Re National Trust Co and Bouckhuyt, 1987, ON CoA p 583; Tobacco quota is not personal property; absolute and unfettered licence is not property
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Facts: The Bouckhuyts bought a farm and then bought a license to produce tobacco pursuant to the Farm Marketing Act. The licence was tied to the land, not to the licensee. The regs changed and new licenses were then granted to individuals, not to land, so the license could be traded. The Bouckhuyts sold the land to the Atkinsons and separately sold the licence to them. The agreement stipulated that the quota was not to be sold unless the Bouckhuyts consented.
The Atkinsons mortgaged the land with a bank. The license was included in the mortgage and the bank proceeded with the mortgage despite knowing about the restrictive covenant. Things went badly and the bank attempted to seize the tobacco license, alleging it to be personal intangible property within the meaning of the Personal Property Security Act (PPSA).
Issue: Is the tobacco quota intangible personal property? [NO]
Why? Although the (new) Act provided that the license could be traded, the Board has an unlimited discretionary power to delimit its use. Therefore, it is State property and not personal property. The only right the licensee has is to apply to the board for production rights.
Ratio:
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Any owner must apply to the board for their consent to transfer ownership.
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The BPQ (i.e. the board) has control over allotment, can cancel the licence, and has complete discretionary powers.
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A tobacco crop cannot even be produced without the BPQ’s consent. BPQ has all the privileges.
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INS v AP: “Property is the right to exclude. Property depends upon exclusion by law from interference…(by others)”
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The BPQ might be eventually sold (in light of the new laws) but that alone does not make it property.
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The intention of the Act is to confer unrestricted power to the Board.
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CIBC v Hallahan (1990) ON CoA; 589; Bouckhuyt upheld; Milk Quota is not property
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Facts: The CIBC issued a loan to the Hallahans which was secured by a milk quota and corresponding proceeds. Shortly before the Hallahans became unable to pay the bank, they conveyed the farming business and the permit to a relative, while retaining any right to future revenue. Things went bad. The bank brought a case to recuperate the proceeds from the permit, using the Fraudulent Conveyances Act.
Issue: Is the quota property? [NO]
Why: Just followed Bouckhuyt, but feels that quota should be treated as property in certain cases where there is fraud, so that the institution of property can be put forth in the interest of justice.
Ratio:
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Followed rule according to Bouckhuyt (stare decisis) which is: a quote is not property so it cannot be fraudulently or otherwise transferred.
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Court disagrees that this rule (i.e. a quota is not property) should apply to this case because there is fraud, but finds itself bound.
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It considers that in the modern commercial realities, the quota should be considered property.
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Re Foster (1992), (Ont. Gen. Div.), 591; Taxi licence is intangible personal;
Facts – Foster held a taxi cab license – He borrowed money using it as security from several people – Now his creditors want to seize the license – However, to do so, they must demonstrate that the license is property for the purpose of the PPSA – The license was granted by an administrative body which could only revoke it under certain specific circumstances, subject to appeal – Furthermore, the license could be transferred, notably to the holder’s heirs.
Issues – Is the taxi license property? [YES]
Reasoning (Lane J.):
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“The characterization of such a license depends on the extent to which the licence holder can be said to have been granted a vested right on the one hand, or a privilege wholly dependent on the discretion of the issuing Ministry or regulatory body on the other hand.” (p. 591)
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“The case law reveals a tension between the commercial reality that licenses, like any commodity in restricted supply, have a value and may be traded, and the legal impact of the legislator’s desire to maintain, in varying degrees, control over the industry in questions. Where the control is absolute and unfettered, no property interest exists even though there is a market (Bouckhuyt)…where there is a market and a practical, historical assurance of renewal the licensee has a right akin to a choice in actions, and hence property” (p. 595)
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Bouckhuyt – if the transactions pertaining to the license are subject to “unfettered discretion of the board” then it is “too transitory and ephemeral” to be considered property
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Hallahan – Courts should balance the concerns in Bouckhuyt with regard to “the realities of commercial transactions within the regulatory framework”
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The possibility that licenses can be refused for renewal based on “public policy grounds” is not enough to conclude that the council’s discretion is unfettered (Roncarelli v. Duplessis, issuers of licence for the carrying on of business must act in GF)
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There is a prima facie entitlement to renewal, which means that the license is almost certain to be a long-lasting right.
Rule – The question is whether the degree of discretion exercisable by the regulatory board is so great that notwithstanding the commercial reality the license may be too ephemeral and transitory to be regarded as property.
Saulnier v Royal Bank, 2008, SCC p599; Fishing License is Property for bankruptcy; broad definition of property
Facts – S holds 4 fishing licenses. He signs a General Security Agreement (GSA) with a bank. In 2004, fishing business faltered and S made an assignment in bankruptcy. Trustee and others sign an agreement to sell the 4 licenses to a third party for $630,000- S refuses to sign. S claims that the licenses do not constitute ‘property’ (instead, they constitute ‘privilege’) under the BIA (Bankruptcy and Insolvency Act) or PPSA (NS Personal Property Security Act).
Issue – Does a commercial fishing license constitute property (available to trustee under BIA or creditor under PPSA)?
Holding (Binnie J.) – Yes in the circumstances, but not in the traditional sense (appeal dismissed, the Bank wins).
Why?
1. The components of this “bundle of rights” invested the license holder with property-like rights, similar to “profit à prendre” sufficient to bring the licenses w/in the bankruptcy regime and the PPSA.
2. The minister’s discretion is not fettered in the future. He still retains all the powers.
3. For the purposes here, protection of creditors, the court finds that because the license grants to fishermen, the ability to make a profit (by harvesting the waters), it has certain elements in common with other things protected by the institution of property.
4. The Bankruptcy Act has sweeping language, and the court infers that the legislator’s intent was to include anything that “smelled” like property to be included in the assets that creditors could divvy up.
5. The Fisheries Act also provides for intangible property, which is similar to the license.
6. The main criticisms to this approach was Bouckhuyt, which the court finds is different because that is a quota where this is a licence. Also, the fact that the license is transitory and ephemeral is unimportant since other property things are transitory (i.e. a lease).
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Question of statutory interpretation: ‘Property’ must not be analyzed in the abstract; instead, it needs to be interpreted in light of the relevant statutes (in a purposive manner).
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The interest conferred by a fishing licence: 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 on first catching it. Despite the Minister’s protestations (which are that he has absolute discretion in awarding the license and is concerned that if the Court declares it property then that discretion will be reduced), 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.
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Traditional ‘property’ approach:
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The license bears similarity to profit à prendre.
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It confers “something more” than mere permission to do something.
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there is a difference between a quota (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. Equally, profit of piscary (being a type of profit a prendre) is recognized as a property right to fish in the privately owned waters of another. The earnings flow from the catch which is lawfully reduced to possession at the time of the catch, as is the case with profit a prendre (i.e. a right to fish once caught).
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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 bears a reasonable analogy to rights traditionally considered at common law to the proprietary in nature. It is consistent with art. 2 of the BIA which makes a reference to a “profit, present or future…” In this connection the property in question is the fish harvest.
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To say that the fishing licence is coupled with a proprietary interest does not encumber the Minister’s discretion with proprietary fetters. The licence is no more and no less than is described in the relevant legislation. Nonetheless, during its lifetime, however fragile, the fishing licence clearly confers something more than a ‘mere’ permission to do something which is otherwise illegal.
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The regulatory approach:
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The objection that the license is transitory and ephemeral bears no weight. A lease is transitory but it is property.
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uncertainties of renewal do not detract from the interest presently possessed by the holder, but nor does an expectation of renewal based on a Minister’s policy which could change tomorrow, transform a licence into a property. How much ‘fetter’ is enough to transform a ‘mere licence’ into some sort of interest sufficient to be constituted as ‘property’???
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The commercial realities approach:
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One cannot ignore the value of a fishing license. Here, it is the proprietary right in the wild fish harvested.
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The preferred approach:
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The BIA is “property means any type of property…..as well as easements and every description of estate, interest and profit…etc…IT IS VERY WIDE SWEEPING.
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The Fishing license is personal property because it is included in the definition of “intangible” property. Here, the intangible property is the interest, the profit from the right to fish.
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what’s of ‘prime importance,’ is that the licence creates a proprietary right in the wild fish harvest thereunder, and earnings from their sale. See rule #1.
Rule – “Because a fishing license may not qualify as ‘property’ for the general purpose of the CML does not mean that it is also excluded from the reach of the statutes. For the particular purposes, Parliament can and does create its own lexicon”
Rule – The prospect of renewal (whether or not subject to an ‘unfettered’ discretion) and ‘commercial realities’ are NOT determinative.
Regulatory licenses: Recap.
Case name
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Issue
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Held
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Why?
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Interesting points.
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National Trust co. v Bouckhuyt
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Is a tobacco quota property?
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No
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Because the Board has unfettered discretion. Even if the quota can be traded, the bundle of rights associated with it are exclusively determined by the Board.
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INS v AP is cited: Property is the right to exclude. Here, only the Board can exclude others.
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CIBC v Hallahan
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Is a milk quota property?
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No.
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Just follows Bouckhuyt.
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But there was fraud in this case and the court would have liked to depart from Bouckhuyt for reasons of equity, saying that where there is fraud commercial realities must be considered.
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Re Foster
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Is a cab licence property?
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Yes.
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Court notes the tension between Bouckhuyt and CIBC and declares that commercial reality must be taken into account.
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Bankruptcy case. Here, the licence was not transferrable for the first 3 years after issue. Renewal here is conditional to the Board however, per Roncarelli v Duplessis, that discretion must be in good faith, therefore, it is not unfettered.
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Saulnier v RBC (SCC) 2008
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Is a fishing licence property?
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Yes.
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It gives property-like rights (rights to profit) so in the circumstances, it should be treated as property).
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The statutes define property very very widely such that rights to profits are held up as property. The court states that because it is property in this case, it does not for that matter limit the Minister’s discretion as to the granting of rights associated with fishing licences.
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Saulnier – Binnie took a good survey of the earlier cases
1. Commercial – how does it look in the market (cf INS v AP)
2. Regulatory approach – what does the regulation say
3. Statutory Interpretation Contextual/Purposive (Saulnier Approach)
** Clear to interpret the answer for this particular case only**
Finds fishing licence is property in this instance. The licence when combined to this right to the harvest is a property interest.
Minister is reluctant to have the licence declared a right, as this means everyone could have one. Binnie is very clear to say this applies only to PPSA and BIA.
Other cases in this section, are just survey as what courts will grant property rights.
Bouckhuyt: Quota is so transitory and ephemeral in its nature that it cannot be considered property (Binnie rejects this in Saulnier). BPQ – regularly and successfully traded on the market, board issues the licenses annually and holders can transfer them with permission. Board has control over amount of tobacco produced. Quota is a licence and not a proprietary right. Outcome: Tobacco Quota cannot be used as security for loans.
Hallahan: ON CoA – not decided pur incurium – shows respect for Cory J’s earlier decision by refusing to overturn Bouckhuyt. Hallahan transferred his credit/milk quota to his sister-in-law to avoid his creditors. This was against the fraudulent conveyance…but could only be held if the quota was declared a personal property.
Foster: (Added for more examples of what qualifies as property) Taxicab licence is property. Identifies the tension between commercial interest and regulatory approach.
Issue Spotting: Licence renewal; Minister’s control of; licenses are presumed granted; unless for public interest; licences cannot be transferred; immediate cancellation at ministry’s discretion with no appeal; financial value
Property: habitual renewal, appeal process, spot check; fettered; discretion; market
Privilege: No Harvest, not salable, Hunter licence, No right to appeal,
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