On appeal from: [2013] CSIH 75

The case concerned a dispute between a property developer and a bank over the provision and purpose of a loan.

Mr Carlyle had applied to Royal Bank of Scotland for a loan in order to purchase a plot of land for development. Mr Carlyle had to complete the construction of a new house on the plot by a specified date and the purchase was subject to a buy-back clause allowing the seller to re-purchase the plot if that construction was not completed on time.

Mr Carlyle met with the bank to discuss the loan and made it clear he would be borrowing the money to build the house as well as to purchase the plot, also drawing attention to the buy-back clause. Mr Carlyle also reiterated this in telephone calls with the bank. On 14 June 2007 the bank told him his proposal was approved. However, in August 2008 the bank told him that it would not provide money for the construction element of the project and raised an action against Mr Carlyle for £1,449,660 plus interest. Mr Carlyle defended the action and brought a counter-claim for his loss of profit.

The issue for the court was whether, on an objective assessment, the bank intended to enter into a legally binding promise to lend Mr Carlyle money not just for the purchase of the plot but also for the construction on it.

The Lord Ordinary declared that the bank was in breach of a collateral warranty to make development funding available to Mr Carlyle. The bank appealed and the Second Division of the Inner House allowed the bank’s reclaiming action. Mr Carlyle appealed to the Supreme Court.

The Supreme Court unanimously allowed Mr Carlyle’s appeal and set aside the interlocutor of the Second Division. The Supreme Court remitted the case to the Court of Session, noting that the appellate court has limited power to reverse the findings of fact of the judge who has heard the evidence. The court went on to state that the Lord Ordinary had a reasonable evidential basis for finding on an objective analysis that the bank made a legally binding promise in the telephone call of 14 June 2007 to provide development finding. Once the Lord Ordinary was satisfied that the bank had the intention to make a legally binding promise, he was entitled and in fact required to look for ways to give effect to that promise.

For judgment, please download: [2015] UKSC 13

For Court’s press summary, please download: Court’s Press Summary

For a non-PDF version of the judgment, please visit: BAILII