The Queensland Supreme Court, in the Quinlan litigation,  recently provided some of the first judicial guidance on the modified whistleblower laws in relation to assessment of the reasonableness of a whistleblower’s disclosure, and therefore whether the discloser qualifies for protection under the Corporations Act.
In this case, Quinlan was seeking compensation for loss of pay rises, other benefits and loss of employment, arising from his former employers’ treatment of him for the period 2012-2019.
In 2012-2014, Mr Quinlan made whistleblower disclosures on alleged sham transactions and insider trading. He claimed that details of or related to his disclosures were improperly divulged by the defendants without his consent, and he was not given the protections to which he was entitled under the whistleblower provisions.
Although this decision was only a procedural strike-out motion, it does provide guidance to the key principles in judicial assessment of the whistleblowing provisions. In this case, some parts of the (amended) statement of claim were struck-out, with grant of leave to re-plead.
Before 2019, a whistleblower was required to disclose “in good faith”. Under the new laws, enacted in 2019, the Court considers the question: Does the whistleblower have reasonable grounds? The answer is that:
- reasonableness must be assessed on the information known to the discloser at the time of the disclosure. Subsequently proving the truth (or lack) of the disclosure, or the truth (or lack) of the facts known to the discloser, is not legally  The benefit of hindsight was not available to the discloser, and it would be unfair to apply it in judicial assessment; and
- to have reasonable grounds, the whistleblower must have knowledge of facts. These facts, evaluated in light of their source, context and the circumstances at the time of disclosure, must be reasonable grounds to raise at least a suspicion of misconduct.
All companies should have a Whistleblower Policy. However the policy is not just a check-the-box document ‘off the internet’. Businesses must also have in place a process that supports the operation of that policy and ensures compliance with the law if a report is made. How you respond to a disclosure is just as important as what the policy says. The company must provide guidance and training to its senior officers on the management and response to a disclosure, including what is meant by reasonable grounds. If there is even the slightest of doubts, it is better to err on the side of caution.
At Keypoint, we are familiar with developing corporate policy, guidance and training, particularly in relation to the first response to whistleblower disclosures.
The whistleblower laws were first introduced in 2004 and amended in 2019. The present law sets out provisions in relation to:
- who is an eligible whistleblower;
- disclosure to a government body including ASIC and APRA or to a lawyer in some circumstances;
- if the discloser has reasonable grounds to suspect that the information concerns misconduct, or an improper state of affairs or circumstances, including many offences or breaches of law.
Modifications to the law in 2019: from the “good faith” test to the “reasonable grounds” test.
The initial 2004 version of the provisions required that the discloser acted “in good faith”. The good faith requirement was intended to discourage malicious reports. Some companies responded to whistleblower claims by accusing the discloser of “subjective or collateral motivation”, to defeat the good faith requirement.
An example of how the good faith test was applied is found in an earlier whistleblower case, in which the Federal Court of Australia found that the discloser did not act in good faith, being motivated to trigger the law’s whistleblower protections to keep his job. However it seems that the legal approach to, and issues examined in, that case would under the modified legislation be somewhat different.
The good faith test is effectively a subjective test – ie what was the subject’s (ie the discloser’s) motivation, or state of mind? In its stead, the test of reasonable grounds was inserted, which is a subjective-objective test. It is subjective in that it requires identification of what was known at the time to the subject (the discloser), and also objective in that the court considers what a reasonable person would make of those facts, in light of their sources, context and circumstances. However the Court does not look beyond what was in the mind of the discloser at the time.
The information known to the whistleblower may in fact turn out to be wrong (not relevant unless the whistleblower knew that it was wrong at the time of disclosure). The discloser is not required to have observed the information personally, and the source of the information may be anonymous. However the facts must at least seem reasonable in the circumstances and context.
What does it mean “to suspect”? (but not necessarily believe)
The facts must form reasonable grounds for the discloser to “suspect” misconduct, or an improper state of affairs in the conduct of the business. The difference between suspicion and belief is eloquently explained. Suspicion requires a lower threshold of facts than belief. Suspicion inherently precludes proof – it is merely “a state of conjecture or surmise”. In contrast, to believe, while also not requiring proof, does infer that on the balance of probabilities, assent is more likely than rejection.
That a discloser need only suspect is designed to encourage early reports by whistleblowers, to facilitate early detection of misconduct. The onus is not on the whistleblower to show that the suspected conduct in fact has occurred, or is occurring.
Summary: The Whistleblower Laws in operation
The Court has indicated how it will apply the amended Whistleblower Laws, and the test of reasonable grounds has held up well.
Under the test of reasonable grounds, the Court looks at:
- what facts were known to the whistleblower at the time of the disclosure, and
- whether those facts were, in the circumstances and context, reasonable grounds to suspect misconduct or an improper state of affairs.
The laws address the power imbalance that often exists between whistleblowers and corporations, and offers enhanced protection to whistleblowers because:
- The whistleblower may remain anonymous;
- The whistleblower’s report does not have to turn out to be correct; and
- The whistleblower’s motivation for reporting is not examined.
The Take-away message
To avoid costly litigation and to ensure employees receive their entitled benefit of statutory protection, all companies should review, and if necessary, revise their Whistleblower Policy. It is important also to support the policy’s operations, for example, including mechanisms to record accurately and precisely the facts known to the whistleblower at the time of the disclosure, and training senior staff to understand the legal assessment of whether these facts are reasonable grounds for the disclosure, and hence guide an appropriate first response.
The law has changed, and companies have a responsibility to apply the enhanced employee protections that lie at the heart of the 2019 modifications.
We are interested to see the final judgment in Quinlan, and will send out an update when it is available.
 Corporations Act 2001 (Cth) s 1317AA and Part 9.4AAA.
 This is a reasonable position that benefits all parties equally. The truth of the allegations is potentially relevant to other legal issues (such as corporate misconduct charges, if laid) but not to the assessment of a whistleblower’s grounds for disclosure.
 Revised Explanatory Memorandum for the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2018, at 2.42. Accessed at:
 The Environmental Group Ltd and others v Bowd (2019) 137 ACSR 352.
 Quinlan at . In formulating the correct approach to determining the subjective-objective analysis, the Court cited with approval a UK case O’Hara v Chief Constable of the Royal Ulster  AC 286.
 Quinlan at  and also George v Rockett (1990) 170 CLR 104.
This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please also note that the law may have changed since the date of this article.