In December 2022, ASIC commenced proceedings against 11 current and former directors and officers of The Star Entertainment Group alleging breaches of s180 of the Corporations Act – the duty of care and diligence.
The company itself is not a party to the proceedings. The observations in this article are necessarily general in nature and refer only to the statement of claim filed by ASIC.
General observations
There are three features of these proceedings that are of interest:
- ASIC is proceeding against the entire board as relevantly constituted from time to time. Before the Nuix proceedings, commenced in September 2022, ASIC had not commenced proceedings against the entire board of a large public company for over a decade, and had instead “cherry-picked” individual directors and officers as defendants.
- ASIC has limited its allegations to breaches of s180. ASIC has not, for example, alleged breaches of the duty of good faith (s181) or breaches of the continuous disclosure obligations that apply personally to directors and officers.
- ASIC is not seeking to prove a breach of the law by The Star as a “stepping stone” to proving that directors and officers breached their duty of care and diligence by failing to take adequate steps to avoid the foreseeable risk that the company would breach its own legal obligations. It is noteworthy that in the current pleading, ASIC is for the most part, not going so far as to allege actual contraventions of laws, but instead alleges that the directors’ and officers’ conduct gave rise to a real risk that the company was in breach of such obligations.
Further, there are a number of aspects of the claims against the directors and officers that raise interesting issues for the court and the governance community.
Claims against the non-executive directors (NEDs)
ASIC alleges that the NEDs breached their duty of care and diligence by failing to take very particular actions in view of the information available to them. Views will differ on whether the NEDs were obliged in the circumstances to take those actions in order to discharge their duty.
Claims against the general counsel (GC)
There has been quite a bit of interest from the legal profession in the allegations made against the GC of The Star. The GC was also the company secretary at all relevant times (and was also the chief risk officer for a period). ASIC alleges that the GC had some broad duties and responsibilities by virtue of her GC and company secretary roles, including:
- “taking all reasonable steps necessary to ensure that Star and the companies in the Group complied with their legal obligations”
- “taking all reasonable steps necessary to protect Star from legal risks”
- “taking all reasonable steps necessary to ensure the Board was informed of matters which:
- exposed Star to legal risks; or
- created or increased a risk that Star or the companies in the Group would breach their legal obligations.”
Harm to the community
ASIC alleges that the harm attendant on the contraventions of s180 by the directors and officers was “aggravated” by the fact that the activities of The Star were vulnerable to money-laundering and exploitation by criminal influences, which can cause grave harm to the community generally. It is unclear why ASIC included this claim, and whether ASIC is alleging that the duty of the directors and officers to protect the interests of the company encompasses an obligation to takes steps to prevent harm to the community. If so, that would be a very significant development and would be relevant to claims relating to environmental harm.
