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Equitable Members Action Group Limited, a company limited by guarantee, number 5471535 registered in the UK

Media Stories: 18/10/2005 - Equitable cuts claim against former directors

Equitable cuts claim against former directors

Financial Times, by Nikki Tait,Law Courts Correspondent
Published: October 18 2005

In a statement, Charles Thomson, chief executive, said the decision was a "pragmatic" one. "This will speed up the process and reduce overall costs," he said.

But the announcement was greeted with surprise and some derision by some of the 11 former directors and their lawyers, who said they were increasingly baffled by the society's legal tactics.

"I'm astonished - it's a shambles," said Philip Vaughan, partner at Simmons & Simmons, the law firm that is advising Jennie Page, one of the former non-executive directors.

Tim House, at Allen & Overy, which is acting for six former non-executives, said: "More than 1bn has fallen off the wreckage of their case. The question is why now?"

The withdrawal of another substantial tranche of the society's claim could re-ignite questions from policyholders over the way the society and its lawyers have conducted the controversial litigation. There has already been anger that the society has thrown away 30m on legal costs without recovering anything, prompting calls for Vanni Treves, Equitable's chairman, to resign.

The claim, which is now being abandoned against the 11 former directors, is the "lost sale" claim. This is the allegation that had the directors taken legal advice about the society's differential terminal bonus policy at an earlier stage, and proper steps to mitigate the risks of losing a test-case over this, they would have put the society up for sale earlier and raised more money. The claim is strenuously denied.

But this marks the third time Equitable has dropped a large part of its case against one or more defendants in the course of the litigation; moves that open the way for the defendants to ask for the return of legal costs that they have spent on these elements of the case.

Yesterday Mr House described them as "very considerable" as far as his clients and the lost-sale claim were concerned.

In July a similar lost sale claim against Ernst & Young, the society's former auditor, which Equitable was suing for alleged negligence, was also abandoned. The two parties settled the remaining elements of the dispute several months later on the basis they would pay their own legal costs.

More recently the society dropped a large portion of its claim against Chris Headdon, its former chief executive and reporting actuary.

As the directors' lawyers pointed out yesterday, they explicitly asked about the fate of the lost sale claim against the directors when the similar claim against E&Y was dropped, and were assured by Equitable that it would be pursued. "Nothing has changed . Why didn't they do this then if they wanted to save costs?" said one.