PwC pays £427,000 damages over valuation work

Four businessmen who sued Big Four firm
PwC for
£35m have won damages worth just a fraction of that figure at London’s High

Derek Dennard, Michael Gearon, Graham Turner and Colin Peter Dixon sued the
corporate giant for compensation after alleging their interest in 11 PFI
projects had been negligently undervalued.

In January 2006, the four sold shares in Ryhurst Limited, a vehicle they had
used to bid for PFI projects which involved the building and operating of health
care facilities.

They accepted £5.5m from a subsidiary of Barclays Bank after a valuation by
PWC in May 2005.

But the bank sold the shares on just 11 months later for around £40m, an
increase of 736%.

All four businessmen said that sum represented the true open-market value,
and sued PwC for the difference.

Mr Justice Vos – who ruled PwC in “breach of the valuation engagement” – said
that Dennard, Gearon, Turner and Dixon were entitled to £427,000 in total
damages between them for their “loss of chance”.

Lawyers for PwC had said that Barclays were in a strong bargaining position
when it bought the shares because, under certain rights it had, it could have
ensured it was the only potential bidder.

Mr Justice Vos said that, even though PwC undervalued the shares, the highest
price Barclays would have gone to was £6.5m, and even then, there was only a 75%
chance that would have been the case.

He described the bank as a “tough” bidder, adding it took months for it to be
persuaded to increase previous offers it had made, and then it only did so

Dennard, of Grove Road, Penshurst, Tonbridge; and Turner and Gearon, of
Colemans Hatch, Hartfield, East Sussex, set up the Rydon Group in the 1970s.
Dixon, of Ryst Wood Road, Forest Row, East Sussex, became its managing director
in the 1990s.

The group – which specialised in construction and property development
projects – was sold at the same time as Ryhurst Ltd, but for £40m, with Dennard
and Turner receiving more than £12m each, and Gearon £7.2m.

PwC said in a statement to Accountancy Age: “Clearly, we are
disappointed that Mr Justice Vos found against us on one small judgmental part
of our work but we are pleased that the rest of our work has been vindicated and
with the cost award that was made in our favour. We are considering our position
in respect of an appeal.”

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