Equitable unveils new £100m claim
Mutual is now 'clutching at straws,' says E&Y
Equitable Life is attempting to claim another £100m from Ernst & Young,
its former auditor, Accountancy Age can reveal.
The claim, which was outlined in court yesterday, was immediately denounced
by E&Y as ‘clutching at straws.’ It comes halfway through the court
proceedings of an action that was launched four years ago.
The claim concerns the charging of surrender penalties to policyholders in
the late 1990s.
Taking as its basis the idea that E&Y was negligent in not advising
Equitable of the need for greater provisions for guaranteed annuity rates,
the grounds for the mutual’s other claims, it further alleges that directors
would have increased surrender penalties on some of its policies to shore up its
financial position in the late 1990s.
The claim has not as yet been formally outlined. Though raised in court
yesterday, questions about the valuation, currently £100m, have been raised.
The parties are due to discuss the terms of the valuation amongst other
issues with expert witnesses over the weekend, amidst uncertainty about how to
value the potential loss from the lower surrender penalties in place.
It is not clear how many people might have cashed in policies with different
surrender penalties in place, and how that loss might have affected the
financial position of the society.
The amendment may not be allowed on the grounds that it opens up so many
issues that there will not be time to decide them, it is thought.
Mr Justice Langley has given the parties until close of play Monday to come
up with firmer details of the claim, and defences against it.
In a statement, E&Y said: ‘The last ten weeks in Court have only
reinforced the belief of Ernst & Young, and most impartial observers of the
case, that the claim by Equitable Life against us is totally without merit.
‘The fact that four years into this process and nearly half way through the
current proceedings, Equitable has been forced to attempt to amend its claim for
the sixth time, can only be seen as clutching at straws. More policyholders’
money will be poured down the drain.’