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RBS sues over Gleneagles £1.5m property dispute

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RBS sues over Gleneagles £1.5m property dispute

A lengthy legal battle involving the Royal Bank of Scotland has finally ended.


RBS had sued property developer William Derek Carlyle for the return of money loaned to him to buy two plots of land from Gleneagles Hotel in 2007.


Carlyle, an established customer of RBS, had received development funding for previous projects and had a solid track record, achieving an average profit margin of 30 per cent.


In March 2007, Mr Carlyle met someone from the bank’s commercial centre to negotiate funding for the project in two parts – the purchase of the land and the building development of a £4 million house.

The Bank agreed to provide him with a bridging loan in order to allow him to purchase land at the renowned Gleneagles Hotel in Perthshire. However, there was a condition of the sale of the land that the plots could not be resold, and were required to be developed by March 2011, failing which the land could be bought back by the hotel in a buy-back clause.

Because of the clause, Mr Carlyle had impressed on the Bank that he would not accept funding for the purchase of the land unless funding for the development would be made available. RBS agreed and released £845,000 and £560,000 in August 2007. The repayment date was stated in the loan agreements to be 12 months from drawdown. 

The repayment date came and went with no repayment by the developer.  On 12 August 2008, the Bank raised an action to recover the £1.45 million loaned funds used to purchase the Gleneagles land.

In the court proceedings Mr Carlyle accepted that he had failed to repay the loan by the repayment date, however he raised an interesting and complex argument that an assurance was given by the bank at the time of the loan agreement that additional funding would be given to allow the development of the plot of land purchased. 

He countersued for £1.5 million claiming he’d bought the land on the promise he would be given more money to build houses on the plots.



He submitted that the assurance was given by the Bank in the knowledge and with the intent that he would act on it be entering into the original loan agreements. The Bank did not provide any additional funding.


The developer’s case was that the assurances given by the Bank regarding additional funding amounted to a collateral warranty of which the Bank was in breach. He sought to counterclaim for damages in excess of the principal sum craved and withheld payments due under the loan agreements pending resolution of his claim for damages. 

The judge in this case held that assurances by the Bank and its employees to the effect that additional funding would be made available amounted to a collateral warranty.  A witness who was an ex-employee of the Bank provided evidence to the effect that assurances had been made orally regarding additional funding which was held to be sufficient by Lord Glennie to constitute the contractual relationship required for a warranty to exist.

Mr Carlyle claimed he lost out on a potential profit of £1.2 million as a result of the bank’s decision and he won the case.


But three appeal judges at the Court of Session have now overturned Lord Glennie’s decision that the bank had breached an obligation to provide funding of £700,000.


A later hearing will be set to decide how much money is to be awarded to the bank, which could be up to £1.5 million plus interest.



By Jason McGee-Abe


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