Evergrande accuses PwC of negligence: $8.4 billion compensation demanded

The liquidators of Evergrande Group, the Chinese real estate giant that went bankrupt, are claiming $8.4 billion in damages from PwC, accusing the auditing firm of negligence in the performance of its auditing duties. This was the outcome of this morning's hearing at the Hong Kong court, which focused on how much responsibility PwC should assume.

The potential damages would be in addition to the huge fines imposed on the global auditing group by authorities in mainland China and Hong Kong after the collapse of Evergrande, which left behind liabilities of more than USD 300 billion, one of the biggest financial holes in China's real estate sector. Of the equivalent of $38bn, about $5.5bn is being sought from PwC International, PwC Hong Kong and PwC's Chinese subsidiary. The rest is demanded from PwC Hong Kong and the Chinese branch of PwC.

Richard Handyside, a lawyer representing PwC International, argued that the company should not have been a party to the lawsuit because the auditing giant (part of the so-called Big Four) is made up of several companies and the Hong Kong and China entities were not its subsidiaries. There was no communication between PwC International and Evergrande, and the latter had no 'duty of care' in relation to the audits of the Chinese manufacturer.

For his part, the liquidators' lawyer, Adrian Beltrami, argued that PwC International is at the top of the group and is responsible for maintaining the standards of its member companies.

Evergrande defaulted on its foreign debts at the end of 2021 and the Hong Kong High Court. In 2024, the Chinese subsidiary of PwC was sanctioned by Beijing regulators with a six-month suspension and a record fine of 441 million yuan ($65 million) for auditing Evergrande. An investigation by the Chinese Securities Regulatory Commission found that PwC Zhong Tian LLP had 'turned a blind eye' and 'even tolerated' Evergrande's manipulation of revenue data and bond issuance based on the same falsified statements.