The appellant strip club successfully appealed the dismissal of its judicial review application of the City of Hamilton’s licensing committee’s decision to revoke its adult entertainment license for failure to actively carry on business within a reasonable time. The Court of Appeal found that the City’s failure to provide proper disclosure of the basis of the proposed revocation and an accurate statement of grounds tainted the hearing from the outset and denied the appellant’s right to a fair hearing. This failure to comply with its obligation of procedural fairness was sufficient to set aside the licensing committee’s recommendation and council’s decision adopting it.

Administrative law – Decisions of administrative tribunals – Municipal councils – Permits and licences – Renewal of business licence – By-laws – Hearings – Conduct of hearings – Disclosure – Evidence – Judicial review – Procedural requirements and fairness – Natural justice

1657575 Ontario Inc. (c.o.b. Pleasures Gentlemen’s Club) v. Hamilton (City), [2008] O.J. No. 3016, Ontario Court of Appeal, July 31, 2008, J.C. MacPherson, P.S. Rouleau and G.J. Epstein J.J.A.

The City of Hamilton (the “City”) expressed its intention to reduce the number of adult entertainment parlours in the city from four to two within its general licensing by-law, through the expiration or revocation of existing licences. A licence could be revoked if, following a hearing before the city council’s licensing committee, it was determined that a licensee had not actively carried on business “within a reasonable period of time” following issuance or renewal of a licence.

The appellant operated a strip club which was granted an adult entertainment license in March 2006. The appellant had difficulty obtaining a liquor licence and did not open its business until July 2006 after a hearing before the licensing committee to consider revoking the licence due to its failure to actively carry on business within a reasonable period of time following issuance of a licence. Prior to the hearing, the appellant’s counsel request disclosure of the evidence the City intended to rely upon at the hearing. It became apparent at the hearing that the information provided by the City was, to a large extent, false or misleading. The licensing committee voted unanimously at the conclusion of the hearing to recommend to city council revocation of the appellant’s licence. The appellant immediately opened the premises for business notwithstanding the lack of liquor licence. The appellant’s counsel faxed submissions to the mayor and council members confirming that the premises was open and requesting council refer the matter back to the committee or decline accepting the recommendation. However, the fax was not received by council prior to the vote because, unbeknownst to the appellant, the council meeting time had been changed. At its meeting, council accepted the committee’s recommendation and revoked the appellant’s licence.

The appellant brought a judicial review application before the Divisional Court, arguing that the licensing committee had revoked its licence in a manner that was procedurally unfair or that it constituted a denial of natural justice. The Divisional Court dismissed the application, finding that the appellant had been given particulars of the complaint. The Court of Appeal granted leave to appeal the judgment of the Divisional Court on the issue of denial of procedural fairness in respect of the proceedings before the licensing committee and council.

The Court of Appeal found that the Divisional Court erred when it found the appellant “was given particulars of the complaint” and when it concluded there had been no procedural unfairness. The extent of the procedural rights encompassed in the duty of fairness depends on the context of the particular statute and the nature of the rights affected: Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817 at paras.21-27. In the circumstances of this case, at a minimum, procedural fairness required the committee to provide the licensee with the basis of the proposed revocation and an accurate statement of the grounds. This is mandated in the by-law which requires the information to be provided twice: first when the original recommendation is made and again when the notice of hearing is sent. Neither notices sent to the appellant provided any meaningful grounds for the recommendation to revoke its licence and both were misleading in respect of the type of evidence that would be introduced at hearing.

Failure to make proper disclosure rendered the process “irretrievably tainted with unfairness from the outset”. For this reason, the decision could not stand. The Court of Appeal set aside the judgment of the Divisional Court, quashed the licensing committee’s recommendation that the appellant’s licence be revoked as well as council’s resolution adopting the recommendation. The effect of the Court’s decision was to reinstate the appellant’s licence.

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