A team from Bird & Bird has successfully represented the bankruptcy estate of the Gothenburg-based high-tech company Prosolvia in a landmark dispute against the company's former auditor, Coopers & Lybrand, now part of PricewaterhouseCoopers (PwC).
The proceeding was a consequence of the auditors acting negligently, as held by the Swedish Court of Appeal, in the audit of the company's accounts, management and communication of information to the public for the financial year 1997. The inadequate audit contributed to the company's bankruptcy at the end of 1998. Proceedings were originally brought against the auditors in 2001. In October 2008 the District Court found that the accounts did not conform to generally accepted accounting standards and that the accountants were negligent when they executed the audit. The negligent audit was to be considered as one of several causes of the bankruptcy, however, it did not seem to be “clearly more probable” that this cause was the explanation of the bankruptcy, rather than the alternative explanations submitted by PWC. In consideration of this lack of a causal link there was, in the opinion of the court, no basis to award damages and the claim was dismissed.
Bird & Bird appealed this decision to the Court of Appeal and on 15 August 2013 the court ruled that PwC had to pay 890 million SEK (103 million EUR) in damages to the bankruptcy estate of Prosolvia. In addition, PwC is obliged to pay the litigation costs of 112 million SEK and interest of 1,1 billion SEK – a total of 2,1 billion SEK (250 million EUR). This ruling has made this the largest damages claim ever in Sweden.
Michael Frie, partner, Bird & Bird said: "The decision is a great success for our client and us. Just like the District Court, the Court of Appeal found that PwC's audit of Prosolvia's accounts and management did not conform to generally accepted auditing standards. But the Court of Appeal has also ruled that the negligent audit caused the company's bankruptcy and that Prosolvia would have survived if the audit had not been negligent. We are thrilled to have achieved such a positive outcome for our client after almost 12 years in court."
The Bird & Bird team was comprised of partners Michael Frie and Ulf Mellqvist together with associates Maria Grufman, Jessica Carlqvist, Arvid Bard Bringeus, Peter Eriksson and project assistant Johanna Lindqvist.
For more information in Swedish, please see the press release issued by the Swedish Courts: http://domstol.se/Om-Sveriges-Domstolar/Pressrum/Nyheter-och-pressmeddelanden/Hovratten-for-Vastra-Sverige-domer-ut-skadestand-i-tvist-mellan-Prosolvias-konkursbo-och-revisorerna/