On September 23rd, the First Instance Courts No 2 in Novelda (Alicante) pronounced a sentence whereby a false equity release scheme, signed up by an octogenarian British couple in 2007, was rendered void ordering Caixabank to refund the full capital value of the product.
The plaintiffs´ lawyers, Antonio Flores and Juan Martinez Soler, from Lawbird Legal Services, a Marbella based law firm, argued in their claim that the cause of the contract was false, in the sense that product consisted in the provision of a loan to retired expatriates residing in Spain as if it were an indispensable requirement to avoid Spanish inheritance tax.
In addition, the judge considers there is sufficient evidence to demonstrate that the bank never paid most of the loan capital, but retained it to invest it at the borrower’s risk on complex and highly speculative products, without the latter knowing.
Additionally, the sentence resolves that there is no recorded evidence that the bank truthfully reported the borrowers about the true nature of the product or the compliance of the banking and financial transparency regulations.
On declarations to this paper, Juan Martinez Soler concludes that the pronouncement reveals that “The cause of the product is radically false, as in accordance with the Spanish tax regulations concerning Inheritance Tax, payment cannot be avoided by mortgaging a previously owned property”. For its party, Antonio Flores adds that “the dishonest trick advertised by the bank in this case, becomes void pursuant to the Civil Code, for advertising a financial package leading to a clear fraudulent purpose”.
