Financial Ombudsman Service successfully defends fractional ownership timeshare judicial reviews

On 5 May 2023, Mrs Justice Collins Rice handed down judgment in respect of two joined judicial review claims challenging decisions of the Financial Ombudsman Service upholding complaints in respect of the sale of types of “fractional ownership” products by timeshare providers (R (on the application of Shawbrook Bank Ltd) v Financial Ombudsman Service Ltd; R. (on the application of Clydesdale Financial Services Ltd (t/a Barclays Partner Finance)) v Financial Ombudsman Service [2023] EWHC 1069 (Admin)).

The consumers (who were interested parties to the claims) were existing customers of the timeshare providers at the time of the sales in question. They were sold an entitlement to share in the proceeds of the sale of a specifically identified property under “Upgrade Agreements”.

The claimants in each case – Shawbrook Bank Ltd ('Shawbrook') and Barclays Partner Finance ('BPF') respectively – were the financial services provider that financed the loans the consumers took out to cover their lump sum purchases.

In each case, the ombudsmen concluded the fractional ownership timeshare package had been mis-sold and the contractual arrangement, including the associated loan, should be unwound. Each decision was put on a number of alternative bases.

Mrs Justice Collins Rice concluded that (at [188]):

(1)  The ombudsman in the Shawbrook case did not err in law in his construction of, or approach to, Reg.14(3) of the Timeshare Regulations

(2)  Both ombudsmen did not err in law in concluding that the deemed agency provisions of section 56 of the Consumer Credit Act, read together with s.140A(1)(c) of the Act, meant that the acts and omissions of the timeshare companies in conducting negotiations with consumers antecedent to forming timeshare contracts fell to be regarded by a court as things done or not done by or on behalf of the lenders, for the purposes of considering whether they caused the debtor/creditor loan relationship between lenders and consumers to be unfair.

(3)  In those circumstances, both ombudsmen did not err in law in holding that an unfair relationship had been created for the purposes of s.140A of the Consumer Credit Act or in providing remedies having regard to the provisions of s.140B.

Mrs Justice Collins Rice reached a number of further conclusions, which were not determinative of the proceedings (at [190]). These included (amongst other things) that: (a) the ombudsman in the Shawbrook complaint erred in law in deciding that a fractional ownership timeshare contract did not fall within the terms of Reg.7 of the Timeshare Regulations, but was instead one or more Collective Investment Schemes, (b) both ombudsmen erred in law in finding a breach of Reg.12 of the Timeshare Regulations constituted by a failure pre-contractually to provide 'valuation information' to timeshare customers, but (c) both ombudsmen did not err in law as to the construction of approach to the Resort Development Organization Code of Conduct, which did require further information that that provided in the standard-form documentation. 

James Strachan KC and Gethin Thomas acted on behalf of the Financial Ombudsman Service.

Fenella Morris KC acted on behalf of the consumer and First Interested Party in the BPF claim, Mr Hopwood, who also defended the claim.

The judgment is available online here.

Press coverage: The Times