Understanding Liquor Reform: Discretion, Policy and the Law of Liquor in British Columbia

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A wave of discussion about British Columbia’s liquor laws has recently swamped both social media and the traditional media. Much of this discussion has been prompted by a number of high profile issues surrounding the Liquor Control and Licensing Branch’s (the “LCLB”) refusal to grant a special occasion license to a Whistler pride event and a condition the LCLB placed on the Rio Theatre’s license that it cannot show movies at any time while holding the liquor license. Vancouver’s Mayor, Gregor Robertson, has picked up this issue and has signalled that the city supports the Rio and would like the LCLB to reform the rules. Additional pieces by reform stalwarts Mark Hicken (a lawyer in Vancouver) and Kurtis Kolt (a highly respected independent wine consultant) have further catalyzed the debate.

Amongst all the chatter I have noted a continued misstatement or misapprehension of the legal structures that create and give jurisdiction to both the B.C. Liquor Distribution Branch (the “LDB”) and the LCLB. Calls to reform “liquor laws” are imprecise and regularly inaccurate, which is a problem when asking for change to big powerful bureaucracies. As a lawyer I feel that it is my duty to clarify how the system works so that proponents of change can understand what it is exactly they are asking to be changed. This article is thus meant as a primer for those who are interested in the legal structure of these issues and I hope it will contribute to the dialogue by making discussion more accurate and more precise.

The Legal Structure of the Liquor Bureaucracy in British Columbia

Liquor in British Columbia is governed by two entities, the LDB and the LCLB. Each of these entities was created by an act of the legislature of British Columbia. The LDB was created by the Liquor Distribution Act (the “LDA”) and the LCLB was created by the Liquor Control and Licensing Act (the “LCA”). Both the LDB and LCLB operate under the auspices of the Ministry of Public Safety and Solicitor General.

The LDB is responsible for the sale and distribution of alcohol in the Province and the LCLB is responsible for alcohol licensing and enforcement of offences under the LCA along with license conditions.

These acts give the Lieutenant Governor in Council (i.e. the executive branch of government) the authority to pass regulations. The most important regulation is passed pursuant to the LCA and is called the Liquor Control and Licensing Regulation.

And even further down the chain, the LDB and the LCLB have the legal authority to create certain “policies”. Most policies are not publically published, though they must be made publically available on request. However, this is the meat of where most decisions that impact the industry are made.

Policies are subordinate to the regulations and the legislation. This means that LDB and LCLB policies must be consistent with the acts that grant these entities the authority to create such policies. Additionally, there are a number of legal principles that restrict the creation of policies and the manner in which policies are implemented by the LDB and LCLB. This area of law, known as administrative law, is extremely complex but also fundamentally important to understanding what the LDB and LCLB can and cannot do.

The Acts

The Acts are the source of authority for the LDB and the LCLB. These establish the structure of the organizations and grant them the discretion to make decisions with respect to a very wide array of matters pertaining to liquor.

For example, the LCA prohibits any person from selling liquor without a license and requires licensees to purchase all liquor from the Liquor Distribution Branch.

As a further example, the LDA grants government control of all liquor distribution and retailing in the Province. In particular, it requires all liquor sold in the province to go through the LDB, it requires that title to all liquor be surrendered to the government upon entering the Province, and it places all liability for losses, damages or costs upon importers, retailers and other private entities.

The LDA also grants the general manager of the LDB the authority to create specific restrictions on the storage and movement of liquor, including the physical structure, operations and security measures of all facilities storing liquor prior to retailing (i.e. the ability to govern warehousing in the Province).

The Regulations

The most important regulation is the Liquor Control and Licensing Regulation, which was promulgated pursuant to the LCA. It sets out the various restrictions on license types such as liquor primaries, food primaries, agents, retailers and wineries (both commercial and land based).

For example, these restrictions include (at s. 8(2)) barring granting or transfer of a Liquor Primary License to entities that are predominantly by or directed to minors, motion picture theatres, restaurants and video arcades.

The regulations (s. 14(1)) also grant the LCLB the authority to control the sale of food and the consumption of liquor on premises licensed as Liquor Retail Stores.

The Policies

As I mentioned earlier, the policies are the real meat for the majority of issues in the industry. Examples of policies include the restriction on LRS’s not to sell food or coffee, the LDB “mark up” of 123% for wine, use of inefficient forms and methods to sell and order wine, and the ban on corkage.

Policies must be consistent with the legislation that governs the given agency. In other words, there must both be legislative authority to implement a policy and that policy cannot conflict with other parts of the relevant statutes and regulations.

The Legal Basis for Challenge

The various legal bases for challenging decisions of the LDB and LCLB, including challenging policies, are quite vast. I will only outline the basic parameters of the most important administrative law principles and remedies.

The most important concept to understand in the liquor context is “discretion”. The LDA and the LCA grant the LDB and LCLB quite a broad discretion to make decisions. This includes, for example, the LCLB’s discretion to grant licenses and the LDB’s discretion to set prices, grant a direct shipping exemption to B.C. wineries, or appoint agency stores.

However, there are rules that restrict the exercise of this discretion. It is an abuse of discretion, for example, if the LCLB takes into account irrelevant considerations or fails to take into account relevant considerations, if it makes a decision for an ulterior purpose or in bad faith, or if it fetters its discretion.

This idea of “fettering” discretion is especially important with respect to the LDB and LCLB because most of the issues arise from policies that they create. It is a fettering of discretion to rely on an inflexible policy without considering the individual merits of a particular matter. Many of the complaints I have been reading about in the media arise out of these sorts of inflexible policies. If such policies are too inflexible, and decisions are made in reliance on these inflexible policies, then such decisions are susceptible to a “judicial review”, which is a petition to the court to review the decision made by an agency (in this case the LDB and LCLB).

If this petition is successful the court can “quash” the LDB or LCLB decision and return it to the relevant board for reconsideration. Reconsideration must be made in accordance with the reasons provided by the judge. As such, judges can create parameters that restrict the LDB and LCLB decisions in the future. However, judges cannot, in most cases, tell the LDB and LCLB what to decide. Rather, they can only restrict the manner in which the decision must be made. Courts will also sometimes provide comment on what they view to be reasonable. All of this can lead to the LDB or LCLB reversing its decision.

There are other principles such as bias and procedural fairness that restrict the manner in which the LDB and LCLB can make decisions.

The second fundamental way in which to legally challenge an LDB or LCLB decision is by way of a jurisdictional argument. The LDB and LCLB can only make decisions if they are made in accordance with the authority granted to them under the LDA and LCA, respectively.

In the case of the LDB, there is little, if any, direct legislative authority for most of their policies. Rather, the LDB is operating mostly on a discretionary basis. Since policies are essentially the nuts and bolts of how the LDB is run, these nuts and bolts are subject to the general principles discussed above. That is, the discretion to implement these policies must be exercised reasonably. It is unreasonable, for example, to consider something that is entirely irrelevant to the decision being made. Determining whether or not something is relevant can be complex and requires analysis of the wording and the purpose of the legislation, regulations, and policies at issue.

In conclusion, there are quite a few legal avenues by which the actions and decisions of the LDB and LCLB can be challenged. The arguments can be complex and require lawyers, but this is a proven and effective method to challenge certain decisions. However, one cannot change the acts (the LDA or LCA) or the regulations by legal challenge unless they violate the constitution. That said, courts will provide interpretation of statutory provisions that can be beneficial to those who wish to challenge LDB and LCLB decisions.

The Political Basis for Challenge

While all policies must be reasonable and within jurisdiction, any policy that meets the administrative law requirements will be upheld by the court. The only way to challenge these policies is for the LDB or LCLB to change them internally.

Additionally, if change is to be made to the act then these changes must be made by the provincial legislature. Any change to regulations must be made by the executive (i.e. the Ministry).

The incongruity I have been seeing is that many call for the “law” to be reformed without considering whether they are asking the government to change the act, the regulations or LDB and LCLB policies. Each of these requires a completely different mechanism and involves very different stakeholders. It is also important to consider that any changes to the act are likely to still grant the LDB and LCLB considerable discretion. Thus, the question becomes: what changes are most likely to ensure the consistent results I want in the future?

The LDB and LCLB have always slightly modified their policies over time to ensure that no major challenge is made to their overall structure. Those interested in reform must therefore question whether all they want is a change in a policy or whether they want a change to the structure of the organizations. If structural change is desired, then reformers must ask what is the effective mechanism to both achieve this change and to ensure that changes to the governing act and regulations translate into policies that ‘reformers’ want to see and prevent policies that ‘reformers’ want to avoid.

I would also note that most of the complaints about the LCLB pertain to the regulation and policies, while most of the complaints about the LDB pertain both to policies and to the fundamental restrictions on the industry created by the LDA.

I think it is fundamentally important for those discussing reform to aim their hammers at the correct nail and make sure their efforts land squarely on the appropriate entities. Otherwise, such discussions risk diffusion and present opportunities for political misdirection.

*The author practices law in Vancouver. His profile and contact information can be found by clicking here

Comments

  1. WINEcouver
    February 3, 2012

    Great primer, Shea, especially for a non-legal type like me. My gut reaction was that we should challenge the Acts, as they are the root of the bureaucratic nightmare of the LDB/LCLB.

    The LDA and LCA are in direct contradiction to Section 12 of the Cdn Charter of Rights and Freedoms. Every time I shop for wine in BC, I feel cruelly punished. The downside of my playful argument is that since it happens multiple times a week, it’s hardly unusual punishment.

    Cheers,
    WINEcouver

  2. Bon Vivant
    February 8, 2012

    Thank you for making this convoluted discussion a little more clear for non-regulatory types like me. The public, and even the hospitality industry, really is not well versed enough in what their government has allowed the various stakeholders to manipulate for their own special interests. Transparency is a difficult task for all areas of government and I think taking steps to start a dialogue in public about ways to reform the LDB and LCLB would go along way.

  3. robert simpson
    February 8, 2012

    Great read,
    What I find most interesting is the people behind the policy and their sometimes personal “agendas”
    My crystal ball says we will see more revenue generation through alternative methods…. mostly punitive.
    Lastly if some one could explain to me why the government needs to be in the business of wharehousing and distribution I would be most grateful.

  4. Shea
    February 8, 2012

    Bon Vivant,

    You are probably right. Though it takes a lot of work to clear through the webs of confusion with respect to the various influences on liquor regulation and policy.

    Robert, glad you found the article helpful. Any revenue generation through ‘punitive’ methods will be subject to scrutiny as per the principles I discussed above. So, both branches will have to be careful and licensees should react carefully (ideally with expert advice) and keep excellent records of all interactions if they want to be in the best position to challenge a particular decision.

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