When duty calls: lessons following the Star decision

The judgment, which spanned an impressive 1959 paragraphs, reflected the complexities of this saga. Justice Michael Lee painstakingly set out the reasons for his decision with the precision and theatrical flair that he is known for.

Australian Securities and Investment Commission (ASIC) made claims against 11 people and named four defendants, alleging that each of the defendants contravened their statutory duty under section 180(1) of the Corporations Act 2001 (Cth) (Corporations Act).

Section 180(1) of the Corporations Act provides that a “a director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they:

a) were a director or officer of a corporation in the corporation’s circumstances; and

b) occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.”

ASIC alleged that the former Chief Executive Officer (CEO) and the former Chief Legal Risk Officer (CLRO) failed to adequately address the money laundering risks that arose from Star’s dealing with the foreign gambling junket ‘Suncity’ and its funder, and they continued to deal with them despite being alerted to reports of criminal connections.

Part of ASIC’s case was that the former CEO and CLRO failed to act even after becoming aware of possible suspicious activity, including money laundering and other possible criminal activity, occurring.

ASIC also alleged the CLRO, Paula Martin, allowed ‘misleading statements’ to be provided by Star to NAB over the usage of debit cards issued by China Union Pay International Ltd (CUP) at NAB ATMs situated on Star’s premises. The statements masked the fact that Star had allowed the cards to be used to withdraw money for gambling even though that was banned by CUP.

Justice Lee found the former CEO breached his duties by failing to deal with a KPMG report that detected deficiencies or flaws in Star’s procedure for managing Anti-Money Laundering/Counter Terrorism Financing risk. His Honour also found the former CEO failed to adequately manage the risks flowing from the gambling junket in an “exclusive gaming room” provided by Star to Suncity even after it became cognisant of allegations in the media regarding Suncity and Crown.

His Honour noted that “Directors are remunerated, sometimes handsomely, to do their job, which requires real engagement with information provided to them. A director, whether executive or non-executive, is required to take reasonable steps to place themselves in a position to guide and monitor the management of the company and is expected to take a diligent and intelligent interest in the information available to them, understand that information, and apply an enquiring mind to their responsibilities.”

He continued, “Non-executive directorships of public companies, particularly those conducting high-risk enterprises, are not just tokens or glittering prizes decorating a CV; the job requires intelligent people prepared to engage actively”.

Dr Pamela Hanrahan, Consultant at Johnson Winter Slattery, one of Australia’s eminent experts in corporate law and governance and a former Regional Commissioner of ASIC, acknowledges that it was an important proceeding for ASIC to commence. “[I]t’s the first time really, since the Centro decision, … where they’ve brought proceedings against the whole board including the non-executive directors and the senior management team.”

She explains that the significance of the decision is that it verified the “orthodox view of the nature of the statutory duty of care and the burden that ASIC would have to satisfy in order to succeed in the action.”

The decision confirms that it is the responsibility of the board as a whole to ensure it has the information it requires to discharge its responsibilities. “[T]hat’s an important takeaway for directors … you have to actively manage the information flow that’s coming to you from the management team.

“I think that’s an important development. In terms of the executive responsibility … [Justice Lee] was prepared to distinguish between failures of management and failures of oversight,” she explains.

Hanrahan acknowledges the statement of principle contained in the statute is straightforward, “everybody has to act with reasonable care and diligence … [T]he point that Justice Lee makes really strongly is its application is always contextual.

“So, what’s reasonable to expect a person to have done depends entirely on the context and is specific to each individual person in each different situation and the fact that some people at Star had an executive role and some … had a non-executive role means that the context in which the general standard applies is different.

“So the standard is the same, but the context is different.”

As for whether the outcome of this decision will affect the advice she gives her clients, Hanrahan says it probably won’t alter “the advice that I would give a non-executive director about their duty of care. I think it is consistent with the existing jurisprudence. …

“[M]y big takeaway for my clients has been, let’s go back and make sure that you’re really satisfied with the information flows and what you’re getting from management,” she says.

Hanrahan points out it was clear from the decision that the culture at Star was “dysfunctional” and “unethical,” that allowed organised crime and money laundering to subvert the casino. The matter has impacted everyone who was involved, including those who were found not to have breached their statutory duty of care. “[T]his case began in 2022, and it concerns decisions that were made or not made in 2017.

“There’s a lot of personal cost associated with that,” she says.

When it comes to good governance practices, Ivana Kovacevic, multi-award-winning group general counsel, non-executive director and Chair, stresses that it is important to have good governance in place. “Good governance isn’t passive oversight – instead, it’s visible and constructive challenge.

“Strong boards probe and interrogate management constructively, escalate risks early and ensure that the minutes tell that story.”

She cautions that while decisions may be “collective”, liability is personal. “[D]irectors need a clear record of how they actively exercised care and judgment, rather than just going along with the room,” she says.

When it comes to the different legal obligations between directors and ‘shadow directors,’ Kovacevic points out that if a person is influencing decisions, irrespective of whether they are an officially appointed director or not, the law will likely treat you equally. “While the title might differ … the legal obligations and the liability do not. Be aware that if you are shaping outcomes, you are likely carrying the same duties and the same personal risk,” she says.

The use of technology and artificial intelligence has been a hot topic in recent years. What was particularly interesting about this decision was the observation made by Justice Lee in relation to the use of artificial intelligence to summarise material. As his Honour noted in the judgment, “The use of technology may assist comprehension, but it cannot displace judgment. The statutory obligation imposed by s 180(1) remains personal, and it requires informed human judgment.”

Hanrahan says boards and companies “can and should” incorporate technology to improve their oversight of what is happening in the company. “I think you can use AI to help with the comprehensibility of material that you’re getting … ask it to extract key points or reorder material … just to help you as you read all of that material to get a different perspective on what’s important…,” she says.

However, she cautions that AI is not a replacement for reading the material yourself. She acknowledges there are benefits to using AI, such as exploring various situations, generating different issues from different viewpoints, or assisting the board to focus on matters that they haven’t focused on before, however, its use is subject to three important caveats. “The first is, you have to be confident about the security and the confidentiality and the appropriateness of using it. Second, you can use it to help comprehensibility, but you can’t use it … to read the Board Papers instead of you …

“And the third, … [is] there are applications of AI that can support richer decision making but ultimately the directors have to be individually responsible for making those decisions.”

Kovacevic agrees and says that boards are broadening their involvement with AI from oversight of the company’s AI governance to using it to improve governance practices. She points out that AI can be a useful tool to assist boards by providing “faster insights, handy summaries, access to real life data [and] less information overload, which can free up the board to spend more time on material issues like strategy.”

She cautions that AI is an “amplifier” and not a substitute and boards need to have “clear guardrails; no unofficial use, strong data controls and absolutely clarity that accountability stays human. AI can help to inform human judgment, but it can’t replace it.”

Following the decision, ASIC Chair Joe Longo said, “ASIC pursued this case because of the fundamental questions it raised about trust, governance and accountability at one of Australia’s largest casino operators.

“The Court found that senior executives have a critical responsibility to identify serious risks, ensure those risks are properly managed, and escalate them to the board.”

The final hearing to determine penalty has been listed for 27 May 2026.