Backgrounder - Implications of the Saulnier decision for DFO Licensing Policies

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On October 24, 2008, the Supreme Court of Canada rendered its decision in the case of Saulnier v The Royal Bank. The Supreme Court ruled that a fishing licence is considered “property” for the purposes of the Bankruptcy and Insolvency Act, and is considered “personal property” for the purposes of the Nova Scotia Personal Property Security Act. At the same time, the ruling confirmed the Minister’s discretion to issue licences under the Fisheries Act.

In response to the decision, the Department of Fisheries and Oceans (DFO) has developed procedures for working with trustees in bankruptcy and secured creditors and their receivers. These procedures apply to licences issued in all regions of the country for commercial fishing activities.

Bankruptcy

In the case of a bankruptcy, DFO will accept requests respecting licences from a trustee in bankruptcy upon submission of a “certificate of appointment” of trustee in bankruptcy.

DFO’s licensing policy and eligibility criteria continue to apply, and the Minister retains the discretion to approve or deny the request.

Performance of a Security Interest in Canada except Quebec

In the case of performance of a security interest, DFO will provide information and policy advice relating to specific licences subject to a security agreement registered under the appropriate provincial legislation, upon submission of the following information and documents:

• A copy of the Security Agreement and a Search Report of the appropriate provincial registry, and
• Where applicable, a copy of the Notice of Appointment of a Receiver or a copy of the Court Order appointing the Receiver.

In Quebec in the exercise of Hypothecary Rights

In the context of exercise of hypothecary rights, DFO will provide information and policy advice relating to specific licences subject to a deed of hypothec registered under provincial legislation upon submission of the following information and documents:

• A copy of the deed of hypothec and an extract of the provincial register of personal and moveable real rights, and
• A copy of the prior notice to exercise a hypothecary right and a copy of the proof of service to the licence holder.

In all provinces

In the case of performance of a security interest (in Canada except Quebec) or exercise of hypothecary rights (in Quebec), DFO will accept requests respecting licences from a secured creditor and/or its receiver, where the fishing licence is subject to a security agreement or to a deed of hypothec registered under the appropriate provincial legislation upon submission of the following information and documents:

• Written consent of the license holder, who will personally sign the request for the transaction requested, or
• A legal opinion as to the validity and enforceability of the secured creditor’s rights concerning the fishing licence, or
• A court document outlining and confirming that the secured creditor’s claim for the transaction is valid and enforceable. These include court documents appointing a receiver or a court order confirming the secured creditor’s rights.

Each situation will be handled on a case-by-case basis. DFO will not be making any determination regarding priority between secured creditors. DFO’s licensing policy and eligibility criteria continue to apply, and the Minister retains the discretion to approve or deny the request.

This process complements the Notice and Acknowledgment System, implemented in 2007. The Notice form allows the Recognized Financial Institution (RFI) to notify DFO that they have a financial arrangement with a licence holder in respect of a particular licence. When a Notice is on file, an Acknowledgement form, signed by a representative of the RFI is required when a request for “licence re-issuance” or “quota transfer” is submitted to DFO.

Together, the Notice and Acknowledgement System and Saulnier implementation process address the concerns of the financial sector about the security of loans against fishing licences or quota.