fév. 20. 2019

Keywords: Beer; Microbrewery; Mark-Up; Nova Scotia Liquor Corporation


Unfiltered Brewing Inc. (the “Appellant”) is a microbrewery which manufactures and sells beer in Halifax under a permit issued by the Nova Scotia Liquor Corporation (“NSLC”). As a condition of the permit allowing the Appellant to sell its own beer on-site, the beer sold to customers is deemed to have been first purchased from the NSLC.

NSLC remits a “mark-up” of $0.50 for each litre of beer sold, sampled, or given away by the Appellant at its store.

The Appellant applies to the Supreme Court of Nova Scotia for a declaration that the $0.50 mark-up is an unlawful tax under s. 53 of the Constitution Act. The Application Judge found that, although the mark-up possessed the hallmarks of a tax, it was, in pith and substance, a “proprietary charge” (i.e. not a tax, and constitutionally permissible).

The Appellant appeals on the basis the Application Judge erred in finding the mark-up to be a proprietary charge. The Court of Appeal disagrees, dismissing the appeal and awarding costs to the Attorney General.


Does the $0.50 mark-up constitute an illegal tax by the Province? For present purposes, the answer depends on whether the mark-up fits the definition of “proprietary charge”.

In the circumstances of this case, the beer is being sold ‘directly’, in a physical sense, from the microbrewery to the customer. However, even though the NSLC does not physically take delivery of the beer prior to its purchase/consumption by a customer, the NSLC takes the $0.50 mark-up because the Appellant is “…dependent on the NSLC’s deemed right of first sale in order to sell at its on-site store”. (See Unfiltered Brewing Inc. v Nova Scotia Liquor Corporation, 2018 NSSC 14 (CanLII) at para. 62).

Even if that provides a description of what takes place at the Appellant’s microbrewery, the question remains: is this an illegal tax on the Appellant? The Court of Appeal simply determined that, had the Application Judge found this mark-up was not a proprietary charge (and, thereby, an illegal tax on beer), he “…would have been in conflict with a significant body of authoritative case law that has developed over the years.” (See para. 60).

For the Court of Appeal, the Liquor Control Act, R.S.N.S. 1989, c. 260, Regulations, and policies establish the following parameters within which microbrewers must operate:

  1. the sale and distribution of liquor in the province can only be done through the NSLC;
  2. the NSLC has the sole discretion to determine the manner in which liquor is sold and distributed in Nova Scotia;
  3. the NSLC has determined that any liquor sold by a microbrewery shall be deemed to be purchased by a microbrewery from it;
  4. the NSLC has the ability to set the prices for the sale of liquor at a microbrewery and the sale price can include a mark-up;
  5. the only way that a microbrewery can operate to manufacture and sell liquor is through permits issued by the NSLC; and
  6. as a condition of receiving a permit, the microbrewery has to agree to comply with the terms and conditions of the permit which include complying with the Act, the Regulations and NSLC policies. (See para. 31).

The Court of Appeal also noted that, pursuant to a number of appellate decisions across Canada, including Air Canada v. Ontario (Liquor Control Board), [1997] 2 SCR 581, DFS Ventures Inc. v. Manitoba (Liquor Control Commission), 2003 MBCA 33 (CanLII), and Toronto Distillery Company Ltd. v. Ontario (Alcohol and Gaming Commission), 2016 ONCA 960 (CanLII), a Provincial/Territorial liquor commission like the NSLC can exercise proprietary rights over liquor it neither pays for nor physically possesses. (See discussion at paras. 35-51).

Ultimately, while the Appellant sought to distinguish these precedents, the Court of Appeal found a significant “common thread” which connects them to the present dispute:

Unfiltered argues that Air Canada, Steam Whistle, DFS and Toronto Distillery are all distinguishable from the present case because of the various schemes that were put in place by the provinces in those cases. Although there are distinguishing characteristics in those cases, there is one common thread that runs through them; the provinces were enacting schemes to manage the supply and demand for liquor within their provinces. The reality is simply this: no one can sell liquor in Nova Scotia without complying with the procedures put in place by the Act, Regulations and Policies of the NSLC. (See para. 57).

The Court of Appeal rejected the Appellant’s complaint that it “receives nothing for the mark-up which it pays to the NLSC”, noting that the Appellant receives the ability to sell beer – something it could not do “[w]ithout the licences and permits issued by the NSLC”. (See para. 58).

Counsel for the Appellant: Richard Norman (Cox & Palmer, Halifax)

Counsel for the Respondent: Edward Gores, Q.C. (Department of Justice (Nova Scotia), Halifax)