Fisheries Law

Papers and Articles

By Brad Caldwell

 

LICENCE TRUSTS:  DISPUTES OVER ENTITLEMENTS

As has been discussed in a number of previous Legal Desk columns, when dealing with licence disputes between individual fishermen and the Department of Fisheries and Oceans (D.F.O.), the individual is usually the loser.  This is because of the tendency of the courts to treat fishing licences not as property, but as privileges renewable annually at the absolute discretion of the Minister of Fisheries. When dealing with disputes between private individuals, however, the courts have employed the trust concept to treat licences much more like property.   This article will briefly review how the courts have used trusts so as to resolve disputes between individuals over entitlements to fishing licences.

 Trusts can be divided into two broad categories:  (1) Intentional trusts, and (2) constructive trusts.  

 

Intentional Trusts

 An intentional trust can be loosely defined as a right of property held by one party for the benefit of another.  It usually involves an arrangement where property is transferred to a “trustee” with the intention that it be administered by the trustee for another’s benefit.  Although strictly speaking a fishing licence is not property, the courts have often overlooked this deficiency for the purpose of imposing trusts on the holders of fishing licences.  The leading case in this regard, is B.C. Packers Ltd. v. Sparrow (1989), 35 B.C.L.R. (2d) 334 (B.C.C.A.).  In this case a status Indian agreed to sell his roe herring licence to a fishing company at a time when transfers of such licences were not allowed by D.F.O.  In order to circumvent this restriction, the seller agreed to “do all things necessary or proper to secure the benefit of the licence for the use of Packers …” including renewing the licence each year in his name and transferring the licence to the purchaser when and if it became transferable.  After a dispute arose between the parties, the seller refused to sign the annual renewal papers and the purchaser brought an application to the court to enforce the agreement.  In rejecting a defence by the seller based upon illegality, the British Columbia Court of Appeal said as follows:

  The object of the agreement was the transfer of all beneficial interest in the herring licence to the respondent, Sparrow, who was to remain a bare trustee holding the legal title. It would be unprofitable elaboration to do more than say that one can search the statute and regulations and find no prohibition of transfer of beneficial interest in a herring licence. The restrictions apply only to dealing with the legal title (underline added).

 As a result of this case, many legal agreements involving temporary transfers of fishing licences now contain express trust clauses.  

 Constructive Trusts

 In addition to recognizing express intentional trusts, in some instances even when there is no express intention to create a trust the courts will impose a constructive trust over a fishing licence.  The test for deciding whether or not a constructive trust will be imposed is very complex, involving a two-step test with several subsidiary tests within each of the two steps.  The first part of the test is to determine whether or not there has been an unjust enrichment. This has been described by the Supreme Court of Canada as the “basis for remedying the injustice that occurs where one person makes a substantial contribution to the property of another person without compensation.  In order to establish unjust enrichment, a claimant must establish the following:  (1) an enrichment, (2) a corresponding deprivation, and (3) the absence of any juristic (legal) reason for the enrichment.  A juristic reason for enrichment could, for example, be the existence of a contract or law requiring such an enrichment.  The second part of the test is to review whether in the circumstances a constructive trust is an appropriate remedy to redress the unjust enrichment.  This ordinarily involves the questions of (1) whether the claimant’s efforts or contribution give him or her a special link to the property and (2) whether a simple monetary award could satisfy the claim.  With respect to the issue of whether or not a monetary award could satisfy the claim, factors to be considered would include the specific and unique character of the property in question, changes in value of the assets, or a need to give a claimant priority in bankruptcy proceedings.

 

In the fisheries context, constructive trusts have been applied in three cases to date, two cases involving partnership disputes and one involving the lease of a fishing licence.  The first, and most analytical case is the Wa Yas  [1993] F.C.J. 909 (F.C.A.) affirming [1993]1 F.C. 36. This case involved an alleged partnership arrangement whereby the plaintiff provided a substantial amount of labour and material to rebuild an old commercial dragger owned by an acquaintance and written off for insurance purposes as a constructive total loss.  The evidence led at trial and accepted by the trial judge was that the plaintiff performed the work and supplied the materials in the expectation that he would eventually own 50 per cent of the vessel and its fishing licences and jointly operate the fishing vessel and share in its fishing revenues.  Although the court held that the partnership arrangement was too vague to be enforced, it granted an award to the plaintiff based on quantum meruit.  This is the equitable doctrine that one who benefits from the labour and materials of another should not be unjustly enriched thereby.  In addition to the monetary award based upon quantum meruit, the court also granted the plaintiff a constructive trust over the vessel’s fishing licences. In doing so, it said as follows:

 

It is clear that the value of the “Wa Yas” without the fishing licenses is not high.  Also, from the evidence, it is clear that there is reason to be concerned that the defendant, in the absence of some restraint, might sell the licenses or transfer the licences from the vessel prior to any supervised or judicial sale of the vessel.  It is also clear that there is reason to think that, in the absence of a trust attaching to the licences, . . . [the defendant] . . . might be in, or place himself in a position where his is unable to satisfy any judgment which . . . [the plaintiff] . . . obtains against him.  In the circumstances, it is clear the requirements for the declaration of a constructive trust exist and I am persuaded that a declaration of a constructive trust is an appropriate remedy in the circumstances of this case.

 

Another partnership type case where a constructive trust was imposed is Cabot v. Hicks [1999] N.J. 69 (Nfld. S.C.).  This case involved a fairly common arrangement whereby an established fisherman advanced the funds and organizational skills for the purchase and outfitting of a fish boat to be operated by his former deckhand.  After advances plus interest were repaid from fishing profits, both parties were to have an equal partnership interest in the fishing vessel and its licences.  Since fishing regulations prevented the licences from being held in the name of anyone other than an individual fisherman, the licence and boat were placed in the name of the former deckhand.  As a result of the untimely death of the former deckhand and the lack of any written partnership agreement, the fisherman who advanced the funds found himself having to sue the deceased’s estate in order to protect his interest in the fishing licences.  After reviewing all of the evidence, the Newfoundland Supreme Court granted the fisherman who advanced the funds a constructive trust over the fishing licence and the proceeds of its sale on the “principles explicit in the concepts of constructive trust and unjust enrichment” (para. 42).

  

A more recent non-partnership case involving the imposition of a constructive trust over a fishing licence is Baines v. Deluney [2002] N.J. 48 (Nfld. S.C.). This case involved the issue of whether or not a shrimp licence transferred to a fisherman was transferred for the purpose of a sale or the purpose of a long-term lease.  After reviewing all of the evidence, the court concluded that the transfer was for the purpose of a lease and not a sale.  It then imposed a constructive trust on the fishing licence and ordered that the licence be transferred back.  In imposing the constructive trust, the court adopted the following quote from a decision of the Supreme Court of Canada:  “a constructive trust is the formula through which the conscience of equity finds expression.  When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee.”

 

As can be seen from the cases described above, the legal nature of a fishing licence depends to a large extent upon whether one is involved in a dispute with D.F.O. or a dispute between private individuals.  If one is involved in a dispute between private individuals, the courts are much more likely to treat licences like property.

 

Brad Caldwell is a Vancouver based lawyer and former fisherman whose practice is primarily devoted to fisheries, maritime and insurance matters. 

 

This article was published in the July 2002 issue of Fisherman Life magazine (Vancouver, B.C.: Anchor Publishing Ltd.).