The High Court has refused PricewaterhouseCoopers’ application to require Quinn Insurance Ltd, which is under administration, to provide security for PwC’s costs in a €900 million damages action. The ruling concerned only whether PwC was entitled to security in principle; the court did not decide how much security would be required or the merits of the underlying claim.
Quinn Insurance alleges that PwC breached contractual, professional and statutory duties while auditing its financial statements and regulatory returns for 2005 to 2008. The claim concerns alleged underestimation of insurance reserves and guarantees given by Quinn subsidiaries over debts of the wider Quinn Group. Quinn says the alleged failures contributed to losses and its eventual insolvency. PwC disputes liability and causation.
Justice Robert Haughton found that PwC had raised prima facie defences across the claim. These included arguments that responsibility for preparing the accounts and estimating reserves rested with Quinn and its actuaries, that PwC’s audit work met applicable standards, and that Quinn had failed to disclose relevant information. The judge stressed that this interlocutory assessment did not determine which side’s evidence or legal arguments would prevail at trial.
The judge also accepted credible evidence that Quinn might be unable to pay PwC’s costs if the firm succeeded. PwC relied on a costs estimate of more than €30 million, exclusive of VAT. The court noted Quinn’s insolvency, its reliance on Insurance Compensation Fund support and the absence of assurances that funds had been set aside for a possible costs order. Further funding might be sought, but would require approval; that possibility did not displace the evidence of Quinn’s present inability to pay.
However, Haughton found on a prima facie basis that the alleged wrongdoing could have contributed to Quinn’s insolvency. He accepted that the company’s account of what its board or the Financial Regulator might have done if alerted to the alleged reserve deficiencies and guarantees was a reasonable hypothesis supported by known facts. He did not decide whether those actions would have occurred or whether PwC caused the claimed losses.
The judge also found that the case raised issues of exceptional public importance. He cited the collapse of a large insurer, the continuing 2% levy on insurance premiums to recoup public funding, and questions about auditors’ obligations within the insurance regulatory system. Exercising his discretion on both grounds, he refused PwC’s application for security for costs.