ITP Techblog

As noted in our article "What's in a name?", mandatory data breach reporting has been on the agenda in New Zealand for some time. While they may have some ground to make up on the rugby field, it is one area where our trans-Tasman cousins have stolen a march on New Zealand. In February this year, the Australian Parliament enacted the Privacy Amendment (Notifiable Data Breaches) Act 2017 (Cth) (the Amendment Act) which will (when it takes effect on 22 February 2018) require that all 'eligible' data breaches are notified to both affected individuals and to the Office of the Australian Information Commissioner (the OAIC).

The new regime will apply to all organisations that are caught by the principles set out in the Australian Privacy Act 1988 (Cth). In practice, that is a long list and will include all Australian public sector agencies, any private sector and not-for-profit organisations with annual turnover of greater than A$3m, as well as some small businesses (collectively referred to in the Privacy Act as 'APP entities'). APP entities will be required to notify a data breach if:

• There has been unauthorised access to, or disclosure of, information, or information has been lost in circumstances where unauthorised access or disclosure is likely to occur
• Objectively, that access or disclosure is likely to result in 'serious harm' to any individuals to whom the information relates.

In assessing whether 'serious harm' is likely to result, APP entities are required by the Amendment Act to:

• Consider the kinds and sensitivity of the information
• The kinds of people who are likely to have obtained access to it (and presumably, what their motives and likely uses of that information are)
• Whether it was protected by any security measures (such as encryption)
• The nature of the harm that could result.

Those factors allow APP entities a certain amount of discretion in determining how 'serious' a breach is. While it's frequently argued that immediate and voluntary disclosure following a breach is a very good thing, a significant number of breaches still go unreported in the hope of avoiding reputational, regulatory and legal damage. The same self-preservation interest is likely to remain a factor when an APP entity considers how 'serious' the harm from a breach could be, and therefore whether the mandatory notification requirements apply to them.

At the same time, the new law needs to draw a line somewhere. As pointed out at a recent IAPP breakfast seminar hosted by Buddle Findlay, leaving a computer unlocked and unattended could be argued to be a data breach so any notification regime needs to create a sensible and workable yardstick that organisations can work with.

In Australia, the OAIC has promised guidance to assist APP entities in determining the seriousness of a breach. Here in New Zealand, guidance published by the Office of the Privacy Commissioner (OPC) strongly encourages notification to affected individuals and the OPC where there is a risk of harm (note the absence of the qualifier 'serious'). In a voluntary notification regime, organisations will exercise a lot more discretion, and so seriousness or materiality will be read into any decision on whether to notify or how to proceed.

The introduction of a mandatory breach reporting regime, and broader privacy law reform, has been on the cards in New Zealand for a long time (we've written about this previously here).  While there seems to be political will from both sides of the aisle, the process of introducing those reforms has not moved quickly.  When it comes to breach notification, the best indicator we have is from a May 2014 Cabinet Paper which outlined a two-tier regime involving:

• Notification to the OPC of 'material' breaches
• Notification to both the OPC and affected individuals for more serious breaches, being those where there is a real risk of harm. 

While any final statutory language would need to go through the various Law Commission, Parliament and Select Committee filters, it is interesting to note that, based on the wording of that Cabinet Paper, the prospect of any harm is enough to constitute a breach as 'serious' and therefore warrants notification to affected individuals.  Whereas in Australia, there seems to be a qualitative threshold applied to the nature of the harm itself - ie, a breach is only notifiable if it is likely to lead to serious harm.

To some extent, that might be playing with words, but there would presumably be advantages in aiming for consistency across the language and requirements of the two regimes. Companies operating in both the New Zealand and Australian markets could implement uniform policies and practices and there would be a greater body of applicable regulatory guidance, real-world experience and market practice available to people on both sides of the ditch, regardless of what rugby team they support.