The Lobster Trap v. Registrar (Alcohol, Cannabis & Gaming)
In order to obtain (and renew) a licence to sell alcohol in British Columbia, the General Manager of the Liquor and Cannabis Regulation Branch must be satisfied that the individual or individuals applying for the licence are suitable – meaning that they are “fit and proper”. To assist the General Manager (and his or her delegates) in making this determination the Liquor Control and Licensing Act provides that the General Manager may make inquiries and conduct investigations, including background investigations and criminal record checks, for the purpose of informing the exercise of this discretion.
This is an important concept for existing and pending licensees to understand if they (or their business partners, investors, friends and family) have a history of criminality or otherwise unlawful behaviour – even if that conduct occurred in other provinces or countries. Alcohol & Advocacy has written about these concepts before in other contexts, and those articles can be found here and here.
A very recent decision of Ontario’s Licence Appeal Tribunal (“LAT“) involved an analysis of these very concerns. Although Ontario’s legislation and processes are a little different than British Columbia’s, the LAT’s treatment of issues relating to past criminality, accountability, and transparency during the licence application process are in the writer’s view instructive.
The facts in 5006576 Ontario Inc. o/a The Lobster Trap v. Registrar, Alcohol, Cannabis and Gaming are nothing short of astounding. The decision can be read in full here.
In July, 2020 the Registrar of Ontario’s Alcohol, Cannabis & Gaming Branch refused Mr. Kuganesan’s application to have the liquor licence for The Lobster Trap, a seafood restaurant located in Toronto, transferred to his numbered company from the existing owner. He was the company’s sole officer and director. At the time he was an employee of The Lobster Trap who agreed to purchase the business from its then-owner Ms. Luczak.
The Registrar refused Mr. Kuganesan’s request to have the subject liquor licence transferred on the basis of his criminal record, his lack of honesty and integrity during the application process, and his recent breach of liquor licensing laws.
Mr. Kuganesan appealed the Registrar’s decision. On appeal the LAT was tasked with deciding whether Mr. Kuganesan’s past conduct provided reasonable grounds for belief that he would not carry on business in accordance with the law and with integrity and honesty.
The LAT, based on the record of evidence before it, agreed with the Registrar that there were reasonable grounds and directed the Registrar to carry out his proposal to deny Mr. Kuganesan the liquor license.
Mr. Kuganesan had a significant, albeit dated, criminal history.
Between 2007 and 2011, Mr. Kuganesan had charges and convictions related to: theft, assault, forging credit cards, carrying a concealed weapon, aggravated assault, assault with a weapon, breach of recognizance, dangerous driving, failure to remain at the scene of an incident, obstructing a peace officer, escape from lawful custody, impaired driving and failure to provide a breath sample, among other charges. Not an insignificant RAP sheet, in the writer’s humble opinion.
More recently, in 2017, he was charged with driving without a licence.
While the Registrar acknowledged that Mr. Kuganesan’s criminal record was not in itself a bar to obtaining a licence to sell liquor, it did indicate a pattern of committing serious crimes and then trying to escape responsibility (such as failing to remain at the scene of an accident, escaping lawful custody, and failure to provide a breath sample).
Further, some of the charges involved dishonesty such as theft and forging credit cards. Mr. Kuganesan argued that his criminal past does not speak to his current character; he submitted that he had changed his life and he provided the tribunal with evidence from four character witnesses, in addition to his former employer and current owner of The Lobster Trap, Ms. Luczak, who all testified that they were confident he was a different person than he was ten years ago and that he could be trusted with a liquor licence.
Exacerbating matters for Mr. Kuganesan, the tribunal was concerned about his lack of candour when going through the application process and when testifying at the hearing about his criminal charges. For example during the application process Mr. Kuganesan repeatedly failed to provide information related to his criminal past; first by denying it in the initial application, and later by minimizing it and attempting to explain it away.
The tribunal concluded that although Mr. Kuganesan’s criminal history was not on its own sufficient to bar him from obtaining a liquor licence, it found that when combined with the more recent charge of driving without a licence and his lack of candour regarding his criminal history, collectively these incidents were relevant in determining whether Mr. Kuganesan would comply with the law and operate the establishment with the honesty and integrity.
For example, when completing the disclosure report as part of the licence transfer application, Mr. Kugenasan was asked if he’d ever been charged, found guilty, and/or convicted of any offence in any jurisdiction. The answer he provided was “no”. This answer was obviously not true, but Mr. Kugenasan submitted the application with is signature on it anyway.
In confusing and inconsistent testitormy before the LAT, Ms. Luczak (the current owner) testified that it was her who prepared the licence transfer package on Mr. Kuganesan’s behalf, and Mr. Kuganesan testified that he did not review it before signing it. This irregularity, paired with other uncertainty with respect to which of them was the person communicating with the Branch (by way of email) during the application process, led the LAT to conclude that Mr. Kuganesan had not acted with honesty or integrity during the application process.
Lastly, the tribunal concluded that very recently Mr. Kuganesan had breached liquor licencing laws and regulations. After having received a communication from the Branch advising that his request to obtain The Lobster Trap’s liquor licence was rejected, he proceeded to purchase beer off licence and kept it for sale on the premises. In Ontario, like in British Columbia, liquor cannot be kept for sale or sold at a licensed premises unless it was lawfully purchased by the licence holder.
Though the tribunal recognized that Mr. Kuganesan had taken significant strides toward becoming a productive and valued member of society, it concluded that he had not yet taken full responsibility for his criminal past. The tribunal concluded that it did not think Mr. Kuganesan was ready to operate in a regulated industry where the public interest depends upon being able to trust the registrant to do the right thing, that is to act in accordance with the law and with integrity.
If you wish to obtain a liquor licence in British Columbia (in first instance, or by way of transfer) or need to renew an existing licence, and are concerned about your criminal history, or the history of any of your associates or affiliates, contact Dan Coles at Owen Bird.
*Alcohol & Advocacy publishes articles for information purposes only. They are not a substitute for legal advice, and persons requiring such advice should consult legal counsel