Thousands of former MG Rover employees have seen their hopes of a payout virtually wiped out by a High Court decision.

The High Court has refused an application by lawyers for Phoenix Venture Holdings seeking to prove banking giant HBOS should not have withdrawn £12 million pledged to 6,500 redundant Longbridge workers.

PVH has vowed to carry on the legal battle – more than seven years on from the original pledge by chairman John Towers of a £10 million to £30 million windfall.

However, the judgement by Mr Recorder Baister in the High Court Chancery Division prolongs the wait by thousands of former MG Rover workers thrown out of work in April 2005 when the car firm collapsed with debts of more than £1 billion.

Lawyers for PVH had argued for the disclosure of financial information relating to the disposal of 8,000 cars by HBOS which could have helped raise funds for ex-workers.

Days after the collapse of MG Rover, then chairman John Towers said: “Phoenix Venture Holdings has significant assets totalling around £50 million, but we believe a reasonable estimate of its present value is between £10 million and £30 million.”

MG Rover Trust Fund trustee Carl Chinn said: “Instead of spending all this money on court cases, the Phoenix Four should now do the honourable thing and put £1 million each of their own money into the Employee Trust Fund.”

A former senior Rover employee said: “This judgement is disappointing. This was an opportunity to shine a light into the workings of HBOS who seem to be the only people who have profited from the collapse of MG Rover. As it is documents which might have shed some light on HBOS’s behaviour will remain secret. We have to ask why HBOS and PWC seem so keen to keep them secret.”

A spokesman for the former PVH directors said: “Although the former directors are not directly involved in this process, we continue to support every effort to maximise the value of the Employee Trust Fund, and these efforts continue.”