We are noticing a gradual uptick in activity which engages with the whistleblower protection provisions of the Australian Corporations Act 2001 (Cth) (Corporations Act). At HopgoodGanim we offer a range of services, described further below, to help manage those issues.
It is important, and becoming more so, for corporates doing business in Australia to have whistleblowing issues well in their sights, not only to demonstrate their ESG credentials, but also to manage the significant litigation risks – particularly employment-related claims – that can arise from missteps in the management of whistleblowers.
HopgoodGanim Lawyers' Partner Andrew Tobin, Senior Associate Adele Garnett and Solicitor Phoebe Kenafake discuss further in a two-part series updating on recent developments in the whistleblower regime.
The background
The whistleblower protection provisions in the Corporations Act were substantially amended with effect from 1 July 2019.
The legislation applies to all corporate entities doing business in Australia, with additional obligations for big business and listed entities. Very substantial criminal and civil liabilities can be incurred for contraventions, such as not having or publishing a relevant policy, breaching the confidence of a whistleblower’s identity, or exposing or threatening to expose a whistleblower to any kind of detriment.
The temperature is clearly rising on a number of different fronts – from within the Australian Securities and Investments Commission (ASIC), with more cases reported – and also in our general experience.
Whistleblowing activity is on the rise. Between FY2019 and FY2021 whistleblower reports made to ASIC rose by 194% (from 278 to 817).1
Those figures only scratch the surface. In our practice – and we engage with whistleblowing issues very regularly – the vast majority of whistleblower reports don’t find their way to ASIC or to the courts. Regardless, their consequences can be significant.
This alert is part of a two-part series, with this week focussing on ASIC developments and recent cases. Next week we will continue the update with our recent experiences in the area.
ASIC developments
Over the course of FY2021, the Australian Securities and Investments Commission (ASIC) reviewed a sample of whistleblower policies, which ASX-listed and ‘large proprietary’ companies 2 have been mandated to both have and publish since 1 January 2020. Both criminal and civil penalties can apply for non-compliance with either of those obligations. ASIC found major deficiencies in the majority of the policies reviewed (see our previous article about whistleblower policy compliance) and has indicated that their compliance monitoring activities – specific to whistleblowing – were ongoing.3
Case developments
We are seeing more frequent complaint activity by alleged whistleblowers – with the associated statutory protection from 'detriment’ – to lever for better financial outcomes in employment-termination scenarios. These complaints can present significant management challenges when you combine them with the protections provided by other legislation dealing with complaint activity; for example, under the Fair Work Act 2009 (Fair Work Act), safety or anti-discrimination legislation.
The difficulties can be compounded by the reverse onus of proof applicable to claims (of which an assortment is available including uncapped compensation, imposition of civil penalties, injunctions and reinstatement orders) relying on the Corporations Act protections or the general protections provisions of the Fair Work Act.
The effect of these is that once credible allegations of unlawful conduct (for example, victimisation or detriment because of a complaint) are made against a company – whether as the whistleblower’s current or former employer – by a complaining whistleblower, the onus shifts to the company to prove that the claims are not made out. The same applies to claims made against natural persons alleged to have engaged in unlawful conduct, and significant civil penalties and, in some cases, offences attach to both.
There have been multiple recent examples of formal litigation involving claims by alleged whistleblowers. For example:
1. In 2020 an ex-employee sued his former employer alleging unlawful treatment as a whistleblower, based on the termination of his employment in 2015, before the current Corporations Act protections commenced (in mid-2019): Alexiou v Australia and New Zealand Banking Group Limited [2020] FCA 1777. The Corporations Act imposes a six-year limitation period for the bringing of such claims, which commences to run once a contravention has occurred.4
The claim argued that the 2019 amendments had retrospective effect. While the court rejected that argument and the claim failed, there remains a prospect that a claim might properly be made in respect of unlawful treatment / detriment, which itself occurs after the current protections commenced (on 1 July 2019), despite arising out of complaint activity which took place beforehand.
2. In another recent case brought in mid 2020, the claimant alleged unlawful treatment by his former employer over a period of seven years between 2012 to 2019, based on alleged whistleblowing activity dating back to 2012: Quinlan v ERM Power Ltd & Ors [2021] QSC 35. In Quinlan one of the preliminary issues related to when a whistleblower might properly claim, as required by the legislation, to have ‘reasonable grounds to suspect’ that information concerns ‘misconduct or an improper state of affairs or circumstances’ in relation to an entity.
The Court held that ‘reasonable grounds to suspect’ has a subjective and objective element – ‘the discloser must, themselves (subjectively) possess grounds to suspect the relevant things; and those grounds must, objectively, be reasonable’, but did not need to be in a position to prove the actual misconduct etc. Quinlan also demonstrated that a protected disclosure can’t be supported by facts and events not known or suspected by a whistleblower at the time they made their disclosure or complaint (i.e., as coming to light after the event).
3. The 2021 decision in Quirk v Construction, Forestry, Maritime, Mining and Energy Union [2021] FCA 1587 concerned (among other issues) unlawful dismissal claims made by former office bearers in and employees of the respondent union. They alleged that they had been unlawfully dismissed because of disclosures they had made to the media accusing the union of criminal infiltration and corruption.
It was alleged that the dismissals were unlawful on multiple grounds, including that they had been motivated by the exercise by the applicants of a workplace right recognised by the Fair Work Act, being that they were ‘able to make a complaint or inquiry… in relation to [their] employment’. They argued that this right extended to include whistleblowing to the media. That claim failed, on the basis that the applicants failed to point to any legal norms or source which gave them an ability to make a whistleblowing complaint to the media (noting that under the Corporations Act complaints must be made to certain eligible recipients in the first instance).
4. Along similar lines, in the earlier decision in The Environmental Group Ltd (TEG) v Bowd [2019] FCA 951 the Federal Court held that the whistleblower protection provisions in the Corporations Act are not a ‘workplace law’ which, in themselves, create ‘workplace rights’ of the kind protected by the Fair Work Act. In that case, Mr Bowd, the former CEO of TEG, sought compensation and penalties for alleged contravention by TEG, in terminating his employment, of both the general protections provisions of the Fair Work Act and the whistleblower protection provisions of the Corporations Act. One of the several complaints he relied upon, as unlawfully motivating his termination, was a complaint he had made to ASIC alleging fraud by TEG’s employees.
The ASIC complaint was alleged to be both a protected disclosure of the kind to which the whistleblower protections apply and the exercise of workplace rights conferred by the Fair Work Act. In relation to the Fair Work Act claims, the court held that the ASIC complaint could not be relied upon as the exercise of a right conferred by a ‘workplace law’. However, the complaint could have amounted to an exercise of the separate workplace right of the kind referred to in Quinlan, namely that Mr Bowd was ‘able to make a complaint or inquiry… in relation to his… employment’. That claim also failed, because the court found that Mr Bowd had not made the complaint in good faith. Rather, he had made it because he feared he would be dismissed, and he wished to secure the protection from dismissal afforded by the whistleblower protection provisions. Further, the court held that he could not rely on the ASIC complaint as a disclosure protected by the Corporations Act, partly because he did not have reasonable grounds to suspect the matters referred to in it.
5. As of August 2022 Lendlease and its former tax advisory firm, Greenwoods & Herbert Smith Freehills, were defending a claim in the Federal Court by Anthony Watson, a former partner in Greenwoods, in which Mr Watson is seeking compensation of $15.5M.5 He claims that he was forced to resign in circumstances amounting to unlawful victimisation under the Corporations Act whistleblower protections, after complaining to both Lendlease and Greenhill about Lendlease’s alleged ‘aggressive’ approach to tax on various projects and unlawful tax avoidance: Watson v Greenwoods & Herbert Smith Freehills Pty Ltd & Anor, NSD288/2022.
At least two other cases on the subject were reported in 2021.6 But most of the relevant news isn’t in the reported cases – next week we will report further on developments we are seeing from our own client engagement with whistleblower protection issues.
What whistleblowing services are recommended for businesses?
In its relevant Regulatory Guide (RG 70, November 2019), ASIC advises all relevant entities to consider authorising an independent whistleblowing service provider to receive disclosures under their whistleblower policies.
HopgoodGanim Whistleblower Reporting Service
HopgoodGanim can provide you with a confidential whistleblower reporting service for your employees and other third parties, to assist you to perform your obligations under Australia’s whistleblower protection laws. As part of our HopgoodGanim Whistleblowing Reporting Service, we can:
- take and document reports or complaints made under your own whistleblowing policy;
- for that purpose, maintain dedicated phone and email channels to which reports and complaints might be made. The service contemplates that you will incorporate these into your own whistleblowing policy and/or complaint/reporting mechanisms;
- provide you, in suitable form, with the detail of reports or complaints made through the service; and
- liaise, as appropriate, with whistleblowers.
Along the way we will make sure to keep complaints and reports confidential and secure and, as legally required, help you to protect the confidentiality of whistleblowers’ identities.
Other whistleblowing services
Outside or additional to the HopgoodGanim Whistleblower Reporting Service, we can also:
- train your relevant personnel about the basics of Australia’s whistleblower protection laws;
- help you develop a compliant whistleblower policy (see above review by ASIC of a sample of whistleblower policies);
- investigate complaints or reports made under the policy;
- advise you how to manage such complaints or reports and the individuals affected by them.
For further information about our Whistleblower Reporting Service, please contact HopgoodGanim's Workplace and Employment team, your usual HopgoodGanim or Effective Governance advisor, or, send us a note to whistleblower@hopgoodganim.com.au.
Our Workplace and Employment team at HopgoodGanim are also well positioned to provide legal expertise across wider employment, industrial relations and workplace health and safety matters to whistleblowing. Our team can advise individuals and businesses about compliance with regulation, optimising workforce engagement and outcomes, and managing and containing exposure to possible disputes or litigation.
1.Ibid.
2. A company is a ‘large proprietary company’ if it has at least two fo the following characteristics:
(a) the consolidated revenue for the financial year of the company and any entities it controls is $50 million or more; (b) the value of the consolidated gross assets at the end of the financial year of the company and any entities it controls is $25 million or more; and (c) the company, and any entities it controls, has 100 or more employees at the end of the financial year.
3. https://asic.gov.au/about-asic/news-centre/speeches/whistleblower-policies-and-the-compliance-gap/, accessed 12 October 2022.
4. Corporations Act, section 1317K.
5. 'Accounting firm accused of pushing out director for raising tax dodge risk’, Australian Financial Review, 16 August 2022, https://www.afr.com/companies/professional-services/accounting-firm-accused-of-pushing-out-director-for-raising-tax-dodge-risk-20220801-p5b65i, accessed 10 October 2022.
6. Wu v United Overseas Bank Ltd, Sydney Branch (No 2) [2021] FedCFamC2G 264 and Dunn v Return to Work SA [2021] SAET 62.