In the final chapter of court action regarding the 2020 collapse of Freedom Foods Group, the Federal Court has found former managing director and CEO, Rory Macleod, breached his duties as a director and officer, and failed to take all reasonable steps to secure the company’s compliance with its financial reporting obligations.
Justice Ian Jackman delivered the 395-paragraph judgment on 22 July, following a 12-day hearing across June-July. Penalties, the Australian Securities and Investments Commission (ASIC’s) application to disqualify Macleod, and Macleod’s statutory defences are listed to be dealt with on 27 August.
The finding is the last strand of the civil penalty proceedings ASIC launched against Noumi, Macleod, and former CFO and company secretary Campbell Nicholas in February 2023. Unlike the cases against the company and Nicholas, which were decided on admissions, Macleod contested the allegations, and Justice Jackman said he had considered the matter afresh. Macleod did not give evidence, and ASIC “expressly disclaimed any case of dishonesty” against him.
Findings
The court found Macleod failed to take all reasonable steps to secure compliance with financial reporting requirements in relation to the half-year report for the period ended 31 December 2019, and breached his duty of care and diligence as a director in relation to both that report and, on a narrower basis, the FY19 annual report.
On FY19, the breach was confined to Macleod’s failure, from November 2019, to take reasonable steps to qualify, withdraw or correct the report, and to inform the board and the ASX that it was inaccurate and misleading.
Justice Jackman said he was comfortably satisfied that by 27 February 2020, when the half-year report was released, Macleod had actual knowledge that the disclosed inventories of $122.3 million included at least $20 million of unsaleable stock.
The court also found the company’s disclosed half-year revenue was overstated by at least $9.3 million, and profit by at least $8.5 million, through the inclusion of lactoferrin invoices for unfulfilled purchase orders that were liable to cancellation.
Central to the case was a standing policy, in place from at least early 2018 and referred to in the judgment as the CEO Instructions, under which no stock could be disposed of or written off without Macleod’s authority.
Justice Jackman found Macleod “placed himself in a position of sole responsibility” for writing off unsaleable inventory, knew more than $20 million of recorded inventories could not be sold, and failed to write the stock down in accordance with the company’s own accounting policy.
Where ASIC fell short
It was not a clean sweep for the regulator. The court dismissed ASIC’s case that Macleod gave false or misleading information in relation to the FY19 and half-year reports, its financial reporting case against him on FY19, and most of the FY19 duty of care allegations.
ASIC’s continuous disclosure case also failed. Justice Jackman found that where the parties’ experts held contradictory but plausible views on materiality, and in the absence of direct evidence, he was unable to infer that Macleod knew the inventory and revenue information was material price-sensitive information requiring disclosure to the ASX.
ASIC chair, Sarah Court, said, “Today’s outcome confirms that directors and officers must take reasonable steps to ensure the accuracy of a company’s financial reporting. Accurate financial information is fundamental to maintaining investor confidence and the integrity of Australia’s markets.
“While ASIC was not successful on every aspect of the proceedings, the Court has found significant breaches relating to Noumi’s financial reporting obligations, demonstrating the importance of accurate and reliable information for investors and the market.”
The long tail of the collapse
The proceedings have already cost the company and its former CFO. In August 2024, the Federal Court ordered Noumi to pay a $5 million penalty for breaching its continuous disclosure obligations, with the company admitting breaches on a qualified basis.
In October 2024, the court found Nicholas had been knowingly concerned in the company’s continuous disclosure breaches, breached his duties as an officer, and gave false or misleading information to directors and auditors. He was fined $100,000 and disqualified from managing corporations for four years.
The case against Macleod was delayed by a dispute over legal professional privilege attached to documents Noumi provided to ASIC under a voluntary disclosure agreement, which ran to the Full Federal Court before ASIC and Noumi won on appeal in late 2024.
The scale of the failures at Freedom Foods emerged through 2020. In May that year, Macleod told the ASX to expect $21 million in write-downs. Within a month he was gone, and the write-downs were revised to closer to $60 million, with $10 million in bad debts. By December 2020, the company disclosed $590 million in write-downs and almost $175 million in losses for the year, restating FY19 from an $11.6 million profit to a $145.8 million loss.
The company sold its cereals and snacks business, including the Freedom Foods brand, to Arnott’s and was renamed Noumi in November 2021. It has since settled the consolidated shareholder class action brought against it and its former auditor, Deloitte Touche Tohmatsu.
Macleod joined Freedom Foods as an executive director in 2008, served as CFO, and was appointed managing director and CEO in August 2012.
[Australian Securities and Investments Commission v Noumi Limited (No 7) [2026] FCA 958]
