SUPREME
COURT OF CANADA
Citation:
Saulnier v. Royal Bank of Canada,
[2008] 3
S.C.R. 166, 2008 SCC 58
|
Date: 20081024
Docket: 31622
|
Between:
Benoit
Joseph Saulnier and
Bingo
Queen Fisheries Limited
Appellants
and
Royal
Bank of Canada, WBLI Inc., in its
capacity
as receiver of Benoit Joseph Saulnier
and
Bingo Queen Fisheries Limited, and
Goodman
Rosen Inc., in its capacity as Trustee in
bankruptcy
of Benoit Joseph Saulnier
Respondents
‑ and ‑
Attorney
General of Canada, Seafood
Producers
Association of Nova Scotia, Groundfish
Enterprise
Allocation Council, BC Seafood Alliance,
Canadian
Association of Prawn Producers
and
Fisheries Council of Canada
Interveners
Coram: McLachlin C.J. and Bastarache,* Binnie, LeBel,
Deschamps, Fish, Abella, Charron and Rothstein JJ.
Reasons for
Judgment:
(paras. 1 to 53)
|
Binnie J. (McLachlin C.J. and
LeBel, Deschamps, Fish, Abella, Charron and Rothstein JJ. concurring)
|
* Bastarache J. took no part in
the judgment.
______________________________
Saulnier v.
Royal Bank of Canada, [2008] 3 S.C.R. 166, 2008 SCC 58
Benoit Joseph
Saulnier and
Bingo Queen
Fisheries Limited Appellants
v.
Royal Bank of
Canada, WBLI Inc., in its
capacity as
Receiver of Benoit Joseph Saulnier
and Bingo
Queen Fisheries Limited, and
Goodman Rosen
Inc., in its capacity as Trustee in
bankruptcy of
Benoit Joseph Saulnier Respondents
and
Attorney
General of Canada, Seafood
Producers
Association of Nova Scotia, Groundfish
Enterprise
Allocation Council, BC Seafood Alliance,
Canadian
Association of Prawn Producers
and Fisheries
Council of Canada Interveners
Indexed
as: Saulnier v. Royal Bank of Canada
Neutral
citation: 2008 SCC 58.
File
No.: 31622.
2008: January 23; 2008: October 24.
Present: McLachlin
C.J. and Bastarache, Binnie, LeBel, Deschamps,
Fish, Abella, Charron and Rothstein JJ.
on appeal from
the court of appeal for nova scotia court of appeal
Bankruptcy and insolvency — Property — Commercial fishing licences —
Fisher signing general security agreement with bank — Fisher subsequently
making assignment in bankruptcy — Whether fisher’s commercial fishing licences
constitute “property” within scope of bankruptcy and insolvency legislation and
within scope of personal property security legislation — Bankruptcy and
Insolvency Act, R.S.C. 1985, c. B‑3, s. 2 “property” — Personal
Property Security Act, S.N.S. 1995‑96, c. 13, s. 2(w), (ad).
S holds four fishing licences. In order to finance his fishing
business, he signed a General Security Agreement (“GSA”) with a bank, as well
as a guarantee for the debts of his company. The company entered into a
parallel GSA. The GSAs gave the bank a security interest in “all
. . . present and after acquired personal property including
. . . Intangibles . . . and in all proceeds and renewals
thereof”. In 2004, the fishing business faltered and S made an assignment in
bankruptcy. The following year, the receiver and the trustee in bankruptcy
signed an agreement to sell the four licences and other assets to a third party
for $630,000, but S refused to sign the necessary documents. The trustee in
bankruptcy and the bank brought an application for declaratory relief. S
claimed that the commercial fishing licences did not constitute “property”
available to a trustee under the federal Bankruptcy and Insolvency Act
(“BIA ”), or to a creditor who has registered a GSA under the Nova Scotia
Personal Property Security Act (“PPSA”). For different reasons,
both the trial judge and the Court of Appeal rejected this position.
Held: The appeal should be dismissed.
The task in this case is to interpret the definitions of “property”
in s. 2 of the BIA and of “personal property” in s. 2 of the PPSA
in a purposeful way having regard to their entire context, in their grammatical
and ordinary sense harmoniously with the scheme of the Act, the object of the
Act, and the intention of Parliament. A fishing licence is unquestionably a
major commercial asset. The holder of such a licence, issued at the discretion
of the Minister of Fisheries and Oceans under s. 7(1) of the Fisheries
Act , obtains a good deal more than merely permission to do that which would
otherwise be unlawful. A s. 7(1) licence confers to the holder a right to
engage in an exclusive fishery under the conditions imposed by the licence, and
a proprietary right in the fish harvested and the earnings from their sale.
The subject matter of the licence, coupled with a proprietary interest in the
fish caught pursuant to its terms, bears a reasonable analogy to a common law profit
à prendre which is undeniably a property right. While these elements of
the licence do not wholly correspond to the full range of rights necessary to
characterize something as “property” at common law, the issue is whether they
are sufficient to qualify the “bundle of rights” conferred on S as property for
the purposes of the BIA and PPSA. [16] [23] [28] [34] [43]
In an industry where holding one of a very restricted number of
licences is a condition precedent to participation, the licence unlocks the value
in the fishers’ other marine assets. While “commercial realities” cannot
legitimate wishful thinking about the notion of “property” in the BIA
and the PPSA, these statutes are largely commercial instruments which
should be interpreted in a way best suited to enable them to accomplish their
respective commercial purposes. [14] [42]
The BIA is intended to achieve certain objectives in the
event of a bankruptcy which require, in general, that non‑exempt assets
be made available to creditors. The s. 2 definition of “property” in the BIA
should be construed accordingly to include a s. 7(1) licence. Parliament
unambiguously signalled an intention to sweep up a variety of assets of the
bankrupt not normally considered “property” at common law, and this intention
must be respected if the purposes of the BIA are to be achieved. It is
important to look at the substance of what is 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 regulations. While
it is true that the proprietary interest in the fish is contingent on the fish
first being caught, the existence of that contingency is contemplated in the BIA
definition and is no more fatal to the licence’s proprietary status for BIA
purposes than is the case with an equivalent contingency arising under a profit
à prendre. It follows that the trustee was entitled to require S to
execute the appropriate documentation to obtain a transfer of the fishing
licences to the third party purchaser. [44] [46‑47] [49]
A holding that a fishing licence is property in the hands of the
holder for limited statutory purposes does not fetter the Minister’s discretion
under the Fisheries Act to issue, renew or cancel a fishing licence,
according to the exigencies of the management of the fisheries. [48]
The fishing licence is also “personal property” within the meaning
of s. 2 of the PPSA. The definition of “intangible” in that
section includes an interest created by statute having the characteristics of a
licence coupled with an interest at common law. The grant by the Minister of a
licence, coupled with a proprietary interest in the fish caught, is thus
sufficient to satisfy the PPSA definition. The registration is
therefore valid to include the s. 7(1) licence and, in the absence of any
other PPSA defence, the bank is entitled to proceed with its PPSA
remedies. [51‑52]
Cases Cited
Distinguished: Re National Trust Co.
and Bouckhuyt (1987), 61 O.R. (2d) 640; referred
to: St. Anthony Seafoods Limited Partnership v. Newfoundland and
Labrador (Minister of Fisheries and Aquaculture) (2004), 245 D.L.R. (4th)
597, 2004 NLCA 59; Comeau’s Sea Foods Ltd. v. Canada (Minister of Fisheries
and Oceans), [1997] 1 S.C.R. 12; Jenkins, Re (1997), 32 C.B.R. (4th)
262; Townsend, Re (2002), 32 C.B.R. (4th) 318; Husky Oil Operations
Ltd. v. Minister of National Revenue, [1995] 3 S.C.R. 453; C.I.B.C. v.
Marathon Realty Co., [1987] 5 W.W.R. 236; Credit Suisse Canada v. 1133
Yonge Street Holdings Ltd. (1998), 41 O.R. (3d) 632; Noël (Syndic) (Re),
[1994] Q.J. No. 978 (QL); Canadian Imperial Bank of Commerce v.
Hallahan (1990), 69 D.L.R. (4th) 449; Bank of Montreal v. Bale
(1992), 4 P.P.S.A.C. (2d) 114; The Queen in Right of British Columbia v.
Tener, [1985] 1 S.C.R. 533; Waryk v. Bank of Montreal (1991), 85
D.L.R. (4th) 514; British Columbia Packers Ltd. v. Sparrow, [1989] 4
C.N.L.R. 63; Buston v. Canada, [1993] 2 C.T.C. 2720; Kelly v. Kelly
(1990), 92 A.L.R. 74; Pennington v. McGovern (1987), 45 S.A.S.R. 27; Harper
v. Minister for Sea Fisheries (1989), 168 C.L.R. 314; Sugarman (in
trust) v. Duca Community Credit Union Ltd. (1999), 44 O.R. (3d) 257; Foster
(Re) (1992), 89 D.L.R. (4th) 555; Re Rae, [1995] B.C.C. 102; Joliffe
v. The Queen, [1986] 1 F.C. 511; Bennett, Re (1988), 67 C.B.R.
(N.S.) 314; Ward (Bankrupt), Re (2000), 229 N.B.R. (2d) 121; Dugas,
Re (2004), 50 C.B.R. (4th) 200, 2004 NBQB 200; Saskatoon Auction
Mart Ltd. v. Finesse Holsteins (1992), 4 P.P.S.A.C. (2d) 67; G. Slocombe
& Associates Inc. v. Gold River Lodges Ltd. (2001), 2 P.P.S.A.C. (3d)
324, 2001 BCSC 840; Re Celtic Extraction Ltd., [2000] 2 W.L.R. 991; Swift
v. Dairywise Farms Ltd., [2000] 1 W.L.R. 1177; Veffer v. Canada
(Minister of Foreign Affairs), [2008] 1 F.C.R. 641, 2007 FCA 247.
Statutes and Regulations Cited
Bankruptcy and Insolvency
Act, R.S.C. 1985, c. B‑3, ss. 2
“property”, 67(1).
Fisheries Act, R.S.C.
1985, c. F‑14, ss. 7(1) , 9 .
Fishery (General) Regulations, SOR/93‑53, ss. 2 “document”, 16.
Personal Property Security Act, S.N.S. 1995‑96, c. 13, ss. 2(w), (ad).
Authors Cited
Canada. Fisheries and Oceans. Commercial
Fisheries Licensing Policy for Eastern Canada, 1996. Ottawa: Minister of
Supply and Services, 1996.
Honoré, A. M. “Ownership”, in A. G. Guest, ed., Oxford
Essays in Jurisprudence: A Collaborative Work. London: Oxford University
Press, 1961.
Johnson, Tom. “Security Interests in Discretionary
Licences Under the Ontario Personal Property Security Act”
(1993), 8 B.F.L.R. 123.
Megarry, Robert, and H. W. R. Wade. The Law of
Real Property, 4th ed. London: Sweet & Maxwell, 1975.
Mossman, Mary Jane, and William F. Flanagan, Property
Law: Cases and Commentary, 2nd ed. Toronto: Emond Montgomery, 2004.
Sullivan, Ruth. Sullivan and Driedger on the
Construction of Statutes, 4th ed. Markham, Ont.: Butterworths, 2002.
Telfer, Thomas G. W. “Statutory Licences and the
Search for Property: The End of the Imbroglio?” (2007), 45 Can. Bus. L.J.
224.
Ziegel, Jacob S. “Regulated Licences and the
OPPSA: No End in Sight to the Judicial Imbroglio” (1998), 30 Can. Bus. L.J.
284.
Ziegel, Jacob S., and David L. Denomme. The
Ontario Personal Property Security Act: Commentary and Analysis. Aurora,
Ont.: Canada Law Book, 1994.
Ziegel, Jacob S., Benjamin Geva and R. C. C.
Cuming. Commercial and Consumer Transactions: Cases, Text and Materials,
3rd ed., vol. III, Secured Transactions in Personal Property, Suretyships
and Insolvency by Jacob S. Ziegel and R. C. C. Cuming. Toronto: Emond
Montgomery, 1995.
Ziff, Bruce. Principles of Property Law, 2nd
ed. Scarborough, Ont.: Carswell, 1996.
APPEAL from a judgment of the Nova Scotia Court of Appeal (Bateman,
Hamilton and Fichaud JJ.A.) (2006), 246 N.S.R. (2d) 239, 780 A.P.R. 239, 271
D.L.R. (4th) 34, 21 B.L.R. (4th) 1, 22 C.B.R. (5th) 38, 10 P.P.S.A.C. (3d) 221,
[2006] N.S.J. No. 307 (QL), 2006 CarswellNS 323, 2006 NSCA 91, affirming
in part a decision of Kennedy C.J.S.C. (2006), 241 N.S.R. (2d) 96, 767 A.P.R.
96, 17 C.B.R. (5th) 182, [2006] N.S.J. No. 38 (QL), 2006 CarswellNS 41,
2006 NSSC 34. Appeal dismissed.
Andrew S. Nickerson, Q.C.,
for the appellants.
Carl A. Holm, Q.C.,
and Christian Weisenburger, for the respondents.
Peter M. Southey and Christine
Mohr, for the intervener the Attorney General of Canada.
Richard F. Southcott and Andrea F.
Baldwin, for the interveners the Seafood Producers Association of Nova
Scotia, the Groundfish Enterprise Allocation Council, the BC Seafood Alliance,
the Canadian Association of Prawn Producers and the Fisheries Council of
Canada.
The judgment of the Court was delivered by
[1]
Binnie J. — The question raised by this appeal is whether a commercial fishing
licence, which enables a fisher to engage in a regulated industry where
participation is otherwise prohibited, constitutes “property” available to a
trustee under the federal Bankruptcy and Insolvency Act, R.S.C. 1985, c.
B-3 (“BIA ”), or a creditor who has registered a General Security
Agreement (“GSA”) under the Nova Scotia Personal Property Security Act,
S.N.S. 1995-96, c. 13 (“PPSA”).
[2] The
appellant, a bankrupt commercial fisherman, and his wholly owned company, the
appellant Bingo Queen Fisheries Limited, say that a fishing licence is merely a
“privilege” to do that which would otherwise be illegal. As such, it does not
pass to the respondent Royal Bank under the GSA which the appellants signed,
nor to the respondent trustee in bankruptcy. In the result, they say, the
appellant Saulnier, who holds the four fishing licences in question, is
entitled to carry on fishing despite the bankruptcy, leaving the creditors to
fight over the remaining assets. Without the licences the assets do not come
close to covering the liabilities.
[3] The
appellants were unsuccessful in the courts of Nova Scotia. The trial judge
based his decision on “commercial reality”. The Nova Scotia Court of Appeal
agreed in the result but declined to base its decision on “commercial
reality”. Instead it looked to the rights acquired by the holder of a fishing
licence to the earnings from the catch, and to the administrative law
principles which the court felt would govern the exercise of the Minister’s
discretion in any application for renewal or transfer of the licence under the
federal Fishery (General) Regulations, SOR/93-53 (“Regulations”).
Collectively, in its opinion, the components of this “bundle of rights” invested
the licence holder with property-like rights sufficient to bring the licences
within the bankruptcy regime and the PPSA.
[4] For
different reasons, and on a more limited basis, I also agree that the appeal
must be dismissed.
I. Facts
[5] The
appellant Saulnier holds four fishing licences (lobster, herring, swordfish and
mackerel). Like most fishers, he required loans to finance his business.
Accordingly, in April 1999, he signed a GSA with the Royal Bank. In January
2003, he signed a guarantee (limited to $215,000) to the Royal Bank for the
debts of the appellant Bingo Queen, a company of which he was the sole owner.
At that time, Bingo Queen also entered into a GSA. The standard form GSA gave
the Bank a security interest in: “all . . . present and after acquired personal
property including . . . Intangibles . . . and in all proceeds and renewals
thereof”. The GSA also specified that the term “intangible” would be
interpreted according to its definition in the PPSA. The GSA
contemplated a listing of specific property in Schedule C but in the case of
both GSAs in question Schedule C was left blank.
[6] In 2004,
the appellants’ fishing business faltered. As of July 6, Mr. Saulnier owed the
Bank $120,449, and Bingo Queen owed $177,282. On July 8, Saulnier made an
assignment in bankruptcy. His Statement of Affairs under the BIA showed
liabilities of $400,330, of which about $250,000 was owed to the Royal Bank.
The trial judge found that according to the evidence, Saulnier’s four fishing
licences had a market value in excess of $600,000. This amount, if available
to creditors, would be sufficient to discharge all debts and provide a surplus.
[7] On
November 18, 2004, four months after the bankruptcy, Saulnier purported to
lease his lobster licence to Horizon Fisheries Limited, whose principal owner
was his common law spouse. In March 2005, the receiver and the trustee in
bankruptcy signed an agreement to sell Saulnier’s fishing licences and other
assets to a third party for $630,000 (the sale was conditional on the trustee
being able to effect a transfer of the licences). Saulnier refused to sign the
necessary documents. The trustee in bankruptcy and the Royal Bank brought the
present application for declaratory relief.
II. Relevant Statutory
Provisions
[8]
Fisheries Act, R.S.C. 1985, c. F-14
7. (1) Subject to subsection (2), the Minister may, in his
absolute discretion, wherever the exclusive right of fishing does not already
exist by law, issue or authorize to be issued leases and licences for fisheries
or fishing, wherever situated or carried on.
.
. .
9. The Minister may suspend or cancel any lease or licence
issued under the authority of this Act, if
(a)
the Minister has ascertained that the operations under the lease or licence
were not conducted in conformity with its provisions; and
(b) no
proceedings under this Act have been commenced with respect to the operations
under the lease or licence.
Fishery (General) Regulations,
SOR/93‑53
2. . . .
“document” means a licence, fisher’s registration card or vessel
registration card that grants a legal privilege to engage in fishing or any
other activity related to fishing and fisheries;
. . .
16. (1) A document is the property of the Crown and is not
transferable.
(2) The issuance of a document of any type to any person does not
imply or confer any future right or privilege for that person to be issued a
document of the same type or any other type.
Bankruptcy and Insolvency Act,
R.S.C. 1985, c. B‑3
2. . . .
“property” means any type of property, whether situated in Canada or
elsewhere, and includes money, goods, things in action, land and every
description of property, whether real or personal, legal or equitable, as well
as obligations, easements and every description of estate, interest and profit,
present or future, vested or contingent, in, arising out of or incident to
property;
. . .
67. (1) The property of a bankrupt divisible among his
creditors shall not comprise
(a)
property held by the bankrupt in trust for any other person,
(b)
any property that as against the bankrupt is exempt from execution or seizure
under any laws applicable in the province within which the property is situated
and within which the bankrupt resides, or
(b.1)
such goods and services tax credit payments and prescribed payments relating to
the essential needs of an individual as are made in prescribed circumstances
and are not property referred to in paragraph (a) or (b),
but it shall
comprise
(c)
all property wherever situated of the bankrupt at the date of his bankruptcy or
that may be acquired by or devolve on him before his discharge, and
(d)
such powers in or over or in respect of the property as might have been
exercised by the bankrupt for his own benefit.
Personal Property Security Act,
S.N.S. 1995‑96, c. 13
2. In
this Act,
. . .
(w) “intangible” means personal property that is not goods, a document
of title, chattel paper, a security, an instrument or money;
.
. .
(ad) “personal property” means goods, a document of
title, chattel paper, a security, an instrument, money or an intangible;
III. Judicial
History
A. Supreme
Court of Nova Scotia (2006), 241 N.S.R. (2d) 96, 2006 NSSC 34
[9]
Kennedy C.J.S.C. found that “the fair and correct approach is to
characterize the federal fishing licences based on the reality of the
commercial arena” (para. 49). He added that “[t]o accept the argument . . .
that there can be no property in these licences in the hands of the holder,
because of ministerial control would . . . foster an unrealistic legal
condition based on an historic definition of property that ignores what is
actually happening in the commercial world that the law must serve” (para.
53). In his view, the bundle of rights conferred by the licences “constitute
marketable property capable of providing security” (para. 54) and also
“property for purposes of the BIA ” (para. 57).
B. Nova Scotia Court of Appeal (Bateman,
Hamilton and Fichaud JJ.A.) (2006), 246 N.S.R. (2d) 239, 2006 NSCA 91
[10] Fichaud
J.A., writing for the court, found that while commercial reality and the market
value attached to licences “may be a determinant in the accounting or appraisal
contexts” (para. 17), the legal issue should be determined with reference to
the definitions of “property” and “personal property” in the BIA and the
PPSA.
[11] Based
on his consideration of ss. 2 and 16(1) of the Regulations, he concluded
that the licence itself is the property of the Crown, and not of the holder.
However, “during the term of a license, a licensee has a beneficial interest in
the earnings from use of the license. That interest, and the right to those
earnings, pass to the trustee in bankruptcy of the license holder” (para. 38).
An important issue, in his view, was whether Mr. Saulnier had any rights
relating to the renewal or reissuance of his licences, and whether these rights
pass to the trustee. He considered it important that the holder of a fishing
licence not only had the right to request a renewal but a right not to be
arbitrarily denied it. In these circumstances
[t]he license holder has a legally recognized right — limited though it
may be — that constitutes intangible personal property. . . . The security holder
or trustee in bankruptcy takes the license holder’s limited legal right or
beneficial interest. The security holder or trustee takes [it] subject to all
the risks of non-renewal that applied to the license holder — i.e. non-renewal
on grounds that are not arbitrary. This ensures that the interest of the
security holder or trustee in bankruptcy does not degrade the regulatory scheme
of the [fisheries] legislation . . . . [para. 49]
[12] Fichaud
J.A. cited cases in which bad-faith ministerial decisions had given rise to
damages or had been judicially reviewed by the courts including St. Anthony
Seafoods Limited Partnership v. Newfoundland and Labrador (Minister of
Fisheries and Aquaculture) (2004), 245 D.L.R. (4th) 597, 2004 NLCA 59. On
the strength of these decisions, he found that “[a] legal right to damages or
to set aside a ministerial decision is, in my view, intangible personal
property under the broad definition in s. 2 of the BIA ” (para. 52).
Moreover, while “[t]he PPSA’s framework to define ‘intangible’ is less
substantial than in the BIA ”, the result concerning the fishing licences
is the same (para. 61). The holder’s rights in the fishing licences are also
personal property (“intangibles”) for the purposes of the PPSA, in his
view.
IV. Analysis
[13] 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. Financial institutions looking for readily marketable loan collateral
want to snap up licences issued under the federal Regulations, which in
the case of the lobster fishery can have a dockside value that fluctuates up to
a half a million dollars or more. Fishers want to offer as much collateral as
they can to obtain the loans needed to acquire the equipment to enable them to
put to sea.
[14] The
Minister’s claim to more or less unfettered discretion to renew or not to renew
fishing licences each year is based on the legislation as interpreted in Comeau’s
Sea Foods Ltd. v. Canada (Minister of Fisheries and Oceans), [1997] 1
S.C.R. 12. In that case, Major J. wrote for the Court:
Canada’s fisheries are a “common property resource”, belonging to all the
people of Canada. Under the Fisheries Act , it is the Minister’s duty to
manage, conserve and develop the fishery on behalf of Canadians in the public
interest (s. 43 ). Licensing is a tool in the arsenal of powers available to
the Minister under the Fisheries Act to manage fisheries.
[para. 37]
Nevertheless,
the fact is that the stability of the fishing industry depends on the
Minister’s predictable renewal of such licences year after year. Few fishers
expect to see their loans paid off with the proceeds of a single year’s catch.
In an industry where holding one of a very restricted number of licences is a
condition precedent to participation, the licence unlocks the value in the
fishers’ other marine assets.
[15] Yet
the appellants are correct to say that just because a “right” or “power” to
fish has commercial value, it does not follow that licences also constitute
property within the scope of the BIA or PPSA. Earlier trial
level decisions in Nova Scotia had held that fishing licences were not property
and were not claimable by the trustee in bankruptcy. See e.g. Jenkins, Re
(1997), 32 C.B.R. (4th) 262 (N.S.S.C.), and Townsend, Re (2002), 32
C.B.R. (4th) 318 (N.S.S.C.). We cannot wish away the statutory language,
however, much practical sense is reflected in the result reached by the courts
below.
A. A
Question of Statutory Interpretation
[16] The
questions before the Court essentially raise a dispute about statutory
interpretation. We are not concerned with the concept of “property” in the
abstract. The notion of “property” is, in any event, a term of some elasticity
that takes its meaning from the context. The task is to interpret the
definitions in the BIA and PPSA in a purposeful way having regard
to “their entire context, in their grammatical and ordinary sense harmoniously
with the scheme of the Act, the object of the Act, and the intention of
Parliament” (R. Sullivan, Sullivan and Driedger on the Construction of
Statutes (4th ed. 2002), at p. 1). Because a fishing licence may not
qualify as “property” for the general purposes of the common law does not mean
that it is also excluded from the reach of the statutes. For particular
purposes Parliament can and does create its own lexicon.
[17] In
determining the scope of the definition of “property” in a statutory context,
it is necessary to have regard to the overall purpose of the BIA ,
which is to regulate the orderly administration of the bankrupt’s affairs,
keeping a balance between the rights of creditors and the desirability of
giving the bankrupt a clean break: Husky Oil Operations Ltd. v. Minister of
National Revenue, [1995] 3 S.C.R. 453, at para. 7. The exemption of
designated property from distribution among creditors under s. 67(1) is to
allow the bankrupt to continue a living pending discharge and, when discharged,
to make a fresh start. Those exemptions do not, it seems to me, bear much
similarity to the proposed “exempting” of a valuable asset such as a commercial
fishing licence. If Saulnier had “sold” his licences prior to discharge the
cash proceeds would, it seems, be after-acquired property that would be divided
amongst his creditors under s. 67(1) (c) of the BIA .
[18] Within
this overall purpose an appropriate interpretation must be given to the
following definition of “property” in s. 2 of the BIA :
“property” means any type of property, whether situated in Canada or
elsewhere, and includes money, goods, things in action, land and every
description of property, whether real or personal, legal or equitable, as well
as obligations, easements and every description of estate, interest and
profit, present or future, vested or contingent, in, arising out of or incident
to property;
[19] The PPSA,
on the other hand, is designed to facilitate the creation of a security
interest 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.
Proceeding
from the premise that all security agreements are designed to accomplish the
same end and that borrowers usually have little bargaining power, the PPSA
prescribes a detailed system for the regulation of default rights and remedies
which is designed to provide consistency and fairness in the enforcement of
security interests.
(J. S. Ziegel, B. Geva and R. C. C. Cuming, Commercial and Consumer
Transactions: Cases, Text and Materials (3rd ed. 1995), vol. III, at p. 18)
To the same
effect see C.I.B.C. v. Marathon Realty Co., [1987] 5 W.W.R. 236 (Sask.
C.A.), at p. 247, and Credit Suisse Canada v. 1133 Yonge Street Holdings
Ltd. (1998), 41 O.R. (3d) 632 (C.A.).
[20] Within
that overall purpose, an interpretation must be given to the somewhat circular
definitions given in s. 2 of the PPSA:
(w) “intangible” means personal property that is not goods, a document
of title, chattel paper, a security, an instrument or money;
.
. .
(ad) “personal property” means goods, a document of
title, chattel paper, a security, an instrument, money or an intangible;
[21] Of
course a creditor/lender who enters into a security agreement that is not
registerable under the PPSA may still have contractual rights against
the borrower. However, the objective of lenders is to achieve priority (or to
know in advance what priority they can achieve) over other claimants.
Otherwise a miscreant could enter into a series of unregistered financing
agreements purporting to use and re-use the same boat and licence as
collateral.
B. The
Interest Conferred by a Fishing Licence
[22] The
fishery is a public resource. The fishing licence permits the holder to
participate for a limited time in its exploitation. The fish, once caught,
become the property of the holder. Accordingly, the fishing licence is more
than a “mere licence” to do that which is otherwise illegal. It is a licence
coupled with a proprietary interest in the harvest from the fishing effort
contingent, of course, on first catching it.
[23] It is
extremely doubtful that a simple licence could itself be considered property at
common law. See generally A. M. Honoré, “Ownership”, in A. G. Guest, ed., Oxford
Essays in Jurisprudence (1961). On the other hand, if not property in the
common law sense, a fishing licence is unquestionably a major commercial
asset.
[24] Successive
Ministers of Fisheries have issued policies underscoring their support for
stability in the fishing industry, which necessitates continuity in the ranks
of licence holders. Despite a policy favouring stability and continuity, the
Minister’s Commercial Fisheries Licensing Policy for Eastern Canada, 1996
seeks to guard against any notion that such licences should be read as
conferring a property interest on licence holders, which could possibly impose
a fetter on the exercise of the Minister’s “absolute discretion” in their
issuance. Thus s. 5(a) of the Licensing Policy states:
A “licence” grants permission to do something which, without such
permission, would be prohibited. As such, a licence confers no property or
other rights which can be legally sold, bartered or bequeathed. Essentially,
it is a privilege to do something, subject to the terms and conditions of the
licence.
The Minister’s
statement of policy expresses a departmental position that has no regulatory
status and which, in the eye of the law, does not add to or subtract from his
“absolute discretion” under s. 7(1) of the Fisheries Act to issue
licences. Nor does this informal policy determine whether the licence can be
construed as “property” for the purposes of the BIA and PPSA.
The reality, as found by the courts below, is that the commercial market
operates justifiably on the assumption that licences can be transferred on
application to the Minister with the consent of the existing licence holder,
that licences will be renewed from year to year, and that the Minister’s policy
will not be changed to the detriment of the existing licence holders. Thus,
despite the Minister’s protestations, the market attributes a high market value
to what might otherwise be seen, as some of the cases put it, as a “transitory
and ephemeral” right.
[25] The
jurisprudence indicates a number of different approaches.
(i) The Traditional “Property” Approach
[26] The
appellants rely on the decision of the Ontario Court of Appeal in Re
National Trust Co. and Bouckhuyt (1987), 61 O.R. (2d) 640. In that case,
the court dismissed the trust company’s claim that a valuable tobacco quota
listed in a chattel mortgage could properly be made the subject of Ontario PPSA
registration. Cory J.A., as he then was, referred to some traditional
indicia of rights of property and concluded that renewal of the tobacco quota
year to year was subject to the “unfettered discretion of the [Tobacco B]oard”
and that the quota itself was “transitory and ephemeral” (pp. 647-48).
Accordingly, the quota did “not constitute intangible personal property as that
term is utilized” in the Ontario PPSA (p. 649). The Quebec Court of
Appeal reached a similar conclusion under the BIA in relation to a
fishing licence in Noël (Syndic) (Re), [1994] Q.J. No. 978 (QL).
[27] The Bouckhuyt
approach has been followed in some of the Ontario PPSA cases; see e.g. Canadian
Imperial Bank of Commerce v. Hallahan (1990), 69 D.L.R. (4th) 449 (Ont.
C.A.), and Bank of Montreal v. Bale (1992), 4 P.P.S.A.C. (2d) 114 (Ont.
C.A.), but it has been criticized as insufficiently sensitive to the particular
context of personal property security legislation, which (so the critics say)
commands a broader concept of intangible property if the purposes of that
legislation are to be achieved. See e.g. J. S. Ziegel and D. L. Denomme, The
Ontario Personal Property Security Act: Commentary and Analysis (1994), at
pp. 41-42. As discussed below, more recent cases have tended to restrict Bouckhuyt
to its facts. Even in the “regulatory cases” the courts now adopt a more
purposeful approach to the definitions in the BIA and in personal
property security legislation, and consider traditional common law notions of
property as less of a stumbling block to recognition of licences and quotas as
“property” for statutory purposes. I agree with this evolution.
[28]
In any event, there is a significant difference between a quota (as in Bouckhuyt)
and a fishing licence, which bears some analogy to a common law profit à
prendre which is undeniably a property right. A profit à prendre
enables the holder to enter onto the land of another to extract some part of
the natural produce, such as crops or game birds (B. Ziff, Principles of
Property Law (2nd ed. 1996), at pp. 333-34; The Queen in Right of
British Columbia v. Tener, [1985] 1 S.C.R. 533; M. J. Mossman and W. F.
Flanagan, Property Law: Cases and Commentary (2nd ed. 2004), at p.
545). Equally, a “profit of piscary” (being a type of profit à prendre)
is recognized as a property right to fish in the privately owned waters of
another.
[29] Fichaud
J.A. in the court below noted numerous cases where it was held that “during the
term of a license the license holder has a beneficial interest to the earnings
from his license” (para. 37). See also: Waryk v. Bank of Montreal
(1991), 85 D.L.R. (4th) 514 (B.C.C.A.), at pp. 521-24; British Columbia
Packers Ltd. v. Sparrow, [1989] 4 C.N.L.R. 63 (B.C.C.A.), at p. 68; Buston
v. Canada, [1993] 2 C.T.C. 2720 (T.C.C.), at pp. 2733-34. This is another
way of expressing substantially the same idea. The earnings flow from the
catch which is lawfully reduced to possession at the time of the catch, as is
the case with a profit à prendre.
[30] Some
analytical comfort may be drawn in this connection from the observations of R.
Megarry and H. W. R. Wade on The Law of Real Property (4th ed. 1975), at
p. 779:
A licence may be coupled with some proprietary interest in other
property. Thus the right to enter another man’s land to hunt and take away the
deer killed, or to enter and cut down a tree and take it away, involves two
things, namely, a licence to enter the land and the grant of an interest (a
profit à prendre) in the deer or tree.
And at p. 822:
A right to
“hawk, hunt, fish and fowl” may thus exist as a profit, for this gives the
right to take creatures living on the soil which, when killed, are capable of
being owned.
(See also Kelly v. Kelly (1990), 92 A.L.R. 74 (H.C.); Pennington
v. McGovern (1987), 45 S.A.S.R. 27 (S.C.).)
[31] The
analogy of a commercial fishing licence to the profit à prendre has
already been noted by the High Court of Australia in Harper v. Minister for
Sea Fisheries (1989), 168 C.L.R. 314. In that case a challenge was made to
the authority of the Tasmanian government to issue a licence to fish for
abalone, inter alia, in the Australian fishing zone beyond the coastal
waters of the state of Tasmania. The facts are far removed from our case, as
is the relevant statutory regime, yet of interest are the observations of
Brennan J. with whom Dawson, Toohey and McHugh JJ. concurred:
A fee paid to obtain such a privilege is analogous to the price of a
profit à prendre; it is a charge for the acquisition of a right akin to property.
Such a fee may be distinguished from a fee exacted for a licence merely to do
some act which is otherwise prohibited (for example, a fee for a licence to
sell liquor) where there is no resource to which a right of access is obtained
by payment of the fee. [p. 335]
[32] The
concurring judgment of Mason C.J., Deane and Gaudron JJ. pointed out that
notwithstanding its resemblance in some respects to a profit à prendre,
the fishing licence is nevertheless a statutory creation:
What was formerly in the public domain is converted into the exclusive
but controlled preserve of those who hold licences. The right of commercial
exploitation of a public resource for personal profit has become a privilege
confined to those who hold commercial licences. This privilege can be compared
to a profit à prendre. In truth, however, it is an entitlement of a new kind
created as part of a system for preserving a limited public natural resource .
. . . [p. 325]
[33] In my
view these observations are helpful. A fishing licence is, no doubt, a
creature of the Fisheries Act and its Regulations. Our Court has
already emphasized the broad scope and discretion of the Minister in relation
to such licences in Comeau’s Sea Foods. Nevertheless, there are
important points of analogy between the fishing licences issued to the
appellant Saulnier and the form of common law property called a profit à
prendre, which may include a profit of piscary. If the question were
whether a fishing licence is a profit à prendre, the answer would
almost certainly be no. But that is not the question. The question before us
is whether the fishing licences thus conceived can satisfy the statutory
definition of the BIA and PPSA, purposefully interpreted.
[34] My
point is simply that the subject matter of the licence (i.e. the right to
participate in a fishery that is exclusive to licence holders) coupled with a
proprietary interest in the fish caught pursuant to its terms, bears a
reasonable analogy to rights traditionally considered at common law to be
proprietary in nature. It is thus reasonably within the contemplation of the
definition of “property” in s. 2 of the BIA , where reference is made to
a “profit, present or future, vested or contingent, in, arising out of
or incident to property”. In this connection the property in question is the
fish harvest.
[35] Of
course, the holder’s rights under a fishing licence are limited in time, place
and the manner of their exercise by the Fisheries Act and Regulations.
To say that the fishing licence is coupled with a proprietary interest
does not encumber the Minister’s discretion with proprietary fetters. The
analogy used for present purposes does not prevail over the legislation. The
licence is no more and no less than is described in the relevant legislation.
Nevertheless, during its lifetime, however fragile, the fishing licence clearly
confers something more than a “mere” permission to do something which is
otherwise illegal.
(ii) The Regulatory Approach
[36] Bouckhuyt
resulted in a line of cases in which licences and quotas were held to be
intangible property (or not) according to the degree of renewal discretion
vested in the issuing authority. In Sugarman (in trust) v. Duca Community
Credit Union Ltd. (1999), 44 O.R. (3d) 257 (C.A.), the court distinguished Bouckhuyt
on the basis that the authority issuing nursing home licences was bound to
grant licences to operators that qualified, with little discretion to refuse,
and an administrative appeal procedure in the event issuance or renewal was
refused. See also Foster (Re) (1992), 89 D.L.R. (4th) 555 (Ont.
Ct. (Gen. Div.)), at pp. 564-65. The Nova Scotia Court of Appeal in the
present case adopted a variant of the “regulatory” approach in holding that a
licence holder’s ability to request a renewal or reissuance of a licence to its
designate, and to resist an arbitrary denial by the Minister, forms part of a
“bundle of rights” which collectively constitute a type of property in which a
security interest can be taken. A somewhat similar approach was taken in the
English case of Re Rae, [1995] B.C.C. 102, where the Court of Chancery
held that a Minister’s stated policy of renewing licences (similar to the
policy in Canada) created what the Minister herself described as an
“entitlement” sufficient to bring the fishing licence into the bankrupt’s
estate. It should be noted, however, that under the English legislation,
unlike the Canadian legislation, a licence is issued “in respect of a named vessel”,
and the court was therefore able to say that the licence was an interest
“incidental to property, namely his vessels” (p. 113).
[37] In my
view, the debate about the extent to which licences are “transitory and
ephemeral” is of limited value. A lease of land for one day or one hour is
undeniably a property interest, as is a lease terminable at pleasure. A third
party may be willing to pay “key money” to take over a shop lease that is soon
to expire in the expectation (reasonable or not) that a renewal will be
forthcoming. Uncertainties of renewal do not detract from the interest
presently possessed by the holder, but nor does an expectation of renewal based
on a Minister’s policy which could change tomorrow, transform a licence into a
property interest.
[38] A
difficulty with the “regulatory approach” is that there are no clear criteria
to determine how much “fetter” on the issuing authority’s discretion is enough
to transform a “mere licence” into some sort of interest sufficient to satisfy
the statutory definitions in the BIA and the PPSA. In Bouckhuyt,
the fetters on the authority issuing tobacco quota were considered too weak,
the discretion too great, to qualify the tobacco quota as Ontario PPSA
“property”. In Sugarman and Foster the “fetters” placed on the
issuing authorities of nursing home licences and taxi licences, respectively,
were thought to be enough to confer a proprietary interest within the terms of
the Ontario PPSA. The regulatory frameworks in all three cases were
different to be sure, but at what point does a licence that does not qualify
under personal property security legislation become transformed into a
qualifying licence? See generally T. Johnson, “Security Interests in
Discretionary Licences Under the Ontario Personal Property Security Act”
(1993), 8 B.F.L.R. 123, at p. 240; J. S. Ziegel, “Regulated Licences
and the OPPSA: No End in Sight to the Judicial Imbroglio” (1998), 30 Can.
Bus. L.J. 284, at p. 284. The cases do not suggest an answer. No doubt
criteria will emerge more clearly as cases that rely on a “regulatory approach”
evolve. In this respect, however, I do not believe the “judicial review”
paradigm offered by the Nova Scotia Court of Appeal in this case is helpful.
The Regulations permit anyone to apply for a fisheries licence
and everyone is entitled to a ministerial decision that complies with
procedural fairness. I cannot agree that these elements are capable, as such,
of constituting a licence “property” in the hands of a holder.
[39] In any
event, I agree with the observation adopted by Major J. in Comeau’s Sea
Foods that he could not find in the fisheries legislation any legal
underpinning for the “vesting” of an interest in a licence “beyond the rights
which it gives for the year in which it was issued” (para. 33). See also Joliffe
v. The Queen, [1986] 1 F.C. 511 (T.D.), at p. 520; Bennett, Re
(1988), 67 C.B.R. (N.S.) 314 (B.C.S.C.); Ward (Bankrupt), Re (2000), 229
N.B.R. (2d) 121 (Q.B.), and Dugas, Re (2004), 50 C.B.R. (4th)
200, 2004 NBQB 200. To the extent the regulatory cases are considered relevant
here they do not assist the appellants, in my opinion. Section 7(1) of the Fisheries
Act says that the Minister’s discretion is “absolute”.
[40] However,
I do not believe the prospect of renewal, whether or not subject to an
“unfettered” discretion, is determinative. For present purposes the appellants
do not have to prove a renewal or even the reasonable prospect of it. The
question under the PPSA is whether the holder (in this case the
appellant Saulnier) had a qualifying interest in the licence either at the
time he entered into a GSA with the Royal Bank in April 1999, or at the
time the Bank sought to realize on Saulnier’s after-acquired property, and the
question under the BIA is whether he had a qualifying interest within
the meaning of that Act when he made an assignment in bankruptcy on July
8, 2004.
(iii) The “Commercial Realities” Approach
[41] This
approach is well illustrated by the trial decision of Kennedy C.J.S.C. in this
case, who put the argument succinctly:
That evidence confirms my understanding, that on the east coast of
Canada fishing licenses, particularly for lobster, are commonly exchanged
between fishermen for a great deal of money.
Fishing vessels of questionable value are traded for small fortunes
because of the licences that are anticipated to come with them.
.
. .
To ignore commercial reality would be to deny
creditors access to something of significant value in the hands of the
bankrupt. That would be both artificial and potentially inequitable. [paras.
51-52 and 58]
Similar views
have been expressed in other licensing contexts: see Saskatoon Auction Mart
Ltd. v. Finesse Holsteins (1992), 4 P.P.S.A.C. (2d) 67 (Sask. Q.B.); G.
Slocombe & Associates Inc. v. Gold River Lodges Ltd. (2001), 2
P.P.S.A.C. (3d) 324, 2001 BCSC 840, at para. 8; and the English cases of Re
Celtic Extraction Ltd., [2000] 2 W.L.R. 991 (C.A.), at p. 1000, and Swift
v. Dairywise Farms Ltd., [2000] 1 W.L.R. 1177 (Ch.).
[42] The
criticism of this approach is that many things that have commercial value do
not constitute property, while the value of some property may be minimal.
There is no necessary connection between proprietary status and commercial
value. See generally T. G. W. Telfer, “Statutory Licences and the Search for
Property: The End of the Imbroglio?” (2007), 45 Can. Bus. L.J. 224, at
p. 238. I agree with the Court of Appeal that “commercial realities” cannot
legitimate wishful thinking about the notion of “property” in the BIA
and the PPSA, although commercial realities provide an appropriate
context in which to interpret the statutory provisions. The BIA and the
PPSA are, after all, largely commercial statutes which should be
interpreted in a way best suited to enable them to accomplish their respective
commercial purposes.
(iv) The Preferred Approach
[43] As
described above, the holder of a s. 7(1) licence acquires a good deal more than
merely permission to do that which would otherwise be unlawful. The holder
acquires the right to engage in an exclusive fishery under the conditions
imposed by the licence and, what is of prime importance, a proprietary right
in the wild fish harvested thereunder, and the earnings from their sale. While
these elements do not wholly correspond to the full range of rights necessary
to characterize something as “property” at common law, the question is whether
(even leaving aside the debate about the prospects of renewal) they are
sufficient to qualify the “bundle of rights” the appellant Saulnier did
possess as property for purposes of the statutes.
(a) Fishing Licences Qualify as Property Within the Scope of
Section 2 of the BIA
[44] For
ease of reference I repeat the relevant part of s. 2 :
“property” means any type of property, whether
situated in Canada or elsewhere, and includes money, goods, things in action,
land and every description of property, whether real or personal, legal or
equitable, as well as obligations, easements and every description of
estate, interest and profit, present or future, vested or
contingent, in, arising out of or incident to property;
The terms of the
definition are very wide. Parliament unambiguously signalled an intention to
sweep up a variety of assets of the bankrupt not normally considered “property”
at common law. This intention should be respected if the purposes of the BIA
are to be achieved.
[45] Reliance
was placed on s. 16 of the Regulations which provides that a fishing
licence is a “document” which is “the property of the Crown and is not
transferable”. From this it was inferred that the licence, in its commercial
dimension, is declared by the Regulations to be a property right in the
hands of the Crown. I think s. 16 merely says that the Regulations
contemplate that the documentation of the licence (as opposed to the
licence itself) is the property of the Crown, in the same way that a Canadian
Passport is declared to be the property of the Crown, not the holder: Veffer
v. Canada (Minister of Foreign Affairs), [2008] 1 F.C.R. 641, 2007 FCA 247,
at para. 6. A fisher whose licence is suspended or revoked cannot refuse the
Minister’s demand for a return of the documentation on the basis the Minister
gave it to him and it is now his property.
[46] 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. As
noted earlier, the BIA is intended to fulfill certain objectives in the
event of a bankruptcy which require, in general, that non-exempt assets be made
available to creditors. The s. 2 definition of property should be construed
accordingly to include a s. 7(1) fishing licence.
[47] It is
true that the proprietary interest in the fish is contingent on the fish first
being caught, but the existence of that contingency is contemplated in the BIA
definition and is no more fatal to the proprietary status for BIA
purposes than is the case with the equivalent contingency arising under a profit
à prendre, which is undeniably a property interest.
[48] Counsel
for the Attorney General of Canada was greatly concerned that a holding that
the fishing licence is property in the hands of the holder even for limited
statutory purposes might be raised in future litigation to fetter the
Minister’s discretion, but I do not think this concern is well founded. The
licence is a creature of the regulatory system. Section 7(1) of the Fisheries
Act speaks of the Minister’s “absolute discretion”. The Minister gives and
the Minister (when acting properly within his jurisdiction under s. 9 of the
Act) can take away, according to the exigencies of his or her management of the
fisheries. The statute defines the nature of the holder’s interest, and this
interest is not expanded by our decision that a fishing licence qualifies for
inclusion as “property” for certain statutory purposes.
[49] It
follows that in my view the trustee was entitled to require the appellant
Saulnier to execute the appropriate documentation to obtain a transfer of the
fishing licences to the third party purchaser.
[50] 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. 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”.
(b) The Fishing Licence Is Also “Personal
Property” Within the Meaning of Section 2 of the PPSA
[51] I
repeat, for convenience, the relevant PPSA definitions:
(w) “intangible” means personal property that is not goods, a document
of title, chattel paper, a security, an instrument or money;
.
. .
(ad) “personal property” means goods, a document of
title, chattel paper, a security, an instrument, money or an intangible;
The definition
of “intangible” simply describes something that otherwise constitutes “personal
property” but is not one of the listed types of tangible personal
property. “Intangible” would include an interest created by statute having the
characteristics of a licence coupled with an interest at common law as in the
case of a profit à prendre. Again, to repeat, I do not suggest
that a fishing licence constitutes a profit à prendre at common law, for
clearly there would be numerous conceptual objections to such a
characterization. Our concern is exclusively with the extended definitions of
“personal property” in the context of a statute that seeks to facilitate
financing by borrowers and the protection of creditors. In my view the grant by
the Fisheries and Oceans Minister of a licence coupled with a proprietary
interest as described above is sufficient to satisfy the PPSA
definition.
[52] In
this respect, the registration is therefore valid to include the s. 7(1)
fishing licence and, in the absence of any other PPSA defence, the
respondent bank is entitled to proceed with its PPSA remedies.
V. Disposition
[53] For
these reasons I would uphold the result of the decision of the courts below and
dismiss the appeal with costs in this Court to the respondents.
Appeal dismissed with costs.
Solicitors for the appellants: Nickerson Jacquard,
Yarmouth.
Solicitors for the respondents: Wickwire Holm, Halifax.
Solicitor for the intervener the Attorney General of
Canada: Attorney General of Canada, Toronto.
Solicitors for the interveners the Seafood Producers Association of
Nova Scotia, the Groundfish Enterprise Allocation Council, the BC Seafood
Alliance, the Canadian Association of Prawn Producers and the Fisheries Council
of Canada: Stewart McKelvey, Halifax.
Bastarache J. took no part in the judgment.