A Bermuda-based reinsurance company has begun a High Court action for some $25 million (€18.4 million) damages against three Deloitte & Touche accountancy companies, including Deloitte & Touche Ireland, for losses alleged to have resulted from the withdrawal of their auditing services.

ESG Re, based in Bermuda, has sued Deloitte & Touche LLP, an accounting firm with its headquarters in Connecticut, US; Deloitte & Touche Bermuda and Deloitte & Touche Ireland, with offices at Earlsfort Terrace, Dublin.

It is claiming damages under a number of headings, including negligence, breach of contract, misrepresentation and breach of fiduciary duty.

ESG claims its losses resulted from the defendants' wrongdoing and especially from the manner of the defendants' resignation as auditor for ESG in November 2002 and the withdrawal of its audited report. As a result of the actions of the defendants, ESG claimed its shares were delisted from the US Nasdaq index, its reputation was damaged and contracts were cancelled.

All three defendant companies deny the claims.

The case opened before Ms Justice Mary Finlay Geoghegan in the Commercial Court of the High Court yesterday and is listed to last 10 weeks.

Opening the case, Paul Gallagher SC, for ESG, said Deloitte and Touche's "sudden resignation" amounted to "a serious lack of professionalism".

Mr Gallagher said ESG and its subsidiaries provided services such as insurance, reinsurance and insurance management in a number of countries. Its shares were traded on the Nasdaq index from December 1997 to March 2003.

In addition to being ESG's auditors, Deloitte & Touche provided a number of services to ESG such as tax advice, actuarial services, ensured that the companies reports complied with US standards and general accounting advice, he said.

Deloitte & Touche were "significantly involved" with ESG from 1997 until 2002 and his clients had paid Deloitte and Touche $5.6 million in fees.

An issue arose in relation to the conversion of foreign currency into dollars which resulted in the companies annual accounts for 2001 being "restated", Mr Gallagher said.

While this was resolved in August 2002, the advice given in relation to the restatement was "wrong" and did not satisfy the US authorities, to whom ESG had to file reports on a regular basis. The matter of the wrong advice was not resolved and, in November 2002, Deloitte and Touche suddenly resigned as auditors.