A recent dispute between numerous secured lenders claiming priority interests in the quota allotted to the debtor, a commercial fishery, resulted in the high court of Nova Scotia closely examining proprietary interests in fishery quota entitlements.
It is common practice in the commercial fishing industry for a fishing licence, including the quota, to be used as collateral by secured lenders when filing security agreements under the Personal Property Security Act (“PPSA”).
In Re D’Eon Fisheries Limited, 2016 NSCA 30, the Nova Scotia Court of Appeal was confronted with an appeal of a decision which held that a reference to a fishing licence in a financing statement was not sufficient to perfect a lien on the fishery quota entitlements under the Nova Scotia PPSA.
Ultimately, the case resulted in the finding that the term “licence” in the financing documents also included the related quota entitlements despite the lack of a specific reference to the quota.
The facts of the case are that D’Eon borrowed money from time to time to support its operations. Pursuant to a fishing licence assignment agreement dated September 23, 2013, the Province of Nova Scotia, represented by the Minister of Economic and Rural Development and Tourism (the “Province”) loaned $500,000 jointly to D’Eon and its affiliate, Blue Wave. That document provided D’Eon would pledge all of its interest in the ‘Licence Assets’ which was defined as the fishing licences and all quota and enterprise allocation.
However, the description of general collateral in the financing statements filed pursuant to the PPSA by the Province registered against D’Eon referred only to “groundfishing licence No. 304715.” The word ‘quota’ was omitted. The loans made to D’Eon were subject to security interests granted in favour of two banks.
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