Wednesday, November 16, 2016

Conflict Of Interest: Judge Slams Real Estate Broker With $25K In Punitive Damages For Failure To Fully Disclose To Client In Foreclosure That He Owned Company Holding Delinquent Mortgage While Contemporaneously Acting As Listing/Sales Agent

In Langley, British Columbia, the Langley Times reports:
  • A falling-out over a business deal involving two former long-time friends and business associates has ended with a judge ordering Langley real estate agent Geoffrey Stephenson to pay a $25,000 punitive fine for the way he dealt with Thomas Mulligan.

    According to the judgment, filed Oct. 24, Stephenson and Mulligan had been friends for decades, and Mulligan had worked as a licensed realtor from 2002 to 2005 at Greyfriars Realty International Ltd., a company owned and operated by Stephenson.

    The written decision described how that relationship ended over the forced sale of a White Rock house that Mulligan bought in 2004, shortly after he was discharged from bankruptcy.

    Mulligan had "repeatedly" borrowed money against the value of the house from Greyfriars Mortgage Investment Corp., another company owned and operated by Stephenson. When Mulligan fell behind on his payments in 2008, Stephenson suggested selling.

    After another realtor proved unable to find a buyer at the desired asking price, Mulligan had his house listed with Greyfriars Realty International Ltd.

    Shortly after that, Greyfriars Mortgage foreclosed, and, assisted by Greyfriars Realty, sold Mulligan's home "with a significant shortfall left owing on his debt,” the judgment said.

    "All things considered, I am satisfied that Mr. Mulligan did not think much about conflict of interest issues until Greyfriars Mortgage commenced foreclosure proceedings against him," the judge wrote.

    "However, when that happened he began to think about them a lot."

    Mulligan complained to the Real Estate Council, which fined Stephenson $1,000 for professional misconduct in a consent order that, among other things, said Stephenson failed to fully disclose that he acted as Mulligan's realtor at the same time he owned Greyfriars Mortgage and knew it would probably commence a foreclosure action.

    After hearing the same issue, the judge called the Real Estate Council fine a "modest punishment (with) little, if any, discernible punitive or salutary effect,” and imposed a punitive damages award of $25,000.

    While the judge ruled that Stephenson's conduct was not malicious, it was a "marked departure from ordinary standards of behaviour reasonably to be expected of a realtor."

    "What Mr. Stephenson's ownership of Greyfriars Mortgage does mean is that he was in a serious conflict of interest position when he agreed to act as Mr. Mulligan's realtor."

    Reached by the Times for comment, Stephenson would only say that "it was a very bad experience and the only people who really won were the lawyers."

    As of Monday, Mulligan had not responded to a Times request for comment made to his lawyer.

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