Special Compensation Fund claims
The Special Compensation Fund, funded by all practising lawyers in BC, provides compensation (on claims prior to May 1, 2004) to people who suffer loss through the misappropriation or wrongful conversion of money or property by a lawyer acting in that capacity.
After May 1, 2004 compensation is provided by trust protection coverage under Part B of the Compulsory Professional Liability Insurance Policy.
In this bulletin, please find claim reports on:
Dale Bruce Harder
Called to the Bar: June 29, 1972
Consented to appointment of Custodian and undertook to cease practice: November 16, 2001
Ceased membership: January 1, 2003
Disbarred: December 7, 2006
Admitted one or more of: professional misconduct, conduct unbecoming a member of the Law Society, contraventions of the Legal Profession Act or rules made under it, and incompetently carrying out duties undertaken as a member of te Law Society. A hearing panel accepted Mr. Harder’s admissions and found him guilty of 10 counts of professional misconduct, confirmed in a hearing report issued November 10, 2005 (2005 LSBC 48). Mr. Harder was disbarred on December 7, 2006 (2006 LSBC 48): see page 30 for the digest of the disbarment decision.
Special Compensation Fund Committee decisions involving claims 20010130, 20010133, 20010154, 20010155, 20010175 and 20010180
All decisions dated: April 5, 2005
Reports issued: May 30, 2006 for claim 20010130, all others issued June 21, 2006
Prior and related Discipline Committee proceeding (2005 LSBC 48)
On March 26, 2003 a citation was issued against Mr. Harder, alleging 10 counts of misconduct, including: failure to serve his clients competently; failure to hold and remit Social Service Tax and Goods and Services Tax; breach of various Law Society trust accounting rules; failure to pay annual fees when due and practising law while uninsured; and misappropriation of funds received in his capacity as a lawyer.
Mr. Harder acknowledged that a trust shortage of between $42,396.11 and $56,626.21 existed when he consented to the appointment of a custodian for his practice.
After hearing testimony from medical experts and witnesses on the issue of whether the combined effect of his state of mental health and life circumstances prevented him forming the requisite intention, the hearing panel concluded that Mr. Harder had misappropriated clients’ trust funds. The panel also found Mr. Harder guilty of professional misconduct in respect of all the allegations in the citation.
Special Compensation Fund claims 20010130, 20010133, 20010154, 20010155, 20010175 and 20010180 (all six claims)
Claim 20010130 : B paid $500 to P, an employee in Mr. Harder’s office, as a retainer for handling a Workers’ Compensation claim. According to B, no work was done on the file; the Committee found no evidence to the contrary. The Committee noted Mr. Harder’s acknowledgement that he had failed to provide adequate supervision of P’s work.
Claim 20010133 : Mr. Harder received the sum of $10,000 from J in his capacity as solicitor for K, in relation to business dealings between J and K. J claimed that he had instructed Mr. Harder to hold the funds in trust until provided with J’s instructions for disbursement to a third party. However, Mr. Harder paid J’s $10,000 out of trust to K and to himself (on account of fees owed by K). Mr. Harder claimed that K had “conned” him regarding beneficial entitlement to the funds. Mr. Harder also said that upon learning that K was not entitled to J’s money, he tried to reimburse J by providing him with four cheques for $2,500. J stated that the first such cheque was returned “NSF” by his bank and that he hadn’t even tried to cash the others.
Claim 20010154 : X paid $5,100 to Mr. Harder as a retainer to conduct a litigation matter. While X claimed that a cheque for an additional $550 was also delivered to Mr. Harder, forensic accounting confirmed only that the sum of $5,100 was deposited on X’s behalf to Mr. Harder’s trust account and was subsequently paid out of trust to Mr. Harder’s personal account. The custodian of Mr. Harder’s practice valued the work done on X’s behalf at $350, and deducted that amount from $5,100. Having determined that insufficient funds were available in Mr. Harder’s trust account to satisfy all claims, the custodian made a pro rata trust distribution of $2,815.80 to X, leaving owing $1,934.20.
Claim 20010155 : In April 2003, W mailed two cheques totalling $1,140 to Mr. Harder, as a retainer for assessment of his Workers’ Compensation file and conduct of an appeal. Several months later Mr. Harder informed W that he could no longer represent him. Forensic accounting determined that while W’s funds were not deposited in trust and no account for legal services was rendered to him, both his cheques were negotiated by or on Mr. Harder’s behalf. Mr. Harder claimed that he had been unaware that W’s cheques were to fund his retainer, and had included them with a group of cheques for deposit to his general account.
Claim 20010175 : As a client of some 20 years, M had placed substantial funds in Mr. Harder’s trust over time. The Committee noted Mr. Harder’s admissions that he had been retained by M on several matters, that he had failed to render accounts to M with reasonably descriptive statements of services, and that he had withdrawn M’s trust funds prior to rendering or delivering accounts. Forensic accounting disclosed that a great deal of trust fund activity involved M, and estimated Mr. Harder’s trust liability to M at $13,230.10. Having determined that insufficient funds were available in Mr. Harder’s trust account to satisfy all claims, the custodian made a pro rata trust distribution of $7,842.79 to M, leaving owing $5,387.31.
Claim 20010180 : Mr. Harder admitted that he had acted for purchasers of property owned by P, and accordingly that he was bound by the terms of the Contract of Purchase and Sale to hold the sum of $1,000 in trust for P as a holdback for repairs. Forensic accounting confirmed that while P’s funds had been deposited in trust, Mr. Harder’s trust fund balance was insufficient to repay the trust liability in full. Having determined that insufficient funds were available in Mr. Harder’s trust account to satisfy all claims, the custodian made a pro rata trust distribution of $592.73 to P, leaving owing $407.27.
Was the appropriate notice given to Mr. Harder?
All six claims : Under Rule 3-31(4), notice of the claim must be given to the lawyer “as soon as practicable, and in any event, before the Special Compensation Fund Committee makes any decision under Rule 3-32.” The Committee determined that appropriate notice was given to Mr. Harder.
Should the Committee require the claimants to exhaust their civil remedies?
All six claims : The Committee noted that in determining whether to require a claimant to pursue a judgment against a lawyer, it may consider a number of factors, including the likelihood of recovery, clear evidence of theft and hardship. The Committee exercised its discretion to require the claimants to assign any rights and causes they may have against Mr. Harder to the Law Society, in lieu of pursuing judgment.
Were the claims made in time?
All six claims : The Committee observed that while the Legal Profession Act provides for a limitation period of two years for filing claims to the Special Compensation Fund, the BC Court of Appeal has indicated that the purpose of the limitation period is to protect the Law Society against undue delay, and that the Society has discretion “within the bounds of reasonableness” to decide what degree of formality and strictness should be required in dealing with claims to the Fund. The Committee then went on to note that it generally considers the limitation period issue in the context of the purpose of the Fund, which is to reimburse people adversely affected by acts of dishonesty by Law Society members.
Accordingly, while some of the claims to the Fund were commenced outside the two-year limitation period, in all such cases the Committee exercised its discretion to waive any reliance on the limitation period.
Was Mr. Harder a member at all material times?
All six claims : Noting that Mr. Harder was a member of the Law Society from June 29, 1972 until January 1, 2003, the Committee concluded that he was a member at all material times.
Did Mr. Harder receive the funds in his capacity as a lawyer?
Claim 20010130 : Having determined that P likely received B’s funds while under Mr. Harder’s authority, the Committee concluded that Mr. Harder received B’s funds in his capacity as a lawyer.
Claim 20010133 : The Committee observed that while J was not Mr. Harder’s client, Mr. Harder admitted that he had received $10,000 from J. Noting that receiving monies into trust and paying them out of trust are normal activities conducted in the course of practising law, the Committee concluded that Mr. Harder had received J’s funds in his capacity as a lawyer.
Claim 20010154 : The Committee determined Mr. Harder had received the sum of $5,100 from X as a retainer for legal services, and accordingly had received those funds in his capacity as a lawyer.
Claim 20010155 : The Committee found W’s funds had been paid to Mr. Harder for future legal representation. Noting Mr. Harder’s acknowledgement of his responsibility for supervising his staff’s conduct, and finding such supervision to be part of the normal work of a lawyer, the Committee concluded he had received W’s funds in his capacity as a lawyer.
Claim 20010175 : Upon determining that Mr. Harder had received M’s funds as a retainer for legal services, the Committee concluded Mr. Harder had received the funds in his capacity as a lawyer.
Claim 20010180 : The Committee determined that because P’s funds had been placed in Mr. Harder’s trust account in the course of a conveyance, Mr. Harder had received the funds in his capacity as a lawyer, notwithstanding that P was not his client.
Did Mr. Harder misappropriate and/or wrongfully convert the funds?
All six claims : The Committee confirmed that to answer “yes” to this question, it must be satisfied that Mr. Harder acted dishonestly or fraudulently in appropriating or converting the money. The Committee adopted the BC Court of Appeal’s objective standard of culpability: “conduct which ordinary, decent people would feel was discreditable as being clearly at variance with straightforward or honourable dealings.” The Committee then acknowledged the Court of Appeal’s warning that the lawyer’s intention becomes relevant only when an explanation is offered to excuse conduct objectively determined to be dishonest.
The Committee noted that a lawyer is not entitled to withdraw trust funds in respect of fees unless the work has been done and a bill has been prepared and delivered. The Committee also observed that on November 10, 2005, a discipline hearing panel ruled Mr. Harder had knowingly misappropriated funds held by him on account of trust obligations.
Claim 20010130 : The Committee reviewed the manner in which Mr. Harder had allowed P to deal with B: taking instructions on substantive matters, providing legal advice, accepting funds, issuing receipts and disbursing retainer funds without ever sending a bill, all over an extended period and without adequate supervision. Having determined that Mr. Harder had acted in a manner that ordinary, decent people would find discreditable and at variance with honest dealings, the Committee concluded that Mr. Harder’s conduct constituted misappropriation.
Claim 20010133 : On analysis of all the circumstances surrounding Mr. Harder’s payment of J’s trust funds to K and to himself, the Committee found Mr. Harder’s explanation to be an inadequate answer to conduct that, on an objective analysis, was dishonest. Noting the importance of every lawyer’s obligation to ensure that funds placed in a trust account are paid out properly and on instructions from the party who deposited the funds in the first place, the Committee concluded that Mr. Harder misappropriated J’s trust funds by paying them to K and to himself.
Claim 20010154 : Focusing on Mr. Harder’s admission that he had withdrawn X’s trust funds prior to rendering accounts, the Committee endorsed the November 10, 2005 ruling of the Law Society’s Discipline Committee that Mr. Harder had knowingly misappropriated funds being held subject to trust obligations.
Claim 20010155 : The Committee noted that, while forensic auditing could not confirm that W’s funds had been deposited in trust (or at all), there was evidence that W had mailed two cheques to Mr. Harder’s office, and that the cheques were negotiated at the bank where Mr. Harder maintained his principal trust account. Dismissing the explanation for including W’s cheques with others to be deposited in Mr. Harder’s general account “as lacking the ring of truth,” the Committee stressed that any legitimate general account deposit of client funds would be prefaced by the rendering of an account, and no such account was ever produced or found in this case. Accordingly, the Committee concluded Mr. Harder had misappropriated W’s funds.
Claim 20010175 : Noting that a lawyer is not entitled to withdraw trust funds to pay fees unless the work has been done and a bill rendered, the Committee endorsed the November 10, 2005 ruling of the Discipline Committee that Mr. Harder had knowingly misappropriated clients’ trust funds. Accordingly, the Committee concluded Mr. Harder had misappropriated M’s funds.
Claim 20010180 : The Committee endorsed the November 10, 2005 ruling of the Discipline Committee that Mr. Harder had knowingly misappropriated clients’ trust funds. Accordingly, the Committee concluded Mr. Harder had misappropriated P’s funds .
Did the claimant(s) suffer a loss?
The Committee confirmed that the claimants incurred losses (net of applicable pro rata shares of the custodial distribution of available trust monies) as follows:
Claim 20010130 : $500; Claim 20010133 : $10,000; Claim 20010154 : $1,934.20; Claim 20010155 : $1,140; Claim 20010175 : $5,387.31; and Claim 20010180 : $407.27
Disposition of Special Compensation Claims 20010130, 20010133, 20010154, 20010155, 20010175 and 20010180
The Committee approved these losses as claims for payment from the Fund, subject to the following conditions:
- each claimant must provide a release of the Law Society of BC, its members, the Special Compensation Fund and its related entities;
- each claimant must provide an assignment to the Law Society of BC of all the claimant’s rights and any causes that he or she may have against Mr. Harder; and
- each claimant must agree to these conditions or the claim will be returned to the Committee for consideration.
Re: A Lawyer*
* The lawyer is not identified as this claim was denied.
Special Compensation Fund Committee decision Involving Claim 20035068
Decision date: March 1, 2006
Report issued: May 24, 2006
Claim of $150,000 denied
In 1995 the lawyer visited the claimants (his relatives) in their home and asked if they wanted to make an investment with a high interest payment. On March 22, 1995, P&P gave the lawyer a cheque and a bank draft totaling $137,250.
During their interviews through a translator, P&P said the lawyer “lured” them into reinvesting when he gave them an interest payment of $12,500. They said they gave this sum back to the lawyer, bringing their total investment up to $150,000. The Special Compensation Fund Committee noted that the language barrier made it unclear whether the $12,500 did pass back and forth between the lawyer and P&P, or whether there was only discussion of that “interest payment,” with P&P agreeing to reinvest the money before they ever received it. There was no documentation to verify that the $12,500 was exchanged between the lawyer and the claimants.
On March 24, 1995 a mortgage was registered in the Land Title Office, with a Form B having been filed by the lawyer. According to the Form B, one of the claimants was listed as having an undivided 150,000/500,000 interest. On December 15, 1995 the lawyer registered another mortgage in the LTO, and the Form B again listed one of the claimants as having an undivided 150,000/500,000 interest. P&P did not know that either of these mortgages had been registered, and they stated they only provided the lawyer with $150,000.
In September 1996 the mortgagors went into bankruptcy. The property was sold in foreclosure, and the sale proceeds were insufficient to support the return of any monies to the claimants. P&P said they did not receive notice of either the foreclosure or the bankruptcy. In fact, P&P said at that time the lawyer continued to tell them the value of their investment was going up.
The Committee considered the capacity in which the lawyer received the funds, noting that P&P did not know themselves whether the lawyer was working for them as a lawyer or as a mortgage broker. In addition, pursuant to the borrower’s disclosure statement under the Mortgage Brokers Act , the lawyer received a finder’s fee of $4,975 and appeared to have been acting as a mortgage broker. The lawyer’s own statement of accounts indicated he paid himself that fee, plus an additional finder’s fee of $10,250. Further, the lawyer did not undertake to perform any services that could be considered legal in nature in his dealings with P&P.
After taking into account all of these factors, the Committee found the lawyer did not receive the funds in his capacity as a barrister and solicitor. Therefore, the Committee concluded that while P&P sustained a loss, that loss was not the result of misappropriation or wrongful conversion by a member of the Law Society. Accordingly, P&P’s claim was denied.
Called to the Bar: May 18, 1989
Gave undertaking not to practise: September 8, 2003
Custodian appointed: September 11, 2003
Ceased membership for non-payment of fees: January 1, 2004
Admitted to the Discipline Committee that his misappropriation of trust funds and breach of an undertaking constituted professional misconduct, and undertook never to apply to the Law Society for reinstatement: April 6 and 7, 2005 (see Discipline Digest , No. 05/01)
Special Compensation Fund Committee decision involving Claim 20035002
Decision date: May 10,2006
Report issued: September 11, 2006
Claimant: Government Agency (GA)
Payment approved: $117,165.77
Mr. Skagen represented Company A in the 2003 sale of Property B to Mr. C. Mr. C’s lawyer provided Mr. Skagen with a trust cheque for the net sale proceeds, which he deposited in his trust account. Acting on his client’s instructions, Mr. Skagen sent a trust cheque for $117,165.77 to GA in partial payment of the $168,886.58 owing under GA’s second mortgage. GA refused the partial payment and returned the funds by a cheque deposited in Mr. Skagen’s trust account.
Following discussions with GA counsel regarding the propriety of his payment of an unsecured bank line of credit in priority over the GA mortgage, Mr. Skagen provided GA with a trust cheque for the sum of $168,886.58, with a further cheque drawn on his general account for $964.92 to cover additional interest. The general account cheque cleared, but the trust cheque did not. A Law Society audit report showed that after accepting the trust deposit of $117,165.77 and before issuing his trust cheque for $168,886.58, Mr. Skagen made six unauthorized payments to third parties from his trust account, totalling $401,357.15.
The Special Compensation Fund Committee determined that Mr. Skagen’s trust cheque for $168,886.58 failed to clear because he had misappropriated funds from trust. The Committee also determined that GA had effectively exhausted its civil remedies against Mr. Skagen, and that GA’s claim to the Special Compensation Fund had been brought within time. The Committee decided that Mr. Skagen had been a member at all material times, and that his receipt of trust funds had been in his capacity as a lawyer.
Finally, the Committee concluded that Mr. Skagen had misappropriated trust funds by making unauthorized payments to third parties, and that GA had suffered a loss in the sum of $117,165.77, being the amount that Mr. Skagen had been instructed to pay to GA out of the sale proceeds received into trust.
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 20020119/131, 20020120/132 and 20020121/133
Decision date: April 5, 2006
Report issued: August 25, 2006
Payment approved: $127,048 ($100,000 and $27,048 interest)
Mr. Wirick acted for Mr. G, a developer client. Mr. G had business dealings with J&K and they agreed to advance funds to Mr. G that would be secured by a mortgage. Mr. Wirick represented Mr. G and J&K in the transaction.
Initially J&K advanced $60,000, which was secured by a property in Vancouver. That mortgage was released in September 1998. At the request of Mr. G, J&K agreed to use the initial funds plus an additional $40,000 for a new mortgage on another Vancouver property. Again, at the request of Mr. G, that $100,000 mortgage was subsequently released by J&K and applied against another property belonging to Mr. G. On two further occasions, Mr. G asked J&K to release their mortgage on one property and told them it would be registered against another property. In both instances J&K agreed and were led to believe their mortgage had been registered against a subsequent property. In the last instance, J&K were specifically told that if they released their mortgage on Property E, it would be replaced with a mortgage on Property N. In all the mortgage transactions, Mr. Wirick acted for both J&K and Mr. G — preparing the various documents and attending on execution and registration.
As with the previous mortgages, J&K continued to receive interest payments from Mr. G on their mortgage on Property N. The last payment they received was in May 2002 — the same month Mr. Wirick resigned from the practice of law. At that time J&K discovered that, despite their instructions, Mr. Wirick had not registered a new mortgage against Property N in their favour. In fact, Mr. G had sold Property N in February 2001; J&K were left with no security against Property N for their $100,000 and with no recourse against Mr. G, because he had made an assignment in bankruptcy. The Special Compensation Fund Committee found that had Mr. Wirick followed through on his obligation to register their mortgage against Property N, J&K would have been able to enforce it and obtain payment through foreclosure.
The Committee further found that in obtaining from J&K the release of the Property E mortgage and then, contrary to their instructions, not registering a replacement mortgage on Property N, Mr. Wirick had knowingly misappropriated or wrongfully converted their funds. As all of the other statutory prerequisites for payment were also met, the Committee thus approved a payment of $127,048 from the Fund to J&K, subject to various conditions and assignments.
Special Compensation Fund Committee decisions involving Claims 20020661, 20020660, 20020661, 20020660, 20020597, 20020325, 20020491 and 20020600
Decision dates: October 12, 2005, December 7, 2005 and February 1, 2006
Reports issued: January 10, 2006 and April 25, 2006
Claimants: Ms. T and B Credit Union
Payment approved, in part, for Ms. T totaling $279,752.27 ($8,224.07 in relation to Property A and $271,528.20 in relation to Property B). Payment for B Credit Union approved in the principal amount of the outstanding mortgage loan ($174,594.20) and its line of credit ($73,111.35) plus interest ($40,082.48 and $11,116.43, respectively)
Mr. G was a client of Mr. Wirick and sole director of V Construction. In April 1999, Mr. R, a nominee of Mr. G, entered into a contract to sell Property A in Vancouver to Ms. T for $200,000. Ms. T obtained a $150,000 mortgage from B Credit Union, and borrowed the balance of the purchase price from her mother.
V Construction was to construct a home for Ms. T on Property A for $120,000. Ten thousand dollars was to be paid by Ms. T, $60,000 by her parents and $50,000 was to be raised through a second B Credit Union mortgage, which replaced the first B Credit Union mortgage. B Credit Union also agreed to establish a line of credit for Ms. T in the amount of $73,000.
In June 2000, Ms. T sold Property A to Mr. M for $350,000. Mr. M financed the purchase through a mortgage with C Bank in the amount of $245,000 and a $100,000 loan from his father that was given to Mr. Wirick by Mr. M.
The sale of Property A was a transaction in which Mr. Wirick acted for Ms. T, Mr. M and C Bank. Mr. Wirick gave an undertaking to C Bank that its mortgage would be a first charge on title. But Mr. Wirick did not use the funds received from Mr. M and C Bank to pay out and discharge the prior B Credit Union mortgage. Instead, he misappropriated the funds received from C Bank by paying $170,000 to a company owned by Mr. G and by transferring the balance of the funds to the credit of other properties.
Ms. T made a claim to the Special Compensation Fund for the mortgage payments regarding the B Credit Union mortgage on Property A, which were for the mortgage that was supposed to have been paid out and discharged by Mr. Wirick. As it was not, payments continued to be drawn out of her B Credit Union line of credit without her knowledge.
As the $100,000 Mr. Wirick received from Mr. M was used for Ms. T’s purchase and construction of the home on Property A, the Special Compensation Fund Committee decided that Mr. Wirick had misappropriated $8,224.07 from Ms. T in relation to Property A. The Committee arrived at that figure by taking the amount Mr. Wirick received from C Bank and Mr. M minus the amounts of B Credit Union’s mortgage and line of credit, which had to be paid out. Consequently, the Committee approved the payment of $8,224.07 to Ms. T in relation to Property A, subject to certain releases, conditions and assignments.
On December 7, 2006 the Committee decided to amend its October 12, 2005 decision to include a payment to B Credit Union with respect to the line of credit, plus interest. The amendment occurred because after reviewing the payout figure provided by the Law Society, B Credit Union realized the figure did not include an amount for the line of credit granted to Ms. T. The Committee noted that B Credit Union’s first Statutory Declaration and Application to the Special Compensation Fund inadvertently did not include the line of credit amount and, therefore, in November 2005 B Credit Union submitted a new Statutory Declaration amending its claim with respect to Property A. The Committee allowed the original claim and amended claim of B Credit Union, subject to certain releases, assignments and conditions.
In May 2000, Mr. P, a nominee of Mr. G, purchased Property B in Vancouver for $258,000. In June 2000, this contract was assigned to Ms. T.
Ms. T and Mr. G executed an agreement for the construction of a home on Property B in May 2000. As part of the agreement, Ms. T paid a deposit of $55,000 to Mr. G for the purchase of the property and construction of the new home. The total price of the property and completed home was $410,000.
Ms. T obtained a mortgage against Property B from B Credit Union for $186,300. Mr. Wirick acted for B Credit Union and Ms. T. In her Statutory Declaration, Ms. T stated that the balance to complete the purchase of Property B was $62,808.67 and that sum was paid by Mr. Wirick from the $99,582.75 sale proceeds from Property A ($37,191.33 of which was used to finance the construction of Property B).
In October 2001, Ms. T sold Property B to Mr. L for $475,000. To finance his purchase, Mr. L obtained a mortgage from D Bank in the amount of $356,250.
On December 21, 2001 Mr. J, solicitor for Mr. L, sent a letter to Mr. Wirick enclosing his trust cheque for the balance due on completion, which was $454,151.55. The cheque was sent upon Mr. Wirick’s undertaking to discharge B Credit Union’s mortgage. Mr. Wirick did not use the funds to pay out the prior B Credit Union mortgage, as he had undertaken, and instead transferred the money to unrelated transactions.
The Special Compensation Fund Committee determined the amount Mr. Wirick misappropriated from Ms. T in relation to Property B was $271,528.20. The amount represented the difference between $454,151.55, the sale proceeds Mr. Wirick received from Mr. J, and the amount Mr. Wirick should have paid to B Credit Union for its mortgage, which was $182,623.35 at the time of the completion of sale. Consequently, the Committee approved the payment of $271,528.20 to Ms. T in relation to Property B, subject to certain releases, conditions and assignments.
* * *
In the cases indicated below, Mr. Wirick acted for the vendor, Mr. G, a developer client, one of Mr. G’s nominees, or one of Mr. G’s companies in respect of conveyances and mortgages of real property. In each instance, there were one or more existing mortgages, and in some cases there were also assignments of rents on the property at the time of the purchases. Mr. Wirick accepted the funds of the purchaser(s) on his undertaking to pay out and legally discharge the existing mortgage(s). Mr. Wirick did not fulfil his undertaking(s).
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(s) to apply the proceeds of sale to the discharge of registered mortgage(s) and he instead misappropriated or wrongfully converted the funds.
The Committee decided that it would not require the claimants to exhaust their civil remedies in these cases 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.
Subject to various conditions and assignments, the Special Compensation Fund Committee has approved the following claims involving situations such as those described above:
Special Compensation Fund Committee decision involving Claims 20020127, 20020180, 20020205 and 20020329, 20020181, 20020204, 20020279, 20020182, 20020201, 20020284, 20020183, 20020202, 20020282, 20020184, 20020203 and 20020283
Decision date: February 1, 2006
Report issued: April 12, 2006
Claimants: Credit Union A, D&M, B Bank and Dr. M
Payment for Credit Union A approved: $138,103.64 ($114,778.12 and $23,325.52 interest), $142,999.66 ($118,318.58 and $24,681.08 interest), $156,690.53 ($129,646.47 and $27,044.06 interest), $157,652.12 ($130,442.09 and $27,210.03 interest), $153,687.31 ($127,161.59 and $26,525.72 interest)
Payment for D&M approved: $172,019.98 ($140,000.00 and $32,019.98 interest)
The claims of B Bank and Dr. M were denied because the allowed claims of Credit Union A and D&M put the other claimants in the positions for which they bargained, and which they ought to have been had Mr. Wirick fulfilled his undertakings.
Special Compensation Fund Committee decision involving Claims 20020025, 20020511, 20020287, 20020043, 20020512, 20020288, 20020113 and 20020114.
Decision date: October 27, 2004
Report issued: April 26, 2005
Supplementary decision date: February 2, 2005
Report issued: April 26, 2005
Claimants: C&C, E Bank, Credit Union A, Y&C, and D
Payment for Credit Union A approved: $213,073.41 ($186,337.23 and $26,736.18 interest)
Payment for Mr. C approved: $141,465.75 ($100,000 and $41,465.75 interest)
Payment for D approved $578,260.27 ($500,000 and $78,260.27 interest)
Credit Union A’s mortgage was inter alia over the two neighboring properties at issue in these claims. There was an inter alia mortgage registered in second position in favour of Mr. C who was not a claimant. As well, D had an inter alia mortgage registered in third position over these properties and over a third property (Property X), which was not the subject of any other Special Compensation Fund claims.
Property X was sold pursuant to a foreclosure action and funds were paid into court to the credit of D, but the funds were not sufficient to pay out the inter alia mortgage in its entirety. The Special Compensation Fund Committee decided to approve payment of D’s claim, subject to the assignment to the Law Society of D’s position in the foreclosure action involving Property X, and subject to the written agreement by the trustee of the bankrupt estate of Y not to oppose the Law Society’s application for payment of the funds being held to the credit of D in that foreclosure action.
The Committee decided to approve a payment to Mr. C for principal and interest outstanding, as well, even though he was not a claimant. The Committee decided that paying out Mr. C’s mortgage, as Mr. Wirick had undertaken but failed to do, put the other claimants in the position for which they had bargained. Therefore, the claims of C&C, E Bank and Y&C were denied, because the allowed claims of Credit Union A and D along with payment to Mr. C put the other claimants in the positions for which they bargained, and which they ought to have held had Mr. Wirick fulfilled his undertakings.