STS no. 16 of 16-01-2017. Appeal no. 2718-2014, on Club Paradiso and investment schemes.

The first judgment of the Supreme Court has proved to be a real surprise for many, although expected by others (among which I include myself). There have been many proceedings before the Courts of First Instance and the Provincial Court of Santa Cruz de Tenerife (now onwards, Court of Appeal or just CoA) against the group of companies headed by Silverpoint Vacations, S.L. Initially lower court judges started deciding in favor of consumers, declaring the contracts null and void. The issue radically changed when the CoA started to review the judgements. His first decision was no. 26/2014 of July 4, 2014. This judgment reviewed the case of a customer who had purchased at Club Paradiso and considered this as a Holiday Club. Holiday clubs as such were not included in Law 42/98 (now they are with Law 4/12) so the CoA declared that it was not applicable (interpretation pro Law).

Later, and in these almost two and a half years, the CoA has issued more than one hundred sentences, not all about Club Paradiso but also on other clubs such us Beverly Hills Club, Heights, Hollywood Mirage or Palm Beach Club. In addition, it also resolved issues in which the clients had bought many weeks with the idea to resell them with a profit. This was a strategy that Silverpoint used with those customers who were not interested in buying "timeshare" to be able to capture them and put them into their network of sales and resales. In these cases, the CoA has stated that these buyers were investors, not consumers, so Law 42/98 was not applicable as it is only for consumers. As the aim of the purchase was the resale, not its use, could not be considered as consumers.

Faced with such a situation, filing a lawsuit against Silverpoint when the contract was about Club Paradiso or there was an investment scheme was almost a lost cause ... lost until last January 16. This was the date when the Supreme Court issued the first ruling that has to do with Silverpoint. So far another 4 more rulings have been issued and as soon as I can read them I will comment it here in this blog.

With respect to ruling No. 16/17, this comes to say that,

1) Club Paradiso is a holiday product that has been sold trying to avoid the application of the Law that regulates this type of products, in clear consumer fraud, so that, by not applying the Law to which it was obligated, is why the Contract must be declared void. The Supreme Court makes a more extensive interpretation of the Law and protects the interests of consumers and users (pro-consumer interpretation).

2) Buyers do have to be considered as consumers because, although the purpose is not the use, the fact is that this activity of buying and selling is not usual in them, it is not their business, and therefore must be considered consumers. The Supreme Court has considered rather the ambit or scope, private or professional, in which the buyer operates to consider it or not a consumer.

Initially this sole decision does not create jurisprudence, although it leaves quite clear the way how the highest court in Spain thinks. In any case, I am sure that within these 4 published rulings there will be some more that confirms what this initial ruling has declared, creating the necessary and expected case law.

See full judgement here in Spanish.