Royal Bank of Scotland faces a £4m bill after failing in its seven-year legal pursuit of bankrupt developer Derek Carlyle.


Supreme Court judges have ruled that Lord Glennie was right to uphold Mr Carlyle's defence against the bank five years ago, in a Court of Sesssion judgement that was critical of the bank.

Mr Carlyle is the subject of a record bankruptcy restriction order of 12 years, for transferring proceeds of a property sale, which were remitted to him by the bank, after he had been sequestrated.

But his original sequestration in 2011 was for a minor debt, in what local MP Jim Hood claimed in the Commons was a "personal vendetta by bank personnel" against his constituent.

Now the Supreme Court has said Mr Carlyle was entitled to rely on a phone call from the bank in June 2007 as a legally binding contract.

The bank had promised the developer £700,000 to build houses adjacent to the Gleneagles golf course, having loaned him £1.4m to buy the land. But after the financial crash it changed its mind.

Mr Carlyle appeared to have won his claim for damages against the bank when Lord Glennie upheld his case in 2010 and reproached the bank for "lack of candour" in its evidence.

The bank went successfully to the Court of Appeal in 2013 over its £2m claim for return of its land loan. But following yesterday's unanimous 5-0 judgement by the Supreme Court, RBS faces paying Mr Carlyle's £3m counter-claim for damages, on top of legal costs since 2008 of at least £1m.

Mr Carlyle said: "I hope that this can now stop RBS from persecuting myself, and other customers, in personal vendettas, and that Ross McEwan will be the man who stands tall and pays for the needless destruction caused to myself and my family over the past seven years."

A spokesperson for the bank said: "It has been clear throughout that this case turns on its particular facts, and this is very much reflected in the judgment. We accept the Supreme Court's finding that the Lord Ordinary's decision should not be overturned." The bank declined to comment on whether it would now settle with Mr Carlyle.

The developer was backed by the Scottish Legal Aid Board in taking the case all the way to the Supreme Court and he paid tribute to his QC Roddy Dunlop and his solicitor Cat McLean, head of dispute resolution at MBM Commercial, one of the few leading Scottish firms not to be hampered by bank connections.

Ms McLean commented: "This has been a long, hard battle for Derek, who has had his life put on hold for a number of years, but has stuck with the case with dogged determination in the face of numerous obstacles put in his way by RBS.

"It is a vindication of not only his position, but also gives hope to many individuals and businesses in the property and other sectors who have suffered at the hands of banks. It sends a message that banks are not beyond censure or free to do what they choose, regardless of the human consequences - they will face legal redress in the end."

Lord Glennie had ruled that the bank had effectively created a "collateral warranty obligation", encouraging Mr Carlyle to proceed with the land deal in June 2007. The land at Gleneagles had been subject to a buyback clause because of the need to complete any development before the 2014 Ryder Cup, and Mr Carlyle had repeatedly told the bank that a complete funding package was critical.

The appeal judges said the bank's change of mind "may have been contrary to the spirit of the negotiations" but the critical phone-call could not be taken as legally binding.

Lord Hodge, however, delivering the Supreme Court judgement yesterday, said that although the informal approval by the bank had lacked detail, it "did not prevent the agreement from having legal effect".