A high court judge is believed to have set a judicial precedent by ruling that nine former non-executive directors at troubled life assurer, Equitable Life, can be sued alongside former executives and former auditors, Ernst & Young.
Link: Equitable Life unlikely to win E&Y battle, say experts
The list of executives facing legal action from Equitable
Equitable claims the former directors ‘were negligent and in breach of duty in not taking legal advice before deciding on the differential terminal bonus practice in each year from 1996 to 1998′.
It also claims that the former directors ‘acted unreasonably in 1999 and 2000 in failing to take appropriate steps to mitigate the risks involved in the Hyman litigation (which Equitable Life lost in the House of Lords) and to ensure that policyholders were aware of those risks’.
The directors deny any wrongdoing and say they are not to blame for the financial crisis which hit Equitable Life in the late 1990s, but Justice Langley, decided that the non-executive directors did have a case to answer.
The non-executive directors will join five former executive directors of Equitable and former auditors Ernst & Young in court, with the case expected to begin in April 2005.
The case is expected to set a precedent for future cases being brought against non-executive directors, and could discourage people from taking on such posts at all.
Since 8 December 1999 Equitable Life, the world’s oldest mutual life assurer, ceased writing new business and sinc then has only operated as a closed fund.
Commenting on the decision, Vanni Treves, chairman of Equitable Life, said today: ‘We are pleased, but not surprised, that Mr Justice Langley agrees that this case should proceed to trial. The Board believes there is a strong claim against the former directors and in the interests of policyholders it has a duty to proceed.’
List of executives facing legal action
*(NED = non-exec)