UK - Beleaguered mutual Equitable Life has won the right to sue accountant Ernst & Young for £2.6bn over negligence.
The Court of Appeal overturned a High Court ruling that restricted Equitable’s claim to £500m when Mr Justice Langley threw out the mutual’s “lost sale” claims against E&Y.
The Court of Appeal decision allows the lawsuit to go ahead in full.Equitable claims E&Y should not have signed off the insurer’s accounts given the potentially huge liabilities it faced on guaranteed pensions.
Equitable claims that if it had known about its problems then, it would have put itself up for sale in September 1998 instead of March 2001. It believes the enforced delay wiped at least £2.5bn off its potential sale value.
It is also suing E&Y for a further £1.2bn on the basis that it made bonus payouts to its former directors based on misleading information from the auditor.
The trial is expected to begin in October 2004.
Chairman Vanni Treves said: “We are pleased, but not at all surprised, that the Court of Appeal has vindicated the board’s decision to pursue this important litigation in the interests of policyholders.”
E&Y has vowed to fight the action.
Partner and general counsel Victoria Cochrane said: “Two courts have now expressed scepticism around the size of the claim.
“In re-pleading its case we believe that the effect of this judgement will be that the lost sale claim will be more difficult for Equitable to prove, and that its size will be significantly reduced.
“The court clearly has some sympathy for the situation we find ourselves in facing such an unrealistic claim, and we are confident that it will be discredited on close examination.”
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