Australian Securities and Investments Commission v Noumi Ltd
[2024] FCA 349
•11 April 2024
FEDERAL COURT OF AUSTRALIA
Australian Securities and Investments Commission v Noumi Ltd [2024] FCA 349
File number: NSD 163 of 2023 Judgment of: SHARIFF J Date of judgment: 11 April 2024 Catchwords: EVIDENCE – informal discovery – claim of legal professional privilege over investigation report and communications protocol – whether privilege attaches to these communications – requirements of legal professional privilege – held that privilege attaches to the relevant communications
EVIDENCE – informal discovery – waiver – whether privilege attaching to the investigation report was waived by its disclosure to regulator – whether privilege attaching to the investigation report was waived by references in ASX announcements – considerations as to implied or imputed waiver – whether the privilege holder’s conduct was inconsistent with the maintenance of confidentiality in the privileged communication – held that privilege was waived by disclosure to regulator but not waived by reason of the ASX announcements
PRACTICE AND PROCEDURE – whether non-publication and suppression orders should be made – whether orders necessary to prevent prejudice to the proper administration of justice – orders made
Legislation: Australian Securities and Investments Commission Act 2001 (Cth) ss 19, 68 and 76
Corporations Act 2001 (Cth) ss 180(1), 344, 674(2), 674(2A), 1309(2) and 1309(12)
Federal Court of Australia Act 1976 (Cth) ss 37AF, 37AJ(2)
Cases cited: Archer Capital 4A Pty Ltd as trustee for the Archer Capital Trust 4A v Sage Group plc (No 2) [2013] FCA 1098
Australian Broadcasting Commission v Parish (1980) 29 ALR 228
Australian Competition and Consumer Commission v NSW Ports Operations Hold Co Pty Ltd [2020] FCA 1232
Australian Securities and Investments Commission v Australia and New Zealand Banking Group Ltd (No 2) [2020] FCA 1013
AWB Ltd v Cole (No 5) [2006] FCA 1234; (2006) 155 FCR 30
AWB Ltd v Cole [2006] FCA 571; (2006) 152 FCR 382
Baker v Campbell (1983) 153 CLR 52
Barnes v Commissioner of Taxation [2007] FCAFC 88
Benecke v National Australia Bank (1993) 35 NSWLR 110
BHP Petroleum (Australia) Pty Ltd v Sagasco South East Linc [2001] WASCA 159
Cadbury Schweppes Pty Ltd v Amcor Limited [2008] FCA 88
Cantor v Audi Australia Pty Limited (No 4) [2019] FCA 1633
Cantor v Audi Australia Pty Ltd [2016] FCA 1391
Commissioner of Australian Federal Police v Propend Financial Pty Ltd (1997) 188 CLR 501
Commissioner of Taxation of the Commonwealth of Australia v Pratt Holdings Pty Ltd [2005] FCA 1247
Commissioner of Taxation v PricewaterhouseCoopers [2022] FCA 278
Commonwealth Director of Public Prosecutions v Citigroup Global Markets Australia Pty Ltd [2021] FCA 511
Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305
Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49; (2002) 213 CLR 543
DSE (Holdings) Pty Ltd v InterTAN Inc [2003] FCA 1191; (2003) 135 FCR 151
Esso Australia Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49
Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46; (2013) 250 CLR 303
Goldberg v Ng (1995) 185 CLR 83
Grant v Downs (1976) 135 CLR 674
Halford v Price (1960) 105 CLR 23
Hanks v Admiralty Resources NL (No 2) [2011] FCA 1464
Kenquist Nominees Pty Ltd v Campbell (No 5) [2018] FCA 853
Kirby v Centro Properties Limited (No 2) [2012] FCA 70; (2008) 172 FCR 376
Komlotex Pty Ltd v AMP Ltd [2022] NSWSC 1525
LHRC v Deputy Commissioner of Taxation (No 4) [2015] FCA 70
Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1
Marshall v Prescott [2015] NSWCA 110
Martin v Norton Rose Fulbright Australia [2019] FCAFC 234
Mitsubishi Electric Pty Ltd v Victorian Workcover Authority (2002) 4 VR 332
New South Wales v Betfair Pty Ltd [2009] FCAFC 160; (2009) 180 FCR 543
Newey v Westpac Banking Corporation [2014] NSWCA 319
Nine Films & Television Pty Ltd v Ninox Television Limited [2005] FCA 356
Osland v Secretary, Department of Justice [2008] HCA 37; (2008) 234 CLR 275
Perpetual Custodians Ltd v IOOF Management Ltd [2013] NSWCA 231; 304 ALR 436
Pratt Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 122; (2004) 136 FCR 357
Re Northern Energy Corporation Ltd [2020] NSWSC 1073
Secretary, Department of Justice v Osland [2007] VSCA 96
Singapore Airlines v Sydney Airports Corporation [2004] NSWSC 380
Spotless Group Ltd v Premier Building & Consulting Pty Ltd (2006) 16 VR 1
Switchcorp Pty Ltd v Multiemedia Ltd [2005] VSC 425
Sydney Airports Corporation Ltd v Singapore Airlines Ltd [2005] NSWCA 47
TerraCom Ltd v ASIC [2022] FCA 208; (2022) 501 ALR 143
TerraCom Ltd v ASIC [2022] FCAFC 151
The Council of the Municipality of Woollahra v Westpac Banking Corporation (1994) 33 NSWLR 529
Thomason v Campbelltown Municipal Council (1939) 39 SR(NSW) 347
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
UIL (Singapore) Pte Ltd v Wollongong Coal Limited [2023] FCA 1578
X7 v Australian Crime Commission [2013] HCA 29; (2013) 248 CLR 92
Passmore C, Privilege (4th ed, Sweet & Maxwell, 2020) Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Economic Regulator, Competition and Access Number of paragraphs: 257 Date of last submission/s: 1 March 2024 Date of hearing: 14-15 February 2024 Counsel for the Plaintiff: Mr J Arnott SC and Ms G Westgarth Solicitor for the Plaintiff: Minter Ellison Counsel for the First Defendant: Ms E Collins SC and Ms B Lambourne Solicitor for the First Defendant: Ashurst Counsel for the Second Defendant: Mr S H Hartford-Davis and Ms M Mellos Solicitor for the Second Defendant: Norton Rose Fulbright ORDERS
NSD 163 of 2023 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Plaintiff
AND: NOUMI LTD
First Defendant
RORY MACLEOD
Second Defendant
CAMPBELL NICHOLAS
Third Defendant
ORDER MADE BY:
SHARIFF J
DATE OF ORDER:
11 APRIL 2024
THE COURT ORDERS THAT:
1.Within 7 days, the parties are to confer and provide by email to the Associate to Shariff J any agreed or competing proposed short minutes of orders:
(a)to give effect to the Court’s reasons; and
(b)in relation to the order as to costs that the Court should make.
2.In the event that the parties do not reach agreement as to the proposed orders to be made by the Court pursuant to Order 1, within 14 days the parties are to file written submissions of no more than 5 pages in support of their respective positions as to the orders the Court should make including in relation to costs.
3.Pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth), the unredacted version of these reasons be suppressed until the completion (including by way of appeal) of Proceeding No S ECI 2020 04505 in the Supreme Court of Victoria or until further order of the Court.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
SHARIFF J:
A. INTRODUCTION
By an interlocutory application filed on 13 September 2023, the first defendant, Noumi Ltd (Noumi) (formerly, Freedom Foods Group Ltd), seeks a declaration that legal professional privilege attaches to certain documents and resists production of those documents to the second defendant, Mr Rory Macleod (Noumi’s former Chief Executive Officer).
The privilege dispute has arisen in the context of proceedings brought by the Australian Securities and Investments Commission (ASIC) against Noumi, Mr Macleod and Mr Campbell Nicholas (Noumi’s former Chief Financial Officer) for alleged contraventions of the Corporations Act 2001 (Cth) (Corporations Act). Pursuant to orders made by Jackman J, ASIC produced four tranches of documents by way of informal discovery to which Noumi was given first access for the purpose of identifying claims of legal professional privilege. Noumi claimed privilege (either in whole or in part) over 135 documents. On 5 September 2023, Mr Macleod notified a dispute in respect of 53 of the documents over which privilege was claimed. At a case management hearing on 15 September 2023, Jackman J directed that the privilege dispute be determined by another judge of this Court.
The dispute was thereafter allocated to my docket for determination. Noumi’s interlocutory application was listed for hearing before me on 14 and 15 February 2024. By the time of and during the course of the hearing, the dispute between the parties was narrowed to 15 documents (Contested Documents). Following the hearing, the parties filed and served supplementary written submissions dealing with various issues that arose during the course of the hearing.
The main document in dispute is a report prepared by PwC entitled “Freedom Foods Group Limited – Investigation Report” dated 28 September 2020 (PwC Report). Noumi claims privilege over the PwC Report. Mr Macleod challenges Noumi’s assertion of privilege and further contends that any privilege which does attach to the PwC Report has been waived by reason of:
(a)Noumi’s voluntary disclosure of the PwC Report to ASIC pursuant to the terms of a “voluntary disclosure agreement”; or, alternatively,
(b)announcements made to the Australian Stock Exchange (ASX) which are said to have conveyed parts of the conclusion of the PwC Report.
The parties agreed that the resolution of Noumi’s claim that legal professional privilege attaches to the PwC Report would also determine its claim for privilege over all but one of the remaining 14 documents. The remaining document is one entitled “Privileged Communications Protocol” between Noumi and PwC in respect of which Mr Macleod separately claims that Noumi has not established legal professional privilege.
The parties also agreed that the determination of Mr Macleod’s claim that the privilege, if any, in the PwC Report had been waived would also determine his claims as to waiver over Documents 2 to 5 and 8 to 14 because each of these documents referred to or disclosed the contents of the PwC Report. Mr Macleod’s claims as to waiver do not affect any of the other Contested Documents (being Documents 6, 7 and 15).
Initially, ASIC informed the Court that it did not wish to be heard in relation to the privilege dispute, but changed its position when it became evident from Noumi’s and Mr Macleod’s written submissions that a central issue in dispute related to the proper construction and purpose of the voluntary disclosure agreement pursuant to which the PwC Report was disclosed to ASIC. ASIC confined its submissions to this question of waiver and opposed Mr Macleod’s contentions.
Based on the written and oral arguments advanced by the parties, the issues that arise for determination are:
(a)whether Noumi has established that legal professional privilege attaches to the PwC Report;
(b)if so, whether Mr Macleod has established that Noumi waived privilege by:
(i)voluntarily disclosing the PwC Report to ASIC; or
(ii)conveying the conclusions of the PwC Report in materials published to the ASX; and
(c)whether Noumi has established that legal professional privilege attaches to the Privileged Communications Protocol between Noumi and PwC.
For the reasons which follow, I have found that:
(a)Noumi has established that legal professional privilege attaches to the PwC Report;
(b)Mr Macleod has established that Noumi waived privilege by voluntarily disclosing the PwC Report to ASIC;
(c)Mr Macleod has not established that Noumi waived privilege in the PwC Report by reason of the materials published to the ASX; and
(d)Noumi has established that legal professional privilege attaches to the Privileged Communications Protocol between Noumi and PwC.
Before turning to my reasons for so finding, it is necessary to address at the outset that Noumi sought orders pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) (FCA Act) that disclosure of certain information contained in evidence and documents that have been filed in these proceedings be prohibited until the conclusion of separate class action proceedings which are currently before the Supreme Court of Victoria (No S ECI 2020 04505) (Class Action Proceedings). I was satisfied during the hearing before me that the non-publication orders should be made on an interim basis. Following the hearing, I was also satisfied that the orders should be made on an ongoing basis until the final determination of the Class Action Proceedings (including any appeals), and I made those orders on 6 March 2024. My reasons for making those orders are set out below in Part G. As a result of having made these orders, I have redacted certain paragraphs of these reasons so that they conform with the orders that I have made. An unredacted copy of these reasons will be distributed to the parties and I have made orders that this version of the reasons be subject to non-publication and suppression orders.
I have structured the balance of these reasons as follows:
(a)Part B sets out the background factual matters relevant to the issues that fall for my determination;
(b)Part C deals with the question of whether Noumi has established that legal professional privilege attaches to the PwC Report;
(c)Part D deals with the question of whether Mr Macleod has established that there has been a waiver of legal professional privilege in the PwC Report by reason of its disclosure to ASIC;
(d)Part E deals with the question of whether Mr Macleod has established that there has been a waiver of legal professional privilege in the PwC Report by reason of the ASX releases;
(e)Part F deals with the question of whether Noumi has established that legal professional privilege attaches to the Privileged Communications Protocol;
(f)Part G deals with the making of non-publication orders; and
(g)Part H sets out the orders that I will make to dispose of the application.
B. BACKGROUND
Noumi is an Australian publicly listed company in the business of manufacturing and selling dairy and plant-based beverage and nutritional products. Prior to 2021, Noumi also manufactured and sold cereals and snack food products.
Mr Macleod was the CEO and Managing Director of Noumi between August 2012 and 29 June 2020.
Mr Nicholas was the CFO and Company Secretary of Noumi between September 2016 and 23 June 2020.
B.1 Summary of the substantive proceedings
ASIC’s case in the substantive proceedings concerns the alleged accumulation within Noumi of “unsaleable inventory” in the period 1 January 2019 to 30 June 2020. In short, Noumi is alleged to have accumulated large amounts of unsaleable inventory without, at the same time, having any or adequate policy for writing down the carrying values of that inventory within Noumi’s accounts. ASIC’s pleaded case asserts that this issue (the Inventory Issue) was brought to Mr Macleod’s attention in or about early October 2019 by Ms Stephanie Graham, an employee of Noumi.
ASIC’s case relates in particular to Noumi’s annual report for the year to 30 June 2019 (FY19 Financial Report), and the half-yearly report for the six months to 31 December 2019 (HY20 Financial Report). ASIC alleges, among other things, that the FY19 Financial Report and the HY20 Financial Report: (a) included material amounts of unsaleable inventory; (b) were materially overstated as a result of the inclusion of the value of unsaleable inventory; and (c) did not make sufficient or adequate provisions or write-downs for the unsaleable inventory. ASIC seeks:
(a)declarations of contraventions by Noumi of s 674(2) of the Corporations Act;
(b)declarations of contraventions by Mr Macleod and Mr Nicholas of ss 180(1), 344, 674(2A), 1309(2) and 1309(12) of the Corporations Act;
(c)pecuniary penalty orders against all three defendants; and
(d)orders that Mr Macleod and Mr Nicholas be disqualified from managing corporations for a period to be determined by the Court.
B.2 Chronology of events giving rise to the privilege dispute
During March 2020, Noumi engaged the law firm, Ashurst, to provide legal advice and services relating to a separate matter arising from its employee share option plan (ESOP Issue). Ms Rani John was one of the partners of Ashurst who was involved in undertaking this work for Noumi.
[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED].
On or about 15 April 2020, Mr Nicholas sought assistance and advice from Ms Paddy Carney, a partner of PwC, in relation to the potential engagement of PwC by Noumi in relation to the ESOP Issue. On that day, Ms Carney sent Mr Nicholas an email with a proposed “[s]cope of work” regarding the ESOP Issue and attached an “umbrella accounting advice engagement letter” (the PwC Umbrella Engagement).
On 28 May 2020, the Inventory Issue was escalated to Noumi’s Board. At a Board meeting on that date, Mr Macleod informed the Board that $37 million of inventory was considered “at risk” with a provision to be made in the range of $20-25 million as net exposure. The Board minutes record that Mr Trevor Allen, then a non-executive director of Noumi, expressed concern “that this issue (known by Senior Management, not Board [sic]) was not stated anywhere in the Audit Report for the last 4 years” and that Mr Macleod believed that “the issues started to occur in 2018 & 2019 during rapid expansion but could offer no explanation as to why is [sic] was not stated in the report for those years”. The minutes further record that another non-executive director, Ms Genevieve Gregor, stated the need for an external review: “possibly PwC given their current engagement for the Option Series they could add this engagement [sic]”. It was further recorded that the matter needed to be “resolved and accounting treatment determined for 30 June 2020” and that Mr Allen was concerned that employees would not be confident enough to “raise the scale of the issue”.
On 29 May 2020, Noumi issued an ASX announcement, described as a “COVID 19 Trading Update”. One of the matters highlighted in that announcement was that there would be a “one-off non-cash write down of the carrying value of inventory in FY 20” and that “[i]nitial estimates indicate that the write down will be approximately $25 million”. It was reported that final details would be announced with the release of the FY20 results.
On 30 May 2020, Mr Allen sent an email to Mr Nicholas, which also copied Mr Macleod, regarding matters to be included in a brief to PwC to conduct a “review [into] the process for determining the quantification of the stock provision requirement”. Those (draft) matters included a list of various items relating to a review of stock, a reworking of inventory and an assessment of practices and methodologies. Relevantly, the email also listed the following matters:
•[W]hether management could have adopted reasonable additional internal control procedures that would have led to the earlier identification of aged stock;
•For stock described as ‘phantom stock’ review:
…
•The processes adopted by management and the failings of internal control procedures that have allowed this item not to be identified as a matter requiring correction;
•When did senior management become aware of this matter and the [dollar] value of this matter. What escalation policies were adopted by line management to bring this matter to senior managements’ attention.
On 23 June 2020, Mr Nicholas ceased to be the CFO and Company Secretary of Noumi.
At a Board meeting held at 8.30am on 24 June 2020, the Board accepted Mr Nicholas’ resignation and resolved to make an announcement to the ASX before the market opened that day that Mr Macleod (then Managing Director and CEO) had been placed on leave pending a further announcement.
At a further Board meeting held at 2pm on 24 June 2020, the Board discussed information it had “just received” that “there may be further irregularities in the accounts of the company… [which] could not be immediately particularised or quantified and required further investigation”. The Board resolved to request an immediate trading halt in the shares of the company. Noumi entered into a trading halt that afternoon, which continued until 22 March 2021.
At a Board meeting held the next morning at 8.30am on 25 June 2020, the Board discussed “recent events”. It was noted that Mr Macleod had not attended a meeting that had been scheduled to explain these recent events. The minutes of the Board meeting record that Mr Nicholas “did not provide a satisfactory explanation of the issues raised and tendered his resignation”. The minutes also record that the Board had not previously received information regarding the emerging accounting irregularities which were coming to light, and that it had become apparent to the Board that “management below Mr Macleod had been blocked from speaking with Directors”. The Board “noted that it was essential to ensure that all areas of concern in relation to the company’s accounts must be uncovered” and that “all staff need to come forward and feel it safe to do so”. Importantly, the minutes record that the Board had “determined to seek legal advice on the issue”.
The reference to the Board seeking legal advice requires some elaboration. The unchallenged evidence of Ms John was that, although Ashurst had been engaged in early March 2020 to advise in relation to the ESOP Issue, its engagement by Noumi was ongoing during May and June 2020 and expanded to matters about which Noumi wished to obtain advice during that period. Ashurst’s advice was provided both in writing and orally including at Board meetings. Many of the issues about which Noumi sought advice included “complex accounting matters”.
On 25 June 2020, Noumi issued a further ASX announcement entitled “Corporate Update”. The announcement stated that the company “continues to review its inventory levels and the carrying value of inventory” and that “further analysis undertaken since [the 29 May 2020 ASX announcement] suggests the need for further write downs”, with a revised estimate for an aggregate inventory write down for FY20 of $60 million. The announcement also advised that Noumi had requested that its securities be suspended to allow it to investigate its financial position, and that it had “engaged Ashurst and PwC to advise it in relation to these matters”.
On 29 June 2020, Mr Macleod ceased to be a director, CEO and Managing Director of Noumi. On 30 June 2020, Noumi issued an ASX announcement stating, among other things, that the Board had accepted Mr Macleod’s resignation as Managing Director and CEO, and that Noumi had “engaged Ashurst and PwC to advise and assist with ongoing investigations into the Company’s financial position”.
On 5 July 2020, Mr Stephen Longley, a partner of PwC, sent an engagement letter to Mr Perry Gunner, then the Executive Chair of Noumi, confirming “the scope of our services and the terms of our engagement which commenced on 24 June 2020” (the PwC Longley Engagement). The letter observed that Noumi’s CEO and CFO had recently left and that the Directors had “concerns regarding the accuracy of financial statements following the revelation of certain issues” including in relation to the Inventory Issue. The “[s]cope of work” was stated to include a number of matters including to investigate inventory valuation, and other matters relating to accounting of cash and assets, as well as financial reporting such as the “risk of error in the profit statement issued for H1 FY20…”. The PwC Longley Engagement was signed by Mr Gunner on 28 July 2020.
On 8 July 2020, Ashurst provided Noumi with its investigation report into the ESOP Issue (ESOP Report). On 9 July, Noumi disclosed that report to ASIC pursuant to a “Voluntary Confidential Legal Professional Privilege Disclosure Agreement” which was in materially the same terms as the agreement pursuant to which Noumi would later disclose the PwC Report, as described below at [47]-[51].
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On 16 July 2020, Ms John received an email from Ms Cassandra Michie, a forensic accounting partner at PwC. The email stated that Ms Michie had been asked by Ms Carney to send Ms John a draft engagement letter to provide “forensic assistance in relation to the concerns at [Noumi].” The email attached a first draft of the engagement letter. Ms John had not spoken to Ms Michie prior to this time, but had met with Ms Carney and Mr Longley.
The following day Ms John sent a revised version of the engagement letter to Ms Michie. There were subsequent communications between Ms John and Ms Michie and her team at PwC in relation to the draft engagement letter that sought to refine the scope of work that Ms Michie and her team would undertake. The final version of the engagement was not executed until 20 August 2020 (the PwC Michie Engagement). The salient provisions of the PwC Michie Engagement letter are as follows:
We are writing to confirm that:
1. Ashurst (or “you”) act for [Noumi]. You have been retained to provide [Noumi] with legal advice in relation to certain matters.
2. In order to assist it in providing that legal advice, Ashurst wishes to have PwC conduct enquiries and analytical procedures as set out in ‘The Services’ below.
3. PwC’s work will be performed at the direction of Ashurst in order to assist it in providing legal advice to [Noumi] and as such should be considered protected under all applicable legal professional privileges.
…
Background
[Noumi (“the Company”)] is a listed cereals, snacks and dairy company. The CEO and CFO have recently left the Company and the Directors have concerns regarding the conduct of these individuals (and potentially the conduct of others employed or formerly employed by the Company) following the revelation of certain issues.
The services
(a) Scope of work
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(b) Deliverables
We will issue a written factual report setting out the findings of our investigation and any relevant evidence. We will provide a draft of the report to you to confirm factual accuracy before we issue a final report.
Our report, working papers and correspondence will be marked “Privileged & Confidential – For the purposes of Legal Advice”.
Ms John said that her purpose in engaging Ms Michie was to assist her in providing advice to Noumi. Specifically, she worked with Ms Michie to formulate an approach to the factual investigation, which would involve PwC interviewing certain Noumi personnel and seeking information from them on a confidential basis. Ms Michie was assisted by Mr Patrick Millwood (then a Manager in PwC’s Risk and Forensic Practice) and Ms Olivia Bruce, an employee of PwC in Ms Michie’s team. Ms John explained that the PwC Michie Engagement did not address the matters being separately addressed by other partners of PwC, relating to accounting issues such as adjustments, restatements or write-downs in Noumi’s restated prior year accounts, or those for the then extant or upcoming financial period.
Consistently with Ms John’s evidence, on 20 July 2020, Ms Carney issued a “Statement of Work” to Noumi setting out the accounting services PwC would provide to Noumi under the umbrella engagement letter dated 15 April 2020 (the PwC Carney Engagement). The scope of those services included providing assistance with the preparation of accounting position papers and the FY20 annual report. That statement of work was updated on 10 August 2020, and ultimately signed by the then Acting CFO of Noumi on 30 September 2020.
On or about 24 July 2020, Ms John had a telephone discussion with officers of ASIC. The context of this discussion related to requests that ASIC had made for the production of documents in relation to the ESOP Issue. As part of that discussion, Ms John’s recollection was that one of ASIC’s officers raised the issues that had been the subject of Noumi’s ASX announcement dated 25 June 2020, but she could not recall whether there was a specific reference to that announcement. Ms John informed ASIC that an internal investigation was occurring. By that time, Ms John was aware that Ms Michie had commenced work on the forensic investigation. Ms John did not mention to ASIC that a report would be prepared. Ms John considered that there was a possibility that ASIC would be provided with a copy of the report once it was received, but she had no view about this matter at that time as such a decision would be subject to instructions from Noumi.
On 29 July 2020, Ashurst sent a letter to ASIC notifying it of the matters that “the investigation being conducted by PwC and Ashurst [was then] currently examining”. The unredacted part of the letter stated:
There is a particular focus on whether or not there were directives or instructions by current or former executives as to the recording of transactions or information in particular ways, or conversely the omission of transactions or information, in the Company’s books and records.
You mentioned that ASIC had received from third party sources, assertions as to subject areas that may warrant investigation. We would be grateful if you could inform us of the nature of those assertions so that the company may assess whether or not it is necessary and/or feasible to incorporate consideration of those matters, into the scope of the investigation current being conducted on behalf of the Company.
On 30 July 2020, ASIC responded to Ashurst’s letter of 29 July 2020, stating:
Notwithstanding the information provided, ASIC is of the view that more detailed and specific information about what the suspected conduct is that led to the accounting issues being investigated would be of great assistance to its understanding of the issues. ASIC accordingly requests such information be provided.
ASIC also stated:
ASIC is willing to await the outcome of the Company’s internal investigation as it currently believes it may lead to a more expedient outcome during this difficult external environment. However, should circumstances change so that ASIC considered such an approach no longer provided those expediencies, ASIC would proceed to use its compulsory powers to obtain information and advance its investigation.
The balance of ASIC’s response provided details to Ashurst in relation to certain concerns raised by third party sources as to Noumi’s accounting treatment and other matters.
On 6 August 2020, Ashurst responded to ASIC and stated that it would consider the matters raised by ASIC. The letter further stated:
As to the “suspected conduct” which has led to the investigation, you will appreciate that no findings have yet been made or conclusions drawn in the investigation. We, PwC and [Noumi] are seeking to approach the investigation without pre-determining or assuming those findings or conclusions, and we consider it premature to do so at this stage. Accordingly, as the investigation progresses, it may become apparent that the matters described below do not completely or correctly describe what has occurred. Having said that, we can confirm that the following matters (which should be understood in the context just described) have prompted the investigation:
a) a review of inventory resulted in the Board becoming aware that it had been provided with incorrect information by Mr Macleod in respect of certain obsolete stock and out of date stock. [Noumi] staff then indicated that they received various verbal instructions from Mr Macleod not to perform write downs or recording provisions relating to certain obsolete stock, out of date stock and product withdrawals;
b) revenue was recognised on certain inventory prior to it being shipped even though the relevant purchase orders for that inventory were expressed to be subject to quality confirmation and grant of export licences, which conditions were ultimately not met. Incorrect information was provided to the Board as to the classification of associated receivables and their ageing; and
c) insufficient analysis of amounts shown as being owed by the overseas distributor of [Noumi] products, which has been shown subsequently to be referable to trade marketing expenditure which was not recorded in a timely manner as an expense.
The PwC Report was finalised on 28 September 2020. It was then provided by Ms John to Noumi’s Board. Ms John’s evidence is that she did not receive instructions to offer the PwC Report to ASIC on terms of confidentiality until after Ashurst had received and considered the final report and Ashurst had provided it to Noumi for its consideration. It will be necessary for me to say something further about the PwC Report, within limits. I will return to it later in these reasons.
On 2 October 2020, Ms John on behalf of Noumi again wrote to ASIC in the following terms:
As you know, we have caused PwC to prepare a privileged and confidential report concerning the matters referred to in our letter to you dated 29 July 2020 and your letter to us dated 30 July 2020. The Board of [Noumi] wishes us to share that report with ASIC on a confidential basis and pursuant to a “Voluntary Confidential Legal Professional Privilege Disclosure Agreement” in substantially the form provided on ASIC’s website and referred to in section 5 of ASIC’s Information Sheet 165.
Could you please let us know whether ASIC is prepared to receive the report on that basis, in which case we will prepare a form of the disclosure agreement, based on the similar agreement reached in respect of our report concerning employee share option issues, for your consideration.
At the time, ASIC’s Information Sheet 165 relevantly provided as follows:
Section 5: Voluntary confidential disclosure of LPP information
ASIC may elect to accept, on a confidential basis, privileged information (or information that is claimed to be privileged) voluntarily provided by a notice recipient or other disclosing party. ASIC’s standard agreement, the ‘Voluntary confidential LPP disclosure agreement’, sets out the terms on which ASIC may elect to accept such information. The agreement provides that:
•ASIC and the privilege holder agree the disclosure of the information to ASIC is not a waiver of any privilege existing at the time of the disclosure. (Note: Although the agreement prevents ASIC from asserting that the provision of the information amounts to a waiver of privilege, the agreement does not prevent third parties from asserting that privilege has been waived. You should consider seeking legal advice in relation to this issue.)
•ASIC will generally treat the information as confidential, but the privilege holder retains responsibility for otherwise safeguarding any privilege, including asserting any privilege where ASIC is compelled by law to disclose the information (such as in the case of a court order for discovery or a subpoena)
•ASIC is permitted to review and use the information for ASIC’s investigative purposes
•ASIC agrees it will not seek the admission of the disclosed information as evidence in any proceeding other than:
•where the privilege holder has consented to its tender as evidence
•to challenge the validity of the privilege claim
•where privilege has otherwise been waived or it has been determined that the information is not privileged
•for the purposes of a criminal proceeding in respect of the falsity of a statement made by the privilege holder.
A full copy of ASIC’s ‘Voluntary confidential LPP disclosure agreement’ is available on believes there can be a public benefit in accepting privileged documents (or documents claimed to be privileged) on this basis, as it may assist in the effective and efficient conclusion of ASIC’s investigation and determination of consequential steps (which might include no further regulatory action). It may also assist the parties to identify efficiently, and with precision, the critical issues to be addressed in an investigation. It will often be in the public interest for ASIC, in seeking to perform its regulatory functions, to have access to LPP material and it will often not be detrimental to the privilege holder for this to occur.
Noumi sought to negotiate amendments to ASIC’s standard form VDA. Relevantly, the changes included the following (seeking to retain the mark-up and deletions):
Recitals
A.
ASIC issued a notice under section <<INSERT jurisdiction>> of the<INSERT jurisdiction>> to the Disclosing Party dated <<INSERTjurisdiction>> (the Notice)Reference is made to communications between ASIC, the Disclosing Party and the Disclosing Party Representative in July 2020 in connection with an investigation related to<INSERT jurisdiction>>certain accounting issues (the Investigation).B. On
<<INSERT jurisdiction>>2 October 2020, ASIC received notification from the Disclosing Party that it held, or had within its control documents (the Disclosed Information), which it claims are subject to legal professional privilege.…
D. The Disclosing Party has entered into this Agreement to facilitate the provision of the Disclosed Information to ASIC, to assist
in the conduct ofASIC being informed in relation to the Investigation, without waiving any Privilege in the Disclosed Information.…
3. Use of the Disclosed Information by ASIC
…
3.2. Subject to clause 3.1, ASIC may use the Disclosed Information for the purposes of its consideration of the matters the subject of the Investigation and any proceedings commenced by ASIC in connection with the subject matter
as a result ofthe Investigation, including any appeals in respect of those proceedings.On 14 October 2020, ASIC and Noumi entered into a “Voluntary Confidential Legal Professional Privilege Disclosure Agreement” (VDA) in respect of the PwC Report.
Given the centrality of the proper construction and effect of the VDA to the determination of these proceedings, I will set out its salient provisions in full. The Recitals section of the VDA provided:
Recitals
A.Reference is made to communications between ASIC, the Disclosing Party and the Disclosing Party Representative in July 2020 in connection with an investigation conducted by the Disclosing Party related to certain accounting issues (the Investigation).
B.On 2 October 2020, ASIC received notification from the Disclosing Party that it held, or had within its control documents (the Disclosed Information), which it claims are subject to legal professional privilege (Privilege).
C.The Disclosing Party has sought to provide the Disclosed Information to ASIC under this Agreement in a manner which is consistent with the maintenance of any Privilege. ASIC has agreed to receive the Disclosed Information subject to the terms of this Agreement.
D.The Disclosing Party has entered into this Agreement to facilitate the provision of the Disclosed Information to ASIC, to assist ASIC being informed in relation to the Investigation, without waiving any Privilege in the Disclosed Information.
E.Neither the entry by ASIC into this Agreement, nor its receipt of the Disclosed Information subject to the terms of this Agreement, indicates that ASIC accepts that the Disclosed Information is subject to Privilege.
Clause 1 of the VDA provided:
1. ASIC acknowledgments and undertakings
1.1 ASIC acknowledges that:
(a) the Disclosing Party does not lose the right to make a claim that the Disclosed Information is subject to Privilege by having provided the Disclosed Information to ASIC in accordance with this Agreement;
(b) the Disclosed Information has been provided to ASIC in confidence by the Disclosing Party;
(c) the provision of the Disclosed Information to ASIC by the Disclosing Party is not a waiver of any Privilege existing at the time of disclosure and is consistent with the maintenance of any Privilege;
(d) subject to clause 3.1, it will not seek to present the Disclosed Information as evidence in proceedings against the Disclosing Party, or any third parties.
1.2ASIC undertakes that it will not contend in any proceeding, that by reason of the Disclosing Party having disclosed the Disclosed Information to ASIC under this Agreement, that the Disclosing Party has lost its right to make a claim that the Disclosed Information is subject to Privilege.
1.3Subject to clause 1.2, ASIC reserves its rights to contend in any proceeding that the Disclosed Information disclosed to ASIC by the Disclosing Party is not subject to Privilege (including, without limitation, by reason of the Disclosed Information lacking the necessary quality of confidentiality).
Clause 3 of VDA provided:
3. Use of the Disclosed Information by ASIC
3.1ASIC will not seek to present the Disclosed Information as evidence in any proceeding other than:
(a) where the Disclosing Party has consented to its admission as evidence in the proceeding;
(b) subject to clause 1.2, to challenge the validity of the Privilege claim (including, without limitation, by asserting that the Disclosed Information lacks the necessary quality of confidentiality);
(c) where Privilege in respect of the Disclosed Information has otherwise been waived or it has been determined that the Disclosed Information is not privileged;
(d) in a criminal proceeding in respect to the falsity of a statement made by a person who has a claim of privilege in respect of the Disclosed Information.
3.2Subject to clause 3.1, ASIC may use the Disclosed Information for the purposes of its consideration of the matters the subject of the Investigation and any proceedings commenced by ASIC in connection with the subject matter of the Investigation, including any appeals in respect of those proceedings.
3.3Without limiting clause 3.2, ASIC is permitted to obtain, and to present as evidence in proceedings against the Disclosing Party or third parties, material and information obtained as a result of the Disclosing Party having provided the Disclosed Information to ASIC.
Finally, clause 4 of VDA relevantly provided:
4. Disclosure of the Disclosed Information by ASIC
4.1ASIC will treat the Disclosed Information as confidential, and will not disclose the Disclosed Information, other than in accordance with the procedures set out in this clause 4.
4.2 ASIC is permitted to disclose the Disclosed Information to:
(a) ASIC’s external advisers or experts, on a confidential basis, in performance of their duties, who will provide an acknowledgement to ASIC that the Disclosed Information is received by them on that basis; and
(b) any Commonwealth Minister or any committee established by the Parliament of the Commonwealth of Australia, or to any advisor to such Minister or committee, in response to any questions or requests to which ASIC may be expected to respond, whether by reason of compulsion or not. If Disclosed Information is to be disclosed pursuant to this clause 4.2(b), ASIC will request that the recipient of the Disclosed Information maintain the confidentiality of the Disclosed Information.
…
Schedule A to the VDA, entitled “Privilege Claims Schedule”, set out the documents over which privilege was claimed by Noumi and the bases on which such privilege was claimed. Those documents were described as:
(a)“Privileged and confidential report prepared for Ashurst by PwC on the outcome of an investigation into certain accounting and reporting matters (PwC Report)”, said to have been “[p]repared for the purpose of providing legal advice”; and
(b)“Appendices to the PwC Report”, said to have been “[p]repared for the purpose of providing legal advice”.
On 19 October 2020, Ashurst provided the PwC Report to ASIC pursuant to the VDA.
At this time, Ms John did not know whether or not ASIC had formally commenced any investigation relating to Noumi. Noumi had not been served with any statutory notices by ASIC in relation to the Inventory Issue. Ms John said that ASIC commenced to issue statutory notices in late November 2020. Those statutory notices identified that ASIC was investigating various alleged contraventions of the Corporations Act, including contraventions of s 180 of that Act.
On 30 November 2020, Noumi released its end of financial year Annual Report (FY20 Annual Report), accompanied by an ASX release, in which it announced a major write down of the carrying value of inventory and a restatement of prior period accounts, as part of its financial statements for the year to 30 June 2020.
C. WHETHER THE PWC REPORT IS PRIVILEGED
The first area of dispute between the parties relates to whether Noumi has established that the PwC Report is subject to legal professional privilege. The parties proceeded on the basis that my determination of this question in relation to the PwC Report would flow through to Noumi’s claim for privilege over the balance of the documents in dispute save for the Privileged Communications Protocol.
C.1 The applicable principles relating to privilege
It was common ground between the parties that Noumi’s claims for privilege were to be determined by reference to common law principles rather than Pt 3.10 of the Evidence Act 1995 (Cth): Esso Australia Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49 at [16]-[17] (Gleeson CJ, Gaudron and Gummow JJ).
A communication will only attract legal professional privilege if it was brought into existence for the dominant purpose of giving or obtaining legal advice or the provision of legal services: Esso at [61] (Gleeson CJ, Gaudron and Gummow JJ); Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49; (2002) 213 CLR 543 at [9] (Gleeson CJ, Gaudron, Gummow and Hayne JJ).
Privilege can only exist and be maintained when the conditions of the test for its existence are strictly complied with and continue to apply: Grant v Downs (1976) 135 CLR 674 at 677 (Barwick CJ), 685, 688, 690 (Stephen, Mason and Murphy JJ); Baker v Campbell (1983) 153 CLR 52 at 86 (Murphy J), 95-96 (Wilson J), 114-116 (Deane J), 122 (Dawson J); Commissioner of Australian Federal Police v Propend Financial Pty Ltd (1997) 188 CLR 501 at 508 (Brennan CJ), 540, 543 (Gaudron J), 552 (McHugh J), 568 (Gummow J), 584-585 (Kirby J); Esso at [35] (Gleeson CJ, Gaudron and Gummow JJ); and Daniels Corporation at [9]-[11] (Gleeson CJ, Gaudron, Gummow and Hayne JJ).
For legal advice privilege, a confidential communication with a legal adviser will not attract privilege unless it has the requisite dominant purpose associated with obtaining or giving legal advice, although that concept is to be interpreted widely so as to include advice as to what a client should prudently and sensibly do in the relevant legal context: AWB Ltd v Cole [2006] FCA 571; (2006) 152 FCR 382 at [100]; DSE (Holdings) Pty Ltd v InterTAN Inc [2003] FCA 1191; (2003) 135 FCR 151 at [45]. In this sense, courts have taken a “pragmatic and realistic approach” in circumstances where advice involves legal and commercial elements, provided always that the dominant purpose test is met: Barnes v Commissioner of Taxation [2007] FCAFC 88 at [8].
The dominant purpose test can be difficult to apply when there are competing purposes. To characterise a purpose as “dominant” entails that it is the “prevailing or paramount purpose or one which predominates over other purposes”: AWB v Cole at [105]; Archer Capital 4A Pty Ltd as trustee for the Archer Capital Trust 4A v Sage Group plc (No 2) [2013] FCA 1098 at [11]; Kenquist Nominees Pty Ltd v Campbell (No 5) [2018] FCA 853 at [11]. If two purposes are of equal weight, “neither can be said to be the dominant purpose”: Commonwealth Director of Public Prosecutions v Citigroup Global Markets Australia Pty Ltd [2021] FCA 511 at [95](f). If the most that can be said on the evidence is that one of the purposes of the communication included providing legal advice to the client, privilege will not apply: Esso at [50]. If the decision to bring the document into existence would have been made irrespective of any purpose of obtaining legal advice, the latter purpose cannot be dominant: Commissioner of Taxation of the Commonwealth of Australia v Pratt Holdings Pty Ltd [2005] FCA 1247 at [30](8).
Legal professional privilege is not limited to communications between lawyer and client, but may also cover communications with a third party if those communications are made for the dominant purpose of a lawyer providing legal services: Pratt Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 122; (2004) 136 FCR 357. However, privilege does not extend “to third party advices to the principal simply because they are then ‘routed’ to the legal adviser”: Pratt Holdings at [46] (Finn J). The principle in Pratt Holdings extends to communications from the client to the third party and not only communications emanating from the third party. In this way, the privilege captures communications between the client and third party during the “iterative process” of the third party preparing a commissioned document: New South Wales v Betfair Pty Ltd [2009] FCAFC 160; (2009) 180 FCR 543 at [36]-[40].
The party claiming privilege bears the onus of establishing its existence: Grant v Downs at 689 (Stephen, Mason and Murphy JJ). The claimant must provide evidence of facts from which the court can determine whether an assertion as to the purpose of the communication is properly made. Generally, the “best evidence” will be that given by the person whose purpose is in question: Australian Competition and Consumer Commission v NSW Ports Operations Hold Co Pty Ltd [2020] FCA 1232 at [49]. However, while subjective purpose will be relevant and often decisive, dominant purpose is a question of fact that must be determined objectively: Esso at [172] (Callinan J).
Ordinarily, the relevant purpose will be that of the author of the document in question: AWB v Cole at [108]; “or of the person or authority under whose direction, whether particular or general, it was produced or brought into existence”: Grant v Downs at 677 (Barwick CJ). Where a “technical report” has been commissioned by a solicitor, the relevant intention may be that of the solicitor: Mitsubishi Electric Pty Ltd v Victorian Workcover Authority (2002) 4 VR 332 at [14] (Batt JA, Charles and Callaway JJA concurring). In other cases, it may be necessary “to examine the evidence concerning the purpose of other persons involved in the hierarchy of decision-making or consultation that led to the creation of the document and its subsequent communication”: AWB v Cole at [110].
As a matter of general principle, it is not possible to describe the evidence necessary to support such a claim in all cases, which may depend on the circumstances such as the factual and legal issues dividing the parties and the number of documents said to attract the claim: Martin v Norton Rose Fulbright Australia [2019] FCAFC 234 at [30].
In many instances, the character of the documents will illuminate the purpose for which they were brought into existence: Grant v Downs at 689 (Stephen, Mason and Murphy JJ). Where that is not the case, it may be demonstrated by identifying the circumstances in which the communication took place and the topics to which the instructions or advice were directed: Commissioner of Taxation v PricewaterhouseCoopers [2022] FCA 278 at [146] (and the cases there cited).
C.2 The parties’ submissions
C.2.1 Noumi’s submissions
Noumi contended that the dominant purpose for the creation of the PwC Report was for it to obtain legal advice from Ashurst. It submitted that the objective circumstances established that at the time PwC was engaged under the PwC Michie Engagement, Noumi was seeking to obtain advice from Ashurst as to the matters within the scope of that Engagement, specifically, matters that may best be described as those pertaining to who knew what and when, and what they did or did not do, and what were the causal factors relating to the Inventory Issue (the Accountability and Causal Issues).
Noumi sought to distinguish the PwC Michie Engagement from its other engagements of PwC. Noumi contended that there were three other relevant engagements of PwC that were connected with the accounting issues that had emerged during April to July 2020. The first engagement was the PwC Umbrella Engagement which initially related to the ESOP Issue. The second engagement was the PwC Longley Engagement which was considering issues relating to the accuracy of past reporting, adjustments, restatements and write-downs. The third engagement was the PwC Carney Engagement which was focussed upon the preparation of accounting position papers and the FY20 annual report. It was contended that each of these other three engagements of PwC related to “nuts and bolts” issues as to accounting and financial reporting, and the investigations that would be involved in them. It was submitted that the PwC Michie Engagement was qualitatively different to the other three engagements as it related to the factual investigations relating to the Accountability and Causal Issues.
It was submitted that the objective features of each of the separate engagements had to be considered together with Ms John’s evidence that her purpose in engaging Ms Michie was to provide legal advice to Noumi. Noumi submitted that where a report has been commissioned by an external solicitor, the purpose that must be ascertained is that of the solicitor. In this case, it was submitted that Ms John had commissioned Ms Michie to investigate the Accountability and Causal Issues for the purpose of advising Noumi and therefore it was her purpose that was relevant. Whilst Noumi acknowledged that Ms John’s state of mind would not be determinative, her subjective purpose was said to be corroborative of the objective one. In this regard, it was emphasised that Ms John’s credit was not challenged by Mr Macleod.
C.2.2 Mr Macleod’s submissions
Mr Macleod submitted that there were other purposes for which the PwC Report was obtained or created and that Noumi had not discharged its onus of excluding these as dominant, or at least equal, purposes. In particular, Mr Macleod pointed to evidence that prior to any involvement of Ms John in retaining Ms Michie, Mr Allen had already expressed concerns in relation to the Accountability and Causal Issues at the Board Meeting on 28 May 2020 and in his subsequent email of 30 May 2020. It was submitted that, as a result, Mr Allen, or the Board, had a pre-existing purpose in retaining PwC to investigate and address the Accountability and Causal Issues. Whilst Mr Macleod accepted that Ms John commissioned the PwC Report, the essence of his submission was that she was only one relevant person and that Noumi itself wished to have a report commissioned. Mr Macleod accepted that Ms John’s subjective purpose, or even her objectively discerned purpose, was relevant but not determinative.
In support of his contentions, Mr Macleod placed considerable reliance on the decision of McDougall J in Singapore Airlines v Sydney Airports Corporation [2004] NSWSC 380. Mr Macleod submitted that Singapore Airlines establishes that, in cases involving a third party investigative report commissioned by a solicitor, it can be relevant to look at the period from the date the report is commissioned “up until the time when the document is brought into existence”. Mr Macleod submitted that in the present case, the relevant period for determining the purpose for the creation of the PwC Report was from on or about 20 July 2020 (when Ms John first liaised with Ms Michie) up until 28 September 2020 (when the PwC Report was finalised).
Mr Macleod submitted that, even though Ms John had commissioned the report, the Court had to assess both Ms John’s purpose and that of other persons, including at least Mr Allen. Mr Macleod noted that in Singapore Airlines, although McDougall J accepted that one corporate officer (an in-house counsel) had commissioned an investigation report, that officer’s purpose alone was not determinative. McDougall J had reasoned that the individual purposes of other employees acting within the scope of their authority were relevant to the overall inquiry. Mr Macleod submitted that, in the present case, there were multiple purposes for the commissioning of the PwC Report, one of which was Ms John’s purpose to provide legal advice to Noumi, but another of which was Noumi’s purpose in seeking to find out what had happened and why. It was submitted that the evidence established that Noumi’s purpose did not arise contemporaneously with Ms John’s purpose; rather, it indicated that Noumi had a purpose in determining what had happened in relation to the Inventory Issue which existed over a month beforehand. [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] which he contended was more consistent with the fact that Noumi’s primary, or at least equal, purpose was to understand the Accountability and Causal Issues.
Mr Macleod also submitted that the evidence established a further purpose, namely, that from at least 24 July 2020, Noumi intended to share the PwC Report with ASIC to assist it with its investigation so as to advance Noumi’s strategic interests. Mr Macleod contended that the discussions and correspondence between Ms John and ASIC revealed that Noumi wished to obtain a factual and other account of relevant events for the purpose of disclosing them to ASIC in its capacity as a regulator, or at least to respond to ASIC’s likely investigation or request for documents and information. Mr Macleod submitted that this purpose accorded with a more general purpose that Noumi had reported to the market via its ASX releases that it was investigating the matter. For these reasons, Mr Macleod submitted that Bromwich J’s conclusion in Cantor v Audi Australia Pty Ltd [2016] FCA 1391 at [68] that “a later decision to use legal advice… will not displace the dominant purpose otherwise established” was not applicable here where “the ASIC purpose” arose at least contemporaneously with, if not prior to, Ms John’s purpose.
Further, Mr Macleod submitted that it was not necessary to demonstrate that there was in fact a different dominant or equal purpose, but only that, as in Singapore Airlines, Noumi had not excluded the other purposes as being equal or dominant purposes. In support of this contention, Mr Macleod drew attention to the fact that no attempt was made by Noumi to adduce any evidence from any employee of Noumi other than its current legal counsel, whose employment post-dated the relevant events, and, in particular, from Mr Allen. Mr Macleod invited the Court to infer that in those circumstances, Mr Allen’s evidence would not have assisted Noumi in establishing that the dominant purpose of commissioning the PwC Report was to seek legal advice.
C.2.3 Noumi’s reply submissions
Noumi submitted that, as the person who commissioned the PwC Report, it was Ms John’s purpose that mattered and that she had no purpose other than to obtain the PwC Report for the purpose of advising Noumi. It was submitted that Noumi’s purpose to understand the Accountability and Causal Issues purpose was “part of, or ancillary to” Ms John’s purpose, and that the “ASIC purpose” advanced by Mr Macleod was not established on the evidence.
Noumi submitted that the decision of the Court of Appeal of the Supreme Court of New South Wales in Sydney Airports Corporation Ltd v Singapore Airlines Ltd [2005] NSWCA 47 does not stand for the proposition that “where there are multiple purposes, the Court must have regard to both Ms John’s purpose and that of other persons”, and that Mr Macleod’s reliance on the first instance decision of McDougall J, rather than the decision of the Court of Appeal, led Mr Macleod into error in this respect. Noumi submitted that the Court should not look for “an intention outside of, objectively construed, Ms John as the commissioner of the report.” It was submitted that, as Ms John’s evidence as to her sole and dominant purpose was not challenged, and this was corroborated by the terms of the PwC Michie Engagement, Ms John’s purpose was conclusive.
Noumi further submitted that its purpose of obtaining legal advice and the purpose of it finding out the answers to the Accountability and Causal Issues were not mutually exclusive: relying on Singapore Airlines at [24], Sydney Airports at [20] and Komlotex Pty Ltd v AMP Ltd [2022] NSWSC 1525 at [31]. In this regard, Noumi accepted that the relevant time for assessing purpose may extend from the time the PwC Report was commissioned up until the time it was brought into existence. It submitted that just as a purpose could evolve during the commissioning of the PwC Report, it is equally true that an anterior purpose to find out “what happened”, that existed over a month before the commissioning of the PwC Report, could evolve following consultation with lawyers and before the time the PwC Report came to be commissioned.
Finally, Noumi submitted that no inference should be drawn from Noumi’s failure to call Mr Allen. It was submitted that it was Ms John’s objective purpose that the Court must determine and that, to the extent Mr Allen’s purpose could be relevant, his objective purpose in engaging Ms Michie’s team was evidenced by the terms of the Michie PwC Engagement letter, which he signed.
C.3 Consideration
I am satisfied that the dominant purpose for the creation and bringing into existence of the PwC Report was for Ms John to provide legal advice to Noumi, and for Noumi to obtain that legal advice.
The bringing into existence of the PwC Report needs to viewed in context, and in light of the moving parts that led to it being “commissioned” and brought into existence. In this regard, I agree with the parties’ submission that the purpose of the PwC Report is to be ascertained across the continuum of time leading up to its creation on 28 September 2020: see Singapore Airlines at [17]-[22] (being a part of McDougall J’s reasons that were not disturbed on appeal per Sydney Airports at [9], [20] (Spigelman CJ, Sheller JA and Campbell AJA agreeing)).
On the evidence before me, the Inventory Issue was first brought to the attention of Noumi’s Board at a meeting on 28 May 2020. Thereafter, there were a series of cascading developments drawn to the Board’s attention, with each subsequent development presenting a worsening position in relation to unsaleable and obsolete inventory, as well as raising other serious concerns. The Board was grappling with these developments as an evolving process. Some of the issues confronting the Board related to the, aptly described, “nuts and bolts” accounting issues, and others related to whether management had any knowledge about these issues.
The initial report from Mr Macleod to the Board on 28 May 2020 indicated that the Inventory Issue would lead to a write down in Noumi’s accounts in the range of $20-25 million. Given the quantum involved, it is unsurprising that Mr Allen expressed concern as to whether Noumi’s senior management knew about the Inventory Issue and, if so, why it had not been disclosed in the Audit Reports of previous years. In the context of Noumi having reporting obligations, it is also unsurprising that Ms Gregor expressed the need for an external review possibly to be conducted by PwC given it had (then) recently been involved in reviewing the ESOP Issue. Consistent with these initial reactions, a few days later, on 30 May 2020, Mr Allen sent an email referring to the fact that the Board had asked “PwC to review” the process for the quantification of stock. Mr Allen’s email raised a number of issues that would need to be considered including whether management knew about the issue and the efficacy of control procedures. However, it does not follow that the purposes for the engagements of the professional advisers that followed were immutably anchored in time to these initial reactions. Nor does it follow that the purposes were incapable of refinement after further consideration. The fact is that there were subsequent developments. Those developments satisfy me that Noumi, through its Board including Mr Allen, refined its purposes in seeking out legal and accounting assistance to deal with the overlapping but distinct issues at hand.
By late June 2020, the Board had been informed of further “irregularities”. Noumi then published a revised estimate for the write down in inventory in the order of $60 million for FY20. By the time of the Board meeting on 25 June 2020, the Board considered that it had not received a satisfactory explanation from Mr Nicholas in his position as CFO, and Mr Macleod had not attended a meeting to explain the (then) recent developments. Importantly, by this time, the Board considered that “management below Mr Macleod had been blocked from speaking with Directors” and that it was essential that “all staff need[ed] to come forward and feel it safe to do so”. As these matters came to light after the Board meeting on 28 May 2020, in my view it would be wrong to fix the Board and Mr Allen with a purpose based on their initial reactions, or to do so solely by reference to those earlier reactions.
In light of the developments which came to light after the Board meeting of 28 May 2020, the Board at its meeting on 25 June 2020 determined that it would seek legal advice. Mr Allen was present at that Board meeting. The course taken by the Board and the determination that it made to seek legal advice is important in ascertaining the purpose for the commissioning and creation of the PwC Report. It was after the Board meeting on 25 June 2020 that Ms John was approached in the first half of July 2020 by Mr Allen to provide advice, and it was after this time that PwC came to be engaged by Ashurst to, in effect, conduct a forensic investigation for the purpose of Ashurst advising the Board in relation to various matters including the Accountability and Causal Issues.
Consistent with the above, in the days and weeks following the 25 June 2020 Board meeting, Noumi entered into a number of engagements. Each engagement related to a different stream of work and was distinct to the other, but obviously enough all related to the general topic of the Inventory Issue. By 5 July 2020, Mr Longley was tasked with (in a simplified sense) looking backwards in time in relation to the accounting and reporting issues in so far as any revisions were required, and, by 20 July 2020, Ms Carney was tasked with (in a simplified sense) looking forward in time to impending reports and announcements. Throughout this period, Ms John was retained to provide ongoing legal advice, which expanded in scope as more information came to hand. By early July 2020, Ms John was specifically retained to provide advice in relation to the Inventory Issue, and [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. This then brought about the PwC Michie Engagement.
On 16 July 2020, Ms Michie contacted Ms John by email to introduce herself. Mr Macleod placed emphasis on the fact that it was Ms Michie who made contact with Ms John as being consistent with Ms Michie’s engagement being at the initiative of Noumi and Mr Allen. Ms Michie’s email to Ms John stated that she had been asked by Ms Carney to contact Ms John. Ms John had said she had earlier met with Ms Carney, and also Mr Longley, who were both partners of PwC working with Noumi at the time. Given the involvement of a number of partners from PwC in different streams of work and the pace at which things were moving, I do not consider that it is of any moment that it was Ms Michie who contacted Ms John. Rather, what matters is the purpose of the engagement that followed.
As it was Ms John who ultimately engaged Ms Michie and sought the production of an investigation report, she may be regarded as the person who came to “commission” the PwC Report. As the person who commissioned the PwC Report, Ms John’s stated, and objectively discerned purpose, is relevant: Mitsubishi Electric at [14]. Ms John gave evidence, which I accept, that she caused Ms Michie and her team to be engaged “for the purposes of assisting Ashurst to provide legal advice and professional legal services to Noumi”. Ms John’s evidence as to her subjective purpose accords with an objective assessment of the purpose for Ms Michie’s engagement and the creation of the PwC Report. Ms John’s purpose is corroborated by the draft and final terms of engagement by which Ms Michie came to be retained. These documents establish that Ms Michie was being engaged by Ms John for the purpose of providing legal advice to Noumi. This purpose is also corroborated by the fact that by the time Ms Michie came to be engaged, the Board wanted legal advice about the serious issues that had been raised about whether Mr Macleod and other senior executives knew about the Inventory Issue and whether they had given directions to subordinates to, effectively, conceal the Inventory Issue. The PwC Michie Engagement was qualitatively different from the other engagements of PwC at the time which were focussed on “nuts and bolts” accounting issues.
On the facts here, I accept that it is also necessary to have regard to whether, separately to Ms John, the Board including Mr Allen, had some different purpose in seeking out, through Ms John, to obtain the PwC Report: AWB v Cole at [110]. I am satisfied that, over the continuum of time leading to the creation of the PwC Report, Noumi’s Board, including Mr Allen, had the same purpose as Ms John, which was that the PwC Report was being obtained and created to provide legal advice to Noumi.
Contrary to Mr Macleod’s submissions, having regard to the way things evolved, I do not regard the Board’s purpose, or that of Mr Allen, to have been mutually exclusive to Ms John’s purpose. I am satisfied that the Board, including Mr Allen, wanted to know what had happened, what needed to be done, who knew what and when, and what they did about it. However, I am also satisfied that the Board, including Mr Allen, came to want to know and be advised about these matters by way of legal advice provided by Ms John. Specifically, at the Board meeting on 25 June 2020, when other developments were raised including that staff subordinate to Mr Macleod had been blocked from disclosing information to the Board and may not have felt comfortable in coming forward, the Board determined to seek legal advice. It was after this time that Ms John was approached about specific advice and that, in turn, led to Ms Michie being engaged.
In substance, Mr Macleod’s submissions proceeded on the premise that the initial reactions expressed by Mr Allen fixed him with a purpose from which neither he nor the Board could diverge, and which purpose could not be refined or evolve. The premise of these submissions is unsound. It does not reflect the commercial reality as it was lived by Noumi’s Board at the relevant time. That is not to say that in other cases a pre-existing purpose will not continue to be a dominant purpose or at least a competing or other purpose. The Singapore Airlines litigation provides an example of cases where there may be other purposes, none of which dominate, or which at least compete. This may be especially so in large organisations where different officers, with different regulatory considerations in mind, and having different duties from each other, may have different purposes in seeking to obtain an investigation report. Whatever may the position in other cases, in this case I am satisfied that by the time the PwC Report was commissioned and created, it was being commissioned by Ms John for the purpose of providing legal advice to Noumi and it was created for that purpose.
I do not accept Mr Macleod’s submission that, as it was Mr Allen [REDACTED] [REDACTED] [REDACTED], he had some purpose different to Ms John. Given that PwC was already engaged in other respects, and the PwC Umbrella Engagement was in place, [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]. It was left to Ms John to make the decision as to how best to provide legal advice to Noumi, including as to whether she would retain Ms Michie and her team to assist in this regard.
I do not regard it as critical that Mr Allen was not called to give evidence. The evidence before me is as I have set it out above. On the basis of that evidence, I am satisfied that Noumi has discharged its onus of establishing that there was no other purpose that was inconsistent with Ms John’s purpose.
I also do not accept that there was any rival purpose in Noumi or Ms John seeking to commission and obtain the PwC Report for the purpose of it being provided to ASIC. I accept Ms John’s evidence that at the time she retained Ms Michie, Ms John had not given any thought to whether a report would be provided to ASIC and I accept her evidence that this was a matter for further consideration and instructions. I also accept that Ms John was not instructed to provide a copy of the PwC Report to ASIC until after it had been created and provided to Noumi’s Board, and, as a result, it was not the purpose for which that Report had been brought into existence. This is not a case where the later disclosure of the privileged communication gives rise to an inference as to the anterior purpose of that communication being brought into existence: see Cantor at [68].
I am satisfied that Noumi has established that the PwC Report is subject to legal professional privilege. This finding means that the documents identified as Documents 2 to 14 are also the subject of legal professional privilege.
D. WAIVER OF THE PWC REPORT BY DISCLOSURE TO ASIC
Mr Macleod submitted that the disclosure of the PwC Report to ASIC gave rise to an implied waiver of privilege. Such a waiver is imputed by operation of law where the actions of the privilege holder are inconsistent with the maintenance of the confidentiality which the privilege is intended to protect: Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 at [29].
Mr Macleod, as the party asserting that privilege has been waived, bears the onus of establishing waiver: Betfair at [54].
D.1 The applicable principles relating to waiver
The present application concerns the common law principle of waiver: Mann at [23]; Osland v Secretary, Department of Justice [2008] HCA 37; (2008) 234 CLR 275 at [49]. At common law, the question of waiver is governed by an examination of whether there has been inconsistent conduct by the privilege holder. The overriding principle of inconsistency was expressed by the plurality in Mann at [29] as follows:
… 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; not some overriding principle of fairness operating at large.
The central concept in implied or imputed waiver is relevant and plain inconsistency of position. Where necessary, inconsistency may be informed by considerations of fairness, but “not some overriding principle of fairness operating at large”: Mann at [29]. Waiver in this sense focuses upon the conduct of the privilege holder. It is a doctrine introduced to prevent a person from taking up two inconsistent positions: see Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46; (2013) 250 CLR 303 at [30]-[31], citing Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305.
However, it has been recognised that there are instances where the privilege holder may disclose privileged communications to a third party for limited or specified purposes without that disclosure giving rise to a waiver. In Goldberg v Ng (1995) 185 CLR 83 it was said by the majority at 95-96:
That does not mean, however, that an imputed waiver must completely destroy the privilege. Like an express waiver, it can be limited so that it applies only in relation to particular persons, materials or purposes.
The plurality in Mann at [30] observed that, although the Court in Goldberg was divided upon whether privilege had been waived in that case, “the reasoning of all members of the Court was inconsistent with the proposition that any voluntary disclosure to a third party necessarily waives privilege”. Their Honours extracted the following statement of Jordan CJ in Thomason v Campbelltown Municipal Council (1939) 39 SR(NSW) 347 at 355:
The mere fact that a person on some one occasion chooses to impart to another or others advice which he has received from his solicitor indicates no intention on his part to waive his right to refuse on other occasions to disclose in evidence what that advice was, and supplies no sufficient reason for depriving him of a form of protection which the law has deemed it specially necessary to throw around communications between solicitor and client.
Similarly, Maxwell P observed in Secretary, Department of Justice v Osland [2007] VSCA 96 at [51] (in reasoning that was expressly endorsed by the High Court on appeal: Osland at [50]):
[T]he inconsistency test readily accommodates the notion that, in appropriate circumstances, the privilege-holder may disclose the content of legal advice to a third party for a particular purpose without being held to have waived privilege in the advice.
The “notion” of “limited waiver” was examined by Bromwich J in Cantor. After reviewing the authorities in detail, Bromwich J stated at [88]:
The conclusion available to be reached following Goldberg v Ng and Mann v Carnell is that:
(1)A limited waiver may in some situations be effective in preserving privilege. The minority in Goldberg v Ng supported that outcome effectively in all cases subject to the necessary steps being taken to preserve privilege.
(2)In other situations limited waiver may be ineffective and be treated as constituting complete waiver and privilege is lost altogether.
(3)In yet other situations, limited waiver may provide a basis for some degree of limited implied or imputed waiver, provided there is also present conduct by (or perhaps on behalf of or in the interests of) the party asserting privilege that is relevantly inconsistent with its preservation. The conclusion reached may be informed by questions of specific unfairness, not general unfairness, as to be unfair in all the circumstances to the person against whom privilege is maintained. It is a question of factual analysis against the principles stated in those cases as to whether privilege has been preserved and if so as to whether, despite having been preserved, waiver should be imputed or implied.
I respectfully adopt Bromwich J’s analysis, with which I agree.
D.2 The parties’ submissions
D.2.1 Mr Macleod’s submissions
Mr Macleod submitted that in assessing the question of waiver, it was necessary to discern the objective and not the subjective purpose of the disclosing party. It was submitted that the “contractual context” brought about by the VDA meant that the parties’ subjective intentions were not relevant to the question of waiver. Mr Macleod submitted that Noumi should be held to the terms of the VDA, even if the terms, objectively construed, did not accord with Noumi’s subjective intentions.
Although there was at that time no statutory investigation on foot and no powers of compulsion were being exercised, I am satisfied that it was in Noumi’s reasonable contemplation, given the seriousness of the matters being raised with ASIC, that ASIC would consider all information provided to it in its determination of an appropriate regulatory response as against both Noumi and Mr Macleod. From the contents of Information Sheet 165 and the terms of the VDA, Noumi knew that the purpose of the disclosure to ASIC was to assist ASIC with its investigative and statutory processes, including the determination of whether a statutory investigation would be commenced or concluded, and whether enforcement proceedings would be commenced including against Mr Macleod. Thus, although Noumi was only seeking to disclose the PwC Report on a confidential basis, without waiving privilege, on the terms of the VDA, and as informed by the Information Sheet, I am satisfied that Noumi knew that the PwC Report would contain the evidence that PwC had gathered, as well as its findings, in relation to the Inventory Issue including an examination of what Mr Macleod and other executives knew about that Issue and what they did. It follows that by the time of the disclosure to ASIC, Noumi knew or it was within its reasonable contemplation that ASIC could use the information contained in the PwC Report to conduct statutory investigations including a realistic possibility that such investigations would examine Mr Macleod’s conduct, together with a potential that proceedings could be commenced against him. To use the expression in Osland at [46], the legal and practical consequence of the disclosure of the PwC Report was to permit ASIC to use the information contained in the Report as against Mr Macleod, including, as discussed further below, permitting ASIC to have derivative use of that information in proceedings against Mr Macleod.
These contextual matters bear upon the scope, breadth and extent of the uses of the Disclosed Information permitted by cll 3.2 and 3.3. The purpose of the disclosure as expressed in Recital D was to “assist” ASIC being “informed in relation to the Investigation”. The contextual circumstances demonstrate that this was consistent with Information Sheet 165 which indicated that ASIC could review and use the information for its investigative purposes. However, the terms of the VDA extended beyond this for the reasons I have outlined above at Part D.3.2(e).
Whilst Noumi largely accepted the uses that ASIC could make of the material in the PwC Report (as set out at [178] above), it contended that these purposes were limited and fell within the scope of a “limited waiver”. As noted above, Noumi submitted that disclosure of the PwC Report to ASIC as the regulator facilitated the administration of justice. It submitted that the conditions that the material could not be used or relied upon in court was at the very heart of what privilege is intended to protect. It contended that the fact that ASIC might use the information internally to inform its own investigation and decision whether to commence proceedings is not to the point as this was “simply the scope of the limited waiver”.
However, it does not follow from the fact that there has been disclosure to a third party for a limited purpose that there will be no inconsistency. In Osland at [50], it was stated that “[t]he inconsistency test readily accommodates the notion that, in appropriate circumstances, the privilege-holder may disclose the content of legal advice to a third party for a particular purpose without being held to have waived privilege in the advice”. The reference to “appropriate circumstances” in this passage gives an indication that regard must be had to the circumstances of the limited disclosure and whether it can be readily accommodated within the inconsistency test.
As Bromwich J reasoned in Cantor at [88], in some situations a limited waiver may be effective in preserving privilege, in other situations it may not, and in yet other situations it may give rise to some degree of limited implied or imputed waiver provided there is conduct that is relevantly inconsistent with the preservation of privilege. Bromwich J further reasoned that these conclusions may be informed by questions of specific unfairness, not general unfairness. None of the parties before me contended that this aspect of Bromwich J’s reasoning was erroneous in any respect. As I have observed at [103] above, I agree with Bromwich J’s reasoning.
The real question that arises here is whether the disclosure to ASIC, even if for limited purposes, was inconsistent with the maintenance of confidentiality in the privileged communication. In this case, I am satisfied that Noumi’s conduct was inconsistent with the maintenance of confidentiality in the PwC Report.
Although Noumi disclosed the PwC Report to ASIC for a limited purpose, in doing so Noumi placed ASIC in a position where it was permitted to use the PwC Report and the information contained in it for the purposes of its consideration of the Investigation and for its consideration of any proceedings that it might commence against either Noumi or any other third party including, relevantly, Mr Macleod. Importantly, these purposes were not limited to ASIC’s internal considerations. By cl 3.3 of the VDA, Noumi permitted derivative use of the Disclosed Information for the purpose of any proceedings that may be brought against any third party, including Mr Macleod. Noumi knew that it had placed ASIC in a position whereby it was permitted to use the information contained in the PwC Report to obtain evidence in an admissible form (including the evidence contained in the PwC Report) in proceedings that could be commenced against Mr Macleod. The effect of this was to permit ASIC (if it so wished) to obtain the evidence contained in the PwC Report (which it would hold in an inadmissible form) in an admissible way to use against Mr Macleod.
Noumi did so in circumstances where (as stated at [198] above) it knew the contents of the PwC Report and knew that the information contained in the PwC Report would be probative to ASIC’s regulatory response, if any, against both Noumi and Mr Macleod. The effect of Noumi’s disclosure was to place ASIC in a position where it was armed with information that it did not have at that time, given there was at the time no statutory investigation on foot. Noumi knew that ASIC would be able to consider not only PwC’s findings, but also the underlying evidence leading to those findings. From the uses which it permitted ASIC to make of that information, Noumi knew that ASIC was in a position to identify which witnesses to examine, the topics to be explored with them, the questions to be asked, the answers they would give, the documents to obtain, the relevant documents to show witnesses, the likely evidence that would be given by witnesses and located in documents, and so on.
In my view, this conduct, when viewed in context in light of the surrounding circumstances, was inconsistent with the maintenance of confidentiality in the PwC Report as a privileged communication. In particular, permitting ASIC to use the Disclosed Information in a derivative way as against Mr Macleod in proceedings that could be brought against him was conduct that was inconsistent with the maintenance of confidentiality in the PwC Report as a privileged communication. It does not matter that ASIC could not present the PwC Report as evidence in proceedings or disclose it to any third party, other than in specified circumstances. That is because, in essence, ASIC was placed in a position where (if it so wished) it could seek to elicit any of the relevant evidence in the PwC Report by derivative means. The placing of ASIC in that position was, in my view, conduct that was inconsistent with the maintenance of confidentiality in the PwC Report.
Consistent with authority, Noumi accepted that questions of fairness may inform an analysis and conclusion as to inconsistency. It relied upon the decisions in Cantor and AWB v Cole (No 5) to contend that in cases where a purported waiver is based on disclosure to a third party, the question “unfair or inequitable to whom?” must be asked. It submitted that if the disclosure from A to B is confidential, there must be some inconsistency between A’s act of disclosing to B, and A’s conduct towards C, to give rise to an imputed waiver as against C. It posed the question: what makes the disclosure from A to B unfair to C?
I am satisfied that there was and is a specific unfairness that arises here which informs the conclusion as to inconsistency. The unfairness that arises is that, on the one hand, Noumi has disclosed information to ASIC that it could consider and use in statutory investigations and potential proceedings against Mr Macleod, but, on the other hand, it has maintained confidentiality over that same information as against Mr Macleod. In my view, that gives rise to a specific unfairness.
Noumi submitted that there was no unfairness to Mr Macleod in that, as things have come to pass, proceedings have been commenced against him in which he has had full disclosure of the case he has to meet and the evidence that ASIC is bringing forth in that case. That submission assumes that an inconsistency or nexus must exist between the disclosure and some extant proceedings, or at least some unfairness must be manifested in this regard. Whilst that may have been a prism of analysis in Goldberg and Cantor (leading to different outcomes), it will not always be necessary to point to such a connection or nexus. It may be that, as Young J observed in AWB v Cole (No 5) at [131] an inconsistency informed by unfairness may be easier to point to in the context of inter partes litigation. However, this need not always be the case. Here, the inconsistency arises for the reasons I have set out above.
ASIC contended that no unfairness arises to a former company officer if a company provides information to a regulator to enable it to properly carry out its regulatory functions. This submission misses the point. The issue here is whether there is specific unfairness to the former company officer when such information is provided to the regulator, but withheld from that officer. That issue informs whether the privilege holder has acted inconsistently in the maintenance of confidentiality in the privileged communication.
In coming to this conclusion, I have not accepted Mr Macleod’s submission that Noumi acted for a calculated or forensic purpose. Noumi was seeking to assist ASIC in respect of a matter of serious concern. I do not consider that to be a calculated purpose engaged in for a forensic purpose. Nor do I consider that Noumi was making its disclosure to secure some advantage from ASIC. At the time that the VDA was entered into, ASIC had not commenced any proceedings against Noumi and there is no evidence that any specific assurance or promise was given by ASIC to Noumi.
I also do not consider that it answers the question as to inconsistency that ASIC has not in fact disclosed the PwC Report to Parliament or other third parties. It may also be observed that ASIC did not adduce any evidence that it did not use the Disclosed Information for the purpose of its investigation, the commencement of the proceedings against Mr Macleod, or any step that has been taken in those proceedings. These points do not matter to the outcome of the present case. As Noumi submitted, “it is only an act of the privilege holder that can produce relevant inconsistency”. The relevant question here is whether Noumi’s conduct was inconsistent with the maintenance of confidentiality in the relevant communication.
Both ASIC and Noumi relied upon public policy arguments. Broadly stated, those arguments were to the effect that the “voluntary disclosure regime” under which ASIC accepts confidential information encourages candid disclosure with the regulator, which, in turn, facilitates the administration of justice by allowing relevant information to be brought to the regulator’s attention, with consequent time and cost savings in the investigation and bringing of proceedings. It will be apparent from these reasons that at various times ASIC made reference to a “voluntary disclosure regime”. To the extent that this is a regime, it is not a statutory one. I have no doubt that regulators such as ASIC have good reason to encourage regulated entities to share information, including privileged communications. Whether the sharing of that privileged material will give rise to waiver will be a matter to be determined on a case by case basis. Encouraging candid and voluntary disclosures to regulators may be accepted as a generally sound objective. However, Parliament has not abrogated legal professional privilege. With that in mind, the objective of candid disclosure could have been equally promoted by Noumi disclosing the PwC Report to ASIC without attaching confidentiality to it or seeking to maintain privilege. Having elected to assert privilege and maintain confidentiality, Noumi took the risk that its conduct may give rise to waiver of its privilege.
The underlying assumption of the argument that was advanced is that regulated entities will be less willing to be candid with regulators if sharing privileged communications would lead to a waiver of privilege. Whilst this assumption may reflect the attitudes of some regulated entities on some occasions, I do not accept that it is an assumption that can be uniformly applied to every regulated entity on every occasion. For example, the facts in Komlotex (as recorded at [32], [44] and [94] of that judgment) demonstrate that some regulated entities will waive any privilege attaching to investigation reports without condition. In any event, as was observed in Osland at [50], the inconsistency test “readily accommodates the notion that, in appropriate circumstances, the privilege-holder may disclose the content of legal advice” without waiving privilege. Whether that has occurred will fall to be determined on a case by case basis, and not by application of a rule of automatic application in respect of disclosures to regulators.
I do not regard Rees J in Northern Energy as enunciating a principle giving rise to a category of limited waiver to regulators that could be applied in every case. In other jurisdictions, disclosure of privileged communications to regulators have led to different outcomes. In AWB v Cole (No 5), Young J at [151]-[155] considered the approach that has been taken in the United States to questions of limited waiver in the context of voluntary disclosures of privileged material to regulatory bodies. The position is different in the United Kingdom, Ireland and Hong Kong, as examined by the learned author in Privilege (4th ed, Sweet & Maxwell, 2020) at pp 679-697. Neither the developments in the United States nor other jurisdictions are particularly helpful. The principle of inconsistency as it has been developed and applied in Australian courts is one that does not produce fixed or absolute outcomes in terms of voluntary disclosures of privileged information to regulators.
In light of the above analysis, I am satisfied that Noumi waived privilege in the PwC Report by voluntarily disclosing it to ASIC. This finding also means that privilege has been waived in the documents identified as Documents 2 to 5 and 8 to 14.
D.3.4 The decisions in Cantor, Goldberg, Woollahra, Betfair and Kirby
For completeness, I have addressed the parties’ various submissions which relied upon other cases.
Both ASIC and Noumi placed reliance upon Cantor. Mr Macleod contended that it was distinguishable and, alternatively, wrongly decided. I do not regard the decision in Cantor as analogous. There, the disclosure by Volkswagen to the German regulator did not contemplate that the regulator would use the information outside the limited purpose for which it was disclosed, such as the commencement of proceedings against Volkswagen or third parties. There was also no relevant unfairness to inform the question of inconsistency as there was no correspondence or, as Bromwich J described it, “nexus”, between the parties to the regulatory investigation in Germany and the class action proceedings in Australia. By contrast, in the present proceedings, the disclosure was made to ASIC in the course of an investigation leading to the commencement by ASIC of proceedings against both Noumi and third parties including Mr Macleod.
As to Bromwich J’s reference to the requirement for a “nexus” in [169] of Cantor, his Honour’s reasons need to be read and understood in the context of the arguments advanced in that case as to “unfairness”. His Honour reasoned that, because there was no relevant connection or nexus between the regulatory process in Germany and the class action proceedings before the Court, there was no relevant unfairness to the class action litigants by which to inform the conclusion as to inconsistency. I do not understand his Honour to have been erecting a general test of nexus, and I do not understand his Honour to have been applying a two-step test or giving precedence to a test of unfairness above any question of inconsistency.
Mr Macleod placed considerable reliance on Goldberg. I do not regard the factual circumstances of that decision as being determinative here. In Goldberg, it was found that the disclosure to the Law Society was made for the “calculated purpose” of demonstrating the reliability of Mr Goldberg’s denial of the allegation of failure to account. No such calculated purpose on the part of Noumi can be discerned here. Goldberg was also decided prior to Mann, such that the question of whether the disclosure gave rise to an imputed waiver of privilege was resolved by reference to general considerations of fairness. That is no longer the law.
Noumi placed considerable reliance upon the decision of Giles J in Woollahra. That case is also distinguishable. The critical parts of Giles J’s reasoning at 540D-F were that the “disclosure was confined to the inspectors” and that evidence demonstrated that there had been no greater dissemination than flowed from the fact that inspectors were officers of the Department. Critically, there was no evidence before Giles J that the Council had permitted particular uses of the relevant document by the inspector, only that it was given subject to obligations of confidence. In the present case, Noumi knew and expressly agreed that ASIC could use the information for the purposes specified in the VDA in the context of what it knew to be the prospect of a regulatory investigation and potential proceedings against a third party, Mr Macleod.
Noumi also relied upon Betfair. There the disclosure was found to have occurred for the limited purpose of a consultative process of formulating and finalising the State’s drafting instructions to Parliamentary Counsel under an implicit regime of confidentiality, with no other express authorised purposes. That is different to the position here.
Reference was also made by both parties to the decision in Kirby v Centro Properties Limited (No 2) [2012] FCA 70; (2008) 172 FCR 376. That case is also distinguishable. The documents there under consideration had been produced in a redacted form in answer to compulsory notices issued under s 30 of the ASIC Act, rather than being voluntarily produced pursuant to a disclosure agreement.
The effect of the above analysis is that none of the cases cited by the parties are determinative of the outcome of this case. This is unsurprising given the fact that inconsistency is a question which must always turn on a close analysis of the circumstances and context attending the disclosure in question.
E. WAIVER OF PRIVILEGE BY REASON OF THE ASX RELEASES
Having found that Noumi waived privilege in the PwC Report and associated documents through their voluntary disclosure to ASIC, it is not strictly necessary for me to consider Mr Macleod’s alternative argument that Noumi waived privilege in the PwC Report by way of certain ASX releases. However, for completeness, I deal with that contention here.
E.1 The parties’ submissions
E.1.1 Mr Macleod’s submissions
Mr Macleod submitted that, by various ASX announcements which conveyed parts of the conclusion of the PwC investigation in relation to inventory, Noumi waived privilege over the PwC Report at least as to the extent of that subject matter.
Relying on Citigroup at [140], Mr Macleod submitted that inconsistency of the requisite kind can arise where the privilege holder makes assertions or representations about the nature, character or effect of the contents of the privileged documents, especially where the privilege holder wishes to have others rely on the accuracy of the assertion or representation.
Mr Macleod cited TerraCom as a recent and instructive example. In that case, Stewart J held that there had been implied waiver of privilege in relation to a ‘Project Rex Report’ prepared by PwC in the context of an engagement by TerraCom of Ashurst to act for and advise it on issues relating to allegations of misconduct by a former employee against the company and company personnel. The Project Rex Report was provided to TerraCom on 16 December 2019, and was referred to in an announcement on 12 March 2020, in the following terms: “As previously stated, [TerraCom] took allegations that its CEO and CFO had been involved in a scheme relating to the fake analysis of coal samples seriously and an independent forensic investigation was conducted and found no evidence of wrongdoing”. A statement in those terms was repeated on 3 April 2020. Stewart J found that this constituted a waiver over the report to the extent that it addressed the subject matter of allegations relating to fake analysis of coal samples (at [66]), which conclusion was not challenged on appeal (TerraCom Ltd v ASIC [2022] FCAFC 151).
Mr Macleod submitted that the circumstances are analogous in this case. In June 2020, Noumi announced that it had engaged PwC. In the November 2020 ASX Announcement, Noumi reported that it had commissioned an independent investigation into its financial position, and that the financial year 2020 audit by Deloitte and “a forensic accounting investigation by PwC” identified “a range of accounting matters going back a number of years”. It was also stated that one of the “[k]ey impacts” of the independent investigation was that “$60.1 million in write-downs of out-of-date, unsaleable and obsolete inventory” had been made. Similar statements were made in the FY20 Annual Report, and in the HY21 Financial Report and HY21 Results Release, Noumi referred to the independent investigation conducted by PwC to confirm the write-offs had been made.
Mr Macleod submitted that the reliance by Noumi on findings in the PwC Report by these public statements was inconsistent with the maintenance of any privilege that otherwise attached to that document. It was submitted that Noumi was taking advantage of PwC’s professional status and its independent investigation to deflect criticism of its balance sheet and controls, and that it sought to add force and authenticity to what it told the market by virtue of the fact that independent professionals had agreed to the amount of the write-down. Mr Macleod submitted that Noumi could not rely upon the public statements whilst at the same time maintaining privilege so as to prevent Mr Macleod from testing those statements.
Mr Macleod submitted that the Court should examine the PwC Report to determine whether there had been waiver of it through the ASX releases.
E.1.2 Noumi’s submissions
In response to Mr Macleod’s submissions, Noumi submitted that none of the ASX announcements or company reports cited by Mr Macleod disclosed the conclusions of the PwC Report. It was submitted that the reference in the 30 November 2020 Announcement to an “investigation of the Group’s financial position in June 2020” was the investigation undertaken by Mr Longley and Ms Carney following the departure of Noumi’s CFO.
Noumi further submitted that, even if the disclosures in Noumi’s ASX announcements and company reports could be characterised as references to Ms Michie’s investigation, they would be insufficient to amount to waiver for the following reasons:
(a)First, the composite expressions used to refer collectively to investigations performed by Noumi’s numerous external advisers mean that it could not be said that the substance or content of any privileged communication was disclosed “with specificity and clarity”: Nine Films & Television Pty Ltd v Ninox Television Limited [2005] FCA 356 at [26].
(b)Second, disclosure to the effect that a company has considered advice and taken action based on that advice is not sufficient to amount to waiver: Kirby at [116]; Hanks v Admiralty Resources NL (No 2) [2011] FCA 1464 at [17]-[18].
(c)Third, a statement of belief, even if based on a privileged communication, does not amount to waiver: Switchcorp Pty Ltd v Multiemedia Ltd [2005] VSC 425 at [12.2]; Australian Securities and Investments Commission v Australia and New Zealand Banking Group Ltd (No 2) [2020] FCA 1013 at [31]. To this end, a statement regarding the Board’s satisfaction as to certain generic corporate governance matters, supported by the activities and work of advisers, did not amount to waiver.
(d)Fourth, Noumi’s disclosures to the market regarding the basis for its financial restatements were not disclosures made to secure some advantage in litigation, but rather, were “to satisfy the public that due process had been followed” and that Noumi had “taken a proper course in obtaining and considering advice from appropriate persons”: see Osland at [48] (Gleeson CJ, Gummow, Heydon and Kiefel JJ) and [97] (Kirby J). By contrast, the announcement in TerraCom was an “exculpatory statement” on the subject matter of pending litigation and possible ASIC investigation. Forensic unfairness arose because “ASIC [could not] test whether TerraCom’s statements to shareholders and to the market [were] false or misleading in circumstances where it kn[ew] from the letter to it by EY that there we[re] reasonable grounds to suspect that there was wrongdoing”: at [62]. The position here was different to that in TerraCom.
E.2 Consideration
In oral submissions, counsel for Mr Macleod conceded that the “high point” of the argument as to disclosure through ASX releases was the November 2020 ASX Release. In other words, if waiver through disclosure to the ASX was not established by reference to that document, it would not be established at all. I will therefore confine my analysis of this issue to that document.
The November 2020 ASX Release relevantly provided as follows:
Board investigations and restatement of prior year accounts
In March 2020, the Board initiated an investigation into issues regarding the operation and administration of the company’s equity incentive plan. Separately, the implementation of a warehouse consolidation program led to the identification in May 2020 of out-of-date, unsaleable and obsolete inventory, as reported to the ASX on 29 May 2020 and 25 June 2020.
In June 2020, the Board expanded the investigation to take a broader look at the Group’s financial position and operations with the assistance of external advisors including PwC, Ashurst, Arnold Bloch Leibler and Moelis Australia.
The FY20 audit by Deloitte and a forensic accounting investigation by PwC identified a range of accounting matters going back a number of years.
Most significantly, the reviews determined that most of the costs capitalised during the commissioning phase of the Group’s capital investment program should be more appropriately treated as expenses. These accounting treatments contributed to decisions on new products and expansions that were based on unrealistic assessments of market opportunities and margin assumptions that were not realised. As a result, too many Group products were sold at prices that did not fully recover their costs.
These matters have resulted in a material restatement of the Group’s FY19, FY18 and prior period accounts and material write-downs and adjustments.
The total impact of the adjustments and write-downs for FY20 and prior periods is approximately $590 million.
I accept Mr Macleod’s submission that relevant inconsistency can arise where the privilege holder discloses the gist, substance or conclusion of a privileged communication. However, I am not persuaded this occurred here.
First, having inspected the contents of the PwC Report, I do not consider that the November 2020 ASX Release in fact discloses the conclusions, gist or substance of that Report.
Second, the November 2020 ASX Release refers variously to the investigation into the ESOP Issue, “a broader look at the Group’s financial position and operations” in June 2020, “the FY20 audit by Deloitte” and “a forensic accounting investigation by PwC”. The reference to the ESOP Issue does not relate to the PwC Report. The reference to the broader look at the Group’s financial position does not relate to the contents of the PwC Report and I consider it to be a reference to the “nuts and bolts” accounting investigations led by Ms Carney and Mr Longley which led to the “material restatement of the Group’s FY19, FY18 and prior period accounts and material write-downs and adjustments” referred to later in the ASX release. The reference to the audit conducted by Deloitte does not relate to the PwC Report. This leaves in play the reference to the “forensic accounting investigation by PwC”. I do not consider this to be a reference to Ms Michie’s investigation. The full text is that “The FY20 audit by Deloitte and a forensic accounting investigation by PwC identified a range of accounting matters going back a number of years”. Read in its full context, I consider this to be a reference to the “nuts and bolts” accounting investigations conducted by Ms Carney and Mr Longley. In any event, even if I am wrong about this, I do not consider that the words “identified a range of accounting matters going back a number of years” disclosed the substance, gist or conclusions of the PwC Report.
Third, the November 2020 ASX Release refers to a number of reviews and investigations collectively, and at such a high level of generality such that it cannot be said that the substance or content of any single privileged communication is disclosed with the degree of specificity and clarity required to effect waiver: Ninox at [26].
Fourth, I do not consider the analogy with TerraCom to be apt. In that case, the ASX announcement was found to be an “exculpatory statement” by which TerraCom sought to publicly exonerate the CEO and CFO of wrongdoing in the context of pending litigation and possible investigation by ASIC. Forensic unfairness arose because “ASIC [could not] test whether TerraCom’s statements to shareholders and to the market [were] false or misleading in circumstances where it kn[ew]… that there [were] reasonable grounds to suspect that there was wrongdoing”: at [62]. Here, the relevant parts of the November 2020 ASX Release are more correctly characterised as statements intended to “satisfy the public that due process had been followed” and that Noumi had “taken a proper course in obtaining and considering advice from appropriate persons”: see Osland at [48] (Gleeson CJ, Gummow, Heydon and Kiefel JJ) and [97] (Kirby J). Unlike in TerraCom, where the accuracy of the statements regarding the culpability of the CEO and CFO was in issue, the subject of the November 2020 ASX Release—namely the accuracy of Noumi’s write-downs and restatements—is not in dispute in the substantive proceedings.
In the result, I am not satisfied that Noumi waived privilege in the PwC Report by disclosing the conclusions, gist or substance of that report through the November 2020 ASX Release. As this was expressly said to be the high point of Mr Macleod’s ASX release argument, I need not consider this argument any further.
F. PRIVILEGED COMMUNICATIONS PROTOCOL
The remaining document in dispute is the one entitled “Privileged Communications Protocol”, said to have been “put in place in relation to the Ashurst PwC Engagement” on or around 17 July 2020 (Protocol). The Protocol was referred to by Ms John in an affidavit of 3 October 2023. Mr Macleod issued a notice to produce seeking production of the Protocol on 27 October 2023. That notice was resisted by Noumi on the basis that the Protocol was privileged.
At the hearing, counsel for Mr Macleod invited me to inspect the Protocol to determine whether, on its face, it was created for the dominant purpose of Ashurst providing Noumi with legal advice. Counsel for Mr Macleod stated that he “apprehended that it might be a document… the purpose of which was to obtain immunity from production of other documents”, but that “if it is, in substance, an advice to Noumi, then we accept it’s privileged”.
I have inspected the Protocol and I am satisfied it is privileged. I accept Ms John’s evidence that the Protocol was prepared by her for the dominant purpose of providing legal advice to Noumi regarding the protection of its privilege over documents in the context of the various engagements of PwC. It is not appropriate for me to say anything further about the contents of the document. As Mr Macleod does not make any assertion of waiver in relation to this document, Noumi’s privilege claim in this regard should be upheld.
G. NON-PUBLICATION ORDERS
Noumi sought orders pursuant to s 37AF of the FCA Act that disclosure of certain information contained in evidence and documents that have been filed in these proceedings be prohibited until the conclusion of the Class Action Proceedings which are currently before the Supreme Court of Victoria. Noumi is also a defendant in the Class Action Proceedings, which overlap in terms of subject matter with the present proceedings.
Noumi sought the non-publication orders on the grounds that they are necessary to prevent prejudice to the proper administration of justice, in particular, that they are necessary to preserve the integrity of Orders made by the Supreme Court of Victoria in the Class Action Proceedings and to prevent the administration of justice in those proceedings from being frustrated or undermined.
The material in respect of which the non-publication orders were sought is material which is either:
(a)the subject of a determination by the Supreme Court of Victoria that the information is privileged or should be redacted pending determination of Noumi’s claims for privilege and subject to a confidentiality order prohibiting disclosure to any person other than Noumi, its legal representatives and the Court; or
(b)the subject of a confidentiality order made by the Supreme Court of Victoria under which disclosure is only permitted to certain specified persons or to persons who sign a confidentiality undertaking with Noumi’s consent.
Neither Mr Macleod nor ASIC opposed the making of the non-publication orders sought by Noumi. I also invited each of the parties to the Class Action Proceedings to appear before me in the event that they wished to oppose the making of such orders, however, none took up that opportunity. Though not determinative, I considered these to be relevant factors in support of making the orders: LHRC v Deputy Commissioner of Taxation (No 4) [2015] FCA 70 at [25]; Australian Broadcasting Commission v Parish (1980) 29 ALR 228 at 255.
At the hearing, counsel for Noumi invited me to make the non-publication orders on an interim basis, which I did. Following further correspondence with the parties after the hearing, I was satisfied that the orders should be made on an ongoing basis and did so in chambers on 6 March 2024. I considered that the orders were necessary for the reasons put forward by Noumi, namely that if such orders were not made, the orders of the Supreme Court of Victoria could be circumvented or undermined by the uplift of materials in these proceedings, including by the plaintiffs in the Class Action Proceedings whose access to those materials has been limited by that Court. This would be a direct interference with the administration of justice in the Supreme Court of Victoria and could lead to the destruction of the subject matter of an interlocutory dispute in those proceedings.
In this regard, I note that the power to issue non-publication orders extends to securing the interest of the administration of justice in connection with proceedings other than those before the Court: Cantor v Audi Australia Pty Limited (No 4) [2019] FCA 1633 at [26]-[28] and [36] and the cases there cited.
I was also satisfied that, consistently with s 37AJ(2) of the FCA Act, Noumi sought to ensure that the orders would operate for no longer than is reasonably necessary to achieve the purpose for which they were made, that is, by limiting the effect of the orders until the completion (including by way of appeal) of the Class Action Proceedings.
Finally, as I have already noted, certain paragraphs of these reasons have been redacted so that they conform with the non-publication orders I have made, with an unredacted version of the judgment to be distributed to the parties. For the same reasons as in relation to the materials discussed above, and pursuant to s 37AF of the FCA Act, I will make a further order to suppress the unredacted version of these reasons until the completion (including by way of appeal) of the Class Action Proceedings or until further order of the Court.
H. DISPOSITION
In light of the above reasons, I have concluded that Noumi has established legal professional privilege over all of the Contested Documents, but that it has waived that privilege over 11 of them, being the PwC Report and the documents that are contingent on my finding as to waiver in the PwC Report. I have concluded that Noumi has established privilege over the Protocol document.
Noumi sought declarations to the effect that all 15 of the Contested Documents were privileged, but in light of my conclusions I will give the parties an opportunity to confer about the orders I should make to dispose of the interlocutory application. If the parties are unable to reach an agreement about the orders within 7 days, I will determine that matter after receiving written submissions from the parties and hearing from them if they wish to be heard.
In relation to costs, Noumi has succeeded in establishing privilege over all 15 Contested Documents, but Mr Macleod has succeeded in establishing that privilege in 11 of those Documents has been waived. Again, I will give the parties an opportunity to confer about the appropriate costs orders that I should make. If the parties are unable to reach an agreement about costs within 7 days, I will also determine that matter on the same basis as set out at [255] above.
Accordingly, I will make the following orders:
(a)Within 7 days, the parties are to confer and provide any agreed or competing proposed short minutes of orders:
(i)to give effect to the Court’s reasons for judgment; and
(ii)in relation to the order as to costs that the Court should make;
(b)In the event that the parties cannot agree to proposed orders pursuant to (a), within 14 days, the parties are to file written submissions of no more than 5 pages in support of their respective positions as to the orders the Court should make, including in relation to costs.
(c)Pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth), the unredacted version of these reasons be suppressed until the completion (including by way of appeal) of Proceeding No S ECI 2020 04505 in the Supreme Court of Victoria or until further order of the Court.
I certify that the preceding two hundred and fifty-seven (257) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Shariff. Associate:
Dated: 11 April 2024
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