Justice Michelle Quigley yesterday ruled the process by which the sheriff assessed Cr Hoskin’s equity was flawed and led to a sale significantly undervalue, “which in all the circumstances was unfair”.

She found the sheriff and the authorised officer, Kelvin Griffin, breached their duty to act reasonably in the interests of both the creditor and debtor to obtain a fair price for the Kennington property.

While Cr Hoskin wants the sale set aside, Justice Quigley will hear further submissions on Friday from the involved parties to determine relief, including whether the sale should be voided or damages be awarded.

But she said that given the circumstances of the matter, the sale was liable to be set aside.

The property was sold at auction on November 23 last year for $387,000 - just $180 more than the debt Cr Hoskin owed to lending company Ask Funding from a family law matter.

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Cr Hoskin claimed the price was not fair, and argued that the sheriff should have made reasonable enquiries to establish her equity in the property, postponed or cancelled the auction, and passed the property in at the bid of $387,000.

Before the auction, the sheriff received two kerbside valuations from the Valuer-General that put the property’s value at $450,000 in 2015 and $470,000 in 2017. The second valuation was used to set the reserve of $387,000.

But the sheriff was aware when setting the reserve that a real estate agent employed by Cr Hoskin had advertised a price range of $750,000 to $825,000, and a rates notice stated that the property had a capital improved value of $576,000.

Cr Hoskin also told the sheriff in the lead-up to the auction the property was worth more than $700,000, and afterwards obtained a sworn valuation of $720,000.

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Justice Quigley said caution should be taken with kerbside valuations, and the sheriff should not have relied on the second valuation as the only evidence of market value.

Mr Griffin said he contacted the Valuer-General after the second valuation and was told the real estate agent’s price range was “a bit overinflated”.

Justice Quigley ruled that a “reasonable person” in the sheriff’s position should have revisited the assessed market value of the property before auctioning it.

She said the sheriff should have made further enquiries to the Valuer-General.

“Given that the range between the market values was so great, to press ahead with setting the reserve based on the lowest of the estimates of market value was not acting fairly in the process of obtaining ‘a reasonable price for what he sells’,” Justice Quigley ruled.

She found that the sheriff also should have stepped in to stop the November 23 auction.

Justice Quigley said was satisfied that had it been stopped, Cr Hoskin would have had adequate time to secure finance.

Cr Hoskin had told Mr Griffin on the day of the auction several times that she was trying to secure funds to stop the auction, but he said he advised her that he could not stop it unless full payment was received or Ask Funding made such a request.

Mr Griffin also said a court order would have allowed him to cancel the auction.

But Justice Quigley determined that he acted without due consideration to his duty and failed to take into account the actual circumstances.

“Stopping the Final Auction would have been a reasonable step to take in all the circumstances and would represent a balance of the best interests of both the judgment debtor and the judgment creditor,” she said.

While Mr Griffin and the sheriff argued this would have gone against the sheriff’s duty to execute the warrant quickly, Justice Quigley said postponing the auction for eight weeks would not have breached that obligation.

She also found the sheriff should have passed in the property when it received a single bid at the reserve price.

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The property was sold to Mouhammad Mehrabi, the sole bidder.

“Mr Griffin conceded that he knew that if a purchaser paid essentially the value of the debt that the purchaser might walk away with a property worth $700,000,” Justice Quigley said.

Justice Quigley said that as Mr Mehrabi knew he was the only bidder and the reserve was set at $387,000, it was almost inevitable the property would sell for no more than the reserve.

Mr Mehrabi has not taken possession of the property because a series of injunctions have prevented the transfer of registration, the latest of which will apply until the final hearing and determination of the proceeding.

Justice Quigley ruled that setting the reserve low would, in all likelihood, cause Cr Hoskin a substantial and foreseeable loss of equity.

Justice Quigley also found during the trial that the sheriff’s usual procedures for such matters were inadequate for the duty to both the creditor and debtor in achieving a fair price.

There was also a lack of understanding of obligations, powers and duties, she determined, and there was no policy on what an officer must take into account when making a decision.

She said there was a “dogmatic adherence” to the usual processes, and Mr Griffin was inflexible when it came to the information he was willing to take into account.

A spokesperson from the Department of Justice and Regulation said the department would carefully consider the findings of Justice Quigley.

"As the matter remains the subject of ongoing proceedings, it would not be appropriate for the Department to comment further at this time,” the spokesperson said.

The Bendigo Advertiser contacted Cr Hoskin but she declined to comment on the matter.