Can voluntary disclosure agreements with ASIC protect against waiver of privilege? Uncertainty for companies and ASIC following Federal Court decision

ASIC v Noumi Ltd [2024] FCA 349

By Tom McMahon, Cameron Forsyth and Harvey Duckett

A significant Federal Court decision has undercut the assumption that voluntary disclosure agreements are a sufficient mechanism to protect against waiver of privilege.

Key takeaways

• While appeals have been filed by both ASIC and Noumi, for the time being, the case will cause uncertainty for both companies and ASIC.
• Companies under investigation or in communication with ASIC about ASIC’s enforcement activities should seek specific advice on whether or not it’s appropriate for them to enter into a VDA and to disclose documents under same.
• Our team can help with any queries you have about protecting the confidentiality and legal professional privilege attaching to documents required to be produced to ASIC.

Overview

In ASIC v Noumi Ltd, the Federal Court recently found that a company waived privilege that subsisted in a report by disclosing it to the Australian Securities and Investments Commission (ASIC), despite the company having disclosed it under a voluntary disclosure agreement (VDA) it had entered into with ASIC.

VDAs are a tool commonly used by ASIC during its investigations against corporate entities, where a company agrees to provide privileged material to ASIC on the basis that the disclosure amounts to a limited waiver of privilege to assist ASIC, but does not amount to a broader waiver of privilege at large.

This is a significant decision that has undercut the assumption that VDAs are a sufficient mechanism to protect against waiver of privilege, and both ASIC and Noumi have filed separate applications seeking leave to appeal. In its draft notice of appeal, ASIC argues that ‘substantial injustice would result‘ if the regulator is refused leave to appeal, citing the ‘consequent loss to public benefit‘ that could result if the decision is allowed to stand (in that it may prejudice the effectiveness of the VDA regime that allows ASIC to receive privileged information in its investigations or for surveillance). For the time being, the case will cause uncertainty for both companies and ASIC alike.

While the court’s findings were largely informed by the particular facts of this case (which was acknowledged by the court in the decision), companies under investigation or in communication with ASIC about ASIC’s enforcement activities should seek specific advice on whether or not it is appropriate for them to enter into a VDA in light of the Court’s findings.

We have substantial experience advising clients in relation to investigations conducted by ASIC and engaging with ASIC about the compulsory production of documents. We are happy to answer any queries you may have, including advising you about protecting, to the greatest extent possible, the confidentiality and legal professional privilege attaching to documents that are required to be produced to ASIC.

Key background and parties’ positions

In ASIC v Noumi Ltd, Noumi Ltd (formerly known as Freedom Foods Group Limited) brought an interlocutory application seeking a declaration that legal professional privilege attached to certain documents that it had produced to ASIC under a VDA, such that they should not be produced to Rory Macleod. Mr Macleod was the second defendant to the proceedings, and Noumi’s former CEO. Mr Macleod opposed the application, while ASIC supported it.

The key document in dispute in the interlocutory application was an investigation report prepared by PwC entitled ‘Freedom Foods Group Limited – Investigation Report‘ dated 28 September 2020 (PwC Investigation Report). Noumi engaged PwC to prepare the PwC Investigation Report and subsequently disclosed it to ASIC during its investigations under a VDA. The VDA was substantially in ASIC’s standard form (with some minor amendments).

During discovery, Noumi asserted privilege over the PwC Investigation Report. Mr Macleod disputed this, arguing that:

• the PwC Investigation Report was not subject to legal professional privilege; and
• if the PwC Investigation Report was subject to privilege, then Noumi’s voluntary disclosure of it under the VDA had constituted an implied waiver of privilege.

The parties proceeded on the basis that the court’s findings on the question of:

• privilege would flow through to Noumi’s claim for privilege over the balance of the other 14 documents in dispute (with the exception of one other document); and
• waiver would determine Mr Macleod’s claim that Noumi had waived privilege over 11 of the documents.

Court’s findings and reasoning

The court accepted that Noumi had established legal professional privilege over all of the 15 documents. However, the court also found that Noumi had waived privilege over 11 of the documents (being the PwC Investigation Report and associated documents) through voluntary disclosure to ASIC under the terms of the VDA.

On the question of privilege, the court found that the dominant purpose for creating the PwC Investigation Report was to provide legal advice to Noumi.

As to waiver, the court found that Noumi had waived privilege over the PwC Investigation Report on the basis that Noumi’s disclosure of it to ASIC was inconsistent with maintaining the confidentiality that the privilege in the report was intended to protect.

Key elements of the court’s reasoning were as follows:

• The court conducted a close analysis of the VDA’s terms. The court acknowledged there was an expressed intention to maintain confidentiality and retain privilege on Noumi’s part. However, in construing the VDA as a whole, it found that ASIC could use the information disclosed to it under the VDA to inform its next steps in its regulatory response. This had the effect that ASIC could, if it wished, seek to elicit the same or similar evidence from other ‘derivative means’ – including issuing notices to produce certain documents, selecting witnesses to attend compulsory examinations, and asking witnesses questions knowing what their likely evidence would be. In this regard, Noumi was found to have permitted ASIC to use the ‘Disclosed Information’ (including the PwC Investigation Report) in both its statutory investigations and in the proceedings it ultimately commenced against not only Noumi, but also Mr Macleod and others.
• The court placed emphasis on the context of the disclosure, noting that it did not occur in a ‘factual vacuum’. Key facts cited by the court were that Noumi knew the PwC Investigation Report would not simply impart legal advice, but that it would also disclose evidentiary materials relating to findings made about the allegations against Mr Macleod, at a time when ASIC had not itself conducted any investigations into those matters.
• The court did not accept the position that, just because Noumi had made disclosure to a third party (ASIC) for a limited purpose, that it necessarily followed that there would be no inconsistency in the maintenance of confidentiality. The court reiterated that regard must be had to the circumstances of the limited disclosure.
• In this case, Noumi’s conduct was inconsistent with the maintenance of confidentiality in the PwC Investigation Report because:
  • it placed ASIC in a position where it was permitted to use the PwC Investigation Report and the information contained in it for the purposes of its consideration of the investigation and for the consideration of any proceedings it might commence against either Noumi or any other third party, including Mr Macleod; and
  • Noumi placed ASIC in this position in circumstances where Noumi knew the contents of the PwC Investigation Report, and that it would be probative to ASIC’s broader regulatory response.
• There was also a specific unfairness that informed the court’s conclusion as to inconsistency in the maintenance of confidentiality. On the one hand, Noumi disclosed information to ASIC that ASIC could consider and potentially use in its investigations and any proceedings it commenced against Mr Macleod, while, on the other hand, Noumi was seeking to maintain confidentiality over that same information as against Mr Macleod.
• In reaching its decision, the court rejected public policy arguments advanced by ASIC and Noumi to the effect that a finding of waiver of privilege in this case would result in regulated entities being less willing to be candid and cooperate with regulators. The court did not give much weight to these arguments, noting that this was not an assumption that could be uniformly applied to every regulated entity on every occasion, and that the voluntary disclosure ‘regime’ (such as it was described by ASIC) was not codified in statute.