Ontario (Alcohol and Gaming Commission of Ontario) v. 751809 Ontario Inc. (Famous Flesh Gordon's)

Ontario (Alcohol and Gaming Commission of Ontario) v. 751809 Ontario Inc. (Famous Flesh Gordon's) Collection Decisions of the Court of Appeal Date 2013-03-18 Neutral citation 2013 ONCA 157 Docket numbers C55984 Judges Goudge, Stephen Thomas; Cronk, Eleanore Ann; Armstrong, Robert Patrick Subject Civil Decision Content COURT OF APPEAL FOR ONTARIO CITATION: Ontario (Alcohol and Gaming Commission of Ontario) v. 751809 Ontario Inc. (Famous Flesh Gordon's), 2013 ONCA 157 DATE: 20130318 DOCKET: C55984 Goudge, Cronk and Armstrong JJ.A. BETWEEN Registrar, Alcohol and Gaming Commission of Ontario Appellant and 751809 Ontario Inc. operating as Famous Flesh Gordon’s Respondent Scott C. Hutchison, for the appellant Richard Posner, for the respondent Heard: February 7, 2013 On appeal from the order of the Divisional Court (Justice Wilton-Siegel, Justice Swinton and Justice Sachs), dated April 24, 2012. Goudge J.A.: Introduction [1] Robert Barletta is a full patch member of the Hells Angels. He was a founding member of the London, Ontario chapter when it was established in 2003, and was its president at least until 2008. [2] He has no record of criminal convictions or infractions of the Liquor Licence Act, R.S.O. 1990, c.L. 19 (the Act). Nor is he facing any outstanding charges. [3] Mr. Barletta is also the owner of an establishment operating in London as Famous Flesh Gordon’s. He received a liquor licence for this establishment in 2001 and has operated it ever since. [4] In 2010, the Registrar of the Alcohol and Gaming Commission of Ontario (the Commission) applied to the Board of the Commission to revoke his liquor licence. As the Board put it, the sole issue was whether Mr. Barletta’s membership in the Hells Angels was, in itself, sufficient to strip him of the privilege of holding a liquor licence. [5] On September 22, 2011, the Board concluded that it was not. On May 15, 2012, the Divisional Court dismissed the Registrar’s appeal. With leave, the Registrar appeals to this court. [6] For the reasons that follow, I would allow the appeal and refer the Registrar’s application back to the Board to be dealt with in accordance with these reasons. The Proceedings Below [7] The Registrar’s application to revoke was made pursuant to s. 15(1) of the Act. It permits the Registrar to make an application on any ground under s. 6(2) that would disentitle the licensee to a licence in the first place. The ground advanced here by the Registrar is found in s. 6(2)(d) of the Act: 6(2) Subject to subsection (4) or (4.1), an applicant is entitled to be issued a licence to sell liquor except if, [...] (d) The past or present conduct of the persons referred to in subsection (3) affords reasonable grounds for belief that the applicant will not carry on business in accordance with the law and with integrity and honesty. [8] The facts before the Board were uncontested. In addition to Mr. Barletta’s history with the Hells Angels, and as operator of Famous Flesh Gordon’s, there was evidence about the Hells Angels as an organization. It is a criminal organization as defined in s. 467.1 of the Criminal Code, although being a member is not a crime. The organization has both written and unwritten rules. It is an unwritten rule that no member shall ever give a statement to the police or give any information that could betray the Hells Angels. A member would not testify regarding the operation of a bar or any criminal activities within it. Criminal activity by members is common. Sixty-seven point two percent (67.2 %) of all Ontario members have been convicted of a criminal offence. Indeed one of the main purposes or activities of the organization is the facilitation or commission of serious criminal offences. [9] The uncontested evidence clearly framed the fundamental issue as the Board defined it: Is Mr. Barletta’s membership in the Hells Angels (referred to as “the HAMC” by the Board), sufficient, in itself, to revoke his liquor licence? Perhaps understandably, the Board viewed this as a test case. [10] The Board set out the task before it at paragraphs 54 and 55 of its reasons: 54. More particularly, the Board has to resolve whether Mr. Barletta’s membership in the HAMC provides the reasonable grounds for the Registrar’s belief that the Licence should be revoked. 55. The onus lies upon the Registrar to prove his case on the balance of probabilities. Since the Registrar seeks the more significant remedy of revocation rather than suspension of the Licence, the evidence tendered in proof must be particularly compelling. While in the result the Licensee’s liberty will not be denied, finding the Licensee to be in violation of clause 6(2)(d) would deprive him of his livelihood or business, which is a serious matter. [11] In dismissing the Registrar’s application, the Board ultimately concluded at paragraphs 138 and 139: 138. Here, where there is not a hint of impropriety on Mr. Barletta’s part in operating the licensed establishment, it would be improper for the Board to conclude that there is a risk of non-compliance such as would justify the revocation of the Licence. The evidence proves that Mr. Barletta is conducting his establishment’s business in the fashion as is required by the regulatory laws, despite his membership in the HAMC. [Emphasis in the original.] 139. Put differently, the Board believes that this Licensee has not shown himself to be ungovernable as the holder of a liquor licence. As such, the Registrar has also not established that the Licensee presents a risk to the public, its interest or its safety. [12] At the time of the Board’s decision, s. 11(2) of the Alcohol and Gaming Regulation and Public Protection Act, 1996, S.O. 1996, c. 26, provided for an appeal from the Board’s decision to the Divisional Court, but only on a question of law. [13] The Registrar appealed to the Divisional Court. The Registrar argued that the Board erred in law in two ways. First, the Registrar said that the Board applied a higher standard of proof than the “reasonable grounds for belief” standard called for by s. 6(2)(d). Second, the Registrar argued that the Board erred in not applying properly the test in s. 6(2)(d), namely, whether past or present conduct afforded reasonable grounds for belief that Mr. Barletta will not carry on business in accordance with the law and with integrity and honesty. [14] The Divisional Court dismissed the Registrar’s appeal. It concluded that the Board applied the correct standard of proof. The court supported this conclusion by referring to several occasions in the Board’s reasons such as paragraph 54 quoted above, where the Board recited the “reasonable grounds for belief” standard of proof. The Divisional Court also concluded that the Board’s language made clear that it indeed applied the test prescribed by s. 6(2)(d). The Board used paragraph 139 quoted above as support for its conclusion. Analysis [15] In this court, the Registrar reiterates the two arguments dealt with by the Divisional Court and adds a third: the Registrar says that if the right standard of proof were used and the test called for by s. 6(2)(d) were properly applied, revocation of Mr. Barletta’s licence would be the inevitable outcome on these facts. Any other outcome would be unreasonable. [16] The respondent, on the other hand, says that the Divisional Court read the Board’s decision correctly, that the Board did not err in either the standard of proof or the test required by s. 6(2)(d) of the Act and that the result that the Board reached was reasonable. [17] The parties agree that if the Registrar succeeds in this court on either of the first two issues but not the third, the application to revoke should be remitted to the Board for a rehearing. In addition, the Registrar contends that success on the third issue ought to result in an order revoking Mr. Barletta’s liquor licence. First Issue: Did the Board apply the proper standard of proof? [18] The standard of proof provided by s. 6(2)(d) of the Act is that of “reasonable grounds for belief”. There is no doubt that this is a lower standard of proof than “balance of probabilities”. The Supreme Court of Canada made that clear in Mugesera v. Canada (Minister of Citizenship and Immigration), [2005] 2 S.C.R. 100, which dealt with this standard, one commonly used in regulatory statutes, in the context of the Immigration Act. The court said this at para. 114: The FCA has found, and we agree, that the “reasonable grounds to believe” standard requires something more than mere suspicion, but less than the standard applicable in civil matters of proof on the balance of probabilities: Sivakumar v. Canada (Minister of Employment and Immigration), [1994] 1 F.C. 433 (C.A.), at p. 445; Chiau v. Canada (Minister of Citizenship and Immigration), [2001] 2 F.C. 297 (C.A.), at para. 60. In essence, reasonable grounds will exist where there is an objective basis for the belief which is based on compelling and credible information: Sabour v. Canada (Minister of Citizenship & Immigration) (2000), 9 Imm. L.R. (3d) 61 (F.C.T.D.). [19] As applied to this case, s. 6(2)(d) of the Act requires 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 the 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. [20] With respect, I disagree with the Divisional Court’s view that the Board applied the lower standard of proof. Rather, it read the “reasonable grounds for belief” standard as meaning proof on a balance of probabilities. [21] Paragraph 54, one of those on which the Divisional Court relies for its conclusion on this issue, is followed immediately by paragraph 55, which makes that clear. It is useful to quote these two paragraphs again: 54. More particularly, the Board has to resolve whether Mr. Barletta’s membership in the HMAC provides the reasonable grounds for the Registrar’s belief that the Licence should be revoked. 55. The onus lies upon the Registrar to prove his case on the balance of probabilities. Since the Registrar seeks the more significant remedy of revocation rather than suspension of the Licence, the evidence tendered in proof must be particularly compelling. While in the result the Licensee’s liberty will be denied, finding the Licensee to be in violation of clause 6(2)(d) would deprive him of his livelihood or business, which is a serious matter. [Emphasis added.] [22] If more were necessary, the Board repeats the “balance of probabilities” requirement several more times in deciding what it must find. In para. 70 for example, the Board said this: 70. Specifically, in order to strip this Licensee of its Licence, the Board must find, on the balance of probabilities and based on the evidence before it, that the requirements under clause 6(2)(d) have been compromised. [23] There is thus no doubt that the Board applied a higher standard of proof than s. 6(2)(d) calls for. It read s. 6(2)(d) as requiring proof on the balance of probabilities. This is an error of law. Moreover, it is an error on a question of law of general importance to the legal system, one which is outside the area of expertise of the Board as an administrative decision maker. Hence, the Board’s choice of standard of proof cannot attract any deference in this court. See: Dunsmuir v. New Brunswick, [2005] 1 S.C.R. 190 at paragraph 55. The Board’s choice must be reviewed on a standard of correctness. The choice was incorrect. [24] I would therefore conclude that the Divisional Court erred in finding that the Board applied the correct standard of proof in this case. Second Issue: Did the Board apply the test called for by s. 6(2)(d)? [25] The Registrar’s application to revoke Mr. Barletta’s liquor licence required the Board to apply the test in s. 6(2)(d) of the Act. It is helpful to reiterate its provisions: 6(2) Subject to subsection (4) or (4.1), an applicant is entitled to be issued a licence to sell liquor except if, [...] (d) The past or present conduct of the persons referred to in subsection (3) affords reasonable grounds for belief that the applicant will not carry on business in accordance with the law and with integrity and honesty. [26] This test entails an examination of the past and present conduct of the person seeking to acquire or maintain the privilege of carrying on an activity authorized by the state, namely a licensed establishment. The purpose of the examination is to see if there are reasonable grounds for belief that the person will, in future, carry on the activity in a way that is not contrary to the public interest. Many regulatory statutes use this approach. [27] The question is whether the Board misconstrued this test in this case. The Divisional Court found that it did not. With respect, I disagree, for three reasons. [28] First, in examining Mr. Barletta’s past and present conduct, the Board focussed on his conduct as a licensee. The Board’s penultimate paragraph dealing with his past and present conduct makes this clear: 138. Here, where there is not a hint of impropriety on Mr. Barletta’s part in operating the licensed establishment, it would be improper for the Board to conclude that there is a risk of non-compliance such as would justify the revocation of the Licence. The evidence proves that Mr. Barletta is conducting his establishment’s business in the fashion as is required by the regulatory laws, despite his membership in the HAMC. [Emphasis in the original.] [29] The difficulty is that there is no such limiting language in the subsection. 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). The words of the subsection, “past or present conduct”, are not limited to the operation of the business or in any other way. Their ordinary and grammatical meaning, in the context of legislation that is designed to ensure that licensed establishments will be operated by those who can be counted on to properly serve the public interest, requires that past and present conduct not be confined to the individual’s operation of the licensed establishment. [30] Second, the Board appeared to require evidence of past criminal activity by Mr. Barletta in order to find past conduct supporting revocation. The Board put it this way at paragraph 100: 100. Importantly, mere membership in a criminal organization, in itself, is not a criminal offence. Thus, the Registrar must substantiate the (alleged) criminal activity undertaken by the Licensee in order to invoke the “past conduct” provisions. [31] Once again, there is no such limitation in the test. Both the plain language and the purpose of the legislation make that clear. Past conduct that is not criminal could also provide the necessary reasonable grounds for belief. [32] Third, in exploring the way in which Mr. Barletta has carried on and will carry on the business of his establishment, the Board focused on whether or not he is ungovernable, that is, whether he has observed and will observe the regulatory laws governing a licensed establishment. Paragraphs 138 and 139 quoted above make this clear. With respect to both the past and the future, there is no such limitation in the legislation. The Board can look beyond Mr. Barletta’s past or present observation of the regulatory laws for his establishment. Moreover the requirement that he carry on business in future in accordance with the law and with integrity and honesty is not limited to complying with the regulatory laws applicable to licensed establishments. It is too narrow to look merely at his future compliance with regulatory laws. Compliance with the law generally and acting with integrity and honesty are not so limited. [33] In these three ways, the Board erred in limiting the analysis required by s. 6(2)(d) in ways that the legislation does not provide. The Divisional Court erred in finding that it did not. [34] I conclude that the Board erred in law in its interpretation of s. 6(2)(d) of the Act. It may be that if this case is seen as an interpretation by the Board of its home statute, it may be owed some deference in this court. That need not be decided here because, even if that is so, my view is that the Board’s erroneous interpretation of the test does not fall within a range of possible acceptable interpretations, given the plain language of the section and the clear purpose of the legislation. It is not a reasonable interpretation of the legislative test. It is outside any margin of appreciation that deference requires. Third Issue: If the Board had proceeded correctly, is revocation the only reasonable conclusion that the Board could have reached? [35] The Registrar argues that if the Board had used the proper standard of proof and applied the proper test, revocation would have been the only result that the Board could reasonably have reached on these undisputed facts. [36] I do not agree. There is no doubt that the evidence about the Hells Angels as a criminal organization, with its troubling code of conduct, and Mr. Barletta’s role in the organization, was clear. However, so was the fact that, while a member, he had apparently acted lawfully, with honesty and integrity, and had operated his licensed establishment properly for almost ten years. While Mr. Barletta’s association with the Hells Angels is in our view powerful evidence pointing that way, I cannot say that revocation is the only reasonable conclusion the Board could reach on a proper application of s. 6(2)(d). I would therefore reject this argument. [37] In summary, I would conclude that the Divisional Court was in error. The Board erred in law in using an erroneously high standard of proof and in misconstruing the test for revocation required by s. 6(2)(d) of the Act. The appropriate remedy is to allow the appeal and remit the Registrar’s application to revoke to the Board for reconsideration in accordance with these reasons. [38] Costs to the appellant fixed in the sum of $5,000 in full. Released: March 18, 2013 (“S.T.G.”) “S.T. Goudge J.A.” “I agree. E.A. Cronk J.A.” “I agree. Robert P. Armstrong J.A.”