2016 NBCA 19, 2016 NBCA 19

COURT OF APPEAL OF COUR D’APPEL DU NEW BRUNSWICK NOUVEAU-BRUNSWICK 17-15-CA CYRÉNUS DUGAS APPELLANT CYRÉNUS DUGAS APPELANT - and - - et - PETER GAUDET, ADAM GAUDET, 508571 N.B.LIMITED and 100167 PEI INC. RESPONDENTS PETER GAUDET, ADAM GAUDET, 508571 N.B.LIMITED et 100167 PEI INC. INTIMÉS Dugas v. Gaudet et al., 2016 NBCA 19 Dugas c.

Gaudet et autres, 2016 NBCA 19 CORAM: The Honourable Chief Justice Drapeau The Honourable Justice Richard The Honourable Justice Quigg CORAM : l’honorable juge en chef Drapeau l’honorable juge Richard l’honorable juge Quigg Appeal from a decision of the Court of Queen’sBench: February 27, 2015 Appel d’une décision de la Cour du Banc de la Reine: le 27 février 2015 History of Case: Historique de la cause : Decision under appeal: 2015 NBQB 59 Décision frappée d’appel : 2015 NBBR 59 Preliminary or incidental proceedings: Court of Appeal: [2016] N.B.J. No. 10 [2015] N.B.J.

No. 82 Procédures préliminaires ou accessoires : Cour d’appel : [2016] A.N.-B. no 10 2016 NBCA 21 , [2016] A.N.-B. no 82

Appeal heard: February 25, 2016 Appel entendu : le 25 février 2016 Judgment rendered: April 14, 2016 Jugement rendu : Le 14 avril 2016 Counsel at hearing: For the appellant: Charles A. LeBlond, Q.C. For the respondents: Eugene J. Mockler, Q.C. and Christian E. Michaud, Q.C. Avocats à l’audience : Pour l’appelant: Charles A. LeBlond, c.r. Pour les intimés : Eugene J. Mockler, c.r. et Christian E. Michaud, c.r. THE COURT The appeal is dismissed, with costs. Reasons to follow. LA COUR L’appel est rejeté, avec dépens. Motifs à suivre.

The following is the judgment delivered by THE COURT [ 1 ] The appeal is dismissed, with costs. Reasons to follow. ______________________________________ J. ERNEST DRAPEAU, CHIEF JUSTICE OF NEW BRUNSWICK

_______________________________________ J.C. MARC RICHARD, J.A. ________________________________________ KATHLEEN A. QUIGG, J.A. Le jugement suivant a été rendu par LA COUR [1] L’appel est rejeté, avec dépens. Motifs à suivre. COURT OF APPEAL OF COUR D’APPEL DU NEW BRUNSWICK NOUVEAU-BRUNSWICK 17-15-CA CYRÉNUS DUGAS APPELLANT CYRÉNUS DUGAS APPELANT - and - - et - PETER GAUDET, ADAM GAUDET, 508571 N.B. LIMITED and 100167 P.E.I. INC. RESPONDENTS PETER GAUDET, ADAM GAUDET, 508571 N.B. LIMITED et 100167 P.E.I. INC. INTIMÉS Dugas v. Gaudet et al., 2016 NBCA 19 Dugas c. Gaudet et autres, 2016 NBCA 19

CORAM: The Honourable Chief Justice Drapeau The Honourable Justice Richard The Honourable Justice Quigg CORAM : l’honorable juge en chef Drapeau l’honorable juge Richard l’honorable juge Quigg Appeal from a decision of the Court of Queen’s Bench: February 27, 2015 Appel d’une décision de la Cour du Banc de la Reine : le 27 février 2015 History of Case: Historique de la cause : Decision under appeal: 2015 NBQB 59 Décision frappée d’appel : 2015 NBBR 59 Preliminary or incidental proceedings: Court of Appeal: [2015] N.B.J. No. 82 [2016] N.B.J.

No. 10 Procédures préliminaires ou accessoires : Cour d’appel : [2015] A.N.-B. n o 82 [2016] A.N.-B. n o 10 Appeal heard: February 25, 2016 Appel entendu : le 25 février 2016 Judgment rendered: April 14, 2016 Jugement rendu : le 14 avril 2016 Reasons delivered: August 25, 2016 Motifs déposés : Le 25 août 2016 Reasons for judgment by: The Honourable Chief Justice Drapeau Motifs de jugement : l’honorable juge en chef Drapeau Concurred in by: The Honourable Justice Richard The Honourable Justice Quigg Souscrivent aux motifs : l’honorable juge Richard l’honorable juge Quigg Counsel at hearing: For the appellant: Charles A.

LeBlond, Q.C. For the respondents: Eugene J. Mockler, Q.C. and Christian E. Michaud, Q.C. Avocats à l’audience : Pour l’appelant : Charles A. LeBlond, c.r. Pour les intimés : Eugene J. Mockler, c.r., et Christian E. Michaud, c.r.

THE COURT On April 14, 2016, the Court dismissed the appeal with reasons to follow. Those reasons are provided in the accompanying text. LA COUR Le 14 avril 2016, la Cour a rejeté l’appel en précisant que des motifs suivraient. Ces motifs sont exposés dans le texte qui suit. The judgment of the Court was delivered by DRAPEAU, C.J.N.B. I.

Introduction and Overview [1] In its practical dimension, the underlying litigation is concerned with no more than the rights and obligations of the parties in connection with a crab-fishing licence typically issued on a year-to-year basis, but invariably renewed by the Department of Fisheries and Oceans.

However, a step back from the case shows it offers a most valuable lesson: with dogged determination and perseverance, an aggrieved party can overcome strategic miscalculations, procedural missteps, unfavourable obiter dicta in parallel proceedings, the adverse party’s dishonesty and defences foreign to the merits, and manage to obtain justice in the final showdown, the trial. [ 2 ] The dispute between the parties traces its genesis to agreements executed more than a decade and a half ago.

Those agreements were meant to divest the appellant and his wife, both residents of the Acadian Peninsula in northeastern New Brunswick, of the beneficial interest in the key assets of their commercial fishing business, which included snow crab licence #23622. Significantly, the agreement of purchase and sale for that licence obligated the appellant to “do all such further acts and things as may be necessary to give effect” to its terms and conditions. One of those terms was a warranty by the appellant that the licence was “transferable” to the named purchaser, 508571 N.B. Ltd., or its assign.

In the result, the appellant was required to do all that was necessary to secure departmental approval of the licence’s nominal transfer to the purchaser’s assign, the respondent Adam Gaudet. However, before any such transfer could be considered, let alone approved by the Department, the appellant had to submit a written transfer request. Pending approval of any such request, the appellant would hold the licence in trust for its beneficial owners, Mr. Gaudet and 508571 N.B.

Ltd. [ 3 ] To that end, on January 29, 1999, the appellant executed a Declaration of Trust and Indemnity confirming explicitly Adam Gaudet and 508571 N.B. Ltd. had purchased licence #23622 and were its true owners . The appellant also acknowledged he had no “ownership rights” in the licence and that it was held in his name for the sole purpose of “complying with the [Department] of Fisheries and Oceans regulations regarding the holding of fishing Licences, and for no other reason”.

The appellant’s post-closing contractual and fiduciary obligations were not time-limited and none of the agreements between the parties provides for reversion to the appellant of the beneficial ownership of licence #23622 in the event the Department refused to approve Adam Gaudet as its licence holder. [ 4 ] The respondents discharged, in timely fashion, their contractual obligations, including the partially-financed payment of $1,400,000, the agreed-upon price for the fishing business, which included more than $500,000 for the market value of licence #23622.

Over the next three years, and as agreed, the appellant continued to hold licence #23622 in his name and to act as vessel captain (when his health permitted), but all earnings from harvesting snow crab under the licence’s authority flowed, whether directly or indirectly, to its beneficial owners. [ 5 ] In late summer 2000, the Department set December 31, 2000, as a deadline to submit the required written transfer request for licence #23622.

By that time, Adam Gaudet had moved from P.E.I. to New Brunswick with a view to satisfying departmental residency requirements and the value of licence #23622 had grown considerably. Be that as it may, the appellant, in violation of his covenant “to do all […] acts and things as may be necessary” to secure the licence’s transfer into Adam Gaudet’s name, refused to submit the transfer request within the time prescribed. When he finally submitted a transfer request in February 2001,

the Department refused to act upon it, taking the position it was out of time. [ 6 ] In early 2002, the appellant “terminated” the arrangement with the respondents, a course of action he purported to justify on the basis of licence transfer impossibility and the risk of its cancellation by the Department if the parties pursued transfer-related efforts. To be clear, the appellant did not simply decline to make any such effort; he appropriated licence #23622 as his own. [ 7 ] The respondents objected to the appellant’s unilateral termination of his fiduciary and contractual obligations.

They commenced an action in the Court of Queen’s Bench, alleging breach of those obligations, and requesting, among other relief, their specific performance, a declaration that licence #23622 was held in trust by the appellant pursuant to the Declaration of Trust and Indemnity and, in the alternative, damages, including the fair market value of the licence. In his Statement of Defence, the appellant pleaded several grounds of defence, including frustration on the basis that the Department’s approval of Mr. Gaudet as licence holder could not be secured despite best efforts.

It followed he was no longer bound “to do all […] acts and things as may be necessary” to secure the licence’s transfer. [ 8 ] In August 2002, on the eve of oral discovery, the parties reached a settlement resolving “all outstanding issues” in the action. A Consent Judgment was signed by the parties and a judge of the Court of Queen’s Bench, admittedly without the benefit of supporting evidence. Given the document’s centrality in the litigation and its resolution, limning without delay two key provisions may prove useful in shedding light on the dispute.

The first obligated the appellant to immediately pay the sum of $50,000, and to make a further payment of $2,050,000 within 30 days. The other simply stated “[t]his consent judgment permanently resolves and settles all outstanding matters between the parties”.

The appellant did not pay the $2,050,000, opting instead for an assignment in bankruptcy, following which he harvested snow crab under the authority of licence #23622 and appropriated the catch and the proceeds of its sale as if he was their owner. [ 9 ] The respondents responded with the underlying action, seeking an order setting aside the Consent Judgment and requesting the relief claimed in the previous proceedings. Their case at trial rested on the proposition that the Consent Judgment was without legal validity for two reasons.

First, it was void ab initio , having been obtained essentially by fraud, specifically the appellant’s dishonest and false representation that he would pay in full the judgment debt of $2,100,000, and not just $50,000. Second, and in any event, full payment of the debt arising from the Consent Judgment was a condition precedent to its legal efficacy. In the respondents’ submission, the Consent Judgment ceased to be legally effective no later than 30 days after its execution, the deadline for the payment of the balance due ($2,050,000).

In the result, all fiduciary obligations owed to the beneficial owners of licence #23622, Adam Gaudet and 508571 N.B. Ltd., were preserved, and those obligations emerged intact from the bankruptcy proceedings initiated by the appellant. [ 10 ] As for the appellant, it was his testimony that he honestly intended to pay the settlement/judgment debt, but was unable to do so.

He contended that, in any event, the legal efficacy of the last provision of the Consent Judgment (“[t]his consent judgment permanently resolves and settles all outstanding matters between the parties”) is not umbilically tied to satisfaction of that debt; upon the Consent Judgment’s execution, that catch-all provision would have extinguished all fiduciary and contractual obligations, and restored his exclusive beneficial ownership of licence #23622.

And it matters not one iota, according to the appellant, that the judgment debt remained unpaid following his subsequent assignment and absolute discharge under the Bankruptcy and Insolvency Act , R.S.C. 1985, c. B-3 (“ BIA ”) .

The appellant also submitted: (1) the contract providing for the sale of licence #23622 was unenforceable because the performance of his obligations was frustrated by the Department; and (2) the doctrine of res judicata precluded the successful prosecution of the action. [ 11 ] Following a 24-day trial spread over four years, and after considering extensive pre- and post- trial briefs, the trial judge delivered comprehensive reasons for rejecting the appellant’s manifold grounds of defence and validating the respondents’ claims for declaratory and mandatory relief, as well as damages ( see 2015 NBQB 59 , 434 N.B.R. (2d) 45 ).

More specifically, the trial judge: (1) confirmed the legal validity and enforceability of all key agreements bearing upon the sale of licence #23622; (2) found the Consent Judgment was void ab initio , having been obtained through the appellant’s dishonest representation that he intended to comply with its financial dictates; (3) determined s. 178(1) (

d) of the BIA prevented the Registrar’s order of discharge from releasing the appellant from liability qua trustee for misappropriation of licence #23622 and its benefits, from early 2002 until trial; (4) issued a mandatory order enjoining the appellant to take all steps required to [TRANSLATION] “ensure and facilitate” the transfer of licence #23622 into Adam Gaudet’s name; and (5) awarded $2,384,162 in damages to the respondents, as well as costs and disbursements.

The judge declined, wisely in my view, to take the extra step and order the Department issue licence #23622 to Adam Gaudet. [ 12 ] A judge of this Court subsequently dismissed the appellant’s motion for a stay of execution ( see Gaudet et al. v. Dugas (2015), 434 N.B.R. (2d) 137 , [2015] N.B.J. No. 82 (C.A.) (QL) ). The Department has since seen fit to approve the transfer of licence #23622 into Adam Gaudet’s name.

[ 13 ] The appellant seeks reversal, arguing the trial judge erred by: (

a) rejecting the defence of frustration, an option he says was ousted by observations in Dugas v. PricewaterhouseCoopers Inc. and Gaudet et al. , 2012 NBCA 85 , 395 N.B.R. (2d) 265 ; leave to appeal denied [2012] S.C.C.A. No. 521 (QL) , and the precedential authority of Doucette and 508428 N.B. Limited, a body corporate v. Jones , 2006 NBCA 38 ; 299 N.B.R. (2d) 288; (

b) holding the Consent Judgment was void ab initio , rather than accepting it definitively settled the dispute between the parties (cause of action estoppel); (

c) failing to find the respondents were estopped from relying upon a version of the facts that was excluded by the Registrar’s remarks in Dugas (Re ), 2004 NBQB 200 , [2004] N.B.J. No. 187 (QL) and “observations” made in Dugas v. PricewaterhouseCoopers Inc. and Gaudet et al. (issue estoppel); and (

d) in misinterpreting and misapplying s. 178(1) (

d) of the BIA . According to the appellant, the misapplication would have occurred when the trial judge failed to respect the doctrine of issue estoppel by giving effect to that provision on the basis of a finding of “misappropriation” that was not open to him, the contrary view having been espoused by this Court in Dugas v. PricewaterhouseCoopers Inc. and Gaudet et al. [ 14 ] Judges are bound by their oath of office to “do right according to law”.

It is beyond serious dispute that justice has been rendered by the judgment under appeal: after an embarrassingly long judicial ordeal, the parties are finally where they would have been but for the appellant’s bad faith in the performance of his contractual and fiduciary obligations and, indeed, his outright refusal to comply with them. The overarching question for the Court is whether the trial judge committed reversible error in effectively finding the law did not trump justice in this admittedly extraordinary case. For the reasons that follow, the Court’s answer is an emphatic “no”. II.

The Context with an Occasional Editorial Observation [ 15 ] Absent palpable and overriding error, the factual and credibility findings at trial must be accepted for adjudicative purposes on appeal. The test for appellate disregard of findings of that nature is very stringent in both civil and criminal proceedings: Gillis v. R. , 2014 NBCA 58 , 426 N.B.R. (2d) 1 , leave denied [2014] S.C.C.A. No. 496 (QL).

I n the case at hand, the reasons for judgment feature remarkably strong findings of fact and credibility, the cumulative effect of which, but for palpable and overriding error, precludes appellate success on any question of fact or mixed law and fact. No such error has been established. Moreover, and as will be seen, I am satisfied none of the trial judge’s findings of fact and credibility are objectionable on the basis of issue estoppel.

Accordingly, the account that follows borrows liberally and serenely from those reasons. [ 16 ] The main assets of the appellant’s commercial fishing business were a 65-foot vessel, the Emy Serge D., its nautical and fishing equipment and three fishing licences, one for mackerel, one for oysters and one for snow crab. For more than two decades, and without fail, those licences had been issued annually to the appellant by the Department of Fisheries and Oceans.

Formal title to the other assets was held by a private corporation, Les Investissements Emy Ltée, whose sole shareholder was the appellant’s business partner and wife. The appellant’s business-related duties included pre-fishing preparatory work, the operation and ongoing up-keep of the Emy Serge D. as well as harvesting and disposing of the species for which he held licences. The appellant’s wife performed all the administrative tasks associated with the business. [ 17 ] In 1998, the appellant, who was in his early 50s and had been a fisher since childhood, began experiencing some health problems.

At the same time, he and his wife came to accept their only son would not carry on the family’s fishing business. Given those circumstances, the appellant and his wife decided to put the business up for sale. [ 18 ] After failing to find a local buyer willing to pay the asking price ($1,500,000), the appellant caused a classified ad to be placed in various newspapers of the Atlantic region.

It was in response to an ad published in The Guardian , a Prince Edward Island newspaper, that Peter Gaudet and his son, Adam, both fishers by trade and residents of P.E.I., approached the appellant to explore the possibility of acquiring his family’s fishing business. The Gaudets, who were particularly interested in the snow crab licence, which they considered to be quite valuable because of its quota of 168,000 pounds for the upcoming season, instructed their lawyers to make inquiries of the Department about the process for licence transfers.

They were told that: (1) an applicant had to be recognized by the Department as a “new entrant” in the administrative zone to which the licence related; (2) an existing licence holder had to be willing to sell his or her licence; (3) the licence holder had to submit a written transfer request to the Department ; and (4) it had to approve the request.

The Department would not approve the transfer of a snow crab licence to a non-resident of the administrative “zone” for which it had been issued. [ 19 ] In October 1998, the Gaudets met with the appellant in Shippagan, New Brunswick, to inspect the Emy Serge D. and the fishing equipment, and to discuss the purchase price. Although they found the business’ physical assets were somewhat worn, the Gaudets were prepared to park any related concern because of their keen interest in acquiring snow crab licence #23622.

After some wrangling, the parties settled on an overall price of $1,400,000, including $100,000 in cash. This was a significant improvement over the best offer the appellant had received from fellow residents of the Acadian Peninsula. In short order, the parties’ lawyers put together a bundle of agreements to formalize the deal.

[ 20 ] On December 4, 1998, the appellant’s wife executed an agreement transferring to Peter Gaudet the 500 shares she held in Les Investissements Emy Ltée for the sum of $772,059. Recall this corporation owned the business’ physical assets, including the Emy Serge D. The agreement obligated the appellant’s wife, the “vendor”, to “make all possible effort to transfer in favour of the purchaser or the Corporation, or the nominee or nominees of the purchasers, all her interest” in the fishing licences mentioned above, including licence #23622.

The agreement also specified that “until such time as those transfers can be made in compliance with the Fisheries Regulations of the [Department] of Fisheries and Oceans, the vendor agrees to execute and be bound by a trust agreement, in favour of the purchaser and the corporation, or the nominee or nominees of the purchasers, witnessing the fact that the vendor holds those licences in trust for the purchaser and the corporation, or the nominee or nominees of the purchasers”.

Presumably, this agreement was meant to prevent any future claim based on marital property legislation and to secure, for an indefinite period, the cooperation of the appellant’s wife in achieving the licence transfers into Adam Gaudet’s name. That said, if the appellant’s wife did execute a “trust agreement”, it did not find its way into the record, and she is not a party to the litigation. [ 21 ] On December 15, 1998, the appellant executed a “Share Transfer Agreement” by which Peter Gaudet acquired beneficial ownership of all issued and outstanding shares in 508571 N.B. Ltd. for the price of $527,941.

It is not clear how that sum was arrived at, what assets 508571 N.B. Ltd. owned at the time and why it was a party to the sale of shares agreement. Happily, none of these issues weigh in the balance. [ 22 ] On January 9, 1999, the appellant executed an “Assignment of Interest” in favour of 100167 P.E.I. Inc., a company controlled by Peter Gaudet, for “all of his interests in the contract executed between [the appellant] and 508571 N.B. Limited in regards with the Fishing Activities of the Crab Licence”.

Mention is made of this document solely for the sake of thoroughness, neither side arguing it is essential to their case on appeal. A. The critical agreements [ 23 ] By agreement dated January 22, 1999, the appellant sold snow crab licence #23622 to 508571 N.B. Ltd. At this juncture, Peter Gaudet owned all issued and outstanding shares in 508571 N.B. Ltd.

As mentioned in my introductory remarks, the agreement does not provide for reversion to the appellant of the beneficial interest in licence #23622 in the event the Department was slow in approving or refused outright to approve Adam Gaudet as licence holder and none of the agreement’s transfer- related obligations are time-limited. The appellant was paid $527,941, the parties’ best estimate of the licence’s fair market value.

I pause to drive home the point that the appellant sold the licence, not a temporary right to its benefit or a mere chance at ownership, and that the only uncertainty involved the formal transfer of the licence out of the appellant’s name. [ 24 ] The appellant represented and warranted in Clause 3 of the agreement that he was “the beneficial owner” of licence #23622 and that it was “saleable and transferable” to 508571 N.B. Ltd. Pursuant to Clause 8, this term “[enured] to the benefit” of the numbered company’s “assigns”.

Just as significantly, the appellant undertook in Clause 7 to “ do all such further acts and things as may be necessary to give effect to the terms and conditions ” of the agreement, and there is no doubt whatsoever the parties understood this undertaking applied to the nominal transfer of licence #23622 to Adam Gaudet (emphasis added). As will be discussed, the appellant’s failure during the last four months of 2000 to attend at the local Department office to submit a licence transfer request closed the door on a real opportunity for Mr.

Gaudet’s approval as licence holder. [ 25 ] On January 29, 1999, the appellant executed a further, and equally critical, document: the Declaration of Trust and Indemnity. It features three recitals, a part entitled “Declaration of Trust” and

Schedule “A”, which sets out the three affected fishing “permits”, “Oyster Permit #25341, Mackerel Permit #45432 and Snow Crab Permit #23622”. The parties and the judge refer to the last-mentioned document as a “licence” and I will do likewise. [ 26 ] The recitals confirm: (1) the appellant is the “LICENCE HOLDER” of licence #23622; (2) 508571 N.B.

Ltd. and Adam Gaudet are the “LICENCE OWNERS”; (3) the licence had been previously purchased by the LICENCE OWNERS; (4) the LICENCE OWNERS are the “true owners”; and (5) the appellant holds the licence in his name “for no consideration and for the sole purpose of complying with the [Department] of Fisheries and Oceans regulations regarding the holding of fishing Licences, and for no other reason […]”. [ 27 ] In the part entitled “Declaration of Trust”, the appellant acknowledges, in explicit terms: (1) he has no financial interest or ownership rights in licence #23622; and (2) he holds the licence in trust for its beneficial owners, 508571 N.B.

Ltd. and Adam Gaudet. [ 28 ] The Declaration of Trust reads as follows:

I, Cyrennus Dugas, DO HEREBY DECLARE that I hold the fishing licences and permits set forth in

Schedule “A” annexed hereto, in trust for 508571 N.B. Limited and ADAM GAUDET, their heirs, successors or assigns and that I have no financial interest or ownership rights in the said Licences, or any undertakings associated therewith; I HEREBY COVENANT for myself, and my heirs, successors, administrators, executors and assigns where applicable, that I will, upon the request of THE LICENCE OWNERS, or their heirs, successors, or assigns, assign and transfer the benefit of the licences and permits set forth in

Schedule “A” hereto, to the LICENCE OWNERS, if qualified, or, as they shall in writing direct to a qualified party, and do hereby irrevocably constitute and appoint Adam Gaudet, or his nominee, to be my Attorney and to sign my name to any transfer hereof. AND I FURTHER COVENANT and agree to be present upon the fishing boat utilizing the fishing licences during all fishing relating to the aforesaid licences, as required by the regulations of the [Department] of Fisheries and Oceans. AND I FURTHER COVENANT and acknowledge that should the aforesaid 508571 N.B.

Limited, cease to exist as a body corporate during the terms of this trust, all legal right and entitlement to the aforesaid licences shall vest in the remaining owner, Adam Gaudet, and in the event of the death of Adam Gaudet, the Estate of Adam Gaudet shall succeed to the interest of Adam Gaudet in this agreement.

AND I FURTHER COVENANT and agree to execute and make to the benefit of and deliver to LICENCE OWNER, its nominee or legal representative(s), all documents required by the Department of Fisheries and Oceans, or any other Federal or Provincial Government authority, to keep and maintain the licences and permits set forth in

Schedule “A” hereto in good order and effect. [Underlining in original.] [ 29 ] The Declaration of Trust and Indemnity does not prescribe an expiry date. The explanation is simple: neither side knew how long the Department would take to approve Adam Gaudet as a licence holder. As the trial judge observed: [TRANSLATION] No date had been set for the licence transfer. The parties might each have their own idea of the required timeframe, but it was a matter of obtaining approval from Fisheries and Oceans Canada after Adam Gaudet had qualified. However, as agreed, Mr.

Dugas was required to cooperate with the purchasers in ensuring that Fisheries and Oceans Canada requirements were met in order to keep the licences valid, and wait for Adam Gaudet to qualify as a new entrant. Mr. Dugas’s role was dictated by the terms and conditions of the Declaration of Trust. [para. 34] It bears repeating the appellant had been paid the licence’s full market value in early 1999. B.

The closing’s immediate aftermath [ 30 ] Following execution of the Declaration of Trust and Indemnity, the Gaudets paid the agreed- upon purchase price, which the appellant financed to the tune of $300,000, and the transaction closed, subject to compliance by the appellant with his outstanding fishing- and transfer-related obligations, and repayment of the $300,000 debt.

The latter was secured by a collateral mortgage on Peter Gaudet’s home and property in P.E.I. and his personal guarantee, as well as Adam Gaudet’s. [ 31 ] For the next three years (1999-2001), Adam Gaudet harvested snow crab under the authority of licence #23622, with the appellant on board the Emy Serge D. as its captain unless his health dictated otherwise. [ 32 ] As noted, the Department advised the Gaudets’ lawyers that approval of any licence transfer was contingent upon Adam Gaudet qualifying as a “new entrant” and the appellant, the licence holder, submitting a written transfer request.

It is common ground that the appellant was bound (by the combined operation of the licence’s purchase and sale agreement of January 22, 1999, specifically Clauses 3, 7 and 8, and the Declaration of Trust) to do all that was necessary to secure its nominal transfer to Adam Gaudet.

[ 33 ] After being informed by the Department that he needed to reside in New Brunswick to qualify as a “new entrant”, Adam Gaudet moved into an apartment in Moncton, in early February 1999. On August 4, 1999, he filed with the Department an application for recognition as a “new entrant”. On November 15, 1999, the Department rejected the application on the grounds that Mr. Gaudet did not in fact reside in New Brunswick. It did so based on a statement by Mr. Gaudet’s landlord that he was “seldom” seen. Mr.

Gaudet appealed the Department’s rejection through its internal review processes. [ 34 ] The trial judge identified at least three problems with the Department’s decision. First, a subsequent, more fulsome investigation identified compelling evidence that Mr. Gaudet met the Department’s residency requirements. Second, and in any event, under departmental rules, residency was not a criterion for “new entrant” approval; it only came into play at the licence transfer stage. Third, some Department officials were not always dealing with the issue of residency in good faith.

Here are the trial judge’s findings on point: [TRANSLATION] Mr. Dugas called three Fisheries and Oceans Canada employees, James B. Jones, Rhéal Vienneau and Janet Smith, as witnesses. Although now retired, each played an important role in Mr. Gaudet’s and Mr. Dugas’s file at all material times. James B. Jones was Regional Director General at the time and responsible for the management and administration of the activities of the Department of Fisheries and Oceans Canada in the Gulf area, including Eastern Canada.

He had his office in Moncton and three regional offices, one each in Tracadie-Sheila, Charlottetown and Antigonish. It is these regional offices that handle fishing licence administration. Rhéal Vienneau was Regional Director in Tracadie-Sheila and reported to Mr. Jones. Janet Smith was responsible for issuing and transferring fishing licences and worked in the Moncton office, but reported to Mr. Vienneau. […] It was in the course of Mr. Gaudet applying for recognition as a new entrant and its actions towards Mr.

Dugas that Fisheries and Oceans Canada’s ultimate goal would become clear, which was quite simply to prevent the New Brunswick fisher’s licences from being transferred to the Prince Edward Island fishers, even if Mr. Jones, Mr. Vienneau and Ms. Smith did not want to admit it. In hindsight, Adam Gaudet filed his first application for recognition as a new entrant with the Tracadie-Sheila regional office of Fisheries and Oceans Canada on August 4, 1999. Mr. Gaudet had taken up residence in Moncton, New Brunswick, on February 1, 1999, having been informed that he had to be a resident of the administrative area.

On November 15, 1999, Fisheries and Oceans Canada informed Mr. Gaudet that he did not qualify because he was not a resident. Mr. Gaudet then filed a notice of appeal from that decision on November 29, 1999. While awaiting his hearing, Mr. Gaudet repeatedly contacted the Tracadie-Sheila and Moncton offices of Fisheries and Oceans Canada on the subject. He did not receive a satisfactory answer, except that his file was under review, until September 8, 2000.

The documents that could be obtained in the course of these proceedings include a memorandum dated July 10, 2000, prepared by Maurice Maillet, another Fisheries and Oceans Canada employee in the Tracadie-Sheila office, that reveals the tenor of Fisheries and Oceans Canada’s discussions and considerations at the time, as they relate to Mr. Gaudet. Indeed, on the issue of residence, Mr. Maillet writes that Fisheries and Oceans Canada received confirmation, in addition to his home address in Moncton, that Mr.

Gaudet would be paying his personal taxes in New Brunswick for 1999, that he has a New Brunswick driver’s licence and Medicare number, and that he voted in the provincial election in 1999. Mr. Maillet also adds that pursuant to a request dated March 15, 2000, sent to the Fisheries and Oceans Canada office in Prince Edward Island, Peter Zahrndt, Director of Conservation and Protection, confirmed that Mr. Gaudet now resides in New Brunswick and that his residence in Prince Edward Island is even up for sale. In the same vein, Mr.

Maillet adds that according to Robert LeBlanc, another Fisheries and Oceans Canada officer, who investigated and prepared a report, he contacted the owner of the residence Mr. Gaudet had rented in Moncton, and the owner told him that he seldom saw Mr. Gaudet.

Mr. Maillet, therefore, concluded that there were two contradictory reports! He asked Edmond Martin, Director of Conservation and Protection at the Fisheries and Oceans office in Moncton, for help and wanted to know the Moncton office’s position. He asked that this request be addressed promptly since this was a sensitive file. On August 18, 2000, in an e-mail to Rhéal Vienneau regarding the appeal Adam Gaudet had filed on November 29, 1999, Janet Smith states that Mr. Gaudet meets all of the criteria as a new entrant. In support of her position, she submits that Mr.

Gaudet is recognized as a commercial fisher, having fished in at least two of the last five years, i.e., in Prince Edward Island in 1998 and in New Brunswick in 1999. This was confirmed to her by a Fisheries and Oceans Canada officer. In the same e-mail, Ms. Smith states that residence is not a requirement at this stage of the procedure and recommends that Mr. Gaudet receive the usual letter confirming that he qualifies as a new entrant. Ms. Smith further states that although Fisheries and Oceans Canada had not received a formal licence transfer request, Mr.

Gaudet had informed her of his intention to submit such a request for Cyrennus Dugas’s licence as soon as possible. She mentions that if Fisheries and Oceans Canada were to receive a transfer request, it should check whether Adam Gaudet meets the eligibility criteria for a transfer, specifying the issue of residence as a consideration on which they could focus at that point. Finally, Ms. Smith mentions the sensitivity of this file. She asks for their comments, indicating that she would be returning from her holidays during the week of September 4, 2000. On September 8, she would confirm in writing Mr.

Gaudet’s status as a new entrant. [paras. 150-152 and 155-164] [Emphasis added.] [ 35 ] Because the appellant’s apparently poor health risked preventing his captaincy of the Emy Serge D. during the upcoming 2000 fishing season, Mr. Gaudet sought recognition as a “substitute operator”. Satisfied he met its residency requirements , the Department approved the application on April 14, 2000. It issued a “substitute operator” licence to Mr. Gaudet. As “substitute operator”, he replaced the appellant as operator of his fishing “enterprise”, which included licence #23622.

The “substitute operator” licence was valid from April 5 to August 15, 2000. In effect, the Department approved Mr. Gaudet, albeit temporarily, as the holder of licence #23622. [ 36 ] By letter dated September 8, 2000, the Department informed Adam Gaudet he qualified as a “new entrant” and this status was “valid for this year only”. The letter pointed out that, should Mr. Gaudet “not acquire a core status with all licences attached by December 31, 2000, it will be necessary for you to reapply as a new entrant in the new year”. The letter confirmed the Department understood it was Mr.

Gaudet’s “intention to acquire a core status and all the licences attached to it”. He was advised that, when application was made by the current core fisher, the appellant, to have replacement licences issued , a further assessment would be undertaken to determine whether Mr. Gaudet was a resident “of the same DFO administrative area where the fisher who is relinquishing that licence [the appellant] was a resident when the licence was originally issued to him”. [ 37 ] There is no gainsaying the importance of the letter of September 8, 2000.

Indeed, it is described as a “turning point” for the respondents in the Appellant’s Submission. Furthermore, it followed on the heels of the Department’s determination that Mr. Gaudet met all residency requirements. Thus, there was no principled basis to deny any request to transfer licence #23622 into his name. And there is no evidence the Department intended to deal with any such request other than reasonably and honourably. [ 38 ] Unfortunately for Adam Gaudet, and as the trial judge found, the appellant would just not make the requisite formal request.

As will more fully appear, I am of the view that, had the appellant cooperated with Adam Gaudet in submitting a transfer request before the deadline of December 31, 2000, it is probable the Department would have granted approval. I hasten to underscore that, unlike the situation in Doucette and 508428 N.B. Limited, a body corporate v.

Jones , the defence of frustration advanced here is founded upon allegations in respect of events that occurred after the contract could and should have been fulfilled. [ 39 ] The trial judge found the Department resorted to “manufactured” reasons (the residency criterion) to deny Adam Gaudet the status of new entrant. He also found the Department [TRANSLATION] “completely manufactured reasons” to deny the nominal transfer of licence #23622 from February 14, 2001 onwards.

The findings in question cast doubt upon the bona fides and seriousness of the warnings and conditions articulated in the following four post-2000 letters from Department officials to the appellant. Those letters are dated April 4, April 27 and May 1, 2001, and April 9, 2002. [ 40 ] On April 4, 2001, the Department informed the appellant his status as licence holder was under

review, and that he could not designate Adam Gaudet as substitute operator for the 2001 fishing season. [ 41 ] On April 12, 2001, the appellant and three other similarly-situated fishers applied to the Federal Court of Canada for an interim injunction , asking specifically that the Minister be ordered to grant them snow crab licences. As the trial judge noted, this application for injunctive relief had absolutely no chance of success. On April 24, 2001, the Federal Court dismissed it after noting s. 7 of the Fisheries Act , R.S.C. 1985, c.

F-14, confers upon the Minister an “absolute discretion” over the issuance of fishing licences and s. 22 of the Crown Liability and Proceedings Act , R.S.C. 1985, c. C-50 prohibits explicitly the grant of an injunction against the Crown (see Caissie v. Canada (Minister of Fisheries and Oceans , 2001 FCT 379 , [2001] F.C.J. No. 625 (QL) (Blanchard J.) . Of course, there is no such prohibition against the judicial review of governmental decisions. [ 42 ] A few weeks later, on April 27, 2001, the Department cautioned the appellant that licence #23622 might not be issued to him unless his status was clarified.

By way of response, the appellant filed an affidavit in which he stated that, under the circumstances, he would now be the head of the enterprise and the captain aboard the vessel, but that his intent was to retire, and transfer his fishing licences to Adam Gaudet as soon as possible. [ 43 ] On May 1, 2001, the Department informed the appellant it would “make an exception to [its] policy” and grant him a “temporary” licence, which would be valid until July 15, 2001, but that it would not consider any request to transfer the licence to another fisher during the period of validity .

Nothing was said about transfer requests submitted after July 15, 2001. [ 44 ] The appellant assumed the position of captain aboard the Emy Serge D. for the 2001 fishing season, with all earnings turned over to Adam Gaudet and 50871 N.B. Ltd. as beneficial owners of licence #23622. C. The appellant’s purported termination of his contractual and fiduciary obligations [ 45 ] By letter dated January 16, 2002, and unbeknownst to the Gaudets, the appellant advised the Department he wished to “[cancel] and/or withdraw any demand and/or application” for the transfer of licence #23622.

The appellant added “[this] statement can be considered as an irrevocable authorization […] to your Minister to stop and/or [cancel] any demand and/or application to that effect”. These directions were given notwithstanding the appellant’s explicit acknowledgement that the Department was “still reviewing this matter and no final decision has yet been made on the overall situation”. [ 46 ] Two weeks later, on January 31, 2002, Peter Gaudet received a letter from the appellant’s lawyer, Jacques Cormier, advising of his client’s decision to terminate their arrangement.

The stated reason: “[…] in April 2001 , it became clear and apparent that it will be impossible for [the appellant], [or] yourself, to pursue and/or [achieve] the essence of the agreement […]” (emphasis added).

I note parenthetically that this allegation of performance impossibility cannot readily be squared with: (1) the lack of temporal limitations for the appellant’s contractual and fiduciary obligations; (2) the Department’s May 1, 2001 letter barring requests for the licence’s transfer during only a limited timeframe, namely from the beginning of May to the end of July 2001; (3) the appellant’s affidavit of April 2001 in which he swears his intent is to retire and transfer the fishing licences to Adam Gaudet as soon as possible; and (4) the trial judge’s findings of fact to the contrary.

I will return to this topic momentarily. The letter further stated any inter-party contact was prohibited “except through legal representation”. It also conveyed this unusual – some might say bizarre – threat: “any disrespect of the [non contact instruction] will be considered a form of trespass and/or harassment and the proper authorities will be contacted immediately”. [ 47 ] By letter dated March 5, 2002, the Department informed Adam Gaudet that he qualified as a new entrant for the year 2002.

The letter advised that if he did not acquire “a core status with all licences attached by December 31 st , 2002, it will be necessary for you to reapply as a new entrant in the new year”. This letter was in response to Mr. Gaudet’s year-old application for new entrant status. In its letter, the Department acknowledged “the delay in completing our review”. [ 48 ] On April 9, 2002, the Department advised the appellant of its decision to issue licence #23622 for two seasons (2002 and 2003), a clear and admitted derogation from its policy of issuing licences for only one year.

The issuance was subject to the following conditions: there could be no request for transfer of the licence and no substitute operator would be allowed aboard the vessel during those two seasons . The letter was silent on what might be permitted after 2003. At any rate, the letter’s apparently immutable conditions were anything but.

Indeed, the Department subsequently agreed to allow another operator to captain the appellant’s boat and use the “privileges of his crab fishing licence for [the 2003] fishing activities” (see Dugas (Bankrupt), Re , 2003 NBQB 220 , 263 N.B.R. (2d) 216 , Léger J. , aff’d 2004 NBCA 15 , 268 N.B.R. (2d) 290 ).

D. The respondents’ first legal action [ 49 ] Two months earlier, more precisely on February 13, 2002, the respondents had filed a Notice of Action with Statement of Claim Attached, seeking a declaration that the appellant was holding licence #23622 in trust pursuant to the Declaration of Trust and Indemnity and an order directing him to fulfill his contractual and fiduciary duties. [ 50 ] On April 26, 2002, a judge of the Court of Queen’s Bench issued an interlocutory order: (1) allowing the appellant to act as “the head of the enterprise” for the purposes of licence #23622 during the 2002 fishing season; (2) directing the appellant (

a) comply strictly with the Department’s “regulations and policies”; (

b) report to Adam Gaudet on crab sales under the licence by way of a statement of disbursements, expenses and profit; and (3) pay the profits into Court until the legal dispute was resolved. The motion judge subsequently suspended repayment of the mortgage debt to the appellant ($114,516.50 out of the original $300,000 loan). [ 51 ] After the appellant filed a Statement of Defence and Counterclaim, an examination for discovery was scheduled for August 22, 2002. On this date, the parties negotiated a settlement, which was incorporated into a Consent Judgment that was signed the very next day. E.

The Consent Judgment [ 52 ] The August 23, 2002 Consent Judgment provides as follows: WHEREAS the Plaintiffs filed a Statement of Claim in the Court of Queen’s Bench of New Brunswick, Trial Division, Judicial District of Bathurst, Province of New Brunswick, under Number B/C/69/02; (The “action”) and the defendant has filed a defence and counterclaim to the said action. WHEREAS the defendant recognizes his obligation to indemnify the Plaintiffs at the fixed and agreed amount of TWO MILLION ONE HUNDRED THOUSAND ($2,100,000.00) CDA dollars.

WHEREAS all parties now agree to settle all outstanding issues of this action; THEREFORE it is hereby agreed and consented that the within action be settled upon the following terms; 1. The defendant, Cyrenus Dugas, shall pay the Plaintiffs the amount of TWO MILLION ONE HUNDRED THOUSAND ($2,100,000.00) CDA dollars, as damages, within Thirty (30) days of the signing of this consent judgment of which FIFTY THOUSAND ($50,000.00) CDA dollars shall be paid by the defendant upon the signing by the parties of this consent judgment; 2.

Upon receiving the payment mentioned in paragraph 1, the Plaintiffs agree to deliver immediately to the defendant the vessel EMY SERGE D. at the Shippagan Harbor, Province of New Brunswick in a good and seaworthy condition. The said vessel shall be free and clear of all encumbrances; 3. It is further agreed that the defendant will release and discharge all encumbrances it currently holds against the plaintiff’s assets and properties simultaneously with compliance by the plaintiffs of the obligation as stated herein; 4. Each [party] shall be responsible for their own costs; 5.

This consent judgment permanently resolves and settles all outstanding matters between the parties.

[ 53 ] As can be seen, the Consent Judgment does not mention licence #23622, its beneficial ownership and the appellant’s fiduciary obligations under the Declaration of Trust. Tax considerations may have played a role in the drafting of Clause 5. Be that as it may, on August 29, 2002, Bernard Roux, another lawyer acting on the appellant’s behalf, informed the Department that the Consent Judgment settled the dispute with the Gaudets and opined the appellant was no longer party to any contract affecting licence #23622.

The Department agreed, advising that, since the legal ties between the appellant and the Gaudets with respect to the licence were severed, the appellant was [TRANSLATION] “reinstated in the core group and […] his status as a commercial fishing licence holder [had] been normalized”. [ 54 ] Whether or not the general and vague wording of Clause 5 sufficed to sever contractual and fiduciary ties, the respondents proceeded on the understanding that, upon payment of the full sum of $2,100,000, the appellant would regain full beneficial ownership of the fishing licences listed in

Schedule “A” of the Declaration of Trust and Indemnity, including licence #23622 and, correlatively, all associated contractual and fiduciary obligations would end. Indeed, in the expectation that the appellant would fulfill his obligations under the Consent Judgment, the Gaudets and their lawyers pressed for a “closing” no later than September 23, 2002, the deadline for payment of the last instalment under the Consent Judgment. They proposed to tender on that occasion: (1) a discharge of the appellant’s obligations under the Declaration of Trust and Indemnity; (2) a release by 508571 N.B.

Ltd. and Adam Gaudet of their interest in licence #23622; (3) a bill of sale for the Emy Serge D., free and clear of all encumbrances; (4) the boat keys; and (5) a letter of direction for the payment of the $2,050,000.

They expected to receive, in exchange, a certified cheque for that sum, as well as a release of the mortgage on Peter Gaudet’s home and property in P.E.I., and any personal guarantees. [ 55 ] There was one problem with that scenario: the appellant never intended to make the final instalment of $2,050,000. [ 56 ] Nevertheless, the appellant’s lawyer, Jacques Cormier, requested the exchange of closing documents and the payment of $2,050,000 be postponed for ten days.

The reason invoked (a “pretext” according to the trial judge): his client’s imminent hospitalization would prevent him from securing the needed financing within the deadline set by the Consent Judgment. The trial judge found the appellant actually secured that financing from a third party, Canadian Ocean Products Ltd., on September 10, 2002, slightly less than two weeks before the deadline of September 23, 2002 for the payment of $2,050,000. Instead of availing himself of that source of funds, the appellant turned to the BIA to avoid payment of his debt under the Consent Judgment. F.

The bankruptcy proceedings [ 57 ] The appellant made an assignment in bankruptcy in late October 2002. His objective was to benefit from the use of licence #23622 without having to pay the $2,050,000 debt. [ 58 ] The Gaudets filed a proof of their claim for that sum, and opposed the appellant’s discharge. The taking of this step, the acceptance of subsequent payouts from the Trustee and the objection to the appellant’s final discharge under the BIA might have proven to be prejudicial strategic miscalculations.

However, the appellant did not plead in his wide-ranging Amended Statement of Defence and Counterclaim that those events, individually or collectively, estopped the respondents from contesting the validity of the Consent Judgment. As a result, the issue does not arise (see Rule 27 of the Rules of Court (“Pleadings”), in particular Rules 27.06(1), Rule 27.06(2) and Rule 27.07(4)). [ 59 ] PricewaterhouseCoopers Inc. was appointed Trustee at the first meeting of the creditors on December 6, 2002. [ 60 ] Throughout the bankruptcy proceedings, the appellant used licence #23622 to generate income.

Starting with the 2002 fishing season, he operated under a new company, 600605 NB Inc. It leased a fishing vessel for the 2002 season and purchased another, the Richard B., for use in the 2003 and subsequent seasons. [ 61 ] In March 2003, the Trustee applied to the Court of Queen’s Bench for, among other relief, an order compelling the appellant to turn over all revenues derived from his fishing activities. The application was prompted by the Trustee’s serious doubts regarding several business transactions carried out by the appellant.

In a decision that was subsequently upheld by this Court (see Dugas (Bankrupt), Re , Léger, J.), the motion judge made the following observations before siding with the Trustee:

Historically, the bankrupt’s crab fishing activities have brought in a substantial amount of income in a very short time. The Trustee has serious doubts regarding several transactions by the Bankrupt in the past. Further, the evidence discloses that the Bankrupt has already been through bankruptcy proceedings in the past. The Bankrupt indicated in his affidavit that he would not be fishing crab in the year 2003 due to health problems. The Bankrupt has made an arrangement with another captain to use the privileges of his crab fishing licence for this year’s fishing activities.

The Department of Fisheries and Oceans has agreed with this arrangement. The Bankrupt does not know the price of the crab and the amount of crab that will be caught. That is normal at the beginning of any fishing season. According to the Bankrupt’s solicitor, the quota allocated to Mr. Dugas in 2003 is 195,000 lbs. Mr. Dugas agrees that he should turn over some of his income to the Estate, but not all the revenues from the fishing activities. He stated through his solicitor that he would agree to turn over 20% of the total income of his fishing activity in 2003.

That is the share usually given to the captain of the boat and that is the share the Bankrupt expects to receive from the 2003 crab fishing activities. The Bankrupt proposes that the Trustee would then assess the amount to be given to the Bankrupt for reasonable living expenses according to the provisions of

section 68 of the Act . The Trustee wishes to have the total income from the 2003 fishing activities paid directly to him and the Trustee would pay the fishing expenses from the revenues. He would then establish the amount to be given to the Bankrupt for living expenses under the provisions of

Section 68 of the Act. […] Considering all of the circumstances of the present case, I find that the most reasonable approach in dealing with the revenues and expenses of the 2003 crab fishing activities is to direct that all revenues from the 2003 crab fishing activities be paid to the Trustee. The Trustee will immediately pay all bona fide arm’s length transactions arising out of the ordinary course of the fishing activities from the revenues of the crab fishing activities. That obviously includes paying the employees salaries and other necessary expenses relating to the 2003 crab fishing activity.

On balance, I am satisfied that the best approach to ensure that the assets are protected is to order that all revenues from the 2003 crab fishing activities under the crab fishing licence #23622 issued to the Bankrupt Cyrenus Dugas be paid directly to the Trustee PriceWaterHouseCoopers Inc. The Trustee is ordered to prepare a report for the benefit of the Bankrupt and the Creditors of all revenues and expenses and then proceed according to the provisions of

Section 68 of the Act .

The present motion will resume on the 2nd of July 2003 at 1:30 P.M. or such other date as the parties may agree in order to determine all unresolved issues relating to the 2003 crab fishing activities including any reasonable expenses. [paras. 8-12 and 18-20] [ 62 ] As a result of that order, the Trustee was able to collect $263,256.22 (for distribution purposes) out of the revenues generated by harvesting snow crab under licence #23622 during the 2003 and 2004 seasons. [ 63 ] On April 23, 2004, the appellant applied for a discharge order. [ 64 ] On May 7, 2004, the Registrar in Bankruptcy ordered, over the objection of the Gaudets and the Trustee, the appellant’s discharge, which was suspended until May 5, 2005 subject to conditions (see Dugas (Re) , 2004 NBQB 200 , [2004] N.B.J.

No. 187 (QL) ). Those conditions reflected the Registrar’s treatment of licence #23622 as a source of income, either through snow crab harvesting or its assignment to a third party, not as seizable and realizable “property” for BIA purposes: This case must be decided by balancing the liabilities with the earning potential of the Bankrupt. The fishing licence is not in and of itself property of the Bankrupt which is subject to seizure by or surrender to the Trustee for sale .

The Federal Government retains ownership of the licences granted and an absolute discretion, when properly exercised, in the renewal by the incumbent holder or his transfer to

another individual. This, however, does not remove the licence from the court’s consideration. The exploitation of the licence permits the earning of a substantial revenue and its transfer, when authorized by the DFO, can be negotiated for a significant payment.

To give effect to the objectives of the Act , these circumstances must be considered when establishing conditions for discharge. […] Although ultimate control of the licence rests with the Federal Government such that it cannot be assigned and resold at will, it would be frivolous to suggest that the Bankrupt has no legal or equitable right to the benefits conferred by this permit, as long as he is exploiting it in accordance with DFO policies. [Parliament] has granted a right that is not exclusive to an individual but to a group of persons, fishers in the administrative zone, who are entitled to have that right assigned.

The possibility of assignment results in competition and consequent commercial value that could be realized as income by the holder upon its devise. To hold that such income should be withheld from the estate and not inure to the benefit of creditors would be contrary to the principles of the bankruptcy legislation. […] The discharge of the Bankrupt will be granted but its operation shall be suspended until the 5th day of May 2005 and shall be subject to his completion of the following conditions.

During this period the Bankrupt shall file a complete and accurate financial statement for each month of the bankruptcy both precedent and subsequent to this decision and shall fully cooperate with the Trustee, whose rights under the Act remain undiminished, in any administrative and judicial procedures undertaken to ascertain the financial situation of the Bankrupt and recover assets to which the Estate is entitled. The Bankrupt shall tender payments on any surplus income received from the date of the assignment until May 5, 2005 in accordance with the Superintendent’s Directive.

Should the Bankrupt choose during this period to assign his rights to licence #23622 in an arm’s length transaction, 30% of the consideration tendered shall be deemed to be income for purposes of calculating payments.

Should the Bankrupt choose to assign his rights to licence #23622 in a non-arm’s length transaction, 70% of a deemed fair market value shall be considered to be income for the purposes of calculating payments . [paras. 23, 26 and 35] [Emphasis added.] [ 65 ] By decision dated October 20, 2005, the Registrar confirmed the appellant’s absolute discharge under the BIA . [ 66 ] On January 3, 2007, PricewaterhouseCoopers was discharged as Trustee pursuant to s. 41(1) of the BIA .

Prior to this time, the parties and the Registrar in Bankruptcy had accepted and acted upon the view that the fishing licences held in the name of the appellant were not seizable and realizable “property” for bankruptcy purposes. [ 67 ] On October 24, 2008, the Supreme Court of Canada rendered its decision in Saulnier v. Royal Bank of Canada , 2008 SCC 58 , [2008] 3 S.C.R. 166 , which jettisoned the commonly accepted understanding of the BIA by holding its definition of “property” could, in certain circumstances, encompass fishing licences issued by the Department of Fisheries and Oceans.

Believing that, under Saulnier , the fishing licences held in the appellant’s name constituted assets that had not been previously realized, PricewaterhouseCoopers applied for reappointment as Trustee of the appellant’s estate pursuant to s. 41(11) of the BIA , which reads as follows: 41(11) The court, on being satisfied that there are assets that have not been realized or distributed, may, on the application of any interested person, appoint a trustee to complete the administration of the estate of the bankrupt, and the trustee shall be governed by the provisions of this Act, in so far as they are applicable. 41(11) Après s’être assuré que certains avoirs n’ont pas été réalisés ou distribués, le tribunal peut, à la demande de toute personne intéressée, nommer un syndic pour achever l’administration de l’actif du failli, et le syndic se guidera sur les dispositions de la présente loi, dans la mesure où elles sont applicables.

The Trustee’s application could only succeed if two conditions were met:

(1) Saulnier covers fishing licences subject to contractual and trust terms such as the ones affecting licence #23622; and (2) retrospective effect could be given to that decision. The first condition does not appear to have been considered.

[68] A judge of the Court of Queen’s Bench ordered the sought-after reappointment and vesting inthe Trustee of whatever licence-related interest the appellant did have (see Dugas (Bankrupt), Re, 2012 NBBR 48 , 2012 NBQB48, 384 N.B.R. (2d) 98). This Court reversed on the grounds that Saulnier did not have retrospective application (see Dugas v.PricewaterhouseCoopers Inc. and Gaudet et al.). It bears mention that the respondents sought and obtained leave to intervene as“parties” to the appeal (see PricewaterhouseCoopers Inc. v. Dugas, [2012] N.B.J. No. 126 (C.A.) (QL)).

Had our Court reversed ongrounds susceptible of triggering the application of the doctrine of issue estoppel, this intervention could have proven to be a verydamaging procedural misstep. Happily for the respondents, this scenario did not materialize. That said, it may be an opportune momentto delineate the true reach of Saulnier. [69] Saulnier does not cover a situation where the bankrupt is a mere licence holder without anyproprietary right in the species harvested and the resulting earnings. The decision stands for the following proposition.

For fishinglicences to constitute seizable and realizable “property” for bankruptcy purposes the holder must have more than a right to fish; that rightmust be coupled with a proprietary right in the fish harvested and the earnings from its sale.

Thus, the appellant could only have aproprietary right in the crab harvested under licence #23622 and any resulting earnings if, despite his failure to pay the judgment debt of$2,050,000, Clause 5 of the Consent Judgment unraveled the prior sale of that licence and freed him of his fiduciary obligations underthe Declaration of Trust and Indemnity. [70] The Registrar made no such determination; he simply dealt with the licence as a source ofdistributable income, whether through harvesting under its authority or its possible assignment for consideration to a third party.

In theresult, the bankruptcy proceedings did not attempt to, let alone actually, resolve the issue of beneficial ownership of licence #23622. G. The underlying action [71] On December 22, 2004, the Gaudets filed an application in the Court of Queen’s Bench for: (1)an order setting aside the August 23, 2002 Consent Judgment; (2) licence-related declaratory and mandatory relief previously claimed inthe action that culminated with the Consent Judgment; and (3) an award of damages commensurate with the profit generated byharvesting snow crab under the authority of licence #23622 during the post-2001 seasons.

On June 6, 2005, a judge of the Court ofQueen’s Bench ordered the application’s conversion to an ordinary action: Peter Gaudet et al. v. Dugas, 2005 NBQB 200. In hisdecision, McNally J. observed that a determination of disputed key facts “ought not to be decided solely on the basis of affidavitevidence or under the constraints that are inherent in the Notice of Application procedure”. I agree, and would add the following. It iscritically important that judges, in disposing of interlocutory motions or applications, limit their observations to what is necessary todispose of the claim for relief.

Going beyond the strictly necessary invariably sows confusion over the state of the factual record uponwhich the ultimate merits-based decision stands to be made. [72] In their Amended Statement of Claim, the respondents make the following allegations: On January 29, 1999, the Defendant executed a Declaration of Trust and Indemnity (hereinafter the Declaration of Trust) with thePlaintiffs, 508571 N.B.

Ltd. and Adam Gaudet, wherein the Defendant declared that he held various fishing licences and permits,including Oyster Permit No. 25341, Mackerel Permit No. 45432, Snow Crab Permit No. 23622, in trust for the Plaintiffs 508571 N.B.Ltd. and Adam Gaudet, their heirs, successors and assigns. The Trust Agreement also stated that the Plaintiffs, 508571 N.B. Ltd. andAdam Gaudet are the true owners of the licences. […] […] The Plaintiffs, Peter Gaudet and Adam Gaudet, received notice from the Defendant’s solicitor dated January 31, 2002, alleging that itwould be impossible for the Defendant to complete the Agreements.

The Defendant’s solicitor instructed the Plaintiffs to terminate anyform of contact with the Defendant except through legal representation. As a result of the Defendant’s refusal to transfer the Licences held in trust, the Plaintiffs brought an action against the Defendant forvarious remedies, including specific performance of the Agreements. The parties agreed to settle the action on the condition that the Defendant pay $50,000.00 to the Plaintiffs upon the signing of Consent Judgment dated August 22nd, 2002 and an additional $2,050,000.00 within thirty (30) days of the signing of the Consent Judgment.

TheDefendant has failed to satisfy the condition and pay the $2,050,000.00 to the Plaintiffs within the prescribed thirty (30) day period or at

all. On October 28, 2002, the Defendant voluntarily assigned himself into bankruptcy for the second time within a ten year period.

The Plaintiffs say at the time of agreeing to the settlement of the action and the Consent Judgment consequent thereon the Defendant had no intention of complying with the terms thereof and that he misrepresented his intentions to the Plaintiffs for the purpose of inducing them to enter into said settlement and Consent Judgment and such misrepresentation does thereby render said settlement and Consent Judgment void at law or voidable at the instance of the Plaintiffs. […] The Plaintiffs say the Defendant was in a fiduciary relationship with them and the Defendant breached the fiduciary duties of trust, good faith dealing and avoidance of conflict of interest which it owed to the Plaintiffs and the Plaintiffs suffered damage as a result thereof.

Further, or in the alternative, the Plaintiffs rely upon the doctrine of fundamental breach and say the said settlement and Consent Judgment should be set aside. The Plaintiffs say further that the Trust Agreement referred to in paragraph 9 remains in full force and effect and the Defendant must “assign and transfer” to the Plaintiffs, or to a nominee designated by the Plaintiffs, the benefit of the Licences given that: (

i) The Defendant’s obligations pursuant to the Trust Agreement remain in full force and effect as the Defendant has not complied with the terms and the Conditional Consent Judgment as aforesaid; and (ii) The Consent Judgment does not, in any event, provide that the Defendant’s obligations pursuant to the Trust Agreement are terminated in any way. Further, or in the alternative, the Plaintiffs say that the Defendant’s assignment in bankruptcy does not affect the validity and enforceability of the Trust Agreement, as per the decision of the Registrar, Mr. Michael J.

Bray, dated May 7, 2004, which provides for a conditional discharge of the Defendant and which states as follows at paragraph 23: The fishing licence is not in and of itself property of the Bankrupt which is subject to seizure or surrender to the Trustee for sale. The Plaintiffs therefore claim against the Defendant the following:

a) An Order declaring that the Share Transfer Agreements respectively dated December 13, 1998 and January 22, 1999 between the Plaintiffs, Peter Gaudet and 508571 N.B. Ltd., and the Defendant are valid and legally binding between the parties;

b) An Order declaring that the Declaration of Trust and Indemnity dated January 29 th , 1999 between the Plaintiffs, Adam Gaudet and 508571 N.B. Ltd., and the Defendant is valid and legally binding between the parties and the said fishing licences and all benefits arising therefrom are held in trust by the Defendant as Trustee for the benefit of the Plaintiffs or some one or more of them;

c) A Mandatory Order, in furtherance of the Agreement and Declaration of Trust aforesaid, compelling the Defendant to co-operate and take all steps necessary to facilitate the transfer of the fishing licences and permits, including Oyster Permit No. 25341, Mackerel Permit No. 45432, Snow Crab Permit No. 23622 (the “Licences”) to Adam Gaudet or other qualified fisher as designated by the Plaintiffs, including signing the application and other documents as required by the Department of Fisheries and Oceans to effect a transfer;

d) A Mandatory Order, in furtherance of the Agreements and Declaration of Trust aforesaid, compelling the Defendant to sign or cause any person holding his attorney to sign all application or other documentation required by the Department of Fisheries and Oceans

for the transfer of the Licences and to do so no later than 72 hours after the Defendant is advised of the requirement for his signature;

e) In the alternative, an Order that the Conditional Consent Judgment dated August 22, 2002 be set aside, and that the Plaintiffs return the initial deposit in the sum of $50,000.00 to the Defendant;

f) In the further alternative, damages for breach of the Agreement and Declaration of Trust, including, but not limited to, the fair market value of the property and licences as provided for in the Agreement;

g) aggravated damages;

h) interest;

i) costs on a solicitor/client basis;

j) such further and other relief as this Honourable Court may deem just and expedient. [paras. 9, 14-17 and 19-22] [Underlining in original.] [ 73 ] In the Amended Statement of Defence and Counterclaim, the appellant contends: (1) the Consent Judgment gives rise to res judicata (cause of action estoppel); (2) the order of discharge issued by the Registrar in Bankruptcy released the appellant from all liability to the respondents; (3) the contract between the parties was unlawful; and (4) in any event, it is unenforceable, having been frustrated by the unwillingness of the Department of Fisheries and Oceans to approve the transfer of licence #23622 into Adam Gaudet’s name.

The appeal does not bring into play the issue of contract lawfulness or any aspect of the Counterclaim. That being so, no useful purpose would be served by a discussion of their merits. [ 74 ] The trial judge found the Consent Judgment was void ab initio because it was the product of dishonest misrepresentations on the appellant’s part. He also held the Registrar’s order of discharge did not insulate the appellant from liability for breach of his fiduciary duties, having regard to s. 178(1) (

d) of the BIA , which states that an order of discharge does not release the bankrupt from any liability arising out of any “misappropriation” while acting in a fiduciary capacity. The trial judge concluded the contract between the parties had not been frustrated, distinguishing on the facts this Court’s decision in Doucette and 508428 N.B. Limited, a body corporate v. Jones . The judge was satisfied that, at the end of the day, “the only way to do justice in this case [was] to order the transfer of the fishing licences held in trust by [the appellant] for the benefit of Adam Gaudet ” (para. 255 ).

He wrapped up the proceedings by awarding damages of $2,384,162. [ 75 ] The trial judge assessed damages at that amount on the basis of the net licence-generated earnings appropriated by the appellant for more than a decade, from 2002 to 2014. The judge deducted from that total: (1) estimated taxes; (2) the balance of the purchase price owing to the appellant ($114,516.50); (3) the $50,000 he paid on August 23, 2002; and (4) the sum of $263,256.22 paid by the Trustee to the respondents.

The trial judge then added interest totalling $230,043 and a federal subsidy of $242,703 received by the appellant qua holder and owner of licence #23622. After making further adjustments for tax and interest, the trial judge arrived at the final figure of $2,384,162. He then awarded costs of $125,533 pursuant to Rule 59, Tariff “A”, Scale 5, HST and taxable disbursements. [ 76 ] The formal judgment issued in the court below provides as follows:

a) The Court confirms that the agreement of transfer of shares dated December 15 th , 1998 and that of January 22 nd , 1999 which was executed between Peter Gaudet and 508571 N.B. Ltd. and Cyrennus Dugas is valid and that it binds the parties, and that accordingly the transaction therein contemplated was concluded on January 29 th , 1999.

b) The Court recognizes that the Declaration of Trust and Indemnity dated January 29 th , 1999 between Adam Gaudet and 508571 N.B. Ltd. and Cyrennus Dugas is valid and that it binds the parties, and that accordingly the Declaration of Trust and Indemnity is

therefore enforceable.

c) The Court issues a mandatory order directing Mr. Dugas to cooperate and to take all means necessary to ensure and to facilitate the transfer of the fishing licences which are the subject of the Declaration of Trust and Indemnity to Adam Gaudet or to any other person of his choosing. The Court orders Mr. Dugas to sign all requests and other documents required by the Department of Fisheries and Oceans Canada to give effect to such transfer.

d) The Court issues a mandatory order directing Mr. Dugas to sign or to allow [any] person holding a power of attorney signed by him to sign all requests and other documents required by the Department of Fisheries and Oceans Canada to give effect to the transfer of the fishing licences that are [covered] by the Declaration of Trust and Indemnity, so that such transfer can take place. Mr. Dugas shall have 72 hours to provide his signature after having been advised that his signature is so required.

e) In the alternative, should Cyrennus Dugas fail to attend in order to provide his signature as provided for in the within Order, and should the Department of Fisheries and Oceans Canada fail to recognize the power of attorney provided by Cyrennus Dugas in favour of Adam Gaudet, then the Court orders, pursuant to

section 37 of the Judicature Act , that the Clerk of the Court of Queen’s Bench of New Brunswick shall have authority to execute all documents necessary to give effect to the transfer of the licences which are the subject of the Declaration of Trust and Indemnity and for all practical means shall have the net effect as if such documents has been signed or endorsed by Cyrennus Dugas, following his own obligation to execute such documents by the within order.

f) The Defendant shall pay to the Plaintiffs the sum of $2,384,162.00 as special damages net of income taxes.

g) The Defendant shall pay the Plaintiffs [their] costs relating to fees in the sum of $125,533.00 and HST of $16,319.29 plus disbursements to be determined at a later date by the undersigned Clerk of the Court of Queen’s Bench of New Brunswick at the Judicial District of Moncton. [ 77 ] In the Amended Notice of Appeal, the appellant contends the trial judge erred in law and in fact: [TRANSLATION]

a) In concluding that the agreement between the parties was not frustrated despite the decisions of this Court in PricewaterhouseCoopers Inc. et al. , 2012 NBCA 85 , and Doucette et al. v. Jones , 2006 NBCA 38 , thereby refusing to apply the doctrine of stare decisis;

b) In concluding that the Consent Judgment of August 23, 2002 was null ab initio , instead of finding it disposed of all contested issues in the action between the parties;

c) In failing to find the respondents’ action was res judicata , having regard to the fact that the questions raised by the respondents had been decided in two previous proceedings, [ Dugas (Re) ], 2004 NBQB 200 and Dugas v. PricewaterhouseCoopers Inc. and Gaudet et al. ; and

d) In adopting an erroneous

interpretation of s. 178(1) (

d) of the Bankruptcy and Insolvency Act . [ 78 ] Unlike the original Notice of Appeal, the amended version does not take issue with the trial judge’s assessment of damages and his award of costs. [ 79 ] As mentioned, following dismissal of a motion by the appellant for a stay of the judgment, the Department approved Adam Gaudet as holder of licence #23622. [ 80 ] On April 14, 2016, we dismissed the appeal, with reasons to follow.

III. Analysis [ 81 ] While an appellant can only rely on the grounds stated in the Notice of Appeal or Amended Notice of Appeal (Rule 62.09), minor amendments are often made in the Appellant’s Submission, and as long as they do not expand the stated grounds no issue arises. In the case at hand, the stated grounds are occasionally reformulated in the Appellant’s Submission, mostly for clarification purposes. Bearing in mind the limits imposed by Rule 62.09, the questions submitted for our consideration are: (1) could the trial judge reject the defence of frustration despite this Court’s “observations” in Dugas v.

PricewaterhouseCoopers Inc. and Gaudet et al. and the precedential authority of Doucette and 508428 N.B. Limited, a body corporate v. Jones ?; (2) did he err in determining the Consent Judgment was void ab initio , rather than holding it settled the dispute through the doctrine of cause of action estoppel?; (3) did the doctrine of issue estoppel ordain the dismissal of the action, findings favourable to the respondents and essential to the success of their claims being precluded by statements of the Registrar in Dugas (Re ) and “observations” in Dugas v.

PricewaterhouseCoopers Inc. and Gaudet et al. ?; and (4) did the doctrine of issue estoppel foreclose the trial judge’s finding of a dishonest “misappropriation” of licence #23622 and its benefits, a condition precedent to the application of s. 178(1)(

d) of the BIA and the post-discharge survival of the appellant’s liability in damages for breach of trust? [ 82 ] In my respectful view, and for the reasons that follow, each question must be answered

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