IF Vanni Treves had ever contemplated returning to his former career as a lawyer once he had engineered an exit from the chair of Equitable Life, he had better think again. Yesterday’s settlement with Ernst & Young was deeply embarrassing for those at Equitable who had so determinedly pursued it.

The auditor’s barrister may have been indulging in a little court room hyperbole when he described the decision to abandon the case as ‘the biggest climb-down in English history’ but it was certainly an expensive one. Mr Treves and his colleagues have spent nearly £30 million of their policy holders money on taking the case to this stage.

Admittedly, had the result been different and Ernst & Young been found liable for the £2 billion that Equitable was claiming, then Mr Treves would have been hailed as a hero. But E&Y’s senior partner, Nick Land, had made it clear that he believed there was too much at stake for him to take the usual route and agree an out of court settlement with his pursuers.

His counsel claimed in court that Equitable was only pursuing the auditors because they had ‘deep pockets’. But in July it dropped the largest part of its claim against the firm. Yesterday, Equitable was still maintaining that it felt that the auditors had been negligent but this assertion was less than convincing given the decision to drop the case.

The reason given, that directors might have acted the way they did irrespective of the auditor’s intelligence, would certainly have had some impact on the damages but had Equitable proved its case against E&Y, it might at least have been able to cut back on the bill for costs.

However, Mr Treves is now determined to run up more legal bills continuing his case against the 15 former directors of the business. Policyholders must ask whether this is really worthwhile.

Undoubtedly, the directors failed the policyholders. Wrong decisions were taken at Equitable and inappropriate policies pursued over a prolonged period. The policyholders are now suffering horribly diminished returns as a result. Yet while the directors must take some responsibility, is it really worth pursuing them through a protracted legal action? The non-executive directors were mostly people who did not have the knowledge to ask the questions that needed to be asked. Jennie Page, the civil servant who was mistakenly put in charge of the Dome was as unlikely to spot the dangers in Equitable’s interpretation of what constituted ‘guaranteed’ bonuses as was Peter Davies, who had a less than glorious stint as the Lottery regulator.

The executive directors are more directly culpable but their reputations are now ruined and so they have, to some extent, paid the price for the misery they have inflicted on so many of Equitable’s investors. If they had the deep pockets of Ernst & Young, then it could be argued that Mr Treves had a duty to continue with the legal action but the fact is that only one of the 15 is thought to have significant assets. David Bowden, the former chairman of Wilson Bowden, the property group, could find the funds to pay Equitable’s costs if the insurer were to win.

But if the court made a significant damages award against the former directors, it would not make a vast difference to policyholders and it could drive a collection of individuals into bankruptcy. That does not seem a great deal for Mr Treves to strive for at the risk of running up another hefty legal bill.

There were plenty of people responsible for letting down Equitable policyholders, including the government and the regulator. But revenge will not repair the damage.

EU needs new reform model

AS PRESIDENT of the European Union, the Government has organised a two-day conference in Edinburgh on better regulation in the union. One day in Brussels ought to have done just as well but that would doubtless have broken regulations stipulating that the presidency should spread gravy round the country and that top officials and business folk do not turn up without a night or two at a five-star hotel somewhere interesting.

The risk is that such conferences, like the one that spawned the EU’s Lisbon agenda, will match fine words with no action. Like the notion of subsidiarity, better regulation is something that everyone in Europe can agree in principle and ignore in practice.

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