Friday, February 6, 2009

ERA told to return $257,000 to couple

Feb 6, 2009

Judge slams unethical agents who 'flip' properties for profit

By Selina Lum

A HIGH Court judge yesterday criticised the unethical behaviour of two ERA Realty Network agents and ordered the return of $257,000 to a couple who used the agency to sell their apartment.

Mr Yuen Chow Hin, an IT company vice-president, and his wife, Madam Wong Wai Fan, a housewife, had let go of their two-bedroom downtown flat at $688,000. They took their ERA agent's word that this was the best price they could get.

What they did not know was that the buyer of their Riverside Piazza unit was the wife of their agent's boss, and that she re-sold it almost immediately for $945,000, making a hefty profit.

Yesterday, Justice Choo Han Teck ruled in favour of the Yuens, who had sued ERA for the 'secret profit' made in the second deal.

Justice Choo found that the conduct of agent Jeremy Ang and his boss, Mr Mike Parikh, senior group division director at ERA, amounted to breach of duty and fraud.

He also had a stern reminder for the industry of its ethical responsibilities, as it had emerged in court that such practices were common.

The judge concluded that it was Mr Parikh who wanted to buy the flat in order to make a quick profit during the property boom.

To distance himself from the deal, he used his wife, Madam Natassha Sadiq, as the buyer and Mr Ang as the seller's agent, the judge found.

Mr Ang was the link but Mr Parikh was the person behind the scheme, and his position made his subordinate's breach of contract even more reprehensible.

The misconduct was of such magnitude that the judge said he felt bound to make the reasons clear in his judgment so that no property agent could now claim ignorance.

When a property agent is engaged to sell or buy property, he has a responsibility to act in the interests of the person who appointed him - not his own, or his friends', or his relatives' or his boss', said the judge.

'This responsibility that the agent bears is the foundation of the ethical rules and contractual principles that prohibit an agent from acting in conflict of interests and reaping secret profits for himself or his friends.'

Madam Sadiq was a party to the plan carried out by her husband and Mr Ang.

'The result of the concerted efforts of Jeremy, Mike and Natassha resulted in the plaintiffs selling their flat for less than what they might have had they been properly and honestly advised,' said the judge.

Justice Choo rejected the testimony of ERA's top brass - president Jack Chua and senior vice-president Marcus Chu - that the two men had done nothing wrong.

The judge said it was clear why they thought so - Mr Chu admitted in court that he and others in the company, as well as agents in other companies, had done the same thing.

Justice Choo also rejected arguments by ERA that it was not liable for the actions of its agents, who are 'independent contractors'.

The option form had ERA's logo printed on it; the commission agreement was between Madam Wong and ERA; and the newspaper advertisements sought to persuade the public that they would have the backing of the company and its network by engaging an ERA agent.

It was also ERA - not Mr Ang - which took the couple to the Small Claims Tribunal when they refused to pay the commission on the sale.

Yesterday, a relieved Madam Wong said: 'Naturally, I'm very happy. I respect the decision of the court.'

In a statement, ERA president Jack Chua said: 'ERA intends to appeal the court decision that finds our company liable as we did not benefit from the transaction.'

Mr Jeff Foo, president of the Institute of Estate Agents, would only say the case could have been prevented if real estate agencies and their agents are licensed.

He said: 'In this way, the industry will be regulated and everybody can be held responsible and accountable for their actions.'

The institute has a code of conduct and ethics for members.

Mr Ang is not a member of IEA.

Additional reporting by Diana Othman

[Good Judgement. Based on the ruling of the Judge, the Police should be investigating now and make an example of this case. Yes it may be industry practice, but if so, then the industry is corrupt and unprofessional. It would be good to set clear standards as to what is acceptable, professional, and ethical standards.]

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