Quick Facts
Overview
The Federal Court of Australia imposed a $7.5m pecuniary penalty on TerraCom Ltd following admissions of a single contravention of s 1317AC(1) of the Corporations Act 2001 (Cth), as brought by the Australian Securities and Investments Commission (ASIC).
The violation involved TerraCom publishing three market announcements that caused detriment to an eligible whistleblower, Mr Justin Williams, who had raised concerns about manipulated coal quality certificates.
Details of the Case
TerraCom Ltd, a public company listed on the ASX and owner of the Blair Athol Coal Mine in Queensland, admitted to contravening whistleblower protection provisions under the Corporations Act. The case centered on Mr Justin Williams, who joined TerraCom as General Manager, Commercial, in July 2019 and was terminated in August 2019. Shortly after his termination, Mr Williams disclosed concerns to TerraCom's executives about a practice where coal quality results in shipping analysis reports were amended without justification to favor TerraCom, leading to amended Certificates of Analysis used for customer invoicing.
TerraCom engaged PricewaterhouseCoopers (PwC) to investigate these allegations in August 2019. The PwC Report, delivered in December 2019, identified inconsistencies in net calorific value (NCV) results but could not determine underlying reasons and did not exclude TerraCom's involvement. Mr Williams later disclosed his concerns to ASIC in February 2020 and initiated Fair Work Act proceedings against TerraCom directors in December 2019.
Between 24 February 2020 and 3 April 2020, TerraCom published three announcements that the court found caused detriment to Mr Williams in the form of hurt, humiliation, distress, embarrassment, and reputational damage. These actions were partly motivated by TerraCom's belief or suspicion that Mr Williams had made or might make a qualifying disclosure. The court noted that Mr Williams qualified as an eligible whistleblower under s 1317AAA, and his disclosure met the criteria of s 1317AA(4) as he had reasonable grounds to suspect misconduct.
WORKED EXAMPLES
February Announcement (24 February 2020)
TerraCom lodged an ASX announcement stating Mr Williams' alleged involvement in a "fake analysis of coal samples" scheme, categorically denying the claims, noting he was made redundant in August 2019, and asserting his allegations were false and unfounded after an independent investigation. This contributed to the detriment by publicly discrediting Mr Williams, leading to reputational damage.
Open Letter Publication (12 March 2020)
TerraCom published an "Open Letter to TerraCom Shareholders" in the Australian Financial Review and The Australian, denying Mr Williams' allegations, stating proceedings began after TerraCom rejected his demands (including a $5,000,000 payment), and noting his past unsuccessful similar allegations against other companies. It also referenced an independent investigation finding no wrongdoing and no customer quality issues.
April Announcement (3 April 2020)
TerraCom lodged an ASX announcement responding to an ALS release about manual amendments to 45-50% of Certificates of Analysis since 2007, reiterating that an independent investigation found allegations against its CEO and CFO unfounded, noting no customer complaints, and quoting the CEO on consistent umpire testing results aligning with invoiced amounts. It linked Mr Williams' allegations to his dismissal in a company-wide redundancy program.
Fines and Penalties
The total pecuniary penalty imposed is $7,500,000, broken down as follows:
- $4,000,000 payable within 28 days of the order.
- $3,500,000 payable on or before 30 June 2026. Additionally, TerraCom must pay $1,000,000 toward ASIC's costs within 28 days of the order.
Key Quotes
"TerraCom believed or suspected that Mr Williams may have made a qualifying disclosure; the tone and content of the Announcements caused detriment to Mr Williams in the form of hurt, humiliation, distress and embarrassment, and damage to reputation." (From the Federal Court declaration in the orders).
"Mr Williams' allegations were false; TerraCom had the conduct of its employees independently investigated; and TerraCom believed that the allegations made by Mr Williams were totally unfounded." (From the February Announcement, as summarised in the judgment).
"These new provisions effected material changes which included... it is now sufficient to establish that detrimental conduct occurred because the wrongdoer 'believes or suspects' that the whistleblower or any other person 'made, may have made, proposes to make or could make a disclosure'." (From the summary of amendments in Watson v Greenwoods & Herbert Smith Freehills Pty Ltd [2023] FCAFC 132).
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