Evergrande liquidators challenge watchdog’s HK$1 billion settlement with auditor PwC

Hong Kong's securities regulator has defended a HK$1 billion settlement with accounting firm PwC after a developer's liquidators challenged the agreement, arguing it constituted an abuse of power. The Securities and Futures Commission (SFC) maintains it has unrestricted authority to enforce disciplinary actions and protect the interests of investors.

Lawyers for the liquidators sought to have the HK$1 billion agreement with PwC quashed, contending the watchdog's actions were unjustified and prejudicial to China Evergrande and its creditors. The liquidators claimed the agreement prioritized minority shareholders over creditors and precluded the court from assessing the merits of the regulator's requests.

The SFC's legal team countered that the challenge assumed the need to safeguard PwC Hong Kong's assets, a questionable position given the uncertainty of the firm's future solvency. The dispute arose as the liquidators pursued a separate lawsuit seeking 57 billion yuan from three PwC entities, one of the largest claims ever filed in Hong Kong.

The SFC agreed in April to set aside HK$1 billion to compensate Evergrande's minority shareholders, marking the first time the watchdog used a settlement without court orders to address alleged financial regulation breaches. China Evergrande's liquidators, Tiffany Wong and Eddie Middleton, raised concerns about the agreement's potential to leave creditors HK$1 billion worse off.

Jin Pao SC, representing the liquidators, argued the SFC lacked express authority under the Securities and Futures Ordinance to settle disputes this way. The regulator's legal counsel, Paul Shieh, countered that the liquidators' concerns were unfounded, emphasizing that any aggrieved parties could still seek redress from the court.

Justice Russell Coleman reserved his judgment at the end of the five-and-a-half-hour hearing, concluding the judicial review proceedings.