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Louise

Club La Costa and it’s dealing with G.E Money (G.E) have resulted in a major High Court ruling. The relationship between the two companies has been dealt a crippling blow as the Court supported the consumer’s contention that the relationship was unfair.

Proceeding arose out of a timeshare/long term holiday product acquisition in 2007. Club La Costa sold an interest in Club La Costa Vacation Club. This was a purported Timeshare scheme. Whereby the consumer could acquire points and in exchange for a yearly payment. The purchase was via Leading Resorts Ltd. The purchase was for the right to acquire 1501 Points and the contract ran for 60 years.

Many deem this system as floating arrangements and could be classed in any event as unlawful in Spain.

The total price paid in 2007 was £20,026 and after giving credit for a trade-in of another Timeshare product. A loan (to support the purchase) was arranged via G.E money at an interest rate of 16.32 %.

In addition to the loan the G.E/Club La Costa contract contained contractual obligations and as a result of the membership acquired.

Clause (D) stated “in the event of the applicant (consumer) failed to make any payments due within 14 days of being given written notice to that effect by the vendor company, the vendor company, could rescind the agreement, whereupon all monies paid by the applicant would be forfeited to the vendor company, and it would be under no further liability to the applicant”.

The consumer did fail to pay G.E and G.E did serve a default notice on the 19th of October 2007.

On the 17th G.E assigned the debt to Link Financial Ltd (Link) who then issued proceeding against the defaulting consumer. The consumer filled an admission of default and judgment was entered for the sum of £22,593.25.

After seeking and taking the proper legal advice the consumer applied for the judgement to be set aside.

The judgement was set aside on the 22nd of May 2012 essentially on 2 grounds

1 The loan was not properly executed and that the relationship between Club La Costa was unfair, explaining that relief under section 127 of the Consumer Credit Act 1974 (The Act) applied and the relationship was unfair and contrary to section 140 (a) of The Act. If so the consumer was entitled to relief under section 140 (b) of The Act.

The matter came before the Court. Ms Roberta McCamly of CLC issued a statement.

I don’t intend to recant the hearing or the particulars however the consumer case floundered and Link was granted Judgement.

Normally this would be the end of the case, however, the Court heard submission with respect to clause (d) that indeed an “unfair relationship” did exist.

The Clause Stated

In the event the applicant fails to make any payment due within 14 days of being given written notice to that effect by the vendor company or on its behalf, the vendor company may at the vendor’s companies option rescind this agreement whereupon all monies paid by the applicant will be forfeited to the vendor company and the vendor company shall be under no further liability to the applicant. Time shall be of the essence in respect of any payment due from the applicant under the agreement.”

In short, if the consumer did not pay the loan, the consumer could lose the product acquired. The seller could be the recipient of a windfall if the timeshare retained any value. A debt could say £50 yet all of the Timeshare interest was at risk and without taking into consideration its resalable value. That said the consumer was still responsible for the loan.

This was claimed to be a draconian provision by the consumer’s legal team.

The loan entered into was a consumer and G.E money and fell within the meaning of Section 140 (a) of The Act. The provisions of section 140(a) of The Act were considered by the Court of an Appeal in Harrison v black horse [2011] EWCA Civ 1128.  This authority explained 3 points should be noted at the outset.

  1. The relationship must be determined to be unfair, not the agreement although it is envisaged that the terms must be determined to be fair, not the agreement, although it is envisaged that the terms of the agreement may themselves give rise to an unfair relationship.

       2. Although Section 140 (a) is directed at determining unfairness to a debtor, in reaching that determination the Court must have regard to matters relating to the creditor, as well as matters relating to the debtor.

       3. Unlike provisions such as the Unfair Contract Terms Act 1997 which offers in schedule 2 guidelines for application of a reasonableness test or the Unfair Terms in Consumers Contract Regulations 1999 (SI1999) (No 2083) schedule 2 of which is an indicative and Non Exhaustive list of terms which may be regarded as Unfair section 140 (a) of The Act offers no guidance in respect of factors which either may or must be regarded as rendering a “relationship unfair” to a debtor.

Judgement

The court did not have sufficient information to calculate what furthers Sums (if any) would have remained payable if the Timeshare could have been sold to another. The Court could not assess what percentage of the debt could have been paid by selling the Timeshare as no expert evidence was made available.

Therefore, the Court adopted a broad brush approach and was persuaded that they accordingly order under 140 (b) (1) (c) that no further sums be payable by the consumers by virtue of the agreement.

 The appeal was allowed.

Wilson was invited to a timeshare presentation and decided to acquire the Club La Cost Product. When in the presentation, Club La Costa presented to her a finance agreement, drafted entirely by G.E money. The finance agreement was then taken out by the consumer for the purposes of acquiring the Timeshare points product, sold by Club La Costa.

An issue developed and she believed that an “unfair relationship” did exist between Club La Costa and G.E and chose to action a claim setting out why she believed it was so.

The Court inspected the Club La Costa contractual terms and that of the bank and concluded that the relationship between G.E. and Club La Costa was unfair and all monies due under the loan was forfeited by Link.

Our Opinion

In all matter of contractual disputes, each party has to weigh up the potential risk involved. In this case, the consumer stood to lose 20k however, if Link lost, many hundreds of contracts would be deemed unfair as an unfair relationship existed. The potential exposure is Millions. Due to this many consumer claims can be brought as many contracts were sold whilst this unfair relationship existed. Equally, consumers can and should consider their own contracts with all resorts as the documentation is repeated in many other resort contracts and by the authors of such contracts. If it exists in your entire loan, you can and should be cancelled it immediately and without risk.

Is your resorts relationship with a lender unfair? Do you want to cancel your loan?

Taking matters, a little further, the Court was not provided with any valuation and as to the value of the Timeshare product sold by Club La Costa.

Was this an innocent omission or if an expert report was given to the Court, is the truth, the Timeshare sold was worthless and when sold? If such a report was issued and such a low value was asserted by the independent report, would this show that valueless Timeshare is being sold for large sums of money whilst being essentially worthless? If this is the case, I am sure the Court will want to know what is being said to a consumer in presentations which lead them to believe that the product (on offer) attracts such a high value.

All Club La Costa had to do, was to issue an independent report concerning values and they did not.


Posted on: 29th February 2016