Week 13

Day 48 – Monday 11th July 2005

Miles for ELAS continues to cross-examine Ms Page.

The usual hypotheticals. Ms Page takes the line that if you want to imagine a hypothetical situation then, given whatever event is supposed to have taken place, you would have discussed it with your fellow Board members and, whatever you might personally feel, the outcome is going to be pretty unpredictable. Some might regard that as a bit evasive as each Director is asked the same question so that an overall picture can be built up.

She is fairly canny in responding to these questions.

Page 55: Sher for Wilson cross-examines Ms Page.

Page 72: Mumford for Ranson cross-examines Ms Page.

Page 85: Headdon cross-examines Ms Page.

Page 101: Headdon is trying to emphasise that ring-fencing has always been considered as valid all along and that Mr Justice Waller just happened to mention it in the Court of Appeal. He ignores earlier evidence that Denton’s had raised doubts about ring-fencing from early in the Hyman litigation.

Page 105: Ms Page believes that telling the policyholders about the worst case Scenario 6 would have led to a run on the bank. She does not seem to be worried about misleading policyholders and potential policyholders who invested more money after the Nash letter of 1st February 2000.

Page 106: Hapgood for E+Y cross-examines Ms Page.

Page 108: Page spells out her commitment to mutuality.

Page 110: But she felt “straitjacket that the regulators were imposing did not fit with mutuality”.

Page 139: A general argument is developed that FFA (Fund for Future Appropriations) was irrelevant in bonus discussions – it was always large enough to pay out the maturities due in the next year. No mention of whether it was necessary to have the money to back up the bonuses that were being declared.

Page 173: Vaughan re-examines his client Ms Page.

Day 49 – Tuesday 12th July 2005

Sher calls his client Wilson.

Wilson was a non-executive director from 1st April 1994 to 30th June 1999. Earlier in the trial it was suggested that he might be critical of the executive Directors in that they kept him in the dark. Nothing of this comes out in to-day’s transcript. It will also be remembered that there was criticism of Wilson by the nominations committee who queried his performance as a Director in that he was a fish out of water. Generally he comes across as having not much idea or understanding of what was going on. He had left before the critical Nash letter of 1st February 2000.

Page 3: Milligan for ELAS cross-examines Wilson.

Page 7: Wilson suggested to Ranson, in 1995, that there should be a finance director instead of everything been dealt with by actuaries. Naturally Ranson did not think this necessary.

Page 9: Wilson queried the use of derivatives. Thomas told him that his query had cost the Society about half a million – presumably though this meant his query had been taken seriously.

Page 62: Prior to September 1998 he had no understanding of the DTBP and he continues to give the impression that he was generally rather clueless about what was going on.

Page 96: Wilson suggested at a Board meeting on 23rd September 1998 that the DTBP was reneging on a guarantee. This made David Price (who is too ill to give evidence?) quite angry and nobody else supported Wilson.

Page 146: He clearly has not thought through how a smoothing policy should work as he thinks it is not necessary for assets ever to exceed policy values or that such a policy should fluctuate about a norm.

Day 50 – Wednesday 13th July 2005

Milligan for ELAS continues to cross-examine Wilson.

All just hypotheticals. Why anyone could think that anything useful would emerge from cross-examining Wilson escapes me.

Page 49: Vaughan for Miss Page cross-examines Wilson.

Page 50: Derivatives: Sedgwick backed Wilson so they stopped using derivatives but only for a time.

Page 58: Mumford for Ranson cross-examines Wilson.

Generally Mumford is out to show there was no conflict between Ranson and Wilson.

Page 73: Wilson says that if he had been shown the complaints about the DTBP he would have called for legal advice.

Page 93: Headdon cross-examines Wilson.

Page 118: Hapgood for E+Y cross-examines Wilson.

Page 130: Hapgood points out that Wilson could never have known about the amount of outstanding accrued terminal bonus so comparing it to the FFA was just not available to him.

Day 51 – Thursday 14th July 2005

Hapgood for E+Y continues to cross-examine Wilson.

Page 2: Hapgood quotes Wilson: ‘the reassurance treaty … a bit of nonsense to meet a bit of nonsense.’

Page 11: Wilson did not understand too much and there is consequently much confusion.

Page 14: Wilson’s level of understanding of what is going on is not very high and I must say it is difficult to blame him:

7 Q. All right. Can you tell me, Mr Wilson, why are you

8 adducing hostile expert evidence against Ernst & Young?

9 A. Sorry, why am I?

10 Q. Why are you calling hostile expert evidence against

11 Ernst & Young?

12 A. I am not actually quite sure that I am actually -- are

13 you saying that you are part of the contribution claim?

14 Q. Well, there is only one contribution -- or there are two

15 contribution claims in these proceedings, one which you

16 launched against Ernst & Young, and the other which

17 Ernst & Young have had to launch against you

18 responsively.

19 A. But can I just make the point that you said to me

20 yesterday, "You understand my clients are being sued for

21 a lot of money", and I have the greatest sympathy with

22 that, but I could have added, well, so am I, and I am

23 being sued for something that I did not even know

24 anything about.

25 Q. Yes, but Mr Wilson, I am asking you about a quite

16

1 separate aspect of this litigation, which is that you

2 have launched a hostile attack against Ernst & Young,

3 and you are calling an expert to support that case,

4 Mr Whitworth.

5 A. I have called expert evidence, you know, whether that

6 offends you I am frankly not sure. Presumably it does.

7 Q. Well, it is not a question of whether it offends me

8 personally. The fact is that your expert is condemning

9 Ernst & Young in negligence. I want to go on and

10 suggest to you that you are ill-disposed towards

11 Ernst & Young.

12 A. I am?

13 Q. Ill-disposed towards Ernst & Young.

14 A. I am not ill-disposed towards anyone, I am just feeling

15 very sorry for myself, the fact that my life is in

16 absolute ruins over something that I absolutely knew

17 nothing about.

18 Q. I mean, the truth is that your attitude is, if you are

19 going to be found liable, you are determined that

20 Ernst & Young are also going to be found liable.

21 A. I do not think I am -- I have been advised, I think

22 I said the other day --

23 Q. I think you had better not disclose the legal advice.

24 MR JUSTICE LANGLEY: Let him finish his answer. You carry

25 on, Mr Wilson.

17

1 A. I have been advised to run a contribution claim, and

2 I am assuming that is against the Society, and as I said

3 two days ago, I had never heard of a contribution claim

4 in my life, but that is what my advisors recommended me

5 to do.

6 MR HAPGOOD: Do you not understand, you are doing two quite

7 different things? As against the Society, you are

8 relying on alleged negligence of the management as

9 constituting contributory fault of the Society itself.

10 That is one thing you are doing.

11 A. In the event that his Lordship finds that I am guilty,

12 then what I am saying is, that is a bit rich, I am

13 guilty of something that I absolutely was completely

14 unaware of.

and what about this? (page 37)

17 Q. As an abstract proposition, it may be so, but the point

18 I want to put to you is that the financial tool used by

19 the Society to assess its ability to withstand adverse

20 market conditions was the solvency matrices buttressed

21 by the traffic light system, all of which is based on

22 the regulatory return.

23 A. Yes.

24 Q. That is right, is it not?

25 A. Yes, I am not wishing to quibble, but I heard the use of

38

1 the traffic lights the other day, and that is not

2 something that I am -- being slightly colour blind, I am

3 not really into traffic lights, but I understand the

4 point you are making.

Page 60: But Wilson does have a different view on getting independent actuarial advice:

11 Q. Lastly, it has been suggested that the Society would

12 have sought external actuarial advice; this is quite

13 different from the second opinion which you mentioned

14 the other day, because that was an opinion, I think, if

15 you felt no one had been able to explain sufficiently

16 the need -- or the alleged need for this additional

17 provision.

18 A. I am a big second opinion person, and I had picked up

19 the nuances that such things are not very popular within

20 the Society, but if in doubt, I go and ask someone else.

7 Q. This resort to external advice is not about a dispute as

8 to the existence of the provision, we have moved on from

9 that point in this hypothetical world, and it is being

10 suggested that the directors had come to the view that

11 Mr Headdon was providing advice which they thought

12 inadequate, do you understand what I am saying, that is

13 to say as to what to do.

14 A. If I could just answer that in my own words, I would

15 agree with the first sentence that it would be quite

16 alarming but at the same time, Mr Headdon was giving the

17 impression that he had taken everything carefully into

18 account.

19 Q. Can I put it this way: if you were out of your depth and

20 Mr Headdon was in his depth, you are not going to start

21 saying, "Let us get a second advisor, an outside advisor

22 to tell us whether Mr Headdon is right".

23 A. I appear to be arguing all the time, I am sorry. I did

24 hear Mr Headdon say that he would never have taken any

25 help from anyone else, you know, that is just slightly

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1 strange to me, but at the end of the day, everyone had

2 great confidence in him, including me, and it would have

3 been difficult to be saying, "Well, you know, we do not

4 believe you", because we have no basis on which to be

5 saying that.

6 Q. Exactly, and having no basis for saying it, you could

7 not have made a credible argument seeking external

8 advice.

9 A. That is right, but having said that, in my own business,

10 we would take external advice instantly and get very

11 annoyed with someone that did not want to.

12 Q. But the difference is, you are an expert, and obviously

13 a very successful man in your own business, whereas we

14 are now in the refined world of the actuaries, which is

15 unknown to you.

15 A. I accept that.

But to me Hapgood’s argument is not sound and Wilson’s instincts are correct.

What is special about the world of actuaries that they should not get a second opinion?

Page 63: Sher re-examines Wilson.

Page 87: Judge Langley bins the Burgess Hodgson report.

Page 91: Judge Langley calls Peter Martin.

Page 92: Miles for ELAS cross-examines Peter Martin.

Director January 1984 until April 2001.

Page 93: The Directors are sticking together:

14 Q. In your witness statement, you make some comments about

15 Mr Ranson, and I think you respected him as an actuary.

16 A. As a man.

17 Q. But you found him somewhat arrogant and old-fashioned?

18 A. No, neither of these. Certainly not arrogant; sometimes

19 old-fashioned, perhaps,

and page 95:

22 What you were referring to in that paragraph as

23 a row was a meeting that took place in November 1993.

24 A. It is not my note. I do not recall using those words,

25 but I am happy enough with them, in a jovial sense.

95

1 Q. It does not sound very jovial, just looking at the note.

Well we are not getting the critical fireworks that we might have expected from Martin earlier. A change of policy?

Page 149: But Martin cannot resist a dig at Sclater:

14 Q. And that is in part because others on the board were

15 looking to you on the basis of your legal experience, is

16 that right?

17 A. I find this quite difficult. I really do not know,

18 because if you look at the evidence which John Sclater

19 gave here, he seemed to have taken the view that

20 I really knew nothing except a bit about aircraft

21 accidents, so why would they have asked me about

22 anything? I do not know.

Page 160: At close of play Hapgood for E+Y drops a bombshell:

17 MR HAPGOOD: Yes, it was sent yesterday. My Lord, that

18 letter was sent in the context of a review by

19 Ernst & Young of where we have got to in this

20 litigation. We take the view that the case against

21 Ernst & Young is utterly hopeless, in light of the

22 evidence of the directors. We therefore see no need to

23 call any factual evidence, and a decision has been taken

24 today not to do so. We will, however, be calling our

25 expert evidence.

Basically what he seems to be saying is that the evidence of the Directors is that even if Ernst & Young had acted differently the Directors would not have done anything differently by allocating different bonuses or selling the company and therefore no damage has resulted. They are saying therefore there is no case to answer.

I would say that I have not studied the pleadings which go to several re re re amendments in sufficient detail to be able to say where this leaves the case.