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Equitable hit again as court rejects its claim Against auditor

The High Court has dealt a hugely embarrassing blow to Equitable Life and its lawyer chairman Vanni Treves by largely striking out its £2.6bn claim against its former auditor Ernst & Young.

In a scathing judgment, Mr Justice Langley describes Equitable&#39s case as lacking “rigour and reality”. He added: “I do not think it is right that Ernst & Young should face claims which can be shown to have so many basic flaws.”

He did, however, say part of Equitable&#39s claim amounting to hundreds of millions of pounds had a chance of success but only if its lawyers represented the case properly.

Equitable has immediately vowed to appeal the decision, provoking a sense of déjà vu among commentators who have seen the stricken society follow its legal advice to the bitter end of the House of Lords&#39 judgment on guaranteed annuity rates, forcing it to close to new business.

A successful claim against E&Y would have provided a lifeline to the Equitable with-profits fund as it fights to stave off insolvency but would have brought the global accountancy firm to its knees.

Equitable alleged that E&Y&#39s actions meant that it was unable to find a buyer and paid out too much in bonuses because it was not made fully aware of its liabilities.

Equitable has also instructed City litigators Herbert Smith to pursue its former directors.

Treves says: “Leading counsel has advised the board we must appeal and we will do so with speed and vigour.”

E&Y UK chairman Nick Land says: “We are absolutely confident of defeating any restated claim that might emerge. Auditors should not be regarded as insurers of other people&#39s businesses.”

Equitable Members&#39 Action Group spokesman Paul Braithwaite says: “The amount spent on lawyers is obscene. We are seriously disappointed. The case as presented was not as strong as it should have been.”

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