Pursuant to s 1317E of the Corporations Act 2001 (Cth) (the Act), the third defendant contravened s 180(1) of the Act on two occasions, by failing to discharge his duties to The Star Entertainment Group Ltd (Star) with the degree of care and diligence that a reasonable person would exercise if they were an officer of a corporation in Star's circumstances and occupied the office held by the third defendant and had the same responsibilities, by:
in light of information he knew of the conduct of the representatives of the Suncity junket in the 'Salon 95' private gaming room in the Sydney casino (which conduct created or increased the risk of The Star Sydney Pty Ltd (Star Sydney), The Star Entertainment Qld Ltd (Star Qld) and The Star Entertainment Qld Custodian Pty Ltd (Star Qld Custodian) breaching their statutory obligations to remain suitable persons to hold casino licences (Suitability Obligations) and, in the case of Star Sydney and Star Qld, their obligations as reporting entities under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Obligations)):
giving approval for a new rebate and exclusive access agreement with the Suncity junket when that approval was sought on 13 June 2018 for an agreement that was then entered on 21 June 2018; and
failing to inform the Board of Star at its meeting on 26 July 2018 and at which he was present, the information he knew about the conduct of the representatives of the Suncity junket in the 'Salon 95' private gaming room in the Sydney casino and recommend that Star terminate and have no further business associations with Mr Alvin Chau (Mr Chau) and/or the Suncity junket;
at least the time of the meeting of the Board of Star held on 15 August 2019, in light of allegations that had been published in the media concerning Suncity and Mr Chau and in light of information he then knew about the conduct of Suncity representatives and players in 'Salon 95' (which created or increased the risks of Star Sydney, Star Qld and Star Qld Custodian breaching their Suitability Obligations and, in the case of Star Sydney and Star Qld, AML/CTF Obligations)) failing to:
inform the Board of Star at its meeting on 15 August 2019 and at which he was present, the information he knew about the conduct of the representatives of the Suncity junket in the 'Salon 95' private gaming room in the Sydney casino; and
recommend that Star terminate and have no further business associations with Mr Chau and/or the Suncity junket.
Pursuant to s 1322(4)(a) of the Act, the third defendant's application under s 206G of the Act is not invalid by reason of non-compliance with s 206G(2).
THE COURT ORDERS THAT:
Pursuant to s 206C(1) of the Act, the third defendant be disqualified from managing corporations for a period of 18 months.
The third defendant's application under s 206G of the Act be heard and determined instanter consequent upon order 1.
Pursuant to s 206G of the Act the third defendant have leave to manage Futureview Group Pty Ltd (ACN 132 138 482).
Pursuant to s 1317G of the Act that the third defendant pay to the Commonwealth of Australia within 28 days a pecuniary penalty in the amount of $180,000.
The third defendant contribute to the plaintiff's costs in the amount of $65,000.
The proceeding against the third defendant otherwise be dismissed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
NSD 1082 of 2022
[2]
BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Plaintiff
AND: HARRY JAMES THEODORE
Fourth Defendant
[3]
order made by: STEWART J
DATE OF ORDER: 24 FEBRUARY 2025
[4]
THE COURT DECLARES THAT:
The fourth defendant, in the period between 6 November 2019 and 18 March 2020, contravened s 180(1) of the Corporations Act 2001 (Cth) (the Act) by failing to discharge his duties to The Star Entertainment Group Ltd's (Star) with the degree of care and diligence that a reasonable person would exercise, if they were a officer of a corporation in Star's circumstances and occupied the office held by the fourth defendant and had the same responsibilities, when, in circumstances where China UnionPay (CUP) and National Australia Bank Ltd (NAB) had sought confirmation from Star that CUP's debit cards were not being used at Star's properties to fund gambling, he failed to prevent Star sending to NAB, on 7 November 2019, an email which contained inaccurate, incomplete and misleading representations in respect of that issue.
THE COURT ORDERS THAT:
Pursuant to s 206C(1) of the Act, the fourth defendant be disqualified from managing corporations for a period of 9 months.
Pursuant to s 1317G of the Act, the fourth defendant pay to the Commonwealth of Australia within 28 days a pecuniary penalty in the amount of $60,000.
The proceeding otherwise be dismissed as against the fourth defendant.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(Delivered ex tempore; revised from transcript)
STEWART J:
[5]
Introduction
The Australian Securities and Investments Commission (ASIC) commenced this civil penalty proceeding against 11 members of the executive team and board of The Star Entertainment Group Ltd. The alleged contraventions principally arise from Star's dealings with, and in respect of, junkets. A junket is an arrangement between a casino and a junket operator to facilitate a period of gambling by a group of players. There are also issues with regard to Star's relationship with its principal banker, National Australia Bank Ltd (NAB).
The final hearing of the principal proceedings is currently on before another judge of the Court. Shortly before that hearing, Harry James Theodore (the fourth defendant), and soon after its commencement, Gregory Francis Hawkins (the third defendant), settled the claims against them by reaching agreements with ASIC as to contraventions by them and appropriate penalties. They each, jointly with ASIC, seek the Court's approval of their respective settlements and the making of consent orders. In respect of each of Messrs Hawkins and Theodore, in customary fashion ASIC and the relevant defendant have concluded agreed statements of facts and submitted joint written submissions in support of the approval and the consent orders that they seek. Mr Hawkins and Mr Theodore have each read affidavits. The parties have also presented, by their counsel, oral submissions and I have had the opportunity to raise queries and discuss any issues arising.
The joint written submissions are comprehensive, careful, lengthy and, needless to say, most helpful. I pay tribute to counsel and solicitors for their assistance in that regard. They have made my task easier than what it might otherwise have been. After hearing the parties through their counsel and considering the submissions, the agreed statements of facts, the affidavits and the authorities referred to, I am satisfied to adopt the joint submissions as my reasoning in relation to each of Mr Hawkins and Mr Theodore. No useful purpose would be served in fully canvassing the facts, the law and the application of the law to the facts as the joint submissions do, in these reasons for judgment in those circumstances.
With the consent of the parties, I annex the joint written submissions to these reasons for judgment - those in relation to Mr Hawkins as annexure A and those in respect of Mr Theodore as annexure B. That will enable anyone who wishes to to understand the basis for the state of satisfaction that I have reached with regard to the admitted contraventions by both Mr Hawkins and Mr Theodore and the penalties that they and ASIC have agreed are appropriate. It suffices for present purposes to merely record a high-level summary.
Star was, at all material times, a publicly listed company that conducted a business providing gaming, entertainment and hospitality services. That included operating, through companies of which it was the ultimate holding company, casinos known as The Star Sydney (Sydney Casino), The Star Gold Coast and Treasury Brisbane. The Star Pty Ltd was the holder of a casino licence under the Casino Control Act 1992 (NSW) (CCA NSW) permitting it to operate the Sydney Casino. The Star Entertainment Qld Custodian Pty Ltd and The Star Entertainment Qld Ltd were the holders of casino licences under the Casino Control Act 1982 (Qld) (CCA Qld) permitting them to operate The Star Gold Coast and Treasury Brisbane respectively.
The CCA NSW imposed a regulatory regime governing casinos in NSW requiring that the casino operator and each of its "close associates" be a "suitable person to be concerned in or associated with the management or operation of a casino." The assessment of suitability included whether each of the licensee and its close associates is of "good repute, having regard to character, honesty and integrity" and whether they have "any business association" with any person or entity who is not of good repute having regard to character, honesty and integrity. Similar provisions applied in Queensland under the CCA Qld.
Star was also subject to the regulatory regime directed at combating money-laundering and the financing of terrorism under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act). As casino operators, The Star Sydney Pty Ltd, The Star Entertainment Qld Custodian Pty Ltd and The Star Entertainment Qld Ltd were "reporting entities" under the latter Act as they provided a "designated service", namely "gambling services". As such, they had the "fundamental and foundational" obligation under s 81 to adopt and maintain an anti-money laundering and counter-terrorism financing program and the obligation under s 82 to comply with that program: CEO, AUSTRAC v Westpac Banking Corporation [2020] FCA 1538; 48 ACSR 247 at [135].
Further, pursuant to s 41 of the AML/CTF Act, a reporting entity was required to make reports, known as suspicious matter reports, to the Chief Executive Officer of the Australian Transaction Reports and Analysis Centre (AUSTRAC) of information about certain matters. Those included, for example, if the reporting entity suspected on reasonable grounds that information it had regarding a matter may be relevant to money laundering offences or certain other criminal offences. Also, under Pt 2 of the AML/CTF Act, a reporting entity had various obligations regarding verification of a customer's identity before providing designated services. A reporting entity was required to carry out ongoing due diligence on its customers, with a view to identifying, mitigating and managing the risk it might face that its provision of a designated service might involve or facilitate money laundering.
[6]
Mr Hawkins
Mr Hawkins was employed by Star as the Managing Director of The Star Sydney, being the Sydney Casino and its associated hotels, apartments, restaurants and bars, from September 2014 to January 2019. He was employed by Star as the Chief Casino Officer from January 2019 to September 2020. He was then employed by Star as the Chief Casino Officer (NSW) until 6 May 2022 when he resigned. At all times between September 2014 and 6 May 2022, Mr Hawkins was a member of Star's executive leadership team.
The parties agree, and I am satisfied, that Mr Hawkins was one of Star's "key management personnel" in each of his roles within the meaning of s 9 of the Corporations Act 2001 (Cth) defined by reference to the Australian accounting standards to mean a person having authority and responsibility for planning, directing and controlling the activities of Star, directly or indirectly. Also, at all times between September 2014 and May 2022, Mr Hawkins was a "close associate" of The Star Sydney under the New South Wales legislation.
At all times between September 2014 and 6 May 2022, for the purposes of s 180 of the Corporations Act, Mr Hawkins was an "officer" within the meaning of s 9 of that Act.
As Managing Director of The Star Sydney, Mr Hawkins was the executive responsible for managing a highly significant unit within the business of the group - in the period between 1 July 2016 and 30 June 2019, Star earned between 62% and 70% of its revenue, and generated between 55% and 69% of its EBITDA, from the operations of the Sydney Casino. Further, from March 2018, Mr Hawkins was responsible for Star's International Rebate Business (IRB) which, in FY2018 and FY2019, accounted for 27.6% ($711.5 million) and 23.3% ($586.0 million) of Star's revenue.
Star's IRB business generated its gaming revenue from direct customers and through junkets. In the financial years ending 30 June 2015 to 30 June 2019, a substantial proportion (between around 23% and 27%) of Star's revenue was generated through its relationships with foreign junkets. By June 2017, a junket known as Suncity was Star's largest customer, generating turnover of $2.1 billion for Star in the financial year ended 30 June 2017.
Mr Hawkins was aware of the heightened risk that junkets presented to the integrity of Star's casinos. Those risks arose from junkets being vulnerable to exploitation by criminal influence and by the introduction of an intermediary, the junket operator, between Star and the ultimate gamblers, thereby obscuring the origins of funds and facilitating money-laundering.
Star had a formal business relationship with a particular junket known as Suncity which was associated with Mr Chau Cheok Wa and Mr Alan Iek. Star's turnover from Suncity had increased from $918 million in the 2016 financial year to $2.1 billion in the 2017 financial year. By 30 June 2017, Suncity was Star's largest customer. By 18 April 2018, a VIP gaming room known as "Salon 95" had been set up within the Sydney Casino for Suncity's exclusive use.
In 2018 and 2019, Mr Hawkins became aware of multiple suspicious cash transactions in Salon 95 that displayed money-laundering characteristics, multiple allegations of possible criminal associations of Suncity, Mr Chau having likely been refused a visa to enter Australia due to a significant seizure of cash in a hotel room, the exclusion of six people from the Sydney Casino by the NSW Police likely because of involvement in serious criminal activities, and allegations of links between Suncity and triad societies and organised crime figures.
In that period, Mr Hawkins failed to terminate all business association between Star and Suncity and Mr Chau. Also, Mr Hawkins attended meetings of the board of directors of Star in which relatively anodyne and incomplete reports were made to the board about activities at Salon 95 and of Suncity. Mr Hawkins failed to inform the board about the information that he had concerning what had occurred in Salon 95 and he failed to recommend that Star terminate and have no further business association with Suncity and Mr Chau.
I am satisfied that at the relevant times Mr Hawkins was aware that in order to hold and retain its casino licence, The Star Sydney Pty Ltd had a legal obligation to remain a "suitable" person to hold it under the CCA NSW. Mr Hawkins was also aware of the key obligations of The Star Sydney Pty Ltd under the AML/CTF Act as identified above.
On the basis of what I have summarised above, and as more fully developed in the joint submissions based on the statement of agreed facts, I am satisfied that a reasonable officer in Mr Hawkins' position, acting with due care and diligence, would have taken a number of steps to ensure compliance with the regulatory requirements. Those would have included ensuring that the board was informed of relevant matters. In the circumstances, I am satisfied that Mr Hawkins was in breach of his obligations under s 180(1) of the Corporations Act as an officer of Star.
As explained in the joint submissions, at all relevant times s 180 of the Corporations Act was a "civil penalty provision": see s 1317E(3). Accordingly, under s 1317E(1) the Court "must" make a declaration of contravention. Naturally, being satisfied of the contraventions I am satisfied that I must make declarations in relation to them, including the details required by s 1317E(3).
I am also satisfied, as sought jointly by the parties, that Mr Hawkins should be disqualified under s 206C of the Corporations Act from managing corporations for an appropriate period of time. Having regard to the authorities set out in the joint submissions, I am satisfied that in the case of Mr Hawkins the agreed period of disqualification of 18 months is an appropriate period. I do not see any need to consider the alternative under basis for disqualification under s 206E.
I am also satisfied that an exemption should be made in respect of Futureview Group Pty Ltd under s 206G as agreed by ASIC. Mr Hawkins is a director of that company which is the corporate trustee of a discretionary family trust. Minimal, if any, public risk arises from his continued management of that company. To avoid any procedural issue with the timing of the application of leave to manage Futureview, I am satisfied that it is appropriate to make an order under s 1322(4) of the Corporations Act to the effect that the failure to give ASIC the relevant notice does not invalidate the application, and that the application should be heard immediately. See - ASIC v Blumenthal [2024] FCA 384 at [62]-[64].
Insofar as a pecuniary penalty is concerned, the parties seek a penalty under s 1317G of the Corporations Act that Mr Hawkins pay to the Commonwealth the sum of $180,000. Given the large sums of money involved in the contraventions and Mr Hawkins' substantial earnings from Star as detailed in the joint submissions, at first blush that may not seem like a sufficiently high penalty for the purposes of both general and specific deterrence. However, taking into account Mr Hawkins' admission of having contravened s 180(1), his cooperation with ASIC, the extra-curial detriment that he has suffered as a consequence of his conduct including considerable public scrutiny, the absence of any prior criminal convictions and, significantly, ASIC's acceptance as the relevant regulator that that penalty is appropriate, I am satisfied that it is within the range of appropriate penalties.
I note that Mr Hawkins has agreed to contribute to ASIC's costs in the amount of $65,000, which ASIC has accepted.
I am accordingly satisfied to make the orders that the parties seek by consent.
[7]
Mr Theodore
Mr Theodore was employed by Star as Head of Strategy and Investor Relations from mid-2011 until about February 2016. He was employed by Star as the Head of Strategy, Investor Relations and Treasury from about February 2016 until about October 2018. He was then employed by Star as Chief Commercial Officer until about September 2019. At that time, Mr Theodore was formally appointed as Star's Chief Financial Officer. Mr Theodore was a director of The Star Pty Ltd from 18 October 2019, and of The Star Entertainment Qld Custodian Pty Ltd and The Star Entertainment Qld Ltd from 10 January 2020.
In his roles as Chief Commercial Officer and then CFO, Mr Theodore was a member of Star's executive team. In his role as CFO, he was one of Star's key management personnel. I am satisfied that from at least 1 November 2019, Mr Theodore was an "officer" of Star for the purposes of s 180 of the Corporations Act.
Further, for the purposes of the Gaming and Liquor Administration Act 2007 (NSW), Mr Theodore was a "close associate" of The Star Pty Ltd from 18 October 2019 and thereafter.
NAB was a significant lender to Star and, from around October 2012, NAB provided payment terminals that were located in hotels operated by the Star group that were adjacent to casinos, which could accept cards issued by China UnionPay (CUP).
A large proportion of the funds transacted at the NAB terminals by way of CUP cards was for use by patrons to gamble. In February 2016, CUP made plain to NAB that it considered transactions relating to the purchase of gaming chips were not permitted. NAB conveyed that to Star in 2016 and 2017.
On a number of occasions from 2016 to December 2019, CUP raised inquiries (passed by NAB to Star) about transactions conducted at the NAB terminals, including as to whether they were for gambling. In its responses, Star did not report that a large proportion of the funds was ultimately used for gambling.
In particular, on 7 November 2019, Star sent a response to NAB, after it had been reviewed by Mr Theodore, which conveyed that the funds were used for non-gambling expenses such as hotel accommodation, private jet travel, tourism services, food and wine and jewellery and that none of the funds obtained were used (whether directly or ultimately) to fund the purchase of gaming chips. Those representations were inaccurate, incomplete and misleading, and there was a real chance or possibility that representatives of NAB and/or CUP would be misled by them.
For the reasons more fully developed in the joint submissions, I am satisfied that by failing to prevent Star from sending the 7 November 2019 email to NAB, or from failing to ensure that the email properly and accurately represented what the NAB terminals were used for, Mr Theodore breached his obligations under s 180(1) of the Corporations Act: he failed to discharge his duties to Star with the degree of care and diligence that a reasonable person would exercise if they were a director of a corporation in Star's circumstances and occupied the office held by Mr Theodore and had the same responsibilities. In particular, Mr Theodore was aware of the misleading nature of the email, and the email exposed Star to a number of risks. Those included with regard to its relationship with NAB and that it would contravene statutory prohibitions against misleading and deceptive conduct.
Insofar as relief is concerned, for the same reasons as in relation to Mr Hawkins, I am satisfied that I must make declarations of contravention. I am also satisfied that the agreed disqualification period from the management of corporations of nine months under s 206C of the Corporations Act is appropriate in the circumstances.
The parties have agreed a penalty of $60,000. For the reasons canvassed in the joint submissions, including the mitigatory aspects identified and that the relevant regulator, ASIC, is satisfied with that penalty, I am satisfied that the penalty is within the range of appropriate penalties in the circumstances. I have given consideration to the need for the penalty to be appropriate for both general and specific deterrence. I have also given consideration to the significant adverse personal consequences Mr Theodore has faced as a result of the public scrutiny in various inquiries of the events canvassed above.
For those reasons, as more fully developed in the joint submissions, I am satisfied that I should make the orders that the parties seek by consent.
I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart.
[8]
ANNEXURE A - Joint outline of submissions in respect of the third defendant
[9]
JOINT SUBMISSIONS OF THE PLAINTIFF AND THIRD DEFENDANT ON LIABILITY & RELIEF
[10]
INTRODUCTION
These submissions are made jointly by the plaintiff, the Australian Securities and Investments Commission (ASIC), and the third defendant, Gregory Francis Hawkins (Mr Hawkins).
ASIC and Mr Hawkins seek the following relief:
a declaration pursuant to s 1317E of the Corporations Act 2001 (Cth) (Corporations Act) that the Third Defendant contravened s 180(1) of the Corporations Act in relation to conduct occurring in 2018 and 2019 respectively;
a disqualification order pursuant to s 206C and/or s 206E of the Corporations Act for a period of 18 months;
an order that pursuant to s 206G of the Corporations Act the Third Defendant have leave to manage Futureview Group Pty Limited (ACN 132 138 482);
an order that Mr Hawkins pay a pecuniary penalty pursuant to s 1317G of the Corporations Act in the amount of $180,000; and
an order that Mr Hawkins contribute to the Plaintiff's costs in the proceeding in the amount of $65,000.
The proposed declarations and orders which are sought are annexed to these submissions (Proposed Orders).
ASIC and Mr Hawkins seek this relief based on the Statement of Agreed Facts dated 13 February 2025 (SoAF), which sets out the facts agreed between the parties and admissions made by Mr Hawkins for the purpose of this proceeding as against him, and the anticipated evidence which Mr Hawkins will give by way of affidavit (Hawkins Evidence).
In summary, these submissions cover:
Part B: Factual and Legal Background;
Part C: Section 180(1);
Part D: Mr Hawkins' Contravention of s 180(1);
Part E: Relief;
Part F: Appropriateness of disqualification period and pecuniary penalty; and
Part G: Conclusion.
[11]
FACTUAL AND LEGAL BACKGROUND
The period from 1 November 2016 to 31 March 2020 is defined, in the SoAF, to be the Relevant Period. A summary of the relevant facts (which are set out in more detail in the SoAF) follows.
Star
At all material times, Star Entertainment Group Ltd (Star) was listed on the Australian Securities Exchange and was the ultimate holding company (within the meaning of that term in s 9 of the Corporations Act) of various companies (comprising, the Group), including (SoAF at [3]):
The Star Pty Ltd (Star Sydney);
The Star Entertainment Qld Custodian Pty Ltd (Star Qld Custodian); and
The Star Entertainment QLD Ltd (Star Qld), which, until 3 February 2017, was called Jupiters Limited.
Through the Group, Star conducted a gaming, entertainment and hospitality business. This business, relevantly, included the operation of three casinos known as: The Star Sydney, The Star Gold Coast, and Treasury Brisbane: SoAF at [6(b)]. At all material times, these casinos were operated pursuant to casino licences granted to companies within the Group, pursuant to s 18 of the Casino Control Act 1992 (NSW) (CCA NSW) (in respect of The Star Sydney) and s 18 of the Casino Control Act 1982 (Qld) (CCA Qld) (in respect of The Star Gold Coast and Treasury Brisbane): SoAF at [7].
Star's regulatory environment
The nature of Star's business - the operation of casinos - relevantly resulted in the Group being subjected to regulatory regimes in multiple jurisdictions of two kinds. The first kind of regulatory regime was found in the State-based statutes that governed casinos in NSW and Queensland, being the CCA NSW and the CCA Qld. The second was Commonwealth legislation directed to combatting money laundering and the financing of terrorism: the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act).
The Casino Control Acts in NSW and Queensland
It was a necessary condition of Star carrying on its core business of operating casinos that it, or companies within the Group, continued to hold appropriate licences that permitted the Group to operate its casinos. Compliance with the statutory regimes that regulated casinos in NSW and Queensland was therefore critical to Star's viability. Key features of those statutory regimes - particularly as regards the requirements for holding casino licences - are outlined below.
The Casino Control Act 1992 (NSW)
Three core features of the CCA NSW have remained unchanged between the enactment of that legislation up to and including the Relevant Period.
First, one of the principal objects of the CCA NSW is to ensure "that the management and operation of a casino remain free from criminal influence or exploitation". When first enacted, that principle was enshrined in the CCA NSW by being specified as one of the objectives of the Authority, in s 140. Then, the Authority was, as defined in s 3(1), the Casino Control Authority. Throughout the Relevant Period (as a result of the enactment of the Miscellaneous Acts (Casino, Liquor and Gaming) Amendment Act 2007), the Authority was, as defined in s 3(1), the Independent Liquor and Gaming Authority (ILGA).
Following the amendment of the CCA NSW by the Casino Control Amendment Act 2001 (NSW), an objects clause was introduced, in s 4A. Section 4A(1) provided that the primary objects of the CCA NSW were:
ensuring that the management and operation of a casino remain free from criminal influence or exploitation;
ensuring that gaming in a casino is conducted honestly; and
containing and controlling the potential of a casino to cause harm to the public interest and to individuals and families.
Section 4A(2) provided that all persons having functions under the CCA NSW were required to have "due regard" to the objects specified in s 4A(1) when exercising those functions.
Secondly, the holder of a casino licence, and its "close associates", must each be a "suitable person to be concerned in or associated with the management or operation of a casino". This requirement was set out in s 12(1) of the CCA NSW, which prohibited the Authority from granting an application for a casino licence, unless satisfied that the applicant and its close associates were all "suitable".
Section 12(2) of the CCA NSW set out several criteria relevant to the assessment of suitability, including:
in s 12(2)(a), whether each of the licensee and its close associates is of "good repute, having regard to character, honesty and integrity"; and
in s 12(2)(g), whether the licensee or any of its close associates has "any business association" with any person or entity who, in the opinion of the Authority, is not of good repute having regard to character, honesty and integrity.
The scheme of the CCA NSW made clear that this suitability requirement was not limited to the point in time when the Authority was determining an initial application for a casino licence. To begin with, s 31 of the CCA NSW required the Authority, every five years, to "review a casino licence" by investigating and forming an opinion as to whether or not:
the casino operator is a "suitable person" to continue to give effect to the casino licence and the NSW Act; and
it is in the public interest that the casino licence should continue in force.
Further, s 59 of the CCA NSW empowered the Authority, at any time, to take disciplinary action against a holder of a casino licence, including by suspending or cancelling its licence. The Authority could take such action if it was satisfied that grounds for disciplinary action existed, which included (in s 59(1)(f)) if the Authority formed the opinion that the licensee was not a "suitable person" to hold a casino licence.
Thirdly, when it commenced and until 2013, the CCA NSW, by s 6, permitted there to be only one casino operating in NSW. That was the Sydney Casino, whose licence was held by Star Sydney. With the passage of the Casino Control Amendments (Barangaroo Restricted Gaming Facility) Act 2013 (NSW), which commenced on 27 November 2013, the CCA NSW permitted there to be only two gaming facilities operating in NSW, being the Sydney Casino, and the "gaming facility" to be established at Barangaroo.
Thus, the legal entitlement to operate a casino in NSW is, and always has been, a rare privilege granted to scarce corporations. The price of that privilege was that a casino operator comply with a strict regulatory regime, which had at its core the requirement that the casino operator and its close associates be of good character, be honest and have integrity, and that they only maintain business associations with persons of similar good repute. As the Hon Sir Laurence Street AC KCMG explained in his report on the Government's proposal to introduce a draft, publicly released Casino Control Bill (which ultimately became the CCA NSW) (27 November 1991) at [7.1.4]:
The philosophy behind the strict approach to regulation is that participation in the gambling industry is a privilege which is granted only after suitability according to strict criteria has been demonstrated. To be eligible for a casino operator's licence, an applicant must be shown to be willing and able to conduct operations honestly and in the public interest, in accordance with all applicable rules and regulations.
This requirement of suitability related not only to the casino licensee itself, but also to its "close associates" (paragraphs 15 to 18). Section 3(1) of the CCA NSW provided that "close associate" meant a close associate within the meaning of the Gaming and Liquor Administration Act 2007 (NSW) (GLA Act). Section 5(1) of the GLA Act provided, relevantly, that a person was a close associate of the holder of a casino licence if the person:
"holds or will hold any relevant financial interest, or is or will be entitled to exercise any relevant power (whether in his or her own right or on behalf of any other person), in the business of the applicant or licensee that is or will be carried on under the authority of the licence, and by virtue of that interest or power is or will be able (in the opinion of the Authority) to exercise a significant influence over or with respect to the management or operation of that business"; or
"holds or will hold any relevant position, whether in his or her own right or on behalf of any other person, in the business of the applicant or licensee that is or will be carried on under the authority of the licence".
Section 5(2) defined a "relevant financial interest" in relation to a business to include, relevantly, any share in the capital of the business, and any entitlement to receive any income derived from the business or to receive any other financial benefit or financial advantage from the carrying on of the business.
Section 5(2) defined a "relevant position" to mean the position of director, manager or secretary, or any other position, however designated, if it is an "executive position". Section 5(3) defined a "relevant power" to mean any power, whether exercisable by voting or otherwise, and whether exercisable alone or in association with other, to participate in "any directorial, managerial or executive decision" or to elect or appoint any person to a relevant position.
Having regard to this definition, Star, as the ultimate holding company of the holder of the licence for the Sydney Casino (Star Sydney) was a "close associate" of Star Sydney. Given that Star and the entities it controlled (including Star Sydney) operated as the Group, Star had a relevant financial interest in Star Sydney. Additionally, as the ultimate holding company of Star Sydney, Star was entitled to exercise a "relevant power" over Star Sydney.
And so, as a close associate of Star Sydney, if Star itself was not of good repute, or if it maintained business associations with persons or entities who were not of good repute, Star Sydney could fail to be a "suitable person" to hold its licence for Star Sydney, and would be liable to have its licence cancelled or suspended.
The Casino Control Act 1982 (Qld)
During the Relevant Period, the CCA Qld imposed a similar obligation of suitability on casino licensees that applied under the CCA NSW.
Section 20(1) (and s 26) of the CCA Qld required that, prior to being granted a casino licence, the licensee was required to be assessed as a "suitable" person to be associated or connected with the management and operations of a casino. This suitability obligation in s 20(1) also applied to all persons (natural or not) who were "associated or connected with the ownership, administration or management of the operations or business of the casino licensee". Such persons were, therefore, similar to "close associates" in NSW (paragraphs 21 to 24). As with the CCA NSW, the criteria relevant to the assessment of suitability included:
whether the licensee and its associates were each of "good repute, having regard to character, honesty and integrity" (s 20(1)(a)); and
whether the licensee or any of its associates had "any business association" with any entity that is not of good repute (s 20(1)(f)).
Additionally, as in NSW, a casino licence was liable to be cancelled or suspended, pursuant to s 31(1)(d) of the CCA Qld, if the licensee or any director, executive officer, secretary, officer or person associated or connected with the ownership, administration or management of the licensee's operations or business ceased to be a suitable person, having regard to the matters specified in ss 20 and 26.
Similarly, Star, as the ultimate holding company of Star Qld and Star Qld Custodian, was a person associated or connected with the ownership, administration or management of those casino licensees' operations or businesses. Therefore, if Star itself was not of good repute, or if it maintained business associations with persons or entities who were not of good repute, that might render Star Qld and Star Qld Custodian unsuitable to hold their casino licences under the CCA Qld, and liable to have them cancelled or suspended.
The AML/CTF Act
During the Relevant Period, the objects of the AML/CTF Act, set out in s 3(1), included to provide measures to "detect, deter and disrupt money laundering, the financing of terrorism, and other serious financial crimes", and to provide relevant Australian government bodies and their international counterparts with the information they need to investigate and prosecute money laundering offences and other serious crimes.
The AML/CTF Act imposed obligations on "reporting entities", which were defined in s 5 to mean a person who provides a "designated service". Services that were "designated services" were specified in s 6. They included a variety of "gambling services". Therefore, Star Sydney and Star Qld, as the operators of the Sydney Casino, Treasury Brisbane, and The Star Gold Coast, were "reporting entities", and were required to comply with the obligations imposed by the AML/CTF Act.
Three types of obligations under the AML/CTF Act are of particular relevance in this proceeding.
First, a "fundamental and foundational" requirement of the AML/CTF Act was the obligation, under s 81, to adopt and maintain an anti-money laundering and counter-terrorism financing program (AML/CTF Program), and the obligation, under s 82, to comply with that program: CEO, AUSTRAC v Westpac Banking Corporation (2020) 148 ACSR 247; [2020] FCA 1538 at [135] (Beach J). Star Sydney and Star Qld together formed a "designated business group", and thus, pursuant to s 85, had a joint AML/CTF Program. Section 85 required that an AML/CTF Program have two parts, being:
Part A, whose purpose was to identify, mitigate and manage the risks that the provision of designated services might involve or facilitate money laundering or financing of terrorism; and
Part B, whose purpose was to set out applicable customer identification procedures.
In CEO, AUSTRAC v Tabcorp Ltd [2017] FCA 1296, Perram J observed, at [3]-[4], that the AML/CTF Program was at the heart of a "risk management" approach that Parliament decided to adopt in the AML/CTF Act. His Honour noted that, in the Second Reading Speech, the relevant Minister had stated that this risk-based regulatory approach recognised that "reporting entities have the experience and knowledge needed to assess and mitigate risk".
Section 85 of the AML/CTF Act required that both Part A and Part B of an AML/CTF Program comply with any requirements specified in the Anti-Money Laundering and Counter-Terrorism Rules 2007 (AML/CTF Rules). One of those requirements, in Part 9.4, was that Part A of the AML/CTF Program be approved by the "governing board and senior management" of the reporting entity or its main holding company, and that it be "subject to the ongoing oversight" of the governing board and senior management. In this way, the directors of Star - the "main holding company" of each of Star Sydney and Star Qld - were responsible for approving, and then overseeing, Star's AML/CTF Program concerning the identification, mitigation and management of money-laundering risks. This requirement reflected the assumption that underlay Parliament's choice of a risk-based regulatory approach, namely, that a corporation that had AML/CTF Act obligations, would, through its most senior stewards, have or would take steps to acquire, appropriate experience and knowledge necessary to assess the money laundering risks involved in that company's business.
Secondly, pursuant to s 41 of the AML/CTF Act, a reporting entity was required to make reports, known as suspicious matter reports or SMRs, to the Chief Executive Officer of the Australian Transaction Reports and Analysis Centre (AUSTRAC) of information about certain matters. This included, for example, if the reporting entity suspected, on reasonable grounds that information it had regarding a matter may be relevant to money laundering offences or certain other criminal offences.
Thirdly, under Part 2 of the AML/CTF, a reporting entity had various obligations regarding verification of a customer's identity before providing designated services. Also, s 36 (in Part 2) imposed an obligation on a reporting entity to carry out ongoing due diligence on its customers, with a view to identifying, mitigating and managing the risk it might face that its provision of a designated service might involve or facilitate money laundering.
If a reporting entity breached its obligations under the AML/CTF Act, it was liable to have very substantial civil penalties imposed on it, pursuant to s 175 of the AML/CTF Act. A single contravention could attract a penalty of up to 100,000 penalty units, which, during the Relevant Period was:
$18 million, from the start of the Relevant Period to 30 June 2017;
$21 million, from 1 July 2017 to 30 June 2020; and
$22.2 million, from 1 July 2020 to the end of the Relevant Period.
The risk of the imposition of substantial civil penalties was not a theoretical one. During the Relevant Period, the following escalating penalties were imposed under the AML/CTF Act:
$45 million on Tabcorp Holdings Ltd and its related entities: AUSTRAC v Tabcorp;
$700 million on Commonwealth Bank of Australia Ltd: CEO, AUSTRAC v Commonwealth Bank of Australia Ltd [2018] FCA 930;
$1.3 billion on Westpac Banking Corporation: AUSTRAC v Westpac.
Mr Hawkins
Mr Hawkins, was the Managing Director of The Star, Sydney from 1 September 2014 until January 2019: SoAF [11(a)]. In January 2019, he became Star's Chief Casino Officer (SoAF at [11(b)]), before becoming Chief Casino Officer (NSW) in September 2020: SoAF at [11(c))]. He remained in this role until he resigned from Star on 6 May 2022: SoAF at [11(c)].
Mr Hawkins was, at all times, an "officer" of Star for the purposes of ss 9 and 180(1) of the Corporations Act. He was a person who: (i) made or participated in making decisions that affected the whole, or a substantial part, of the business of Star; and (ii) had the capacity to significantly affect the corporation's financial standing.
In his role as Managing Director of The Star, Sydney, Mr Hawkins was the executive responsible for managing a highly significant unit within the business of the Group, the Sydney Casino. As shown by Star's financial statements in its Annual Reports for FY17 to FY19, in the period between 1 July 2016 and 30 June 2019, Star earned between 62% and 70% of its revenue, and generated between 55% and 69% of its EBITDA, from the operations of the Sydney Casino: SoAF at [14(a)]. In addition, from March 2018, Mr Hawkins was also responsible for Star's International Rebate Business (IRB - which is described in more detail in paragraphs 47 to 53 below), which, in FY2018 and FY2019, accounted for 27.6% ($711.5 million) and 23.3% ($586.0 million) of Star's revenue: SoAF at [25(d)] and [25(e)].
As Managing Director of The Star, Sydney, Mr Hawkins reported directly to Mr Bekier, the CEO of Star, and had a large team that reported into him: SoAF at [13(a)] and [13(b)]. In this role, Mr Hawkins was also responsible for formulating and presenting a number of significant proposals to the Board of Star: SoAF at [13(g)]
The importance of Mr Hawkins' leadership was reflected in his remuneration. For the period he was Managing Director of The Star, Sydney (between 1 September 2014 and January 2019), the total remuneration listed for Mr Hawkins in Star's annual reports was between $1,636,722 and $2,703,864: SoAF at [22].
In his roles as Chief Casino Officer and Chief Casino Officer (NSW) at Star, between January 2019 and 6 May 2022, Mr Hawkins was responsible for developing strategies for gaming on a Group-wide leve: SoAF at [17(c)]. He continued to be responsible for the significant IRB business and to be involved in Board-level deliberations: SoAF at [18(d)]. In the period he held the roles of Chief Casino Officer and Chief Casino Officer (NSW) (between January 2019 and 6 May 2022), the total remuneration for Mr Hawkins in Star's annual reports was between $1,265,209 and $1,718,848: SoAF at [23].
For the entirety of the Relevant Period:
Mr Hawkins was a "close associate" of Star Sydney for the purposes of the GLA Act; and
was nominated by Star as one of its "key management personnel" in each of its annual reports: SoAF at [11(e)]
IRB and Junkets
During the Relevant Period, Star attributed its revenue to either its "domestic" business or its International VIP business, the latter of which was called its IRB.
In each of the 2016 to 2019 financial years, around 25% of Star's total revenue was generated by its International Rebate Business, as follows (see SoAF at [14(b)]):
in the financial year ending 30 June 2016, the International Rebate Business generated 25.3% ($596.3 million) of Star's revenue of $2.357 billion;
in the financial year ending 30 June 2017, the International Rebate Business generated 26.3% ($639.6 million) of Star's revenue of $2.432 billion;
in the financial year ending 30 June 2018, the International Rebate Business generated 27.6% ($711.5 million) of Star's revenue of $2.579 billion;
in the financial year ending 30 June 2019, the International Rebate Business generated 23.3% ($586.0 million) of Star's revenue of $2.514 billion;
The IRB comprised three segments, which had different characteristics (see SoAF at [26]).
First, there was the "North Asian junket" business, in which patrons typically participated through "junkets", and front money was typically in the range of $1 million to $5 million.
Secondly, there was the "South Asia Direct" business, in which there were few junkets, and front money was typically around $500,000.
Thirdly, there was the "Premium Mass" business, which was a "nascent" market, where patrons' front money was typically in the range of $50,000 to $250,000.
Star's IRB business generated its gaming revenue from direct customers and through junkets: SoAF at [27]. A junket was defined in the CCA NSW and in the CCA Qld. During the Relevant Period, s 76(3)(a) of the CCA NSW described a junket as an arrangement involving a person or a group of persons (the junket participants or players), who were introduced to a casino operator by a junket promoter (sometimes called a junket operator), where the junket promoter received a commission based on the turnover of play in the casino attributable to the junket participants. The definition of a "junket agreement" in s 85A of the CCA Qld described an arrangement with equivalent features.
In the financial year ending 30 June 2017, 74.6% of revenue generated by Star's IRB business was derived from the North Asian junket segment of the business: SoAF at [30].
Form March 2018, when Mr Hawkins became responsible for the IRB business, he spent approximately 15-20% of his time overseeing the business: SoAF at [28].
By reason of his extensive experience in the casino business and, in particular, his responsibility for the IRB business, throughout the Relevant Period Mr Hawkins was aware of the General Junket Risks (see SoAF at [31]-[34]), being the heightened risk that junkets presented to the integrity of Star's casinos because:
junkets were vulnerable to exploitation by criminal influence; and
junkets introduce an intermediary between Star and the ultimate gamblers, which assists in obscuring the origins of funds and can facilitate money laundering.
Suncity
From about July 2011, until at least March 2020, Star and Star Sydney had a business association with a junket known as "Suncity" (Suncity). Star's commercial relationship with Suncity formed part of its IRB operations: SoAF at [35].
Star's turnover from Suncity had increased from $918 million in the 2016 financial year to $2.1 billion in the 2017 financial year. By 30 June 2017, Suncity accounted for 9% of the North Asia junket segment's turnover and was Star's largest customer: SoAF at [43].
Throughout the Relevant Period, Mr Chau Cheok Wa, also known as Mr Alvin Chau (Mr Chau), was the holder of a "Cheque Cashing Facility" (CCF) that was used to fund the Suncity junket at Star. Mr Chau's CCF originally had a limit of $20 million. In February 2014, it was increased to $30 million, and in March 2017 it was increased to $50 million: SoAF at [40].
From around 30 June 2017, the promoter of the Suncity junket was Mr Alan Iek (Mr Iek). Star Sydney and Mr Iek (as the "promoter") entered an agreement dated 30 June 2017, entitled "Win/Loss Rebate and Exclusive Access Agreement" (2017 Suncity Agreement): SoAF at [41]. The agreement (SoAF at [41]):
set out terms, among other matters, as to the commissions and rebates and allowances (to cover items such as food and beverages) that Star Sydney would pay in respect of gaming by Suncity junket players, provided that gaming play by Suncity junket players reached a minimum monthly turnover figure of $50 million.
provided that Star Sydney would provide the Suncity promoter with exclusive access to a VIP gaming salon at the Sydney Casino known as Salon 95.
provided that the agreement commenced on 1 July 2017, and would expire on 30 June 2018, unless terminated or extended as agreed by the parties.
set out grounds on which Star Sydney was entitled to terminate the agreement, and any agreement "arising from or contemplated by it", which included an agreement with the "CCF Holder" (identified in cl 8 to be Mr Chau). One of the grounds upon which Star Sydney could terminate the agreement, in cl 10(q)(iv), was if Mr Iek, Mr Chau or any other "related entitled or individual", in the opinion of Star Sydney or Star, "acts in a manner which brings or is likely to bring" Star Sydney, Star or any other Group casino "into disrepute" or is likely to be "adverse to the interests of" Star Sydney, Star or a Group casino.
Salon 95 Service Desk
By 18 April 2018, a VIP gaming room that had been set up within Star's Sydney Casino for Suncity's exclusive use was operational: SoAF at [51]. The gaming room was known as "Salon 95".
A risk assessment for the Salon 95 Service Desk was completed on 27 April 2018, when it was approved by Mr Paul McWilliams (Star's Chief Risk Officer): SoAF at [52]. The risk assessment:
identified that Suncity would be operating the Salon 95 Service Desk as a junket promoter and that the "services" it would provide to junket participants, included: "the acceptance of cash by a player for entry into a junket"; "the provision of chips for play"; and "the provision of cash at the settlement (or partial settlement) of the junket"; and.
identified the following controls that it was proposed be applied in order for Star to "remain compliant" without "significant compromise to the customer experience":
players are not to be accepted into junkets until they have undergone "appropriate identity checks" from Star employees, in order for Star to meet its KYC (know your customer) requirements under the AML/CTF Act;
cash received from players must not be kept at the Suncity Service Desk or provided to other patrons and must be deposited in the Suncity Front Money account at the Star Cage (being the location in the Sydney Casino where patrons could exchange chips for cash and cash for chips) as soon as practicable upon being received;
players cannot provide cash and receive chips in the same transactions;
Suncity cannot provide chips to players that have not been received from the Star cage (in exchange for cash or as a result of drawing down on a CCF);
upon settlement (or partial settlement) of a junket, Suncity representatives must exchange chips for cash at the Star's cage, and then disperse that cash to players (as opposed to retaining or drawing down excess cash to provide to players).
Suspicious transactions in Salon 95 and First Warning Letter
On 8 May 2018, Mr Hawkins received an email containing reports of suspicious transactions that were taking place inside Salon 95: SoAF at [53]. On 8 May 2018, a verbal warning was issued to Suncity as a result of the suspicious transactions (First Verbal Warning). The next day, on 9 May 2018, another verbal warning was issued (Second Verbal Warning). This second warning was issued by a Star employee after Mr Hawkins had directed her to visit Salon 95: SoAF at [55]. On each occasion, Mr Hawkins was informed by email after the verbal warnings were given: SoAF at [56].
On 10 May 2018, Mr Hawkins was copied to an email from Mr Mugnaini (Star's General Manager VIP International), that "the suncity letter explaining our position" was being "finalized by Mr White": SoAF [56A].
On 14 May 2018, Mr Hawkins signed a letter on behalf of Star Sydney, which was addressed to Mr Iek, providing Suncity with a formal written warning (First Warning Letter): SoAF at [57]. This letter was provided to Suncity on or around 14 May 2018: SoAF at [58].
KPMG Reports
On 16 May 2018, KPMG provided Star with two reports (SoAF at [92]), being:
a report setting out its independent review of Star's Part A AML/CTF Program (KPMG Part A Report); and
a report setting out its independent review of Star's Part B AML/CTF Program and additional specific issues (KPMG Part B Report): (together, the KPMG Reports).
One specific issue that KPMG had been asked by Star to consider in the KPMG Part B Report was whether "the money laundering and terrorism financing… risks posed by the use of 'junket' operators based in Hong Kong and Macau have been adequately identified and addressed": SoAF at [93]. In relation to this issue, KPMG's overall conclusion was that the risk was "high": SoAF at [93]. In relation to this conclusion, KPMG:
noted that junkets were generally considered by anti-money laundering regulators as being higher risk and explained further that a risk associated with junkets was that they could facilitate money laundering because "they add a layer of obscurity to the source of funds and source of wealth";
identified that Star did not have in place any "documented ML/TF Risk Assessment or Risk Assessment Methodology in relation to Junkets";
identified significant limitations on the due diligence Star conducted in relation to junkets
(KPMG Junket Risk Information).
Mr Hawkins was on the distribution list for the KPMG Reports: SoAF at [94]. Additionally, he was present at a meeting of Star's Board on 24 May 2018 at which Mr Zlatko Todorcevski reported on the "'high' rated findings" from the KPMG Reports: SoAF at [94].
Further suspicious transactions and the Salon 95 Service Desk Operations
Between 12 and 15 May 2018, Star employees identified further suspicious cash transactions in Salon 95. Mr Hawkins was made aware of these suspicious transactions on 15 May 2018: SoAF at [61].
On 15 May 2018, Mr Mugnaini met with Suncity representatives: SoAF at [62]. Mr Mugnaini sent Mr Hawkins (and others) an email at 9.35pm on 15 May 2018, setting out some information relating to that meeting, including that Suncity had requested a "document such as procedures, which they can refer to so they are compliant with all relevant acts and regulations": SoAF at [62].
On 15 May 2018 at 10.09pm, Mr Power (Star Sydney's General Counsel) sent an email to Mr Hawkins (Power Email), which contained the Power Email Information (as defined in the SoAF at [63]). In that email Mr Power said that, in his opinion, the conduct of Suncity in Salon 95, particularly in relation to cash transactions:
had exposed Star to an "unacceptable level of risk";
breached the agreement between Star and Suncity (being the 2017 Suncity Agreement);
breached "applicable laws" (which, in context, could only have meant the CCA NSW, the AML/CTF Act, or both); and
otherwise amounted to "casino operations" (which, in context, was a reference to the fact that only Star Sydney, and not Suncity or any of its representatives, was authorised under the CCA NSW to operate a casino)
In short, the Power Email Information raised serious issues about Suncity and its conduct at Star Sydney (see SoAF at [63]).
On 16 May 2018 at 7.36am, Mr Hawkins sent an email to Mr Bekier forwarding the Power Email and stating "FYI as discussed". As is apparent from the terms of that communication, Mr Hawkins had discussed its contents with Mr Bekier prior to sending the email. However, at no point after receiving the Power Email, including in any of the Board meetings that he attended in 2018 and 2019 thereafter, did Mr Hawkins disclose the contents of the Power Email to the Board generally: SoAF [64].
On 21 May 2018, Mr Brodie sent an email to Mr Hawkins and Mr McWilliams, attaching a draft version of a document setting out the procedures and processes to be followed by Suncity in connection with its operation of Salon 95 and the Salon 95 Service Desk (the Salon 95 Service Desk Processes): SoAF at [69]. In his email, Mr Brodie referred to the fact a "number of practices were identified occurring at the Salon 95 Service Desk" which were of concern, and he sought Mr Hawkins' and Mr McWilliams' endorsement of the proposed Salon 95 Service Desk Processes: SoAF at [69]. The final version of the Salon 95 Service Desk Processes was provided to Suncity staff at a meeting on 23 May 2018: SoAF at [70].
On 5 June 2018 at 6.40pm, Mr Hawkins sent an email to Ms Martin and Star executives suggesting that "if senior management popped into the SC room every now and then it would assist with reinforcing our focus on compliance and sound management.": SoAF at [72]
On 6 June 2018, Ms Martin, Mr McWilliams and Mr Mugnaini visited Salon 95.
On 7 June 2018, Mr Brodie sent an email to Mr McWilliams, to which he copied Mr Power and Mr Hawkins, in which he (see SoAF at [75]):
expressed concern that a number of large cash transactions originating from people associated with Suncity might have increased Star's risks as regards layering-type activity (being a recognised money-laundering typology where illicit funds are moved or dispersed in a way that conceals their origin);
noted that: (i) an unusually large proportion of Star Sydney's suspicious matter reports in June related to Suncity; and the volume of cash transacted; and (ii) the final destination of some of the money had created uncertainty as to whether the transactions might relate to criminal offences.
Mr McWilliams replied to Mr Brodie (also copying Mr Hawkins and Mr Power) at 5.08pm. He expressed agreement with Mr Brodie that "the pattern of money flows is unusual enough to warrant a more detailed analysis": SoAF at [76].
Second Warning Letter and 2018 Suncity Agreement
On 7 or 8 June 2018, Mr Hawkins signed another warning letter to be sent to Suncity (Second Warning Letter). This letter:
recorded that there had been "further non-compliance" by Suncity representatives in Salon 95 since the First Warning Letter had been issued;
referred to the fact that Suncity representatives had been provided with the Salon 95 Service Desk Processes on 23 May 2018 but noted that Mr Hawkins understood that there had been material non-compliance with those processes on 29 May 2018; and
stated that Star Sydney viewed the breach "very seriously" and that any further breaches of the Salon 95 Service Desk Processes would result in Star Sydney terminating use of the Salon 95 Service Desk, and may result in Star Sydney reviewing Suncity's exclusive access to Salon 95.
At the time, Mr Hawkins had formed the view that Suncity's conduct warranted the issuance of a further letter: SoAF at [79].
On 13 June 2018 at 11.55am, Mr Hawkins received an email from a paralegal employed by Star that attached a proposed new agreement in relation to Suncity to be entered into by Star Sydney, Star Qld and Mr Iek (the 2018 Suncity Agreement). At 1.13pm that afternoon, Mr Hawkins responded to this email, giving his approval.
On 21 June 2018, Star Sydney and Star Qld entered into the 2018 Suncity Agreement with Mr Iek: SoAF at [83]. The 2018 Suncity Agreement dealt with similar matters to the 2017 Suncity Agreement (see paragraph 57 above) as well as, relevantly:
imposing an obligation on Mr Iek that Suncity representatives must conduct all activities in Salon 95 in accordance with the Salon 95 Service Desk Processes; and
providing that Star Sydney had a right of immediate termination of the agreement if in the opinion of Star or Star Sydney, among other things, Mr Iek, Mr Chau or any other related entity or individual acted in a manner that brought or was likely to bring Star Sydney, Star or any other casino operated by entities related to the Star into disrepute or was likely to be adverse to their interests.
July 2018 Board Meeting
Mr Hawkins attended a meeting of the Board of Star on 26 July 2018. Two of the papers taken as read at the July 2018 Board Meeting were a paper entitled "The Star Entertainment Group Limited Managing Director & CEO Report May 2018" (May 2018 CEO Report) and a paper entitled "The Star Entertainment Group Limited Managing Director & CEO Report June 2018" (June 2018 CEO Report).
The June 2018 CEO Report contained no mention of the suspicious conduct of Suncity representatives in Salon 95: SoAF at [87]. The May 2018 CEO Report said only (see SoAF at [86]):
Salon 95 Service Desk: In May, concerns emerged around certain activities undertaken at the junket service desk in Salon 95. At present functions at the service desk are limited pending the roll out of detailed processes for the junket representatives in that salon. It is expected that training will be completed by 8 June, with regular on-going compliance monitoring following resumption of services at the service desk.
Mr Hawkins' speaking notes for this meeting contain no reference to the serious compliance and AML/CTF issues that had arisen in relation to Salon 95: SoAF at [88]. Mr Hawkins did not provide an update to the Board about those matters.
Mr Chau Visa Refusal Information
On 11 September 2018, Mr Hawkins received an email from Mr Adrian Hornsby (Star's General Manager, Credit and Collections) which stated that he was aware of speculation among his sources in North Asia that (see SoAF at [91]):
Mr Chau had been refused a visa to enter Australia (and perhaps also some other countries); and
if Mr Chau was uncontactable for a period of 24 hours or more, the likely explanation was that he had been detained.
Mr Hawkins received a further email on 19 September 2018 that stated that "Suncity owner Chau Cheok Wa has been declined of Australian visa by immigration due to significant seized cash in hotel room": SoAF at [91A]. Together, these emails contained the Mr Chau Visa Refusal Information.
Events relating to Suncity and Salon 95 in 2019, prior to the Crown Allegations
On 22 July 2019, Mr Hawkins sent an email to Mr Bekier and Ms Martin in which he (see SoAF at [97]):
observed that Suncity had been "singled out" in Chinese media as an example of a junket offering gambling experiences to people in China in contravention of Chinese law (Suncity Overseas Conventions); and
reported that the Star had recently received correspondence form NSW Police advising of the "exclusion" (pursuant to s 81 of the CCA NSW) of six people associated with Suncity (NSW Police Suncity Exclusions); and
noted that, typically, these types of exclusion may be related to parties involved in organised criminal activities.
Crown Allegations
In the period between 27 July and 9 August 2019, a number of allegations were published in The Sydney Morning Herald (SMH) and The Age newspapers, and broadcast on the television program 60 Minutes, concerning the manner in which Crown conducted its casino business. These included allegations concerning Crown's business associations with junkets who were alleged to be involved in, or associated with, organised crime and money laundering: SoAF at [99]-[103], [106]-[110].
In articles published on 27 and 28 July 2019, and a program broadcast on 60 Minutes on 28 July, the "Crown Allegations" included that (SoAF at [100]):
Crown had done business with various persons and entities that were engaged in, or had links to, organised crime;
Crown did business with Suncity and provided Suncity with its own "high roller room" at Crown's casino in Melbourne; and
the Hong Kong Jockey Club Report (a copy of which reporters for 60 Minutes had obtained) had identified that key Suncity personalities had demonstrated links to numerous triad societies and organised crime figures, and that Suncity or persons associated with it were of interest to Australian authorities in relation to money laundering activities, as a result of which Suncity had been "black banned" by the Hong Kong Jockey Club.
Further news articles were published in the Fairfax newspapers on 31 July 2019 and 1 and 9 August 2019 in relation to the Crown Allegations: SoAF at [106]-[107], [109]. Significantly, the 9 August 2019 article in The Age newspaper referred to conduct occurring at The Star, Sydney.
The article was entitled "The Star casino roped into Crown Controversy over links to Junkets" and referred to the Hong Kong Jockey Club Report. It also noted that (see SoAF at [109] -[110]):
the Hong Kong Jockey Report had referred to a suspicious transaction at Star Sydney in 2012 in which two alleged money launderers were said to have deposited $403,000 into an account held by Mr Chau at The Star, Sydney;
Mr Chau was the head of the Suncity junket and had also been blocked from entering Australia; and
the Hong Kong Jockey Club had: (i) banned Suncity over its links to drug trafficking and money laundering; and (ii) had assessed that Mr Chau posed tangible criminal and reputational risks to that club.
15 August 2019 Board Meeting
A meeting of the Board of Star was held on 15 August 2019 (15 August 2019 Board Meeting). At that meeting, Mr Hawkins and Ms Martin spoke to a board paper (referred to as the Crown Allegations Board Paper) which they had both prepared at the request of the Board (see SoAF at [108], [111]-[113], [115]-[117]).
The contents of the Crown Allegations Board Paper and its attachments are described in the SoAF at [117]-[119]. Critically, the Crown Allegations Board Paper provided the Board with inadequate information to enable the directors to form a view as to the appropriateness of the Group continuing to maintain a business association with Suncity in the face of the allegations of serious wrongdoing: SoAF at [120].
Significantly, the Crown Allegations Board Paper did not refer to the information that Mr Hawkins was aware of concerning the activities of Suncity representatives in Salon 95 in 2018 or the subsequent matters described above at paragraphs 82 to 84.
The minutes of the 15 August 2019 Board meeting record that Mr Hawkins addressed the board in relation to the junkets mentioned in the media, including Suncity. However, neither he nor any other member of management present, informed the Board of any of the information described in the preceding paragraph: SoAF at [121].
C SECTION 180(1) OF THE CORPORATIONS ACT
At all relevant times, s 180(1) of the Corporations Act provided:
A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they:
(a) were a director or officer of a corporation in the corporation's circumstances; and
(b) occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.
Section 180 applied to Mr Hawkins throughout the Relevant Period, because as a senior executive, holding the roles of Managing Director of The Star, Sydney and Chief Casino Officer or Chief Casino Officer (NSW), he was at all times an "officer" of Star: see paragraph 41 above and SoAF at [12].
As French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ explained in Shafron v ASIC (2012) 247 CLR 465; [2012] HCA 18 at [18]:
The degree of care and diligence that is required by s 180(1) is fixed as an objective standard identified by reference to two relevant elements - the element identified in para (a): "the corporation's circumstances", and the element identified in para (b): the office and the responsibilities within the corporation that the officer in question occupied and had.
As to the circumstances of the company, this includes: "the type of company, the provisions of its constitution, the size and nature of the company's business, [and] the composition of the board": ASIC v Maxwell (2006) 59 ACSR 373; [2006] NSWSC 1052 at [100] (Brereton J). It may also be "necessary to have regard to the status of the company as a listed or unlisted entity, and in the case of a parent company, to have regard to the size and nature of the businesses of its subsidiaries if they are under the general supervision of the parent": ASIC v Rich (2009) 236 FLR 1; [2009] NSWSC 1229 at [7201(a)] (Austin J). The relevant circumstances also include the "distribution of responsibilities within the company, including as between the directors and as between the directors and officers": ASIC v Macdonald (No 11) (2009) 256 ALR 199; [2009] NSWSC 287 at [240] (Gzell J). Further, those circumstances will "necessarily include, if it be relevant to the particular case, any breach or potential breach of law by the corporation": Cassimatis v ASIC (2020) 275 FCR 533; [2020] FCAFC 52 at [456] (Thawley J).
The office and responsibilities that must be considered "include any responsibility that is imposed on the officer by the applicable corporations legislation", but also encompass "whatever responsibilities the officer concerned had within the corporation, regardless of how or why those responsibilities came to be imposed on that officer": Shafron at [18]; Morley v ASIC (2010) 274 ALR 205; [2010] NSWCA 331 at [908]-[913]. In this regard, as was explained in ASIC v Rich (2003) 174 FLR 128; [2003] NSWSC 85 at [49] (Austin J):
The director's responsibilities would include arrangements flowing from the experience and skills that the director brought to his or her office, and also any arrangements within the board or between the director and executive management affecting the work that the director would be expected to carry out.
In other words, the standard imposed by s 180 requires consideration of all of the features of an officer's role including what others within the corporation expected the officer to do and including any special responsibilities that the officer had: Cassimatis at [27] (Greenwood J) and [455]-[457] (Thawley J).
The test under s 180(1) is an objective one and is measured by what an ordinary person, with the knowledge and experience of the relevant director, would have done: ASIC v GetSwift at [2527]. Determining whether an officer has breached his or her statutory duties requires a balancing exercise to be undertaken in which the potential benefits that could have accrued to the company by reason of the officer's actions must be weighed against the foreseeable risk of harm: ASIC v GetSwift at [2528]; ASIC v Mariner Corporation Ltd (2015) 241 FCR 502; [2015] FCA 589 at [451]-[452] and the authorities cited at I Ramsay, Company Directors: Principles of Law and Corporate Governance (2nd ed, LexisNexis, 2023) at [6.10].
The exercise is "forward-looking" and should be carried out without the benefit of hindsight: ASIC v GetSwift at [2528]; ASIC v Drake (No 2) (2016) 340 ALR 75; [2016] FCA 1552 at [396]; ASIC v Rich (2009) 236 FLR 1; [2009] NSWSC 1229 at [7232]-[7235]. The risks that must be considered are "not necessarily confined to commercial considerations or to a comparison of monetary consequences, but extend to considering all of the interests of the corporations, including its continued existence and its interest in pursuing lawful activity": Cassimatis at [459] (Thawley J); ASIC v Mitchell (No 2) (2020) 382 ALR 425; [2020] FCA 1098 at [1431]; ASIC v GetSwift at [2529].
D MR HAWKINS' CONTRAVENTION OF SECTION 180(1) OF THE CORPORATIONS ACT
Mr Hawkins' has admitted to two contraventions of s 180(1).
The first contravention relates to the conduct of representatives of the Suncity junket in its designated gaming room at Star's Sydney Casino (Salon 95) and Mr Hawkins' failure to:
take steps to terminate all business associations between Star and Suncity and Mr Chau at that time; or
inform the Board of Star at its meeting on 26 July 2018 about the information that he knew concerning what had occurred in Salon 95 and recommend that Star terminate and have no further business associations with Suncity or Mr Chau.
The second contravention relates to Mr Hawkins' failure, by the meeting of the Board of Star held on 15 August 2019, and in light of the allegations that had been published in the media concerning Suncity and Mr Chau by that time, to:
terminate all business associations between Star and Mr Chau and/or the Suncity junket; or
inform the Board at that meeting of the information he knew about the conduct of the representatives of the Suncity junket in Salon 95 and recommend that Star terminate and have no further business associations with Mr Chau and/or the Suncity junket.
Contravention of s 180(1) in relation to Suncity in 2018
As at mid-June 2018, Mr Hawkins had been the Managing Director of The Star, Sydney (that is, Star's Sydney Casino) for almost four years. Mr Hawkins brought to his role as Managing Director particular expertise in the management of casino businesses. Prior to commencing in that role, Mr Hawkins had over 20 years' experience in the gaming industry in Australia, New Zealand and Asia, including as the CEO of Crown's casino in Melbourne, and roles with businesses in Macau: SoAF at [10].
Mr Hawkins reported directly to Mr Bekier, his employment contract described him as "the most senior officer of The Star, Sydney"; he was one of Star's key management personnel; and he was a member of Star's executive leadership team: SoAF at [11(d)]. He had, at the start of 2018, assumed responsibility for Star's IRB business (SoAF at [13(f)]), and, as explained in paragraph 48 above, junkets made up a very significant proportion of that part of Star's business.
The Court should be satisfied that, by no later than mid-June 2018, Mr Hawkins was aware of the following matters.
First, that, in order to hold and retain its casino licence, Star Sydney had a legal obligation to remain a "suitable" person to hold it. This obligation was so central to Star Sydney's business that Mr Hawkins could not, as Managing Director of the Sydney Casino and its most senior officer, perform his role without being aware of that requirement. In any event, Mr Hawkins would have become aware of Star Sydney's suitability obligation due to his involvement in a review conducted by Mr Horton QC in 2016 into Star Sydney (Mr Horton QC was appointed by ILGA to review Star Sydney (under s 31 of the CCA NSW) in order to assist ILGA to form an opinion as to whether it was still a suitable person to hold its licence): SoAF at [21(b)].
Secondly, Mr Hawkins was aware of Star Sydney's key obligations under the AML/CTF Act. This was another of Star Sydney's core regulatory obligations, and an officer in Mr Hawkins' position could not have performed his role without being aware of these obligations. In any event, it is plain from Mr Hawkins' contemporaneous communications that he was sufficiently familiar with the nature of Star Sydney's obligations under the AML/CTF Act and he was able to identify what conduct would generate a risk of non-compliance. For example, on 16 May 2018, he sent an email to Mr Lim (Star's President of International Marketing), on the topic Suncity, in which he said "…we have had some very significant non-compliance which poses a real AML risk to our business": SoAF at [65].
Thirdly, Mr Hawkins was aware of the General Junket Risks, both by reason of the fact that he was an experienced casino executive but also having regard to:
his familiarity with the Horton Report (SoAF at [32]-[33]); and
the fact that he received an email from Mr Micheil Brodie on 7 June 2018 which reported suspicious conduct in Salon 95 and flagged that the large cash transactions may have increased Star's risks in respect of "layering-type activity", and that the volume of cash transactions and the final destination of the money created uncertainty as to whether the transactions were related to criminal offences: SoAF at [75].
Fourthly, Mr Hawkins knew that Suncity and its representatives had engaged in suspicious transactions in Salon 95, which prompted the issuing of the First Warning Letter. Mr Hawkins had received reports of the suspicious activities of Suncity representatives in Salon 95: see SoAF at [53]. Indeed, such was Mr Hawkins' familiarity with the issues that were occurring in Salon 95, that he directed a meeting be held between Suncity representatives and Star management on 9 May 2018: SoAF at [55]. Further, it was Mr Hawkins who signed the First Warning Letter, on behalf of Star: SoAF at [57].
Mr Hawkins sent an email on 16 May 2018 describing the issues with Suncity as involving "very significant non-compliance which poses a real AML risk to our business": SAFA at [65].
Fifthly, Mr Hawkins was aware of the Power Email Information. Indeed, Mr Hawkins was the recipient of the Power Email, and forwarded that email to Mr Bekier with the message "FYI as discussed": SoAF at [63]-[64].
Sixthly, Mr Hawkins was aware of the KPMG Junket Risk Information. He was one of the persons on the distribution list for the KPMG Reports, one of which (KPMG Part B Report) set out the KPMG Junket Risk Information: SoAF at [93]-[94]. Additionally, Mr Hawkins was present at the May 2018 Board Meeting, when Mr Todorcevski reported on the Audit Committee's discussion of the "'high' rated findings" from the KPMG Reports, which included its findings regarding junkets: SoAF at [94].
Seventhly, Mr Hawkins was aware that, after the First Warning Letter, Suncity and its representatives had continued to engage in suspicious transactions in Salon 95. As noted above, Mr Hawkins received an email from Mr Brodie, on 7 June 2018, explaining that an unusually large number of SMRs by Star Sydney so far in June had related to Suncity, and that the volume of cash transactions and the final destination of the money created uncertainty as to whether the transactions were related to criminal offences: SoAF at [75].
Furthermore, it was Mr Hawkins who signed the Second Warning Letter on behalf of Star in early June 2018: SoAF at [78]. It can readily be inferred that Mr Hawkins would not have done so unless he had formed the view that Suncity's conduct warranted the sending of a letter in those terms.
Having regard to the matters set out above, the Court should be satisfied, on the basis of the facts set out in the SoAF (and summarized in Part B above) and in light of the principles identified in Part C above, that a reasonable officer in Mr Hawkins' position, acting with due care and diligence, would have given careful consideration to those matters and then taken the following steps, between mid-June and 26 July 2018.
First, the reasonable officer would have recognised that, in the circumstances, maintenance by the Group of business associations with Suncity and Mr Chau, gave rise to the following foreseeable risks:
that the companies within the Group with suitability obligations arising from their holding of casino licences would breach that statutory obligation if they maintained business associations with an entity such as Suncity which, to Mr Hawkins' knowledge, had not been conducting itself in a manner consistent with being of "good repute";
that the Group would fail to comply with its obligations under the AML/CTF Act; and
that Star would suffer reputational harm if it came to be perceived as a company willing to maintain and profit from doing business with persons and entities who were not of good repute.
Secondly, the reasonable officer would have recognised that members of Star's Board relied on them, as a member of Star's executive team and the most senior officer of the Sydney Casino, to draw to their attention to matters of which they were aware that created or increased the risks identified in paragraph 114.
Thirdly, the reasonable officer would have taken all necessary steps to:
decline to provide approval for a new rebate and exclusive access agreement with the Suncity junket when that approval was sought on 13 June 2018
ensure the Board was informed of the matters concerning Suncity about which they had become aware in 2018 (being the matters set out in paragraphs 107 to 112 above), and of the risks that would, in the circumstances, arise if the Group maintained a business association with Mr Chau and Suncity (being the risks identified in paragraph 114); and
recommend to the Board that the Group have no further business associations with Mr Chau and/or Suncity.
It was open to Star to decide to cease to do business with Suncity and Mr Chau at any point it considered it appropriate to do so. In relation to Mr Chau, it was a term of the CCF that the issuer of the CCF (Star Sydney or Star Qld) was entitled, "in its absolute discretion" to terminate or suspend a CCF: SoAF at [37]. Further, both the agreement Star Sydney entered into with Mr Iek in June 2017 and the 2018 Suncity Agreement contained a term entitling the Star entities the right to terminate the agreement if, in Star's opinion, Mr Iek, Mr Chau or any related person acted in a manner that was likely to bring Star into disrepute or was likely adverse to Star's interests. Additionally, Star Sydney and Star Qld had power to issue to Mr Chau, Mr Iek, and any representatives of Suncity notices that any express or implied licences they had to enter or remain on premises where Star's casinos were located were withdrawn: Hinkley v Star City Pty Ltd (2011) 284 ALR 154; [2011] NSWCA 299.
It would also have been a simple matter for Mr Hawkins to ensure the Board was informed of the matters described above. He could have raised those matters in the July 2018 Board Meeting, or prepared a Board paper containing the relevant information and recommendations, or prepared a paper containing the relevant information and recommendations for Mr Bekier and Mr O'Neill, and requested it be provided to the Board.
Further, terminating or suspending the Group's business associations with Mr Chau and Suncity, or recommending those courses of action to the Board would not, in the circumstances, have been disproportionate or unwarranted. While it can be accepted that ceasing, either permanently or temporarily, the Group's business association with Mr Chau and Suncity would have meant Star lost the shorter term financial benefits of that association, the risks described in paragraph 114 would, if they eventuated, have a far more devastating and long-term impact on Star. A reasonable officer would have been diligent to avoid causing harm to Star's longer-term interests (in keeping its casino licences, complying with its AML/CTF obligations, and protecting its reputation) in pursuit of short term profits.
The Court should find that, in all of the circumstances, in failing to take the steps set out in paragraphs 114 to 116 above, Mr Hawkins failed to discharge his duties to Star with the degree of care and diligence that a reasonable officer of a company in Star's position, and occupying the same role as Mr Hawkins, would have taken, and that Mr Hawkins therefore contravened s 180(1) of the Corporations Act.
Contravention of s 180(1) in relation to Suncity in 2019
As at August 2019, Mr Hawkins was Star's Chief Casino Officer, a role he was appointed to in January 2019. In that role, he continued to report directly to Mr Bekier, to be on Star's executive team, and to be one of Star's key management personnel: see SoAF at [17].
For the following reasons, the Court should be satisfied that, by the time of the 15 August 2019 Board Meeting, in addition to knowing all of the matters addressed in paragraphs 107 to 112 above, Mr Hawkins was aware of the following additional matters.
First, Mr Hawkins had been informed, by two emails in September 2018, that Mr Chau had been refused a visa to enter Australia, potentially as a result of having previously been associated with the seizure of a significant amount of cash from a hotel safe: SoAF at [91]-[91A].
Secondly, Mr Hawkins was aware of reports that Suncity had been singled out in Chinese media as a business that contravened Chinese law, by providing gambling services to persons in mainland China, as is shown by his sending of an email to Mr Bekier and Ms Martin about this matter on 22 July 2019: SoAF at [97].
Thirdly, Mr Hawkins was aware that the NSW Police Commissioner had required that six persons associated with Suncity be excluded from the Sydney Casino, and that those types of exclusions might typically be related to parties "involved in organised criminal activities". He reported these matters to Mr Bekier and Ms Martin in an email dated 22 July 2019: SoAF at [97].
Fourthly, Mr Hawkins was aware of the Crown Allegations, being the allegations made in the media reporting in The Age, the Sydney Morning Herald and on 60 Minutes, as described in paragraphs 85 to 88 above and the SoAF at [99]-[103], [106]-[108], [109]-[110].
Additionally, Mr Hawkins was invited to the "briefing call" for the Board that was arranged on 30 July 2019, for the purpose of discussing the Crown Allegations (as well as an adverse planning decision concerning a proposal for a Ritz-Carlton tower at Star Sydney) (SoAF at [105]).
Finally, Mr Hawkins was involved in the preparation of the Crown Allegations Board Papers. He received draft versions by email on 11 August 2019 (SoAF at [111]) and 12 August 2019 (SoAF at [113]), and had input into a draft of the paper: SoAF at [113]. The final version of the Crown Allegations Board Paper was from Mr Hawkins and Ms Martin: SoAF at [115].
Having regard to the matters set out above, the Court should be satisfied, on the basis of the facts set out in the SoAF (and summarized in Part B above) and in light of the principles identified in Part C above, that a reasonable officer in Mr Hawkins' position, would have given careful consideration to those matters and then taken the following steps, by the time of, or at, the 15 August 2019 Board Meeting.
First, the reasonable officer would have recognised that, in the circumstances, maintenance by the Group of business associations with Suncity and Mr Chau gave rise to or increased the foreseeable risks described in in paragraph 114 above.
Secondly, the reasonable officer would have appreciated that members of Star's Board relied on them, as a member of Star's executive team and the most senior officer of Star's Sydney Casino, to draw to their attention the matters of which they were aware that created or increased the risks identified in paragraph 114 above.
Thirdly, the reasonable officer would have recognised that the Crown Allegations Board Paper did not inform the Board of the substance of matters concerning Mr Chau and Suncity that had become known to Mr Hawkins in 2018 (being the matters referred to in paragraphs 108 to 112) and/or in 2019 (being the matters referred to in paragraphs 123 to 126), and thus that it failed to inform the Board of key matters that would be relevant to an assessment of whether, in light of the Group's key regulatory obligations under the CCA NSW, the CCA Qld and the AML/CTF Act and the General Junket Risks, the Group should terminate its business associations with Mr Chau and Suncity.
Fourthly, the reasonable officer would have taken all necessary steps to ensure that the Board was informed of the substance of the matters concerning Mr Chau and Suncity of which they were aware and to recommend that Star terminate and have no further business associations with Mr Chau and/or the Suncity junket.
For the reasons set out in paragraphs 117 to 119, taking these steps would not have been difficult, and nor would they have been disproportionate or unwarranted. Rather, they are the obvious and natural steps a reasonable officer, acting carefully and diligently, would have taken in order to protect Star's interests from harm.
The Court should find that, in all of the circumstances, in failing to take the steps set out above, Mr Hawkins failed to discharge his duties to Star with the degree of care and diligence that a reasonable officer of a company in Star's position, and occupying the same role as Mr Hawkins, would have taken, and that Mr Hawkins therefore contravened s 180(1) of the Corporations Act
E RELIEF
As set out in the Proposed Orders, the parties jointly seek a declaration of contravention of s 180(1) of the Corporations Act pursuant to s 1317E, a disqualification order pursuant to s 206C of the Corporations Act, and a pecuniary penalty pursuant to s 1317G of the Corporations Act.
The proper approach to civil regulatory orders which are sought on an agreed basis is that explained in Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 (Cth v FWBII). The High Court there reaffirmed the practice of acting upon agreed penalty submissions.
The plurality emphasised, at [46], the "important public policy involved in promoting predictability of outcome in civil penalty proceedings" which "assists in avoiding lengthy and complex litigation and thus tends to free the courts to deal with other matters and to free investigating officers to turn to other areas of investigation that await their attention". As a result, there is "very considerable scope" for the parties to civil proceedings to agree upon the appropriate remedy and for the court to be persuaded that it is an appropriate remedy: at [57]. Their Honours stated, at [58]:
Subject to the court being sufficiently persuaded of the accuracy of the parties' agreement as to facts and consequences, and that the penalty which the parties propose is an appropriate remedy in the circumstances thus revealed, it is consistent with principle and … highly desirable in practice for the court to accept the parties' proposal and therefore impose the proposed penalty. (original emphasis)
A further reason for courts acting upon such submissions is that they are advanced by a specialist regulator able to offer "informed submissions as to the effects of contravention on the industry and the level of penalty necessary to achieve compliance", albeit that such submissions will be considered on the merits in the ordinary way: see [60]-[61].
These principles are not confined to agreed submissions on pecuniary penalties but apply equally to agreement on other forms of relief. The High Court's conclusions as to the desirability of acting upon agreed penalty submissions were made in the context of its broader recognition that civil penalties were but one of numerous forms of relief which regulators could choose and pursue as civil litigants in civil proceedings, including by making submissions as to that relief: see Cth v FWBII at [24], [57]-[59], [63], [103], [107]. This is consistent with the long-standing judicial support for agreed positions on declarations, injunctions and the like in civil regulatory proceedings, having regard to the public interest explained in NW Frozen Foods Pty Ltd v ACCC (1996) 71 FCR 285; [1996] FCA 1134.
In considering whether an agreed and jointly proposed penalty is appropriate, it is necessary to bear in mind that there is no single appropriate penalty, as the Full Court explained in Volkswagen Aktiengesellschaft v ACCC (2021) 284 FCR 24 at [127], [129] (Wigney, Beach and O'Bryan JJ). There, the Full Court explained that there is a permissible range of penalties within which no particular figure can necessarily be said to be more appropriate than another. Further, their Honours said that the Court should generally recognise that the agreed penalty is most likely the result of compromise and pragmatism on the part of the regulator, and reflects, amongst other things, the regulator's considered estimation of the penalty necessary to achieve deterrence and the risks and expense of the litigation had it not been settled.
Accordingly, where the penalty proposed by the parties is within the permissible range, the Court will not depart from the submitted figure "merely because it might otherwise have been disposed to select some other figure": Cth v FWBII at [47].
A pre-condition to the Court's powers in s 206C (disqualification orders) and s 1317G (pecuniary penalty orders), which are addressed in further detail below (see paragraphs 151 to 159 and 160 to 178 respectively), is the making of a declaration under s 1317E. Therefore, it is appropriate to address the proposed declaratory relief first, before addressing the imposition of any disqualification order or pecuniary penalty.
Because the imposition of a disqualification order is a relevant factor in determining an appropriate pecuniary penalty, it is appropriate to consider the issue of a disqualification order before considering the imposition of a pecuniary penalty: ASIC v Wooldridge [2019] FCAFC 172 at [56]-[58]; see also Cruickshank v ASIC (2022) 292 FCR 627; [2022] FCAFC 128 at [143]-[145] (Allsop CJ, Jackson and Anderson JJ).
The balance of this part of these submissions is organised accordingly.
Declaration of contravention
At all relevant times during the period, s 180(1) was a "civil penalty provision" for the purposes of the Corporations Act: see s 1317E(3).
Section 1317E(1) provides that if a Court is satisfied that a person has contravened a civil penalty provision, it must make a declaration of contravention. The provision is not discretionary: ASIC v Helou (No 2) [2020] FCA 1650 at [140] (Beach J). The mandatory terms of the section necessarily override the discretionary considerations to which a court might otherwise have given weight, in declining to make a declaration: Mayfair Wealth Partners Pty Ltd v Australian Securities and Investments Commission [2022] FCAFC 170 at [184] (Jagot, O'Bryan and Cheeseman JJ).
Section 1317E(2) of the Corporations Act sets out the matters that must be specified in any declarations made. Those matters are relevantly as follows (and have been at all material times):
the Court that made the declaration;
the civil penalty provision that was contravened;
the person who contravened the provision;
the conduct that constituted the contravention; and
in relation to the s 180(1) contravention, the corporation to which the conduct related.
In framing declarations, "attention must be given to the form of the declaration, so that it is at least informative as to the basis on which the Court declares that a contravention has occurred": ACCC v Renegade Gas Pty Ltd [2014] FCA 1135 at [66] (Gordon J). However, a declaration of contravention need not recite in detail all of the factual matters and evidence upon which a finding of contravention is made: Rural Press Ltd v ACCC (2003) 216 CLR 53; [2003] HCA 75 at [90], [93] (Gummow, Hayne and Heydon JJ).
The declaratory relief sought by the parties, as set out in the Proposed Orders, complies with s 1317E(2) and identifies the essential aspects of Mr Hawkins' conduct that constituted the contravention of s 180(1).
Disqualification
The Court has power to order disqualification under ss 206C and 206E of the Corporations Act.
Section 206C permits the Court, on application by ASIC, to disqualify a person from managing corporations for a period that the Court considers appropriate if:
a declaration is relevantly made under s 1317E that the person has contravened a "corporation/scheme civil penalty provision"; and
the Court is satisfied that the disqualification is justified.
At all relevant times, s 180(1) of the Corporations Act has been a "corporation/scheme civil penalty provision".
In determining whether the disqualification is justified, the Court may (under s 206C(2)) have regard to:
the person's conduct in relation to the management, business or property of any corporation; and
any other matters that the Court considers appropriate.
In ABCC v Pattinson (2022) 274 CLR 450; [2022] HCA 13, the High Court noted that the purpose of civil penalty provisions is to serve the objects of specific and general deterrence and that "they are protective of the public interest and they aim to secure compliance by deterring repeat contraventions": at [42]-[43] (Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ).
After referring to those aspects of Pattinson, the Full Court in Cruickshank noted that "[d]isqualification orders have in the past been said to have elements of retribution, deterrence, reformation and mitigation as well as the objective of protection of the public": at [144]. It placed particular emphasis on the primary purpose of disqualification orders being the protection of the public, while noting that the purpose of a pecuniary penalty is to act as a specific and general deterrent to the general public against repetition of like conduct: at [114] (Allsop CJ, Jackson and Anderson JJ).
The principles which guide the exercise of the Court's power to order disqualification pursuant to s 206C of the Corporations Act were identified in ASIC v Adler (2002) 42 ACSR 80 at 97-98 by Santow J. They include, relevantly:
(i) Disqualification orders are designed to protect the public from the harmful use of the corporate structure or from use that is contrary to proper commercial standards;
(ii) The banning order is designed to protect the public by seeking to safeguard the public interest in the transparency and accountability of companies and in the suitability of directors to hold office;
(iii) Protection of the public also envisages protection of individuals that deal with companies, including consumers, creditors, shareholders and investors;
(iv) The banning order is protective against present and future misuse of the corporate structure;
(v) The order has a motive of personal deterrence, though it is not punitive; The objects of general deterrence are also sought to be achieved;
(vi) In assessing the fitness of an individual to manage a company, it is necessary that they have an understanding of the proper role of the company director and the duty of due diligence that is owed to the company;
(vii) Longer periods of disqualification are reserved for cases where contraventions have been of a serious nature such as those involving dishonesty;
(viii) In assessing an appropriate length of prohibition, consideration has been given to the degree of seriousness of the contraventions, the propensity that the defendant may engage in similar conduct in the future and the likely harm that may be caused to the public;
(ix) It is necessary to balance the personal hardship to the defendant against the public interest and the need for protection of the public from any repeat of the conduct;
(x) A mitigating factor in considering a period of disqualification is the likelihood of the defendant reforming;
(xi) The eight criteria to govern the exercise of the court's powers of disqualification set out in Commissioner for Corporate Affairs (WA) v Ekamper (1987) 12 ACLR 519 have been influential. It was held that in making such an order it is necessary to assess:character of the offenders; nature of the breaches;
structure of the companies and the nature of their business;
interests of shareholders, creditors and employees;
risks to others from the continuation of offenders as company directors;
honesty and competence of offenders;
hardship to offenders and their personal and commercial interests; and
offenders' appreciation that future breaches could result in future proceedings
The above principles have been frequently cited: see, eg: Rich v ASIC (2004) 220 CLR 129; [2004] HCA 42 at [48] (McHugh J); ASIC v Soust (No 2) (2010) 76 ACSR 1; [2010] FCA 388 at [21] (Goldberg J); Registrar of Aboriginal and Torres Strait Islander Corporations v Murray [2015] FCA 346 at [166] and [220] (Gordon J).
Section 206G permits a person who is disqualified from managing corporations to apply to the Court for leave to manage a corporation. Mr Hawkins is a director of a corporate trustee, Futureview Group Pty Limited (ACN 132 138 482), which acts as a director of a family trust. Despite the disqualification jointly proposed by the parties, Mr Hawkins seeks leave, and ASIC consents, to Mr Hawkins continuing to manage that corporation as a director (ASIC v Helou (No 2) [2020] FCA 1650).
Pecuniary penalty
Section 1317G of the Corporations Act provides that if the Court has made a declaration of contravention of a civil penalty provision pursuant to s 1317E, it "may" order the person to pay to the Commonwealth a pecuniary penalty.
As s 180(1) is a "corporation/scheme civil penalty provision" (s 1317E(3)(b)), in order to make a pecuniary penalty order, the Court must be satisfied pursuant to s 1317G(1)(b) that the contravention:
materially prejudices the interests of the corporation, scheme or fund, or its members; or
materially prejudices the corporation's ability to pay its creditors; or
is serious;
The contravention was serious
Mr Hawkins admits that the contravention of s 180(1) was "serious" within the meaning of s 1317G(1)(b)(iii) of the Corporations Act: SoAF at [130].
It is accepted that a Court may act upon the admission of fact that the conduct in the present case is serious: ASIC v Hochtief Aktiengesellschaft [2016] FCA 1489 at [98] (Wigney J); Australian Securities and Investments Commission v Newcrest Mining Limited (2014) 101 ACSR 46; [2014] FCA 698 at [57] (Middleton J). It follows, that the Court's discretion under s 1317G(1) is enlivened in this case.
In any event, conduct is "serious" for the purposes of s 1317G(1)(b) if the default or neglect is "grave", "not trifling", "weighty", "important" or "significant" by reference to the "potential or actual consequences of the contravention": Hochtief at [97]. As set out at above, the potential or actual risks that the contravening conduct presented to Star and its investors were significant.
Maximum penalty
For conduct occurring prior to 12 March 2019, s 1317G(3) provided at that time that the maximum pecuniary penalty applicable to the contravention of a civil penalty provision by an individual was $200,000.
Following passage of the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 (Cth), s 1317G(3) was amended to increase the maximum pecuniary penalty available for a contravention of a civil penalty provision, such that during the period 13 March 2019 through to the 15 August 2019 Board Meeting, the maximum pecuniary penalty applicable for a contravention of a civil penalty provision by an individual was the greater of:
[12]
ANNEXURE B - JOINT OUTLINE OF SUBMISSIONS IN RESPECT OF THE FOURTH DEFENDANT
JOINT SUBMISSIONS OF THE PLAINTIFF AND FOURTH DEFENDANT ON LIABILITY & RELIEF
[13]
INTRODUCTION
These submissions are made jointly by the plaintiff, the Australian Securities and Investments Commission (ASIC), and the fourth defendant, Harry James Theodore (Mr Theodore).
ASIC and Mr Theodore seek the following relief (as set out in a proposed minute of orders annexed to these submissions) (Proposed Orders)):
a declaration, pursuant to s 1317E of Corporations Act 2001 (Cth) (Corporations Act), that the Fourth Defendant, in the period between 6 November 2019 and 18 March 2020, contravened s 180(1) of the Corporations Act by failing to discharge his duties to The Star Entertainment Group Ltd (Star) with the degree of care and diligence that a reasonable person would exercise, if they were an officer of a corporation in Star's circumstances and occupied the office held by the Fourth Defendant and had the same responsibilities, when, in circumstances where China UnionPay (CUP) and National Australia Bank Ltd (NAB) had sought confirmation from Star that CUP's debit cards were not being used at Star's properties to fund gambling, he failed to prevent Star sending to NAB, on 7 November 2019, an email which was inaccurate, incomplete and misleading in respect of that issue;
an order pursuant to s 206C(1) and/or s 206E of the Corporations Act that the Fourth Defendant be disqualified from managing corporations for a period of 9 months;
an order pursuant to s 1317G(1) of the Corporations Act, that the Fourth Defendant pay to the Commonwealth within 28 days a pecuniary penalty in the amount of $60,000 in respect of the Fourth Defendant's contravention of s 180(1) of the Corporations Act (referred to in the declaration above); and
an order that the proceeding otherwise be dismissed as against the Fourth Defendant (the parties agree that there be no order as to costs).
ASIC and Mr Theodore seek this relief based on the Affidavit of Mr Theodore dated 31 January 2025 (Theodore Affidavit) and the Statement of Agreed Facts and Admissions dated 31 January 2025 (SAFA), which sets out the facts agreed between the parties and admissions made by Mr Theodore for the purpose of this proceeding as against him.
In summary, these submissions cover:
Part B: Relevant Facts;
Part C: Section 180(1);
Part D: Mr Theodore's Contravention of s 180(1);
Part E: Relief;
Part F: Appropriateness of disqualification period and pecuniary penalty; and
Part G: Conclusion.
[14]
RELEVANT FACTS
The period from 6 November 2019 to 18 March 2020 is defined, in the SAFA, to be the Relevant Period. A summary of the relevant facts (which are set out in more detail in the SAFA) follows.
Star
At all material times, Star was listed on the Australian Stock Exchange and was the ultimate holding company of various companies (comprising, the Group): SAFA at [3]-[5].
Through the Group, Star conducted a gaming, entertainment and hospitality business. This business, relevantly, included the operation of three casinos known as: The Star Sydney, The Star Gold Coast, and Treasury Brisbane: SAFA at [5]. At all material times, these casinos were operated pursuant to casino licences granted to companies within the Group, pursuant to s 18 of the Casino Control Act 1992 (NSW) (in respect of The Star Sydney) and s 18 of the Casino Control Act 1982 (QLD) (in respect of The Star Gold Coast and Treasury Brisbane): SAFA at [6].
Mr Theodore
Mr Theodore commenced employment at Star in mid-2011 in the role of Head of Strategy and Investor Relations: SAFA at [7]. He became the Chief Commercial Officer of Star in October 2018. He was formally appointed as Chief Financial Officer (CFO) of Star in September 2019. By 1 November 2019, and after an initial transition period, Mr Theodore had fully assumed the responsibilities of the CFO role, and he remained in that role throughout the Relevant Period: SAFA at [7].
From at least 1 November 2019, Mr Theodore was an officer of Star for the purposes of s 180 of the Corporations Act: SAFA at [9].
Further, for the purposes of the Gaming and Liquor Administration Act 2007 (NSW), Mr Theodore was a "close associate" of The Star Sydney, from about 18 October 2019 and for the entirety of the Relevant Period: SAFA at [10].
NAB
As at late 2019, NAB was a significant lender to the Group. For example, in June 2019, an entity in the Group (Star Entertainment Financial Limited) and NAB entered into a facility agreement, pursuant to which NAB agreed to lend $200 million to the Group: SAFA at [11].
NAB also provided various transaction services to the Group, the terms of which were relevantly set out in the "NAB Merchant Agreement - General Terms and Conditions" (as amended from time to time) (NAB Merchant Terms): SAFA at [12]-[13].
Pursuant to the NAB Merchant Terms that applied in the Relevant Period, Star was, amongst other matters, required to: (a) comply with the NAB Merchant Terms; (b) provide NAB with all information and assistance that NAB reasonably required to perform its obligations; and (c), indemnify NAB for all losses and liabilities incurred by NAB resulting from the breach of an obligation under the NAB Merchant Terms: SAFA at [13].
CUP
At all material times, CUP was a Chinese State-owned financial services corporation that offered bank card services and an EFTPOS network for China's banking industry (CUP cards): SAFA at [15].
Pursuant to the NAB Merchant Terms, the Group was able to accept payment from CUP debit cards: SAFA at [14].
As an "Acquirer" participating in the CUP network, NAB was required to comply with CUP's "Operating Regulations - Volume II Business Rules" (CUP Scheme Rules): SAFA at [16].
The CUP Process
In about 2013, Star and Star Sydney began to develop and operate a process, a key feature, and purpose of which was to enable CUP cardholders to use their CUP cards to transfer funds to the Group, and thereafter use those funds for gambling (CUP Process): SAFA at [17], [20].
The elements of the CUP Process (see SAFA at [17]) were as follows:
the patron's CUP debit card was swiped at an EFTPOS terminal located within the hotel located at Star Sydney, which terminal had been allocated MCC 7011 by NAB;
the funds accessed by swiping the CUP debit card were transferred from the patron's bank account to one of the Group's bank accounts;
if the funds did not immediately clear (that is, were not immediately received by Star Sydney), a temporary cheque cashing facility was established for the patron equivalent to the amount of the funds, and the patron was entitled immediately to draw down on that facility;
the Group recorded a credit in favour of the patron within its internal ledger system; and
such credits could be used to pay for various expenses incurred by the patron, including accommodation and other non-gaming expenses; but
such credits were primarily transferred to the patron's "front money account" within Star Sydney's casino and used to pay for gaming chips.
In the period from 1 December 2013 to 8 March 2020, over $905 million was transacted through CUP cards at Star properties: SAFA at [22].
Mr Theodore was not involved in the introduction of CUP Cards to Star Sydney or in the development of the CUP Process: SAFA at [21]. He was made aware of the key elements of the CUP Process in early 2016, including that funds obtained by the CUP Process would primarily be used for gambling: SAFA at [25].
Inquiries made by CUP (through NAB)
In 2013, while Star was developing the CUP Process, one of its employees informed an employee of NAB of the key features of the CUP Process, and NAB employees in turn informed several employees of CUP of those key features, including that funds obtained via the CUP Process would be used for gambling. At that time, a CUP employee informed NAB (who in turned informed Star) that the CUP Process "should be fine": SAFA at [23].
In early 2016, Mr White (Star's Corporate Counsel) informed Mr Theodore about the correspondence with NAB referred to in the previous paragraph, including that NAB was made aware by that correspondence that funds obtained via CUP Process would be used for gambling: SAFA at [25]. Mr White also told Mr Theodore that the CUP Process was designed so as not to breach the CUP Scheme Rules: SAFA at [25].
However, from at least early 2016, CUP expressed the position that its cards were not permitted to be used for gambling. As summarised in paragraphs 24 to 30 below, and detailed in the SAFA at [27]-[44]:
CUP's position in this regard was communicated to Star, via NAB, in early 2016; and
in the period from February 2017 to October 2019, CUP made numerous requests for information about CUP transactions at Group properties. These requests variously sought information as to whether Star was a "gambling merchant" (which was a prohibited merchant category under the CUP Scheme Rules) and whether particular large transactions carried out on CUP cards were "gambling transactions".
On 5 April 2016, Mr Theodore and other Star representatives attended a conference call with representatives of NAB to discuss transactions made by Star's customers using CUP Cards: SAFA at [27]-[28]. The "call report" of this conference call relevantly records that: (a) a NAB employee informed Mr Theodore (and others at the meeting) that CUP had raised concerns with the size of various transactions at The Star given that the CUP Scheme Rules did not allow CUP Cards to be used to purchase gaming chips; and (b) Mr Theodore "confirmed that the transaction values covered a broad range of services available to high rollers through The Star", including accommodation costs, food and beverage expenses, airfare costs, tourism-based expenses and high-end retail purchases such as jewellery: SAFA at [28]. Mr Theodore did not inform the NAB employees present at the meeting of the CUP Process: SAFA at [29]. It follows, then, that he did not inform them that funds obtained by customers using their CUP cards were primarily transferred to their "front money account" and then used to purchase gaming chips.
On 30 March 2017, Mr Theodore received an email from Mr Bowen (NAB) stating that: "NAB would like to ensure that all transactions through Star… Merchant Facilities restrict Gambling": SAFA at [32].
On 1 May 2017, Mr Theodore received a further email from Mr Bowen, this time requesting (on behalf of CUP) copies of transaction details and sales receipts in respect of four specified transactions made by customers using their CUP Cards: SAFA at [34]. Mr Theodore forwarded this email to Mr White (Star's Corporate General Counsel), who later that day sent an email to various Star employees (including Mr Theodore) noting that, "the use of China Union Pay direct debit cards at our property is a sensitive issue, particularly as China Union Pay cards are not to be used directly for acquiring gaming chips": SAFA at [35]. On 8 May 2019, Mr White responded to Mr Bowen's remail. His response (to which Mr Theodore was copied), did not disclose the nature of any goods or services that the customers had purchased with funds obtained via their CUP cards or that funds obtained from CUP cards at Star's properties were being used for gambling: SAFA at [36]-[37].
From about October 2018 until about September 2019, Mr Theodore was not involved in or responsible for Star's communications with NAB regarding the use of CUP debit cards at the Group's properties: SAFA at [40].
In June and August 2019, CUP made a number of further requests via NAB for Star to provide information about the nature of the "merchant's" (that is, Star's) business, and, in relation to particular transactions, the types of goods or services which CUP cardholders had purchased at the Group's properties using their CUP cards: SAFA at [41].
In response to each of these requests, Star (a) described Star's business as operating "integrated resorts in Australia, consisting of hotels, restaurants and other entertainment facilities", (b) stated that in the transactions about which CUP had requested information, CUP cardholders had purchased "hotel accommodation services", (c) attached documentation regarding the transactions that referred only to "transfer[s] to customer's account" with no further details as to any goods or services purchased, and (d) did not inform NAB that funds obtained by patrons via their CUP cards were primarily transferred to their front money accounts and then used to purchase gaming chips: SAFA [42]-[43].
In October 2019, a further inquiry was made by CUP (through NAB) seeking clarification as to what "transfer to customer's account" meant: SAFA at [44]. Star's response described "high end premium guests incurring hotel expenses, travel expenses (such as limousine transfers and flights) and external expenses (such as local tourism operator expenses)": SAFA at [49]. It did not inform NAB of the CUP Process: SAFA at [52]. In particular, it did not explain that funds obtained by patrons via their CUP cards were primarily transferred to their front money accounts and then used to purchase gaming chips. Prior to and shortly after the response was sent, the Star employees who prepared and sent that response exchanged a number of emails regarding the drafting of the response, which were detailed in the SAFA at [44]-[51]. The Court would infer from those emails that Mr Theodore reviewed and approved the terms of that response before it was sent to NAB.
The 7 November 2019 Email
On 6 November 2019, CUP sent an email to NAB emphasising that, in light of concerns that some individuals appeared to spend more than $20 million at Star properties, urgent action needed to be taken to ensure that Star was not using CUP cards for gambling related transactions. CUP foreshadowed that, unless Star provided documentation by midday on 7 November 2029 to demonstrate "that individual clients are spending the above amount [i.e. $20m p.a] at their venue on entertainment and accommodation expenses", CUP may issue a directive to NAB to remove Star as a merchant: SAFA at [53]-[54].
At 7.27 pm on 6 November 2019, Ms Arthur (NAB's Relationship Manager for Star) sent an email to Star's Group Treasurer (Ms Scopel. In that email, Ms Arthur described the communication NAB had received from CUP, including concerns that CUP cards were being used for gambling, that CUP was considering issuing NAB a directive that it cease providing CUP card acceptance to Star, and that CUP could fine NAB if NAB did not comply with its directives. She requested Star provide the following "additional information" (SAFA at [57]):
Example breakdown of typical expenditure of ~$20m spent at The Star (e.g. $400,000 penthouse suit, $3m private jet flights etc..). Useful information may include details of the number of people in a party having their expenses covered by an individual cardholder.
Copies of supplier invoices e.g. private jet hire company invoices, tour operators, restaurants etc
Written confirmation that no transactions via the merchant facility includes a gambling component.
The next day on 7 November 2019, the following events occurred, culminating in the sending of the 7 November 2019 Email at 11.59am:
At 9.06am, Ms Scopel sent to Mr Theodore and Mr White a draft response to Ms Scopel's email dated 6 November 2019 at 7.27 pm: SAFA at [59].
At 9.19am, a Star employee sent an email to Mr Theodore (copied to Ms Scopel) referring to a conversation he had had with Mr Theodore the previous day, and attaching a series of invoices he described as "sample of high value invoices covering aircraft charter, premium wine, diamonds, vehicles, and tourism activities": SAFA at [60].
At 11.18 am, Ms Scopel sent a further draft response to Mr Theodore (and Ms Martin and Mr White) for "review": SAFA at [61]. This draft response set out examples of the types of expenses customers charged to their accounts, of which "gambling" was not one, and noted that an "overview of the types of luxury offerings customers frequently consumed" was to be set out in a document to be attached with the response: SAFA at [61].
At 11.25am, Ms Scopel sent a further email to Mr Theodore and Mr White attaching a copy of a document entitled "Luxury Entertainment Overview", as referred to in her earlier draft email at 11.18 am on 7 November 2019: SAFA at [62]. That document described Star Sydney as featuring 35 restaurants, Sydney's only Forbes Five Star luxury hotel, a 16-room day spa, "world class gaming facilities" and a nightclub.
At 11.36am, Ms Martin replied to Ms Scopel's email of 11.18am (copying Mr Theodore and Mr White). Ms Martin said the draft "looks okay to me" and suggested that Ms Scopel remove "the tour company receipt for the private Japan tour if this actually relates to travel in Japan as I am not sure that helps our case with connecting expenses to hotel stays in Sydney, Australia": SAFA at [63].
At 11.48 am, Mr Theodore replied to Ms Scopel's email of 11.18am, making some edits to her draft response email. None of his edits included listing gambling as a related service or expense, or disclosing the key elements of the CUP Process: SAFA at [64].
At 11.51am on 7 November 2019, Mr Theodore responded to Ms Scopel's email of 11.25 am. He requested that the words "gaming facilities" be removed from the description of Star Sydney in the "Luxury Entertainment Overview" document, and that the words "world-class entertainment facilities" be used instead: SAFA at [65]. The Court would infer from Mr Theodore's request to remove the words "gaming facilities" from the description of Star Sydney that he was seeking to downplay the obvious fact that Star operated gaming facilities so as to increase the plausibility of the claim that Star was providing CUP cardholders with access to significant non-gambling goods and services.
At 11.55am, Mr Theodore and others received an updated version of the Overview Document in which the words "gaming facilities" had been replaced with the words "world-class entertainment", consistent with the request made by Mr Theodore's in his 11.51 am email: SAFA at [66].
Ms Scopel noted that those services might include both internal and external services. She stated that some examples of external services were attached (in the form of invoices), and said that these might be charged to customer accounts (such as jets, premium wines, jewellery, cars, cruises, and events for customers).
Ms Scopel then noted that there were a number of "luxury services" Star itself provided to its "VVIP" customers, such as use of private jets, yachts, accommodation and expenses beyond room charges, such as premium goods and services and a 24-hour butler service.
Ms Scopel stated that the attached "Overview" document set out the types of offerings customers "frequently" consumed.
This aspect of the 7 November Email addressed the first two parts of CUP's request for information, as conveyed in NAB's email (see paragraph 32 above), namely, an example breakdown of typical expenditure, and copies of supplier invoices.
The last part of the 7 November Email stated the following:
We confirm the terminal is located in The Star Grand hotel, outside of gaming related areas and gaming transactions are not conducted at the hotel.
To provide further comfort around the nature of transactions, we could restrict the transaction size to $50K with no more than one of this value per day available for customers to pay for resort expenses. For customer expenses exceeding this amount, we will then require alternate payment methods to cover the excess charges. Please advise if such enhanced restrictions would be preferred by CUP/NAB and we can implement the limits, effective immediately.
This part of the 7 November Email was conveying Star's response to CUP's request (as set out in NAB's email (see paragraph 32 above)) for written confirmation that "no transactions [using CUP cards] include[] a gambling component".
CUP 2020 Warning Letter
On 3 March 2020 at 10.34 am, Ms Arthur sent Ms Scopel an email attaching a letter from CUP dated 28 February 2020. CUP's letter stated it had detected some other "irregular transactions", referred to prior responses "that transactions were for 'accommodation services' and 'do not include any component for the purpose of gambling', and requested NAB take further actions, including to provide supporting documents for a set of further transactions and explain what type of goods or services cardholders had purchased (CUP 2020 Warning Letter): SAFA at [74]-[75].
On 3 March 2020 at 11.32am, Ms Scopel forwarded Ms Arthur's email and the 2020 CUP Warning Letter to Mr Theodore and Mr White: SAFA at [77].
At 1.42 pm on 3 March 2020, Mr Theodore sent an email to Mr Bekier, noting that NAB had received further requests from CUP for information and flagging that "I expect we are now in a position where we will lose the terminals": SAFA at [78].
Subsequently, on 4 March 2020, Ms Scopel sent an email to Ms Arthur explaining that Star had decided to stop accepting CUP card transactions. Ms Scopel had initially flagged that Star would stop accepting CUP card transactions on 7 March 2020. On 9 March 2020, Star permanently ceased the CUP Process: SAFA at [79]-[80].
C SECTION 180(1)
At all relevant times, s 180(1) of the Corporations Act provided:
A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they:
(a) were a director or officer of a corporation in the corporation's circumstances; and
(b) occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.
Note: This subsection is a civil penalty provision (see section 1317E).
Section 180 applied to Mr Theodore throughout the Relevant Period, because as CFO of Star, he was an officer within the meaning of s 9 of the Corporations Act: SAFA at [9].
structure of the companies and the nature of their business;
interests of shareholders, creditors and employees;
risks to others from the continuation of offenders as company directors;
honesty and competence of offenders;
hardship to offenders and their personal and commercial interests; and
offenders' appreciation that future breaches could result in future proceedings
The above principles have been frequently cited: see, eg: Rich v ASIC (2004) 220 CLR 129; [2004] HCA 42 at [48] (McHugh J); ASIC v Soust (No 2) (2010) 76 ACSR 1; [2010] FCA 388 at [21] (Goldberg J); Registrar of Aboriginal and Torres Strait Islander Corporations v Murray [2015] FCA 346 at [166] and [220] (Gordon J).
Pecuniary penalty
Section 1317G of the Corporations Act provides that if the Court has made a declaration of contravention of a civil penalty provision pursuant to s 1317E, it "may" order the person to pay to the Commonwealth a pecuniary penalty.
As s 180(1) is a "corporation/scheme civil penalty provision" (s 1317E(3)(b)), in order to make a pecuniary penalty order, the Court must be satisfied pursuant to s 1317G(1)(b) that the contravention:
Materially prejudices the interests of the corporation, scheme or fund, or its members; or
Materially prejudices the corporation's ability to pay its creditors; or
is serious;
The contravention was serious
Mr Theodore admits that the contravention of s 180(1) was "serious" within the meaning of s 1317G(1)(b)(iii) of the Corporations Act: SAFA at [88]. It has been held that a Court may act upon the admission of fact that the conduct in the present case is serious: ASIC v Hochtief Aktiengesellschaft [2016] FCA 1489 at [98] (Wigney J); Australian Securities and Investments Commission v Newcrest Mining Limited (2014) 101 ACSR 46; [2014] FCA 698 (Newcrest), [57] (Middleton J). It follows, that the Court's discretion under s 1317G(1) is enlivened in this case.
In any event, conduct is "serious" for the purposes of s 1317G(1)(b) if the default or neglect is "grave", "not trifling", "weighty", "important" or "significant" by reference to the "potential or actual consequences of the contravention": Hochtief at [97]. As set out at paragraphs [67] above, the potential or actual risks that the contravening conduct presented to Star and its investors were significant.
Maximum penalty
Section 1317G(3) provides that the pecuniary penalty applicable to the contravention of a civil penalty provision by an individual is the greater of:
5,000 penalty units; and
if the Court can determine the benefit derived and detriment avoided because of the contravention - that amount multiplied by 3.
The benefit derived and detriment avoided because of the contravention cannot readily be calculated. It follows that the maximum penalty is 5,000 penalty units as specified in s 1317(G)(3)(b).
The value of a penalty unit is fixed by s 4AA of the Crimes Act 1914 (Cth) and was $210 between 6 November 2019 and 18 March 2020. It follows, that at the time of the contravening conduct, the maximum penalty was $1,050,000.
The primary purpose - deterrence
It is well established that deterrence, both specific and general, is the primary purpose of civil penalties and that they are "primarily if not wholly protective in promoting the public interest in compliance": Pattison at [15] (Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ). A penalty must have the necessary "sting or burden" to secure "the specific and general deterrent effects that are the raison d'être of its imposition": ABCC v CFMEU (2018) 262 CLR 157; [2018] HCA 3 at [116] (Keane, Nettle and Gordon JJ). However, the penalty ought not be "disproportionate or oppressive": Pattinson at [41] (Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ).
Penalty factors
Parties
Applicant/Plaintiff:
Australian Securities and Investments Commission
Respondent/Defendant:
Hawkins
Legislation Cited (9)
Casino Control Amendment Act 2001(NSW)
Casino Control Amendments (Barangaroo Restricted Gaming Facility) Act 2013(NSW)
if the Court can determine the benefit derived and detriment avoided because of the contravention - that amount multiplied by 3.
The benefit derived and detriment avoided because of the contravention cannot readily be calculated. It follows that the maximum penalty is 5,000 penalty units as specified in s 1317(G)(3)(b).
167A. The value of a penalty unit is fixed by s 4AA of the Crimes Act 1914 (Cth) and was $210 between 1 July 2017 and 30 June 2020. It follows, that at the time of the contravening conduct, the maximum penalty was $200,000 for the first contravention and $1,050,000 for the second contravention.
The primary purpose - deterrence
It is well established that deterrence, both specific and general, is the primary purpose of civil penalties and that they are "primarily if not wholly protective in promoting the public interest in compliance": Pattison at [15] (Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ). A penalty must have the necessary "sting or burden" to secure "the specific and general deterrent effects that are the raison d'être of its imposition": ABCC v CFMEU (2018) 262 CLR 157; [2018] HCA 3 at [116] (Keane, Nettle and Gordon JJ). However, the penalty ought not be "disproportionate or oppressive": Pattinson at [41] (Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ).
Totality Principle
In determining the appropriate pecuniary penalty in circumstances where there are multiple contraventions, the Court may have regard to the "totality" principle. The totality principle is not a rule, but rather, a tool of analysis, which may assist the Court in arriving at an appropriate penalty: Australian Competition and Consumer Commission v Yazaki Corporation [2018] FCAFC 73; (2018) 262 FCR 243 at [226] (Alssop CJ, Middleton and Robertson JJ).
The "totality" principle operates to guard against manifestly absurd penalties. It requires the Court, when imposing and assessing multiple pecuniary penalties, to satisfy itself that the total penalty it proposes to impose is "just and appropriate" having regard to all the relevant circumstances and, in particular, the entirety of contravening conduct involved. The principle directs attention to all factors going to penalty - including, but not limited to, any course of conduct analysis - to determine whether the total overall penalty is appropriate: Australian Competition and Consumer Commission v Hillside (Australia New Media) Pty Ltd trading as Bet365 (No 2) [2016] FCA 698 at [8] (BeachJ). The "totality" principle is the final step in the process as, having fixed an appropriate penalty for each contravention or course of conduct, it is appropriate for the Court to take a final look at the aggregate penalty, to determine whether it is overall an appropriate response to the conduct which led to the contraventions. It provides the opportunity for the Court to take "a last look at the total just to see whether it looks wrong": Mornington Inn Pty Ltd v Jordan; [2008] FCAFC 70; (2008) 168 FCR 383 at [91] (Gyles, Stone and Buchannan JJ).
Penalty factors
Section 1317G(6) of the Corporations Act provides that in determining the pecuniary penalty, the Court must take into account "all relevant matters", including:
the nature and extent of the contravention;
the nature and extent of any loss or damage suffered because of the contravention;
the circumstances in which the contravention took place; and
whether the person has previously been found by a court to have engaged in any similar conduct.
Numerous authorities have identified potentially relevant factors for the imposition of pecuniary penalties, in addition to (or overlapping with) the mandatory factors specified in s 1317G.
As the Full Court explained in Australian Building and Construction Commission v CFMEU (2017) 254 FCR 68 (ABCC v CFMEU) at [102]-[104] (Dowsett, Greenwood and Wigney JJ), some of the factors relate to the objective nature and seriousness of the contravention, and others concern the particular circumstances of the contravener.
Factors relating to the objective nature of the contravention include:
the extent to which the contravention was the result of deliberate or reckless conduct, as opposed to negligence or carelessness;
whether the contravention comprised isolated conduct, or was systematic or occurred over a period of time. (Relatedly, it has been observed that facts prior to the period being penalised may be taken into account in determining the penalty in the instinctive synthesis performed by the Court: see, ASIC v MLC Limited (2023) 168 ACSR 122; [2023] FCA 539 at [96] (Moshinsky J));
the seniority of officers responsible for the contravention;
the impact or consequences of the contravention on the market or innocent third parties; and
the extent of any profit or benefit derived as a result of the contravention.
Factors relating to the particular circumstances of the defendant include:
whether the defendant has been found to have engaged in similar conduct in the past (noting that this is a mandatory factor pursuant to s 1317G(6)(d));
whether the defendant has demonstrated contrition and remorse;
the degree of the defendant's cooperation with the regulator, including in the investigation and prosecution of the contravention; and
whether the defendant has suffered any extra-curial punishment or detriment arising from the finding that it had contravened the law.
Not all factors that have been identified in previous cases will necessarily be relevant or important in every case, and they should not be treated as a rigid checklist of matters to be applied in every case, because in each case, the overriding principle is that the Court must weigh all relevant circumstances: ABCC v CFMEU at [101].
The appropriateness of the amount of a penalty must be assessed by reference to the specific civil penalty provision which has been contravened in light of its context and purpose, and the objects of the relevant statute as a whole: ASIC v Australia and New Zealand Banking Group Ltd [2018] FCA 155 at [22(f)] (Middleton J).
The statutory maximum penalty
The majority in Pattinson considered that the statutory maximum penalty "is 'but one yardstick that ordinarily must be applied' and must be treated 'as one of a number of relevant factors'" to inform the assessment of a penalty of appropriate deterrent value: Pattinson at [53]-[55]. Their Honours at [49]-[51] rejected an approach by which the statutory maximum penalty was required to be reserved exclusively for the worst category of contravening conduct. However, they emphasised that there should be "some reasonable relationship between the theoretical maximum and the final penalty imposed"; the relationship of reasonableness being established by reference to a need for deterrence having regard to the circumstances of the contravenor and the circumstances of the contravention: at [53]-[55].
F APPROPRIATNESS OF DISQUALIFICATION PERIOD AND PECUNIARY PENALTY
ASIC and Mr Hawkins jointly submit that:
The Court ought to disqualify Mr Hawkins from being a company director pursuant to s 206C of the Corporations Act for the period of 18 months; and
The Court ought to impose a pecuniary penalty pursuant to s 1317G of the Corporations Act in the amount of $180,000.
ASIC and Mr Hawkins submit that the proposed disqualification period and pecuniary penalty are appropriate having regard to the circumstances of the contravening conduct, and the relevant principles in relation to disqualification and pecuniary penalties. In particular, the proposed period of disqualification is appropriate to achieve the protective objects of a disqualification order, and the proposed penalty is appropriate to achieve the principal object of general deterrence.
The salient features of this case, which support the making of a disqualification order and a pecuniary penalty order, and for the period and in the amounts jointly proposed, are as follows.
First, during the period that he was Managing Director of The Star, Sydney, Mr Hawkins was responsible for the operations of the Sydney Casino (being the most financially important part of the Star Group's business). This means that during mid-2018 when Mr Hawkins was receiving communications about suspicious activities occurring in Salon 95, those reports fell within his responsibilities for the operations of the Sydney Casino. Subsequently, as Chief Casino Officer, Mr Hawkins was a highly important executive with strategic responsibilities that extended across the Star Group. In both roles, Mr Hawkins regularly attended Board meetings and presented to the Board allowing him ample opportunity to make the relevant disclosures to the Board.
Secondly, from at least March 2018, Mr Hawkins was responsible for the IRB business at Star. Notably, the commercial relationship with Suncity formed an important part of the IRB business unit. For that reason, Mr Hawkins was responsible for that relationship. By reason of that matter, together with Mr Hawkins' seniority within the Star Group, in both 2018 and 2019 he was well placed to recommend to the Board that Star should cease to have any future associations with Suncity and/or Mr Chau.
Thirdly, Mr Hawkins was an experienced casino executive who ought to have been particularly well-placed to identify the significant regulatory and reputational risks associated with junkets and the need for heightened care to be taken in relation to Star's relationship with junkets as a result. Further, the specific risks associated with Suncity and its conduct in Salon 95 were repeatedly brought to Mr Hawkins' attention by other Star employees in May 2018 most notably (but not exclusively) in the Power Email of 16 May 2018 in which Mr Hawkins was informed that the conduct of Suncity in Salon 95, particularly in relation to cash transactions, had exposed Star to an "unacceptable level of risk". Notwithstanding these matters, instead of taking any steps to recommend termination of Star's business association with Suncity to the Board, Mr Hawkins endorsed the 2018 Suncity Agreement.
Fourthly, in relation to Mr Hawkins' contravention of s 180(1) of the Corporations Act in 2019, by the time of the meeting of the Board on 15 August 2019, the reputational risks to Star that arose by reason of its association with Suncity ought to have been particularly obvious to Mr Hawkins. By that time, the Crown Allegations (including allegations about Crown's relationship with the Suncity junket) had been the subject of extensive media coverage. This state of affairs highlighted the need for:
careful assessment of the risks arising from a continuing business association with that junket; and
a full and frank disclosure to the Board of all of the information that Mr Hawkins possessed that was relevant to those risks.
However, against the backdrop of the matters outlined above, the following mitigating circumstances demonstrate why neither a disqualification period longer than 18 months, nor a pecuniary penalty greater than $180,000, are warranted. In each case evidentiary support is provided in the Hawkins Evidence.
First, Mr Hawkins has admitted to contravening s 180(1) and co-operated with ASIC. In doing so, some of the cost to the public of a fully contested hearing has been avoided, even if the admissions were made after the commencement of the hearing of this proceeding. Mr Hawkins' admission and co-operation also demonstrates contrition, and insight into his conduct.
Secondly, Mr Hawkins has suffered some extra-curial detriments for his conduct the subject of this proceeding. Shortly after giving evidence at the Bell Review of The Star Pty Ltd (Bell Inquiry), he resigned from his role at The Star. He was then subsequently on "gardening leave" for 3 months. To continue working in the casino industry, Mr Hawkins has had to seek opportunities overseas. In 2023 he secured a senior management role in the casino sector in the Philippines.
Thirdly, Mr Hawkins has already faced considerable public scrutiny in relation to the conduct of the subject of this proceeding against him, in the context of the Bell Review of The Star Pty Ltd and also media coverage concerning this proceeding.
Fourthly, Mr Hawkins has no prior criminal convictions and has not previously been subject to any investigations or proceedings commenced by ASIC or any other regulator.
G CONCLUSION
For the reasons set out in these submissions, the Court should make the declaration and orders sought by ASIC and Mr Hawkins, as set out in the Proposed Orders.
13 February 2025
Ruth Higgins SC Albert Dinelli KC
James Arnott SC Sophie Kearney
Stephanie Patterson Counsel for the Third Defendant
Stephen Speirs
Luca Moretti
Counsel for the Plaintiff
On 7 November 2019, at 11.59am, Ms Scopel sent an email to Ms Arthur, with a copy to Mr Theodore, responding to Ms Arthur's email of the previous day (7 November Email). The text of that email is set out in full in the SAFA at [68]. The salient aspects of it are as follows.
The 7 November Email commenced by stating that, without specific customer transactions to review, it was difficult to understand the areas of concern, and that a review of CUP usage data for the 2019 year to date did not show that any individual had spent amounts in the range of $20 million.
The next part of the 7 November Email addressed the following matters:
Ms Scopel stated:
As previously mentioned, certain very high end premium guests at The Star Entertainment Group's integrated resorts incur expenses at the hotel, across a range of entertainment venues within the resort, travel expenses (for example limousine transfers, flights) and external expenses (for example local tourism tour operator expenses, food and beverage, major events and entertainment), during their time in Australia and whilst staying at The Star Entertainment Group's resorts. Such expenses are consolidated within the guest's personal account, which is linked to the guest's hotel accommodation, and cleared with a transfer from the hotel accommodation account, as noted in the receipts provided previously.
There are two elements as to the content of the duty of reasonable care and diligence under s 180(1) of Act, namely: (a) the circumstances of the company; and (b) the position and responsibilities of the officer: ASIC v GetSwift Limited [2021] FCA 1384 at [2530] (Lee J).
As to the circumstances of the company, this includes: "the type of company, the provisions of its constitution, the size and nature of the company's business, [and] the composition of the board": ASIC v Maxwell (2006) 59 ACSR 373; [2006] NSWSC 1052 at [100] (Brereton J). It may also be "necessary to have regard to the status of the company as a listed or unlisted entity, and in the case of a parent company, to have regard to the size and nature of the businesses of its subsidiaries if they are under the general supervision of the parent": ASIC v Rich (2009) 236 FLR 1; [2009] NSWSC 1229 at [7201(a)] (Austin J). The relevant circumstances also include the competence of a company's management and of its advisers and the "distribution of responsibilities within the company, including as between the directors and as between the directors and officers": ASIC v Macdonald (No 11) (2009) 256 ALR 199; [2009] NSWSC 287 at [240] (Gzell J). Further, those circumstances will "necessarily include, if it be relevant to the particular case, any breach or potential breach of law by the corporation": Cassimatis v ASIC (2020) 275 FCR 533; [2020] FCAFC 52 at [456] (Thawley J).
The office and responsibilities that must be considered "include any responsibility that is imposed on the officer by the applicable corporations legislation", but also encompass "whatever responsibilities the officer concerned had within the corporation, regardless of how or why those responsibilities came to be imposed on that officer": Shafron v ASIC (2012) 247 CLR 465; [2012] HCA 18 at [18]; Morley v ASIC (2010) 274 ALR 205; [2010] NSWCA 331 at [908]-[913]. In this regard, as was explained in ASIC v Rich (2003) 174 FLR 128; [2003] NSWSC 85 at [49] (Austin J):
The director's responsibilities would include arrangements flowing from the experience and skills that the director brought to his or her office, and also any arrangements within the board or between the director and executive management affecting the work that the director would be expected to carry out.
In other words, the standard imposed by s 180 requires consideration of all of the circumstances of an officer's role including what others within the corporation expected the officer to do and including any special responsibilities that the officer had: Cassimatis at [27] (Greenwood J) and [455]-[457] (Thawley J).
The test under s 180(1) is an objective one and is measured by what an ordinary person, with the knowledge and experience of the relevant director, would have done: ASIC v GetSwift at [2527]. Determining whether an officer has breached his or her statutory duties requires a balancing exercise to be undertaken in which the potential benefits that could have accrued to the company by reason of the officer's actions must be weighed against the foreseeable risk of harm: ASIC v GetSwift at [2528]; ASIC v Mariner Corporation Ltd (2015) 241 FCR 502; [2015] FCA 589 at [451]-[452] and the authorities cited at I Ramsay, Company Directors: Principles of Law and Corporate Governance (2nd ed, LexisNexis, 2023) at [6.10].
Because Mr Theodore's contravention of s 180(1) relates to a misleading communication (the 7 November Email), it is necessary to have regard to the interrelationship between the obligations of officers under s 180(1) of the Corporations Act and breaches of law by the company of which they are officers. This interrelationship has been considered in a number of the authorities, from which the following propositions emerge.
First, it cannot be assumed that officers are subject to an overriding obligation to ensure that the affairs of a company are conducted in accordance with the law generally or the Corporations Act specifically: ASIC v Maxwell at [104], [110]; Cassimatis at [460]; ASIC v GetSwift at [2538].
Secondly, a finding that a company has contravened the law will not be sufficient, by itself, to establish that an officer of that company has breached s 180(1) of the Corporations Act: Cassimatis at [79]; ASIC v GetSwift at [2537]. In other words, the liability of the officer "does not automatically follow from the company's contravention" at the time that the defendant was an officer: ASIC v GetSwift at [2538], citing ASIC v Vocation Ltd (In liq) (2019) 371 ALR 155; [2019] FCA 807 at [730]. Nor does s 180(1) of the Corporations Act "provide a backdoor method for visiting directors with accessorial liability for every contravention of the Act committed by a corporation": ASIC v Avestra Asset Management Ltd (In liq) (2017) 348 ALR 525; [2017] FCA 497 at [214] (Beach J); ASIC v Maxwell at [110].
Thirdly, having said that, the fact that an officer has exposed a company to potential liability for a breach of the law is far from irrelevant to the question of whether there has been a contravention of s 180(1) of the Corporations Act. Indeed, "[i]t is well-established that a contravention of directors' duties may be made out by failing to take reasonable care to ensure that the company did not breach other legal norms, whether within or outside the Corporations Act": DSHE Holdings Ltd (recs and mgrs apptd) (in liq) v Potts (2022) 405 ALR 70; [2022] NSWCA 165 at [112]. As Lee J explained in ASIC v GetSwift at [2538] in the context of breaches by a company of the Corporations Act (though, in principle, there is no reason why these observations would not apply more generally to breaches of the law by the relevant company):
… liability under s 180(1) is triggered in circumstances where the [officer's] failure to exercise reasonable care and diligence has caused, or allowed, the company to contravene the Corporations Act, at least where it was reasonably foreseeable that such contravention might harm the company's interests: [ASIC v Vocation Ltd (In liq) (2019) 371 ALR 155 at [730] (Nicholas J)]. That is, the relevant analysis concerns whether, and the extent to which, the corporation's interests were jeopardised, and if so, whether the risks obviously outweighed any potential countervailing benefits, along with whether there were reasonable steps which could have been taken to avoid them: [ASIC v Maxwell [2006] NSWSC 1052 at [104] (Brereton J)]. The fact of a contravention by a company, is therefore but one factor relevant to be considered when determining whether a director has met the statutory standard. (emphasis added)
Fourthly, it may be sufficient for a plaintiff seeking to establish that an officer contravened s 180(1) of the Corporations Act to show, even in the absence of a finding that the relevant company contravened the law, that the officer's conduct "meant that a breach of the [law] was extremely likely and that this high degree of risk, and its consequences, might give rise to a breach [of s 180(1)] despite other considerations such as the burden of alleviating precautions": Cassimatis (No 8) (2016) 336 ALR 209; [2016] FCA 1023 at [679] (Edelman J), and also [5] and [834]; ASIC v Maxwell at [104].
In summary, although the liability of an officer under s 180(1) of the Corporations Act "is direct and not derivative from a company's contravention" it remains the case that "a company's contravention [of the law] might be a material fact relevant to the question whether [an officer] failed to meet the standard mandated by s 180(1) by exposing a company to risk": Cassimatis at [463], [465]. As Brereton J explained in ASIC v Maxwell at [104]:
There are cases in which it will be a contravention of their duties, owed to the company, for [officers] to authorise or permit the company to commit contraventions of provisions of the Corporations Act. Relevant jeopardy to the interests of the company may be found in the actual or potential exposure of the company to civil penalties or other liability under the Act, and it may no doubt be a breach of a relevant duty for a director to embark on or authorise a course which attracts the risk of that exposure, at least if the risk is clear and the countervailing potential benefits insignificant. But it is a mistake to think that ss 180, 181 and 182 are concerned with any general obligation owed by [officers] at large to conduct the affairs of the company in accordance with law generally or the Corporations Act in particular; they are not. They are concerned with duties owed to the company. …
These application of these principles in the context of the approval by a director or officer of the making of a misleading communication by a company was illustrated in ASIC v Macdonald (No 11) (2009) 256 ALR 199; [2009] NSWSC 287, and the appeals that followed: Morley v ASIC (2010) 274 ALR 205; [2010] NSWCA 331; Shafron v ASIC (2012) 247 CLR 465; [2012] HCA 18 and ASIC v Hellicar (2012) 247 CLR 345; [2012] HCA 17. In those cases, Gzell J, the NSW Court of Appeal and the High Court considered breaches of s 180 of the Corporations Act that arose in relation to a misleading announcement that was made to the ASX by JHIL Ltd. At first instance, Gzell J held (see ASIC v Macdonald (No 11) at [330]-[343]) that the non-executive directors who had approved the ASX announcement had breached their obligations under s 180 of the Corporations Act because they knew that it contained false or misleading information and they (see [259]):
… knew or should have known that if JHIL made the statements as to the sufficiency of funding of the Foundation in the Draft ASX Announcement there was the danger that JHIL would face legal action for publishing false or misleading or misleading or deceptive statements, its reputation would suffer and there would be a market reaction to its listed securities
The finding that the non-executive directors had approved the ASX announcement was overturned by the Court of Appeal but re-instated by the High Court: ASIC v Hellicar at [171].
These authorities, together, demonstrate that where the making of misleading statements exposes a company to the risk of breaching its legal obligations to its lenders, damaging its commercial relationships with lenders, and/or breaching statutory prohibition on misleading conduct, compliance with the duty of care and diligence in s 180(1) will ordinarily require a director or officer who knows, or who ought to know, of the misleading nature of the statement, to take reasonable steps to prevent the company from making such statements.
D MR THEODORE'S CONTRAVENTION OF S 180(1)
For the following reasons, the Court should be satisfied, on the basis of the facts set out in the SAFA (and summarised in Part B above) and in light of the principles identified in Part C above, that, by failing to prevent Star from sending the 7 November Email to NAB, Mr Theodore failed to discharge his duties to Star with the degree of care and diligence that a reasonable person would exercise if they were a director of a corporation in Star's circumstances and occupied the office held by Mr Theodore and had the same responsibilities.
First, the 7 November Email was inaccurate, incomplete and misleading. It conveyed that the funds which Star's patrons obtained via their CUP cards were used to fund non-gaming expenses only, when in fact (SAFA at [81]):
a key feature and purpose of the CUP Process was to enable CUP cardholders to use their CUP cards to transfer funds to the Group, and thereafter use those funds for gaming; and
gaming was the principal activity funded via the CUP Process.
The fact that the 7 November Email did not contain express statements to this effect (and particularly, to the effect that CUP transactions had no gambling component) does not mean that it did not convey those matters. To begin with, the immediate context was that the 7 November Email was Star's response to a request from CUP, through NAB, that Star provide a breakdown of expenditure by CUP cardholders, and written confirmation that CUP cardholders' transactions had no gambling component. A communication, in response, which (a) referred only to expenditure on goods and services such as high-end accommodation, private jet travel and expensive goods, and (b) stated "we confirm" that the CUP card terminal is located in the hotel area and that gaming transactions are not conducted at the hotel was apt to convey that Star was, in the 7 November Email, providing the written confirmation CUP had sought.
Further, the broader context of the 7 November Email was that it was the culmination of repeated requests by CUP, over several years, that Star explain the nature of CUP transactions at Star's properties. In response to those requests, Star had described Star's business as an entertainment business (rather than a gaming business), and described customers spending funds withdrawn from their CUP cards on a variety of expensive goods and services (without mentioning that funds were primarily used to purchase gaming chips). Mr Theodore himself gave an explanation of that nature during the teleconference on 5 April 2016 (see paragraph 24 above), and approved a similar explanation sent to NAB less than a week before the 7 November Email (see paragraph 30 above. The 7 November Email would therefore have reinforced impressions already created by Star's earlier responses.
Secondly, prior to 7 November 2019, Mr Theodore was aware that:
from early 2016 (SAFA at [24] - [25], [79]) - that a key feature of the CUP Process was to enable customers to use CUP transactions to purchase gaming chips and to circumvent the CUP Merchant Rules; and
from as early as 5 April 2016 (when he attended a meeting with NAB employees, SAFA at [28]) - that CUP did not permit its cards to be used by Star's customers to purchase gaming chips.
Further, Mr Theodore was aware that Star had been asked, by NAB, to confirm that there was "no gambling component" to CUP transactions conducted at Star's properties, and that the 7 November Email was Star's response to that request: SAFA at [83]. He was also aware of the terms of the 7 November Email: He was involved in reviewing and amending drafts of it, and was copied to it: see paragraph 33 above. He therefore knew that it did not mention that a key feature and purpose of the CUP Process was to enable CUP cardholders to use their cards to transfer funds to the Group and thereafter use those funds for gambling, or that gaming was the principal activity funded by the CUP Process: SAFA at [83].
Thirdly, and in these circumstances, Mr Theodore should have known that the 7 November Email was misleading, and that there was a real chance that NAB and/or CUP would be misled by it. A reasonable officer in Mr Theodore's position would readily have recognised that the 7 November Email should have disclosed that CUP cardholders used their CUP cards to transfer funds to the Group and thereafter used those funds primarily for gaming, and that a failure to do so would render the 7 November Email misleading.
Fourthly, Star's conduct in sending a misleading communication like the 7 November Email to one of its major lenders, NAB, exposed Star to a number of risks, including the following (SAFA at [85]):
It had the potential to put Star in breach of the NAB Merchant Terms, or to enliven Star's obligations under it to indemnify NAB if NAB suffered losses as a result (see paragraphs 12 to 13 above).
It exposed Star to the risk that its lenders may form the view that Star and its senior executives had misled them (or been less than candid about inquiries regarding its business practices), resulting in them being unwilling to continue to make debt finance available to Star or the Group.
It exposed Star to the risk of contravening statutory prohibitions on misleading conduct, such as s 18 of the Australian Consumer Law and s 1041H of the Corporations Act.
Finally, in these circumstances and in order to prevent exposing Star to risks of the kind described in paragraph 67 above, a reasonable officer in Mr Theodore's position could, and would have, upon being provided a draft of the 7 November Email, declined to approve the draft and required Ms Scopel to prepare a response that accurately described the CUP Process. It can be accepted that that may, as a practical matter, have meant Star would have had to cease operating the CUP Process in early November 2019 (rather than when it did, in March 2020), and that it would lose any immediate commercial or financial benefits it obtained from offering the CUP Process to patrons. But the longer-term financial, reputational and legal harms to which Star was exposed by the sending of the misleading 7 November Email comfortably outweighed any such short-term benefits.
E RELIEF
As set out in the Proposed Orders, the parties jointly seek a declaration of contravention of s 180(1) of the Corporations Act pursuant to s 1317E, a disqualification order pursuant to s 206C of the Corporations Act, and a pecuniary penalty pursuant to s 1317G of the Corporations Act.
The proper approach to civil regulatory orders which are sought on an agreed basis is that explained in Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 (Cth v FWBII). The High Court there reaffirmed the practice of acting upon agreed penalty submissions. The plurality emphasised, at [46], the "important public policy involved in promoting predictability of outcome in civil penalty proceedings" which "assists in avoiding lengthy and complex litigation and thus tends to free the courts to deal with other matters and to free investigating officers to turn to other areas of investigation that await their attention". As a result, there is "very considerable scope" for the parties to civil proceedings to agree upon the appropriate remedy and for the court to be persuaded that it is an appropriate remedy: at [57]. Their Honours stated, at [58]:
Subject to the court being sufficiently persuaded of the accuracy of the parties' agreement as to facts and consequences, and that the penalty which the parties propose is an appropriate remedy in the circumstances thus revealed, it is consistent with principle and … highly desirable in practice for the court to accept the parties' proposal and therefore impose the proposed penalty. (original emphasis)
A further reason for courts acting upon such submissions is that they are advanced by a specialist regulator able to offer "informed submissions as to the effects of contravention on the industry and the level of penalty necessary to achieve compliance", albeit that such submissions will be considered on the merits in the ordinary way: see [60]-[61].
These principles are not confined to agreed submissions on pecuniary penalties but apply equally to agreement on other forms of relief. The High Court's conclusions as to the desirability of acting upon agreed penalty submissions were made in the context of its broader recognition that civil penalties were but one of numerous forms of relief which regulators could choose and pursue as civil litigants in civil proceedings, including by making submissions as to that relief: see Cth v FWBII at [24], [57]-[59], [63], [103], [107]. This is consistent with the long-standing judicial support for agreed positions on declarations, injunctions and the like in civil regulatory proceedings, having regard to the public interest explained in NW Frozen Foods Pty Ltd v ACCC (1996) 71 FCR 285; [1996] FCA 1134.
In considering whether an agreed and jointly proposed penalty is an appropriate penalty, it is necessary to bear in mind that there is no single appropriate penalty, as the Full Court explained in Volkswagen Aktiengesellschaft v ACCC (2021) 284 FCR 24 at [127], [129] (Wigney, Beach and O'Bryan JJ). There, the Full Court explained that there is a permissible range of penalties within which no particular figure can necessarily be said to be more appropriate than another. Further, their Honours said that the Court should generally recognise that the agreed penalty is most likely the result of compromise and pragmatism on the part of the regulator, and reflects, amongst other things, the regulator's considered estimation of the penalty necessary to achieve deterrence and the risks and expense of the litigation had it not been settled.
Accordingly, where the penalty proposed by the parties is within the permissible range, the court will not depart from the submitted figure "merely because it might otherwise have been disposed to select some other figure": Cth v FWBII at [47].
A precondition to the Court's powers in s 206C (disqualification orders) and s 1317G (pecuniary penalty orders), which are addressed in further detail below (see paragraphs 83 to 89 and 90 to 105 respectively), is the making of a declaration under s 1317E. Therefore, it is appropriate to address the proposed declaratory relief first, before addressing the imposition of any disqualification order or pecuniary penalty.
Because the imposition of a disqualification order is a relevant factor in determining an appropriate pecuniary penalty, it is appropriate to consider the issue of a disqualification order before considering the imposition of a pecuniary penalty: ASIC v Wooldridge [2019] FCAFC 172 at [56]-[58]; see also Cruickshank v ASIC (2022) 292 FCR 627; [2022] FCAFC 128 at [143]-[145] (Allsop CJ, Jackson and Anderson JJ).
The balance of this part of these submissions is organised accordingly.
Declaration of contravention
At all relevant times during the period, s 180(1) was a "civil penalty provision" for the purposes of the Corporations Act: s 1317E(3).
Section 1317E(1) provides that if a Court is satisfied that a person has contravened a civil penalty provision, it must make a declaration of contravention. The provision is not discretionary: ASIC v Helou (No 2) [2020] FCA 1650 at [140] (Beach J). The mandatory terms of the section necessarily override the discretionary considerations to which a court might otherwise have given weight, in declining to make a declaration: Mayfair Wealth Partners Pty Ltd v Australian Securities and Investments Commission [2022] FCAFC 170 at [184] (Jagot, O'Bryan and Cheeseman JJ).
Section 1317E(2) of the Corporation Act sets out the matters that must be specified in any declarations made. Those matters are relevantly as follows (and have been at all material times):
the Court that made the declaration;
the civil penalty provision that was contravened;
the person who contravened the provision;
the conduct that constituted the contravention; and
in relation to the s 180(1) contravention, the corporation to which the conduct related.
In framing declarations, "attention must be given to the form of the declaration, so that it is at least informative as to the basis on which the Court declares that a contravention has occurred": ACCC v Renegade Gas Pty Ltd [2014] FCA 1135 at [66] (Gordon J). However, a declaration of contravention need not recite in detail all of the factual matters and evidence upon which a finding of contravention is made: Rural Press Ltd v ACCC (2003) 216 CLR 53; [2003] HCA 75 at [90], [93] (Gummow, Hayne and Heydon JJ).
The declaratory relief sought by the parties, as set out in the Proposed Orders, complies with s 1317E(2) and identifies the essential aspects of Mr Theodore's conduct that constituted the contravention of s 180(1).
Disqualification
The Court has power to order disqualification under ss 206C and 206E of the Corporations Act.
Section 206C permits the Court, on application by ASIC, to disqualify a person from managing corporations for a period that the Court considers appropriate if:
a declaration is relevantly made under s 1317E that the person has contravened a "corporation/scheme civil penalty provision"; and
the Court is satisfied that the disqualification is justified.
At all relevant times, s 180(1) of the Corporations Act has been a "corporation/scheme civil penalty provision".
In determining whether the disqualification is justified, the Court may (under s 206C(2)) have regard to:
the person's conduct in relation to the management, business or property of any corporation; and
any other matters that the Court considers appropriate.
In ABCC v Pattinson (2022) 274 CLR 450; [2022] HCA 13, the High Court noted that the purpose of civil penalty provisions serve the objects of specific and general deterrence and that "they are protective of the public interest and they aim to secure compliance by deterring repeat contraventions": at [42]-[43] (Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ). After referring to those aspects of Pattinson, the Full Court in Cruickshank noted that "[d]isqualification orders have in the past been said to have elements of retribution, deterrence, reformation and mitigation as well as the objective of protection of the public": at [144]. It placed particular emphasis on the primary purpose of disqualification orders being the protection of the public, while noting that the purpose of a pecuniary penalty is to act as a specific and general deterrent to the general public against repetition of like conduct: at [114] (Allsop CJ, Jackson and Anderson JJ).
The principles which guide the exercise of the Court's power to order disqualification pursuant to s 206C of the Corporations Act were identified in ASIC v Adler (2002) 42 ACSR 80 at 97-98 by Santow J. They include, relevantly:
(i) Disqualification orders are designed to protect the public from the harmful use of the corporate structure or from use that is contrary to proper commercial standards;
(ii) The banning order is designed to protect the public by seeking to safeguard the public interest in the transparency and accountability of companies and in the suitability of directors to hold office;
(iii) Protection of the public also envisages protection of individuals that deal with companies, including consumers, creditors, shareholders and investors;
(iv) The banning order is protective against present and future misuse of the corporate structure;
(v) The order has a motive of personal deterrence, though it is not punitive; The objects of general deterrence are also sought to be achieved;
(vi) In assessing the fitness of an individual to manage a company, it is necessary that they have an understanding of the proper role of the company director and the duty of due diligence that is owed to the company;
(vii) Longer periods of disqualification are reserved for cases where contraventions have been of a serious nature such as those involving dishonesty;
(viii) In assessing an appropriate length of prohibition, consideration has been given to the degree of seriousness of the contraventions, the propensity that the defendant may engage in similar conduct in the future and the likely harm that may be caused to the public;
(ix) It is necessary to balance the personal hardship to the defendant against the public interest and the need for protection of the public from any repeat of the conduct;
(x) A mitigating factor in considering a period of disqualification is the likelihood of the defendant reforming;
(xi) The eight criteria to govern the exercise of the court's powers of disqualification set out in Commissioner for Corporate Affairs (WA) v Ekamper (1987) 12 ACLR 519 have been influential. It was held that in making such an order it is necessary to assess:character of the offenders; nature of the breaches;
Section 1317G(6) of the Corporations Act provides that in determining the pecuniary penalty, the Court must take into account "all relevant matters", including:
the nature and extent of the contravention;
the nature and extent of any loss or damage suffered because of the contravention;
the circumstances in which the contravention took place; and
whether the person has previously been found by a court to have engaged in any similar conduct.
Numerous authorities have identified potentially relevant factors for the imposition of pecuniary penalties, in addition to (or overlapping with) the mandatory factors specified in s 1317G.
As the Full Court explained in Australian Building and Construction Commission v CFMEU (2017) 254 FCR 68 (ABCC v CFMEU) at [102]-[104] (Dowsett, Greenwood and Wigney JJ), some of the factors relate to the objective nature and seriousness of the contravention, and others concern the particular circumstances of the contravener.
Factors relating to the objective nature of the contravention include:
the extent to which the contravention was the result of deliberate or reckless conduct, as opposed to negligence or carelessness;
whether the contravention comprised isolated conduct, or was systematic or occurred over a period of time. (Relatedly, it has been observed that facts prior to the period being penalised may be taken into account in determining the penalty in the instinctive synthesis performed by the Court: see, ASIC v MLC Limited (2023) 168 ACSR 122; [2023] FCA 539 at [96] (Moshinsky J));
the seniority of officers responsible for the contravention;
the impact or consequences of the contravention on the market or innocent third parties; and
the extent of any profit or benefit derived as a result of the contravention.
Factors relating to the particular circumstances of the defendant include:
whether the defendant has been found to have engaged in similar conduct in the past (noting that this is a mandatory factor pursuant to s 1317G(6)(d));
whether the defendant has demonstrated contrition and remorse;
the degree of the defendant's cooperation with the regulator, including in the investigation and prosecution of the contravention; and
whether the defendant has suffered any extra-curial punishment or detriment arising from the finding that it had contravened the law.
Not all factors that have been identified in previous cases will necessarily be relevant or important in every case, and they should not be treated as a rigid checklist of matters to be applied in every case, because in each case, the overriding principle is that the Court must weigh all relevant circumstances: ABCC v CFMEU at [101].
The appropriateness of the amount of a penalty must be assessed by reference to the specific civil penalty provision which has been contravened in light of its context and purpose, and the objects of the relevant statute as a whole: ASIC v Australia and New Zealand Banking Group Ltd [2018] FCA 155 at [22(f)] (Middleton J).
The statutory maximum penalty
The majority in Pattinson considered that the statutory maximum penalty "is 'but one yardstick that ordinarily must be applied' and must be treated 'as one of a number of relevant factors'" to inform the assessment of a penalty of appropriate deterrent value: Pattinson at [53]-[55]. Their Honours at [49]-[51] rejected an approach by which the statutory maximum penalty was required to be reserved exclusively for the worst category of contravening conduct. However, they emphasised that there should be "some reasonable relationship between the theoretical maximum and the final penalty imposed"; the relationship of reasonableness being established by reference to a need for deterrence having regard to the circumstances of the contravenor and the circumstances of the contravention: at [53]-[55].
F APPROPRIATNESS OF DISQUALIFICATION PERIOD AND PECUNIARY PENALTY
ASIC and Mr Theodore jointly submit that:
The Court ought to disqualify Mr Theodore from being a company director pursuant to s 206C of the Corporations Act for the period of 9 months; and
The Court ought to impose a pecuniary penalty pursuant to s 1317G of the Corporations Act in the amount of $60,000.
ASIC and Mr Theodore submit that the proposed disqualification period and pecuniary penalty are appropriate having regard to the circumstances of the contravening conduct (as set out at paragraphs 60 to 67 above and the relevant principles in relation to disqualification and pecuniary penalties (see paragraphs 83 to 89 and paragraphs 90 to 105 respectively). In particular, the proposed period of disqualification is appropriate to achieve the protective objects of a disqualification order, and the proposed penalty is appropriate to achieve the principal object of general deterrence.
The salient features of this case, which support the making of a disqualification order and a pecuniary penalty order, and for the period and in the amounts jointly proposed, are as follows.
First, the 7 November Email was a misleading communication sent by Star to one of its major lenders, NAB. The circumstances in which it was sent exposed Star to the risk of a variety of different forms of harm.
Secondly, Mr Theodore was directly involved in the drafting of the 7 November Email. Mr Theodore ought to have been aware of the misleading or inaccurate nature of the representations in the 7 November 2019 Email. In these circumstances, the Court will find that Mr Theodore's conduct in failing to prevent the sending of the 7 November 2019 Email was reckless, in the sense that it involved gross negligence.
Thirdly, as CFO, Mr Theodore occupied a senior role at Star, and it was thus within his power to prevent the 7 November Email be sent.
Fourthly, in light of his knowledge of the primary purpose of the CUP Process, and his involvement in prior requests for information from CUP regarding the use of its cards at Star properties, he was aware of the circumstances in which CUP, through NAB, made its request for information to which the 7 November Email was a response. Therefore, even though the 7 November Email was drafted under significant time pressure on the morning of 7 November 2019 it cannot be said that Mr Theodore's failure to prevent it from being sent was a momentary lapse in judgement.
However, against the backdrop of the matters outlined above, the following mitigating circumstances demonstrate why a disqualification period longer than 9 months, or a pecuniary penalty greater than $60,000, are not warranted.
First, Mr Theodore has admitted to contravening s 180(1) and co-operated with ASIC. In doing so, some of the cost to the public of a fully contested hearing has been avoided, even if the admissions were made at a relatively late stage of the proceedings after the preparation of lay and expert evidence and shortly before the trial. Mr Theodore's admission and co-operation also demonstrates contrition, and insight into his conduct.
Secondly, Mr Theodore did not derive or seek to derive any personal benefit from his contravening conduct: SAFA at [87].
Thirdly, there was a single contravention of s 180(1) and Star ceased to implement the CUP Process about 19 weeks later.
Fourthly, Mr Theodore has suffered extra-curial detriments for his conduct the subject of this proceeding. In the almost 3-year period since Mr Theodore resigned from his role at Star in May 2022, he has been unable to secure alternative employment in an executive or senior level role: Theodore Affidavit at [12]. Since resigning from Star, Mr Theodore has only managed to secure temporary contract positions at significantly lower pay, causing him to suffer financial loss: Theodore Affidavit at [13]-[14], [20].
Fifthly, Mr Theodore has already faced considerable public scrutiny in relation to the conduct the subject of this proceeding against him, in the context of the Bell Review of The Star Pty Ltd and also media coverage concerning this proceeding: Theodore Affidavit at [17]. This public scrutiny has had a significant adverse effect on his health and his family: Theodore Affidavit at [18]-[19].
Sixthly, even prior to his admissions in this proceeding, Mr Theodore had shown contrition for his conduct in respect of the 7 November 2019 Email.
Seventhly, Mr Theodore has no prior criminal convictions and has not previously been subject to any investigations or proceedings commenced by ASIC or any other regulator: Theodore Affidavit at [22].
G CONCLUSION
For the reasons set out in these submissions, the Court should make the declaration and orders sought by ASIC and Mr Theodore, as set out in the Proposed Orders.
31 January 2025
Ruth Higgins SC
James Arnott SC Garry Rich SC
Stephanie Patterson Greg O'Mahoney
Stephen Speirs Adam Khadra
Luca Moretti Counsel for the Fourth Defendant
Counsel for the Plaintiff