Judge attacks RBS for pulling plug on customer then suing him for £1.4m

Published on Wednesday 13 January 2010 21:36

THE Royal Bank of Scotland was yesterday criticised for reneging on a deal to lend a property developer £700,000 to build a house beside the Gleneagles Hotel, in a development dubbed "the most exclusive street in Scotland".

Derek Carlyle bought a plot of land in the grounds of Gleneagles Hotel

A judge suggested that the bank had lacked candour in its dealings with Derek Carlyle, an entrepreneur whose dream of creating a luxury residence in the grounds of the Perthshire hotel was dashed when the loan for the development was unexpectedly rejected.

Lord Glennie ruled in favour of Mr Carlyle yesterday after the developer clashed with the taxpayer-funded banking giant in the Court of Session in Edinburgh.

The case sparked a furious reaction from politicians, who accused the bank of not doing enough to help businesses through the economic crisis.

Tavish Scott, the Lib Dem leader, said: "In the normal world, a promise should be honoured, but yet again banks don't seem to operate in the real world.

"If RBS have billions of pounds of taxpayers' money to spend on bankers' bonuses, why didn't they honour their commitment to keep our economy moving by lending to businesses?"

In August 2007, RBS loaned Mr Carlyle, 45, sums of 845,000 and 560,000 so that he could buy a plot of land on Queen's Crescent from the Gleneagles Hotel.

Mr Carlyle had envisaged that the loans would provide the initial capital to build on the prestigious development – which is near the Gleneagles championship golf courses and aims to rival its near neighbour, Caledonian Crescent, as one of Scotland's most expensive addresses.

Mr Carlyle said he had entered into the loan agreements only on the understanding that RBS would make another 700,000 available to develop the plot, once he had bought it.

The initial loans were given to the Glasgow-based businessman before the true extent of the banking crisis had come to light.

After the economy went into meltdown, his request for the 700,000 was rejected. The bank's decision came just two months before RBS was rescued by a multi-billion bailout by the taxpayer, in October 2008.

In his ruling yesterday, Lord Glennie said that a complaint by Mr Carlyle's advocate, Roddy Dunlop, that the Royal Bank had lacked "candour" was "fully justified".

RBS had attempted to sue Mr Carlyle in order to reclaim the 1.4 million they had lent him, but the property developer made a counterclaim, arguing that there had been a breach of the undertaking that he would receive the 700,000.

Mr Carlyle had been dealing with Helen Hutchison, then an assistant commercial director with RBS.

The court heard that he told her: "Please do not give me the money for the purchase unless you are going to give me the funding for development."

Lord Glennie said that the tenor of Ms Hutchison's evidence was that Mr Carlyle had been told by the bank that the 700,000 would be advanced.

Mr Carlyle's solicitor, David Calder, of MBM Commercial, said that he was "delighted" the bank was not "allowed to get away with it".

Mr Carlyle said: "I am delighted that the judge saw the truth of the matter and that the bank will now be held to account for not keeping its promise."

A spokeswoman for RBS said: "As this matter is subject to an ongoing litigation, it would be inappropriate for us to comment."

DREAMS OF 3.5M PROPERTY PROFIT

BY THE time the Ryder Cup comes back to Scotland in 2014, there is little doubt that Queen's Crescent, Gleneagles, will be one of the most sought-after addresses in the country.

Derek Carlyle's plan had been to build a top-of-the-range house beside the immaculate fairways that will host the cream of European and US golf.

He had hoped to then sell his house for around 3.5 million – a transaction that would have helped a property business which has since gone into administration.

He is not the only entrepreneur to have had that dream. Other people who have invested in Queen's Crescent include the English former footballer Jimmy Carter, George Russell of Russell Construction, the taxi tycoon Stevie Malcolm and the venture capitalist Stuart MacAlpine.