Special Compensation Fund claims

The Special Compensation Fund, funded by all practising lawyers in BC, is available to compensate persons who suffer loss through the misappropriation or wrongful conversion of money or property by a BC lawyer acting in that capacity. (Note: The primary source of compensation for claims after May 1, 2004 is the trust protection coverage under Part B of the Compulsory Professional Liability Insurance Policy.)

The Special Compensation Fund Committee makes decisions on claims for payment from the Fund in accordance with section 31 of the Legal Profession Act and Law Society Rules 3-28 to 3-42. Rule 3-39 (1)(b) allows for publication to the profession of summaries of the written reasons of the Committee. These summaries are published with respect to paid claims in 2004, and without identifying the claimants.

Martin Wirick
Vancouver, BC
Called to the Bar: May 14, 1979
Resigned from membership: May 23, 2002
Custodian appointed: May 24, 2002
Disbarred: December 16, 2002 (see Discipline Case Digest 03/05)

Special Compensation Fund Committee decision involving claims 20020168, 20020255, 20020397, 20020405 and 20020195

Decision date: November 12, 2003
Report issued: December 23, 2003

Claimant: A Bank (first mortgagee)
Payment approved: $167,546.84 ($154,554.56 and $12,992.28 interest)

Claimant: B Mortgages Inc. (second mortgagee)
Payment approved: $179,036.04 ($167,297.70 and $11,738.34 interest)

Claimant: C Credit Union (third mortgagee)
Payment approved: $198,905.47 ($185,764.87 and $13,140.60 interest)

The G Street property

In December, 2000 Mr. Wirick represented Mr. J in the purchase of a property on G Street in Vancouver.

Mr. J was a nominee of another of Mr. Wirick’s clients (Mr. G), and he held the G Street property in trust for Mr. G’s construction company. Mr. J obtained $158,000 in mortgage financing from A Bank. Mr. Wirick represented both Mr. J and A Bank in this transaction.

Mr. J then obtained a $175,500 mortgage on the property in favour of B Mortgages Inc. Mr. Wirick acted only for B Mortgages Inc. in this transaction. He undertook to pay out and discharge the A Bank mortgage from title from the mortgage funds received from B Mortgages Inc., but he failed to do so. Instead, he diverted the funds to other purposes.

In 2001 Mr. J obtained a $189,750 mortgage in favour of C Credit Union. Mr. Wirick acted for both Mr. J and the credit union in this transaction. He undertook to pay out and discharge from title the A Bank and B Mortgages Inc. mortgages from the mortgage proceeds received from C Credit Union, but he failed to do so, instead diverting the funds to other purposes.

In July, 2001 Mr. G, under a power of attorney for Mr. J, sold the property to H and L. The lawyer representing the new purchasers forwarded the sale proceeds to Mr. Wirick on his undertaking to pay out and discharge the A Bank, B Mortgages Inc. and C Credit Union mortgages. Mr. Wirick did not discharge these mortgages but instead transferred funds to other properties, paid his account and forwarded the remaining funds to Mr. G’s construction company.

The Special Compensation Fund Committee found that, while not every breach of undertaking is dishonest, the circumstances of these claims suggested, not negligence or error by Mr. Wirick, but an intention to deceive.

The Committee decided that it would not require the claimants to exhaust their civil remedies in this case by obtaining judgments against Mr. Wirick, noting that he had made an assignment in bankruptcy claiming liabilities far in excess of assets, and there was little hope of recovery from him.

The Committee allowed the claim of A Bank, B Mortgages Inc. and C Credit Union in the principal amount of their respective mortgages, with interest at the mortgage rate to May 24, 2002 and to a ceiling of 6% per annum thereafter. The payment was subject to certain releases, assignments and conditions, including the requirement that these financial institutions provide to the Law Society registrable discharges of their mortgages on title.

As a result of the payment of these claims and discharges of mortgages, the new purchasers (H and L) and their own financial institution would be placed in the position that they ought to have been in and would suffer no loss. Accordingly, their separate claims for compensation were denied.


Special Compensation Fund Committee decision involving claims 20020123, 20020194, 20020403 and 20020394

Decision date: December 10, 2003
Report issued: March 9, 2004

Claimant: A Bank (First mortgagee)
Payment approved: $149,256.27 ($138,254.26 and $11,002.01 interest)

Claimant: B Mortgages Inc. (Second mortgagee)
Payment approved: $158,039.29 ($148,949.30 and $9,089.99 interest)

The W Avenue property

In August, 2000 BJ obtained $142,000 in mortgage financing from A Bank respecting a property on W Street in Vancouver. BJ was a nominee of Mr. G, one of Mr. Wirick’s clients. Mr. Wirick represented both BJ and A Bank in this transaction and used the mortgage proceeds to discharge two existing mortgages from title. Accordingly, the A Bank mortgage became the first charge on title.

BJ further encumbered the property with a $159,250 mortgage in favour of B Mortgages Inc. Mr. Wirick acted for BJ and B Mortgages Inc. in this transaction. He misdirected the funds from this mortgage and did not discharge the A Bank mortgage.

BJ further encumbered the property by signing a mortgage and assignment of rents for $120,000 in favour of PN.

In April, 2001 BJ sold the W Street property to Mr. and Ms. N for $402,800. Mr. Wirick acted for BJ. He received in trust from the purchasers’ lawyer $393,010.26 as the net proceeds of sale on his undertaking, among other things, to discharge the A Bank, B Mortgages Inc. and PN mortgages. In breach of his undertaking, Mr. Wirick misdirected the funds and failed to discharge the A Bank or B Mortgages Inc. mortgages. The PN mortgage was eventually discharged from other funds.

Mr. and Ms. N had obtained mortgage financing of $285,000 from another financial institution for their purchase of the property.

As a result of Mr. Wirick’s actions, the new mortgage arranged by Mr. and Ms. N was a third mortgage on title and not a first mortgage as it ought to have been.

The Special Compensation Fund Committee found that, while not every breach of undertaking is dishonest, the circumstances of these claims suggested, not negligence or error by Mr. Wirick, but an intention to deceive. He had declined to provide any explanation or comment, other than a general statement in his bankruptcy documentation indicating that he knowingly paid out monies in breach of his undertakings. In these circumstances, the Committee was satisfied that he had misappropriated or wrongfully converted funds.

The Committee allowed the claim of A Bank and B Mortgages Inc. in the principal amount of the mortgages, including interest at the mortgage rate to May 24, 2002 and to a ceiling of 6% per annum thereafter. The payment was subject to certain releases, assignments and conditions, including the requirement of providing to the Law Society registrable discharges of their mortgages.

As a result of the payment of these claims and discharges of mortgages, Mr. and Ms. N and their own financial institution would suffer no loss. Accordingly, their separate claims for compensation were denied.


Special Compensation Fund Committee decision involving claim 20020582

Decision date: December 10, 2003
Report issued: February 23, 2004

Claimant: C Trust Company
Payment approved: $162,428.17

The U Drive property

Mr. D was a nominee of Mr. G, a developer client of Mr. Wirick. As nominee of Mr. G, Mr. D purchased a property on U Drive in Vancouver and obtained a $215,000 mortgage loan from B Credit Union.

He subsequently obtained a further $95,000 mortgage loan from C Trust Company.

In August 2001, Mr. D sold the property to Mr. and Ms. C. While representing Mr. D and Mr. G in the transaction, Mr. Wirick gave his undertaking to the lawyer for the purchasers that he would discharge the mortgages and assignment of rents from the proceeds of sale. He failed to do so, in breach of that undertaking.

In August, 2002 C Trust Company registered a certificate of pending litigation against the property and brought a petition for foreclosure in Supreme Court. An order nisi for foreclosure was entered. The last date for redemption of the mortgage was fixed at September 8, 2003, later extended to October 3, 2003.

The Special Compensation Fund Committee found that Mr. Wirick had engaged in culpable conduct to facilitate the wrongful misappropriation of funds otherwise payable to B Credit Union and C Trust Company.

The Committee allowed the claim of Mr. and Ms. C in a sum sufficient to satisfy the order nisi of foreclosure obtained by C Trust Company, plus taxable costs and disbursements. This payment was subject to certain releases, assignments and conditions, including the condition that C Trust Company provide a registrable discharge of its mortgage and assignment of rents to the Law Society and remove its certificate of pending litigation.


Special Compensation Fund Committee decision involving claims 20020030, 20020189 and 20020454

Decision date: February 4, 2004
Report issued: April 5, 2004

Claimant: A Bank
Payment approved: $196,039.57 ($178,783.40 and $17,256.17 interest)

The E. 56th Avenue property

In August, 2001 Ms. G (wife of Mr. G, one of Mr. Wirick’s clients) became the registered owner of property on E. 56th Avenue in Vancouver. Ms. G obtained mortgage financing of $182,000 from A Bank and a mortgage was registered against the property.

Ms. G and SD borrowed $200,000 from Mr. and Ms. N as mortgagees, and a mortgage and assignment of rents in their favour was registered against the E. 56th Avenue property and another property (the R Street property).

Mr. G signed the mortgage on behalf of his wife and SD as co-covenanter.

In August, 2001 Ms. G agreed to sell the E. 56th Avenue property to Mr. C. The contract was signed on her behalf by Mr. G.

Mr. C and another person (H) obtained mortgage financing for the purchase from B Bank. The transfer was registered in November. Mr. Wirick acted for Mr. and Ms. G as vendors. He undertook to the purchaser’s lawyer to pay out and discharge the A Bank mortgage on receipt of the sale proceeds, but then failed to do so, in breach of his undertaking.

The Special Compensation Fund Committee found that, although not every breach of undertaking is dishonest, these claims suggested, not negligence or error, but an intention to deceive on the part of Mr. Wirick. His conduct facilitated the wrongful misappropriation of funds otherwise payable to A Bank.

The Committee allowed the claim of A Bank, with payment subject to certain releases, assignments and conditions. If the A Bank mortgage were paid out, Mr. C and H and B Bank would be restored to the same position they would have been in had Mr. Wirick fulfilled his undertaking. Accordingly, their separate claims were denied.


Special Compensation Fund Committee decision involving claims 2002027, 20020398 and 20020415

Decision date: February 4, 2004
Report issued: April 6, 2004

Claimant: A Bank
Payment approved: $170,723.38 ($158,016.07 and $12,707.31 interest)

The R Street property

In June, 2001 SD became the owner of a property on R Street in Vancouver. He signed a declaration that he held the property in trust for V Ltd., a construction company owned by Mr. G, a client of Mr. Wirick.

SD obtained a $162,500 loan from A Bank. Mr. Wirick acted for both SD and A Bank in this transaction. SD and Ms. G (wife of Mr. G) further encumbered the R Street property and another property on E. 56th Avenue with an inter alia mortgage and assignment of rents for $200,000 in favour of Mr. and Ms. N.

SD and two other nominees of Mr. G next obtained a $266,000 loan from CM, secured by a mortgage against the R Street property and two other properties.

Mr. G, acting under a power of attorney granted by SD, sold the property to Mr. and Ms. L for $430,000. An addendum to the contract stated that Mr. G’s company, V Ltd., would build a new house on the property for $200,000. The new purchasers obtained $100,000 in financing from B Bank, secured by a mortgage on title.

The purchasers’ lawyer sent completion funds of $382,962.39 to Mr. Wirick on his undertaking to pay out and release the prior charges on title. Contrary to his undertakings, Mr. Wirick did not use the funds to retire the encumbrances, but instead, after paying his account, transferred the balance to V Ltd. and to other unauthorized recipients.

Subsequently, the mortgage in favour of Mr. and Ms. N and the mortgage in favour of CM were discharged, but the A Bank mortgage remained on title in priority to the mortgage in favour of B Bank, which ought to have been the first charge.

The Special Compensation Fund Committee found that these circumstances suggested, not negligence or error, but an intention to deceive by Mr. Wirick. The Committee noted it was satisfied that Mr. Wirick had misappropriated or wrongfully converted funds. The Committee approved the A Bank claim in the principal amount owing, together with interest at the mortgage rate to May 24, 2002 and to a ceiling of 6% per annum thereafter.

Payment was subject to certain releases, assignments and conditions. If the A Bank mortgage were paid out, Mr. and Ms. L and the financial institution that provided them with mortgage financing would be placed in the position they ought to have been in. As a result, their separate claims for compensation were denied.