Saulnier (Bankrupt), Re, (2008) 381 N.R. 1 (SCC)

• Judge: , Binnie, LeBel, Deschamps, Fish, Abella, Charron and Rothstein, JJ.
• Court: Supreme Court (Canada)
• Case Date: October 24, 2008
• Jurisdiction: Canada (Federal)
• Citations: (2008), 381 N.R. 1 (SCC);2008 SCC 58

Saulnier (Bankrupt), Re (2008), 381 N.R. 1 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2008] N.R. TBEd. OC.064

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 (intervenors)

(31622; 2008 SCC 58; 2008 CSC 58)

Indexed As: Saulnier (Bankrupt), Re

Supreme Court of Canada

McLachlin, C.J.C., Bastarache * , Binnie, LeBel, Deschamps, Fish, Abella, Charron and Rothstein, JJ.

October 24, 2008.

Summary:

Saulnier entered into an agreement under the Personal Property Security Act (PPSA) which granted a bank a security interest over all of his present and after acquired personal property. The bank placed Saulnier into receivership. Saulnier made an assignment in bankruptcy. Saulnier held fishing licences granted by the Federal Department of Fisheries and Oceans which could be sold for in excess of $600,000, an amount sufficient to satisfy all of his debt and provide a surplus. The bank, the receiver and the trustee in bankruptcy applied for a declaration that a fishing licence was a form of personal property under the PPSA and therefore was subject to the security agreement. They also sought a finding that such a licence constituted property for purposes of the Bankruptcy and Insolvency Act (BIA) which a receiver/trustee could require a bankrupt to transfer.

The Nova Scotia Supreme Court, In Bankruptcy, in a decision reported at 241 N.S.R.(2d) 96; 767 A.P.R. 96, held that the interest of a holder in a fishing licence issued by the Department of Fisheries and Oceans was intangible personal property which could be charged under a security agreement made pursuant to the PPSA. Further, such licences were property pursuant to the BIA which, in appropriate circumstances, a trustee could require a bankrupt to transfer. Saulnier appealed.

The Nova Scotia Court of Appeal, in a decision reported at 246 N.S.R.(2d) 239; 780 A.P.R. 239, allowed the appeal in part. Neither Saulnier, the trustee, nor the bank had "property" in the fishing licences. Saulnier had a beneficial interest in the earnings from his subsisting fishing licences. That interest passed to the trustee under s. 67(1)(c) of the BIA and, assuming that it was secured by the general security agreement, was personal property under the PPSA. The interest was not "a right to fish" and was subject to the Minister's powers under the Fisheries Act and regulations to regulate or cancel the licences. Saulnier's power to apply for renewal of his licences or reissuance to his designate, coupled with his legal right to resist an arbitrary (or reviewable under the pragmatic and functional approach) denial was property under both ss. 67(1)(c) and 67(1)(d) of the BIA and was personal property under the PPSA. The interests of the trustee and receiver were subject to the Minister's statutory discretion, just as Saulnier's position was subject to that discretion. The trustee was entitled to direct Saulnier to execute the required documentation under s. 158(l) of the BIA. Saulnier obtained leave to appeal and appealed.

The Supreme Court of Canada dismissed the appeal, holding that the fishing licences constituted "property" as defined in the BIA and "personal property" as defined in the PPSA.

* Editor's note: Bastarache, J., took no part in the judgment.

Bankruptcy - Topic 402

Property of bankrupt - General - What constitutes - The Supreme Court of Canada reviewed the commercial realities approach to determining what constituted property for purposes of the Bankruptcy and Insolvency Act (BIA) and provincial personal property security legislation, and in particular the Nova Scotia Personal Property Security Act (PPSA) - The court stated that "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. ... 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." - See paragraphs 41 and 42.

Bankruptcy - Topic 440.7

Property of bankrupt - Particular property - Fishing licences - At issue included whether a commercial fishing licence constituted property available to a trustee under the Bankruptcy and Insolvency Act (BIA) or to a creditor who had registered a general security agreement under the Nova Scotia Personal Property Security Act - The Supreme Court of Canada reviewed the traditional property approach as set out by the Ontario Court of Appeal in National Trust Co. v. Bouckhuyt (1987) - The court stated that "... 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." - See paragraphs 26 and 27.

Bankruptcy - Topic 440.7

Property of bankrupt - Particular property - Fishing licences - At issue was whether a commercial fishing licence issued under s. 7(1) of the Fisheries Act constituted property available to a trustee under the Bankruptcy and Insolvency Act (BIA) or to a creditor who had registered a general security agreement under the Nova Scotia Personal Property Security Act (PPSA) - The Supreme Court of Canada reviewed the Regulatory approach 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 - The court stated that the debate about the extent to which licences were "transitory and ephemeral" was of limited value - A lease of land for one day or one hour was undeniably a property interest, as was a lease terminable at pleasure - Uncertainties of renewal did not detract from the interest presently possessed by the holder - Nor did an expectation of renewal based on a Minister's policy which could change tomorrow, transform a licence into a property interest - A difficulty with the regulatory approach was that there were not yet clear criteria to determine how much "fetter" on the issuing authority's discretion was enough to transform a "mere licence" into some sort of interest sufficient to satisfy the definitions in the BIA and the PPSA - The court agreed that there was no legal underpinning in the fisheries legislation for the vesting of an interest in a licence beyond the rights which it gave for the year in which it was issued - To the extent that the regulatory cases were considered relevant, they did not assist the licence holder here - Section 7(1) provided that the Minister's discretion was "absolute" - However, the prospect of renewal, whether or not subject to an "unfettered" discretion, was determinative - Here, the licence holder did not have to prove a renewal or even the reasonable prospect of it - The question under the PPSA was whether the holder had a qualifying interest in the licence either at the time he entered into the general security agreement or at the time the bank sought to realize on the holder's after-acquired property - The question under the BIA was whether he had a qualifying interest when he made an assignment in bankruptcy - See paragraphs 36 to 40.

Bankruptcy - Topic 440.7

Property of bankrupt - Particular property - Fishing licences - At issue included whether a commercial fishing licence constituted property available to a trustee under the Bankruptcy and Insolvency Act - The bankrupt placed reliance on s. 16 of the Fishery (General) Regulations which provided that a fishing licence was a "document" which was "the property of the Crown and is not transferable" - From this the bankrupt inferred that the licence, in its commercial dimension, had been declared by the Regulations to be a property right in the hands of the Crown - The Supreme Court of Canada held that s. 16 merely stated that the Regulations contemplated that the documentation of the licence (as opposed to the licence itself) was the property of the Crown, in the same way that a Canadian passport was declared to be property of the Crown, not the holder - A fisher whose licence was suspended or revoked could not refuse the Minister's demand for a return of the documentation on the basis that the Minister gave it to the fisher and it now was the fisher's property - See paragraph 45.

Bankruptcy - Topic 440.7

Property of bankrupt - Particular property - Fishing licences - Saulnier entered into an agreement under the Personal Property Security Act which granted a bank a security interest over all of his present and after acquired personal property - The bank placed Saulnier into receivership - Saulnier made an assignment in bankruptcy - Saulnier asserted that his fishing licences issued under s. 7(1) of the Fisheries Act did not constitute property available to the trustee under s. 67(1) under the Bankruptcy and Insolvency Act (BIA) - The BIA defined "property" as including "every description of estate, interest and profit, present or future, vested or contingent, in, arising out of or incident to property" - The Supreme Court of Canada stated that the holder of a s. 7(1) licence acquired a good deal more than merely permission to do that which would otherwise be unlawful - The holder acquired the right to engage in an exclusive fishery under the conditions imposed by the licence and, what was of prime importance, a proprietary right in the wild fish harvested thereunder, and the earnings from their sale - The question was whether these elements were sufficient to qualify the "bundle of rights" that Saulnier possessed as property for purposes of the BIA - The court concluded that the definition of "property" should be construed to include a s. 7(1) licence - Although the proprietary interest in the fish was contingent on the fish being caught, that contingency was contemplated in the definition of "property" and was no more fatal to the proprietary status than was the case with the equivalent contingency arising under a profit à prendre, which was undeniably a property interest - Should the fishing licence expire or be expired, the trustee would have the same right as the original holder of an expired licence to seek its replacement and have the same recourse (or the lack of it) if the request was rejected - See paragraphs 43 to 50.

Fish and Game - Topic 222

Right to fish - Licensing - Nature of licence - At issue was whether a commercial fishing licence issued under s. 7(1) of the Fisheries Act constituted property available to a trustee under the Bankruptcy and Insolvency Act or to a creditor who had registered a general security agreement under the Nova Scotia Personal Property Security Act - The Attorney General of Canada expressed concern that a finding that the fishing licence was property in the hands of the holder, even for limited statutory purposes, might be raised in future litigation to fetter the Minister's discretion - The Supreme Court of Canada stated that "... 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." - See paragraph 48.

Fish and Game - Topic 222

Right to fish - Licensing - Nature of licence - The Supreme Court of Canada stated that "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." - See paragraph 35.

Fish and Game - Topic 223

Right to fish - Licensing - Issuance of licence - [See first Fish and Game - Topic 222 ].

Fish and Game - Topic 224

Right to fish - Licensing - Who owns licence - [See first Fish and Game - Topic 222 ].

Personal Property - Topic 6003

Security interests - General - Personal property defined - [See Bankruptcy - Topic 402 and second Bankruptcy - Topic 440.7 ].

Personal Property - Topic 6003

Security interests - General - Personal property defined - Saulnier entered into an agreement under the Personal Property Security Act (PPSA) which granted a bank a security interest over all of his present and after acquired personal property - The bank placed Saulnier into receivership - Saulnier made an assignment in bankruptcy - Saulnier asserted that his fishing licences issued under s. 7(1) of the Fisheries Act did not constitute "personal property" under the PPSA - The Supreme Court of Canada stated that the holder of a s. 7(1) licence acquired a good deal more than merely permission to do that which would otherwise be unlawful - The holder acquired the right to engage in an exclusive fishery under the conditions imposed by the licence and, what was of prime importance, a proprietary right in the wild fish harvested thereunder, and the earnings from their sale - The question was whether these elements were sufficient to qualify the "bundle of rights" that Saulnier possessed as property for purposes of the PPSA - The PPSA defined personal property as including "an intangible" - The PPSA's definition of "intangible" simply described something that otherwise constituted personal property but was 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 - This was not to suggest that a fishing licence constituted a profit à prendre at common law - The concern was exclusively with the extended definitions of "personal property" in the context of a statute that sought to facilitate financing by borrowers and the protection of creditors - The court concluded that the grant of a s. 7 licence coupled with the property interest satisfied the PPSA's definition - See paragraphs 43, 51 and 52.

Personal Property - Topic 6013

Security interests - General - Intangible personal property - What constitutes - [See Bankruptcy - Topic 402 , second Bankruptcy - Topic 440.7 and second Personal Property - Topic 6003 ].

Cases Noticed:

St. Anthony Seafoods Limited Partnership v. Newfoundland and Labrador (Minister of Fisheries and Aquaculture) (2004), 241 Nfld. & P.E.I.R. 97; 716 A.P.R. 97; 245 D.L.R.(4th) 597; 2004 NLCA 59, refd to. [para. 12].

Comeau's Sea Foods Ltd. v. Canada (Minister of Fisheries and Oceans), [1997] 1 S.C.R. 12; 206 N.R. 363, refd to. [para. 14].

Jenkins, Re (1997), 32 C.B.R.(4th) 262 (N.S.S.C. Registrar), refd to. [para. 15].

Townsend, Re (2002), 32 C.B.R.(4th) 318 (N.S.S.C.), refd to. [para. 15].

Husky Oil Operations v. Minister of National Revenue et al., [1995] 3 S.C.R. 453; 188 N.R. 1; 137 Sask.R. 81; 107 W.A.C. 81, refd to. [para. 17].

Canadian Imperial Bank of Commerce v. Marathon Realty Co., [1987] 5 W.W.R. 236; 57 Sask.R. 88 (C.A.), refd to. [para. 19].

Credit Suisse Canada v. 1133 Yonge Street Holdings Ltd. et al. (1998), 114 O.A.C. 296; 41 O.R.(3d) 632 (C.A.), refd to. [para. 19].

National Trust Co. v. Bouckhuyt (1987), 23 O.A.C. 40; 61 O.R.(2d) 640 (C.A.), consd. [para. 26].

Noel, Re, [1994] Q.J. No. 978 (C.A.), refd to. [para. 26].

Canadian Imperial Bank of Commerce v. Hallahan (1990), 39 O.A.C. 24; 69 D.L.R.(4th) 449 (C.A.), refd to. [para. 27].

Bank of Montreal v. Bale (1992), 4 P.P.S.A.C.(2d) 114 (Ont. C.A.), refd to. [para. 27].

Tener and Tener v. British Columbia, [1985] 1 S.C.R. 533; 59 N.R. 82; 17 D.L.R.(4th) 1, refd to. [para. 28].

Waryk v. Bank of Montreal - see Noel & Lewis Holdings Ltd. (Bankrupt) v. Bank of Montreal.

Noel & Lewis Holdings Ltd. (Bankrupt) v. Bank of Montreal (1991), 6 B.C.A.C. 81; 13 W.A.C. 81; 85 D.L.R.(4th) 514 (C.A.), refd to. [para. 29].

British Columbia Packers Ltd. v. Sparrow, [1989] 4 C.N.L.R. 63 (B.C.C.A.), refd to. [para. 29].

Buston v. Canada, [1993] 2 C.T.C. 2720 (Tax. C.C.), refd to. [para. 29].

Kelly v. Kelly (1990), 92 A.L.R. 74 (H.C.), refd to. [para. 30].

Pennington v. McGovern (1987), 45 S.A.S.R. 27 (S.C.), refd to. [para. 30].

Harper v. Minister of Sea Fisheries, [1989] HCA 47; 168 C.L.R. 314 (Aust. H.C.), refd to. [para. 31].

Sugarman et al. v. Duca Community Credit Union Ltd. (1999), 120 O.A.C. 333; 44 O.R.(3d) 257 (C.A.), refd to. [para. 36].

Foster, Re (1992), 89 D.L.R.(4th) 555 (Ont. Gen. Div.), refd to. [para. 36].

Rae, Re, [1995] B.C.C. 102, refd to. [para. 36].

Joliffe v. Canada, [1986] 1 F.C. 511 (T.D.), refd to. [para. 39].

Bennett, Re (1987), 67 C.B.R.(N.S.) 314 (B.C.S.C.), refd to. [para. 39].

Ward (Bankrupt), Re (2000), 229 N.B.R.(2d) 121; 592 A.P.R. 121 (Q.B. Bktcy.), refd to. [para. 39].

Dugas (Bankrupt), Re, [2004] N.B.R.(2d) Uned. 64; 50 C.B.R.(4th) 200; 2004 NBQB 200 (Bktcy. Reg.), refd to. [para. 39].

Saskatoon Auction Mart Ltd. v. Finesse Holsteins - see Agricultural Credit Corp. of Saskatchewan v. Finesse Holsteins.

Agricultural Credit Corp. of Saskatchewan v. Finesse Holsteins (1992), 4 P.P.S.A.C.(2d) 67; 104 Sask.R. 154 (Q.B.), refd to. [para. 41].

Slocombe (G.) & Associates Inc. et al. v. Gold River Lodges Ltd., [2001] B.C.T.C. 840; 2 P.P.S.A.C.(3d) 324; 2001 BCSC 84, refd to. [para. 42].

Celtic Extraction Ltd., Re, [2000] 2 W.L.R. 991 (C.A.), refd to. [para. 41].

Swift v. Dalrywise Farms Ltd., [2000] 1 W.L.R. 2117 (Ch. Div.), refd to. [para. 41].

Veffer v. Canada (Minister of Foreign Affairs), [2008] 1 F.C.R. 641; 367 N.R. 1; 2007 FCA 247, refd to. [para. 45].

Statutes Noticed:

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, sect. 2, sect. 67(1) [para. 8].

Fisheries Act, R.S.C. 1985, c. F-14, sect. 7(1), sect. 9 [para. 8].

Fisheries Act Regulations (Can.), Fishery (General) Regulations, SOR/93-53, sect. 2 [para. 8]; sect. 16 [paras. 8, 45].

Fishery (General) Regulations - see Fisheries Act Regulations (Can.).

Personal Property Security Act, S.N.S. 1995-96, c. 13, sect. 2 [para. 8].

Authors and Works Noticed:

Canada, Minister of Fisheries and Oceans, Commercial Fisheries Licencing Policy for Eastern Canada (1996), s. 5(a) [para. 24].

Guest, A.G., Oxford Essays in Jurisprudence: A Collaborative Work (1961), generally [para. 23].

Honoré, A.M., Ownership, in Guest, A.G., Oxford Essays in Jurisprudence: A Collaborative Work (1961), generally [para. 23].

Johnson, Tom, Security Interests in Discretionary Licenses under the Ontario Personal Property Security Act (1993), 8 B.F.L.R. 123, p. 240 [para. 38].

Megarry, Robert and Wade, H.W.R., The Law of Real Property (4th Ed. 1975) (2008 Update), pp. 779, 822 [para. 30].

Mossman, Mary Jane, and Flanagan, William F., Property Law: Cases and Commentary (2nd Ed. 2004), p. 545 [para. 28].

Sullivan, Ruth, Sullivan and Driedger on the Construction of Statutes (4th Ed. 2002), p. 1 [para. 16].

Telfer, Thomas G.W., Statutory Licences and the Search for Property: the End of the Imbroglio? (2007), 45 Can. Bus. L.J. 224, p. 238 [para. 42].

Ziegel, Jacob S., and Denomme, David L., The Ontario Personal Security Act: Commentary and Analysis (1994), pp. 40 to 42 [para. 27].

Ziegel, Jacob S., Geva, Benjamin and Cuming, Ronald C.C., Commercial and Consumer Transactions: Cases Text and Materials (3rd Ed. 1995), vol. III, p. 18 [para. 19].

Ziegel, Jacob S., Regulated Licences and the OPPSA: No end in Sight to the Judicial Imbroglio (1998), 30 Can. Bus. L.J. 284, p. 284 [para. 38].

Ziff, Bruce H., Principles of Property Law (2nd Ed. 1996), pp. 333 to 334 [para. 28].

Counsel:

Andrew S. Nickerson, Q.C., for the appellants;

Carl A. Holm, Q.C., and Christian Weisenburger, for the respondents;

Peter Southey and  Christine  Mohr, for the intervenor, Attorney General of Canada;

Richard F. Southcott and Andrea F. Baldwin, for the intervenors, 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.

Solicitors of Record:

Nickerson Jacquard, Yarmouth, Nova Scotia, for the appellants;

Wickwire Holm, Halifax, Nova Scotia, for the respondents;

Attorney General of Canada, Toronto, Ontario, for the intervenor, the Attorney General of Canada;

Stewart McKelvey, Halifax, Nova Scotia, for the intervenors, 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.

This appeal was heard by McLachlin, C.J.C., Bastarache, Binnie, LeBel, Deschamps, Fish, Abella, Charron and Rothstein, JJ., of the Supreme Court of Canada. The judgment of the Supreme Court of Canada was delivered in both official languages by Binnie, J., on October 24, 2008. Bastarache, J., took no part in the judgment.