Diamond Resorts and Club La Costa Fractional Ownership Claims
High Court Judge Upholds Decisions of The Financial Ombudsman Service
We write with some good news for timeshare owners regarding timeshare claims involving Fractional Ownership products sold by Diamond Resorts and Club la Costa.
We have, in previous articles, advised that this firm has been working on behalf of numerous clients presenting similar fact evidence complaints to the Financial Ombudsman Service (“FOS”).
A copy of our previous articles can be read below:
Fractional Products and Complaints to the Financial Ombudsman Service – Test Cases
One product which has been the cause of numerous complaints is membership in fractional owners property clubs sold and managed by Club La Costa and Diamond Resorts. These products have been financed by a number of UK Financial Institutions including Shawbrook Bank Limited, Clydesdale Financial Services Limited t/a Barclays Partner Finance and Hitachi.
It is a matter of record that the FOS has been in receipt of hundreds of consumer complaints about fractional ownership timeshare selling. Faced with these complaints the FOS decided to select two lead cases for detailed consideration and after a lengthy inquisitorial procedure lasting several years and including receiving industry submissions at sequential stages, two extensive final Ombudsman decisions were issued in these cases at the end of 2021 (“the Test Cases”). In each case the Ombudsman decided the product had been mis-sold and the contractual arrangement, including the associated loan, should be unwound. Each decision is put on a number of alternative bases but they were intended to represent a comprehensive application of relevant legal and regulatory principles. As well as applying them to the facts of the individual test cases, the FOS no doubt has a view as to the efficient disposal of the bulk of the other outstanding cases.
Athena law acted for one of the two test complainants and were of course pleased when the FOS upheld our client’s complaint, following a lengthy review of evidence and legal submissions. In the test cases the FOS had concluded:
- There had been a breach by the sellers of the products of regulation 14(3) of the Timeshare Holiday Products (Re-sale and Exchanged Contracts) Regulations 2010 (“the Timeshare Regulations”) prohibiting the sale of a proposed timeshare contract or long-term holiday product as an investment.
- There had been a breach of regulation 12 of the Timeshare Regulations in that there was a failure to give consumers required information in a form which was clear, comprehensible and accurate, sufficient to enable consumers to make an informed decision about whether or not to enter into the contract.
- Even if regulation 12 of the Timeshare Regulations did not require such information, good industry practice at the time would have provided such information to be provided.
- Key contractual terms of the timeshare scheme were unfair for the purposes of the Unfair Terms in Consumer Contracts Regulations 1999 (“UTCCR”).
- The Courts would be likely to find an unfair relationship existed for the purpose of section 140A of the Consumer Credit Act 1974 (“CCA 1974”).
- A fair and reasonable remedy required the setting aside of the underlying loan agreement, a full refund of all payments made, and interest at 8% per annum calculated from the date of loss to resolution of the complaint.
Judicial Review Proceedings
Needless to say, if left unchallenged the decisions in the Test Cases could potentially expose the banks to millions of pounds in compensation claims. In an attempt to overturn the decisions of the FOS, the banks obtained permission to bring judicial review proceedings in the High Court, said proceedings being consolidated in the cases of Shawbrook Bank Limited v The Financial Ombudsman Service and Clydesdale Financial Services Limited t/a Barclays Partner Finance v The Financial Ombudsman Service (CO/506/2022 & CO/4312/2021) (“the Proceedings”).
Judicial Review is the process of challenging the lawfulness of decisions made by public authorities, such as the FOS. The Court has a “supervisory role” – making sure the decision maker acts lawfully. It is important to understand that judicial review is not a re-run on the merits of the decision but a challenge to the lawfulness of the decision that was made. Such challenges are not straightforward to make in the context of a FOS decision as the FOS has a very wide discretion as part of its decision-making process. It is entitled to arrive at conclusions that it regards as “fair and reasonable” in all the circumstances albeit is obliged when arriving at those decisions to take into consideration the law.
The banks, by the Proceedings, sought to challenge the Ombudsman’s decisions in the Test Cases. A number of parties were joined as interested parties who had an interest in the outcome of the Proceedings. In addition to Shawbrook Bank and Barclays Partner Finance (who were the claimants in each case) a further finance company, Mitsubishi HC Capital (previously Hitachi) supported the application, as did the timeshare companies who sold the packages, namely Diamond Resorts and Club la Costa. Athena Law represented one of the successful complainants before the FOS, which was the subject of the challenge.
The judicial review hearing took place over 3 days, commencing 16th March 2023. The presiding High Court Judge was Mrs Justice Collins Rice.
Each of the banks and the FOS were represented by Kings Counsel. As is to be expected, Counsel for the parties made their respective arguments skillfully and the Court had to consider a considerable volume of underlying documents, including Skeleton Arguments and case authorities before making her Judgment.
On 5th May 2023 Mrs Justice Collins Rice handed down her Judgment. She dismissed the claims for Judicial Review. In other words, she refused to interfere with the FOS findings in the Test Cases. In dismissing the claims, she found:
- The ombudsman did not err in law in his construction of, or approach to, Reg.14(3) of the Timeshare Regulations. By way of reminder Reg. 14 (3) prohibits the sale of timeshares as an investment.
- The Ombudsman did not err in law in concluding that the deemed agency provisions of section 56 of the Consumer Credit Act, read together with s.140A(1)(c) of the Act, meant that the acts and omissions of the timeshare companies in conducting negotiations with consumers antecedent to forming timeshare contracts fell to be regarded by a court as things done or not done by or on behalf of the lenders, for the purposes of considering whether they caused the debtor/creditor loan relationship between lenders and consumers to be unfair.
- The Ombudsman did not err in law in holding that an unfair relationship had been created for the purposes of s.140A of the Consumer Credit Act or in providing remedies having regard to the provisions of s.140B. In other words, the Ombudsman was not wrong in finding that the terms of the fractional products and how they were sold (including the omission of key information) gave rise to an unfairness entitling the consumers to the remedy – write off of loans, refund of payments, and interest at 8% per annum.
- The Ombudsman did not err in law in his general approach to construction of the contractual terms nor in the application of Regulation 7(1) UTCCR (unfair contractual terms).
In making her decision the Judge made the following comment:
“This adds up to a decision which does involve a point of law about statutory deemed agency – a point which has already been considered at Court of Appeal and Supreme Court level. The decision’s premise, however, is the fundamental case-by-case evaluative task of an ombudsman considering whether any timeshare has, as a matter of fact and evidence, been mis-sold as an investment. A reviewing court has a limited function in relation to such ombudsman decisions; and in this regard, at least, this decision reflects that high degree of fact-sensitivity, albeit recognising the factors particular to fractional ownership timeshares which may elevate the risk of mis-selling as an investment. It also engages the respect a reviewing court must give to the evaluation an ombudsman has to make about the ultimate fairness or unfairness of the resulting relationship in any given set of circumstances, and the ombudsman’s decision about what is in the end a ‘fair and reasonable‘ outcome.”
It is noteworthy that in making her decision and findings the Judge made no findings of illegality per se. Instead, she found that the FOS had not acted unlawfully in how it approached dealing with these complaints and the conclusions reached. Nevertheless, decisions in the test cases and the findings made therein have now survived challenge via judicial proceedings before the High Court. In issuing its decisions in the test cases FOS clearly intended to provide a framework as to how similar complaints should be dealt with. It now has that framework. This does not mean there is automatic entitlement to compensation. Complaints will still have to be presented to the relevant financial institutions, supported by evidence, and if needed be by way of referral to the FOS.
How Can Athena Law Help?
Athena Law has been one of the leading firms in this arena for a number of years. The Timeshare Dispute Resolution Department is headed by one of the founding partners of our firm, Stephen Boyd, ably supported by his team. Mr Boyd and his team are well familiar with fractional products, having represented hundreds of complaining consumers regarding these products. He was also directly involved in obtaining a successful decision in the test case involving Diamond Resorts fractional ownership products which were the subject of challenge before the High Court Judge in the judicial review proceedings.
If you need assistance, please do not hesitate to contact us. We offer a preliminary appraisal without charge. In many cases we are willing to act on a no win – no fee basis.
There is a need to act reasonably quickly. As time passes claims will become statute barred. The general rule is that you have 6 years from the date of any purchase to make a claim and/or within 6 years from the end of a relationship with a financial institution (i.e. redemption of any loan). If you have engaged an unregulated claims company and your claim has been lost due to delay, you may have a claim against such advisers.
Finally a word of warning. Personal data belonging to timeshare owners has somehow made its way into the public domain, and is in the hands of ex-timeshare salesmen who are cold calling purporting to offer unregulated claims management services. It is an offence for unregulated entities to provide services connected with claims or potential claims against UK Financial Institutions. Further, regulated businesses cannot solicit such business via the medium of cold calling unless there has been an opt in. It is therefore highly likely that if you are cold called you are speaking to an unregulated business.
If you have purchased a fractional ownership product from either Club La Costa or Diamond Resorts then please do not hesitate to contact Stephen Boyd, by direct email: Stephen.firstname.lastname@example.org or by email to our office email email@example.com