Bills: Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2018 - Second Reading
Senator Patrick: I wish to speak in support of the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017. This bill and the associated amendments that have been circulated represent a significant leap forward in protecting whistleblowers in Australia and set a world benchmark in many areas. While there may be some room for improvement, we should, as a parliament, pass this bill and pass it without delay. In doing so, we would recognise the enormous amount of work that has gone into it over the past two years. Importantly, passing the bill now will give corporate Australia food for thought over the holiday period as to how to implement the bill's whistleblower protection provisions in its workplaces in the coming year. It will also give Australians confidence that, with the help of conscientious employees, the type of disgraceful conduct that we've seen in the corporate sector, which has been flushed out by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, will become a thing of the past.
I shall speak more about the royal commission in a moment, but let me just say now that the evidence given by the NAB chair, Ken Henry, at the commission last week illustrates what we are up against and why this bill is so important. In an appearance widely condemned by commentators and both mainstream and social media, Dr Henry told the commission that the reforms of the financial sector might take up a to decade to implement. He also stated that the main function of a board is to maximise profits for the company. Clearly, at the NAB board level, when it comes to consuming food for thought, there is little appetite for change.
If passed today, this bill will empower employees in corporations to call out unethical behaviour in their workplaces without fear of repercussion. This bill is part of a process that will, in due course, make Australia the world leader in whistleblower protection in the public, corporate, not-for-profit and union sectors. It's something the parliament has been working on for several years, starting with the rather weak provisions in the Public Service Act. This was followed by a move to a more substantive but still wanting Public Interest Disclosure Act, the PID Act, in 2013. The intention of the PID Act was to encourage officials to report suspected wrongdoing in the Australian public sector, and it gave whistleblowers protection against reprisal action. The government began work on similar provisions for the private sector in mid-2016. It was a commendable step, in both instances, although in both instances the provisions did not equate to world's best practice.
Similar protections were also legislated in the Fair Work (Registered Organisations) Amendment Act, which was passed in November 2016. These protections were added as an amendment by my predecessor, former senator Nick Xenophon. In his speech on the second reading, former Senator Xenophon noted an undertaking by the government to support a parliamentary inquiry into implementing the same level of protection across the corporate and public sectors. In September 2017, the Parliamentary Joint Committee on Corporations and Financial Services published a unanimous report on whistleblower protections in the corporate, public and not-for-profit sectors. The drafting of this particular bill and the consultation on it were already underway when that report was published.
Whilst the government hasn't yet responded to the parliamentary joint committee report, this bill addresses some 32 of the 35 recommendations. Senator Hume alluded to some of the areas where we still need to do some further work. The three substantive recommendations are not addressed in this bill, as was pointed out, including having a single private sector act, introducing a rewards scheme for whistleblowers and establishing an independent whistleblower protection authority. However, as I stated at the onset, parliament can deal with those matters in due course.
One of my first duties as a senator was to be a participating member of the Senate Economics Legislation Committee inquiry into this bill in February. At its conclusion, I submitted a dissenting report that contained 12 recommendations. They were recommendations that the Centre Alliance felt were necessary to fulfil an agreement Senator Xenophon made with the government in 2016 to pass the registered organisations bill. In the course of this year, I met with government ministers on numerous occasions to discuss our position on its corporate tax and whistleblower protection reforms. At this point, I'd like to acknowledge Professor AJ Brown, who has been most helpful in an informal fashion in my office. He was in the gallery yesterday but is not here this morning. It's evident from the meetings I had and from the ongoing engagement we had in relation to this issue that the government and Centre Alliance were both committed to improving the protections afforded to whistleblowers, who provide an invaluable service to society, often at a great personal cost. It's critically important to me, as I know it is to the government and all of us in this chamber, that we get the whistleblower protection framework correct. We need to ensure that a strong deterrent against wrongdoing exists. We also need to ensure that, if deterrent fails, more whistleblowers will be encouraged to come forward to expose wrongdoing and that they are protected when doing so. While not all of my suggestions have been adopted, Centre Alliance is sufficiently satisfied with these amendments. I'd call it a nine out of 10, but in the nine the government actually gave a bit more than we perhaps asked for, so, overall, I must thank the government for working with us on that.
The amendments include the adoption of the first two recommendations in the Senate Economics Legislation Committee report. The first of those was to require that the minister cause a review to be undertaken of the operation of the whistleblower laws, as soon as practical, five years after the amendments commence, and that the minister must table a report on the review outcomes in the parliament. The second was to amend the definition of 'journalist' to make it clear that public broadcasters are not excluded from the legislation.
The result of my specific negotiations with the government has achieved the following outcomes. Firstly, the definition of an 'eligible recipient' in the bill has been amended so that it's limited to senior managers rather than supervisors and managers. That basically removes some burden on companies to have everyone completely trained in the provisions. The explanatory memorandum has been amended to ensure that whistleblowers are able to make disclosures to an internal auditor. Individual personnel, employment or workplace grievances are now specifically not protected under this act unless they are a grievance raised under the civil remedy or victimisation provisions under this bill. We don't want to have people using whistleblower protections to raise what are effectively workplace issues. The existing emergency disclosure provisions have been amended to create a new public interest disclosure provision. This will be done using the Public Interest Disclosure Act 2013 test, the PID Act test, as a reference point and adapting that to the corporate context. That is, there will be a public interest limb and an emergency limb.
The proposed amendments will remove the requirement to wait a reasonable time under the emergency limb, but it will remain in the public interest limb. This is consistent with the PID Act, which refers to the time limit for investigations of a disclosure for the public interest limb only. The main difference in the proposed amendments is that the PID Act is under the emergency limb. A discloser will need to have first made the disclosure to a regulator and will need to notify the regulator prior to making an emergency disclosure, and there is no need to wait a reasonable time. The PID Act allows for emergency disclosures to be made without first making the disclosure internally in exceptional circumstances. The definition of 'reasonable time' for emergency disclosures will be defined in the bill as a fixed 90-day period rather than a reasonable period. ASIC and APRA have both been consulted on this.
Information that may be disclosed under an emergency disclosure has been amended so that it is consistent with the PID Act. This includes a requirement that the extent of the information disclosed in the emergency disclosure is no greater than is necessary to inform the recipient of the danger. A similar limitation will apply to public interest disclosures so that only so much information is disclosed as is necessary to inform the recipient of the relevant misconduct or the improper state of affairs.
The belief or suspicion requirement in the bill has been amended so it does not hinge on state of mind. The burden of proof section makes it clearer that the claimant only needs to prove that detriment was suffered, not the state of mind of the defendant. The tax regime will also mirror this amendment. The term 'victimising conduct' has been replaced with 'detrimental conduct'. This amendment will also be mirrored in the tax regime.
A new subsection in both the corporate and tax regimes has been created that provides an avenue for whistleblowers to claim compensation or other remedies on the basis that they have suffered detriment because the company breached a duty to them. The explanatory memorandum has been amended to provide for circumstances in which a court may make an order for compensation. The bill has been amended to clarify the considerations a court may take into account when awarding compensation, and, finally, the explanatory memorandum has been amended to clarify the factors that may be considered when a court is determining whether a claim can be made.
I am wholeheartedly convinced that the bill before us will usher in a new era of accountability in Australia's corporate sector. For evidence of this, we need look no further than the experience of the Commonwealth Bank whistleblower Jeff Morris. Mr Morris studied economics and law at the University of Sydney and is a certified financial planner. He has had nearly 30 years experience working in financial services, including as a tax manager at NatWest Bank and Deloitte & Touche chartered accountants, as a financial consultant with the firm Towers Perrin, and as vice president of investment bank Bankers Trust Australia. In 2008, Mr Morris joined Commonwealth Financial Planning and soon became concerned about the severe losses and emotional distress being suffered by many elderly and vulnerable clients due to the poor advice they had received. In October of that year he blew the whistle to the corporate regulator ASIC in relation to the financial planner Don Nguyen and Commonwealth Financial Planning.
In June 2013, Mr Morris again blew the whistle on ASIC itself, which for 16 months had failed to act on facts sent by whistleblowers. As many here know, this led to a Senate inquiry into ASIC by the economics references committee that same year. Among the committee's final recommendations were that an independent inquiry be held 'possibly in the form of a judicial inquiry or royal commission', principally to:
… examine the actions of the Commonwealth Bank of Australia (CBA) in relation to the misconduct of advisers and planners within the CBA's financial planning businesses and the allegations of a cover up.
It was also a recommendation that such an inquiry:
… make recommendations about ASIC and any regulatory or legislative reforms that may be required.
If we fast forward to today, it's fair to say that Mr Morris's actions as a whistleblower provided much of the momentum for this year's Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The evidence heard at the royal commission has shocked and outraged Australians. I refer to forged documents, bribery, loans to customers without verifying their living expenses, selling insurance to people who couldn't afford it, lying to regulators and charging fees to clients who had died. These are just a few of the revelations from the royal commission which, for many years in this parliament, it was claimed we didn't need to have. Commissioner Hayne's damning interim report in September also took issue with the performance of ASIC. In the executive summary, the royal commissioner wrote:
Much more often than not, when misconduct was revealed, little happened beyond apology from the entity, a drawn out remediation program and protracted negotiation with ASIC of a media release, an infringement notice, or an enforceable undertaking that acknowledged no more than that ASIC had reasonable 'concerns' about the entity's conduct. Infringement notices imposed penalties that were immaterial for the large banks. Enforceable undertakings might require a 'community benefit payment', but the amount was far less than the penalty that ASIC could properly have asked a court to impose.
The whole of Australia eagerly awaits Commissioner Hayne's final report and his recommendations—perhaps with the exception of Dr Henry and those of his ilk. And I contend that, without whistleblowers like Mr Morris and, of course, Ms O'Dowd, who is in the gallery here now, it is less likely that there would have ever been a royal commission.
This bill ultimately recognises the importance of whistleblowers like Mr Morris and what they can do to make Australia a fairer and better place. It puts the corporate sector on notice that whistleblowers with courage and integrity now have a raft of protections to support them in calling out skulduggery in high places. It also serves as a portent to any unethical practitioners in the public sector, the not-for-profit sector and the trade union movement that they are next, as Australia strives to rid itself of corruption from the inside out.
Before I conclude, I'd like to acknowledge the work of former Senator Xenophon; Mr Steve Irons MP and the Parliamentary Joint Committee on Corporations and Financial Services; the Hon. Kelly O'Dwyer MP, who had primary carriage of the negotiations; the Hon. Stuart Robert, who has assisted in finalising the amendments; and last but not least, as I said before, Professor AJ Brown. This bill does represent a team effort, and we should be proud of what we have achieved.
This is the culmination of great work by the Senate, from Senate inquiries through to the joint parliamentary inquiries, to difficult and tough negotiations that I had with Minister O'Dwyer. And I might say: those negotiations were tough. There were times when I was summoned to her office; there were times when I ignored her phone calls—all the normal stuff we do in negotiations in the back rooms of this building. But you know what? We got to a really good ending. And, once again, I thank Minister O'Dwyer for her efforts. We've actually come up with a really good piece of legislation. It's not perfect, but it will have an enduring effect on corporate Australia and the ethical conduct of those businesses, and I commend it to the Senate.