Case law

  • Case Details
    • National ID: 8 Ob 286/98m
    • Member State: Austria
    • Common Name:link
    • Decision type: Other
    • Decision date: 26/11/1998
    • Court: Oberster Gerichtshof (Supreme court)
    • Subject:
    • Plaintiff:
    • Defendant:
    • Keywords:
  • Directive Articles
    Timeshare Directive, Article 2
  • Headnote
    A person who makes payments to acquire a timeshare entitlement linked to membership of a club does not necessarily have the right to make a claim should the club go into receivership.
  • Facts
    In 1994 the plaintiff became a member of a timeshare club. The club had been legally constituted as a not-for-profit organisation. In accordance with the club’s statute book, a member was required to acquire a timeshare entitlement for the use of a holiday apartment in a complex for a set period each year. The price paid to acquire this entitlement and thus join the club was 17,695 DM. The plaintiff paid this sum to the club. According to the club’s statute book, if the club were to be wound up, its entire assets should be liquidated and, once all liabilities had been covered, these should in principle be distributed among the members.
    After the club had become insolvent, bankruptcy proceedings were opened in 1997 to deal with the remaining assets. During the course of these proceedings, several members, as well as some external creditors, lodged claims. As a member, the plaintiff made a claim for the “purchase price” she had paid together with interest that had accrued on the capital. Since the administrator did not acknowledge her claim, the plaintiff brought an action for a declaratory judgement against him. During the trial, the administrator argued that because the plaintiff was a member of a legal entity (the club), her claim should be assessed in accordance with the rules governing personal equity compensation in the case of shareholder schemes. The plaintiff’s claim was in direct competition with other bankruptcy claims made by external creditors and therefore had to be withdrawn.
    The Court of First Instance upheld the claim, ruling that at the very latest when bankruptcy proceedings began, the plaintiff could no longer use her contractual entitlement. In accordance with the club's statute book, if the club was dissolved and its assets distributed, she was entitled to the proportion of the liquidation assets commensurate with her timeshare entitlement. Buying a holiday residence entitlement linked to membership of a club could not be regarded as equivalent to personal equity investment in a shareholder scheme.
    The Court of Appeal reversed the verdict. It explained that in shareholder law individuals do not have the status of creditors in bankruptcy proceedings if the investments they have made come from personal equity. These principles – developed in shareholder law – also apply to not-for-profit organisations that are economically active. The acquisition made by the plaintiff (she purchased a timeshare entitlement by joining the club) did not mean that she enjoyed creditor status. Examining the club’s statutes also led one to the same conclusion. With the opening of bankruptcy proceedings over the club’s assets, the club was in the process of being wound up and the assets liquidated. According to the liquidation procedure laid down in the club’s statute book, once the club’s liabilities had been covered, its assets were to be distributed among members according to clearly defined rules. It is necessary to distinguish between the club’s liabilities and the members’ claims, which stem from the fact that they are members of the club. Thus, the plaintiff was not entitled to make a bankruptcy claim unless all liabilities involving external creditors had been covered and there was still money remaining from the liquidation procedure. Since any claims that depend entirely on the existence of - and the value of – assets from the receivership cannot be made during bankruptcy proceedings, the plaintiff was unable to prove that she had a valid bankruptcy claim.
  • Legal issue
    The OGH concurred with the Court of Appeal’s verdict. Going into greater detail, the court explained that the timeshare law (TNG) did not apply to the case in question because it had only entered into force on 1st April 1997 and, according to § 13 of the law, was not applicable to timeshare contracts agreed prior to that date. However, had the TNG applied in this case, the transaction between the plaintiff and the insolvent club would have been considered a timeshare contract as per § 2 para 2 TNG. This is because it is not the legal form or the classification of the transaction per se that matters, but rather it should be assessed according to its “true nature”. In other words, it should be assessed according to the intended legal consequences for both parties (in accordance with the "qualified theory of legal consequences"). In this context, the OGH ruled that it would contravene good moral practice if the club's members were to be given precedence over, or even equal status to, creditors of the club. On the question of whether the rules governing personal equity compensation applied to the fee paid by the plaintiff, the OGH argued that any doubts about whether the investment (payment of the “purchase price”) in the club to acquire a timeshare entitlement could be regarded as a personal equity investment had been definitively removed by the provisions governing the club's liquidation. According to these, the remaining assets were only to be distributed once priority had been given to covering external liabilities. For these reasons, the plaintiff was not entitled to make a bankruptcy claim, meaning that the Court of Appeal was right to reject the claim.
  • Decision

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