The independent action group for current and ex Equitable Life policyholders, funded by contributions.

Equitable Members Action Group

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

Media Stories: 28/11/2005 - Equitable's former directors may be able to recoup legal costs

“Equitable's former directors may be able to recoup legal costs

At least one of the former Equitable Life directors, who has settled the multi-billion pound litigation brought by the mutual against 15 former board members and its auditors, could get back some costs if negotiations with other directors result in the repayment of legal expenses.

To date, the society has settled its negligence and breach of duty claims with six of the former directors, as well as Ernst & Young. Although no party will comment, discussions are believed to be continuing with another nine.

Former directors involved in these negotiations - seven of whom were represented by law firms acting on success-related "conditional fee agreements" - are understood to be pressing to have at least some of their costs repaid by the society. By contrast, the deals already secured were done on a "drop hands" basis, with each side agreeing to bear its own legal costs, although both E&Y and David Wilson, a former non-executive director, did extract relatively small reimbursements for specific legal expenses. Formally, and apart from these exceptions, the subsequent court orders made no order as to costs.

However, it seems that at least one of these agreements could make provision for some costs to be repaid if the negotiations result in a deal that sees the society repay some of the remaining former directors' legal costs.

Equitable declined to comment yesterday, citing the continuing litigation.

If no agreement is reached with the remaining former directors in the next few weeks, the parties are due back in court on December 12, when they are due to make closing submissions before a judge rules on the long-running and controversial litigation. All the former directors and E&Y have strenuously denied negligence and breach of duty.

The move comes as Equitable considers a break-up of the troubled mutual, which could lead eventually to the jettisoning of the 250-year-old name. This is one of several options believed to be under consideration by Lexicon, the specialist insurance investment bank that Equitable has appointed. The outstanding litigation would also have to be resolved first.

Prudential, the UK's second-largest life assurer, is understood to be interested in Equitable's £7bn book of annuities.

Hugh Osmond, the entrepreneur, is believed to be interested in Equitable's assets, with the first of these likely to be sold off being the annuity book.

Sources in the market for buying and selling life assurance funds that no longer sell new policies pointed out that a sale of Equitable's £10bn closed with-profit fund, which includes with-profit annuities, could prove difficult because the fund would need to demutualise.

However, interest could also come from Royal London if Equitable were to reach the point of selling off the closed with-profit fund. Resolution Life is also interested in acquiring

Andrea Felsted and Nikki Tait in the Financial Times 28 November 2005