Equitable Life v Ernst & Young: good, old-fashioned litigation
7 February 2005
18 April 2005
3 October 2005
26 September 2005
9 January 2006
3 October 2005
Equitable Life v Ernst & Young is one of those pieces of litigation that has been rumbling on for what seems like forever. But this year it finally reaches the High Court in a full-blown, six-month trial, beginning on 11 April.
April’s trial is, of course, not the first time the various parties in the litigation will have faced each other in court. Since Equitable launched its giant £2.6bn negligence claim against former auditors Ernst & Young (E&Y) in 2001, following it up in 2003 with a civil suit against former executive and non-executive directors, there have been several sizeable pre-trial hearings.
2005, though, sees the culmination of years of rumours about potential settlements, strike-out applications and Court of Appeal decisions.
The cast list of barristers and solicitors is enormous, such is the size and significance of this case. Herbert Smith is leading for Equitable, with Julian Copeman and Charles Plant in charge. The firm is instructing 20 Essex Street’s Iain Milligan QC, a silk with vast experience in financial litigation and professional negligence.
Up against Milligan is Brick Court’s Mark Hapgood QC, instructed by Barlow Lyde & Gilbert (BLG) litigation partner Clare Canning. E&Y’s decision to instruct Canning in 2002 was a sign of the respect in which she and BLG are held in the professional negligence field, but nevertheless the win was, and remains, a coup.
Several BLG partners
are involved in the case. Estimates of E&Y’s legal fees have reached £29m, which placed against BLG’s 2003-04 turnover of £78.2m show just how important this case is for the firm.
The other defendants – 15 former Equitable executive and non-executive directors – have selected a variety of solicitors. Allen & Overy (A&O) has the lion’s share, defending six non-executive directors. Fox Williams has two executive directors, but Baker & McKenzie, Fishbu-rns, Ince & Co and Simmons & Simmons are also involved. The final firm to appear is an oddity in the line-up of well-known insurance and litigation specialists – East Anglian 14-partner outfit Metcalfe Copeman & Pettefar. Metcalfes is instructed by a director who chose to go for solicitors local to him.
Mr Justice Langley’s courtroom will be busy come April. Although Equitable brought its claims against E&Y and the directors separately, the litigation is being treated as one action and all the parties will be in court together. Luckily, the judge has a lot of experience in managing complex litigation.
Judge Langley oversaw various interlinked film finance disputes during 2002 and 2003, with the final settlements coming last year, the last being the ‘Paramount One’ and ‘Paramount Two’ cases. Case conferences for that litigation were reportedly chaotic, with packed courtrooms and barristers clamouring to put their cases. Judge Langley needs to manage the Equitable trial “like a football referee”, as one commentator put it.
And what a match it
will be. When she was instructed, Canning told The Lawyer: “It’s important for people to realise that this isn’t an Enron and Andersen situation.” But there is still a lot of money at stake.
Judge Langley’s judgment, when it comes, is bound to be scrutinised eagerly. During the attempts in 2003 by the non-executive directors to have the claims against them struck out on the grounds that as non-executives they were not liable for the negligence and breach of fiduciary duty that Equitable is claiming, he delivered a judgment casting doubt on the rights of non-executives.
On the strike-out application, he said: “I’ve concluded that Equitable’s claims against the non-executive directors aren’t ones of which it can be said that they have no real prospect of succeeding. I should stress that this conclusion does not mean that I think Equitable’s case is right, or even probably right.”
The judgment means that, contrary to the way the Companies Act is usually defined, non-executive directors can be held liable for claims against the company. If Judge Langley finds for Equitable, there could well be a renewed reluctance on the part of potential non-executives to take up the role.
So far his handling of the case has been praised. On Friday (4 February) he held a pre-trial case management conference in court, to determine the order of cross-examination and other such apparently mundane, but crucial, matters. Ensuring that every party receives a fair hearing is always paramount, but this is particularly important with so much at stake.
As ever, the real winners in a case such as this are the firms and chambers involved. Whatever the outcome for the client, the exposure and experience is welcome. On the barristers’ side, One Essex Court has done particularly well, scoring instructions from three parties, including roles for two silks – Laurence Rabinowitz and Peter Leaver. 3 Verulam Buildings also has three barristers involved.
At the trial’s conclusion, the legal fees (in addition to E&Y’s £29m) could hit £100m, making the case the most expensive civil suit in history. For claimant and defendants, Equitable is a burdensome nightmare. For the lawyers, it will have been a profitable return to good, old-fashioned, large-scale litigation.
Who’s acting for whom?
For Equitable Life: Julian Copeman, Charles Plant (Herbert Smith); Iain Milligan QC, Guy Morpuss (20 Essex Street), Robert Miles QC
(4 Stone Buildings)
For Ernst & Young: Clare Canning (Barlow Lyde & Gilbert); Mark Hapgood QC (Brick Court), Jonathan Gaisman QC, James Brocklebank (7 King’s Bench Walk), Cyril Kinsky (3 Verulam Buildings)
For six non-executive directors: Tim House (Allen & Overy); Laurence Rabinowitz QC (One Essex Court), Richard Handyside (Fountain Court)
For executive directors Roger Bowley and David Thomas: Gavin Foggo (Fox Williams); Christopher Symons QC, Sonia Tolaney (3 Verulam Buildings)
For executive director Shaun Kinnis: David Rutter (Metcalfe Copeman & Pettefar); Mary Stokes (Erskine)
For executive director Alan Nash: Andrew Davis (Fishburns); Simon Adamyk (New Square)
For non-executive director Jennifer Paige: Philip Vaughan (Simmons & Simmons); Peter Leaver QC (One Essex Court)
For executive director Roy Ranson: David Fraser (Baker & McKenzie); David Mumford (Maitland)
For non-executive director David Wilson: Bob Deering (Ince & Co); Jules Sher QC, Rupert Reed (Wilberforce)
Christopher Heddon (an executive) and Peter Martin (a non-executive) are litigants-in-person