posted 17th October 2023
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Club La Costa Court Case - Banks Lose Timeshare Misselling Cases.
A London court has dismissed Barclays' and Clydesale's judicial reviews looking to overturn findings by the Financial Ombudsman Service that timeshares were missold, in a decision that could impact hundreds of consumer complaints.
High Court Judge Rowena Collins Rice ruled that banks, including Barclays, Clydesdale and Shawbrook, could not appeal their losses in two claims brought by two separate consumers — but which were a representation of "hundreds" of complaints against so-called fractional ownership timeshare selling.
The judicial reviews looked at two cases, but the Financial Ombudsman Service has received thousands of complaints about the misselling of these products, and the Ombudsman held in a recent decision that many of them were unfair contracts and violated consumer law.
Three who fund these products — Barclays, Shawbrook and Clydesale — appealed the Ombudsman's decision, saying it had misinterpreted underlying consumer law — for example, a law stating that a timeshare arrangement should not be sold as an investment or something on which the purchaser can expect a return.
In these cases, the companies selling timeshare products were Diamond Resorts (Europe) Ltd. and CLC Resort Developments Ltd.
But the High Court disagreed with the bank, saying the Ombudsman was within its rights in applying the law to the facts of the two specific cases and finding they had been misrepresented as investments.
To succeed in a judicial review, the banks had to prove that the Ombudsman made an error of law. The banks argued it is possible for timeshare arrangements to be sold without any element of investment — but the High Court agreed with the Ombudsman that is not what happened in this case.
"Just because it was possible to sell [timeshare investments] without breaching Regulation 14(3) of the timeshare regulations doesn't mean that's what happened in practice or in the present case," the judge said. "And I still think that, on the balance of probabilities, the supplier actively relied on the [timeshare investment's] potential to provide an investment return as a significant selling point in its presentation."
The banks also argued that the Ombudsman had made a mistake in applying a test in consumer law as to whether a contract is unfair. They argued this law imposes obligations on the actual sellers of the timeshare products, not the banks that fund them.
But the judge disagreed, saying the statute does not limit the responsibility in this way and that, properly construed, it makes sense that these obligations of fairness extend to the relationship between the bank and the consumer, as well as between the timeshare seller and the consumer.
"It was open to [the Ombudsman] to proceed to make an assessment as to whether the relationship between the banks and the consumers was made unfair because of the acts or omissions of the timeshare companies in the antecedent negotiations," the judge said.
And the judge agreed that the relationship between the banks and the consumer was, in fact, unfair.
The High Court disagreed with the Ombudsman on several points, but these were not ones that were crucial to the decision to dismiss the appeals. For example, the court agreed with the banks that the Ombudsman was wrong to find the banks violated consumer law by not providing enough pre-contractual information to the consumers about the timeshare products.