Aussie business could face $46m in fines

The Australian Securities and Investments Commission (ASIC) revealed it had launched civil proceedings in the Federal Court against Noumi – formerly known as Freedom Foods Group – which manufactures plant-based drinks and UHT milk.

The action also includes former managing director and CEO Rory Macleod and former CFO Campbell Nicholas who have alleged disclosure failures and alleged breaches of company director and officer duties.

Noumi, which at the time was the name behind brands such as kids snacks Messy Monkeys and almond drink Milk Lab, was on the brink of collapsing in 2020 after it was suspended from the ASX for nine months.

It was forced to reveal $590 million in writedowns – where the value of stocks or good is reduced – while the company’s accounts went from an $11.6 million profit in 2019 to a $145.8 million loss. It also revealed a near $175 million loss for the 2020 financial year.

Noumi was restructured and its Freedom Food business was sold to Arnott’s, while the brand now manufactures and sells a range of dairy and plant-based beverages and nutritional products including brands like Milklab, Australia’s Own, So Natural and Vitalife.

According to ASIC, Freedom Foods is alleged to have failed to disclose material information about the value of inventories in its financial reports for the full year ending 30 June 2019 and the half year ending 31 December 2019.

It is also alleged to have failed to disclose material information about its sales revenue, gross profit and profit after tax in its financial report for the half year ending 31 December 2019.

ASIC alleges that Mr Macleod and Mr Nicholas were involved in Freedom Foods’ failures to disclose this information and that by allowing these failures, they breached their duties as a director and officer.

The corporate regulator also alleges that Mr Macleod gave false or misleading information to directors, auditors and shareholders of Freedom Foods, as well as the ASX, by representing that the full year and half year reports were accurate.

ASIC deputy chair Sarah Court said directors and officers have a fundamental responsibility to ensure that their organisations comply with the law.

“However, in this case ASIC alleges Freedom Foods’ former CEO and CFO misled investors, auditors and directors, and allowed their company to breach continuous disclosure laws by failing to disclose a significant writedown, leading to an uninformed market,” she said.

Noumi said in a statement that it was reviewing ASIC’s statement of claim

“Given that the matter is before the court, Noumi will not be providing commentary in relation to the progress of these proceedings but will continue to comply with its continuous disclosure obligations,” the company said.

Earlier this month, Noumi settled a legal dispute with a company linked to champion surfer Joel Parkinson and former Gold Coast Titans boss Michael Searle.

The pair had sought damages worth $26 million over a failed distribution deal for 14 countries for its popular Milklab products via their Sunday Collab outfit – but the matter was settled for $400,000.

It also settled a case in February when Californian supplier Blue Diamond sued for breach of contract, with Noumi agreeing to pay $50 million.

Ms Court said that combating governance failures is a key priority for ASIC.

“When directors and officers fail in their obligations, as we allege in this case, they not only cause harm to investors by denying them the information they are entitled to, they also erode confidence in Australia’s financial markets,” she said.

“ASIC is continuing its focus on potential breaches of company officer and director duties, and we will continue to take court action seeking penalties and other sanctions in appropriate matters.”