Equitable life yesterday received a major boost in its attempt to make its former management pay for its near collapse when the High Court gave it the right to proceed with a £3.3bn negligence claim against nine former directors.
The insurer, which nearly collapsed three years ago after the courts ordered it to honour costly guaranteed annuity policies, has accused the former non-executive directors of negligence and breach of duty.
Mr Justice Langley said Equitable could press on with its claim, rejecting assertions by the former non executive directors that the case should be dismissed because it would not succeed. The move was a blow to the directors, who include well known City figures such as Peter Sedgwick, former chairman of Schroders, and Peter Davis, former deputy chairman of Abbey National.
The nine had attempted to have the legal threat struck out.
Mr Justice Langley said the directors had put forward some strong arguments, but added: "I do not think they were so powerful as to justify the relief they seek."
Vanni Treves, Equitable chairman, said: "We are pleased, but not surprised, that Mr Justice Langley agrees that this case should proceed to trial. The board believes there is a strong claim against the former directors and in the interests of policyholders it has a duty to proceed."
However the group of directors, who have been advised by Allen & Overy, warned the decision would scare possible future recruits off from agreeing to take up non-executive roles. "Many existing, and potential, non-executives will be asking themselves whether it is reasonable to expose themselves to this devastating risk," the former directors said in a statement.
There have been a number of high-profile mismanagement scandals at British firms, including former industry icons Marconi and Cable & Wireless, but the Equitable Life trial will mark the first full examination of non-executive directors' duties by a court.
Equitable, the world's oldest life assurer, is also claiming negligence against six former executive directors and is pursuing a £2.6bn claim against its former auditors, Ernst & Young. The company claims the directors breached their duties by not seeking legal advice between 1996 and 1998 on cuts to bonuses the insurer paid some customers on policies.Reuse content