Carlyle v Royal Bank of Scotland Plc (Scotland)
| Jurisdiction | Scotland |
| Judge | Lord Hodge,Lord Neuberger,Lord Kerr,Lord Clarke,Lord Reed |
| Judgment Date | 11 March 2015 |
| Neutral Citation | [2015] UKSC 13 |
| Court | Supreme Court (Scotland) |
| Docket Number | No 6 |
| Date | 11 March 2015 |
[2015] UKSC 13
Lord Neuberger, President
Lord Kerr
Lord Clarke
Lord Reed
Lord Hodge
Appellant
Roddy Dunlop QC Alasdair N McKenzie
(Instructed by MBM Commercial LLP)
Respondent
Richard Keen QC Alastair Duncan QC
(Instructed by Brodies LLP)
Heard on 20 November 2014
(with whom Lord Neuberger, Lord Kerr, Lord ClarkeandLord Reedagree)
This appeal is concerned with oral discussions between a property developer and his bank about funding a development at Gleneagles, Perthshire. The central issue in the case, which went to proof before the Lord Ordinary, Lord Glennie, in 2009, was whether, on an objective assessment of what the parties said to each other, the bank intended to enter into a legally binding promise to advance sums in the future to fund not only the purchase of two development plots but also the construction of a house on each plot.
In considering that issue, because the matter is raised on appeal, the court must have regard to the limited power of an appellate court to reverse the findings of fact of the judge who has heard the evidence. Those limits are well known. The House of Lords discussed them in Thomas v Thomas 1947 SC (HL) 45. More recently this court has reiterated those limits in McGraddie v McGraddie 2014 SC (UKSC) 12 and Henderson v Foxworth Investments Ltd 2014 SC (UKSC) 203; [2014] 1 WLR 2600 and the Judicial Committee of the Privy Council has made similar comments in Beacon Insurance Company Limited v Maharaj Bookstore Ltd [2014] UKPC 21, at paras 11–17. Those limits apply equally in this court as in other appellate courts.
The Royal Bank of Scotland Plc ("the bank") lent Mr Carlyle funds to purchase a development plot but later refused to fund its development. The bank raised an action against him for payment of £1,449,660 and interest on 14 August 2008. Mr Carlyle defended the action and counterclaimed for damages, including for alleged lost profit on the development, in a sum that exceeded what the bank claimed from him. Mr Carlyle depended on bank finance for the proposed development. He alleged that because, as the bank knew, the vendor of the plots of land would insist upon a right to buy back the plots if they were not promptly developed, he had sought and obtained an unequivocal commitment from the bank to fund not only the purchase of the plots but also their development. Having received that commitment, he entered into missives to purchase a plot but the bank, in breach of its promise, refused to fund its development.
The Lord Ordinary by order dated 6 October 2009 allowed a preliminary proof before answer of the issues (a) whether or not a collateral warranty was given to Mr Carlyle as averred on Record and (b) whether the bank was personally barred from seeking payment of the sums which it claimed. The latter issue is no longer live.
Mr Carlyle was ordered to lead at the proof. He gave evidence himself and called as witnesses his accountant, Colin Hamilton, and the bank's principal representative in the transaction, Helen Hutchison, who was the assistant director of commercial banking at its Motherwell branch. The bank chose to lead no evidence although its employees, Rebecca Young and Mark McClymont, were also involved in the transaction. In an interlocutor dated 10 May 2010 the Lord Ordinary declared that the bank was in breach of "a collateral warranty in terms of which [it] bound [itself] to make development funding of £700,000 sterling available to [Mr Carlyle] by way of loan for the purposes of the development of plot 5, Queen's Crescent, Gleneagles Hotel, Perthshire".
The bank appealed that decision but the hearing of the reclaiming motion was delayed by the difficulties which Mr Carlyle faced in obtaining legal representation after his estates were sequestrated on 2 November 2009 and he failed to obtain the recall of his sequestration. By interlocutor dated 12 September 2013 the Second Division of the Inner House allowed the bank's reclaiming motion, recalled the Lord Ordinary's interlocutor and continued the cause to ascertain the terms of the decree for payment to be pronounced in favour of the bank. Mr Carlyle appeals to this court.
As the Lord Ordinary's findings of primary fact were not in dispute, I will summarise them in order to set out the circumstances.
Mr Carlyle was a property developer and had enjoyed the support of the bank since 1991. In 2005 he set up a property development company, Carlyco Limited ("Carlyco") to purchase and develop a site at Stewartfield Grove, East Kilbride.
In February 2007, Mr Carlyle learned that Gleneagles Hotel proposed to sell two plots of ground at Gleneagles, Perthshire. He proposed to purchase and develop one plot (plot 5) and that Carlyco should purchase and develop the other (plot 2). He and Colin Hamilton prepared a presentation for the bank. On 26 March 2007 they met Ms Hutchison, who represented commercial banking, and Ms Young, who represented private banking. Their proposal was that plot 2 would be purchased for £975,000 and plot 5 for £1,250,000 and that the build cost of each plot would be £700,000. They discussed the requirement in the sales brochure that the dwelling house on each plot had to be wind and watertight and all external finishes and hard landscaping completed by 31 March 2011 so that there would not be half-completed houses when the Ryder Cup was staged at Gleneagles golf course. The vendor proposed to secure this requirement by a buy-back clause which, in the event of non-completion on that date, entitled it to re-purchase the site at the original purchase price. The purchaser was not allowed to sell the plots to others unless developed. The buy-back clause was discussed and the note of the meeting made it clear that Mr Carlyle "specifically and clearly stated" that, if the bank was to provide funds for the deposits on the plots, "then the balance [of the purchase price] for the plots and the Build/Development Costs must be provided as they needed to be built". Mr Carlyle asked for "a full commitment on the proposal or nothing". The note recorded that Ms Hutchison and Ms Young understood this, were enthusiastic about the proposal and would push for its approval by the bank's head office. Both Mr Carlyle and Mr Hamilton gave evidence confirming this account of the meeting. Mr Carlyle explained that the funding would be in three stages: deposit, land purchase, and build costs. He gave evidence that he asked the bank not to give him money for the land unless it also gave him money to build. He explained that Ms Hutchison said that the bank would have an appetite for the project, that it would involve both commercial and private banking with the former taking the lead, that she would refer it to head office and that she was aiming to get 100% funding for the project.
On 28 March 2007, Mr Carlyle and Carlyco submitted qualified offers to purchase the plots. Mr Carlyle then worked on design options over several weeks during which he had telephone conversations with Ms Hutchison or Ms Young. On 24 April 2007 Mr Carlyle emailed Ms Hutchison to inform her that the vendor would accept his offers at £995,000 for plot 2 and £1,350,000 for plot 5. He required a commitment in principle as the vendor was pressing for completion of the missives and the payment of a 5% deposit. Towards the end of May Ms Hutchison and Ms Young advised that they could advance the deposit moneys in early June. Mr Carlyle informed Ms Young in a telephone call that the deposit money was of no use unless he also got the purchase money and the development funding and that he needed a commitment to the whole proposal. He gave evidence that Ms Young responded that the bank knew that he had made that clear from the outset. When he spoke on the telephone with Ms Hutchison on 5 June 2007 he again made clear his position that the bank should not give the deposit money unless everything was agreed and that she replied that the bank would not give money only for the land as that would not make sense for it, especially with the buy-back clause. He informed her that he would not pay even the deposit until the bank confirmed that it would provide the development funding.
The crucial finding of fact relates to a telephone call on 14 June 2007. In para 15 of his opinion the Lord Ordinary stated:
"On 14 June 2007 Ms Hutchison telephoned [Mr Carlyle]. [He] described her manner as enthusiastic. … she said: 'You'll be pleased to know it's all approved, Edinburgh are going for it for both houses'. … On the strength of this conversation, he instructed Fiona Bryson, his and Carlyco's solicitor, to pay the deposits on the plots. At that point he became committed to the project."
Counsel, clarifying that finding, informed this court that the deposits were paid on 14 June 2007, which was before the conclusion of the contract to purchase plot 5.
The Lord Ordinary also recorded Ms Hutchison's evidence to the effect that Mr Carlyle was told on various occasions that funding for the development would be advanced. She knew of the buy-back clause and was aware that the bank would need to fund the development costs. She recalled Mr Carlyle saying to her that the bank should not give any funding unless it agreed to fund the development costs. She thought that she had spoken only of approval of funding the purchase of the plots in the telephone conversation of 14 June 2007. Her position was that the bank had "an appetite" to fund the development but that the level of funding had not been discussed. She stated that there was a general understanding that there would be development funding at some level, but that the...
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