By Russell Cocks, Solicitor
First published in the Law Institute Journal
In September 2011 I wrote a column in relation to sheriff sales based on the case of Kousal v Suncorp-Metway Limited [2011] VSC 312. The case exposed the sheriff sales process as flawed and likely to lead to injustice but at that time Mukhtar AsJ. lamented that “the Court can do no more”.
In fact the court was subsequently able to do more when the judgment debtor sought review of a subsequent sale conducted by the sheriff in accordance with the orders of AsJ. Mukhtar. This review was the subject of the case of Zhou v Kousal [2012] VSC 187(Zhou). That sale was conducted at the office of the sheriff and two prospective bidders were in attendance. The potential equity in the property was in the order of $165,000 and the highest bid was $1,000. As the property was being sold ‘without reserve’ in accordance with AsJ. Mukhtar’s orders, the property was knocked down to that bidder. The judgment debtor sought review against both the bidder and the sheriff.
An argument based on unconscionability was unsuccessful but an argument that the sale was in breach of the Sheriff Act 2009 resulted in an order that the sale be set aside as it was in breach of the sheriff’s duties under the common law and the Sheriff Act 2009. The case has not returned to court and one may therefore assume that the judgment debtor, having finally responded to a litany of proceedings by attending court with a legal representative, was able to negotiate a satisfactory resolution of the overall dispute.
The aftermath of Zhou left the sheriff’s office in a state of shock. The time honoured process of conducting sheriff sales at the office of the sheriff (rather than on site) and only advertising in the Government Gazette appeared to expose the sheriff to attack. To protect himself the Sheriff therefore sought orders from the Court as to the appropriate process to be followed when the next ‘without reserve’ auction rolled around. This was the case of JG King P/L v Kim Ngan Thi Do [2012] VSC 545 (JG King). The sheriff had conducted an unsuccessful sale and sought court permission to conduct a further sale ‘without reserve’. There was evidence before the court that the property was valued at $700,000, that the judgment debt was in the order of $230,000 and unpaid rates were approximately $10,000. The judgment debtor’s equity was therefore approximately $450,000.
The court ordered that the property be sold but that any sale be subject to review by the court, thus introducing into the sheriff’s sale process a step that had previously not existed – one of judicial review of a ‘without reserve’ sale. This example of judicial law reform is in response to what was clearly an unsatisfactory situation that was finally exposed by Zhou, but one wonders whether it should not be the role of parliament, rather than the courts, to effect such change.
JG King led to an auction on Saturday 6 April 2013. Little, if any, advertising of this auction was evident and it was left to readers of the Government Gazette to be aware of the date. The auction was conducted on site and (unusually) prospective bidders were given access to the house, which was vacant, for one hour prior. The auction was conducted by a sheriff’s officer and there was a crowd of more than 50 people in attendance. After reading out the terms of the contract and emphasising that the sale would need to be approved by the court, the officer invited bids. At least five interested bidders took the price from an opening bid of $300,000 to a successful bid of $450,000.
At the time of writing there was no report of the outcome of the subsequent hearing but one would imagine that the court would be satisfied that a genuine sale had been conducted and that approval would follow. The purchaser would then be required to pay the purchase price to the sheriff, who would retain the costs of the process, pay out the judgment debtor and presumably pay any balance into unclaimed money, as the registered proprietor appears to have left the jurisdiction. The purchaser would be faced with the problem of obtaining registration without the duplicate certificate of title, although perhaps an application to the court for an order in that regard might be made when court approval for the sale was sought.
The question however remains: is the sheriff sale process fair to judgment debtors? The debtor in JG King showed no interest in the outcome but many other judgment debtors may be desperate to ensure that full value of their asset is achieved. Consideration should be given to legislative reform of the process to give the sheriff the ability to contract out sales to a panel of estate agents so that sales may be conducted in a more commercial manner.
Tip Box
Whilst written for Victoria this article has interest and relevance for practitioners in all states.