Ron Sandler, the executive chairman of Northern Rock, is examining the conduct of the troubled bank's former board to see if they could be sued for compensation.

Adam Applegarth, the bank's former chief executive, was widely blamed for the flawed business model that brought the Rock down.

Mr Applegarth has insisted that the Treasury and the Bank of England were to blame for preventing a rescue bid for Northern Rock by Lloyds TSB. The Financial Services Authority (FSA) has admitted that it was wrong to approve the bank's high-risk strategy.

Lawyers said yesterday that executives who were sued for negligence could fight back in court by trying to call members from these three elements of the regulatory framework - the so-called tripartite regime - as witnesses. They recalled Equitable Life's disastrous attempt three years ago to claim more than £2 billion in compensation from its former directors and auditors, which resulted in defeat for the insurer after five years' of expensive legal wrangling.

A lawyer who represented one of the Equitable directors said: “Equitable's board and the directors involved would say that the case was one of the most scarring experiences of their life. You'd be a very brave new board to bring this kind of case ... Northern Rock's former directors could certainly try to involve the tripartite in it, though whether that would be a good strategy is questionable.”

Clare Canning, litigation partner with Mayer Brown International, who at her previous firm defended Ernst & Young, the auditors, against Equitable, said that Mr Sandler could struggle to prove his case. “The legal issues are that, even if you can establish negligence, can you establish a causative link to any loss?” she said.

A spokesman for Northern Rock said yesterday that the review was considering the bank's previous controls and processes, not the actions of individual directors. Looking at the activities of individuals would call into question the position of Andy Kuipers, who is at present the Rock's chief executive and has served on the board since January 2005. Mr Kuipers was Northern Rock's sales director through its years of rapid growth.

The Treasury is fighting a legal challenge brought by institutional shareholders in Northern Rock over both the Government's decision to nationalise the bank and the level of compensation that is being offered to investors. This is expected to be heard in December.

Shareholders said that Mr Sandler should pursue the FSA and PricewaterhouseCoopers, the bank's auditors, alongside the directors. “This is a clumsy attempt by the Government to divert attention from the failings of the Tripartite Authorities,” one former shareholder said. “Mr Sandler's role is not to indulge in speculative litigation bankrolled by the UK taxpayer.”

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