Court overturns $1,000 sheriff sale of Braybrook home valued at $630,000

A Melbourne man has won his legal proceedings to reverse the sheriff’s extraordinary $1,000 sale of his six-bedroom Braybrook home.

Owner-builder Zhiping Zhou's imposing two-storey brick house, which was seized by the sheriff, had an estimated value of $630,000, but sold at the Swanston Street, Carlton sheriff's room auction in December 2010 without a reserve price. There had been an earlier no-bid sheriff's auction when there was a $171,000 reserve which represented Zhou's equity in the property after his debts were paid.

The case into the second auction which had a court decided no-reserve sale price was heard in February, with Justice Peter Vickery delivering his judgement in the Victoria Supreme Court Commercial and Equity this morning.

"The purported sale is set aside," Vickery ruled citing equity laws dating back to the Middle Ages.

"It is important to note that, although the order of Associate Justice Mukhtar 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 power of sale”, Justice Vickery noted.

Ronald Kousal, who was the highest bidder for the Wirraway Avenue home after beating off a $200 bidder, was taken to court by the aggrieved foreclosed house owner.

Justice Vickery ruled he did not regard Kousal’s conduct in seeking to enforce the sale of Zhou’s "as unconscionable."

Anthony Strahan, for the sheriff, had argued the Sheriff's Act made the office ''immune'' from being held responsible for the outcome of such an auction, and the buyer must be protected.

Zhou's lawyers told the court the sale was "absurd", arguing the judge ought to reverse the sale and to find the sheriff in breach of duty.

"[The sale is] so short of the mark it's not a real sale," barrister Paul Hayes told the court in February.

He said it was hard to imagine lawmakers had intended for people like Zhou to lose out so badly.

Zhou was “vulnerable to the sheriff properly exercising his duty under law” according to his lawyers.

“He was exceptionally vulnerable to the price accepted by the sheriff,” barrister Hayes said during the second day of the hearing. The judge was asked to consider invalidating the sale and or awarding damages.

The property had remained in Zhou’s registered name, according to a title search, although there were warrants of claim registered on title.

The man who bought the home is also being accused of taking advantage of Zhou, however his lawyer told the court the sale was legal and legally it could have been sold for one cent.

The property had been briefly listed in 2007 through Barry Plant Sunshine, according to the Australian Property Monitors auction database. It was then listed with different agents in June 2010 with $650,000-plus hopes for its slightly postponed July 2010 auction, according to the APM report on the property.

There was a subsequent $660,000 auction offer, but it fell short of the $750,000 reserve price when listed through Burnham Real Estate.

There was $465,000 owing on the property.

The block cost $170,000 in 2003.

Lawyers for Zhou highlighted submissions in the buyer’s affidavit that he would search the Government Gazette every Thursday looking for properties coming up for auction.

A week before the auction he would contact the sheriff’s office to find out if the auction was going ahead and following a review of the assets, land and any encumbrances set a budget for purchase.

From 2000 Zhou has bought and sold property at least 10 times.