February 2008

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When the Hammer Falls

The Supreme Court of Queensland recently delivered a decision which discussed some potential pitfalls of buying a property at auction.

HZD and BB were bidding on a Paradise Waters property at auction. The standard "Conditions of Sale by Public Auction for Real Property in Queensland" were prominently displayed and read out to the crowd.

The auction conditions specified the three things needed before the highest bidder was deemed to be the purchaser -

  • The fall of the hammer;
  • The signing of the conditions of sale and purchase by the bidder; and
  • Payment of the required deposit.

The auction conditions also required all bidders to be registered.

HZD registered as a bidder but BB failed to do so.

The bidding progressed to $7.5 million after which the auctioneer announced that the property was 'on the market'. HZD placed a bid for $7.530 million and BB placed a higher bid. At this point the auctioneer asked for BB's bidding number and it emerged that they had not registered as bidders.

The auctioneer reverted to the HZD bid and announced that he was going to ‘hold it over'. BB then registered as bidders. The auctioneer re-commenced at the last bid of $7.535 million in favour of BB. HZD was not present and was unreachable. With no higher bids, the property was sold under the hammer to BB.

HZD registered a caveat over the property asserting that they had validly purchased the property with their bid of $7.530 million.

HZD's argument was rejected.

Crucial to the court finding was that the property was never 'knocked down' to HZD - the hammer never fell on its bid.

BB was entitled to complete the purchase that it had validly acquired at the auction.

This case highlights the importance for buyers to read and understand the auction conditions.

HZD Pty Ltd v McInnes [2007] QSC 213