PricewaterhouseCoopers International (PwCIL) will remain a defendant in litigation brought by the liquidators of China Evergrande Group after a court in Hong Kong rejected its attempt to be removed from the case.
The ruling allows the liquidators to proceed with a 57bn yuan claim for damages against PwCIL, PwC Hong Kong and PwC’s mainland China arm over allegations of negligent auditing work.
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According to a Reuters report, PwCIL faces a potential liability of up to 38bn yuan under the action.
The lawsuit was initially lodged in a Hong Kong court in May this year by the liquidators managing the property developer’s wind-up.
During a hearing, PwCIL sought to be removed from the action.
The company argued that it held no direct ties to Evergrande, had never engaged in communication with the company, and did not count the Hong Kong and mainland China entities as its subsidiaries.
However, in a judgment handed down on 26 August, the court ruled that PwCIL did owe “a duty of care” to Evergrande.
Deputy High Court Judge Patrick Fung wrote: “I take the view that not all the facts are known and, hence, it is crucial that there should be discovery of documents and interrogatories administered, which I believe will throw more light on the case.
“In such circumstances, the Plaintiff should not be driven from the judgment seat without a trial.”
Responding to the outcome, the liquidators welcomed the decision, acknowledging that whilst the ruling does not resolve the final merits of the allegations, they will proceed with investigating Evergrande’s affairs and seeking financial recoveries for creditors.
PwCIL stated that it disagrees with the judgment whilst respecting the court.
When approached by International Accounting Bulletin, a PwCIL spokesperson said: “While we respect the Court’s decision, we disagree with it.
“PwCIL is the coordinating entity within the PwC network and has never provided any services to Evergrande or had any relationship with the company.
“PwCIL is confident that the claims against it have no merit. We are reviewing the Court’s decision and evaluating our legal options.”
The Hong Kong High Court placed Evergrande into liquidation in 2024 following defaults across the majority of its $300bn liabilities. It appointed Alvarez & Marsal’s Edward Middleton and Tiffany Wong to handle the process.
