Interesting story about conflict of interest

Interesting story about conflict of interest



Couple, awarded $257,000 in judgement against ERA, did detective work to uncover agent link in 'flipping'They dig through marriage records, old newspapers

By Tay Shi'an
February 08, 2009 Print Ready Email Article

THEIR first inkling that something was wrong came when they received a call from their lawyer.

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NEVER GIVE UP: Mr Yuen Chow Hin and his wife, Madam Wong Wai Fan, even went to the final buyer's house a few times, even slipping a note in his letter box, to track him down. -- --PICTURES: TAY SHI'AN, LIANHE ZAOBAO, THE STRAITS TIMES

The CPF Board wants to know why you sold your property for such a low price, the lawyer told the Yuens.

Mr Yuen Chow Hin, 50, an IT company vice-president, and his wife, Madam Wong Wai Fan, 48, a housewife, were surprised and puzzled.

In July 2007, three months before the call, they had sold their two-bedroom apartment at Riverside Piazza for $688,000 through ERA agent Jeremy Ang.

The buyer, said Mr Ang, was one of his 'regular clients', Madam Natassha Sadiq. He told the Yuens that the valuation for the unit was between $650,000 and $700,000, and Madam Sadiq's offer was the best price they could get.

Unknown to the Yuens, Madam Sadiq sold the apartment almost immediately for $945,000.

The valuation which the new buyer, a MrTeo, got was much higher than $688,000, which led to the red flag from CPF.

The Yuens immediately queried Mr Ang, and then played detective to find out what had happened.

What they uncovered led to a High Court case which ended with the judge ordering ERA to pay the couple the $257,000 difference in the sale prices. He also blasted the two agents for their unethical behaviour.
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ERA last night said it was suspending the two agents and introducing measures to improve transparency and accountability to its customers. (See report on facing page.)

After checking a copy of the caveat lodged for their property, the Yuens realised that MrTeo had exercised his option to buy the unit from Madam Sadiq on 25 Jul - one day before she exercised her option to buy the unit from the Yuens on 26 Jul.

Suspicious about the dates, the Yuens decided to track down Mr Teo. His address was listed on the caveat.

Madam Wong told The New Paper: 'We wanted to find out, how did he buy our house, who he bought it from. The timing didn't sound correct.'

She said that although the thought of knocking on a stranger's door was scary, she and her husband were determined to find answers.

But trying to track down Mr Teo was not easy. The first few times the Yuens went to his house in Toa Payoh, he was not home. The couple also left a note in his letter box, but he did not respond.

Finally, in late November, they managed to contact him.

That's when he told them he had bought the unit through an ERA agent called 'Mike'.

The Yuens then went through newspaper archives and found three advertisements 'Mike' had put up on 7, 9 and 14 Jul 2007.

Madam Sadiq was granted the option to purchase only on 12 Jul.
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By matching the handphone number on the advertisements with other promotional material they found, they confirmed 'Mike' was Mr Ang's boss, Mr Mike Parikh, an ERA senior group division director.

The Yuens were surprised - Mr Parikh was the agent who had helped to sell Mr Yuen's brother Steven's flat in 2006.

It was through Mr Parikh that they hired MrAng to sell Mr Yuen's mother's flat as well. The Yuens' Riverside Piazza unit was the third property the family had entrusted with ERA in two years. The couple had, by now, drawn a link between the two agents involved in the two transactions. But how did Madam Sadiq fit into the picture?

Said Madam Wong: 'We were thinking and brainstorming, wondering if there was any linkage. Then we thought, maybe she's (someone's) wife.'

Based on the hunch, and Madam Sadiq's IC number on the caveat, the Yuens did searches at the Registry of Marriages in December 2007 and discovered that Madam Sadiq was married to Mr Parikh.

Said Madam Wong: 'That's when we realised there was definitely something going on, some internal arrangement.

'It was a big surprise to us. (Mr Ang) had seemed genuine and helpful... We felt indignant that our trust had been misplaced.'

The Yuens refused to pay Mr Ang's 1 per cent commission of $7,361.60, including GST, and wrote to ERA about their findings.

ERA wrote in reply that the two agents had done nothing wrong.

Then, in January last year, ERA made a claim against the Yuens at the Small Claims Tribunal for failing to pay the commission.
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It was after this that the Yuens filed their lawsuit against the company.

When the verdict was handed out on Thursday, Madam Wong hugged their lawyer, Ms Gan Kam Yuin, in joy.

Mr Yuen was not in court as he was abroad on a business trip.

But his mother and brother - Mr Parikh and Mr Ang's former clients - and his sister were there to give Madam Wong support.

Madam Wong admitted that the case, which took about a year, and its five-figure costs gave her many sleepless nights.

She said: 'It does occupy your mind. Now I can get a chance to sleep well.'

ERA suspends the two agents, sets new rules

THE two agents involved in the Yuens' case have been suspended, Mr Jack Chua, president of ERA Realty Network, told The New Paper last night.

He said: 'We reserve our rights as to what further actions we may take against them.'
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This is a turnaround from what Mr Chua had said during the trial, when he said he felt the two agents had done nothing wrong.

ERA has yet to decide if they will take legal action against the agents and/or Madam Sadiq to claim back the $257,000 and costs that the court had ordered it to pay the Yuens.

The company still intends to appeal against the court's decision.

ERA also released a statement last night introducing measures to improve transparency and accountability to its clients.

It claimed these steps are a first for the Singapore real estate industry.

1) Effective immediately, agents will have to make a set of disclosures and give an undertaking to all customers at the start of each proposed transaction.

The customer will be assured that he is the agent's top priority and service expectations will be set. Assurance will also be given that all possible conflicts of interest will be properly disclosed.

The undertaking will also make clear that the agent is an independent contractor of ERA. This is important as the judge had stated that, unless the agent's client was expressly told otherwise, the client is entitled to regard him as a servant or agent of the agency. This is one of the reasons ERA was found liable.

This clause seems to imply that a client cannot hold ERA liable in future for the agent's actions.

To this, Mr Chua said it is to improve the client's understanding by fully disclosing the agent's position in relation to the company.
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2) All buyers must declare that they are not ERA agents or members of their immediate family, before any offer to purchase an ERA-marketed property is accepted.

3) Within three months, an amended code of ethics governing its agents will be in place.

Judge: ERA agents created conflict of interest

DID the two agents do anything wrong? If so, could ERA be held liable for their actions? High Court judge Choo Han Teck ruled 'yes' and ordered ERA to pay the Yuens $257,000, plus costs and interest.

He sharply criticised the Yuens' agent, ERA senior marketing director Jeremy Ang, and his boss Mike Parikh, a senior group division director, saying their actions amounted to a breach of duty and fraud.

Their misconduct was a matter of such importance that he felt bound to explain clearly why he thought their actions were so wrong, so that no property agent can claim ignorance after this.

He found Mr Parikh and Mr Ang were ethically wrong and in breach of contract by creating a conflict of interest between their client and themselves.

He agreed with the Yuens that had they known Madam Sadiq is Mr Parikh's wife, they would not have sold the unit to her, and would have hired another agent.

More importantly, the Yuens did not know that Mr Parikh placed newspaper advertisements for the sale of the unit for his wife, while Mr Ang did not do so for the Yuens - even though he told Madam Wong 'no one had responded to the advertisement'. Mr Ang told the court that he believed telling his regular clients verbally about the unit constituted advertisement.

Chastising him, Justice Choo said: 'I think that it is fair to say that most people know the huge difference between (a tip-off and an advertisement).'

The judge also noted that while Mr Ang was the agent, Mr Parikh was the person behind the scheme, and the latter's senior position in ERA made the breach 'even more reprehensible'.

ERA claimed that they could not be held liable for the two agents' actions as they were 'independent contractors', and had signed associate agreements stating they were not employees of the company.

But the judge rejected this, as the option form had ERA's logo on it, the commission agreement was between Madam Wong and ERA. Therefore, unless a client is expressly told otherwise, he is entitled to regard the agent as a servant or agent of ERA.

The judge also noted that when the Yuens refused to pay the commission, it was ERA, not Mr Ang, who filed the case at the Small Claims Tribunal.

Said Justice Choo: 'This kind of misconduct is never easy to discover because it is carried out in stealth and in breach of trust; and far too many homeowners and potential purchasers are at risk.'