Steam Whistle Brewing Inc. v. Alberta Gaming And Liquor Commission

Alberta brewers win action against Alberta Gaming and Liquor Commission

The liquor market in Alberta is privatized. However, before any liquor makes its way to retailers, it first passes through the Alberta Gaming and Liquor Commission (the “AGLC”), a corporation established under the Gaming and Liquor Act, RSA 2000, c G-1 (“GLA”). The AGLC collects a mark-up on the liquor it then sells to private retailers. Notionally, this mark-up is paid by the retailers, but in reality it is absorbed by the producers. The AGLC applies different mark-up rates to different classes of liquor. Historically, it has applied higher rates to beer produced by large, multi-national corporations than to beer produced by small, domestic “craft” brewers.

Prior to October 28, 2015, the lower mark-up rate applied to all craft beer produced anywhere in Canada. On that date, a new mark-up regime (the “2015 mark-up”) came into effect, giving favourable treatment to craft beer produced in British Columbia, Alberta and Saskatchewan. Shortly thereafter, Steam Whistle Brewing Inc. (“Steam Whistle”), an Ontario craft brewer, commenced an action against the AGLC, claiming that the regime was unconstitutional.

On August 5, 2016, the mark-up regime was again altered. Under the new regime (the “2016 mark-up”), all brewers were charged the same rate. However, the Province of Alberta simultaneously created a program which provided Alberta craft brewers with a grant identical to the difference they paid under the 2015 and 2016 mark-ups.

Great Western Brewing Company Ltd. (“Great Western”), a Saskatchewan craft brewer, then sued the AGLC. Steam Whistle and Great Western argued that the mark-up is a tax that violates s. 53 of the Constitution Act, 1867 (UK), 30 & 31 Vict, c 3, reprinted in RSC 1985, Appendix II, No 5 (the “Constitution”). They also argued that the mark-up constitutes a barrier to interprovincial trade that violates s. 121 of the Constitution.They sought declaratory relief and restitution of amounts paid under the mark-up.

On January 18, 2016, an interim injunction was granted in favour of Steam Whistle preventing the application of the 2015 mark-up. Instead, Steam Whistle was to continue to pay $0.51/L, the rate it paid prior to the 2015 mark-up.

On November 8, 2016, both Applicants received a further injunction from Justice E. C. Wilson preventing the application of the 2016 mark-up. Great Western would instead pay $0.48/L, the price it paid under the 2015 mark-up. Decision: the 2015 and 2016 mark-ups contravene s. 121 of the Constitution. Steam Whistle is entitled to restitution of $163,964.98. Great Western is entitled to restitution of $1,938,660.06. The applicants have been successful and are entitled to costs.

This is the first time that a law has been successfully challenged on the grounds that it violates section 121 of the Constitution Act, 1867. An appeal of the decision is scheduled to be heard in Calgary on April 9, 2019.

Douglas C. Hodson, Q.C. and Kristen MacDonald of MLT Aikins LLP acted for Great Western Brewing Company Ltd.

Andrew E. Stead and Preet Saini of McMillan LLP acted for Steam Whistle Brewing Inc.

Sean P. McDonough and Robert J. Normey of the Ministry of Justice and Solicitor General of Alberta acted for Her Majesty the Queen In Right of Alberta and the Alberta Gaming and Liquor Commission.