A property developer says he has been to hell and back at the hands of Royal Bank of Scotland’s Global Restructuring Group.
Derek Carlyle, of Hamilton, Lanarkshire, fought a long and stressful battle, before eventually winning a landmark legal case against the bank at the Supreme Court.
After his traumatic experience he is backing Financial Mail’s campaign for an independent forum to resolve disputes between banks and their business customers.
Carlyle said he discovered at first-hand just how difficult it is to take a bank through the courts and this shows why a tribunal or ombudsman is so badly needed.
‘The frustration is that my case could have been easily resolved at any time with a commonsense approach,’ he said. ‘However there was – and still is – no arbitration or tribunal mechanism for this.’
His former MP Jim Hood described RBS’s actions over a number of years as ‘a personal vendetta’.
Carlyle said: ‘I was under attack by an extremely powerful organisation, even though I had done nothing wrong.’
His ordeal started in June 2007 when RBS – where he had banked for two decades – agreed to lend him £2.58 million to buy two plots of land adjacent to the Gleneagles golf resort in Perthshire, plus an additional £1.4 million to develop a luxury home on each.
A purchase agreement clause meant that if the land was undeveloped within 12 months then ownership would revert to Gleneagles. So Carlyle needed guaranteed further funding.
He says the bank told him it was ‘all agreed’. However, by March 2008 – with the land bought and paid for – it was clear that RBS did not intend to provide new funding.
In July 2008, it transferred Carlyle’s accounts into Global Restructuring Group, an arm of RBS supposed to help troubled firms.
He said that later that summer GRG sold off one of his properties for less than half its value. In addition, his bank accounts became intermingled and his children’s school fees went unpaid.
Determined to fight the bank, Carlyle found it difficult to find a law firm willing to take him as a client. He finally teamed up with Edinburgh-based MBM Commercial.
In October 2009 he was put into sequestration, the Scottish term for personal bankruptcy, even though he says had a property portfolio worth £8 million and total borrowings of less than £5 million.
RBS sued Carlyle for his failure to repay the sum lent to him. Carlyle counter-sued RBS in Edinburgh’s Court of Session claiming it failed to honour its commitment to provide a second tranche of funds.
In January 2010, Lord Glennie found in his favour, saying RBS should have kept its promise and declaring that it showed a ‘lack of candour’ in its evidence.
In an appeal brought by RBS in July 2013, three Scottish judges found for the bank, but Derek went to the Supreme Court where five judges unanimously ruled in his favour in 2015, reinstating Lord Glennie’s original judgement.
Carlyle set about claiming £3 million in damages, but he was forced to spend large sums on establishing exactly how much money he had lost.
A secret settlement was finally reached earlier this year. In a joint statement, RBS and Carlyle said they were pleased to have reached a ‘satisfactory conclusion.’ The bank declined to comment further.
Carlyle added: ‘My two daughters were 12 and 8 when this started. They’re now 22 and 18. The younger one’s catchphrase when she was nine was “the first rule of life: never trust a bank”.’
The article above is exactly as published in the Mail on Sunday on 28 October 2017. Read it on Mail Online. The version below is unexpurgated version, as filed to the Mail on Sunday on 24 October 2017.
“We will destroy you…” Full version of article on Derek Carlyle by Ian Fraser, as filed to the Mail on Sunday
Derek Carlyle, a Hamilton-based property developer, has been to hell and back at the hands of RBS’s global restructuring group. He was bankrupted, lost his home, smeared in the press, spied on by private investigators, saw three law firms drop him after the bank threatened them, subjected to “scorched earth” litigation tactics and put through Scotland’s longest-ever bankruptcy restriction order.
But, whatever punches the bank landed on him, Derek Carlyle always bounced back. Unlike some other businesspeople who suffered at the restructuring group’s hands, Carlyle kept his cool and ultimately defeated RBS in the UK Supreme Court.
Carlyle’s only crime was that, after the bank failed to honour a financial commitment, he refused to hand over the £586,000 net proceeds from a property sale over which the bank had relinquished its claim. Carlyle’s former MP Jim Hood describes RBS’s actions against Carlyle as “a personal vendetta”.
It started in June 2007 when RBS, where Carlyle had banked for two decades, agreed to lend the developer £2.58m for the purchase of two plots near Gleneagles, Perthshire, plus £1.4m to develop a luxury home on each. Carlyle had made clear that, due to a “buyback” clause in his land purchase agreement which meant that if plots went undeveloped, ownership reverted to Gleneagles, he could only proceed if development funding was guaranteed. The bank told Carlyle that it was “all agreed”.
However by March 2008, with the land bought and paid for, it became clear RBS had no intention of honouring its pledge to advance the second tranche of funding. Without warning, in July 2008, it transferred Carlyle’s accounts into global restructuring group, which Carlyle’s accountant had warned him resembled “the Gestapo”.
All his questions about the development funding were met with silence. Then, in August 2008, GRG started meddling in Carlyle’s affairs, selling off one of his properties for less than half its value and intermingling bank accounts so school fees went unpaid. Carlyle’s relationship manager, who was not part of GRG, told him this was designed “to get his attention”.
The bank then issued an ultimatum, saying “give us £586,000, or the bulk of that, by close of play today as a gesture of goodwill or else chaos will ensue”. Asked what chaos meant, the bank through its lawyers told Carlyle “we will destroy you”.
“I was under attack by an extremely powerful organisation, even though I had done nothing wrong,” said Carlyle. It seemed the only way he could placate RBS was hand over everything he owned.
The bank stepped up its campaign in August 2008, seeking to persuade two law firms to drop Carlyle as a client — threatening one with a £2m lawsuit and referral to the Law Society of Scotland if it dared to represent him. He then found one, Edinburgh-based MBM Commercial, which was willing to take him on.
Even though Carlyle had an £8m property portfolio on which total borrowings were less than £5m — implying an overall loan-to-value ratio of less than 62% — he was put into sequestration (the Scottish term for personal bankruptcy), without his knowledge, in October 2009. This was over a relative piffling debt of £3,000 owed to builders’ merchants Jewson which he had, in fact, settled.
Carlyle did not discover he had been sequestrated until the following month. “That was intended to isolate me, denigrate me and emotionally drain me.”
With MBM’s support and using cash he had managed to keep out of the bank’s grasp, Carlyle counter-sued RBS in Edinburgh’s Court of Session over its failure to honour its commitment. In January 2010, Lord Glennie found in Carlyle’s favour, saying RBS should have kept its promise, and accusing it of a “lack of candour” in its evidence — judge-speak for dishonesty.
As the bank set out to appeal this judgement, Carlyle felt more exposed than ever. He could no longer afford MBM’s fees but convinced the Scottish Legal Aid Board to fund him using a different law firm. However RBS blocked the SLAB’s funding and sought to bully the law firm, once again leaving him without any legal representation. Carlyle said: “It had become a game to them. There was nothing more they could take.”
Then, in April 2012, RBS was instrumental in getting a record 12-year bankruptcy restriction order (BRO) imposed on Carlyle, and sought to further deplete his resources by hiring one of Scotland’s most expensive lawyers, Richard Keen QC, and by dragging out its appeal case.
In May 2013 the legal-aid board discovered Carlyle’s bankruptcy trustee had failed to fully disclose the developer’s assets, revealing he had been solvent all along, and reinstated its funding. However, at an appeal case in July 2013, three Scottish judges found in the bank’s favour, determining that a promise of funding made over the telephone was not a “contract”.
In a statement, RBS’s lawyers Brodies argued this was “a victory for commerciality and common sense.”
Carlyle then sought to have this verdict toppled in the UK Supreme Court, securing the support of MBM Commercial and barrister Roddy Dunlop QC on a no-win no-fee basis, with some backing from litigation funders Restitution. In March 2015, five Supreme Court judges unanimously ruled in Carlyle’s favour, confirming that the appeal judges had been wrong, and reinstating Lord Glennie’s original judgement.
Carlyle was claiming £3m in damages but the bank was in no hurry to compensate him instead forcing him and his backers to spend large sums on forensic accountants, valuers and quantity-surveyors to prove “causation” – meaning what would have happened had the bank honoured its pledge. “RBS seems to have been thinking ‘we may have lost a battle, but we can win the war by starving him of funds’,” said a legal source.
A secret settlement was finally reached in January 2017 about which a joint statement read: “The bank and Mr Carlyle are pleased that they have been able to agree terms of settlement allowing the long-running litigation between them to be brought to a satisfactory conclusion.” The bank declined to comment further.
“RBS have been a model of consistency,” said Carlyle. “My two daughters were 12 and 8 when this started. They’re now 22 and 18, so they’ve grown up with this. The younger one’s catchphrase when was nine was ‘the first rule of life never trust a bank’.”
He added: “What surprises me the most is that, after all this time, the same people are still working there, doing the same things, getting the same salaries – it seems that they’re totally unaccountable.”
Cat MacLean, partner at MBM Commercial, agreed said: “In other cases, we’re still dealing with the same individuals within GRG. It’s really surprising the same people are still in place and still wielding the same amount of power over people’s lives.”
The RBS/NatWest global restructuring group executives who are believed to have been behind the decade-long persecution of Derek Carlyle and his family are said to include Neil Graham, head of GRG in Scotland, as well as GRG and recoveries operatives Frank McCusker and Stephen Brogan.
Lawrence Tomlinson, the former entrepreneur-in-residence at the Business Department who wrote the original GRG report in November 2013 said: “The authorities should look at whether these bankers’ behaviour is incompetent or criminal – either way, whoever allowed the scandal at GRG to occur should not be allowed to work in the sector or enable similar ethos and culture to enter other banking institutions.”
Note: It was the successful outcome of Derek Carlyle’s initial case against the Royal Bank of Scotland, in front of Lord Glennie in the Court of Session, and Labour MP Jim Hood’s impassioned speech about this in the House of Commons, which first alerted me to the unconscionable behaviour of state-rescued NatWest / RBS’s Global Restructuring Group back. I first blogged about this in December 2010.