Legal tip 1192.Clients deciding on Actions against Banks 
11 August 2014 @ 12:08 
 

Yes, not easy but, in those early years (2007 to 2011) there was little or no Case Law to support action against the Banks according to LEY 57/1968.  However for various reasons at that time it was important for many people to obtain contract cancellation.  Most got this via an action against the Developer.  Unfortunately, during those legal actions many developers became insolvent and although most Judges awarded contract cancellation and a refund of deposit, very few claimants were successfully able to enforce the sentence against the now insolvent developers.

However, it must be remembered that contract cancellation was and still is a very important aspect of any new action against the Bank.

Having contract cancellation in a previous action strengthens the new action against the Bank.  It reduces the arguments that the Bank can use as there is now no valid arguments regarding the possible or future completion of the property and honouring of any purchase contract.  This was a risk in joint actions against developer and bank - as the fact that at the time of filing of the Lawsuit and subsequent Preliminary Hearings & Final Hearings the purchase contract was still 'valid'.  Therefore the banks and developers could possibly use this to their advantage, especially if the delay in completion was relatively short or if the property was almost completed or if there was a reasonable chance of the developer completing the construction.

So in a joint action there were 2 main arguments that the claimants were trying to win - Contract Cancellation and then the joint liability of bank and developer for the refund of off-plan deposit.

For those buyers who now already have contract cancellation in a previous action against the developer, their subsequent action against the bank is somewhat clearer as there is no argument regarding the validity of the purchase contract.  The main argument can instead focus on the liability for refund.

Unfortunately, any legal fees incurred in a previous action against the developer cannot be claimed in a subsequent action against the bank, as the bank was not party to the original action.

But, I have seen many successful actions against banks, following a previous action against the developer, where in the Bank Action the Judge has imposed interest on the Bank from the date the off-plan deposit was paid to the developer.  However, this is up to each individual Judge in each individual case based on the available evidence.

Kind regards

Keith
 

It's also important to note that some (in fact many I suspect) offplan purchasers who gained cancellation and successful rulings against the developer (with costs/interest awarded in the early days, were the days when developers were still solvent and in some cases during the prolonged period whilst they awaited preliminary enforcements (with no time contraints in place to ensure timely justice..... some endured years) the developers actively "asset stripped" to ensure that rulings could not be enforced against them. Also many major delays (YEARS stuck in the legal system with little progress) in itself left purchasers vulnerable to developers becoing insolvent in the interim. Very few law firms were reporting these facts to the "powers that be" so that statistically the facts would emerge as a pattern of events, which to be honest is sadly still a major failing within the Spanish justice system.

How else can these stark realities be responded to (with adequate resources) if they are not accurately monitored, and how easy for developers to abuse the system and "play" the system of delays........ now we are witnessing a similar scenario with the Banks as they continue to "play" the system of delays....submitting their appeals in full knowledge that it may take many years to effect justice and enforcement of rulings without adequate time constraints in place.

Keith called for a specialised court (to ensure consistent rulings and to minimise miscarriages of justice) and the need for time constraints many years ago, when he first astutely recognised a pattern of events and how innocent purchasers were being denied their inalienable rights according to Ley 57/68.

OK, so this is where we are now, but the focus needs to be kept on the need for adequate monitoring and reporting of events /miscarriages of justice by those good law firms who are striving for reform. It's reassuring to hear of progress being made but to hear how the system is still a legal lottery strikes understandable fear into many minds..... even those who have been fighting from day one Maria.To worry if you are in an area where the judiciary tend to favour developers/Banks is of great concern, and how do clients know if this is the case if there is no accompanying statistical evidence? How can these miscarriages of justice/misintepretations of INALIENABLE RIGHTS (in their entirety) be fought if there is no statistical evidence to support these facts?

Also these uncomfortable facts relating to the impact from compromising delays need to be brought to the attention of the Supreme Court, especially when they now question those purchasers who witnessed these events unfolding before their eyes and no doubt considered the risks far too great to proceed until such time as consistent case law was established...... to deny them their inlienable rights is in itself a miscarriage of justice when from the outset a law existed to protect them from this scenario ......... the law still exists, and to ignore these circumstances that were totally beyond their control appears harsh in the extreme. It does not demonstrate moral authority I'm afraid, and for many it only adds to the distrust of a system that is crying out for adequate and transparent monitoring/effective reporting mechanisms/time constraints and a willingness for the judiciary/SC to take into account the circumstances that were beyond purchasers' control, and/or the true facts that have been overlooked/ignored by some judges in their questionable interpretations of Ley57/68 (i.e. those favouring developers/Banks). Likewise, where relevant, it would be reassuring to witness a consistent approach by Judges willing to take account of these facts when making their rulings relating to the imposition of interest on Banks from the date off-plan deposits were paid to developers. In other words, fair accountability and justice for their failings and denials/refusal to recognise their responsibilities to adhere to an existing Spanish law..

Sorry for the rant (another dog with a bone I'm afraid ) but to bear witness to the "moving of the goal posts" by the Supreme Court in this way, not to mention continuing instances of inconsistent rulings with regard to Ley 57/68 after all these years of striving for recognition of inalienable rights in their entirety, is heartbreaking.....

Please forgive this outpouring of frustration but there are still many uncomfortable truths to be addressed in this fight for consistent rulings ....

Thank you both for your patience and understanding in this regard.

In purity, those actions against developers--- and long judicial battles-- would have not been necessary if every buyer had had his individual certificate of Bank Guarantee available.

Law 57/68 is a great tool to protect off plan buyers in Spain when.... it is respected.

We had many clients who enfoced their guarantees years ago and for whom all these nightmare are now history. We have many other clients---in samde developments as those just mentioned--- that becuase were not provided with the individual certificate of Guarantee are now-- and have been for years--- in a queue for justice.

Further thoughts?

You ask for further thoughts, Maria, well here goes!

To restrict the application of justice according to an existing law just at a time when inalienable rights are being recognised and case law established, (recognition it must be stressed that has taken years to achieve), does a grave disservice to the justice system in Spain, and to some it appears that this is a ploy to restrict the numbers who remain eligible to have their inalienable rights finally recognised.

IMHO there is no purity in this, just recognition of an existing law that was intended to protect offplan purchasers. If this law is not acknowledged and enforced for those who have been denied their rights then the whole ethos of respecting the law in Spain will be brought into question. The principal of legal certainty is fundamental to this scenario and any attempts to "cherry pick" the law, to demonstrate favour to developers/Banks will be viewed with great suspicion, especially if these instances are not being reported and officially recognised. There should be no favours, just respect for the law.

It is simple.....(or it should be), whether or not it was individual guarantees, generic guarantees, (whatever), offplan purchasers' inalienable rights should be respected and monies returned without years of struggle to enforce a law that at its heart provides inalienable rights with safety mechanisms in place for adequate protection of deposited monies. To quote Keith from his BG petition http://www.bankguaranteesinspain.com/, Inalienable rights definition:- "Unchallengeable, Absolute, Immutable, Not Able to be Forfeited, Unassailable, Incontrovertible, Indisputable, Undeniable. "

To expose innocent offplan purchasers to ever increasing ways of recovering their monies, first action against developers, then Banks, then lawyers (indemnity) etc fails to recognise that inalienable rights are indisputable and wherever monies have been deposited they should be returned and then it should be for the other "parties" (developers/Banks/lawyers) to do battle between themselves. Not left to the innocent purchaser who has the backing of existing law. It makes a mockery of the justice system when the innocent party is left to defend their rights in this lengthy and costly manner. But to add insult to injury just when these rights are being recognised and good case law established, the SC decides to restrict their enforcement by placing time constraints on eligibility! How ironic and hypocritical when all too many have suffered injustices due to lack of time contraints to gain timely justice, timely enforcements, timely case law during this past decade.

If law firms have failed in their comprehension of this law and the requirement to provide Bank Guarantees, or if the law firms have failed in their due diligence to ensure timely cancellation, or failed to recognise illegal BG's, whatever the negligences/manipulative ploys (and there are many!), IMHO they should be made accountable by the Banks who have no right to retain these offplan deposited monies in the interim. These are monies that by law should have been protected by the Banks via secure accounts, via issuance of LEGAL BG's, via a credible Banking administrative system that ensures the law is adhered to, that ensures offplan monies are identified and protected. Why should an innocent purchaser be the pawn in this equation, left to defend themselves against offenders of all persuasions, when a law already exists to prohibit such abuse/negligence via the issuance of inalienable rights and return of their monies once breach of contract has occurred?

Keith identified in his petition "we must conclude that the Banco de España has failed in its duty to verify compliance with banking regulations, especially those relating to transparency and customer protection and has failed to ensure that the Banks and Savings Banks under its supervision comply with the "obligations imposed by LEY 57/1968 on financial institutions". He goes on to explain " The Banks & Savings Banks funding the developers were happy to avoid the obligations imposed on them by LEY 57/68 and use purchasers 'unsecured deposit funds' to lessen the Banks exposure to the various developments.".... "We must remember that the Banks & Savings Banks who are supervised by the Banco de España were the 'vehicle' through which the illegalities were performed'. "

With all this in mind IMHO it should be for the Banks to return deposited monies, to respect offplanpurchaser's inalienable rights, and if they consider they have been compromised by "others" negligences/illegal activities in this sorry saga, then surely it is for them to fight their corner against such "offenders", not the innocent purchaser.

But in the interim, it is still necessary for all good lawyers to report instances of negligence, of compromising manipulative ploys, lack of due diligence, conflict of interests, illegal BG's, compromising delays, miscarriages of justice, etc, to the "powers that be" with a longer term aim of ensuring that a credible monitoring and regulatory system is put in place to prevent future occurrences of this nature. Only then will faith in the Spanish Justice system and the wider legal fraternity be restored.

But in the meantime Maria please know that we are very grateful for yours and Keith's endeavours to pursue justice, to educate us, and hopefully influence reform through your continuing pioneering work.

I would argue to make the Banks fully accountable for return of monies (without restrictive time constraints that inhibit inalienable rights), and leave them to defend instances of negligence etc, if applicable. After all, to repeat Keith's wise words, they are the vehicle through which the illegalities were performed.

Have a pleasant evening!

Kind regards.

 Seldom have I read an article that hits the nail dead on the head with every point covered.

Irrevoccable damage has been done to the name of justice in Spain because of this, I know because I am sone of them.

Why is the European Union remaining so quiet on this matter?

 Seldom have I read an article that hits the nail dead on the head with every point covered.

Irrevoccable damage has been done to the name of justice in Spain because of this, I know because I am one of them.who has suffered.

Why is the European Union remaining so quiet on this matter?

This message was last edited by liztc on 12/08/2014.

Well said Ads and liztc, wish i could feel better after reading your comments.  You hit the nail on the head right enough, Ads but it's depressing that we are in limbo yet again for another month, wish I could have a months holiday.

This dispute has gone on too long and we are starting to feel as if the law doesn't give a damn!!

joyjo

Any further thoughts/observations would be greatly appreciated Maria and/or Keith.

"With all this in mind IMHO it should be for the Banks to return deposited monies, to respect offplan purchaser's inalienable rights, and if they consider they have been compromised by "others" negligences/illegal activities in this sorry saga, then surely it is for them to fight their corner against such "offenders", not the innocent purchaser."

Reading this my eyes welled up.  If Ads can see this, if Keith can see this and if I can see this then why can the Spanish legal system NOT see it?

It is   frustrating, disheartening and eventually soul destroying. One feels so powerless.

P.S.I wish I could express myself as clearly as Ads who most certainly has a gift. Thank you for your contributions.

Thanks for those kind words Sandra.

You ask about the European Union and what they are doing about this. Apologies in advance for this long response.

FYI Marta Andreasen (previously a proactive MEP before she lost her seat in the recent European elections) responded back in February 2014 as follows:

You ask,  "if EU law includes any directive to ensure that a member state has to comply with its own laws and does not act OUTSIDE the rule of law and adheres to the principal of legal certainty?"

The answer is no.  However as part of the process of joining the EU, the institutions of a country are assessed against what are now known as the "Copenhagen Criteria", one of which is respect for the rule of law, and Spain would have been assessed as meeting these criteria at its accession in 1986.

Accession to the European Convention on Human Rights is accepted (with some reservations) as an essential condition of EU membership.  The Convention is not an EU treaty, although the treaties refer to it.  It binds signatory states to the jurisdiction of the European Court of Human Rights (which again is not an EU body).  Spain is a signatory and is bound by the ECHR.

However the European Court of Human Rights only has jurisdiction over matters covered by the European Convention on Human Rights.  Cases in the ECHR have to be against a state, not an individual or company.  Moreover you are only allowed to use it when you have exhausted all the possibilities in the legal system in the signatory state (in this case it means going to the Supreme Court of Spain).  The Court is strict and unbending on questions of admissibility - and any refusal is for keeps: you are not allowed a second chance.  Moreover there is no mechanism for enforcing the judgements - they are dependent on moral authority only.”

She continued “Article 345 of the Treaty on the Functioning of the European Union expressly provides that it shall in no way prejudice the rules in Member States governing the system of property ownership. “

So the conclusion appears to be that as things stand the European Commission currently have no powers to act and are depending upon the member state (Spain) to demonstrate moral authority. For those still suffering at the hands of these compromising failures after nearly a decade, therefore, it has sadly become essential that this situation be highlighted as a major failing of the EU. 

This needs to be urgently expressed to all local MEP’s with the continuing question, “What current plans/measures does the EU have to ensure that the member state, Spain, continues to respect the rule of law and does not act outside the rule of law and adheres to the principal of legal certainty? Likewise how is the EU going to ensure that Spain adheres to the World Justice Project’s directive that "Appropriate and effective enforcement does not only mean that it occurs without public or private meddling, but also that regulatory proceedings are conducted in a timely way that respects the due process of law. ".

Sadly the recent Supreme Court ruling which appears to have placed restrictive time constraints on those striving for recognition of cancellation rights (every delay brings cancellation) which in turn then inhibits  inalienable rights as defined in existing law Ley 57/68, together with the failure to provide time constraints on regulatory proceedings/judicial rulings to ensure timely justice for all those compromised by Banks’/Developers’ non adherence to this law during this last decade, acts as a prime example of the systemic failure by Spain to respect the rule of law and the principal of legal certainty. 

Everyone affected should be writing to their MEP’s (using www.writetothem.com )  together with a brief and unemotive letter to Viviane Reding, Justice Commissioner at the European Commission which might also elicit a response. (note the email to Viviane Reding should be forwarded to Michael Shotter mailto:michael.shotter@ec.europa.eu  for the attention of Viviane Reding or whoever is now the Justice Commissioner since the European elections )

Post script update:

European Commission presents a framework to safeguard the rule of law in the European Union

For those who query the European Union’s ongoing action and the EU’s Justice policy relating to the rule of law please read the following:

1) http://ec.europa.eu/justice/effective-justice/index_en.htm

In particular take note of the final paragraph where it states

 “Shortcomings in the national justice systems are thus not only a problem for a particular Member State, but can affect the functioning of the Single Market itself and, more generally, the whole EU legal system which is based on mutual trust. “

2) http://europa.eu/rapid/press-release_IP-14-237_en.htm

Annex 2 of this press release states

“(b) legal certainty, which requires amongst other things that rules are clear and predictable and cannot be changed retrospectively;  “

This appears to be relevant to ALL instances where inalienable rights as defined in Law 57/68 have been retrospectively legally challenged, as this contravenes the principal of legal certainty.

 “(f) equality before the law. The Court has emphasised the role of equal treatment as a general principle of EU law by stating that "it must be recalled that the principle of equal treatment is a general principle of EU law, enshrined in Articles 20 and 21 of the Charter of Fundamental Rights of the European Union"

This appears to be relevant to ALL instances where there has been inequality of imposed time constraints, which currently favour one party above the other. As one example, restrictive time constraints now imposed on those trying to gain recognition of their inalienable rights (including consistent recognition that every delay brings cancellation together with recognition of the principal of legal certainty) versus no time constraints being imposed to ensure that regulatory proceedings have been conducted in a timely way that respects the due process of law. This unequal use of time constraints flies in the face of equal treatment and has without doubt compromised the innocent party’s abilty to gain timely enforcement of Ley 57/68.

3) http://ec.europa.eu/justice/newsroom/effective-justice/news/140311_en.htm

http://europa.eu/rapid/press-release_SPEECH-14-202_en.htm

Viviane Reding identified in March 2014, “I have systematically pointed to the need for a better framework which allows the Commission to intervene early and transparently in cases of serious and systemic threats to the rule of law in a Member State. Today, the Commission is delivering on this commitment making sure that, in future, and based on our recent past experience, we can prevent and effectively resolve rule of law crises in our Member States." 

“The framework can be activated in situations where there is a systemic breakdown which adversely affects the integrity, stability and proper functioning of the institutions and mechanisms established at national level to secure the rule of law. The EU framework is not designed to deal with individual situations or isolated cases of breaches of fundamental rights or miscarriages of justice. “

Given this proviso, it becomes vital therefore to identify to the EU (from all offplan purchasers affected) how there has been a systemic breakdown to the rule of law during this past decade by Spain’s failure to enforce in its entirety an existing law (Ley 57/68) in place to protect offplan purchasers’ monies alongside the failure to adhere to the principal "Appropriate and effective enforcement does not only mean that it occurs without public or private meddling, but also that regulatory proceedings are conducted in a timely way that respects the due process of law. ".

In the interim it also becomes even more essential that all instances relating to those offplan purchasers who have been compromised by this systemic failure in Spain to adhere to Ley 57/68 during this last decade, (including cases where miscarriage of justice has occurred) are reported back to the “powers that be” by all good Law Firms in Spain.

Ads:

I agree with your comments on lawyers liabilities. It is a non explored field so far in regards to these disasters. They represented clients and did not ensure that these buyers had  the corresponding individual certificates of Guarantees.

Unless they can prove they requested it, using all the necessary due diligence; if (1) the action against the developer cannot be enforced and (2) there is no possibility of action against the Bank (using Law 57/68), an action against former conveyancing lawyers/ their professional indemnity insurance need to be explored.

Deadlines for these actions are of 1 year after previous measures prove to be fruitless. 

All related damages can be added here ( interests, moral damages...)

This message was last edited by mariadecastro on 18/08/2014.

Dear Maria,

Surely any attempt to remove/challenge cancellation rights or deny inalienable rights for that matter (by any means or from whatever quarter), when every delay (breach of contract) should lead to cancellation of contract according to existing law Ley 57/68, would be in contravention of the principal of legal certainty. This means that every delay must lead to cancellation without provisos that restrict this legal principal which then allows the challenge to be made against the Bank.

Surely this strengthens the legal argument for BANKS to be made fully accountable and the requirement to recognise inalienable rights according to existing law, with return of monies, costs and relevant interest , once delay (breach) has occurred?

Surely the principal of legal certainty cannot be overlooked Maria according to the rule of law?

"legal certainty, which requires amongst other things that rules are clear and predictable and cannot be changed retrospectively; "

p.s. The reference to yet another time constraint "Deadlines for these actions are of 1 year after previous measures prove to be fruitless.  " appears to be yet another example of unequal treatment when purchasers have themselves been denied time constraints to ensure timely justice, timely enforcement, timely provision of case law, etc, during this last decade.

"equality before the law. The Court has emphasised the role of equal treatment as a general principle of EU law "

Ads:

Legal principle of legal certainty you are using is of course applicable in every case as it is one of the principles expressed in our Constitution.

I agree with you that provision 3 of law 57/68 needs to be further clarified by the Supreme Court ( we have one case which has been admitted to discussion on this point) and if necessary by the Constitutional Court.

Let´s see.... 

Many thanks Maria,

Does your constitution also recognise equality before the law and the role of equal treatment?

You can find here the text of the Spanish Constitution:

http://www.senado.es/web/conocersenado/normas/constitucion/index.html

Happy to discuss on Spanish Constitution... I started my PhD in that field!

Does the principal of legal certainty (a requirement according to the rule of law) in effect override contra legem final rulings which fail to recognise inalienable rights according to existing law ley 57/68, when every delay brings cancellation?

Can this legal argument be used to block subsequent enforcement of a contra legem ruling and any request by the court to adhere to that final ruling, Maria?

Surely the rule of law and its principals have to be ultimately adhered to in Spain don’t they, and what better way to demonstrate this than by adherence to the principal of legal certainty?

Does this form part of your continuing endeavours to protect clients who have been subjected to such injustices, Maria?

With regard to inconsistencies within the Spanish system of justice it's important to stress that until such time as the rule of law is adhered to with regard to legal certainty and equal treatment, innocent purchasers continue to be reliant upon moral authority to be demonstrated from the judiciary/Supreme Court.

Sadly this only exposes the current failings that point to grave inconsistencies that challenge this rule of law in Spain, where some provisional courts are favouring developers/Banks by their failure to recognise inalienable rights/cancellation rights/ legal certainty according to existing law Ley 57/68.

Failures to gain admission to the Supreme Court and the failure to provide an effective reporting and monitoring regulatory system to identify cases of miscarriages of justice where the requirement for legal certainty has been ignored by some provincial courts,  also demonstrates major inconsistencies in the Spanish justice system, which in itself is a failure to recognise the requirement that  “rules are clear and predictable and cannot be changed retrospectively “.

Such disregard for the rule of law due to inconsistent / contra legem rulings cannot continue, and all rights according to existing law must be recognised if mutual trust is to be achieved. Viviene Reding (the previous European Commissioner for Justice, Fundamental Rights and Citizenship) in her framework to safeguard the rule of law earlier this year has already identified that any serious and systemic threat to the rule of law in any member state  needs to be addressed and effectively resolved.

I would suggest that we are now at the point where this has become a serious and systemic threat to the rule of law, and we should all be requesting that instances of this nature be brought to the attention of the Spanish “powers that be” (whoever they are!) AND brought to the attention of the current European Justice Minister (see below for details) by all good law firms who have this detail to hand,

Viviene Reding’s summary “Shortcomings in the national justice systems are thus not only a problem for a particular Member State, but can affect the functioning of the Single Market itself and, more generally, the whole EU legal system which is based on mutual trust” is sadly indicative of the current situation in Spain. Only when the lack of consistency within the Spanish Justice system and failures to adhere to the rule of law (legal certainty) and equal treatment are proactively addressed by ALL those striving for safeguards to the rule of law, will mutual trust ever be restored in both the EU and Spain.

In order for justice to prevail in Spain we all have to be of one voice……

Details follow (which I trust will be of assistance, Maria ):

The current Commissioner for Justice, Fundamental Rights and Citizenship is Martine
Reicherts. She has replaced Viviane Reding, who is now a member of the
European Parliament. You can contact the Commission´s Justice Directorate
General through their online form:

ec.europa.eu/justice/contact/webforms/index_en.htm

or through their phone line or other contact options:
http://ec.europa.eu/justice/contact/index_en.htm

We have an urgent enquiry for Maria following the postings within this thread.

Can the principal of legal certainty (as recognised in the Spanish Constitution and the safeguards to the rule of law as identified previously within this thread) and adherence to this rule of law be enforced in Spain and used to counter a final contra legem ruling that failed to recognise illegal BG’s and inalienable rights according to existing law Ley 57/68?

If not, then would this contra legem ruling be deemed unenforceable outside Spain i.e within another European Member State?

This principal of legal certainty and adherence to the rule of law is critical to all ongoing cases, so long as failure to recognise inalienable rights afforded by Ley 57/68 in its entirety by some provincial courts/judicial rulings in Spain (which in effect demonstrate favour to developers/Banks) is allowed to continue unchallenged.