



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
    Gordons

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 Gordons. 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. Barlettas
    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 Registrars appeal. With leave, the Registrar
    appeals to this court.

[6]

For the reasons that follow, I would allow the appeal and refer the
    Registrars application back to the Board to be dealt with in accordance with
    these reasons.

The Proceedings Below

[7]

The Registrars 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.
    Barlettas history with the Hells Angels, and as operator of Famous Flesh
    Gordons, 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. Barlettas 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.
    Barlettas membership in the HAMC provides the reasonable grounds for the
    Registrars 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
    Licensees 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 Registrars application, the Board ultimately concluded at
    paragraphs 138 and 139:

138.   Here, where there is not a hint of impropriety on Mr.
    Barlettas 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 establishments 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 Boards 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 Boards 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 Registrars appeal. It concluded that the Board
    applied the correct standard of proof. The court supported this conclusion by
    referring to several occasions in the Boards 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 Boards
    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. Barlettas 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 Boards
    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. Barlettas
    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. Barlettas 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. Barlettas 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 Courts 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.
    Barlettas membership in the HMAC provides the reasonable grounds for the
    Registrars 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 Licensees 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
    Boards 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 Boards 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
    Registrars application to revoke Mr. Barlettas 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. Barlettas past and present conduct, the Board focussed on his
    conduct as a licensee. The Boards penultimate paragraph dealing with his past
    and present conduct makes this clear:

138.   Here, where there is not a hint of impropriety on Mr.
    Barlettas 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 establishments 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 individuals 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. Barlettas 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 Boards 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. Barlettas
    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.
    Barlettas 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 Registrars 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.


