Countdown to the $1,000 Braybrook sheriff auction - and its overturning by the Supreme Court

The owner of the $630,000 Braybrook house that sold for $1,000 at sheriff’s auction was the plaintiff, Zhiping Zhou, who from 2000 had bought and sold property at least 10 times.

He was born in Shanghai China in 1962, immigrating to Australia in 1989 on a student visa following the June 4, 1989 uprising in Tiananmen Square in Beijing.

He obtained permanent residency in Australia in 1993 and became an Australian citizen in 1998.

In Shanghai, Zhou completed his studies at the Shanghai Mechanic Engineering University where he graduated with a bachelor’s degree in mechanical engineering.

Since graduation and immigrating to Australia, he has worked principally in the area of building and construction.

Zhou built the five-bedroom house as the owner-builder in 2006.

The warrant of seizure was issued November 2009.

Zhou owed Guan Feng Wu a judgment debt of over $100,000, with the debt unpaid by Zhou for almost three years.

In November 2008 Wu had commenced legal proceedings against Zhou in the Magistrates’ Court of Victoria at Sunshine, claiming the amount of CNY440,000.00 (approximately AUD $96,660.00), being monies claimed to be outstanding arising from a loan agreement entered into between the two in 2006.

The property was also subject to a mortgage in favour of Suncorp for $457,345.50.

Suncorp took no part in the trial.

The property was also subject to a charge in the sum of $7,691.10 for council rates.

At the time of the auction, the Valuer-General for the Victoria valued the property to be worth approximately $630,000 following a kerbside valuation.

The valuation was supplied to the sheriff prior to the purported sale.

A first public auction of theproperty was conducted by the sheriff on July 15, 2010.

At the time of the first auction there was $452,691.70 outstanding to the mortgagee Suncorp and $5,692.54 owing to the Maribynong City Council for arrears of rates.

It left an equity for Zhou in the sum of $171,615.76, which was set as the “sheriff’s reserve” for the property.

The first auction was conducted in July 2010, however no bids were received by the sheriff and the property was passed in.

On application by the sheriff, orders were then made in October 2010 by Associate Justice Nemeer Mukhtar permitting the sheriff to sell the property without a reserve.

Subject to paragraph 3 there had to be leave to the sheriff to conduct a sale of the property (in exercise of powers under a warrant of seizure and sale filed November 9, 2009) without a reserve price provided that such leave does not thereby derogate from, or relieve the Sheriff of a duty at law to the owner of the land when exercising a power of sale.

There be leave to the owner of the property to notify the plaintiff of an intention to discharge the order in paragraph 1, and apply to this court for a discharge of that order. Unless such an application is filed and served within 10 days after the date of the service of this order, the order will take effect upon the plaintiff’s solicitor giving to the sheriff evidence of service of this order and the absence of any application to discharge it.

Justice Peter Vickery noted that it was “important to note 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 power of sale”, Vickery noted.

After the October hearing Zhou neither satisfied the judgment nor took any step to prevent the sale before it occurred.

By the time of the second auction in December 2010 there was an equity for Zhou of $164,963, which was set as the “sheriff’s reserve” for the property as shown on the “Real Estate Auction Sheet”, except that the words “NO RESERVE” were also included beside the stated reserve.

The second auction was conducted at the sheriff’s premises at 444 Swanston Street, Carlton, by the real property sales officer of the sheriff, Kelvin Griffin.

The auction was overseen by another officer of the sheriff.

Two potential bidders attended the second auction, namely the ultimate purchaser, Ronald Kousal, and one other person.

Vickery noted Kousal was an experienced purchaser of property at public auctions conducted by the sheriff.

“Every Thursday or soon thereafter, he was accustomed to review the Government Gazette to search for advertised sheriff auctions of land.

“One week or so before the auction day, he would enquire at the Sheriff’s Office as to whether the advertised auction was scheduled to proceed.

“If so, he would assess the land, its value, encumbrances, money owed on the property and he would set himself a budget for the purchase.

“Prior to the auction in issue in this proceeding, Kousal had previously bought land from the sheriff and had attended seven or eight unreserved sheriff auctions.”

Prior to the second auction, Kousal had never been met or had any dealings with either Zhou or Wu, and knew nothing at all of their personal, social or financial circumstances.

The events from the second auction on 16 December 2010 proceeded as follows:

After reading aloud the Government Gazette advertisement for the sale of the property and the terms of the auction, Mr Griffin advised the attendees that $457,345.50 was owed to Suncorp under a registered mortgage on the Property and that $7,691.10 was owed to the Maribyrnong Council for arrears on rates.

He invited bids for Zhou’s remaining interest in the Property.

Kousal bid $100.

Another bidder bid $200.

Kousal then bid $1,000.

There being no further bids, Griffin knocked the property down to Kousal.

Immediately following the second auction Kousal paid Griffin the $1,000 and received a receipt and a copy of the transfer.

Griffin later sent Kousal a copy of the transfer of the Property signed on behalf of the sheriff.

On December 21, 2010, Kousal wrote to Zhou and asked him his intentions in relation to remaining in possession of the property.

He received no reply.

On January 5, 2011, Kousal was present during a phone call between a Mandarin Chinese-speaking interpreter and Zhou.

Kousal instructed the interpreter to advise Zhou that he had bought the property from the sheriff.

The interpreter told Kousal that Zhou didn’t want anything to do with him and that he should leave him alone.

By summons dated May 2011, Kousal commenced legal proceedings against Suncorp seeking orders pursuant to s 116(3)(a) of the Transfer of Land Act 1958 (Vic) (the “Transfer of Land Act”) that it deliver up the duplicate Certificate of Title for the property, so that Kousal could register his interest in the Property with the Registrar of Titles.

In June 2011, Kousal obtained orders that Suncorp “produce the duplicate certificate of title [for the property] to the [the Registrar of Titles] for the purpose of enabling [Kousal] as transferee to lodge a transfer of that land from the [sheriff] as transferor under the [Warrant]”.

In July 2011, Zhou in the present proceedings, sought and obtained orders from the court that restrained the registering of any transfer of the property.

Zhou won the case on May 5, 2012.