Jeremy Warner's Outlook: The end of the road for such litigation as Equitable case against auditors falls apart

Energis still too pricey for C&W; Wilson blow to M&S turnaround
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The second part of the claim, that adequate forewarning might have enabled directors to limit the damage by cutting bonuses, has also already been challenged by the judge, who has remarked that deep cuts might in any case have plunged the society into chaos, while marginal cuts wouldn't have done any good.

Sensing that the entire case is as good as over, Ernst & Young is not mincing its words. "This was one of the worst examples ever seen of the disreputable tactic of making a hugely inflated claim, now admittedly hopeless, against a 'Deep Pocket' in the hope of forcing a settlement out of fear of litigation risk."

Well, up to a point. Litigation to hold auditors accountable for a corporate collapse is always a high risk gamble. In this case, directors have played and they seem to have lost. The stakes were high, for by the time the case closes anything up to £100m in legal costs may have been run up, which Equitable will now have to shoulder out of already depleted policyholders' funds. Yet directors would no doubt have faced an even greater risk had they not at least tried.

Someone is obviously to blame for what happened, though everyone involved has denied it. Equitable is also suing former directors. Under the rules of joint and several liability, even if Ernst & Young were found to be only a tiny bit to blame, they would still have had to pay up for any negligence the directors are found guilty of. In that sense, Equitable was entitled to believe that suing the auditors too might pay dividends.

As it happens, the Government is today publishing proposals for the reform of the law of joint and several liability, so that auditors can in future be held accountable only for their share of the blame. It's unlikely this case would ever have been brought had the new rules already been in place.

In the meantime, that other legal juggernaut - the attempt by liquidators of BCCI to hold the Bank of England liable for regulatory failure - continues to roll on. This is an even more hopeless endeavour than that of Equitable. Again the hope was that the threat of litigation would force the Bank to settle, which was never remotely likely given that the litigants have to prove dishonesty to succeed. Not in a million years would the Bank concede to that. The outcome of these two cases may deter such litigation for years to come.

Energis still too pricey for C&W

About five years ago Energis, the telecoms company which had grown out of the National Grid, held a lavish dinner at the Tate Modern in London to celebrate its 10th anniversary. It was the height of the technology bubble and the mood was of high excitement and exaggerated exuberance. From the germ of an idea just 10 years previously, Energis had come to command a position in the FTSE 100 and it was one of the hottest stocks in town.

Sitting at my table was one Graham Wallace, then chief executive of Cable & Wireless. It seemed a little odd to have invited one of your leading competitors to an anniversary bash, so putting two and two together and making five I asked him whether there was any truth in the theory the two would one day merge. Well there was some logic in it, he admitted, and the market was ripe for consolidation. But the price was far too high. Heady days. Despite his reservations, I predicted an eventual merger.

Five years after the event, the prediction may finally be about to come true. Since then, the telecoms industry has been through the mangle. Energis went bust and Cable & Wireless might have done so too had it not baled out of some of its biggest assets - One2One and Hongkong Telecom - at close to the top of the market.

As first reported by The Independent a few weeks back, the two are now in merger talks, with a mooted price being put on Energis of £700m. If Archie Norman, the Energis chairman, and his chief executive, John Pluthero, manage to persuade C&W to pay that, then they truly would deserve the £20m or so they stand to get out of it. Frankly, I cannot imagine Francesco Caio, the C&W chief executive, paying anywhere close, despite the cash pile still burning a hole in C&W's pocket.

This is approaching double what Permira, Apax and Carlisle were offering the banks for Energis in a consortium bid three years ago. It is not clear prospects have changed markedly since then. If anything, Energis's revenues are lower than then, nor does the company seem yet to be cash generative. Admittedly, there was no strategic value in Energis to the private equity bidders, but industrial logic can be as much a negative as a positive. Telecoms companies, with their different systems and technologies, are notoriously difficult to integrate, and there is a considerable operational risk in attempting to do so.

C&W would knock out a competitor for business telecommunications, but with so many rivals still around, it is not clear this would have a noticeable impact on prices. C&W would still be a poor second in terms of market share. There's no doubting the industrial logic of such a get together, yet the price now may be as wrong for C&W as it was when Mr Wallace first dismissed the idea five years ago.

Unless Mr Norman reduces his expectations somewhat, I may have to wait even longer to see my prediction come true.

Wilson blow to M&S turnaround

The departure of Charles Wilson as Stuart Rose's right-hand man at Marks & Spencer is no doubt a blow to the company's credibility as it struggles to achieve the desired turnaround, but its significance beyond that is being blown out of proportion.

Only 39, Mr Wilson already has an enviable reputation as an operational manager, with a clinically analytical approach to stock control and negotiation that impressed even the ever demanding Philip Green when Mr Wilson worked for him at Arcadia. He wouldn't for ever want to live in Mr Rose's shadow.At first sight, the decision to ditch Marks & Spencer in favour of the Baugur-controlled Booker none the less looks an odd one, the equivalent of moving from the top of the Premier League to somewhere deep down in the first or even second divisions.

That's not much of a vote of confidence in the turnaround at M&S, some rivals were saying yesterday. Yet no doubt he will be well rewarded, and anyway, he already knows the business well, having helped Mr Rose turn around the Booker cash and carry company in the late 1990s. It will be his show, as opposed to someone else's.

As for M&S, the heavy lifting in terms of stripping out working capital and renegotiating with suppliers, is now largely complete. Mr Wilson's usefulness at M&S was already approaching its end.

His departure follows a fierce power struggle at M&S when an attempt was made by the senior non-executive, Kevin Lomax, to oust the chairman, Paul Myners, Mr Rose's main supporter on the board. It may be that Mr Wilson hoped to gain from the fallout. In the end, a messy compromise was engineered which seems to ensure Mr Rose's position for at least the foreseeable future. If Mr Rose fails, Mr Wilson would scarcely be first in line as a successor. And if Mr Rose succeeds, then Mr Wilson was unlikely to get a run at the top job anyway.

The position at M&S is not significantly altered; it's still as tough as ever but unlikely to be made worse by Mr Wilson's departure.

j.warner@independent.co.uk

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