Equitable pressed to clarify case

The judge in Equitable’s lawsuit with Ernst & Young has pressed the
mutual to clarify its case against the Big Four firm.

On the last day of the trial before the summer break, Mr Justice Langley
asked Equitable QC Iain Milligan to clarify ‘what targets are still seriously
being aimed at?’

It also emerged that the bonus claim against Ernst & Young now has an
upper limit of just £608m, down from £700m. Equitable’s original claims against
its former auditor amounted to £2.6bn.

Equitable was under attack from all sides at the High Court, with defendants
all stressing that key aspects of Equitable’s claim had not been put to the
factual witnesses.

All the factual witnesses have now appeared in the case, leaving only experts
to come when the case resumes on September 19.

E&Y pointed to Equitable’s press release earlier this week, in which
Equitable chairman Vanni Treves said part of the claim known as the lost sale
claim – was being dropped on the basis that ‘it appears from the evidence given
by the former directors that, although the old board should have sold the
business to raise capital, they would not have done so.’

E&Y contend that that punctures the other substantial claim made by its
former client – known as the bonus claim – as well, since directors did not
indicate that they would have cut bonuses.

What the directors did and did not say, and whether in fact they were even
asked key questions about the case facing them and E&Y, is what is at issue.

Milligan indicated that Equitable’s case against E&Y depended on Chris
Headdon, the society’s former chief executive, to a large extent.

Directors, Milligan suggested, would have gone along with Headdon’s advice in
the matter of bonus cuts.

The cuts would in turn have depended on policyholders’ reasonable
expectations(PRE), to be explored with the expert witnesses.

Milligan said: ‘What was put to the witnesses was that they would have been
willing to adopt growth cuts which were consistent with PRE, and which did not
have a significant impact on their competitive position, and it is going to be a
matter for expert evidence as to whether Mr Arnold’s cuts would have infringed
either of these two limits.’

The Judge replied that he had read this point in one of Equitable’s letters,
noting in the margin: ‘What does that mean?’

Equitable says it is for the experts to clarify later.

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