Court to review Evergrande liquidators' challenge to audit watchdog

A Hong Kong court will hear China Evergrande liquidators' challenge to a deal brokered by the city's market regulator on Aug. 19, as parties race to extract funds from what was once China's biggest and most indebted developer.

Liquidators have asked for a judicial review of a HK$1 billion ($127.6 million) fund that PricewaterhouseCoopers' Hong Kong affiliate agreed to set up to compensate shareholders. The Securities and Futures Commission struck the deal in April to settle investigations into the firm's auditing work for the developer, whose downfall was emblematic of China's property crisis and dragged down the country's economic growth.

In a June 12 filing, the liquidators argued the regulator "avoided judicial oversight and misapplied its powers" by bypassing the courts. An August hearing, two months after their request, is a relatively quick turnaround, given some judicial review cases can take years to reach the courtroom. The docket for June 23, for example, includes more than a dozen judicial review cases filed in 2023.

The liquidators told Bloomberg last week they would proceed with their legal action, after the SFC said it would move ahead with the payout plan, brushing aside the legal challenge.

Separately, the liquidators are pursuing their own legal action against the auditor. Last month, they sued PwC International alongside its Hong Kong and mainland China affiliates, seeking 57 billion yuan ($8.4 billion) in damages for claims including alleged negligence and misrepresentation in its auditing of Evergrande.