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

MILLS, Ms Kate, Principal Adviser, Financial System Division, Markets Group, Department of the Treasury

WOOD, Mr Gregory, Manager, Base Erosion and Profit Shifting Unit, Department of the Treasury

[14:23]

CHAIR: Welcome. I remind officials that the Senate has resolved that an officer of a department of the Commonwealth or of a state or territory shall not be asked to give opinions on matters of policy, and shall be given reasonable opportunity to refer questions asked of the officer to superior officers or to a minister. This resolution prohibits only questions asking for opinions on matters of policy and does not preclude questions asking for explanations of policies or factual questions about when and how policies are adopted.

Thank you very much to you both for appearing before the committee today. I invite you to make a brief opening statement, should you wish to do so.

Ms Mills : It's fair to say that the work we did on the policy side covers the corporate side of this bill. I was also the chairman of the expert panel that was appointed by the minister in September, a couple of members of which have also appeared before the committee today.

Mr Wood : I'm the manager of the Base Erosion and Profit Shifting Unit in Treasury's Corporate and International Tax Division. Myself and colleagues were responsible for the tax component of this bill.

CHAIR: I might ask you, first of all, about this government expert panel. Could you tell me briefly, Ms Mills, exactly what the panel was constituted to do and whether the work of that panel is ongoing?

Ms Mills : The panel was originally constituted to do two things. Firstly, it was in respect of a commitment that the government had made to some crossbenchers, towards the end of 2016, that if the PJC came out with some recommendations there would be an expert panel set up to assist the government, to work out what its position would be in respect of those recommendations and, potentially, some legislation coming out of that. The panel was also established by the minister because we had a bill that had been prepared and that was ready, virtually, to go to exposure-draft stage around the time the PJC report came out. It was an opportunity, obviously, to take the benefit of that expertise and obtain some feedback on the bill, to work out whether there might be a necessity to make some amendments that may be beneficial for the bill. Certainly, there was a process put in place that enabled that feedback to be obtained from the panel. In effect, they were the two aspects the panel has addressed, to date.

CHAIR: Thank you for that. So the government had made commitments, in relation to whistleblower reforms, before the PJC reported.

Ms Mills : Yes. The government initially made a budget commitment—I think it was in early 2016, if I've got this correct—to introduce, for the first time, tax whistleblower provisions. But around the same time the government became part of the open government fora process and it made a number of commitments, in that regard, to at least seek to harmonise the corporate law components to see if they could bring that into line with things like the Public Interest Disclosure Act, in particular, and then, separately, later the government also made a commitment in respect of the Fair Work Registered Organisations Act to the crossbenchers to look at some harmonisation there.

CHAIR: So it had begun work not just before the PJC reported but before the PJC commenced.

Ms Mills : Yes. The work in Treasury began around about May or June of 2016; whereas the commitment in respect of the PJC inquiry was made in November or December 2016, so there was some six or seven months of work within Treasury that was underway, including quite a bit of comparative analysis of overseas systems and so forth, with a view to preparing a consultation paper. That consultation was prepared and issued by Treasury in, I think, late November or early December 2016.

CHAIR: Before we get into some of the technical aspects of the bill, I just want to clear up a couple of issues that we heard from witnesses earlier today. I'm assuming that you heard testimony from Mr Morris and others throughout the day. Was Mr Morris confusing the issue of compensation versus a bounty scheme in his testimony today?

Ms Mills : Yes, that's probably a fair assessment. Compensation is a legal concept and what the law tries to do, in the context of compensations, is put people back in the position they would have been in had they not suffered the harm or injury. It's about redressing something that has happened to them because someone else has breached their duty, be it a contractual, statutory, tort or fiduciary duty that they may owe that person. The law says, 'Because you've breached that duty, you now have an obligation to provide redress to this person so that the damage they have suffered, in some way, is removed.'

Bounty systems, on the other hand, look at it quite differently, from my understanding of the system. You're actually rewarding or trying to incentivise people to come forward in return for, potentially, getting a share of the moneys that might be recovered as part of an action that the government or that person—which is the case in the United States, in some instances—may take on behalf of the government to recover moneys as a result of someone breaching the law in a more nebulous way. It may not affect that person at all. They may suffer no loss whatsoever. Nevertheless, because they have taken a risk in coming forward, the view is taken that it may be appropriate to provide them a percentage of the recovered funds.

CHAIR: There was some discussion earlier about whistleblower authority having the power to waive legal professional privilege. Do you have any comments on that particular issue?

Ms Mills : Legal professional privilege is a long-standing policy, certainly common law, which in our case is derived principally from England. It's very well recognised in virtually every jurisdiction that operates on the rule of law. It is a public policy; it is a privilege that obviously can be lost if it's misused in some way. Classically, the cases in which that occurs are where the person may be engaging in some specie of fraud or something like that and, for policy reasons, the privilege may not be able to be maintained. But, generally speaking, the law has been very chary in removing that privilege. Indeed, there are some very significant and long-standing High Court pronouncements on this very issue. The High Court itself will not likely infer that legislation is taking away legal professional privilege because it is considered to be essentially a fundamental right that a person has to be able to obtain legal advice in relation to their affairs and to feel that they are free to do so—and, indeed, to obtain robust advice if they need to. That is why the privilege, or if you like the policy position, is set the way that it is.

CHAIR: There was a discussion a little bit earlier about whether the ABC Online or the Guardian would be considered under this bill as journalists or commercial journalists. Would you like to make a comment on that?

Ms Mills : Yes. It is the intention of the bill that they would be covered. I do understand that suggestion has been made that because there is a reference to them having to operate commercially that it might somehow exclude them. But the real intent or purport of the bill, indeed the policy position, was to ensure that professional journalists, people whose business it is to engage in journalism be it for a publicly controlled entity or a privately controlled entity, would be recipients or potential recipients of those emergency disclosures.

It was never the intention to exclude publicly funded entities, such as the ABC or even SBS. It was really more to try to draw an appropriate distinction between them and social media and people who might say that they're conducting some form of journalism when in fact that's not the case. And that is because there is a very delicate balancing exercise, which I think a number of witnesses today have adverted to. On the one hand you want people to come forward and make disclosures where they feel something's gone wrong within an organisation and they think it's actually seriously wrong and they need to do something about it. On the other hand they may not necessarily have all the facts at their disposal—they may not be senior enough in the company to understand all of the integers of the information that they need to be able to form an accurate view—and in some circumstances you ultimately need a regulator who's got compulsory powers of production in terms of documents and appearances for examinations and so forth to get to the information that's needed to form an effective view about the spectrum of information that's available.

If you have a situation in which people can go out and simply make an assertion in the media without necessarily taking into account those possibilities, then there's a very real risk that those entities or individuals that are working for those entities are seriously or irreparably damaged. In the case of individuals, they may be defamed and they have really no recourse once they're subjected to that kind of external scrutiny. I do note that the PJC itself was extremely cautious in this regard and noted, firstly, that if there are to be those kinds of disclosures they shouldn't be to politicians or to members of parliament—there should be some careful thought around that—and, secondly, in relation to media disclosures, they should be limited to circumstances in which there is a serious risk of harm or damage, or there's some kind of systemic issue that creates an emergency. It was that kind of cautionary note that was looked at fairly carefully.

We did also consider the position of the Public Interest Disclosure Act, which has a similar sort of regime. We obviously considered the tier disclosure regime that exists in the United Kingdom, and a few other exemplars that exist around the world, to try to arrive at this policy balance between not damaging people needlessly on the one hand but on the other hand trying to ensure that people are encouraged to come forward, and to deal with the prospect that there may genuinely be an emergency situation where you need to have an ability to continue to give people protection but allow that information to come forward because of the emergency.

CHAIR: There have been a number of criticisms of the bill either discussed today or throughout the submissions, and I wouldn't mind a brief comment on each of them. The first one is that there should be a separation of criminal liability and civil remedies. Can you comment on that?

Ms Mills : I believe that the bill does that. The bill clearly articulates a position that says: if you engage in reprisals or victimisation or other conduct that causes detriment to a person or a third party because a disclosure has been made, or because you think a disclosure might be made, or it could potentially emerge in some way, then that is a criminal offence. Likewise, if you were to willingly or otherwise disclose the identity of someone as a whistleblower and therefore potentially expose them to the risk of retaliation or reprisal, not necessarily even by you but by some third party, and that would extend to them perhaps not getting a job in future because they've told someone, as part of a reference, 'Don't trust them; they're a whistleblower,' then, again, that is a criminal offence. The reason that they are both criminal offences is obviously to send a very clear message to regulated entities and the people who may be working in the regulated entities or associated with those entities: this is not acceptable, from a public policy perspective. We want people to be able to come forward and to make disclosures where they see something is wrong, so it's completely unacceptable to expose them to those risks.

That's the position in the current law. That has been retained in the new law. But, because there is a very clear concern around the enforcement of those offences and the difficulties that some of the regulators may have experienced with that, there is a need to have a civil option on the table. So a civil penalty has been introduced in both cases, to make it easier for regulators to take enforcement action in the event that there is evidence that there has been a breach of either of those provisions. That opens a gateway for a range of other things that I could comment on, but that deals, if you like, with the sanction side of things. It shouldn't be confused with the concept of remedy. Remedy, from the perspective of the whistleblower, is about getting compensation for the damage that the whistleblower has personally suffered. It is completely different to a sanction. A sanction is punitive. It's taking action against someone for having breached the underlying law. I think there's a bit of confusion or conflation that's been occurring there between the concept of sanction on the one hand and remedy on the other, possibly because, I guess, from the perspective of a regulator that is the remedy you are seeking, but, ultimately, as a whistleblower you are not seeking that remedy; you're seeking compensation or something else to redress the damage you've suffered.

CHAIR: What about the criticism that civil remedies should be available for detriment flowing from a failure in duty to support or protect a whistleblower, as occurs in the registered organisations act?

Ms Mills : Sorry; could I have the question again?

CHAIR: The criticism has been that civil remedies should be available for detriment flowing from a failure in duty to support or protect a whistleblower, because that's what is specified in the registered organisations act and that was potentially a technical weakness of this particular bill.

Ms Mills : But this bill does provide for that. If you do a comparison with the Fair Work (Registered Organisations) Act list of remedies, you'll find the same list of remedies is now in this bill.

CHAIR: What about the criticism that the reverse onus of proof doesn't necessarily meet global best practice?

Ms Mills : I guess there might be different views about what is global best practice. We undertook a comprehensive survey of what existed offshore. We obviously had regard to the Whistling While They Work work that has been done at the Griffith University as well in preparing the consultation paper that went out from Treasury at the end of 2016. But we didn't take the view that it was possible to identify what the best practice was in this area. What we identified was that there was diverse practice in this area and that, in different jurisdictions, they've approached these things differently. But we to some extent, I suppose, had regard to what was there and we had regard to what we received in submissions, to try and work out where we would like, from a policy perspective, to try to set this legislation to get the balance right.

On the one hand, the major criterion was to provide protection for whistleblowers, to encourage them to come forward and to eliminate the existing gaps that are there in the law because they fall between statutes. This bill does achieve that much.

The second aspect, and an important aspect, is to try to get companies onto a self-regulatory footing, to encourage them to do much more in this area than perhaps they have been to date and to remove some of the difficulties that exist in the legislation, in particular around the confidentiality constraint, where it is the case—it's been documented—that one of the reasons the Commonwealth Bank didn't take action initially in relation to some of these allegations is that it appeared to be an offence to do so, to share any information about what had been imparted to them by the whistleblowers. That's clearly not an appropriate public policy setting if that's the view that people are taking. So that part of the legislation, in the bill, has changed to create an opportunity for those entities to now conduct some investigations internally and perhaps also to speak to other companies to the extent that they are able to do so but in such a way that they try, so far as possible, to have the information de-identified so it doesn't identify the whistleblower. Those kinds of steps that have been taken try to deal with those sorts of issues.

CHAIR: Just finally, before I turn over to Senator Ketter, I should say that I'm assuming you heard the testimony from Jeff Morris today and you're familiar with his case. Is it your view that the bill in its current form would or would not have provided protection to Mr Morris had it been enacted at the time when he blew the whistle?

Ms Mills : In looking at the policy of the bill, we obviously had regard to the whistleblower cases that we knew of, and we clearly did have regard to the reports and so forth that had been made, both in the media and through previous inquiry processes involving parliament, and the facts that emerged from those. What I can say of those facts so far as I understand them—and obviously I wasn't involved at the time—is that, firstly, the complaints made were anonymous. The current law does not provide for anonymous disclosures; in fact, it says you must identify yourself to get the benefit of protection. That's been fixed. The second aspect of it is that it didn't apply to people who were former employees. That aspect has been fixed.

The third aspect was that currently there's a balancing exercise around emergency disclosures and whether or not the concept of causing irreparable harm or some kind of catastrophic harm or systemic harm to the financial system will be enough. In my view, it would be, and we've tried to design the legislation that way so that it reaches not just a single person, because probably everybody can think of circumstances in which a single person may suffer loss. The real issue—and it's why there's also a provision for disclosure to members of parliament—is that the issue may be so great, or it may be so systemic, that you need to actually change the law to address the situation, and you need to bring it to light so that people can see that there is the systematic problem. So the law, in the way that the bill is drafted at the moment, if it's accepted, will allow people to come forward in those situations. I think that would have assisted Mr Morris, having regard to the nature of the matters that he disclosed.

There have been other cases that have emerged subsequently, not on the basis of whistleblowers but because ASIC has taken particular action against certain of the larger organisations for what it might regard as inappropriate conduct. It has been off the basis of what ASIC has perceived to be systematic or systemic issues. So, had there been a whistleblower who'd come forward in those circumstances, I would have expected that, under this bill, they would have had protection.

The point about it is that currently they have no protection. They can go to the media anyway, and this bill does nothing to alter that position. They can still go to the media. They still have all their common-law rights in that regard, and they'll still presumably have journalists saying, 'We won't disclose our source,' and risking contempt of court in doing so. But what the bill does for the first time is introduce protection in certain circumstances which largely mirror the sorts of circumstances that exist under the Public Interest Disclosure Act regime and which also mirror some of the tiered disclosure regimes that exist overseas.

CHAIR: Thank you, Ms Mills.

Senator KETTER: Firstly, I have a follow-up question to the chair's line of questioning in respect of comparison with the registered organisations bill, in particular the fact that in section 337BB(3) of the registered organisations bill there is a duty to take reasonable steps to ensure 'other persons under the respondent's control' were 'prevented or refrained from, any act or omission likely to result in detriment' to the whistleblower. I understand that that duty is not in this regime.

Ms Mills : Not expressly, but it is indirectly, if you have a look at the provisions that provide relief. If the whistleblower goes to court and says, 'I suffered a detriment,' one of the things that the court has to pay regard to in the context of this bill is whether or not there's any, if you like, due-diligence defence, or a defence that the defendant might be able to mount, saying, 'We had reasonable systems, policies and procedures in place, and here are all the steps we took to try to prevent this harm from happening.' The court can't make an order if satisfactory evidence of those matters is adduced.

Senator KETTER: So it's an implicit duty rather than explicit as per the registered organisations act?

Ms Mills : Yes. But that and, in tandem, the obligation to have a whistleblower policy among the large listed entities and public companies, if you like, are two mechanisms by which companies and regulated entities should now focus much more squarely on ensuring that they have real systems in place as distinct from just a policy, because ultimately they are going to be assessed on that, and an order will be made against them in a court if they cannot substantively establish that they had real things in place that could and should have prevented this.

Senator KETTER: What's behind the decision not to make it explicit in the bill as per the registered organisations regime?

Ms Mills : Because the duty, if you like, already exists. If you're an employer, then, as a matter of common law and as a matter of work health and safety law, you have a duty to look after the welfare of your employees. So, in a way, all this does is extend that to say that, if you're a court and you're being called upon to make an order—and as a means of, I guess, balancing, on the one hand, that there have been concerns raised about people making vexatious complaints. One of the ways we tried to address that was to say, 'Well, if you make a vexatious complaint you might be subjected to an adverse cost order, because if that's proved that's fair enough.' Likewise, in this context, if it's a vexatious complaint or if it's established that the entity has really done all it reasonably can to care for you and avoid the outcome that has been visited upon you, then it might be appropriate as a balancing exercise to say, well, the compensation isn't going to be available in those circumstances—or it might be that the whistleblower has actually contributed to the situation that's caused the detriment. They're very conventional approaches that are taken in terms of loss shifting or proportionate liability in legislation.

Senator KETTER: Let me just flip that question around. If you say that the duty already substantially exists, why was there a need to make it explicit in the registered organisations act?

Ms Mills : That I can't answer, because I wasn't involved in the policy discussion around that.

Senator PATRICK: The question that flows from that is: what harm would there be in making it explicit? You're saying it's the same thing. Why would we not make it explicit in both cases?

Ms Mills : It's entirely a matter of policy. If the Senate or the parliament wants to make adjustments to the bill then obviously that's its prerogative. All we've tried to do is strike a balance and ensure that we're not trying to undercut other legislation that may already exist in the area where people already would have these duties. But, again, that's a policy question that ultimately the parliament and the government will need to consider as part of their evaluation of this bill.

Senator KETTER: I think in Dr Chaikin's evidence—I don't want to verbal him, but I thought—he had some concerns about that particular duty in its explicit form, in the sense that it created legal uncertainty because of the difficulty of understanding what the content of that duty was.

Ms Mills : That's a difficulty with all duties. If you think about it, the law might set out a whole range of duties, and in some cases it will take a bright-light approach and it will actually prescribe every element of the duty that it says people have to comply with, but then the risk with that is that people only comply with those parts of the duty because they're prescribed, and they don't take a broader approach. Alternate ways to deal with duties are to take what might be called a kind of at-large approach and just say, 'You've got a duty to protect,' without giving it any particular content. That allows flexibility, particularly for courts or tribunals, to say, 'Well, having regard to the circumstances that exist today and contemporary views about what the duty should be, we say you've breached that duty.'

It's that kind of approach that's been taken historically in relation to directors' duties, for example. The law doesn't really prescribe what the content of a director's duty is. There are three provisions under the Corporations Act that say 'care and diligence', 'good faith', 'proper purpose' and 'not misusing position or misusing company information', but they're really just an outworking of fiduciary duties that have been well established in the law for a very long time. I well understand Dr Chaikin's view around: what would be the content of the duty; how do you establish it? But ultimately it's a matter for evidence and it's a matter for the court, applying, if you like, that contemporary lens and saying, 'That crosses the line and that doesn't.' It's certainly not something courts are unable to do. In fact, they're very adept at working through those situations, in my view.

Senator KETTER: I move on to another subject. Time is limited. I've been asking other witnesses about the status of the big four accounting firms because of the fact that they're considered to be partnerships. Whether they have other structures as well is another question. I put to you the situation of an employee of a big-four accounting firm who blows the whistle on his or her employer because of the fact that the firm is promoting aggressive tax practices amongst its clientele. Is that whistleblower protected?

Ms Mills : My understanding is that the accounting firms like the large law firms—and I was a partner of a large law firm—set up service companies and the service companies employ the staff. I don't know whether that's the case in relation to every single accounting firm or every single partnership that's a law partnership, but it's a quite common practice. To that extent, certainly the employee would be covered. If it's the case that they're a true partnership and there's no company sitting behind it, then, yes, there's a risk that they would not have any protection under this bill, but it would depend on whether they're making the complaint purely about the accounting firm in that scenario or whether, in fact, because that advice is ultimately being provided to a company, it's about the regulated affairs of that company, and therefore they would have protection because that is a corporation that's covered by this bill.

Mr Wood : Certainly in the case of the example you gave, Senator, in the tax part of the bill the subject of the disclosure is an entity, which is described elsewhere in the tax legislation and it's a much broader definition than that which applies on the corporate side of the bill. It could range from any type of entity, from a multinational to a sole trader. So, in that circumstance, that disclosure would be protected, if it were a tax related disclosure.

Senator KETTER: Thank you for that. Under the fair work, registered organisations regime and where there's the situation of a reprisal against a whistleblower, the court must consider the period that the whistleblower is likely to be without employment when determining compensation. Can you tell me why the bill doesn't replicate that provision?

Ms Mills : The current law has that in, I think, 1317AB. I think that, as a result of the amendments, that's been adjusted because the list of civil penalties that has been included was intended to pick up what sits under the Fair Work (Registered Organisations) Act. I think there was an expectation that that would come across. Ultimately it's a matter for the community as to whether it believes the bill covers that or whether it feels that the bill needs to go further in that regard.

Senator KETTER: I'm referring to subsection 337BB(5) of the registered organisations provision. Are you saying that it's picked up somehow in a provision of this bill?

Ms Mills : That particular provision is in the current law, in 1317AB.

Senator KETTER: Is any work being done about guidance for internal whistleblowing policies?

Ms Mills : Guidance has been left as a matter for the respective regulators who are going to have responsibility for receipt of whistleblower disclosures. ASIC, I'm aware, already has quite a deal of guidance in the public domain and I would anticipate that, as a result of this bill being passed, if it is passed, that it will obviously update that guidance.

Senator KETTER: Can you tell us what sort of themes will be in the guidance?

Ms Mills : It will be a matter for the regulators to develop, presumably having regard to the experience that they have had in respect of disclosures and having regard to perhaps the policies and so forth that people will be introducing. The intent, with the policy as well, was to allow flexibility, recognising that there will be different approaches taken by different companies and different entities based on the nature of the business that they are in, the size of the organisation or the enterprise that they have, the number of employees and so forth they have so it was to allow that flexibility to be developed over time.

Senator KETTER: I want to turn to Mr Jeff Morris. Has that Treasury had any contact with Mr Morris in relation to the preparation of this bill?

Ms Mills : Not to my knowledge.

Senator KETTER: The chair has already asked you for some of your reaction. Are there any other comments you would like to make in response to his testimony today?

Ms Mills : I understand the testimony that he has given. I've been asked whether I would agree necessarily with that view. I understand where his view comes from but we certainly have regard to what we understood to be the particular issues or concerns that were identified arising from his particular circumstances at the time and tried to reflect that in this bill, and achieve an appropriate balance between that and some of the competing considerations that exist.

Senator KETTER: So there was no attempt to contact Mr Morris to seek his feedback in relation to the preparation of this?

Ms Mills : No, but there was a public process both in terms of the original consultation—there was a Treasury paper that went out in 2016—and also in relation to the exposure draft of the bill that went out, I think, in October or November last year. Of course this bill has been out publicly so our expectation, I suppose, is that if people had keen interest in it that they would make a submission to Treasury. It is certainly not the case that Treasury generally goes out to solicit submissions. We run a public process and expect the people with an interest will provide information in respect of that.

Senator KETTER: I want to turn to the ACTU submission. They have raised some concerns about the interaction of the confidentiality provisions of 1317AAE. There seems to be conflicting provisions there. I haven't got that in front of me. Are you familiar with that aspect of their submission?

Ms Mills : I understood they were raising a concern around whether or not that might perhaps be creating some difficulties.

Senator KETTER: Yes, that is between 1317AAC and 1317AAE. Section 1317AAC requires disclosures to be made but then to the line manager, for example. But then 1317AAE prohibits the distribution of confidential information through the management structure so there is the argument that this prohibits eligible recipients from referring disclosures to one another.

Ms Mills : I understand that that's what their perspective is but I don't think that's what this bill does. Section 1317AAC is, if you like, identifying the classes of people who will be eligible for protection if they fall into one of these categories. The confidentially consideration is in 1317AAE. If you look at subsection 4, it basically says you can pass on information to others for the purpose of investigation provided you try to do so in a manner that you take reasonable steps to reduce the risk of a particular person being identified as the disclosee. I don't see any necessary conflict or tension in the way that that's drafted.

Senator KETTER: The bill lists eight Commonwealth acts, and a whistleblower can be protected for disclosing contravention for any of these acts. For all other Commonwealth acts, the disclosure has to be about an offence punishable by more than one year under those acts. Can you explain why the list of acts does not include, for example, the Workplace Health and safety Act, the Fair Work Act or the Competition and Consumer act?

Ms Mills : What the bill tried to do was to take, if you like, a number of separate whistleblowing regimes. For instance, there's a regime currently under the Banking Act, there's a regime under the SIS Act and there's a regime under the Insurance Act. There isn't a regime in the credit act, but there was also obviously a regime under the Corporations Act and the ASIC Act. They all worked in the way that, for example, if you made a disclosure under the Banking Act it had to be about breaches of the Banking Act. That didn't help you if you were trying to make a disclosure about something that was also potentially a breach of some other law, as is often the case with corporations because they won't fall neatly into one bucket. Under the Banking Act, for instance, there was this more prophylactic disclosure regime which was premised on this idea of misconduct, improper state of affairs or circumstances. That has been carried across into this legislation, but instead of the Corporations Act now only looking at the corporations legislation—which is the Corporations Act, the ASIC Act and a few regulations that hang off that—there is an attempt to bring all of those together into one statute so that people wouldn't end up falling between the gaps.

The intention was to broaden the protections or the protective aegis, if you like, that would be available for whistleblowers, so they didn't have to think anymore about what statute they were under and whether they were covered or not covered. It's recognising that if you wanted to try to take in all areas of potential endeavour across the government or existing legislation—I don't know how many pieces of separate legislation there would be at federal level, but it's probably several thousand—there are two approaches. You can enumerate them, but that would be a very long list and it would be changing daily because statutes are changing their names or being repealed or amended. Or you can try to identify what you regard as the key statutes that operate in the corporations area to cover the corporate field, if you like, which we've done. In addition, pick up Commonwealth law where it might lead to an offence of 12 months or more because we're trying to convey an idea that it's the more serious breaches of the law that we're focused on and that we want our regulators to focus on, because they've got finite resources, and then pick up that kind of catch-all misconduct. Misconduct, in a way, becomes a mechanism that enables people to make disclosure about pretty much anything if they choose, and they'll get protection.

Senator KETTER: I have one final question, in relation to the CDPP's submission. They don't normally put in submissions in these types of situations. You're probably aware that they have a criticism of the penalties under the bill—they say they're too low and that they're not a strong deterrent. Can you tell us how the penalty levels were set and how you respond to the CDPP's concern.

Ms Mills : The current penalties are only for criminal offences under the Corporations Act, and it's the same under the Banking Act and so forth, because there aren't civil penalties, and they are low. In looking at this we looked at the penalties available under the Public Interest Disclosure Act and the penalties available under the Fair Work (Registered Organisations) Act. Incidentally, the latter doesn't have any offence for breach of confidentiality, so that's an aspect of that act that we weren't able to follow. We looked at those and said: 'What are the penalties for those? This bill should at least match those.' Part of the reason for not taking that further was because we were aware of other work that is occurring as part of the ASIC Enforcement Review Taskforce. You may be aware that the task force came out with a paper towards the end of last year recommending that there be very, very significant increases in both civil penalties and criminal penalties. That is another piece of policy work, and if the government accepts those recommendations there could potentially be very significant increases across the board under the Corporations Act. So it was felt that it was more appropriate to at least move this bill to the level that's at least equivalent to what's happening with the Fair Work Act and PIDA, then wait to see what happens in relation to Corporations Act offences and civil penalties generally, and then move this up in line with all of that if that is ultimately what the government accepts and agrees to do.

Senator PATRICK: I just want to follow up from the opening line of questioning from the Chair on LPP. I'm not a lawyer, so I'm sort of dog paddling in the deep end of the pool here. Just looking at the Ombudsman Act, section 9 says:

Notwithstanding the provisions of any enactment, a person is not excused from providing any information, producing a document or other record or answering a question when required to do so under this Act on the ground that the providing of the information, the production of the document or record or the answer to the question—

Would disclose one of the following:

… a legal advice given to a Minister, a Department or a prescribed authority; or

… discloses a communication between an officer of a Department or of a prescribed authority and another person or body, being a communication protected against disclosure by legal professional privilege; or

(v) otherwise acts contrary to the public interest.

It's clear that it is possible to override the substantive law in the legislation. I'd also point out that, sadly, I once read a book called Legal Professional Privilege in Australia—I don't know why I was reading that—which made mention of the fact that a lot of the times when matters of LPP get to the High Court it's because they involve difficult questions. There have been a number of case where, a lot of the time, the court is split. It's not a unanimous decision on LPP. For example, in circumstances where privilege protects information where, by lifting the privilege, it would prove innocence, it's a really difficult question and the courts have difficulty answering that. In that context, moving forward, as you look at this I'm asking if you would consider that it's not a lay down misere that LPP is an absolute privilege. As you indicated, there are circumstances where it's waived anyway. That was a nod, for the Hansard.

Ms Mills : I can comment on it if you want me to.

Senator PATRICK: Sure. Remember, I'm dog paddling here.

Ms Mills : The leading case on legal professional privilege still is the Daniels case back in the early 2000 against the ACCC. It used to be the case under the ASIC Act and the ACCC Act and, probably, I think, the ATO Act, that there seem to be an attempt to abrogate legal professional privilege. Ultimately, it was challenged and it went to the High Court. The High Court took the view that that particular statute, the ACCC legislation, in that instance did not evince an intention by the parliament to abrogate legal professional privilege. Of the way that is worded in the Ombudsman Act, which you've referred me to, it's possible that, if a court was asked to opine on that, it would take the view that parliament has evinced an intention to remove, by statute, legal professional privilege. Currently, under the ASIC Act, the ACCC Act and the APRA Act—and I believe it's the same under the ATO Act—legal professional privilege is actually still enshrined. If you're called up to answer a question on oath under an examination, you're entitled to declined to answer that question.

The other observation I would make is that it's very common in any litigation process for their to be discovery of documents ordered. Each party has an obligation to produce them, whether they are privileged or not. If they are privileged, they're required to enumerate the privileged documents, but not to provide the detail, because that might waive the privilege. Then, if people feel that that hasn't been appropriately claimed, they can take a challenge in court. The court has the capacity to look at the documents to form a view about whether they satisfy the dominant purpose test or not. There are mechanisms in the court process to manage that. I note that the PJC recommended against the abrogation of legal professional privilege and said it should be carefully maintained.

Senator PATRICK: I was just making the point that if, in drafting legislation, the parliament says it, then in actual fact it is a possibility.

Ms Mills : Yes, it would need to be very express words, because that's the High Court's view.

Senator PATRICK: I don't know whether I heard it correctly, but I believe that when you were talk about sanctions you said regulators can take action in circumstances where a detriment has occurred. Is that correct? Doesn't the obligation rely on the disclosure in this instance to initiate an action if there is detriment?

Ms Mills : Because the bill introduces civil penalties. The civil penalty regime in the Corporations Act works this way: if ASIC brings the action and they're effectively seeking a declaration of a civil penalty because they say a civil penalty provision has been breached, the court then hears the evidence about that and then makes a declaration. If the court makes a declaration that there is in fact a civil penalty, that opens the gateway to compensation for the affected company as well as for third parties who may suffer loss by reason of that. ASIC itself has power under section 50 of the act to run hearings and actions, and it has done that in the past on behalf of people or entities where they think it is an appropriate circumstance to take such actions to obtain compensation or other forms of relief, or to get some kind of court declaration about conduct.

Senator PATRICK: I note that you are the chair of the expert panel. I presume that panel provided advice to the minister in a formal arrangement. What form did that advice come in? Was it oral or written?

Ms Mills : The panel process, effectively, operated with what I guess I could describe as Chatham House rules, to encourage people to express views freely. Everybody was able to do that in the context of confidentiality. It wasn't just Treasury involved; there were other government agencies as well. The process was gathering it in the form of feedback and then, ultimately, via Treasury and Prime Minister and Cabinet, because the PJC inquiry traverses both the public and the private sector.

Senator PATRICK: What was the medium used to transmit the outcome of the expert panel's deliberations? Was it written?

Ms Mills : There is some information that was made available to the minister in writing about the totality of the consultative processes, which included the expert panel process, in the ordinary way.

Senator PATRICK: You may want to take this on notice, but can I ask you to table that advice. You may wish to claim public interest immunity, but, on notice, can you table that for the committee's benefit.

Ms Mills : I will have to take that question on notice.

Senator PATRICK: You said you are in a stage 2 phase. You are now taking the next step, which is to look at how the recommendations of the PJC would be implemented. I imagine that in any circumstance where you're provided with a task like this, as often happens with things where you are given terms of reference, you are also given a reporting date. What date are you working to in terms of finalising the expert panel's work for what you call phase 2.

Ms Mills : It's probably not correct to characterise the task as implementation of the PJC report, because the PJC report still has to be accepted by government. The process that the panel was involved in was providing a considered view and feedback and so forth about the PJC report, as well as about an earlier version of this bill. That's the process that it was engaged in, and that was to assist the government to come to a view about, firstly, the bill and then, secondly, about the PJC report. The second part is still with the government, and I don't know what the government's position on that will be.

Senator PATRICK: If I heard you correctly, the expert panel is, in effect, assisting with the government response to the parliament?

Ms Mills : It is providing feedback that forms part of a range of things that would be fed back to the government to enable the government to come to a view about the PJC report. But the government will independently come to a view about a range of those aspects as well, I would expect.

Senator PATRICK: The standing orders would have a time frame for the government response. It's normally three months for a Senate—

Ms Mills : The report was tabled in parliament on 13 September. The normal standing orders is three months from that date.

Senator PATRICK: Which has passed now.

Ms Mills : Yes, but my understanding is that is honoured more in the breach than the observance. It is a very detailed report. It contains a number of recommendations. There is clearly a lot of consideration, on the government's part, that will go into how it will respond to that.

Senator PATRICK: I can ask the minister about that. Thank you very much for your help.

CHAIR: Thank you for appearing before the committee today, Mr Wood and Ms Mills. That concludes today's hearing. On behalf of the committee, I'd like to think all of those who made submissions and sent representatives here today for their cooperation with this inquiry. The committee stands adjourned.

Committee adjourned at 15:14