Waiver Nou-more – successful appeal from ASIC v Noumi preserves privilege over documents produced to a regulator

Last year, the Federal Court of Australia held that Noumi Limited (Noumi) waived legal professional privilege over a report prepared by PwC (PwC Report) by voluntarily providing a copy of the report to ASIC. Noumi had provided the report in accordance with a standard form confidentiality agreement with ASIC that was designed to preserve privilege.

That decision was significant because it called into question the continuing viability of ASIC’s ‘voluntary confidential disclosure of LPP information’ regime. We wrote about the original decision.

The Full Court has now reversed the first instance decision, effectively validating ASIC’s voluntary disclosure regime. Noumi was held to have maintained confidentiality over the PwC Report, despite providing it to ASIC, and the privileged status of the PwC Report was preserved. 

ASIC, like other regulators, frequently encounters claims of legal professional privilege over material that might otherwise assist it in the effective and efficient conclusion of an investigation. In practice, a party might not be particularly concerned about a regulator having access to relevant privileged communications, provided those communications are kept confidential vis-à-vis other parties. A privilege-holder may even consider it beneficial in some circumstances to provide the material to ASIC, but may be understandably reluctant to do so for fear of being taken to have waived privilege over that material. 

To facilitate disclosure in these circumstances, ASIC has a standard form voluntary disclosure agreement (VDA) whereby ASIC and the disclosing party agree that ASIC: 

• will keep the disclosed material confidential;
• will use the disclosed material only for its investigative purposes (with limited exceptions); and
• acknowledges that the disclosure does not waive privilege. 

Central to the question of waiver of privilege is whether there has been conduct inconsistent with maintaining confidentiality. As stated by the High Court in Mann v Carnell:

What brings about the waiver is the inconsistency, which the courts, where necessary informed by consideration of fairness, perceive, between the conduct of the client and maintenance of the confidentiality.^[2]

The VDA regime seeks to invoke the principle of ‘limited waiver’, which effectively operates as an exception to waiver. Limited waiver recognises that a disclosure of legally privileged information to a third party for a limited and specific purpose, in circumstances where the recipient is obliged to keep that information confidential, may not necessarily be inconsistent with maintaining confidentiality as against the rest of the world.

Noumi’s disclosure of privileged material to ASIC under a VDA was held by the Full Court to be just that – not inconsistent with maintaining confidentiality. 

However, assessing whether certain conduct is or is not consistent with confidentiality can involve a highly fact-specific inquiry, as is evident from the primary judge’s lengthy analysis of the minutiae of the VDA’s terms and the context in which Noumi and ASIC entered into it. Despite the Full Court’s decision that Noumi had not waived privileged, use of a VDA is not without risk and it remains prudent to seek legal advice before disclosing any privileged material to a third party, including to a regulator under a VDA. 

ASIC had commenced enforcement proceedings against Noumi and its former CEO (Nicholas) and CFO (Macleod) in relation to contraventions of Noumi’s continuous disclosure obligations. By the time the Full Court heard the privilege dispute, the Federal Court had already declared Noumi and Nicholas to have contravened their respective obligations and made civil penalty orders against them.

In the enforcement proceedings, ASIC was ordered to produce certain documents including the PwC Report (which it had previously received from Noumi subject to a VDA) to the defendants. Noumi claimed privilege over the PwC Report to avoid ASIC producing it to Nicholas and Macleod. Macleod sought access to the PwC Report. He disputed that the report was privileged and argued that if privilege did apply it had been waived because Noumi had voluntarily given it to ASIC, albeit under the VDA.

There were two issues relating to the PwC Report before the primary judge and on appeal:

• was the PwC Report subject to legal professional privilege; and
• if so, did Noumi waive privilege over the PwC Report?

As to the first issue, the judge at first instance and all judges on appeal determined that the PwC Report was privileged because the dominant purpose for its creation was for Noumi to obtain legal advice. 

Whether legal professional privilege attaches to expert reports has been the subject of a string of decisions in recent years (for example, in the Optus cyberattack class action). Macleod relied on these decisions to argue that the dominant purpose of commissioning the PwC Report was not to obtain legal advice, and that Noumi had other purposes for commissioning the report.

In rejecting Macleod’s submissions, both courts highlighted the following:

• Noumi did not directly retain PwC for the engagement to produce the PwC Report; rather, it had directed its legal representatives to retain PwC;
• the engagement of PwC, which was made by Noumi’s lawyers, was expressly ‘in order to assist [them] in providing legal advice’; and
• it was the purpose for which Noumi’s lawyers engaged PwC that is relevant to the dominant purpose analysis. There was no evidence connecting the lawyers’ purpose of commissioning the PwC Report with any purpose other than obtaining legal advice.

The Noumi decisions on whether privilege applied are an interesting contrast to Optus. In the Optus case, the external expert (Deloitte) was also engaged by lawyers and the purpose of the Deloitte retainer was expressly stated as being to assist the lawyers in giving legal advice. However, the Federal Court held that Optus had not discharged its burden of proving a dominant privileged purpose, having regard (among other things) to earlier internal Optus communications that disclosed other purposes for Deloitte’s engagement.

On the issue of waiver, the primary judge had accepted that Noumi, by entering into the VDA, intended to maintain confidentiality and retain privilege over the PwC Report. Despite that intention, his Honour determined that the disclosure of the PwC Report to ASIC was inconsistent with the maintenance of confidentiality and, consequently, privilege had been waived.

The primary judge’s decision was heavily influenced by the finding that ASIC could, under the terms of the VDA, use information in the PwC Report to potentially guide its investigation and ultimate prosecution of Macleod. The primary judge held that it was unfair for Noumi to disclose information to ASIC in these circumstances, while withholding and maintaining confidentiality over that same information from Macleod. 

The Full Court disagreed, noting that use of the PwC Report by guiding the course of ASIC’s investigation did not amount to disclosure. Under the terms of the VDA, ASIC was expressly prohibited from disclosing the contents of the PwC Report. The PwC Report therefore remained confidential. Noumi could not be said to have acted in a way that was inconsistent with the maintenance of confidentiality.  

The Full Court also clarified that the unfairness which informs inconsistency is forensic unfairness between the holder and challenger of privilege. Noumi’s disclosure to ASIC did not give it an advantage over Macleod in litigation against each other (in fact, Noumi and Macleod were both defendants to ASIC’s enforcement proceedings), so it could not be said to have caused any forensic unfairness to Macleod.

While the Full Court’s decision may provide some comfort that VDAs should be effective in preserving privilege over documents voluntarily produced to ASIC, determining whether privilege has been waived can involve fine distinctions and careful consideration should always be given to the risks associated with disclosure of any privileged material to any third party, including the risk of privilege being taken to have been waived.

[1] Australian Securities and Investments Commission v Macleod [2024] FCAFC 174.
[2] Mann v Carnell [1999] HCA 66, [29].