'Cuckoo' case may be an omen

All hail Moore Stephens and its recent High Court victory in the Stone &
Rolls case.

The case was notable for being the first in which a claimant, audit client
Stone & Rolls, brought a case using third party funding ­ litigation funding
­ against a UK firm.

But can auditors really rest easy? According to some, the case merely served
to expose litigation funding ­ little known in the UK ­ to a bigger audience.

Others say it will only deter opportunists looking to make a quick buck,
leaving serious players to back cases with real merit. With liability caps still
the talk of the town, though, the possibility of getting dragged to court by
clients, backed by a third party with deep pockets, should still send chills
down the spines of auditors.

Fortunately for Moore Stephens, the suit was adjudged to be incredibly shaky.

Beaks said the suit was barred by public policy because it was based on the
fact that Stone & Rolls had committed a fraud and was trying to punish Moore
Stephens for
not flagging it up.

Earlier in the case, a judge famously described Stone & Rolls as being in
‘cloud cuckoo land’ for trying to tack compound interest on the claim.

Whatever the particulars, it represents a massive turnaround for Moore
Stephens, which had faced paying out £90m for allegedly being negligent.

But when a claim with more merit emerges, who’s to say that an accountancy
firm won’t find itself embroiled in a case bankrolled by a disinterested third
party?

That said, there’s still an outside chance that the House of Lords might see
some merit in the action and allow Stone & Rolls leave to appeal, so Moore
Stephens isn’t counting its chickens just yet.

David Jetuah is is a reporter on Accountancy Age