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

BAILES, Mr Morry, President, Law Council of Australia

GOLDING, Mr Greg, Chair, National Integrity Working Group and Foreign Corrupt Practices Committee, Law Council of Australia

MOULT, Dr Natasha, Deputy Director of Policy, Law Council of Australia

[9:48]

CHAIR: I welcome representatives of the Law Council of Australia. Thank you for appearing before the committee today. I invite you to make a brief opening statement, should you wish to do so.

Mr Bailes : As the committee would be aware, the Law Council is the peak national body representing the legal profession in Australia. I would like to thank the committee for the opportunity to provide evidence to its inquiry on the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017. The Law Council strongly supports significant reform of whistleblower laws in Australia and the broad thrust and intent of the bill. It also supports several aspects of the bill as an important first step in whistleblower reform. The Law Council welcomes this inquiry as it seeks to examine the bill, which would create a single whistleblower protection regime in the Corporations Act 2001 and create a new whistleblower regime under the Taxation Administration Act 1953. In its submission on the bill, the Law Council reiterates much of its submission on the exposure draft of the bill. The Law Council's written submissions on the exposure draft and the bill raise concerns about the bill not addressing several of the issues required for a comprehensive whistleblower regime as identified by the Parliamentary Joint Committee on Corporations and Financial Services' whistleblowers protection report, which was published in September 2017. These include, for example, the committee's recommendations relating it to the creation of a single whistleblower protection act covering all areas of Commonwealth regulation beyond the bill's corporate financial service and tax entities; access to non-judicial remedies, for instance, through the Fair Work Commission under the Public Interest Disclosure Act 2013; an agency empowered to implement the regime, such as a whistleblower protection authority; and appropriate resourcing for effective implementation.

Further, there are concerns raised by the Law Council about changes between the exposure draft and the bill, which include that the expanded definition of 'eligible recipient' now includes a person who supervises or manages the individual. In some organisations this may be relatively junior employees, and this will place a substantial trading and compliance burden on organisations. Given the very broad scope of disclosable conduct, companies may be required to expend a lot of time responding to complaints which are outside the intended scope of the legislation. If this change is to proceed, clarification is needed to ensure the obligations imposed are realistically achievable.

In the change in the onus of proof with regard to orders of compensation and other remedies, the claimant only needs to adduce or point to evidence that suggests the reasonable possibility of the matters in proposed paragraph 1317AD(1)(a). That is, it is not necessary for the claimant to prove the matters on the balance of probabilities. In this context, the Law Council notes, for example, that KPMG in its submission on the exposure draft suggests that there should be mandatory conciliation similar to that contained in the Commonwealth Fair Work Act 2009 general protections regime before a victimisation claim can be filed.

The manner in which the emergency disclosure provisions will work—that is, the notification process in proposed 1317AAD(1)(d)—appears to serve no purpose, as it does not require the disclosure to notify the regulated entity or to give the Australian Securities and Investments Commission, the Australian Prudential Regulation Authority or the prescribed bodies an opportunity to respond. The matters which must be dealt with in whistleblower policies have been further expanded by the bill rather than confined.

In its more recent submission on the bill, the Law Council also reiterates its view that consideration be given to extending the whistleblower protection to volunteers; advocates for a redrafting of the proposed subsection 14ZZT(1) of the Taxation Administration Act 1953; and asks for clarification that the reporting obligations under part IIIC of the Privacy Act do not apply.

The Law Council encourages the Australian government and the Treasury to continue to work towards a comprehensive whistleblower regime and to provide a prompt response to the committee's report. My colleagues and I are happy to answer any questions the committee may have of us. Thank you.

CHAIR: Thank you very much, Mr Bailes. I just want to confirm first and foremost that you believe the current bill does in fact improve the situation for whistleblowers.

Mr Bailes : As a general remark, yes.

CHAIR: In what ways would you specifically suggest that it is an improvement?

Mr Golding : The existing legislation is subject to a variety of weaknesses, as is well known. It removes many of those. In particular, the improvements to the victimisation and compensation regimes would be quite strong, we think, in terms of the impact on business.

CHAIR: I understand you have a particular issue with the single private sector act. Can you tell the committee why you believe that a single act is better than more than one act, even where those multiple acts are as far as possible consistent.

Mr Golding : A whistleblower doesn't have a particular act in mind. They have a particular breach of the law in mind, but that might not be well understood by the average private sector employee. We think a single clearing house, if you like, that deals on a whole-of-government basis with breaches of law would be a better solution than a whistleblower trying to work out whether they have a complaint relevant to APRA, a complaint relevant to ASIC or a complaint relevant to the Australian Federal Police.

Mr Bailes : In our submission we make the point that, the more pieces of legislation that are caught up and involved, the more risk there is of a loss of uniformity.

CHAIR: I assume you are aware of the ATO's position that keeping the whistleblower regime separate to a corporate regime is paramount. Can you comment on that particular position of the ATO.

Mr Golding : We think a single clearing house would be a more efficient way of administering this.

CHAIR: So you disagree with the ATO?

Mr Golding : Yes.

CHAIR: Do you think there are any constitutional limits to achieving a single private sector act?

Mr Golding : There clearly can be, yes

CHAIR: Do you want to expand on that?

Mr Golding : An obvious example of a deficiency, in a sense, is the lack of application to a partnership, for example. My firm has over 1,000 Australian employees; it's a partnership. This legislation will not apply to it. I don't have a view on that particularly, in my own circumstances, but clearly there would be a constitutional issue in regulating partnerships under the federal law.

CHAIR: I want to quickly move on to the PJC's recommendation for a single whistleblower authority. You have said that this bill does not necessarily address that particular recommendation. Does ASIC have any whistleblower office within its purview, within its operations?

Mr Golding : The Senate inquiries involving ASIC, for example, and the more notorious circumstances over the last decade, have clearly had the result that ASIC has devoted additional resources to this area.

CHAIR: Do you think ASIC could potentially fulfil this role?

Mr Golding : Potentially, yes. It is a question of resources and focus. There are two aspects of an office of a whistleblower. The first is to act as a clearing house. The other is to act as an advocate for whistleblowers generally and, potentially, to have a focus of enforcement on behalf of whistleblowers. It is a question of the myriad tasks that ASIC has. This is a very important issue to get right. For the government to spend some money on actually getting it right and showing some global leadership in this area would be a good use of money.

CHAIR: This bill makes significant leaps forward in this space. You wouldn't suggest delaying the passage of the legislation until a single act or the new authority proposals are considered?

Mr Golding : That's a very hard question. Clearly, the legislation is a significant advancement; there is no doubt in that. However, if you are sitting on our side of the table it has been quite rushed. We saw it in October. We had two weeks to comment on it. It was then released a week before Christmas in a different form. It is now the beginning of March and it is certainly not without difficulties. It would always be better to take the time and get it right. That being said, it is a significant advance on—

CHAIR: Can I quickly cover the Jeff Morris case. Had this bill been enacted back then, do you think you could say with any certainty that Jeff Morris would have lost his protection when he went to the media?

Mr Golding : We don't support the media being a route that is generally available. The best solution is for private corporate enterprises to fix issues themselves before there is any need for others to be involved. That is clearly the most efficient and best result. The second best result is for a regulator who is charged to deal with these issues to deal with the issues. We do not support as a good way of thinking about this issue the proposition that somehow reporting to the media or to parliamentarians is a way to fix the issues underlying whistleblowing.

CHAIR: You would agree, though, that the key aim of this bill is to encourage whistleblowers to come forward to the company and to the regulators so that companies can investigate and take appropriate action and that this is a significant step forward in the direction?

Mr Golding : Looking at the bill from the perspective of a private lawyer who advises companies, I would expect that, when I'm advising companies on whistleblowing under this new act, this will be a game changer in comparison to the existing legislation.

Senator KETTER: I'd like your views on how this bill stacks up to the obligations under the Registered Organisations Commission legislation. The regime under the registered organisations act provides for compensation where the employer should have known that the whistleblower made a disclosure. Do you think it appropriate for that standard to be included in this bill as well?

Mr Golding : Obviously, this bill builds upon legislation that exhibits significant improvements over the existing Corporations Act legislation. There are nuances around all these pieces of legislation. In the formulation of this bill, they suspect or they propose or they may, to use various words used in this bill—personally, I think they are a significant improvement.

Senator KETTER: That goes short of the registered organisations standard.

Mr Golding : Yes.

Senator KETTER: Other submissions have noted that the bill stops short of making companies liable where they fail to take reasonable steps to prevent persons under their control from acting to the detriment of a whistleblower. This is described as the duty to support and protect. Do you think this duty should be included in this bill?

Mr Golding : If we had more time with this legislation, thinking about corporate culpability, generally, would be a positive. Corporate culpability of general law is a somewhat difficult concept. The general common law proposition is that companies are only responsible for the conduct of their employees where the acting mind and will of the company has taken a decision on the matter. There are circumstances where presumptive liability with companies is necessary to ensure the correct behaviour. For example, my area of interest is the UK Bribery Act and its requirement for foreign corrupt practices, that the company undertake reasonable steps to ensure that liability doesn't arise; it is a fairly extreme example of making companies responsible for the conduct of their employees.

There are degrees and nuances to this issue. On my side of the table, we want fair supervision of companies, not unfair imposition of liabilities on companies for things they can't control. There is a slight difficulty in the legislation with corporate culpability. I would agree with that proposition. Care needs to be taken in the nuance, in terms of allowing companies to deal with the issue rather than just impose responsibility to companies presumptively. Something around you that urges reasonable supervision et cetera would be a way of dealing with this issue, and we would support it.

Senator KETTER: With those modifications you would say it's not too onerous on companies.

Mr Golding : Companies can take reasonable steps to deal with the issues. In the whistleblowing area, it is a very difficult issue for companies to act responsibly, particularly where there are other issues surrounding the whistleblowing—for example, grievances or employment issues.

Senator KETTER: I'm interested in why it's appropriate to have this standard in the Registered Organisations Commission but not in the corporate world.

Mr Golding : I'm agreeing with you, that there is an issue with the legislation, as I read it, into corporate culpability on victimisation and the imposition of liability, particularly in the civil penalty area. But in fashioning a corporate culpability regime you need to allow companies that are acting responsibly a safe harbour. That's all I'm saying.

Senator KETTER: What about whistle-blowers who go to their lawyer for protection. Do you think that the bill adequately provides protection to them?

Mr Golding : Anonymous whistleblowing is an important issue, and it's not directly comparable. But for example, the way the US SEC regime deals with anonymous whistleblowing, which has proven very successful, requires representation through a lawyer. I think in general terms the recognition of the ability to receive legal advice that's contained in the existing draft of the bill is appropriate and fair. But going back to Senator Hume's point at the beginning, the lack of a regime to permit anonymous whistleblowing is a very significant limitation of existing legislation. If we had more time, I'd like to think we would think a bit more about anonymous whistleblowing and how to facilitate that through lawyers or otherwise.

Senator KETTER: So I just came back to your submission. You've highlighted that you retain a preference for a single whistleblower protection act. What about your concern about the lack of access to non-judicial remedies—is that still your position?

Mr Golding : Yes, that is my position.

Senator KETTER: What recommendations would you make in that area?

Mr Golding : The use of the courts is expensive. In our submission, we reference the Fair Work Commission. That sort of regime, we think, would be a preferable regime to the court system.

Senator KETTER: You have also raised concerns about how the bill fails to hold corporations accountable for the acts of their employees in the context of compensation. Do you still have those concerns?

Mr Golding : In the compensation regime, you'll observe that an employer is responsible for the actions of their employees, and there is a due diligence or reasonable steps defence that attaches to that for the corporation. So in compensation, as distinct from victimisation, there is an appropriate recognition of the fact that a company has a safe harbour if it's taken reasonable steps to deal with the matter.

Senator KETTER: You've raised new concerns about junior staff and receiving disclosures. What recommendations would you make in that regard?

Mr Golding : I agree with Professor Brown that pitching at a manager or supervisor is probably too low. Frequently there will be issues with managers and supervisors. It's not the way that the company should operate. The company should operate through having appropriate systems in place that provide a degree of independence and independent scrutiny. That is recognised in the bill. One of the limbs provides for authorisation to an authorised person of the company. Just organisationally in a corporation, that is the proper recognition to give in the legislation, rather than potentially applying it to managers or supervisors. For many large Australian corporations that's potentially thousands of employees who would fit within that scope.

Senator KETTER: You've mentioned that partnerships are not covered by the scope of the bill. Of the big four accounting firms, are any of those covered by the scope of this bill?

Mr Golding : I am not an expert on the legal organisation of large accounting firms, but my suspicion, on what I do know, is that no, they wouldn't be covered. There are some incorporated entities within those accounting firms, but the employer would typically be the partnership, I would expect, but I am no expert on corporate law.

Mr Bailes : In as far as the law is concerned, there are two models. Certainly the traditional model is a partnership model. There are now incorporated legal practices, but they are less than more. I too can't speak for the accounting world.

Senator KETTER: You've also said that volunteers should be covered by the bill. Why do you say that?

Mr Golding : Volunteers would be a large component of the structure of a not-for-profit organisation. Once more speaking from my own experience, the not-for-profits I deal with are typically public companies limited by guarantee, so they would be covered by the legislation, because a public company limited by guarantee has to be a public company and can't be a proprietary company. The question then is whether a volunteer is an employee and whether they are covered by the bill or not. That was our point.

Senator PATRICK: Consistent with the question I asked Professor Brown, it seems you also agree that PJC came up with a pretty good set of recommendations as to where we should be heading. We have our current set of laws, and we have where we ultimately want to get to. I understand you're concerned the scope of the changes don't meet all of the requirements, but where there's consistency in the scope, does the Law Council's believe the legislation as proposed steers it in the right direction, or are there any tangents that would take the law in directions other than where the PJC was recommending?

Mr Golding : This legislation is a substantial improvement on existing legislation and therefore is to be commended. It has been rushed, and we would like more time, but it is a good piece of legislation.

Senator PATRICK: What if the legislation implemented takes you off on a tangent and causes companies to set up regimes, and courts to deal with issues that may create precedents, only to then have it jump back in another direction when we finally hit where we want to be with the PJC recommendations? That's the context in which I'm asking this question: is it sending us to a temporary place that in some respects causes some cost?

Mr Golding : I'm an adviser to large business. I think this piece of legislation will be very significant and will cause positive change in corporations.

Senator PATRICK: You believe it's heading in exactly the right direction? There's no veering off the course?

Mr Golding : 'Exactly in the right direction' is not the question.

Senator PATRICK: That is my question, actually. It might not be your answer, but that's my question.

Mr Bailes : Given the general nature of the question, the answer is, 'Not in all directions.' That's reflected in our submission. Given the lack of particularity of the questions, it's difficult to answer it other than in a generality.

Senator PATRICK: I take your point that we should go back to your submission, but I'm trying to establish that we need to make some changes in order to get this right.

Mr Bailes : Certainly.

Senator PATRICK: From your comments in relation to the media, I get you don't support that, which must be based on an assumption that officials will always do the right thing.

Mr Bailes : Yes.

Senator PATRICK: A whole body of administrative law suggests that doesn't happen either in extremes like misfeasance or malfeasance or simply by interpreting the law incorrectly. My view is you shouldn't make that assumption. In those circumstances the media become a useful tool of last resort. Going back to Senator Hume's question, had Jeff Morris gone to the media at a time when this bill had been in place, would his circumstances have met the threshold for protection in the bill before this committee?

Mr Golding : I think I'm with Professor Brown, who took this question on notice. I personally think the bill sets a very high threshold that in the real world would be very difficult to meet.

Senator PATRICK: I'm not trying to change your view that it's not necessary, but if it's there and ineffective, in some sense it achieves your aim.

Mr Golding : Yes, it does. In that sense we're quite happy with it.

Senator PATRICK: Fair enough, but I think that draws out the fact that the threshold is perhaps too high. I think you mentioned in your submission—I read a lot of them, so I don't want to verbal you—that you thought there might be a conciliation step before going to court. Can you elaborate on that a bit more?

Mr Golding : I believe we did make that submission. It's a question of the cost of the administration of justice. Any practical steps that can be taken within the administrative machinery of the legislation that negate that necessity is a positive thing—so a more nuanced regime.

Senator PATRICK: Segueing from your point about cost, in some sense in almost 100 per cent of situations where a whistleblower is involved, the whistleblower is at a disadvantage from a financial perspective compared to the potential respondent. In that context do you believe it's important in the framing of the legislation to make sure we address that imbalance by dealing with some of the confusion and burden of proof issues Professor Brown has raised? He says there's ambiguity and confusion in some areas, which means a lawyer gets involved. As a general principle framing the law so it's not confusing is a better proposition.

Mr Golding : Yes. Our focus has been on remedies that don't involve the need for courts. We made a couple of suggestions, including a tribunal to deal with these matters. The courts are always going to be a blunt instrument when it comes to this, because as you point out, in the corporate context by definition you're going to have well-resourced companies dealing with badly-resourced applicants.

Senator PATRICK: Should we be in a situation where if a whistleblower protection authority gets involved and takes on the matter, would it be sensible to have them become a party to any litigation that flowed from that?

Mr Golding : That was the second element of the 'Office of the Whistleblower' I was advocating for earlier: to act not just as a clearing house for complaints to the relevant bodies but as an advocate for whistleblowers, including the potentiality of enforcing rights—for example, a victimisation claim on behalf of the whistleblower.

Senator PATRICK: That is often a considerable bar for the people who are out of a job because of some detrimental action. They have no money or resources at all.

CHAIR: I want to clarify a particular issue you mentioned before. Professor Brown believes the threshold is too high to go to the media and should be relaxed, and you say whistleblowers should lose protection immediately if they go to the media. I know that Herbert Smith Freehills, one of your member firms, has made that point very clearly. Don't you think the bill as it stands strikes the right balance between those two competing views?

Mr Golding : It's difficult, because we don't support the proposition, but in a sense we support the bill in that it sets a high bar. It should be a very high bar, because that's not the best policy outcome.

Senator PATRICK: Have you examined the circumstances of the Jeff Morris case in your consideration as to whether or not people should be able to go to the media, coming to the conclusion that it was unnecessary in the circumstances and that a better alternative would have been available to him?

Mr Golding : No. I've examined the legislation and formed a view on the application of the legislation to individual whistleblowers.

Mr Bailes : I want to underscore that point. We tend to evaluate bills for what they are rather than taking singular circumstances and then saying, 'Is it within or without?'

Senator PATRICK: But isn't there a validity in testing a piece of legislation against some circumstances?

Mr Bailes : Yes, but then you'd find yourself prescribing legislation for particular circumstances, which is not the preferred approach we're advocating.

CHAIR: Thank you very much for appearing before the committee today.