Justice Michael Lee’s decision in the important case against former directors and officers of The Star Entertainment Group Ltd was delivered in the Federal Court in Sydney yesterday. Star’s former chief executive officer Matt Bekier was found to have breached his statutory duty of care and diligence in four of the seven instances pleaded by the Australian Securities and Investments Commission (ASIC). ASIC also made out its three claims against former company secretary and general counsel Paula Martin; it had earlier settled its proceedings against the former chief financial officer Harry Theodore and chief casino officer Greg Hawkins who admitted liability. However, ASIC’s case against the former Chairman and six other non-executive directors failed.
As his Honour explained, the legal principles involved in the case are well-established. Star’s directors and officers had a statutory duty to exercise the degree of care and diligence that a reasonable person occupying their position at Star, in Star’s circumstances at the relevant time, would have exercised in carrying out their functions. For non-executive directors, this includes what Justice John Middleton, in the case against the directors of Centro 15 years ago, described as the “core, irreducible requirement of directors to be involved in the management of the company and to take all reasonable steps to be in a position to guide and monitor” that management.
While the broad principle is clear, the question whether a director has failed to meet that standard is necessarily contextual. It always turns on the facts. A court can only decide whether the specific failure that ASIC has pleaded is established against each defendant by the evidence adduced at trial. ASIC was not able to show that a reasonable non-executive director at Star, knowing what they knew at the relevant time, would have taken the specific actions or measures set out in its pleadings. As his Honour observed, “the Court’s task is not to conduct a general review of corporate governance, but to determine whether ASIC has established the specific contraventions it alleges”. This must be done without the benefit of hindsight.
Despite the outcome, Justice Lee’s decision contains some important lessons for directors. His Honour’s restatement of the broad legal principles, which he describes as “now relatively uncontroversial”, explains the respective roles of the management team and the board and emphasises that failures of management and failures of oversight must be considered separately. He also confirmed that a director is entitled to rely on the “judgment, information and advice of management and other officers, at least except where they know, or by the exercise of ordinary care should have known, facts that would deny reliance”. They are “entitled to rely upon management to bring to their attention any problems or irregularities as to operational issues, unless there is reason to believe that management is not honest, trustworthy or competent”. But directors cannot be passengers. They must actively and diligently carry out their oversight responsibilities based on the information they have.
Information is key. At trial, the non-executive directors argued that the volume of material included in board packs meant it was not realistic to expect directors to read and absorb board materials in full and accord importance to information buried within them. This argument must and did fail.
The second important takeaway for directors is that they must control the information they receive. The information must be in a form “that is both comprehensive and capable of proper digestion”, and the board (through the Chair) must insist on it. A director 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”.
Dealing with the volume of material could include making “principled and transparent use of emergent technology”. But technology “may assist comprehension, but it cannot displace judgment. That statutory obligation imposed by s 180(1) remains personal, and it requires informed human judgment.”
As Justice Lee noted in his concluding remarks, s 180(1) does not demand omniscience or impose a standard of perfection. The case was “not some freewheeling inquiry into the board’s discharge of its duties”, but he observed that the evidence did not paint “a portrait of [a board] actively pressing management with difficult questions as to whether the business was being conducted ethically, lawfully and to the highest standards”.
The norms and behaviours of directors are shaped by three things: their legal duties, their ethical responsibilities and their accountability to stakeholders. While ASIC may have failed to meet the heavy persuasive onus to establish its case against the non-executive directors of Star, a culture that 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” was left clearly on display.
Australian Securities and Investments Commission v Bekier [2026] FCA 196.