Equitable Life launches £4bn case

Equitable's case is expected to last until the end of 2005

Life assurer Equitable Life has launched a £4bn claim in the High Court against former directors and auditors.

It alleges Ernst & Young signed off its accounts without warning of the problems that led to its collapse.

However, Ernst & Young say they could not have told the society anything it did not already know.

Equitable also wants nearly £2bn from 15 former directors it claims were negligent in their duties. The directors deny the allegations.

The life assurer closed to new business in December 2000.

Penrose inquiry

A two-and-a-half-year inquiry into Equitable Life by Lord Penrose found that the society was the "author of its own misfortunes".

He said over-generous payouts to policyholders led to a financial black hole amounting to billions of pounds.

Today sees the beginning of a case that should have never been brought Nick Land, Ernst & Young chairman

But in today's legal case, Equitable claims Ernst & Young signed off unrepresentative accounts and that it would have acted differently if it had known the scale of the problem.

It wants more than £2bn from its former auditors.

Ernst & Young has emphatically denied the claims.

"Today sees the beginning of a case that should have never been brought, Nick Land, chairman of Ernst & Young UK, said in advance of the trial.

"Nothing that Ernst & Young did caused Equitable's problems. There is nothing we could have told them that they did not already know. There was no black hole, no fraud and no money lost," he added.

The claim is believed to be the largest brought against private individuals or an auditor in Britain.

It will also be the first full examination of non-executive directors' duties by an English court.

The case is expected to last the rest of the year.