Fets Whisky Kitchen Loses SMWS Legal Battle with British Columbia Regulators

June 21, 2019 – The Vancouver whisky bar raided in January 2018 for selling Scotch Malt Whisky Society whiskies has lost its bid to have the case dismissed as a violation of Charter rights. A British Columbia Liquor & Cannabis Regulation Branch adjudicator rejected the arguments by Fets Whisky Kitchen owners Eric and Allura Fergie, and ordered a fine of $3,000 in addition to the loss of 242 SMWS bottles seized in the raid.

Fets is one of four Scotch Malt Whisky Society “partner bars” in British Columbia that were part of the province’s undercover “Operation Malt Barley” investigation that began with an anonymous tip in late 2017. Little Jumbo and the Union Club in Victoria, along with the Hotel Grand Nanaimo, all settled their cases with the province without going to a hearing. The Fergies, faced with losing approximately $40,000 worth of SMWS whiskies, chose to fight the “contravention” on the grounds that the raid was illegally conducted without a search warrant, and that Allura Fergie was never notified of her Charter rights or given time to contact a lawyer during the January 18, 2018 raid.

Adjudicator Nerys Poole issued a written ruling in the case following two days of hearings last month, declaring that the Branch’s liquor inspectors were authorized under provincial law to enter the bar and seize “illegal” product without a search warrant. Poole ruled that the liquor agency acts in an “administrative” function under provincial law instead of a “criminal” one, and that liquor license holders have a reduced expectation of freedom from search and seizure than they otherwise would as private citizens because of the highly regulated nature of the liquor licensing system.

In a statement provided to WhiskyCast, the Ministry of Attorney General said the LCRB’s approach to enforcement has not changed, and that liquor inspectors follow up on all complaints. “This is done to ensure fairness to all licensees and to prevent law-abiding businesses from being put at a disadvantage,” the Ministry said, noting that the LCRB “expects the licensee will use this contravention as a means to review its business practices and ensure that all aspects of its licence are being operated lawfully.”

In an email to WhiskyCast, Eric Fergie said he and his wife will ask for reconsideration of the ruling by a different adjudicator within the liquor agency – a mandatory prerequisite to appealing the case in court. “What the ruling states is that the government is not required to follow their own rules and that they are free to interpret their own guidelines and the rule of law,” he said, claiming that Poole made her decision in the case before hearing any of the evidence. Fergie declined an interview until after consulting further with their attorney.

SMWS Canadian Chapter owners Kelly and Rob Carpenter also criticized the ruling. “We support Fets and their request for re-adjudication. BCLDB regulations that deny restaurants like Fets the right to purchase bottles from private liquor stores take choice away from B.C. consumers and have been identified as anti-competitive by Canada’s federal Competition Bureau. And allowing the BCLDB, the agency that pursued a covert investigation against Fets and then raided it, to rule on its own actions while at the same time denying Fets the right to any evidence related to the investigation and raids, is fundamentally unjust. We urge B.C. consumers and the B.C. hospitality industry to continue to support Fets in their efforts to free the whisky,” they said in an email to WhiskyCast.

The case stems from a British Columbia regulation requiring bars and restaurants to source all of their liquor directly from the Liquor & Cannabis Distribution Branch or a designated outlet, limiting licensees to products that the provincial wholesale monopoly chooses to make available in its retail outlets. The SWMS whiskies are not available legally to “hospitality” licensees through that system, but are available to consumers through two privately-owned retail stores in Vancouver and Victoria which order them through the provincial agency.

Fets and the other three bars bought their SMWS whiskies through either Legacy Liquor Store in Vancouver or The Strath in Victoria, and Allura Fergie testified during the hearing that she believed Fets was acting legally by sourcing the whiskies through Legacy, a licensed British Columbia retailer that paid all of the required taxes to the province.

“When the LDB does not have the products that we require to have a successful business, we need to go to the alternative store to find the products.We can’t have a strong business with the monopoly. We buy so much from the LDB, you look at all the taxes and now we are being treated like criminals. So wrong,” she testified. However, neither store is considered a “designated outlet” by the Liquor & Cannabis Distribution Branch for sales to hospitality licensees.

Fergie also argued that liquor inspectors had never raised the issue previously during routine inspections, but Poole rejected that, noting that the Fergies never asked inspectors whether they were operating within the rules. In addition, she cited that “the liquor regulatory regime relies on voluntary compliance and expects liquor licensees to comply with the rules and regulations, regardless as to how they feel about them.” The $3,000 fine is the maximum for a first-time offender, and Poole determined that the length of the violations warranted the maximum fine. Poole could also have ordered a one to three-day suspension of the Fets liquor license, but chose not to impose that penalty.

Editor’s note: This story was updated to include comments from the British Columbia Ministry of Attorney General.  The adjudicator’s ruling is available for download at the WhiskyCast web site. 

Links: Fets Whisky Kitchen | British Columbia Liquor & Cannabis Regulation Branch | Scotch Malt Whisky Society Canada