If Equitable had pursued a claim for damages from Ernst & Young for audit negligence before 1997, it would have been ‘the proverbial thirteenth chime of the clock,’ a court has heard.
Opening the second day of Ernst & Young’s defence against a £2bn lawsuit from Equitable Life at the High Court, Jonathan Gaisman QC, defending, told the court that Equitable’s neglicance claims for audits conducted by E&Y in the late 1990s made little sense.
Equitable is suing E&Y for professional negligence in the conduct of audits from 1997 onwards.
Gaisman said that Equitable had not pursued a claim before 1997 becuase it would have been ‘the proverbial thirteenth chime of the clock which falsifies the previous 12.’
There was no difference, he said, in the requirement for Guaranteed Annuity Rate provisioning in either 1996 or 1997. In neither case was there any need for such provisioning.
Equitable’s case is that E&Y should have advised it of the need to pay out more to GAR policyholders in the late 1990s as a result of a changing interest rate environment.
He questioned why Equitable should claim E&Y should have addressed the issue in 1997, when there was no liability either.
The GAR issue only arose in 1998, when E&Y did address the issue, and looked at provisioning for the extra GAR liabilities, Gaisman said.
It did not include the provisions Equitable now says it should have done, of £1.6bn, because there was no commercial need at the time.
Experts disagreed on the best way to provide for GAR liabilities (which were emerging as an issue only then), so E&Y can not be found guilty of professional negligence in their strategy, he said.
The case continues.
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