B.C. Realtor ‘intentionally undermined’ his client’s offer, then purchased property himself, court finds

The property at the centre of the lawsuit is seen in this 2011 photo from BC Assessment. (bcassessment.ca)

A B.C. Realtor has been ordered to “disgorge” his portion of a more than $1.2-million profit he received from the sale of a home that he purchased himself after one of his clients made two failed offers on it.

Alan Hu sold the home on 174 Street in South Surrey for $3,350,000 in September 2021, after purchasing it in January 2018 for just $2,098,000, according to a B.C. Supreme Court decision issued Friday and published online this week.

At the time of the purchase, Hu was representing a client – Pei Hua Zhong – who was looking to sell his property and purchase the one on 174 Street, the decision indicates.

Hu prepared two offers for the property on Zhong’s behalf, according to the decision. The first of these was accepted, but was not completed because Zhong had not yet sold his home and secured financing.

The second offer was rejected because the seller had received an offer from a different buyer: a friend of Hu’s, who assigned the contract to purchase the home to him just two weeks later.

Hu initially kept Zhong in the dark about the transaction. When Zhong found out about it, he sued, and B.C. Supreme Court Justice Amy D. Francis ultimately ruled in his favour.

The offers and the Las Vegas trip

The property at the centre of the dispute is a one-acre parcel on 174 Street just north of 20 Avenue, which is home to a modest, one-storey house with three bedrooms and three bathrooms that was built in 1980.

Its assessed value for 2025, according to BC Assessment, is $3,022,700, with all but $72,700 of that total attributed to the value of the land, rather than the building.

Francis' decision indicates it was the neighbourhood that led Zhong to the property.

“Mr. Zhong had a friend who had enjoyed a significant profit from purchasing and selling real property in the Grandview Heights neighbourhood of South Surrey,” the judge’s decision reads.

“As a result, Mr. Zhong decided that he too wanted to move to this neighbourhood.”

Zhong met Hu in November 2017 and hired the Realtor to facilitate both the sale of his home on Poplar Drive and the purchase of a new home, according to the decision.

In December 2017, Zhong asked Hu to make an offer on the 174 Street property. After some back-and-forth with the seller, the decision indicates, the parties signed a contract of purchase and sale for $2.1 million, subject to three conditions: financing, a home inspection, and a title search.

The “subject removal” date, by which the conditions were to be met, was Dec. 29, 2017.

While Zhong received mortgage approval from his bank, that approval was conditional on him having funds for a down payment of $735,000, which required him to sell his Poplar Drive home.

“As the subject removal date approached, the Poplar Drive property had not yet been sold,” the decision reads. “Mr. Zhong was concerned about removing the financing subject on the first contract in the absence of an offer to purchase the Poplar Drive property.”

Zhong asked Hu to seek an extension to the subject removal date, but it ultimately came and went without an extension, and the contract expired without being completed.

While this was happening, Hu was in Las Vegas with his wife and another couple – Lingxia Tao and her husband Zhi Chen.

According to the decision, what exactly was discussed between the parties in Las Vegas was disputed during the court proceedings, but the end result was that Tao made an offer on the 174 Street property for slightly less than $2.1 million, which was accepted, while Zhong made a new offer of $2.05 million, which was rejected.

Two weeks later Tao assigned her contract to purchase the property to Hu, who ultimately completed the transaction.

Realtor ‘intentionally undermined’ client

Hu, Tao, Chen and Hu’s wife all signed an “investor agreement” regarding the home on 174 Street, and the couples are currently embroiled in a separate legal battle over the terms of that agreement, according to Francis' decision.

In the case at hand, Hu told the court he merely mentioned the property to Tao and referred her to a different Realtor when she showed interest in acquiring it.

Tao, on the other hand, testified that Hu pitched the property to her during their Las Vegas vacation, claiming it was “a good investment opportunity” because of the size of the lot and its potential for redevelopment.

Tao, who at the time was not a permanent resident of Canada and spoke no English, told the court that it was Hu, not her, who made all the arrangements with the other Realtor and facilitated the transaction.

She claimed that the investor agreement – while not signed until the purchase was completed in March 2018 – was discussed during the Las Vegas trip, and called for the couples to split the profit from re-selling the property 50-50.

Francis found Tao’s version of events to be the more likely of the two, noting that Hu had provided the court with sworn evidence that he later admitted was not true on multiple occasions.

The judge found him to be an “unreliable witness,” and noted that his version of events made “less sense” than those of Tao and Zhong.

“I accept that Mr. Hu told Ms. Tao about Mr. Zhong’s failed first contract and invited Ms. Tao to invest in the (174 Street) property with him,” the decision reads. “He intentionally undermined Mr. Zhong’s bid to purchase the (property) so that he could take an interest in the (property) for himself.”

‘Ill-gotten gains’

As Zhong was Hu’s client at the time of the transaction, Hu had a fiduciary obligation to Zhong, which Francis found he failed to meet.

“At a minimum, Mr. Hu’s fiduciary duty to Mr. Zhong included a duty of confidentiality, a duty to act transparently, and a duty to avoid conflicts of interest and promptly disclose any that arise,” the decision reads.

In his defence, Hu argued that his breaches of these duties were rendered less serious because Zhong could not have afforded to purchase the property in the first place.

The Realtor alleged that Zhong had exaggerated his wife’s foreign income in his mortgage application, and that ordering Hu to “disgorge” his profits from the sale of the property would amount to allowing Zhong to profit from his own wrongdoing.

Francis was unpersuaded by this argument, citing “the vastly different nature of the two alleged wrongs” in the case.

“Disgorgement is about giving back ill-gotten gains,” the decision reads.

“Mr. Hu made a profit on the purchase and sale of the (174 Street) property as a direct result of his decision to prefer his own interests over the interests of his client when he decided to buy the (property). In contrast, Mr. Zhong overstated his family’s income on a mortgage application. Mr. Zhong’s action simply does not rise to a level of wrongdoing that would cause the integrity of the justice system to be undermined if a disgorgement order was made in this case.”

The judge ordered Hu to disgorge all profits he received from the sale of the property, a total that remains unspecified because of the ongoing litigation between Hu and Tao over the investor agreement.

If the proceeds of the sale were split 50-50 between couples, the amount Hu would need to pay would be $626,000, plus a $19,245.25 commission he improperly took for referring Tao to the other Realtor who represented her in the transaction.

Francis declined to order any punitive damages against Hu, reasoning that the disgorgement order would be “sufficient to achieve punishment and deterrence.”

She also declined to make any orders against Tao, who she noted was never in a fiduciary relationship with Zhong and had not committed any unlawful acts.