It has been discovered, with some distress we may add, that the much flaunted Court victory of a Landsbanki victim in 2011 had more to it than met the eye for, whilst the victim won a ruling in the First Instance declaring the mortgage loan and the investment contract void, the ruling was subsequently revoked entirely, on appeal, by the Málaga Appeal Court (ruling dated 18th February 2013).
In principle, not good news for pessimists but being practical, one can extract in interesting conclusions on how should a new claim be filed, what laws be invoked, the extreme importance of supporting evidence or even, the situation with Landsbanki’s bankruptcy. Below is a very sketchy summary of the case (a more comprehensive resume will follow):
– OMM was sued together with Landsbanki, but Lef Life was left out (even if their contract was attacked by the claimant’s legal representation).
– The claim was based heavily on mis-selling within a financial investment contract, as opposed to an Equity Release contract or even a mortgage loan but then, the party to the financial product -a Unit Linked Life Insurance Policy- was not sued jointly.
– Mentions were made to IHT benefits but apparently so, no evidence that this constituted fraud or, at the very least, not proven. The Court of Appeal in fact admits that the substance or essence of the contract is actually Tax Mitigation, and that there is no error there (!!!). More so, the Appeal Court does even go to name product, Spanish Inheritance Tax Reduction Arrangement (SITRA).
– The claim confused the mortgage loan contract with the investment portfolio contract, and it was not proven they were one single overall agreement with several contracts in it: the Malaga Appeal Court outlined this.
– The claim invoked the 47/2007 Securities Markets Act when it was not applicable at the time of the claimants signing their ER contract.
– The Appeal Court noted that there was a general lack of evidence in support of the claim, in particular to do with failing to prove that either defendant guaranteed the improbable fact that the investment yield would suffice to cover the mortgage repayments as well as,
On a side note, we must add that OMM came out victorious for 2 reasons: a) they were deemed as business introducers, nothing more and b) even if they were selling financial products, the Court found that life insurance unit-linked contracts were within their remit, considering they did have an insurance brokerage license.
The upside is that the Court of First Instance did find both defendants guilty of mis-selling which should make Landsbanki wonder what would happen if, for instance, a new claim was filed against them addressing all the above shortcomings/incorrections, as they were highlighted by the Appeal Court, in particular the position of the Spanish Tax Office.
In our opinion, the case should be revisited and the Court of Appeal shown that they have just endorsed, unknowingly, a tax evasion product…
It is good to see that ERVA report all news and not just the news that suits the needs of the equity release victims. Whilst this does not appear to be a good ruling on behalf of the injured party, is it all that bad. It seems to me that the ruling has been made as a result of the lack of evidence provided by the claimants as opposed to a ruling of law. What it does highlight is the fact that when presenting a case to the courts in Spain, one needs to have as much conclusive evidence in paper form. Dot the eyes and cross the T’s before submitting it to the courts. Choose you lawyer well is the message we give out. Let us hope that the lawyers involved have picked up the Binding Consulta from the Spanish Tax Office as posted on the erva web site and have now presented this to the Appeal Court it is a shame they did not think of it before as the law appertaining to the Binding Consulta was in force since the late 1980’s. Alternatively, lets hope they have re submitted the writ to the court of first instance with all the relevant information as set out by the Appeal Court. It would be a travesty of justice if they left this one unanswered.
Seems to me Karen that this could pave the way for any future litigation against Overseas Money Managers (OMM) and Landsbanki. As you say, it was admitted that the purpose of the scheme was to avoid or mitigate IHT. We now know this is not the case, as per the Binding Consulta. It is a shame that the lawyers did not ask the Hacienda for this ruling prior to submitting the proceedings. Had they done so a different result would have been achieved. I presume that this does not stop the persons from starting new proceedings as they now have more conclusive evidence of the fraud or at least the mis-selling. Alternatively why don’t they try a different tact, for example. We have seen posts on this web site that writs have been lodged with two courts, to have the mortgage contract “null & void” as they were entered into for the purpose of evading taxes. Whoever you are do not stop fighting these people.
We have asked the erva lawyers if this is in fact the end of the Landsbanki victims claims in Spain. And is there a way forward for them, if so what would they do. Our lawyers stated that whilst this ruling could be looked upon as negative, it does leave the door open for further litigation as can be gleaned from the court ruling. It is evident that at least one crucial piece of evidence was not submitted to the courts, that of course being the law (Binding Consulta) from the Ministry of Hacienda, which has been reported many times by erva. A new case would be favourite, as the current one and the subsequent ruling would be based on new allegations and therefore one can expand even more. Also, the fact that the ruling is based on mis-selling and a new one would be based on nullity of the object of the contract, the defendant could not argue that there is “resiudicata”, or claim preclusion on a matter already judged. The Landsbanki victims have to be aware that all these claims cannot be brought to the courts in one “class action” proceedings will have to be filed in court in individual claims. It may be however, that Landsbanki are making efforts to settle all claims, if that is the case then we wish all victims lots of luck.
I would imagine, Antonio Flores of Lawbird Legal Services who is acting for some Landsbanki victims has it under control. Lets hope all the other victims represented by other lawyers together with the CDSAG have picked this up and acted accordingly.
Evidently the Malaga Appeal Court Judges don’t log on much. Otherwise they would be aware of all the cases being lost by the banks in the UK for mis-selling financial products. The AXA one came after this judgement, so we can’t blame them for that.