KPMG, administrators of collapsed property finance company Lexi Holdings, have abandoned a £50m claim against law firm Pannone before the case reached court.
The claim began in September 2008 when KPMG administrators Brian Green and Richard Fleming filed a High Court claim alleging breach of contract and professional negligence.
KPMG withdrew on Thursday and the case was due to be heard at High Court today. Under the terms of the settlement, each party agreed to pay their own costs.
KPMG claimed that Pannone, which advised Lexi on bridging loans and credit facilities from Barclays Bank between 2001 and 2004, allowed Lexi's former boss Shaid Luqman to misappropriate around £50m of assets and unlawful loans.
Simon Pedley, partner in Pannone's Dispute Resolution Group, said: "The claim, which wrongly called into question our competence and integrity in a quite unjustified attempt to extract significant damages, should never have been brought in the first place.
"We are delighted that the administrators have dropped this baseless claim. Pannone has not paid a single penny in damages and we are pleased that common sense has prevailed."
Pedley added: "We would like to take this opportunity to thank our legal team at Barlow Lyde & Gilbert, Patrick Lawrence QC and insurers Zurich for their excellent advice and support throughout."
Brian Green, joint administrator of Lexi Holdings and partner at KPMG, said: "We can confirm that the administrators of Lexi Holdings have agreed a settlement with Pannone. This was a commercial decision, which will allow us to focus on the ongoing administration.
"The administration of Lexi Holdings was incredibly complex, comprising several areas of litigation including professional negligence claims. Significant sums of money have been received in respect of these other claims, and we continue to realise the remaining assets for the benefit of the creditors."