2012 NBCA 85, 2012 NBCA 85

COURT OF APPEAL OF NEW BRUNSWICK 19-12-CA CYRENUS JOSEPH DUGAS (Respondent) APPELLANT CYRENUS JOSEPH DUGAS (Intimé) APPELANT - and - - et - PRICEWATERHOUSECOOPERS INC., in its capacity as Trustee in Bankruptcy (Applicant) RESPONDENT PRICEWATERHOUSECOOPERS INC., en sa qualité de syndique de faillite (Requérante) INTIMÉE - and - - et - PETER GAUDET, ADAM GAUDET, 508571 N.B. LTD., 100167 P.E.I. INC. and LES INVESTISSEMENTS ÉMY INC. INTERVENORS PETER GAUDET, ADAM GAUDET, 508571 N.B. LTD., 100167 P.E.I. INC. et LES INVESTISSEMENTS ÉMY LTÉE INTERVENANTS Dugas v.

PricewaterhouseCoopers Inc. and Gaudet et al., 2012 NBCA 85 Dugas c. PricewaterhouseCoopers Inc. et Gaudet et autres, 2012 NBCA 85 CORAM: The Honourable Justice Robertson The Honourable Justice Bell The Honourable Justice Green CORAM : L’honorable juge Robertson L’honorable juge Bell L’honorable juge Green Appeal from a decision of the Court of Queen’s Bench: February 14, 2012 Appel d’une décision de la Cour du Banc de la Reine : Le 14 février 2012

History of case: Decision under appeal: 2012 NBQB 48 Preliminary or incidental proceedings: Court of Appeal [2012] N.B.J. No. 126 (QL) [2012] N.B.J.

No. 89 (QL) 2004 NBCA 15 (NB CA), 261 NBR (2d) 99 Court of Queen’s Bench 2005 NBQB 362 2004 NBQB 200 2003 NBQB 220 2003 NBQB 197 Historique de la cause : Décision frappée d’appel : 2012 NBBR 48 Procédures préliminaires ou accessoires : Cour d’appel [2012] A.N.-B. no 126 (QL) [2012] A.N.-B. no 89 (QL) 2004 NBCA 15 (NB CA), 261 R.N.-B. (2e) 99 Cour du Banc de la Reine : 2005 NBBR 362 2004 NBBR 200 2003 NBBR 220 2003 NBBR 197 Appeal heard: May 24, 2012 Appel entendu : Le 24 mai 2012 Judgment rendered: October 11, 2012 Jugement rendu : Le 11 octobre 2012 Reasons for judgment by: The Honourable Justice Bell Motifs de jugement : L’honorable juge Bell Concurred in by: The Honourable Justice Robertson The Honourable Justice Green Souscrivent aux motifs : L’honorable juge Robertson L’honorable juge Green

Counsel at hearing: For the appellant: Charles A. LeBlond, Q.C. For the respondent: Chantal A. Thibodeau For the intervenors: Eugene J. Mockler, Q.C., and Christian Michaud Avocats à l’audience : Pour l’appelant: Charles A. LeBlond, c.r. Pour l’intimée : Chantal A. Thibodeau Pour les intervenants : Eugene J. Mockler, c.r., et Christian Michaud THE COURT The appeal is allowed. The appellant will have one set of costs of $5,000 payable jointly and severally by the respondent and the intervenors. LA COUR L’appel est accueilli.

L’intimée et les intervenants sont solidairement condamnés à verser à l’appelant, en une seule masse, des dépens de 5 000 $. The judgment of the Court was delivered by BELL J.A. I. Introduction [ 1 ] The Department of Fisheries and Oceans (DFO) does not permit the transfer of fishing licences from one zone to another. Cyrenus Joseph Dugas lives in Lamèque, New Brunswick, which is not in the same zone as Tignish, Prince Edward Island, where Peter and Adam Gaudet reside. In 1998 and 1999, Messrs.

Gaudet apparently believed, for reasons not at all apparent, that they could convince the Minister of Fisheries and Oceans (MFO) to transfer fishing licences owned by Mr. Dugas to them. They entered into agreements with Mr. Dugas related to the acquisition of fishing licences, a vessel, personal services from Mr. Dugas and other consideration. In the result, they received considerable return on investment for the monies paid, but, because of DFO’s policy, they did not obtain the fishing licences. This is the backdrop to a saga in which Mr.

Dugas made an assignment in bankruptcy, the Gaudets believe they did not obtain the benefit of their bargain and the t rustee in bankruptcy applied by way of motion to a justice of the Court of Queen’s Bench, many years after Mr. Dugas’ and the trustees’ own discharge, to be reappointed as t rustee pursuant to s. 41(11) of the Bankruptcy and Insolvency Act , R.S.C. 1985, c. B-3 ( BIA). The sole purpose of the motion for reappointment was to permit the trustee to realize upon and sell Mr. Dugas’ fishing licences. The motion judge allowed the motion. Mr. Dugas now appeals. II.

Facts and my observations regarding the intervenors’ contention the appellant has misused the BIA [ 2 ] Cyrenus Joseph Dugas is a lifelong fisherman who has lived in Lamèque, New Brunswick since 1969. He has a Grade 4 education and is illiterate. He fishes and his spouse looks after the financial aspects of the business. He became a boat captain in 1973, at which time he purchased his first boat, the Emy-Serge D. In 1977, DFO granted him snow crab licence No. 23622. Although it is this snow crab licence which is at the heart of the dispute between the parties, Mr.

Dugas has two other commercial fishing licences: Oyster Licence No.25341 and Mackerel Licence No.45432. All licences are issued by DFO for a period of one year. Mr. Dugas has received renewals every year, up to and including 2012. Although Mr. Dugas has operated his fishing business through various numbered companies over the years, he has always held personal title to the licences.

[3] In the fall of 1998, Adam Gaudet and his father, Peter Gaudet, having learned of Mr. Dugas’interest in selling his fishing business, contacted Mr. Dugas regarding its potential purchase. Messrs. Gaudet live in Tignish, PrinceEdward Island. On December 15, 1998, Mr. Dugas entered into a Share Transfer Agreement with Peter Gaudet concerning the sale of allof Mr. Dugas’ shares in 508571 N.B. Limited. In addition, Mr. Dugas undertook, among other things, to make every effort to transfer thelicences, which were held in his personal name, to Peter Gaudet. The agreement also stipulated that Mr.

Dugas was to hold the licencesin trust for Mr. Gaudet until the transfer was approved by DFO. [4] In January 1999, the parties took additional steps to consummate their transaction, including:the transfer of Mr. Dugas’ interest and goodwill associated with the fishing activities and the execution of a Declaration of Trust andIndemnity in favour of Adam Gaudet and a numbered company. Later that winter, the parties concluded the sale at the price of$1,300,000, and agreed the Gaudets were responsible for obtaining the consent and approval of DFO for the transfer of the licences.

TheGaudets tendered $1,185,483.50 to Mr. Dugas, who then transferred possession of the Emy-Serge D., as required by the agreement. [5] The fishing licences were never transferred to the Gaudets because, as already indicated,transfers between administrative zones are contrary to DFO policy. As a result, Mr. Dugas, Peter Gaudet and Adam Gaudet fished crabas a joint-undertaking in the years 1999, 2000 and 2001. This arrangement was subject to the strict scrutiny of DFO, which threatenedloss of licence rights if Mr. Dugas ceased to remain “chef d’entreprise” in this activity. On April 4, 2001 the MFO informed Mr.

Dugasthat his status as a snow crab licence holder was under review and that the substitute operator he had designated for the 2000 seasoncould not continue in 2001. The Minister purported to enforce the Fisheries Licensing Policy for the Gulf Region. [6] It is not without considerable effort that Mr. Dugas sought to obtain permission for him andthe Gaudets to fish during the 2001 season. In the spring of 2001, the Federal Court dismissed Mr.

Dugas’ application for an interiminjunction by which he had sought to order the Minister to deliver the necessary permits to enable him and the Gaudets to engage in thefishery for the 2001 season (2001 FCT 379). In a letter dated April 27, 2001, the Minister expressed concern that the transaction withAdam Gaudet contravened three provisions of the Fisheries Licensing Policy, not the least of which was that a substitute licence couldonly be granted to Mr. Gaudet if he resided in the same administrative zone as Mr. Dugas. Eventually, the Minister relented somewhatwhen, on May 1, 2001, he informed Mr.

Dugas he would issue a temporary licence which would be valid until July 15, 2001. In thesame letter, the Minister stated that during the period of validity, DFO would not entertain any request for issuance of the licence toanother fisher and that a final decision on the renewal of Mr. Dugas’ licences would be forthcoming. [7] Believing his licences were in jeopardy, Mr. Dugas set out to preserve them in 2002 byreturning to commercial fishing. For that purpose, he incorporated a new company and leased a boat. As a result of Mr.

Dugas’ efforts,DFO delivered licences for both the 2002 and 2003 seasons, albeit with very strict conditions, one of which was that the licences couldnot be delivered to a substitute operator. Mr. Dugas took these steps without advising the Gaudets. [8] Meanwhile, the Gaudets filed a Notice of Action on February 14, 2002 alleging a breach of theagreements. This culminated in the filing of a Consent Order on August 23, 2002, pursuant to which Mr.

Dugas agreed to pay theGaudets and two numbered companies controlled by them, a total of $2,100,000; $50,000 of which was to be paid on signing, and thebalance due within 30 days. Upon receipt of payment in full, the Gaudets were to return the vessel Emy-Serge D. to Mr. Dugas andexecute full and complete releases and discharges in his favour. Mr. Dugas made no payments pursuant to the consent order other thanthe initial $50,000. [9] Given his inability to pay the consent judgment, Mr. Dugas made an assignment in bankruptcyon October 27, 2002.

On November 7, 2002, after having assured DFO that the Consent Order had terminated his contractualrelationship with the Gaudets, DFO reinstated Mr. Dugas as a licence holder with full fishing privileges. [10] It cannot be overlooked that letters sent by the Gaudets’ counsel to the National Bank of Canadaand fish processors in late September and early October of 2002, stating that all proceeds otherwise due to Mr. Dugas were to be paid tothem, limited Mr. Dugas’ ability to obtain funding with which to pay the consent judgment. [11] At the time of his bankruptcy on October 27, 2002, Mr.

Dugas’ only creditors were Peter andAdam Gaudet, who filed a proof of claim for unsecured debt in the amount of $2,050,000.00. At the first meeting of creditors RandolphP. Jones was appointed as trustee in bankruptcy on behalf of PricewaterhouseCoopers. Mr. Jones had also been the trustee in bankruptcyfor the estate in Caisse Populaire de Shippagan Ltée v. Ward (2000), (NB KB), 229 N.B.R. (2d) 121, [2000] N.B.J.No. 378 (Q.B.) (QL), in which it was held that fishing licences were not realizable property for the purposes of the BIA.

Because of thisdecision, which followed a decision by the Québec Court of Appeal in Noël (Syndic) (Re) [1994] J.Q. 978 (QL), all parties appear to

have accepted that the licences were not realizable by the trustee in bankruptcy. [ 12 ] On March 11, 2003 the trustee in bankruptcy filed a motion, seeking an order that a portion of the income from Mr. Dugas’ fishing enterprise be paid directly to him. In a decision reported at 2003 NBQB 220 , a justice of the Court of Queen’s Bench granted the motion, which was upheld on appeal: Dugas (Re), 2004 NBCA 15 , 268 N.B.R. (2d) 290 . [ 13 ] On April 23, 2004, Mr. Dugas applied for a discharge, which was opposed by both the Gaudets and the t rustee in bankruptcy on grounds of “public policy”.

Nevertheless, the Registrar granted the discharge but suspended it until May 5, 2005 on the condition that Mr. Dugas remit a portion of the revenue from his fishing activities to the t rustee. No appeal was taken from that decision. [ 14 ] Mr. Dugas received his discharge on May 5, 2005, and the t rustee was discharged on January 3, 2007. On October 24, 2008 the Supreme Court of Canada released its decision in Saulnier v.

Royal Bank of Canada , 2008 SCC 58 , [2008] 3 S.C.R. 166 , which held that fishing licences issued by DFO constitute “property” for purposes of the BIA and are therefore realizable by a t rustee in bankruptcy . Saulnier was followed in Caines (Re), 2010 NLTD 72 , [2010] N.J. No. 123 (QL) , where the Court allowed the seizure of fishing licences even though the bankrupt had been discharged. I would note, however, that in Caines the trustee advised the bankrupt that the issue of “ownership” of the fishing licences was before the Supreme Court and its decision on the matter might have an impact on the bankruptcy.

Furthermore, in Caines, the trustee had not been discharged when the Supreme Court rendered its decision in Saulnier . [ 15 ] In light of the Saulnier and Caines decisions, the respondent brought a motion for its reappointment pursuant to s. 41(11) of the BIA , which provides as follows: Appointment of trustee by court to complete administration 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. Nomination d’un syndic par le tribunal pour achever l’administration 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. [ 16 ] The respondent brought its motion more than three years after the Saulnier decision, five years after the discharge of the trustee and nearly seven years after Mr. Dugas’ discharge.

In a decision reported at 2012 NBQB 48 , the motion judge reappointed the t rustee and ordered that the interest of Mr. Dugas in the commercial fishing licences vest in it. [ 17 ] Lest anyone conclude, as was advanced by the intervenors on the hearing of this appeal, that Mr. Dugas is using the BIA for some improper purpose or to commit a fraud upon the Gaudets, a brief

summary of some of the steps taken by Mr. Dugas to respect the 1998 and 1999 agreements is in order: 1. Mr. Dugas agreed to transfer his fishing vessel, Emy-Serge D. to the Gaudets. This vessel, valued at between $750,000 and $1,000,000, was transferred as required. 2. Mr. Dugas agreed to be present upon the “fishing vessel utilizing the crab licence during the crab fishing season” without remuneration. Since Mr. Dugas held the licence, it was essential that he be on the vessel until such time as the Gaudets had succeeded in convincing the Minister to transfer the licence.

Based upon the language of the agreement and the evidence, it is apparent the parties contemplated Mr. Dugas’ presence on the vessel would be required for only the 1999 season. Not only did Mr. Dugas respect this requirement, he provided services to the Gaudets, for no remuneration, for the 2000 and 2001seasons.

3. The Gaudets received all revenue from the delivery of crab in 1999, 2000 and 2001 which totaled $1,728,810.79. 4. The Gaudets were responsible for arranging the transfer of the licence. This they failed to do. Mr. Dugas was responsible to execute whatever documents were necessary to facilitate the transfer. Mr. Dugas did everything possible to respect this condition, including taking action in the Federal Court against the Minister. Prior to Mr. Dugas’ bankruptcy, the Gaudets had therefore benefited from the contracts to the fullest extent possible. Following Mr.

Dugas’ assignment in bankruptcy, the respondent realized from Mr. Dugas, among other assets, his net fishing revenues for 2003 and 2004, which, according to the trustee, were $602,725.45. [ 18 ] I am of the view the issue before the Court arises, not because of any improper use of the BIA by Mr. Dugas, but as a result of the Gaudets’ inability to convince the MFO to transfer fishing licences between zones and Mr. Dugas’ inability to raise the funds contemplated by the consent order.

The Gaudets knew or ought to have known of the DFO requirements prior to entering into the 1998 and 1999 agreements and prior to paying Mr. Dugas in full. [ 19 ] I have set out this history, and my observations, for the sole purpose of ensuring balance is maintained in the assessment of the positions advanced by the parties. This is important given the intervenors’ assertion of improper or even fraudulent conduct on the part of Mr. Dugas. As is evident, I do not accept any such assertion. The legal issues raised will be considered without any fear that the BIA is being abused by any party. III.

Issues [ 20 ] The appellant contends the motion judge erred when he re-appointed the respondent as the t rustee in bankruptcy of his estate and ordered that the fishing licences constituted realizable property for purposes of the BIA . While the appellant bases his appeal upon several grounds, I would reduce them to the following: 1. The motion judge erred when he concluded Saulnier applied retrospectively to the facts of this case. 2.

The motion judge erred by failing to conclude the issues before him were res judicata. [ 21 ] For the reasons set out below, I agree with the positions advanced by the appellant, would allow the appeal and would set aside the re-appointment of the respondent as t rustee of Mr. Dugas’ estate. IV. Analysis A.

Retrospectivity of common law developments [ 22 ] In concluding the Saulnier decision had retrospective effect, which would permit him to conclude the fishing licences constitute unrealized property of the bankrupt, the motion judge observed: After an exhaustive review of the case law on the subject matter, Hall, J. in Caines came to the conclusion that the Saulnier decision has a retrospective effect in that it constitutes clarification and a clear statement of the rule of law that applies to a situation of this nature. This Court agrees and the same principles would apply to the case at bar. [para. 40]

[23] In the course of his analysis, the motion judge cited both Caines and British Columbia v.Imperial Tobacco Canada Ltd., 2005 SCC 49, [2005] 2 S.C.R. 473. The facts in Caines are distinguishable from those in the presentcase. Significantly, in Caines, the trustee had not been discharged at the time the motion for reappointment was made. A careful readingof British Columbia v. Imperial Tobacco Canada Ltd. reveals the very limited retrospective effect accorded to developments in thecommon law.

Those developments are binding in the case under consideration, cases in which proceedings have commenced but havenot yet terminated, and, of course, cases whose facts arise subsequent to the decision. Major J. stated as follows: It might also be observed that developments in the common law have always had retroactive and retrospective effect. Lord Nichollsrecently explained this point in In re Spectrum Plus Ltd., [2005] 3 W.L.R. 58, [2005] UKHL 41, at para. 7: A court ruling which changes the law from what it was previously thought to be operates retrospectively as well as prospectively.

Theruling will have a retrospective effect so far as the parties to the particular dispute are concerned, as occurred with the manufacturer ofthe ginger beer in Donoghue v Stevenson (FOREP), [1932] AC 562. When Mr Stevenson manufactured and bottled andsold his ginger beer the law on manufacturers' liability as generally understood may have been as stated by the majority of the SecondDivision of the Court of Session and the minority of their Lordships in that case. But in the claim Mrs Donoghue brought against MrStevenson his legal obligations fell to be decided in accordance with Lord Atkin's famous statements.

Further, because of the doctrine ofprecedent the same would be true of everyone else whose case thereafter came before a court. Their rights and obligations would bedecided according to the law as enunciated by the majority of the House of Lords in that case even though the relevant events occurredbefore that decision was given.

This observation adds further weight, if needed, to the view that retrospectivity and retroactivity do not generally engage constitutionalconcerns. [Emphasis is mine] [para. 72] [24] I am of the view that in this case, the governing law was the law as it existed in New Brunswickat the time the trustee was discharged. The lis between Mr. Dugas and the trustee had long been resolved at the time the Saulnier decisionwas rendered. Although the trustee and the Gaudets appear not to have been satisfied with the result, neither party appealed theRegistrar’s decision to discharge Mr.

Dugas. [25] If one were to accept the retrospective approach to the law as adopted by the motion judge,every time the Supreme Court of Canada speaks in a way that changes some aspect of the law, cases long decided would be subject tobeing revisited. Parties to those cases which have been concluded should not live in fear that rights already adjudicated upon may bealtered by subsequent court decisions. B. Res Judicata [26] The appellant also contends the motion judge erred by failing to apply the principle of resjudicata. In rejecting Mr.

Dugas’ contention in this regard the motion judge concluded: The Court of Queen’s Bench and the New Brunswick Court of Appeal were asked to grant an order for the revenue of the licences after amotion had been filed by the Trustee. Neither court were asked to decide if the licenses constituted property under the BIA nor did theyrender any decision in that regard. […] I take from Saulnier that a fishing license qualifies for inclusion as “property” for certain statutory purposes and includes

section 2 of theBIA. The trustee should have the same rights as the original holder of the license once the license vests. Therefore the licenses at bar areproperty subject to the BIA provisions. As it was not dealt with by the Trustee, res judicata would have no application. [paras. 33 and 37]

[27] The motion judge is correct when he concludes the trustee did not specifically ask whether thelicences constituted property. No doubt the trustee, having been the same trustee that handled the Ward matter, already had an opinionand considered it was bound by Ward. Regardless, while the trustee may not have specifically asked the question, it certainly was raisedin the course of the proceedings. Léger J. in Dugas (Re), 2003 NBQB 220, 263 N.B.R. (2d) 216, stated: “In my view, the Bankrupt’s2003 crab license is property under the Act.

In the least, the right to fish for crab is an interest or profit arising out of property orincidental to property” (para. 17). This issue of an interest or right arising from the property was also addressed by this Court in Dugas(Re), 2004 NBCA 15, 268 N.B.R. (2d) 290, when we upheld Léger J.’s decision to grant the respondent a limited interest in the profitsfrom the licences. Finally, the Registrar, in his decision of May 7, 2004, reported at 2004 NBQB 200, concluded the licences wereproperty under the BIA but were exempt from seizure.

He reached this conclusion after a detailed analysis of Noël, Ward and Bennett(Re), [1988] B.C.J. No. 402 (S.C.) (QL). I am satisfied the issue of whether the fishing licences constituted property under the BIA wasintegral to the analysis undertaken by both the Registrar and the courts. In my view, it follows that the matter was already decided andthe motion judge had no authority to embark on the enquiry. [28] In any event, I am satisfied this issue regarding the status of the fishing licences was one thatcould have and, frankly, should have been raised before the Registrar and the Court of Queen’s Bench.

If a matter could have been raisedin the prior proceeding, the principle of res judicata applies with equal authority to those cases in which it was raised. Drapeau J.A. (ashe then was) explained this principle succinctly in Desrosiers v. National Bank of Canada (1998), (NB CA), 201N.B.R. (2d) 103, [1998] N.B.J. No. 204 (C.A.) (QL): The doctrine of res judicata is sufficiently broad to encompass not only the issues the court considered at trial, but also any issue whichformed an integral part of the initial dispute and which the parties could have reasonably raised at the time.

In this respect, like Ryan,J.A. did in Comeau et al. v. Breau et al. (1994), (NB CA), 145 N.B.R. (2d) 329 at pages 346-47, I adopt the words ofRitchie, J. in Fenerty v. The City of Halifax (1920), (NS CA), 50 D.L.R. 435 (N.S.C.A.), at pages 437-38: The doctrine of res judicata is founded on public policy so that there may be an end of litigation, and also to prevent the hardship to theindividual of being twice vexed for the same cause.

The rule which I deduce from the authorities is that a judgment between the sameparties is final and conclusive, not only as to the matters dealt with, but also as to questions which the parties had an opportunity ofraising. [para. 15] See also the opinion of Cromwell J.A. (as he then was) for a unanimous court in Hoque v. Montreal Trust Co. of Canada, 1997 NSCA153 , [1997] N.S.J. No. 430 (C.A.) (QL), leave to appeal refused, [1997] S.C.C.A. No. 656 (QL). [29] In my view, the fishing licences were, and always have been, the focal point of the litigationbetween the trustee and Mr. Dugas.

The Gaudets were party to the proceedings before Registrar Bray and vigorously contested Mr.Dugas’ discharge application. The issue of ownership of the fishing licences could have been raised at any time by any party just as itwas pursued by the parties in Saulnier. [30] In

summary, I am of the view the issue of ownership of the fishing licences was raisedthroughout the litigation and was integral to decisions made in the Court of Queen’s Bench and by the Registrar. If the issue was notraised, it certainly could have been and the principle of res judicata applies with equal force. V. Conclusion [31] The sole purpose of s. 41(11) is to permit the completion of the realization of an estate.

Givenmy opinion with respect to the retrospective nature of developments in the common law, and the application of the principle of resjudicata, I would conclude the estate was fully realized on or before the discharge of the trustee. Section 41(11) therefore has noapplication to the facts of this case. I would allow the appeal and quash the order to reappoint the respondent as trustee of the appellant’sestate. I would award one set of costs of $5,000 payable jointly and severally by the respondent and the intervenors. ____________________________ B. RICHARD BELL, J.A.

WE CONCUR: _____________________________ J.T. ROBERTSON, J.A. _____________________________ BRADLEY V. GREEN, J.A.