Liquidators for Evergrande Group told a Hong Kong court on May 18 that they are pursuing 57 billion yuan in damages from PwC, alleging the auditing firm was negligent in its work for the failed property developer. The requested amount - about $8.4 billion - would be sought in addition to substantial fines imposed on PwC by regulators in mainland China and Hong Kong following Evergrande’s collapse with liabilities exceeding $300 billion.
Of the 57 billion yuan being claimed, 38 billion yuan is targeted at PwC International, PwC Hong Kong and PwC’s China arm. The remaining portion of the claim is directed at PwC Hong Kong and the China entity only. Monday’s court session focused squarely on the question of how much responsibility, if any, should be borne by PwC International.
Representing PwC International, lawyer Richard Handyside told the court that the global network should not be made a party to the suit. He argued that the Big Four network is comprised of distinct firms and that the Hong Kong and China entities are not subsidiaries of PwC International. Handyside also said there were no communications between PwC International and Evergrande and that PwC International did not owe a "duty of care" in relation to the company’s financial audits.
Adrian Beltrami, counsel for the liquidators, countered that PwC International sits at the top of the group and bears responsibility for setting and maintaining standards across member firms. That disagreement framed much of the litigation on Monday as the court examined the structural and legal links between the international network and the local PwC firms that audited Evergrande.
Fines and reprimands
Evergrande defaulted on its offshore debt in late 2021 and the Hong Kong High Court ordered the company into liquidation in 2024. Chinese regulators penalised PwC’s Chinese arm in 2024 with a six-month suspension and a record fine of 441 million yuan for its audit work on Evergrande. The China Securities Regulatory Commission said PwC Zhong Tian LLP "turned a blind eye" to, and "even condoned," the inflation of Evergrande’s revenues and the issuance of bonds based on those falsified statements.
Hong Kong authorities likewise found that PwC Hong Kong had seriously breached its professional duties in auditing Evergrande. PwC Hong Kong was hit with a HK$300 million fine and a six-month suspension. In addition, it reached an agreement with the city’s securities regulator to earmark HK$1 billion to compensate Evergrande’s independent minority shareholders.
Creditors and asset recovery
Creditors have lodged claims against Evergrande totalling about $45 billion. According to the company’s liquidators, only roughly $255 million worth of assets had been sold as of last August, underscoring the scale of outstanding claims relative to recoveries.
(Exchange rates used in reporting: $1 = 7.8313 Hong Kong dollars; $1 = 6.8130 Chinese yuan.)
Summary
The liquidators of Evergrande have brought a 57 billion yuan damages claim against PwC entities, alleging negligent audits that contributed to the developer’s collapse. Central to the current proceedings is whether PwC International should be held liable alongside its local member firms. The legal claims are presented on top of regulatory penalties already imposed on PwC’s China and Hong Kong practices.
- Key points
- Liquidators seek 57 billion yuan ($8.4 billion) from PwC entities for alleged negligent auditing.
- PvC International’s role is under dispute - liquidators say it oversees member firms, PwC International says there was no duty of care.
- Regulators previously fined and suspended PwC’s China and Hong Kong arms over audit failures tied to Evergrande.
- Risks and uncertainties
- Legal determination of PwC International’s liability remains unresolved - outcomes could affect accountability for global audit networks (impacting the audit and professional services sectors).
- Asset recoveries for Evergrande’s creditors are limited to date - only about $255 million of assets sold against roughly $45 billion of creditor claims (impacting bondholders and credit markets linked to distressed Chinese developers).
The litigation is ongoing and the amounts sought by the liquidators, as well as the regulatory penalties already assessed, highlight the financial and legal ramifications that continue to follow Evergrande’s collapse.