THE LICENSE APPEAL TRIBUNAL AND CANNABIS LICENCE APPLICATIONS

The recent decision of the Ontario government to terminate the retail cannabis lottery system and move toward an open market for private cannabis retail has opened many questions about the process of appealing a decision of the Alcohol and Gaming Commission of Ontario (“AGCO“) in refusing a licence application.

In Ontario, the AGCO is responsible for issuing, denying, suspending, or revoking cannabis licences and/or or their applications. Under the Cannabis Licence Act, 2018 (“CLA“), the AGCO has the discretionary authority to determine whether a licensee or applicant has satisfied the requirements of a cannabis Retail Operator Licence (“ROL”), Retail Store Authorization (“RSA”) and Retail Manager Licence (“RML”). In all circumstances, the AGCO’s objective is to ensure the safe, responsible, and lawful sale of cannabis and the retail cannabis sale is equally accepted to be carried out with honesty, integrity, and public interest.

If, and when, the AGCO determines that an applicant or licensee’s conduct fails to meet or satisfy the requirements in accordance with the law, integrity, honesty or in the public interest, a notice of proposal is served on the applicant or licensee outlining the reason for denial or revocation of licence. Following this, the applicant or licensee has the right to appeal the AGCO’s decision within 15 days of receiving a notice of proposal to the Ontario License Appeal Tribunal (“LAT“).

Known as one of the five tribunals in the Safety, Licensing Appeals and Standards Tribunal Ontario, the LAT is an independent, quasi-judicial agency of the Government of Ontario that adjudicates applications and resolves disputes concerning compensation claims and licensing activities regulated by the provincial government. LAT is separate from the AGCO and, has the standing to hear issues related to refusals, revocation, or suspensions of cannabis-related matters.

Although the implementation of cannabis sales is a relatively new phenomenon in Ontario, the procedures associated with appealing a decision from the AGCO to LAT are similar to those of other regulatory body licensing regimes. Further information on LAT appeal procedures for a retail operator licence, retail store authorizations and retail manager licences can be found here.

How then has the LAT dealt with cannabis-related disputes where the AGCO refuses to grant an application to a licensee? As noted, the appeal of an AGCO decision to LAT is a relatively recent phenomenon with the ROL and RSA application process being open to the market, in or around January 2020, and April 2020, respectively. In fact, LAT has yet to release any decisions arising from revocation, or suspension of cannabis licences as of the date of this article.

LAT has decided on one denial of a ROL application stemming from the lottery system. In the case of Hildebrand v AGCO, 2020 ONLAT CLA 12267, Kyle Drake Hildebrand appealed the AGCO’s Notice of Proposal to LAT. In this case, the AGCO rejected Hildebrand’s application under the CLA on the following two grounds:

• 3 Eligibility
  (4) An applicant is not eligible to be issued a retail operator licence in any of the following circumstances:
• 2 There are reasonable grounds to believe that the applicant will not carry on business 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;
• 6 The applicant or an employee or agent of the applicant makes a false statement or provides false information in the application

The AGCO claimed Hildebrand made false statements on his ROL application contrary to section 3(4)(2) and 3(4)(6) of the CLA by failing to disclose information relating to previous charges, findings of guilt and/or convictions. Hildebrand agreed that there was non-disclosure in his application but argued that he did not intend to deceive the AGCO. Hildebrand noted that the information relating to his prior offences were ultimately disclosed to the AGCO albeit at a later date.

The LAT member Jean Theoharis confirmed the standard of proof of the AGCO to prove the applicant’s conduct was contrary to the law, integrity, honesty or in the public interest, is “reasonable grounds for belief” which is a lower standard of proof than a balance of probabilities, but more than mere suspicion. In this case, the member agreed with the AGCO and upheld the denial of ROL application. The decision states:

• [60] the cannabis regime in Ontario is one which requires licence holders to ensure compliance with the laws and regulations. A licence holder has a positive obligation to notify the Registrar if any aspects of the Act or regulations have been breached.
• [64] The cannabis regulatory scheme requires a relationship based on trust as it is dependent on licensees’ self-reporting, acting in the public interest, and acting in accordance with the law, with integrity and honesty even when doing so might be contrary to their own interests. Regulators trust their licensees to comply with the requirements, and trust that licensees will take steps to notify the regulator when the requirements were not followed. The Act is about protecting the public interest, and rules have been made to ensure the public is protected. The Act requires individuals to be able to comprehend the importance of compliance, address stressful situations, own up to their mistakes and deal with any consequences resulting from failing to comply with any requirements.

The above-noted decision made clear that the LAT will strictly adhere to applicable sections of the CLA and the failure to disclose relevant information is a standalone ground for ineligibility. The decision also notes that a main purpose of the CLA is that of consumer protection and to ensure that an applicant, if granted a licence, will carry on business in accordance with the law or with integrity, honesty or in the public interest. Overall, LAT will look at the totality of the evidence when determining if a denial of application should be upheld.

With the rise of ROL and RSA applications being submitted to the AGCO daily, it is quite probable LAT will start to hear more and more of appeals of notice of proposals on cannabis-related licensing before LAT. Although the LAT has only released one decision, it is clear LAT’s focus on cannabis-related matters will be strict adherence to statutory legislation and consumer protection. Should an applicant be denied a ROL, RSA or RML, the Cannabis Law Group at Chand & Co. are well equipped to assess the complexities of the CLA, the regulations and case law for appellant regulatory related services.

At Chand Snider, we have unrivalled experience in the cannabis licensing and regulatory field. We have assisted thousands of businesses and business owners across Ontario with issues related to licensing and regulatory compliance. We have not only obtained licenses for our clients, but we ensure that our clients remain in business and don’t lose their licences if regulatory and compliance issues arise. With offices in both the financial district in Toronto and Ottawa, Chand & Co. is committed to serving our clients throughout Ontario.

Please contact the Cannabis Law Group at Chand & Co. to ensure that your legal rights are protected.