Royal Bank of Scotland is to appeal against a Court of Session judgment that it obtained a £300,000 personal guarantee from two property developers by misrepresentation.
The Edinburgh-based bank's latest legal move follows a successful reversal of its Court of Session defeat at the hands of now bankrupt developer Derek Carlyle, where three Court of Appeal judges ruled that RBS was bound only by what was contained in its written contract.
In a Court of Session judgement in June this year, Lord Malcolm commented that the bank's recovery action against developers Ian McDonald and Joe O'Donnell was "a case study of the causes and consequences of the property crash", and ruled against the bank.
RBS had backed the developers with a £1.65 million loan in 2007 to buy a piece of land in Greenock - which was sold off three years later for just £65,000.
The judgement revealed that following the crash, the RBS credit division instructed that all property loans needed at least 30% security, and that the critical valuations of sites appeared to vary wildly depending on which firm of surveyors was instructed.
The two developers were persuaded to sign a £300,000 personal guarantee in March 2009 on the basis of an updated site valuation produced by leading Scottish surveyors Ryden, which the judge said appeared "designed to ensure that the end result met the figure previously promised" in discussions between bank and surveyor.
Lord Malcolm said the borrowers would not have signed the guarantee "if they had known that the Ryden revaluation could not be relied upon as a professional opinion from a large and respected firm of surveyors".
He commented: "It would appear that vastly differing valuations of the site were obtainable depending upon whatever assumptions the valuer was asked to, or chose to adopt."
Ryden however demonstrated that it had warned the bank that it had been instructed to produce only a "desktop revaluation" for a £500 fee, not a full £2500 valuation.
In its grounds of appeal, RBS says its valuations were not misrepresentations but "simply passing on information...provided to the pursuer by professional advisers".
The bank denies that it had a duty to alert the developers to a letter from Ryden warning that its valuation was "for indicative purposes only", and denies that the defenders suffered any loss as a result.
The banking giant faces paying the defendants' costs and also a counter-claim for interest.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article