Australia – Getting It Right When Things Go Awry: Top Tips For Internal Investigations.

Companies and corporations will often commence internal investigations following major events, directives from corporate regulators, audit findings, or whistleblower complaints. Internal investigations can consume significant resources and often have the potential to cause hostility and reputational damage both internally and possibly externally.

However, an investigation that is not conducted properly can potentially expose the company and its personnel to even greater liability. Here are our top tips for investigators tasked with conducting an internal investigation:

1. BEFORE AN EVENT GIVING RISE TO AN INTERNAL INVESTIGATION EVEN OCCURS, ensure that your company’s internal policies are up to date. For example, the Corporations Act 2001 (Cth) (“Corporations Act”) requires most large Australian companies and entities operating in Australia to have whistleblower policies in place that comply with the Act’s requirements (particularly in light of renewed focus from ASIC, who in October 2021 reiterated the importance of maintaining such policies).
2. DETERMINING WHETHER TO COMMENCE AN INVESTIGATION can be difficult and involves a balancing act of competing interests. Factors which can be useful in making this decision include: (i) the severity of the complaint, audit finding or major event; (ii) whether an investigation is required by the law or a regulator; and (iii) the potential risks and outcomes (including legal) if an investigation is commenced or not commenced. Developing a framework in advance can make this process easier. We also recommend, at this very early stage, deciding whether you want the investigation to be conducted on a privileged basis.
3. BEFORE COMMENCING AN INVESTIGATION, create a plan for the investigation. This can involve, for example, clearly formulating the scope of the investigation, creating a ‘road map’ of the investigation, identifying witnesses to obtain evidence from, anticipating issues and drawbacks, and articulating potential solutions to these issues.
4. DURING AN INVESTIGATION, it is critical to ensuring complaint mechanisms and policies are followed, particularly in relation to confidentiality. This can be achieved by ensuring communications are marked ‘confidential’ and making clear to personnel that they will not be exposed to retaliation due to making a complaint. This would, for example, increase the likelihood of establishing a qualified privilege defence to a claim for defamation (should this arise). It is particularly important to ensure identities and/or identifying information are not disclosed if the person making the complaint has requested their identify be kept confidential. This is especially relevant if the complaint is covered by the Corporations Act’s whistleblowing provisions, as there are severe penalties which can result from disclosure.
5. DURING AN INVESTIGATION, it is also invaluable to keep a detailed record of all interview notes and other documents which are prepared, discovered, or otherwise arise during the course of the investigation.
6. FOLLOWING AN INVESTIGATION and when reporting findings to any third parties or regulators (if relevant), ensure that legal professional privilege is maintained over key documents. To reduce the risk of inadvertent waivers of privilege with third parties, clearly identify and/or mark documents privileged, clearly articulate the limited purpose for which the material is being disclosed, and consider the use of confidentiality agreements.
7. OTHER TIPS to increase the likelihood of a successful internal investigation:

• Keeping proper documentation of all records, interview notes and other information relating to the investigation, including ensuring these documents remain confidential.
• Ensuring that those responsible for the investigation remain objective and the investigation is carried out in a fair manner without biases and undue influences.
• Finalising findings promptly and ensuring that any final report(s) is provided to key decision makers and stakeholders (as relevant).
• If you wish to keep claim legal professional privilege over the investigation process (including documents created during it or at the conclusion), we recommend seeking legal advice early in the process. Best practice dictates this be done at the time a decision is taken to conduct an investigation.

For further information, please contact:

Jonathon Ellis, Partner, Bird & Bird

jonathon.ellis@twobirds.com