Jeremy Lever QC: letter to Paul Braithwaite EMAG

26, John Street London WC1N 2BW 29th December 2000

Mr Paul Braithwaite EMAG Committee

A Primary Purpose of Further Litigation

In a widely commended speech in the House of Commons on 19th December 2000 Mr Richard Ottaway MP commented,

"The least that the [Equitable Life Assurance] Society can do is to take an independent legal opinion on the point [that non-GAR policy-holders could not be properly represented by the Society's management in the proceedings in the House of Lords] and consider legal action if it supports the contention."

I believe that in saying that, Mr Ottaway was absolutely right. And if the independent legal opinion indicates that there is any real chance of reversing, or significantly limiting the effect of the House of Lords' decision, I favour the bringing of fresh proceedings not only because, if the House of Lords' decision, as presently understood, stands, the Society is dead in the water but also for another, perhaps even more important, reason.

If, on the basis of the independent opinion, fresh proceedings are commenced, they will constructively alter policy-holders expectations. It will then be possible to offer both GAR and non-GAR policy-holders the opportunity to replace uncertainty with acceptable certainty by entering into a sensible settlement. At the moment GAR policy-holders may believe that they have two birds in hand and a third (surviving spouse's rights) in the bush. The further litigation will mean that only the settlement offers them a bird in hand. Whether further litigation is an absolute pre-condition for the offer and widespread acceptance of a settlement is debatable - but further litigation would indisputably make the offer and widespread acceptance of such a settlement much more probable.

The putting together of a fair and widely acceptable settlement offer would certainly be a complex task but the potential benefits of success would fully justify attempting the task. One important objective in so doing would be to enable the Society to invest its pension funds on a more satisfactory long term basis rather than being constrained to invest the funds to a disproportionate degree in low yielding fixed interest/fixed redemption dated stock. The resulting potential benefit of greater freedom to invest in more attractive securities and other assets would provide an additional incentive to policy-holders to accept the settlement offer.

It would no doubt be open to policy-holders not to accept the settlement offer and to take their chance on the outcome of the fresh litigation but the potential (though uncertain) advantage of so doing might, I believe, properly be reduced in so far as acceptance of the settlement offer enabled the Society to realize benefits that would be otherwise unattainable and accordingly the costs or some of the "costs" resulting from the settlement were made charges that had to be met before the "profits" of the Society were calculated. In other words, even if the outcome of the further litigation was favourable to a policy-holder who had declined the settlement offer, he or she could not reasonable expect to share in benefits realized by the Society only as a result of acceptance by others of the offer. While great care would have to be taken to ensure not only that the settlement offer was attractive to the widest possible spectrum of the membership of the Society but also that it was fair and equitable to those who decided to take their chance on the litigation, I do not see why such a settlement should be attackable by the latter group of policy-holders as legally objectionable.

However, the possibility of widespread acceptance of any settlement offer is legally heavily dependent on getting credible fresh litigation up and running (and preventing the present Board from selling the pass without even considering the possible course outlined in this note).

Jeremy Lever