A recent decision released by the Supreme Court of Canada (the
"SCC"), Saulnier v. Royal Bank of Canada, 2008
SCC 58 (S.C.C.), revisited an important question to lenders and
creditors: whether a commercial fishing licence constitutes
personal property chargeable by a general security agreement and
property available to a trustee in bankruptcy. The SCC answered
both these questions in the affirmative, finding that the
definition of property in the Bankruptcy and Insolvency
Act (the "BIA") should be construed to include a
licence granted pursuant to section 7(1) of the Fisheries Act and
that this same licence falls within the scope of the definition of
'personal property' for the purposes of the Nova Scotia
Personal Property Security Act (the "PPSA").
Saulnier, a fisher, held four fishing licences. He financed his
fishing business with loans from RBC to himself personally and to
his company, Bingo Queen Fisheries Limited ("Bingo
Queen"). As security, RBC obtained a general security
agreement ("GSA") from each of Saulnier and Bingo Queen.
The GSA's charged all of Saulnier and Bingo Queen's
personal property, including intangibles. In 2004, Saulnier made an
assignment in bankruptcy. The receiver and trustee in bankruptcy
sought to sell the four fishing licences and other assets to a
third party. However, Saulnier refused to sign the documentation
assigning the licences, taking the position that the trustee in
bankruptcy and RBC had no interest in the fishing licences as they
did not constitute property available to a trustee or to a secured
creditor under a GSA. The trustee in bankruptcy and the receiver
brought an application to court to determine the issue.
The Supreme Court's Decision
Saulnier was not successful within the lower courts of Nova
Scotia. At trial, the judge claimed that "commercial
reality" dictated that a commercial fishing licence
constituted "marketable property capable of providing security
... and property for the purposes of the BIA." The Nova Scotia
Court of Appeal upheld this decision, but cited a different line of
reasoning, holding that the rights invested in the holder of a
fishing licence were similar to property-like rights, thus bringing
the licences within the definitions of the BIA and the PPSA. As a
result, Saulnier appealed to the SCC.
Saulnier maintained the position that a fishing licence is a
"mere privilege" to do what would otherwise be illegal.
Thus, the licence should not pass to RBC under a GSA or to a
trustee in bankruptcy. Furthermore, Saulnier put forth the notion
that just because a "power" to fish has commercial value,
it does not immediately follow that licences also constitute
property under the applicable legislation.
While the SCC acknowledged that it did not follow that a licence
should be classified as property based on its commercial value, the
SCC disagreed with Saulnier's claim that a fishing licence was
a "mere privilege." Since a fish becomes the property of
the holder once it is caught, a fishing licence is more than a mere
licence as it gives the user proprietary interest in the harvest
from fishing. The court went on to reason that fishing licences
bear some analogy to a profit a prendre (which is a
property right), as they grant both a proprietary right in the fish
harvest and the fishing licence itself. Accordingly, when looking
at the overall purpose of the BIA and the BIA's broad
definition of property, which includes a "profit... arising
out of or incident on property," the SCC found that the
licences were "property" within the meaning of the
In terms of a fishing licence being considered "personal
property" within the meaning of the PPSA, the court ruled that
as an "intangible," it is included within the definition
of "personal property." An interest created by a statute
that has the characteristics of a licence along with an interest at
common law, such as in the case of a profit a prendre,
fits within the statutory definition of "intangible."
Thus, the licence in conjunction with a proprietary interest
adequately satisfies the requirements of the PPSA.
It should be noted that the SCC did not recognize a
"full" property right in a fishing licence and placed
limitations upon recognition of such a right. For instance, the SCC
noted that a bankrupt is unable to transfer a right which is
greater than that which he himself holds and that a trustee would
be subject to the same renewal procedures as the original holder.
However, the effect of this decision has been lauded as a positive
one for both lenders and fishers, as much of the time a fishing
licence is the only, if not the most valuable, asset a fisher
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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