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Enoch Yiu

The liquidators of China Evergrande Group are in a legal battle with the city’s market regulator over its settlement agreement with PricewaterhouseCoopers (PwC) Hong Kong, claiming that the agreement leaves creditors HK$1 billion (US$128 million) worse off, according to a court document released on Monday.
The writ filed with Hong Kong’s High Court seeks leave to apply for a judicial review of the Securities and Futures Commission’s (SFC) agreement with PwC Hong Kong and an order preventing the regulator from taking further steps to implement the settlement. The document was filed on Friday and became public on Monday.
Following inquiries by the South China Morning Post, PwC Hong Kong and the SFC said they did not wish to comment.
In April, the SFC reached an agreement with PwC Hong Kong to pay HK$1 billion in compensation to Evergrande’s minority shareholders, citing serious breaches of the auditors’ professional duties. By reaching the agreement, PwC did not admit any liability.
The liquidators – Tiffany Wong Wing-sze and Eddie Middleton of Alvarez & Marsal – wrote to the SFC on May 8, identifying their concerns over the agreement and urging the commission not to take any further steps to implement it. However, the SFC rejected the requests a few days later, the writ said.
The liquidators are seeking a judicial review because, they argued, “China Evergrande Group’s creditors are made HK$1 billion worse off by the agreement”. PwC Hong Kong’s assets are unlikely to cover both the agreement with the SFC and the separate lawsuits by the liquidators, it added.
“In entering into the agreement, the SFC failed to consider the interests of China Evergrande Group and its creditors, and specifically, did not consider whether the agreement would unfairly prejudice China Evergrande Group and its creditors,” the writ said.
The liquidators are seeking 57 billion yuan (US$8.4 billion) from three PwC entities in one of the largest corporate lawsuit claims ever filed in Hong Kong, according to a court hearing last month.
The liquidators sought a judicial review on the grounds that the SFC should seek court orders under the Securities and Futures Ordinance 213, which would have paid damages to Evergrande shareholders, instead of accepting the agreement struck with PwC Hong Kong that provided compensation without any admission of liability.
“The applicant’s primary case is that the SFC had no statutory power to enter into the agreement,” the writ said.
PwC Hong Kong was not a regulated person under the Securities and Futures Ordinance; therefore, the SFC lacked the statutory basis to reach an agreement that compromised disciplinary action, it added.
Evergrande’s liquidators said they would seek an oral hearing if leave to apply for judicial review is not granted.
In announcing its agreement with PwC Hong Kong, the SFC said that Evergrande’s annual reports and results for 2019 and 2020 contained materially false or misleading information. The developer inflated revenue and profits by recognising income from property sales before projects had been completed and delivered to buyers.
Evergrande, now in liquidation, overstated its 2019 audited revenue by 44.79 per cent, or 213.9 billion yuan (US$31.59 billion), and its 2020 revenue by 69.03 per cent, or 350.2 billion yuan, the SFC said in April. It reported profits of 33.5 billion yuan in 2019 and 31.4 billion yuan in 2020, but these figures should have been losses of 7.12 billion yuan and 19.9 billion yuan, respectively.
Evergrande founder Hui Ka-yan, once among China’s ­richest businessmen, pleaded guilty in April to charges including embezzlement and corporate bribery, according to the Shenzhen Intermediate People’s Court.
Formerly the world’s largest ­developer by sales, Evergrande collapsed under liabilities exceeding US$300 billion, leaving creditors facing heavy losses.
The High Court ordered the winding-up of Evergrande in January 2024, and appointed Eddie Middleton and Tiffany Wong Wing-sze, managing directors of consulting firm Alvarez & Marsal, as joint liquidators.


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Failed developer’s creditors have been made HK$1 billion worse off by the agreement, liquidators say


Failed developer’s creditors have been made HK$1 billion worse off by the agreement, liquidators say.


China

Hong Kong

Tiffany Wong Wing-sze

China Evergrande liquidators seek judicial review of SFC agreement with PwC Hong Kong

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Failed developer’s creditors have been made HK$1 billion worse off by the agreement, liquidators say

Failed developer’s creditors have been made HK$1 billion worse off by the agreement, liquidators say