Troubled insurer Equitable Life is to learn if it can go ahead with a £2.6 billion legal claim against its former auditor, Ernst & Young.
Equitable is claiming that the accountancy firm played a major role in bringing the 241-year-old insurer to the brink of collapse by failing to warn it of the dire financial consequences of its exposure to expensive guaranteed pension annuities.
If successful, Equitable's damages claim could bankrupt Ernst & Young.
Last month, Mr Justice Langley heard Ernst & Young's plea that the case should be dismissed, arguing that it was not responsible for bringing Equitable to its knees.
Equitable's directors, chaired by lawyer Vanni Treves, are suing Ernst & Young for alleged professional negligence, claiming that it failed to provide proper advice as Equitable's auditor during the Nineties.
The writ alleges that the business could have been sold for £2.9 billion four years ago had the former auditor warned it earlier of its expensive guaranteed annuity liabilities and allowed the mutual to take action to put matters right.
Instead, Equitable closed to new business in 2000 and was sold to Halifax for an initial £500 million.
A legal source said: 'Whatever the outcome, whether it favours Ernst & Young or Equitable Life, we expect the decision will probably go to appeal. There is a possibility that the result will not be clear-cut.'
A date for Equitable Life's case against Ernst & Young has been provisionally set at the High Court for the second half of 2004.
The current board is also suing 15 former Equitable Life directors for more than £3 billion for alleged breach of duty.
The case was lodged against them in the High Court almost a year ago.
Treves said at the time that the directors' actions, or inactions, between 1993 and 2000 'caused many policyholders substantial loss of benefits'.
