Equitable Life cleared to sue Ernst & Young for £2.6bn

Equitable life yesterday won the right to sue its former auditors Ernst & Young for £2.6bn after the Court of Appeal overturned an earlier judgement that had thrown out its claim.

The troubled insurance company had contested the decision of a High Court judge in February which rejected the majority of a £2.6bn suit it had launched against the accountants.

Equitable claimed it would have put itself up for sale for £3.5bn had Ernst & Young fully informed it of its precarious finances. The cost of paying guaranteed pension rates to its customers landed Equitable with a £1.5bn bill in July 2001 and the company was forced to close to new business having failed to find a buyer.

This 'lost sale' claim, the first of a two-part action, was rejected by Mr Justice Langley in February, but the Court of Appeal overturned the decision and said Equitable could sue for "the lost chance of a sale" which Equitable reckons cost it £2.55bn.

The ruling now means Equitable can go forward with the second part of its claim, that Ernst & Young failed to rein in the society's over-generous bonus policy.

Mr Justice Langley had said the £1.6bn claimed was "fanciful", but following the ruling, Equitable can sue its auditors for £1.24bn of losses so that, with both claims, Ernst & Young could be facing a compensation bill of £2.6bn.

However the Court of Appeal did say that it had "serious doubts" over the size of Equitable's suit. Equitable can also seek to recover the costs of defending its claim from Ernst & Young, which are believed to be in the millions.

Ernst & Young, however, said it was still determined to fight the suit through the trial process and did not regret trying to have Equitable's claims against it struck out. "The strike-out process has shown up the flaws of Equitable's claim. We are confident it will be discredited on closer examination," Victoria Cochrane, counsel for Ernst & Young, said yesterday.

The case will go to trial in October 2004. Meanwhile, Equitable is suing 15 former directors of the society for negligence but nine non-executive directors are trying to have Equitable's claims thrown out.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

John Palmer: 'Goldfinger' of British crime was murdered, say police

Murder of the Brink’s-MAT mastermind

'Goldfinger' of British crime's life ended in a blaze of bullets, say police
Forget little green men - aliens will look like humans, says Cambridge University evolution expert

Forget little green men

Leading evolutionary biologist says aliens will look like humans
The Real Stories of Migrant Britain: An Algerian scientist adjusts to life working in a kebab shop

The Real Stories of Migrant Britain

An Algerian scientist struggles to adjust to her new life working in a Scottish kebab shop
Bodyworlds museum: Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy

Dying dream of Doctor Death

Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy
UK heatwave: Temperature reaches 39.8 degrees on Central Line - the sweatiest place in London

39.8 degrees recorded on Tube

There's hot (London) and too damn hot (the Underground). Simon Usborne braved the Central line to discover what its passengers suffer
Kitchens go hi-tech: From robot chefs to recipe-shopping apps, computerised cooking is coming

Computerised cooking is coming

From apps that automatically make shopping lists from your recipe books to smart ovens and robot chefs, Kevin Maney rounds up innovations to make your mouth water
Jessie Cave interview: The Harry Potter star has published a feminist collection of cartoons

Jessie Cave's feminist cartoons

The Harry Potter star tells Alice Jones how a one-night stand changed her life
Football Beyond Borders: Even the most distruptive pupils score at homework club

Education: Football Beyond Borders

Add football to an after-school homework club, and even the naughtiest boys can score
10 best barbecue books

Fire up the barbie: 10 best barbecue books

We've got Bibles to get you grilling and smoking like a true south American pro
Wimbledon 2015: Nick Bollettieri - Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power

Nick Bollettieri's Wimbledon Files

Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power
Ron Dennis exclusive: ‘This is one of the best McLaren teams ever – we are going to do it’

‘This is one of the best McLaren teams ever – we are going to do it’

Ron Dennis shrugs off a poor start to the season in an exclusive interview, and says the glory days will come back
Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Cheaper energy on the way, but it's not all sunshine and rainbows

Cheaper energy on the way, but it's not all sunshine and rainbows

Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most