Creditors are in ‘cloud cuckoo-land’, says judge

Litigation-funded claimants seeking damages from Moore Stephens were in
‘cloud cuckoo-land’, the judge in the case said this week, over a claim they are
hoping to make for compound interest on their losses.

An attempt to strike out the claim was heard in court this week. The claim
for compound losses could see the firm hit with a $78.9m (£39.7m) charge
included in the $173m being sought.

‘The test for ordinary interest is discretionary, what you are seeking to
claim are special damages. The sums paid out would have gone to reducing the
indebtedness of the company – aren’t we in cloud cuckoo land here?’ Mr Justice
Langley said.

Creditors for Stone & Rolls are pursuing the claim against the mid-tier
firm with the help of IM Litigation Funding. The claim is the most high-profile
claim so far to have been funded by a third party. The use of litigation funding
is controversial, and has worried auditors in particular who are commonly
regarded as deep pockets.

The claim is for £90m, just short of Moore Stephens’ turnover for 2006,

The case was heard on Tuesday, and a decision on whether or not to strike out
the action is expected in the next few weeks.

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