£90m suit against auditors dismissed

A controversial legal action in which hedge-fund investors have been bankrolling a fraud lawsuit against a firm of auditors has been thrown out.

City accountant Moore Stephens has won its appeal to strike out a £90million lawsuit filed by the liquidators of bust company Stone & Rolls. It has been followed in the legal profession as a test case over whether third-party funding of such actions is permissible.

The action was being financed by IM Litigation Funding, which had raised money from hedge funds and other investors.

Three judges at the Court of Appeal ruled the case could not be brought against Moore Stephens as Stone & Rolls was not the victim of the fraud but the perpetrator.

Though the judges refused an application to appeal, the liquidators may go to the Law Lords.