Arthur Moses SC and Kim Anderson recently appeared for Richard Gregg, a partner of PricewaterhouseCoopers (PwC), in his successful challenge to an attempt by PwC to remove him from the partnership: Gregg v Burrowes & Ors (trading as PricewaterhouseCoopers) [2023] NSWSC 895.
Mr Gregg is a partner of PwC and a member of its R&D Team, which provides advice in relation to the federal Research and Development Tax Incentive scheme. On 3 July 2023, PwC released a media statement which announced that PwC had concluded its investigation of its handling of confidential government information and identified Mr Gregg as one of eight partners who had recently exited, or were in the process of being removed from, the partnership. On the same day, Mr Gregg was notified that the management of PwC had made a recommendation to PwC’s Board of Partners, under cl 23 of PwC’s Partnership Agreement, that he should be required to retire from the partnership.
Clause 23 of PwC’s Partnership Agreement gives PwC’s Board of Partners (Board) the power, in certain specified circumstances, to require a partner to retire on terms chosen by the Board. The power is enlivened by a “recommendation” from PwC’s management, which must “specify” the “reasons” for the recommendation. Before the Board can exercise its power, cl 23 requires that the affected partner then be given an opportunity to put on written or oral submissions in relation to the recommendation.
The recommendation made in respect of Mr Gregg was recorded in written form. It did not refer to the handling of confidential government information and PwC subsequently eschewed that the recommendation was based on Mr Gregg having misused confidential information.
In the Supreme Court, Mr Gregg successfully contended that the recommendation that he should be required to retire had failed to “specify” management’s “reasons” for the recommendation, with the consequence that the cl 23 procedure had not been lawfully engaged.
Hammerschlag CJ in Eq held that the requirement in cl 23 for a recommendation to “specify … reasons” serves a number of important purposes: first, to allow the Board to consider whether the conditions on the cl 23 power are satisfied; secondly, to allow the Board to determine whether it is in the interests of the partnership for the affected partner to be required to retire; and thirdly, to permit the partner to make meaningful submissions before the power to require them to retire is exercised. Those factors, in his Honour’s view, indicated that a recommendation under cl 23 should identify the “basal facts” of the relevant partner’s conduct and expose “the actual path of reasoning” by which PwC’s management had arrived at the recommendation. His Honour found that the recommendation that Mr Gregg should be required to retire had failed to do either of those things, and that Mr Gregg was entitled to a declaration to that effect.
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