Realtor liable for ‘underhanded’ home purchase ordered to repay profit

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A B.C. realtor who went behind a client’s back to buy a stake in a house the would-be buyer wanted has been ordered to shell out his share of the $1.2 million in profits made when he later flipped the house.

In a B.C. Supreme Court decision published this week, Justice Amy Francis said Alan Hu’s dealings with Pei Hua Zhong, a Chinese immigrant in Surrey who sought the private real estate agent’s services to sell his current home and buy another more than six years ago, were “deceptive and underhanded.”

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“His conduct represents a marked departure from ordinary standards of behaviour and is deserving of denunciation,” the judge wrote in ruling that Hu breached his fiduciary responsibility to Zhong.

Not long after Zhong hired Hu to sell his home in South Surrey and find a new spot in Surrey’s Grandview neighbourhood, they put forward an offer of $2.06 million on a modest split-level home on a one-acre lot at 2038 174th Street listed at $2.5 million but assessed at $2.04.

Part of the offer was conditional on Zhong selling his current home, which didn’t happen in time and led to the offer expiring. Still interested, Zhong decided to pursue bridge financing — a short-term loan until his house sold — and was informally approved by his bank.

On New Year’s Day, with the house still on the market, Zhong instructed Hu to make another offer, this time for $2.05 million, with none of the previous financing conditions.

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After hearing nothing, he sent Hu a text message telling him to go to $2.1 million.

As this was happening, and entirely unbeknownst to Zhong, Hu was vacationing in Las Vegas with friends Lingxia Tao and her husband, Zhi Chen, both new arrivals to Canada from China on visitor visas.

Minutes after his Jan. 2 message to Hu, Tao and Chen became owners of the home Zhong was gunning for when they, through an agent referred to them by Hu, put in a winning bid of $2.098 million.

It came with a provision that Tao could transfer the title and mortgage to a third party, which two weeks later ended up being Hu and his wife, Hui Ma. The transaction was finalized in mid-March, at which time Hu and Ma became the owners.

Hu, who’ll also have to repay a nearly $20,000 referral fee, never disclosed the assignment deal to Zhong, for whom he continued to act as realtor until late January.

Zhong didn’t learn Hu was in the home until he drove past in July 2020 to see his former realtor outside. The claim was filed in January 2022.

Hu, meanwhile, sold the home for $3.35 million in September 2021.

What happens in Vegas…

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Competing accounts of what occurred in Vegas that led to Hu’s friends scooping up the property were presented in court proceedings.

For his part, Hu said he spoke to Tao about Zhong’s failed offer, specifically mentioning the price, and then referred her to another agent, Iris Liu, explaining how he could not be involved in the purchase.

“Mr. Hu claims to have had no further involvement in Ms. Tao’s bid for the 2038 Property,” Francis wrote.

As for Zhong’s New Year’s Day offer, Hu testified that by the time he reached the listing agent, the property had been sold.

Tao told the court Hu advised her the home “was a good investment property” and, when she and her husband asked for advice on purchasing, he instructed them about obtaining financing and told them to offer $2.1 million

As Tao and Chen were already paying a mortgage, she said Hu suggested he and his wife invest alongside them and that “they would share the profit 50/50 between the two couples.”

As the transaction played out, Tao said Hu handled all matters and that she never dealt directly with Liu. In her limited testimony, Liu said she believes she spoke to Tao, but the judge noted she had difficulty remembering much about a transaction she had limited involvement with six years prior.

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At trial, Tao didn’t offer clarity on the decision to assign the controlling interest to Hu and said “she understood that she would be on title to the 2038 Property, although it is not clear how she anticipated that would happen.”

“She does not appear to have paid careful attention to the legal steps undertaken by Mr. Hu,” Francis concluded.

Regardless, the judge found her version to be a more likely accounting and deemed Hu to be an “unreliable witness” about the events that transpired in Las Vegas.

She also chastised the realtor for being misleading about his previous connection to Tao — he’d helped her purchase a home earlier that year — and not being truthful to Zhong about his part in buying the property out from under him.

“He intentionally undermined Mr. Zhong’s bid to purchase the 2038 Property so that he could take an interest in the 2038 Property for himself,” Francis decided.

‘More profound than simply breaching confidentiality’

Hu admitted that discussing Zhong’s failed offer with Tao was a clear breach of his duties, but maintained the rest of his actions were not.

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Francis disagreed and ruled it was “far more profound than simply breaching confidentiality.”

Not only was he actively working against Zhong, but he “was very clearly in a conflict of interest insofar as he preferred his own interest” over his client’s.

Hu’s lawyer said the breaches “were less significant” because Zhong couldn’t afford the house and, knowing this, Hu had no obligations to him.

Francis countered that Zhong was willing to take the financial risk and proceeded with the second offer, and that Hu allowed him to keep making offers on the property when he himself was “actively undermining” his client by dealing with Tao and another agent.

The judge also dismissed Hu’s defence that Zhong misrepresented himself on mortgage application documents by including his wife’s overseas pension to calculate the family’s income, despite not yet receiving any of that money. Zhong said Hu advised him to do this.

As for how much of the $1.2 million profit 2038 property sale in 2022 Hu will have to “disgorge,” the legal order to return funds obtained unethically, it depends on a separate lawsuit filed by Tao and Chen alleging Hu has not shared the profits from the property, as per their investment agreement.

Francis declined to award Zhong for his claimed punitive damages and found Tao not liable of conspiring with Hu.

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