JUDGMENT CONDEMS CAM BANK & CLEYTON GES SL, JOINTLY AND SEVERALLY, TO RETURN THE DEPOSITS PAID BY THE GROUP MEMBERS WITH INTEREST AND LEGAL COSTS.
FINCA PARCS ACTION GROUP – TIMELINE OF THE LAWSUIT
● No legally required Bank Guarantees for Off-Plan deposits totalling 1.5 million Euros
● Lawsuit against CAM Bank & developer Cleyton GES SL filed in February 2011
● First Instance Court Preliminary Hearing held on 12 January 2012
● Trial held on Monday 21 May 2012 & Tuesday 22 May 2012
● Judgment released in favour of Finca Parcs Action Group on Friday 8 June 2012
● CAM Bank and Cleyton GES SL must return deposits amounting to almost 1.5 million euros to the buyers with the addition of legal interest and costs
Justice was delivered in an overwhelming manner on Friday 8 June 2012 when the Judge in the First Instance Court in Hellín found in favour of 47 buyers who make up the Finca Parcs Action Group.
The court convicted jointly and severally both defendants, the developer Cleyton GES SL and the sole financial entity of the project, Caja de Ahorros del Mediterráneo (CAM), to return the off-plan deposits paid by group members totalling almost 1.5 million euros for houses that were never built at the abandoned Las Higuericas, Finca Parcs development close to Agramón, Albacete.
Furthermore, the judgment orders the payment of interest and costs.
The Judge declared the 55 sales contracts terminated due to “serious breaches” by the developer, in particular, “the long and indefinite delay in delivery of the properties, the failure to obtain the First Occupation Licences and the lack of Bank Guarantees for deposits paid by the buyers”. The Judge also stated that CAM Bank “failed in its legal obligations to control the use of off-plan deposits paid in advance for this development”.
The sentence is strong and fully in favour of the buyers.
The decision of Consuelo Romero, Judge of the First Instance Court No.2 in Hellín was announced on Friday 8 June 2012 and concludes that both the developer and financial entity failed to fulfil their legal obligations.
The ruling requires CAM and Cleyton GES, jointly and severally, to return 1,494,710 Euros in off-plan deposits paid by 47 Finca Parcs Action Group members for 55 Sales Contracts, plus interest and costs.
The costs may represent a significant amount considering that the case was started in February 2011 and has accumulated over 5,000 pages in the Courts records. In addition 70 members of the Finca Parcs Action Group were forced to travel to Spain following the request to the Court by CAM Bank for all buyers to appear in person at the trial.
In the sentence the Judge states that, “this is not just a simple delay in the delivery of the housing but in this case it can be considered as an excessive delay that has obstructed the very purpose of the contract and broken mutual good faith”.
The Judge quotes the testimony of Keith Rule, who himself paid over 53,000€ in off-plan deposits to CAM Bank, during which Mr Rule when questioned by Cleyton GES said that under no circumstances would the buyers now be willing to accept a property from the 50 completed, but unlicensed houses on Phase 1, as the delay for the buyers already amounted to between 5 and 7 years from the signing of each individual contract and completion cannot be left to the discretion of the developer indefinitely.
The Judgment states expressly that “the lack of the First Occupation Licence is attributable exclusively to the developer” and that the lack of Bank Guarantees is also “cause for termination of the contract, since it is an obligation of legal and mandatory character”.
MISMANAGEMENT, NEGLIGENCE & MALPRACTICE
Regarding the involvement of CAM Bank, which claimed it has no relationship with the buyers, the detailed and comprehensive judgment also rules in this area. The Judge quotes extensively from the preamble of LEY 57/1968 and from the Law itself and says in this regard, “we cannot ignore the testimony of the purchaser who when interrogated said that the buyers were encouraged to pay reservation deposits at the development due to the promise of Bank Guarantees from CAM and because of the intense involvement of CAM as a financial partner not only in the promotional material but also in the contract”.
CAM maintained in their defence that it was oblivious to transactions in the two ‘current accounts’ into which the buyer’s money was paid. However, in view of the documents submitted as evidence and the testimonies of those who managed the transactions in CAM and Cleyton GES, the judgment states that, “The fact is that CAM knew that the payments into Cleyton GES accounts opened at the CAM branches were payments by buyers on account of off-plan real estate purchases and CAM failed in its obligations as a financial institution under LEY 57/1968 and this behaviour can be described as malpractice”. The Judge noted that “it is clear the off-plan deposits were used in a manner contrary to the requirements of Spanish Law, LEY 57/1968”.
The Judgment also refers to the ‘special account’ and notes that, “documents submitted corroborate that the value of Bank Guarantees issued by CAM to other buyer, not party to these proceeding, amounts to approximately 6.5 million Euros, however the total payments into the ‘special account’ amount to significantly less”. Furthermore, the Judge says that “other documents submitted during the course of the trial are of importance and very interesting items are the copies of CAM Bank Guarantees issued to other buyers, not party to these proceedings, as they describe as ‘Special’ the 2 accounts, that CAM maintained throughout the trial were just ‘ordinary’”.
The Judgment concludes:
“The truth is that CAM knew that the payments made by buyers into accounts at their branches were on account of real estate purchases and CAM showed absolute disregard to the obligations imposed on financial institutions by LEY 57/1968.
We must not forget that the obligation to deposit the amounts advanced to an account opened specifically for that purpose is that of the financial institution as not only does it receive the premium of the guarantees but also benefits by way of profit from the project. In fact, CAM was the only financial entity involved in the project as it demanded exclusivity.
The claimant questioned at the trial clearly demonstrated that the buyers contacted both the developer and Bank through multiple means urging them to grant the Bank Guarantees for the deposits paid”.
As in any First Instance Court decision the defendants have the right of appeal.
COMMENTS FROM FINCA PARCS ACTION GROUP
JAIME DE CASTRO – LAWYER
Jaime de Castro, the lawyer for the Finca Parcs Action Group said he was pleased with the ruling yesterday, and stressed that:
“It is technically flawless; it analyzes all the points, leaving no gaps and has forceful arguments that make it difficult to challenge. So I think that ultimately my clients will receive their refund in this case”
He noted that it is a decision which because of the significance of the case will be an important precedent for similar cases, and is also:
“Good for the image of Spain, its Justice System and even the financial system. Given the sensitivity of this type of issue in the United Kingdom, and the situation we are currently facing in Spain, it is good to convey the message that the system works and solves these issues fairly and expeditiously”.
KEITH RULE – COORDINATOR – FINCA PARCS ACTION GROUP After the group coordinator, Keith Rule was informed of the decision, he said the group members were elated, but commented that “it has been a very stressful process and we have endured many years of struggle and effort to defend our rights”
Keith continues: “For us this is a great judgment. It is a credit to the work and determination of all those involved. This is an important judgment as none of the buyers received the Bank Guarantees as required by Spanish Law, LEY 57/1968. The wider significance of this judgment should not be underestimated.
I really think this case and Judgment will be studied far and wide. As the news spreads there will be many very interested observers.
Unfortunately it does not mean that every other buyer of off-plan property in Spain without the legally required Bank Guarantees will be able to follow the same course of action against the Bank. There were several specifics in this case and the volume of evidence gathered, in our opinion, is probably unprecedented. However, parallels can be drawn between this case and similar cases on other developments and undoubtedly this First Instance Court Judgment will be used, not as a precedent, as Case Law is only established by an Appeal Court or Higher Court, but as an argument in many other future Lawsuits.
KEITH RULE’S COMMENTS ON THE LIABILITES OF THE BANKS ACCORDING TO LEY 57/1968 The Finca Parcs Action Group is represented by Costa Luz Lawyers and De Castro Gabinete Jurídico. We are truly grateful for the professionalism, dedication, hard work and support of our legal team during the past 4 years. Special thanks go to María de Castro whom I first contacted in 2008 and to Jaime de Castro, our litigator, with whom I have had the pleasure of working with very closely on this case during the past 2 years.
It now seems strange to think that in 2007 when we first realised there was a problem with the Finca Parcs project I was unable to find a single Lawyer who shared my view that the Banks had a liability in these type of cases. That was until 2008 when I found María de Castro and Costa Luz Lawyers via the Eye on Spain internet forum. If a little sceptical at first María soon realised that I was not going give up and there was only one way forward – legal action against the developer and Bank. We encountered many hurdles along the way, not least from other Lawyers who, for various reasons, did not share our philosophy.
FAIR AND TIMELY JUSTICE
As I have said many times before, the Spanish Law which grants inalienable rights to protect off-plan purchasers is not new. It was introduced in 1968; the problem is that it has been conveniently ignored by the developers and financial institutions over the past decade. The Bank of Spain and Spanish Government failed to enforce the Law and many Court Judgments over the past few years have failed to apply LEY 57/1968 correctly. The ‘spirit’ of LEY 57/1968 and its preamble are of vital importance if one is to truly understand the purpose of the Law and the reasons for its introduction.
The Finca Parcs Judgment quoted extensively not only from the Law itself but from the preamble of LEY 57/1968 and it shows that when the Law is applied correctly the Spanish Justice System works and that fair and timely justice can be delivered.
For far too long Spain has alienated the very people who once helped the country prosper.
Now the Spanish Government must learn important lessons from this case and from the Bank Guarantees in Spain Petition (www.bankguaranteesinspain.com). If these types of Bank Guarantee cases are dealt with in a fair and speedy manner then maybe some of those people who have been the victims of negligence and malpractice may once again have the confidence to invest in Spanish property. After all that is what Spain wants and more importantly, desperately needs. Right now as the Finca Parcs Action Group we are enjoying the moment and focussing on the positives. But we are realistic and understand that although we have made a massive leap forward in our fight for justice we are not yet over the finishing line. We will be making a preliminary enforcement of the Judgment but also preparing ourselves for any appeal that may be submitted by either defendant.
Should an appeal be forthcoming then it will be heard by the Appeal Court in Albacete and the decision of that court would then set a precedent and may be used as Case Law in other Lawsuits.
NOTE: BANK GUARANTEES AT LAS HIGUERICAS, FINCA PARCS Other buyers at Las Higuericas, Finca Parcs who did receive the legally required Bank Guarantees fromCAM, have during the past 3 years been able to execute their Bank Guarantees and receive refunds. However, some of these buyers also encountered problems and were forced into taking individual legal action to execute their Bank Guarantees asCAM initially refused to honour the Bank Guarantees in many cases.