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 20020058, 20020139, 20020328 and 20020427
Decision date: February 5, 2003
Report issued: March 25, 2003
Claimant: A Credit Union
Payment approved: $169,749.50
The M Avenue property
In November, 2001 Mr. P purchased a property on M Avenue in Vancouver for $240,000, with financing of $168,000 from A Credit Union secured by a first mortgage.
In December, 2001 Mr. P executed a power of attorney in favour of Mr. G, a client of Mr. Wirick. Mr. P also executed a trust declaration in favour of V Ltd., a construction company of which Mr. G was the sole director. In the trust declaration, Mr. P stated that he had no beneficial interest in the property, but rather held it in trust for V Ltd.
Two individuals, L and H, subsequently agreed to purchase the property from Mr. P for $245,000 and to retain V Ltd. to construct a house on the property for $180,000. These purchasers obtained mortgage financing of $183,750 from B Bank to complete the purchase. Mr. Wirick acted for the vendor by power of attorney in this transaction.
On April 5, 2002 the purchasers' lawyer sent Mr. Wirick purchase funds of $235,602.04 in trust on Mr. Wirick's undertaking to discharge the A Credit Union mortgage. Mr. Wirick did not comply with the terms of his undertaking. Instead he paid the funds to unauthorized payees, with the bulk of the funds paid to a company owned by Mr. G.
Had the transaction proceeded as the purchasers anticipated, they would have received their interest in the property subject only to the B Bank mortgage that they had arranged. Instead, their interest was also subject to the A Credit Union mortgage.
In considering the eligibility of claims for compensation from various parties to this transaction, the Committee noted that Mr. Wirick had received trust funds in his capacity as a lawyer. He had paid out funds in breach of his undertaking in circumstances that suggest, not negligence or error, but an intention to deceive. Mr. Wirick misled the lawyer for the purchasers and breached his undertaking to facilitate the misappropriation of purchase money and he did in fact misappropriate and wrongfully convert the funds.
The Special Compensation Fund Committee exercised its discretion to give early consideration to the claims, given the hardship of the claimants and given that Mr. Wirick had already been disbarred and that further discipline proceedings were not anticipated. The Committee also decided that it would not require the claimants to exhaust their civil remedies in this case by obtaining a judgment against Mr. Wirick, as he had made an assignment into bankruptcy, his debts greatly exceeded his assets and there was little hope of recovery from him.
The Committee resolved to pay the claim of A Credit Union, including interest at a specified rate, subject to certain releases, assignments and conditions. This payment would allow A Credit Union to discharge its mortgage and would restore the purchasers, L and H, and B Bank to their intended positions.
The Committee noted that, on the face of the documentation, Mr. P had no interest in the property, and the Committee accordingly adjourned his claim pending receipt of further information.
Decision involving claim 20020014
Decision date: January 22, 2003 Claimant: M Corporation
Report issued: February 24, 2003
Payment approved: $3,604,801.01
Decision date: January 22, 2003
Claimant: M Corporation
The G Road property
In February, 2001 C Company purchased two properties on G Road in Abbotsford for a total of $3.6 million. Mr. Wirick's client Mr. G was a director of C Company.
C Company obtained $2.7 million in mortgage financing from E Credit Union, secured by an inter alia mortgage against the two lots. The lots were subsequently consolidated into one.
C Company obtained second mortgage financing secured by an inter alia mortgage for $2 million against the consolidated Abbotsford property and a property in Vancouver. The mortgage lenders were two individuals, A and B, who advanced $1.35 million of the funds.
In February, 2002 M Corporation agreed to lend C Company $9.2 million, supported by the personal convenants of Mr. G and the President of C Company. The loan was to be secured by a mortgage against the G Road property. Mr. Wirick acted for C Company in the transaction.
The lawyer for M Corporation forwarded the mortgage documents to Mr. Wirick for execution, confirming that the mortgages of E Credit Union and of A and B would be discharged. The lawyer subsequently sent to Mr. Wirick cheques for $2,928,910.12 as the first advance of mortgage funds, for $92,000 payable to C Company as a "refundable commitment fee" and for $568,585.87 as the second mortgage advance.
Mr. Wirick did not use any of these funds to discharge the mortgages as he had undertaken to do. Although he did pay $82,021.26 to the city for outstanding property taxes, he paid the balance of the funds to unauthorized recipients, including $201,554.93 toward the purchase of a hotel.
After Mr. Wirick admitted his breach of undertaking, Mr. G granted M Corporation a covenant, promissory note, general security agreement and second mortgage over the hotel lands. The hotel, which was in receivership and under foreclosure, was ultimately sold and the remaining sale proceeds of $1,594,000 were held in trust by Mr. G's trustee in bankruptcy.
Had the transaction proceeded as envisioned by M Corporation, the Corporation would have received a first charge against the G Road property. Instead it held a mortgage third in priority behind the mortgages of of E Credit Union and of A and B.
The Special Compensation Fund committee found that Mr. Wirick had misappropriated and/or wrongfully converted funds entrusted to him as a lawyer in breach of his undertaking to pay out and discharge mortgages. He had breached his undertaking and misled M Corporation as to the nature of its security to facilitate this misappropriation and wrongful conversion.
The Committee decided that it would not require the claimant to exhaust its civil remedies in this case, noting that there was little hope of recovery against Mr. Wirick and requiring the claimant to try to recover on its security in the hotel might be difficult and expensive.
The Committee approved M Corporation's claim in the amount of $3,604,801.01, including interest at a specified rate and subject to certain conditions, releases and assignments. The Committee noted that the amount approved did not include the funds that Mr. Wirick had paid on outstanding property taxes. The Committee denied claims by M Corporation for various consequential costs, such as legal fees and insurance