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.
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, and without identifying the claimants.
Special Compensation Fund Committee decision involving claims 20020033, 20020316, 20020406 and 20020399
Decision date: October 1, 2003
Report issued: December 15, 2003
Claimant: A Bank
Payment approved: $157,424.16 ($146,685.08 and $10,739.08 interest)
Claimant: B Mortgage Company
Payment approved: $161,695.50 ($151,989.02 and $9,706.48 interest)
Claimant: C Credit Union
Payment approved: $179,843.43 ($169,142.06 and $10,701.37 interest)
The P Street property
In late 2000 Mr. Wirick represented Mr. C in the purchase of a property on P Street in Vancouver. Mr. C had been assigned the right to purchase the property by V Ltd., a construction company that belonged to Mr. G, another client of Mr. Wirick. Mr. C signed a declaration that he held the P Street property in trust for V Ltd.
While represented by Mr. Wirick, Mr. C obtained a mortgage for $150,000 from A Bank. He then obtained a mortgage and assignment of rents for $159,250 from B Mortgage Company, in which transaction Mr. Wirick represented B Mortgage Company only. Mr. Wirick gave B Mortgage Company his undertaking that he would pay out and discharge from title the A Bank mortgage, but he failed to do so and instead diverted the funds received from B Mortgage Company for other purposes.
Mr. C next obtained a mortgage for $172,500 in favour of C Credit Union, registered February 1, 2001. Mr. Wirick represented both Mr. C and C Credit Union in the transaction. Mr. Wirick gave his undertaking to the credit union that he would pay out and discharge from title the A Bank mortgage and the B Mortgage Company mortgage and assignment of rents, but he failed to do so, instead diverting the funds received from the credit union for other purposes.
In September, 2001 V Ltd. contracted to sell the P Street property to Mr. M and Ms. K for $420,000. Mr. Wirick received in trust from the purchasers' lawyer $362,097.58, on his undertaking to pay out and discharge the A Bank mortgage, the B Mortgage Company mortgage and assignment of rents and the C Credit Union mortgage. In breach of that undertaking, Mr. Wirick instead transferred funds received from the purchasers' lawyer to another property, paid his own account and forwarded the balance to V Ltd.
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 breached his duty to comply with his undertakings to facilitate the misappropriation of mortgage proceeds.
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 found that A Bank, B Mortgage Company and C Credit Union had suffered losses by not receiving the funds payable to them in the sale of the property to Mr. M and Ms. K. Their claims were allowed, subject to certain releases, assignments and conditions, including the requirement of providing to the Law Society registrable discharges of their mortgages on title. The Committee also exercised its discretion to pay interest on these claims at the contract rate to May 24, 2002 and thereafter at the applicable rate to a maximum of 6% per annum.
As a result of the payment and discharge of the prior charges from title, the purchasers (Mr. M and Ms. K) and their own mortgage lender would all be placed in the positions 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 20020559, 20020393 and 20020425
Decision date: September 3, 2003
Report issued: January 5, 2004
Decision date: September 3, 2003
Claimant: B Mortgage Company
Payment approved: $198,003.10 ($186,701.28 and $11,301.82 interest)
The L Street property
In October, 2001 Mr. Wirick acted for PG in the purchase of a property on L Street in Vancouver for $286,000. PG was a nominee of Mr. G, another client of Mr. Wirick. At the time of this purchase, PG arranged a mortgage for $185,500 in favour of A Bank.
In January, 2002 PG further encumbered the property with a mortgage for $188,500 in favour of B Mortgage Company, which was to be a first charge on title. Mr. Wirick acted for both PG and B Mortgage Company in this transaction.
In March, 2002 Mr. G (under a power of attorney from PG) sold the property for $280,000 to Mr. M. Mr. Wirick represented the vendor in this transaction. In the contract of purchase and sale, Mr. M had agreed that Mr. G's construction company, V Ltd., would build a house on the property for $199,000. To help finance the purchase and construction, Mr. M arranged for mortgage financing from A Bank for $350,000.
The purchaser's lawyer sent to Mr. Wirick in trust the mortgage proceeds on his undertaking to pay out the two prior mortgages of A Bank and B Mortgage Company. Mr. Wirick eventually used most of these funds to pay out the A Bank mortgage, but did not use any of the funds to pay out the B Mortgage Company mortgage. Instead he transferred the funds to another party and paid his own account.
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 breached his undertaking to apply the proceeds to the B Mortgage Company mortgage. He later breached his undertaking to discharge mortgages in the sale of the property to Mr. M.
Although Mr. Wirick provided no explanation for his actions, he made a general statement in his bankruptcy documentation that he knowingly paid out money in breach of his undertakings. The Committee was satisfied that he misappropriated or wrongfully converted funds.
The Committee decided that it would not require the claimant to exhaust its civil remedies in this case by obtaining a judgment against Mr. Wirick. As Mr. Wirick had made an assignment in bankruptcy claiming liabilities far in excess of assets, there was little hope of recovery from him.
As Mr. Wirick failed to pay out or discharge the mortgage of B Mortgage Company, the company suffered a loss. The B Mortgage Company's claim was allowed, subject to certain releases, assignments and conditions, including the requirement that A Bank and B Mortgage Company provide to the Law Society registrable discharges of their mortgages on the property. In the case of A Bank, it was required to discharge the mortgage relating to PG. The Committee also exercised its discretion to pay interest on these claims at the contract rate to May 24, 2002 and thereafter at the applicable rate to a maximum of 6% per annum.
Once the B Mortgage Company mortgage was discharged from title, Mr. M and A Bank (as his mortgage lender) would be restored to the positions they would have been in had Mr. Wirick fulfilled his undertakings. Their separate claims for compensation were accordingly denied