Saulnier v. Royal Bank of Canada

In Fish Cases, Fisheries Practice on (Updated )

This case involved the holder of a lobster licence, a herring licence, a swordfish licence and a mackerel licence, the combined value of which exceeded $600,000. Upon the holder of the licence making an assignment into bankruptcy (after being placed in receivership by the bank), an application was made by the Royal Bank for a declaration that these fishing licences were intangible personal property so as to be encumbered pursuant to a general security agreement granted by the licence holder to the bank under the Nova Scotia Personal Property Security Act (PPSA). Since the value of the licences was sufficient to cover more than just the debt owed to the Bank, an application was also made by the Trustee in Bankruptcy seeking a declaration that the licences were property for the purposes of the Federal Bankruptcy and Insolvency Act (BIA). This would give the Trustee the ability to require the bankrupt to execute a transfer of the licences to a purchaser.

Judicial History

At trial, the court accepted evidence that these licences had a high commercial value, were regularly bought and sold, and sometimes accepted as security by financial institutions. After reviewing authorities including some obiter (non binding comments) of the Ontario Court of Justice as affirmed by the Ontario Court of Appeal in Sugarman v. Duca Community Credit Union (1988), 13 P.P.S.A.C. (2d) 117, affirmed (1999), 44 OR. (3d) 257 (Ont. C.A.), National Trust Co. v. Bouckhuyt (1987), 7 P.P.S.A.C. 273 (Ont. C.A.) and F.A.S. Seafood Producers Ltd. v. Her Majesty the Queen 98 TTC 2034 (digested herein), the Court concluded that "it is not necessary that the holder have the complete power of exclusion [as suggested in Bouckhuyt] to allow those rights to be property in the real and practical context" (para. 48 of trial level decision as quoted at para. 10). On the basis of this conclusion the court declared that the licences were intangible property for the purposes of the PPSA and property for the purposes of the B.I.A. (see 2006 NSSC 34)

Upon appeal, the appeal court rejected the trial judges finding that the licence holder had a property interest in the licence based upon the commercial reality of licences being treated as property. It held that the proper approach was to review the definition sections of both the BIA and PPSA.

With respect to the BIA, the court followed earlier decisions such as Re Bennett (1987), 67 C.B.R. (N.S.) 314 to hold that a licence holder’s interest in earnings from a subsisting licence during its annual term were rights that could be assigned to a trustee in bankruptcy (para 378). With respect to a licence holder’s right to future renewals of a licence, after reviewing a number of authorities that limit the discretion of the Minister of Fisheries to issue licences under s. 7 of the Fisheries Act, the court concluded that the licence holder’s "rights to apply for, and resist an arbitrary denial of, a renewal or reissuance of his license are [intangible] ‘property’ passing to the trustee under each of ss. 67(1)(c) and 67(1)(d) of the BIA.’ (para. 55). Accordingly, under s. 158(1) of the BIA, the licence holder was required to sign documents required by the trustee in bankruptcy to re-designate the licence to the trustee’s designate.

With respect to the PPSA, for similar reasons, the court found that the licence holder’s rights to the fishing licence were intangible property for the purposes of that Act. (see 2006 NSCA 91)

Decision of the Supreme Court of Canada

Upon further appeal to the SCC, the court conducted an analysis of the different approaches taken by the courts to the issue of whether or not a licence is property for the purposes of the BIA and PPSA.

When reviewing the traditional property approach, the court endorsed the movement to restrict Bouckhuyt to its facts and "consider traditional common law notions of property as less of a stumbling block . . ." The court also noted that a licence to fish is similar to a "profit of piscary" (a type of profit a prendre) which could be a type of "profit" referred to in the definition of property in s. 2 of the BIA. (para. 26-35)

When reviewing the regulatory approach, as adopted by the Sugarman case, the court was unable to find sufficient fettering of the Minister’s discretion to convert a fishing licence into a property right. (para. 36-40)

When reviewing the commercial realities approach as adopted by the trial judge in Saulnier, although the court recognized that fishing licences have a commerical value (para. 23-4), it was not prepared to adopt this approach. (para. 41-2)

Preferred Approach

With respect to the BIA, the court noted that the definition of "property" was very broad with the "intention to sweep up a variety of assets of the bankrupt not normally considered ‘property’ at common law". This broad definition includes "any type of property . . . and profit . . . arising out of or incident to property". As such, "a licence to participate in the fishery coupled with a proprietary interest in the fish caught" would fall within the scope of that definition. (para. 43-9)

With respect to the Nova Scotia PPSA, the court noted that its purpose was to "enable holders of personal property to use it as collateral, and to enable lenders to predict accurately the priority of their claims against the assets in question (para. 19). As with the BIA, the court found that the definition of personal property, including intangible personal property, was sufficiently broad so as to include "a licence coupled with an interest at common law" (para. 50).

In response to concerns raised by the Attorney General of Canada, the court rejected the notion that the treatment of a fishing licence as property for the purposes of the BIA and PPSA could be raised in future litigation so as to fetter the Minister’s discretion.

Editor’s notes:

Beware that not all PPSA legislation has the same wording. In September of 2012,an amendment to the British Columbia PPSA was made to allow it to apply to licences. Note, that this likely only has prospecive effect.
See Also: Article dealing with the trial level decision.

For other cases involving the treatment of fishing licences upon bankruptcies see: Dugas (Re Bankruptcy) 2004 NBCA 15 (digested herein); Re Bennet (1988), 67 C.B.R. (NS) 314 (B.C.S.C.); Waryk v. Bank of Montreal (1990) 80 C.B.R. (N.S.) 44 (B.C.S.C.); Caisse Populaire de Shippagan Ltee v. Ward [2000] N.B.J. No. 378 (N.B.Q.B.); Careen v. Fewer & Strathie Ltd. 2003 NLCA 33 (digested herein).