The London High Court has ordered PricewaterhouseCoopers UK (PwC) to pay damages of £427,000 ($648,000) over its valuation work of Ryhurst Limited, although the penalty was significantly lower than the £35m originally sought.
Derek Dennard, Michael Gearon, Graham Turner and Colin Peter Dixon, who set up Ryhurst Limited as a vehicle to bid for PFI projects in the health care sector, sued PwC after alleging their shares in 11 PFI projects had been negligently undervalued.
In January 2006, the men sold shares in Ryhurst Limited for £5.5m to a subsidiary of Barclays Bank on the basis of a PwC valuation in May 2005. The bank went on to sell the shares 11 months later for about £40m, an increase of 736%.
The businessmen alleged this inflated sum represented the true open-market value and PwC had substantially undervalued their shares. They sued the Big Four firm for the difference, £35m.
Lawyers representing PwC claimed that Barclays was in a strong bargaining position when it bought the shares because it could have ensured it was the only potential bidder under certain rights it had.
Justice Vos said that even though PwC were in breach of the valuation engagement, the highest price Barclays would have bought the shares for at the time of bidding was £6.5m, and there was only a 75% chance that would have been the case.
Therefore, the court ruled the plaintiff was entitled to £427,000 in total damages for their loss of chance.
PwC are considering an appeal.