Cash crisis could end split capital investors' legal case

Potential legal action by investors caught up in the split capital investment trust debacle is in danger of falling apart.

Investors who lost hundreds of millions when many investment vehicles, often sold as low or no risk, collapsed are seeking compensation from fund managers and other City professions.

But those investors represented by solicitors Leon Kaye have been hit by a refusal from Aberdeen Asset Management to launch a test case. Without substantial funds, court action could prove too costly. Aberdeen does not believe there is legal case to answer.

Leon Kaye, which represents around 1,000 investors, is meeting with its counsel to discuss the matter.

A source confirmed: "We're having another meeting with our barrister next week. We have got to decide on the way forward, but I can admit that the problem is money and that's what Aberdeen is counting on. Unless something changes I don't immediately know the way forward."

It is understood the firm still believes it has a strong case, and funding is the sole issue. Class Law, a rival firm which is not working in conjunction with Leon Kaye, is confident its action will go to court. Partner Howard Epstein said writs would be issued "in time".

Class Law had originally said it aimed to serve the writs by the end of 2002. It intends to sue a total of 150 brokers, fund managers and company directors.

Leon Kaye is targeting only the fund managers, and wanted to use Aberdeen as a sample case for legal actions against others, including the manager of the BFS Income & Growth Trust, Dartmoor Investment Trust and the Framlington Split Capital Trust.