A former partner at an embattled consultancy firm was wrongly ordered to retire in the wake of a damning scandal, the NSW Supreme Court has found.
Pricewaterhouse Coopers was thrown into disarray in January after revelations its former taxation partner Peter Collins leaked sensitive and confidential government information to fellow partners and clients.
After the scandal broke, the firm issued Richard Gregg, who had been a partner with the firm since 2013, with notice from the board informing him that he needed to retire.
Mr Gregg’s removal was said to be related to conduct from 2015 to 2017 and not to PwC’s misuse of information.
Mr Gregg argued in court that PwC management did not give valid reasons in its recommendation to the board to retire him in the months after the scandal broke.
On Friday, Supreme Court Justice David Hammerschlag found the embattled consultancy firm had improperly booted him from his position
Justice Hammerschlag ruled the board’s “recommendation that the plaintiff be required to retire does not satisfy the requirements of the Partnership Agreement made on 8 April 1997”.
“Gregg is accordingly entitled to declaratory relief,” he stated in his conclusion.
The company claimed Mr Gregg had incurred financial costs and reputational damage to PwC in his tenure at the research and development team and also “failed to adequately discharge his leadership role and/or professional responsibilities” on a number of engagements.
“There have been occasions where the partner has failed to discharge his supervisory functions in relation to matters ([redacted] for FY16 and FY17) which resulted in a $100,000 R&Q penalty being imposed in FY21,” the July 3 recommendation notice states.
“There was also a dispute with one of the clients [redacted] for which the partner was responsible seeking recovery of fees amounting to $130,000.”
But Justice Hammerschlag said the firm failed to specify the “basal facts” of the alleged misconduct.
“PwC submitted that if the partner regards the reasons as inadequately specified, it is a matter that she or he can take up in their own submissions to the board of partners,” he wrote in his judgment.
“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.
“PwC also submitted that 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.
“I also reject this submission. To accept it 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.
“The recommendation does not identify, or sufficiently identify, the basal facts constituting the conduct of Gregg upon which management’s view is based.”
Further in the judgment, Justice Hammerschlag said PwC did not specify how Mr Gregg had failed in his “supervisory functions”.
“The nature and extent of Gregg’s supervisory functions, leadership role and professional responsibilities are not identified with respect to any particular matter or at all,” he wrote.
“Neither the occasions upon which he is said to have failed nor the way in which he is said to have failed is identified.”
“Paragraph 3 refers to a dispute with a client (for which Gregg was allegedly responsible) seeking recovery of fees amounting to $130,000.
“The dispute is not described. No act or omission by Gregg pertinent to the dispute is identified.
“It is not said that any complaint was justified or that the fees were recoverable by the client or why.
“It follows from the recommendation’s failure to identify the basal facts, that it does not disclose management’s path of reasoning by which it reached its view that Gregg has acted in a manner which is materially inconsistent with the standard of conduct expected of a partner or has acted in a manner which may damage the reputation of the firm.”
Justice Hammerschlag emphasised the proceedings were centred only on “the validity or otherwise of the recommendation”
“These proceedings do not concern the merit, or lack of merit, as the case may be, of any complaint against Gregg,” he wrote.
“This is not a case concerning the sufficiency of reasons given by a court, arbitrator or other tribunal exercising jurisdiction or power.
“It is squarely a case about a contract and the qualities of a bargain.
“It does not involve the application of any principle beyond contractual principles.”
Mr Gregg was one of nine partners stood down by PwC in May as it navigated the fallout from the scandal.
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