Deloitte abandoned its 12-year lawsuit against the Bank of England on behalf of some 6,000 creditors of the collapsed Bank of Credit & Commerce International, after a secret court order to discontinue the action as it was no longer in the best interests of the creditors to pursue it any further.
Deloitte, suing as English liquidator of BCCI, had approached the High Court for guidance on the future conduct of the case as Peter Cooke, former head of banking supervision at the Bank was completing 20 days of cross-examination.
After the ruling, which the Bank says it knew nothing about, Deloitte approached it for a settlement, but was rebuffed, as it had been on earlier occasions.
The case, the first ever brought against the Bank, centred on the accusation that the Bank, responsible at the time for supervising all banks operating in Britain, left "an unsupervised monster on the loose", with the result that its customers lost their money.
Most of these were Asian businessmen, but they also included a number of local councils, including the Western Isles Council, which lost £24 million.
Together their deposits amounted to £550 million - the amount claimed by Deloitte, raised by interest over the year to £850 million.
Deloitte claimed yesterday that despite the failure of its lawsuit the liquidation had been an "overall success". English creditors have already been paid 75p in the £1 of the money they lost and Deloitte said they would receive another 6p in December.
That would amount to some $6 billion - £3.4 billion at today's exchange rate - far more that was first expected.
The Bank of England is going to court next Friday to demand full payment of its legal costs of nearly £75 million, much of it spent assembling documentary evidence. Deloitte put its own costs at £38 million.
Lawyers for Deloitte had alleged the Bank knowingly failed to protect depositors from the world's biggest bank fraud, as a result of which BCCI collapsed in 1991 owing more than $16 billion.
As the Bank is legally protected from negligence claims, Deloitte pursued the stronger claim that 22 individual officials were guilty of " misfeasance" - that they acted dishonestly or in bad faith, an accusation requiring a very high standard of proof.
This was bitterly resented at the Bank, which rejected all moves for a settlement because it was determined to clear the names of its staff and former staff.
Mervyn King, the Bank's governor who was in court yesterday, said afterwards: "There has never been a shred of evidence to support these disgraceful allegations, and the case has collapsed as we always expected it would."
In the event only Mr Cooke and Brian Quinn, his predecessor as head of banking supervision, took the witness stand.
Mr Quinn was crossexamined by Deloitte's barristers for 28 days over seven weeks.
They originally wanted a 48-day cross-examination, but the Bank objected successfully.
The juryless trial, which began in January, 2004, made English legal history for the two longest opening speeches - 119 days for the Bank and 80 days for Deloitte.
If the trial had continued witnesses could have included three past governors of the Bank Eddie George, Robin Leigh-Pemberton and Gordon Richardson, giving evidence of events stretching back to the 1970s.
"If the case were to continue it could last for several more years, allowing for appeals, and involve further enormous costs," Deloitte said in a statement.
The case had already run for far longer, with far greater costs, than the accountants had expected. Toby Graham, litigation partner at law firm Taylor Wessing, said the Bank stands a good chance of recouping its costs.
"I think the Bank of England has been totally vindicated by this. They took a robust stance on this right from the word go...Deloitte took a huge gamble and it hasn't paid off.
They did not have the evidence to prove their case and were totally reliant on evidence from the Bank of England."
Founded in 1972 by Pakistani banker Agha Hassan Abedi, BCCI grew from a small, Asian bank to an empire spanning 69 countries with $20 billion of assets.
Even before it collapsed BCCI was alleged to have had links with drug barons and dictators, its executives had been 'stung' by US regulators in an elaborate "wedding party" set-up in Florida and it was accused by auditors of widespread fraud. The CIA admitted in August, 1991, that it had used BCCI "as a way to move money".
Its problems escalated and BCCI was closed in 1991 by regulators in a worldwide swoop, partly organised by the Bank, after they discovered that BCCI had disguised losses and was insolvent.
Its collapse left more than 6,500 depositors unable to withdraw their money.
Deloitte's claim rested an the assertion that the Bank granted BCCI a licence to operate in the City of London in 1980, but did little in the way of active supervision because BCCI was formally registered in Luxembourg even though its head office was in London.
The case had become so complex that a stack of files five feet high - described by lawyers as "the Berlin Wall" - grew up between the two legal teams in the courtroom.
The courtroom became home to about 20 lawyers, evenly split from the two sides and scattered among dozens of computer screens, six large-screen monitors and, at a conservative estimate, at least 2,000 thick files covering most available wall space.
