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The Actuary The magazine of the Institute & Faculty of Actuaries

From Court 76

Financial Times, 3 December 2005 (extract)

‘The long-running and highly controversial litigation brought by Equitable Life against its former directors and auditors finally shuddered to a halt yesterday as the society agreed to pay legal costs incurred by nine of its former board members.

‘Equitable first filed the multi-billion pound claims against Ernst & Young, its former auditors, and 15 former directors, in April 2002. Last night, it had nothing to show for its efforts but a bill for legal costs totalling £45m.

‘The last two to settle were Jennie Page, … a former non-executive director who is probably best known as ex-chief of the Millennium Dome, and Chris Headdon, the society’s former chief executive and appointed actuary.

‘Even so, Ms Page was clear that, given how far matters had progressed, she would have preferred to have seen a final judgment in the case and even in the final stages tried to negotiate for a statement in court at the very least. “I’d have preferred that policyholders had had the opportunity of Mr Justice Langley saying something to mark the end of these proceedings, but the society refused to allow a hearing,” she said.

‘Those views were generally echoed by Mr Headdon, who still faces the prospect of professional disciplinary proceedings. He, too, says he would have welcomed a final judgment, objectively weighing up the evidence. “It is regrettable that policyholders have not had the benefit of hearing Mr Justice Langley’s views,” he commented. Having acted as a litigant-in-person for much of the proceedings, and been obliged produce copious submissions and even prepare to cross-examine some witnesses, he will be paid £450,000 by the society to cover legal and other costs.

‘Of the society’s final bill of £45m, about £35m represents its own costs. Add the legal expenses shouldered by other parties and the entire litigation has cost more than £70m; all to no avail, beyond grief on all sides.

‘Had the parties not settled, they were due to go back to court on December 12 to make final submissions to the judge. Although negotiations had been under way for weeks, this meant that Equitable had to deliver its closing submission in early December, and the defendants a few weeks later. All that work was duly done before the final deals were struck and the entire effort made largely redundant. “Ever since the Ernst & Young settlement, this has been dragged out and dragged out”, said one lawyer. And that, he pointed out, simply added to the costs bill which policyholders have ultimately had to shoulder.’

Equitable Life letter to policyholders, 2 December 2005 (extract)

‘In his report into the near collapse of Equitable Life, Lord Penrose said that the Society was “the author of its own misfortune”. His Lordship concluded that decisions were made by the previous Board which resulted in dire financial consequences for policyholders and for the Society as a whole; decisions that nearly put your society out of business.‘Lord Penrose reached clear and forceful conclusions as to the downfall of the Society. However, we must accept that it is a different matter to satisfy a Court that the role of the former directors constitutes a responsibility that leads in law to culpability and redress.’