The UK Supreme Court has allowed the appeal of a borrower who argued that a phone call from his bank telling him that his loan application was “all approved”  amounted to a commitment to advance funds not only for the purchase of a plot, but also for development costs.

The case provides a clear example of the limits of the appellate courts when it comes to interfering with findings in fact.


The central issue in the appeal was whether, on an objective assessment of the parties’ discussions, the bank intended to enter into a legally binding promise to advance sums in the future to fund both the purchase of the land and the development of it.

In 2007 Mr Carlyle approached the bank seeking loans to purchase a plot of land at Gleneagles which he intended to develop.  If the development was not completed by March 2011 (because of the Ryder Cup) the vendor was entitled to buy back the land for the original purchase price.

Mr Carlyle alleged that because of the buy-back clause, he had sought a commitment from the bank to fund not only the purchase of the plot, but also its development. During a telephone call about funding, a bank employee informed Mr Carlyle “it’s all approved”.  Mr Carlyle understood that to be an unequivocal commitment that the bank would provide funding for the development costs (some £700,000).

Shortly after that conversation the parties signed the paperwork for the provision of funds to purchase of the land, but not for the development costs.  Mr Carlyle drew down the loans and purchased the land. In 2008, the bank made it clear that it would not provide development funding.  It called in the loan and sued for payment of approximately £1.450 million plus interest.  Mr Carlyle defended the claim and counterclaimed for damages for loss of profit on the development.

The decisions of the lower courts

At first instance, the judge found that the bank had given Mr Carlyle an assurance (or “collateral warranty”) that funding for the development would be available, and that he had relied upon that assurance in deciding whether to borrow from the bank to fund the purchase of the land.

The bank appealed successfully.  The Inner House of the Court of Session decided that, looked at objectively, the most that the bank had done was to inform Mr Carlyle of a decision in principle.  It had not created a legal obligation to advance millions of pounds. The written loan agreements between the parties did not provide for lending beyond the loans for the purchase of the land.  Those agreements alone created, defined and expressed the parties’ obligations.  The bank was not under any legal obligation to provide further funding until there was a written loan agreement in relation to that funding.  The promise which Mr Carlyle said the bank had made was not legally effective because essential terms had not been agreed.

Mr Carlyle appealed to the Supreme Court.

The Supreme Court’s judgment: the limits on appellate courts

The Supreme Court unanimously allowed the appeal.  Delivering the Court’s judgment, Lord Hodge (with whom all of the other judges agreed) said that, had he been deciding the case at first instance, he might have shared the view of the Inner House that the bank had only communicated to Mr Carlyle a decision in principle to provide funding for the development, and that the parties required to take further steps to create a legally binding obligation on the bank to provide that funding.

However, he emphasised the limited power of an appellate court to interfere with findings of fact made by the judge who has heard the evidence.  An appellate court had to defer to those findings of fact unless satisfied that the judge at first instance was “plainly wrong.’ 

The Inner House had not faced up to the restricted role of an appellate court on questions of fact.  It did not have an adequate basis for overturning the judge’s findings of fact:

  • There was a reasonable basis in the evidence for the judge’s finding that, on an objective analysis, the bank made a legally binding promise to provide funding for the development when it told Mr Carlyle “it’s all approved”. 
  • Mr Carlyle’s and the bank’s shared knowledge that that commitment would eventually be superseded by more detailed loan agreements in relation to both the purchase and development of the land did not prevent the earlier commitment from having legally binding effect.
  • That was so notwithstanding the “relatively ill-defined nature of the obligation” to provide the development funding. 

In addition, the fact that a previous loan transaction between Mr Carlyle and the bank had been conducted differently was not relevant, as the previous transaction had not involved a buy-back clause.


The case is highly fact specific. However, it serves as a reminder of how easily a binding obligation may arise and the importance of ensuring that parties clearly express whether or not they intend to be legally bound by what they say.

The Supreme Court’s judgment is also a stark reminder that an appellate court will be slow to interfere with the findings of fact of a judge at first instance, even where it might have decided differently.