Irresponsible court official has actions nullified

THE recent case involving a Braybrook landowner who fell foul of the Sheriff’s Office offers lessons both for people with unpaid debts and for the authorities tasked with collecting outstanding amounts.

The Supreme Court of Victoria this week overturned the sale of Zhiping Zhou’s family home for the not-so-princely sum of $1000 after the Sheriff offered it at a no-reserve auction in its attempt to recoup $100,000 that Mr Zhou had failed to pay after three years.

For anyone receiving a warrant for the seizure and sale of land, the message flowing from Mr Zhou’s case is simple: when the Sheriffs Office says it is coming for your land, assume it means business and seek immediate legal advice.

For the Sheriff, the message is equally clear: in executing a warrant for seizure and sale you have a common law duty to act reasonably in the interests of both the judgment creditor and the judgment debtor to obtain a fair price.

In this case, a fair price - according to Supreme Court Justice Peter Vickery and Mr Zhou’s lawyers - would have been significantly higher than $1000 and probably closer to the property’s $630,000 market value.

While these type of auctions regularly fetch sale prices well below market value – due to the property owner’s inability to hold out for a better price – one might find it reasonable to assume that the sale of a house valued at over $600,000 would be enough to cover a $450,000 mortgage and the $100,000 Mr Zhou owed to other creditors.

In giving the reasons for his decision, Justice Vickery acknowledges that, while “a fair price is not necessarily the market value”, there should be some floor level, a reserve, below which a sale should not be allowed to proceed.

Under the Sherriff Act 2009, the Sherriff is empowered to sell property seized in accordance with relevant court rules.

To recover a debt, the creditor can apply for a Court judgment classifying the outstanding amount as a judgment debt. A further application can then be made for a warrant of execution – enforceable by the Sherriff – to seize and sell personal property like motor vehicles and household items.

If that personal property is insufficient to cover the judgment debt, the judgment creditor can issue a warrant of seizure and sale, enabling them to sell any land owned by the judgment debtor.

While that process appears to have been followed in the Zhou case, Justice Vickery determined that the judgment debtor is entitled to some protection under common law. In his reasons he states that if it becomes apparent to the Sherriff that the highest bid received at auction is “far below” the true value he would be acting “unreasonably” and in breach of his common law duty to accept it and should therefore pass the property in.

Fortunately these cases are extremely rare and the clarification around common law rights provided by this Supreme Court judgment is likely to make them even rarer.


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