In ASIC v Noumi Ltd [2024] FCA 349, Justice Shariff of the Federal Court delivered a landmark judgment challenging the effectiveness of “Voluntary Confidential LPP Disclosure Agreement” (VDAs) VDAs as a mechanism to protect privilege. He found that Noumi had waived privilege in a report prepared by PwC by disclosing the report to ASIC under a VDA. Whilst the decision may be confined to its context, his Honour’s reasoning queries maintaining privilege under a VDA or any other similar arrangement.

Context: ASIC presently has no power to compel the production of privileged material. ASIC receives privileged material under VDAs, on the basis that the disclosure to ASIC amounts to a limited waiver of privilege to assist ASIC in its investigation but does not constitute a broader waiver of privilege.

Background: ASIC had engaged with Noumi in 2020 about issues concerning Noumi’s quantification of inventory. Noumi later provided ASIC with a copy of a PwC investigation report relating to the issues (PwC Report). The PwC Report was provided on a confidential basis pursuant to a standard form VDA. The terms of the VDA were that Noumi sought to maintain privilege over the PwC Report, despite its disclosure to assist ASIC’s investigations.

Proceedings: ASIC commenced proceedings in 2023 against Noumi, its former CEO and its former CFO for alleged contraventions of the Corporations Act 2001 (Cth) associated with disclosure of information about the value of inventories in its financial reports. In the discovery process, Noumi claimed privilege over the PwC Report. Noumi’s former CEO argued that the PwC Report was not privileged, and alternatively, that its voluntary disclosure to ASIC gave rise to an implied waiver of privilege.

The Court held that the PwC Report was privileged. (According to Noumi, the PwC Report was created so that its lawyers could advise it on what to do about the alleged irregularities. While members of the Board wanted the accounting irregularities investigated, this did not mean the Company’s lawyers did not commission the report to give legal advice (about who was culpable). The sharing of the report with ASIC did not negate privilege.)

As to waiver, the Court examined whether Noumi’s conduct was inconsistent with the maintenance of privilege, informed by consideration of fairness. Justice Shariff found that the disclosure to ASIC did constitute a waiver, noting:

• Under the VDA, ASIC could not disclose the PwC report to a third party or use it as evidence but it could use the information within it against directors or officers, and against the company (i.e. to identify issues to be explored, documents to be obtained and witnesses). As such, the purpose of disclosure went beyond the internal considerations of ASIC.
• Permitting ASIC to use the PwC Report in a derivative way against the former CEO in future enforcement proceedings was conduct that was inconsistent with the maintenance of confidentiality in the PwC Report as a privileged communication. ASIC could seek to elicit any of the relevant evidence in the PwC Report by derivative means.
• “Specific unfairness” arose in circumstances where Noumi disclosed the PwC Report to ASIC which it could consider and use against the former CEO but sought to maintain confidentiality over that same information as against the former CEO.
• 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.
• ASIC’s voluntary disclosure regime is not entrenched in statute and the public policy associated with facilitating candid disclosure would not apply to “every regulated entity on every occasion”.

This decision is contrary to earlier cases which have upheld limited waivers as effective in maintaining privilege. Companies cannot ignore this decision. More caution will now be required in relation to considering VDAs and similar arrangements, even if, as Justice Shariff said, “[w]hether the sharing of that privileged material will give rise to waiver will be a matter to be determined on a case by case basis”.