B.C. Supreme Court Considers Criteria for Section 151 Application in Bunn v. Bunn Estate

In a reasons for judgment issued on November 18, 2016, Madam Justice Gray considered the tests set out in section 151 of the Wills, Estates and Succession Act for allowing a beneficiary of an estate to bring a claim on behalf of the estate, and in the name of the deceased’s personal representative. The case is Bunn v. Bunn Estate, 2016 BCSC 2146, and the decision provides an indication that a successful application under this section may require the applicant to provide a significant amount of information concerning the merits of a claim, and sufficient evidence for the court to weigh the costs of proceeding with the potential benefits to the estate of doing so.  Although this is not the first reported decision on section 151, in the other case of which I am aware, Werner v. McLean, 2016 BCSC 1510, the application for an order under section 151 was not opposed, and, accordingly, the court did not need to consider the tests in depth.

Section 151 is a new provision that came into effect with the Wills, Estates and Succession Act, and I am not aware of any similar provisions in other Canadian provinces. Accordingly, this case may very well lay the foundations for future decisions in British Columbia.

This section provides as follows:

151  (1) Despite section 136 [effect of representation grant], a beneficiary or an intestate successor may, with leave of the court, commence proceedings in the name and on behalf of the personal representative of the deceased person

(a) to recover property or to enforce a right, duty or obligation owed to the deceased person that could be recovered or enforced by the personal representative, or

(b) to obtain damages for breach of a right, duty or obligation owed to the deceased person.

(2) A beneficiary or an intestate successor may, with leave of the court, defend in the name and on behalf of the personal representative of a deceased person, a proceeding brought against the deceased person or the personal representative.

(3) The court may grant leave under this section if 

(a) the court determines the beneficiary or intestate successor seeking leave

(i) has made reasonable efforts to cause the personal representative to commence or defend the proceeding,

(ii) has given notice of the application for leave to

(A) the personal representative,
(B) any other beneficiaries or intestate successors, and
(C) any additional person the court directs that notice is to be given, and

(iii) is acting in good faith, and

(b) it appears to the court that it is necessary or expedient for the protection of the estate or the interests of a beneficiary or an intestate successor for the proceeding to be brought or defended.

(4) On application by a beneficiary, an intestate successor or a personal representative, the court may authorize a person to control the conduct of a proceeding under this section or may give other directions for the conduct of the proceeding.

In Bunn, Jennifer Bunn, one of the beneficiaries of her mother’s estate, wished to bring a claim against her brother challenging a number of gifts and transactions made by their mother during the mother’s lifetime. The beneficiary alleged, among other things, that her brother obtained benefits by exercising undue influence over their mother.

She requested that her cousin, who was her mother’s executor, bring the claim on behalf of the estate, but he refused to do so. The executor reviewed the transactions and in his view, the transactions were done with the mother’s knowledge, and were not induced by the exercise of undue influence.

In this case,  Madam Justice Gray found that the applicant had made reasonable efforts to cause the executor to bring the claim, that she had given proper notice of the application to the executor and the beneficiaries, and that she was acting in good faith.

Madam Justice Gray considered the further requirements of the section, and looked at by analogy the jurisprudence in respect of derivative actions by shareholders on behalf of a company under the Business Corporations Act. She addressed the criteria for exercising her discretion as follows:

[48]         Both s. 151 of WESA and s. 233 of BCA give the court discretion as to whether to make the order sought by using the words that the court “may” grant leave.

[49]         As set out in Primex [Investments Ltd. v. Northwest Sports Enterprises Ltd. (1995), 13 B.C.L.R. (3d) 300 (S.C.), aff’d (1997), 26 B.C.L.R. (3d) 357 (C.A.)], an applicant for derivative leave must establish not only an arguable case, but also that the potential relief in the proposed action is sufficient to justify the inconvenience to the company of being involved in the action.

[50]         In my view, a proceeding may be “necessary” under s. 151 of WESA if the personal representative is unwilling or unable to proceed. It may be “expedient” if it is in the best interests of the estate.

[51]         In this case, the applicant is a beneficiary of the Estate and seeks the order under s. 151 of WESA on the basis that the claim, if successful, will increase the value of the Estate. In such a case, in my view, to satisfy the court that it should exercise its discretion to grant leave to commence litigation on behalf of the estate, the applicant must show not only that there is an arguable case, but also that the potential relief in the action is sufficient to justify the inconvenience to the estate of being involved in the action, and that proceeding is overall in the best interests of the estate. In my view, that must involve a consideration of the costs of proceeding, including the potential of a costs award against the estate if it fails. Further, in my view, in determining whether the proposed lawsuit appears to be in the best interests of the estate, the court can consider the strength of the proposed claim based on a limited weighing of the evidence.

[52]         I reject the argument made by the Proposed Defendants to the effect that the court should show deference to the views of the executor, and grant leave only if the executor is in a conflict of interest. The views of the executor and the basis of those views are simply a factor for consideration.

Madam Justice Gray then analyzed the evidence before her and the law in some depth (the analysis of undue influence provides a very clear treatment of the subject, but for the purpose of this post, I am focused on section 151).  She concluded that the applicant did not have an arguable case in respect of any of her claims.

But even if the applicant had persuaded the Court that she had an arguable case, Madam Justice Gray wrote that she would have required more information concerning the economic s of the litigation, including costs and potential benefit to the estate, before exercising her discretion to allow the applicant to bring the claim on behalf of the estate. She wrote,

[232]     Jennifer’s evidence does not set out a plan for the litigation. She has not provided an estimate of how much the litigation would cost to prosecute, or explained who she proposes would pay the prosecution costs initially and ultimately, or detailed what funds would be available from her or in the Estate to satisfy an award of costs in favour of Chris or Charters or both of them. In my view, the court should be provided with such evidence by an applicant for leave to commence an action on behalf of an estate.

[233]     If Jennifer had established an arguable case to challenge any of the transactions, and the Court were to consider whether the proposed litigation was in the best interests of Joyce’s Estate, the Court would require further information to determine whether the potential relief in the action would be sufficient to justify the inconvenience to the Estate of being involved in the action.

Madam Justice Gray dismissed the application.

This case indicates that to successfully make an application under section 151 a beneficiary will need to provide the court with ample materials to show that there is an arguable case, and to allow the court to weigh the costs and the benefits of allowing the beneficiary to bring a claim on behalf of the estate.