Pressure is mounting on Royal Bank of Scotland chief executive Ross McEwan to call off the bank’s seven-year legal battle against bankrupt developer Derek Carlyle following his victory over the bank in the Supreme Court.

In a letter to Mr McEwan, Margaret Ferrier MP has said despite legal costs already estimated at £1m, RBS had made no meaningful response in four months to a settlement proposal on Mr Carlyle’s £3m counter-claim for damages following the court’s failure to uphold the bank’s £600,000 claim against him.

“My constituent is therefore left with no option but to try to obtain costly litigation funding in order to take the bank to the Court of Session,” Ms Ferrier says. “This will prolong the matter and cost both parties an increasing amount of money, causing my constituent who has done nothing wrong more stress.”

The MP notes that the Financial Conduct Authority is about to report on allegations that the bank’s now disbanded Global Restructuring Group (GRG) mistreated small firms. She says Mr Carlyle’s case has been handled continuously from 2008 until the present by two bankers formerly in the Edinburgh-based GRG.

“Mr Carlyle alleges that (they) have a ‘personal vendetta’ against him and he believes that as such the bank is not acting in the interests of either party,” Ms Ferrier writes.   

The developer’s former MP Jim Hood, speaking in the Commons in 2010, said “the taxpayer should not be funding personal vendettas by bank personnel”.    His comments came after Mr Carlyle was sequestrated for a £4000 debt  in spite of having a £3m claim against the bank still in progress , and was then subjected to a record 12-year bankruptcy restriction order after a sheriff court received submissions from RBS objecting to the recall of his sequestration.

Mr Carlyle’s solicitor  Cat MacLean of MBM Commercial took the case to the Supreme Court on a no-win no-fee basis, and said in March that he had persevered despite “numerous obstacles put in his way by RBS”.  She has revealed that Restitution, Scotland’s only third party litigation funder set up by private backers and managed by former MBM partner David Calder, will now fund Mr Carlyle’s case.

Ms MacLean said Restitution was not a purely commercial venture as it was keen to fill the funding gap “where there has been a clear wrong perpetrated by a bank”.  Bringing a damages case, even after a Supreme Court victory, would otherwise be impossible due to the upfront costs of specialist experts who were not allowed to operate on the contingent basis of third party funders.

Ms MacLean noted that Scottish Legal Aid Board funding for the Court of Appeal stage had been conditional on Mr Carlyle’s obvious solvency in the event of winning his claim.  Had the same reasonable judgement been used in 2010, the lawyer said, the developer’s sequestration would have been recalled in Hamilton Sheriff Court. Instead at the bank’s instigation he had been subjected to the order which means he cannot be involved in any way in a business for 12 years or borrow more than £500.

She commented: “Our offer to the bank is that we have all been through this for seven years, is it not time to draw a line under it?  It has increasingly seemed to us as the case has gone on that this has been a personal matter between people in GRG and Derek, and I would have thought that it was time to put these personal issues to one side.”

In her letter to Mr McEwan,  Ms Ferrier noted that the RBS chief executive has said he wants the bank “to stand up for its past misdemeanours” adding: “If this is a true reflection of your position I would urge you to intervene personally in this case.”

It was reported last month that Mr McEwan was responding to the FCA’s as yet unpublished findings by drawing up plans for a compensation scheme for former GRG customers.

RBS said on Friday it was not prepared to comment on the allegations about the workings of the former GRG, or against individuals. A source said the bank would be responding to Ms Ferrier on all points raised, and that the bank’s lawyers were waiting for information to be provided by Mr Carlyle’s lawyers.

A spokesman said: “We are taking all possible measures to resolve this matter”.