PwC broke its own rules in removing partner Richard Gregg, court finds

PwC says it’s considering its next move after the NSW Supreme Court found the firm had broken its own rules by removing partner Richard Gregg.

Former PwC partner Richard Gregg (right) with his lawyer, Rebekah Giles. Picture: Britta Campion

PwC Australia is considering its “next steps” after the NSW Supreme Court blocked the consulting firm’s attempt to remove a partner over claims he was linked to a tax scandal.

In a decision that opens the way for seven other partners to challenge the firm, the NSW Supreme Court found on Friday PwC had failed to provide proper reasons when it attempted to kick partner Richard Gregg out of the firm in July.

Justice David Hammershlag said PwC’s management had failed to specify reasons to remove Mr Gregg when it served a notice on him in July that he was being removed for supervisory failings.

PwC had argued Mr Gregg had agreed to be stood down on paid leave and was being removed over events he was aware of that took place in the tax practice in 2021.

The firm had claimed Mr Gregg was being removed over his failed management of projects in PwC’s research and development practice.

However, PwC conceded Mr Gregg’s removal was not in relation to the tax scandal which has brought public anger against the firm after it was revealed PwC took confidential government tax briefings and used them to shape a series of aggressive new tax products for multinational clients.

“The recommendation does not disclose any path of reasoning by which management reached its view that the outcome should be that Gregg should be required to retire,” Justice Hammershlag wrote in his judgment.

“In this context, and specifically, the recommendation does not (among other things) disclose any path of reasoning which led to its view that the R&Q penalty affair, which was finalised by the imposition on Gregg of a financial penalty, has any part to play in its conclusion or what part.”

Mr Gregg’s legal team, which included defamation specialist Rebekah Giles, had argued PwC failed to show a material breach that would merit his removal from the partnership.

In a rushed hearing two weeks ago, Mr Gregg’s barrister, Arthur Moses, skirmished with PwC over its reasons for removing him from the firm.

Justice Hammershlag rejected PwC’s argument that even if its reasons for removing Mr Gregg were inadequate, he could take up submissions on that to the firm’s board of partners.

“I reject this submission. The adequacy of the reasons is not to be measured against the possibility that the partner has the opportunity to point out deficiencies,” he said.

Justice Hammershlag said PwC’s submission argued the “adequacy of the reasons should be viewed in light of the partner’s own knowledge of the facts surrounding matters or circumstances identified in the reasons”.

But he knocked this back, warning accepting the argument ”would be inimical to the requirement under the Partnership Agreement that reasons be specified”.

“In addition, it cannot be assumed that management or, more importantly, the Board of Partners, will know what the partner knows so as to enable the Board of Partners justly, and in utmost good faith, to make a determination,” he said.

Justice Hammershlag said Mr Gregg would be entitled to “declaratory relief”, agreed by both sides, within seven days.

He made orders PwC pay Mr Gregg’s costs.

PwC said it was “considering our next steps” after the defeat in the NSW Supreme Court.

A PwC spokeswoman said the firm respected the court’s decision but was considering further action “in relation to Mr Gregg”.

“We remain committed to taking the appropriate action against those we believe have failed to live up to the firm’s professional, ethical or leadership standards,” she said.

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Former PwC partner Richard Gregg leaves the Supreme Court in Sydney with his lawyer, Rebekah Giles. Picture: Britta Campion

The decision of the court opens the way to other PwC figures to challenge the firm’s attempt to remove them from the partnership or strip them of their retirement benefits.

Former PwC chief executive Tom Seymour is among eight partners the firm has named as connected to the tax scandal.

These include three former members of the firm’s executive board, former chief risk officer Sean Gregory, former government leader Peter Konidaris and former financial advisory head Pete Calleja.

Former board of partners chairman Peter van Dongen has also been removed from the firm.

In addition, four former partners, Michael Bersten, Peter Collins, Neil Fuller and Paul McNab, have also been named in connection to the tax scandal and faced having their retirement benefits stripped from them.

The Australian is aware some of these partners are considering legal action against PwC after Mr Gregg’s success in the courts.

PwC has assembled a list of 63 current and former partners and staff from the firm it says are linked to the scandal.

The firm is also awaiting the outcome of a review by corporate veteran Ziggy Switkowski, who was brought in to examine PwC’s culture.

Mr Gregg was among a number of partners referenced in a media release published by PwC in May, which detailed that the firm had told partners to go on leave pending “the outcome of an ongoing investigation by PwC”.

PwC said in the release it had removed eight partners for governance breaches after the firm “reached conclusions in its investigation into the handling of confidential Treasury information and past failures in professional, ethical or leadership responsibilities”.

Mr Gregg has warned PwC the firm defamed him in its media releases and has retained Sue Chrystanthou to act for him in an action likely to land in the courts next week.