[Australia] Deloitte agrees to pay Noumi shareholders $31m for audit failure
Feb 4, 2025
Deloitte will pay shareholders in ASX-listed food producer Noumi more than $31 million in one of the biggest settlements reached between aggrieved investors and the auditor of the company they are suing.
Noumi and Deloitte were sued by investors who alleged they had lost money because the company’s accounts did not provide “a true and fair view” of its performance between 2014 and 2020, then known as Freedom Foods.
Noumi makes long-life milk and plant-based drinks. In 2020, it revealed more than $590 million in writedowns and said it would be forced to restate several years’ worth of accounts. The new accounts showed Noumi had really recorded a $145.8 million loss in 2019 rather than the $11.6 million profit it first disclosed. It made a $175 million loss in 2020.
Deloitte would pay the lion’s share of a proposed settlement in the class action suit. Dion Georgopoulos
Deloitte, Noumi’s auditor, signed off on both sets of accounts.
The disclosure of the accounting issues led to the departure of a string of executives and the collapse in Noumi’s share price. The company, once valued at almost $2 billion, is now worth just $43 million. In turn, investors filed lawsuits against Noumi and its auditor in late 2020 and 2021.
Noumi and Deloitte will pay $43 million to settle those claims, according to a deed circulated among the aggrieved investors. As part of the proposed settlement, Deloitte has agreed to pay almost three-quarters of the settlement, or $31.4 million. Noumi will pay the balance.
The settlement, if it is approved at an April 17 hearing in the Victorian Supreme Court, would be the largest known local settlement payment made by Deloitte over its auditing work. Deloitte in 2023 settled a claim related to its auditing work at collapsed construction group Hastie for $18.5 million.
The Supreme Court claim against Noumi and Deloitte alleged that the company made inaccurate statements to investors including about its “assets, stock inventory balances, trade receivables and doubtful debts, revenue, trade and other payables, goodwill and employee share scheme”.
Deloitte was also accused of failing to properly audit the company’s books during the seven-year period. The firm’s alleged auditing errors – such as failing to write off quantities of expired or obsolete inventory – led to the company overstating its financial position.
In documents filed with the Supreme Court, however, Deloitte blamed Noumi for providing it with information that was “misleading or deceptive”. In those filings, the firm claimed that “the true state of affairs was other than as presented” by Noumi, and the company “did not provide Deloitte with accurate and complete information and all information that was relevant”.
Deloitte had claimed Noumi’s management had made “significant assumptions” in its internal accounting work that were unreasonable, and told auditors that the “effects of uncorrected misstatements … were immaterial” when they were ultimately material.
The claims against Noumi and Deloitte were led by Slater & Gordon and Phi Finney McDonald. The legal costs have been capped at $9.5 million.
Australian Securities and Investments Commission has also taken civil action in the Federal Court against the company and its former chief executive and former chief financial officer for alleged continuous disclosure failures and breaches of company director and officer duties. Last year, it paid a $5 million penalty.
A Deloitte spokeswoman said the firm had reached a settlement “on this legacy matter”. Noumi declined to comment.
[Financial Review]
