Court blocks £2.6bn Equitable case

12 April 2012

EQUITABLE Life's attempt to sue its former auditors for up to £2.6bn has been thrown out the High Court. Dubbing the case 'fanciful', Justice Langley dismissed two of the three claims against Ernst & Young and said a third had so many basic flaws it should be re-submitted.

Equitable had argued that E&Y failed to warn it of the potentially massive cost of paying out guaranteed pensions. But the judge said Equitable's case was 'fanciful in approach and demand'.

The mutual's chairman, Vanni Treves, vowed to appeal the decision. 'Leading counsel has advised the board that we must appeal and we will do so with speed and vigour,' he added. 'We will press on with the bonus declaration claim and the preliminary advice we have received is that the judgment, as it stands, allows a claim of hundreds of millions of pounds to be pursued against E&Y.'

The mutually-owned society, founded in 1762, hit trouble in 2000 when the House of Lords ordered it to honour guaranteed policies sold in the high interest rate years of the 1970s and 80s. It responded by slashing bonus rates and closing to new business.

Justice Langley said Equitable should not be allowed to pursue a claim for lost sales as a result of the insurer's woes. Equitable's claim for money lost because it was forced to pay out bonuses on those policies was flawed. He left the door open for the firm to put its case again. 'In my judgement, if they are to be pursued, Ernst & Young is entitled to have them presented with a rigour and reality which is presently lacking,' the judge added.

Equitable is also suing 15 former directors regarding its near-collapse.

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