There have been newspaper reports recently 1 about Mr Zhiping Zhou, whose Braybrook 2 home, valued at more than $630,000, was sold by the sheriff in Victoria for $1,000.3
Mr Zhou has commenced proceedings in the Victorian Supreme Court to, amongst other things, have the sale set aside.4
The prospect of the sheriff or a mortgagee selling a person's property for less than its true value is a common concern for debtors. For this reason, owners will go to great lengths to ensure they retain control of the sale, fearful of reducing the equity that will be available to them (if any) once the property is sold and the creditors paid.
So what are the obligations of the sheriff or a mortgagee in Western Australia? If Mr Zhou had owned property in WA, could this have happened?
At common law, a sheriff (subject to what is said below with respect to their immunity) and a mortgagee owe a duty of care to an owner to not wilfully or recklessly sacrifice the interest of the owner 5. The factors relevant in determining whether there has been an improper exercise of the power of sale include:
- considering the extent and content of advertising;
- whether there has been adequate lead time to sale to give potential purchasers sufficient time to arrange finances;
- consideration of whether the sale was independent or not;
- whether the sale was negotiated at arms length between purchaser and mortgagee; and
- obtaining expert advice on the value, what the appropriate reserve price should be and the best way to sell the property
It seems undeniable that if Mr Zhou's property had been sold by a mortgagee, that mortgagee would have breached its duty of care and therefore be liable for damages. But this was a sale by an officer of the court, the Victorian sheriff.
The right of the WA sheriff to sell a debtor's property arises from the Civil Judgments Enforcement Act 2004 (WA) ("the CJE Act"). This act provides that:
- Personal property is to be sold in preference to real property 6;
- Only sufficient property be sold – that is, the sheriff cannot sell more property than is sufficient to wholly satisfy the judgment debt 7;
- The sheriff must take reasonable steps to determine a fair value for the interest. This may include asking the judgment for information relevant to the value of the interest or by engaging a suitably qualified and experienced person to provide a written valuation of the interest 8;
- Details of an intended sale are to be advertised in a reasonable manner. This requires that at least 7 days elapses before the sale is conducted (unless they are perishable personal property or the judgment debtor has consented in writing) 9;
- Sale of property must be by public auction and must not be for less than a fair value of the interest. The sheriff or the judgment creditor may apply to the court for an order that the interest be sold for an amount less than fair value or sold by private agreement or by public tender but the debtor is entitled to be heard on such an application 10.
On the other hand, the Sheriff Act 2009 (Vic) simply gives the Victorian sheriff the power to sell or deal with the property for the purpose of applying the proceeds of the sale to the payable amount 11. There is no express requirement in the Sheriff Act to obtain a fair and reasonable price for the debtor's property.
It is arguable that section 25 of the Sheriff Act provides immunity to the Victorian sheriff for any action that would otherwise arise under common law from the conduct of the sale.12 Under the CJE Act, the Western Australian sheriff is immune from any civil action as long as the sheriff has acted in good faith.13
There appear to be a number of safeguards in WA to prevent what happened to Mr Zhou happening here. Whilst there will always be concerns about potentially undervalued sales, the safeguards provided by the CJE Act and the common law appear to provide sufficient protection for the owner.
In the meantime, Mr Zhou's trial has been heard and the parties are awaiting judgment.
1"Zhiping Zhou's Braybrook home
valued at more than $630,000, sold for $1000", Herald Sun, 10
2 A Victorian suburb approximately 10km east of Melbourne
3 Periphery issues were dealt with in Kousal v Suncorp-Metway Limited  VSC 312 and Wu v Ma & Anor  VSC 208 – these decisions provide a summary of the background facts, to the extent that they were able to be established at the time
4 Zhou v Kousal & Ors, Supreme Court of Victoria at Melbourne, Commercial and Equity Division, S CI 2011 3613
5 Cashalot Nominees Pty Ltd v Prime Nominees Pty Ltd  WAR 380, Owen v Daly  VLR 442 at 446
6 section 64
7 section 65
8 section 66
9 section 68
10 section 69
11 section 24
12 Whether or not this is the proper construction of section 25 is almost certain to be addressed when the decision on Mr Zhou's case is handed down.
13 section 111(3)
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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