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Economics Legislation Committee
06/03/2018
Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017

BROWN, Professor AJ, Board member, Transparency International

ZIRNSAK, Dr Mark, Senior Social Justice Advocate, Synod of Victoria and Tasmania, Uniting Church in Australia

Committee met at 08:33

CHAIR ( Senator Hume ): I declare open the Economics Legislation Committee for the inquiry into the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017. The Senate referred this inquiry to the committee on 8 February 2018 for report by 16 March 2018. The committee has received 32 submissions, which are available on the committee's website. This is a public hearing, and a Hansard transcript of the proceedings is being made, although the committee may determine or agree to a request to have evidence heard in camera. I remind all witnesses that in giving evidence to the committee they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee, and such action may be treated by the Senate as contempt. It is also contempt to give false or misleading evidence to a committee. If a witness objects to answering a question, the witness should state the ground upon which the objection is taken, and the committee will determine whether it will insist on an answer. If the committee determines to insist on an answer, a witness may request that the answer be given in camera. Such a request may also be made at any other time.

I now welcome Professor AJ Brown and Dr Mark Zirnsak. Thank you very much for appearing before the committee today. I invite both of you to make a brief opening statement, should you wish to do so, either collectively or separately. Do you have any additional information about the capacity in which you appear?

Prof. Brown : I'm a professor of public policy and law at Griffith University.

CHAIR: Do you wish to make an opening statement?

Prof. Brown : Thank you, perhaps just a very short opening statement because we did give you a reasonably lengthy submission. I just want to open by emphasising what a historic opportunity this is for the parliament and for the government to move in a space that's been long overdue for legislative movement for quite a long period of time and, in particular, to put on the record that I think the Turnbull government needs to be congratulated for the momentum that it's put into legislative reform in this area in this term of the parliament not only in its support for and role in the inquiry of the Parliamentary Joint Committee on Corporations and Financial Services last year, which produced the unanimous report that the committee would all be familiar with that is very historic in its comprehensiveness and depth but also in its practicality in finally seeing Australia catch up, especially on the private and not-for-profit sector side, when it comes to whistleblower protection. The fact that that was a unanimous report as a result of a nine-month inquiry I think means that it really does provide a very strong blueprint for what should be happening next and, to some degree, what is happening next.

There is also the fact that the move with this bill, which was long overdue, means clearly in the Treasury portfolio there was an awareness that it was long overdue to move on some of the reforms that are needed to start correcting this longstanding gap that has been previously pointed out by this committee and many other committees over many years in many inquiries that I've been involved in. It is clearly an opportunity to have a very significant and strong first stage of what can and should be a really, truly robust and comprehensive legislative regime.

I think the key things are that many stakeholders and many experts, including me in my role at Transparency International as well as in my personal and professional capacity, are really looking forward to the full response to the parliamentary joint committee report. It's clear from many, many submissions from many, many stakeholders, that having a truly comprehensive scheme that operates right across the private and not-for-profit sectors is a goal within grasp. It may not be a goal that is realistically fully within grasp in this term of parliament, given some of the legislative development and policy development that's needed for that, but it's certainly clearly what a very broad consensus of the stakeholders involved, whether from the corporate sphere, the community sphere or the consumer sphere, are looking for. But, having said that, the bill that's before the parliament now certainly has the potential to be the first stage of such a comprehensive and robust regime.

My evidence, my submissions and any answers to questions that I give, including the questions on notice which I have been given from the committee, are really aimed at trying to ensure that we truly learn from experience, both national and international, and from international best practice in making sure that this bill really is a quality first stage in the legal thresholds that it sets and the approaches that it takes so that it can then be rolled out into a fully comprehensive scheme as those other issues get resolved.

My submission highlights the five issues that I think are crucial for a workable scheme. I am happy to take questions or elaborate on those. There are many other issues in many other submissions, including ones that have been given to me in some of the questions on notice from the committee, that I certainly agree could well be quality improvements to the bill, but the five that I've identified are simply the five that I think are crucial for the scheme, to be confident that the scheme will work in a way that has the potential to meet that international best practice standard. The only other thing that I'd like to quickly add is that of those five issues, many of them are quite technical and go to the workability of compensation schemes et cetera.

The fifth of the five issues is the always contentious and challenging question of when a whistleblower who is forced to go public, at the end of the day, should retain the protections or benefit from the protections of legislation like this. So taking off my expert hat, and putting on my Transparency International hat for a moment, I particularly wanted to emphasise that as being a core point in the Transparency International submission that you have, for the obvious reasons that it really goes to the heart of what happens at the end of the day in terms of public accountability around issues that need to be disclosed in the public interest if they're not dealt with properly within the system. And in that light, I think later you'll be hearing from Mr Jeff Morris as a witness, but I wanted to highlight that this bill still, although it extends beyond the Treasury portfolio, and the financial services sector, is still very much framed in many ways as a result of having been drawn up within the Treasury portfolio. So while it's valid to look at the financial services sector and issues within the financial services sector as provoking some of those policy questions, including that question of what's the appropriate test for public disclosure, there are many, many other issues that can reach the same sort of threshold which, as per my submission, would not be covered by the bill in relation to that issue. I think the Chair and the committee are probably aware that in the audience today is just one example, a case involving just one example, Mr James Shelton, who is referenced in my submission and has made his own submission. I think that is a really useful example for the committee of a situation where Commonwealth law enforcement has depended on a whistleblower who eventually did go public in order to trigger the action that was required. It was in relation to now notorious foreign bribery offences and quite clearly lay outside that financial services bracket.

Senator PATRICK: That was the currency one.

Prof. Brown : That was, Senator. That was really all I wanted to say by way of scene setting, and I'm very happy to assist the committee with any questions about any of the specific issues.

CHAIR: Thank you, Professor Brown. Dr Zirnsak, do you want to make an opening statement?

D r Zirnsak : Yes. We welcome this bill as a step forward, but we'd prefer to see some significant amendments to the bill to strengthen it and make it more workable. We would have preferred, ultimately, to see a comprehensive stand-alone piece of legislation, recognising the parliament has previously passed for a good legislation around protecting public servants. We also have the registered organisations bill, which now covers trade unions. So this is now covering the corporate sector. I obviously look forward to when the charity-not-for-profit sector also get caught comprehensively. Ultimately we would see effective whistleblower protection part of the central to that, would be out of the previous parliamentary enquiry, the recommendation around having a whistleblower protection authority. We see that as very, very important. We conceived a whistleblower responding to whistleblowers with three layers of response. The first is protection, where possible. If protection doesn't work, then you have compensation for retaliatory action. Thirdly, we've also supported the notion of reward. Sometimes protection and compensation can seem like a very tough road for a whistleblower to pursue at times, so sometimes knowing maybe that there's a simple reward. We also therefore have seen whistleblower protection primarily being targeted at serious criminal activity—exposure of fraud, tax evasion, bid ringing, human trafficking, forced labour, bribery, money laundering—those kind of offences. To that extent, that's probably the one area in this bill where we think the bill's probably too broad in terms of the definition of who will be covered.

There are obviously some very positive aspects of this bill. For example, the replacement of the good faith test by a reasonable grounds to suspect wrongdoing is part of that. But ultimately we will look forward to a time when we see a very comprehensive regime of protecting, compensating and rewarding whistleblowers. We see this as a step forward but would certainly welcome the committee making strong recommendations for amendment to this bill.

CHAIR: Thank you, Dr Zirnsak. I might kick off the questions, if I can, to Professor Brown. I just want to confirm that you are a member of the government's expert panel.

Prof. Brown : Yes.

CHAIR: In broad terms, what is the panel constituted to do?

Prof. Brown : Certainly. I should emphasise that, although I am a member of the administrative adviser expert panel, I am not appearing today in that capacity. It may save time, where it's convenient, to direct questions about the panel's role to Commonwealth Treasury, which is chairing the panel, and I know you'll be hearing from them today. There was a two-stage terms of reference: to provide advice on the bill that Treasury was already preparing at the time that the panel was constituted, and, secondly, to provide advice to the government on its response to the parliamentary joint committee report.

CHAIR: So the panel is still ongoing at this time?

Prof. Brown : As far as I'm aware.

CHAIR: Just to confirm, you said that the panel was convened to consider a bill the Treasury was already considering at the time. Did you say that?

Prof. Brown : Yes. It was clear from the fact that Treasury had already been running its own process for many months and was already looking at some processes before the establishment of the parliamentary joint committee. That was public knowledge through the Open Government Partnership process and other processes, and then it ran its own public process in parallel to the parliamentary joint committee. I think it's fairly clear from the statements of the minister that Treasury was waiting for the parliamentary joint committee to wrap up in order to continue to progress those proposals.

CHAIR: The government had already made commitments in relation to whistleblower reforms before the PJC had reported?

Prof. Brown : To some. Again, Treasury and the government can fill you in. I think the immediate impetus to finally start to move in a tangible way in terms of government commitments was actually in March 2016.

CHAIR: That was before the PJC was commenced, wasn't it?

Prof. Brown : Yes, absolutely. It was in relation to protecting tax whistleblowers. That was announced, I think, by Minister Keenan at the United Kingdom's anti-corruption summit in London and then confirmed in the budget for that year. So there has been a ramping up and a widening out since that time of the scope of what needed to be addressed, much of which is actually consistent with what this committee recommended in its inquiry into the performance of ASIC in 2014, when it recommended a complete overhaul of the whistleblower protection regimes, not just in relation to tax but in relation to the whole corporate sector.

CHAIR: My understanding is that the government is currently considering the panel's advice on the second phase of its work. Is that your understanding too?

Prof. Brown : I hope so.

Dr Zirnsak : That is a commitment that's in the government's public response to the Open Government Partnership. The whistleblower regime is part of the first National Action Plan in the Open Government Partnership. The government has stated publicly in response to that that they are looking at the rest of the recommendations out of the parliamentary inquiry.

CHAIR: Perhaps, Dr Zirnsak, you can expand for us on the process involved in the consultation of that National Action Plan in the Open Government Partnership.

Dr Zirnsak : There is at the moment what's called the Open Government Forum. They are a group meeting. Half of them are departmental officials, and the other half are civil society representatives. From memory, there are eight on each side. Out of that a first National Action Plan was established, which had 15 actions. One of them was around the whistleblower legislative reform, which the government has followed through on. It is attempting to meet the targets that were set in the first National Action Plan. A second National Action Plan is now being developed. I certainly know that some of the civil society groups will be putting forward that comprehensive whistleblower protection continue to be one of the points in the National Action Plan.

CHAIR: I want to specifically discuss three specific aspects of your submission, Professor Brown, one of which is regarding the issue of the single act. The PJC obviously have recommended a single private sector act and also a whistleblower authority. That's correct, as far as you're aware? Yes. Regarding that single act, if the government were to decide to adopt a single private sector act in the future, how do you think that the bill that's before us today would affect that—or would prevent it, more to the point?

Prof. Brown : I don't believe that it would prevent it. I think the real question is whether the issues that are covered in this act, which relate to setting out the legal thresholds for who's defined as a whistleblower, who are eligible recipients, what are the compensation rights and the protections, what are the requirements on employers and corporate entities—the basic legal machinery—should be of a standard that can simply be then rolled up into a standalone act. That would be the ideal. The things that a standalone act would add, which are somewhat different from the approach that's being taken under this bill, would be to provide one overarching framework for whistleblowing in the private and not-for-profit sectors, rather than having it in multiple pieces of legislation. And also being able to make clear the roles and responsibilities of the different regulatory agencies, many of which aren't explicitly covered, or potentially covered at all, or given a role at all in this bill. There are various other things. Some of those are listed in what I've described as being the limits of this bill, relative to what was recommended by the parliamentary joint committee.

CHAIR: So the ATO says that the whistleblower regime should in fact be separate to the corporate regime. Do you have a response to the ATO's position?

Prof. Brown : I think the history shows, including history internationally, that most agencies will say that it's easier if, if the legislation pertains to them, that it be contained in their own legislation. The recommendation of the parliamentary joint committee, which I certainly advocated for and support, was specifically to take a step back from that and look at, for the Australian circumstances, what's the most efficient and effective way to approach it from a business regulatory point of view. That is why everybody from the Law Council to the Governance Institute to the Australian Council for Superannuation Investors et cetera have all ended up advocating that, yes, it should be, if it can be—and technically I think it can be—placed all in a single act. Even though there will clearly be different implications and consequential amendments still for different regulators.

CHAIR: On those expectations, is there any constitutional limits on placing it all in a single act, that you're aware of?

Prof. Brown : Not if the act is framed to be constitutionally appropriate and supported. If the Commonwealth can legislate to protect whistleblowers who blow the whistle on tax contraventions, then that head of power exists, whether it's put in the Taxation Act or whether the taxation power is used to support legislation that is omnibus, if you like. Indeed, any employer who victimises somebody who reports a breach of Commonwealth law, under the incidental power in the constitution that's simply a law enforcement issue. Witness protection is something that the Commonwealth can legislate for. So there is a wide range of powers that the Commonwealth can use, in the same way that it uses them for corporate regulation generally as well as for law enforcement generally. I think the only significant difference between the provisions that this bill proposes to put into the Tax Administration Act and the Corporations Act provisions—well, there are a couple of significant differences, but for present purposes the salient one is that tax entities who are individuals, as opposed to bodies corporate or other forms of financial licensee or whatever, will be captured as employers under the Taxation Act provisions. So in fact there's no reason why the Corporations Act provisions or the single standalone act can't also capture individual employers, whether they're corporations or not, if the subject matter is in fact the protection of witnesses who are providing information about the breach of Commonwealth regulation or Commonwealth law or the Criminal Code.

CHAIR: So you fundamentally disagree with the ATO on their position on this?

Prof. Brown : I understand their position. But I think it's a policy question for government whether it wants to continue to have parallel schemes in different bits of legislation and end up like the United States with 47 different pieces of federal regulatory legislation applying to the private sector alone, all of which have sometimes different whistleblower protection obligations in them, often applying to the same businesses—or we have the opportunity and the constitutional power to do something that is a bit simpler for Australian conditions. I fully understand the ATO's position, but I think as a question of law the single act is viable and preferable to that path.

Dr Zirnsak : From our perspective, it is about looking at it from the perspective of the whistleblower. Our conceptual view of this is that having a whistleblower protection authority would mean the whistleblower has one point to go to. In our experience with whistleblowers, often where there's corporate wrongdoing it won't just be tax evasion or tax avoidance. They'll be aware that the company's involved in fraud. It might be involved in money laundering. It's probably breaching the Fair Work Act in terms of underpaying workers. These would be our experiences of common people who have come to us about companies. With separate authorities, when the whistleblower wants to report, can they go to the one agency? Is the ATO going to refer all those different crime types to the different agencies, or is it going to expect the whistleblower to go to all the different regulatory law enforcement authorities with each of those different crime types? If you have the one clearinghouse, the whistleblower protection authority, it would then be the clearinghouse to pass on the different crime types to the different agencies that need to respond to it.

CHAIR: You have led me to my next question, Dr Zirnsak. It's almost like we planned this. I want to understand whether the PJC recommended a new agency be established to perform the role of a whistleblower authority or whether an existing agency could fulfil it.

Prof. Brown : In the recommendation in the PJC report I think there are references to both as options. I think the recommendation itself frames it in terms of being within an appropriate existing agency.

CHAIR: What do you think?

Prof. Brown : I think both. I think there could be viable ways of doing either. I think in an ideal world an independent agency might be desirable. Many submissions support the idea of an independent agency from business and others. But I think there are viable ways of putting it in with an appropriate existing regulatory agency if it's designed properly. It would just be designed slightly differently.

CHAIR: Dr Zirnsak, what do you think?

Dr Zirnsak : Our experience with Commonwealth regulators would be, if it is given to an existing agency, it needs to come with substantial resources. That agency also, culturally, needs to see it as a priority. Our experience is that, where an agency is simply given something else to do and resources are inadequate or it does not see it as part of its core business, it often doesn't necessarily follow that through. A good example—just picking one off the top of my head—would be that the Australian Federal Police previously were given the task of enforcing the law about illegal activities by online gambling companies based offshore, who were breaching the Interactive Gambling Act. Basically, complaints about illegal activity by online gambling companies were never a priority for them. Understandably, for them, they were dealing with many other things and this was very low on the priority list. It has now been passed over to the ACMA. I think that is a much better fit. ACMA, I think, is going to take a much more active line on that because it fits more clearly with its core business. So I think if it is given to an existing regulatory authority it needs to be one that's going to see it as part of their core business and a priority for them.

CHAIR: There is nothing in this bill, however, that prevents that.

Dr Zirnsak : Correct.

Prof. Brown : The only thing I would add is that it's crucial that, whoever that implementation agency is, they actually have an obligation to fulfil these protection support clearinghouse functions, not simply a power to do so and an ability to do. They need an obligation to do so. I guess that's one of the limits of this bill. It may attempt to set up the legal machinery to give people the rights of compensation, but there is still nothing in terms of an obligation upon ASIC or any regulatory agency to actually make sure those mechanisms are activated or enforced.

CHAIR: These aren't good enough reasons for the bill to be delayed, though, are they?

Prof. Brown : Not if the path to the full scheme is a strong, clear path that is actually going to get the sorts of results we're discussing.

CHAIR: I want to ask about rewards and bounties. Was this a recommendation of the PJC?

Prof. Brown : It was.

CHAIR: Do you agree with that recommendation? I know Dr Zirnsak agrees.

Dr Zirnsak : Yes.

Prof. Brown : In broad terms, I think it was a very constructive and persuasive recommendation in that what was being recommended by the PJC was a carefully worked through set of principles for how that type of reward scheme could be adapted and designed for Australian circumstances, rather than being an off-the-shelf copy of any overseas scheme. From that point of view, I think that's why it's worth the serious consideration of the government and the parliament.

CHAIR: The submissions that we've seen, particularly those to the Open Government Partnership national action plan, have been very mixed in response to this. Why do you think that is?

Prof. Brown : There are a number of reasons. One is that many stakeholders' reservations about the risk of perverse incentives from those sorts of schemes are based on perceptions and, to a lesser degree, the reality of US experience. That's why the PJC's recommendation is significant, because it actually takes those into account in the principles that it suggests for the design of the scheme. I think there's been almost a cultural aversion, for the same reason that United Kingdom authorities have been rejecting the idea of reward schemes—although they're now having another look at that themselves. It's part of our political culture and our legal culture to not want to have to resort to that sort of mechanism, but, at the same time, I think there's been some serious movement towards realisation that a scheme like that can play a role—it's not a silver bullet but it can play a positive role, if it's designed well.

Dr Zirnsak : In our submission, we've highlighted that there are other jurisdictions that provide a variety of different schemes to incentivise and reward whistleblowers. As I say, it's a third line, from our perspective. But we do point out that the UK has actually paid people for informing on tax crimes, so it has already implemented in that space. Canada has obviously got its scheme up and running, and we'll see how that goes. But there are different models and we are very aware that it is a different cultural context to the US, which is the one people often point to. There are ways of putting more safeguards in place, and the US does have some of those safeguards against people who might want to try to vexatiously or maliciously claim a reward when none is due.

CHAIR: To clarify, there is no real consensus on this particular issue? There is quite a mixed opinion?

Dr Zirnsak : Interestingly, though, I would add that it would be worth asking the ATO. Our conversations with them have changed over time. Initially, when we were talking to the ATO, they were not very warm to the idea of reward. In my most recent conversations with them—not wanting to put words in their mouth—they seemed much more warm to it and they were looking more closely. They get an awful lot of existing information through their informant line, but, in fact, they haven't been collecting the data. When we've previously tried to ask them, 'How much do you recover as a result of people informing on tax?' they haven't been able to inform us; whereas, if you looked at social security fraud, obviously the department in that case can tell you very concretely how much they recover from informants reporting on social security fraud.

Prof. Brown : Regarding consensus, the really interesting consensus was the consensus on the parliamentary joint committee after having given it such a serious look, given the diversity of interests and members on that committee, and hearing all of these submissions. I think that's the really interesting consensus, which is why there is a real opportunity to have this as an element of a very strong and robust, comprehensive regime but not a silver bullet.

CHAIR: You mentioned, Professor Brown, the Jeff Morris case. Obviously, Jeff Morris is appearing before us later today, so I'm interested in your views on this. Is your view that the bill in its current form would not have provided the protection to Mr Morris had it been enacted at the time that he blew the whistle?

Prof. Brown : My view is that the provisions as proposed would not have given him the protection he needed once he went public, which was the critical point at which effective action started to be taken.

CHAIR: So you're saying that the matters that Mr Morris took to the media back then wouldn't meet the statutory test in this bill?

Prof. Brown : Not in my opinion.

CHAIR: On what do you base that?

Prof. Brown : The test in the bill is one of requiring 'an imminent risk to health and safety of a member of the public or to the financial system', amongst some other things. Even in the Jeff Morris case, I think there are two issues. Firstly, I don't believe that, at the time of those disclosures, it would have been safe to classify his disclosures as clearly indicating an imminent risk to the financial system. Secondly, I think the committee has got to ask itself: is this a question that it even thinks a whistleblower in those circumstances should have to fight out in court? That is the crucial issue—that it is even in the public interest to force a whistleblower to have to fight to demonstrate that, in that sort of circumstance, their disclosure achieved that sort of threshold in order to then achieve the benefits of any protections. The answer to that is fairly clear: if you're going to set thresholds, you want them to be thresholds which are reasonably capable of being met and satisfied without long, drawn-out, protracted legal arguments, which are only going to cost all parties an enormous amount and cost the whistleblower in particular, just in order to get to the point where they have the right to argue that they actually should receive the benefit of protections.

CHAIR: I understand. If a whistleblower goes to the media or makes disclosures to the media, can it potentially harm a regulator's investigation?

Prof. Brown : Potentially it can, which is why the threshold needs to be carefully and deliberately drawn.

CHAIR: You wouldn't want disclosures to the media to be made in bad faith, either, in the same vein.

Prof. Brown : It depends on exactly what definition of bad faith you're applying.

CHAIR: Do you think that a court would be more likely to interpret the words in the bill favourably towards a whistleblower, given that the whole intent of the bill is to protect the whistleblower themselves?

Prof. Brown : That goes to my second point, which is that, even if the court was predisposed to recognise that this small, individual breach of law or conduct might be serious and egregious but isolated—it might have been one grandmother who had lost her life savings and it hadn't been properly dealt with—and it was still something that was in the public interest to ensure was actually addressed and rectified—

CHAIR: My concern is that the media doesn't necessarily act in the whistleblower's best interest.

Prof. Brown : I couldn't agree with you more. That's why the reality of this is that we're talking about a backstop, because we're talking about a very small proportion of people who are actually prepared to go the distance. Mr Shelton is another example of somebody who was prepared to go the distance in going to the media. But any whistleblower who goes to the media will tell you that it's no more fun than all their previous attempts to try and get regulators to take notice and is sometimes even riskier. So I'm certainly not an advocate for the media being the first port of call, other than in circumstances where there is literally no other way to raise a serious matter. To that extent, the threshold that's set in the bill that is different from some of the public sector provisions, for example, which I believe is appropriate, is that there should be a requirement on whistleblowers to have gone to a regulator, at least, before they have an entitlement to protection for going public. The question is: what should the threshold be as to when and what type of inaction or delay on the part of the regular, or inadequate action on the part of the regular, then can trigger an entitlement for people to actually take it public?

Senator KETTER: With external disclosure, it sounds to me as if you are somewhat critical of the concept that's used in the bill that relates to imminent risk of serious harm. Do you think that's too restrictive?

Prof. Brown : I'll come back to the fact that I think the parliamentary joint committee, having gone through this and heard all the evidence over nine months, came up with eminently reasonable and sensible recommendations, which were to acknowledge that as being a legitimate ground on which people might go public. So I don't think there's any objection to having that in there to make it clear that those are certainly types of circumstances where there may be a legitimate public interest in people taking that next step and going public. The problem is really the extent to which this current bill doesn't grapple with or implement the parliamentary joint committee's recommendation on the second front, which is when a regulator has failed to act or not taken appropriate action in relation to a disclosure.

Senator KETTER: Is there a risk that limiting external disclosures lowers the bar for internal procedures that companies set?

Prof. Brown : It's not just a risk; it's a certainty because part of the policy reason for acknowledging the legitimacy of media disclosures, at least as a last resort or in necessary circumstances, is the imperative that gives to companies and employers to get their own whistleblowing misconduct processes in order, in order to limit and prevent the need for people to go public. I think it's understood now, within government and more broadly, that that's a policy objective. So, unless the threshold operates correctly to provide that incentive, it doesn't provide that incentive to actually make companies set up good systems and procedures, because companies can accurately look at the act and say, 'They've got no chance of being protected if they go public anyway.'

Dr Zirnsak : Obviously, conceptually we would argue there are two types of wrongdoing, simplistically. One is where you've got people somewhere inside the company at the middle level engaged in the wrongdoing without the company's approval and, therefore, the internal systems in that case may be an appropriate response to that kind of wrongdoing. But obviously, where the wrongdoing is authorised right from the top of the company, from the senior management or from the board, it's a very different circumstance where the whistleblower must go to a regulatory authority. There's actually a danger in that case. If they report internally, they're tipping off those who have orchestrated the criminal activity that they're about to be exposed, which would allow them to take action to try and thwart further law enforcement activity down the track.

Senator KETTER: Taking a further step back, Professor Brown, you were quoted in the Financial Review as saying that the bill was more a sideways than a forward step on key issues—and I note that you do support the bill as a first step in the process of reform. Can you provide further detail on where you think this bill is a step sideways?

Prof. Brown : Not beyond the issues that I've identified in my submission. I believe, if you look at the parliamentary joint committee recommendations, they're all issues that can and should be dealt with in line with the parliamentary committee recommendations, or where there is a clear precedent in terms of national and international best practice that could be incorporated. These are the areas where I think the bill won't work unless these issues are satisfactorily addressed, and that would, obviously, be a real shame. If they are properly addressed, the bill can be that first stage. That's why it would be great to see it step forward.

Dr Zirnsak : It should also be pointed out that there were some minor improvements made between the exposure draft that was put out by Treasury for consultation and the bill that is now before the parliament.

Senator KETTER: You referred me back to your submission, Professor Brown. Are you talking about the areas in blue that you've highlighted?

Prof. Brown : No, the areas in blue, I think, are in the attachment in my submission that seeks to reconcile the bill with the parliamentary committee report. They're simply there to provide something of a road map of the extent to which the bill currently does or doesn't move on those issues in terms of what's being addressed now and what remains to be addressed in the full scheme. The issues that I think are imperative for this bill to be workable and then to be rolled up into the full scheme are the five issues in part C of my submission.

Senator KETTER: In your opinion, does the bill match the substance and detail of the protections and compensation arrangements in the whistleblower regime in the Fair Work (Registered Organisations) Act 2009?

Prof. Brown : It matches it in some respects, it goes beyond it in some respects around issues like a reverse onus of proof as a principle for being able to obtain civil remedies and then it fails to meet it in other respects.

Senator KETTER: Can you detail those?

Prof. Brown : The main one in those five points of mine is the fact that the Fair Work registered organisations amendments recognise the role of a duty to protect and support whistleblowers on the part of employers by recognising that the failure to fulfil such a duty, in part or in whole, can itself give rise to the right to civil remedies. That's not a concept that is picked up in this bill.

Senator KETTER: I'm interested in the next steps in respect of the reform process—and you've identified that there is work the government has indicated it's going to do. I'm interested in your view as to how you would characterise your interactions with the government. Are you confident that there is a strong commitment to go forward with further recommendations?

Prof. Brown : I would say I'm confident to the extent that I'm an eternal optimist, and I'm confident to the extent that I know, as this committee would know from the many inquires it's done in this field over many years, that none of these issues are going to go away until they're satisfactorily resolved. They're always going to keep coming back to haunt the government and the parliament. So I'm confident that, in the long run, there will be a quality, robust and comprehensive scheme.

Senator KETTER: In the long run.

Prof. Brown : If not in the short run, then in the long run. I don't think I can comment beyond that.

Senator KETTER: What barriers are you seeing to progressing further reforms?

Prof. Brown : None that aren't fairly traditional: parliamentary terms, the life cycle of the parliament and, I think, a proper understanding of the extent to which we can learn from international best practice in choosing what we do in this bill. Australian innovation is a very good thing where it's fully thought through and fully researched, and I think the parliamentary committee inquiry demonstrates that. But there's always the risk that we're not fully conscious of the extent to which what we have already done in the past—and this applies to some of our compensation provisions in other whistleblowing bills—is not getting us the result we want because we haven't done it right in the past and we actually need to take a serious look at international best practice on some of these issues in order to get that better legal result. There's always a challenge in any government processes with being able to marry those two things, and I think this process is no different.

Dr Zirnsak : We've always found it very strange. You would think that the vast majority of people, where a company or any other organisation is involved in serious criminal activity, would want to do all in their power to encourage people to come forward and report that and protect them for doing so in order to get compliance with law. Yet we tend to run into what feels like a fairly overblown concern about people who will come forward and make vexatious or malicious complaints. As Professor Brown comments, the international experience is that, if you get the legislation right, you don't tend to get people coming forward making vexatious and malicious complaints because normally they get found out and the consequences for doing so can be very dramatic for them; whereas, you really do want people coming forward and exposing this criminal activity.

Senator BUSHBY: Surely the key to that is getting the legislation right.

Dr Zirnsak : Correct, but it's not like we don't have—

Senator BUSHBY: That's what the government's working through and that's why we're having a hearing today.

Dr Zirnsak : But it's not like we don't have models from overseas that have demonstrated what elements of getting it right look like.

Senator KETTER: Would you say that this is world-leading legislation?

Prof. Brown : I would say it is not yet by any means, but it definitely has the potential to be. 'World leading' doesn't mean we need to go out on some bold new adventure going where no person has ever thought about going before. It simply means that we already have been an innovator in the past in some aspects of whistleblower protection in the public sector that have worked. This is an opportunity to actually combine the strengths of our own experience with actually acknowledging where there are real opportunities to pick up from international best practice and marry that effectively. I don't think that's a complex or unrealistic problem, but it's not something that's been achieved yet in relation to this bill.

To go back to the previous question about barriers, I'm pointing out those particular barriers because I think they're self-evident behind the submissions that I'm making around reasons why the things that need to be fixed in the bill have perhaps proved to be a challenge up to this point. But I want to emphasise that I'm personally very committed to assisting the government to get this right, because that's realistically possible. To that extent, even if I perceived other barriers, I'm quite happy to say that it wouldn't be appropriate. I don't believe it's useful for me to be airing them here. What I wanted to emphasise was that I think one of the things which is not a barrier but which is part of this unique opportunity is the commitment. It is the commitment of the government to move in this space, within the realms of the possible of this parliamentary term, and the commitment of all parties as represented on the parliamentary joint committee to actually move forward in a way which can be world leading. I think that commitment is incredibly historic and a unique opportunity, and I believe we should all be doing our best to support the realisation of that commitment.

Senator KETTER: Given that there are a large number of the PJC recommendations that are not addressed by this bill, I'm interested in your opinion about future reforms. Can I get your best-guess time frame for what might happen after we get through this bill? Are there any milestones that we should be looking for in future reforms?

Prof. Brown : The main thing is that, although the realisation of some other recommendations in the parliamentary joint committee report requires some complex policy and research—and testing of the exploration of institutional models is how you might implement things—they're not unusual tasks for government, if government has that commitment to solve those tasks. What is really needed is a realistic time frame and set of milestones that demonstrate that the rest of the package is being fully developed, and it really is in the province of government to provide that.

CHAIR: My understanding is the government hasn't yet responded to the recommendations of the PJC—

Prof. Brown : Exactly.

CHAIR: and that the bill that we're talking about now was, as you said, well in train before the commencement of the PJC's inquiry. There's nothing in this particular bill that's going to prevent any of the other recommendations of the PJC being implemented eventually, as part of the journey. But this is a fundamental part of the journey.

Prof. Brown : Only to the extent that, once some of the processes established under this bill start working, if they're not well designed they will create a momentum of their own which may or may not be consistent with the best way of operating under a full, comprehensive and robust regime. That's why it's really important that this bill be designed in a way which fits in with, in my view, the type of path set out by the parliamentary joint committee so that we can minimise the risk of saying, 'We've already gone down this path, so it's too late to really consider doing this other thing,' or, 'We'll consider doing this other thing in five or 10 years time,' when, in fact, we still know we need to do all those other things. That's why I think the test will be—

CHAIR: The government response to the PJC will be the test.

Prof. Brown : Yes, which I think everybody will be looking forward to.

Senator BUSHBY: And which hasn't actually happened yet.

Prof. Brown : No, exactly.

Dr Zirnsak : On the positive side, the original momentum for this, as far as I picked up, was in the original budget announcement. The budget announcement around it was that it was going to be only for tax related offences initially. This bill does actually expand beyond that. In that sense, that's already positive. At the time, while we welcomed the announcement around tax, it did seem a bit odd to only restrict it to that area. If you were going to do this kind of reform around whistleblowing in the private sector, then it would make sense to expand it out to other serious crime types as well.

Senator KETTER: Can I come back to external disclosure. You've probably covered a lot of these issues, Professor Brown. Is there anything further you want to say about corporate whistleblowing and what kinds of provisions for external disclosure you would recommend?

Prof. Brown : Not at this particular time.

Senator KETTER: Dr Zirnsak's submissions, I think, touched on this particular issue. There have been concerns raised about the definition of 'authorised persons' to receive disclosures being too broad, particularly where a supervisor or manager could be a relatively junior person. What's your view on that?

Prof. Brown : I think they're very valid and understandable questions that have come from a range of submitters. I think the crucial thing is that the legislation needs to make clear that, if a person makes a disclosure to their supervisor, or to a manager or somebody in a position of responsibility in the organisation, then the entitlement to the protections will trigger from that point in terms of criminal liability for reprisal, right to civil remedies if detrimental action is taken et cetera. The question of who should be given statutory responsibilities to handle disclosures in what way, which is what creates the risk of a burden that is unmanageable on some employers, is actually a separate question. So I think part of the challenge here is that the definition of 'eligible recipient' bundles up both of those problems into the one provision. There might well be a solution to separate those two considerations.

But in broad terms I think it's more important for it to be clear from the act that the right to protections is triggered as soon as somebody discloses to a responsible person in the organisation, which includes their own supervisor. I think that's got to be the first priority out of those two concerns; the act has to make that clear. The reason for that is that we know from research that in a huge variety and majority of circumstances that is who people make their first disclosure to, and people do that in circumstances where, unknown to them, it's actually highly dangerous to do that, because of the fact that the supervisor or manager may be already complicit, aware or defensive in relation to the disclosure, and that the risk of detrimental action starts right then, not when it eventually finds its way to internal audit, a regulator or somebody else. So I think those two issues have to be borne in mind in the way in which the committee considers whether there's some adjustment to the act that would deal with those concerns about overburdening organisations at the first-level manager level.

Senator KETTER: Professor Brown, you've talked about the fact that there should be comprehensive coverage for the legislation, so it should go beyond the present range of corporate, financial service and tax entities. Which entities are not covered by this bill?

Prof. Brown : The principal gap, I guess, is employers who are not corporations, bodies corporate or financial licensees et cetera, or tax entities in relation to tax contraventions. So that covers an enormous amount of employment in the private sector and in the not-for-profit sector in particular. A lot of large—or even not-so-large—not-for-profits may be companies limited by guarantee which would be covered by this regime, but others wouldn't, such as unincorporated associations. There's a whole range of areas. I'm not suggesting that the Commonwealth should use this as a vehicle for taking over the regulation of employment in even further areas than it already has under the Fair Work regime. But the reality is that, if we want a seamless, unified, relatively simple system for private sector and not-for-profit sector employment generally, then there are ways of ensuring that that comes in using Commonwealth powers beyond the corporations power or the powers that lie immediately within the Treasury portfolio to cover employers who might be individuals, trusts, partnerships, whatever. The issue is not their form; the issue is the fact that people are blowing the whistle on Commonwealth regulatory matters or breaches of the Commonwealth Criminal Code, et cetera.

Senator KETTER: This was an issue that was raised by the Queensland Nurses and Midwives' Union about coverage of large not-for-profits and charities involved in the aged-care sector. Do you have a comment about that? Those areas are not covered by the bill, currently.

Prof. Brown : Yes, I think that just confirms what was reflected in the parliamentary joint committee recommendations, which is that there should be as comprehensive coverage as realistically achievable by the Commonwealth.

Senator BUSHBY: What constitutional head of power would the Commonwealth government use to do that?

Prof. Brown : Well, there's a range. There's a range of heads of power that support the Fair Work Act at the moment, beyond simply the corporations power.

Senator BUSHBY: A lot of those are referrals from states for that.

Prof. Brown : So there could be referrals. There are still elements of the external affairs power. But also, when we're talking about Commonwealth criminal laws and the enforcement thereof, and people providing information in relation to those, as well as—

Senator BUSHBY: That's fairly limited in terms of the range of what whistleblowing powers are intended to cover, if it's just Commonwealth offences.

Prof. Brown : And other contraventions of law.

Senator BUSHBY: I think it has the potential to get a little bit more complicated, though, if you're going down the path of noncorporates—in terms of identifying an appropriate head of power to actually cover everything.

Prof. Brown : I think if you look at the collective heads of power that support the areas of Commonwealth regulation and law enforcement that we're talking about across a wide range of spheres then there's an awful lot of power.

Senator BUSHBY: Okay.

Dr Zirnsak : Just following on, though, in the aged-care sector the government currently does have a complaints body set up to deal with those that receive Commonwealth funding for aged-care facilities. So clearly there is ability to—

Senator BUSHBY: That would be corporate, rather than not-for-profits. Sorry, they'd have a corporate structure of some sort.

Dr Zirnsak : Yes, although in the aged-care sector there are quite a few that are trusts, in those large providers of aged care.

Prof. Brown : But certainly these are issues for examination, as long as it's done swiftly and the task is actually taken on to work through those issues and figure out where the right boundary lies—what's realistically and effectively desirable to bring in and what's unrealistic. But certainly it can be broader than it is now in this bill. I haven't included that issue in my five key issues, because it's something that clearly can justify—and it needs to be done properly.

Senator BUSHBY: It's not totally straightforward.

Prof. Brown : It's not totally straightforward, no.

Senator KETTER: I've just got a couple more questions; I know we're going a little bit over time. But are the criminal and civil sanctions for reprisals sufficient in this legislation?

Prof. Brown : We are up against time. I did want to point out the fact that three of my five points relate not especially to the criminal reprisal provisions in the act. All such criminal reprisal provisions are largely symbolic, but valuable to have. They're a backstop, in effect, for really serious reprisals, retaliation or victimisation which is capable of being proved to a criminal threshold. The three points of mine, C1, C2 and C3, all relate to things that I think can and should be improved amongst the civil remedies provisions in terms of making them stand alone separately from the circumstances in which criminal victimisation might be shown the reverse onus of proof and what's an effective best practice standard there, and the question of the duty to protect and support, and recognising that. I think there are some issues amongst the questions on notice that go to that as well that I'm happy to answer, that will fill in the committee a little bit more on my views on that. I know that there will be other witnesses who you can talk to about that. Dr David Chaikin is another member of the panel and a colleague, and I know he has some views where we have a bit of a difference of opinion on some elements of that. I guess the main thing is that in trying to reassure myself that my suggestions are realistic and would help the bill actually meet that international best practice, if not world leading test, there's a couple of submissions that I think the committee should note from Professor Tom Devine at the Government Accountability Project in Washington DC, which is submission 23, and also a submission from Professor David Lewis, who is a professor of employment law at Middlesex University in London, which is submission 7. I think the key thing about those submissions is that they do help us navigate the question of what's international best practice, from a practical point of view—don't take it from me; take it from the OECD, take it from everybody else. take it from some of the most experienced litigators and scholars in this area of law from around the world. I think that just confirms that there are still some issues here in this bill that, as per the parliamentary committee recommendations, in at least two respects this bill can, in a quite straightforward way, achieve that sort of standard.

Senator KETTER: How would you respond to Dr Chaikin's submission that says that the bill is drafted sufficiently when it comes to the criminal and civil sanctions?

Prof. Brown : I think Dr Chaikin's submission and mine share many items in the same list of what are strengths of the bill. I would love to share Dr Chaikin's optimism that in practice the bill would operate as he predicts it would, with his expertise in statutory interpretation. In some circumstances I believe it would work in the way that he describes. But in the submissions I mentioned and my submission I think the key issue on which we differ from Dr Chaikin is the fact that to achieve the civil remedies the focus still revolves around the state of mind or the belief or suspicion of the respondent or the person who was responsible for the detrimental action and that as long as that is the case—and that's what's inconsistent with compensation regimes overseas but has been either explicitly or implicitly a reason Australian whistleblower compensation provisions have not been working since 1994—I think that's the critical issue which can be rectified in this bill, to prevent, with or without a reverse onus of proof, or irrespective of how that's characterised, that that will always run the risk of leading to an unjust or disadvantageous outcome in many circumstances, and not all circumstances but in many circumstances.

Senator PATRICK: We've gone from a situation where we had little protection, and then if we look at the PJC's report, that's the ideal standard. Would that be fair, if I were to talk about two extremes? Obviously this bill is supposed to be a step in the direction of the PJC. That's ultimately where we want to be?

Prof. Brown : Yes.

Senator PATRICK: Okay. In your submission you suggest—notwithstanding that it doesn't cover the full scope of the suggestions in the PJC report, but for those that it does cover, maybe a portion of the ultimate solution, do they step in the right direction? It appears from my reading of your submission that it doesn't, does it step in the correct direction towards the PJC recommendations?

Prof. Brown : Which particular aspect, sorry, Senator?

Senator PATRICK: I can run through C1 through to C5. It comes down to what you said before: we can legislate and it goes off on a different tangent. It would seem to me that if we're going to legislate we want to be heading in the direction of the PJC. So in terms of C1 to C5, how would you characterise them—either stepping towards, or veering on a different course?

Prof. Brown : C1 is unfortunately a slight step backwards, relative to the exposure draft. C2 is the duty to support and protect, and that simply wasn't picked up. I don't think it's because there's a lack of feasibility of picking it up, I just think it hasn't been picked up. C3, which is the onus of proof, I think that this is where the bill goes further than the PJC report, and in a good way—but it's a question of that reverse onus of proof being best practice and as workable as possible to actually deliver on the goal. C4 is the issue of whether we really want to capture all personal and employment grievances in our definition of wrongdoing. I think it's just an issue of practicality that needs to be resolved in the bill, if it's going to work at an operational level.

Senator PATRICK: The PJC had that right?

Prof. Brown : The PJC had that right.

Senator PATRICK: And this bill gets it wrong? If you're being blunt.

Prof. Brown : At the moment, I think this bill won't work very well at all if it's left the way it is. Then the fifth one is the public disclosure issue. On that, the PJC, I think, articulated the right principles.

Senator PATRICK: So it had the right thresholds. In this bill, we've talked about the Jeff Morris test—you've made it clear you don't believe that Jeff Morris would have met the public or external disclosure threshold. You've obviously looked at many, many whistleblower circumstances. Would you be able to tell me how many whistleblower examples you know of—well, how many that you know of, and how many would meet that threshold?

Prof. Brown : I'm struggling to think of any, Senator.

Senator PATRICK: So in that sense, you're saying it doesn't work at all, it doesn't help anyone.

Prof. Brown : I'm struggling to think of any actual individual—I can think of hypothetical examples that might be rammed into it.

Senator PATRICK: I'm after the actuals that you're aware of. I know you've studied this ad infinitum. But you're saying that it does not help any of those that you're aware of, or wouldn't have helped?

Prof. Brown : I'm happy to take that question on notice, just to make sure that—

Senator PATRICK: I'd love to hear the answer to that. You use words in your submission that suggest there's a confusion created by the words in the legislation, in terms of perhaps statutory interpretation—or maybe how the whistleblower might interpret, or maybe how the organisation that we're trying to generate a culture of protection to—you also talk about ambiguities that have to be resolved by a court. In terms of the parties that might appear before a court, doesn't that put the advantage—noting that before you go into any litigation you're often advised by counsel as to whether to proceed—surely that confusion, that ambiguity, puts the party with the best legal resources in front here?

Prof. Brown : I think the short answer is yes, that's always the case with litigation. I think the key issue, in terms of thinking about the way in which the language of the bill is structured, is to think about it both in terms of how it would play out in terms of statutory interpretation in the court—and whether that would be simple, or whether that would be drawn out, expensive and hard for a whistleblower to engage in and fight. I think the other thing is that this legislation also has to be intelligible to whistleblowers directly. It especially has to be intelligible to businesses, organisations and employers. It has to give the right signals, in terms of what does 'victimising conduct' mean relative to this or relative to that? For businesses to actually take responsibility for creating an environment in which people can speak up and they are protected and supported, having the incentives to do that—then it's crucial that the language of the bill actually achieves that result. Rather than being just a lawyer-fest, where the lawyers inside the organisation can say to management, 'We don't really have to worry about this, because this would be so hard for them to prove'.

That has been the issue. Most people do not want to fight it out in court, and most people shouldn't have to fight it out in court. Most people, if there is a duty to protect and support, or there is effective oversight of these regimes, should be able to have access to administrative remedies. Those things are all dependent upon organisations and regulators having a culture of being prepared to acknowledge their responsibility for the environment and for the way in which the whistleblower is managed. Those things are all things for which this bill has to provide clear triggers and not end up just simply being something that relies on the risk of litigation.

Senator PATRICK: So just to sum up, what you're saying is that this bill has elements that go in the wrong direction, compared to where the PJC recommended—or goes off on a tangent that would have to be corrected. You're saying the bill has some confusion and ambiguity that would, in some sense, potentially turn this into a lawyer-fest and in that context not protect the whistleblower. You're also saying that the thresholds, particularly in relation to external disclosure, are simply inadequate?

Prof. Brown : That's your summation, Senator.

Senator PATRICK: Is it a fair summation, from your submission and what I've heard you say?

Prof. Brown : I think that the thing that I would add to that summation is that these things can all be fixed.

Senator PATRICK: I understand that. But unless you say that that's where we're sitting at the moment, then there's no drive to fix them, if AJ Brown is happy.

Prof. Brown : I don't know what that's got to do with it. The thing is that unless these things are fixed, in my view the scheme won't work. I'm just happy that they can be fixed, and that there is still an opportunity to fix them.

Senator PATRICK: Yes. I understand your optimism.

Senator BUSHBY: I apologise to your other witnesses. Would the Commonwealth Ombudsman potentially be an appropriate clearing house?

Prof. Brown : Not for the private and not-for-profit sectors, no.

Senator BUSHBY: So as a whistleblower agency, it's not an appropriate—

Prof. Brown : I don't believe so, no.

Senator BUSHBY: Just on that last point that you were discussing with Senator Patrick, I don't know where you set the threshold for external disclosure, but isn't it the case that it's always going to be grey at the point where the threshold is. And there's always the potential for legal argument at that point. It might change where it's clearer, but at the point where it's set it's always going to be grey. I see you nodding, for the record.

Prof. Brown : I think the only thing I'd add is that in terms of it being the risk of a lawyer-fest, the question is whether it's an unnecessary lawyer fest, and keeping the lawyer-fest within manageable proportions.

Senator BUSHBY: I think counsel might have a different view, but I don't know that.

CHAIR: Thank you, Dr Zirnsak Professor Brown.