[co-author: Stuart Moss]
TerraCom has been ordered by the Federal Court of Australia to pay an AUD7.5 million civil penalty for retaliating against a whistleblower in proceedings commenced by the Australian Securities & Investments Commission (ASIC). Australia’s whistleblower protection regime was strengthened in 2018 in the Corporations Act 2001 (Cth). The threshold to establish detrimental conduct against a whistleblower was lowered, and civil penalties for non-compliance were introduced. This is the first enforcement action taken by ASIC since the changes came into effect, and will likely set a precedent for penalties applied in future cases.
The penalty serves as a reminder to companies to put whistleblower policies in place, ensure careful compliance with those policies, and avoid engaging in conduct that could be seen as harmful to whistleblowers.
We previously published an article on these proceedings which discussed the risk of waiving privilege when making public disclosures: Waving goodbye to privilege with public disclosures | A&O Shearman - JDSupra.
Summary of facts
During his employment in July 2019 as Commercial General Manager of ASX-listed mining company TerraCom, Justin Williams raised concerns to the company’s executives that coal quality testing results were being falsified. In August 2019, Mr Williams was told he was being made redundant and was dismissed. Over the course of 2020, TerraCom published two ASX announcements and a letter to shareholders that referred to Mr Williams and caused him detriment. Mr Williams disclosed his concerns about the quality testing results to ASIC in February 2020, which ultimately resulted in ASIC commencing numerous proceedings against TerraCom, including the case at hand.
In this case, TerraCom admitted to the court that it contravened the whistleblower regime’s prohibition against victimising whistleblowers, with the relevant publications causing “hurt, humiliation, distress and embarrassment, and damage to [the] reputation” of Mr Williams. Those publications represented Mr Williams as someone who had been made redundant (when he believed he had been terminated for whistleblowing) and who had made unfounded accusations for personal gain. TerraCom also admitted that part of the reason the publications were made was due to a belief or suspicion that Mr Williams’ had engaged in protected whistleblowing.
Appropriateness of penalty
Although ASIC and TerraCom agreed the appropriate quantum of penalty, his Honour Justice Jackman was required to consider its appropriateness in light of established general principles regarding penalties.
His Honour concluded that the AUD7.5 million penalty – 30% of the statutory maximum – was appropriate and sufficient to have a specific and general deterrent effect such that repetition is discouraged and the penalty for the conduct is not seen as “an acceptable cost of doing business”.
To reach this determination, he considered the non-exhaustive list of factors set out in Trade Practices Commission v CSR Ltd [1991] ATPR 41-076:
- the nature and extent of the contravening conduct;
- the amount of loss or damage caused;
- the circumstances in which the conduct took place;
- the size of the contravening company;
- the degree of power it has, as evidenced by its market share and ease of entry into the market;
- the deliberateness of the contravention and the period over which it extended;
- whether the contravention arose out of the conduct of senior management or at a lower level;
- whether the company has a corporate culture conducive to compliance, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention; and
- whether the company has shown a disposition to cooperate with the relevant regulator in relation to the contravention.
While his Honour found that TerraCom’s conduct was objectively serious, the court took into account the lack of evidence that (i) Terracom issued the publications solely because of its suspicion that Mr Williams was a whistleblower, or (ii) that it intended to cause Mr Williams detriment. His Honour noted TerraCom’s efforts to review its whistleblower policy and engage in compliance training, as well as its cooperation with ASIC (rather than contesting liability). Taking into account all of these factors, Justice Jackman found the penalty to be appropriate, albeit “very much at the higher end of the range”.
Finally, his Honour considered that TerraCom was justified in paying the penalty in two instalments having regard to its financial position.
Key takeaways
This decision is a landmark in the enforcement of whistleblower protections in Australia and illustrates the damage that can result from mishandling whistleblower disclosures. It also affirms the critical role of whistleblowers in maintaining corporate accountability and integrity, and signals that breaches of their protections will attract serious consequences. In addition to financial penalties, companies risk significant harm to their public image and relationships with regulators, investors, and employees.
For companies, the case is a timely reminder to prioritise robust whistleblower frameworks and to cultivate a culture where speaking up is supported, not punished. Companies should review and, if necessary, update their whistleblower policies and training programs. Key steps include:
- ensuring that all employees, especially managers and executives, are aware of their obligations under the whistleblower regime;
- establishing clear procedures for handling disclosures and protecting whistleblowers from detriment;
- adequately documenting reasons for taking internal disciplinary actions or dismissing an employee and ensuring that such reasons are non-retaliatory; and
- regularly auditing compliance with whistleblower protections and responding promptly to any allegations of retaliation.
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