Saulnier v. Royal Bank of Canada

Saulnier v. Royal Bank of Canada
Collection
Supreme Court Judgments
Date
2008-10-24
Neutral citation
2008 SCC 58
Report
[2008] 3 SCR 166
Case number
31622
Judges
McLachlin, Beverley; Bastarache, Michel; Binnie, William Ian Corneil; LeBel, Louis; Deschamps, Marie; Fish, Morris J.; Abella, Rosalie Silberman; Charron, Louise; Rothstein, Marshall
On appeal from
Nova Scotia
Subjects
Bankruptcy and insolvency
Notes
SCC Case Information: 31622
Decision Content
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 “me