Equitable Life drops €1bn claim against auditors

THE chairman and chief executive of Equitable Life faced calls to resign yesterday as the society dropped its stg£700 million (€1.03 billion) damages claim against its former auditors.

The world’s oldest mutual announced it was abandoning its long-running claim against Ernst & Young in the High Court in London yesterday.

Chairman Vanni Treves said it was with “great sadness and frustration” that the board had decided to settle, but it would have been “foolhardy” to continue following legal advice the board had received.

He said the society was confident it could prove E&Y’s audit was negligent.

But he said the evidence given by the former directors in court had persuaded the board there was too great a risk the judge would find the former directors would not have done anything differently, whatever E&Y had done and said.

“Of course, we are deeply disappointed that we have been unable to secure redress for our policyholders.

“But we cannot ignore the evidence, broadly given by all the former directors.

“We must recognise that if we had fought on and lost on the issue of causation, we would have had to pay very substantial costs to E&Y, as well as more costs to our advisers - additional costs which would have been borne by our policyholders,” he said.

Equitable announced in July it was abandoning its claim against its former auditor, reducing its £2.6bn (€3.8bn) claim to £700m.

Lawyer Mark Hapgood, representing E&Y, said the decision was “the biggest climbdown in English legal history.” Nick Land, chairman of E&Y, said: “Today’s news is a complete vindication for us. This was an ill-conceived and badly-prepared action which we have said all along should never have been brought.”

Equitable now has a £30m (€44.2m) legal bill after both sides agreed to pay their own costs. The society is still pursuing its £1.7m (€2.5m) claim against 15 former directors.

The two main policyholder action groups called for Mr Treves and chief executive Charles Thomson to resign, claiming their position had become untenable.

Equitable was plunged into difficulties after losing a legal showdown in the House of Lords over the rights of its guaranteed annuity rate policyholders in 2000. It was left with a £1.5bn liability and was forced to close its books to new business.