banks can be sued over timeshare

Bank Can Be Sued Over Timeshare

In News by

Lord Justice Ward, Lord Justice Potter) 31 October 1996

A couple induced to buy a timeshare property in a foreign country on the basis of misrepresentations by the seller could bring proceedings in the UK under the Consumer Credit Act 1974 against the bank which financed the deal.

While the agreement concerned might be a “tenancy” under European law, the “object” of the claims was not the tenancy itself but the finance agreement, so the buyers were not required by article 16 of the Brussels Convention on Civil Jurisdiction and Judgments to bring their claim in the country where the property was situated.

The Court of Appeal allowed an appeal by Trevor and Elizabeth Jarrett against the dismissal by Judge Brandt, sitting at Ipswich County Court on 19 April 1995, of their claim against Barclays Bank plc and the Royal Bank of Scotland. The court also allowed an appeal by Peter and Denise Jones against the dismissal by Judge Hamilton, at Liverpool County Court on 30 August 1995, of their claim against First National Bank plc, and dismissed an appeal by that bank against a decision of Judge Jack, at Bristol County Court on 1 February 1996, allowing a claim brought against it by Judith and Christopher Peacock to go ahead.

In each case the plaintiffs had entered into agreements to buy annual timeshare properties abroad, using finance provided by the banks. They claimed they had been induced into signing the agreements by misrepresentations by the sellers, and that under sections 56 and 75 of the 1974 Act the banks were liable.

By section 56 “antecedent negotiations” with the debtor in relation to a transaction financed by a “debtor-creditor-supplier agreement” were deemed to be conducted by the supplier on behalf of the creditor as well as himself. By section 75(1):

If the debtor under a debtor- creditor-supplier agreement . . . has, in relation to a transaction financed by the agreement, any claim against the supplier in respect of a misrepresentation or breach of contract, he shall have a like claim against the creditor, who, with the supplier, shall accordingly be jointly and severally liable to the debtor.

The banks contended that these were “proceedings which have as their object rights in rem in immovable property or tenancies of immovable property” within the meaning of article 16 of the Convention (as incorporated into English law by the Civil Jurisdiction and Judgments Act 1982) so that “the courts of the Contracting State in which the property is situated” had exclusive jurisdiction; that by article 19 the UK courts were bound to decline jurisdiction; and that the plaintiffs’ claims should be struck out.

John Williams (Carruthers & Co, Cambridge) for the Jarretts; Neil Levy (Kennan Bell & Co, Liverpool, and Moriarty Westlake, Bristol) for the Joneses and Peacocks; Sam Neaman (Shoosmith & Harrison, Northampton) for Barclays; Fred Philpott and Julia Smith (Manby & Steward, Wolverhampton) for RBS; Peter Sayer (Davis & Co, Harrow) for FNB.

Lord Justice Morritt said the question whether the timeshare agreements were tenancies (or the grant of rights in rem over immovable property) within article 16 must be determined in accordance with the interpretation of the European Court of Justice.

No uniform interpretation had yet emerged but in the light of the court’s decision in Rosler v Rottwinkel [1986] QB 33 that a short-term holiday letting was not excluded from article 16, his Lordship could see no reason for denying to the agreements in the present appeals the status of tenancies. In each case one party was entitled to the exclusive occupation of immovable property assumed by the contract to be owned by the other for a specified period in return for a sum of money.

But his Lordship did not accept the banks’ submission that the timeshare agreements were the “object” of the proceedings under the Consumer Credit Act.

In each action the foundation of the claim against the bank was the debtor- creditor-supplier agreement. That contract had attached to it the personal statutory rights conferred by the Act on the debtor.

The enforcement of those statutory rights was based on the debtor-creditor-supplier agreement, not the timeshare agreement.

If you have a Timeshare problem, do not hesitate to contact H&G for a little free expert advice.