Defence shipbuilder Austal faces legal action by the corporate regulator challenging claims of privilege over documents sought as part of a probe into disclosures linked to cost overruns on the company’s $4 billion US Navy ship-building program.
The Australian Securities and Investments Commission filed an application in the Federal Court last week against Perth-based Austal and Ernst & Young, seeking an order that the material is not shielded by legal professional privilege as claimed.
The documents were sought by the watchdog in notices to produce issued to Ernst & Young in February and April as part of its investigation, revealed by Austal in January. The privilege is claimed by the shipbuilder, according to ASIC.
Austal said in a statement to ASX on January 24 that the company was being investigated by ASIC over market announcements relating to earnings from its Littoral Combat Ship program, a program to build 11 combat ships for the US Navy.
The company went into a trading halt on June 30, 2016 and announced to the market several days later a $156 million write-back of work in progress. The company said a contractual requirement to meet the US military shock standard and US naval vessel rules had caused a “significantly higher level of modifications to the ship design and cost than previously estimated”.
Austal said in its January announcement that ASIC’s investigation also related to market updates in December 2015, when it warned investors of “margin pressure” on the program.
“Austal is fully cooperating with ASIC so that its investigation may be completed as soon as is reasonably possible,” the company said.
Austal also revealed its US division was assisting US regulators with separate but related open investigations into the program. The company declined to comment on ASIC’s Federal Court action on Monday.
Ernst & Young did not respond to a request for comment.
ASIC is represented by MinterEllison.
The case is Australian Securities and Investments Commission v Austal Limited & Anor.