In another key decision regarding legal professional privilege (see our previous article on Optus’ failed bid to keep a report on its 2022 data breach confidential) the Federal Court has ruled that a company waived privilege by disclosing a report to ASIC, despite a voluntary disclosure agreement (VDA) aiming to restrict its use.

Although the Court accepted that legal professional privilege applied to the report (and was not found to have been waived by certain ASX announcements), sharing the report with ASIC under a VDA resulted in waiver of privilege, thereby compelling the company to provide the report to its former CEO.

This is an important decision for parties considering the voluntary disclosure of confidential materials as part of engaging with ASIC and other regulators.

BACKGROUND

In 2023, ASIC commenced proceedings against Noumi Ltd (formerly known as Freedom Foods Group) (Noumi), its former CEO (Mr Macleod) and its former CFO, alleging contraventions of the Corporations Act 2001 (Cth), regarding alleged issues with the Company’s accounting treatment of its inventory.

Prior to the commencement of those proceedings, Noumi was in communication with ASIC regarding the accounting issues, and agreed to share a confidential PwC report that investigated the inventory valuation and other matters regarding its accounting of cash and assets (PwC Report). The PwC report was provided to ASIC under a VDA which was substantially in ASIC’s standard form. The VDA stated that Noumi did not intend to waive privilege by providing ASIC with the PwC report[1] and provided permitted uses of the disclosed information.

During discovery, Noumi claimed privilege over the PwC report. Mr Macleod disputed that claim on the basis that the report was not privileged, and if it was, there had been a waiver of privilege in Noumi’s voluntary disclosure of the report to ASIC[2]. ASIC also sought to make submissions opposing Mr Macleod on the question of waiver.

The Court was satisfied that the PwC report was subject to legal professional privilege – that is, the dominant purpose for its creation was for Noumi’s solicitors to provide legal advice. The question requiring consideration was whether privilege had been waived by providing the report to ASIC.

WAIVER – DISCLOSURE NOT ‘FOR A LIMITED PURPOSE’

The court applied the well-established common law test for waiver of privilege; whether the party claiming privilege has acted inconsistently with the maintenance of the confidentiality which the privilege is intended to protect. ‘Inconsistency’ is judged with regard to the context and circumstances and in light of any consideration of fairness arising from that context and circumstance[3].

Considering the context and circumstances of the disclosure, the Court determined that Noumi’s actions breached confidentiality and concluded that privilege over the report had been waived.

Although the VDA emphasised Noumi’s endeavour to protect the confidentiality of the report and constrained ASIC from tendering or presenting the disclosed information in any proceedings, the Court found that the VDA effectively allowed ASIC to direct its powers to compel production of documents and examination of witnesses in a focused way, and to gather evidence for the purpose of proceedings[4].

Even though Noumi shared the PwC Report with ASIC with specific restrictions, the nature of this disclosure allowed ASIC to use information from the report against third parties, such as Mr. Macleod. Therefore, the disclosure extended beyond the purpose of internal review by ASIC.

The Court determined this conduct to be inconsistent with the maintenance of confidentiality because Noumi knew ASIC could utilise not just the PwC Report’s conclusions, but also the evidence supporting them. While ASIC was restricted from presenting the report as evidence or sharing it with others, the VDA did not prevent ASIC from separately compelling information derived from the report.

SPECIFIC UNFAIRNESS

The Court was further satisfied that there was a ‘specific unfairness’ which informed the conclusion as to inconsistency[5], given Noumi had disclosed information to ASIC for potential use against Mr Macleod while simultaneously aiming to keep that information confidential from Mr. Macleod.

PUBLIC POLICY ARGUMENTS

The Court recognized the public policy arguments presented by ASIC and Noumi, highlighting the underlying assumption that regulated entities might hesitate to cooperate with regulators and share pertinent privileged communications if doing so would result in waiving privilege.

In addressing these concerns, the Court noted that deciding whether sharing privileged material to a regulator gives rise to a waiver is to be on a case-by-case basis, and not any rule of automatic application[6] – leaving scope for certain voluntary disclosure to remain privileged.

It did also note, however, that any voluntary disclosure regime was not a ‘statutory one’ and that ‘Parliament has not abrogated legal privilege’[7], which should be read as a warning for parties making voluntary disclosures to ASIC.

CONCLUSION & KEY LESSONS

The decision will no doubt dissuade companies from sharing privileged materials with ASIC, which would be unhelpful for the regulator. In response, it may seek to appeal the decision, seek legislative reform or otherwise amend its voluntary disclosure regime.  Query if the latter would be effective though, unless the use of the document was heavily restricted, which would defeat the purpose of obtaining it.

The Court’s insistence that determinations of waiver will be on a case-by-case basis does provide potential for departure from this decision in differing circumstances.

Key learnings may be taken from this decision:

• companies under ASIC (or other regulatory body) investigation should not presume that information provided under a VDA will be protected by privilege;
• advice should be sought prior to entering into any VDA, and an assessment undertaken of the risks and consequences of potential waiver; and
• a reminder that privilege holders should ensure they act in a way that is consistent with maintaining confidentiality such that no intention to abandon the privilege can be evinced.

[1] ASIC v Noumi Ltd [2024] FCA 349 [48]-[53]

[2] Ibid [8]

[3] Ibid [189]

[4] [178]- [188]

[5] [209]

[6] [214]-[216]

[7] [214]