Royal Bank of Scotland will today attempt to overturn a landmark Court of Session judgment, which upheld a developer's claim that the bank had a contractual obligation to deliver a promised loan.

The appeal follows a five-year saga which saw the bank reproached for a "lack of candour" by Lord Glennie for claiming that when it advanced £1.4 million to developer Derek Carlyle for a land purchase at Gleneagles it had not promised a further £700,000 to fund housing development.

The judge found the bank was subject to a "collateral warranty obligation", not previously tested in the Scottish courts and with implications for much bank property lending.

Now more than three and a half years after the original case was heard, the bank has appointed a new QC, Richard Keen, the Dean of Faculty, to argue its appeal. Mr Carlyle was last week refused legal aid and will be representing himself.

Soon after the case was heard in the Court of Session in October 2009, Mr Carlyle discovered he had been sequestrated by builders merchants Jewson for a debt of £4000, and that the Royal Bank of Scotland's solicitors Brodies had been aware of the sequestration before he was, and had passed information to the trustee.

Advised that the sequestration could be recalled because he had not been properly notified and had repaid the debt, Mr Carlyle went to Hamilton Sheriff Court, to find RBS was heavily involved in the case, despite the Court of Session judgment.

Mr Carlyle had received £564,000 from the sale of a property in August 2008, which RBS said it had a claim over, but the bank had released its security over the property and was unable to produce any evidence for a further claim.

As a result of the bank's submissions, which used evidence from private investigators, the sequestration was not recalled, the sheriff referred his report to the Accountant in Bankruptcy, and the AIB a year ago imposed a record 12-year bankruptcy restriction order on Mr Carlyle, finding him guilty of having transferred the cash to other accounts and then squandered the £564,000 on a "party lifestyle".

Jim Hood, Labour MP for Lanark, in a blistering attack in the Commons in March 2010 after the court judgment, said the bank's involvement had been "an attempt to destroy his ability to claim justice and reparation if he succeeded in his Court of Session counterclaim".

The MP said he was "horrified by the inexcusable and underhand tactics adopted against [Mr Carlyle], both personally and professionally", adding: "The taxpayer should not be funding personal vendettas by bank personnel."

Cat MacLean at MBM Commercial, which represented Mr Carlyle in the original case, said: "The original decision was very helpful to people in Derek's position, property developers in particular, and the bank would like it overturned."

Mr Carlyle received legal aid for two positive QC's opinions on the appeal case but was refused aid for the appeal following objections from RBS. A spokeswoman for RBS said: "The matter is subject to ongoing litigation and therefore we are unable to comment."

She suggested however that the bank had followed "normal debt recovery procedures" in relation to Mr Carlyle, and that legal aid had been assessed independently without any improper pressure.