Billed as one of the year’s biggest pieces of litigation, by the end of September Equitable Life’s 2bn negligence claim against former auditor Ernst & Young (E&Y) collapsed after 59 days.
Equitable, a mutual insurance society, was suing E&Y over the way the auditor had provisioned some of its policies in the late 1990s. The society said E&Y had been negligent with its advice.
Equitable also sued 15 of its former executive and non-executive directors for negligence, claiming a total of 3.2bn at the start of the case.
Litigation powerhouse Herbert Smith instructed 20 Essex Street’s head of chambers Iain Milligan QC for Equitable. On the other side, Barlow Lyde & Gilbert (BLG) picked Brick Court Chambers’ Mark Hapgood QC and 7 King’s Bench Walk’s Jonathan Gaisman QC.
Several other firms are advising the directors, including Allen & Overy (A&O) for six non-executives.
After a number of pre-trial skirmishes, including an unsuccessful application by E&Y to have part of the claims ‘struck-out’, the case finally began on 11 April 2005 before Mr Justice Langley.
From the start it was a dramatic trial. Both Equitable and E&Y employed large press teams to manage publicity and BLG’s lawyers were given media training. In May, E&Y attacked Herbert Smith’s disclosure exercise (how documents are chosen to be used as evidence). Hapgood told the court that Herbert Smith’s disclosure was not done correctly and Langley J ordered that additional documents be released to the court.
In July, Equitable sensationally dropped part of its claim, reducing the total amount to 705m. The trial was then adjourned for the summer and it took just three days for the settlement deal to be announced on 22 September. Under the terms of the settlement, both sides pay their own costs.
The claims against most of the directors continue, although only 1.7bn is now being claimed. In early October settlements were reached with two of the directors and negotiations continue with others. The case is likely to go on, but Equitable’s chances of winning are now small.