Page last updated at 15:08 GMT, Tuesday, 21 July 2009 16:08 UK

High Court hears Equitable battle

Equitable Life sign
The Equitable saga has been continuing for years

The government should not "evade reality" over regulatory failures in the near-collapse of Equitable Life, the High Court has heard.

The Equitable Members Action Group wants a judicial review over the decision not to follow recommendations to offer full compensation to victims.

The group is representing 21,000 people who lost savings after the firm's near-collapse in 2000.

The case was brought quickly owing to the advancing age of those affected.

MPs also debated the case in the House of Commons on Tuesday.

Compensation

Equitable Life, one of the UK's largest private pension providers, came close to collapse nine years ago after being ordered by the High Court to fulfil financial promises that it could not afford.

The government has failed to provide cogent reasons for rejecting the ombudsman's findings and has accordingly acted irrationally in rejecting them
Dinah Rose QC

The subsequent saga saw more than a million policyholders suffer large cuts to the value of either their prospective or current pensions as the society struggled to stay solvent.

The Parliamentary Ombudsman, Ann Abraham, investigated the events leading up to the society's troubles and ruled last year that various government departments had been guilty of maladministration.

She also called for the establishment of a compensation scheme for more than a million policyholders.

However, the government continues to deny some of her findings, and is going only part of the way in carrying out her recommendation for compensation. It says it needs to be fair to policyholders and taxpayers.

A former Appeal Court judge, Sir John Chadwick, has been asked by ministers to design a scheme that will give voluntary payments to the "hardest hit" of Equitable's investors.

His next report outlining issues to be considered under the scheme will be published in August.

Treasury Minister Liam Byrne said that he was working at speed, but opposition parties argued that there had been little progress towards compensation and accused the government of "foot-dragging".

Legal battle

Dinah Rose QC, for the Equitable Members Action Group, told the High Court in London that the government could not fudge the issue of compensation.

"We say the government is not entitled to evade reality, which is that it is responsible for falling very seriously below acceptable standards of administration, and people are entitled to compensation as a result," she said.

"The government has failed to provide cogent reasons for rejecting the ombudsman's findings and has accordingly acted irrationally in rejecting them."

The group is also calling for an urgent resolution, estimating that 15 people who lost money were dying each day.

Lord Justice Carnwath and Mr Justice Gross are sitting in the case which is expected to last for three days.



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