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 the identification of claimants.
Decision involving claims 20020170, 20020407 and 20020554
Decision date: December 16, 2002
Report issued: January 29, 2003
Claimant: A Bank
Payment approved: $162,605.23
The L Street property
In May, 2001 Mr. Wirick represented H in the purchase of a residential property on L Street in Vancouver for $210,000. The client had arranged for a $160,000 mortgage from A Bank to fund the purchase. On H's behalf, Mr. Wirick received in trust from the notary representing A Bank $159,618.94, which represented the mortgage proceeds less the fees of the notary.
To purchase the L Street property, Mr. Wirick did not use the mortgage funds but rather used funds from the sale and mortgaging of other unrelated properties.
In early 2002 H contracted to sell the L Street property for $239,000 to Mr. and Mrs. L. The parties agreed that a new house would be built on the property by V Ltd., a company owned by another of Mr. Wirick's clients (G). G held a power of attorney for H and signed the vendor's documents in the transaction.
After Mr. and Mrs. L arranged mortgage financing with A Bank, the lawyer representing Mr. and Mrs L and A Bank forwarded the net sale proceeds of $229,201.65 to Mr. Wirick on his undertaking to pay out and discharge the existing first mortgage of A Bank. Mr. Wirick did not in fact use the funds to pay out or discharge the mortgage, contrary to his undertaking. Instead he transferred the sums of $228,279.22 and $496.17 for use with respect to two other properties and $426.26 for his own law firm.
The Special Compensation Fund Committee exercised its discretion to give early consideration to the claims, taking into account the hardship suffered by the purchasers, Mr. and Mrs. L. As the original house on the L Street property had been demolished in preparation for construction of their new house, and as the construction had not proceeded, Mr. and Mrs. L had been forced to live in a basement suite with their two children and Mrs. L's two elderly parents.
In considering the claims before it, the Committee concluded that Mr. Wirick had acted dishonestly in breaching his undertaking to discharge a mortgage and in misappropriating and/or wrongfully converting the funds advanced to him by the purchasers' lawyer.
Subject to certain releases, assignments and conditions, the Committee resolved to pay the claim of A Bank so as to discharge its existing first mortgage on title (the mortgage from H). Following this discharge, the new A Bank mortgage from Mr. and Mrs. L would be placed in first position on title. Both A Bank and Mr. and Mrs. L would accordingly be restored to their intended positions.
The Committee noted that Mr. and Mrs. L faced the possibility of foreclosure unless A Bank were adequately compensated. The Committee accordingly determined to include interest in its payment at the mortgage rate of 5.55%. (On the claims on which it allowed interest, the Committee resolved to pay the mortgage interest rate up to May 24, 2002, the date of Mr. Wirick's custodianship, and the mortgage rate to a maximum of 6% thereafter.)
Decision involving claims 20020037, 20020422 and 20020442
Decision date: December 16, 2002
Report issued: February 25, 2003
Claimant: A Bank
Payment approved: $173,498.87
The A Drive property
In January, 2002 Mr. Wirick represented G who had contracted to purchase a property on A Drive in Vancouver from Mr. and Mrs. W for $261,000. In March, 2002 Mr. and Mrs. W transferred the property to S, a nominee of G.
S financed the purchase through a $169,000 mortgage with A Bank; the mortgage and an assignment of rents were registered on title.
Two days later S agreed to sell the property for $261,000 to Mr. and Mrs. M. These new purchasers contracted separately with G to have construction work done on the property.
Mr. and Mrs. M arranged a mortgage of $169,650 with B Bank. The lawyer representing Mr. and Mrs. M and B Bank subsequently forwarded the net sale proceeds of $246,691.45 to Mr. Wirick in trust on his undertaking to pay out and discharge the A Bank mortgage and the assignment of rents. Mr. and Mrs. M, B Bank and their lawyer all expected that the B Bank mortgage was to be a first charge on title.
Mr. Wirick deposited the net sale proceeds to his trust account, but did not use the funds to pay out the A Bank mortgage, contrary to his undertaking. Instead he paid out the funds in relation to another property.
The Special Compensation Fund Committee exercised its discretion to give early consideration to the claims. The Committee took into account the hardship suffered by Mr. and Mrs. M. The couple could not obtain funding to complete construction on the property as long as the A Bank mortgage remained on title and, in the interim, were paying rent to the new owners of their previous residence in order to live there.
The Committee found that Mr. Wirick had misappropriated and/or wrongfully converted the funds received in trust. The Committee resolved to approve the claim of A Bank in the amount of $173,498.87, subject to certain releases, assignments and conditions. The Committee also resolved to include interest in its payment at the mortgage rate of 4.9%. (On the claims on which it allowed interest, the Committee resolved to pay the mortgage interest rate up to May 24, 2002, the date of Mr. Wirick's custodianship, and the mortgage rate to a maximum of 6% thereafter.)
By discharging the A Bank mortgage, the Committee noted that Mr. and Mrs. M and B Bank would be restored to their intended positions.