South African Court Rules: PwC to Pay $14m to NAK Over Audit Failure Charges
In the decade-long court proceedings filed by the National Potato Co-operative (NAK) against its former audit firm PricewaterhouseCoopers and others over charges of audit failure, the cooperative has now partially succeeded in seeking the defendants to pay for its losses. The court’s ruling, $14 million (ZAR100 million) to be received by NAK.
The case, filed by NAK in December 1999 before a South African court, seeks $113 million (ZAR800 million) from the defendants in damages plus interest. However, Judge Chris Botha dismissed NAK’s claims over other write-offs for the loss of interest and debts of subsidiaries and the loss of capital from irregular payments.
Botha said PricewaterhouseCoopers, Hoek & Wiehahn and Wiehahn Meyernel, were only responsible for damages that happened in two years from their last audit report. He further ruled that the audit failure of Price Waterhouse Meyernel and Price Waterhouse occurred only within one year following September 23, 1997.
Determination of the extent of damage on the part of NAK is still subject to further considerations and agreement between the two parties, Botha said.
Other than PricewaterhouseCoopers, the audit failure charges also indict Hoek & Wiehahn, Wiehahn Meyernel, Price Waterhouse Meyernel and Price Waterhouse, whom NAK claimed to have failed to thoroughly look into its finances and write-offs in the debtors books for 14 reporting periods beginning 1984 until 1998.
PricewaterhouseCoopers had challenged the claims of NAK before, saying it was a legal financing that they engaged with, meaning NAK financed its complaints through an agreement entered into with a third party funding company that treated the litigation as an investment.
In exchange, the funder would charge NAK a certain percentage of the litigation funding if the case would go successful.
However, in June 2010, an interlocutory decision released by the court has ruled to dismiss the claims of PwC on grounds that the funder was a co-plaintiff, thus formed part of the trial.