Carpe Diem Sports Productions Ltd., Welter Weight Productions Ltd., FS: ATF 3 Ltd., FS: DLC3 Ltd., Applicants - v. -, 2021 ABQB 691

Court of Queen’s Bench of Alberta Citation: Carpe Diem Sports Productions Ltd v Alberta (Culture, Multiculturalism and Status of Women), 2021 ABQB 691 Date: 20210903 Docket: 2001 05234 Registry: Calgary Between: Carpe Diem Sports Productions Ltd., Welter Weight Productions Ltd., FS: ATF 3 Ltd., FS: DLC3 Ltd., Applicants - and - Her Majesty the Queen In Right of Alberta, as Represented by the Minister of Culture and Tourism now known as, the Minister of Culture, Multiculturalism and Status of Women, The Assistant Deputy Minister Creative and Community Development, Alberta Culture and Tourism, Alberta Film and the Alberta Media Fund Respondents _______________________________________________________ Reasons for Decision of the Honourable Mr.

Justice R.J. Hall _______________________________________________________ [ 1 ] This is a Judicial Review of an Alberta Government Minister’s decision to revoke two grants to the Applicants. [ 2 ] The Applicants are a group of four companies, whom I will call, collectively, Carpe Diem. They are all owned and directed by Mr. Paul Anderson. [ 3 ] The Respondent Alberta Government entities administer the Alberta Production Grant program, which provides financial assistance to Albertan film makers; in the main, the program is administered by Alberta Culture and Tourism (“Alberta Culture”).

[ 4 ] The Applicants were first approached by Mr. Ari Taub, who was the CEO and founder of Hard Knocks Fighting Ltd. (Hard Knocks). Hard Knocks had received funding from the grant program. It sought production assistance from Mr. Anderson. Mr. Anderson, via Carpe Diem, began producing his own documentary series. His corporations submitted nine Grant program applications; including the two in issue in this application, being “Fight Sport: Day in the Life of a Coach, Season 3” (“DLC”), and “Fight Sport: After the Fight, Season 3” (“ATF”).

The applications for grant funding were accompanied with a detailed breakdown of anticipated costs. All 9 applications were approved, and contracts were entered into between Carpe Diem and the Minister of Culture. The approved grant funding for DLC was $342,571.00, and for ATF was $153,923.00. [ 5 ] Under the Agreements the grant proceeds were to be paid within a reasonable time of completion of the films. Hence Carpe Diem had to borrow funds elsewhere, and Mr.

Anderson, to the knowledge of Alberta Culture, guaranteed the debts of Carpe Diem. [ 6 ] The Agreements obligated the Ministry to notify Carpe Diem of any perceived Event of Default under the Agreements, including non compliance with the Guidelines and/or the Regulations. Carpe Diem was then to have 30 days within which to remedy the Event of Default.

The Agreements further required that “any dispute or material disagreement was to be resolved through a meeting between the parties or, failing resolution, through consensual, facilitative mediation.” [ 7 ] The Agreements specified that nothing in the paragraph directing mediation would prevent the Minister from proceeding with termination of the Agreement upon any Event of Default. [ 8 ] Hard Knocks and Carpe Diem were separately owned and operated. However each of them made use of services from the other. Regarding the two grants under consideration here, Mr.

Taub or his companies supplied substantial services to the projects. [ 9 ] In November of 2016 Alberta Culture was examining operations of Hard Knocks in respect of its many grant applications and grants of funding. Alberta Culture was concerned about the legitimacy and accuracy of costs and expenses of Hard Knocks. That, in turn, led Alberta Culture to question Carpe Diem’s costs. [ 10 ] While it is clear that Alberta Culture treated Hard Knocks and Carpe Diem as being related parties, the term “Related Parties” was not defined or referred to in either the Guidelines or Regulations .

The guidelines have since been changed to define Related Parties; under that new definition, Hard Knocks and Carpe Diem would be considered to be Related Parties. However those guidelines were not in existence at the time of these occurrences. [ 11 ] In the grant applications Mr. Anderson disclosed no anticipated “Related Parties” transactions. However, he listed the anticipated expenses payable to Hard Knocks or Mr. Taub as being “Third Party Costs”.

In other words, these anticipated costs and expenses were disclosed. [ 12 ] Without a definition of Related Parties, I consider that Carpe Diem properly disclosed the anticipated costs as being Third Party Costs. The usual definition of Related Parties is one of common ownership and direction, in whole or in part. No such relationship existed between Carpe Diem and Hard Knocks. [ 13 ] Once the two projects were completed, Carpe Diem engaged independent auditors, Kay + Warburtin, CPA’s, to provide an audit opinion respecting expenses incurred.

Those auditors did so in June, 2017, and independently opined that the production costs for each project were presented fairly, in all material aspects. The report of those auditors was provided to Alberta Culture. [ 14 ] The Assistant Deputy Minister wrote a letter to Mr. Anderson on April 7, 2017 indicating the government would be reviewing all of Carpe Diem’s applications to ensure they were in compliance with the Agreements, and the spirit and intent of the grant program.

On December 22, 2017 the Assistant Deputy Minister spoke to its review and its only complaint was that the Alberta Grant Program had not received appropriate credits in the films. [ 15 ] A meeting was convened by Alberta Culture, in relation to Hard Knocks’ claimed expenses, on January 29, 2018, because Auditors engaged by Alberta Culture had expressed concerns about Hard Knocks’ claimed expenses. While the meeting focused on Mr. Taub and Hard Knocks, Mr. Anderson of Carpe Diem was invited to the meeting and attended. The meeting notes state in part: “Focus of meeting will be on files where Mr.

Taub is identified as the sole director. A meeting to discuss Mr. Anderson’s files could be set up if desired to discuss those files at a later date” And: “He [Mr. Anderson] has wanted to meet with the Department for the last 18 months. Today was the first time the Department has met with him.” And: “Ms. Wyrstiuk [Assistant Deputy Minister] indicated that a follow up meeting could be arranged with Mr. Anderson to discuss the details of his files.” [ 16 ] Mr. Anderson was told an audit of Carpe Diem’s expenses was taking place, and he could expect it to be completed in about 4 months. Mr.

Anderson pushed for an audit response, but no audit was completed until 22 months had passed. The audit was performed by Alberta Gaming and Liquor Commission (AGLC). AGLC asked Carpe Diem to provide various responses, and additional documentation and information, and Carpe Diem complied. At no time was Carpe Diem advised that the information it provided was incomplete or insufficient. [ 17 ] Unknown to the applicants, Mr. Mark Ham, of Alberta Media Fund, had received AGLC’s initial draft findings in its audit. Mr.

Ham emailed AGLC on January 16, 2019, urging it to “take a firmer approach when delivering the audit findings”. He suggested, or requested that the AGLC Audit Report express a conclusion that misstatements, misconduct, misrepresentations and fraud were evident

in the materials it has reviewed. [ 18 ] The reasons for that request are obvious. The Agreements provided that such activities were Events of Default. Mr. Ham was asking AGLC to provide its conclusions, in the manner he stated, to ground a Ministerial finding that Events of Default had occurred. [ 19 ] This was improper. The Audit should be independent. Mr. Ham was attempting to interfere with that independence. It appears that Mr.

Ham had already made up his mind to recommend to the Minister that the two grants to Carpe Diem under investigation be revoked. [ 20 ] In the result, however, AGLC did not alter its conclusions. Those conclusions in the final Audit Report indicated, in substance, that there may be irregularities, inconsistencies or misstatements. The Audit Reports were completed by May 1, 2019 and provided to Alberta Culture. However, they were never provided to Carpe Diem.

Not until the Judicial Review was commenced by Originating Application was a record prepared by the Respondents that included those Audit Reports. [ 21 ] On October 15, 2019, more than 5 months after Alberta Culture received the Audit Reports, a decision letter was sent on behalf of the Minister of Culture, signed by Anne Davidson, Acting Assistant Deputy Minister (the “Denial Letter”).

In that letter the Ministry advised that it would not be paying the Grant Funds owing under the Agreements, and was terminating the Agreements on the basis that the Applicants had made false or misleading statements in their applications or had furnished false or misleading information that, in the opinion of the Minister, materially affected the Applicant’s eligibility to receive a grant under the Regulation. [ 22 ] The letter said the decision was based on findings from the AGLC audits.

No further information was contained in the Decision letter. [ 23 ] It is to be noted that, despite the Agreements calling for the parties to meet to discuss any disputes or disagreements; and despite the representations made in the meeting of January 29, 2018 that a meeting to discuss Carpe Diem’s applications could be set up, if desired, at a later date; and despite Mr. Anderson’s repeated efforts to receive the Audit results; and despite Mr. Anderson providing responses to all of the Auditor’s inquiries; and despite that Mr.

Anderson was never told that the information he provided was insufficient or unresponsive; the Denial Letter, purporting to terminate the Minister’s obligations under the Agreements, was sent. [ 24 ] Mr. Anderson then asked for a meeting to discuss the Minister’s decision. He requested mediation. However, Mr. Ham wrote to inform him that the decision was final. Mr. Anderson asked to see the Audit Reports. His request was refused. Eventually, on November 18, 2019, he was provided with “Audit Summaries”.

However he was told the previous decision was final, and Alberta Culture refused his request for a meeting. [ 25 ] The Audit Summaries contained certain language which differed from the actual Audit Reports. It is not clear, from the record, who prepared the summaries. [ 26 ] The Applicants seek to quash the decision of the Minister because of a lack of procedural fairness. Additionally, the Applicants argue that the Minister’s decision was unreasonable and should be quashed. Procedural Fairness [ 27 ] The standard of review when this court determines procedural fairness is not in issue between the parties.

As stated by the Respondents, the court must determine whether the proceedings met the level of fairness required by law, applying the considerations set out by the Supreme Court of Canada in Baker v Canada , 1999 SCC 699. Baker set out a non exhaustive list of factors to be considered. • The first factor is the nature of the decision being made and the process followed in making it. • The second factor is the nature of the statutory scheme. • The third factor is the importance of the decision to the individual(

s) affected. • The fourth factor is the legitimate expectations of the person challenging the decision. • The fifth factor is the choice of procedures made by the decision maker, and deference to that decision maker. [ 28 ] Here, the nature of the decision was to cancel grants previously approved and contracted with the Applicants.

That, to my mind calls for greater attention to fairness than would be the case at the initial stage where the grant application was being considered. [ 29 ] As to the nature of the statutory scheme, no right of appeal is provided to the affected party; thereby calling for a higher degree of procedural fairness. [ 30 ] Turning to the third factor, the Minister’s decision is obviously very important to the Applicants and Mr. Anderson, who are the affected parties. Based on the initial approval, and the Agreements reached, the applicants took out loans, and Mr.

Anderson guaranteed those loans, to the tune of about $500,000.00. The Respondents were fully aware of the obligations taken on by the Applicants in reliance on the promised grants. [ 31 ] The legitimate expectations of Carpe Diem and Mr. Anderson were that, if Alberta Culture had a problem with costs and expenses incurred, they would convene a meeting to discuss those issues, as was provided in the written Agreements; and if the problem was not resolved by such a meeting, the parties would engage in mediation, again as provided in the Agreements.

In short, the legitimate expectations of the Applicants were that they would be shown the evidence being used to ground the Minister’s decision, and would be given the opportunity to respond to Alberta Culture. Indeed, Alberta Culture had said as much in the meeting of January 29, 2018. Mr. Anderson was specifically told that the meeting was about Hard Knocks, but if he wished, a meeting would be arranged to discuss Carpe

Diem’s projects. He had every expectation that such a meeting would take place. [ 32 ] The fifth factor weighs in favour of the Respondents in that there is wide Ministerial discretion granted in the Regulations. However, it is proscribed by the terms of the Agreements entered into by the Minister. [ 33 ] I am satisfied that the Applicants were not afforded procedural fairness in this decision making process. They were never advised which statements in their application or documentation were false or misleading; or of any false for misleading information they were alleged to have provided.

While, after the decision was made, they were told they had failed to disclose Related Party transactions, they had in fact disclosed such transactions as being Third Party Costs. As I have discussed above, Alberta Culture applied its own, unpublished definition of Related Party Transactions, which was far from the normal accounting and legal

definitions of that phrase. They never convened the promised meeting. They never mediated. They never produced the Audit Reports to Mr. Anderson. The audits took an inordinate amount of time; the decision was then delayed a further 5 months. [ 34 ] There was a further lack of procedural fairness where the Respondents were urging the AGLC Auditors to express an opinion that there were misstatements, misconduct, misrepresentations and fraud found in the audit process.

This demonstrates that Alberta Culture had already decided not to fund the grants, even before the audit process was complete, and that it was urging the Auditors to change their initial report, to support such a decision. That is definitely not fair. [ 35 ] Where there has been a lack of necessary procedural fairness, the decision reached is therefore unreasonable. [ 36 ] The decision of the Minister cannot be maintained. It is hereby quashed. The Minister is to conduct a transparent review, giving the Applicants the full opportunity to respond to allegations made against them, and to be heard.

In addition, the dispute resolution mechanisms set out in the Agreements are to be followed by the parties. [ 37 ] The Applicants have succeeded in this Judicial Review. If the parties cannot agree upon costs, they may address me further. Heard on the 10 th day of August, 2021. Dated at the City of Calgary, Alberta this 3 rd day of September, 2021 . R.J. Hall J.C.Q.B.A. Appearances: Munaf Mohamed and Patrick Schembri for the Applicants Lesley Akst, Christopher Ghesquiere and Raffaella Gaofalo for the Respondents