B.C. Supreme Court orders unlicensed Vancouver cannabis stores to close

Owners of 28 stores argued in court that the city had no constitutional right to license them

City Cannabis Co. on Robson Street is one of many cannabis stores that are operating illegally, according to governments | Glen Korstrom

B.C. Supreme Court justice Christopher Hinkson ordered all streetfront cannabis stores operating in Vancouver to close in his December 13 judgment in a case that involved dozens of dispensaries and three levels of government.

The City of Vancouver launched a petition to try to get a court order requiring dispensaries that did not have city-issued business licences to get them, and to pay city-issued fines that total nearly $3 million. City fines started out at $250 per ticket and have since risen to be $1,000 per ticket, with tickets potentially issued weekly.

Lawyers for the dispensaries argued that the city had no constitutional authority to regulate streetfront cannabis sales, which were federally illegal until October 17. They also argued that the stores were medical dispensaries that provided necessary medicine to patients who are constitutionally entitled to access to cannabis thanks to past Supreme Court of Canada judgments.

Neither of those arguments was sufficient to sway Hinkson.

The city filed 53 injunctions against marijuana-related businesses operating outside city regulations starting in April 2016, when the city started enforcement.

Some operators closed their stores before Hinkson heard the case, but owners of 28 stores participated in the case and will now have to shut down or face court-ordered fines, jail time, or both.

“This decision reaffirms the city’s authority over land use, and our municipal business licensing for cannabis retail, and confirms the regulatory regime introduced in 2015 was well within the city’s jurisdiction to establish,” said Kaye Krishna, general manager, development, buildings and licensing at the city.

“It also signals that any cannabis retail store operating outside city regulations can and will be enforced against, using all the tools at the city’s disposal to the fullest extent moving forward.”

The new regime that the federal government ushered in on October 17 allows provinces to regulate retail licensing for cannabis stores. In B.C., private stores are allowed but owners must fill out provincial-government forms, pass criminal records checks and endure scrutiny of their finances by bureaucrats.

The province also requires entrepreneurs to pass reviews conducted by the cities in which they want to operate.

Vancouver’s chief licence inspector, Kathryn Holm, told Business in Vancouver on December 4 that the provincial government has referred 17 applications to the city and the city has approved four of those. Those four applications are now with the provincial government to give the final approval, she said.

She would not disclose the names and locations of the four private cannabis store applicants.

The city said in a December 13 news release that the city had only received 14 referrals from the province, but its data may not have been as up to date as that which BIV received from Holm. The city concurred that it has forwarded four applications back to the province for final approval. It said that it has notified the 10 remaining applicants of what to do next. Nine of those applicants have previously been issued development permits (land use approval), which is the first step that needs to be completed, according to the city.

Once the province gives final approval to an applicant, the operator then may apply for a city business licence. The City of Vancouver will charge $33,097 in 2019 for a cannabis-store business licence. It started charging $33,000 several years ago and the annual licence fee has risen each year. 

The $33,097 business-licence rate for 2019 is 79 times the rate that private liquor store operators have to pay.

Holm explained that the rationale for the high fee is that the city needs to recoup costs related to reviewing licence applications, and ensuring through inspections that city bylaws are being followed. She noted that there was no agreement in place for the province to share excise-tax revenue that it gets from cannabis sales.

Ad Lucem lawyer Robert Laurie, who represented some of the dispensaries, said on Facebook, "Looks like we can appeal or take the government to Federal Court. The Charter issues are still open. I guess we need more affidavits and to highlight the access problems. Looks like the chief justice did us some favours. There are some loopholes for further challenge."

Dentons partner Shea Coulson, who spoke to BIV after the judgment was released, said that there is a right of appeal in this case and that lawyers do not need to win an appeal by proving that the case merits an appeal. Whether the case is actually appealed will be a strategic decision.

Coulson, however, thought that one argument in the case was "particularly interesting for the cannabis industry" as it involved Section 7 of the Canadian Charter of Rights and Freedoms – the part that protects an individual's autonomy and personal legal rights from actions of the government in Canada. 

The Supreme Court of Canada dealt with Section 7 in its 2016 Allard decision that involved it saying that medical cannabis patients deserve "reasonable access" to their medicine.

The respondents in the case that was decided today tried to argue that the cannabis stores should be able to stay open because they provide that access. 

Justice Hinkson, however, wrote in his judgment that "access to cannabis under Section 7 does not mean access on every corner of a city. It does not mean access to a particular store or a particular strain. Section 7 demands that individuals be given reasonable access to medical cannabis, not unrestricted access. Individuals may be inconvenienced, but such inconvenience does not engage Section 7." (Italics are in the judgment.)

If the judgment is allowed to stand, that paragraph could be used by a future government lawyer and pointed to in a separate future case to show that the current Cannabis Act is constitutionally compliant and that more access to medical patients is not constitutionally required.

"It's an arrow in the quiver for a lawyer who wants to say that an effective legal regime requires that there is authority in the federal, provincial and municipal governments to limit the number of dispensaries and to prohibit unlicensed dispensaries from operating, and you can't create a loophole that allows the medical dispensaries to operate without a licence," Coulson said.

If the case is upheld on appeal, however, Hinkson's reasoning would be seen as being more persuasive to a future justice hearing that future case, he added.

gkorstrom@biv.com

@GlenKorstrom