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Getting Over the Hedge

30 March 2015

Dunvale Investments –v- Burness Paull

On 26 March 2015 the Court of Session issued its decision in a £2.7m professional negligence action by Dunvale Investments Ltd –v- Burness Paull, solicitors (“Burness”). The court found that Burness was negligent in failing to advise Dunvale of the consequences of not putting in place a security which was referred to in Dunvale’s facility agreement with its bank (RBS). Without raising the matter with Dunvale, Burness wrongly assumed that neither Dunvale nor RBS actually intended for that security to be taken at that stage. Burness negligently failed to warn Dunvale of the fact that the absence of the security would materially impact upon Dunvale’s loan to value covenant.   The absence of the security led to Dunvale breaching the covenant and enabled RBS to force it to enter new hedging arrangements. Although the covenant would have been breached at a later date even with the security in place, the drop in interest rates, which followed the global credit crunch, meant that the hedge costs would have been much lower at that date. Dunvale was awarded all of those increased costs amounting to just over £2.7m.

Richard Keen QC and Gavin Walker, both of Axiom, represented Dunvale. Alastair Clark QC and Paul O’Brien, also both of Axiom, represented Burness.