Court Ruling Won against Nadalsol and Zurich España S.L.

August 15th, 2010

Lawbird has won a court ruling against the developer Nadalsol, currently under voluntary insolvency administration, and Zurich España S.L.

This is a very interesting ruling, because the Granada Judge, so as to reach his conclusions and findings, resorts to “fresh” case law being written up in the midst of the economic crisis by mercantile courts dealing with insolvency cases, and therefore has that extra little bit of interest for our readers:

  1. The Judge starts criticizing the developer for bringing as a witness a son and nephew of the 2 shareholders of the defendant company, thereby with a “forecast of logical bias”. He also criticizes the fact that the owner of the report drawn up to prove force majeure is not called to give witness statement, particularly when he is not related to the owners (this is what I call a bad start!).
  2. Recorded the above, the Judge cites the developer Nadalsol quoting article 62.3 of the Insolvency Act whereby “even if the Judge finds that there are sufficient grounds for cancellation of contracts he may uphold the validity of these based on the interest of the Insolvency administration”. Here the judge says that yes, this may well be the case, but adds that “it is paradoxical that if the interest of the insolvency administrators is primarily to protect the creditors, such protection should not come at the cost and expense of other creditors, which are the purchasers of properties”. In this respect the Judge invokes established mercantile case law that concurs in one opinion: “such prerogative to uphold the validity and enforceability of contracts should be referred to suppliers’ contracts and generally all of those that are related to the phases of production, processing and formation, of the goods or services object of the commercial activity, and NOT real estate private purchase contracts.”
  3. The Judge also establishes a distinction between suppliers and property buyers and states that a supplier who has not been paid cannot be compared with property purchasers who have not received the promised property within 3 years from buying, and therefore the legal treatment should be clearly distinct. In any event, he warns that in the interest of equity a rationalized use of discretion should be made, on a case by case basis.
  4. Going to the delay, the Judge establishes that a 3 years delay is so long that, and read this well, “there is not one tribunal that would understand that such delay would not generate a right to cancel, for the contrary would equate to prostituting the principles of equity and proportionality of obligations” (could he have come up with a more graphic word?!).
  5. The developer argues that having had to change building contractors, a delay was expected and the Judge argues back, not without sarcasm: do you really need 3 years to swap contractors? Adopting a more serious tone, the Judge cites well established case law pointing to the inexistence of force majeure when the developer becomes insolvent, has disagreements with the contractor, suffers administrative expropriation, etc. “Force Majeure refers exclusively to events, certainly extraordinary and uncertain and detached from the will, prevision or forecast of the parties, a force superior to all control and prediction and that necessarily excludes guilt on any of the parties.”
  6. Finally, the Judge opposes the contention thrown by Zurich España S.L. that since the buyers had extended the validity of the insurance policies written out by the defendant’s insurance company till 2010, then that date would have to be upheld as a newly agreed completion date. Although the judges mistakes here the facts, as he does not realize that the buyers did indeed sign this document of extension of policy, he concludes by saying that this option never implied a will to extend the validity of the delivery date on the contract, but only the validity of the policy, as the mere filing of the claim pointed to exactly the opposite.

As usual, a copy of the Court ruling is available upon request.

Leave a Reply

Your email address will not be published.