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Fishing licence is property, says Supreme Court of Canada
By Arnold Ceballos

November 07 2008 issue


Carl Holm, counsel for the Royal Bank and trustee in bankruptcy, says this decision should help fishing operations secure financing. (David Grandy for The Lawyers Weekly)
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The Supreme Court of Canada has held that a commercial fishing licence constitutes “property” that falls within the scope of bankruptcy and insolvency law and Nova Scotia’s personal property security legislation.

Nova Scotia fisherman Benoit Saulnier had argued that his commercial fishing licences merely granted a privilege and were thus not “property” available to a trustee under the federal Bankruptcy and Insolvency Act or to a creditor under Nova Scotia’s Personal Property Security Act (PPSA). The Supreme Court has disagreed, ruling that these valuable assets were available to creditors of Saulnier and his company.

Saulnier holds licences to fish for lobster, herring, swordfish and mackerel. Like most commercial fishers, Saulnier used loans to finance his business, Bingo Queen Fisheries Limited. To secure the loans, he signed a general security agreement with the Royal Bank and a guarantee. Ultimately, his business failed and Saulnier made an assignment in bankruptcy, based on over $400,000 of liabilities.

But Saulnier’s four licences had a substantial commercial value in excess of $600,000. As a result, the receiver and trustee in bankruptcy reached an agreement to sell the licences and other assets to a third party for $630,000, but Saulnier refused to sign the necessary documents. The trustee and the Royal Bank of Canada sought declaratory relief and succeeded at trial and on appeal to the Nova Scotia Court of Appeal. Saulnier then took his case to the Supreme Court of Canada.

“A commercial fisher with a ramshackle boat and a licence to fish is much better off financially than a fisher with a great boat tied up at the wharf with no licence,” wrote Justice Ian Binnie for a unanimous Supreme Court. However, he added that the fact that the licences have commercial value does not necessarily mean that the licences also constitute property. The court doubted that fishing licences could be considered property at common law. Nonetheless, based on an analysis of the statutory language, the court was prepared to find that the licences constituted property for statutory purposes.

“I prefer to look at the substance of what was conferred, namely a licence to participate in the fishery coupled with a proprietary interest in the fish caught according to its terms and subject to the Minister’s regulation,” wrote Justice Binnie. As a result, the definition of property in the Bankruptcy and Insolvency Act should be construed to include fishing licences, according to the court. Such a finding, added Binnie, will not act as a fetter to the minister’s discretion to manage the fishery. In the circumstances, the court ruled that the trustee was entitled to require Saulnier to execute the documentation necessary to transfer the licences to the third party purchaser.

“It may well be that in the course of a bankruptcy the fishing licence will expire, or has already expired. If so, the trustee will have the same right as the original holder of an expired licence to go to the Minister to seek its replacement, and has the same recourse (or the lack of it) if the request is rejected,” wrote Binnie. “The bankrupt can transfer no greater rights than he possesses. The trustee simply steps into the shoes of the appellant Saulnier and takes the licence ‘warts and all’.”

The court also found that the grant of the licence coupled with the proprietary interest was sufficient to satisfy the PPSA definition of intangible property. This entitled the Royal Bank to proceed with its PPSA remedies, according to the court.

The decision reflects a “significant leap in that it permits both trustees and lenders to obtain an interest in the licence,” according to Carl Holm, who represented the bank and trustee. He noted that his clients’ position was supported by seafood associations, which saw the potential benefits for financing their operations. “It permits an independent fisherman running a small enterprise to get financing to purchase a licence,” said Holm, of Wickwire Holm in Halifax. He added that the decision will also benefit larger offshore enterprises, who can add fishing licences to the “package of security that they can offer to a lender.”

Saulnier’s lawyer was surprised at the ruling, which he said takes an “expansive” view that goes beyond the traditionalist approach that viewed licences as a permission to do something. “We took a fairly classical interpretation of the legal principles involved,” said Andrew Nickerson of Nickerson Jacquard in Yarmouth, Nova Scotia. “But the court decided in their wisdom to take a much broader point of view.”

He said that the decision will pose some challenges for the industry, which historically treated the licences differently. “It will be interesting to see what approach the financial industry will take,” said Nickerson, who added that it is also unclear how the Minister of Fisheries and Oceans will treat the ruling.

Reasons:Saulnier v. Royal Bank of Canada, [2008] S.C.J. No. 60.

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