Fallen Stars: How far do directors' and officers' duties go?

The hearing of ASIC's case against the former CEO, former Chief Legal and Risk Officer, and former non-executive directors of ASX-listed Star Entertainment Group Ltd recently concluded, with judgment reserved. However, the penalty judgment handed down earlier this year concerning two other former officers of Star in ASIC v Hawkins [2025] FCA 121 is a reminder of the broad scope of directors' and officers' duties. The decision, and the ongoing proceedings, also demonstrates ASIC's preparedness to pursue cases, where it considers it appropriate to do so, against both executive and non-executive directors, as well as senior management.

Directors and officers must not sit on their hands

In ASIC v Hawkins, the Federal Court considered settlement agreements entered into by ASIC and each of the former Chief Casino Officer (CCO) and Chief Financial Officer (CFO) of Star. The CCO and CFO each admitted to breaching their statutory obligations to discharge their duties with the necessary degree of care and diligence.

What duties do directors and officers have?

Directors and officers have various duties to companies. Primary statutory duties include obligations to:

• exercise their powers and discharge their duties with the requisite degree of care and diligence;

• exercise their powers and discharge their duties in good faith in the best interests of the company, and for a proper purpose; and

• not improperly use their position to gain an advantage for themselves or someone else, or cause detriment to the company.

What was the context to the settlement agreement?

ASIC alleged that certain former directors and officers of Star, including the former CCO, knew or should have known that junkets, whose participants were gambling in Star's casinos, were vulnerable to money laundering and exploitation by criminal influences, which increased the risks of Star-related entities failing to comply with regulatory requirements for casinos and/or anti-money laundering obligations. ASIC alleged, in short, that those directors and officers failed to properly mitigate those risks. ASIC's case against the former CFO was slightly different, and centred on his alleged failure to prevent misleading correspondence being sent to Star's principal banker, NAB. As mentioned above, settlement agreements were entered into by the former CCO and former CFO and were approved in ASIC v Hawkins.

What did the former CCO and CFO admit to doing which was wrong?

The unlawful conduct to which each of the CCO and CFO admitted was different. Nevertheless, a common feature of their unlawful conduct was the exposure of Star to breaches of the law (regulatory/civil) and reputational damage.

However, the judgment did not refer to any admission or finding that Star ultimately breached any law. That is, there was no admission or finding that any actual harm was suffered by Star as a result of the CCO's or CFO's conduct. This is because establishment of actual harm is not required to prove a breach of director's duty.

The former CCO admitted to contravening, and was found to have contravened, section 180 of the Corporations Act 2001 (Cth) for failing to act with reasonable care and diligence by exposing the company to harm in failing to take "a number of steps to ensure compliance with regulatory requirements", in summary because:

• he was aware of:

  • multiple suspicious cash transactions by representatives of an organisation (Suncity) that arranged junkets at Star Sydney, that displayed money-laundering characteristics;

  • multiple allegations of possible criminal associations of Suncity (which, by June 2017, was Star's largest customer);

  • Star Sydney's legal obligation to remain a "suitable" person to hold a casino license; and

  • Star Sydney's key obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth);

• he failed, notwithstanding that knowledge, in the period 2018 and 2019 to:

  • terminate all business associations with Suncity and a related individual, Mr Chau;

  • inform the Star Board of information he knew about the conduct of representatives of Suncity; and

  • recommend to the Board that Star terminate its business relationship with Suncity and Mr Chau.

The former CFO admitted to contravening, and was found to have contravened, section 180 of the Corporations Act 2001 (Cth) for failing to act with reasonable care and diligence by failing to prevent Star from sending a misleading communication to its principal banker NAB. The communication to NAB concerned the use of its terminals by China UnionPay debit card holders.

The misleading communication exposed Star to a number of risks, including with regard to its relationship with NAB and the risk of contravening statutory prohibitions on misleading or deceptive conduct.

Were they penalised?

The former CCO and CFO agreed to being fined ($180,000 and $60,000 respectively) and being disqualified from managing corporations (18 months and 9 months respectively). The former CCO also agreed to pay $65,000 towards ASIC's costs.