Humphreys v Pioneer Homes Australia Pty Ltd [2000] VSC 10

11. The auction was unsuccessful and the warrant was returned to the County Court Registry bearing an appropriate endorsement to that effect.

14. On 9 July 1998 Pioneer issued out of the County Court a second warrant of seizure and sale. Once again the warrant was registered against the title to the property.

17. On some unspecified date Mr Holland was declared bankrupt.

20. On 26 May 1999 the Sheriff's office received a summons filed in the County Court by Pioneer, whereby Pioneer sought the following orders in relation to the warrant:

1. The Sheriff sell the property by auction for the highest bid without reserve.

2. In the alternative the Sheriff sell the Second Defendant's interest in the Property by auction for the highest bid without reserve.

3. The Defendants pay the Plaintiff's cost in relation to this application.

27. Not surprisingly the Sheriff did not appear at the hearing of the summons. He was not a party to the proceeding and the orders sought would have been of little significance to him at that time.

30. I say that because if any auction of the property did take place the most that the Sheriff was authorized by any warrant to do was to sell the interest of the Hollands in the property and to sell it at the highest price he could achieve for it.

33. At all events the summons came before the Master of the County Court on 9 June 1999. The only appearance before the Master was that of counsel for Pioneer.

36. That day the Master made the following orders concerning the warrant:

1. The Sheriff is ordered to forthwith execute the Warrant of Seizure and Sale No. CW-98-008574-9 and sell the land situate at and known as 30 Gallery Gate Road, Yallambie in the State of Victoria, being land more particularly described in Certificate of Title Volume 10186 Folio 691 by public auction with a reserve of $190,000.00.

2. The said Warrant be extended to 9 January 2000.

3. That unless the Sheriff show cause to the contrary by serving notice of his objection to this Order upon the Plaintiff's solicitors within 7 days of the service of a copy of this Order upon him, the Sheriff pay the Plaintiff's costs of the Summons filed on 12 May 1999 fixed in the sum of $750.00.

42. On 28 October 1999 Pioneer filed a further summons in the County Court by which it sought the following orders:

1. The Sheriff sell the Property in accordance with the Order of the Master made 9 June 1999 and in particular allow for encumbrances in the reserve price.

2. The Sheriff pay the Plaintiff's costs in relation to this application.

47. The summons came before the Master on 3 November 1999. On this occasion the Sheriff was represented by counsel. It is said that during the course of the hearing that day the Master made the following observations concerning his earlier order:

"The Sheriff is obliged to sell the property once the reserve of $190,000 is reached. The Sheriff is not just selling the judgment debtors equitable interest, but he is selling the whole interest in the land, including the debt, and the Order allows him to do so. The Sheriff should announce the sale without any encumbrances and that he should give vacant possession. In respect of the Order obtained on 9 June 1999 the Sheriff should sell if a bid of $190,000 is reached. The Order is 'clarification enough' and 'nothing further' is required."

(In respect of the costs that day the Master ordered the Sheriff pay the plaintiff's costs of $647.)

52. On 4 November 1999 the Sheriff held another auction of the property.

55. Not surprisingly he did not receive a bid for the property. I say not surprisingly for this reason. The property is mortgaged to the National Australia Bank Limited.

58. Despite the efforts of the Sheriff's solicitors to obtain from the bank the amount outstanding pursuant to the mortgage, he was unable to do so. The most that the bank was prepared to say was that should the property reach the reserve price of $190,000 it would provide a discharge of its mortgage. Any person bidding for the property would not know therefore what his or her actual liability to the bank might be. Further, as no warrant of possession had ever been issued authorizing the Sheriff to take possession of the property, he was in no position to offer the property for sale with vacant possession, let alone sign a contract to that effect.

61. I now have before me an application on behalf of the Sheriff for leave to appeal out of time from the order of the Master that the property be auctioned with a reserve of $190,000.

64. No application for leave to appeal out of time is made in respect of the two orders for costs the Master made against the Sheriff, and those orders will stand.

67. I propose to deal first with the application for leave to appeal. In my opinion, in making the order he did on 6 June 1999 the Master made two significant errors in the matter.

70. In the first place the Master ordered that the Sheriff "sell the land". In the second place he fixed a reserve of $190,000 in respect of the land.

73. It is trite law that a Sheriff when armed with warrant of seizure and sale and endeavouring to effect a sale of land registered in the name of the debtor with a view to satisfying the warrant, can only sell the debtor's interest in the land. That that is so is clear from the decision of the High Court in Anderson v. Liddell [1968] HCA 12; (1968) 117 C.L.R. 36.

76. In that case the Sheriff had sold the land of a debtor. At p.44 Barwick, C.J. said:

"The nomination of the minimum bid which the Sheriff would accept stemmed to some extent from the fact that he had decided to sell the land as unencumbered thus requiring the price to be large enough to enable him to pay out the mortgagee. In truth the Sheriff should have been selling the right title and interest, if any, of the judgment debtor in the land."

80. At p.50 Kitto, J. described the Sheriff's actions in intimating at the auction that the payment of the mortgage moneys would be made through him instead of directly to the mortgagee as an unfortunate mistake.

See also Bruce v. Woods [1951] VicLawRp 7; (1951) V.L.R. 49.

84. The distinction between an order to sell land and an order to sell a debtor's interest (if any) in land is no artificial distinction.

87. More often than not in the case of a sale by the Sheriff, there are other persons who have interests in the land the subject of the sale other than the debtor. The most common example of course is a mortgagee, as in the present case.

90. For the Sheriff to announce to prospective buyers that he is selling "the land" when the reality of the situation is that he is only selling the debtor's interest in the land, would be misleading, because it could well induce a person to bid for the land in the expectation that if the land was knocked down to him or her, he or she would take it with an unencumbered title.

93. The Master's order, if any such order was necessary, should have simply been that the Sheriff sell the defendants' interest (if any) in the land.

96. As to the reserve of $190,000, I say that in the circumstances of this case no such reserve should have been set by the Master. The Sheriff should have been permitted to sell the land to the highest bidder.

99. The land had previously been auctioned by the Sheriff but the auction had been unsuccessful. In that situation I consider that it was quite inappropriate to set any reserve.

102. In Anderson, Barwick, C.J. at p.44 described the disclosure by the Sheriff of the lowest sum for which he would sell the land as unwise and not a course to be recommended. With respect I agree with his Honour's observation.

105. In the present case the fixing of the reserve in question had the practical effect of ensuring that the land was not sold. The Sheriff should not have been placed in that situation.

108. Before parting with this aspect of the matter it is appropriate that I say something concerning certain of the statements made by the Master during the course of the hearing before him on 3 November 1999.

111. It is said that the Master stated that the Sheriff was obliged to sell the property once the reserve of $190,000 was reached. He was not. If prospective buyers were still bidding for the property at that figure the obligation of the Sheriff was to continue to accept bids and ultimately knock the property down to the highest bidder.

114. It is said that the Master stated that "the Sheriff is not just selling the judgment debtors' equitable interest, but he is selling the whole interest in the land including the debt and the Order allows him to do that".

117. As I have endeavoured to make clear, that statement is also incorrect. The Sheriff was only selling the defendants' interest in the land.

120. Finally, it is said that the Master stated that the Sheriff should announce the sale without any encumbrances and that he should give vacant possession. If those comments were made, again they were erroneous.

123. It would be misleading for the Sheriff not to disclose the existence of a mortgage of which he was aware, and the Sheriff was in no position to offer, let alone give, vacant possession of the land. The Sheriff had no warrant for possession of the land, nor did he know whether the land was tenanted by some innocent third party.

126. And so, in my opinion, the order made by the Master on 9 June 1999 was plainly wrong.

129. Will substantial injustice be done by leaving the order stand?

132. In my opinion the clear answer to the question posed is yes.

135. The warrant in question originally remains current to 9 January 2000. It has been extended to 8 January 2001. In reliance upon the Master's order the Sheriff could be called upon by Pioneer to again conduct an auction of the property. I consider it would be an injustice to the Sheriff if that was to occur whilst the Master's order was still on foot.

138. But perhaps of more importance is the fact that the order, whilst it stands, could become a precedent for the making of similar orders. If that was to occur the Sheriff could be seriously inconvenienced and prejudiced in fulfilling his duty to execute warrants of seizure and sale. In my opinion such a situation should not be allowed to occur.

141. In the normal course of events I would not hesitate to grant the Sheriff leave to appeal, grant the appeal and quash the order.

144. But of course the Sheriff is well out of time for seeking such leave. Should his application in that regard be granted?

147. In the circumstances of this case I consider that it should.

150. In my opinion the Sheriff was not in a position to fully appreciate the significance of the Master's order until he obtained appropriate legal advice in relation to the matter after the auction on 4 November.

153. Further, in my opinion no prejudice would be caused to Pioneer by extending the time within which the Sheriff may seek leave to appeal.

156. Indeed, in the circumstances of this case I consider it can be said that it is very much in its interests that the Sheriff be given such leave because if the Sheriff's arguments are well founded and, as I have already stated, in my opinion they are, the Sheriff will be empowered to auction the property without reserve, which is the very result Pioneer sought to achieve by its summons filed in the County Court on 12 May 1999.

159. Finally, in this regard I consider that grave injustice would be caused to the Sheriff if he was not granted the extension he seeks.

162. The following are the orders I make in the matter:

1. Pursuant to Rule 58.03(4) of the Supreme Court Rules the time for the Applicant applying for leave to appeal from the order made by Master Patkin in the County Court of Victoria at Melbourne on 9 June 1999 in proceeding No. 9609742 of 1996 in that Court is extended to 30 November 1999.

2. Pursuant to Rule 58.02(1) the Applicant is given leave to appeal against the order made by the Master.

5. Paragraph 1 of the order of the Master is set aside and in lieu thereof it is ordered that the Sheriff forthwith execute the warrant of seizure and sale No. CW-98-008574-9 and sell the estate and interests (if any) of Michael George Holland and Elaine Sheila Holland in the land described in Certificate of Title Volume 10186 Folio 691 being the property situate at 30 Gallery Gate Road, Yallambie, Victoria, for the best price that can be obtained for the same.

170. I order that Pioneer Homes Australia Limited pay the Sheriff's costs of the appeal excluding the costs of the hearings before me on 7 and 10 December 1999.

173. I grant to Pioneer Homes Australia Limited the appropriate certificate pursuant to the provisions of the Appeal Costs Act in respect of its costs of the appeal and the costs of the appeal it is required to pay to the Sheriff.

176. I order that the Sheriff pay the costs of Pioneer Homes Australia Limited of the hearings before me on 7 and 10 December 1999 and the costs of the Sheriff's application for an extension of time within which to seek leave to appeal from the order of the Master.