Case 3: Diverting Business to Another Estate Agency
A purchaser engaged an estate agent of Estate Agency A to purchase a property. Aware of such potential deal, a proprietor of Estate Agency B requested the estate agent to refer the purchaser to his company. In return, he offered to pay the estate agent a percentage of the commission received as a reward for the business referral if a deal was secured. Estate Agency A did not allow staff to accept any advantage in relation to its business or refer its clients to other estate agencies.Eventually, the purchaser purchased the property through Estate Agency B and the estate agent received a rebate from Estate Agency B.
The estate agent, an employee (i.e. agent) of Estate Agency A, accepted advantage (i.e. commission) from Estate Agency B as a reward for diverting business concerning a property transaction to the latter, which was an act relating to the affairs of Estate Agency A (i.e. his principal). As the estate agent did not have Estate Agency A’s permission to accept the advantage, he had contravened Section 9(1) of the POBO. The proprietor of Estate Agency B had violated Section 9(2) of the POBO by offering the advantage under such circumstances.The estate agent and the proprietor of Estate Agency B were sentenced to imprisonment. The estate agent was also ordered to pay a restitution to Estate Agency A, which was equal to the amount of commission he received from Estate Agency B.
Case in Perspective
In this case, the estate agent breached the trust placed on him by his employer. He referred his company’s client to another estate agent causing loss to his employer.
An estate agency should lay down appropriate procedures and safeguards to prevent staff from diverting business to competitors. For example,
Set out a Code of Conduct on the ethical standards expected of staff, including solicitation and acceptance of advantage (e.g. prohibit all forms of bribery and corruption, prohibit the solicitation and acceptance of advantage without the company’s permission).
Ensure that an estate agency agreement is entered into with clients.
Set out the policy in respect of referral fee for business referral (e.g. prohibit the acceptance of referral fee without the company’s permission).