Esperanza Broz Martorell, presiding over Court of First Instance 4 in Fuengirola, has declared that 9 mortgage loans worth close to 4 million Euros taken out by British property owners with Chesire-based lender SLM are totally null and void and makes an order to the land registry for the removal of the lender’s charge. Additionally, the Court makes a specific order preventing SLM from claiming the sums advanced to the borrowers, who will not be therefore forced to return any sums.

At the request of the claimants’ counsel (Lawbird Legal Services S.L.P.), the Court accepted the cross-examination of various witnesses -lawyers who acted for SLM, former Hamilton’s Financial Services’ employees, an ubiquitous Mr. Sam Atkisons, current SLM director- and substantial contractual documentation as well as promotional literature, none of which was contested by SLM.

The Court went to consider that the claimants had taken out -between 2006 and 2007- a single product denominated SITIRS (Spanish Inheritance Tax and Income Release Scheme), of complex financial nature, where the grant of a mortgage-backed loan (given to mostly pensioners of limited income) “was inextricably linked to a predetermined purpose for at least 95% of the loan, it being the purchase of shares in a fund that had been previously designated by SLM”, shares that were also pledged in favour of SLM.

According to the ruling, the following were applicable to this case:

  • SLM sold the product in Spain via agents, financial services companies such as Hamiltons Financial Services who, in this case, operated as a tele-sales company. 
  • SLM paid a one-off commission to the agents and for that very reason, cannot be described as “independent financial advisors”.
  • SLM was unable to prove that the investors understood the risks inherent to the product they were acquiring, nor did they establish -beyond reasonable doubt- any previous financial experience by the claimants.
  • SLM provided generic documentation on risks and did not specify all other potential hazards involving the complex financial contraption.
  • Claimants faced the brunt of the financial risk as SLM had secured its investment via a mortgage loan on the property and a pledge on the shares within the investment.
  • SLM held the shares within the investment, giving rights over those to the individual investors.
  • SLM operated unregulated and outside the legality, depriving customers from the protection offered by specific legislation.

The above circumstances satisfied the Court that these loans were illegal in Spain and therefore, should be set aside and declared void. In addition, the Court accepted that SLM committed civil fraud as they withheld vital information from their customers who, had they’d known the extent of it would have never signed up for the investment-linked mortgage loans. 

The ruling is not firm as SLM has 20 days to appeal to the Malaga Appeal Court.