Equitable drops claims against two former directors

Equitable Life on Monday said it had reached agreements to drop its litigation against two of the mutual’s former directors on a “drop hands” basis, which saw the parties walk away bearing their own legal costs.

However the deals do not cover 13 more ex-directors who have had the weightiest legal teams during the long-running High Court trial.

Instead, lawyers for these defendants faced off against the society’s lawyers on Monday morning in a battle over costs which the defendants say were squandered during the related litigation between the society and its former auditors, Ernst & Young.

The society had initially brought separate actions for negligence against its former auditors and 15 of its former directors, claiming damages of £750m and £1.7bn respectively. The two cases were being heard together in a trial which began in April.

In late August, however, Equitable is believed to have offered to settle with all parties on a “drop hands” basis. Last month, a deal was struck with E&Y, with Equitable dropping its claim against the former auditors and both parties agreeing to pay their own legal costs.

Since then, negotiations have also been underway with the former directors.

However, seven former non-executives were represented under “conditional fee agreements”, allowing them to employ top-quality legal teams and some have said that they would be wiped out financially if forced to shoulder all the legal costs.

Accordingly, they are believed to be unable or unwilling to settle on a “drop hands” basis.

Allen & Overy, representing six former non-executives, was expected on Monday morning to push for a repayment of costs which it claims were racked up during the E&Y portion of the trial.

The society also said last week that it was dropping a significant portion of its claims against Chris Headdon, its former chief executive, following its decision to abandon the E&Y claim.

The decision to walk away from the E&Y claim after spending £30m on the litigation was greeted with anger by policyholders, putting pressure on Vanni Treves, the society’s chairman, to resign. However, Equitable indicated last week that Mr Treves and Charles Thomson, chief executive, were unlikely to quit before the end of next year.