• Commercial Fishing Licences: Chargeable Intangible Property
  • March 2, 2010 | Author: Sandra Vitorovich
  • Law Firm: Aird & Berlis LLP - Toronto Office
  • 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”).

    THE FACTS

    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 BIA.

    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.

    CAUTIONARY NOTE

    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 holds.