Equitable claims £3bn from 15 former directors

Equitable Life yesterday unleashed legal proceedings against 15 former directors to try to win £3bn of damages after their alleged incompetence led to the collapse of the once-vaunted life assurer.

Equitable Life yesterday unleashed legal proceedings against 15 former directors to try to win £3bn of damages after their alleged incompetence led to the collapse of the once-vaunted life assurer.

The move has been widely hoped for by Equitable's beleaguered policyholders and was raised as a possibility by the society's new board last year.

Vanni Treves, chairman of Equitable, said: "As a direct result of the actions or inactions of these former directors, a 240-year-old society was brought to its knees over seven years, and many of the society's policyholders have suffered very substantial losses and great anxiety."

The directors named in the action were all members of the board between 1993 and 2000. They include Equitable's former chief executive Chris Headdon, president John Sclater and managing directors Roy Ranson and Alan Nash. The action will also target the former National Lottery regulator Peter Davis, the Schroders chairman Peter Sedgwick and Jennifer Page, former boss of the Millennium Dome.

Equitable embarked on a policy in 1993 of paying two different bonus rates to guaranteed annuity rate policyholders (GARs). Those who exercised their guarantee, which boosted the value of their policy, were paid less in final bonus than those who did not exercise it. The move turned out to have disastrous results when the House of Lords ruled in July 2000 that GARs had to be paid their full bonus entitlement. The ruling cost Equitable £2.6bn and forced it to close to new business in December 2001.

Equitable's new board, which has been advised by the law firm Herbert Smith, said the decision to pay different bonuses in 1993 represented "a serious legal question on which advice should have been sought". After that, the old board allegedly failed to take account of legal advice it did receive which set out the implications for the society if its policy failed. Before the defeat in the Lords, Equitable was saying that its GAR liability would cost no more than £50m.

The law firm Allen & Overy, which is acting on behalf of nine directors, said: "These actions will be defended with the utmost vigour. We believe the claims are totally without merit."

But policyholder action groups signalled that they might mount their own actions against the directors.

The action against the directors follows a separate lawsuit launched earlier this month by Equitable against its former auditor Ernst & Young. Equitable is still considering possible action against the Financial Services Authority.