The Full Court has published its reasons for overturning a first instance decision that the disclosure of privileged material to ASIC under a Voluntary Disclosure Regime waived privilege.
Key takeaways
This decision likely cements Voluntary Disclosure Agreements into the regulatory landscape. While Voluntary Disclosure Agreements will remain an important tool for regulators, each case will turn on its facts including the terms of the Voluntary Disclosure Agreement. Careful consideration should always be given to their terms prior to the disclosure of privileged material. All disclosures of privileged material to third parties involve risk and this decision does not mean the voluntary disclosure of privileged material to ASIC or any regulator will never amount to waiver.
Background
The decision relates to a continuous disclosure proceeding commenced by ASIC against Noumi Ltd and its CEO (Mr Macleod) and CFO (Mr Nicholas). The proceeding as against each of Noumi and Mr Nicholas has been resolved by consent, including the payment by Noumi of $5 million in penalties. ASIC’s proceeding against Mr Macleod is ongoing.
Prior to this proceeding being commenced, Noumi offered to share with ASIC a privileged investigation report that PwC had prepared (PwC Report), pursuant to a ‘Voluntary Confidential Legal Professional Privilege Disclosure Agreement’ (VDA). As ASIC does not have the power to compel production of privileged material, these agreements have been used as means by which it can accept privileged material on a voluntary and confidential basis. These agreements typically prevent ASIC from disclosing the privileged material as evidence, but allow ASIC to use the privileged document/s in a derivative way to guide the direction of their investigations (for example, by issuing compulsory notices for certain documents or selecting witnesses for compulsory examination).
The VDA in this case provided, amongst other things, that:
- The PwC Report was provided to ASIC by Noumi in confidence and ASIC would treat it as confidential
- ASIC would not disclose the PwC Report, other than confidentially to ASIC’s external advisers or experts, or to a Commonwealth Minister or parliamentary committee
- The provision of the PwC Report to ASIC by Noumi was not a waiver of privilege
- ASIC would not seek to present the PwC Report as evidence in proceedings against Noumi or any third parties, and
- ASIC was permitted to make derivative use of the PwC Report ‘to obtain, and to present as evidence in proceedings against [Noumi] or third parties, material and information obtained as a result of the [Noumi] having provided the [PwC Report] to [ASIC]’.
In ASIC’s proceeding against Noumi, Mr Macleod and Mr Nicholas, Mr Macleod sought production of the PwC Report from ASIC. Mr Macleod claimed that Noumi’s disclosure of it to ASIC was inconsistent with the maintenance of privilege and gave rise to an implied waiver.
First instance: privilege was waived
In April 2024, Shariff J decided that Noumi had acted inconsistently with the maintenance of confidentiality in the PwC Report and that privilege had been waived. Shariff J reasoned that although Noumi disclosed the PwC Report to ASIC for the limited purpose of assisting ASIC to be informed of PwC’s investigation while preserving privilege, it had knowingly ‘armed’ ASIC with information that could be used in a derivative way against Mr Macleod. Shariff J found that Noumi knew the information in the PwC Report would be probative to any investigation or proceedings brought by ASIC against not only Noumi, but also third parties including Mr Macleod.
Full Federal Court: privilege was not waived.
In a unanimous decision, the Full Court of the Federal Court overturned the first instance decision, finding that privilege had not been waived through the disclosure of the PwC Report to ASIC under the VDA.
The Full Court held that Shariff J had erred in finding that Noumi had acted in a way that was inconsistent with the maintenance of confidentiality by permitting ASIC to use the PwC Report in a derivative way against Mr Macleod. Although ASIC was permitted under the VDA to use the PwC Report to identify chains of inquiry or witnesses, the Full Court considered that these investigations themselves would not, without more, amount to the disclosure of the information in the PwC Report.
The Full Court further held that there was no specific unfairness in this case (which informs whether conduct is inconsistent with the maintenance of privilege) because Noumi did not make the disclosure in a calculated way in order to gain a forensic advantage over Mr Macleod. Mr Macleod had previously submitted that Noumi made the disclosure to gain favourable treatment from ASIC and an early admission and plea. However, this was rejected by Shariff J due to a lack of evidence of any assurance or promise being given, a finding not disturbed by the Full Court. The Full Court observed that even if Noumi was seeking an advantage from being transparent with ASIC, this would not create the requisite unfairness because it was not an advantage that Noumi would be gaining over Mr Macleod.
Critically, any information asymmetry between the parties did not amount to unfairness in this case because the disclosure was not made by Noumi to gain a forensic advantage and Mr Macleod was entitled to access all material that might be deployed against him by ASIC via the usual discovery process.
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