Carlyle (Scotland) v Royal Bank of Scotland Plc

Factual and Procedural Background

Company A had financed Defendant’s property developments since 1991. In 2007 Defendant wished to buy two plots at Gleneagles, Perthshire (plot 5 personally and plot 2 through his company) and repeatedly told Company A that he would not proceed unless it funded both purchase and construction because the vendor retained a “buy-back” right if the houses were not completed by March 2011.

On 14 June 2007 a senior banker (Ms Hutchison) telephoned Defendant stating that “it’s all approved, Edinburgh are going for it for both houses.” Acting on that call Defendant instructed his solicitor to pay the deposits and later signed two written loan agreements totalling £1.405 million covering the purchase price of plot 5. Company A subsequently refused to advance the £700,000 build costs, called in the purchase loans and sued for £1.449 million plus interest. Defendant counter-claimed for damages alleging breach of a promise (described in pleadings as a “collateral warranty”) to provide development funding.

Judge Glennie, after a proof in 2009–2010, found that Company A had made a binding unilateral promise to lend up to £700,000 for construction and was in breach. The Inner House (Second Division) reversed that decision in 2013, holding that no enforceable promise had been made and that banking practice required written terms. Defendant appealed to the Supreme Court.

Legal Issues Presented

1. Whether, on an objective assessment of the 14 June 2007 telephone call in its context, Company A intended to enter a legally binding promise to fund the construction of a house on plot 5.
2. The extent to which an appellate court may overturn a trial judge’s findings of fact in light of the well-established limits on appellate intervention.
3. Whether the alleged promise was too uncertain—lacking specification of interest, repayment date, securities, etc.—to be legally enforceable.

Arguments of the Parties

Appellant’s Arguments (Defendant)

• Judge Glennie’s primary findings were unchallenged and showed a clear, binding promise to provide development finance.
• The presence of later written loan agreements for the purchase price did not negate the earlier promise; they merely superseded the purchase-price element.
• Scots law does not require consideration; a unilateral undertaking is enforceable without detailed loan terms if intention is clear.

Appellee’s Arguments (Company A)

• Judge Glennie misinterpreted the evidence; the call of 14 June 2007 conveyed only an “agreement in principle,” not a binding commitment.
• Essential loan terms (maximum draw-down, interest, repayment, securities) were never agreed, making any alleged promise void for uncertainty.
• Given Defendant’s unknown overall indebtedness, the bank could not have fixed the quantum of any development loan on 14 June 2007.

Table of Precedents Cited

Court's Reasoning and Analysis

Judge Hodge, delivering the opinion of the Supreme Court, began by restating the stringent limits on appellate interference with primary findings of fact. He observed that although, had he been the trial judge, he might have shared the Inner House’s view, the appellate court’s task is not to retry the case.

The Supreme Court identified three grounds on which the Inner House had overturned Judge Glennie and addressed each:

1. Character of the 14 June 2007 call: Judge Glennie was entitled to find that a binding promise was made, given Defendant’s repeated insistence on full funding and Company A’s knowledge of the buy-back clause.
2. Subsequent documentation: Later indicative terms and written purchase-price loans did not negate the earlier promise; they merely formalised part of the overall funding and could coexist with an earlier unilateral undertaking for development funding.
3. Alleged uncertainty: Relying on Neilson v Stewart, the Court held that Scots law recognises enforceable loan promises without express terms on interest or repayment when the parties’ intention is clear. Judge Glennie had been entitled to imply reasonable terms.

The Court concluded that the Inner House had engaged in its own fact-finding exercise rather than demonstrating that the trial judge was “plainly wrong.” Accordingly, the appellate intervention was impermissible.

Holding and Implications

Holding: The appeal is allowed; the Inner House interlocutors of 12 September 2013 and 3 October 2013 are set aside, and the matter is remitted to a Commercial Judge of the Court of Session for further procedure.

Implications: The decision reinforces the high threshold for overturning first-instance factual findings in Scots civil appeals and confirms that, in Scots law, a bank may bind itself by an oral promise to advance funds even where detailed loan documents are contemplated later. No new precedent is created, but the ruling underscores appellate restraint and the efficacy of unilateral undertakings.