BTI 2014 LLC v Pricewaterhousecoopers LLP & Anor

Proceedings against a professional adviser are not ordinarily an abuse of process merely because earlier proceedings against other parties decided overlapping issues. The critical question is whether the later claim is a collateral attack requiring the same issues to be re-litigated on the same evidence, or whether it raises a distinct question, including what the claimant would have done if competent advice had been given. A company may in principle recover loss from a negligent auditor where it would have paid a smaller dividend, or no dividend, following a non-negligent audit. The scope of duty and recoverable loss depend on the facts and may require trial.

BTI, as assignee of AWA’s claims, alleged that PwC negligently audited AWA’s 2007 and 2008 accounts. It claimed that the audits caused AWA to pay substantial dividends to its parent, Sequana, which would not have been paid, or would have been smaller, had the accounts properly reflected environmental liabilities and related uncertainties.

In earlier proceedings, Rose J held that the accounts relied on for the dividends were proper accounts for the purposes of Part 23 of the Companies Act 2006. PwC applied to strike out the claim or obtain summary judgment, arguing that it was an abusive collateral attack, that no new material evidence could alter the earlier findings, that the losses fell outside the scope of its duty, and that AWA had suffered no loss.

1. Application dismissed. PwC’s applications to strike out the claim and for summary judgment were dismissed.
2. The abuse-of-process principles summarised in Michael Wilson & Partners v Sinclair [2017] EWCA Civ 3; [2017] 1 WLR 2646 require a close merits-based assessment of the private and public interests. A later claim against a different defendant is not prima facie abusive. Abuse is exceptional where success does not require re-litigation of the same issue on the same evidence.
3. The claim was distinguishable from Laing v Taylor Walton [2008] PNLR 11 and Arts & Antiques Ltd v Richards [2013] EWHC 3361 (Comm); [2014] PNLR 10. Those cases involved attempts to obtain a different result on the same material. BTI’s claim required proof of what the directors would have done if PwC had supplied further information, advice or warnings. It also involved the 2007 accounts and new issues concerning the 2008 accounts.
4. There was a realistic prospect of material evidence not before Rose J. The earlier trial did not determine the propriety of the 2007 accounts, and further issues included OU1 liability, the going-concern assumption and a modelling error.
5. The audit was, in principle, an information case under South Australian Asset Management Corporation v York Montague Ltd [1997] AC 191. The proposed comparison between the dividend actually paid and the dividend that would have been paid on a correct audit nevertheless did not justify summary determination. If non-negligent auditing would have led to higher liabilities and a smaller dividend, the difference could be recoverable.
6. It was arguable that AWA suffered loss. Under Golden Strait Corpn v Nippon Yusen Kubishika Kaisha (The Golden Victory) [2007] 2 AC 353, the value of the lost debt was not necessarily nil merely because Sequana was insolvent at trial. Its value had to be assessed at the breach dates, taking account of the prospects of repayment before insolvency.