Ernst & Young attacked Equitable Life saying the mutual life assurer is "pouring its policyholders’ money down the drain" as it launched a lawsuit on charges of negligence against its former auditors. The trial in which Equitable is seeking damages of £2.05 billion from E&Y and £1.7 billion from former directors will start today in London’s High Court.

The spectacular action will be indeed expensive. The estimates of the total cost of the litigation that accuses all defendants of negligence and/or breach of duty range between £85 million and £100 million.

"Today marks the beginning of a case that should never have been brought. We believe by taking this action Equitable is pouring its policyholders’ money down the drain’’, said Nick Land, E&Y’s chairman.

"Nothing that E&Y did caused Equitable’s problems. There is nothing we could have told them that they did not already know. There was no black hole, no fraud and no money lost."

Vanni Treves, Equitable’s chairman, has a different opinion and claims that policyholders backed the legal action. "Based on legal advice, we have a duty to bring these claims," he said. "We will now do our talking in court."

E&Y is alleged to have acted negligently in preparing Equitable’s 1999 and 2000 annual accounts, which caused the collapse of Britain’s oldest insurer in 2000.