Star Entertainment Group judgment: Implications for directors

On 5 March 2026, the Federal Court handed down its judgment in ASIC’s civil penalty proceedings against certain former board and senior executives of The Star Entertainment Group Limited (Star) for alleged breaches of the statutory duty of care and diligence (section 180 of the Corporations Act) – a landmark decision for governance in Australia. 

The decision highlights the central importance of proactive board oversight of the business and its specific risks, board reporting and information flows and challenge of management.   

Importantly, it reinforces that the board’s role is primarily one of oversight, and is no substitute for management acting with integrity and competency.

In many respects, the judgment confirms that existing legal and governance principles remain sound, and well understood.

The AICD is hosting a webinar with a panel of experts to unpack the judgment and implications for directors on Wednesday 18 March. It is free for members and non-members and you can register here.

Background

ASIC’s proceedings – commenced in December 2022 - represented the first time ASIC has pursued an entire board for an alleged section 180 breach related to non-financial risk management.

For background, see previous articles: ASIC action against Star directors: Implications for boards and Star struck

Overview of decision

The 500-page judgment is lengthy and complex, reflecting the number of defendants, the need for the Court to make a large number of findings of fact, and the complexity of the pleadings. 

Ultimately, based on ASIC’s pleadings and the evidence presented, the Court has found that Star’s former Managing Director & CEO and Chief Legal & Risk Officer & Company Secretary breached their duties under section 180(1) in connection with certain conduct connected to Star’s dealings with junkets and its interactions with its major lender in relation to UnionPay credit cards.

However, ASIC’s case against the non-executive directors was not successful.

The Court’s findings against the former Managing Director & CEO and General Counsel & Company Secretary turned on:

• the nature of the risks known to them;
• their executive roles and functional responsibilities; and
• their failure to respond with the level of vigilance and action that a reasonable person in their position would have exercised.

Notably, the Court found that management failed to apprise the Board sufficiently of certain information it possessed, even when ‘warning signals’ were flashing.

Ultimately, in relation to the Non-Executive Directors, the Court was not satisfied that ASIC proved that their conduct fell below the statutory standard, having regard to their roles, the information available to them, and the way the case was pleaded.

The Court also recognised the risk of hindsight bias – that risks tend to look more likely in hindsight after they have manifested. Justice Lee recognised that judgements of directors must be made in real time and their actions or inactions must be judged by reference to the snapshot of knowledge and perspective available at that time.

The judgment canvasses fundamental legal principles, including in relation to: 

• Scope of the duty of care and diligence under section 180(1) - the Court emphasised that it does not demand a standard of ‘perfectionism’ or ‘omniscience’ from directors and ‘making a mistake does not in itself demonstrate a lack of due care and diligence’. What is required of directors and officers in discharging their duties under section 180(1) is necessarily contextual, to be determined by reference to the organisation’s circumstances, the information which the directors and officers knew or should have known and their positions and responsibilities.
  
  
• Reliance on information and advice - under section 189 of the Corporations Act, a director’s reliance on the information or advice is presumed to be reasonable unless the contrary is proved. The Court reaffirmed that the provision creates a rebuttable statutory presumption as to the reasonableness of a director’s reliance on information or advice if certain conditions are satisfied.
  
  
• Relevance of corporation breaches - the Court touched on the relevance of a company’s breach of law in determining liability for contravention for section 180(1), recognising, in effect, that directors cannot be guarantors of corporate compliance. The fact of a contravention by a company is only a factor to be considered when determining whether a director has met the statutory standard.

Key implications for directors 

The judgment is relevant for all directors notwithstanding the specific pleadings and facts. 

The duty of care and diligence under section 180 of the Corporations Act applies to directors and officers of companies of all sizes and requires them to exercise reasonable care and diligence in the performance of their functions. This involves taking reasonable steps to place themselves in a position to guide and monitor the management of the company.

The judgment underscores fundamental governance principles and is consistent with AICD’s teaching and resources for members.

It recognises both the importance of the distinction between the role of the board and management, as well as the high expectations of oversight.

• Guiding and monitoring: Directors must take reasonable steps to place themselves in a position to guide and monitor the management of the company. What is reasonable will be context specific, including whether the organisation operates in an inherently high-risk sector, but it is critical that directors are familiar with the fundamentals of the organisation’s business and keep informed of its activities. Directors 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.
  
  
• Active oversight of non-financial risk and culture: Directors must understand the risks that their specific organisation faces, engage actively with the substance of the risks and govern non‑financial risk with the same rigour as financial risk. Where red flags or warning signals are apparent, a director has a duty to enquire into the matter. The Court commented on the role of organisational culture and reiterated that statements on culture and values must be more than platitudes.
  
  
• Delegation and reliance: Directors are entitled to rely without verification on the judgement, information and advice of management and other officers, in the absence of good reasons not to do so. Evidence of ‘red flags’ will impact what reasonable reliance looks like. As material risks escalate, so too does the obligation to probe, challenge and verify.
  
  
• Active oversight and challenge of management: Directors are expected to engage actively with the materials put to them, and interrogate, probe and, where necessary, challenge management in relation to the company’s affairs, even if outside their specific expertise. Recording evidence of questioning and challenge in board and committee minutes as the formal record of meetings can assist in demonstrating that directors are exercising sustained scrutiny and insisting upon explanation in circumstances where risks were obvious.
  
  
• Boards must control the information they receive: Ultimately directors are responsible for board reporting and information flows, with Justice Lee commenting that ‘directors cannot rely upon an inability to cope with the volume of information they receive’ and ‘information must be ‘in a form that is both comprehensive and capable of proper digestion’. Directors – particularly the Chair – should take steps to strengthen board reporting processes, including proactively considering what insights the board requires to make informed decisions, and reinforcing an expectation that management promptly escalates and accurately reports material compliance and regulatory risks. AI may assist comprehension, but use must be controlled and formally governed by the board and it must not displace independent judgement and individual diligence.

The AICD is continuing to analyse the judgment and will provide further updates to members over the coming weeks.  

ASIC response to the judgment  

ASIC Chair, Joe Longo, in responding to the judgment said:

‘ASIC pursued this case because of the fundamental questions it raised about trust, governance and accountability at one of Australia’s largest casino operators. 

The Court found that senior executives have a critical responsibility to identify serious risks, ensure those risks are properly managed, and escalate them to the board.

We acknowledge that the Federal Court found the non-executive directors did not breach their duties in this case.

ASIC will always require directors and executives to meet the highest standards of corporate governance because of the crucial role they play in maintaining trust.

Given the length of the judgment, ASIC will carefully consider its implications as these proceedings move to the penalty phase.’

AICD Practice Statement on Directors’ oversight of company compliance obligations

In October 2024, the AICD published a relevant practice statement focusing specifically on a director’s duty of care and diligence in overseeing a company’s regulatory compliance obligations.

The guidance was informed by a legal opinion commissioned by the AICD from barristers Michael Hodge KC and Sonia Tame, clarifying how s 180 applies to regulatory compliance oversight by NEDs.

The practice statement will be updated to incorporate learnings from the Star decision, but remains sound. The statement offers practical steps and examples for directors to monitor and manage compliance risk — including staying alert for ‘red flags’, challenging management appropriately, and requiring regular reporting and board engagement on compliance matters.

Access AICD’s Practice Statement on Directors’ oversight of company compliance obligations here.