Court will no longer tolerate "languid, listless indifference of gentleman directors"

“Toleration of the languid, listless indifference of gentleman directors of the Victorian and Edwardian ages is a thing of the past,” according to the Federal Court of Australia, which has found that several senior executives and directors of Star Entertainment Group, including Star’s CEO and Managing Director Matthias Bekier, breached their statutory duties of care and diligence in a landmark case brought by the Australian Securities and Investments Commission.

The proceedings formed part of ASIC’s broader regulatory response to the governance failures that emerged at Star in connection with its historic reliance on international junket operators, including the Macau-based Suncity group. The regulator alleged that members of Star’s executive team and board failed to properly assess and manage foreseeable regulatory and reputational risks associated with those relationships, particularly in light of concerns about money laundering and suitability under state casino legislation.

Justice Lee accepted ASIC’s central case that certain directors and officers did not adequately discharge their oversight responsibilities. The Court emphasised that directors must actively engage with information placed before them and ensure that they remain in a position to guide and monitor the company’s management, particularly where the company operates in a highly regulated industry such as casino gaming.

In assessing liability under s 180(1) of the Corporations Act, the Court applied the well-established objective standard requiring directors to exercise the degree of care and diligence that a reasonable person would exercise if they occupied the same position and had the same responsibilities within the corporation. The judgment also considered the interaction between that duty and the business judgment rule in s 180(2), clarifying that the rule operates as a potential defence rather than a presumption in favour of directors’ decisions. Directors, the Court said, are “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.”

Justice Lee highlighted that directors cannot rely on the complexity of corporate operations or the volume of information provided to them as an excuse for failing to properly engage with governance risks. Boards must maintain control over the information flows they receive and take reasonable steps to understand the matters placed before them. The Court stated that “a board can control the information it receives,” and that “the complexity and volume of information cannot be an excuse for failing to properly read and understand the financial statements.” The Court also observed that while technological tools like AI may assist directors in processing large volumes of material, ultimate responsibility for judgment remains with the human decision-maker.

One of the more striking moments in the evidence involved Mr Bekier’s public remarks defending Star’s continued dealings with the Macau junket operator Suncity despite media reports linking it to organised crime. When asked why Star continued working with the junket, Bekier responded: “Why not?” He also said the company operated “in a very clean and legal way” and that he was comfortable with the compliance processes in place. Justice Lee remarked that the episode demonstrated a degree of “insouciance concerning Star continuing to deal with an alleged crime-associated junket group.”

The judgment further examined the role of Star’s senior legal and governance officers, including Paula Martin, who held the roles of general counsel, company secretary, and later chief legal and risk officer. Justice Lee rejected Ms Martin’s argument that her responsibilities could be divided depending on whether she was acting as company secretary, general counsel, or chief legal and risk officer, holding that it was artificial to treat those responsibilities as separate “capacities” since the work done inevitably overlapped. This latter point will be particularly significant, as it establishes that a general counsel who wears multiple hats cannot limit liability by saying a task was performed in one capacity rather than another.

With liability determined, the Court adjourned the proceeding for a further hearing to determine the appropriate civil penalties and other consequential orders.

Read the decision here.

Professionals involved:

• Dr Ruth Higgins SC of Banco Chambers, James Arnott SC of Sixth Floor Selborne Wentworth Chambers, Stephanie Patterson of Sixth Floor Selborne Wentworth Chambers, Stephen Speirs of Sixth Floor Selborne Wentworth Chambers, and Luca Moretti of Banco Chambers, counsel, and Norton Rose Fulbright, solicitors, for ASIC

• Justin Williams SC of Eleven Wentworth Chambers and Jerome Entwisle of Banco Chambers, counsel, and Gilbert + Tobin, solicitors, for

  Matthias Bekier

• Peter Wood of 5 Selborne and Ben Hancock of Eleven Wentworth Chambers , counsel, and Gadens, solicitors, for Paula Martin

• Matthew Darke SC of Tenth Floor Chambers and Patrick Meagher of Sixth Floor Selborne Wentworth Chambers, counsel, and Gilbert + Tobin, solicitors, for John O’Neill AO

• Michael Henry SC, Zoe Hillman and Leanne Rich, all of Alinea Chambers, counsel, and Arnold Bloch Leibler, solicitors, for Wallace Sheppard, Kathleen Lahey AM, Gerard Bradley AO and Sally Pitkin AO

• Robert Dick SC of Banco Chambers, Alicia Lyons of Sixth Floor Selborne Wentworth Chambers, and Zoe Bush of Banco Chambers, counsel, and Arnold Bloch Leibler, solicitors, for Benjamin Heap and Zlatko Todorcevski