Superior Court of Justice - Ontario (Divisional Court)

Re: Adams Pizzeria (Prescott) Ltd. c.o.b. as Limit Exotic Lounge v. Registrar, Alcohol and Gaming Commission of Ontario

Divisional Court File No.: 11-DV-1763 Date: 2012/06/19

Before: Pierce R.S.J., Swinton and Tucker JJ.

Counsel: Lawrence Greenspon, for the Appellant Scott C. Hutchison, for the Respondent

Heard at Ottawa: June 13, 2012

Endorsement

[1] The appellant, Adams Pizzeria (Prescott) Ltd., carrying on business as Limit Exotic Lounge, appeals an order of the Board of the Alcohol and Gaming Commission (“the Board”) dated August 24, 2011 that revoked its liquor licence.

[2] The Board determined that the management and operation of the appellant’s business would not be carried on in accordance with the law and with integrity and honesty, the test set out in s. 6(2)(d) of the Liquor Licence Act, R.S.O. 1990, c. L.19 (“the Act”), given its findings that there had been several breaches of the regulations under the Act. In particular, the Board found that the appellant had permitted unlawful gambling on the premises and permitted the sale, distribution and/or consumption of controlled drugs and substances on the premises.

[3] An appeal lies to this Court only on a question of law (s. 11(2) of the Alcohol and Gaming Regulation and Public Protection Act, S.O. 1996, c. 26).

[4] The appellant has failed to identify any error of law on the part of the Board. In essence, it seeks to have this Court interfere with findings of fact.

[5] Unlawful gambling is established if the video poker machine or the establishment was making payouts to players based on their performance on the machine. There was evidence respecting the use of the poker machine, especially the guest checks showing points and amounts of money, to support a finding that the appellant had permitted unlawful gambling. The reasons are brief, but they are adequate to explain the Board’s finding and conclusion on this issue. The Board obviously rejected the evidence of the appellant’s employee about the malfunction of the machine.

[6] There was no need for expert evidence before the Board could determine that there had been sale, distribution and/or consumption of controlled drugs on the premises, given the quantities of the drugs, the presence of the scale, and the manner of storage.

[7] The Board was required to determine whether the licensee “permitted” the sale, distribution and/or consumption of controlled drugs. The Court of Appeal discussed the appropriate test for determining whether a licensee had permitted drunkenness in 1213963 Ontario Ltd. (c.o.b. as Sin City Bar and Eatery) v. Ontario (Alcohol and Gaming Commission), [2009] O.J. No. 1553 at para. 3:

In our view, permitting drunkenness on the premises requires proof that the licensee knew or ought to have known of the drunkenness on the premises. That determination, of course, must be made in all the circumstances and, in particular, in the context of the various obligations and duties placed on the licensee by the relevant legislation and regulations …

[8] The Board reasonably concluded that the owner of the appellant had constructive knowledge of the drug activity on the premises. At the time the search warrant was executed by the police, he was the person in possession of the key to the locked office in which the drugs were found. The drugs were not hidden, but were found in a cookie tin and a box on a shelf above the desk, in a first aid kit, and in a plastic bag hanging by the door. The quantity of drugs was significant. There was also drug paraphernalia, such as the scale and small plastic bags, as well as debt lists written on guest checks. The evidence was that the office was accessible only by the owner and management personnel. Given the evidence, the Board could reasonably conclude that the drugs were to be distributed on the premises. The respondent did not lead any evidence about the access to the office or give any explanation about the drugs. In the circumstances, the Board could reasonably conclude that management permitted illegal drug activity in the premises, as they knew or ought to have known of that activity.

[9] Finally, there was no breach of natural justice because of the introduction of the Information to Obtain, as the appellant had the opportunity to cross-examine the witnesses produced and did not challenge confidential informer privilege. The evidence was properly admissible for the Board to consider, and the Board was well aware of its frailties.

[10] Given the findings of the Board, and in particular the finding respecting unlawful drugs, the penalty of revocation was a reasonable one.

[11] As the appellant has failed to identify any error of law, the appeal is dismissed. Costs to the Registrar are fixed at $10,000, an amount agreed upon by counsel.

Pierce R.S.J.

Swinton J.

Tucker J.

DATE: June 19, 2012