PracticeAccounting FirmsEquitable writ could spell merger disaster

Equitable writ could spell merger disaster

Experts warn that the decision by Equitable Life to sue Ernst & Young's old and new partnerships is setting a dangerous precedent that may threaten the planned tie-up between Deloitte & Touche and Andersen's UK offices.

Equitable is taking legal action worth £2.6bn in damages against its former auditors’ limited liability partnership, as well as the pre LLP partnership entity.

Industry commentators say if Equitable is successful in its bid to sue both corporate entities, it would signal potentially treacherous times for Deloitte’s plans to take over Andersen’s UK offices.

Clare Canning, lawyer at Barlow, Lyde & Gilbert, who is acting for E&Y, said: ‘There is a problem if as a result of any negligence partners in the former practice are at risk of bankruptcy.

‘If partners involved on a global basis and in other legal jurisdictions, particularly the US, are the seat of litigation the position becomes far more difficult.’

A Deloitte spokeswoman said: ‘We are confident we have insulated ourselves against any damages claims made against Andersen. Under UK partnership law liabilities are already ring-fenced.’

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