Equitable Life’s QC today finally launched his client’s £3.75bn damages claim in the High Court for alleged negligence by its former auditors and directors.
In a massive legal action involving some 126,000 pages of evidence and set to take up to seven months of court time, finishing after Christmas, Equitable Life is claiming £2.05bn from former auditors Ernst & Young , and £1.7bn from 15 former directors.
Launching the case today, Ian Milligan QC for Equitable told judge Mr Justice Langley: ‘There are an enormous number of issues of fact and law which need to be resolved. Many of these issues can only be resolved in the light of oral evidence.’
He is expected to take at least two days opening the case before the judge, and immediately began reading from the regulations of Britain’s oldest mutual society, and other documents.
Equitable’s claim against Ernst & Young is that the accounts were deficient in 1997-1999, because they did not include proper provisions for guaranteed annuity rates, and the auditors were negligent and in breach of duty in not reporting that.
It is also alleged they were negligent in failing to include a warning in the accounts in 1999 and 2000 of the risk of losing a legal battle over guaranteed annuity rates in the House of Lords in 2000.
There is also a ‘lost chance of sale’ claim because Equitable says if it had known of the true position it would have attempted to sell the company in 1998.
The other half of the claim, against the former directors who were present in court today, is that they were negligent and in breach of duty in failing to take legal advice before deciding on the differential bonus policy from 1996-1998. Equitable also claims that they acted unreasonably in 1999 and 2000 in failing to take steps to mitigate the financial risk of losing the court action over guaranteed annuity rates, and to inform policyholders of the risk.
Ernst & Young, which failed to strike out the claim back in July 2003, has always maintained that Equitable’s claim is misconceived and entirely without merit. It says there is no evidence to support the claim against it.
In written arguments before the court, lawyers for Ernst & Young said: ‘This is a case where the claim brought suffers from so many defects that it is hard to know which of them deserves pride of place.
‘The claimant’s claim in negligence against Ernst & Young depends in essence on proving a single narrow point in relation to provisioning. The claimant assumes the burden of establishing that there was only one reasonable way of provisioning for guaranteed annuity rate (GAR) options in the audit years 1997 to 1999 – its way.
‘As often with theological assertions, the objection is no so much to the truth asserted, but to the insistence that it is an exclusive truth; that whoever disagrees is a heretic who must bow the knee or perish at the stake.
‘Ernst & Young accept that the claimant’s now suggested way of provisioning is an available way of having provisioned for GARs, but they do not accept that it was the only acceptable way. Ernst & Young suggest that a martinet-like approach such as the claimant’s is unwarranted.’
The hearing continues.
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