Freedom Foods' ghosts continue to haunt dairy and plant-based products business, Noumi, with the company now defending fresh court action initiated by the national financial regulator.
The Australian Securities and Investments Commission is also suing former Freedom Foods managing director, Rory Macleod, and former chief financial officer, Campbell Nicholas, in relation to alleged continuous disclosure breaches.
Freedom Foods was broken up and renamed Noumi in 2022 after significant accounting discrepancies were discovered in mid-2020 sending the company's share price into free fall.
About $60 million in outdated and misreported inventory was written off in 2020 as the company remained in a share trading halt for about nine months while its books were re-examined and previous profit reports revised.
Its corrected accounts recorded writedowns totalling almost $600m.
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ASIC began investigating the big long life beverage processor and owner of the popular Milklab and Australia's Own brand names in July 2020 - specifically its 2018-19 and 2019-20 financial accounts.
The company self-reported its concerns after Mr Macleod abruptly departed on extended leave, never to return, and Mr Nicholas left the business, too.
ASIC confirmed it had now begun civil proceedings in the Federal Court of Australia against the two previous executives and Noumi, alleging the former managing director and CFO misled investors, auditors and directors.
It has sought declarations of contravention, pecuniary penalties, disqualification orders against the two executives and costs to cover its court case expenses.
It alleged the two allowed their company to breach continuous disclosure laws by failing to disclose a significant write-down, leading to an uninformed market, falsely claiming the company's full year and half year reports were accurate.
ASIC has claimed Mr Macleod and Mr Nicholas were involved in Freedom Foods' failures to disclose information to the board of directors and by allowing these failures, they breached their respective duties as a director and officer.
Freedom Foods was subsequently alleged to have failed to disclose material information about the value of inventories in its financial reports for the full year to June 30, 2019 and the following half year.
ASIC deputy chair, Sarah Court, said directors and officers had fundamental responsibilities to ensure their organisations complied with the law.
Eroding confidence
"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," Ms Court said.
She said the regulator was still looking at further potential breaches of company officer and director duties.
"We will continue to take court action seeking penalties and other sanctions in appropriate matters," she said.
The company's share price, which peaked at about $7 in 2018, has been lingering below 15 cents a share for the past month, falling to 13c after ASIC made its court submission.
Noumi, which has been headed up by new managing director, Michael Perich, since August 2020, is also defending a joint class action in the Victorian Supreme Court, accused of breaching the Corporations Act, the Australian Securities and Investments Commission Act, and the Australian Consumer Law Act.
Also in court as part of the class action by investors in relation to the accounting discrepancies is the company's former auditor, Deloittes.
Past payouts
Three weeks ago Noumi ended a claim for costs initiated by cafe supplies business, Sunday Collab International, paying out $400,000.
Sunday Colab argued Mr Macleod had not honoured a promised Milklab distribution contract with the company in Europe in 2019, and wanted $27m in damages.
In late 2021 Freedom Foods also paid about $48m following a court settlement with the Californian almond farmer co-operative Blue Diamond Growers whose brand was packed and marketed in Australia by Freedom.
Blue Diamond claimed outstanding licence fees and breaches of its market contract in Australia.
Noumi, which has processing plants in Sydney and Shepparton, said it would not comment about legal proceedings while they were before the court.
However, the company was complying with its continuous disclosure obligations and reviewing ASIC's claim.
A date for the first case management hearing relating to ASIC's claim is yet to be scheduled by the federal court.
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Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
