Equitable Life’s £700m negligence suit against former auditors Ernst &
Young returns to the High Court again on 19 September, with expert witnesses
from PricewaterhouseCoopers the first to take the stand after the summer break.
The case now enters its final stretch, with the curtain expected to be drawn
on the arguments by Christmas.
David Law and David Parmee, expert witnesses for Equitable, are scheduled to
be cross-examined by E&Y’s QCs over the first fortnight.
The expert witnesses form a crucial part of Equitable’s case, with the
mutual’s allegation that if E&Y had advised it differently in regard to its
financial position, it would have moved to cut bonuses to policyholders.
Equitable’s argument has been held back by the insistence of ex-directors
that it would not have done anything of the sort. Its QCs have already been
forced to explain that directors would have followed expert advice, as outlined
by Law and Parmee.
E&Y argues that it was not negligent in advising as it did, since there
was no one way of accounting for guaranteed annuity rate problems, at issue in
the case, and no agreement that E&Y’s approach was definitely the wrong one.
The Big Four firm also claims that if it had advised differently, Equitable
would not have changed anything as a result.E&Y has so far been remarkably
successful in its defence of its actions, with QCs Mark Hapgood and Jonathan
Gaisman successfully forcing Equitable to drop the majority of its claim.
Just before the summer break, the mutual announced it would not be pursuing
its ‘lost sale’ claim against E&Y, which alleged that E&Y’s advice had
left Equitable without the opportunity to pursue a sale of Equitable’s
back-office functions, which would have shored up its financial position. The
claim was worth £1.3bn.
It is now pursuing only its bonus claim, which says that E&Y’s advice on
guaranteed annuity rates lost the mutual the opportunity to cut bonus rates to
policyholders, which were depleting the investment fund’s capital.
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