Liquidators of China Evergrande sue PwC over alleged negligence, misrepresentation

Liquidators of troubled property giant China Evergrande Group have launched legal action against PricewaterhouseCoopers, accusing the auditing firm of "negligence" and "misrepresentation" over its work for the company, according to the Financial Times. The publication has seen court documents showing that lawyers representing the liquidators filed court actions against both PwC Hong Kong and PwC Zhong Tian in March.

The liquidators have also filed lawsuits against commercial real estate services company CBRE Group and investment banking advisory firm Avista Advisory Group over valuation reports the firms prepared for Evergrande and its subsidiaries in 2018.

PwC did not comment on the report; likewise, Evergrande, CBRE, and Avista did not immediately respond to a request for comment from Reuters.

Once China's largest property developer, Evergrande was ordered to liquidate by a Hong Kong court in January after it did not give a concrete restructuring plan for its $23 billion worth of offshore debt, which was deemed in default. PwC, the auditor of Evergrande for almost 14 years until it resigned from the company early in 2023, has been under great scrutiny and pressure due to business ties. The mainland authorities had long probed its role in auditing Evergrande.

The seriousness of the legal actions brought against PwC and other advisory firms only underlines the potential financial ruin that could be visited on all if Evergrande were to collapse. As liquidators try to make these firms accountable, the spotlight has simply been brought right back to untangling the deep, double-barrelled issues of financial mismanagement that occurred at Evergrande and wider for the auditing and advisory sectors. This litigation reiterates why there is a need for strict auditing practices to ensure financial advisors are responsible and liable for protection from corporate failures.