When Management Fails the Board: Lessons from ASIC v Bekier

Background

The Federal Court of Australia has delivered its much-awaited liability judgment in ASIC v Bekier [2026] FCA 196. ASIC Chair Joe Longo has described the case as "probably the most significant corporate governance case we have taken in my time at ASIC".*

The Court made serious findings against the former CEO and former General Counsel and Company Secretary of The Star Entertainment Group Limited (Star) but found that ASIC failed to prove any part of its case against the non-executive directors.

Mr Longo described this as a case that ASIC "had to take on" given the widespread community concern over developments at Star at the time the proceedings commenced. ASIC's enforcement philosophy is clear: it will not shy away from difficult cases, particularly where a strong public interest is at stake.

ASIC pursued eleven defendants, being senior management and the entire Star Board, alleging breaches of the duty of care and diligence under section 180 of the Corporations Act 2001 (Cth). The core allegations were that these officers failed to give sufficient focus to the risk of money laundering and criminal infiltration inherent in operating a major casino.

ASIC succeeded in part against the former CEO, and in full against the Chief Legal and Risk Officer, with the Court finding each engaged in serious contraventions of s 180. It also reached a settlement with the former Chief Casino Operator and CFO in February 2025, pursuant to which those officers admitted to breaches of their duties under s 180 by failing to bring certain matters to the Board's attention. They were fined $180,000 and $60,000 and disqualified from managing corporations for 18 months and 9 months, respectively.

ASIC was unsuccessful against the remaining defendants, being the non-executive directors on Star's Board, though the Court was critical of their conduct.

Subject to any appeals, the Court must now determine the penalties for the former CEO and General Counsel.

What the decision means for corporate managers and boards

The decision is a reminder of the high standards of diligence and accountability expected of senior corporate leaders. It also provides important guidance on the interplay between the roles of management and the Board.

While Justice Lee was clear that the law concerning s 180(1) is settled, and that the outcome of this case has not turned on any new statements of law, the decision set out some important propositions on the application of s 180(1) that provide useful guidance on the standards expected of company directors and officers.

The judgment runs to almost 500 pages. Below, we distil the key learnings.

The evaluative exercise under s 180(1) is forward-looking and context-specific

Justice Lee confirmed that an assessment of whether the standard in s 180(1) has been met requires a judgment made in context, having regard to a corporation's specific circumstances, the responsibilities of the offices held, and the information then known by the relevant officers.

This is a critical reminder. A director's past conduct must not be assessed through the lens of what is known today. Justice Lee was critical of ASIC's case on this point, finding it suffered from what Justice Lee termed "hindsight bias".

In particular, directors' conduct cannot be judged by reference to information they did not actually possess. Justice Lee remarked that ASIC ran a cascading pleading that a hypothetical reasonable director would have made further enquiries, uncovered additional information, and then acted on it. The court rejected this as an impermissible expansion of the s 180(1) duty. A director cannot be in breach for failing to take steps premised on information they did not know and were not alleged to have known.

The court applied the same logic to the non-executive directors. ASIC sought to rely on probity information that the directors would have received had they requested it, but Justice Lee dismissed this as logically flawed, stating that "the nature of the information that would have been provided if the directors had made certain requests cannot logically inform the question of whether a reasonable director in their position, exercising due care and diligence, would have made such requests." Directors must be assessed on what they knew or ought reasonably to have known at the time, not on what a post-hoc investigation might reveal.

Balancing foreseeable risk of harm

The judgment reinforces that directors must balance the foreseeable risks of harm to the company against the potential benefits of any course. Drawing on the Full Federal Court's decision in Cassimatis v Australian Securities and Investments Commission [2020] FCAFC 52, Justice Lee confirmed that a company's actual contravention of the law may be relevant to whether a director has met the s 180(1) standard, but it is not an essential ingredient of liability. The real question is whether a reasonable director in the same position would have run the foreseeable risk of harm to the company and its interests.

Critically, the risks relied upon must be actual and reasonably foreseeable at the relevant time, not merely hypothetical or identified with the benefit of hindsight. There is a clear distinction between saying that foreseeable harm may follow if a company breaches a legal obligation, and the harder proposition that a board's decision to pursue a particular course of action itself gives rise to a reasonably foreseeable risk of specified harm. Directors are expected to exercise sound judgement in weighing up risks, but they are not to be held to an unrealistic standard of prescience.

Real engagement by directors

Section 180(1) does not require "omniscience" or perfection from directors. However, real engagement is required of directors, whether executive or non-executive, and directors must act in the context of the corporation's specific circumstances.

Justice Lee remarked that a director of a high-risk enterprise such as a casino must recognise they are operating in a "singularly high-risk context". To be in a position to "guide and monitor the management" of the company, directors must be diligent, interested, and bring an "enquiring mind" to their responsibilities.

The implications extend well beyond casinos. Directors of any entity in a highly regulated or high-risk environment (including financial services, resources, healthcare, critical infrastructure) should take note: the s 180(1) standard will be calibrated to the risk profile of the business they oversee.

The business judgment rule

Justice Lee briefly considered the state of the debate over whether the statutory business judgment rule is a defence that directors must establish, or whether it is a rebuttable presumption in their favour. Justice Lee remarked that the current state of the law, being that the defendant bears the onus of proving the elements of the business judgment rule, is preferable. The issue was not considered further because both parties agreed that the rule operates as a defence that defendants must establish.

Applying the relevant principles to the decision at hand, Justice Lee confirmed that a critical and decisive limitation of the rule is that it can only be relied upon where a director has consciously made a decision such that judgment has been exercised. A director who simply neglected to consider certain matters, with no evidence that they turned their mind to a judgment of those matters has not made a business judgment. While a decision to refrain from doing something may qualify, the director must have actually turned their mind to the matter. Applying these principles, Justice Lee rejected Mr Bekier's reliance on the rule because there was no evidence he made a conscious decision regarding Suncity, and he could not have been appropriately informed given his failure to share material information with the Board.

Reliance on board papers and management: different approaches for executives and non-executive directors

One of the more practically significant aspects of the decision is the contrast between the extent to which executives and non-executive directors were found to be entitled to rely on Board papers and management.

Justice Lee re-stated the general principle that directors are entitled to rely on the judgment, information and advice of management and other officers—except where they know, or should have known, facts that would deny reliance. Non-executive directors in particular are entitled to rely on management to surface issues and risks, unless there is reason to doubt management's honesty, trustworthiness or competence.

Here, the non-executive directors were found to have reasonably relied on management to bring all relevant information and risks about Star's junket relationships to the Board's attention.

Mr Bekier was in a different position. As the most senior member of executive management, he had a direct reporting line to the Board and bore a heightened responsibility to ensure the Board was informed of matters exposing Star to legal, financial or reputational risk. Justice Lee found that, because Mr Bekier possessed information indicating that risks were higher than the Board papers suggested, a reasonable director in his position would have recognised that key information was missing from those papers, alerted the Board to this deficiency and made recommendations accordingly.

This distinction carries an important practical message for CEOs and other executive directors: where an executive knows that the information presented to the board is incomplete or understates the severity of a risk, the duty under s 180(1) requires the executive to ensure that the board receives a complete and accurate picture. A CEO, as the most senior member of executive management with a direct reporting line to the board, will bear a heightened obligation to identify and rectify any such deficiencies.

The position of non-executive directors

Justice Lee restated key principles concerning the duties of non-executive directors as distinct from the duties of executives. Justice Lee was clear that passivity would not satisfy the requirements of s 180(1). Non-executive directorships must not be seen merely as "glittering prizes decorating a CV". Rather, such roles require active engagement, and a willingness to interrogate matters before them and challenge management where necessary.

That said, Justice Lee affirmed earlier authorities which provide that non-executive directors are not required to be involved in a company’s affairs at an operational level. They are entitled to rely on management and other officers to a greater extent than executives, and are not expected to match an executive's operational knowledge.

Equally, reliance on management is not a substitute for personal attention to matters squarely within the board's remit. Justice Lee was critical of the picture that emerged from contemporaneous documents: meeting minutes did not reveal the non-executive directors "actively pressing management with difficult questions" or insisting on explanations where obvious risks existed.

Ultimately, however, Justice Lee accepted that Star's management had failed the Board, and that the Court's role was not to conduct a "freewheeling" inquiry into the Board's overall discharge of its duties. The assessment was confined to ASIC's pleaded case and the evidence before it. On that basis, ASIC was unable to establish that the non-executive directors failed to meet the standard in s 180(1).

For non-executive directors, the decision is both reassuring and cautionary. It is clear that non-executive directors are entitled to rely on management to a greater degree than executives. However, how they engage with board materials and what questions they ask (or do not ask) will be closely scrutinised if their conduct is ever challenged. Non-executive directors must ensure that contemporaneous records show genuine interrogation of management (where necessary) and active engagement with risk.

Lessons for in-house counsel

The decision is of particular significance for in-house lawyers who also serve as company officers.

In finding that Star's in-house counsel breached her duties under s 180(1), Justice Lee made important observations about her position as an officer of Star that occupied the position of Company Secretary and Group General Counsel (before becoming Chief Legal and Risk Officer).

The fact that the Group General Counsel was a solicitor, and indeed the most senior solicitor employed by Star, was relevant to the subjective element of the statutory duty in s 180(1). Justice Lee found that what is required to comply with the duty will vary according to the officer's skills and training, and that an officer in the Group General Counsel's position would have been reasonably expected to recognise that other officers within the company may be relying on her to alert them to legal risks. Justice Lee also described the Group General Counsel as an 'executive' given her position as a member of Star's Executive Committee.

The implications for all in-house lawyers holding officer positions (within the meaning of s 9 of the Corporations Act) are clear. Legal training and experience raise the bar when assessing whether an officer has discharged their s 180(1) duties. In-house counsel who are officers must be alive to the reality that the Board is likely relying on them to identify and escalate legal and regulatory risks, and that failure to do so may constitute a breach of duty.

While in-house counsel who also serve as company secretary will always fall within the definition of officer under s 9 of the Corporations Act, the definition also captures persons who participate in making decisions that affect the whole, or a substantial part, of the business of the corporation. An in-house counsel who does not also hold the company secretary role can therefore still be an "officer" if they satisfy this broader limb. In practice, for most general counsel of large companies, that threshold is likely to be met where they sit on the executive committee, oversee governance, risk and compliance functions, or materially influence strategic decisions, as was the case with Star's Group General Counsel.

Occupying multiple roles is no excuse. Justice Lee rejected the Group General Counsel's attempts to delineate her roles and duties as Company Secretary, Group General Counsel and Chief Legal and Risk Officer, and her contention that she did not report directly to the Board on matters unrelated to her role as Company Secretary. As an officer, the s 180(1) obligation applies across all responsibilities within the corporation, regardless of how those responsibilities are imposed. The Group General Counsel was accountable directly to the Board through the Chairman, and all directors had access to her for advice. The fact that Mr Bekier also knew of matters relevant to the Board did not excuse her failure to disclose them herself. Citing Shafron v Australian Securities and Investments Commission [2012] HCA 18, Justice Lee said Star's Group General Counsel wrongly assumed that the work she did as Company Secretary could not overlap with her other roles.

The Court did, however, draw a line between a duty to advise and a duty to recommend. Justice Lee observed that there is no general obligation on a solicitor to make recommendations to the Board.

The practical takeaway for company officers who are also lawyers that occupy dual roles in a corporation is that, as officers, their obligations under section 180(1) apply across all of their roles – even roles which do not have a direct reporting line to the board. They cannot compartmentalise their responsibilities by reference to the different capacities in which they serve.

Board packs and the use of AI

Justice Lee made notable observations about directors' obligations to engage with board materials, and about the emerging role of artificial intelligence in that process.

In this case, board packs ran to hundreds of pages and were at times provided mere minutes before a meeting. Justice Lee restated the applicable principles: directors must take reasonable steps to place themselves in a position to guide and monitor management, take a diligent and intelligent interest in available information, and apply an inquiring mind. Information overload is not an excuse for disengagement.

Justice Lee posited that AI could legitimately assist directors in addressing the challenge of information overload, but stressed that any such use must be controlled, transparent and subject to formal policies adopted by boards, rather than being used "in the shadows". AI-generated summaries are no substitute for careful reading and interrogation of board materials, and "inadequately deployed or misdirected AI" could increase risk and legal exposure.

Justice Lee acknowledged that many directors are almost certainly already using AI informally to prepare for meetings. There is, Justice Lee observed, genuine potential for AI, if used appropriately, to assist directors in discharging their duties.

For boards and governance professionals, this is a significant judicial signal that the use of AI in board processes is not only permissible but may in some circumstances be advisable, provided it is subject to appropriate governance frameworks. Boards should consider formulating AI use policies that address the use of AI tools in reviewing board materials, though this should be approached with caution and appropriate advisory input.

Separate to the AI issue, the judgment sets out some additional practical takeaways regarding the preparation of board packs:

• Discipline should be exercised when preparing board packs. The temptation to "chuck everything in", in an attempt to insulate the preparers from criticism, should be avoided.
• The Chairperson and Secretary have a critical role in controlling the information the board receives. They must ensure that the board has sufficient information, and that sufficient time is allowed for the consideration and discussion of important matters.
• The manner of presentation of the information provided to the board matters. Critical information must be presented in a manner that will alert the board to its significance. Material should be presented to the Board in a clear manner that distinguishes material issues from routine matters.

Strategic considerations for practitioners

The outcome in these proceedings has exposed a strategic dilemma for ASIC in bringing a civil penalty case against both executives and non-executive directors.

On the one hand, ASIC alleged that the executives failed to inform the Board sufficiently of certain information. On the other hand, ASIC simultaneously alleged that the non-executives failed to recognise that the information provided was inadequate and failed to make necessary enquiries relating to that fact.

As Justice Lee identified, this created a tension in the case as between executives and the non-executive directors. If the non-executive directors are entitled to expect that the executives would discharge their duties properly and report material risks to the Board, and the executives are found to have failed in this responsibility, then ASIC's case against the non-executive directors is diminished, because those directors are reliant on management for the information needed to discharge their own duties.

This conceptual difficulty, combined with the non-executive directors' decision to not give evidence but to require ASIC to prove its pleaded case, proved decisive. The strategy suggests that non-executive directors accused of s 180(1) contraventions alongside executives may benefit from confining ASIC to the documentary record, particularly where the executive is accused of withholding information from the Board and the non-executives were legitimately reliant on management to provide it.

Justice Lee noted that the non-executive directors in these proceedings were vindicated in their decision to not give evidence in the proceedings. A heavy onus remained on ASIC to establish that the pleaded risks to Star were sufficiently foreseeable to require the directors to take the specific steps ASIC alleged they were required to take.

For practitioners advising officers and directors facing regulatory proceedings, the decision reinforces the critical message: hold the regulator to its pleaded case and carefully weigh the forensic risks and benefits of adducing evidence. In the right case, electing not to give evidence may be the strongest defence available.

Other author: Angus Mullins, Lawyer.