Málaga-based law firm M1 Legal, working with European Consumer Claims, represented a British client against Resort Development Organisation member Club La Costa World at the Court of Appeal.
The Court of Appeal in Málaga (appeal proceeding Nº 104/18) sat on 11 February 2020 and issued its judgment against Club La Costa (UK) PLC – Sucursal en España (Spanish branch) on 24 April 2020.
The key issue on appeal was which company within the Club La Costa Group should be held liable for the group’s activities. Although the timeshare purchase contract was signed by Club La Costa Leisure Ltd, and maintenance fees were paid to Club La Costa Resort Management Ltd (both Isle of Man companies), the Court of Appeal found that Club La Costa (UK) PLC – Sucursal en España was responsible for Club La Costa’s activities carried out through the group.
This formed the basis for applying the “lifting the corporate veil” doctrine. The Tribunal referred to an earlier Court of Appeal ruling (SAP Málaga 507/2003) involving Paradise Trading SLU, also a Club La Costa company:
“In fact, they are a conglomerate of companies where the intention is to avoid the legitimate rights of the clients through the instrumental mechanism of diluting their contractual obligations and the ownership of the affected properties, with the purpose of hiding and protecting the solvent company that could comply with the obligations acquired...Therefore, the fraudulent use of all these companies with the purpose of causing damages to third-parties (clients) lead to the doctrine of lifting the veil”.
In this case, the Court of Appeal noted that the vendor company, Club La Costa Leisure Limited, had been dissolved. It also raised concerns that the maintenance-fees company, Club La Costa Resort Management Ltd, despite being Isle of Man-based, used telephone landlines connected to Málaga, and that Club La Costa (UK) PLC – Sucursal en España was the Spanish entity representing the parent company, Club La Costa (UK) PLC. The Court stated: “The fact that the contractual company is dissolved is not a reason for no-one to be liable. Furthermore being that the Club La Costa group receives the maintenance fees it is not acceptable for it to enjoy rights without obligations”.
As a result, the Court of Appeal agreed the claim could proceed against Club La Costa (UK) PLC – Sucursal en España, which it identified as the only company in the Club La Costa group resident in Spain (Málaga), where the resort is located. The court also found that, on review, the timeshare purchase contract did not comply with Spanish timeshare legislation, regardless of which legal entity was named as the vendor on the agreement.
The client paid £30,303 for his timeshare in October 2011. The court ordered that he should receive £26,061 plus £8,203 (advanced payment), together with interest and legal costs.
M1 Legal spokesperson Sharon Johnson said: “This is one of thousands of cases against the web of Club La Costa World companies.” M1 Legal alone currently has 561 cases in the courts against them with a value of £11.9 million”.
To read the full judgment in Spanish – CLICK HERE
To read the abbreviated judgment in English – CLICK HERE
