The New Zealand arm of PricewaterhouseCoopers (PwC) is being sued for $1.58 billion by members of the Brierley group of companies, which accuse the accounting firm of providing "wrong" advice.
A High Court judgment this week, released to the Herald, outlines the litigation which stems from BIL NZ Treasury, GL Management PTE, GL and Brierley Holdings engaging PwC in mid-1998.
The companies claim for the 20 years to 2018, each acted on advice received from PwC about how to use substantial historical losses of $1.58b, Associate Judge Kenneth Johnston's ruling reads.
"These would of course only be of any value to them if and when they generated income against which they could be offset," the judge said. "At the time that the plaintiffs engaged PwC, there appears to have been no obvious prospect of that."
Judge Johnston said the companies needed to find a way of generating income, internally or by the acquisition of a new, income-generating business.
"In the meantime, they needed to ensure that the losses could be carried forward year on year until they could be utilised. It was in relation to this issue - how these losses could be carried forward - that the plaintiffs say they sought advice from PwC."
The group of companies said PwC provided both initial advice and ongoing advice during the two decade-long period, and it was only during the 2019 financial year "it became apparent that the advice that PwC had provided was wrong, and that as a result the opportunity to utilise the tax losses was lost", the judgment reads.
PwC denies liability in the case, which sees the companies seeking the potential value of the tax losses.
The Big Four accounting firm argued the arrangements in place were developed by the companies' internal advisers and any advice was sound.
"Even if its advice had not been correct, the plaintiffs' claim is for the loss of a chance and they will not be able to prove that at any point they were able to generate income which would have enabled them to avail themselves of the chance," Judge Johnston said, detailing PwC's position.
The judge was asked to rule on two opposed interlocutory applications by both parties for orders requiring each to further particularise its defence and claim, and provide additional discovery.
"There is thus a delightful symmetry between the parties' applications and oppositions," Judge Johnston said.
He ordered both parties to provide further particulars, including for PwC to search the email in-boxes of six staff for relevant material.
"In my judgment, the plaintiffs are entitled to discovery of these email in-boxes. This is a significant claim in which the plaintiffs are seeking to recover over $1.5 billion," the judge said. "Furthermore, with the benefit of modern search techniques, it does not strike me that it will be unduly burdensome for PwC and its solicitors to carry out a targeted electronic search of these email boxes and discover any genuinely relevant material that that throws up, if indeed it throws up any such material."
Judge Johnston said both parties "enjoyed a measure of success" and in those circumstances he held the view costs should be left to lie where it falls.
But he reserved costs until hearing from counsel for both parties.