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Debevoise and Reed Smith face off as British American Tobacco launches €578m claim against PwC

Litigators at the London arms of Debevoise & Plimpton and Reed Smith have been drafted in on a €578m (£418m) professional negligence claim brought by British American Tobacco (BAT) against Big Four accountancy firm PwC.

BAT has instructed Kevin Lloyd, a partner at Debevoise & Plimpton, to bring the claim against PwC in the Chancery Division of the English High Court. The legal action stems from PwC’s audit of paper maker Windward Prospects, a company with which BAT has a long-running dispute over the cost of cleaning up a polluted river in Wisconsin. BAT alleges PwC failed to fully account for clean-up costs of the polluted river in its audit of Windward.

A subsidiary of BAT, BAT Industries, claims it had an indemnity from Windward that it would cover past and future claims from the river pollution. BAT is now looking to recoup from PwC the value of two dividends paid out by Windward, totalling €578m, which were made on the basis of the PwC audit and allegedly jeopardised its ability to cover its share of the river clean-up costs.

A spokesperson for PwC told Legal Business: ‘We strongly dispute the claim and will be seeking to have it struck out in November.’

The dispute led the world’s second-biggest cigarette maker to jettison PwC as its own auditor in early 2015, a position it had held since BAT listed on the London Stock Exchange in 1998. BAT, which is also involved in a high-profile judicial review against the UK Government’s plain packaging rules for tobacco products, has since overhauled its global legal function to incorporate corporate and regulatory affairs.

Lloyd, who joined Debevoise from Herbert Smith Freehills in 2013, has instructed Andrew Thompson QC of Erskine Chambers to bring the case before the courts.

PwC, which wants to strike out the case on the basis there is no cause of action, argues the dividends were based on interim accounts and not audited accounts. The firm has instructed Reed Smith’s co-chair of global regulatory enforcement Charles Hewetson to defend the claim. Hewetson has brought in well-known professional negligence barrister, Simon Salzedo QC of Brick Court Chambers, as counsel.