D’Eon Fisheries Ltd. (Re) v.

In Fish Cases, Fisheries Practice on (Updated )

This case involved a borrower that granted a number of Personal Property Security Act ("PPSA") interests under the Nova Scotia PPSA Act over its enterprise allocation of silver hake. Two of the PPSA security holders had registered their security interests as follows:

"all of the debtor’s rights, title and interest of every kind which the debtor has in, to or under a fishing license, more particularly described as ground fish license number 304715 issued by the Minister of Fisheries and Oceans and any books, records or documents related to such license"

These registrations were held by the trustee in bankruptcy to be invalid because the financing statements did not include a description of the quota by item or kind and consequently were not perfected as against third parties.

Upon appeal to the Nova Scotia Supreme Court, the appellants argued that since a quota is usually transferred along with a license in the event of an application for transfer of the license, a financing statement describing the collateral as "all rights, title and interest of ever kind into and under a fishing license" should be interpreted to include a quota that is automatically transferred with the license. However, this argument was rejected and the decision of the trustee in bankruptcy was upheld for the following reasons:

1)The hake fishery in question was a quota based fishery where quota and licenses were administered separately by the Department of Fisheries;

2) There was a separate commercial market for hake licenses and quotas;

3) The hake quota was transferable independently of the license to which it has been assigned;

4) Commercial practice did not support the applicant’s arguments as two of the applicant’s other creditors separately described the license and quota in their financing statements;

5 It was "arguably ‘unreasonable and unrealistic’ to expect an interested party to ignore the specific word ‘license’ and to infer there may be additional collateral,such as a fishing quota,subject to the security agreement" (para 47);

6) There was no reference to the quota by item or kind or by reference to intangibles; and

7) The description was seriously misleading in that it would give not reason for a reasonable searcher to conclude that quota was included (para 58).

Upon Appeal, the decision was reversed and the validity of the security upheld based upon the following facts:

1)The applicable regulations do not use the word "quota";
2)There can be no participation in a fishery without a licence;
3)The regulations provide that licences can specify conditions;
4)Conditions can specify quantity and species that can be fished pursuant to the licence;
5)Quota is attached as a condition of the licence;
6)When the trustee in bankruptcy transferred the licence, no document other than the one transfer document was required to transfer both the licence and quota.

Based upon these facts the court concluded "[b]ecause the quota is attached as a condition of D’Eon’s licence, I am satisfied that reference to the licence in the financing statement as registered was sufficient to include the quota as it existed at the time the security was given."

Editor’s Note: In this particular case for the licence in question, one transfer form transferred all of the quota when the licence transferred. However, one should not assume that the transfer rules are the same for all licences.