Teamwork scores a victory

On Statistics alone, the action in which accountants Ernst & Young faced potentially devastating negligence allegations warrants a high place in the league of costly and complex trials.

The action, brought by Nederlandse Reassurrantie Groep Holding (NRG) after its ill-fated £122 million acquisition of Victory Reinsurance in 1990, began in January last year and drew to an end in November. It has taken since then for Commercial Court judge Mr Justice Colman to reach his decision, given on 13 June, and a full judgment may not be given until autumn.

Ernst & Young's bill runs to about £5 million, a figure which takes no account of work by the in-house team. When the costs of other parties are included, £20 million seems a fair guess for the total.

No-one would dispute the complexity of the £400 million claim. Apart from the millions of pounds at stake, Ernst & Young's reputation was on the line. After NRG's acquisition, it was discovered Victory had inadequate reserves to meet claims of £254 million arising from its work in reinsurance.

NRG launched its High Court claim alleging it sought expert advice from Ernst & Young and consultant actuaries Bacon & Woodrow. But Mr Justice Colman cleared Ernst & Young and held that in all but one minor point Bacon & Woodrow was also blameless.

Ernst & Young is delighted with the result. Senior partner Nick Land said it is a warning to companies that, at a time of spiralling litigation against professional advisers, firms cannot be expected to underwrite investment decisions which turn out to have been poor with the benefit of hindsight.

Although long, costly and complex, the case managed to avoid becoming unwieldy.

Victoria Cochrane, head of Ernst & Young's in-house legal team and recent winner of The Lawyer/Hifal's In-House Law-yer of the Year award, gave credit to lawyer flexibility, in-court use of the Livenote system and invaluable back-up from Barlow Lyde & Gilbert.

She added that the case is a major argument in favour of in-house departments calling on outside firms for resource backing in major cases. No firm can maintain a legal department big enough to cope with litigation of this stature, she said.

Although the case was not Cochrane's biggest – she is also involved in the BCCI and

Lloyd's litigation – she said there were lessons to be learned. Teamwork was very much the order of the day: "When it came to rolling sleeves up and getting the work done the old role definitions blurred." She added that lines of demarcation went out the window as in-house lawyers, members of Barlow Lyde & Gilbert and counsel Christopher Symons QC, Mark Hapgood QC and Cyril Kinsky got to grips with a "highly technical" case involving "very very esoteric insurance points".