Whistling on the Elevator – Overlap between whistleblower protection regimes requires care

What you need to know

• Private sector whistleblower disclosures can sometimes be covered by two different Commonwealth statutory regimes - the Corporations Act 2001 (Cth) (Corporations Act) and the Taxation Administration Act 1953 (Cth) (TAA). This particularly arises where a disclosure relates to the taxation affairs of a corporation. 
• If a disclosure is covered by both regimes, it will be an offence to make on-disclosures about it contrary to either of the regimes.
• The regimes differ as to what on-disclosures are permitted. Specifically:
  • recipients of a qualifying disclosure which is protected under the Corporations Act cannot disclose the identity of the discloser to the Commissioner of Taxation; and
  • recipients of a disclosure which is protected under the TAA cannot disclose the identity of the discloser to ASIC.
• Accordingly, care needs to be taken to identify all applicable whistleblower regimes, and where more than one regime applies, to manage the risk of the regimes operating inconsistently.
• The relationship between the regimes is unclear and this creates uncertainties when regulatory notices are issued. This should be addressed by legislative amendment. 

What you need to do

• Consider all potentially applicable whistleblower regimes when dealing with on-disclosure of whistleblower material, to ensure that information about the identity of a whistleblower is not provided to third parties, including regulators, in contravention of any of those regimes. 
• When responding to regulatory notices, organisations should consider whether either regime prevents disclosure to a particular regulator. In the case of notices issued by the Commissioner of Taxation, you may need to consider whether the prohibition under the Corporations Act (which does not permit disclosure to the Commissioner) is an answer to the notice.
• Ensure your organisation has adequate policies and procedures in place for all applicable whistleblower regimes, understands how they operate, and is ready to address uncertainties in the regimes.

Background

There are two primary sources for whistleblower protections directly relevant for Australian companies. Those are: 

1. Part 9.4AAA of the Corporations Act; and
2. Part IVD of the TAA.

We focus here on those two regimes. Federally, there are also whistleblower provisions in the Public Interest Disclosure Act 2013 (Cth) (public sector whistleblowers) and the Fair Work (Registered Organisations) Act 2009 (Cth) (registered organisation whistleblowers) that may also need to be considered in certain situations.

There are two stages to thinking about whistleblower provisions in both the Corporations Act and the TAA:

1. Whistleblower protections and whether a disclosure qualifies for them; and
2. When a qualifying disclosure and the identity of the person making it can be disclosed to someone else, including a regulator.

Disclosures qualifying for whistleblower protection under the Corporations Act

Disclosures may be protected under the Corporations Act (qualifying disclosures) if:

• The disclosure is made by an "eligible whistleblower" (which includes officers, employees, suppliers and associates).¹
• The discloser has reasonable grounds to suspect that the information concerns misconduct, or an improper state of affairs or circumstances, in relation to a regulated entity (which includes companies and certain other corporations).² This may involve, but is not limited to, conduct which constitutes an offence under the Corporations Act, ASIC Act, other specified Acts, or an offence against any other law of the Commonwealth that is punishable by imprisonment for a period of 12 months or more.³ Relevantly, the reference to offences against "any other law" has the potential to include conduct in relation to taxation matters. 
• The disclosure must be made to an eligible recipient in relation to the regulated entity.⁴ Company officers, senior managers and auditors are examples of eligible recipients.⁵

When can information about a qualifying disclosure under the Corporations Act be passed on to someone else? 

It is an offence to disclose the identity of the person who made a qualifying disclosure (or information likely to lead to their identification). However, there are certain carve outs in section 1317AAE(2) and (3). Relevantly, on-disclosure is authorised if the person who made the original disclosure consents to that happening, or if it is made to ASIC, APRA, the AFP, a lawyer, or a body prescribed by the regulations. The Commissioner of Taxation and the Australian Taxation Office are not listed or prescribed. Thus, if a person in a company receives a qualifying disclosure for the purposes of the Corporations Act, they cannot disclose information identifying the person who made the original disclosure to the Commissioner or the ATO. 

If ASIC, APRA or the AFP have such information, they are permitted to on-disclose it to a Commonwealth, State or Territory authority or another body that is established under State or Territory law for the purpose of assisting that body in the performance of its functions or duties. This may enable ASIC to pass on information it has to the ATO, but does not permit the original recipient in the company to do so. 

The offence does not apply if the on-disclosure is not of the identity of the original discloser and is reasonably necessary for the purposes of investigating misconduct, or an improper state of affairs or circumstances, to which the qualifying disclosure relates. 

Disclosures qualifying for whistleblower protection under the TAA

The whistleblower provisions under the TAA are broadly similar to those in the Corporations Act set out above. There are, however, differences. Relevantly, the Corporations Act provisions relate to information that concerns misconduct, or an improper state of affairs or circumstances, in relation to a regulated entity. The TAA provisions relate to information that concerns misconduct, or an improper state of affairs or circumstances, in relation to the tax affairs of the entity. 

When can information about a qualifying disclosure under the TAA be passed on to someone else?

The TAA offence of revealing the identity of a discloser is in largely the same terms as the Corporations Act offence for doing so, described above. However, a key difference is that on-disclosure to ASIC or APRA is not exempted, but on-disclosure to the Commissioner of Taxation is permitted.

Overlapping Conduct

As noted above, while both sets of whistleblower provisions are directed to "misconduct, or an improper state of affairs or circumstances", in the case of the Corporations Act, this must be in relation to the regulated entity (or a related body corporate), whereas in the case of the TAA, this must be "in relation to the tax affairs" of the relevant entity. 

Companies will generally be both regulated entities and have tax affairs. If conduct or a state of affairs relates to its tax affairs, both regimes will apply to the whistleblower disclosure. 

A resulting tension

As noted above, the Corporations Act regime permits on-disclosure to ASIC and APRA (amongst others) but not the Commissioner of Taxation or the ATO. Conversely, the TAA regime permits on-disclosure to the Commissioner, but not ASIC or APRA. Where both regimes apply, one or other of them will prohibit on-disclosure to ASIC, APRA and the Commissioner of Taxation. In that scenario, the only regulator to whom protected information can be disclosed is the AFP. 

This highlights the importance of considering both regimes where applicable. 

If both regimes apply, the problem can often be overcome by not disclosing. However, what happens if one of the regulators requires the provision of documents or information that are protected by the whistleblower provisions under compulsory information-gathering powers? 

Looking at a practical example, what should you do if a notice under s 353-10 of Schedule 1 of the TAA requires disclosure to the Commissioner of Taxation, of information which also qualifies for protection under the Corporations Act? 

In this scenario there is a risk that the disclosure to the Commissioner would be a criminal offence under the Corporations Act, creating potential liability of up to two years' imprisonment.

Unfortunately, it cannot be assumed that the prohibition under the Corporations Act necessarily excuses the non-provision of the information or documents required under the TAA. Section 8C of the TAA makes it an offence to refuse or fail to comply with such a requirement. Unlike most provisions of this nature, such as those in the ASIC Act, s 8C does not provide that it is an offence not to comply with the requirement without reasonable excuse. Rather, it provides that it is an absolute liability offence to refuse or fail to comply with the requirement. 

The situation is self-evidently unsatisfactory. It puts the recipients of regulatory notices in the position that they do not know whether or not they must provide qualifying information when a different regulator exercises compulsory information-gathering powers. It may be the Courts would interpret s 8C so as to import a reasonable excuse carve out of the kind found in other legislation, but it is not certain they would do so. 

Potential solutions

We would suggest that s 8C of the TAA should be amended to bring it into line with other investigative power regimes, by expressly making it clear that the offence in s 8C only occurs if there is no reasonable excuse.

The particular difficulty above could also be addressed by broader legislative change to ensure coherence between the two whistleblower regimes. This raises a question of whether regulators' interests in receiving potentially relevant information should be prioritised over the slight dilution of whistleblower protection.

In the meantime, the situation could be alleviated by the Commissioner of Taxation and the Australian Taxation Office being prescribed in the Corporations Regulations for the purposes of s 1317AAE(2)(e). This would at least mean that recipients of notices from the ATO would be able to produce information that is protected by the Corporations Act whistleblower provisions, and not have to grapple with the uncertainties arising from the tension identified above.

Recipients of notices from ASIC are in a less difficult position, because the relevant offence provisions (s 63 of the ASIC Act) do not apply "to the extent that the person has a reasonable excuse". This may, however, reduce the information that ASIC obtains (which may suggest legislative change to ensure coherence between the regimes is desirable).

Absent a legislative solution, one potential course for an ATO notice recipient is to bring to the Commissioner's attention that the disclosure also qualifies for protection under the Corporations Act, and seek guidance as to whether the disclosure should be made (under compulsion) to ASIC first, so s 1317AAE(3)(a) is satisfied, and request that ASIC provide the information to the ATO, as a Commonwealth authority. This can only be done if it is possible without disclosing the identity of the whistleblower.

Material could also be redacted before production to the Commissioner. However, this would also require an accompanying communication to the Commissioner setting out the basis for the redaction without disclosing prohibited matters, if that can be done. It is not certain the Commissioner would accept that position. 

The existence of this inconsistency is a timely reminder for corporations and directors to polish-up their existing whistleblower policies. If you are uncertain about your company's whistleblower obligations in either the Corporations Act or the TAA, seek bespoke legal advice to ensure your company navigates these obligations appropriately.

Authors: Andrew Carter, Partner; Rani John, Partner; Daniel Pannett, Senior Associate; George Barlin, Associate.