Society takes new steps to protect public
September 19, 2002
The Law Society of BC is resolving issues related to Special Compensation Fund claims that have arisen from financial and procedural irregularities in the practice of former Vancouver lawyer Martin Wirick and the actions of one of his clients.
The policy issues facing the Law Society at this juncture are complex. As noted in a recent broadcast email to the profession, the Law Society's Conveyancing Practices Task Force has considered options for reforming conveyancing practice to reduce the opportunity for fraud. The Task Force has also looked at options for compensating the public for such losses in the real estate field: see the Interim Report of the Conveyancing Practices Task Force.
The Law Society has received, and continues to welcome, questions and comments from the profession on the issues and options in this report. If you have a question or comment, please contact Ron Usher (email@example.com) at the Law Society office.
The pivotal decision made by the Benchers this past week was to rescind Law Society Rule 3-33, removing the $17.5 million cap on Special Compensation Fund claims that can be authorized in a calendar year by the Special Compensation Fund Committee. Rescission of the rule means that the Special Compensation Fund Committee now has discretion to approve claims without the restriction of a pre-determined cap, and that the Law Society commits that all payments authorized by the Committee relating to Martin Wirick will be paid.
This decision reinforces the value that all lawyers in BC offer to the public through the Special Compensation Fund which, since 1949, has provided unique financial protection to reimburse members of the public for losses occasioned by dishonest lawyers. The BC legal profession can be proud of that commitment, which has been unmatched by any profession anywhere in North America. The Benchers want to ensure that such effective financial protection remains for the public, now and in the future. Historically, instances of lawyer misappropriation of trust funds have been sporadic and of relatively small amounts. Over the past 15 years, Special Compensation Fund payments vary from a low of $22,031 in 1992 to a high of $1.3 million in 1988 (an average of $348,161). In 15 years, payments have totalled $5.2 million.
The Law Society's commitment to the Special Compensation Fund requires that the program remains effective and properly funded. It is expected that the Special Compensation Fund assessment for 2003 will increase to deal with claims.
The Benchers have also approved in principle a proposal of the Conveyancing Practices Task Force to create an innocent party insurance product. This product has, to date, been considered in the context of protecting purchasers of real estate against fraudulent conveyance or mortgage practices. In this context, a lawyer in real estate practice would be expected to pay a transaction fee (estimated at a maximum of $30) to fund the coverage.
In the wake of several media stories in the past two days, it is important to clarify for BC lawyers that the Benchers have not yet approved the terms and conditions of such a program, but have asked for further work to be done that would allow the program, if given final approval, to be put in place by January 1, 2003.
It is possible that the Benchers may wish to consider the alternative of a much lower transaction fee that would be payable by lawyers in areas of practice other than real estate, such as areas that present similar risks. The Benchers have not yet discussed this option, nor have they precluded other funding options. Regardless of what proposals are ultimately adopted, the Benchers are committed to ensuring that lawyers retain their competitive advantage in real estate conveyancing practice.
In conjunction with the proposed innocent party insurance product in the real estate field, the Law Society is continuing to urge banks and credit unions to adopt a new real estate conveyancing protocol, so as to eliminate the need for a purchaser to obtain a building survey certificate. Survey certificates, which some institutions now require, can cost up to $300 each. The program could also eliminate the need for a purchaser to pay for title insurance as is sometimes required by a financial institution for its own protection against fraud and title defects. For a purchaser to receive protection directly means purchasing an additional policy at considerable cost.
The Benchers have asked the Law Society's Conveyancing Practices Task Force to continue its work to identify needed improvements to conveyancing practice.
Background information on Martin Wirick
Martin Wirick voluntarily resigned his Law Society of BC membership on May 23, 2002. He is now a former member and his practice is under custodianship. The Law Society has a complaints investigation underway, including a financial audit. Mr. Wirick, though a former member, remains subject to the Law Society's complaints and discipline process.
On July 30 the Discipline Committee authorized a citation (a formal discipline charge leading to a hearing) against Mr. Wirick. The citation alleges that Mr. Wirick breached his undertaking and misappropriated trust funds in that he failed to apply the funds to the payout and discharge of certain mortgages, but rather paid out the funds contrary to his undertaking.
The events surrounding Mr. Wirick's practice are extraordinarily complex; the Law Society investigation is continuing and will likely take some time to complete.
As of September 12, 2002, the Law Society has received 108 claims for $18.3 million arising from Mr. Wirick's law practice. At present, these claims are unproven and all claims are subject to investigation and audit before presentation to the Special Compensation Fund Committee.