Accountancy firm PriceWaterhouseCoopers (PwC) has estimated it will incur legal costs of more than €30.1m in defending a claim for €800m brought against it over its auditing of Quinn Insurance Ltd (QIL).
The case arises from QIL being placed in administration in June 2010 and the fact more than €1.2bn has so far been drawn down from the State’s Insurance Compensation Fund (ICF) to meet the deficit between the firm’s assets and liabilities.
In a pre-trial application, PwC has expressed concern whether QIL can pay PwC’s legal costs if QIL loses and it wants court orders requiring QIL provide security for those costs.
QIL’s financial statements for 2014 showed a balance sheet deficit of €1.21bn and QIL entirely depends on the ICF to continue as a going concern, PwC said in court documents.
The fund’s support depends on decisions outside QIL’s control, particularly by government and, even if the Government continues to support the ICF, QIL is also dependent on a High Court judge allowing it to draw down additional monies from the ICF, PwC said.
In the QIL action, initiated by the administrators in 2012, it is alleged, had PwC identified problems with QIL’s claims reserves between 2005 and 2008, it would have been apparent to QIL its business was in “a more parlous state” than it believed and certain actions would have been taken by QIL and/or the financial regulator.
PwC was the auditor of QIL for the years ending 2005, 2006, 2007 and 2008 and the administrators have alleged breach of contract and breach of duty in its auditing.PwC should have known QIL’s relevant financial statements and regulatory returns did not truly reflect the state of its affairs for those years, they claim.
PwC denies the claims and has filed a full defence.
PwC contends it has no liability, that QIL’s directors were responsible for its management and strategy and that the company failed to provide PwC with complete and truthful information.
It also claims any losses incurred by QIL due to its continued trading were not caused by QIL’s reliance on PwC but were due to decisions taken by QIL itself and/or the actions of the administrators.
PwC’s security for costs application was mentioned before Mr Justice Brian McGovern at the Commercial Court yesterday and he agreed to list it on May 30.
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