SJ BERWIN is preparing to launch a legal action on behalf of investors in collapsed merchant bank Barings which could in part be defended by Barings administrators.

Slaughter and May, the administrators' main lawyers, may be asked to defend the action. However, Ashurst Morris Crisp, brought in by Slaughters because of potential conflicts arising from Slaughters' previous role as Barings' advisers, may end up handling the case.

SJ Berwin's client is the Barings Perpetual Noteholders Action Group, which invested in Barings holding companies that left after Dutch bank ING took over Barings' businesses.

The action group intends to sue two Barings companies in administration – Barings plc and Baring Brothers – together with former executives and City financial advisers BZW Securities, Hoare Govett Securities and Cazenove & Co.

Stephenson Harwood fraud partner Tony Woodcock is advising Barings directors. The three finance houses will instruct their own lawyers.

The action would relate to alleged defects in a Barings bond prospectus.

Any action against companies in administration requires leave from the court, which SJ Berwin will seek. The action will be an investors' compensation claim under the Financial Services Act.

The bondholders' action would benefit from the success of the administrators' action against Barings auditors Coopers & Lybrand and Deloitte Touche, handled by Slaughters.

SJ Berwin senior partner David Harrel said the action was likely to involve all hundred or so plaintiffs on one writ, although conduct of the action would be guided by interlocutory hearings.