Directors' Counsel: New whistleblowing initiatives

Professor Bob Baxt considers the possibility of a significant new whistleblowing regime in Australia.

The federal government, through the intervention of the Honourable Kelly O’Dwyer, the Assistant Treasurer and Minister for Revenue and Financial Services, has foreshadowed Australia will soon have in place significant new legislation to govern the operation of a new whistleblowing regime to provide appropriate protection for whistleblowers in relation to Australia’s taxation and corporate regulatory regimes.

The paper, Review of tax and corporate whistleblower protections in Australia, was inspired in part by the successful inclusion of new protections in the recently enacted Fair Work (Registered Organisations) Amendment Act 2016.

The paper was released on 20 December 2016 and foreshadowed the introduction of new arrangements to better protect whistleblowers. In addition, as part of the Open Government National Action Plan, the federal government has committed to ensuring appropriate protections are put in place for people who report corruption, fraud, tax evasion or avoidance, and misconduct within the corporate sector.

Submissions on the paper poured into Canberra and there have been meetings held with interested organisations and persons to enable the federal government to finalise its considered approach in dealing with relevant matters. The next step will be to release draft legislation containing both tax and corporate whistleblower protections for public comment before their introduction into parliament later this year.

The numerous submissions received from members of the public, lawyers and others alike, in response to the consultation paper, have suggested in many respects the proposal, while admirable, does not go far enough. The question is why protection for whistleblowers should only be available in the context of taxation and corporate law issues.

Whistleblowing’s ability to impact other areas of regulation is a critical factor in many areas of the law. In the competition and consumer protection regime, for example, regulators and others depend on whistleblowers and associated action. Many would regard it as being an essential element in the appropriate administration of legislation enacted to protect the public interest.

At a seminar, held at the University of Melbourne Law School on 23 June 2017 conducted by the Flinders Law School and the University of Melbourne Law School, a number of matters the government will be considering were outlined. It will take under consideration the submissions made on the paper, and in particular the further work being undertaken by Griffith University in relation to this exercise.

Perhaps the most significant matter that concerns many lawyers and others in relation to the introduction of a more comprehensive whistleblowing regime for this country is whether Australia will follow the precedent adopted both by the US and by Ontario in Canada to allow significant monetary rewards to be paid to whistleblowers on the successful implementation of whistleblowing legislation.

The US position is a very challenging and demanding one. It has been one parliamentarians have regarded as appropriate for Australia with Senator John Williams supporting it in various Senate Reviews of associated matters. The introduction of similar monetary rewards being available to whistleblowers in Ontario, Canada, which started in 2016, has already resulted in very positive reaction from the perspective of the Ontario regulator. The head of the relevant Ontario regulator, who spoke at the seminar on 23 June, indicated the availability of monetary rewards to whistleblowers was a particularly attractive aspect of the regime administered by her organisation.

As noted earlier, a critical question is whether monetary rewards should be offered to whistleblowers. There seems to be a growing body of opinion in Australia that the community would welcome such an initiative. Such a regime would encourage more whistleblowers to come forward and provide evidence to regulators.

In this context, it is important the government ensures the proposed legislation will apply not just to the taxation and corporate law area but also to other areas where whistleblowing can be of assistance to regulators, for example the Australian Competition and Consumer Commission (ACCC).

In my view what is more important than the provision of monetary rewards for whistleblowers is appropriate legislation to ensure they are properly protected, in the context of blunting any retribution against them. It is also important that whistleblowers are not allowed to become the victims of prejudice and pressure from their employer or others that may be the subject of the whistleblowing initiative.

At the June seminar, two whistleblowers suggested Australians were not natural “dobber-ins” and that was the more important aspect to address than any monetary reward.

Whistleblowers also need to be protected in relation to laws against defamation and other legal action that might be taken by persons who believe they are the subject of challenge by persons who validly believe their whistleblowing activities were warranted and deserve to be supported by the community.

Griffith University is undertaking a major whistleblowing research project. It has produced two reports that have highlighted some of the critical issues that should be considered in any legislation. All of these matters are likely to be set out in the proposed legislation, as indicated at the 23 June seminar, and should be available before the end of the year for consideration. This will represent a very useful base on which the community can provide further input to ensure appropriate and sensible whistleblowing legislation is introduced.

While I am not in favour of providing large monetary rewards for whistleblowers, in this or in other areas, there is some justification for creating incentives to encourage persons to work with the relevant regulators that are given the power to take advantage of this legislation. Such a regime could enable regulators and others who wish to seek appropriate remedies in relation to alleged breaches of the law to ensure such breaches are properly assessed and pursued in a court. This regime should also make adequate provision to ensure the cost incurred by the whistleblowers are appropriately indemnified and are adequately covered by the regime in operation.

Australia is moving very quickly into a regime where more and more regulatory regimes of this kind are being considered. We have under consideration by a parliamentary committee new laws in relation to foreign bribery and corruption. Additionally, cyber hacking and related matters are creating enormous problems for governments, with an emerging need to take preventative action in relation to this area.

The Australian Securities and Investments Commission has been seeking very loudly for increases in penalties to be made available from the courts in the event of breaches of corporate regulation and related matters (and the ACCC would certainly not oppose such an initiative if it were to be pursued) and there are other areas in which similar initiatives may well need to be taken.

In Re Chemeq [2006] FCA 936, the very famous decision made by Justice French of the Federal Court (as his Honour then was and later Chief Justice of the High Court), the importance of corporations’ acceptance of a strict culture of compliance was enunciated. Organisations should be careful to ensure that they do not fall foul of the criticism that is increasingly being made of directors: that the regulatory framework and a culture of compliance is given very little weight and attention.

But what we also need in Australia is the commitment of the states and territories to adopt the culture of compliance, illustrated by the Criminal Code of 1995 enacted by the Commonwealth Government.

As Kelly O’Dwyer summarised in her address to the University of Melbourne seminar, “every company and organisation must have their own policies and procedures in place, to provide for the protection of individuals who speak up. They need governance structures that encourage a culture of openness and transparency and a willingness to be self-critical.”