The Star Decision

On 12 December 2022, ASIC commenced civil penalty proceedings in the Federal Court against 11 current and former directors and officers of Star Entertainment Group Ltd (Star) for alleged breaches of their duties under s 180 of the Corporations Act 2001 (Cth) (the Act). ASIC brought claims against:

• all of Star's non-executive directors (NEDs),
• the CEO (Mr Bekier),
• the General Counsel/Company Secretary/Chief Legal and Risk Officer (CLRO), (Ms Martin),
• the Chief Casino Officer (CCO) (Mr Hawkins), and
• the Chief Financial Officer (CFO), Mr Theodore.

The CCO and CFO admitted to breaches of their duties and, on 24 February 2025, the Federal Court penalised them by ordering the former CCO to pay a penalty of $180,000 and disqualified from managing corporations for 18 months, while the former CFO was ordered to pay a $60,000 penalty and was disqualified from managing corporations for nine months.

On 5 March 2026, Justice Lee handed down his judgement in relation to the NEDs, the CEO and the CLRO. The NEDs were found not to have breached their duties, while the CEO and CLRO were found to have breached their duties in a number of instances. The proceeding has now been adjourned for the making of Orders. At the time of writing, it is unknown whether any of the parties will appeal the decision.

This article considers: ASIC's case against the NEDs and then ASIC's case against the two executives, Mr Bekier and Ms Martin. Each section sets out the relevant facts, ASIC's allegations, the Judge's findings and, where relevant, additional observations.

Non-executive directors

Recap of the facts

ASIC brought proceedings against the NEDs based on these sobering facts:

• The Star board was asked to pass two circular resolutions, in November 2017 and February 2018, to approve an increase in Star's credit limit for two junket operators (Mr Qin and Mr Chau/Suncity, respectively). Each had an existing, long-standing relationship with Star.
• ASIC effectively argued that, even though these were circular resolutions regarding credit limits of long-standing customers, the NEDs breached their duties by not treating the decisions as a checkpoint to interrogate whether Star's continued dealings with the junket operators threatened Star's ability to comply with its casino licences and AML obligations.
• In December 2016, the NEDs had been given an independent report (the Horton Report, commissioned by the regulator, ILGA) which found that Star had adequate systems and processes in place to address the various anti-money laundering and counter-terrorism funding (AML/CTF) risks associated with junkets. In 2017, AUSTRAC had conducted a compliance review of Star's casinos, the outcome of which was positive.
• The December 2017 board pack included a paper in relation to Mr Qin, the junket operator. The board paper was provided at the request of one of the directors, after the November 2017 Qin circular resolution was passed. The board paper had appendices, including a World Check Report on Mr Qin. The board pack was 235 pages long, and the relevant board paper did not cross reference or draw the Board's attention to the Qin World Check Report (which included a notation that Mr Qin was reportedly detained in China in December 2012 for alleged involvement in money laundering).
• In May 2018 (after the February 2018 Chau/Suncity circular resolution was passed), KPMG issued reports which identified deficiencies in Star's systems for vetting and monitoring junket operators and junkets funders. However, the NEDs were only given a summary of the KPMG Report, which did not go into these deficiencies, and the board was told there were "management agreed actions" in relation to each of KMPG's recommendations.
• In 2019, the board was given an incomplete picture of money laundering risks in Star's high roller room, Salon 95 – a lengthy board paper included a subtle reference to compliance "concerns". Other documents positively misinformed the NEDs or omitted critical information about these risks.
• ASIC argued that the NEDs breached their duties by failing to identify and interrogate these "red flags" in the information which Star's management had provided to them and failed to make enquiries about money laundering risks.
• A key question was whether the NEDs breached their duty of care and diligence by failing to take reasonable steps to put themselves in a position to guide and monitor the management of Star.

Justice Lee's findings

A complete win in this litigation was always going to be hard for ASIC, because in the same proceedings, ASIC also maintained that the four executives had breached their duties by not providing sufficient information regarding money laundering risks to the board. ASIC chose to include the non-executives in the litigation anyway and test the limits of directors' duties.

Justice Lee acknowledged this tension between ASIC attacking management for not escalating information to the board, and at the same time attacking the NEDs for not acting on AML risks (even though they had not been given all the information).

Ultimately the judge found that the NEDs were not in breach of their duties and that ASIC's case was 'clouded by hindsight'. At the time the circular resolutions were passed it was appropriate for the NEDs to consider the credit-worthiness of the junket operators, without asking for 'fresh' probity information about long standing customers. A reasonable NED would have assumed that the probity risks were still being managed adequately and that management would have expressly raised material issues, if there were any.

Guidance for a further buffer of safety for directors

While the NEDs were exonerated by the Federal Court, Justice Lee took the opportunity to give some advice to directors, which is helpful to bear in mind to have an additional "buffer of safety" around board decisions and oversight.

Don't be passive

A director is required to take reasonable steps to place themselves in a position to guide and monitor a company's management, to take a diligent and intelligent interest in the information available, to understand that information and apply an enquiring mind to their responsibilities. Justice Lee said the standard required is not "perfection" but that it requires more than formal compliance or the passive receipt of information.

For NEDs, this means keeping informed about a company's activities, generally monitoring its affairs and policies, regularly attending board meetings and reviewing financial statements.

Directors should particularly focus on the major risks the company's business faces which would have a high impact if they came to fruition.

Delegation to management is OK, but NEDs must still think critically

recurring issue in the case was to what extent a director can legitimately delegate to and rely on management in their decision making. Justice Lee noted that NEDs are not expected nor required to be involved in a company at an operational level. Provided directors take reasonable steps to put themselves in a position to guide and monitor management, it is generally reasonable to rely on the information and advice of management unless a director knows, or should have known, information that suggests otherwise.

It is important for NEDs to be on the alert, however, for anything that makes them doubt the quality of the information they are receiving from management. If there is any hint of this, it is important to test further by asking questions and seeking additional information.

Encourage management to provide insight, rather than volume, in board papers

Justice Lee flagged a trend of members of management teams effectively abdicating responsibility by a data dump of information in board papers.

Acknowledging that modern board papers have become impractically long and almost "oppressive", Justice Lee emphasised that the volume of material is not an excuse for a director to not be aware of information contained within a pack – directors are expected to take diligent and intelligent interest in all information available to them, even if that information is contained in a pack that is hundreds of pages long.

Instead, it is a board's responsibility to control the information it receives to prevent "information overloads" and ensure it is delivered in a form that can actually be digested. Practically, this means boards should encourage management to distil the insightful, relevant information and cull the rest.

AI may serve a purpose, but NEDs should be critical

Although there was no AI involved in the case, Justice Lee took the opportunity to say that a director needs to read the material personally and not just rely on AI to flag what is of significance in board papers. If directors are using AI in their board roles, Justice Lee considered that this should be under a considered formal board policy, not for example a director using AI "in the shadows" to review their board papers.

Scrutinise and ask questions

Justice Lee gave governance advice that the board should have more actively pressed management with questions, scrutinised processes, and shown greater vigilance. While no breach of law by the Star NEDs was made out, asking more questions, reading materials with greater scrutiny and documenting these processes in the right way are important ways for NEDs to add a further buffer of safety.

Record keeping

To ensure directors are sufficiently protected should an issue arise in the future, it is important that board minutes are accurately and diligently maintained. However, while Justice Lee criticised the lack of detail in Star's minutes and other documentation, ultimately he did not find the directors' actions to be inadequate based on the available information.

The context in which Justice Lee made his comments is also important. In the Star case, the NEDs elected not to give evidence. Justice Lee notes that their choice was 'vindicated' but also notes that the absence of evidence from officers (other than the CEO and CLRO) has meant that he was reliant on the minutes of board meetings, while aspects of what occurred at those board meetings 'remains obscure'.

There continues to be a high level of judgment involved in documenting minutes and other board actions in an appropriate and protective manner. An irony in Star is that the approval of the circular resolutions to increase credit limits would not have been seen as a particularly high-risk decision for directors, other than in terms of the credit assessment, meaning there was no reason to take specific advice on how to document that decision process.

As litigation risk has increased, documentation of decision processes is an area where we recommend specific advice, tailored to the company's business and risk profile, in terms of usual practice, and particularly in circumstances where the board is considering higher risk matters.

General Counsel / Company Secretary / CLRO and CEO

Recap of the facts

Mr Bekier was the CEO. Ms Martin was company secretary for the entire relevant period (June 2011 to May 2022). She became General Counsel in October 2012, and CLRO in August 2019.

ASIC brought proceedings against Mr Bekier and Ms Martin alleging that they were guilty of two categories of breaches:

• First, they failed to draw the Board's attention to a number of pieces of important information concerning risks associated with the junkets operated by Mr Qin and Mr Chau, and
• Second, Ms Martin allowed Star to make misrepresentation to National Australia Bank (NAB) in relation to the use of credit/debit cards by casino customers and Mr Bekier became aware of the alleged misrepresentations, but did not look into them.

In relation to the first category of allegations, the information that Mr Bekier and Ms Martin were alleged to be aware of included:

• The Star casinos needed to meet suitability obligations in order to retain their casino licences. The casinos also needed to meet AML/CTF obligations. There are general risks associated with allowing junkets, and to remain suitable, the casinos need to have adequate systems and processes in place.
• In May 2018, KPMG issued reports, finding that Star's ML/TF risks were 'high' and finding, amongst other things, that there was no documented ML/TF risk assessment or risk assessment methodology in relation to junkets. The Board was only provided with summaries of these reports, which omitted key findings.
• The Suncity junket operated in the high-roller room, Salon 95, at the casino. It became clear that unacceptable activities were occurring in Salon 95, including cash for chips (and vice versa) transactions, withdrawal of cash by non-junket participants, concerns regarding sources of funds, and the presentation of large quantities of cash. In May 2018 an email was sent to the Mr Bekier, the CEO (and later forwarded to Ms Martin, the CLRO) in relation to these activities. New procedures were put in place, warning letters were issued to Suncity, and Ms Martin herself was asked to pay a visit to Salon 95.
• Ms Martin was aware that Suncity may have criminal associations. In June 2019, Ms Martin was sent a copy of the Hong Kong Jockey Club Report which stated that Suncity "clearly involves a number of criminal enterprises". She did not bring this to the Board's attention.
• Mr Bekier and Ms Martin were aware of other overseas contraventions by Suncity, that the Australian Federal Police were interested in Suncity, and of articles published in relation to Crown Casino (alleging that Asian organised crime groups were operating there, and naming Suncity).

In relation to the second category of allegations, NAB had automatic teller machines (ATMs) at the Star casino. China Union Pay (CUP) had communicated the decision that its credit/debit cards must not be used to withdraw money for gambling.

• The settings at the Star casino ATMs allowed clients to withdraw up to $500,000 a day.
• NAB wrote to Star a number of times, telling Star of the prohibition on withdrawing cash for gambling purposes and asking for details of the types of goods and services purchased by CUP customers and supporting documents for the transactions.
• Star's responses to the NAB requests for information were misleading. They stated that Star "operates integrated resorts in Australia, consisting of hotels, restaurants and other entertainment facilities" and also referred to tourism and travel expenses. No reference was made to gambling.
• ASIC alleged that Ms Martin knew the responses were misleading, but did not take any steps to inform NAB of this fact. ASIC alleged that Mr Bekier, having become aware of a NAB warning letter, should have made further inquiries into the issue.

Ms Martin raised a number of defence arguments, including:

• that she only reported to the CEO, and the CEO ought to have informed the Board of the various risks associated with the junkets;
• that she was only an officer in her capacity as a company secretary, not in her capacity as General Counsel/CLRO;
• that she only read emails addressed to her, and did not read emails addressed to others (where she was only copied in); and
• that she did not provide legal advice on the relevant issues, she merely oversaw the operation of the legal team.

Justice Lee's findings

Justice Lee found that both Ms Martin and Mr Bekier had breached their duties under section 180 of the Act by failing to alert the Star Board to the various pieces of information in relation to the risks faced by Star.

In addition, Justice Lee found that Ms Martin breached her duties by not taking steps to correct the misinformation provided to NAB and Mr Bekier, who was aware of a warning letter from NAB, breached his duties by not looking into the matter further and asking for details of all of Star's communications with NAB.

Justice Lee was highly critical of Ms Martin as a witness. He repeatedly rejected her evidence (often calling it implausible or unsustainable) and described her as "unmeritoriously downplaying" information.

James Hardie decision confirmed

Justice Lee confirmed a number of the principles from the James Hardie case, including:

• If one is an officer (for example, a company secretary), then one has an officer's duties in relation to every aspect of your various duties and roles – not just the company secretarial tasks.
• Ms Martin owed her duties to her client, Star, not to an inpidual (the CEO). A reasonable officer would have made sure that the NEDs were aware of the various risks faced by Star arising out of the reports, emails and other information, not waited for the CEO to raise the issues.

Use legal training

Justice Lee found that where an officer has had legal training or possess legal experience or skills, such an officer may reasonably be expected to apply their legal knowledge, training and skills to identify risks that other officers of the company may not necessarily have appreciated, and to recognise that other officers within the company may be relying on them to be aware of legal risks and to guard against the realisation of those risks.

Positive duty to correct

Ms Martin argued that she did not have a duty to write to NAB and inform it of the past misleading information provided to it. Ms Martin argued that it would have been sufficient to terminate Star's relationship with NAB. Justice Lee rejected this argument and stated that a reasonable person in her role would have written to NAB and corrected the misunderstanding.

No 'duty' to make recommendations

ASIC argued that Ms Martin had a duty to stop Star from dealing with the junkets, to suspend Star's dealings with the junkets while further investigations were carried out, or to recommend to the Board that it stop (or suspend) dealings with the junkets. Justice Lee found that a General Counsel/CLRO does not have the delegated authority to make such management decisions and is not expected to make such recommendations. While a General Counsel/CLRO may choose to make recommendations, it is not what would be "expected" of a reasonable officer in that role.

Duty to provide information to the board not limited to the board's request

Ms Martin claimed, in relation to requests by the Board for additional information in relation to the Crown Casino allegations of illegal activities, that her reporting obligations were confined by the terms of the Board's request. Justice Lee described this position as unsustainable and confirmed that Ms Martin had a duty to report all the above matters in relation to junkets and junket operators of which the Board was not aware. In this case, Ms Martin had gone so far as to remove information about Suncity and Mr Chau from the draft of the relevant Board paper which had been prepared by a member of her team.

Justice Lee found that, to the extent Ms Martin was aware of a matter that gave rise to a relevant foreseeable risk, and she knew the matter had not been raised with the Board, a reasonable officer in Ms Martin's position, given the nature of her duties, ought to have spoken up. Relevant to this finding was that Ms Martin had a direct reporting line to the Board through the Chairman.

Company secretaries have a critical role to play

As outlined above, Justice Lee discussed the board's role in relation to information it receives and the fact that board papers have become too long and are often provided too late (in some cases, moments before the day's meetings commenced). However, Justice Lee went beyond the usual point (that Chairmen have a critical role to play) and added that "company secretaries have a critical role in preserving role boundaries with management and promoting proper director engagement". The comment was obiter dicta, but should be noted by company secretaries.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.