Angry shareholders who invested money in failed discount store, Harris Scarfe, are set to take legal action.

Law firm, Duncan Basheer Hannon, is launching a "class action" on behalf of the shareholders against the store's former directors and auditors.

Harris Scarfe went into voluntary administration in April with accumulated debts of $160m.

Around 1,000 shareholders have already contacted the law firm and this is expected to rise to 2,000 - 3,000. More than 10,000 company shareholders are not expected to recover any of their money.

Investment bank, Hindal Corporate, is hopeful Harris Scarfe, Australia's third largest retailer, will be sold in whole. A spokesman said work was on schedule to sell the 35 stores by the end of the month.