Equitable Life sensationally dropped its £2.6bn negligence claim against its former auditors Ernst & Young (E&Y) last week (22 September) after spending more than £40m on legal fees.
Both sides will have to pay their own costs. Equitable is believed to have amassed costs of around £40m at this stage, with E&Y's estimated at £30m.
However, litigation against 15 former executive and non-executive Equitable directors continues, with the individuals facing a £1.67bn claim.
The settlement means that Mr Justice Langley's hoped-for judgment on auditors' liability will now never be handed down, although precedent on directors' duties may still be set.
In court, E&Y's co-lead counsel Brick Court Chambers' Mark Hapgood QC said: "At the end of this very long, costly and utterly pointless piece of litigation, there is a salutary lesson to be learnt for those thinking of suing auditors."
Barlow Lyde & Gilbert (BLG) litigation head Clare Canning, acting for E&Y, said: "It's a classic claimant's failing - to get excited about both the fact that something must have gone wrong and that it must have been the defendant's fault, without joining the dots between the two concepts. In this case, of course, Equitable Life were able to show neither."
Equitable chairman Vanni Treves said the society had a duty to bring the claim, and that the settlement came with "great sadness and frustration".
The case resumes on 3 October, after counsel for the directors have established what case they still have to answer and which pieces of expert evidence will be valid.
FOR EQUITABLE LIFE
Julian Copeman and Charles Plant, Herbert Smith Herbert Smith has had a nightmare. In May, Barlow Lyde & Gilbert attacked its disclosure exercise and succeeded in obtaining an order to do additional disclosure work. It was an embarrassing situation for a firm with Herbert Smith's reputation, particularly given the length of time this case has been active. Consultant Charles Plant, formerly a partner at the firm, has acted for Equitable for many years, and more recently has been joined by banking and financial services expert Julian Copeman.
Iain Milligan QC, 20 Essex Street 20 Essex Street's head of chambers Iain Milligan QC is a signed-up member of the `£2m club', earning in excess of that figure each year. He is a barrister with a stellar reputation and was an obvious choice to lead Equitable's claim. Milligan will now have to fight hard to salvage some of the claims against the directors to avoid criticism of his own performance. Milligan is leading Robert Miles QC of 4 Stone Buildings and 20 Essex Street's Guy Morpuss.
FOR ERNST & YOUNG
Clare Canning, Barlow Lyde & Gilbert Barlow Lyde & Gilbert's dynamic head of commercial litigation has been focused on the Equitable case for the past five years. Her professional liability expertise, gained through acting on cases such as Elton John's claim against PricewaterhouseCoopers, has been invaluable throughout. Ernst & Young's general counsel Victoria Cochrane praises Canning and her team as being the best commercial litigators she has met.
Mark Hapgood QC, Brick Court and Jonathan Gaisman QC, 7 King's Bench Walk Brick Court Chambers' Mark Hapgood QC and 7 King's Bench Walk's Jonathan Gaisman have shared the advocacy for Equitable. Hapgood has done the bulk of the talking, attacking Equitable's case at every turn, while Gaisman has become noted for his detailed preparation. Their work has been an incredibly successful team effort, backed up by 7 King's Bench Walk's James Brocklebank and Cyril Kinsky of 3 Verulam Buildings.