UK - Accounting giant Ernst & Young has asked the High Court to strike out a £2.6bn law suit filed against it by beleaguered insurer Equitable Life.
Sources claim this is a tactical move to force Equitable to show its hand, or pressure it into an out-of-court settlement.
Equitable’s primary claim is that Ernst & Young failed to highlight the huge liabilities the insurer faced over guaranteed annuities when auditing the accounts.
Equitable says this depleted the sale of the society by £2.7bn, that had Ernst & Young acted properly, the insurer would have realised it was not in a position to pay a further £1.6bn bonuses to policyholders.
Ernst & Young says both claims are ill-founded and cannot be taken up on the basis they are “lost sale” and “bonus” claims – both of which do not stand up in court.
An Equitable insider dismissed E&Y’s claims and said the mutual expects the application to be dismissed within days.
The source said: “I understand why Ernst & Young is doing this but there’s a strong feeling here that Equitable will win this one.
A senior pensions lawyer agreed, but added: “The judge will look at this strike-out to test whether the case has any reasonable prospect of success.
“In doing so, this application forces the other side to disclose their case early or put them under pressure for a settlement. It’s a high risk game.”
A High Court judge said recently that if Ernst & Young lost the civil case, it “would lead to the destruction of the firm and possibly even to the bankruptcy of many of its partners”.
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