ROYAL Bank of Scotland has failed to overturn a Court of Session verdict that it misrepresented a land valuation in order to secure a £300,000 personal guarantee from two property developers in the wake of the financial crash.

The bank faces a £100,000 bill for damages to Glasgow-based Ian McDonald and James O'Donnell, on top of the estimated £400,000 total costs of a lengthy court action aimed at justifying the bank's conduct in early 2009.

Three Appeal Court judges have backed the June 2013 ruling against RBS by Lord Malcolm, who described the bank's action against the developers as "a case study of the causes and consequences of the property crash".

Mr McDonald said yesterday that law firm MBM Commercial had told RBS in February 2010 that the personal guarantee was unenforceable because of a clearly flawed site valuation.

He said: "The bank's global restructuring group said it was their valuation and they would do what they like. Four years down the line and four senior judges have told them the same thing. They have put us through hell for four years and the only compensation that we get is the interest back that we paid them."

In late 2007, the developers were loaned £1.67m by RBS to buy Strone Farm at Greenock,which they planned to sell on to a housebuilder for £3m. When the property crash hit in late 2008, the bank ripped up its previous lending policy and told local managers that all loans must be restricted to 70 per cent of the security's value.

The businessmen were persuaded to sign the £300,000 guarantee in March 2009 by relationship manager Leonard Marsh.

He produced an updated site ­valuation of £2m from surveyors Ryden but said that it fell short of the security which was now needed for their loan.

Nine months later surveyors Graham & Sibbald valued the site for RBS at £156,000. When the bank put the developers' company Whinhill into administration in 2011, it sold the site off for £65,000.

In his ruling, Lord Malcolm said: "It would appear vastly differing valuations of the site were obtainable depending upon whatever assumptions the valuer was asked to, or chose to, adopt."

The judge also said the £2m valuation appeared "designed to ensure the end result met the figure previously promised" in discussions between Mr Marsh and Brian Ronnie, a Ryden partner. Lord Malcolm ruled that Mr Marsh had failed to tell the developers that Ryden had been asked to provide a £500 "desktop updated" estimate rather than a fully-informed revaluation, for which the fee would have been £2,500.

However, Ryden had protected itself by specifying to the bank that its figure was "solely for RBS use" and for "indicative purposes only".

Lord Malcolm concluded: "Neither Mr McDonald nor Mr O'Donnell would have signed the guarantee if they had known the Ryden revaluation could not be relied upon as a professional opinion from a large and respected firm of surveyors."

The developers were not shown the valuation until February 2010, when they immediately protested that it had assumed an impossibly large density of housing on the site, adding eight extra units and also valuing the development as detached houses not flats.

In its grounds of appeal, RBS said its valuations were not misrepresentations but "simply passing on information ... provided to the pursuer by professional advisers", and denied that the defenders suffered any loss as a result.

The appeal judges said Mr Marsh had on two occasions been negligent in allowing his customers to believe what was "a classic example of a half-truth".

Mr McDonald added: "After we received all the documents from the bank we tried to inform Stephen Hester direct and through my MP Jim Murphy. If he had taken the time to look into this it would have saved hundreds of thousands and the ruling that we now have."