ASIC has commenced civil penalty proceedings in the Federal Court against TerraCom Limited, its managing director Daniel McCarthy, chief commercial officer Nathan Boom, former Chair Wallace King and former director and Deputy Chair Craig Ransley.
TerraCom is a coal producer in Queensland.
The case concerns the conduct of TerraCom and its directors and officers following whistleblower allegations made by a former employee that TerraCom had been involved in the falsification of coal quality results.
ASIC Deputy Chair Sarah Court said, ‘This is a significant case because it is the first time ASIC has taken action for alleged breaches of the whistleblower provisions. ASIC alleges that TerraCom and its senior company employees engaged in conduct that harmed a whistleblower who revealed the alleged falsification of coal quality certificates. Whistleblowers perform a vital role in identifying and calling out corporate misconduct,’ continued Ms Court. ‘We take any indication that companies are engaging in conduct that harms or deters whistleblowers very seriously.’
TerraCom made two ASX announcements on 14 February 2020 and 3 April 2020, and published an open letter to shareholders in the Australian Financial Review and The Australian on 12 March 2020. The announcements and open letter denied the whistleblower’s allegations and stated that TerraCom had the allegations independently investigated.
ASIC alleges that Mr McCarthy, Mr Boom (who was Chief Financial Officer at the relevant time), Mr King and Mr Ransley, who were all members of TerraCom’s disclosure committee, failed to take reasonable steps to ensure statements to the ASX were not false or misleading.
The announcements followed TerraCom’s independent investigation, dismissing the whistleblower allegations.
ASIC also alleges that, by allowing the false or misleading statements to be published, TerraCom, Mr McCarthy, Mr Boom and Mr Ransley engaged in conduct that caused detriment to the whistleblower’s reputation, earning capacity and psychological and emotional state.
Further, ASIC alleges that Mr McCarthy, Mr Boom, Mr King and Mr Ransley failed to take reasonable steps upon receipt of the independent investigator’s report into the issues raised by the whistleblower, in breach of their duty to exercise reasonable care and skill in the discharge of their duties as directors and officers of TerraCom.
Deputy Chair Court said that combatting governance failures will remain a key priority for ASIC.
ASIC is seeking declarations of contravention, pecuniary penalties, disqualification orders and costs.
The date for the first case management hearing is yet to be scheduled by the Court.
TerraCom is an ASX-listed company in the mining sector. TerraCom operates the Blair Athol coal mine in Clermont, Queensland, as well as having operations in South Africa.
On 6 August 2021, TerraCom commenced proceedings in the Federal Court seeking to prevent ASIC from reviewing a report by PricewaterhouseCoopers (PwC), the firm engaged by TerraCom to investigate the whistleblower’s allegations. ASIC had obtained the report during a search warrant carried out at TerraCom’s offices in March 2021.
On 7 September 2022, the Full Court of the Federal Court ordered that TerraCom provide ASIC with a copy of a report by PwC with court-approved redactions. The Full Court’s decision followed TerraCom failing at first instance on maintaining its claim for privilege over the PwC report, with Stewart J deciding on 11 March 2022 that TerraCom had waived privilege over the entire report by way of the company’s public disclosures about it.
In October 2021, ASIC called on CEOs of Australian companies to review their whistleblower policies to ensure they complied with the law (21-267MR).