Supreme Court holds bank bound by verbal promiseBack to News Listing
Royal Bank of Scotland v Carlyle  UKSC 13
Mr. Carlyle was a property developer who, in 2007, wished to acquire and develop a plot of land at Gleneagles. He required bank funding both to purchase the land and to develop a house on it. The seller of the land required construction of the house to be completed by 2011 because of the Ryder Cup being held at Gleneagles in 2014. The seller thus insisted on a ‘buy back’ clause in the missives, in terms of which Mr. Carlyle was obliged to sell the land back to the seller at the price for which he originally purchased it, in the event that the house was not completed by 2011. Mr. Carlye approached RBS for both the purchase and the development. He explained the buy-back clause to RBS and that funding for the purchase alone was of no use to him: he needed a commitment from the bank for both the purchase funding and the development funding. The bank told him it was “all approved”. On the strength of that, Mr Carlyle concluded missives and borrowed the purchase funding. When he came to borrow the development funding, the bank informed him that the development funding would not be provided.
The bank sued for repayment of the purchase loan and Mr. Carlyle counterclaimed for damages for breach of the bank’s promise to lend him the development funding. At first instance, Mr. Carlyle was successful in establishing that a binding promise had been given by the bank. On the bank’s appeal, the Inner House disagreed, holding that the bank had not intended to be bound by the promise. The Supreme Court unanimously allowed Mr. Carlyle’s appeal, holding that the judge at first instance had not been ‘plainly wrong’ in reaching the conclusion he did and therefore it was not open to the Inner House to overturn his decision.
In this all-Axiom case, Roddy Dunlop Q.C. and Alasdair McKenzie appeared for Mr. Carlyle, and Richard Keen Q.C. and Alastair Duncan Q.C. appeared for RBS.
The full judgment can be found at https://www.supremecourt.uk/decided-cases/docs/UKSC_2013_0227_Judgment.pdf
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