Federal Court finds former Australian CEO guilty of breaching duties

The court has ruled that Rory Macleod had violated the Corporations Act 2001 (Cth) in relation to the financial reporting of Australian food and beverage manufacturer Noumi Limited for the year ended 30 June 2019 on a limited basis, and the half-year ended 31 December 2019.

The brand portfolio of Noumi, formerly known as Freedom Foods Group Limited, includes MilkLab, Australia’s Own, Vital Strength, PureNFerrin, Crankt, UProtein, So Natural, and Vitalife.

Administered by ASIC, the Corporations Act, which is Australia’s primary national corporate law, regulates market conduct, fundraising, financial services, and the formation, governance, operation, and winding up of companies.

The court determined that Macleod breached his duties as an officer and director due to a failure to exercise reasonable care and diligence, and additionally found that he failed to take all reasonable measures to ensure Noumi adhered to its financial reporting obligations.

With respect to the 2019 report, the court found Macleod “failed to take reasonable steps … to qualify, withdraw or correct the FY19 Financial Report to mitigate the risks that FFG’s financial statements were inaccurate or misleading”.

He also failed to inform the board of FFG and the ASX of its inaccurate and misleading nature.

Following the incident, Macleod was forced to resign, and Michael Perich was subsequently named chief executive, effective August 2020.

Additionally, in 2024, former CFO Campbell Nicholas received a $100,000 fine and a four-year corporate management ban, with the court finding he was knowingly involved in Noumi’s continuous disclosure violations, failed to fulfil his obligations as an officer, and supplied false or misleading information to the company's directors and auditors.

The case brought by ASIC ultimately focused on how unsaleable inventory was treated and how revenue from lactoferrin sales was recognised before key conditions were satisfied.

The matter centred on the recognition of revenue from lactoferrin invoices, which occurred even though the product had not been delivered and the necessary conditions for such revenue recognition remained unfulfilled.

Regarding the period preceding November 2019, the court dismissed ASIC's claims regarding Noumi's financial report for the year ended 30 June 2019 and its associated inventory representations.

The court turned down ASIC’s continuous disclosure case, along with its case concerning false or misleading information.

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,” she said.

“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.”

The matter will return to court for further case management on 27 August.