entered the premises by prying open the door. Once inside, he removed the DVR which stored recordings of the store’s video surveillance. He also removed five boxes of cannabis and derivatives and handed those boxes over to the police. He received a property receipt from the police for the cannabis.

54The appellant states that he took this action in order to shut down the illegal dispensary. He explained that he had no choice but to proceed in the above manner because AG refuse to cooperate in evicting the tenant. The appellant explained that as an equal shareholder in the landlord corporation, AG’s consent was required in order to remove the dispensary.

55The appellant was not successful in evicting the illegal dispensary. It re-opened. In his civil action subsequently brought against AG on June 27, 2018, the appellant sought assistance from the Court in evicting the dispensary.

56The evidence from Detective Whitfield was that the dispensary also re-opened following a police raid in January 2018 and again in October 2018 – after recreational cannabis was legalized and illegal dispensaries were required to shut down or risk not being eligible to be licenced in the legal field.

57In September 2018, charges were laid under the Planning Act against 235 Ontario for allowing the premises to be used for an impermissible use; namely, operation of an illegal dispensary. The appellant disclosed this charge in his application and described his 50% ownership interest in the landlord corporation, as well as his efforts to evict the illegal dispensary from the premises.

58The Registrar did not call AG as a witness at this hearing, or any of the employees at the Dragon who may have provided evidence of the appellant’s involvement, if he was in fact involved.

59The witness who was called by the AGCO – Detective Whitfield – testified that he attended the illegal dispensary approximately 11 or 12 times between June 2017 and June 2018. He never saw the appellant at the premises, nor was the appellant identified to him as being involved. Detective Whitfield said that he spoke to the appellant on June 1, 2018 after the “eviction.” The appellant’s name had been passed on to him by the police officer who had taken the cannabis that the appellant had handed over that night. Detective Whitfield acknowledged that he had no reason to doubt what he was told by the appellant about him being the one trying to shut the premises down. Detective Whitfield said he never was able to ascertain who owned the dispensary.

60Ultimately, the evidence does not persuade me of more than what the appellant has admitted whether in this hearing or under oath in the civil proceedings. The evidence establishes only that, at most, he was involved on the periphery at the planning stages of the dispensary and possibly in relation to a medical marijuana clinic even before then. He also worked at the illegal dispensary on one occasion or at most “a few days.”

61In terms of whether the appellant misled the Registrar by answering “no” to prior involvement in the cannabis industry, I find that even his peripheral involvement, as landlord or at the planning stages, ought to have prompted him to answer “yes” to this question. That said, he does acknowledge elsewhere in the application that he was 50/50 owner in 235 Ontario which owned the building in which the illegal dispensary was operating. And he did disclose that it had been charged under the Planning Act¹¹ for operating an illegal dispensary.

62As I will discuss below, it is less the non-disclosure of involvement in the illegal dispensary that troubles me as it is the late-night break-in and taking of video equipment that gives me pause. I do not see how this would be connected to the appellant’s stated purpose of wishing to “evict” the tenant. One of the exhibits attached to the appellant’s own affidavit sworn in the civil proceedings is an email from AG’s lawyer to the appellant’s lawyer at the time, sent at 6:10 pm on May 31, 2018, just prior to the appellant going in to “evict” the tenant. In this letter, AG’s lawyer alleges that the appellant has misled his lawyer and is himself engaged in the illegal activities of the tenants. Counsel for AG warns that “It is not wise for Mr. Goldlist to mislead you or the record about his alleged oblivion regarding those activities as my client has well documented evidence about his involvement.”¹² That night, the appellant pried open the door and took the video surveillance records. While it may well be that the appellant’s primary purpose was, as he said, to shut down the illegal dispensary, it is unclear why it would be necessary to take the video recordings in order to do so. In my view, his behaviour that evening is concerning.

The appellant’s prior charges and convictions

63One of the questions on the licensing application to be a cannabis retail manager asks the applicant to indicate all previous charges and convictions. The appellant did so. This included listing a conviction in 2008 for possession for the purpose of trafficking cannabis which was an offence that occurred in September 2007. He also disclosed other offences for which he was charged but not convicted arising at the same time. The appellant provided details of the conviction on his application (even though the question does not seek an explanation) stating that the marijuana was for personal and medical use. The appellant further elaborated on the details surrounding his charges and conviction both to Inspector Pailey and at this hearing, adding that the cannabis in his possession was not just for him, but for his sister and girlfriend as well.

64The appellant explained the circumstances leading to this conviction. He described that in September 2007; he was robbed at gunpoint on his way home with a quantity of cannabis that he had just purchased. He says he did not know his assailants. He called the police who later executed a search warrant at his residence and found a quantity of cannabis, cannabis resin, and psilocybin. They also uncovered some weapons and the remnants of a growing operation as well as paraphernalia such as baggies and scales and a quantity of cash.

65The appellant was charged with production of marijuana, possession for the purpose of trafficking marijuana, possession for the purpose of trafficking psilocybin, possession for the purpose of trafficking cannabis resin, and possession of a prohibited weapon. His girlfriend was charged along with him for all but the weapons offence. The police seized the cash and drug paraphernalia.

66As noted above, these charges were all disclosed in the appellant’s application.

67The appellant admits that he had approximately 2lbs of cannabis in his possession but says that it was for personal use and to share with his sister and girlfriend at the time. He also acknowledged – both at the hearing and to Officer Pailey – that he had approximately 6 lbs. of mushrooms in his possession but says this was also for personal use, and to share with his sister and girlfriend. The appellant denied that he had anything to do with the weapons found – which he explained were found in a garage used by another person. He also denied that he was ever growing cannabis. He explained that there was a room when he moved in that had previously been used for that purpose. With respect to the paraphernalia seized, he explained that those items were used in his online business and not used by him for the purposes alleged, i.e. for trafficking in drugs. He claimed that the approximately $4000 in cash found was also from his online business. The appellant was not asked why cash would be used on an online business.

68The appellant pleaded guilty to the possession for the purpose of trafficking in cannabis charge. The other charges were all withdrawn. The facts read into the record to support the plea were as follows:

… on September the 13th, 2007 in responding to a home invasion robbery at the defendant’s home, police located a quantity of drugs and a subsequent CDSA warrant yielded, among other drugs, two pounds of marijuana and a quantity of marijuana resin. There were also items of paraphernalia and some weapons seized at the time. In addition, there was $4,400 in Canadian currency and $162 in U.S. currency seized by the police. Those are the essential facts in this matter.

69The appellant, through counsel, admitted that the facts relating to the plea were “substantially correct” but added that the appellant did not take any responsibility with respect to the money or the weapons.

70The appellant explained that that he pleaded guilty on the advice of his lawyer but says that he nonetheless accepts responsibility for the offence. He was sentenced to an eight-month conditional sentence which included a four-month period of house arrest followed by four months with a curfew. The seized cash and paraphernalia were forfeited. The appellant has very recently taken steps to apply for a pardon, but he has not received a pardon to date.

71The Registrar submits that the appellant’s conviction for possession for the purpose of trafficking cannabis is another reason why the appellant should have answered “yes” to the question on his application about prior involvement in the sale and distribution of cannabis.

72The Registrar also submits that the appellant has launched a “collateral attack” on his conviction by claiming that the drugs were only for personal use or for his sister and girlfriend.

73The Registrar asks me to rely on the police occurrence report as proof that the appellant was involved in drug dealing. As noted above, while hearsay is admissible pursuant to s. 15 of the SPPA, the respondent did not call any of the officers involved in the appellant’s arrest and I have no information about who drafted the report, where the information came from, or how reliable it was in terms of attaching to the appellant – against whom most of the charges were withdrawn. I thus place little weight on the police occurrence report except where it is corroborated by the appellant’s own evidence.

74That said, even on the appellant’s own evidence, he was in possession of approximately 2lbs of cannabis and 6lbs of mushrooms and I find it difficult to accept that he was possessing such large quantities of drugs only for personal use or to share with his sister and girlfriend. Although a guilty plea for possession for the purpose of trafficking could arise from possessing that amount of cannabis and distributing it only to his sister and girlfriend, the whole of the circumstances (the baggies, the cash, the scales, the robbery at gunpoint and the guilty plea) suggest that he was likely involved in selling cannabis and magic mushrooms during that period.

75In terms of whether, 14 years later, this prior involvement in the drug trade should impact whether the appellant can gain a licence to legally buy and sell cannabis today is a separate question that I will address in my conclusion below.

76The appellant served his sentence without issue and completed his period of probation. He has not had been charged with any offences since 2007. He has no other convictions on his record and his guilty plea is to his credit.

77With respect to whether he ought to have said “yes” to prior involvement in the cannabis industry based on his conviction for possession for the purpose of trafficking, this does not concern me given that he had already fully disclosed this conviction in response to the earlier question asking him to list his criminal charges and convictions. I find it was reasonable for the appellant to have understood that the question about his involvement in the cannabis industry was referencing involvement other than in the criminal context which he had already disclosed.

Prior and outstanding lawsuits

78Question # 12 of the application to be a retail manager asks:

Have you ever had any claim or lawsuit (e.g. civil action) based in whole or in part on fraud, deceit, misrepresentation, breach of trust or similar conduct, successfully made against you in any jurisdiction?

Note: This includes any out-of-court settlement.

This question applies to you· as:

• an individual;

• a sole proprietor, partner, general or limited partner in a limited partnership, director, officer, shareholder of an entity;

• an individual who has had a direct or indirect interest in an entity.

79The appellant answered “no” to this question. He then provided further information explaining that he answered no because he had never been subject to a claim or lawsuit in whole or part based on fraud, deceit, misrepresentation, breach of trust or similar conduct. However, “to be completely transparent” he added that he had twice been sued in civil court over “business/monetary reasons” once in 2013 and then in 2018. He gave a brief description of the two lawsuits, explaining that they had both settled out of court and he attached the Minutes of Settlement to his application.

80The Registrar alleges in its Notice of Further Particulars that one of the appellant’s past lawsuits involved allegations of “fraud, deceit, misrepresentation, breach of trust or similar conduct” and that “in that case, he guaranteed MAGG Gifts Inc. business contracts using an alias.” The lawsuit was in evidence before me as it was attached to the appellant’s affidavit sworn June 26, 2018 in his claim against AG. The appellant was named personally in the action because he had signed the contract guaranteeing payment and was therefore jointly liable for the payment together with MAGG Gifts. While he signed using his nickname, “Mike Smith” there is no allegation that this was a misrepresentation. The appellant admitted in his affidavit that he “foolishly agreed” to guarantee payment to the defendant using this nickname but stated that he did not intend to avoid liability by using that name. He further explained that “Mike Smith” was how he was known in the industry.

81Both of the appellant’s previous lawsuits were settled by way of Minutes of Settlement and included a release of liability. There was no evidence about the 2013 lawsuit other than what the appellant said about it which was that it was a dispute over point of sale software.

82Given the above, I am unable to conclude that the appellant ought to have answered “yes” to having had a claim successfully made against him in the past based in whole or in part on fraud, deceit, misrepresentation, breach of trust or similar conduct.

83I find it was to his credit that he disclosed the previous lawsuits at all, given that they did not include such a claim based on fraud or misrepresentation etc.

Current Litigation

84The appellant also answered “no” to question #13, which is the same question about claims based in whole or in part on fraud, misrepresentation, deceit etc. but pertaining to any “outstanding claim or lawsuit (e.g. civil action).” The appellant elaborated on this answer as well in his application stating that he is “currently involved in a civil lawsuit that has nothing to do with fraud, deceit, misrepresentation, breach of trust or similar conduct. It strictly is a matter of ownership.” He then provided further details of the litigation explaining that he and the other 50% owner of MAGG gifts Inc. and 235 “are currently in an ownership dispute over MAGG Gifts” and “both have or may have outstanding lawsuits against each other in relation to this ongoing ownership dispute.”

85The Registrar submits that this civil litigation also includes allegations of fraud, deceit, misrepresentation, breach of trust or similar conduct and thus the answer should have been “yes” to this question. As proof of this, the appellant relies on the factum of AG filed in support of the appellant’s motion for the sale of the Eglinton property. The facts detailed in that factum allege all manner of bad faith conduct on the part of the appellant.

86While a factum cannot be taken for the truth of its contents, I do agree that the factum is evidence that such allegations have been made against the appellant.

87The endorsement of Penny J. following the appellant’s motion for sale of the Eglinton property confirms that allegations of bad faith have been made against the appellant (and vice versa). In describing the dispute, Justice Penny writes,

There are also many allegations and counter allegations by each side ascribing acts of oppression and bad faith in the conduct of the affairs of MAGG and 235.”

88Despite this, I do not find that it weighs against the appellant that he did not answer “yes” to the question of whether his outstanding litigation involves a claim against him “based in whole or in part on “fraud, misrepresentation, breach of trust or similar conduct.” The Registrar did not produce AG’s actual pleadings in the civil action, nor any of his affidavits sworn in those proceedings, nor did the Registrar call AG himself, who might have provided more information about the substance of the claims made against the appellant. Absent the claim itself making allegations of “fraud, misrepresentation or breach of trust” it is reasonable that the appellant would answer “no” to this question. The endorsement of Penny J. supports what the appellant says is the main cause of action in that litigation, namely a dispute over ownership.

89I find it is to the appellant’s credit that he disclosed the outstanding litigation at all, given that he did not believe it to contain any such a claim of fraud or deceit etc. and was rather a claim for ownership. But while I do not fault him for not answering yes to this question. The allegations against him nonetheless remain a concern.

90In my view, it is worth waiting to learn whether a finding of fraud, deceit, misrepresentation etc. is made against the appellant in the superior court action, before allowing him to obtain a licence under the LLA.

91I find this to be particularly the case given the other concerns raised on the evidence about the appellant’s behaviour.

G. Conclusion

92This case was initially presented as a case about non-disclosure. As Mr. Longhurst explained, the application process is an applicant’s first test of honesty and integrity. If applicants do not tell the truth in their application, they arguably cannot be trusted to engage honestly as a licensee.

93I am not persuaded that the appellant’s answers afford reasonable grounds to believe he will not, in acting as a cannabis retail manager, act in accordance with the law or with integrity, honesty or in the public interest.

94I do not place much significance on the fact that the appellant did not say “yes” to prior involvement in the cannabis industry based on his conviction for possession for the purpose of trafficking in 2008. He had already disclosed that offence elsewhere in his application.

95Similarly, while the appellant ought arguably to have said “yes” to this question based on even his peripheral involvement with the dispensary at 282 Eglinton Ave, he did disclose his involvement as landlord elsewhere in the application.

96I accept that he had a minor amount of involvement in the dispensary at the early stages but I cannot conclude that he intended to mislead the Registrar about this nor do I find this minor peripheral involvement determinative of whether he should get a licence today to be a CRM.

97The Registrar also complains that he did not disclose litigation involving “fraud, misrepresentation etc.” Yet on the evidence I cannot conclude that his past and current lawsuits were based in whole or in part on such claims, though it does appear that such allegations have been made within them. Even so, the appellant did disclose the details of those lawsuits.

98But while I disagree that the appellant has attempted to mislead the Registrar by his manner of answering the questions on his application, there are other concerns raised by the evidence that in my view amount to reasonable grounds to believe – at present – that he will not act as a CRM in accordance with the law, or with honesty or integrity or in the public interest.

99For example, I am troubled by the appellant’s implausible explanations for what he was doing in 2007 when the police found him surrounded by 2 lbs. of cannabis, cannabis resin, 6 lbs. of mushrooms, scales, baggies and over $4000 in cash. The appellant claimed the drugs were all for personal use and the cash and paraphernalia were for use in his business. Yet it was an online business, the currency for which could not have been cash. Add to this milieu the robbery at gunpoint of the cannabis he had just purchased, and the context suggests he was not forthright about his involvement in dealing drugs at the time.

100A prior conviction for cannabis does not prevent the appellant from gaining his licence. But being dishonest about the circumstances of that conviction does weigh against him. That said, while the circumstances as he tells them are far-fetched, I do not have proof of his involvement in selling drugs other than his guilty plea, which, as stated above, could be founded on distributing only to his sister and girlfriend, as he says.

101The Registrar invited me to draw an adverse inference against the appellant for not calling his girlfriend at the time to corroborate his personal use. I decline to do so. The evidence was that this was now his ex-girlfriend, that they were not on good terms, and that she was available to the Registrar and had possibly even been contacted by Officer Pailey. It is the Registrar’s burden to prove its case. The Registrar could have called the ex-girlfriend. The Registrar also could have called one of the investigating officers. The Registrar surmised that the officers would no longer have an independent recollection of the events but conceded that no effort had been made to contact the officers at all.

102If the appellant’s suspected and admitted prior drug use and/or involvement were the only concern, I would not agree that the appellant’s application should be refused. I would not conclude that 14 years later, after pleading guilty, serving his sentence, and incurring no new charges, that this should render him ineligible for a licence, even if he downplayed his involvement.

103However, then there is the circumstance of his breaking into the illegal dispensary and taking the video recordings. I need not conclude that he took these tapes to hide his own involvement in the dispensary. Even if the facts are as he explained, that he took the recordings to prove allegations he had against AG and AG’s involvement at the dispensary, it nonetheless strikes me as wrong that he pried open the door, took this equipment and then emptied the dispensary of its product. Giving the cannabis to the police does not absolve the appellant of what is, on its face, concerning conduct for a potential licensee.

104Finally, there is the appellant’s outstanding litigation. Again, I do not take issue with the Appellant’s disclosure. He answered “no” to having a claim made against him for “fraud, misrepresentation, deceit or similar conduct.” because in his view the lawsuits involving AG and MAGG Gifts, all relate to ownership. Then he disclosed that litigation further on in the same question anyway, which is to his credit.

105Yet here again, the surrounding circumstances cause concern. While a factum is not proof of its contents, the allegations contained in AG’s factum are relevant to my consideration. If the appellant is found to have committed half of what is alleged against him in that factum, he would not qualify for a licence. The allegations include descriptions of him manipulating inventory, taking more money as salary than he is owed, refusing to provide disclosure despite a court order, and other nefarious actions.

106Presumably the question about outstanding litigation is asked for a reason; that reason being that outstanding litigation involving fraud, deceit, misrepresentation or similar conduct may be relevant to whether a person qualifies for a licence. When combined with the other factors that cause concern in this case, discussed above, my view is that while the appellant’s civil dispute against AG remains outstanding, and until such time as the matter either settles or a judge makes findings of fact one way or another, there are reasonable grounds to believe that the appellant will not, in acting as a CRM, act in accordance with the law or with integrity, honesty or in the public interest.

107Given the above, I am confirming the Respondent’s proposal to refuse to issue the appellant a CRM licence.

108The Registrar suggested that the appellant might reapply for a CRM licence after some time had passed and he had had had time to “think about what he had done.” Section 5 (3) of the Act provides that a person whose application was refused cannot reapply until after the second anniversary of the refusal “unless the Registrar is satisfied that there has been a significant change in circumstances since the refusal or revocation.” In my view, a suitable time to reapply might be after his civil litigation has concluded and depending on its outcome.

H. Order

109Pursuant to s. 15(2) of the Act, the Registrar’s proposal to refuse to issue the appellant a cannabis retail manager licence is confirmed.

Footnotes

1. 1S.O. 2018, c.12, Sched. 2
2. 2The Registrar did not rely on 5(4)4 of the Act which provides that a person is ineligible for a licence if the applicant makes a false statement or provides false information in the application.
3. 3See 2203099 Ontario Ltd. o/a Jax Bar & Grill v. Registrar, Alcohol and Gaming, 2013 CanLII 51164 (ON LAT) and Ontario (Alcohol and Gaming Commission) v. 751809 Ontario Inc. (Famous Flesh Gordon’s), 2013 ONCA 157 (“751809”).
4. 4751809, supra, at para. 18, citing Mugesera v. Canada (Minister of Citizenship and Immigration), 2005 SCC 40 at para. 114.
5. 5See CS v. Registrar, Real Estate and Business Brokers Act, 2002, 2019 ONSC 1652 at para 32
6. 6Arulappu v. Registrar, Real Estate and Business Brokers Act, 2011 ONSC 797 at paragraph 8.
7. 7For a contrary decision, see Registrar of Alcohol and Gaming v. Hosseini-Rad, 2004 CANLII 34450 (ON SCDC) which found that the Tribunal had no discretion once a ground of “disentitlement” had been made out under the Liquor Licence Act which has similar wording to the Real Estate and Business Brokers Act.
8. 8The appellant requested written reasons for the decision given orally at the hearing.
9. 9In future, it might behoove the parties to raise potential objections to the admissibility of documents in advance of the hearing; particularly where the parties believe they are otherwise cooperating in the preparation of a joint book of documents.
10. 10Exhibit 3, Tab 22, Questions 679-685.
11. 11R.S.O. 1990, c. P. 13
12. 12Exhibit 3 tab 28, at page 818 of the record (p. 822 of the pdf).