LESS than two weeks ago, Equitable Life took the embarrassing step of dropping its remaining £700 million claim against its former auditors, Ernst & Young.

That climbdown was followed yesterday by the revelation that the liquidator of the Bank of Credit and Commerce International (BCCI) had sought to agree an out-of-court settlement with the Bank of England, 12 years into an £850 million legal battle.

On the surface, it may appear that legal advisers to Deloitte and Equitable have encouraged lengthy, improbable actions, while all the time lining their pockets with multi-million-pound fees.

The legal teams involved in the BCCI case so far have made comfortably in excess of £100 million, while those working on the Equitable Life action have made about £50 million.

Yet lawyers insist that, with the more complex cases, it is extremely difficult to predict how a court case is going to pan out until it reaches the courts.

One City lawyer said: “These kind of cases are always surrounded with a huge amount of uncertainty. Until you get to court, test out the witnesses and see how your arguments unfold, you cannot get a sense of whether you will succeed. The unfolding of evidence can put a totally different complexion on things.”

Lawyers argue that an out-of-court settlement does not necessarily make the case a waste of time for either side.

As one lawyer put it: “There can often be an element of terror tactics. You say ‘I’ll see you in court’, but you often have to be prepared to go through with it.”

Although Deloitte, BCCI’s liquidator, has asked the Bank of England to discuss an out-of-court settlement before, last month was the first time that it had done so since the case went to trial in January last year. The reasons for the timing of its latest approach are unclear, although analysts noted that Brian Quinn, the former Bank of England head of banking supervision and a key witness, had “categorically” denied the thrust of BCCI’s allegations in his seven-week testimony, which began in June.

Deloitte’s latest approach to the Bank of England came just before Peter Cooke, another former head of supervision and the second key witness, took the stand on September 27.

Meanwhile, analysts said that Equitable Life dropped its case against Ernst & Young because it had become untenable. The insurer had been forced to strike out so many of its charges that there was very little of the case left, they said.

Equitable Life initially had sought more than £2 billion from Ernst & Young, with Vanni Treves, its chairman, declaring his determination to “wipe them out”.

Under the settlement agreement, both sides are to pay their legal costs, estimated at £20 million for the auditors and £30 million for Equitable.

Lawyers said that Equitable’s failure to pay a substantial part of Ernst & Young’s costs hinted at the extent of the auditors’ willingness to end the case.

TRIAL AND ERROR

• This year Elizabeth Forsyth, a former aide to Asil Nadir, the Polly Peck tycoon, was spared being tried for the second time after a new case against her collapsed, costing the taxpayer up to £16 million in legal fees
• In 2003 Andrew Regan, who tried to buy the Co-op, went on trial three times accused of stealing more than £2 million. In the third trial he was cleared, costing taxpayers more than £5 million

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