Special Compensation Fund claims

The Special Compensation Fund, funded by all practising lawyers in B.C., is available to compensate persons who suffer loss through the misappropriation or wrongful conversion of money or property by a B.C. lawyer acting in that capacity. Although instances of misappropriation in the profession are rare, the Special Compensation Fund is a public protection the profession takes seriously.

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 a summary of the written reasons for decisions of the Committee.

Michael Haynes

Kelowna, B.C.
Called to the Bar: August 30, 1991
Undertook not to practise law: November 27, 1998
Custodian appointed: November 27, 1998
Ceased membership: January 1, 1999

Claimant: M
Payment approved: $586.01
Decision date: February 28, 2000
Report issued: April 25, 2000

While representing the vendor in a mobile home sale in 1998, Mr. Haynes received funds from the purchaser (M) in trust, on his undertaking to pay property taxes, interest and penalties. Mr. Haynes failed to pay the taxes.

The Committee found that Mr. Haynes had misappropriated or wrongfully converted the funds, noting that he offered no response or submission in this regard. The Committee ordered payment of $586.01, representing the unpaid taxes. It exercised its discretion not to pay interest, noting that the claimant had not been asked to exhaust his civil remedies.

Claimants: D and R
Payment approved: $1,278.15
Decision: July 24, 2000
Report issued: October 11, 2000

While representing D and R in the sale of their home, Mr. Haynes received in trust from the purchasers' lawyer $157,983.23, representing the net sale proceeds. The funds were sent to Mr. Haynes on certain undertakings, including an undertaking to pay the 1998 gross property taxes, arrears, interest and penalties to July 31, 1998. Mr. Haynes did not in fact do so, even though he prepared a statement of monies received and disbursed indicating that the taxes had been paid.

There were no funds left in trust to pay the taxes and arrears, and Mr. Haynes offered no explanation. The Committee concluded that he had misappropriated or wrongfully converted the funds.

The Committee approved payment of $1,278.15, representing unpaid taxes and penalties to July 31, 1998, but did not award interest.

Claimant: P
Payment approved: $1,376.10
Decision: February 28, 2000
Report issued: June 26, 2000

In June, 1998 P retained Mr. Haynes to represent him in the sale of his home and the purchase of a new property. Mr. Haynes was to pay the outstanding property taxes on the new property from funds held in trust. He sent his client a statement of monies received and disbursed indicating that he had paid the outstanding taxes of $1,376.10, although he had not. P subsequently received notice that the taxes were in arrears and he was assessed a forfeiture fee, interest and other penalties.

The Committee concluded that, in the circumstances and with no explanation offered by Mr. Haynes, he had misappropriated or wrongfully converted the funds. The Committee approved payment of $1,376.10 and declined to pay the penalties or award interest on the claim.

Claimant: S
Payment approved: $800
Decision: February 28, 2000
Report issued: June 26, 2000

In October, 1998 Mr. Haynes received an $800 retainer from S whom he represented in a matrimonial proceeding. A custodian who was later appointed to wind up Mr. Haynes' practice found no file materials for S or any record of a deposit of the funds. Mr. Haynes told the custodian he would deal with the matter directly with S, but he did not.

In the absence of a trust deposit, or a transfer of the funds from the trust to the general account, the Committee was satisfied that Mr. Haynes wrongfully converted the funds and that S had suffered a loss. The Committee ordered compensation of $800 and declined to pay interest. Given the small size of the claim and the unlikelihood of recovery from Mr. Haynes, the Committee did not require the claimant to obtain a judgment.

Claimants: T and M
Payment approved: $1,482
Decision: July 24, 2000
Report issued: October 29, 2000

In 1998 Mr. Haynes represented T and M in the sale of their business. On September 2 Mr. Haynes received a trust cheque for $43,806.32, representing the sale proceeds. Mr. H deposited the funds to trust and then disbursed them. On September 3 he paid $1,482 and $687.21 to himself without rendering a bill for services. While the claimants allowed the $687.21 for reasonable fees and disbursements, they sought to recover the $1,482 from the Fund.

The Committee was satisfied that the funds had been misappropriated or wrongfully converted, noting that there was no apparent justification for the withdrawal, no bill and no explanation offered by Mr. Haynes. The claim was approved, without interest, and the claimants were relieved of the requirement of seeking a judgment.

William John Graham

Vernon, B.C.
Called to the Bar: May 17, 1996
Suspended: January 25, 1999
Custodian appointed: January 15, 1999
Resigned: October 22, 1999
Discipline: See December, 1999 Discipline Digest
Previous claims: See January-February, 2000 Benchers' Bulletin

Claimant: R
Payment approved: $7,327.35
Decision: March 27, 2000
Report issued: June 26, 2000

In 1998 the firm in which Mr. Graham practised held $17,097.36 in trust for the claimant. Mr. Graham was on an undertaking to use the funds to obtain release of a builder's lien, which in fact was removed by consent. In February he paid out $10,600.09 of the funds on behalf of another client, without R's consent or knowledge.

In October Mr. Graham paid himself $4,971.26 from trust money held for R.

The custodian of Mr. Graham's practice returned to R the $1,526.01 still in trust and Mr. Graham repaid $8,500. After these repayments, $7,071.35 remained owing to R. The Committee found misappropriation or wrongful conversion and ordered that R be compensated for her loss and $256 as the costs of obtaining a Small Claims judgment against Mr. Graham, a total $7,327.35. The Committee declined to award interest.

Claimant: B
Payment approved: $51,008.27
Decision: January 29, 2001
Report issued: March 15, 2001

In 1998 Mr. Graham acted as solicitor for the executor of an estate (B). B was to receive a $15,000 bequest. A charity of her choice was to receive the estate residue.

B received from Mr. Graham a $15,000 cheque, which she deposited. She then issued back a $7,500 cheque to Mr. Graham, which he deposited to his personal account. Mr. Graham later informed B that the balance of her inheritance ($7,500) was available. They met at a bank and Mr. Graham had a trust cheque for $42,935.20 payable to her. He explained the amount as a clerical error. He proposed rectifying the mix-up by B depositing the trust cheque and then giving Mr. Graham a cheque for the difference. B obliged. Mr. Graham received from her a cheque for $35,435.20 with which he purchased a bank draft and deposited those funds to his personal account. As a result of Mr. Graham's actions, the residual beneficiary received none of the estate funds.

The custodian of Mr. Graham's practice discovered that Mr. Graham had also withdrawn $8,073.07 for legal fees but without rendering accounts.

The Committee determined that Mr. Graham's misappropriation through the deposit of estate funds to his own account was a purposely devised scheme to deceive B as executor and falsify his accounting records. His withdrawal of funds for professional services without B's knowledge, authorization or consent was also misappropriation or wrongful conversion of funds.

Claimant: S
Payment approved: $10,700.92
Decision: May 28, 2000
Report issued: July 17, 2001

In late 1996 Mr. Graham began acting for S who had purchased a business for $30,000, but who was in a dispute with the seller over $10,000 of the purchase price. Mr. Graham received $10,000 from S to hold in trust pending resolution of the dispute. Mr. Graham took steps to settle the dispute and paid out the $10,000 from trust without the knowledge, authorization or consent of S. At least $5,000 of this amount he paid to himself without issuing a bill or providing an explanation.

The Committee found that Mr. Graham had misappropriated or wrongfully converted the funds in his capacity as a lawyer and accordingly approved payment of $10,700.92, which included $700.92 for fees and disbursements incurred by S in obtaining a judgment.