Can the sheriff sell land in Victoria without a reserve - part 1?

  • Author : Bill Stark - 07-12-2012

In my post of 14 March 2012, I referred to a paper on recent developments that I had recently presented.

One of the topics covered in the paper was the long-running saga involving the purchase of the equity (worth over $150,000) in a property for $1,000 (see Wu v Ma [2011] VSC 208 and the related case of Kousal v Suncorp-Metway Ltd [2011] VSC 312).

In Zhou v Kousal [2012] VSC 187, Vickery J was called upon to deal with the aftermath of that sale by the Sheriff.

Background

Zhiping Zhou was the registered proprietor of the relevant property. He was born in Shanghai China in1962. He immigrated to Australia in 1989 on a student visa following the 4 June 1989 uprising in Tiananmen Square in Beijing. He obtained permanent residency in Australia in 1993 and became an Australian citizen in 1998.


 

Zhou graduated with a Bachelor’s Degree in mechanical engineering in China. Since graduation and immigrating to Australia, he worked principally in the area of building and construction.

Zhou built a house on the Property himself, as the owner builder. A Certificate of Occupancy was issued in 2006. The house is built of brick and has five bedrooms, and is a good house. The property was valued at approximately $630,000.


The property was mortgaged, and the mortgagee was owed in excess of $450,000. There were unpaid council rates of nearly $8,000.  The judgment creditor was owed in excess of $100,000.

The sale
After several applications to the Supreme Court, and an earlier failed auction, the Sheriff purported to sell the equity in the property at a second auction without reserve for the highest bid, which was $1,000 made by Mr Kousal.

After the sale, Zhou issued proceedings against Mr Kousal, the Sheriff, the mortgagee, the judgment creditor and the Registrar of Titles.

Zhou sought a declaration that the Sheriff breached his legal duty by selling his interest in the Property at the Auction for an amount which was illusory, unfair, unreasonable in that it bore no relation to the evident worth of his interest in the Property, and he sought an order that the purported sale be set aside. He also sought damages against the Sheriff.


Vickery J noted (at paragraph 30) that:

... although the Order of Mukhtar AsJ expressly authorised the Sheriff to conduct a sale of the Property without a reserve price, this was not an unfettered authority to sell at any price which could be obtained. The Order expressly directed that any such sale must be conducted in a manner which did not “derogate from, or relieve the Sheriff of a duty at law to the owner of the land when exercising a power of sale”.


His Honour rejected Zhou's claim that he suffered a special disability by reason of his limited understanding of English, which made the transaction by Mr Kousal unconscionable. In fact, Zhou had been involved in the purchase of at least 10 pieces of real estate in Victoria since 2000, and appeared to be an experienced property developer.

Vickery J specifically found that Mr Kousal was not acting unconscientiously when trying to enforce his purchase of the equity in the property from the Sheriff.

His Honour proceeded to analyse the conduct of the sale by the Sheriff and concluded that the Sheriff was in breach of his common law duty and his duty under the Sheriff Act.

Relying on that breach of duty by the Sheriff, Vickery J set aside the sale by the Sheriff, on the basis that the sum for which the debtor's interest was sold was so far below his equity as to amount to no sale.

About the Author

Bill Stark

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