A second class action has been launched action against Freedom Foods and its auditors Deloitte Touche Tohmatsu. The action is backed by litigation funder Omni Bridgeway and run by Phi Finney McDonald.
The first class action was filed by Slater & Gordon in December 2020. Both have been served in the Victorian Supreme Court.
Phi Finney McDonald’s proceedings allege breaches of the Corporations Act 2001 (Cth), Australian Securities and Investments Commission Act and Australian Consumer Law.
In a statement on the case, Phi Finney McDonald said its claim alleges that since 7 December 2014, Freedom Foods improperly capitalised on certain expenses and failed to write off certain inventory, contravening accounting standards. This resulted in the manufacturer “significantly overstating its financial position and performance in annual and half yearly reports”.
Freedom Foods reported more than $590 million in write-downs and almost $175 million loss for FY20, after the board uncovered internal abuse of its equity incentive plan, inventory write-downs and capital expenses not recorded as such.
The company has since sold its underperforming cereals and snacks business to the Arnott’s Group for $20 million. Majority shareholder Arrovest, owned by the Perich family, has committed to invest $200 million in recapitalisation plans for the business after talks with a potential investor collapsed.