On 22 May 2023, the Full Court of the Federal Court (Full Court) will hear submissions on the retrospective application of certain whistleblower protections as part of the proceedings in Watson v Greenwoods & Herbert Smith Freehills Pty Ltd (NSD288/2022) (Watson).

The hearing will likely involve a challenge to the Federal Court's decision in Alexiou v Australia and New Zealand Banking Group Limited [2020] FCA 1777 (Alexiou), in which the enhanced whistleblower regime contained in the Corporations Act 2001 (Cth) (Corporations Act) was found to have limited retrospective application.

Until the Full Court hands down its decision, this issue is likely to cause short-term uncertainty for employers and employees in existing and contemplated proceedings, as well as the management of disclosures under the Corporations Act whistleblower regime.

A new whistleblower regime

On 1 July 2019, a more comprehensive whistleblower regime came into effect which consolidated whistleblower protections in the private sector by introducing a single legislative scheme under the Corporations Act, which both broadened and strengthened existing whistleblower protections (Enhanced Regime).1 Amongst other things, the Enhanced Regime includes provisions providing for civil penalties if an individual or company victimises (or causes 'detriment') to a whistleblower because of a belief or suspicion that the whistleblower has made, proposes to make, or could make a disclosure.

Alexiou was the first case to consider the application of the Enhanced Regime.

Mr Alexiou claimed that he suffered 'detrimental conduct' after his employment was terminated by ANZ in September 2015, allegedly because of the complaints Mr Alexiou made about suspected rate-rigging practices.

However, as the Enhanced Regime did not exist at the time Mr Alexiou's employment was terminated (in September 2015), the Court was required to consider whether the civil penalty provisions within the Corporations Act extended to 'detrimental conduct' that occurred prior to 1 July 2019.

In his judgment, Perram J stated that although the Enhanced Regime applied "to disclosures which occurred before 1 July 2019", his Honour was unable to see how the civil penalty provisions "can be read as applying to detrimental conduct which occurred before 1 July 2019".

Alexiou decision alleged to be "plainly wrong"

The Full Court's decision in Watson is likely to address whether the decision in Alexiou should be upheld, and whether or not the civil penalty provisions extend to detrimental conduct which occurred before 1 July 2019.

The applicant in Watson has signalled his intention to challenge Alexiou as "plainly wrong". Further, Watson is the only case so far other than Alexiou to consider the protections available under the Enhanced Regime.

The two proceedings also share factual similarities. Mr Watson was a former tax partner at Greenwoods & Herbert Smith Freehills who claims he was given no choice but to resign and suffered other 'detrimental conduct' after raising concerns that a client was allegedly "double-dipping" on certain tax deductions.

Take aways

We will continue to monitor developments and consider the impact of recent whistleblowing litigation, including any potential impact on other jurisdictions.

Some observations from the issue as it currently stands:

  • Employers and employees currently lack certainty about whether the Enhanced Regime applies to detrimental conduct engaged in prior to 1 July 2019.
  • If the Full Court finds that the Enhanced Regime applies retrospectively as contended by Watson, employers may be liable for detrimental conduct in respect of employees who were ineligible for whistleblowing protections under the previous regime. This may lead to the re-agitation of prior disclosures by employees.
  • The Full Court's decision will not directly affect the availability of protections under alternative schemes, such as the public interest disclosure regime. However, the judgment may influence the interpretation of those schemes, particularly as the public interest disclosure scheme appears likely to become more closely aligned with the Corporations Act regime.2
  • Whistleblowing protections are likely to be subject to increased scrutiny in the coming period, particularly by regulators. ASIC recently commenced its first ever proceeding against a company for breach of the Corporations Act whistleblower provisions. Further, in March 2023, ASIC published a guide of 'good practice for handling whistleblower disclosures'.

Footnotes

1. Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019.

2. Senate Legal and Constitutional Affairs Committee, Report on the Public Interest Disclosure Amendment (Review) Bill 2022 at [1.36].

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.