SCC to Rule on Whether Licences Are “property”

Tomorrow morning, the Supreme Court of Canada will, finally, release its judgment in Saulnier v. Royal Bank of Canada. The case concerns whether a government-issued licence – in this case, a fishing licence – can be treated as a form of intangible “property” for purposes of the Personal Property Security Act and the Bankruptcy and Insolvency Act.

This case has the potential to be quite significant. The traditional common law position, represented by cases such as National Trust v. Bouckhuyt (1987), 61 O.R. (2d) 640 (C.A.), was that a discretionary licence issued by a government body grants a mere revocable privilege and not a property right. Consequently, such licences were incapable of supporting PPSA security interests.

The problem with this position is that in the real world, no one treats licences that way. Licences are in practice enormously valuable assets, and are frequently bought and sold or used as security, notwithstanding their indeterminate status or restrictions on their transferability. Indeed, the Ontario Court of Appeal seems to have soon repented of its view, suggesting in CIBC v. Hallahan (1990), 39 O.A.C. 24 that the issue should be reconsidered – but that until such time as the Supreme Court saw fit to do so, it would be bound by its own decision in Bouckhuyt.

Nonetheless, Ontario and other courts, over time, evolved a more pragmatic approach, allowing a licence to constitute property capable of supporting a security interest if the licensor’s discretion is constrained such that the licensee has a reasonable expectation that the licence will continue, and the licence has commercial value. Thirteen years after Bouckhuyt, Jacob Ziegel and David Denomme, in their commentary on the PPSA, observed that this “indicate[s] a willingness by the courts to isolate Bouckhuyt by a process of attrition.”

This has not, unfortunately, permitted any great deal of certainty for those who are asked to opine on the issue. It is notable that while the Nova Scotia Court of Appeal, in Saulnier, upheld the decision of the trial judge, it disagreed with the reasoning. The Superior Court focused on the commercial reality, which assigned substantial value to fishing licences. The Court of Appeal, by contrast, held that licences themselves were not property of the licensee, as the regulations stated that a licence “is the property of the Crown.” The “commercial reality” of the licences’ value was thus irrelevant. However, the licensee nonetheless had rights in respect of the fishing licence: the beneficial interest in the earnings from the use of the licence, and, more importantly, the “rights to apply for, and resist and arbitrary denial of, a renewal or reissuance of [the] licence”. These rights were property for purposes of the PPSA, and had value.

And so, we now wait for the final (one hopes) word on the matter. Stay tuned.

Update: The full text of the decision is available here. The appeal was dismissed, but for reasons that differ in several significant respects from both the trial judge and the Court of Appeal. The debate may yet continue…