ASIC proceedings against directors and officers of The Star Entertainment Group

Federal Court finds that executive officers of The Star breached their duties but NEDs did not.

On 5 March 2026, the Federal Court (Lee J) delivered its judgment in ASIC’s landmark case against all of the directors and certain executive officers of The Star Entertainment Group (the Star).[1]

The court found that the former CEO and the former Chief Legal and Risk Officer (“CLRO”, who was also the company secretary) had breached their duty of care and diligence under section 180(1) of the Corporations Act in relation to some but not all of the breaches alleged by ASIC.  

The court also found that the claims against the non-executive directors failed, for the reasons summarised below.

The conduct of the case

There were a number of notable features about the conduct of the case:

• ASIC commenced proceedings against all of the directors of the Star. With one recent exception, this was the first time in over a decade that ASIC had taken action against the entire board of a large listed company.
• The cases against two former executives of the Star were resolved before trial, with agreed penalties imposed.
• ASIC only alleged breaches of the duty of care and diligence under s180(1): ASIC did not allege a breach of the duty of good faith (s181) or a breach of continuous disclosure obligations (s674 or s674A).
• This was not a “stepping stones” case: the company itself was not a defendant and the case did not depend upon establishing an actual or likely regulatory breach by the company that the directors and officers should have taken steps to prevent.
• The non-executive directors did not appear as witnesses, and only the former Chair swore an affidavit. This meant that the court relied primarily on (voluminous) documentary evidence in making its decisions. The court did not draw any adverse inferences against the non-executive directors for choosing not to appear as witnesses and be cross-examined.
• Complex litigation takes time. The proceedings commenced in December 2022 and are incomplete. A further hearing is required to determine the extent of financial penalties and/or disqualification orders to be imposed on the former CEO and CLRO.

Observations about the judgment

No change to the law

The first and most important observation about the decision is that the court applied the law concerning s180(1) as it had been settled and understood, and did not interpret the duty of care and diligence in a manner that imposed additional obligations on directors and officers.

In particular, it remains the case that directors are entitled to rely without verification on the judgment, information and advice of management and that there must be a “red flag” to trigger an obligation to make enquiries into a matter under s180(1): directors must have known, or should have known by the exercise of care and diligence in response to information known to them, of matters that would deny reliance and/or would “have awoken their suspicion that something is amiss”.

The duty of care and diligence imposes an obligation to respond to risks that are reasonably foreseeable, and to act only where the risks outweigh the benefits of a particular course of action, and then only to the extent reasonably practicable. Section 180(1) does not impose a standard of perfection; making a mistake does not in itself demonstrate a lack of due care and diligence.

All of this remains the case.

Outcome dependent on the pleadings

The way in which ASIC pleaded its case determined the success or failure of its claims in many instances. The court found that a number of ASIC’s allegations that a reasonable director with knowledge of certain facts would have taken particular action in response to a foreseeable risk, either overstated the threat to the Star at that time (for example, that its casino licences would be suspended or terminated) or suggested that more drastic action would have been taken than the court thought would have been reasonable (for example, termination of arrangements with junket operators).

Further, the court considered that several of the matters pleaded by ASIC could only have been appreciated with hindsight, and not on the evidence available to the directors at the time.

“It appeared aspects of ASIC’s case may suffer from a degree of hindsight bias. What may have appeared as the most prudent course of action ex post, with the benefit of information and perspective now available, can obscure the proper analysis of past actions.”

And, quoting Kierkegaard:

“Life can only be understood backwards; but it must be lived forwards”[2]

In short, in relation to the non-executive directors,  the information they did have did not trigger a duty to enquire further.

For those reasons, many of the specific claims failed.

Duty to guide and monitor; obligation to enquire

An important principle confirmed by the court is that directors have a fundamental duty to guide and monitor the affairs of the company. Directors cannot be passive.

In fact, the court stated (summarising) that non-executive directors can rely on management without verification except where they know, or should by acting with care have known, facts that would deny reliance. Specifically:

“If facts have come to the director’s attention that have awoken their suspicion that something is amiss, or would have awoken the suspicion of a prudent director, then the director has a duty to enquire into the matter”;[3] and

“What is expected of directors in the context of their reliance on others … is a level of scrutiny as befits supervision, not the detailed direct involvement that is associated with operational responsibility. Where there is no cause for suspicion nor circumstances demanding critical and detailed attention, it is reasonable for an officer to rely on advice, without independently verifying the information or scrutinising the data or circumstances upon which that advice is based.”[4]

The court confirmed existing case law has not yet supplied a universal objective standard of care for a non-executive director because the diversity of corporations and the variety of business endeavours undertaken by them are such that uniform standards are only possible for very general matters.

Role of the chair

The judgment confirms existing judicial statements about the particular elements of the role of the chair. They include that the chair:

(a) has the power and authority to manage board meetings and to that extent may have greater responsibility for the performance of the board as a whole;
(b) has the power, authority and responsibility for setting the agenda items for board meetings, although these may be added to by the agreement of other directors; the chairman can also discharge that responsibility in consultation with the chief executive officer;
(c) has the power, authority and responsibility to ensure that the board has before it sufficient information, whether presented in written or oral form, such as to be able to consider meaningfully, discuss and decide on the agenda items before the board at the relevant meeting taking into account the context of the decision required or consideration necessary by the board at that meeting; this responsibility may be discharged in consultation with the chief executive officer;
(d) has the power, authority and responsibility to manage the board to ensure that sufficient time is allowed for the discussion of complex or contentious matters and for this purpose it may be necessary to arrange meetings outside board meetings so that board members are thoroughly prepared; and
(e) should ensure that the board members work effectively together and that their skill sets and personalities complement each other.[5]

Board papers and minutes

The board papers received by the Star directors for many of the meetings considered by the court were voluminous and provided on short notice. The non-executive directors submitted that they could not reasonably be expected to read them in full. That submission was not accepted.

The court stated that it was up to directors to control the volume and timing of board papers. The court suggested companies should adopt formal policies as to any use of AI by directors to summarise board papers, but not so as to excuse directors from reading papers in full:

“Directors cannot rely upon an inability to cope with the volume of information they receive. In short, 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. … after all, this is the primary way by which directors access the information necessary to make informed, bona fide decisions.”[6]

And in the court’s conclusions:

“There is nothing inherently objectionable in obtaining … assistance [from AI], but what ought not occur is that this development becomes an excuse for a failure to instil discipline in the provision of information to directors or leads to a quiet normalisation of private reliance by them upon computer-generated distillations, unregulated by any agreed policy. … The use of technology may assist comprehension, but it cannot displace judgment. The statutory obligation imposed by s180(1) remains personal, and it requires informed human judgment.”[7]

The court also observed that signed board minutes were of particular significance in the case as a near contemporaneous record of events, as well as being presumed by law to be “evidence of the proceeding, resolution or declaration to which it relates, unless the contrary is proved”.[8]

Findings against the CEO and CLRO

It is not necessary in this Alert to “wade into the detail” (using the court’s expression) of the facts or the findings against the CEO and CLRO.

The nature of the failures to discharge their duty of care and diligence fell into two categories: a failure properly to inform the board of matters concerning material risks to the Star, and a failure to take reasonable action to address risks of which they had become aware.

As noted above, there was no allegation that the CEO or the CLRO had failed to take steps to prevent a regulatory breach by the Star.

The CEO submitted that he should have the protection of the business judgment rule in relation to alleged breaches of s180 relating to junkets, but the court found that the CEO had not made out the requisite elements of the rule. In particular, the CEO had not made a conscious decision in relation to the matter; his evidence was that he did not turn his mind to it, which is not enough to enliven the rule.

The CLRO initially sought to draw a distinction between her duties and responsibilities undertaken in the capacity of Company Secretary, those undertaken in the capacity of Group General Counsel, and those undertaken in the capacity of CLRO, with the suggestion she could operate within discrete spheres of responsibility and that this was relevant to the question of liability under s 180(1). However, based on a decision of the High Court in a case arising from the James Hardie proceedings, the CLRO withdrew that submission and the court found that once a person is an officer, all of their actions in any capacity for the company are subject to the duty of care and diligence under s180(1).  In other words, s180(1) attaches to the performance of all of the CLRO’s duties and responsibilities, and not only those performed in her capacity as Company Secretary.

However, in her role as the company secretary with a direct reporting line to the Chairman, the CLRO’s duty under s180 required her to ‘speak up’ to the Chairman (and Board) because she was aware of matters concerning material risks to the Star. The CLRO did not discharge that duty by making disclosure only to the CEO.

Observations about board culture

Although the court found that the NEDs had not breached their duties on the basis of the case pleaded and evidence led against them, the court nevertheless made some uncomplimentary observations about the culture and functioning of the Star board:

“But one cannot fairly review all that material without a sense of disquiet. It is not a portrait of directors actively pressing management with difficult questions as to whether the business was being conducted ethically, lawfully, and to the highest available standard. The contemporaneous minutes disclose little by way of sustained scrutiny or insistence upon explanation in circumstances where risks were obvious. There is one notable exception, when Mr Sheppard did seek to interrogate the credit evaluation process and underlying commercial arrangements, but this incident stands out because it is exceptional. … This was no ordinary enterprise, and the role demanded vigilance. … The “culture” that prevailed was so dysfunctional and unethical that senior management was tardy in preventing junket operators from behaving inappropriately and lied to its bankers to secure an ongoing commercial advantage.”[9]

But the end result …

That said, the decisions in this case came down to the application of settled law to particular facts and allegations, and on that basis ASIC failed to prove its case against the NEDs.