PwC faces a potential class action as angry former partners hit back

A group of PwC’s former partners has been preparing for a class action against the firm in the aftermath of damage caused by its response to a tax scandal.

Former PwC chief executive Tom Seymour. Picture: Lyndon Mechielsen

PwC Australia and its former management, including Tom Seymour and Luke Sayers, could face a class action from aggrieved former partners who have secured the backing of a major law firm and litigation funder after a horror year for the audit and consulting giant.

The Australian understands the group of partners has been quietly sounding out other former colleagues from the firm in recent weeks.

A major class action litigation firm has agreed to run their case, and several litigation funders have been contacted. One has committed to back the partners’ case against PwC.

Some partners backing the class action are understood to have seen their distribution payments evaporate last year after the audit and consulting giant came under siege. They are in addition to several who were forced out of the firm or stood down from their roles in the wake of the tax ­scandal.

Luke Sayers has departed PwC but was called before a Senate inquiry. Picture: Martin Ollman

PwC partners who were part of the firm’s government consulting arm, which was sold in a $1 deal to Allegro Funds and rebranded Scyne Advisory, are also understood to have expressed interest in the looming class action.

Partners who chose not to join Scyne Advisory, which welcomed almost 115 former PwC partners, report PwC aggressively enforcing non-compete clauses.

PwC paid 23 of the almost 115 partners a percentage of their future partnership payments under the deal to sell the government consulting arm, but several other partners who were close to the seven-year threshold for access to the scheme missed out.

This is understood to have triggered a number of tax obligations for partners who might otherwise have been able to delay the issue.

PwC partners take home on average $930,000 a year in pay and can get hundreds of thousands of dollars a year from the firm’s distributions.

But PwC moved to slash partner pay by almost 30 per cent last year, as well as accelerating partner retirement, with more than 70 exiting the firm.

This came after PwC cut off its government consulting operations, with the firm losing almost a third of its overall future revenues through the move.

PwC’s former head of international tax, Peter Collins, at his Sandringham home. Picture: Luis Enrique Ascui

PwC also delayed the payment of partner distributions in October, pushing the remaining 20 per cent cash handouts to November, as well as offering new starters up to $10,000 to delay joining the firm by up to 12 months.

The firm also suspended promotions for new partners in ­November.

These factors are expected to play a role in the potential class action facing PwC, which would be the latest courtroom fight facing the firm in the wake of the scandal over the misuse of confidential government tax briefings.

Partners backing the potential class action are understood to be exploring making a claim against PwC as well as the firm’s senior figures and management in the period before the tax scandal was revealed. The Tax Practitioners Board banned PwC’s former head of international tax, Peter Collins, in late 2022 before revealing the move early last year, after finding he shared confidential government documents within the firm. PwC then created several new tax structures for clients ahead of the 2016 introduction of the Multinational Anti-Avoidance Law.

Former PwC partner Richard Gregg, with lawyer Rebekah Giles, took legal action after PwC sacked him. Picture: Britta Campion

PwC has assembled a list of 63 current and former staff and partners believed to be linked to the tax scandal.

But a review by global law firm Linklaters cleared the firm’s overseas partners of potentially using the internal government information, but noted six “should have raised questions as to whether the information was confidential”.

In the wake of the public revelations PwC dumped chief executive Tom Seymour, who formerly ran the firm’s tax practice, after telling partners he had been among dozens of partners who received emails related to the confidential government documents.

A review into the scandal singled out Mr Seymour and the firm’s then head of strategy, risk, and reputation, Sean Gregory, as two figures within the firm with knowledge of the breaches.

Mr Seymour left the top job in May last year, with plans to stay on until September before retiring from the partnership.

But Mr Seymour was instead removed from the partnership in July, along with eight other veteran PwC partners allegedly linked to the tax scandal, including Mr Collins, denying the men access to the firm’s generous retirement benefits scheme.

PwC has also named a number of former partners it claimed to be linked to the tax scandal, including Mr Collins, Neil Fuller, Michael Bersten and Paul McNab, stripping the men of their retirement benefits.

Mr Fuller and PwC agreed to a secret peace deal late last year after the former partner and “rover”, who pitched the firm’s tax schemes to major companies and retired in 2019, took action against the firm over its move to strip him of his benefits.

Richard Gregg succeeded in stopping PwC removing him from the firm in August last year, after the NSW Supreme Court found the firm failed to articulate why he was being removed. Mr Gregg is weighing further action against PwC, after the firm stood him down in July last year.

Former PwC tax partner Paul McNab also recently lodged court action against PwC, claiming the firm wrongly denied him access to its retirement plan.

Originally published as PwC faces a potential class action as angry former partners hit back