China Evergrande fiasco: Court stops PwC International's attempt to distance itself from its local arm's doings

A Hong Kong court has rejected PricewaterhouseCoopers International Ltd's attempt to be removed from a multibillion-dollar lawsuit filed by the liquidators of China Evergrande against the accounting firm and its Hong Kong and mainland China affiliates.

Deputy High Court Judge Patrick Fung said the material submitted by PwC International to support its bid to exit the proceedings was insufficient and failed to meet the required standard, according to a judgment delivered on August 26.

The decision could have wider implications for global accounting networks, particularly in cases where their local member firms face allegations linked to corporate misconduct, Bloomberg reported. It may also give liquidators a route to pursue international entities alongside local affiliates in Hong Kong, it said.


The dispute stems from PwC's auditing of Evergrande, once China's largest property developers and now one of the most prominent casualties of the country's property-sector crisis. The developer defaulted on its debt in 2021 and was ordered to be wound up in January 2024.

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Evergrande's liquidators began legal proceedings against PwC entities in March 2024, alleging shortcomings in the audit work and related misrepresentation. The case initially covered the developer's financial statements for 2017 and the first half of 2018, while arguments at a recent hearing also examined audits covering subsequent years through 2020.

The liquidators are seeking a combined 57 billion yuan ($8.5 billion) in damages, making the action one of the largest corporate claims brought before a Hong Kong court. About 38 billion yuan is being sought from PwC International together with its mainland Chinese and Hong Kong affiliates, while a further 19 billion yuan claim is directed solely at the two local entities.

For Evergrande's creditors, the litigation is part of a broader attempt to recover money after the property developer's collapse left a huge debt burden. The liquidators have estimated the outstanding liabilities at around HK$350 billion ($44.6 billion), while recoveries so far have been relatively limited at about $255 million.

The liquidators, Edward Middleton and Tiffany Wong of restructuring firm Alvarez & Marsal, have also been pursuing claims involving Evergrande's former management and other related parties.

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The latest judgment adds to the pressure on PwC's Hong Kong and mainland operations over their work for Evergrande. Earlier this year, the Hong Kong practice agreed to pay HK$1.3 billion in penalties and compensation as part of a settlement with authorities over investigations into its audits of the developer.

The liquidators' efforts also extend to Evergrande founder Hui Ka Yan. A mainland Chinese court last week sentenced Hui to life imprisonment and ordered the confiscation of his assets. Evergrande's liquidators have been seeking to recover assets estimated at about $7.7 billion held by Hui across jurisdictions, although offshore creditors remain concerned that mainland enforcement actions could affect potential recoveries.

Separately, a Hong Kong court has begun considering a challenge by the liquidators to a HK$1 billion arrangement intended to compensate Evergrande's minority shareholders. The dispute could influence the competing claims of shareholders and creditors and, ultimately, the amount available for creditors in the winding-up process.