The Australian Securities and Investments Commission (ASIC) has instigated a number of cases against directors and officers Star Entertainment Group Limited (Star) for alleged breaches of their duties under section 180 of the Corporations Act 2001 Cwlth.
Section 180 and Statutory Duties
In ASIC v Hawkins [2025] FCA 121, 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. The case highlights the critical importance of directors’ and officers’ duties in governing foreseeable risks and not being complacent regarding these duties.
ASIC Allegations: Risk Management and Board Oversight Failures
ASIC alleges that accountable Board directors and executives failed to give sufficient focus to money laundering risks inherent in the operation of a casino. ASIC also alleges that Board members did not take necessary steps to make further enquiries in the management of critical risks. The hearing of ASIC’s case against the former CEO, former Chief Legal and Risk Officer, and former non-executive directors is ongoing and additional guidance is likely to arise from those judgements.
Overview of Directors’ and Officers’ Statutory Duties
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.
Findings Against the Former Chief Casino Officer
The former Chief Casino Officer 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 that arranged junkets at the Star Casino, that displayed money-laundering characteristics;
- multiple allegations of possible criminal associations of Suncity (Star’s largest customer since 2017);
- 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
Findings Against the Former Chief Financial Officer
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 National Australia Bank. 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.
Failure to Address Foreseeable Risks
ASIC held these two former officers culpable for failing to actively address and properly manage foreseeable risks. The proceedings are a reminder that it is more important than ever for officers to understand their duties and take appropriate steps to ensure they are met.
In short, directors and officers are exposed to liability if they fail to address a risk that a reasonable person in their position would address. Importantly, it does not have to be shown that loss or damage from the risk eventuated. Part of these obligations include that Directors and Officers keep their Boards properly informed of information known to them that creates or increases a risk that the company may breach its statutory obligations or suffer serious reputational harm.
In this instance there were reports to the Star Board about the activities of Suncity, however the judge found these reports to be “relatively anodyne and incomplete”.
There are a number of approaches to potentially address the highlighted risks.
Adopting a Reasonable Steps Framework
Directors and Officers should consider applying either a purpose-based approach or a proactive flexible, principles-based reasonable steps framework to meet their duties.
A fit-for-purpose Framework
A fit-for-purpose Framework using reasonable steps will feature by example, robust governance arrangements and clarity of individual responsibilities and accountabilities. It is important that this approach is adaptive in nature and not a “tick the box” exercise. The ASIC proceedings identified many triggers which ought to have caused an organisation to take further or different steps to respond to an increase in risk.
Useful Information:
- More about Colin
