FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Bekier (Liability Judgment) [2026] FCA 196

ORDERS

THE COURT ORDERS THAT:

1.    The proceeding be adjourned, part-heard, to a date to be fixed within the next seven days for the making of orders in conformity with these reasons.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

CONTENTS:

LEE J:

A    INTRODUCTION

1    The succession of the infant Marquess of Bute to the marquessate in 1848 made him staggeringly wealthy. As part of his inheritance, the Marquess was made President of the Cardiff Savings Bank; a position held by his late father. But despite his Lordship’s abiding interests in architecture, linguistics, philanthropy and Catholicism, the Marquess eschewed any interest in the affairs of the Cardiff Savings Bank. Remarkably, in the almost four decades leading up to the bank’s collapse, he had presided over precisely one board meeting.

2    While his Lordship was engaged elsewhere, a rogue had been busy. An actuary had defalcated approximately £30,000 and a liquidator sought to make officers of the bank responsible. The Marquess was not exempt. The issue in Re Cardiff Savings Bank [1892] 2 Ch 100 (also known as the Marquess of Bute’s case) was whether despite having no knowledge of the irregularities (or really any of the bank’s affairs), the Marquess was liable. Mr Justice Stirling held that he was not: the Marquess was entitled to rely on others to manage the affairs of the bank and to hold otherwise would be to fix him with responsibility for their neglect or omission.

3    Times have changed. Toleration of the languid, listless indifference of gentleman directors of the Victorian and Edwardian ages is a thing of the past. The law now expects significantly more of officers of a corporation in discharging their duties and when delegating to others.

4    A recurring topic canvassed in the submissions in this case, which has also frequently arisen throughout recent case law, is whether a director or other officer has exercised the requisite degree of care and diligence, particularly when delegating to and relying upon management. Part of the case of the Australian Securities and Investments Commission (ASIC) involves consideration of the extent to which directors (and particularly non-executive directors) are required, as part of their statutory duty of care and diligence, to scrutinise information provided by management and to seek further information.

5    But as I will explain, the resolution of this case has been informed by the precise case mounted by ASIC on its pleadings, and the facts found based upon the evidence adduced at trial, rather than by issues of broad legal principle.

6    On one level this is unsurprising. The principles are now relatively uncontroversial and drawing lines as to acceptable engagement with the affairs of a company does not occur in the abstract. An evaluation of whether the statutory standard has been met is necessarily contextual. Like assessments as to what is reasonable, an evaluation as to whether there has been a contravention of the broadly expressed statutory norm is value laden. This is because the required standard is applied by reference to “fact-value complexes, not on mere facts”: see Russell v Australian Broadcasting Corporation (No 3) [2023] FCA 1223; (2023) 303 FCR 372 (per Lee J at 432 [325]).

7    During ASIC’s opening, I indicated a preliminary view that aspects of ASIC’s case might give rise to two conceptual difficulties.

8    The first was that there was a tension in parts of the case brought as between the executives on the one hand and the non-executive directors on the other. The executives were alleged (as it turned out, with justification), to have failed to apprise the Board sufficiently of certain information they possessed. Meanwhile, the non-executive directors were alleged to have failed to recognise that the information they were provided was inadequate and to make enquiries to discover certain information.

9    The second was that it appeared aspects of ASIC’s case may suffer from a degree of hindsight bias. What may have appeared as the most prudent course of action ex post, with the benefit of information and perspective now available, can obscure the proper analysis of past actions. Judgments of directors are made in real time. As Søren Kierkegaard famously observed: “life can only be understood backwards; but it must be lived forwards”. The human experience is to live by making choices and moving forward; sometimes without complete understanding; but one ultimately gains insight into those choices by looking back. Evaluative judgments of past actions, including when assessing legal liability, ought to reflect the reality that actions or inactions of directors, like any human actor, need to be judged by reference to the snapshot of knowledge and perspective then available.

10    In part, these preliminary views have been fortified by closer analysis.

11    Before providing an overview of the case, it is useful to make two additional preliminary points.

12    First, the fourth defendant, Mr Theodore, and the third defendant, Mr Hawkins, each settled the claims brought against them. Consent orders were made by another judge of the Court: see Australian Securities and Investments Commission v Hawkins [2025] FCA 121. Although it is unnecessary to decide the cases brought against Mr Theodore or Mr Hawkins, to the extent their involvement in any event is relevant to ascertaining the facts underlying the contraventions alleged against the other defendants, it will be considered for that purpose and only on the evidence adduced at trial.

13    Secondly, if not already apparent, this is a long judgment. For intended readers, Lent is an apt time for delivery. Its penitential length reflects the number of defendants, the need to make a vast number of factual findings, and the convoluted way ASIC has pleaded its case. As will become apparent, although ASIC’s case was skilfully presented, the pleading is at times difficult to follow and was pregnant with complex definitions; indeed, as was remarked during final submissions, two adjacent and important paragraphs, directly or indirectly, each contained no less than 15 densely drafted defined terms.

14    To facilitate readability, I have divided the judgment into sections, which are identified in the index and broadly mirror the way ASIC presented the various aspects of its case.

A.1    Overview of ASIC’s case

15    ASIC makes claims against eleven persons. Curiously, ASIC named four defendants by including their post-nominals (or presumably some of their post-nominals). Each of them is alleged to have contravened their statutory duty pursuant to s 180(1) of the Corporations Act 2001 (Cth) (Corporations Act). This is because as former directors and officers of The Star Entertainment Group Limited (Star) it is alleged they failed to exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would have exercised if they were a director or officer of Star in Star’s circumstances, and occupied the office held by, and had the same responsibilities within Star as, the director or officer.

16    In broad terms, ASIC’s case concerns two aspects of Star’s casino business.

17    The first is Star’s dealings with junkets, particularly its largest junket customer, Suncity. I return below to what precisely is meant by the common noun, “junket” and the proper noun, “Suncity”. Relevantly, ASIC’s case is that the first defendant, Star’s Chief Executive Officer (CEO) and Managing Director, Mr Bekier, and the second defendant, Star’s most senior in-house solicitor, Ms Martin, each contravened s 180(1) by failing to act after becoming aware that Suncity personnel had engaged in suspicious conduct at Star’s casino in Sydney, including apparent money laundering and other potential criminal activity. ASIC’s case is that they neither took steps to terminate nor suspend Star’s business associations with Suncity, even when on notice of active law enforcement interests. ASIC also alleges that they did not ensure Star’s Board was given a proper overview of Suncity’s conduct within the Sydney casino and the risk Star faced from its ongoing business associations with Suncity.

18    ASIC further alleges that Star’s directors failed to take reasonable steps to place themselves in a position to guide and monitor the management of Star. Specifically, ASIC contends that Star’s directors failed to: (a) apply an enquiring mind to their responsibilities so as to recognise manifest gaps in the information Star’s management had provided to them; (b) recognise when certain information revealed deficiencies in Star’s management of its risks concerning junkets; and (c) act in their roles as stewards overseeing Star’s management of risk. ASIC contends that they thereby failed to exercise the degree of care and diligence expected of a reasonable director in Star’s circumstances with the same office and responsibilities, and contravened s 180(1) of the Corporations Act.

19    The second aspect is Star’s interactions with one of its major lenders, National Australia Bank Ltd (NAB) in relation to UnionPay (CUP or UnionPay) cards. To hearken back to an analogy drawn from simpler days, CUP was effectively the “Bankcard” of China. As will be explained below, Star knowingly permitted customers using those cards to obtain money for the prohibited purpose of gambling, in the guise of hotel expenses.

20    ASIC asserts that since at least 2016, CUP had repeatedly made clear to Star, through NAB, that the use of its cards for gambling purposes was prohibited, yet such use nonetheless continued at Star casinos. According to ASIC, in November 2019, Ms Martin reviewed and permitted correspondence to be sent to NAB (and then on to CUP), which falsely represented that CUP cards were only used by customers at Star to pay for non-gambling expenses. ASIC further alleges that she, and Mr Bekier, failed to inform Star’s Board of the issues in relation to CUP, and that their conduct exposed Star to risks of various types of harm, including damage to Star’s relationship with NAB, exposing Star to potential legal liability and reputational harm.

21    ASIC also brings a case against each of the non-executive directors of Star. That case focusses upon the information provided to them and the action, or inaction, that occurred in the light of that information. ASIC relies on:

(a)    the Board’s approval of credit exposure increases to existing “cheque” cashing facilities (CCFs), which Star had in place with Mr Sixin Qin and Mr Alvin Chau (two junket funders), in the absence of probity information;

(b)    the Board’s failure to suspend or terminate dealings with Messrs Qin and Chau in the light of certain information, including a “World Check Report” and reports prepared by KPMG;

(c)    the information provided to the Board in July and August 2018 about “concerns” relating to certain activities undertaken at the Salon 95 Service Desk (“Salon 95” is a private and “exclusive” gaming room that was made available by Star to junkets affiliated with Suncity); and

(d)    the public reporting of allegations about the way Crown Resorts Ltd (Crown) conducted its casino business.

22    ASIC’s case against the non-executive directors emphasises the individual and discrete duties that each of them owed to Star, and their requirement to engage with and fulfil those duties irrespective of the actions of Mr Bekier and Ms Martin. ASIC contends that while Mr Bekier and Ms Martin “manifestly let Star’s Board down”, that does not excuse the failures of Star’s non-executive directors. ASIC pursues these two theories of liability concurrently rather than alternatively.

23    Having introduced the case, it is next appropriate to say something further about the defendants and summarise their broad responses to the ASIC claims.

A.2    The defendants

24    From 1 November 2016 to 31 March 2020 (Relevant Period), the first defendant, Mr Bekier, was the Managing Director and CEO of Star. He commenced in April 2014. Mr Bekier was a director of Star from March 2011 until March 2022. He was also a director (from August 2006 to July 2022) of each of the companies in The Star Entertainment Group (Group) that held casino licences being: (a) The Star Pty Limited (Star Sydney), (b) The Star Entertainment Qld Custodian Pty Ltd (Star Qld Custodian); and (c) The Star Entertainment QLD Limited (Star Qld) (which, until 3 February 2017, was called Jupiters Limited).

25    The second defendant, Ms Martin, a solicitor holding a current practising certificate, was Star’s Company Secretary from June 2011 to May 2022. From October 2012 until August 2019, she was also the Group General Counsel. By 7 August 2019, she was the Group’s Chief Legal and Risk Officer (CLRO). Additionally, from June 2011, she was the company secretary of: (a) Star Sydney until May 2022; (b) Star Qld Custodian until June 2022; and (c) Star Qld until June 2022. She was also a director of Star Qld from March 2014 to June 2022.

26    The third defendant, Mr Hawkins, was the Managing Director of Star Sydney from September 2014 until January 2019. In January 2019, he became Star’s Chief Casino Officer.

27    The fourth defendant, Mr Theodore, was Star’s Head of Strategy and Investor Relations from 2011 until October 2018, when he became the Chief Commercial Officer. From September 2019, he was Star’s Chief Financial Officer (CFO). When Mr Theodore commenced as CFO, there was a transition period with his predecessor, Mr Barton, until October 2019.

28    The fifth defendant, Mr O’Neill, was a non-executive director of Star from March 2011 until May 2022. He was the Chairman of the Board from June 2012, and as Chairman he was an ex-officio member of all Board committees. Mr O’Neill was also a director of Star Qld from June 2012 to June 2022.

29    The sixth defendant, Mr Sheppard, was a non-executive director of Star from March 2013 to November 2022. He was the Chair of the Risk and Compliance Committee until August 2015 and was Chair of the Investment and Capital Expenditure Review Committee from March 2015 to June 2020. He was a member of a committee carrying the grand (but vaguely Stalinist) name, the “People, Culture and Social Responsibility Committee” from July 2013 until the end of 2014. He was also briefly a member of the Remuneration and Nomination Committees between March and June 2013.

30    The seventh defendant, Ms Lahey, was a non-executive director of Star from March 2013 to December 2022. She was a member of the Risk and Compliance Committee from March 2013 until November 2022. She was the Chair of the People, Culture and Social Responsibility Committee (which became the Remuneration, People and Social Responsibility Committee) for the entirety of her time on Star’s Board. I interpolate to make two remarks: first, why the word “culture” was later omitted from the title is mysterious on the evidence; and secondly, perhaps demonstrating the performative nature of these sorts of titles, to the extent one can discern a “culture” at Star during the period, for reasons that will become evident, it was an unhealthy one. In any event, Ms Lahey was also a member of the Remuneration Committee from March 2013 until the end of 2021, and also a member of the Audit Committee from March 2013 to June 2013.

31    The eighth defendant, Mr Bradley, was a non-executive director of Star from May 2013 to October 2022. Mr Bradley was a member of the Risk and Compliance Committee for the entirety of his time on Star’s Board and the Chair of that Committee from September 2015 to February 2021. He was also a member of the Audit Committee for the entirety of his tenure, the Chair of that Committee from September 2013 to August 2015 and Acting Chair from November 2017 to May 2018. He was a member of the Remuneration Committee from May 2013 to February 2018. He was also a member of the Investment and Capital Expenditure Review Committee from March 2015 to June 2020.

32    The ninth defendant, Ms Pitkin, was a non-executive director of Star from December 2014 to June 2022. She was a member of the Audit Committee for the entirety of her time on Star’s Board. She was also Chair of the Remuneration Committee throughout her tenure until December 2021. She was also a member of the People, Culture and Social Responsibility Committee throughout her tenure.

33    The tenth defendant, Mr Heap, commenced as a board observer on 18 December 2017. He was appointed formally as a director of Star from 23 May 2018 and remained in that role until 31 March 2023. From 23 May 2018, he was a member of the Risk and Compliance Committee, the Remuneration Committee and the People, Culture and Social Responsibility Committee.

34    The eleventh defendant, Mr Todorcevski, commenced as a board observer on 23 October 2017. He was appointed formally as a director of Star from 23 May 2018 and remained in that role until 31 August 2020. From 23 May 2018, Mr Todorcevski was the Chair of the Audit Committee and a member of each of the Risk and Compliance Committee and the Investment and Capital Expenditure Review Committee.

A.3    Overview of the defendants’ cases

35    This section provides an overview of each defendant’s response to the cases brought against them. Although I describe below the “case” of each defendant, this does not involve me making the basic error of inverting onus; it is not, of course, for the defendants to prove a case; this expression is used as convenient shorthand.

36    Of course, my description of these responses is not exhaustive and, like my explanation of ASIC’s case, is presented at a relatively high level of generality. A more detailed consideration of each response will emerge as I progress through the process of fact-finding and formulating my conclusions.

A.3.1    Mr Bekier

37    Mr Bekier focusses on what information ASIC alleges he knew or does not allege he knew at specific points in time. For each contravention alleged against him, he considers what a reasonable director in his position would have done with the knowledge he possessed and without the knowledge he did not possess, which may have been available to others within Star.

38    ASIC’s first and third allegations concern the Board’s decision to approve, by circulating resolution, increases in Star’s net credit exposure under the CCFs for Mr Qin (in late 2017) and Mr Chau (in early 2018). In response to those allegations, Mr Bekier asserts that such approvals were “financial” or “credit” decisions, not requiring consideration or assessment of the suitability of Messrs Qin and Chau as persons with whom Star should continue doing business. He emphasises that the decisions involved increasing existing lines of credit to junket customers, and that he reasonably assumed the probity of Messrs Qin and Chau had been assessed by management.

39    ASIC’s second allegation against Mr Bekier, which is effectively a sequel to the first, concerns a Board paper that Mr Bekier was involved in presenting at a meeting of Star’s Board on 6 December 2017 entitled “Cheque Cashing Facility Process”. This paper included, as an appendix, an extract from a World Check Report on Mr Qin. The extract contained a one-line reference to Mr Qin reportedly being detained in China in 2012 for alleged involvement in money laundering. ASIC’s case is that a reasonable director in Mr Bekier’s position, upon seeing this reference, would have taken all necessary steps to terminate all business associations with Mr Qin or suspend those business associations until he was provided with certain information that satisfied him of Mr Qin’s probity. Mr Bekier is alleged to have contravened s 180(1) by not taking these steps at the Board meeting held on 6 December 2017 and thereafter.

40    In response, Mr Bekier asserts he did not know of the World Check Report information, and even if it was found that he knew that information, terminating or suspending Star’s dealings with Mr Qin was not the only reasonable response in the circumstances.

41    ASIC’s fourth allegation against Mr Bekier is that by the time of Audit Committee and Board meetings held on 23 and 24 May 2018 (or on 16 August 2018), he failed to take steps to suspend Star’s dealings with Mr Qin, Mr Chau and Suncity, and to disclose the contents of an email from Mr Andrew Power (Star Sydney’s General Counsel) to the Board. This allegation is premised upon Mr Bekier having received two further pieces of information that should have caused him to reassess Star’s relationship with Mr Qin, Mr Chau and Suncity: first, the contents of the email from Mr Power concerning Suncity’s conduct in Salon 95; and secondly, the findings of the KPMG reports concerning Star’s AML/CTF programme.

42    By way of response, Mr Bekier contends that the Court should make several factual findings about the prior reviews of Star’s AML/CTF programme, all of which demonstrate that Mr Bekier had received repeated assurances the programme was effective and compliant. Mr Bekier also contends that several factual findings should be made as to the reports prepared by KPMG, Mr Power’s email, and his discussions with Mr Hawkins, Mr O’Neill and Ms Martin, which support his assertion that no contravention can be established.

43    ASIC’s fifth allegation against Mr Bekier concerns his response to the information about Suncity’s conduct in Salon 95 during the period up to the Board meeting on 26 July 2018, which overlaps to some extent with ASIC’s fourth allegation. Mr Bekier answers by contending that several factual findings should be made as to the contents and review of the KPMG reports, his May 2018 CEO report, his June 2018 CEO report, his meetings with Ms Martin and the Board meeting on 26 July 2018. He contends that his knowledge of relevant matters as of 26 July 2018 was effectively the same as of 23 May 2018, and a reasonable director would not have taken any additional steps other than ensuring that KPMG’s recommendations were implemented in full, which is what he did.

44    ASIC’s sixth allegation against Mr Bekier concerns his response to media reporting about Crown’s relationship with certain junkets, including Suncity, published in July and August 2019. According to ASIC, by the time of the Board meeting held on 15 August 2019, Mr Bekier knew or ought reasonably to have known (in addition to the matters he already knew by 26 July 2018) of further adverse information about Mr Chau and Suncity, and the contents of media reporting about Crown. ASIC’s primary case is that, prior to the Board meeting held on 15 August 2019, a reasonable director would have taken all necessary steps to inform themselves of any matters relating to Salon 95 and/or Suncity that had occurred subsequent to the May 2018 CEO report, which enquiries would have elicited information known by Mr Hawkins and Ms Martin (including the “Operation Money Bags Information” and “Operational Lunar Information”).

45    In response, Mr Bekier contends that a reasonable director in his position would not have recommended the termination or suspension of Star’s relationship with Suncity based on the information he had as of 15 August 2019. He also says a reasonable director would have directed management to investigate the Crown reporting and brief the Board on their implications for Star, which is what Mr Bekier did.

46    ASIC’s seventh allegation against Mr Bekier concerns his response to a warning letter from CUP to NAB. He notes this letter was attached as an “FYI” to an email he received on 5 March 2020, days after he had been told that Star’s CFO, Mr Theodore, had already decided to cease offering CUP services at Star. Mr Bekier again says several factual findings should be made about the set up and implementation of the CUP process, Star’s interactions with NAB, his knowledge of communications with NAB during 2017 to 2019, and his response to the letter from CUP. He asserts that a reasonable director in his position would not have appreciated that the information he was being provided indicated that Star had engaged in serious misconduct that required investigation or reporting to the Board. He further submits a reasonable director would not have taken any further steps to enquire into Star’s prior communications with NAB, and that even if the Court assesses the counterfactual aspect of ASIC’s case, the steps alleged that should have been taken do not engage with any risk of harm to Star.

A.3.2    Ms Martin

47    Ms Martin focusses on what she contends are deficiencies in the contraventions alleged against her, arising out of the way ASIC has pleaded and run its case.

48    She asserts that she was relatively detached from the decision-making of Star’s Board and did not possess the responsibilities or capacities ASIC suggests she had in her roles as Company Secretary, Group General Counsel and CLRO.

49    Ms Martin contends that she attended Board meetings in her capacity as Company Secretary for the purpose of taking minutes, with the caveat that, on occasion and upon request to do so, she presented on specific papers in her role as Group General Counsel or CLRO. She submits that she did not have a direct or independent reporting line to the Board on matters that were unrelated to her role as Company Secretary; rather, she contends that she reported to Mr Bekier, who determined what matters were brought to the Board’s attention. She asserts a generalised reliance on Mr Bekier concerning the contraventions alleged against her, which she says is corroborated by Mr Bekier’s evidence.

50    Separately, Ms Martin contends that ASIC has not pleaded nor run a case that seeks to define the scope of her duties and responsibilities, or “the applicable standard of care”, in reliance on any ethical duties. Rather, she says that ASIC has adopted the orthodox approach of seeking to establish the duties and responsibilities held by her as a matter of fact, having regard to her expertise as a solicitor.

51    Ms Martin also focusses on what she says are deficiencies in certain contraventions alleged against her arising out of ASIC’s pleaded case as to her alleged knowledge of “Star Sydney’s Obligations” and the “Queensland Casino Obligations”.

52    There are three allegations of contravention made against Ms Martin. The first relates to events concerning Suncity in 2018; the second relates to events concerning Suncity in 2019; and the third relates to events concerning CUP in 2019 and 2020.

53    Ms Martin responds to the allegations concerning the issues arising concerning Suncity in 2018 and in 2019 by contending that the “obligations” forming part of her alleged knowledge, do not exist. She also asserts that she did not know, and ought not reasonably to have known, all the matters on which ASIC’s case is based. She submits a reasonable officer in her position would not have recognised that the risks which ASIC relies upon arose nor would have had the power to terminate or suspend business associations with Suncity and Mr Chau, and even if she had that power, she would not have done so. Lastly, she says that, to her knowledge, Mr Bekier and Mr Hawkins were aware of the substance of the relevant information, and in such circumstances, a reasonable officer in her position would not have further informed Mr Bekier and the other members of the Board of such information, nor recommended the Board terminate or suspend the business associations.

54    In response to the allegations concerning the issues arising from Star’s dealings with NAB regarding the use of CUP cards, Ms Martin contends that ASIC has not established the pleaded risks it says Ms Martin knew or ought reasonably to have known existed, including the “CUP Suitability Risk”, “NAB Relationship Risk”, “Misleading Conduct Liability Risk”, and “Reputational Risk”. Ms Martin also contends that ASIC has not established she knew or ought reasonably to have known of certain matters concerning CUP’s position and communications between Star and NAB in respect of CUP.

A.3.3    Mr O’Neill

55    ASIC’s claims against Mr O’Neill, which are materially the same as ASIC’s claims against the other non-executive directors, fall into two broad categories.

56    The first category of claims, like the first and third allegations made against Mr Bekier, concerns the Board’s decision to approve, by circulating resolution, increases in Star’s net credit exposure under the CCFs for Mr Qin (in late 2017) and Mr Chau (in early 2018).

57    The second category of claims concerns the Board’s alleged failure to make enquiries into the probity of Mr Chau and Suncity, and to terminate or suspend Star’s business associations with Mr Chau and Suncity, in July 2018 and August 2019.

58    In relation to the first category, Mr O’Neill asserts that the Board was being asked to approve increases to Star’s net credit exposure to Messrs Qin and Chau in the context of Star being presented with a valuable commercial opportunity to win over junket business from Crown. Mr O’Neill contends this was a commercial decision which required the Board to weigh the foreseeable risks of the proposed course against the potential rewards.

59    Contrary to ASIC’s case, Mr O’Neill asserts that a reasonable director would not have considered it necessary, before approving the proposed credit limit increases, to direct Star’s management to provide the Board with all information necessary to carry out a full probity assessment of Mr Qin or Mr Chau. Mr O’Neill submits this aspect of ASIC’s case is clouded by hindsight. Mr O’Neill also highlights that ASIC does not allege that, at the time of the relevant decisions, Mr Chau or Mr Qin were unsuitable persons for Star to be doing business with.

60    As to the second category, Mr O’Neill asserts that the Board was not informed properly by Star’s management of the risks to Star of doing business with Mr Chau and Suncity. Unbeknown to the Board, repeated suspicious transactions had occurred in Salon 95, ultimately attracting interest from the NSW Police and Australian Federal Police (AFP).

61    ASIC alleges that, throughout 2018 and 2019, Mr Bekier and Ms Martin (as well as Mr Hawkins) knew or ought reasonably to have known of important matters about Mr Chau and Suncity that gave rise to serious legal and regulatory risks for Star, and they failed to bring those matters to the Board’s attention. Mr O’Neill contends that it necessarily follows that the non-executive directors were entitled to expect that Mr Bekier, Ms Martin and Mr Hawkins would, in carrying out their duties and responsibilities with care and diligence, recognise material risks when they arose and report such risks to the Board.

A.3.4    Mr Sheppard, Ms Lahey, Mr Bradley and Ms Pitkin

62    Six contraventions are alleged against Mr Sheppard, Ms Lahey, Mr Bradley and Ms Pitkin. Those non-executive directors assert that ASIC’s case against them is founded upon management’s failure to provide information to them and a corresponding requirement to procure this information from management. They contend that the countervailing nature of those propositions is unexplained.

63    The first contravention alleged is that Mr Sheppard, Ms Lahey, Mr Bradley and Ms Pitkin breached s 180(1) by not declining to approve the proposed circulating resolution to increase the credit limit for Mr Qin’s CCF until they were provided with certain probity information concerning Mr Qin. In response they submit that neither the draft resolution nor the Board paper referred to any matter that alerted them to a need to consider whether Star should continue to do business with Mr Qin. They also identify that neither document stated anything that alerted them to any concern or risk arising from Star’s dealings with Mr Qin, and make the same points concerning the third contravention alleged against them concerning the Board’s decision to approve an increase in Star’s net credit exposure under the CCF for Mr Chau.

64    The second contravention alleged against them is that, at or following the 6 December 2017 Board meeting, they breached s 180(1) by not terminating business associations with Mr Qin or suspending dealings with him pending management demonstrating that he and all persons associated with the Shen Minmin junket (the junket funded by his CCF) were of good repute.

65    In response to this allegation, they highlight that the World Check Report information concerning Mr Qin was “buried” in appendix of a 235-page long Board pack to which they were not referred. They also note that the Board pack included a presentation on the “CCF Process” that informed the Board that reputational risk factors had been examined for every CCF applicant. I interpolate to note that I evaluate the submission about the length of this and other Board packs in some detail below.

66    The fourth alleged contravention is that, at the Audit Committee meeting held on 23 May 2018, the Board meeting held on 24 May 2018 or, at the latest, by the conclusion of the Audit Committee meeting held on 16 August 2018, they breached s 180(1) by failing to: (a) request from management probity information, source of wealth information and source of funds information about Mr Qin and Mr Chau; and (b) suspend all dealings with Mr Qin, Mr Chau and Suncity until management had provided them with such information and they were satisfied that it was appropriate for Star to maintain a business association with them. The significance of the May 2018 dates derives from the fact that the executive summaries of KPMG reports were provided to the Audit Committee for its meeting on 23 May 2018. The significance of the Audit Committee meeting held on 16 August 2018 is that, by that date, management had informed the Audit Committee of the actions Star was taking to adopt the recommendations KPMG had made in its review of Star’s AML/CTF programme.

67    In response they contend they, prior to becoming aware of the contents of the executive summaries of the KPMG reports, were entitled to proceed on the basis that Star’s AML/CTF programme was compliant and effective. They further submit that they considered the matters raised by KPMG, requested management to prepare a detailed response and, after being satisfied that the response addressed KPMG’s concerns, approved the response and its implementation. Further, they assert that the neither the KPMG reports nor the executive summaries of those reports referred to Mr Qin, Mr Chau or Suncity.

68    There are two further contraventions alleged against Mr Sheppard, Ms Lahey, Mr Bradley and Ms Pitkin which are also alleged against Messrs Heap and Todorcevski (as well as Mr O’Neill). Mr Sheppard, Ms Lahey, Mr Bradley and Ms Pitkin adopt the submissions of Messrs Heap and Todorcevski in response to these remaining two alleged contraventions.

A.3.5    Messrs Heap and Todorcevski

69    The first contravention alleged against Messrs Heap and Todorcevski, as well as the other non-executive directors, is that they ought to have made enquiries of management about references to Salon 95 in three board papers in July and August 2018 and proposed that the Board direct management to suspend all business associations with Mr Chau and Suncity. In response they contend that, based on the documentary context in which those references appear, a reasonable director would not have considered them to be “red flags” and that the existence of a “red flag” is inconsistent with the proposition that the non-executive directors have been misled or “let down” by Star’s executives.

70    The second alleged contravention is that, at the Board meeting held on 15 August 2019 and all subsequent relevant times during the Relevant Period, they ought to have proposed to the other members of Star’s Board that the Board direct management to either terminate or suspend Star’s dealings with Suncity in the light of the Crown media allegations. In response they assert they demonstrated a “diligent and intelligent interest” into the Crown allegations and that the Board directed management to prepare a paper, which was presented at the Board meeting held on 15 August 2019. They assert that they were entitled to rely on the paper and the reasoning in it that supported the continuation of Star’s relationship with Suncity.

B    PRINCIPAL CONCLUSIONS

71    Given the length of these reasons, it is helpful to provide a summary of my principal conclusions in relation to each claim.

72    First, Mr Bekier failed to exercise his powers and discharge his duties as a director of Star with the requisite degree of care and diligence and thereby contravened s 180(1) of the Corporations Act in relation to: (a) the KPMG reports; (b) Suncity in 2018; (c) Suncity in 2019; and (d) CUP. The findings of contravention concerning the KPMG reports and in 2018 in relation to Suncity overlap to some degree. ASIC has not established that Mr Bekier engaged in contravening conduct concerning: (a) the Board’s decision to approve, by circulating resolution, the increase in Star’s net credit exposure under the CCF for Mr Qin (in late 2017); (b) the Board meeting held on 6 December 2017; and (c) the Board’s decision to approve, by circulating resolution, the increase in Star’s net credit exposure under the CCF for Mr Chau (in early 2018).

73    Secondly, Ms Martin failed to exercise her powers and discharge her duties as an officer of Star with the degree of care and diligence required and thereby contravened s 180(1) of the Corporations Act in respect of the allegations of contravention in relation to: (a) Suncity in 2018; (b) Suncity in 2019; and (c) CUP.

74    Thirdly, ASIC has not established that it is entitled to any relief against Mr O’Neill, Mr Sheppard, Ms Lahey, Mr Bradley, Ms Pitkin, Mr Heap or Mr Todorcevski. The pleaded case that they each failed to exercise their powers and discharge their duties as directors of Star with the requisite degree of care and diligence and thereby contravened s 180(1) of the Corporations Act is not made out on the evidence adduced.

C    THE PLEADED CASE

C.1    Some observations and the relevant principles

75    A pleader can sometimes find themselves caught between Scylla and Charybdis.

76    It is sometimes difficult in a complex case to avoid assertions of insufficient specificity while avoiding the vice of eliding the distinction between material facts and particulars and unnecessarily confining the case being advanced by making allegations that are too granular. Sometimes frustration is faced by pleaders when the same respondents who demand further particularisation then say an applicant has confined their case when the substance or core of the case sought to be advanced is tolerably clear to everyone.

77    ASIC’s pleaded case did not always avoid unnecessary complexity and misconceptions. The device of adopting and then repeatedly deploying complicated definitions has been apt to cause confusion. Also, at times, the pleading put matters too highly or it was unclear as to whether pleas were averred as alternatives or in combination. Although these issues were largely clarified during the hearing and submissions, with a metronome-like predictability, several defendants then relied on pleading points and assert that ASIC was “bound by its pleaded case” and that ASIC had sought to depart from it.

78    In considering the substance of these pleading disputes, it is worth restating some well-known principles.

79    As I observed in Australian Securities and Investments Commission v GetSwift Limited (Liability Hearing) [2021] FCA 1384 (at [84]), an abundance of authority confirms the need for precision in pleadings, particularly in cases involving allegations of contravention of a civil penalty provision. Indeed, a fair trial of allegations of contravention of law requires “the party making those allegations … to identify the case which it seeks to make and to do that clearly and distinctly”: Forrest v Australian Securities and Investments Commission [2012] HCA 39; (2012) 247 CLR 486 (at 502 [25] per French CJ, Gummow, Hayne and Kiefel JJ); see also Australian Building and Construction Commissioner v Hall [2018] FCAFC 83; (2018) 261 FCR 347 (at 368–9 [49]–[50] per Tracey, Reeves and Bromwich JJ).

80    This case does involve allegations of contravention of a civil penalty provision, being s 180(1) of the Corporations Act: see s 1317E(3)(a). It also involves the seeking of pecuniary penalty orders pursuant to s 1317G, and disqualification orders pursuant to ss 206C(1) and 206E. Although some issues have been clarified during trial, it is not a case in which the parties have agreed to countenance a departure from the pleadings and to fight the case on other issues.

81    Some reliance was put by the defendants in this regard on ASIC being a Commonwealth agency and obliged to behave as a “model litigant” pursuant to the Legal Services Directions made under s 55ZF of the Judiciary Act 1903 (Cth). At best, this is a distraction. The model litigant obligation requires ASIC to act fairly, with complete propriety and in accordance with the highest professional standards. This is an important discipline reflecting the traditional and instinctive dealing of fair play between Crown and subject (see Melbourne Steamship Co Ltd v Moorehead [1912] HCA 69; (1912) 15 CLR 333 per Griffith CJ at 342), but it does not change the substantive obligations of ASIC as a party. As s 64 of the Judiciary Act 1903 (Cth) relevantly provides, in any suit to which the Commonwealth is a party, the rights of parties shall as nearly as possible be the same as in a suit between subject and subject.

82    Ultimately, pleadings are a means to an end and not an end in themselves. Litigation, including regulatory litigation, is not a game of “gotcha”. What has informed my approach is recognising the need to define the issues in dispute with sufficient clarity to enable the respondents to understand the case while bearing in mind the basal function of pleadings is to ensure the requirement of procedural fairness that a party should have the opportunity of meeting the case against them: Banque Commerciale SA (En Liqn) v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 (at 286 per Mason CJ and Gaudron J); Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658 (at 664 per Murphy, Brennan, Wilson, Deane and Dawson JJ).

83    With these principles in mind, it is useful to turn to identify at the outset some pleading arguments that can be placed into five categories, and which, to some extent, recur during this case.

C.2    The first pleading issue: counterfactual enquiries

84    Properly analysed, a deficiency exists in those aspects of ASIC’s pleaded case which hypothesise what a reasonable director would have done upon being apprised of information that it is not alleged that the relevant director knew or ought reasonably to have known.

85    For example, in [232] of the Further Amended Statement of Claim (FASOC), ASIC pleads that a hypothetical reasonable director, possessing certain knowledge that Mr Bekier allegedly had as of July 2018, would have made further enquiries to inform themselves of any matters relating to Salon 95 and/or Suncity (see [232(a)(i)]). Making these further enquiries would have allegedly revealed information held by other employees of Star (including the “Operation Money Bags Information”) and the reasonable director would have learned of such information (see [232(a)(ii)]). The FASOC then makes a series of allegations about what a hypothetical reasonable director would have done with that information, including taking all necessary steps to terminate or suspend Star’s relationship with Suncity and/or informing the Board of the information and recommending these steps be taken (see FASOC [232(b)-(f)]). ASIC then alleges that Mr Bekier breached his duty by not taking all these steps, including the steps that would have been taken in the counterfactual (see FASOC [233]).

86    This is a cascading pleading culminating in the allegation of steps that a hypothetical director would have taken in the counterfactual. ASIC’s pleading attempts to establish that a breach arises once the hypothetical reasonable director acts, or fails to act, on certain knowledge which can only be obtained by making enquiries in the light of possessing prior knowledge. This represents an impermissible expansion of the duty imposed by s 180(1). Logically, Mr Bekier cannot be in breach of s 180(1) for failing to take steps which it is alleged a hypothetical reasonable director would have taken if they had been provided with additional information, which Mr Bekier, in fact, did not know nor possess. The breach, if any, is in the failure to make enquiries and at that earlier point, there is either a breach, or no breach.

87    One assumes ASIC pleaded this part of the case against Mr Bekier because the materiality of the breaches would be a matter relevant at the penalty stage, and also with the forethought that Mr Bekier could have submitted that there was no breach of duty because it would have made no difference if a defendant had in fact made the enquiries in question.

88    As it happens, this pleading point has largely become irrelevant because ASIC has averred alternative pleas which allege a breach of s 180(1) at the anterior point when the breach properly crystalises, that is, prior to the hypothetical reasonable director making enquiries (see FASOC [233A] and [237]). These allegations are premised on the Court finding that a reasonable director in Mr Bekier’s position would not have learned of the additional information. Put simply, these are allegations of failures to take certain steps premised on information which Mr Bekier, in fact, knew.

89    In a similar vein, ASIC makes various allegations about the information that would have been provided to the non-executive directors if they had requested probity information concerning Mr Qin and Mr Chau. Those allegations may be put to one side. The nature of the information that would have been provided if the directors had made certain requests cannot logically inform the question of whether a reasonable director in their position, exercising due care and diligence, would have made such requests. It is not alleged that any of the non-executive directors had actual or constructive knowledge of that information at the time they approved the circulating resolutions to increase credit limits of the CCFs for Mr Chau and Mr Qin.

C.3    The second pleading issue: the “Suitability Obligations”

90    The second issue, as to the pleaded “Suitability Obligations”, necessitates a descent into the brume of the definitions embedded in the pleading.

91    If Star Sydney, being the holder of the relevant casino licence permitting it to operate the Sydney casino (see [215]), 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” and could have its casino licence cancelled or suspended upon investigation or disciplinary action by ILGA: ss 23 and 31 of the Casino Control Act 1992 (NSW) (CCA NSW). Likewise, as a “close associate” of Star Sydney (see [228]–[231]), if Star itself was not of good repute, Star Sydney could fail to be a “suitable person” and could have its casino licence called or suspended upon investigation or disciplinary action by ILGA.

92    As I will set out specifically below, ASIC pleaded that each of the defendants knew or ought reasonably to have known of “Star Sydney’s Obligations”, which were defined as an amalgam of Star Sydney’s “Suitability Obligations” and “AML/CTF Obligations”. Relevantly, Star Sydney’s “Suitability Obligations” were defined to be an “obligation … to remain, throughout the Relevant Period, a suitable person having regard to the considerations identified in s 12(2) of the CCA [NSW] …” (FASOC [5(c)]). I will return to Star Sydney’s “AML/CTF Obligations” later.

93    ASIC has described the CCA NSW as imposing an “obligation” on Star Sydney to remain a “suitable person” by reference to the factors in s 12, including, relevantly, to not have or maintain a business association with persons who were not of good repute. This is not accurate because the CCA NSW does not impose a freestanding “obligation” to remain suitable. The requirement to be a “suitable person” in s 12(1) is a prerequisite for the grant of a casino licence; it is not a continuous legal obligation imposed on the licensee to remain suitable thereafter.

94    Properly analysed, once the application for a casino licence was successful, ILGA was then required, in accordance with s 31, to investigate and form an opinion every five years as to whether the casino operator remained a suitable person to continue to give effect to the casino licence and the CCA NSW. The matters listed in s 12 did not expressly form part of that review process, notwithstanding they were considered as part of Dr Horton QC’s review to assist ILGA with its periodic investigation pursuant to s 31(1) of the CCA NSW in November 2016 (Horton Review), which I will consider below.

95    What can be said is that while a licensee’s failure to remain suitable results in risk of disciplinary action (ranging in severity from, for example, the issue of a letter of censure to suspension or cancellation of their licence), that potentiality also does not impose any express legal obligation on the licensee to remain suitable.

96    Ultimately, and inevitably, ASIC accepted the CCA NSW did not impose any “direct obligation” on an applicant for a casino licence or the holder of such a licence to be or remain suitable.

97    The issue assumed some significance in submissions because ASIC’s pleading at FASOC [5] is as follows:

Throughout the Relevant Period, Star Sydney, as the holder of the Licence, was:

(a)    subject to periodic reviews required, by s 31 of the CCA [NSW], to be conducted by the Independent Liquor and Gaming Authority (Authority) as to whether it was a suitable person to continue to give effect to the Licence and as to whether it was in the public interest that the Licence should continue in force;

(b)    liable to be subject to disciplinary action taken by the Authority pursuant to s 23 or s 59 of the CCA (including suspension or cancellation of its Licence) if the Authority was satisfied that grounds existed for such action, which grounds included, as specified in s 23(1)(d) or s 59(1)(f) of the CCA [NSW], that the Authority was of the opinion that the licensee was not a suitable person to be the holder of a casino licence;

(c)    accordingly, was under an obligation (Suitability Obligations) to remain, throughout the Relevant Period, a suitable person having regard to the considerations identified in s 12(2) of the CCA [NSW], which included obligations:

(i)     that it, and its close associates, be persons of good repute, having regard to character, honesty and integrity;

(ii)     that it, and its close associates, not have or maintain any business association with any person, body or association who, in the Authority’s opinion, was not of good repute having regard to character, honesty and integrity or has undesirable or unsatisfactory financial resources.

    (Emphasis added).

98    Both by way of opening and during the hearing, ASIC contended that the effect of ss 11 and 12 of the CCA NSW was indirectly to impose a series of cascading requirements on an applicant to demonstrate their suitability and on the holder of a licence to maintain their suitability “under pain of disciplinary action”. Initially, in making this submission, ASIC placed sole reliance on s 59 of the CCA NSW. Section 59 is contained in Part 4 of the CCA NSW, being the Part concerning the licensing of casino employees whereas ss 23 and 31 are contained in Parts 2 and 3 respectively and concern casino operators. The casino licences in this proceeding are those of casino operators, not casino employees. This was obviously problematic.

99    But in the end, following an amendment allowed during the hearing, ASIC submitted that the effect of s 31 was to require a licensee to “seek to maintain its suitability from time to time, having regard to the s 12 matters: under pain of proportionate disciplinary action under s 23 (or s 59)”.

100    Again the reliance on s 59 is misconceived, but while it is now common ground there is no freestanding obligation imposed on a casino operator by the CCA NSW to remain suitable, the terms and structure of the CCA NSW can be seen to impose a practical requirement on a holder of a casino licence to maintain its suitability to avoid the risk or possibility of some form of disciplinary action, having regard to the matters in s 12(2).

101    For completeness, I should note two matters.

102    First, the same issue arises as to the cognate Queensland statutory regime (which I have outlined below in detail in Section F.2.2). Put shortly, like the CCA NSW, the Casino Control Act 1982 (Qld) (CCA Qld) did not impose a freestanding “obligation” on a licensee to remain suitable – but it is sufficient in this part of the reasons to refer further to only the CCA NSW.

103    Secondly, as noted above, Star Sydney’s Obligations combined Star Sydney’s Suitability Obligations together with its AML/CTF Obligations. There is, of course, no question the AML/CTF Obligations were subsisting legal obligations to the extent they became applicable.

104    So how am I to proceed?

105    As I have noted, even absent a direct legal obligation, a holder wishing to retain its licence needed to act in such a way as to maintain its suitability. After all, Star’s core business was being a part of a group operating casinos, and this required Star Sydney to hold a casino licence, which was subject to review. As the holder of that licence, it was also liable to be subject to disciplinary action taken by ILGA pursuant to the CCA NSW.

106    It is plain that ASIC has sought and seeks to maintain a case that Star Sydney was required, if it wished to continue to conduct its business, to remain a suitable person having regard to the considerations identified in s 12(2) of the CCA, including that it and its close associates not have, or maintain, any business association with any person, body or association, who in ILGA’s opinion was not of good repute having regard to character, honesty and integrity or has undesirable or unsatisfactory financial sources. Although ASIC referred to this as a form of legal obligation and spoken in terms of “breach” (or adopted terms or phrases such as “Suitability Obligation” or a “requirement of suitability”), the substance or nature of the case advanced was no secret. Put simply, ASIC says that to reduce risk of disciplinary action, and to secure retaining its licence, Star Sydney was required to remain a suitable person having regard, inter alia, to the requirements of s 12(2) of the CCA NSW. Any “breach” in this context is not of an extant legal obligation but in conducting its business otherwise than in accordance with this requirement giving rise to the pleaded foreseeable risks.

107    Although the pleading defines this requirement as the Suitability Obligation, this is the case that all the defendants knew they were to meet. The case should not be determined by reference to admittedly canny pleading points. One of the benefits of the docket system in a large case is a judge seeing how a case evolves from its origin up until the hearing and during a long trial following a detailed written and oral opening. This provides a broader and more accurate perspective than a single-minded focus on some paragraphs of a pleading that in some respects is expressed maladroitly. This does not minimise the need for precision in pleading, but such a perspective is a surer guide to assessing whether there is, in truth, any want of procedural fairness.

108    When the terms “Star Sydney’s Obligations” (which combines Star Sydney’s Suitability Obligations and its AML/CTF Obligations) and “Queensland Casino Obligations” (which combines the Star Qld Companies’ Suitability Obligations and Star Qld’s AML/CTF Obligations) are used, they must also be understood by reference to the proper understanding of the Suitability Obligations. When I use these terms below (which are necessary to adopt given the number of times they recur throughout the case), this is what is meant.

109    Returning to the pleaded “AML/CTF Obligations”, being the other component of “Star Sydney’s Obligations”, at the risk of repetition, these obligations as pleaded accurately describe the relevant legal obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act). However, it is important to note, for reasons that will become apparent, that these pleaded obligations are not exhaustive.

C.4    The third pleading issue: foreseeability of risk (FASOC [222(a1)], [239(a1)], [252(a1)], [265(a1)], [278(a1)], [291(a1)], [304(a1)], [309(a1)])

110    In section H.1 below, I canvass the general principles concerning the statutory norm of care and diligence of directors and other officers. As I will explain, in determining whether a director or other officer has engaged in contravening conduct, it is necessary to balance the foreseeable risk of harm to the company against the benefits that could have reasonably been expected to accrue to the company by reason of the director’s or officer’s actions, along with the difficulties attending any alleviating action.

111    ASIC’s case is that each defendant (except for Ms Martin) knew or ought reasonably to have known, by reason of knowing or ought reasonably of knowing of Star Sydney’s Obligations, the Star Qld Companies’ Queensland Casino Obligations, and the existence of the General Junket Risks, that:

… if Star Sydney’s Obligations or the Star Qld Companies’ Queensland Casino Obligations were breached as a consequence of the Group having entered into or maintained a business association with particular persons or entities who operated or funded junkets, it was reasonably foreseeable that Star would suffer harm to its interests including in the form of (1) investigations and inquiries into compliance with Star Sydney’s Obligations or the Star Qld Companies’ Queensland Casino Obligations (2) the imposition of conditions on, or the suspension or cancellation of, the licences to operate the Sydney Casino and/or the Queensland Casinos, (3) the imposition on Star Sydney and/or Star Qld of substantial civil penalties under the AML/CTF Act, and/or (4) reputational harm (including to Star’s reputation with regulators, government, the ASX, debt providers and equity investors and the public generally).

112    An issue will no doubt already be apparent.

113    It is one thing to contend that if Star breached a legal obligation, then it was reasonably foreseeable that it would suffer harm to its interests, which is straightforward and uncontroversial; it is another thing, however, to contend that if Star pursued some particular course, such as entering into or maintaining a business association with a particular person or entity, then it was reasonably foreseeable that Star would risk suffering specified harm to its interests. But as will be apparent from a proper understanding of Star Sydney’s Obligations or the Star Qld Companies’ Queensland Casino Obligations and what is meant by “breach”, ASIC’s case does involve the proposition that there was a reasonably foreseeable risk (of which any defendant director knew or ought reasonably to have known) that if the Board pursued some particular course, such as approving the proposed increases to Mr Qin’s or Mr Chau’s CCF limits, or maintaining a business association with Mr Qin or Mr Chau, Star would risk suffering pleaded forms of harm to its interests.

114    The approach of ASIC was the subject of criticism in submissions, but it is not inconsistent with authority.

115    In Cassimatis v Australian Securities and Investments Commission [2020] FCAFC 52; (2020) 275 FCR 533, ASIC pleaded and ran its case on the basis that it had to establish a contravention of the Corporations Act by the company to prove the breach of directors’ duties it had alleged (at 599 [290] per Thawley J). That was not because the liability of the directors under s 180(1) was derivative of that of the company, but rather because the contraventions by the company were said to contain a foreseeable risk of serious harm to its interests which reasonable directors ought to have guarded against (at 554 [77] per Greenwood J; 642 [465] per Thawley J). As I explain in further detail below (at [403]), Greenwood J held that, had ASIC not established contraventions of the Corporations Act by the company, “it would have been difficult, if not impossible” to sustain the contention that the directors had contravened s 180(1) by failing to guard against a foreseeable risk of serious harm to the company (at 533 [79]). Thawley J articulated a less restrictive threshold, reasoning that a breach of s 180(1) “might potentially be demonstrated by showing that [a director’s] conduct exposed the company to relevant jeopardy because it was likely to result in future contravention by the company or that the direct and immediate consequence of the conduct was that the company contravened the Corporations Act or some other law” (at 533–534 [464]).

116    Ultimately, the dispositive reasoning of the majority (Greenwood and Thawley JJ), was that reasonable directors in the company’s circumstances, having the same responsibilities, would not have run the foreseeable risk of harm or jeopardy to the company and its interests (see 574 [179], 578 [204], 648–650 [488]–[500]); this is to be contrasted with Rares J who, in dissent, concluded that while the directors were responsible for the company’s contraventions on number of occasions, a reasonable director would not have come under a duty under s 180(1) to prevent the contraventions, as it was not then likely that the contraventions would have led to the imposition of a banning order or suspension or cancellation of licence, as opposed to the taking of prompt remedial action (see 581 [218], 595 [278], 596 [282]).

117    It is clear, following the decision of the majority, that depending upon the circumstances, a company’s contravention might be a material fact relevant to the question whether a director failed to meet the standard mandated by s 180(1) by exposing a company to risk, but it is not an “essential ingredient of liability” (see 574 [179], 641–642 [462]–[466]).

118    Consistently with those principles, the director’s conduct in approving or permitting (in the sense of failing to prevent) a course of action to be pursued by the company must be assessed by balancing the potential benefits that could reasonably have been expected to accrue to the company from such course of action against the reasonably foreseeable risks of such course of action.

119    Relevantly, those risks said to be foreseeable are as follows:

(a)    investigations and inquiries into compliance with Star Sydney’s Obligations or the Star Qld Companies’ Queensland Casino Obligations (as those requirements are properly understood);

(b)    the imposition of conditions on, or the suspension or cancellation of, the licences to operate the Sydney Casino and/or the Queensland Casinos;

(c)    the imposition on Star Sydney and/or Star Qld of substantial civil penalties under the AML/CTF Act; and/or

(d)    reputational harm including to Star’s reputation with regulators, government, the ASX, debt providers and equity investors and the public generally.

120    I note that in Section F.2.5 I explain, in the light of the evidence, some issues that arise as to the reasonable foreseeability of some regulatory responses at points in time relevant to the allegations in this proceeding.

C.5    The fourth pleading issue: Ms Martin’s obligations

121    There is a further important pleading issue which relates solely to Ms Martin. It makes more sense to deal with that below when dealing with the first of Ms Martin’s alleged contraventions.

C.6    The fifth pleading issue: The case concerning CUP against Mr Bekier

122    Again, there is another important pleading issue which relates to the case concerning CUP against Mr Bekier. Given its complexity, it is better to deal with that issue below in the section concerning the relevant allegation.

D    THE EVIDENCE GENERALLY

123    Before making factual findings, it is appropriate to make a few observations about the evidence generally.

D.1    ASIC’s evidence

124    ASIC tendered a tsunami of documentary material, including Star’s annual reports, casino licences, corporate governance documentation and standard operating procedures, as well as company extracts on Star and its subsidiaries, contracts and agreements between: (a) Star and Suncity; (b) Star and NAB; and (c) NAB and CUP; and also Star’s Board and Board committee agendas, minutes, and papers. The tender also included documents concerning the KPMG review, CUP, and Star’s relationships and interactions with junkets and Suncity, along with documents relating to various roles and responsibilities within Star and probity material. I made rulings on ASIC’s documentary tender during the trial.

125    ASIC also read the affidavits of two witnesses: Ms Tanya Arthur and Mr Andrew Bowen, both of whom were former employees of the NAB responsible for managing the relationship between Star and NAB. Neither of these witnesses were cross-examined. Counsel for Mr Bekier and Ms Martin objected to specific aspects of Mr Bowen’s and Ms Arthur’s affidavits, and I addressed those objections during the trial.

126    Given the evidence of these deponents was unchallenged (and that nothing about it is inherently incredible), it should, in accordance with the relevant principles, generally be accepted. As I noted in Palmer v McGowan (No 5) [2022] FCA 893; (2022) 404 ALR 621 (at 719 [462]):

… It is often remarked that unchallenged evidence that is not inherently incredible ought generally to be accepted by the tribunal of fact (although such evidence may be rejected if it is contradicted by established facts or the particular circumstances point to its rejection): Precision Plastics Pty Limited v Demir [1975] HCA 27; (1975) 132 CLR 362 (at 370–371 per Gibbs J); Ashby v Slipper [2014] FCAFC 15 (2014) 219 FCR 322 (at 349 [77] per Mansfield and Gilmour JJ)…. [B]ut this is not the end of the matter. As I recently noted in Transport Workers’ Union of Australia v Qantas Airways Limited [2021] FCA 873; (2021) 308 IR 244 (at [284]–[288]), when the law requires proof of any fact, the tribunal of fact must feel actual persuasion as to its occurrence or existence before it can be found. A party bearing the onus will not succeed unless the whole of the evidence establishes a reasonable satisfaction on the preponderance of probabilities such as to sustain the relevant issue. In this way, the facts proved must form a reasonable basis for a definite conclusion affirmatively drawn of the truth of which the tribunal of fact may reasonably be satisfied: Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 (at 305). Despite the criticisms referred to in Transport Workers’ Union of Australia v Qantas (at [286]), this approach is well entrenched and unquestionably represents the current state of the law. Hence it is appropriate I pose the relevant question in this part of the case as being whether, on the whole of the evidence, including the unchallenged evidence, I have reached a [relevant] state of actual persuasion or reasonable satisfaction...

(Emphasis in original.)

127    It follows that the relevant question to be answered is whether, on the whole of the evidence, including the unchallenged evidence, I have reached a state of actual persuasion or reasonable satisfaction of Mr Bowen’s and Ms Athur’s explication of the occurrence or existence of the facts to which they depose. I will make that assessment when I consider the relevant factual narrative and contraventions to which their evidence relates, below.

D.2    The defendants’ evidence

128    Leaving aside part of the overall documentary tender, notwithstanding that this proceeding involves nine remaining defendants, only Mr Bekier, Ms Martin and Mr O’Neill elected to go into evidence, and only Mr Bekier and Ms Martin went into the witness box. I will later consider the inferences that may be drawn from the remaining defendants’ forensic decisions not to give evidence.

129    Mr Bekier’s affidavit sworn on 25 February 2025 and Ms Martin’s affidavit affirmed on 25 February 2025 were both read subject to rulings which I made during the trial. Cross-examination of Mr Bekier and Ms Martin was, obviously enough, primarily conducted on behalf of ASIC, but also by counsel for Ms Martin and Mr Bekier.

D.2.1    Mr Bekier

D.2.1.1        Affidavit evidence

130    Before considering Mr Bekier’s credibility, it is appropriate to provide an overview of his affidavit evidence. The following paragraphs of this subsection are a summary or a recounting of the evidence and do not represent findings on contested matters. I will return to his evidence in chief when considering his credibility.

131    In his affidavit, Mr Bekier identifies Star’s “key Group support functions”, their responsibilities, and the senior executives who led those functions and ultimately reported to him (at [15]–[27]). He also describes the nature and frequency of Board meetings and discusses the process through which agendas and Board and Board sub-committee papers were prepared, settled and distributed (at [35]–[46]).

132    Mr Bekier notes that the materials and papers for each Board meeting regularly exceeded 300 pages and were often up to 700 or more pages (at [41]). The Board sub-committees had their own materials and papers, which would be of similar length and sometimes longer, and provided on the same day or one day before the Board papers (at [41]).

133    Mr Bekier and Ms Martin would separately review all Board and Board sub-committee papers before they were circulated to the Board and uploaded to the Board portal (at [44]). Board and Board sub-committee papers were typically uploaded to the Board portal five days prior to the meeting (at [45]). Board meeting discussions proceeded on the basis that the materials provided in advance of meetings had been read (at [46]).

134    Mr Bekier also describes the format of his CEO Report and the process involved in its preparation (at [47]–[57]). He spoke to the CEO Report at Board meetings, though the nature of his oral update would depend on the circumstances facing the company at the time (at [53]–[54]). His practice was to accentuate rather than restate key matters, and to focus on overall financial performance, major projects and strategic matters (at [53]–[54]). Mr Bekier would work with the executive committee and their teams to prepare and finalise the CEO Report (at [50]). Each executive committee member or their respective team members drafted the text of the section(s) related to their business function for inclusion in the CEO Report (at [50]). Mr Bekier says his approach was to review drafts of the CEO Report and ensure that he was comfortable with its content before it was finalised and provided to the Board (at [51]).

135    Mr Bekier also identifies the six Board sub-committees of Star, each of which were chaired by a non-executive director (at [58]–[59]). He states that he was not a member of any Board sub-committee but regularly attended Board sub-committee meetings as an observer (at [62]). Mr Bekier also discusses the nature and frequency of meetings and discussions he had with the Board Chairman, Mr O’Neill (at [63]–[64]).

136    Mr Bekier then describes his role as Managing Director and CEO of Star, outlining his key responsibilities and general daily practice (at [65]–[76]). He sets out the details of his key direct reports (at [77]–[102]) and discusses the nature and frequency of executive committee meetings and one-on-one catch-ups (at [103]–[110]).

137    He also discusses the regulation of Star (at [112]–[126]), Star’s engagement with regulators and law enforcement agencies (at [127]–[143]), risk management at Star (at [144]–[158]), independent reviews of Star (at [159]–[170]), junkets (including the management of junket risks, vetting of new junket operators and monitoring of junkets) (at [171]–[225]), CCFs (at [226]–[246]), Suncity and Mr Chau (at [247]–[261]), the Shen Minmin junket and Mr Qin (at [258]–[261]), the CCF increases for Suncity and Shen Minmin (at [262]–[281]), Salon 95 (at [282]–[307]), the KPMG review (at [308]–[338]), Suncity matters from August 2018 to August 2019 (at [339]–[393]), and CUP and NAB (at [394]–[427]). As these matters tend to follow and respond to the case put forward by ASIC, I will return to them at the appropriate juncture.

D.2.1.2        Credit findings

138    During the initial phase of his cross-examination, Mr Bekier presented as a generally good witness. He was responsive, made concessions, and differentiated between what he could recall and the likelihood of certain events. Despite forceful (and appropriate) questioning and repeated suggestions his evidence was wrong, his demeanour remained consistent. However, as the cross-examination progressed, roughly following the timeline of events the subject of this proceeding, it was noteworthy how his responses grew increasingly elliptical and, in some respects, evasive. As time went on, he repeatedly attempted to circumvent the crux of the questions asked, which ultimately led to his evidence being, in some respects, unconvincing, contradictory, and on occasion, highly improbable.

139    In making these assessments, I have had regard to several adverse findings I make below and the totality of Mr Bekier’s evidence; however, in the following paragraphs I discuss three examples focussed upon by ASIC.

The Hong Kong Jockey Club Report

140    The first example is not of great moment. It is not determinative of my credit conclusions as to Mr Bekier’s evidence generally but rather illustrates the need to approach his uncorroborated evidence with a degree of caution. It concerns Mr Bekier’s evidence of a conversation he says he had with Mr Angus Buchanan, Star’s Due Diligence Program Manager, in August 2019 about a report Mr Buchanan and his intelligence team compiled in 2018 while he was working for the Hong Kong Jockey Club (Hong Kong Jockey Club Report) (T418.33-44).

141    Mr Bekier’s evidence was inconsistent with the testimony he gave on oath to the Independent Review of The Star conducted by Mr Adam Bell SC (Bell Inquiry) in 2022. For reasons which I provided in Australian Securities and Investments Commission v Bekier (Evidentiary Ruling) [2025] FCA 237, prior inconsistent statements to the Bell Inquiry were admitted as evidence in the trial.

142    During his examination-in-chief, Mr Bekier said he recalled asking Mr Buchanan, along with other people within Star, for a copy of the Hong Kong Jockey Club Report in August 2019, which was when “… the Hong Kong Jockey Club was first kicked around in the media and reported on …” (T418.39-44).

143    Mr Bekier said he approached Mr Buchanan at his desk and asked him for a copy of the Hong Kong Jockey Club Report because he knew that Mr Buchanan “had previously worked there and been in the investigations department there” (T418.46-419.3). Mr Bekier said that Mr Buchanan responded with “No, I can’t give you a copy. I was one of the authors, but this is – was written for the Hong Kong Jockey Club. It’s not mine to give. It’s their IP.” Mr Bekier recalled subsequently asking Mr Buchanan whether there was “anything in that report that should make us concerned” (T419.5-6). Mr Bekier said that Mr Buchanan’s response was “No … the report is a collection of allegations that are all well-known to you and you also have to bear in mind that we wrote this report for a competitor of Suncity” (T419.6-9).

144    Despite allegedly having this conversation, he agreed he did not press Mr Buchanan for a copy of the Hong Kong Jockey Club Report. He said this was because Mr Buchanan had said there was “nothing to worry about”, and he trusted Mr Buchanan’s judgment as one of the people that he was relying on to carry out the relevant investigations (T419.27-32). It is common ground Mr Bekier ultimately did not receive a copy of the Hong Kong Jockey Club Report until late 2021 or early 2022, in preparation for the Bell Inquiry (T419.23-24).

145    During cross-examination, Mr Bekier was tested closely on the honesty of his evidence about his conversation with Mr Buchanan, and particularly, the timing of the conversation. In response, Mr Bekier said that he could not “recall precisely what time it was”, but that his best recollection was that he “was asking a lot of people to try get a copy of that report, so it could have been July, could have been August, could have been September” (T680.47-681.7). Mr Bekier was asked whether he wished to withdraw that evidence. He declined to do so as it was “the best recollection [he had] of that conversation in terms of the timing” (T681.32-40).

146    Contrary to this evidence, Mr Bekier gave evidence on oath to the Bell Inquiry that he thought he asked Mr Buchanan for a copy of the report in January 2022 or February 2022 (Exhibit 2, T3115.1-6). ASIC’s Senior Counsel suggested to Mr Bekier that the “true position” was that he had a different conversation about the Hong Kong Jockey Club Report with Mr Buchanan in January or February 2022, to which Mr Bekier responded “… I realised that that’s in my statement to Mr Bell, but I’ve reflected on the timing and, to the best of my knowledge … I was chasing down the report when it was topical, and it was topical in 2019” (T681.46-682.4). At a later point during cross-examination, Senior Counsel put the “true position” to Mr Bekier again. He responded by saying:

That’s not my recollection today, Ms Higgins. I acknowledge that this is the statement and the position I took to Mr Bell. I have been reflecting on this, on the timing of my conversations, and, to the best of my recollection, is that I – you know I – I chased down – I tried to chase down copies of that report and in that context, when it was topical, I talked to Angus Buchanan to find out whether he could get me a report. By 2022, that report wasn’t that topical anymore. It was – you know, it was going to be part of the court paper but – court process but it wasn’t sort of valuable for me to try and chase it down. That’s why I’m saying, to the best of my recollection, I had that meeting with Angus in 2019.

(T688.36-46).

147    Although I am far from certain, I consider the evidence he gave at the Bell Inquiry as to the timing of the conversation is probably more likely to be correct. This topic was not a peripheral matter at the Bell Inquiry, and it is not suggested Mr Bekier was taken by surprise when he made these prior inconsistent statements. One would think Mr Bekier’s recollection of the timing of the conversation in May 2022 was better than his recollection of the timing of the conversation in 2025. But for reasons that will become clear, the timing does not really matter.

148    Turning to the content of the conversation, ASIC correctly submitted that Mr Bekier’s account of the content of his conversation with Mr Buchanan was implausible on two bases: first, it is unlikely Mr Buchanan would have refused to provide a copy of the report to the CEO of the company by which he was employed (a fortiori where Mr Buchanan had already provided a copy of the report to other Star employees and much of its content had already been the subject of reporting in the media); and secondly, Mr Bekier’s contention that Mr Buchanan deprecated the importance of the report and told him that he did not need to worry about its contents because it “is a collection of allegations that are well-known to you” and was written “for a competitor of Suncity”, was inconsistent with the documentary evidence (T419.5-9).

149    Mr Buchanan sent an email on 12 June 2019 to Ms Martin, Mr White and Mr Houlihan, which attached the report and stated:

Dear all,

Please find attached a copy of the 2018 Sun City report my intelligence team compiled whilst I was with the Hong Kong Jockey Club.

It is a comprehensive report and was prepared due to the potential threat Sun City posed/poses to the integrity of racing in Hong Kong.

I suspect certain aspects of the report may be of interest to The Star.

Due to overlapping ‘interests’, the report was disseminated to senior management in the Hong Kong Police, Hong Kong ICAC, the Australian Criminal Intelligence Commission and the Australian Federal Police.

Given the confidentiality of the report, would appreciate if the document is not distributed beyond this group.

Best regards,

Augus

150    It strikes me as implausible the author of this communication would, six weeks later (or anytime later), have told his CEO that there was nothing in the report he should be concerned about (or he would not have also disclosed it to him on the same conditions of confidentiality).

151    Additionally, ASIC pointed to the fact that Mr Bekier said that the Hong Kong Jockey Club Report was a “very good report” that “assembles a lot of evidence that, in pieces, we may be – partially have been aware of. But it assembles to paint a picture of somebody we shouldn’t be doing business with” (Exhibit 2, T3115.36-43). ASIC went on to submit there is an “obvious tension” between this evidence and Mr Bekier’s evidence in this proceeding that Mr Buchanan downplayed the importance of the report.

152    I consider it highly unlikely that Mr Buchanan ever played down the importance of the Hong Kong Jockey Club Report and any evidence Mr Bekier gave to the contrary struck me as unpersuasive.

153    In reaching this conclusion, I recognise that ASIC made the forensic decision not to call Mr Buchanan. It is not in dispute that Mr Buchanan was having discussions with representatives of ASIC, ASIC’s solicitors and ASIC’s senior counsel after Mr Bekier’s affidavit had been served. As I remarked during the trial, Mr Buchanan would have been the most obvious person to put a stake through this evidence. I would decline to go so far as to draw an inference that ASIC did not take this step because Mr Buchanan’s evidence would not have assisted its case (see Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361 (at 384–385 [63]–[64] per Heydon, Crennan and Bell JJ). That said, the absence of any contrary account has caused me to hesitate before accepting ASIC’s submission that any part of Mr Bekier’s account of his conversations with Mr Buchanan was deliberately false. It is enough to say that I am unpersuaded by Mr Bekier’s evidence that Mr Buchanan deprecated the importance of the Hong Kong Jockey Club Report.

Mr Hawkins’ “Board Talking Points – Macau Junkets and Suncity” Email

154    The second and better example concerns an email that Mr Hawkins sent Mr Bekier on 22 July 2019, copying Ms Martin, and was headed “Board Talking Points – Macau Junkets and Suncity”.

155    In his affidavit, Mr Bekier states that he does not recall whether he read the email (at [350]), but during cross-examination, he acknowledged it to be “highly likely” that he read it (T641.1-13).

156    In the email, Mr Hawkins stated that he had planned to be in Queensland to meet with the International Rebate Business (IRB) group, and subject to timing, expected to be able to attend the upcoming Board meeting (at least in part).

157    During cross-examination, Mr Bekier acknowledged that Mr Hawkins was not present at that meeting (T643.17-18). He also accepted that Mr Hawkins did not usually send him his “board talking points” (T641.36) and that Mr Hawkins would not typically provide him with an indication of what he proposed to raise with the Board in advance of Board meetings (T642.4-7). It follows Mr Hawkins was seemingly departing from his usual practice, and it is more likely than not that Mr Hawkins was providing his Board Talking Points to Mr Bekier in case he was not able to attend the Board meeting. I raised this with Mr Bekier, and he accepted that was a conclusion he could have drawn, but that he ultimately did not.

158    Mr Hawkins’ email identified that:

Macau Junket Situation

Last week, all Macau junket operators received a formal warning from the DICJ of the possible revocation of their junket licenses [sic] if they conduct active selling/promotion of overseas casino play, whether executed via online, proxy betting or normal play. All promotional material for overseas resorts/casinos as well as displayed global currency exchange rates were directed to be removed.

Suncity were singled out in the Chinese media as an example of a business presenting gambling experiences (online/proxy) to mainland Chinese which is in direct contravention of Chinese law. Suncity have denied this activity.

…

Sydney Suncity Personnel Exclusions

We recently received correspondence from the Police Commissioner in NSW advising of a number of exclusions. This in itself is not abnormal but in this instance 6 of them were people associated with SunCity.

The letter from the Commissioner does not articulate any reasons for the exclusions. Internal guidance at this point does not provide any further insight, apart from typically these type of exclusions may be related to parties involved in organised criminal activities.

…

159    Mr Bekier could not recall whether he raised the talking points with the Board. He agreed with the proposition that it would be fair to say that when he read the heading of the email, he would have thought that Mr Hawkins believed these were points that ought to be raised with the Board (T643.32-35). Mr Bekier did not ask for any further information about the “Macau junket situation” matters identified in the email (T643.3-4). Mr Bekier maintained that these points were Mr Hawkins’ points to raise with the Board, noting that he knew another Board meeting would take place within two weeks’ time, allowing Mr Hawkins to raise them with the Board at that upcoming meeting “if they were really important” (T643.39-46).

160    In response to the question of whether Mr Bekier should have read out the talking points that the absent Mr Hawkins sent him, Mr Bekier provided what forcefully struck me at the time as an evasive answer (see T643.20-25). He said:

No, because I believed the first section on the Macau junket situation, that was relevant to the direction we wanted to take with our business and, you know, I think it’s – either Mr Barton or myself talked to the budget and the five-year plan, so those points would have been covered broadly in terms of the direction of the business.

161    The entirety of this evidence, culminating in an unpersuasive justification for inaction, is troubling. Mr Bekier did not explain persuasively why he did not raise the matters with the Board.

Mr Bekier’s evidence concerning CUP and NAB

162    The third example concerns Mr Bekier’s wholly unconvincing evidence about his understanding as to why Star did not provide direct responses to NAB about the impermissible use of CUP cards for gaming.

163    ASIC characterises this as evidence, not unfairly, as the embrace by the witness of a “tacit three-way conspiracy between Star, NAB and CUP to mislead an unnamed party”. Mr Bekier’s evidence on this topic was as follows:

So is this the case: you knew that CUP via NAB was making requests for information, but you thought they were just seeking to confirm that CUP cards were not being used to acquire gaming chips directly?---That was – in my mind, that was the effect. If I can put it in different words, Ms Higgins, I thought that, you know, whoever sent these requests from CUP tried to build up a paper trail that demonstrated that those transactions were not being used directly for the acquisition of chips.

…

HIS HONOUR: Can I understand the last answer. So when you say “build up a paper trail”, do you mean that somebody was conscious of the fact that the cards were being used for this purpose but notwithstanding this, wanted to put in place a series of communications to protect themselves from later scrutiny so they could assert dishonestly that they weren’t aware?---Your Honour, my assumption – and it’s an assumption only – was that CUP, you know, probably was receiving queries either from its member banks or the Chinese regulator about certain transactions and that the people within CUP who knew about our arrangement and just wanted to make sure that they can point to communication coming back saying, you know, “We have inquired; this what it’s being used for” and so that they can point to that. That was my assumption of what was happening here.

Does that mean the answer to my question is yes?---Yes, sorry

(T724.46-725.25)

164    Then later during his cross-examination:

But if Star, NAB and CUP were all on the same page, Mr Bekier, Star could just say, “The transactions are being effected pursuant to the two-stage process that you’ve always understood and are being used indirectly for gambling”?---We certainly could have said the first bit of that statement, yes.

And the second bit because that was part of what you say you believe was understood by all three parties?---Yes, but it may not have been understood by other parties in China.

Who are these other parties in China, Mr Bekier?---I don’t know, maybe the regulator, maybe the member banks. But we - - -

You’re just speculating at this point; correct?---Yes.

HIS HONOUR: Do I understand that, putting that together with your earlier evidence where you said there was a creation of the paper trail - - -?---Sorry, your Honour, I assumed that there was.

Yes, no, you assumed there was a creation of the paper trail. A frank exchange which would have said that there was a use indirectly for gambling – notwithstanding you thought CUP knew exactly what was going on, to say that frankly in the communication might cause a problem because they were creating a paper trail inconsistent with that?---Yes.

(T731.37-732.11)

165    And finally:

And do you have any view about which member bank was involved?---No.

Or which regulator was involved?---My understanding of the Chinese banking system is the People’s Bank of China and that CUP is a card issuer like Visa on behalf of a whole – a whole host of Chinese member banks.

So it’s your evidence that you believe that the Star, NAB and CUP were all involved, knowingly, in conduct to convey dishonest information to the People’s Bank of China?---No, that was not the purpose in itself but that might have been the effect.

Mr Bekier, you just know that none of this is the case, don’t you?---No, I disagree. And I think if you look at the evidence of – of the volumes in the play, I think that – that validates the perspective, at least in my mind.

(T743.1-13)

166    Counsel for Mr Bekier submitted that his evidence has a ring of truth given Mr Bekier’s experience working with Chinese companies and Chinese government policy, and particularly, his knowledge that the Chinese government sought to restrict its citizens’ ability to take money outside of the country to gamble. It was said the whole point of the CUP process was that Star, NAB and CUP had agreed to create a technical “workaround” that permitted CUP’s customers to bypass the Chinese government’s restriction; that is, by creating a two-step process of withdrawing funds at the hotel and then transferring those funds to the customer’s gaming account, the restriction could be circumvented.

167    Further, counsel submitted that when Mr Bekier was told that Star was receiving communications from NAB passing on requests for information about the use of CUP cards, he may have reasonably assumed that the ultimate source of those requests was the Chinese government (represented by the People’s Bank of China or state-owned member banks). As CUP had supposedly been party to the initial arrangement to achieve a workaround of Chinese government policy, it arguably made sense to interpret those requests as an attempt to create a “paper trail” that the CUP could show those interested in China.

168    I reject these submissions. As I explain below, the documentary evidence paints a different and more disturbing picture. The documentary evidence reveals escalating scrutiny and scepticism in repeated requests from NAB and CUP concerning CUP card usage at Star. I do not believe for a minute that Mr Bekier did not know what was going on. As I will explain, it is plain why Star dissembled the true position to its banker, and the embrace of an ongoing tacit understanding to permit the purchase of gaming chips with CUP cards cannot be accepted. His willingness to volunteer the evidence he gave during cross-examination reflects poorly on his credit.

D.2.2    Ms Martin

D.2.2.1        Affidavit evidence

169    Again, I will here recount the evidence in chief but will not proceed to make findings on contested topics.

170    In her affidavit, Ms Martin identifies and describes the various roles and responsibilities she held at Star (at [13] and [28]–[73]). She also identifies her direct reports, which relevantly included Mr Power, Mr White, Mr Houlihan and Mr Brodie (at [74]–[78]), and discusses her reliance on them (at [79]–[99]). She describes Mr McWilliams’ responsibility for the Compliance portfolio in his role as Chief Risk Officer (CRO) of Star from February 2016 to July 2019 (at [100]–[107]), and her general interactions with and observations of Mr Bekier (at [108]–[115]).

171    Ms Martin also describes her practice with emails (at [124]–[131]) and her involvement with Board meetings (at [132]–[144]), including her attendance, and her preparation of minutes, Board papers and the legal and regulatory section of the CEO Report (at [132]–[159]). She notes that lawyers, including Mr Power and Mr White, would prepare the first draft of the “legal and regulatory” section of Mr Bekier’s CEO Report (at [137]).

172    Ms Martin also discusses Star’s engagement with regulators (at [165]–[177]), Star’s risks and obligations (at [178]–[201]), and various other events and conduct which are the subject of the allegations in this proceeding (at [202]–[570]). As these matters follow and respond to the case put forward by ASIC, I will return to them at the appropriate juncture.

D.2.2.2     Credit findings

173    Ms Martin approached cross-examination with marked caution. She considered each question at length and, although this cannot be discerned from the transcript, her answers were frequently preceded or interrupted by pauses, at times excruciatingly prolonged pauses. She was reluctant to make concessions, even where they appeared obvious, and concessions were often yielded only after sustained and careful pressing.

174    I have borne in mind that some witnesses are by temperament reserved and circumspect. I also accept that cross-examination is stressful, and Ms Martin appeared at times to be under strain. Conscious of this, I ensured she was afforded appropriate opportunities to take breaks. However, having observed her closely in the witness box, I am satisfied that her presentation was not explained merely by caution or stress. Rather, her difficulty lay in maintaining positions that were increasingly difficult to reconcile with the contemporaneous documentary record or inherent probabilities.

175    As the cross-examination unfolded, it became apparent that Ms Martin was reconstructing events in a manner that accommodated the documents where necessary, while invoking uncertainty of memory where it did not. Her recollection of certain events was strikingly detailed: for example, her evidence in chief concerning what was said at the Board meeting of 24 July 2019, the Board call of 30 July 2019, and the Board meeting of 7 August 2019, being matters in respect of which detailed recollection served her interests. That specificity stood in marked contrast to her professed inability to recall other significant Suncity-related matters.

176    I accept that assessing credibility is not an easy exercise. Nonetheless, Ms Martin was an unimpressive witness. The inconsistencies in her evidence materially affect the weight I can place upon it, and I hesitate in accepting any testimony by her unless it is corroborated by other evidence I accept. I will highlight the troubling aspects of her evidence that have contributed to my overall impression where necessary throughout the judgment, but it is worth mentioning here one example. Again, this example is illustrative of, but far from determinative in, my overall assessment of her credibility.

The inconsistency in Ms Martin’s evidence about the 7 November email

177    On affirmation to this Court, and to Mr Bell SC in the Bell Inquiry, Ms Martin has provided separate accounts about her actions in relation to, and understanding of, an email chain titled ‘FW: UnionPay notice for the Star’.

178    At paragraph 144 of her written statement filed in the Bell Inquiry, which was admitted into evidence in the present proceeding (T1171.4-12), and which she adopted on affirmation as true and correct when called (see T1097.16-17), Ms Martin stated:

I recall that, after correspondence from NAB was forwarded to me at 10.46am on 7 November 2019 (STA.3401.0005.1453), I had a brief conversation with Mr Theodore in relation to the information which was proposed to be provided to NAB. Later that day, or in the following days, I recall that I had a further conversation(s) with Mr Theodore, in which I discussed with him why NAB was asking questions and the significance of the increased scrutiny in the context of The Star Entertainment Group’s broader commercial relationship with the NAB. I wished to understand why there had been an apparent change in NAB’s position in relation to China Union Pay. …

(Emphasis added).

179    Ms Martin says she was aware there had been an “apparent change in NAB’s position in relation to [CUP]”. While she does not say she understood that NAB had in fact changed its position, it does convey she had some level of awareness that NAB’s position might have changed, and she “wished to understand” why such change occurred.

180    In referring to the same matters in this proceeding, Ms Martin stated in her affidavit (at [570]):

I did not consider that the Board needed to be informed of the matters concerning CUP. I was not aware at the time that NAB had changed its position in relation to CUP card usage or the CUP two-step process or that The Star had sent any communication that may be inaccurate or misleading to NAB. I only became [aware] that there was an issue with the 7 November 2019 email in 2021. I was also aware as at March 2020 that the Star was proposing to cease accepting CUP cards.

(Emphasis added).

181    This carefully drafted evidence in chief contradicts Ms Martin’s earlier account. If she was “not aware” of any change in NAB’s position, she would not have sought to understand why the “apparent change” occurred.

182    I regret to say that my impression, after closely observing her in the witness box, is that there is substance in ASIC’s submission that this inconsistency in her evidence demonstrates that she was a witness willing to tell an untruth on an important matter if she perceived that doing so could assist her in maintaining her position. I do not make this finding lightly. I recognise it is a serious conclusion to draw about a witness who is a solicitor, having a paramount duty to the court and the administration of justice, but I am amply persuaded it is the most rational way of explaining the inconsistencies in her evidence and her unsatisfactory demeanour.

Other aspects of Ms Martin’s evidence concerning the 7 November email

183    Turning to another important aspect of her testimony, Ms Martin gave further evidence about the correspondence from NAB that was forwarded to her at 10:46am on 7 November 2019, and in particular, Star’s draft response to that correspondence.

184    It would be inappropriate for me to explain and assess her evidence on that topic without doing so in its appropriate context, and such context can only be properly understood by considering many factual findings which span across several pages of this judgment. For convenience, I note in this section of my reasons that her evidence concerning Star’s draft response to NAB, and the circumstances surrounding the finalisation of that response bears the hallmarks of Ms Martin fashioning her evidence to explain away an inconvenient truth and, in the light of the contemporaneous documentary record, her account must be rejected as being false. While I readily appreciate the wisdom in judges being reticent in reaching such conclusions, both the implausibility of her evidence and her unconvincing manner of giving it struck me forcefully. The relevant factual findings and my analysis of Ms Martin’s credibility are set out in [1186]–[1235] below.

185    Further, for reasons which I have explained later in this judgment, I am also satisfied that Ms Martin was aware that the representations in Star’s response to NAB were inaccurate, incomplete and misleading. Ms Martin is an experienced solicitor, having held a Queensland practising certificate since January 2002. From 1999 to late 2005 she was employed at a large law firm. In late 2005, she commenced as Legal Counsel (Qld) at Tabcorp Holdings Limited. From mid-2011, she was employed by Echo Entertainment Group Limited, which later became Star. With her legal education, training and experience, she was well-equipped with the knowledge and skills to identify misleading representations, and to have been attentive to the legal and commercial risks to which Star would be exposed if it dealt falsely with one of the Group’s key lenders.

D.2.3    The non-executive directors

186    As noted above, each of the defendant non-executive directors elected not to give evidence.

187    Justifying his decision not to give evidence, Mr O’Neill relied on the affidavit of Dr Carolina Velásquez Vanegas affirmed on 20 February 2025 and its accompanying annexure. The redacted contents of the annexure remain subject to a suppression order.

D.2.3.1        Jones v Dunkel inferences

188    In seeking to discharge its burden of proof to the civil standard, ASIC relies principally on the documentary records and inferences arising directly from them. However, ASIC places some reliance upon the rule in Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 to support the drawing of inferences.

189    At this risk of stating the obvious, in the light of the civil standard of proof applicable to ASIC’s case, before any inference may be drawn in its favour, ASIC must establish that the circumstances appearing in the evidence give rise to a reasonable and definite inference, and not merely to conflicting inferences of equal degrees of probability: Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing & Allied Services Union of Australia v Australian Competition and Consumer Commission [2007] FCAFC 132; (2007) 162 FCR 466 (at 482 [38] per Weinberg, Bennett and Rares JJ).

190    As is well-known, the rule in Jones v Dunkel concerns the unexplained failure by a party to call a witness from which certain inferences may be drawn. As I noted in GetSwift (at [126]) and Patrick Stevedores Holdings Pty Ltd v CFMEU [2019] FCA 451; (2019) 286 IR 52 (at 61 [21]), the availability of such inferences in the context of civil penalty proceedings has been the subject of some discussion. Ultimately, however, authority supports the proposition that Jones v Dunkel inferences may be drawn in civil penalty proceedings: Adler v Australian Securities and Investments Commission [2003] NSWCA 131; (2003) 46 ACSR 504 (at 644 [661] per Giles JA, with whom Mason P and Beazley JA agreed); Adams v Director of the Fair Work Building Industry Inspectorate [2017] FCAFC 228; (2017) 258 FCR 257 (at 302 [147] per North, Dowsett and Rares JJ); Master Wealth Control Pty Ltd v Australian Competition and Consumer Commission [2024] FCAFC 171; (2024) 306 FCR 462 (at 472 [38] per Sarah C Derrington, Halley and Shariff JJ).

191    The drawing of a Jones v Dunkel inference requires the court to be satisfied of three matters: first, that it is expected or natural for the party in question to have called the witness; secondly, that the evidence of the witness would elucidate a particular matter; and thirdly, that the absence of the witness is unexplained: Payne v Parker [1976] 1 NSWLR 191 (at 201–202 per Glass JA); Roberts-Smith v Fairfax Media Publications Pty Ltd (No 41) [2023] FCA 555; (2023) 417 ALR 267 (at 324 [178] per Besanko J).

192    In this case, the third condition requires careful consideration as its formulation and application was disputed. It is satisfied if “no explanation is offered for the absence of the witness, or the tribunal thinks that the explanation given is unsatisfactory”: Payne v Parker [1976] 1 NSWLR 191 (at 202 per Glass JA).

193    While the rule has no application “if there are facts which provide an explanation of why the witness was not called or which show that the reason for not calling [the witness] was not that the party ‘fears to do so’”: Fabre v Arenales (1992) 27 NSWLR 437 (at 445–446 per Mahoney JA, with whom Priestley and Sheller JJA agreed), such “explanation” for the person’s absence must be “sufficient”: Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 (at 308 per Kitto J).

D.2.3.2        Mr O’Neill

194    While it is undoubtably the case that the matters referred to in Dr Vanegas’s evidence would have affected Mr O’Neill significantly, her evidence does not provide a sufficient explanation for his absence. While I have considered the totality of Dr Vanegas’s evidence, in these reasons I will only refer to matters not forming part of the redacted contents of the annexure to her affidavit, which remain subject to suppression.

195    These proceedings started as long ago as 2022. It is difficult for me to accept that detailed and comprehensive instructions as to ASIC’s case would not have been obtained from Mr O’Neill when solicitors were initially retained by him (and there is certainly no evidence this usual step taken in preparing for complex ligation by experienced solicitors did not occur in a timely way).

196    While Dr Vanegas provided an unchallenged medical opinion that unfortunate developing circumstances have caused Mr O’Neill to experience anxiety and exhaustion, which in turn had adversely affected his ability to concentrate and to recall events with precision, as well as his memory in general, the evidence adduced on this issue is significant for what it does not say, including relating to the early stages of this case.

197    Moreover, Dr Vanegas’s evidence does not rise to the level of opining that Mr O’Neill was physically or intellectually incapable of giving evidence. While there may be a suggestion or undertone to that effect, it does not go that far.

198    Notably, Mr O’Neill did not seek any measure to ameliorate the circumstances affecting him, such as for a combination of shorter sitting times, suspension of the livestream, the provision of breaks or shorter cross-examination periods. Steps could have been taken to ensure that any stress Mr O’Neill would have suffered could have been reduced.

199    I also gave the parties ample opportunity to seek an adjournment of the case against Mr O’Neill to a point in time at which he could have provided evidence, and I indicated my inclination towards granting such an adjournment. However, I accept the submission made by Senior Counsel for Mr O’Neill that if Mr O’Neill were to give evidence, other defendants may have sought to cross-examine him and made submissions as to their own case based on evidence given by him. In that way, any adjournment would have necessarily been an adjournment of the whole proceedings. Nonetheless, I do not accept the submission that such an adjournment would have been indefinite. Dr Vanegas provides no evidence that the circumstances affecting Mr O’Neill were indefinite.

200    For the reasons above, the explanation offered for Mr O’Neill’s absence is insufficient, and the third condition of the rule in Jones v Dunkel is satisfied. The two inferences may be drawn against him. But this is not the end of the matter. There is no compulsion on the trial judge to draw any Jones v Dunkel inferences: Manly Council v Byrne [2004] NSWCA 123 (at [52] per Campbell J, Beazley JA and Pearlman AJA agreeing); Howell v Macquarie University [2008] NSWCA 26 (at [97]–[98] per Campbell JA, Spigelman CJ and Bell JA agreeing); CSG Limited v Fuji Xerox Australia Pty Ltd [2011] NSWCA 335 (at [82] per Sackville AJA, Bathurst CJ and Campbell JA agreeing).

201    As will emerge, the facts arising from the contemporaneous business records in this case are sufficiently compelling to inform the critical findings and not require resort to the drawing of inferences based upon the absence of evidence from Mr O’Neill. Although there are some ambiguities in some aspects of what Mr O’Neill knew, said, or did, none of these ambiguities turn out to be decisive, and I am unconvinced that the drawing of any adverse inferences to resolve such uncertainties that do exist would amount to anything other than speculation.

D.2.3.3        The other non-executive directors

202    I am satisfied that the same conclusion should generally be made in respect of the other non-executive directors. However, ASIC occasionally relies on the principle in Jones v Dunkel to assist the Court to more comfortably draw the inferences that otherwise arise from the documents in the absence of any contrary evidence. I will consider ASIC’s reliance on Jones v Dunkel inferences as and when they arise throughout the fact-finding process.

203    However, I hasten to add that while the principle in Jones v Dunkel may permit a court to more readily draw an inference that a defendant read a particular document, that does not alter the position that the Court must feel actual persuasion before finding that a defendant read a particular document or part thereof and, in consequence, had particular knowledge: see Australian Securities and Investments Commission v Geary [2018] VSCA 103; (2018) 332 FLR 201 (at 239 [251]–[252] and 239–240 [257] per Ferguson CJ, Weinberg JA and Sifris AJA).

E    APPROACH TO FACT FINDING

E.1    Burden and standard of proof

204    ASIC must prove its case to the civil standard of proof, which is provided in s 140(1) of the Evidence Act 1995 (Cth) (EA). Section 140(1) requires the Court, in a civil proceeding, to find a party’s case proved if satisfied that it has been proved on the balance of probabilities. In deciding whether it is so satisfied, the Court must take into account the three matters specified in s 140(2): (a) the nature of the cause of action or defence; (b) the nature of the subject-matter of the proceeding; and (c) the gravity of the matters alleged.

205    As I observed in Transport Workers’ Union of Australia v Qantas Airways Ltd [2021] FCA 873; (2021) 308 IR 244 (at 324–325 [284]–[288]) and more recently in McNickle v Huntsman Chemical Company Australia Pty Ltd (Initial Trial) [2024] FCA 807 (at [40]), when the law requires proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. A party bearing the onus will only succeed if the whole of evidence establishes a “reasonable satisfaction” on the preponderance of probabilities such as to sustain the relevant issue: Axon v Axon (1937) 59 CLR 395 (at 403 per Dixon J). In this way, the facts proved must form a reasonable basis for a definite conclusion affirmatively drawn of the truth of which the tribunal of fact may reasonably be satisfied: Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 (at 305 per Dixon CJ).

206    Having noted this, in Uniting Church in Australia Property Trust (NSW) v Allianz Australia Insurance Limited (Liability Judgment) [2023] FCA 190 (at [347]–[349]), I explained that where there is no direct evidence of a fact that a party bearing the onus of proof seeks to prove, “it is not possible to attain entire satisfaction as to the true state of affairs”: Girlock (Sales) Pty Ltd v Hurrell (1982) 149 CLR 155 (at 169 per Mason J). The standard of proof can be met by drawing “reasonable and definite” inferences from circumstances, and the law does not require proof to the “entire satisfaction” of the tribunal of fact: Transport Industries Insurance Co Ltd v Longmuir [1997] 1 VR 125 (at 141 per Tadgell JA, with whom Winneke P and Phillips JA agreed). The question of whether an inference is open and can be drawn as a matter of probability is to be determined by considering the combined weight of all the relevant established facts: Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141 (at [75] per Tate ACJ, Kyrou and Ferguson JJA).

207    But finally, what is of particular importance in the circumstances of this case, is the requirement that the strength and quality of the evidence required to achieve this reasonable satisfaction on the balance of probabilities varies according to the seriousness of the allegations, the inherent unlikelihood of a particular occurrence, and the gravity of the consequences flowing from a particular finding: Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 (at 361–363 per Dixon J).

208    Although I have avoided repeating it mantra-like throughout the judgment, in making findings on contested issues in this case I have always kept steadily in mind that s 140 reflects the position of the common law that the gravity of the fact sought to be proved is relevant to the degree of persuasion of the mind according to the balance of probabilities: see GLJ v Trustees of the Roman Catholic Church for the Diocese of Lismore [2023] HCA 32; (2023) 280 CLR 442 (at 471 [57] per Kiefel CJ, Gageler and Jagot JJ).

E.2    Contemporaneous documents and witness evidence

209    When resolving contested factual issues in commercial cases such as this one, it is usually most appropriate to focus upon and analyse the contemporaneous documents prepared in the ordinary course of business. In this case, that proposition finds particular significance in the minutes of the Board and its committees. Signed minutes are a formal and near contemporaneous record of the proceedings of meetings: Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 247 CLR 345 (at 403 [138] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ). So much is reflected in the Corporations Act. Section 251A(6) creates a presumption that signed minutes are “evidence of the proceeding, resolution or declaration to which it relates, unless the contrary is proved”, and s 1308 makes it an offence to make or authorise a false minutes, or to omit or authorise the omission of a matter from minutes, which renders them materially false or misleading.

210    Contemporaneous documents assume their importance, in part, from the difficulties associated with witness evidence based upon recollection. As I observed in Webb v GetSwift Ltd (No 5) [2019] FCA 1533 (at [17]–[18]), referring to the reasoning of Leggatt J in Getsmin SGPS SA v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm) (at [15]–[23]):

… there are a number of difficulties with oral evidence based on recollection of events given the unreliability of human memory. Moreover, considerable inference with memory is also introduced in civil litigation by the procedure of preparing for trial. As his Lordship noted, a witness is asked to make a statement, often when considerable time has already elapsed since the relevant events. The statement is usually drafted by a solicitor who is inevitably conscious of the significance for the case of what the witness does or does not say. The statement is often made after the memory of the witness has been “refreshed” by reading documents. The documents considered can often include argumentative material as well as documents that the witness did not see at the time and which came into existence after the events which the witness is being asked to recall. It may go through several iterations before it is finished. As Lord Buckmaster famously said, the truth “may sometimes leak out from an affidavit, like water from the bottom of a well”. This may be overly cynical, but the surest guide for deciding the case will be as identified by Leggatt J at [22]:

“… the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on the witnesses’ recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts.”

211    As the Full Court later noted in Liberty Mutual Insurance Company Australian Branch trading as Liberty Specialty Markets v Icon Co (NSW) Pty Ltd [2021] FCAFC 126 (at [239] per Allsop CJ, Besanko and Middleton JJ), this approach might be best seen as a helpful working hypothesis rather than something to be enshrined in any rule or general practice of placing little reliance on recollections of conversations.

F    FACTUAL AND LEGAL BACKGROUND

F.1    Overview of Star’s business

212    Throughout the Relevant Period, Star was an Australian public company listed on the Australian Securities Exchange (ASX). Prior to 9 November 2015, Star was called Echo Entertainment Group Limited.

213    During the Relevant Period, Star was the ultimate holding company (within the meaning of that term in s 9 of the Corporations Act) of various companies, including Star Sydney, Star Qld Custodian, and Star Qld. Star, together with the companies of which it was the ultimate holding company, comprised the Group.

214    Throughout the Relevant Period, Star conducted, through the Group, a business providing gaming, entertainment and hospitality services. Its major source of revenue was operating casinos known as The Star Sydney (Sydney Casino), The Star Gold Coast (which was previously known as Jupiters) and Treasury Brisbane.

215    Throughout the Relevant Period, Star Sydney operated the Sydney Casino pursuant to a licence granted to it under s 18 of the CCA NSW, and Star Qld operated Treasury Brisbane pursuant to a licence granted to it under ss 18 and 22 of the CCA Qld. During the Relevant Period, Star Qld Custodian was the holder of a licence granted under the CCA Qld for The Star Gold Coast. The Star Gold Coast was operated by Star Qld.

F.2    Star’s regulatory environment

216    During the Relevant Period, companies within the Group were subject to the requirements of three important statutes: the CCA NSW, the CCA Qld, and the AML/CTF Act.

217    For Star to carry on its core business of operating casinos, it, or companies within the Group, needed to hold appropriate licences permitting it to operate its casinos. Compliance with the statutory regimes that regulated casinos in NSW and Queensland was therefore critical to Star’s viability. Those statutory regimes, and particularly, their requirements for holding casino licences, are outlined below.

F.2.1    Casino Control Act 1992 (NSW)

218    Prior to the introduction of the CCA NSW, the NSW Government appointed the Honourable Sir Laurence Street AC KCMG, the former Chief Justice of NSW, to conduct an inquiry into its proposal for a draft Casino Control Bill (Draft Bill). In November 1991, Sir Laurence completed a report containing his findings (Street Report).

219    In his Report, Sir Laurence stated it was “clear that casinos are vulnerable to criminal influence” and that the “threat to the integrity of casino operations in Australia is real” (at [7.1.2]). Sir Laurence expressed the view that meeting concerns about criminality in casino operations depended on three elements (at [6.1.1]):

(a)    the selection of an operator whose integrity and commitment to preserving a crime-free environment in, and in relation to, the casino was assured;

(b)    the formulation of a comprehensive regulatory structure for the operation of the casino; and

(c)    the diligent enforcement of that regulatory structure.

220    Sir Laurence further observed that the Draft Bill was consistent with the recognition, in other Australian jurisdictions, which had already introduced legislation for casinos, of “‘the absolute necessity for on-going, strict, even draconian control’ of a legal gambling industry” (at [6.1.3]). He observed that a primary objective of the Australian regulatory system was “to ensure that the casino industry operates honestly and free from criminal influence” (at [2.2.3]).

221    Ultimately, Sir Laurence stated that he was “entirely satisfied that the principles of the Bill, the provisions contained in it and the mechanisms and controls that can be implemented under it, combine to create a fabric in which the casinos can be protected from criminal influence and exploitation, kept free from money laundering and maintained as places for honest gaming” (at [6.1.5]). However, Sir Laurence also cautioned that “[u]ltimately the measure of success in achieving an honest, crime-free gaming environment will depend upon the capacity, commitment and diligence of the administration and enforcement of the mechanisms and controls” (at [6.1.5]).

222    For present purposes, five core features of the CCA NSW can be identified.

223    First, one of the objects of the CCA NSW was to ensure “that the management and operation of a casino remain free from criminal influence or exploitation”. Upon enactment, this was specified in s 140 as an object of “the Authority”, which s 3(1) defined as the “New South Wales Casino Control Authority”. Throughout the Relevant Period, the Authority, as defined in s 3(1), was the Independent Liquor and Gaming Authority (ILGA) constituted under the Gambling and Liquor Administration Act 2007 (NSW) (GLA Act).

224    Following the amendment of the CCA NSW by the commencement of the Casino Control Amendment Act 2001 (NSW), an objects clause was introduced in s 4A. Section 4A provided:

4A Primary objects of Act

(1)     Among the primary objects of this Act are:

(a)     ensuring that the management and operation of a casino remain free from criminal influence or exploitation, and

(b)    ensuring that gaming in a casino is conducted honestly, and

(c)    containing and controlling the potential of a casino to cause harm to the public interest and to individuals and families.

(2)    All persons having functions under this Act are required to have due regard to the objects referred to in subsection (1) when exercising those functions.

225    Secondly, when it commenced, the CCA NSW permitted only one casino licence to be in force under the Act at any time, with the requirement that “[a] casino licence is to apply to one casino only” (s 6). Accordingly, only one casino could lawfully operate in NSW. This was the Sydney Casino, whose licence was held by Star Sydney.

226    However, upon the commencement of the Casino Control Amendment (Barangaroo Restricted Gaming Facility) Act 2013 (NSW) on 27 November 2013, a “restricted gaming licence” could be granted under the CCA NSW to operate “the Barangaroo restricted gaming facility”. Like the casino licence, only one restricted gaming licence could be in force under the Act at any one time. As a result, the CCA NSW permitted the operation of only two gaming facilities in NSW: the Sydney Casino and the “restricted gaming facility” to be established at Barangaroo, which later became the Sydney casino operated by Crown.

227    Thirdly, upon enactment and throughout the Relevant Period, s 12(1) of the CCA NSW prohibited ILGA from granting an application for a casino licence unless satisfied that the applicant, and each close associate of the applicant, was a “suitable person to be concerned in or associated with the management and operation of a casino”. For that purpose, ILGA was required to consider the matters provided in s 12(2), including, relevantly, whether each of those persons was “of good repute, having regard to character, honesty and integrity” (s 12(2)(a)), and whether they had “any business association with any person, body or association” who, in the opinion of ILGA, was “not of good repute having regard to character, honesty and integrity or [had] undesirable or unsatisfactory financial resources” (s 12(2)(g)).

228    Throughout the Relevant Period, s 3(1) of the CCA NSW provided that “close associate” meant a close associate within the meaning of the GLA Act. Section 5(1) of the GLA Act relevantly provided that a person was a close associate of an applicant for, or the holder of, a casino licence if the person:

(a)    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

(b)    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.

229    Section 5(2) of the GLA Act defined a “relevant financial interest” concerning a business to include, relevantly, any share in the capital of the business, 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.

230    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(2) defined a “relevant power” to mean any power, whether exercisable by voting or otherwise, and whether exercisable alone or in association with others, to participate in “any directorial, managerial or executive decision” or to elect or appoint any person to a relevant position.

231    It was not disputed that Star, as the ultimate holding company of Star Sydney (the holder of the casino licence for the Sydney Casino), 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.

232    Fourthly, throughout the Relevant Period, s 23 of the CCA NSW empowered ILGA to take “disciplinary action” against a casino operator, specifying four types of disciplinary action and the grounds for such action. The types of action specified in s 23(1) were: (a) the cancellation or suspension of the licence; (b) the imposition on the licensee of a pecuniary penalty of up to $1 million; (c) the amendment of the terms or conditions of the licence (other than under s 22); and (d) the issue of a letter of censure to the licensee. The grounds for disciplinary action, which were also identified in s 23(1), relevantly included “that the licensee is, for specified reasons, considered to be no longer a suitable person to give effect to the licence and this Act”.

233    Fifthly, s 31 required ILGA, at intervals not exceeding five years, to review a casino licence by investigating and forming an opinion as to whether the casino operator was a suitable person to continue to give effect to the casino licence and the CCA NSW (s 31(1)(a)), and whether it was in the public interest that the casino licence should continue in force (s 31(1)(b)).

234    Sections 31 and 23(1) demonstrate that the consideration of whether a person was “suitable” was not confined to ILGA’s determination of whether to grant an application for a casino licence under s 12(1).

235    The disciplinary action regime in s 23 permitted ILGA to serve a written notice on the casino licensee affording the licensee an opportunity to show cause why disciplinary action should not be taken against them (s 23(2)). The licensee could make submissions, and ILGA was required to consider any submissions so made (s 23(3)). ILGA could then decide whether it was appropriate that disciplinary action be taken and could take that disciplinary action by giving written notice to the licensee, or alternatively, provide a rectification order under s 24 (s 23(4)).

236    As I indicated earlier, these components of the statutory framework are relevant to understanding aspects of ASIC’s pleaded case, particularly as to the defendants’ alleged knowledge and the foreseeability of certain types of harm to Star.

F.2.2    Casino Control Act 1982 (Qld)

237    Sections 20(1) and 26 of the CCA Qld required that, prior to being granted a casino licence, the licensee be a “suitable” person to be associated or connected with the management and operations of a casino. This suitability requirement also applied to all persons (natural or not) who were “associated or connected or to be associated or connected, in the opinion of the Minister, with the ownership, administration or management of the operations or business of the casino licensee …” (s 20(1)). Such persons were therefore like “close associates” in NSW. As with the CCA NSW, the criteria relevant to the assessment of suitability included:

(a)    whether the licensee and its associates were each of “good repute, having regard to character, honesty and integrity” (s 20(1)(a)); and

(b)    whether the licensee or any of its associates had “any business association with any person, body or association who or that, in the opinion of the Governor in Council after investigation made or caused to be made by the Minister, [was] not of good repute having regard to character, honesty and integrity or [had] undesirable or unsatisfactory financial resources” (s 20(1)(f)).

238    Additionally, like s 23(1) of the CCA NSW, s 31(1) of the CCA Qld provided various grounds for the cancellation or suspension of a casino licence. Relevantly, one of those grounds was if the licensee or any director, partner, trustee, executive officer, secretary or other officer or person determined by the Minister associated or connected with the ownership, administration or management of the person’s operations or business, was not or ceased to be a suitable person, having regard to the matters in ss 20 or 26 of the CCA Qld (see s 31(1)(d)).

239    If such a ground arose and the Minister was of the opinion that “the act or omission or other thing constituting the ground [was] of such a serious and fundamental nature that the integrity of the operation of the casino [was] jeopardised or the interest of the public [was] adversely affected”, the Minister was empowered to set in train a process that could ultimately result in suspension or cancellation of the licence (s 31(2)). If the Minister was not of the requisite opinion, they could issue a letter of censure (s 31(10)).

240    If the Minister held the requisite opinion, they were required to issue to the casino licensee a notice in writing requiring them to show cause why action should not be taken with respect to the licence (s 31(2)). The Minister was required to issue a copy of the notice to any other person who, in the Minister’s opinion, had an interest in the casino licence (s 31(3)). Any person having an interest as referred to in subsection (3) could make submissions to the Minister (s 31(7)). Upon considering the answers given in reply to the notice and any submissions made, the Minister had options other than recommending to the Governor in Council a suspension or cancellation of the licence. The Minister could have taken no further action (s 31(8)(a)), issued a letter of censure (s 31(8)(b)), or given directions to ensure that any matter connected with or giving rise to the issue of the notice was rectified within a specified timeframe (s 31(8)(c)(i)). If the Minister decided to recommend to the Governor in Council that the casino licence be cancelled or suspended (s 31(8)(c)(ii)), it ultimately remained in the Governor in Council’s “absolute discretion” as to what, if any, action should be taken (s 31(12)).

241    Notwithstanding any other provision of the CCA Qld, the power to cancel or suspend a licence could only be exercised by the Governor in Council if satisfied “that the circumstances [were] so extraordinary that it [was] imperative in the public interest to do so” (s 31(15)).

F.2.3    The AML/CTF Act

242    During the Relevant Period, the objects of the AML/CTF Act, set out in s 3(1), included fulfilling Australia’s international obligations and addressing matters of international concern relating to combatting money laundering and the financing of terrorism. They also included:

(aa)    to provide for measures to detect, deter and disrupt money laundering, the financing of terrorism, and other serious financial crimes; and

(ab)    to provide relevant Australian government bodies and their international counterparts with the information they need to investigate and prosecute money laundering offences, offences constituted by the financing of terrorism, and other serious crimes; and

(ac)    to support cooperation and collaboration among reporting entities, AUSTRAC and other government agencies, particularly law enforcement agencies, to detect, deter and disrupt money laundering, the financing of terrorism, and other serious crimes; and

(ad)    to promote public confidence in the Australian financial system through the enactment and implementation of controls and powers to detect, deter and disrupt money laundering, the financing of terrorism, and other serious crimes

…

243    The AML/CTF Act imposed requirements on “reporting entities”, which were defined in s 5 as “a person who provides a designated service”. The expression “designated service” was defined as having the meaning given by s 6. Section 6 provided tables identifying various types of “designated services”. Relevantly, “designated services” included a variety of “gambling services”, as specified in Table 3 in s 6.

244    It was uncontroversial that Star Sydney and Star Qld, as the operators of the Sydney Casino, Treasury Brisbane, and The Star Gold Coast, were “reporting entities”, providers of “designated services”, and required to comply with requirements of the AML/CTF Act.

245    Three requirements of the AML/CTF Act assume present relevance.

246    First, a “fundamental and foundational” requirement of the AML/CTF Act was that, under s 81, a reporting entity was prohibited from commencing to provide a designated service to a customer unless it had adopted and maintained an anti-money laundering and counter-terrorism financing programme (AML/CTF Programme): Chief Executive Officer of the Australian Transaction Reports and Analysis Centre v Westpac Banking Corporation [2020] FCA 1538; (2020) 148 ACSR 247 (at 268 [135] per Beach J).

247    As I observed in Chief Executive Officer of the Australian Transaction Reports and Analysis Centre v Crown Melbourne Limited [2023] FCA 782; (2023) 168 ACSR 421, the AML/CTF Programme is the principal document for setting out the risk-based systems and controls that are required to ensure compliance with the AML/CTF Act and the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) (Cth) (AML/CTF Rules), and is either a “standard”, “joint” or “special” programme (at 435–436 [63]–[64] per Lee J).

248    Star Sydney and Star Qld, each being a “reporting entity”, together formed a “designated business group” and, pursuant to s 85, had a Joint AML/CTF Programme. Throughout this judgment I use the expressions “Star’s Joint AML/CTF Programme” and “Star’s AML/CTF Programme” as convenient shorthands; they were used by the parties. Section 85 provided that a Joint AML/CTF Programme has two parts, being:

(a)    Part A, whose primary purpose was to identify, mitigate and manage the risk that each of those reporting entities may reasonably face that the provision by the relevant reporting entity of designed services at or through a permanent establishment of the relevant reporting entity in Australia might (whether inadvertently or otherwise) involve or facilitate money laundering or financing of terrorism (s 85(2)(a)); and

(b)    Part B, whose sole or primary purpose was to set out the applicable customer identification procedures for the purposes of the application of the AML/CTF Act to customers of each of those reporting entities (s 85(3)(a)).

249    Section 82 of the AML/CTF Act imposed an obligation on reporting entities to comply with Part A of their standard or joint AML/CTF Programme (s 82(1)(c)). Sections 85(2)(c) and 85(3)(b) required that Part A and Part B of a joint AML/CTF Programme respectively comply with the requirements (if any) as specified in the AML/CTF Rules. In Chief Executive Officer of Australian Transaction Reports and Analysis Centre v Tab Ltd (No 3) [2017] FCA 1296, Perram J considered this “unusual drafting device” and concluded that a failure to comply with the AML/CTF Rules will generally have the consequence of causing an infringement of s 81 (at [25]–[28]).

250    One of the requirements specified in the AML/CTF Rules (in Part 9.4) was that Part A of the AML/CTF Programme be approved by the “governing board and senior management” of each reporting entity in the designated business group, and that it be “subject to ongoing oversight” of the governing board and senior management of the main holding company of the group (see r 9.4.2). In this way, the directors of Star, being the “the main holding company” of each of Star Sydney and Star Qld, were responsible for approving and overseeing Part A of Star’s Joint AML/CTF Programme.

251    Secondly, pursuant to s 41 of the AML/CTF Act, a reporting entity was required to make suspicious matter reports (SMRs) to the Chief Executive Officer of the Australian Transaction Reports and Analysis Centre (AUSTRAC) of information about certain matters in certain circumstances. The circumstances in which SMRs were required to be made were, relevantly, as follows:

(a)    if the reporting entity commenced to provide, or proposed to provide, a designated service to a particular person, or that person requested the reporting entity to provide a designated service and such designated service was of a kind ordinarily provided by the reporting entity, or that the person enquired whether the reporting entity would be willing or prepared to provide a designated service to them and the designated service was of a kind ordinarily provided by the reporting entity (s 41(1)(a)-(c)); and

(b)    if, at the relevant time or a later time, the reporting entity suspected on reasonable grounds that the person or their agent is not the person they or their agent claimed to be (s 41(1)(d)-(e)), or that information it had concerning the provision, or prospective provision, of the designated service is preparatory to the commission of certain offences (ss 41(1)(f), 41(1)(g) and 41(1)(i)) or may be relevant to the investigation of, or prosecution of a person for certain offences, including a “financing of terrorism” or “money laundering” offence (ss 41(1)(h) and 41(1)(j)).

252    As s 41(1) makes clear, the reporting obligation only arises where the circumstances in s 41(1)(a)-(c) exist and any of the conditions in subsections (d)-(j) are satisfied.

253    Thirdly, under Part 2 of the AML/CTF Act, a reporting entity had various obligations regarding verification of a customer’s identity before providing designated services. Section 36(1) imposed an obligation on a reporting entity to monitor its customers as to the provision by the reporting entity of designated services, with a view to identifying, mitigating and managing the risk it might reasonably face that provision of a designated service might involve or facilitate money laundering or the financing of terrorism, and to do so in accordance with the AML/CTF Rules.

254    As with the suspicious matter reporting obligation in s 41, the requirement to “monitor” in s 36 operates by reference to the provision by the reporting entity of designated services. Any finding as to a risk of contravention of those requirements must relate to the designated services supplied by the reporting entity, the person or customer to whom they were provided or to be provided, and, specifically in the case of s 36(1), the risk that the reporting entity might reasonably face in relation to the provision of those designated services without carrying out the required monitoring.

255    If a reporting entity breached its obligations under the AML/CTF Act, it was liable to have 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:

(a)    $18 million per contravention, from 31 July 2025 to 30 June 2017;

(b)    $21 million per contravention, from 1 July 2017 to 30 June 2020; and

(c)    $22.2 million per contravention, from 1 July 2020 to the end of the Relevant Period.

256    The risk of the imposition of substantial civil penalties was not merely theoretical. During the Relevant Period, the following penalties were imposed by this Court for contraventions of the AML/CTF Act:

(a)    $45 million on Tabcorp Holdings Limited and its related entities: Chief Executive Officer of the Australian Transaction Reports and Analysis Centre v TAB Ltd (No 3) [2017] FCA 1296;

(b)    $700 million on Commonwealth Bank of Australia Limited: Chief Executive Officer of the Australian Transaction Reports and Analysis Centre v Commonwealth Bank of Australia Ltd [2018] FCA 930; and

(c)    $1.3 billion on Westpac Banking Corporation: Chief Executive Officer of the Australian Transaction Reports and Analysis Centre v Westpac Banking Corporation [2020] FCA 1538.

F.2.4    Star’s relationship with regulators

257    During the trial, I received aides-mémoire from the parties containing chronologies of Star’s interactions with various regulators based on the material in evidence. The evidence summarised in these documents assumes some significance as it provides the necessary historical context or background against which one can assess the reasonableness of any ex ante perception of risk of disciplinary action by the regulator if the regulator had been apprised of specified information. This importance is highlighted by the reality that, as I have already noted, no evidence was led by ASIC to contradict any representations recorded in business records as to communications with the regulators, nor was evidence adduced as to any remedial disciplinary response that would have been taken by the regulators if they had been apprised of specific information.

258    What I do have is the following.

259    On 15 December 2011, Star Sydney was subject to an independent periodic review under s 31 of the CCA NSW by Gail Furness SC. Ms Furness found that Star Sydney was a suitable person to continue to give effect to their casino licence and that it was in the public interest that the casino licence should continue in force.

260    On 8 February 2012, the Queensland Office of Liquor and Gaming Regulation (OLGR) provided approval for Mr Alan Iek (the junket promoter for Suncity) to enter future junket arrangements in Queensland in the capacity of a junket promoter.

261    On 26 April 2012, ILGA issued a notice to Star under s 32 of the CCA NSW requesting a copy of all documents relating to the due diligence and/or risk assessments conducted on Suncity, and its principals and representatives. Star responded on 30 April 2012, providing information including a World Check Report for Mr Chau and a copy of a report prepared by Mr Jim Lisle, a Macau-based private investigator retained by Star.

262    On 25 November 2012, OLGR provided approval for Mr Shen Min Min (the junket promoter associated with Mr Qin and, obviously enough, the Shen Minmin junket) to enter into future junket agreements in Queensland in the capacity of a junket promoter.

263    On 20 September 2013, ILGA published a review of Star’s junket promoters for the period from 1 January 2012 to 31 January 2013. The review concluded that Star had “comprehensive, risk based procedures in place to limit any junket promoters and their players that may have [had] backgrounds of a suspect nature dealing with The Star” and noted that “[i]t is not considered that at this stage … The Star could put in place any further checking procedures to determine the suitability of their junket operators”.

264    As of 17 October 2013, OLGR had completed a probity review of Star and its three Queensland casino licence holding entities, issuing a letter of advice confirming the suitability of the Queensland licence holding entities and relevant individuals with no specific recommendations or actions required of Star.

265    A Board and Risk Compliance Committee paper from Ms Martin prepared for discussion at a Risk and Compliance Committee meeting on 19 March 2014 provided that “[t]he first 2014 quarterly executive meeting with ILGA Chairman (Chris Sidoti) and Chief Executive (Micheil Brodie) was held on 28 February, with John O’Neill, Matt Bekier and I attending. Mr Sidoti and Mr Brodie confirmed that they were comfortable with [Star’s] standard of regulatory compliance overall.”

266    On 27 August 2014, Star’s Board met with ILGA’s Board.

267    On 25 September 2014, ILGA issued a notice to Star under s 32 of the CCA NSW concerning Star’s dealings with junkets and junket promoters affiliated with the “Neptune Group” and Suncity. ILGA sought information about the number of junkets conducted at Star by Neptune and Suncity, details outlining what due diligence and/or risk assessment checks had been conducted on Neptune and Suncity, its principals and representatives, the names of those junket promoters representing Neptune and Suncity, and copies of any agreements entered with Neptune and Suncity. On 10 October 2014, Star responded to the s 32 notice, indicating that “[n]o corporate entities have been licensed as junket promoters in NSW by The Star and accordingly neither the Neptune Group nor Suncity Group conducted junkets in their own capacity at The Star during the relevant period”. Star also provided information about its dealings with Mr Chau and Mr Iek, including copies of the relevant agreements and a description of the due diligence process that Star followed generally concerning junkets.

268    On 14 October 2014, ILGA issued a s 32 notice to Star, seeking information in relation to Star’s junket arrangements, including copies of any junket agreements entered with Mr Iek as the nominated junket promoter representing Suncity. On 20 October 2014, Star responded to that notice, providing copies of the relevant junket agreements.

269    Following the Four Corners story on casinos (and junket operators in Macau) on 16 October 2014, ILGA wrote to Star to request information regarding junkets that Star had conducted with Neptune and Suncity. This type of information had been provided previously and was submitted again, with no follow up questions received.

270    On 5 November 2014, Mr Bekier and Ms Martin attended a meeting with Micheil Brodie of ILGA. A file note of the meeting records that, following the Four Corners story, ILGA asked for some information about some of Star’s junket groups and operators. It also states that Star responded to that request.

271    On 17 February 2015, an Executive Operations meeting occurred between representatives of Star and Liquor and Gaming NSW (L&GNSW). The minutes of the meeting record that various items were discussed, including the Victorian Auditor General’s report into Regulating Gambling and Liquor, and the s 31 Casino Review. The minutes also record that “[o]ver the past 5 years there has been a much greater reliance on junket groups to bring business to the property”.

272    On 28 October 2015, Star’s Board met with ILGA’s Board. A memorandum prepared by Ms Martin ahead of that meeting indicated that “[t]he meeting is designed to be a high-level discussion between the two Boards, which promotes [Star’s] commitment to ongoing open and transparent interaction with the Board and the authority more broadly”. It also recorded that “[i]n addition to putting [Star’s] points forward (refer below), the meeting is an opportunity to hear directly from the ILGA Board as to … any issues/concerns and other comments that it has to provide [Star] on the operations of [Star] or across the group. This is particularly important in the context of the 2016 casino licence review (section 31 review).” The memorandum also records the ongoing interest of the AFP and Australian Taxation Office (ATO) in junket operators and individuals.

273    On 26 April 2016, a Risk and Compliance Committee paper prepared by Ms Martin with the subject “Regulatory Matters Update” informed the Risk and Compliance Committee at a meeting that, in the first quarterly executive meeting with OLGR’s CEO (Mr Mike Sarquis) on 17 March 2016, that he was “comfortable a good level of compliance [was] being maintained across the Brisbane and Gold Coast properties”. The paper also recorded that compliance reports issued by OLGR as to the period from 1 October 2015 to 31 January 2016 for the Treasury Brisbane and Jupiters Gold Coast properties “noted that good levels of compliance [were] being maintained at both properties”.

274    On 20 July 2016, Mr O’Neill attended what was described as a “coffee catch-up” with Mr Philip Crawford, the Chairman of ILGA.

275    On 4 August 2016, Dr Horton was appointed by ILGA under s 143(1) of the CCA NSW to conduct a review into Star Sydney’s suitability to hold a casino licence under the CCA NSW, relevantly considering the processes and procedures Star had in place to manage junkets. Dr Horton found that Star Sydney was suitable to hold a casino licence. I consider the Horton Review in more detail in Section I below, being the section concerning Star’s relationships with junkets.

276    On 29 September 2016, a Risk and Compliance Committee paper prepared by Ms Martin with the subject “Regulatory Matters Update” informed the Risk and Compliance Committee at a meeting that, in the quarterly executive meeting with OLGR’s CEO in June 2016, he was “comfortable that a good level of compliance [was] being maintained across the Brisbane and Gold Coast properties”.

277    On 6 December 2016, a Risk and Compliance Committee paper prepared by Ms Martin with the subject “Regulatory Matters Update” informed the Risk and Compliance Committee at a meeting that compliance reports issued by OLGR on 25 November 2016 as to the period from June to September 2016 noted “that good levels of compliance [were] being maintained” at the Queensland properties.

278    On 15 December 2016, Mr O’Neill had another get together with Mr Crawford.

279    On 24 May 2017, a Risk and Compliance Committee paper prepared by Ms Martin with the subject “Regulatory Matters Update” informed the Risk and Compliance Committee at a meeting that “OLGR continues to focus on (relatively) minor matters and acknowledge that overall, good levels of compliance are being maintained at both [Queensland] properties”.

280    On 26 May 2017, an Executive Operations meeting occurred between representatives of Star and L&GNSW. The minutes of the meeting record that L&GNSW “thanked [Star] for the presentation around junkets and AML”.

281    On 26 September 2017, a Risk and Compliance Committee paper prepared by Ms Martin with the subject “Regulatory Matters Update” informed the Risk and Compliance Committee at a meeting that “[n]o material compliance issues were raised by OLGR Chief Executive, Mr Mike Sarquis, during the reporting period [May 2017 to 10 September 2017]”, and recorded that “OLGR continues to focus on (relatively) minor matters and acknowledge overall, good levels of compliance are being maintained at both [Queensland] properties”.

282    On 5 December 2017, a Risk and Compliance Committee paper prepared by Ms Martin with the subject “Regulatory Matters Update” informed the Risk and Compliance Committee at a meeting that “[n]o material compliance issues were raised by OLGR Chief Executive, Mr Mike Sarquis, during the reporting period [10 September 2017 to 24 November 2017]”, and recorded that “OLGR continues to focus on (relatively) minor matters and acknowledge overall, good levels of compliance are being maintained at both [Queensland] properties”.

283    On 5 February 2018, Star notified ILGA that it was proposing to make some minor changes to the junket operator’s office located in a private gaming room at the Sydney Casino, called Salon 95. The changes were the installation of a service desk in the Salon and a service window in the wall of the junket operator’s office.

284    On 22 March 2018, a Risk and Compliance Committee paper prepared by Ms Martin with the subject “Regulatory Matters Update” informed the Risk and Compliance Committee at a meeting that “[n]o material compliance issues were raised by OLGR Chief Executive, Mr Mike Sarquis, during the reporting period [December 2017 to 12 March 2018]”. It also recorded that “OLGR continue to focus on (relatively) minor matters and acknowledge that overall, good levels of compliance are being maintained at both properties”.

285    On 27 March 2018, Mr O’Neill had a telephone call with Mr Crawford. There is no record of what passed between them and no reason to think it was a communication of any particular importance.

286    On 23 May 2018, a Risk and Compliance Committee paper prepared by Ms Martin with the subject “Regulatory Matters Update” informed the Risk and Compliance Committee at a meeting that OLGR’s compliance review for the reporting period 1 October 2017 to 31 January 2018 yielded “no recommendations for changes or reviews identified by OLGR for either the Brisbane or Gold Coast property” and the “Gold Coast Inspectorate advised that no audit issues were identified during January and February which included the Lunar New Year business and opening of new gaming areas”.

287    On 16 August 2018, a Risk and Compliance Committee paper prepared by Ms Martin with the subject “Regulatory Matters Update” informed the Risk and Compliance Committee at a meeting that there were “minimal compliance issues identified by OLGR” during the 2018 financial year, with OLGR’s audits identifying “[n]o major issues” and OLGR acknowledging that “good levels of compliance are continuing to be maintained at both [Queensland] properties”.

288    On 31 October 2018, a Risk and Compliance Committee paper prepared by Ms Martin with the subject “Regulatory Matters Update” informed the Risk and Compliance Committee at a meeting that OLGR’s monthly audit reports for August and September did not raise “any significant issues for either South-East Queensland property”. The paper also records that, in respect of ILGA, Star “continued with a range of stakeholder engagement meetings with L&G NSW during the reporting period”, and that Star “has been informed that L&G NSW will issue a warning letter that encompasses a range of breaches over the previous 16 months. The Star has not yet received this letter”.

289    On 21 November 2018, Mr O’Neill, Ms Martin, Mr Bekier attended a meeting with Ms Rochelle Hurst and Mr Crawford, both of ILGA. The “talking points” for the meeting recorded that Mr O’Neill was to speak to the “[b]ackground to requests – previous engagement with the former ILGA Board found beneficial … keen to maintain various, appropriate levels of engagement going forward in NSW”.

290    On 18 December 2018, pursuant to s 124(1) of the CCA NSW, ILGA approved all of Star’s revised Internal Control Manuals. The approved Internal Control Manuals included “ICM 8: Rebate Play (regarding premium player arrangement or Junket play)” and “ICM 9: Cheque Cashing & Deposit Facilities (regarding the utilisation of “cheque” cashing facilities)”. The approval letter signed by Mr Crawford states that “[t]he ICM has been redrafted over several months in a collaborative effort between Liquor and Gaming NSW (L&GNSW), [Star] and [Crown] … The Authority is satisfied that the use of the revised ICM provides greater flexibility and has been updated to reflect changes in community standards, industry circumstances, compliance and enforcement practices, or emergent risks.”

291    On 26 March 2019, a Risk and Compliance Committee paper prepared by Ms Martin with the subject “Regulatory Matters Update” informed the Risk and Compliance Committee at a meeting that OLGR made no recommendations in respect of the Queensland properties in its performance reports for 1 June 2018 to 31 December 2018, and that OLGR’s view was that “the reduction in operator and staff non-conformities in this period [at Star Gold Coast] compared to the same period in 2017 represents an improvement in compliance and indicates that the operator continues to maintain a good level of compliance” and “the operator’s compliance [at Treasury Brisbane] with regulatory requirements and approved controls has considerably improved in the reporting period”. As to ILGA, the update states that “[n]o significant issues were raised in relation to the implementation of the group-wide organisational changes to the marketing and gaming structures of the property-level management structure for The Star during the reporting period”. The update further noted that “[a] meeting with the ILGA Board Chairman and other members and the Managing Director & CEO and Chairman of The Star originally scheduled for 22 August was held on 21 November 2018. The meeting covered a range of topics and set a base for ongoing engagement with the ILGA Board Chairman and members”.

292    On 21 May 2019, a Risk and Compliance Committee paper prepared by Ms Martin with the subject “Regulatory Matters Update” informed the Risk and Compliance Committee at a meeting that following the implementation of risk-based, less prescriptive internal controls at Star Sydney in December, a plan of regulatory reviews was being carried out by the Regulatory Affairs team to provide comfort as to compliance with obligations under the internal controls. The paper records that several reviews had been conducted, including on “Salon 95 Suncity Processes” and the “Junket Residency Checklist”. In respect of the former, the paper records that no significant issues were found and that “Suncity have been conducting all transactions through [Star’s] Cage providing a much higher level of oversight”.

293    On 23 May 2019, Ms Martin and Mr Hawkins met with Mr Crawford. The meeting notes state concerning the background and purpose of the meeting: “Meeting late 2019 with JON and MB – raised [Star’s] priorities and concerns re 2 operator market … The Star has a large pipeline of works and plans across the Group, in relation to which the ILGA Board and L&G NSW will have roles – we want to be proactive and efficient with ILGA”.

294    On 29 July 2019, L&GNSW wrote to Star concerning the Crown allegations, noting that “L&GNSW is currently reviewing the effectiveness of The Star’s compliance with regulatory requirements through audits of its internal controls, standard operating procedures and other regulatory obligations”. The letter contains a request that Star “undertakes a risk assessment of its practices and procedures which mitigate against the types of issues raised in the media reports, and reports the findings to Liquor & Gaming NSW”, and specifically that Star “details what steps it takes to ensure that only suitable operators and representatives operate junkets in its casinos”. L&GNSW also requested that Star review “any current associations or arrangements with junket operators or related individuals to ensure the suitability of any existing relationships” and noted that “a more specific discussion around the individuals and organisations identified in the reports is to take place between L&GNSW and Mr Graeme Stevens, Regulatory Affairs Manager, in a meeting to be held this week”.

295    On 31 July 2019, Mr Power responded to L&GNSW, noting that the Crown allegations did not refer to or relate to Star or any of the casinos it operates, and stating that “… we remain comfortable that The Star’s processes are robust and that the findings of the review conducted by Dr Horton in November 2016 for the Independent Liquor and Gaming Authority hold true today …”. Mr Power also stated that Star “already has in place routine methods of assessing the risks associated with junket participants” and suggested a meeting to discuss Star’s due diligence processes.

296    On 1 August 2019, Mr O’Neill met with Mr Crawford. Following that meeting, Mr O’Neill sent Mr Crawford a briefing note prepared by Ms Martin, which sets out talking points as to the Crown allegations, including that “[m]anagement are reviewing the information in the reports for any further checks/actions needed at The Star (as we do with all such media on AML matters)”. The talking points also summarise the letter received from L&GNSW and indicate Star’s response to that letter.

297    Importantly, Mr Bekier gave evidence of his recollection of this meeting. Although I have expressed credit concerns about aspects of Mr Bekier’s evidence, there was no evidence adduced contradicting his account and it is consistent with the lack of concern that had been expressed by ILGA up until this time. I accept his evidence of what transpired, which was that:

The whole topic was pretty broad-ranging, but it was an effort for Mr O’Neill, our chairman, to open the door and make sure that we had an open line of communication with ILGA …

Mr Crawford was very generous and he – you know, Mr O’Neill basically suggested that we meet – that he and – he and Mr Crawford meet along more frequently to make sure that the conversation continues to flow, continues. And Mr Crawford basically said, “Look, I like meeting with you but I’m not sure we need to because I feel like we’ve got a good relationship with Star. We get everything we need, you know, through Mr Hawkins and there’s no real need for us to meet.” And in that context, he also offered that he felt there was a very different type of engagement between us and Crown…

he said something to the extent of “there’s day and night between you and Crown in the way that you deal with regulators”.

(T421.22-38)

298    On 8 August 2019, ILGA announced its inquiry into Crown, which was to be led by the Honourable Patricia Bergin SC, including into “various matters raised in recent media reports published by the Nine Network, the Sydney Morning Herald and the Melbourne Age relating to Crown Resorts”.

299    On 8 August 2019, L&GNSW wrote to Star, seeking information about the specific individuals and entities named in the Crown allegations, including Suncity and Mr Chau.

300    On 9 August 2019, Mr O’Neill emailed Mr Crawford a copy of Star’s statement to The Sydney Morning Herald regarding the Crown allegations.

301    On 10 September 2019, Star wrote to L&GNSW concerning the Crown allegations, providing a response on specific individuals and entities, including Suncity and Mr Chau, as well as information relating to Star’s Joint AML/CTF Programme.

302    On 24 September 2019, a Risk and Compliance Committee paper prepared by Ms Martin with the subject “Regulatory Matters Update” informed the Risk and Compliance Committee at a meeting that OLGR’s performance report for the reporting period of 1 January 2019 to 30 June 2019 noted that two recommendations were made in respect of Star Gold Coast, but that “the operator is maintaining a good level of compliance and the overall commentary at the meeting was positive”. As to Treasury Brisbane, the paper recorded that “no recommendations were made” and that the performance report noted that “the operator’s compliance with regulatory requirements and approved controls is consistent with the previous reporting period and fewer than half the number of issues of non-compliance with the same reporting period in 2018”.

303    On 22 May 2020, Mr O’Neill, Mr Bekier, Ms Martin and Mr Power met with Mr Crawford and on 6 August 2020 and 2 November 2020, Mr O’Neill met with Mr Crawford. There is no evidence of any concerns expressed by Mr Crawford as to Star’s procedures or operations at these meetings.

F.2.5     The foreseeability of disciplinary action

304    Drawing all these communications together, they must be examined without the distortion of hindsight. The evidence does not furnish a sufficient foundation for any finding as to the diligence, or otherwise, of ILGA, and it is unnecessary to reach such a conclusion. What is relevant for present purposes is that the communications with Mr Crawford disclose a then relatively benign and trusting relationship between Star and the regulator, even after the initial publication of the Crown allegations and the first exchange of information with L&GNSW.

305    In short, a fair review of the material suggests that ILGA, L&GNSW (to whom certain functions were delegated), and OLGR maintained an apparently cordial working relationship, sharing information concerning junkets and Star’s vetting and monitoring of those junkets.

306    There is no evidence that Mr Crawford regarded Star as other than constructively and candidly engaged with the regulator, nor that his view was idiosyncratic or detached from the regulator’s institutional posture. In those circumstances, it cannot be accepted that, upon being apprised of deficiencies in Star’s practices at the material time, ILGA would have been predisposed to take drastic disciplinary action without prior informal engagement and an opportunity for remediation.

307    I repeat I can only proceed on the basis on the evidence presented to me. Viewed against the contemporaneous documents and the regulatory relationship they reveal, ASIC’s repeated contention that termination effectively hung like a sword of Damocles over Star’s business is overstated.

308    Having noted this, I hasten to add the communications set out above were made at a time when the regulator did not understand the full range of facts which bore upon an assessment of Star’s suitability. Steps which might now appear obvious rarely present themselves with such clarity to those acting at the time. When the picture was revealed at the instigation of the media, and later by the evidence given at the Bell Inquiry, views as to suitability were assessed in a very different context. Counterfactual reasoning is often tricky. It is important not to overstate the risk, but it is also important not to diminish it by placing undue emphasis upon communications made in a different environment of knowledge.

309    In the end, there was real risk of some regulatory action during the Relevant Period if the pleaded circumstances canvassed below were revealed, but it is more probable that any initial regulatory response would have been informal. Suspension or cancellation of the licence would only have become a realistic course had Star failed to comply with initial requests or directions or otherwise failed to cooperate with the regulator.

310    This conclusion is fortified by considering the structure and operation of the CCA NSW.

311    As I have already explained, ILGA had a range of actions it could take if it considered it necessary, including four types of disciplinary action (s 23) and a rectification order as an alternative to disciplinary action (s 24). What option was adopted was left to the discretion of ILGA, and before taking any action, it needed to serve on the licensee a show cause notice and seek submissions from the licensee (ss 23(2) and (3)). Only then could it decide to proceed with the proposed disciplinary action or, alternatively, issue a rectification order (ss 23(4) and 24). ILGA also had a general power to issue written directions (with which the casino operator was required to comply) about the conduct, supervision or control of the operations in the casino (s 29).

F.3    The meaning of “Suncity”, “business association” and “person, body or association”

312    Having considered the CCA NSW and CCA Qld in some detail, it is now appropriate to resolve the dispute regarding what is meant by the statutory expressions “business association” and “person, body or association”, as well as “Suncity”.

313    Ms Martin took issue with ASIC’s pleaded definition of “Suncity” in the context of its interaction with the pleaded “Suncity Suitability Risk”. In short, she contends there is a difficulty with ASIC’s formulation of the Suncity Suitability Risk to the extent it concerns maintenance of business associations with “Suncity”. During the trial, her counsel contended there were difficulties with the “different meanings given to Suncity”, providing examples of ASIC referring to “Suncity” as specific entities, such as “Suncity Group Limited” or “Suncity Group Holdings Limited”.

314    In the end, although cleverly articulated, this an exercise in pedantry. I am satisfied that ASIC has sufficiently defined “Suncity” as “a junket known as ‘Suncity’”. I explain below what is meant by a “junket” (see [428]–[434]). “Suncity” is comprehensible shorthand for the junket bearing that name. “Suncity” is a shorthand appellation which takes on slight differences in meaning depending on the context in which it is used. It may refer to the Suncity junket(s); the Suncity group or business, Suncity as an “entity”, a particular Suncity entity, or the collective group of Suncity representatives operating in Salon 95. It was not necessary for ASIC to plead these different shades of meaning; it is obvious that Suncity could take on slightly different meanings which were able to be readily understood by the defendants.

315    Ms Martin and Mr O’Neill contend that there are further difficulties with ASIC’s definition of “Suncity” because s 12(2)(g) of the CCA NSW requires consideration of the repute of “any person, body or association” with whom Star Sydney had business associations, and not any “entity”. They say that “a junket is just an arrangement”, invoking the definition in s 76(3) of the CCA NSW, and that “Suncity” could not be a “person, body or association” nor an “entity”. Relatedly, they contend that Star and Star Sydney could not have a “business association” with an arrangement.

316    For reasons which I will explain, these arguments are unpersuasive.

317    While the Suncity junket(s) fall within the statutory definition of a “junket” in s 76(3), which is defined by reference to an arrangement, “Suncity” in the broader sense was much more than an “arrangement”.

318    I will now consider the statutory expression “person, body or association”. It is trite that the modern approach to statutory interpretation requires, in the first instance, consideration of the text of the statute while, at the same time, having regard to its context and purpose: SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; (2017) 262 CLR 362 (at 368 [14] per Kiefel CJ, Nettle and Gordon JJ).

319    The words “person”, “body” and “association” are not defined in the CCA NSW. Unlike the expression “business association”, which, as I explain below, is a composite expression, the phrase “person, body or association” is a disjunctive list. Each limb appears to operate independently, but the terms are joined by “or”, which casts a wide net over the range of subjects that may be caught by the provision. Given the breadth of that formulation and the purpose underpinning s 12(2) and the CCA NSW more broadly, I am satisfied that Suncity is a “person, body or association”. The broader statutory context in which the expression appears is legislation which has the purposes of protecting casino operations from criminal influence or exploitation, ensuring that gaming is conducted honestly, and preventing the potential of casinos to cause harm to the public (see [223]–[224]). The licensing regime, and particularly, the suitability requirements that form part of that licensing regime, serve to fulfil that purpose. Indeed, the suitability requirements in s 12 should be construed widely, to effectuate the beneficial purpose conferred on the public.

320    Even if “Suncity” is not a “person, body or association”, which I doubt, the evidence in this case amply demonstrates that Star and Star Sydney had a long-standing “business association” with Suncity’s CEO and junket funder, Mr Chau, who falls within the first limb. The unusual nature of Suncity’s structure does not defeat the provision. The purpose of the disjunctive formulation appears to be to ensure that no intended subject escapes merely because it does not fit neatly within a single legal category. Suncity’s junkets were typically funded by a CCF, and Mr Chau was the holder of a CCF that was used to fund the Suncity junket (see [461] and Section J.3). Presumably this is why ASIC used the words “business associations between the Group and Suncity and Mr Chau” and “business associations between the Group and Suncity and/or Mr Chau” throughout its pleading.

321    At this point, it is appropriate to resolve the dispute regarding what is meant by the statutory expression “business association”. The parties gave primacy in their submissions to the meaning of that expression in the CCA NSW as opposed to the CCA Qld. This is for good reason: this case predominantly concerns conduct relating to the Sydney Casino, whose licence was held by Star Sydney. In any event, the two statutory regimes share equivalencies in relation to their use of the concept “business association” (see, for example, s 12(2)(g) of the CCA NSW and s 20(1)(f) of the CCA Qld).

322    Turning to the text, the composite expression “business association” is not defined in the CCA NSW nor the CCA Qld. It was agreed between ASIC and Mr O’Neill that, being undefined, the term has its ordinary and natural meaning and takes its colour from the context and purpose of the statute.

323    The expression “business association” relevantly appears in sections 12(2)(g) of the CCA NSW and 20(1)(f) of the CCA Qld. As I have already explained (see [227] and [237]), those provisions concern whether an applicant for a casino licence and each close associate of the applicant (in NSW), and whether a licensee and its associates (in Qld), have any “business association” with any “person, body or association” who, in the opinion of the relevant authority, is not of “good repute” having regard to character, honesty and integrity, or has undesirable or unsatisfactory financial sources.

324    ASIC provided definitions of the words “business” and “association”, but considering those definitions tends to distract from the fact that the expression is a composite one, and it is necessary to construe such an expression accordingly: XYZ v Commonwealth [2006] HCA 25; (2006) 227 CLR 532 (at 543–544 [19] per Gleeson CJ, 568 [102] per Kirby J, 592–593 [176] per Callinan and Heydon JJ). Indeed, it may be misleading to construe a composite expression by merely combining the dictionary meanings of its component parts, and it is important to avoid the possibility of engaging in any inadvertent, restrictive interpretive error or otherwise distract from the contextual and purposive interpretation of the text.

325    It is notable that the expression “business association” is qualified by the term “any”. The word “any” does not lend itself to a restrictive interpretation and should be construed amply: Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd [2000] HCA 11; (2000) 200 CLR 591 (at 601 [15] per Gleeson CJ and McHugh J); International Litigation Partners Pte Ltd v Chameleon Mining NL (recs and mgrs apptd) [2012] HCA 45; (2012) 246 CLR 455 (at 467 [44] per Heydon J). Indeed, it is revealing that s 12(2)(g) uses the word “any” three times.

326    The immediate statutory context in which the expression “business association” appears in the CCA NSW is s 12, which also uses the term “close associate” (in s 12(1)). As I explained above, that term is given a statutory definition by reference to s 5 of the GLA Act, which involves the capacity to exercise significant influence over the management of the operation of the other person’s business (see [228]). That definition is seemingly much narrower than the expression “business association”. The use of the narrower defined phrase in s 12 serves to confirm the breadth of the wider undefined expression in that same section. The legislature’s choice to define “close associate” but leave “business association” undefined, and to deploy both expressions in the same section, reinforces that “business association” was intended to operate at a higher level of generality.

327    As I observed above, the broader statutory context in which the expression appears is legislation which has the purposes of protecting casino operations from criminal influence or exploitation, ensuring that gaming is conducted honestly, and preventing the potential of casinos to cause harm to the public (see [319]).

328    Mr Bekier submitted that ASIC mischaracterised what was required for a “business association”, suggesting that the expression should require something more than a private arms’ length commercial relationship, and as requiring a connexion between two people that involves more than each pursuing their own private interests.

329    I am persuaded by ASIC’s submission that the preferrable construction of “any business association” is broad, and captures any form of commercial relationship or connexion directed to profit. The legislature selected the broader expression “business association” as opposed to the narrower expression “business relationship”. A business association encompasses a looser affiliation than a business relationship. The word “business” in the composite expression confines the provision to associations of a commercial character.

330    However, ASIC rightly recognises that, having regard to the context and purpose of the suitability provisions and s 12(2)(g) in particular, a question of extent arises. It is necessary to consider the extent of the connexion between a licensee and a person, body or association, which must be such as to attract a concern that having a business association with that person, body or association, when they are not of good repute or have undesirable or unsatisfactory financial sources, is apt to reflect upon the suitability of the licensee itself. Indeed, the “business association” could not be so tenuous or fleeting as to be unlikely to engage the statutory purpose underpinning s 12(2)(g), such as engaging in a series of preliminary meetings to investigate the pursuance of a commercial relationship. To the contrary, a written contractual relationship between the licensee and another party would likely suffice. As would repeated interactions not pursuant to a written contract. Needless to say, each connexion must be considered on its own facts.

331    I am satisfied that Star and Star Sydney had a statutorily relevant “business association” with Suncity. Suncity was Star’s largest junket customer. Even if I am wrong, I am satisfied that Star and Star Sydney had a statutorily relevant “business association” with Mr Chau (see [320]).

332    An agreement entitled “Win/Loss Rebate & Exclusive Access Agreement”, dated 30 June 2017 and to which Star was a party, provides helpful context (see [463]–[464]). It contained what is described as “junket terms for groups that the Promoter hosts/organises to play at The Star”. It conferred a series of rebates (cll 1-3), offered expense allowances for junket programmes (cl 4), and provided the Promoter with exclusive access to Salon 95 for the Promoter’s Customer’s (defined in cl 7 substantially as meaning exclusive customers of the Promoter who are not customers of Star) (cl 5). The Agreement acknowledged the operation of the separate agreement dated 21 December 2014 between Star and Mr Chau as CCF Holder for Suncity (cll 8 and 10(q) chapeau). Clause 10(b) provided that “[t]he necessary junket agreements and paperwork must be entered in to with The Star as per usually legally required process”. Clause 10(x) relatedly provided that the Agreement “is subject to the Promoter having all necessary junket licence approvals in place, the relevant junket agreements being in place with The Star, ongoing creditworthiness of the Promoter and the CCF Holder and all necessary regulatory approvals and procedures being in place at The Star allowing the operation of the junket agreements in the manner anticipated by this agreement”. As those terms demonstrate, the Agreement reflected the relationship among Star as casino operator, Mr Iek as Promoter, Mr Chau as CCF Holder, and the Suncity junket as the Promoter’s Customers.

G    STAR’S CORPORATE GOVERNANCE STRUCTURE

G.1    The role of the Board and its committees

333    Clause 54(a) of Star’s Constitution provided that Star’s business was managed by the Board. Accordingly, all the defendants, save curiously for Mr Bekier, admits that the directors of Star, acting as the Board, had the power to manage the business of Star. Mr Bekier accepted in cross-examination the blindingly obvious proposition that he understood that the Board had responsibility for the corporate governance of the company (T424.37-38). The Board was defined in cl 1 as meaning “all or some of the Directors for the time being acting as a board”.

334    ASX Listing Rule 4.10.3 required a listed company, such as Star, to publish a corporate governance statement in its annual report or on its website (and, if the latter, the statement was required by Listing Rule 4.7.4 to be lodged with the ASX). Star’s Corporate Governance Statements outlining the main corporate governance practices and policies it had in place in the 2018 financial year, the 2019 financial year, and the 2020 financial year, recorded that the Board’s role included:

(a)    reviewing and approving the strategies, budgets and business plans prepared by management;

(b)    assuring itself of the effectiveness of arrangements for the governance of the Group, including the quality of the executive team, the appropriateness of organisational arrangements and structure, and the adequacy of internal controls, policies, procedures and processes;

(c)    overseeing performance against targets and objectives; and

(d)    overseeing reporting to shareholders and other stakeholders on the strategic direction, governance and performance of the Group.

335    Star’s Corporate Governance Statement for the 2020 financial year additionally identified that the Board’s role included “defining the Company’s purpose and setting its strategic objectives” and “approving and overseeing the Company’s organisational culture and values and its risk and compliance management policies and frameworks”.

336    These Corporate Governance Statements also identified that Star operated several standing Board committees, each of which operated under terms of reference approved by the Board.

337    At a Board meeting held on 26 July 2018, the Board resolved to approve amendments to its own terms of reference, and to the terms of reference for each of its Board committees. One of the Board papers for that meeting addressed the amendments to these terms of reference and attached copies of the terms of reference for the Board and each committee, showing the amendments in mark-up. Those attachments thus show the Board’s and the committees’ terms of reference as in place from 2016, and (in mark-up) as in place from July 2018.

338    Under the heading “Key responsibilities”, cl 2 of the Board’s terms of reference identified that the Board had “overall responsibility for the corporate governance of [Star]”, and that its role included oversight of management actions and company performance, business and commercial risks, and regulatory compliance. Clause 2 also stated that, in relation to “Corporate Governance”, matters reserved for the Board or its committees included “monitoring the effectiveness of the Company’s governance, culture and accountability frameworks and practices …”, and from July 2018, “overseeing business issues associated with [Star’s] subsidiaries and other responsible entities”. As to “Management Oversight & Company Performance”, matters reserved for the Board included “overseeing the actions and decisions of management”.

339    In relation to “Business Risk and Regulatory Compliance”, matters reserved for the Board or its committees included:

[O]verseeing the management of business risk, including regulatory and legal risks which may jeopardise any licences held by the Company and key commercial risks (such as the degree of risk associated with high end discounted table game commission play).

340    From July 2018, those matters also included overseeing the management of non-financial risks and potential threats to Star’s reputation and providing strategic guidance on high-risk issues that could impact Star.

341    The Board’s terms of reference also confirmed in cl 7 that any director may “access any employee or other individual (including members of management) to ask questions and/or seek explanations and additional information relating to Board matters”, “access all relevant company records”, “invite any employee or other individual to attend a meeting of the Board”, and “access [Star’s] resources to enable the Board to discharge its duties, as the Board considered appropriate”.

342    The terms of reference for the Audit Committee, in cl 2, stated that the committee’s role was to “consider and make recommendations to the Board on its corporate governance and oversight responsibilities relating to financial accounting practices, financial risk management and system of internal control, external reporting, and the internal and external audit functions”.

343    The terms of reference for the Risk and Compliance Committee identified that the committee’s role was to assist the Board concerning the areas of risk and compliance policies and frameworks (including underlying systems, process and controls), risk management and compliance management. The responsibilities of the Risk and Compliance Committee, as set out in cl 3, included:

(a)    “evaluating the effectiveness of Star’s systems, process and controls” to, inter alia, “enable compliance with legal, regulatory and contractual obligations, including compliance with applicable licence conditions”;

(b)    “evaluating the Group’s internal process for identifying, assessing, monitoring and “managing its key operational, financial, strategic and compliance risks (including regulatory and legal risks which may jeopardise any licences held by [Star])”; and

(c)    “monitoring the management and resolution of significant legal and regulatory matters that may have a material effect on [Star’s] reputation”.

G.2    Appointment and induction of new directors

344    Star’s Corporate Governance Statement for the 2018 financial year stated that the appointment of any new director was subject to “regulatory approvals”. This seemingly was a consequence of s 35(2) of the CCA NSW, which provided that it was a condition of a casino licence that the casino operator ensure that a “major change” in the state of affairs existing concerning the operator, which is within the operator’s power to prevent, does not occur “except with the prior approval in writing of the Authority”. Section 35(1) defined a “major change” to include any change that resulted in a person becoming a close associate of the casino operator.

345    The meaning of a “close associate” is addressed above. As Star was a close associate of Star Sydney, Star and ILGA proceeded on the basis that a director of Star was accordingly also a close associate of Star Sydney. Therefore, before a new director could be appointed to Star’s Board, which would result in that person becoming a close associate of Star Sydney, s 35(2) required Star Sydney to seek ILGA’s approval for that appointment. Each of the defendants admitted that they were “close associates” of Star Sydney.

346    Star’s Corporate Governance Statement explained that, while regulatory approval was being sought for the appointment of a nominated new director, the nominated person attended Board and Board committee meetings as an “observer”, which assisted their transition into their role. The Statement also explained that such observers undertook an induction programme, and were provided with access to Board reference documents, Star’s policies, strategic plans and other materials to “assist them to participate fully and actively in all Board decision-making at the earliest opportunity”. This programme included meetings with each member of Star’s executive team and site visits.

347    As I identified earlier, Mr Heap and Mr Todorcevski were appointed formally as directors on 23 May 2018. Star’s Corporate Governance Statement reported that, during the 2018 financial year in the period between their nomination as directors and this formal appointment, they had attended Board and Board committee meetings as observers. Mr Todorcevski’s proposed appointment as a director had been announced to the ASX on 23 October 2017, and Mr Heap’s on 18 December 2017. They attended Board meetings as observers from at least 15 February 2018. I infer they underwent the induction programme described by Star in its Corporate Governance Statement.

H    RELEVANT LEGAL PRINCIPLES

348    Before providing an explanation of the important but largely uncontroversial principles concerning s 180(1) of the Corporations Act, I note it is unnecessary to discuss the meaning of “officer” in s 9 of the Act. It is common ground all defendant directors were officers of Star and Ms Martin also correctly accepted that she, as Company Secretary of Star, was an “officer” within the meaning of limb-(a) of the definition in s 9.

H.1     Section 180(1) of the Corporations Act – general principles

349    The statutory duty of care and diligence is set out in s 180(1) of the Corporations Act, which provides:

180    Care and diligence—civil obligation only

Care and diligence—directors and other officers

(1)     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).

350    It is unnecessary for me to discuss the history of the statutory duty of care and its general law antecedents. So much has been thoroughly addressed by Edelman J in Australian Securities and Investments Commission v Cassimatis (No 8) [2016] FCA 1023; (2016) 336 ALR 209 (at 288–295 [416]–[445]) and Greenwood J in Cassimatis v Australian Securities and Investments Commission [2020] FCAFC 52; (2020) 275 FCR 533 (at 565–571 [126]–[157]).

351    For the section to be engaged, the director or other officer must “exercise their powers” or “discharge their duties”, and accordingly, the power being exercised or the duty being discharged must be identified along with its source: GetSwift (at [2526] per Lee J, citing Cassimatis (at 545 [25] per Greenwood J, at 639 [450]–[452] per Thawley J)).

352    The section imposes an obligation to meet a statutory standard of care and diligence, which is objectively measured. The Court considers what an ordinary person, with the knowledge and experience of the director or officer, could be expected to have done in the circumstances if the director was acting on the director’s own behalf: Termite Resources NL (in liq) v Meadows (No 2) [2019] FCA 354; (2019) 370 ALR 191 (at 227 [181] per White J); United Petroleum Australia Pty Ltd v Herbert Smith Freehills (a firm) [2018] VSC 347; (2018) 128 ACSR 324 (at 443 [609] per Elliott J); Australian Securities and Investments Commission v Adler [2002] NSWSC 171; (2002) 168 FLR 253 (at 346–347 [372(4)] per Santow J); Permanent Building Society (in liq) v Wheeler (1994) 14 ACSR 109 (at 159 per Ipp J); Australian Securities Commission v Gallagher (1993) 10 ACSR 43 (at 53 per Pidgeon J).

353    The “ordinary person” is a director or officer of the corporation “in the corporation’s circumstances” who occupies the office held by, and has the same “responsibilities within the corporation” as, the director or officer whose conduct is impugned: GetSwift (at [2527] per Lee J, citing Cassimatis (at 545–546 [27] per Greenwood J, at 640 [455]–[457] Thawley J)). Those are the subjective elements which inform the objective assessment.

354    The phrase “corporation’s circumstances” has been interpreted expansively and includes the type of company involved, the provisions of its constitution, the size and nature of the company’s business or businesses, the composition of the board of directors, the competence of the company’s management, the competence of the company’s advisers, and the distribution of the work and responsibilities as between the board and as between other officers: Australian Securities and Investments Commission v Bettles [2023] FCA 975; (2023) 169 ACSR 244 (at 354 [439(2)] per Markovic J); Termite Resources (at 227 [181] per White J); Australian Securities and Investments Commission v Macdonald (No 11) [2009] NSWSC 287; (2009) 230 FLR 1 (at 53 [240] per Gzell J); Australian Securities and Investments Commission v Flugge [2016] VSC 779; (2016) 342 ALR 1 (at 274 [1871] per Robson J); Australian Securities and Investments Commission v Rich [2009] NSWSC 1229; (2009) 236 FLR 1 (at 131 [7201(a)] per Austin J); Australian Securities and Investments Commission v Maxwell [2006] NSWSC 1052; (2006) 59 ACSR 373 (at 397 [100] per Brereton J).

355    Depending on the circumstances of the case, 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 …”: Rich (at 131 [7201(a)] per Austin J). The “corporation’s circumstances” also “necessarily include, if it be relevant to the particular case, any breach or potential breach of law by the corporation”: Cassimatis (at 640 [456] per Thawley J).

356    The “responsibilities” referred to in s 180(1)(b) are not confined to the statutory responsibilities imposed on the officer by the Corporations Act, but also encompass “whatever responsibilities [original emphasis] the officer concerned had within the corporation, regardless of how or why those responsibilities came to be imposed on that officer”: Shafron v Australian Securities and Investments Commission [2012] HCA 18; (2012) 247 CLR 465 (at 476 [18] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ); Cassimatis (at 545–546 [27] per Greenwood J, at 640 [457] per Thawley J). In this context, “responsibilities” directs attention to the acquisition of responsibilities not only through specific delegation by formal means, such as through the company’s constitution or a resolution, but also to the factual arrangements operating within a company that lead to the distribution of work: GetSwift (at [2532] per Lee J); Rich (at 131–132 [7201]–[7202] per Austin J).

357    In determining whether a director or officer has contravened s 180(1), it is necessary to balance the foreseeable risk of harm to the company (including the nature and magnitude of the risk of harm and the degree of probability of its occurrence) against the potential benefits that could reasonably have been expected to accrue to the company by reason of the director’s or officer’s actions, along with the expense, difficulty and inconvenience of taking alleviating action: GetSwift (at [2528] per Lee J, citing Vrisakis v Australian Securities Commission (1993) 9 WAR 395 (at 449–450 per Ipp J) and Maxwell (at 397–398 [102] per Brereton J)); Cassimatis (at 556 [87] per Greenwood J); Australian Securities and Investments Commission v Drake (No 2) [2016] FCA 1552; (2016) 340 ALR 75 (at 155–156 [395] per Edelman J); Australian Securities and Investments Commission v Mariner Corp [2015] FCA 589; (2015) 241 FCR 502 (at 583–584 [449]–[452] per Beach J).

358    The balancing exercise is not confined to commercial considerations or monetary consequences and extends to “all of the interests of the corporation”: GetSwift (at [2529] per Lee J, citing Cassimatis (at 640–641 [459] per Thawley J)); Australian Securities and Investments Commission v Mitchell (No 2) [2020] FCA 1098; (2020) 382 ALR 425 (at 674 [1431] per Beach J).

359    The exercise is forward-looking to what a reasonable person would have done and must be undertaken without the benefit of hindsight: GetSwift (at [2528] per Lee J, citing Cassimatis (at 556 [87] per Greenwood J)); Drake (No 2) (at 156 [396] per Edelman J); Rich (at 139–140 [7234]–[7235] per Austin J).

360    Section 180(1) does not impose a standard of perfection; making a mistake does not in itself demonstrate a lack of due care and diligence: GetSwift (at [2533] per Lee J, citing Australian Securities and Investments Commission v Lindberg [2012] VSC 332; (2012) 91 ACSR 640 (at 654 [72] per Robson J) and Rich (at 141 [7242] per Austin J)).

H.1.1    Guiding and monitoring the management of the company

361    Whatever the position in earlier times, directors are now required to take reasonable steps to place themselves in a position to guide and monitor the management of the company: Australian Securities and Investments Commission v Healey [2011] FCA 717; (2011) 196 FCR 291 (at 330 [166] per Middleton J); Adler (at 346–347 [372(8)] per Santow J); Daniels v Anderson (1995) 37 NSWLR 438 (at 500–501 per Clarke and Sheller JJA).

362    This means that a director should become familiar with the fundamentals of the business or businesses in which the corporation is engaged; a director is under a continuing obligation to keep informed about the activities of the corporation; directorial management requires a general monitoring of corporate affairs and policies (including by way of regular attendance at board meetings); and a director should maintain familiarity with the financial status of the corporation by a regular review of financial statements: Healey (at 330 [166] per Middleton J); Rich (at 132 [7203] per Austin J); Adler (at 346–347 [372(8)] per Santow J); Daniels v Anderson (at 502–504 per Clarke and Sheller JJA); Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115 (at 125 per Tadgell J).

363    While directors are required to take reasonable steps to place themselves in a position to guide and monitor management, they are entitled to rely without verification on the judgment, information and advice of management and other officers, at least except where they know, or by the exercise of ordinary care should have known, facts that would deny reliance: GetSwift (at [2535] per Lee J, citing Healey (at 330 [167] per Middleton J) and Australian Prudential Regulation Authority v Kelaher [2019] FCA 1521; (2019) 138 ACSR 459 (at 476 [41] per Jagot J)); AWA Ltd v Daniels (1992) 7 ACSR 759 (at 868 per Rogers CJ); Adler (at 346–348 [372(10)] per Santow J); Maxwell (at 397 [101] per Brereton J); Flugge (at [1870] and [1876] per Robson J).

364    A director who is appointed to a company because of their special expertise is not relieved of the duty to pay attention to the company’s affairs which might reasonably be expected to attract enquiry, even if outside that area of expertise: Adler (at 346–347 [372(9)] per Santow J, citing Re Property Force Consultants Pty Ltd (In Liq) [1997] 1 Qd R 300).

365    If facts have come to the director’s attention that have awoken their suspicion that something is amiss, or would have awoken the suspicion of a prudent director, then the director has a duty to enquire into the matter: Flugge (at 275 [1874] per Robson J); Daniels v Anderson (at 502–503 per Clarke and Sheller JJA).

366    In Adler (at 346–348 [372(11)]) Santow J distilled the principles from the general law into the following factors to determine the reasonableness of the relevant reliance or delegation:

Although reasonableness of the reliance or delegation must be determined in each case, the following may be important in determining reasonableness:

(a)    the function that has been delegated is such that “it may properly be left to such officers”: Re City Equitable Fire Insurance Co Ltd per Romer J;

(b)    the extent to which the director is put on inquiry, or given the facts of a case, should have been put on inquiry: Re Property Force Consultants Pty Ltd per Derrington J;

(c)    the relationship between the director and delegate, must be such that the director honestly holds the belief that the delegate is trustworthy, competent and someone on who reliance can be placed. Knowledge that the delegate is dishonest or incompetent will make reliance unreasonable: Biala Pty Ltd v Mallina Holdings Ltd (1994) 15 ACSR 1 at 62;

(d)    the risk involved in the transaction and the nature of the transaction: Permanent Building Society v Wheeler (1994) 14 ACSR 109…;

(e)    the extent of steps taken by the director, for example, inquiries made or other circumstances engendering “trust”;

(f)    whether the position of the director is executive or non-executive: Permanent Building Society v Wheeler per Ipp J, though, in Daniels v Anderson, the majority have moved away from this distinction.

367    As Santow JA (who dissented on the facts but not on the principles) explained in Vines v Australian Securities and Investments Commission [2007] NSWCA 75; (2007) 73 NSWLR 451 (at 584–585 [731]), what is expected of directors in the context of their reliance on others (see also Healey at 331–332 [170] per Middleton J):

… is a level of scrutiny as befits supervision, not the detailed direct involvement that is associated with operational responsibility. Where there is no cause for suspicion nor circumstances demanding critical and detailed attention, it is reasonable for an officer to rely on advice, without independently verifying the information or scrutinising the data or circumstances upon which that advice is based: see Australian Securities and Investments Commission v Adler (2002) 168 FLR 253 at 346–348; 41 ACSR 72 at 166–167.

H.1.2    Non-executive directors

368    In Daniels v Anderson, Clarke and Sheller JJA made it clear that all directors, whether executive or non-executive, are required to take reasonable steps to place themselves in a position to guide and monitor the management of the company. Indeed, that is the irreducible requirement of care and diligence expected of all directors.

369    Additional care may be required depending on the director’s skills or experience, and the content of the duty of care and diligence varies according to those skills or experience: Daniels v Anderson (at 505 per Clarke and Sheller JJA). The “responsibilities” referred to in s 180(1) include arrangements flowing from the experience and skills the director brought to his or her office: Rich (at 132 [7202] per Austin J).

370    Non-executive directors are not required to be involved in the affairs of a company at the operational level: Healey (at 332 [171] per Middleton J, citing Macdonald (No 11) (at 250 [255] per Gzell J)). Further, a non-executive director may rely on management and other officers to a greater extent than an executive director: Morley v Australian Securities and Investments Commission [2010] NSWCA 331; (2010) 274 ALR 205 (at 355 [807] per Spigelman CJ, Beazley and Giles JJA). These propositions reflect the reality that non-executive directors typically do not engage in the day-to-day management and administration of the company to the same extent as executive directors. Of course, non-executive directors are not expected to have the same knowledge of the company’s operational activities as executive directors.

371    Non-executive directors are entitled to rely upon management to bring to their attention any problems or irregularities as to operational issues, unless there is reason to believe that management is not honest, trustworthy or competent: Trilogy Funds Management Ltd v Sullivan (No 2) [2015] FCA 1452; (2015) 331 ALR 185 (at 285–286 [487]–[489] per Wigney J). However, directors cannot substitute reliance upon the advice of management for their own attention and examination of an important matter that falls specifically with the board’s responsibilities: Healey (at 332–333 [175] per Middleton J).

372    It has been observed that non-executive directors are not subject to the same (higher) standard as executive directors (see Rich (at 129–130 [7196] per Austin J) and Flugge (at 275 [1875] per Robson J)), but that the standard to which non-executive directors are held now sits closer to those of executive directors (see Vines v Australian Securities and Investments Commission [2007] NSWCA 75; (2007) 73 NSWLR 451 (at 585 [730] per Santow JA)).

373    Although it is helpful to pitch the level at which “the” standard of care for non-executive directors (as a class of director) sits relative to executive directors, one must not lose sight of the idiosyncratic nature of the assessment mandated by s 180(1). The focus of the statutory inquiry must be on determining what a reasonable director or officer, acting in the corporation’s specific circumstances and possessing the particular responsibilities and office of the impugned director or officer, would have done. Those subjective elements in s 180(1) shape the requirements imposed as they apply to each individual director.

374    The case law has not yet supplied an objective standard of the reasonably competent non-executive director. There is good reason for this: the diversity of corporations and the variety of business endeavours undertaken by them are such that uniformity of standards is only possible for very general matters.

375    Ultimately, the relevance of the distinction between executive and non-executive directors for the purpose of determining whether there has been a breach of s 180(1) is to be assessed contextually. The fact that a director was engaged in a non-executive capacity which envisaged less time would be given to the affairs of the company than an executive director is but one factor relevant to the overall assessment of their conduct. In any event, that factor does not absolve a non-executive director from failing to take reasonable steps to place themselves in a position to guide and monitor the management of the company.

H.1.3    Executive officers

376    Where a company has engaged an executive officer or an executive director, it is generally an implied term of their employment contract that they possess the skills of a reasonably competent person in their category of employment, and that they will act with reasonable care, diligence and skill: Rich (at 134–135 [7211]–[7212] per Austin J, citing Adler (at 346–347 [372(5)] per Santow J); Australian Securities and Investments Commission v Vines [2003] NSWSC 1116; (2003) 182 FLR 405 (at 410 [20]–[21] per Austin J); Australian Securities and Investments Commission v Vines [2005] NSWSC 738; (2005) 55 ACSR 617 (at 858 [1064] per Austin J)).

377    The standard of care owed by an executive officer or an executive director “has regard to the knowledge and expertise of persons in the same recognised calling as the person charged with the contravention, and therefore recourse may be had to the evidence of experienced people who have occupied similar offices”: Rich (at 135 [7213] per Austin J).

H.1.4    Chairman of the board

378    The role of the chairman was, with respect, helpfully canvassed by Beach J in Mitchell (No 2) (at 669–672 [1398]–[1420]). In affirming that the chairman “has no power or authority to manage the corporation” and that their “primary function is to preside at board meetings and accordingly to exercise procedural control”, his Honour observed, save for that and an ability to exercise a casting vote (if applicable), the position carries “no greater authority than an ordinary director” and that they are “not some sort of directorial overlord” (at 671 [1409]).

379    However, his Honour also identified that the chairman (at 671–672 [1408]–[1420]) (see Ford, Austin and Ramsay’s Principles of Corporations Law, LexisNexis online (at [8.460.9])):

(a)    has the power and authority to manage board meetings and to that extent may have greater responsibility for the performance of the board as a whole;

(b)    has the power, authority and responsibility for setting the agenda items for board meetings, although these may be added to by the agreement of other directors; the chairman can also discharge that responsibility in consultation with the chief executive officer;

(c)    has the power, authority and responsibility to ensure that the board has before it sufficient information, whether presented in written or oral form, such as to be able to consider meaningfully, discuss and decide on the agenda items before the board at the relevant meeting taking into account the context of the decision required or consideration necessary by the board at that meeting; this responsibility may be discharged in consultation with the chief executive officer;

(d)    has the power, authority and responsibility to manage the board to ensure that sufficient time is allowed for the discussion of complex or contentious matters and for this purpose it may be necessary to arrange meetings outside board meetings so that board members are thoroughly prepared;

(e)    should ensure that the board members work effectively together and that their skill sets and personalities complement each other;

(f)    should endeavour to facilitate the effective contribution of each director;

(g)    should ensure workable and harmonious relations between the executive and non-executive directors, and more generally ensure workable and harmonious relations between the board on the one hand and the executive management on the other hand, particularly the chief executive officer;

(h)    may have greater responsibility for defining and ensuring that the board sets and implements the appropriate corporate governance structure within the company (with the Court referring to “corporate governance” as the framework of rules, relationships, systems and mechanisms under which authority is exercised and controlled within the company and under which it is accountable);

(i)    should assist to identify new directors, deal with the induction of new directors and ensure continuing education and development of each director;

(j)    is responsible for monitoring the performance of the board, board members and board committees;

(k)    should ensure there is appropriate communication with, and the taking into consideration of, the interests and concerns of members of the company; and

(l)    may have a public relations role in representing the board and the company to outside parties.

H.1.5    Boards must control the information they receive: some observations

380    Given some submissions made by the non-executive directors, it is necessary to say something about the extent to which directors must read, understand and engage with the information they receive in their capacity as board members.

381    As long as 14 years ago in Healey, the non-executive directors submitted that because they had received extensive papers and annexures for their board meetings they could not be expected to scrutinise and cross-check all that material. The papers provided to the Board each month were “voluminous”, generally comprising “about one large binder folder” and “around 450 pages” (at 360 [297]–[298]). It was argued that directors, particularly non-executive directors, ought not be expected to read hundreds of pages, and that imposing an obligation to do so risks rendering the board’s oversight of management impracticable.

382    However, in Healey, Middleton J directly addressed this point, stating (at 346 [229]):

In relation to this submission relating to the extent of the papers, I also make the following observations. A board can control the information it receives. If there was an information overload, it could have been prevented. If there was a huge amount of information, then more time may need to be taken to read and understand it. The complexity and volume of information cannot be an excuse for failing to properly read and understand the financial statements. It may be for less significant documents, but not for financial statements … The information was provided to the directors by management for a reason.

383    Middleton J’s sage remarks appear to have fallen on deaf ears. Without unduly stretching the bounds of s 144 of the EA, it appears they have had little normative effect on how boards control the information they receive. If anything, things appear to be getting worse.

384    It is now notorious that the Board pack of a public company no longer arrives as a modest bundle of papers designed to assist judgment; often the packs represent an electronic publishing project. No longer posted or delivered by a bike courier, the document uploaded is often heroically vast. After seeing many such documents, spanning many proceedings as a barrister and judge, a common pattern can be seen: often there are executive summaries, followed by longer summaries of the summaries, followed by detailed papers, followed by appendices, annexures, and technical attachments whose purpose appears to be not so much enlightenment as completeness. Each section is defensible, and, in isolation, apparently sensible, but taken together, they are oppressive.

385    No doubt many new and conscientious directors open their first pack with good intentions. But after several hours, a thought might begin to assert itself: no rational person can evaluate all this material meaningfully in the time available, let alone do so repeatedly, meeting after meeting. Commonsense suggests that what often follows amounts to a form of directorial “triage”. One reads what appears central, scans what appears arguably material, and just trusts that anything alarming would have been signalled plainly.

386    Why, then, does the volume continue to grow? One suspects the answer lies in both director indiscipline and management psychology. Without imposing upon management the discipline of synthesising and summarising material to make it practical for the pack to be delivered manually, the temptation exists for those preparing the pack to chuck in everything. In this sense, the pack is doing two jobs at once. Officially, it is supposed to inform the Board; unofficially, it serves to insulate the preparers from potential criticism.

387    The extent of the existing problem can be seen by returning to the facts of the present case. At least on one occasion, important board papers were made available to the directors only moments before the day’s meetings commenced. On 15 August 2019, the Crown Allegations Board Paper, which is discussed further below, was made available to the directors at 8:57am, three minutes prior to the meeting of the Board’s Remuneration Committee that ran from 9:00am to 10:00am, which was followed by a non-executive director “session” which ran from 10:30am to 11:30am, and then the Board meeting at which the Crown Allegations Board Paper was tabled, at 11:30am (see [985]–[987]). This meant, for example, that the Crown Allegations Board Paper could only have been read by some during the Board meeting.

388    Predictably, the present proceeding involves repeated instances of board packs spanning hundreds of pages, and submissions to the effect that directors should not be expected to read and absorb board materials in full and accord importance to information “buried” within them.

389    I deal with the merits of these specific submissions below, but what is to be done more generally about this common problem?

390    To state the obvious, any observations which relate to the exchange and analysis of information in 2026 must recognise the profound impact of artificial intelligence. It is beyond the scope of this judgment to dwell on the developments usefully summarised in an article recently published by the Australian Institute of Company Directors entitled “AI use by directors and boards: Early Insights” (available at https://www.aicd.com.au/content/dam/aicd/pdf/tools-resources/director-resources/ai-use-by-directors-and-boards.pdf).

391    The article repays close reading and explains that Australian boards are cautiously but increasingly experimenting with AI as a governance support tool, shifting the focus from how companies generally oversee AI in their organisations to how AI might assist the directors themselves in the discharge of their duties. Although it appears current use remains uneven, it would be jejune to deny that many individual directors are using AI informally to prepare for meetings. This is despite collective, board-endorsed use of AI being far from entrenched due, among other things, to confidentiality and legal concerns.

392    Further, leaving aside summarising and consideration of board packs and identifying themes or anomalies for directors, AI is also no doubt being used by management and company secretaries in the creation of packs.

393    Ultimately, however, directors must be furnished, by whatever means are adopted, with information in a form that is both comprehensive and capable of proper digestion. It scarcely requires emphasis to observe that the use of AI-generated summaries as a substitute for the careful reading and interrogation of board materials would warrant caution, not least because inadequately deployed or misdirected AI may increase risk and legal exposure rather than mitigate it. That said, there is considerable potential for AI, if appropriately utilised, to assist directors in the discharge of their duties.

394    But any use of AI should be controlled and transparent. It seems to me prudent that boards should discuss and deliberately govern any AI use by formal adoption of policies, rather than just wink at informal “shadow” use. Chairmen and company secretaries have a critical role in preserving role boundaries with management and promoting proper director engagement. Although ethical reasoning and judgment rests with directors, not machines, AI is already changing the way in which directors receive and analyse material. It is the responsibility of directors to ensure that this occurs in a responsible way, guided by Middleton J’s caution that a board can control the information it receives.

395    Given the submissions in this case, and at the risk of repetition, it appears it is necessary to restate plainly that directors cannot rely upon an inability to cope with the volume of information they receive. In short, a director, whether executive or non-executive, is required to take reasonable steps to place themselves in a position to guide and monitor the management of the company, and is expected to take a diligent and intelligent interest in the information available to them, understand that information, and apply an enquiring mind to their responsibilities.

396    A way of addressing information overload, at least in part, could be through the principled and transparent use of emergent technology. The modalities of reading and examining material in board papers might change, but analysing and understanding information provided by management is a core function of a board; after all, this is the primary way by which directors access the information necessary to make informed, bona fide decisions.

H.1.6    The relevance of the director causing or allowing the company’s breach of the law

397    This has already been touched upon above, but the principles are worth restating at this point of my reasons.

398    Liability for contravention of s 180(1) may be established by the director’s failure to exercise reasonable care and diligence 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] NSWCA 165; (2022) 405 ALR 70 (at 96 [112] per Leeming and Kirk JJA and Basten AJA).

399    However, s 180(1) does not impose an obligation on directors to conduct the affairs of the company in accordance with the law generally or the Corporations Act specifically: GetSwift (at [2538] per Lee J, citing Cassimatis (at 641 [460] per Thawley J) and Maxwell (at 399 [104], 402 [110] per Brereton J)).

400    Indeed, the notion that an action of a company is likely to breach, will breach, or does in fact breach, some other legal norm, does not necessarily establish a breach of the duties owed by the directors to the company: DSHE Holdings (at 96–97 [113] per Leeming and Kirk JJA and Basten AJA); Australian Securities and Investments Commission v Vocation Ltd (in liq) [2019] FCA 807; (2019) 371 ALR 155 (at 330 [730] per Nicholas J). Conversely, the finding that an apprehended breach did not eventuate does not necessarily demonstrate that the director complied with their duties to the company: DSHE Holdings (at 96–97 [113] per Leeming and Kirk JJA and Basten AJA).

401    Liability under s 180(1) may arise where a director’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: Getswift (at [2538] per Lee J, citing Vocation (at 330 [730] per Nicholas J)); Maxwell (at 397–399 [102]–[104] per Brereton J); Cassimatis (at 282–283 [77]–[79] per Greenwood J). In principle, there is no reason why these observations should not apply to breaches of the law more generally.

402    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: GetSwift (at [2538] per Lee J, citing Maxwell (at 402 [110] per Brereton J)).

403    Counsel acting for Ms Martin argued that one can find different approaches in the judgments in Cassimatis. As I have already noted, Greenwood J held that, had ASIC not established contraventions of the Corporations Act by the company, “it would have been difficult, if not impossible” to sustain the contention that the directors had contravened s 180(1) by failing to guard against a foreseeable risk of serious harm to the company (at 555 [79]). Thawley J did not go so far, opining that a breach of s 180(1) (at 641–642 [464]):

… might potentially be demonstrated by showing that [a director’s] conduct exposed the company to relevant jeopardy because it was likely to result in future contravention by the company or that the direct and immediate consequence of the conduct was that the company contravened the Corporations Act or some other law. It might potentially be demonstrated by showing that a failure to act was likely to result in contravention by the company or failed to bring a continuing contravention to an end. Whether or not there was a failure to meet the standard prescribed by s 180(1) depends on the particular facts.

(Emphasis added).

404    Indeed, as Edelman J observed at first instance, it may be sufficient that the director’s conduct meant that a breach of the Corporations Act “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”: Australian Securities and Investments Commission v Cassimatis (No 8) [2016] FCA 1023; (2016) 336 ALR 209 (at 218 [5] and 339 [679] per Edelman J).

405    A “necessary element” of the statutory standard of care and diligence in s 180(1) is that it is “reasonably foreseeable” that “harm to the interests of the company might be caused by the director’s act or omission”, and “foreseeability of damage to the interests of the corporation … is an ingredient of the concept of care and diligence …”: Rich (at 129–130 [7196]–[7197] per Austin J); Cassimatis (at 298 [157] per Greenwood J). It is not necessary that a contravention be likely to have occurred for the risk that such a contravention might harm the company’s interests to be reasonably foreseeable.

406    Having said that, the fact of a contravention by a company is but one factor relevant to be considered when determining whether a director has met the statutory standard; a director’s liability under s 180(1) of the Corporations Act is direct and is not derivative from a company’s contravention: GetSwift (at [2538] per Lee J, citing Cassimatis (at 641 [463] per Thawley J)).

H.2    Section 180(2) of the Corporations Act – the business judgment rule

407    Subsections 180(2)-(3) of the Corporations Act provide that:

Business judgment rule

(2)    A director or other officer of a corporation who makes a business judgment is taken to meet the requirements of subsection (1), and their equivalent duties at common law and in equity, in respect of the judgment if they:

(a)    make the judgment in good faith for a proper purpose; and

(b)    do not have a material personal interest in the subject matter of the judgment; and

(c)    inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and

(d)    rationally believe that the judgment is in the best interests of the corporation.

The director’s or officer’s belief that the judgment is in the best interests of the corporation is a rational one unless the belief is one that no reasonable person in their position would hold.

Note:    This subsection only operates in relation to duties under this section and their equivalent duties at common law or in equity (including the duty of care that arises under the common law principles governing liability for negligence)—it does not operate in relation to duties under any other provision of this Act or under any other laws.

(3)    In this section:

business judgment means any decision to take or not take action in respect of a matter relevant to the business operations of the corporation.

408    The business judgment rule was introduced into the Corporations Law by Schedule 1 to the Corporations Law Economic Reform Program Act 1999 (Cth). The Explanatory Memorandum to the Corporate Law Economic Reform Program Bill 1998 (Cth) stated that a statutory business judgment rule would “offer directors a safe harbour from personal liability in relation to honest, informed and rational business judgments” (at [6.1]).

409    It seems apparent that ss 180(2) and (3) were intended to operate as something akin to safe harbour provisions making clear that a director would not contravene s 180(1) or equivalent obligations at common law and in equity if the integers of those subsections were satisfied: Cassimatis (at 546–547 [30] per Greenwood J). It has also been observed that those subsections, in the light of the observations of Austin J in Rich (at 149–151 [7269]–[7278]), seem to have “little, if any, practical utility”: Cassimatis (at 546–547 [30] per Greenwood J, quoting Nettle J, “The Changing Position and Duties of Company Directors” (2018) 41 Melbourne University Law Review 1402 (at 1417)).

410    The current state of authority is that the defendant bears the onus of proving the elements of the business judgment rule: Mitchell (No 2) (at 675 [1435] per Beach J); Australian Securities and Investments Commission v Fortescue Metals Group Ltd [2011] FCAFC 19; (2011) 190 FCR 364 (at 427 [197] per Keane CJ); Rich (at 149 [7269] per Austin J). The notion that the defendant bears the onus has been said to be “apparent from the express statutory language”: Mitchell (No 2) (at 675 [1435] per Beach J).

411    That view appears to be preferable for at least three reasons. First, it avoids adding elements of the contravention that must be proved by the plaintiff, but which are not referred to in s 180(1): Rich (at 149 [7269] per Austin J). Secondly, if the plaintiff were to bear the onus of establishing that the defendant’s business judgment was not made in good faith for a proper purpose (as one of the four statutory criteria in s 180(2)), it would essentially amount to proving a more serious contravention of the law, namely a contravention of s 181: Rich (at 149 [7269] per Austin J, citing Adler (at 356 [410] per Santow J)). Thirdly, each criterion in s 180(2) is “within the purview, personal knowledge of and proof by the defendant director”, which suggests a statutory intention that they bear the relevant legal and evidentiary onus: Mitchell (No 2) (at 675 [1435] per Beach J).

412    While these are strong reasons supporting the preferred interpretation of s 180(2), I acknowledge the alternative view that the statutory business judgment rule may operate as a rebuttable presumption. Indeed, there are passages in the Explanatory Memorandum that may leave “little doubt that it was the legislature’s intention that the provision would operate as a presumption …”: Nettle J, “The Changing Position and Duties of Company Directors” (2018) 41 Melbourne University Law Review 1402 (at 1417). One of those passages in the Explanatory Memorandum is that the “[p]roposed subsection 180(2) acts as a rebuttable presumption in favour of directors which, if rebutted by a plaintiff, would mean the plaintiff would then still have to establish that the officer had breached their duty of care and diligence” (at [6.10]). The Explanatory Memorandum also states that the statutory business judgment rule would provide a “clear presumption in favour of a director’s judgment” (at [6.4]).

413    There are other reasons supporting the view that s 180(2) may operate as a rebuttable presumption.

414    First, a presumption appears to be more consistent with the policy underlying the introduction of s 180(2) to encourage “directors to take advantage of opportunities that involve responsible risk taking” (Explanatory Memorandum at [6.3]).

415    Secondly, a presumption supporting directors in exercising their business judgment is consistent with the common law doctrine in the sense of courts being reluctant to review bona fide business decisions of directors: see Harlowe’s Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL [1968] HCA 37; (1968) 121 CLR 483 (at 492–493 per Barwick CJ, McTiernan and Kitto JJ); Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821 (at 832 per Lord Wilberforce). In this regard, the Explanatory Memorandum expressly states that “[t]he statutory formulation of the business judgment rule will clarify and confirm the common law position that the Courts will rarely review bona fide business decisions” (at [6.4]).

416    Thirdly, it is consistent with the drafting of s 180(2) in that the director or officer is “taken to meet the requirements of subsection (1)” and that their belief that the judgment is in the company’s best interests is “a rational one unless the belief is one that no reasonable person in their position would hold”, and a plaintiff may rebut the presumption by only needing to disprove one of the four elements. The drafting of s 180(2) also appears to be consistent with the drafting of s 189, which it is accepted relevantly establishes a statutory presumption as to the reasonableness of a director’s reliance on information and advice if certain conditions are satisfied: Mitchell (No 2) (at 680 [1459] per Beach J).

417    It is also noteworthy that, in Rich, Austin J concluded that the defendant bears the onus of proving the elements of s 180(2) with “some hesitation in light of the US approach”, and his Honour ultimately thought the question was an “important one that will eventually need to be resolved at the appellate level”: Rich (at 149 [7269] per Austin J).

418    This debate has interest but does not matter in this case. It was not in dispute before me that the statutory business judgment rule operates as a defence, and no contention was made that the business judgment rule operates as a rebuttable presumption. In those circumstances, and consistent with the weight of authority, I will proceed on that basis.

419    What is presently far more relevant and decisive in this case, is that s 180(2) is engaged only where a director or other officer has made a “business judgment”, which is defined in s 180(3) as “any decision to take or not take action in respect of a matter relevant to the business operations of the corporation”.

420    The statutory language is broad, as evidenced by the words “in respect of”, “matter” and “relevant”: Rich (at 151 [7276] per Austin J). The language captures decisions made in planning, budgeting and forecasting, and decisions to enter certain transactions for financial purposes: Rich (at 150 [7272], [7274] per Austin J). However, it does not capture decisions not to comply with the requirements of the Corporations Act: Fortescue Metals (at 427 [197]–[198] per Keane CJ); Vocation (at 331–332 [737]–[739] per Nicholas J); Australian Securities and Investments Commission v Big Star Energy Ltd (No 3) [2020] FCA 1442; (2020) 389 ALR 17 (at 115–116 [529]–[532] per Banks-Smith J).

421    Additionally, there must be a “decision to take or not to take action”, consciously made such that judgment has been exercised: Rich (at 151 [7277]–[7278] per Austin J). A director who “simply neglected to deal with proper safeguards, with no evidence that they turned their mind to a judgment of what safeguards there should be”, has not made a business judgment: Rich (at 151 [7277]–[7278] per Austin J, citing Adler (at 356 [406] per Santow J)); Gold Ribbon (Accountants) Pty Ltd (in liq) v Sheers [2006] QCA 335 (at [247] per Keane JA). A decision to refrain from doing something may indeed constitute a business judgment; the important question is whether the director or officer has turned their mind to the matter: Rich (at 151 [7277]–[7278] per Austin J). The business judgment rule does not protect the discharge of directors’ monitoring and oversight duties, including monitoring the company’s financial position, as they are not themselves matters that involve a “decision to take or not to take action” in respect of a matter relevant to the company’s business operations: Rich (at 151 [7278] per Austin J).

422    The element of the business judgment rule set out in s 180(2)(c) requires the director or officer to “inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate”. This requires the director to become informed about the subject matter of the decision before making it: Rich (at 152–153 [7284] per Austin J). However, the qualifying words “to the extent they reasonably believe to be appropriate” convey the idea that protection may be available even if the director was not aware of available information material to the decision, if they reasonably believed they had taken appropriate steps on the decision-making occasion to inform themselves about the subject matter: Rich (at 152–153 [7284] per Austin J).

423    Section 180(2)(d) states that a director must “rationally believe that the judgment is in the best interests of the corporation”. Section 180(2) also states that “[t]he director’s or officer’s belief that the judgment is in the best interests of the corporation is a rational one unless the belief is one that no reasonable person in their position would hold”. Section 180(2)(d) is satisfied if the evidence demonstrates that the defendant believed their judgment was in the best interests of the corporation, and that belief was supported by a reasoning process sufficient to warrant describing it as a rational belief, whether or not the reasoning process is objectively a convincing one: Rich (at [7290] per Austin J); Mariner Corp (at 591 [493] per Beach J).

H.3     Section 189 of the Corporations Act – reliance on information and advice

424    Section 189 of the Corporations Act provides that subject to certain matters being satisfied, a director’s reliance on the information or advice is presumed to be reasonable unless the contrary is proved. That is, the provision creates a rebuttable statutory presumption as to the reasonableness of a director’s reliance on information or advice if certain conditions are satisfied: Mitchell (No 2) (at [1459] per Beach J).

425    It is unnecessary to deal with this presumption further. Although pleaded, none of the directors advanced any submission at all concerning s 189 with respect to any allegation made against them.

I    STAR’S RELATIONSHIPS WITH JUNKETS

I.1     Star’s International Rebate Business

426    During the Relevant Period, Star attributed its revenue to either its “domestic” business or its International VIP business. Star’s International VIP business was also known as the IRB. Star’s IRB generated approximately 25% of Star’s total revenue in each of the 2015 to 2019 financial years.

427    Star’s IRB comprised three segments: first, the “North Asian junket” segment in which players generally participated through “junkets” and the amount of front money (being the money used to purchase gaming chips) was typically in the range of $1 million to $5 million (I return to explain what is meant by “junket” below); secondly, the “South Asia direct” segment in which there were few junkets and players had front money typically in the amount of $500,000; and thirdly, the “Premium Mass” segment, which was a “nascent market” in which players had front money typically in the range of $50,000 to $250,000.

I.2     The nature of junkets and the risks associated with them

428    In its pleading, ASIC defined a “junket” as being (see FASOC [43]):

… an arrangement involving a group of persons (referred to as junket participants or players) who were introduced to a casino operator by a junket promoter (sometimes called the junket operator), and who received from the casino operator a commission or rebate, based on the turnover of play in the casino attributable to the junket participants introduced by the junket promoter.

429    Each of Mr Bekier, Mr Sheppard, Ms Lahey, Mr Bradley, Ms Piktin, Mr Heap and Mr Todorcevski admits this definition. Mr O’Neill refers to and relies on the definitions of “junket” in the CCA NSW and CCA Qld. Ms Martin pleads a similar, but slightly different formulation of ASIC’s definition.

430    During the Relevant Period, s 76(3) of the CCA NSW defined a junket as:

(a)     an arrangement involving a person (or a group of people) who is introduced to a casino operator by a promoter who receives a commission based on the turnover of play in the casino attributable to the person or persons introduced by the promoter (or otherwise calculated by reference to such play), or

(b)     an arrangement for the promotion of gaming in a casino by groups of people (usually involving arrangements for the provision of transportation, accommodation, food, drink and entertainment for participants in the arrangements, some or all of which are paid for by the casino operator or are otherwise provided on a complimentary basis).

431    The references to “person” and “group of people” in s 76(3)(a) are references to what is also known as a “junket participant” or “junket player”. Similarly, the reference to “promoter” is a reference to what is known as a “junket promoter”, which was sometimes called a “junket operator”. A “junket promoter” is the ‘face’ for a particular travelling group and acts as its principal.

432    The definition of a “junket agreement” in s 85A of the CCA Qld described an arrangement with equivalent features. During the Relevant Period, s 85A of the CCA Qld provided the following definitions:

85A    Definitions

In this division—

group of participants means a group of persons to which a junket agreement applies.

junket agreement means an agreement entered into by a casino operator, with the approval of the Minister under section 84, with another person (the promoter) under which—

(a)    the promoter arranges for a group of persons to visit the casino     to participate in gaming; and

(b)    the casino operator pays the promoter a commission based on—

(i)    the amount the persons gamble at the casino; or

(ii)    the revenue of the casino derived from the persons.

participant means a person who is a member of a group of participants.

promoter see definition junket agreement.

sole participant agreement means a junket agreement under which the promoter is the only participant.

433    Considering these provisions, it can be seen that a “junket” is an arrangement involving a person or group of people (junket participant(s) or player(s)) who are introduced to a casino operator by a junket promoter. The junket promoter receives a commission from the casino operator, which is based on the turnover of play in the casino attributable to the junket participants introduced by the promoter (or otherwise calculated by reference to such play, such as the revenue the casino derives from the play). Further, a “junket” can also refer to an arrangement for promoting gaming in a casino to groups of people, often including the provision of transportation, accommodation, food, drink and what might be described (no doubt on occasions euphemistically) as “entertainment” for the participants, with some or all of these services paid for by the casino operator or provided on a complimentary basis.

434    In an email to ILGA on 21 November 2017, Mr Graeme Stevens (Star’s Regulatory Affairs Manager) described some further aspects of junket arrangements. He explained that the junket operator “buys in” on behalf of the junket, by drawing down funds to purchase chips for use by junket participants. Junket participants may have used their own funds for play, or they might have borrowed funds from the junket operator. Upon the conclusion of the junket, the junket operator presents the chips back to the casino for redemption. The junket operator kept records of which participants had been provided with which chips (and what funds they therefore owed to the operator) and what chips they had returned to the operator.

I.2.1     The Horton Review

435    As I previously mentioned (at [275]), in August 2016, Dr Horton was appointed by ILGA under s 143(1) of the CCA NSW to conduct a review into Star’s suitability to hold a casino licence under the CCA NSW, relevantly considering the processes and procedures Star had in place to manage junkets. The purpose of the Horton Review was to assist ILGA exercise its function, under s 31 of the CCA NSW, to review a casino operator to form an opinion whether the operator is still a suitable person to hold the licence and whether it is in the public interest for the licence to continue in force (see [94]). In conducting the Horton Review, Dr Horton and experienced junior counsel, Mr Caspar Conde, attended many interviews with employees and officers of Star, members of ILGA, members of L&GNSW, the NSW Police and NSW Crime Commission, and AUSTRAC. As required by s 143(5) of the CCA NSW, Dr Horton prepared and provided a report on the results of the Horton Review (Horton Report).

436    Ms Martin prepared a Board paper regarding the Horton Review, which was taken as read at the Board meeting on 25 August 2016. At the meeting, Ms Martin spoke to the paper, noting that the review had formally commenced and that management was responding to information requests. In the paper, Ms Martin outlined the requirement for ILGA, under s 31 of the CCA NSW, to form an opinion as to Star’s suitability and whether it is in the public interest that the casino licence should remain in force. She explained that the Horton Review would cover the operations of the Sydney Casino, Star Sydney and its “close associates”, which, she noted included its ultimate holding company, Star.

437    Ms Martin also noted in her paper that Star had been advised that there would be “specific inquiry” into the “operations of junket programs and the integrity of their settlement”, “vulnerability of the [Sydney Casino] to money laundering”, and “access to and the availability of ‘High Stakes’ gaming”.

438    Ms Martin attached to her paper a copy of Dr Horton’s terms of reference. Relevantly, the eighth term of reference required that the Horton Review consider certain matters, including “the operation of junket programs and the integrity of their settlement” and “the vulnerability of gaming (and especially high-stakes gaming) carried on at the [Sydney] Casino to money laundering”.

439    In the Horton Report, Dr Horton explained that while junket promoters could provide a “real benefit to a casino’s business, by bringing high value people into the casino who wish to gamble large sums of money”, junkets also introduced “idiosyncratic risks” relating to junket promoters, junket participants, their associates and business practices, as well as the source of funds (at [226]). He stated that junkets facilitated the introduction to the casino of large amounts of money, when the source of that money might be “unknown – and unascertainable” (at [226(b)]).

440    The Horton Report addressed the risks associated with junkets in further detail (General Junket Risks). Dr Horton reported that the National Coordinator of Money Laundering, Organised Crime and Cyber Operations of the AFP had explained that junkets presented an “opportunity for the introduction of tainted funds at various entry points” (at [250]). Dr Horton identified that tainted funds may come from:

(a)    junket participants in China, where the funds taken out of that jurisdiction could be a bribe or an unlawful appropriation;

(b)    a junket operator, who might have received tainted funds in Macau or Hong Kong from a nefarious associate; and

(c)    a source in Australia, such as if an Australian account containing tainted funds was made available to the junket to serve as collateral for the casino.

441    Dr Horton considered that junkets presented a risk to the integrity of the Sydney Casino, “by virtue of the very large amounts of money involved, the potential illicit sources of those funds, and issues relating to junket promoters and the nature of their business” (at [254]). He also concluded that an “obvious risk” that attended junkets was money laundering, and that junkets were vulnerable to money laundering and exploitation by criminal influences (at [257]–[258]).

442    Notwithstanding his recognition of the General Junket Risks, Dr Horton made “no recommendations in relation to junkets, being satisfied that … junket programmes appear to be conducted properly, honestly and with proper protections by The Star, and that their settlement is reliable and honest” (at [258]). As to the “obvious” risk of money laundering, he noted that Star “has procedures to address that risk” (at [257]). He also identified that “in all the interviews with law enforcement and like bodies, there was no assertion made that the junket component of The Star’s business [was] being conducted less than honestly” (at [260]).

443    Further, concerning the eighth term of reference (see [438]), Dr Horton noted that:

(a)    “[j]unket programmes and their settlement are managed appropriately so as to minimise the risk that they pose for criminal influence and honesty in gambling”; and

(b)    he was “satisfied that the arrangements which The Star has in place are adequate, having regard to the nature and extent of the risks posed to the honest conduct of gaming and to resist criminal influence and exploitation”.

444    In the Horton Report, Dr Horton also concluded, relevantly, that:

(a)    at [2]:

The Star is resistant to infiltration by organised crime and other criminal influences. It, and those closely associated with it, appear to be of good repute, seem to have sound and stable financial backgrounds. The Star has no business association, so far as I have been able to ascertain, with a person or body that is not of good repute or which has undesirable or unsatisfactory financial sources. It has systems and practices that reasonably ensure the honest conduct of gambling and the minimisation of harm to the public;

(b)    at [9]:

The public interest, so far as I am capable of assessing it, favours the continuation of The Star’s licence. The Star Casino, apart from being, so far as I could ascertain, well run, appears to be resistant to criminal influence…; and

(c)    at [7], [26]:

Star cooperated fully with [the] Inquiry.

445    On 21 December 2016, the Board was advised of the conclusions reached. A copy of the Horton Report was provided to the Board, through the Board portal, that same day. On 15 March 2017, the Risk and Compliance Committee was also advised by Ms Martin of a selection of the findings and recommendations. A Risk and Compliance Committee paper prepared for that meeting provided a “final update on the status of the mandatory five-yearly Casino Licence Review … and the associated report that was released at the end of December 2016”, indicating that the report was “largely positive” and providing a selection of Dr Horton’s findings and recommendations. As such, the matters described in the Horton Report also formed the basis of the Board’s understanding of the nature and adequacy of Star’s processes in relation to junkets.

446    As far as the Board was informed, the process by which Star engaged with junkets had the following features:

(a)    all junket operators and junket representatives with whom Star did business were required to be approved by Star (in NSW) or OLGR (in Queensland);

(b)    the licensing process at Star involved “extensive due diligence, including background checks”;

(c)    junket operators were required to be invited by Star to apply for approval. Junket operators were only invited by Star to apply for approval if they were believed to be “suitable” by Star’s General Manager of VIP Marketing International;

(d)    in applying for approval, junket operators and junket representatives (in both NSW and Queensland) were required to provide personal information and supporting documentation to Star, including: employment history, business associations, dealings with other casinos, details of any litigation history (civil, criminal or bankruptcy), character references (from persons that have known the applicant for at least five years), and police clearance certificates from the applicant’s country of residence;

(e)    the suitability of the applicant to be a junket operator or junket representative was assessed by Star. In NSW, enquiries for the purposes of that assessment were carried out by Star’s Investigations team. In Queensland, the assessment of whether a junket operator was suitable was made by OLGR. The due diligence that Star conducted as to junkets was not confined to (but did include) a creditworthiness assessment;

(f)    prior to approving any junket operator or representative, and in respect of applicants in both NSW and Queensland, Star undertook checks that were consistent with: (a) Star’s obligations under the AML/CTF Act; and (b) the controls and processes in Star’s regulator-approved Internal Controls Manuals. In particular, a World Check search was run concerning the applicant for adverse application. Star’s investigators could recommend further due diligence as appropriate by an external consultant;

(g)    “repeat junkets” at Star were the subject of “a detailed risk assessment” undertaken by a private investigator (i.e. Lisle Security Consultants, as to which, before any agreement was signed there was a “continuous monitoring of news flow” on the junket operators thereafter);

(h)    as “a further risk mitigation, the Collections team also undertakes a high level review of the major players funded by all junkets”;

(i)    the terms of each junket visit were agreed in advance of the visit between Star and the junket operator. The casino regulator was given advance notice of any junket visit;

(j)    foreign junket participants travelling to Australia were required to clear customs and immigration upon arrival and, normally, obtain a visa;

(k)    upon arrival, all junket participants were required to complete a Star membership application (if they had not already done so) and provide passport details for verification “in accordance with AML/CTF requirements”;

(l)    within eight hours of the arrival of the junket participants at the casino, Star provided to ILGA (in NSW) or OLGR (in Queensland) a list of the junket participants’ names, copies of the junket participants’ passports, and a copy of the relevant junket agreement;

(m)    Star “report[ed] to AUSTRAC throughout the course of the [j]unket, in accordance with its AML/CTF obligations, including:” threshold transaction reports for any cash transaction of $10,000 or more by any junket promoter, representative or participant; suspicious matter reports for any suspicious matter identified by Star’s staff, who had received training for that purpose; and international funds transfer instructions for any internation funds transfers, other than those made through an established bank transfer;

(n)    after the conclusion of junket play, “settlement” occurred in accordance with the controls and processes in Star’s regulator-approved Internal Controls Manuals. A “settlement report” was generated and given to the casino regulator at the time of settlement;

(o)    after the junket concluded and the participants left, Star conducted a World Check search on all participants and any findings were sent to Star’s investigators. A settlement report was given to the casino regulator within seven days. That report included details about any instructions received by Star about disbursement of junket funds. Star also provided a monthly report of all concluded junkets to the casino regulator;

(p)    Star provided a weekly junket report to AUSTRAC, which included the details of the junket participants (including their passports), and all threshold transactions;

(q)    Star lodged an annual return with the ATO, which included details of all junket promoters, the annual amounts paid in cash and in kind to non-residents, and the amount of withholding tax deducted;

(r)    Star “maintain[s] a proactive approach to our initial and ongoing assessment of junket operators”; and

(s)    Star convened a regular Junket and Player Monitoring meeting to discuss information received in relation to junket operators, representatives and participants.

I.3     Contribution of Junkets to Star’s International Rebate Business

447    Throughout the Relevant Period, junkets substantially contributed to Star’s turnover in its IRB, noting that Star’s IRB generated approximately 25% of Star’s total revenue in each of the 2015 to 2019 financial years.

448    A presentation entitled “IRB Strategy Update”, prepared by Mr Bekier and Mr John Chong, Star’s President of International Marketing (which was attached to a Board paper taken as read at a Board meeting on 26 September 2017), recorded that cash turnover in Star’s IRB had been around $46 billion in the 2015 financial year, $49 billion in the 2016 financial year, $40 billion in the 2017 financial year, and was budgeted to be $44 billion in the 2018 financial year.

449    The paper also recorded that junket volumes accounted for approximately 80% of total North Asian junket segment turnover and, since October 2016, had declined significantly. Indeed, the paper records that Star’s IRB turnover in the 2017 financial year had declined by 18.4%, partly because employees of Crown, one of Star’s competitors, were arrested in China.

450    Mr Bekier and Mr Chong described the nature and context of those arrests in the “Current Issues” section of their paper, under the heading “China Update”, as follows:

(a)    a campaign called “Operation Chain Break” was launched in mid-2015 “to stop the flow of money and connections between high-stakes gamblers on the mainland and casinos (incl. Macau)”;

(b)    13 staff of two South Korean gaming companies were detained and subsequently released;

(c)    in October 2016, 18 Crown employees were detained in China on suspicion of having committed “gambling-related crimes” (the Crown Arrests); those employees pleaded guilty and were released in July and August 2017 after having served sentences of up to 10 months and being fined a total of circa $1.7 million, which had been paid by Crown; and

(d)    in March 2017, China’s Public Security Minister had “vowed to investigate and ‘severely punish’ people or companies involved in organising Chinese tourists to visit overseas casinos and advised that the ministry remained committed to Operation Chain Break”.

451    Further, the IRB Strategy Update presentation provided a comparison of Star’s forecasted financial results under their “50/25/25 strategy” and their revised five-year plan, the former of which aimed to reduce Star’s reliance on the North Asian junket segment. The forecasted results indicated that Star’s reliance on the North Asian junket segment would be reduced from circa 70% of IRB’s total business to around 60% by the end of the 2022 financial year.

452    While IRB turnover declined in the 2017 financial year largely due to the reduction in North Asian junket segment turnover because of the Crown Arrests, that reduction did not occur throughout the remainder of the Relevant Period. Indeed, despite this initial reduction, the North Asian junket segment generated increasing turnover for Star’s IRB.

453    At a meeting of the Board held on 26 July 2018, the Board resolved to approve a 2019 five-year plan and a budget for the 2019 financial year. In a Board paper for that meeting with the subject “FY19 Budget”, which attached a presentation entitled “Group FY18 Results and FY19 Budget”, Mr Bekier and Mr Barton (the then CFO) reported that Star’s IRB had seen “record volumes with turnover up 34.6% on budget and up 50.2% on prior year”. The presentation states that the record volumes were the “main driver” of Star’s strong normalised EBITDA of $588.1 million, which grew by 14.2% when compared to the prior year. The budget for the 2019 financial year aimed for overall growth of 5.9% on the 2018 year, with “[f]urther increase in the IRB through a larger sales team presence and a more frequent events and promotions calendar” being identified as one of six “main drivers” of that growth.

454    A further meeting of Star’s Board was held on 26 September 2018 in Hong Kong. At that meeting, the Board considered a paper titled “IRB Strategy Update”, which stated that Star’s IRB had “recovered significantly” in the 2018 financial year, with turnover increasing 51.5% to $61.2 billion. It also stated that although “North Asia IRB turnover was significantly impacted following the Crown employee arrests”, the North Asia junket segment had “recovered strongly”, and its turnover for the 2018 financial year was $46.5 billion. This was 75.9% of the total IRB turnover. The paper also acknowledged that the uplift in IRB’s turnover was “driven by higher reliance on junket play”.

455    A draft Board paper entitled “International Strategy Update” was prepared by Mr Hawkins for a Board strategy day scheduled for 2 December 2020. It was circulated by Mr Theodore to Mr Hawkins and some other Star employees as an attachment to a diary invitation for a meeting on 19 October 2020. That paper recorded that over the 2016 to 2020 financial years, junkets accounted for 80% of IRB’s total turnover.

I.4     Star’s relationship with Suncity as at late 2017

456    By late 2017, Star had an active and long-standing business association with Suncity. That relationship commenced in July 2011 and continued until at least March 2020.

457    Prior to 2016, Suncity had done most of its Australian business with Crown, at its casino in Melbourne, rather than with Star. However, because of both the Crown Arrests and Star’s IRB team pursuing Suncity’s business through sales and marketing activity, Star’s turnover from Suncity had increased from $893.1 million in the 2016 financial year to $2.1 billion in the 2017 financial year. This meant that Suncity was Star’s largest junket customer, accounting for 9% of the North Asia junket segment’s turnover.

458    Throughout the Relevant Period, Suncity’s junkets were typically funded by a CCF (for ease of reference, a “Cheque Cashing Facility”). Section 74 of the CCA NSW prohibited a casino operator from extending credit to patrons. A CCF was an arrangement Star offered to some customers, as an alternative. Under a CCF, the customer would provide a signed personal order to Star, with no dollar value, prior to the commencement of play.

459    Such a document was invariably described in the contemporaneous documents as a “cheque”, but it was, of course, no such thing. Section 10 of the Cheques Act 1986 (Cth) provides that a cheque is an unconditional order in writing that is addressed by a person to another person, being a financial institution; is signed by the person giving it; and “requires the financial institution to pay on demand a sum certain in money”.

460    Once play was completed, if the player (or junket) had lost, the amount Star was owed (net of any commissions or rebates owed by Star) was entered onto the document, which required the financial institution upon which it was drawn to pay on demand a sum certain in money, thus becoming a cheque Star could then bank. This process was described in a Board paper entitled “Cheque Cashing Facility Process”, which was tabled and taken as read at a Board meeting held on 6 December 2017.

461    Throughout the Relevant Period, Mr Cheok Wa Chau, also known as Mr Alvin Chau, was the holder of a CCF that was used to fund the Suncity junket. 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.

462    The application forms signed by a person seeking to establish a CCF with Star Sydney (in relation to the Sydney Casino) or Star Qld (in relation to the Treasury Brisbane and Star Gold Coast casino) contained the terms and conditions which applied to a CCF. One of the terms (cl 3) was that the Star entity providing the CCF (Star Sydney or Star Qld) was entitled, in its absolute discretion to terminate or suspend a CCF.

463    From around 30 June 2017, the promoter of the Suncity junket was Mr Alan Iek. Star Sydney and Mr Iek (as the “Promoter”) entered an agreement dated 30 June 2017, entitled “Win/Loss Rebate & Exclusive Access Agreement”. The terms of that agreement included:

(a)    Clauses 1 to 4, which set out terms, among other matters, as to the commissions, 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 of $50 million.

(b)    Clause 6, which provided that Star Sydney would provide the Promoter with exclusive access to a VIP gaming salon at the Sydney Casino known as “Salon 95”.

(c)    Clause 10(a), which 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.

464    Clause 10(q) 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.

J     JUNKETS AND SUNCITY

J.1     Increasing Mr Qin’s CCF – November 2017

465    On 17 November 2017 at 5:35pm, Ms Hannah Kim, a Board Administration Officer, sent an email to Mr O’Neill, Mr Bekier, Ms Lahey, Mr Sheppard, Mr Bradley and Ms Pitkin attaching a proposed circulating resolution in relation to a CCF held by Mr Qin (Qin CCF Circulating Resolution) and a Board paper relating to that proposed resolution (Qin CCF Board Paper).

466    The Qin CCF Circulating Resolution proposed to increase Star’s net exposure under the CCF for Mr Qin from $28.3 million to $50 million. Approval by Star’s Board was required because the Board had reserved to itself, through a Delegated Authorities Policy, the power to approve an increase to Star’s net exposure under an existing CCF where that net exposure would become $50 million or higher.

467    Before finding further facts concerning the Board’s approval to increase Star’s net exposure under Mr Qin’s CCF, it is appropriate to address a preliminary issue regarding the characterisation of the Board’s decisions concerning CCFs more generally.

J.1.1    Decisions regarding CCFs generally

468    Clause 54(a) of Star’s Constitution provided that Star’s business was “managed by the Board”, and that the Board could exercise all powers of Star that were not required, by law or the Constitution, to be exercised by the company in general meeting. Clauses 54(b) and 60(a) empowered the Board to delegate its powers to the Managing Director, a committee of the Board, or any other person or persons the Board thought fit.

469    During the Relevant Period, the Board delegated some of its powers, but expressly reserved others to itself, on terms set out in a Delegated Authorities Policy. Star’s Board approved a Delegated Authorities Policy that was effective from 1 September 2016 to 31 December 2017 (First Delegated Authorities Policy). It approved a revised Delegated Authorities Policy with effect from 1 January 2018 (Second Delegated Authorities Policy).

470    Clause 3 of the First Delegated Authorities Policy stated that the Board retained “sole authority” to approve “decisions” in respect of the “specific matters” set out in Schedule 1. Clause 3 also stated that authority to approve all other decisions was delegated to the CEO, and through him, to other employees as specified in Schedule 1.

471    Schedule 1 identified different categories of decisions in a table under the heading “Schedule 1 – Delegation approval limits”, including decisions as to capital expenditure, acquisitions and disposals of assets, operating expenditure, financing transactions, supplier credit limits, employee matters, and non-disclosure agreements, as well as, relevantly, CCFs.

472    For each category of decision, criteria were identified which determined whether a decision of the relevant categorisation was reserved to the Board. For example, decisions concerning “capital expenditure” were reserved to the Board if the proposed expenditure was greater than $20 million. Relevantly, the criterion for CCFs was expressed as “[c]ustomer credit ≥ $50m”.

473    ASIC contended that the Board had reserved to itself the power of “approving CCFs where the limit was greater than or equal to $50 million”, and that the Board’s reservation was not expressed to be limited to the “credit aspect” of decisions concerning CCFs. Rather, it contended that the Board reserved to itself “the totality of certain species of decisions above a certain qualitative or quantitative threshold” and “responsibility for determining all matters relevant to the decision whether to approve an increase in a customer’s CCF, when that would lead to the CCF limit being greater than or equal to $50 million”, including probity and suitability.

474    The defendants, unsurprisingly, took a different position. Mr Bekier contended that the First Delegated Authorities Policy “required CCF applications in excess of $50 million to be approved by the Board”, and that the fact that the Board was required to approve the CCF if it exceeded this monetary threshold was a strong indicator that the Board was making a “financial” or “credit” decision. He further contended that the Board was not being asked to assess and form an opinion on the suitability of the CCF holder as a person with whom Star should continue doing business with. Mr O’Neill looked past the characterisation of the decision, submitting that a requirement for the Board to assess probity did not arise from the First Delegated Authorities Policy or at law. Similarly, Mr Sheppard, Ms Lahey, Mr Bradley and Ms Pitkin contended that the decision before the Board in respect of approving the increase to Mr Qin’s CCF could not be understood (by reference to the First Delegated Authorities Policy or otherwise) as putting all questions of suitability, probity and credit before the Board for its deliberation.

475    In isolation, the sole criterion “[c]ustomer credit ≥ $50m” was ambiguous. Conceivably, it might have been thought what was being reserved was: (a) a decision to approve a CCF where the credit limit sought was equal to or greater than $50 million (including or excluding the determination of all matters purportedly relevant to that decision, such as probity and suitability); or (b) a decision to approve an increase to Star’s net exposure under an existing CCF to an amount equal to or greater than $50 million (including or excluding the determination of the same aforementioned matters purportedly relevant to that decision); or (c) both of those decisions.

476    The conflicting positions as to the character of the decisions are illustrated by the following exchange during Mr Bekier’s cross-examination:

DR HIGGINS: Mr Bekier, can I ask you some questions now about how you say you understood decisions about CCF approvals when they came to the board. And if you look at your affidavit at paragraph 237, which is page 65, you say that:

As a result of the processes –

Which is the processes you’ve addressed at 236, you understood that:

By the time CCF applications came to be considered for final approval, the customer’s suitability to do business with the Star had also been assessed separately from the CCF application process.

Do you see that?---Yes.

Now, had that assessment, to your understanding, of suitability to do business with the Star been assessed by management?---Yes, by management.

And it’s your evidence that that question was not in any way to be assessed by the board, is that correct?---That’s my view, yes.

And had you deliberately removed an assessment of suitability or probity from consideration by the board?---No. We – we looked at suitability and credit assessment as two separate decisions and the board only got involved for credit above 50 million. There’s no other role for the board to play.

Now, you understand that creditworthiness had also been comprehensibly – comprehensively, rather, assessed by the credit team?---Yes.

You set out in your affidavit 239 a separation that you say divided these processes, but at 231, you set out in some detail the credit assessment process that had been undertaken by the credit team; correct?---Yes

Do you see that?---Yes, I do.

So it’s correct that creditworthiness had been assessed by the credit team?---Yes.

But it’s your evidence that that aspect of the decision, unlike probity, did have to be assessed independently by the board. Is that your evidence?---No, my evidence is that we’re making two decisions, Ms Higgins. One is management’s forming a view about the suitability of the business through the processes I’ve set out before, then depending on the amount of credit, either management approves the credit or if it’s above $50 million, the board approves the credit.

So had you deliberately removed consideration of an assessment of probity from the board?---No, because even credit approvals below $50 million went through the same process. It was purely a credit decision that was being made after suitability had been established.

(T453.1-47, emphasis added).

477    ASIC did not directly put its construction of the policy to Mr Bekier in cross-examination. But the tenor of Mr Bekier’s evidence was that the Board did not intend to reserve to itself the decision of whether a CCF holder was a suitable person to do business with whenever it approved a CCF limit extension equal to or greater than $50 million. To the extent it matters, this evidence as to subjective intention is probably correct, corroborated, as it is, by the documentary record. This reveals that the processes of assessing, verifying and approving a CCF application were distinct from the process of approving an increase to a CCF limit (see [481]–[486]).

478    The better view on the evidence, including the terms of the First Delegated Authorities Policy and the processes described in detail below, is that there was no settled requirement or understanding that the Board was to undertake an assessment of suitability or probity as part of its decision. Put another way, I am not satisfied the decision to approve an increase to Mr Qin’s CCF was understood at the time (by either management or the directors) as putting all questions of suitability, probity and credit before the Board for its deliberation.

479    More generally, I am not satisfied that the Board reserved to itself the decision of whether a CCF holder was a suitable person to do business with when it considered approving a CCF limit extension equal to or greater than $50 million.

480    Before returning to consider further facts surrounding the Board’s approval to increase Star’s net exposure under Mr Qin’s CCF, it is appropriate to set out Star’s documented processes and procedures as to CCFs as they properly contextualise the nature of the Board’s decision.

J.1.2    Star’s processes and procedures concerning CCFs

481    As I indicated above, the documentary record reveals that the processes of assessing, verifying and approving a CCF application were distinct from the process of approving an increase to the limit of the CCF. Aspects of this distinction are apparent from one of Star’s “Standard Operating Procedure” documents, which was entitled “Cheque Cashing & Deposit Facilities – SOPs” and was effective from 26 August 2016 (CCF SOP).

482    The CCF SOP identified that there are four steps in the CCF application and approval process: CCF request, CCF assessment, CCF approval and CCF approval notification/documentation. It is the second step, performed by Star’s VIP & Credit Collections team, that involves obtaining a World Check Report and undertaking credit checks. This is explained in section “7. Application Verification” of the CCF SOP, where it is identified that Star’s VIP Credit & Collections team is to “perform necessary checks to validate a CCF application …”, including “[c]entral checks within the last 30 business days”, “[w]orld check within 12 months”, “[c]redit bureau report within 12 months”, and “[p]roperty [c]hecks for Hong Kong / Macau / Singapore addresses”. Indeed, the CCF SOP stated:

All Matches or suspected matches on World Check should be forwarded to the AML/CTF Administrator. The AML/CTF Administrator will conduct further checks and liaise with the Investigations team as appropriate.

If suspicious circumstances surround the application for CCF (whether or not the CCF is ultimately approved), information should be forwarded to the AML/CTF Administrator. See Task 6 re AUSTRAC reporting requirements for details.

A CCF applicant who is deemed to be “Undesirable” (whether as a result of potential status as a PEP or other potential material issue flagged through background checks) will be elevated to Legal and Investigations for them to investigate the person more thoroughly.

Based on the investigation undertaken and its findings the matter is to be referred to The Star Executives (CEO, Group CFO, and Chief Risk Officer) for a decision on whether VIP Credit & Collections can proceed.

(Emphasis in original).

483    The process therefore involves Star’s VIP Credit & Collections Team performing a “World Check” and referring any matches or suspicious circumstances surrounding the application to the AML/CTF Administrator and Star’s Legal team for further investigation. If those investigations confirmed that the CCF applicant was “undesirable”, then the application could not proceed without approval of the senior executives identified. Alternatively, if there was no adverse information or, following investigation, the Legal team concluded that the issues identified were not substantiated, then the application could proceed to the CCF approval stage.

484    The CCF approval, which had to be given in accordance with the delegated authorities, was a decision that assumed any probity issues had already been addressed in the second stage. This is apparent from section “9. Applications – Approved/Denied”, which identified that the approval or denial of a CCF application relied on a “risk matrix”. That risk matrix considered the following factors: CCF history, central history, market comparison, current outstanding, AML jurisdiction, recourse, and financial background. None of those factors directly concerned probity. The AML jurisdiction factor, which had a 5% weighting, was focussed on the location of the customer’s cheque account. It was in the risk matrix because of the risk of recovering debts from persons located in jurisdictions with high AML risk ratings. A “risk matrix score” was to be calculated and included in all CCF authorisation requests.

485    The steps involved in the CCF assessment and verification process were also described in a paper entitled “Cheque Cashing Facility Process”, which was presented to the Board at a Board meeting on 6 December 2017 (CCF Paper). I will return to this paper and meeting in due course, but for present purposes, it suffices to note that the steps included: (a) obtaining a “central credit report” from a subscriber database used by casinos around the world, which indicated when an inquiry had been made about a patron; (b) contacting other casinos (based on the information obtained from the central credit report) with the aim of understanding the highest limit, last limit, outstanding balance and details of any issues associated with the patron; (c) obtaining subscriber-based financial reports, which provided details of business and property interests and may have indicated legal action and any pending bankruptcy; and (d) obtaining further information about the patron through a World Check Report.

486    The CCF Paper explained that the World Check Report enabled Star to identify if the patron was considered to be a politically exposed person (PEP) (and if so, then Collections would advise the Legal team, “who may decline the application process immediately”), and whether they “pose[d] a reputational risk to the business due to their personal associations”. It also stated that the risks identified from a World Check Report, if considered “low range” by Collections management, would be escalated to Star’s Legal team, and that high-risk cases would be escalated for discussion at a credit risk committee meeting, which may result in additional background checks being performed. The diagrams in the CCF Paper illustrated that the information obtained from those four steps would be fed into a “risk score matrix”, which would generate a risk rating of “low”, “moderate”, “significant” or “high”. This risk rating formed the basis of the Collections team’s recommendation regarding the amount of the CCF sought. All these assessment and verification steps were to be undertaken before the CCF application progressed to the final decision-maker for approval or rejection.

487    I now return to consider further facts surrounding the Board’s approval to increase Star’s net exposure under Mr Qin’s CCF, including Star’s prior dealings with Mr Qin.

J.1.3    Prior dealings with Mr Qin

488    Mr Qin was a long-standing customer of Star and was well known in the casino industry in both Australia and Asia. The junket he funded, the Shen Minmin junket, was part of the David Group, a well-known Macau junket operator with many VIP rooms in several Macau casinos.

489    The evidence demonstrates that Mr Qin’s probity had been considered by Star prior to the Board’s approval of the Qin CCF Circulating Resolution in November 2017.

490    In October 2015, Mr White (Star’s General Counsel (Corporate)) obtained a confidential report concerning Mr Qin from Mr Jim Lisle, a Macau-based private investigator. The report recorded that, in November 2012, Mr Qin was reportedly arrested in China and reportedly involved in money laundering and underground banking to circumvent Chinese currency export restrictions. The report also recorded that there was media speculation that Mr Qin was involved in laundering money on behalf of a person described as a “disgraced” Chinese politician. It also indicated that “[r]eliable law enforcement sources in PRC revealed that QIN was released from custody but is likely to be monitored by local law enforcement agencies”.

491    ASIC does not allege that any defendant saw or read this report. I infer that this report was procured by Mr White for the purpose of providing advice to his client, Star, as to Mr Qin’s probity in accordance with Star’s usual procedures. Indeed, a Board paper entitled “IRB Credit Process Overview” prepared for a Board meeting on 19 July 2012 reveals that seeking confidential reports from Mr Lisle was part of the credit approval and risk assessment process that Star followed in respect of rolling junkets prior to entering into an agreement. Also, a later email in which Mr White sought information from Mr Lisle on junket representatives noted that the purpose of the request was “so that I can advise my internal clients accordingly”.

492    Between December 2016 and April 2017, Mr Qin requested that Star reactivate his CCF with a limit of $15 million. Mr Bekier and Mr Barton, the then CFO, approved those requests as they were below the $50 million threshold requiring Board approval pursuant to the First Delegated Authorities Policy. Mr Bekier’s evidence was that he did so on the basis that Mr Qin’s and the Shen Minimin junket’s suitability as customers had already been considered as part of the Star’s CCF and junket approval processes. He assumed that the Legal and Regulatory and Risk teams had considered these issues and had not flagged any matters of concern (see Mr Bekier’s affidavit at [259]–[260]).

493    A World Check Report was obtained by Star around the same time, being dated 8 December 2016. This report was obtained prior to Mr Bekier being asked to approve the reactivation of the CCF, in accordance with Star’s usual processes. The report relevantly included two notations, being “Dec 2012 – reportedly detained in China for alleged involvement in money laundering” and “Jun 2016 – no further information reported”. The former notation was presumably a reference to the same information that Mr Lisle addressed in his earlier report (see [490]), without the additional information Mr Lisle had obtained from law enforcement sources in China.

494    In September 2017, Mr Qin requested to increase his CCF limit from $15 million to $28.1 million. This request was again approved by Mr Bekier and Mr Barton. Mr Bekier recalled that he approved the extension on the same basis as the earlier request (see Mr Bekier’s affidavit at [261]). On 11 September 2017, Mr White sought an updated report for Mr Lisle for various individuals and junkets, including Mr Qin. The email was marked “Privileged and confidential”, and the apparent purpose of the request was so that Mr White could advise Star on Mr Qin’s probity and any legal or regulatory risks arising from dealing with him. The timing suggests that this related to the CCF increase requested by Mr Qin.

495    On 9 October 2017, Mr White received the updated report for Mr Qin. It contained relevantly the same information as the 2015 report. The only material difference (identified in blue text) was that Mr Qin was now a shareholder in an additional company. ASIC does not allege that any defendant saw or read this report. There is no evidence that Mr White, or anyone else, determined that the information gave rise to material legal, regulatory or reputational risks if Star continued to do business with Mr Qin.

496    On 15 November 2017, another World Check Report was run on Mr Qin. It contained the same information as the earlier World Check Report (see [493]). This confirmed that there was no new adverse media reporting on Mr Qin since the report that was run in December 2016. As this World Check was run one day before management sought approval for Mr Qin’s credit increase, it is safe to find this World Check was performed as part of Star’s usual processes before seeking approval to increase the CCF limit.

J.1.4    Initial CCF increase request to Mr Bekier and Mr Barton

497    On 16 November 2017, at 2:19pm, Mr Bekier received an email from Mr Hornsby (Star’s General Manager VIP Credit and Collections) addressed to him and Mr Barton proposing an increase to Mr Qin’s CCF limit to $50 million. The email recorded:

Junket Qin SiXin #40188524 will be arriving LATE November 2017 at The Star and will be requesting to reactivate and increase his Junket CCF from:

•    AUD95mil no TTO CCF at 70/30 with Max risk exposure of AUD28.3mil (based upon the HKD exchange rate) to AUD166.67mil no TTO CCF at 70/30 with Max risk exposure of AUD50mil (Perm active).

•    Approved as a Perm active with Max risk exposure of AUD28.3mil no TTOs on 20/09/17 with no payment issues since.

•    Qin Sixin himself will be requesting for AUD20Mil exposure for his own play. Since April 2017, he has been maintain [sic] a strong payment record at our club. Qin Sixin himself is a large player being in the top 5 players over 2010-2015 with us

(Emphasis in original).

498    That email identified the patrons whom the junket would be funding. They were patrons who previously had credit limits with Star. Mr Hornsby also provided a “credit check” showing that Mr Qin had active limits at many casinos, including Crown Melbourne, SkyCity Adelaide, and all the major casinos in Macau.

499    Twenty minutes later, Mr Barton replied (copying Mr Bekier) asking for more detail about the deal structure and margins. Michael Whytcross (General Manager – Financial and Commercial) replied, explaining the details of the junket arrangement and noting that “[a]lthough this was a low margin, I was comfortable given it was Crown’s number 1 player for many years (and we have managed to secure these volumes over the past 6 months). He has also influenced other key players to visit.”

500    It appears that, later that day, Mr Barton had a discussion with Mr Bekier. At 6:52pm, Mr Barton sent an email to Mr Whytcross and Mr Hornsby indicating that the CCF increase was above his and Mr Bekier’s delegated authority. He said, “I have discussed with Matt and we are going to need to do a Board paper tomorrow to seek their approval by circular”. Mr Whytcross responded with a draft board paper at 12:20pm on 17 November 2017. It was materially the same form as the paper that ultimately went to the Board.

J.1.5    The Qin CCF Circulating Resolution and the Qin CCF Board Paper

501    As I indicated above (see [465]), on 17 November 2017, the Board was provided by email with the CCF Circulating Resolution and the accompanying Qin CCF Board Paper.

502    The Qin CCF Circulating Resolution was in the following terms:

By this circulating resolution in accordance with rule 61 of the Company’s Constitution, we the undersigned, being the directors of The Star Entertainment Group Limited who are entitled to vote on this resolution, resolve to:

1.     approve an increase to the Company’s net exposure under the CCF for Mr QIN Sixin from A$28.3 million to A$50 million (based on a maximum gross CCF limit of A$167 million), in order for Mr QIN Sixin to conduct junket business at the Company’s casinos; and

2.     authorise management to enter into and finalise commercial negotiations with Mr QIN Sixin to give effect to the above arrangement.

(Emphasis added).

503    The following matters were identified in, or otherwise obvious from, the Qin CCF Board Paper:

(a)    Mr Qin was an existing customer of Star;

(b)    Mr Qin had, historically, been a major customer of Crown, but was shifting his business away from Crown and towards Star (under the Shen Minmin junket, which had turnover of $880 million in the 2017 financial year and had increased to $2 billion in the 2018 financial year with no repayment issues);

(c)    Pursuant to an “existing agreement” with Star, Mr Qin was already approved to a net exposure of $28.3 million under the CCF;

(d)    Many “high net worth customers” were returning to game under Mr Qin and many of those customers had “long standing relationships” with Star;

(e)    Mr Qin had “been operating as a major global junket for over 15 years” and his then “current financial position [was] widely considered to be the strongest to date”;

(f)    Mr Qin held extensive property assets in Hong Kong having an estimated value of HKD 63.8 million; and

(g)    Mr Qin conducted business at a wide range of established casinos in Australia, Singapore, Macau, the United Kingdom, and North America, at which he had credit approval in amounts of up to USD 70 million.

504    In the Qin CCF Board Paper, management recommended to the Board that the Qin CCF Circulating Resolution be approved, “following the significant increase in volumes generated from Qin Sixin and the growing pipeline of high value key players”.

505    Four of Star’s six directors (Mr Bekier, Mr O’Neill, Mr Bradley and Mr Sheppard) approved the Qin CCF Circulating Resolution by email on the same day. Mr Bekier emailed at 5:56pm, Mr O’Neill emailed at 6:36pm, Mr Bradley emailed at 9:39pm, and Mr Sheppard emailed at 9:39pm. Ms Pitkin and Ms Lahey approved the Qin CCF Circulating Resolution by email the following day, on 18 November 2017, at 6:44am and 7:08am respectively. ASIC attempted to make something of the fact that Mr Bekier sent an email providing his approval of the Qin CCF Circulating Resolution 21 minutes after he received the email with the proposed resolution and Qin CCF Board Paper; however, Mr Bekier was aware of Mr Qin’s request to increase his CCF limit to $50 million from at least the prior day (see [497]–[500]).

506    In the email by which he provided his approval to the Qin CCF Circulating Resolution (copying the other members of the Board, as well as Ms Martin and Mr Barton), Mr Sheppard stated that while he understood the “commercial case” for approval of the Qin CCF Circulating Resolution and “Mr Qin’s track record”, he sensibly advised he wanted to “understand a few issues” when the Board had time for a longer discussion. In particular, he stated that he: (a) “would like to understand a bit more about the arrangements between us and the junket operators mentioned, and between Mr Qin and the junkets”; (b) was “not sure how much comfort [the Board] should take from the fact that Mr Qin has approx[imately] HK$60 million in [p]roperty in Hong Kong without a bit more detail such as whether it is geared or not”; and (c) “would be interested in using this as a bit of a test case to understand a bit more about the credit evaluation process that we go through, and some of the underlying commercial arrangements”.

507    This commendable Sheppard email is an important matter of context to which it will be necessary to return.

508    In any event, Mr Bekier replied to Mr Sheppard’s email on 17 November 2017 at 11:34pm, suggesting that management “provide the detail at the next Board meeting when we have the IRB simulation scheduled”.

J.1.6    The “continuous education” session on 5 December 2017

509    On 5 December 2017, the directors attended a “continuous education” session concerning junkets. This was recorded in the agenda for the Board meeting held on 6 December 2017 and in the minutes of that meeting. That session included a presentation entitled “The Star: International Rebate Business”. The presentation described Star’s IRB and the nature of junkets, and Star’s commercial arrangements with them. The presentation then set out the steps by which junket promoters and representatives were approved in NSW and in Queensland. It identified that, in relation to setting up a CCF, credit checks would be conducted, and information as to business and assets would be gathered, to verify creditworthiness and determine the limit of the CCF. At this point, a World Check would also be done. This is consistent with the processes documented in the CCF SOP and CCF Paper, which I considered above (see [481]–[486]). The presentation then outlined the steps that were taken from when play commenced for a junket, and what records and reporting were done following completion (settlement) of a junket.

J.2    The CCF Paper at the December 2017 Board Meeting

510    At the Board meeting the next day, being 6 December 2017, the CCF Paper (see [485]) was taken as read, and Mr Barton and Mr Saro Mugnaini (Star’s General Manager VIP International) spoke to it.

511    The CCF Paper was distributed to the Board on 1 December 2017. It was one of numerous papers circulated to the directors for the purpose of preparing for the upcoming Board and committee meetings on 6 and 7 December 2017.

512    The CCF Paper began by describing the nature of commissions and rebates Star offered within its IRB. It then outlined the CCF process. This included an explanation of the process followed when assessing and approving a CCF. Here, the CCF Paper identified that, in addition to conducting credit and property searches, a World Check Report was also obtained, to enable Star to check whether the individual being considered for the CCF was a PEP or whether they posed reputational risk to Star because of their personal association.

513    The CCF Paper also included a section outlining Star’s commercial relationship with Mr Qin. Importantly, this was the aspect of the paper that treated Mr Qin as a “test case” (see [506]). It identified that, in November 2017, the Board had approved a resolution for the CCF of Mr Qin to a total net exposure of $50 million. The section also explained Mr Qin’s historical background, payment profile and gaming activity, and provided details of Mr Qin’s assets and credit checks.

514    The CCF Paper also included, in the appendices, a series of reports concerning Mr Qin. These were a “Central Credit Gaming Report”, “Central Credit Call Log”, a credit bureau and asset search, and an extract of a World Check Report. Those reports correspond to the reports obtained and searches conducted as part of the steps involved in the CCF application and approval process, which I explained above (see [482]–[484]). The appendices also included a “risk matrix”, which indicated Mr Qin’s “overall risk rating” was 2.6. That risk rating fell into the lower range of the “significant” category. “Significant” was the third highest of four categories. I previously identified the factors that contributed to the calculation of the “risk matrix” score above and note that none of those factors directly concerned probity (see [484]). Rather, they were concerned with the customer’s credit history and financial background. No doubt these reports were included in the CCF Paper to illustrate the reports Star’s management had obtained and the searches it had undertaken as part of its assessment of the proposed increase to Mr Qin’s CCF.

515    The extract of the World Check Report regarding Mr Qin contained in the CCF Paper contained the same notations as the World Check reports dated 8 December 2016 and 15 November 2017 (see [493] and [496]). For ease of reference, those notations were “Dec 2012 – reportedly detained in China for alleged involvement in money laundering” and “Jun 2016 – no further information reported”.

516    ASIC asked the Court to infer that, in the absence of evidence from any director other than Mr Bekier (to whom I will return to below), each director read the CCF Paper “in its entirety”. However, the evidence does not support an inference in such broad and unqualified terms. It does not simply follow from the fact that the directors received the CCF Paper among other Board materials that they read the detail of the entirety of the CCF Paper, including appendices. The Board pack for the 6 December 2017 meeting was 235 pages long and the materials for the Board and committee meetings comprised some 590 pages.

517    There is a difference in considering whether this representation contained in a document relevant to the “test case” was read by all directors (or ought to have been read) and the broad, omnibus finding as to entirety of the CCF Paper for which ASIC contends based upon inferential reasoning.

518    The minutes of the meeting recorded that Mr Barton, Star’s then CFO, spoke in detail to the approval request concerning Mr Qin that had been put to the Board, including the credit risk assessment carried out and determination of the maximum potential net exposure for Star. The minutes also recorded that the Board requested management to “consider a more standard format for approval requests for approvals to be put to the Board for CCF/maximum exposure limits under the Delegated Authorities Policy to reflect the standardised assessment processes conducted by management”. The minutes do not record that any of the appendices were spoken to or discussed. Typically, no probing questions are recorded as being asked. I am unpersuaded on the evidence that members of the Board were told specifically at the meeting that Mr Qin had reportedly been detained for suspected money laundering in December 2012.

J.3     Increasing Mr Chau’s CCF – February 2018

519    The Board meeting held on 15 February 2018 took place from 11:30am to 4:30pm. Mr Bekier foreshadowed that Star’s management might propose a circulating resolution to increase the CCF limit for the Suncity junket, because Suncity anticipated needing “additional CCF capacity” over the Lunar New Year. The minutes of the meeting recorded:

Mr Bekier noted that management is currently considering the Cheque Cashing Facility (CCF) limit for SunCity, junket operator, as they are anticipating needing additional CCF capacity over Lunar New Year. Management is currently reviewing this and may propose a circular resolution seeking an increase in CCF limit over the coming days for the Board’s consideration and, if thought fit, approval.

520    Of course, as has been explained, Board approval was required because the proposed course of action involved increasing a customer’s credit risk exposure to $80 million.

521    Mr Hornsby had informed Mr Bekier of Suncity’s request to increase the CCF limit, and Mr Bekier had responded that, since the Board meeting was that day, the proposed increase would not be considered at the Board meeting. This was because Mr Bekier considered the Board would be “very disinclined” to consider a paper they had not seen or been alerted to prior to the meeting, and because Mr Bekier was going to be in a Board meeting all day, he would not be in a position to prepare or review the Board paper addressing the proposal.

522    Mr Hornsby responded to Mr Bekier, suggesting that management would look for a second temporary CCF holder within Suncity (such that a secondary temporary CCF holder would be added with the existing CCF holder, Mr Chau, guaranteeing that CCF). Mr Barton, who was copied to that email, rejected Mr Hornsby’s suggestion because that would look like management was seeking to circumvent Star’s Second Delegated Authorities Policy. Mr Barton also indicated that a Board paper “in line with our last one” would need to be prepared, requesting a CCF for $80 million. Mr Barton’s reference to the “last one” was a reference to the Board paper management had provided in support of the Qin CCF Circulating Resolution.

523    From 6:00pm on 15 February 2018, following the Board meeting, a Board dinner was held.

524    At 10:24pm on 15 February 2018, Ms Martin sent an email to Mr O’Neill, Mr Bekier, Ms Lahey, Mr Sheppard, Mr Bradley and Ms Pitkin, attaching a Board paper recommending the increase (Chau CCF Board Paper) and a proposed circulating resolution (Chau CCF Circulating Resolution).

525    The Chau CCF Circulating Resolution was in the following terms:

By this circulating resolution in accordance with rule 61 of the Company’s Constitution, we the undersigned, being the directors of The Star Entertainment Group Limited who are entitled to vote on this resolution, resolve to:

1.    approve an increase to the Company’s CRE [credit risk exposure] under the CCF for Mr CHAU Cheok Wa from A$50 million to A$80 million, in order for Mr CHAU Cheok Wa (Suncity) to conduct junket business at the Company’s casinos; and

2.     authorise management to enter into and finalise commercial negotiations with    Mr Chau Cheok Wa (Suncity) to give effect to the above arrangement.

(Emphasis added).

526    In her email, Ms Martin explained to the directors that the increase was proposed “in light of the now increased pipeline of business expected by the Suncity junket operator … over Lunar New Year”. Ms Martin also stated that “additional detail” was set out in the Chau CCF Board Paper, and she requested a response to the Chau CCF Circulating Resolution at the directors’ earliest convenience. Lunar New Year fell on 16 February 2018, being the next day.

527    Mr Chau’s existing CCF of $50 million had been approved by Mr Barton and Mr Bekier in March 2017, prior to the Board approving the First Delegated Authorities Policy. The proposed Chau CCF Circulating Resolution was the first occasion on which Mr Chau’s CCF had come before the Board for its consideration. Mr Bekier agreed that the increase to $80 million was the biggest credit risk that Star had ever taken with a single group for a junket (T522.19-20).

528    The Chau CCF Board Paper informed the Board that:

(a)    Mr Chau was “the Chief Executive Officer of Suncity”;

(b)    Suncity was “the world’s largest and arguably most compliant junket”;

(c)    Suncity “accounts for approximately 70% of total VIP volumes in Macau (estimated at $400 billion)”;

(d)    Suncity “has held a relationship with the Star since July 2011 (with no payment delays or disputes)”;

(e)    the limit of Mr Chau’s CCF had been increased several times previously, from $20 million to $30 million in February 2014, and, more recently, to $50 million in March 2017;

(f)    the “[m]ajority of Suncity’s Australian business” had “historically diverted to Melbourne”, which was a reference to Crown’s casino there (T522.31-35), but that business had “shifted dramatically due to a combination of the Crown arrests, strengthening of the IRB sales team, tailored events and improved marketing alignment”, resulting in turnover at Star from Suncity increasing from $893.1 million in the 2016 financial year to $2.1 billion in the 2017 financial year;

(g)    management had “recently established Salon 95 in Sydney (Sovereign Rivers) as a permanent area for Suncity patrons” which had “enabled the junket to implement a more structured approach to their operations at The Star and drive higher volumes to Sydney”;

(h)    “a strengthening of the pipeline in the past week” had resulted in Suncity requesting to increase their credit risk exposure as they advised that they “would be unable to fund all key players under the existing facility”;

(i)    Suncity was expecting trips from four high-value customers, with their anticipated front money of at least $40 million in total expected to arrive in the period of 17 to 19 February 2018; and

(j)    Mr Chau conducted business at a wide range of established casinos in Australia, Asia, London and North America, at which he had credit approval in amounts of up to USD $70 million.

529    The Chau CCF Board Paper also outlined Suncity’s historical gaming performance, identified credit checks and provided an appendix of Suncity’s historical payment profile, which indicated that all payments were received on time.

530    Star’s IRB management team then recommended that the CCF be increased due to “increase[s] in volumes generated from Suncity and the pipeline of high value key players” expected over the Lunar New Year period.

531    Mr Bekier and Mr O’Neill provided their approvals at 10:33pm and 10:31pm respectively, less than 10 minutes after receiving Ms Martin’s email (at 10:24pm). It will be recalled that Mr Bekier was aware of the request since the morning of 15 February 2018, when he sent his email stating the proposed increase would not be considered at the Board meeting (see [521]). Also, contrary to Mr Bekier’s initial resistance, the request was ultimately discussed at the Board meeting that afternoon, as indicated in the minutes.

532    Star’s remaining directors had all sent their approvals by 9:22am on 16 February 2018, making the resolution unanimously approved by the Board.

533    It was well known within Star that Chinese New Year was the peak gaming period for the year and that the VIP business could generate a substantial amount of its annual volumes during that period. The issue that arose was that Star’s sales team had “dropped the ball” in terms of seeking approval for the increased CCF until the very last moment. This was explained by Mr Bekier during his cross-examination:

HIS HONOUR: Can I understand that answer a bit better than I do now? As I understand it, you’ve been sent an email just after midnight on the day of Chinese New Year when this is first raised, that is, 16 February?---Yes.

Doesn’t that mean that you would have perceived that someone has dropped the ball?---Oh, yes.

And you were frustrated by that?---Yes, your Honour.

Why would it be that you thought that people had dotted the i’s and crossed the t’s if they were raising something at the eleventh hour which was requiring the board to make an urgent decision which was something which was entirely predictable from anyone looking at the calendar?---Your Honour, they are different people. So the people that, in my view, dropped the ball were the sales people.

Right?---So the sales people – the sales process for Chinese New Year involves people – a lot of Chinese guests having to get a visa, which is a three-month process.

Yes?---We only get closer when they actually get the visa approved and so on. So these – you know, those conversations were in the pipeline for a long period of time, and I was frustrated with the sales people that they suddenly come out and say, actually, all these trips are now confirmed and we have to send a jet and pick up these people. I had total confidence in our investigators and our team that looked at probity and assessed these people.

Right?---So, your Honour, I’m trying to say there are two different groups of people and my frustration was directed - - -

I understand they are two different groups of people. But what I’m trying to understand is, given the sales people had dropped the ball and hadn’t anticipated there would be a need for this request to be made, why you would have thought that immediately before the request was being made, the people in whom you repose confidence would have been doing a probity check?--- Your Honour, the people – so Suncity was pretty much permanently active and so my assumption was that the file was permanently open, and we – through the monitoring meetings, we would monitor the behaviour of Suncity when they were in-house and the investigators had an open review of any new information that would come in on Suncity.

(T525.16-526.5, emphasis added).

534    The point that Mr Bekier made during this exchange was that the last-minute request to him, and then to the Board, was a request to increase the amount of credit available to the Suncity junket when it arrived the following day. Management had been preparing for that trip for some time and continued to perform their regular monitoring of the suitability of Mr Chau and Suncity in parallel with the credit assessment process. As Mr Bekier said in his email to Mr Chong (the head of the VIP business) at 7:39am on the morning when the proposed increase was first raised: “John, you have to get your team to plan more professionally. Chinese new year is not new, the SunCity line is not new, the players have been booked for a while”.

535    One might be forgiven for pausing to remark that this admonition might be thought to reflect considerable understatement given the Spring Festival dates to about 1500 years before Christ.

536    In any event, there is no evidence that the Legal and Regulatory team had been the ones to “drop the ball”. As will become apparent, the evidence demonstrates that Mr White had as recently as September 2017 sought updated investigation reports on Mr Chau and Suncity, and was continuing to liaise with Mr Lisle about any adverse media coverage throughout this period.

J.3.1    Star’s relationship with Mr Chau and Suncity

537    Like Mr Qin, Star had a long-standing relationship with Mr Chau and Suncity. Suncity had been operating a junket with Star since 2011, and Mr Chau was the CCF holder for that junket.

538    By 2013, Mr Chau’s CCF was active with a credit limit of $20 million (being $10 million for each of Star and Jupiters). This limit was increased to $50 million in around March 2017. Mr Bekier, who as the CFO at the time of the initial increases and then CEO by the time of the increase to $50 million, was involved in approving the limit increases and was aware of them.

J.3.2    Suitability assessments

539    Mr Chau and Suncity were vetted when they first applied to operate a junket at Star’s casinos (both by Star and OLGR) and were the subject of monitoring in accordance with Star’s usual processes.

540    In an email reporting on the initial signing of the Suncity agreement in July 2011, Stephen Spence (Executive General Manager, VIP Gaming) stated that:

I am particularly excited about this opportunity as it presents to us a positive upside to our business. The deal is dependent upon granting approval of a $20m CCF and the paperwork to support this has and is still being provided to David Procter. The CCF will be in the name of the chairman of Suncity who is also the guarantor for the other lines Suncity hold in Macau. No doubt the CCF approvers will see this application come through shortly. I think we are waiting on an updated report from Jim lislie [sic] who undertook an initial report for us midway through 2010.

(Emphasis added).

541    The initial report from Mr Lisle indicated that Mr Chau did not have a criminal record and that the Hong Kong Stock Exchange had deemed him to be a suitable person to be chairman of a listed company.

542    As I explained above (see [261]), on 26 April 2012, ILGA wrote to Star requesting a copy of all due diligence and/or risk assessments conducted on Suncity, its principals or representatives. Star responded to that request on 30 April 2012, providing a copy of Mr Lisle’s report and a World Check Report for Mr Chau.

543    In August 2012 and October 2013, Star ran World Check reports on Mr Chau. Each of those reports recorded that “[t]here are no entries matching the above search criteria”. This meant that there was no adverse media about Mr Chau recorded on the World Check database.

544    In July 2013, Mr White procured another investigation report from Mr Lisle on Mr Chau. It stated that:

CHAU is of good repute in the People’s Republic of China and in January 2013 was appointed as a member of the of the 11th Guangdong provincial committee of the Chinese People’s Political Consultative Conference (CPPCC). CHAU is a successful businessman with a diverse portfolio of thirty-six companies, including listed companies, in Hong Kong of which he is a Director. Checks against these Hong Kong companies and his co-directors have found nothing derogatory other than disputes that arise in the normal course of business.

CHAU does not have a criminal record in Macau or Hong Kong. CHAU was a ‘mud chip dealer’ in Casino Jai Alai in the 1990’s. During that period the Jai Alai casino was under the protection of the 14K triad society led by the notorious WAN Kuok-koi (‘Broken Tooth’). To operate as a mud chip dealer CHAU would have had to associate with triad members and have their permission to operate. In Macau in the 1990s it was not illegal to be a mud chip dealer and many respectable people, as well as many not so respectable, entered the business to make a living. CHAU has no criminal record in Macau and no evidence that he was a triad member has come to light. When ‘Broken Tooth’ was sentenced to 15 years imprisonment in 1988 it is highly unlikely that he would have even known CHAU; who was only a 24 year old low level mud chip dealer at that time. Despite widespread media speculation in Macau no evidence of a close relationship between CHAU and WAN has been found.

During his time as a mud chip dealer CHAU was detained, on a number of occasions, during police sweeps in connection with investigations into loan sharking, criminal intimidation, blackmail and unlawful detention. On each occasion CHAU was unconditionally released without being charged with any offence. During the triad tur war of the 1990s the Macau police forces conducted regular sweeps and mass arrests, in Macau casinos, as an anti-triad deterrent. It was not unusual for two hundred or more people to be arrested during these sweeps and all to be subsequently released without charge. Such tactics are still used by the Macau police forces.

…

545    However favourably or unfavourably this information reflects on Mr Chau is irrelevant in circumstances where ASIC does not allege that any defendant knew or ought reasonably to have known of this report. Rather, ASIC alleges that the relevant directors did not request any probity information concerning Mr Chau before voting to approve the Chau CCF Circulating Resolution, and that had they requested such information, they would have uncovered probity information, including the information contained in Mr Lisle’s 2013 report. As I have already explained (see [84]–[89]), given the nature of the case pleaded, the nature of the information that would have been provided to the directors if they had made enquiries cannot logically bear upon whether the directors ought to have made those enquiries.

546    On 21 July 2014 and again on 24 March 2017, further World Check reports were run on Mr Chau. The results were the same as the earlier reports. The latter report, which was in an updated format, recorded that there were “NO MATCHES FOUND”.

547    In June 2016, Mr Lisle provided an updated report on Mr Chau and Suncity. This report recorded that “[t]he company and CHAU have passed numerous probity investigations” and have successfully undergone due diligence screening by Hong Kong, US and Australia listed companies’ regulators; gaming regulators in multiple jurisdictions; the Australian Foreign Investment Review Board; the Hong Kong Stock Exchange; and the Chu Lai Open Economic Zone Authority of Vietnam. It then recorded:

Reliable and authoritative sources confirm that CHAU does not have a criminal record in Macau, Hong Kong or the People’s Republic of China. No evidence indicating a criminal record in any other jurisdiction has been found.

The same sources do not believe CHAU is a member of a triad society or any other organized crime group. However, it is inevitable that CHAU has associates that will be linked to triad societies. In the 1990s CHAU worked as a ‘mud-chip’ dealer in Macau casinos, this was and is a lawful occupation in Macau. However, the 1990s was a period of endemic corruption in Macau and at that time all VIP rooms were controlled by triad societies. As such it was impossible for ‘mud-chip’ dealers not to associate with triad members.

During this period there was a very violent triad ‘turf war’ between the 14K and Wo On Lok triad societies, which saw the murder rate sore and numerous triad outrages including the attempted assassinations of the Commissioner of Police and the head of the gaming regulatory body (DICJ) and the successful assassination of the second in charge of that body. As a result of these outrages the Macau Public Security Police adopted the tactic of raiding casinos and detaining all customers inside, in an attempt to disrupt triad finances, for a number of hours before releasing the majority without any charges being laid. According to reliable and authoritative sources CHAU was detained on 3-4 occasions, with hundreds of other people, during such police operations but was released on each occasion with no charges being laid.

548    This report also addressed what it described as the “Bangladesh Bank Scandal”. On this topic, Mr Lisle reported:

Suncity’s VIP cages in Manila are alleged to be one of the recipients of part of the US$ 81 million stolen from Bangladesh’s central bank and transferred to the Philippines, according to media reports on the fourth hearing at the Philippine Senate on 5 April 2016. CHAU’s legal representative has appeared before the Senate hearing and undertook to provide a full report to that body. To date no evidence of malfeasance on the part of CHAU or Suncity has come to light although there is a great deal of pressure upon Suncity to return the funds.

549    Finally, Mr Lisle conducted media checks against “Worldcheck, Lexis, Factiva and Wisers database searches” and concluded that “none of these are derogatory in nature”.

550    As was the case with the July 2013 Lisle report, ASIC does not allege that any defendant knew or ought reasonably to have known of the June 2016 Lisle report. Rather, according to ASIC, the relevant directors did not request any probity information concerning Mr Chau before voting, and (misguidedly) that had they requested such information, they would have uncovered probity information, including the information contained in Mr Lisle’s June 2016 report.

551    On 11 September 2017, Mr White asked Mr Lisle to prepare an updated report on Mr Chau and Suncity. The September 2017 report is not in evidence. There is evidence that Mr Lisle was continuing to monitor Suncity and regularly briefed Mr White and others in the Risk and Legal teams on developments. This can be seen from the email chain between Mr Lisle and Mr White on 26 February 2018, where Mr Lisle referred to a briefing he gave Mr White “last year”. Mr White responded proposing a “catch up call” with “Paul”, “Paula” and “Kevin”. These were references to Mr McWilliams, Ms Martin and Mr Houlihan.

552    On 13 November 2017, Mr Sheppard (Mr Lisle’s offsider) provided Mr White with updated reports for several individuals including Iek Kit Lon (the Suncity junket operator, Mr Iek). The report on Mr Iek recorded that “IEK Kit Lon is not a politically exposed person (PEP) and does not have any known criminal/triad background in Macau, Hong Kong or the People’s Republic of China. No derogatory information was found on IEK”.

J.3.3    The FTI Consulting Report

553    On 13 April 2017, approximately ten months prior to the Board’s consideration of the Chau CCF Circulating Resolution, Mr O’Neill received an email from Murray Lawson of FTI Consulting. The email was self-evidently a “pitch” for new business from Star. Sensibly, Senior Counsel for ASIC accepted in opening submissions that it was an email “touting for work” (T87.17-21).

554    Attached to the email was a document Mr Lawson said was a “preliminary analysis, based on open source information, of some of the key junket operators linked to Australian gaming” (FTI Consulting Report). The FTI Consulting Report was a landscape spider-web diagram of the links between individuals and various junket operators linked to Crown, with commentary on adverse media reports about those individuals in excruciatingly small font.

555    Mr O’Neill forwarded the email and its attachments to Mr Bekier, copying Ms Martin and Mr McWilliams, approximately 13 minutes later, stating “FYI. Not sure whether this is of any interest, usefulness or not”.

556    The FTI Consulting Report identified several matters concerning Mr Chau, including that: (a) it had been reported, in April 2016, Mr Chau had received some of the proceeds from a theft of USD 81 million from the Bank of Bangladesh by “Chinese hackers”, which had been laundered through Philippine banks and casinos; (b) Mr Chau had joined the Chinese People’s Political Consultative Committee, which made him a PEP; and (c) concerns had been raised in March 2012 about Mr Chau’s links to two persons who had been identified by the US Government as organised crime figures.

557    Mr Bekier accepted that, if the information in the FTI Consulting Report was correct, it supplied grounds to have serious concerns about the probity of Mr Chau and Suncity (T530.32-33; T531.18-20). However, Mr Bekier did not accept that it was information that would immediately need to be verified by Star to ascertain whether it was correct. Instead, he characterised the email as a “marketing email” which was “copied to the head of legal who also has the whole investigative team and is the head of risk …”, with the consequence that he “… would leave it to them to work out whether this is reliable information and whether it requires other investigation” (T531.22-29). Ultimately, and in the light of the Horton Review, Mr Bekier did not feel the need to delve into the information (T531.22-29).

558    ASIC does not plead that Mr Bekier, Mr O’Neill or any other defendant knew or ought reasonably to have known of any of the matters referred to in the FTI Consulting Report. The FTI Consulting Report only appears in ASIC’s pleading as a particular of what the Board would have been told had they asked for probity information about Mr Chau. At the risk of repetition, the pleaded breach, if any, is the failure to make enquiries.

559    ASIC in its final submissions mounted a somewhat broader case (and contended that there was some acquiescence in them doing so by Mr Bekier of the kind referred to by Ipp JA in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2008] NSWCA 206; (2008) 73 NSWLR 653 (at 710 [424]). I do not accept this, but even if I were to find that there was such acquiescence, given the mode by which the information had been conveyed and had been received, there is an infirm basis for finding Mr Bekier or Mr O’Neill would have been cognitively aware of the relevant contents of the FTI Consulting Report at the time the Board approved the Chau CCF Circulating Resolution in February 2018 (some 10 months after the email was received). The assumption that they would have recalled this specific information in an unsolicited email is a heroic one given the amount of information they received. During cross-examination, Mr Bekier agreed that he would have read the email as it had come from Mr O’Neill and would have “scanned” its attachments (T529.21-27). This does not strike me as intuitively odd given the nature of the communication, being a “marketing email”.

560    Whatever reservations I have as to aspects of the evidence of Mr Bekier, I accept he has no recollection of seeing the content concerning Mr Chau in the FTI Consulting Report, which was in miniscule font (T529.36-37). I also accept his evidence he was not familiar with FTI Consulting and knew nothing about them (T530.20-23).

561    Further, the open-source information in the FTI Consulting Report was the kind of information Mr Bekier would have understood Star’s Legal and Regulatory team was collating and reviewing. As Mr Bekier said during his cross-examination:

HIS HONOUR: Would you accept, though, it’s pretty – irrespective of the fact it’s in a marketing document, it’s pretty startling information, isn’t it?---It is, yes.

Well, wouldn’t you think in the light of the nature of the information, it was startling, that someone should really get to the bottom of whether there was any cogency in it?---Your Honour, I was of the view that we had a department of people that did nothing but that.

(T533.35-41).

J.4     The Salon 95 Service Desk commences operation

562    In March 2018, Mr Saro Mugnaini (Star’s General Manager VIP International) and Mr David Aloi (Cash Services Manager at Star Sydney) sought advice from Mr White concerning Suncity operating a “service desk” within Salon 95, the VIP gaming salon in the Sydney Casino to which Suncity was granted exclusive access under the agreement Mr Iek and Star Sydney entered into in June 2017 (Salon 95 Service Desk) (see [463]).

563    In early April 2018, Mr Micheil Brodie (General Manager, Compliance and Responsible Gambling) identified, after having discussions with Mr Marcus Lim (President, International Marketing), that it was appropriate to conduct an anti-money laundering risk assessment in relation to the Salon 95 Service Desk.

564    Salon 95 was planned to be operating by Thursday, 12 April 2018. By at least mid-April 2018, the Suncity junket was using Salon 95 and operating the Salon 95 Service Desk in it.

565    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 CRO (Salon 95 Risk Assessment). The risk assessment identified that Suncity would be operating the Salon 95 Service Desk as a junket promoter and using the service desk to provide customer service to their junket participants. The Salon 95 Risk Assessment also stated that the “customer service amenities” that were being considered for the purposes of the risk assessment were: “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”.

566    Three risks related to the services proposed to be provided at the Salon 95 Service Desk were identified: first, there could be “the accidental provision of a designated service” (pursuant to the AML/CTF Act) by Suncity without appropriate registration or structures in place; secondly, the operations of the casino (that is, through the operation of a casino cage) could be (or be perceived to be) conducted by a person other than the casino operator, which was said to be prohibited under the CCA NSW; and thirdly, the services at the Salon 95 Service Desk could lead to the operation of “super junkets”, where unrelated parties are added to an overarching junket agreement rather than each group of people being treated as an individual junket. Allowing the Salon 95 Service Desk to operate without controlling these risks, “could result in serious legal non-compliances” outside of Star’s “risk tolerance”.

567    Mr Bekier accepted that he understood that the first two of these risks were ones that arose in respect of a VIP room like Salon 95, and that if Suncity were permitted to provide designated services it would result in contraventions of the AML/CTF Act and the CCA NSW (T543.3-29). Ms Martin agreed that not controlling for the risks identified would be outside Star’s risk tolerance, was an accurate reflection of the Group’s risk tolerance (T906.36-45).

568    The Salon 95 Risk Assessment specified that, as a condition of operation, the Salon 95 Service Desk would not be permitted to:

…exchange cash for chips (or chips for cash), accept entry of players into a game, pay out winnings or provide account facilities (such as front money accounts) all of which constitute designated services (as per table 3 of the AML/CTF Act).

569    The Salon 95 Risk Assessment then identified the following controls that it was proposed be applied for Star to remain “compliant”:

(a)    players are not to be accepted into junkets until they have undergone “appropriate identity checks” by Star employees, including by sighting appropriate identity documents, for Star to meet its KYC (know your customer) requirements under the AML/CTF Act;

(b)    cash received from players must not be retained at the “Suncity Service Desk” or provided to other patrons as cash dispersals 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), or be exchanged for a chip purchase voucher, as soon as practicable upon being received;

(c)    players cannot provide cash and receive chips in the same transaction;

(d)    Suncity cannot provide chips to players that have not been received from the Star cage (in exchange for cash or because of drawing down on a CCF); and

(e)    upon settlement (or partial settlement) of a junket, Suncity representatives must exchange chips for cash at the Star Cage, and then disperse that cash to players (as opposed to retaining or drawing down excess cash to provide to players).

J.5     Suspicious cash transactions at the Salon 95 Service Desk and the First Warning Letter

570    As will become evident, from at least early May 2018, Star employees conducting surveillance and reviewing CCTV footage of activity in Salon 95 reported to their superiors that they had observed suspicious cash transactions.

571    On 3 May 2018, Mr Wayne Willett (Star’s AML/CTF Administrator) sent an email to Ms Skye Arnott (Star’s Compliance Manager) referring to a cash deposit of $450,000 on 1 May 2018, and another of $437,374 on 2 May 2018. Ms Arnott replied on the same day, copying Mr Brodie and stating that the information she had received from surveillance was that those cash amounts had come from the “Suncity Service Desk”. Ms Arnott explained that the surveillance team was attempting to identify where the cash had come from, and whether the money was provided to Suncity from a patron, or whether Suncity was bringing the money in from another area altogether. Ms Arnott then reported the following:

Surveillance say that the suncity service desk is behind a little window and that patrons do not have access to the area. They are seeing Sun staff bring in cardboard boxes (that look like they were originally photocopy paper boxes) containing cash to the service desk area on a semi regular basis. I have asked to find out what the source of the funds that are being brought in are.

572    On 5 May 2018, a surveillance supervisor of Star sent an email to Ms Arnott and others, with the subject “Pit 95 – Sun City Activity”. She referred to a review that was ongoing, relating to incidents involving “a number of bags with large sums of cash, mostly $50 notes bundled with elastic bands”. She reported that CCTV footage from these incidents, on 14 April, 21 April, 1 May and 4 May 2018 had been obtained, and that the origins of those bags of cash had not yet been identified.

573    Later in the day on 5 May 2018, one of Star’s cash services duty managers emailed Star’s generic anti-money laundering email address, addressed to “Wayne” (being Mr Willett). The duty manager described a transaction whereby a patron had deposited $100,000 in cash (which was unstrapped and wrapped in a rubber band, in bundles of $10,000) into his front money account. The email indicated that a suspicious matter report for this transaction had been completed, and that suspicious matter report was in evidence. Mr Willett forwarded this email to Mr Brodie and Ms Arnott on 7 May 2018, and observed that this was an incident where “more cash” had been paid by Suncity to a patron, and that this patron had no history of junket play or links with Suncity.

574    On 8 May 2018, a gaming operations manager sent an email to various Star employees, including Mr Mugnaini, forwarding an earlier email chain that set out two instances that morning of chips being exchanged for cash at the Salon 95 Service Desk. In the first instance, after a patron in Salon 95 had finished play, he took chips to the Service Desk and received an unknown amount in cash. In the second instance, a patron walked into Salon 95, exchanged a $100,000 “plaque” for cash and then left Salon 95 soon after.

575    Mr Mugnaini forwarded the gaming operation manager’s email to Mr Anthony Lui, a Senior Vice President of International Marketing at Star, and copied several others, including Mr Hawkins. In his email, Mr Mugnaini asked Mr Lui to remind Suncity that they “must not exchange chips for cash at the Service Desk”. Mr Lui replied later that day (and copied Mr Hawkins), confirming that he had done so.

576    On 9 May 2018, Ms Amy Lim (a director in Star’s VIP International Operations team) sent an email to Mr Mugnaini, in the following terms:

Gaming Manager (Dee Tran) and myself reiterate to Park Chou (Manager of Customer Service) & Van Tan (Acting Assistant Director Vip Club) that they must not exchange chips for cash at the Service Desk.

I have advised Park and Van that they will need to brief all their staff re the seriousness of the above issue. Failure to adhere to the above will result to Suncity losing their junket license.

577    Mr Mugnaini forwarded Ms Lim’s email report of her meeting with Suncity to Mr Hawkins on 10 May 2018. In his email, Mr Mugnaini said:

As directed yesterday a meeting was held between The Star management and Suncity staff yesterday. See below confirmation email.

This is in addition to a strong message delivered 24 hrs prior under my instruction (see attached email).

578    On 10 May 2018, Mr Hawkins signed a letter addressed to Mr Iek (Suncity’s promoter), concerning the Salon 95 Service Desk (First Warning Letter). In the letter, Mr Hawkins explained that he was “writing to re-iterate the restrictions notified to you in April 2018 regarding the operation of the service desk in Salon 95”. Mr Hawkins also stated that:

(a)    the Service Desk must not operate a cash float, that any cash received at the Service Desk “must be deposited” at Star Sydney’s cage, and any payments by Suncity to patrons in Salon 95 must originate from Star Sydney’s cage;

(b)    at the Service Desk, cash was not permitted to be exchanged for chips, and vice versa; and

(c)    the Service Desk was for the “exclusive use” of Suncity’s customers, and persons who were not Suncity customers were not permitted to seek services from the desk.

579    Needless to say, these requirements mirrored the controls, set out in [569] above.

580    Mr Hawkins concluded the First Warning Letter with the following statement:

Compliance with the points above is extremely important and non-compliance will result in The Star, Sydney terminating your use of the Service Desk.

(Emphasis added).

581    Mr Lim delivered the First Warning Letter to Suncity staff overseas, at Suncity’s headquarters, on 11 May 2018. Ms Lim and Mr Mugnaini delivered a copy to Suncity staff in Sydney, and discussed its contents with them, on 14 May 2018. In an email to Mr Power on 15 May 2018, Mr Mugnaini confirmed that his provision of the letter to local Suncity staff had also been for the purpose of on-delivery to Mr Iek. Why it was not sent directly to Mr Iek raises some interesting but incidental questions that are unnecessary to resolve. It suffices to note this curiosity was not explained.

J.6     Further suspicious transactions at the Salon 95 Service Desk

582    Between 12 and 15 May 2018, Star employees identified several further suspicious cash transactions, including the following.

583    First, on 12 May 2018, a person who was not a Suncity customer sought to enter the area where Salon 95 was located, and when he was refused entry, the person made a call to a Suncity representative, who then collected the person from reception and went with him to Salon 95. While there, the person collected $45,000 in cash, signed an unidentified document, and left with the cash in a paper bag.

584    Mr Andrew McGregor, a senior investigator at Star, investigated this incident. In an email he sent on 14 May 2018 to Mr Power and Mr Houlihan, he reported that he had spoken to the person who collected the cash, who claimed (one would have thought suspiciously) that he needed $45,000 “urgently for a private business purpose”, had reached out to a “casino friend” who gave him instructions on how to “get into the Sydney Suncity Club”, and once he arrived, provided a reference number and then received the cash. He also said that he “signed something” when Suncity staff asked for his identification and signature.

585    In the light of this, Mr McGregor unsurprisingly suspected Suncity was operating a “membership club” where customers had access to a line of credit or a Suncity front money account, which the person was able to access, or alternatively, that Suncity was “operating as an informal money remitter or hawala”. “Hawala” is a term used to describe a remittance practice involving offsetting, which enables the international transfer of value without any money being transferred. The arrangement involves an offsetting relationship between two or more dealers operating in different countries, and could be used by criminals to conceal the transfer of illicit funds, obscure the identity of the persons involved, and avoid reporting to AUSTRAC.

586    With some understatement, Mr McGregor observed:

Today’s activities with Suncity have been very strange, we have an entity within our four walls which is totally non-compliant to reasonable requests for basic information. I’m going to call it out early, Suncity is operating a business model under our noses which is problematic for the SEG with regards to AML/CTF Laws.

587    Mr McGregor concluded his email by noting that Mr Willett had called him to “call out” a cash deposit of $300,000 from over the weekend, and a $250,000 cash deposit from that afternoon. The latter incident may have been the incident referred to below (see [589]).

588    On 15 May 2018, Mr McGregor sent a further email, summarising a meeting with Suncity staff. He reported that the staff had provided him with the name of the Suncity customer from whom the person had sought the $45,000, but then refused to provide further information about that customer due to “privacy concerns”. Mr McGregor also reported that he requested documentation relating to the transaction, and that Suncity staff told him that under the agreement Suncity had with Star, they were not required to keep such documents. Mr McGregor also asked for the documents that the person signed, but Suncity staff told him that they were thrown out.

589    Secondly, on 14 May 2018, a person arrived at Salon 95, and shortly thereafter, bundled cash totalling $250,000 was placed on a dining table, and then collected by the person who had recently arrived.

590    Thirdly, on 14 or 15 May 2018, a patron who was not a member of the Suncity junket walked into Salon 95 with a friend, and made a request in relation to “moving some money”. The patron handed over something that appeared to be akin to a card, and did not then take any chips or cash. However, approximately 10 minutes later, the patron and a Suncity representative walked from Salon 95 to the retail area of Star’s premises, and exchanged a bag, which Star employees who observed the incident believed contained cash. The patron and the Suncity representative then departed the area separately.

591    On 15 May 2018, Mr Hawkins received two emails which contained reports of the transactions described in [589] and [590] above.

J.7     The Power Email and the Operation Money Bags Information Note

J.7.1    The Power Email

592    On 15 May 2018 at 10:10pm, Mr Andrew Power (Star Sydney’s General Counsel) sent an email to Mr Hawkins with the subject line “Privileged: Salon 95 and the IEK junket group” (Power Email). On 16 May 2018 at 7:36am, Mr Hawkins forwarded the Power Email to Mr Bekier with the message “FYI as discussed”. The content of the email was for Mr Bekier’s information and was to be understood in the context of their prior discussions, which I return to consider below (at [601]–[604]).

593    Given its importance, it is appropriate to set out the Power Email in its entirety:

From: Greg Hawkins

To: Matt Bekier

Date: Wed, 16 May 2018 07:36:00 +1000

FYI as discussed.

From: Andrew Power

Sent: Tuesday, 15 May 2018 10:10 PM

To: Greg Hawkins

Subject: Privileged: Salon 95 and the IEK junket group

Privileged and confidential

Good evening Greg

As discussed, I have now been briefed on conduct occurring in Pit 95 (the salon the subject of an exclusivity arrangement with the IEK junket group) and reviewed available footage and reports received from gaming staff. The focal point of concern relates to cash transactions occurring in those areas.

Legal and Regulatory Risks: In my opinion, the junket group’s conduct has exposed The Star to an unacceptable level of risk and constitutes a breach of the agreement, of applicable laws or otherwise amounts to casino operations. In particular -

1. Cash for chip (and vice versa) transactions taking place at the service desk;

2. Withdrawal of cash (terms unknown) by non-junket participants at the service desk and other locations (including retail).

Equally, concerns are also held around -

1. Reporting requirements arising from the services offered and compliance with AML reporting requirements

2. source of funds and presentation of large quantities of cash into salon 95

3. Retention of documents relating to transactions

4. Reports by other junket groups that large quantities of cash had been sourced from the “Suncity Group” (presumed to be the IEK junket).

Finally, there are [sic] also a suggestion that one of the junket’s staff was an excluded patron who was present in the salon 95 (a blue line area).

Next steps: Oliver will discuss with Saro and Michael W who will convey to the junket group that cash transactions at the service desk must cease until such time as we have prepared a clear list of permitted activities and prohibited acts. We will also need to outline any other requirements that we have, including the ability to be able to audit compliance on an ongoing basis. A direction will also be issued requiring money held in the service desk area to be deposited with The Star’s Cage. This communication will likely take place by lunchtime tomorrow.

Should you require any further information or advice, please let me know.

Regards

Andrew

594    There are two preliminary matters worth noting.

595    First, the email is addressed to Mr Hawkins and marked “Privileged and confidential”. It appears this is because it contains legal advice that is being provided by Mr Power to Mr Hawkins in his role as Managing Director of Star Sydney. I make this finding with some hesitation as there seemed to be a practice within Star to label all sorts of communications, which could not conceivably be legally professionally privileged, the subject of an apparent claim.

596    Secondly, the content and timing of the instructions given to Mr Power and the context of his advice are entirely unclear. I have not had the benefit of hearing from Mr Power to determine who instructed him to prepare the advice and when he was instructed. The Power Email commences with the words “[a]s discussed”, which suggest that the advice followed a discussion between Mr Hawkins and Mr Power, but there is otherwise no evidence of that discussion.

597    Turning to more substantive matters, as can be seen, Mr Power reported in the email that he had been “briefed on conduct occurring” in Salon 95 and had “reviewed available footage and reports received from gaming staff”; he noted that “the focal point of concern relates to cash transactions” that were occurring in Salon 95 and expressed his opinion as to an unacceptable level of risk and then identified the seven matters identified which supported that opinion.

598    Mr Power’s reference to the “agreement” was plainly to the agreement Star Sydney entered into with Mr Iek, the promoter of the Suncity junket, in June 2017 (see [463]). Mr Power’s reference to Suncity’s conduct constituting a breach of “applicable laws” was a reference to the CCA NSW, the AML/CTF Act, or both. That conclusion is supported by the fact that: (a) one of the concerns Mr Power specifically identified as arising from Suncity’s conduct was “compliance with AML reporting requirements”; and (b) given that Mr Power’s view was that Suncity’s conduct may have amounted to “casino operations”, it is likely he was also referring to the CCA NSW, given that it was only Star Sydney, and not Suncity, who held a licence under the CCA NSW.

599    Further, as can again be seen, Mr Power concluded by identifying a series of “next steps” being:

(a)    “Oliver” (which was a reference to Star’s General Counsel (Corporate), Mr Oliver White), would discuss with Mr Mugnaini and Mr Whytcross “who will convey to the junket group that junket transactions at the service desk must cease until such time as we [Star Sydney] have prepared a clear list of permitted activities and prohibited acts”;

(b)    Star Sydney would need to outline to representatives of Suncity any other requirements, “including the ability to be able to audit compliance on an ongoing basis”; and

(c)    Star Sydney would issue a direction “requiring money held in the service desk area to be deposited with The Star’s Cage”.

600    There was an attempt in submissions to downplay the importance of the information contained in the Power Email by saying it did not identify a problem involving any breach by Star. But that misses the point. The opinion expressed by Mr Power indicated that the conduct of Suncity in Salon 95 was a matter of grave concern that warranted the attention of Mr Hawkins, and in turn, Mr Bekier. A senior solicitor employed by Star had expressed the view that the conduct exposed Star to an “unacceptable level of risk” with respect to compliance with legal and regulatory obligations. The fact that Mr Power had identified that a series of steps to be taken to address Suncity’s conduct did not diminish the force of the unequivocal terms in which Mr Power had expressed his opinion.

J.7.1.1        Mr Bekier’s prior discussion with Mr Hawkins

601    Mr Bekier’s evidence was that, on or around 15 May 2018, before receiving the Power Email from Mr Hawkins, he had a discussion during which Mr Hawkins had brought up Salon 95 and told him that the Investigations team had identified instances where Suncity had not complied with Star’s rules for using Salon 95. In his affidavit, Mr Bekier claimed that Mr Hawkins described those instances as “teething problems”, and that his understanding was that there had likely been a “misunderstanding” of the rules by Suncity (see Mr Bekier’s affidavit at [291]–[294]). However, in cross-examination, Mr Bekier conceded that he could not be certain that Mr Hawkins had described Suncity’s conduct as “teething problems”, and accepted that might have been his own characterisation (T544.14-20).

602    Mr Bekier recalled asking Mr Hawkins if he needed to do anything, to which Mr Hawkins replied, “no” and that he was “taking care of it” (see Mr Bekier’s affidavit at [291]). According to Mr Bekier’s evidence, Mr Hawkins said he had already spoken with Suncity and would follow up in writing, emphasising that the rules needed to be followed and that any further issues would result in Suncity losing access to the room.

603    Based on that conversation, Mr Bekier concluded that Mr Hawkins had the issue at hand. He did not recall being particularly concerned by Mr Hawkins’ update (see Mr Bekier’s affidavit at [294]). He understood that the matter was an “operational matter” and took comfort from the fact that the issue had been identified and was being addressed by Mr Hawkins, who he considered to be a highly experienced and competent executive (T544.42-47; Mr Bekier’s affidavit at [295]).

604    While I accept that a conversation between Mr Bekier and Mr Hawkins occurred on 15 May 2018 given Mr Hawkins’ email to Mr Bekier of 16 May 2018 began with the words “FYI as discussed”, I do not accept Mr Bekier’s evidence of the content of this conversation, which is uncorroborated. Mr Hawkins contemporaneous conduct is objectively inconsistent with him having believed, and told Mr Bekier, that Suncity’s conduct in Salon 95 was merely “teething problems”. Rather, his conduct demonstrated that he considered Suncity’s conduct to pose a real risk of harm to Star’s interests. As I explained above (at [576]–[580]), Mr Hawkins had directed Star employees to deliver verbal warnings to Suncity staff in Salon 95, and he had signed the First Warning Letter in which he indicated that further non-compliance by Suncity would result in Star terminating its agreement with Suncity. Further, on 16 May 2018 at 12:49pm, Mr Hawkins responded to an apparent complaint from Mr Lim that matters concerning Suncity and warning to it were getting “a little over complex” by emphasising that “we have had some very significant non-compliance which poses a real AML risk to our business”.

J.7.1.2        Ms Martin

605    At 7:36am on 16 May 2018, when Mr Hawkins forwarded the Power Email to Mr Bekier, Mr Power also forwarded the Power Email to Ms Martin and Mr White. In his email, Mr Power said: “Greg [Mr Hawkins] asked me for a short note with advice on the IRB issue and recommended next steps. Please see below”. Ms Martin replied to Mr Power’s email at 7:55am, requesting that Mr Power “[p]lease copy me directly on any advice being provided to the business on this topic given the likely pace of the matter”.

606    Ms Martin was aware in “mid-May 2018”, from communications with Mr White, that a letter was being prepared to send to Mr Iek regarding the use of the Salon 95 Service Desk, and that Mr White was providing advice about that letter because she was copied on some emails (Ms Martin’s affidavit at [244]). Upon being shown a copy of the First Warning Letter, Ms Martin agreed that she had seen some pieces of correspondence, one of which included a letter that looked like that letter (T910.26-29).

607    Ms Martin’s evidence was that, after she received the Power Email (at 7:36am on 16 May 2018) but before she responded to Mr Power at 7:55am, she received a call from Mr Bekier (who, it will be recalled, also happened to have received the Power Email from Mr Hawkins at 7:36am). She said that, at the time of the call, she was not aware of what issues had arisen in Salon 95, or the details of the transactions that had occurred. Ms Martin said that after the call from Mr Bekier, but before she replied by email to Mr Power at 7:55am, she spoke with Mr Power. She said it was at this time that he summarised the “concerns” he had about Salon 95, which included chip for cash transactions, dealings with individuals who appeared to have no connexion to junket play, and some cash transactions that “looked suspicious” (Ms Martin’s affidavit at [249]).

608    There is no contemporaneous documentary evidence confirming that there was a call between Ms Martin and Mr Bekier, and then a call between Ms Martin and Mr Power, between 7:36am and 7:55am on 16 May 2018, and Mr Bekier said that the call did not take place (T1135.34-1136.3). No records were tendered proving a call took place. However, it is of relatively little significance whether a call occurred. This is because, even on Ms Martin’s account, she was not in a position to inform Mr Bekier of anything he would not have already known from the Power Email itself, and in any event, Ms Martin and Mr Bekier met again later on 16 May 2018, which I will return to below (at [611]–[615]).

609    At 9:31am on 16 May 2018, approximately two hours after he had received the Power Email, Mr Bekier sent an email to Mr O’Neill about a “catch up” they had scheduled for later that day. Mr Bekier listed his proposed topics for discussion. Mr Bekier had included “Suncity” under the heading “New Risks”. In cross-examination, Mr Bekier gave evidence that the inclusion of this item could have been a function of the discussion he had with Mr Hawkins on 15 May 2018 or his receipt of the Power Email on 16 May 2018 (T553.20-25; T553.30-31). Mr Bekier also accepted that it was highly likely that by the time he sent his email to Mr O’Neill, he had read the Power Email (T553.33-35).

610    Mr Bekier could not recall his conversation with Mr O’Neill on the topic of Suncity, or about any of the other topics listed for discussion (T554.39-40). However, there is no rational explanation as to why Mr Bekier would have included “Suncity” under the heading “New Risks” in his proposed list of topics other than to discuss the new risks about Suncity with Mr O’Neill. Something was no doubt mentioned by Mr Bekier. Indeed, he gave evidence that he “would have reflected to [Mr O’Neill] [his] understanding of the risks that the company faced” (T554.41-555.2). However, what Mr Bekier said to Mr O’Neill remains shrouded in mystery. Mr Bekier could have said many things that were associated with the “risks”, ranging from apprising Mr O’Neill of something relatively benign to apprising him of the true extent of the problem. The fact that Mr Bekier could not recall what he said does not lead me to feeling any actual persuasion or reasonable satisfaction that what he would have said would have been in such a tone to bring home the true extent of the problem to Mr O’Neill.

611    Mr Bekier and Ms Martin met on 16 May 2018, for one of their regular weekly catch-ups. Those usually occurred at 11:00am (T1136.45-46). Ms Martin prepared an agenda for that meeting. One of the items on the agenda was “Suncity room update”.

612    Ms Martin’s evidence as to what she told Mr Bekier about the conduct that had occurred in Salon 95 was as follows (T813.44-814.4):

I told Mr Bekier that I now understood the nature of the events and incidents that had been reviewed in relation to the Suncity room, and they were incidents of the sort that involved particular events of cash handling and transaction. There were three categories that I described to Mr Bekier. One was the – in the nature of chip and cash transactions, the other sort was cash transactions that did not appear to be connected to junket players otherwise permitted to be in the room, and the other was other types of cash-handling that appeared suspicious to the investigators.

613    Ms Martin said she told Mr Bekier the chip and cash transactions were of a sort that “could” give rise to a risk of breaches of the CCA NSW (T814.4-6). She also said she told Mr Bekier that Mr Power and Mr White in her team were working on the matter, and providing advice to Mr Hawkins and Mr McWilliams, and that while investigations were underway, any forms of cash handling in Salon 95 had been directed to cease (T814.4-13). Ms Martin also gave evidence that Mr Bekier then asked her to “keep him updated and said that he would also leave the matter with Mr Hawkins” (T814.13-15).

614    There is real reason to doubt the reliability of Ms Martin’s account. While she claimed to have this detailed recollection of her discussion with Mr Bekier regarding Salon 95, she had no recollection, or only a limited recollection, of what was discussed in respect of other items on the agenda (T1136.31-43). In any event, what Ms Martin claims to have told Mr Bekier as to the types of transactions that had been conducted in Salon 95, and concerns arising, added nothing of substance to what Mr Bekier already knew. Mr Bekier had already been informed, through the Power Email, that the concerning transactions included chip for cash transactions, the presentation of large amounts of cash of unknown sources, cash withdrawals by non-junket participants, and receipts by other junket groups of large quantities of cash from Suncity, and that the conduct gave rise to an “unacceptable level of risk” of contraventions of the law.

615    Mr Bekier appears to contend that, at this meeting, he did not ask Ms Martin to keep him updated about Salon 95 (T1137.40-47). However, Ms Martin recalled being “asked specifically by Mr Bekier to update him following Mr Bekier’s receipt of an email from Mr Hawkins” (T1137.46-47). I will later return to consider the lack of evidence from Mr Bekier that he followed up with Mr Hawkins, Mr Power, or any other member of Star’s Legal team to ensure that steps were being taken in response to Mr Power’s email, and I will also consider his reliance on Mr Hawkins’ alleged reassurance that steps were being taken.

J.7.2    The Operation Money Bags Information Note

616    On 17 May 2018, Mr McGregor sent an email to Ms Martin, Mr Power and Mr White attaching an “Information Note” entitled “Operation Money Bags” which he had prepared (Operation Money Bags Information Note).

617    In the “Summary” box on the first page, Mr McGregor recounted that Star’s Investigations Team had commenced “Operation Money Bags” on 14 May 2018, after being informed of a suspicious transaction involving $45,000 in cash at Salon 95 on 12 May 2018. This was the transaction described above (see [583]–[588]). Mr McGregor noted that the purpose of the Note was “to brief [Star’s] Legal team to assist them in the preparation of legal advice for the business in relation to legal and regulatory obligations arising from the investigation and prepare for any anticipated legal proceedings”.

618    Mr McGregor recounted his efforts to investigate the transaction involving $45,000 in cash. He identified that the transaction involved a “non-promoter customer” (that is, a patron who was not a junket participant), who needed money for a “personal business matter”, and after asking a “casino friend” to borrow money, was given directions to Salon 95 and a reference number. On arrival at Salon 95, he provided his identification, signed a form and was then handed $45,000 in cash in a plastic bag.

619    Mr McGregor reported that, on three occasions, Suncity staff had been unwilling to answer his questions about this odd transaction, and that they had also been unwilling to provide documentation.

620    Mr McGregor then reported becoming aware, on 15 May 2018, of a further transaction where another non-Suncity patron and his friend received a bag of cash from a Suncity staff member in the retail arcade area of Star Sydney. Mr McGregor observed that, from the CCTV footage, it looked like the Suncity staff member stood in a position that obscured the security camera while a colleague opened the cash drawer at the Salon 95 Service Desk and placed something in a plastic bag. The Suncity staff then took the non-Suncity patron and his friend to the retail arcade, where they handed over the plastic bag.

621    Mr McGregor then reviewed CCTV footage and reported on the transactions he observed from that review. This included a number of instances where Suncity staff had been observed to handle substantial amounts of cash from various carriers (a red suitcase, a black and blue sports bag, and a black backpack) located at the host desk and on the balcony in Salon 95, in circumstances where Mr McGregor could not identify when those carriers had arrived in Salon 95 or the source of funds.

622    The transactions included instances where substantial amounts of cash were delivered to Salon 95, in a white plastic bag and a blue “Eski” bag. Mr McGregor also identified several chips for cash or cash for chips transactions.

623    Mr McGregor reported an incident where a man was handed (literally) a brown paper bag containing $100,000, who was then escorted by Suncity staff to The Darling lobby, where he handed it to another waiting man. That man, the original customer and the Suncity staff then returned to Salon 95, where the bag and the cash were handed back to Suncity staff. This all occurred within the span of 11 minutes. Given this remarkable incident, it did Ms Martin no credit to refuse to accept that this transaction was very concerning (she would only accept it “concerns” her), that it was indicative of money laundering (she would only concede that was a “possibility”), and that it was “highly suspicious” (she would only accept that it was “suspicious”) (T931.6-932.3).

624    Mr McGregor concluded the Operation Money Bags Information Note with the following observation:

It should be noted that on many occasions the cash appeared in The Rivers and Pit 95 in suitcases, backpacks and other carriers, which visually can’t be attributed to an owner/promoter’s customer and it is not known which amounts were ultimately attributed to whom.

625    Ms Martin could not recall reading the Operations Money Bags Information Note, but believes that she “would have” (see Ms Martin’s affidavit at [263]).

626    Ms Martin sought to downplay the significance of the startling information she received concerning Suncity’s conduct in the Power Email and the Operation Money Bags Information Note in several ways. She claimed that the conduct might have arisen from a “misunderstanding” on the part of Suncity representatives as to “what was required of them” (see Ms Martin’s affidavit at [265]). Further, Ms Martin claimed that on 19 May 2018, Mr McWilliams informed her that his team had not be able to establish that “prohibited” cash for chip or chip for cash transactions had occurred in Salon 95 (see Ms Martin’s affidavit at [268]).

627    I am not satisfied that either of those matters provided any proper basis for Ms Martin to reach any conclusion other than the obvious one Mr Power had reached, namely, that Suncity’s conduct had exposed Star to “an unacceptable level of risk” in relation to Star’s own legal and regulatory obligations.

628    First, I do not accept Ms Martin’s claim that Mr McWilliams or Mr Power told her that the chips for cash and cash for chips transactions that had been observed were not “prohibited” or did not give rise to a risk of a breach of the CCA NSW (see Ms Martin’s affidavit at [266]; T929.17-22). Ms Martin could not point to any written advice to that effect. Nor could she explain how it could have been concluded that, despite the First Warning Letter in terms stating that the exchange of chips for cash and cash for chips must not take place, such transactions were not “prohibited”. She gave no explanation as to what was seen in any “further review of these matters and footage” to justify any such conclusion (T929.17-18). Her evidence was wholly unpersuasive in this regard.

629    Secondly, and in any event, one did not have to be an experienced solicitor or particularly savvy to conclude that multiple features of the conduct were, or should have been, deeply concerning and was not merely the result of some “misunderstanding” on the part of Suncity’s staff. Ms Martin accepted that the conduct included instances involving large amounts of cash being delivered where the source was unknown, non-junket customers being able to turn up in Salon 95 and receive cash, large amounts of cash being stored in and around Salon 95 where investigators could not identify the source or origin of the funds, occasions where Suncity staff had been unwilling to provide information to Mr McGregor, and tellingly, instances where Suncity staff had moved to obscure the view of the surveillance cameras (T938.22-39).

630    Thirdly, Mr Houlihan had informed Ms Martin that his team was engaging with law enforcement concerning Suncity’s conduct (see Ms Martin’s affidavit at [266]). The fact that Mr Houlihan (Star’s Group Investigations Manager, who was a former detective in the NSW Police and had received commendations from the Australian Crime Commission, the NSW Crime Commission and the NSW Commissioner of Police) considered that Suncity’s conduct was of a kind that warranted the involvement of law enforcement meant he did not consider the conduct to have been just some “misunderstanding”, but rather indicative of possible criminal conduct.

631    Ms Martin gave evidence that she had a weekly catch-up meeting with Mr Bekier on 22 May 2018, and she gave a detailed account of what she said was her recollection of that meeting (T814.31-815.20). Ms Martin’s evidence was that she updated Mr Bekier as to what each of her direct reports were working on. That included that she informed Mr Bekier that Mr Houlihan’s investigations team “were also continuing to liaise with law enforcement agencies at this time in relation to these incidents”.

632    An agenda for a weekly catch-up between Ms Martin and Mr Bekier, dated 22 May 2018, contains the bullet point “Suncity room update” under the heading “Other items”. Except for the date, the agenda is identical to the agenda for the catch-up on 16 May 2018. Ms Martin confirmed that the only document she had to give her any assistance in recalling what was said at this meeting was that agenda.

633    Her evidence was that at this meeting she updated Mr Bekier. This included telling Mr Bekier that Mr Power had spoken to Mr Brodie and had determined that the “cash for chip” transactions mentioned in his email did not give rise to a risk of breach of the CCA NSW (T814.34-815.17). Importantly, Ms Martin did not give evidence that she told Mr Bekier about the Operation Money Bags Information Note, which she had received by this time.

634    Ms Martin’s claim to have a detailed recollection of what she told Mr Bekier during this meeting is at odds with the lack of recollection she had in many other respects in her evidence. That, together with the fact that she relied on an agenda to assist her recollection that she subsequently accepted was likely not the final agenda for the meeting, means there is real reason to doubt the reliability of Ms Martin’s account of the meeting. Additionally, Mr Bekier appears to assert that there was no catch-up meeting at all on 22 May 2018 (T1141.33-34), and if there was, Ms Martin did not tell him that Star’s investigators were continuing to liaise with law enforcement concerning Salon 95, and he did not ask her to stay across matters happening in Salon 95. It is unnecessary to decide, but I suspect Mr Bekier is right. In any event, I do not accept Ms Martin’s uncorroborated account given my general doubts as to her credibility.

J.8     Issuance of written Salon 95 Service Desk Processes

635    On around 16 May 2018, Star employees had commenced drafting a set of SOPs to be followed by Suncity in its operation of the Salon 95 Service Desk.

636    On 21 May 2018, Mr Brodie sent an email to Mr Hawkins and Mr McWilliams, attaching a draft version of the SOPs. In his email, Mr Brodie referred to the fact that 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 SOPs.

637    On 23 May 2018, Mr Mugnaini sent an email to Mr Lui, which he copied to Mr Lim, Mr Whytcross and Mr Hawkins, to which he attached the final version of a document entitled “Salon 95 Service Desk Processes”, which he had provided to Suncity staff at a meeting that day.

638    Mr White emailed a copy of the Salon 95 Service Desk Processes to Ms Martin and Mr Power on 25 May 2018.

J.9    The KPMG Reports, and the Board and Committee meetings on 23 and 24 May 2018

639    A meeting of Star’s Audit Committee was held on 23 May 2018. Each of Mr Todorcevski, Mr Bradley, Mr Sheppard, Ms Pitkin and Mr O’Neill was present at this meeting. Mr Bekier, Ms Martin and Mr McWilliams were in attendance. I return to discuss this meeting in further detail below (see [681]–[695]), but for present purposes, it suffices to note that one of the matters discussed at this meeting was a review KPMG had conducted of Star’s Joint AML/CTF Programme.

J.9.1    The KPMG Reports

640    On 16 May 2018, KPMG provided two reports to Star (KPMG Reports) concerning the Star’s Part A AML/CTF Programme (KPMG Part A Report) and Star’s Part B AML/CTF Programme (KPMG Part B Report).

641    The KPMG Reports were the product of a review conducted by KPMG of Star’s Joint AML/CTF Programme (in the case of the Part A Programme, that being required by Part 9.6 of the AML/CTF Rules) during the period from December 2016 to November 2017.

642    One of the specific issues that KPMG had been asked by Star to consider in the KPMG Part B Report was whether “[t]he 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”.

643    In the Executive Summary section of the KPMG Part B Report, KPMG noted that junkets were generally considered by anti-money laundering regulators as “higher risk”. KPMG also identified that, in relation to “junkets’ ML/TF risk assessment”, Star did not have in place any “formal risk assessment of junkets”. KPMG also made the following observation:

It also appeared that limited due diligence was conducted on junket operators and only a World-Check search was conducted on junket participants, in particular, with no information on source of funds and wealth.

644    In the Summary of Findings section of the KPMG Part B Report, KPMG identified that it had rated its findings concerning “ML/TF Risk Assessments relating to Junket Operators” as “high”. It described those findings in the following terms:

There is no documented ML/TF Risk Assessment or Risk Assessment Methodology in relation to Junkets.

SGR obtains limited information on junket operators’ source of funds or source of wealth.

Due diligence on junket participants is limited, particularly in QLD. No enquiries are made on the junket participants’ source of wealth or funds.

Junket participants did not undergo ECDD in QLD and ECDD was not conducted in a timely manner for junket participants in NSW.

645    KPMG elaborated on these findings in Section 4.3 of its full Part B Report. KPMG reported that Star had not conducted an ML/TF risk assessment of its “junket business”, and instead it conducted a “due diligence” process when a junket operator applied for a junket licence. KPMG then described that application process. It noted that, in Queensland, it was OLGR rather than Star that licensed junket promoters and representatives, and that Star relied on the due diligence conducted by OLGR as part of their licensing process. KPMG set out the steps Star undertook with regard to the junket licensing process in NSW, but also recorded its understanding that because Star frequently received notification of a new junket application when the junket operator and participants were already travelling from overseas, the approval process was conducted within very short timeframes and “most new junket operators commence their junket operations on the basis of a provisional, rather than a full licence”.

646    Mr Bekier submitted the statement that Star had not conducted an ML/TF risk assessment of its junket business cannot be read in isolation. He emphasises that elsewhere KPMG specified that “there is no formal risk assessment of junkets”, and “[t]here is no documented ML/CTF Risk Assessment or Risk Assessment Methodology in relation to Junkets”. Mr Bekier’s contention is that KPMG was only making clear that Star had not documented how it assessed that risk and that this was merely a “procedural criticism”. However, Mr Bekier gave evidence in cross-examination that he understood KPMG’s finding concerning the absence of an ML/TF risk assessment of its junket business was not limited to a finding that Star had not documented such a risk assessment, as opposed to not having conducted an assessment (see [659]). Further, in the context of an AML/CTF programme, it is quite unclear what an undocumented or informal risk assessment methodology concerning junkets would be.

647    In respect of CCFs used to fund junkets, KPMG made the following statement:

We understand that in practice most junket operators are also provided with a cheque cashing facility (CCF). In order to be granted a CCF, the applicant must undergo credit checks by the Credit and Collections team, which include enquiries into the applicant’s credit worthiness and details of their income and employment. This is verified where possible, but does not include any in-depth enquiries as to the junket operator’s source of wealth or source of funds. In some cases, junket operators are funded by a third party’s CCF facility. In that case the funder will have been identified and verified, but enquiries are not made as to the relationship between the funder and the junket operator.

648    As for junket participants, KPMG noted that they are “generally regarded as posing a higher ML/TF risk”, but also found that:

[Star] does not conduct due diligence on the participants during the licensing and CCF application process, although all junket participants are checked on arrival to ensure their passports and visas are in order.

649    KPMG acknowledged that some due diligence was conducted in NSW on junket participants when they applied for Sovereign room membership, which consisted of identification verification, a World Check search, and that details of all new Sovereign room membership applications were sent to NSW law enforcement at the end of each month. However, as to the funds used by junket participants, KPMG noted:

Some information on the amounts contributed by the participants to the junket’s pool of funds can be gleaned from details of the participants’ buy-in, any subsequent buy-ins and partial settlements, but this based on information is provided by the junket operator and SGR cannot independently confirm this.

650    KPMG recorded it had been informed that in Queensland, World Check searches were not conducted on junket participants when they applied for Sovereign room memberships, the AML Administrator did not receive copies of any documentation relating to junkets, and while the AML Administrator did conduct World Check searches on some junket participants, not all participants were captured.

651    KPMG further noted that, when it tested the due diligence processes on a sample basis, in NSW, due diligence was conducted on junket participants on average 50 days after the junket had taken place, and there was no due diligence conducted on junket participants in Queensland (which was because Star relied on the due diligence conducted by OLGR).

652    KPMG summarised its findings in Section 4.3 as follows:

•    There is no documented ML/TF Risk Assessment or Risk Assessment Methodology in relation to Junkets. In NSW, SGR does not enquire into the source of funds or source of wealth of the junket operator, or has any information as to the source of the funds used by the junket program[me]. Furthermore, if the junket program[me] is funded by a third-party through a CCF, SGR does not enquire as to the source of those funds and the relationship between the parties. In QLD, these enquiries are made by the regulator but SGR does not make any independent enquiries. Most junket licenses proceed on provisional approvals, and we have not seen evidence of any full approval being granted by the Investigations team.

•    Due diligence on junket participants is limited, particularly in QLD. In addition, enquiries are not made on the junket participants’ source of wealth or funds.

•    Junket participants did not undergo ECDD in QLD and ECDD was not conducted in a timely manner for junket participants in NSW.

653    KPMG then explained that there were two risks in respect of junkets. First, junket programmes may “facilitate money laundering because they add a layer of obscurity to the source of funds and source of wealth”. That observation echoed the risk identified in the Horton Report, namely, that junkets facilitated the introduction into the Sydney Casino of large amounts of money where the source of that money might be “unknown – and unascertainable” (see [439]). Secondly, there was a risk that customers may not be identified as high risk (e.g. foreign PEPs), due to the “lack of transparency over the participants in QLD, and the distribution of funds being unknown”.

654    KPMG recommended four actions for Star to take to address the issues it had identified in respect of junkets:

4.3.1     Develop a risk assessment methodology for Junkets.

4.3.2     Consider how best to enquire about source of funds and wealth, for junket operators and participants.

4.3.3     Require senior management approval where information as to source of funds and wealth cannot be obtained from junket operators or participants.

4.3.4     Develop procedures to ensure junket participants are subject to ECDD as required by the Program[me].

655    Separately, in its Part A Report, KPMG identified several deficiencies in Star’s approach to ML/TF risk assessment generally, which led it to assign a “high” risk rating to this review area. In particular:

(a)    KPMG found that Star “does not have an adequately documented ML/TF risk assessment methodology on which its ML/TF assessments have been performed”.

(b)    KPMG identified that Star applied a default customer ML/TF risk rating of “low” that was not adequately explained or documented. KPMG illustrated this by pointing out that a customer who brought “a significant amount of money into the casino” would not automatically be assessed as higher than “low” risk by Star and expressed the opinion that such customers should be considered as potentially higher risk of being involved with the facilitation of money laundering or terrorism financing.

(c)    KPMG observed that Star’s risk assessment did not consider terrorism financing “as required by the AML/CTF Rules”. Further, Star’s risk assessment did not consider, in sufficient detail, the ML/TF risk posed by specific parts of the business, where the risk may be higher.

656    KPMG identified deficiencies in Star’s approach to enhanced customer due diligence (ECDD). In particular, KPMG observed:

There is no procedural document that sets out how and what ECDD must be conducted and recorded. Therefore this is open to interpretation and an inconsistent approach by the AML Administrators.

ECDD is conducted and recorded inconsistently across The Star DBG. Our interviews and testing indicated that ECDD performed by and records maintained by the QLD Administrator are more thorough than the NSW AML Administrator.

657    Further, KPMG found that there were “no procedural documents that set out in practice how and what ECDD is performed”. KPMG reached the following conclusion:

Appropriate ECDD is not always conducted. For a number of customers, the ECDD record appeared to be limited to a World-Check and did not include the type of information that we would expect to see, e.g. the reason why ECDD was conducted, details of the customer’s transaction or gaming history, a general Google search which would have identified issues of concern.

658    I return below to consider further facts concerning the KPMG Reports, and particularly, the provision of the executive summaries of those reports to the Audit Committee on 23 May 2018 (see [681]–[698]).

659    Mr Bekier accepted, in cross-examination, that the findings made by KPMG indicated that Star’s AML/CTF Programme “greatly concerned” him and “had to be improved” (T566.15; T571.1-14). He was also forced to accept, contrary to his assertion in chief, that KPMG’s findings concerning the absence of an ML/TF risk assessment of its junket business was not limited to a finding that Star had not documented such a risk assessment (T590.34-591.10). He accepted that there was a “wider issue” regarding Star’s “end-to-end process”, including that Star did not do enough ECDD on junket participants, and that there was an absence of an “overall methodology” (T590.44-591.6).

660    Ms Martin read the executive summaries and aspects of the summary of findings sections shortly after the reports were provided to Star (T941.20-22; T943.21-28). Ms Martin’s “initial reaction” to the KPMG Reports was “surprise and concern”, because she considered that KPMG’s assessment “in some respects differed significantly” from earlier independent review reports Star had received (see Ms Martin’s affidavit at [281]).

661    Despite this, in cross-examination, Ms Martin did not accept that the KPMG Part B Report highlighted some significant deficiencies in Star’s money laundering and terrorism financing assessments, in relation to junkets, or in Star’s processes for dealing with junkets (T942.7-29). She claimed that, until she took on the AML portfolio in 2019 (that is, when she became Star’s CLRO), she did not turn her mind to whether she agreed with KPMG’s findings (T942.31-41).

662    Further, Ms Martin denied that receiving KPMG’s findings and recommendations in May 2018 increased her level of concern about the conduct Mr McGregor and Mr Power had identified in Salon 95, and she did not accept that they should have (T943.30-38; T944.23-29). She asserted that, while the KPMG Reports might have reflected its view concerning “Star’s whole operations”, she was “aware of some different information in relation to the events in Salon 95 around this time” (T944.1-2). She then elaborated that the “different information” was the “active monitoring and assessment of activities in Salon 95”, which she felt distinguished the Salon 95 activities from KPMG’s findings and recommendations (T944.4-10).

663    Ms Martin accepted that Mr McGregor had not been able to ascertain from where the cash described in the Operation Money Bags Information Note had come. But she asserted that the AML team “did their own reviews of the individuals involved” (T944.12-14). When it was pointed out to her that had resulted in the AML team lodging a series of SMRs with AUSTRAC, Ms Martin accepted she was aware that some SMRs had been lodged, and conceded she did not know the basis on which they had been lodged or the details, and that she did not see those SMRs until after the commencement of this proceeding (T944.16-21).

664    Ms Martin’s evidence is quite implausible and appears to be an attempt to avoid accepting what should have been obvious to her, both in May 2018 and when she gave evidence in this proceeding. Independent experts engaged by Star to review its Joint AML/CTF Programme and whether the ML/TF risks posed by Star’s use of junket operators had been adequately identified and addressed, provided a report identifying deficiencies in how Star assessed the risks posed by junkets and conducted due diligence on persons associated with junkets. They did so in the same month that, to Ms Martin’s knowledge, Star’s largest junket customer had been found to have been engaging in conduct involving suspicious cash transactions and cash handling in Salon 95. This concatenation of events should have made it abundantly clear to Ms Martin that Suncity’s conduct had exposed Star to significant risks (or, as Mr Power had recognised, an “unacceptable level of risk”) with respect to Star’s compliance with its obligations under the AML/CTF Act.

J.9.2    Prior reviews of Star’s AML/CTF Programme and junket vetting processes and systems

665    In reaching this conclusion, I have had regard to the fact that Star had previously submitted both Part A and B of its Joint AML/CTF Programme to external review, for the purposes of assessing whether the Joint AML/CTF Programme was operating effectively and complied with statutory requirements. For completeness, and to assist in understanding the whole context, it is worth giving some detail.

J.9.2.1        Brown Review

666    In July and August 2015, Star’s Joint AML/CTF Programme was reviewed by Mr William Brown of Orange Advisory, a solicitor specialising in AML/CTF compliance. Mr Brown was approved by AUSTRAC to act as an external auditor for the purposes of s 164 of the AML/CTF Act. As he noted in his report, he had “extensive knowledge of ML/TF risks faced by casinos in Australia”. Mr Brown’s review was dated 21 August 2015.

667    Mr Brown concluded that, subject to implementation of the key recommended actions and qualifications and assumptions contained in his report, Star’s Joint AML/CTF Programme was effective “in pursuit of its purpose having regard to the money laundering (ML) and terrorist financing (TF) risks the Casinos and the [Designated Business Group] may reasonably face”, complied with the AML/CTF Rules, had been effectively implemented, and that Star’s casinos had complied with the Programme. In providing that opinion, Mr Brown explicitly noted that:

effectiveness, as referred to in opinion item 1 above, is to be interpreted in the context of section 84 of the Act. The purpose of a Program[me] is to “identify, mitigate and manage” the ML/TF risk that that Casinos “may reasonably face”. Mitigation and management do not mean elimination. Accordingly, I use the term “effective” to mean accomplishing mitigation or management …

(Emphasis added).

668    Mr Brown identified a series of recommended actions for consideration by Star. He prefaced those recommended actions with the following commentary (noting that “EEG” was a reference to “Echo Entertainment Group”, Star’s then corporate name, and “DBG” was a reference to “designated business group”):

In the interests of balance, it must be recognised and acknowledged that the Program[me] works well, in accordance with its terms and the efforts of the CO and the dedicated AML/CTF team and other relevant staff of the Casinos. Behind and underpinning my review opinions are an array of positive findings and conclusions about the manner and means by which the DBG implements the Program[me] and complies with the law. Those opinions can therefore give the directors confidence that there are many good things being done in EEG’s efforts to identify, manage and mitigate the ML/TF risks faced by the Casinos.

In particular, as evidence that the Program[me] is effective, Casinos in the DBG:

•    regularly file threshold transaction reports (TTRs);

•    regularly file suspicious matter reports (SMRs);

•    report international funds transfer instructions (IFTIs) when required;

•    have a large number of customers listed on the ML/TF Risk Register;

•    assess the ML/TF risks associated with new types of designated services, ways of delivering designated services and changes in procedures;

•    regularly and actively monitor, review and analyse customer transactions and activities;

•    appropriately identify their customers and conduct ongoing customer due diligence on higher risk customers;

•    train their staff to alert them generally to ML/TF risks and the Program[me];

•    ensure that relevant staff have licences (issued by the casino regulators on strict probity grounds) to act in their roles;

•    liaise with and communicate appropriately with AUSTRAC; and

•    keep good and accessible records related to the Program[me].

(Emphasis added).

669    After identifying those matters, Mr Brown stated that he set out, in his report, several “key” and “other” recommended actions for consideration. He said that while he did not resile from his opinion on Part A of the Programme, it was his view that if any of those recommended actions were not implemented, his opinions “might change”. Further, Mr Brown stated that if any of the “key recommended actions” were not implemented, he could say “with some certainty” that his opinion “would change”.

670    None of Mr Brown’s “key” or “other” recommended actions specifically concerned junkets.

671    On 25 September 2015, Mr Brown attended a Risk and Compliance Committee meeting to present his findings. The minutes of that meeting record that Mr Brown spoke in detail about the review and “noted that his findings were, overall, very positive, with some key recommended areas of action to improve upon”. The minutes further recorded that:

In response to queries from the Committee, Mr Brown talked to perceived potential compliance risk areas for casinos, in particular, suspicious matter reporting requirements and matters relating to premium programs (‘junkets’), noting that the Company performs well in relation to compliance with respect to junkets especially relative to others in the industry.

(Emphasis added).

672    At its next meeting, on 1 December 2015, the Risk and Compliance Committee was updated on management’s actions to date in response to Mr Brown’s recommendations. At a Board meeting on 2 December 2015, the Risk and Compliance Committee recommended to the Board that certain amendments be made to the Joint AML/CTF Programme, following the recommendations made by Mr Brown. The Board accepted the Risk and Compliance Committee’s recommendation and resolved to approve the proposed amendments.

673    All of Mr Brown’s recommendations were adopted by Star in its updated AML/CTF Programme approved by the Board in September 2016. This was confirmed by Mr Brown, who reviewed the draft updated programme before it was adopted. In a further report dated July 2016, he said Star could “consider that the recommendations made in the Report have been adequately and sufficiently implemented”.

674    Mr Bekier’s evidence was that Mr Brown’s review gave him comfort that Star had an effective programme that was compliant with AML/CTF obligations (see Mr Bekier’s affidavit at [161]). I am unpersuaded by ASIC’s sweeping submission that Mr Bekier had no basis for asserting that the deficiencies KPMG had found, or the actions it identified, were “new requirements” (T570.25-40). Mr Bekier’s characterisation of KPMG’s findings and recommendations in this way was based on his evidence that the KPMG Reports were the first time he had been informed of any “suggested weakness in [Star’s] AML/CTF processes generally, and for junkets in particular” (see Mr Bekier’s affidavit at [317]).

J.9.2.2        Horton Review

675    As I previously explained, Dr Horton was appointed by ILGA to conduct a review into Star Sydney’s suitability to hold a casino licence under the CCA NSW. I have already explained the results of the Horton Review in some detail above (see [435]–[445]). It suffices to note that Dr Horton completed the Horton Report in November 2016 and was satisfied that: (a) junket programmes appeared to be conducted properly, honestly and with proper protections by Star, and that their settlement was reliable and honest; (b) junket programmes and their settlement were managed appropriately so as to minimise the risks that they posed for criminal influence and honesty in gambling; and (c) the arrangements which Star had in place were adequate, having regard to the nature and extent of the risks posed to the honest conduct of gaming and to resist criminal influence and exploitation (see [442]–[443]).

J.9.2.3        AUSTRAC compliance assessment

676    Throughout the Relevant Period, Star was subjected to “compliance assessments” undertaken by AUSTRAC.

677    In 2017, AUSTRAC assessed Star and each of its casinos (2017 Compliance Assessment). The 2017 Compliance Assessment included reviewing Star’s Joint AML/CTF Programme, on-site visits to all three of Star’s casinos, discussions with cage and gaming staff at the Sydney Casino, “a simulated Junket experience” at the Sydney Casino, and the provision of information about the operation of Queensland junkets. The Board was advised that the compliance assessment “conducted across all properties … were positive overall” and had resulted in “positive outcomes”.

678    AUSTRAC’s review was summarised in a Board paper from Mr McWilliams and Ms Arnott dated 22 August 2017. That paper reported that:

(a)    AUSTRAC’s assessments were conducted after Mr Brown’s independent review of the programme in late 2015 and recommendations from that review had been incorporated in changes to the programme which the Board approved in late 2016.

(b)    In January 2017, AUSTRAC had assessed the Gold Coast and Brisbane properties, including a review of the programme and associated documents, and “information about the operation of the Queensland junket operations”.

(c)    Following the Queensland review, AUSTRAC had provided a letter dated 17 March 2017 outlining three required and two recommended changes to the programme none of which related to junkets.

(d)    Changes to the programme have been drafted to satisfy all of AUSTRAC’s recommendations. A draft copy of the programme, including the proposed changes, was provided to AUSTRAC. In a letter dated 23 May 2017, AUSTRAC confirmed it was satisfied that the proposed changes would meet its requirements.

(e)    In May 2017, AUSTRAC assessed AML/CTF compliance at the Sydney property including a review of the programme and associated documents and “a simulated Junket experience”.

(f)    Following this review, AUSTRAC provided a letter dated 29 June 2017 outlining two suggested and one required change to the programme. None of those changes related to junkets.

(g)    Star had drafted changes to programme to address AUSTRAC’s comments in its 29 June 2017 letter. A draft copy had been provided to AUSTRAC. Although no response had yet been received, the proposed amendments to the programme were not considered to be controversial.

679    Following the 2017 Compliance Assessment, AUSTRAC wrote to Star outlining certain, confined suggested and required changes. Star proposed minor amendments to address the issues raised and those amendments were approved by the Board at its meeting on 22 August 2017. As reported to the Board, those amendments were also provided to AUSTRAC, and AUSTRAC indicated that it regarded them as satisfactory or, as regards amendments that were uncontroversial, did not raise any objection.

J.9.2.4        Summary of position prior to receipt of the KPMG Reports

680    What one is to take from this is that prior to receiving the KPMG Reports, the Board had been assured that Star’s AML/CTF Programme was effective and complied with relevant laws. To the extent recommendations had been made for improvement, they had been adopted.

J.9.3    Board Committee and Board meetings on 23-24 May 2018

681    Star first received the KPMG Reports on 16 May 2018. However, they were not provided to the Board at this time. Mr Bekier’s unchallenged evidence was that he did not see the full reports until 10 July 2018, when Ms Martin emailed them to him (T578.41-45).

682    As noted above (at [639]), on 23 May 2018, a meeting of Star’s Audit Committee was held. Mr Todorcevski, Mr Bradley, Mr Sheppard, Ms Pitkin and Mr O’Neill were present at this meeting, and Mr Bekier was in attendance. Ms Martin and Mr McWilliams were also in attendance. Ms Lahey and Mr Heap were not recorded as being present nor in attendance.

683    For the meeting, Mr McWilliams and Ms Tarnya O’Neil (General Manager, Internal Audit and Assurance) prepared a paper in relation to the KPMG Reports entitled “Internal Audit Status Update”, dated 23 May 2018. The paper was taken as read at the meeting and reported that KPMG had conducted the review described above.

684    As to the KPMG Part A Report, the Internal Audit Status Update paper described the five broad “significant … improvement opportunities” that had been identified in the KPMG Part A Report. The paper noted that there had been two “high” rated findings, three “moderate” rated findings, and one “low” rated finding. The paper also identified that there were 24 “[m]anagement agreed actions” in relation to those findings.

685    Regarding the KPMG Part B Report, the Internal Audit Status Update paper described three broad “significant improvement opportunities” that had been identified, one of which was, relevantly, “[e]nhancing ML/TF risk assessments relating to junket operators”. The paper noted that there had been one “high” rated finding, one “moderate” rated finding, three “low” rated findings. The paper also identified that there were 12 “[m]anagement agreed actions” in relation to those findings.

686    Attachment B to the Internal Audit Status Update paper was: (a) the executive summary of the KPMG Part A Report; and (b) the summary of findings in the KPMG Part A Report.

687    The executive summary of the KPMG Part A Report in Attachment B stated that:

The objectives of the review, as defined by Chapter 9.6 of the AML/CTF Rules, were to:

•    Assess the effectiveness of SGR’s Part A Program[me] having regarding to the money laundering and terrorism financing (“ML/TF”) risk of each Reporting Entity within The Star Designated Business Group (“The Star DBG”);

•    Assess whether the Part A Program[me] complied with the AML/CTF Rules;

•    Assess whether the Part A Program[me] had been effectively implemented; and

•    Assess whether each Reporting Entity in The Star DBG had complied with the part A program[me]”

…

Overall, SGR’s Part A Program[me] could be enhanced, especially in relation to its ML/TF risk assessment, to more effectively identify, manage and mitigate its ML/TF risks.

…

In particular, we note the following with respect to the scope of this Independent Review as set out in the Scope.

•    The controls developed for the Part A Program[me] appear to be partially effective in regards to the ML/TF risk of each Reporting Entity within The Star DBG;

•    The Part A Program[me] largely complies with the AML/CTF Rules;

•    The Part A Program[me] has been partially effectively implemented; and

•    The Reporting Entities in The Star DBG have largely complied with the Part A Program[me].

688    Attachment C to the Internal Audit Status Update paper was: (a) the executive summary from the KPMG Part B Report; and (b) the summary of findings in the KPMG Part B Report.

689    The executive summary of the KPMG Part B Report in Attachment C stated that:

The objectives of the review, as agreed in the engagement letter dated 27 November 2017, were to:

1    Consider the design and operating effectiveness of SGR’s Joint AML/CTF Part B Program[me].

2    Consider the following specific issues (collectively referred to as “specific issues”). … Specifically, consider management’s processes and controls in place to determine whether:

…

c)    The money laundering and terrorism financing (“ML/TF”) risks posed by the use of “junket” operators based in Hong Kong and Macau have been adequately identified and addressed;

…

In general, we note that the Part B Program[me] has generally been effectively designed to meet the requirements of the Rules. We identified a few minor exceptions. We conducted sample testing and noted no exceptions.

For the Specific Issues relating to regulatory change and governance processes that we were asked to consider, we noted that whilst SGR processes were not formally documented, in practice the processes appear to be effectively implemented.

We consider that the lack of documentation creates a risk that procedures and processes may not be consistent and followed. We also noted that there is limited quality assurance over the information recorded in the Protecht risk management system and we have recommended how this could be improved.

In respect to junkets’ ML/TF risk assessment, we note there is no formal risk assessment of junkets, although these are generally considered by the AML regulators as high risk [footnote omitted]. It also appeared that limited due diligence was conducted on junket operators and only a World-Check search was conducted on junket participants, in particular, with no information on source of funds and wealth.

…

Recommendations, agreed management actions, with action owners and dates, are included in section 3 and 4 of this report.

(Emphasis added).

690    The summary of findings in the KPMG Part B Report included the following finding concerning the “ML/TF Risk Assessments relating to Junket Operators” review area:

There is no documented ML/TF Risk Assessment or Risk Assessment Methodology in relation to Junkets.

[Star] obtains limited information on junket operators’ source of funds or source of wealth.

Due diligence on junket participants is limited, particularly in QLD. No enquiries are made on the junket participants’ source of wealth or funds.

Junket participants did not undergo ECDD in QLD and ECDD was not conducted in a timely manner for junket participants in NSW.

691    That finding was allocated a “high” rating. The classification of findings adopted in the report is explained in Appendix 2 to the KPMG Part B Report. Notably, that classification explains that a “high” rating may indicate “a breach of legal requirements and/or regulations” in respect of which “no further action is likely to be taken by a regulator”. By contrast, a rating of “very high” may indicate a “[s]erious breach of legal requirements and/or regulations” in respect of which “action [is] likely to be undertaken by a regulator”.

692    On 23 May 2018, at the Audit Committee meeting, Mr McWilliams and Ms Martin addressed the Audit Committee on the review undertaken by KPMG. The minutes record the following:

Mr McWilliams noted KPMG were encouraged to apply a high standard to their critique and formation of opinions with the aim of enabling ongoing improvement and evolution of the Company’s program[me] and supporting procedures and practices.

Mr McWilliams spoke to the executive summaries in the papers, noting that the high rated items are classified as such primarily due to the fact that these items relate to risk assessment aspects of the program[me] and improving related documentation. In light of the risk-based approach of the Act and consequential emphasis placed on risk assessments, short periods for management action in response was recommended in these areas, which led to the high ratings for them.

It was noted that the detailed reports have only just been received by management and are undergoing review. There are aspects of the content and bases for some opinions that may be contested by management, however the compliance team’s initial focus has been on developing an action plan in response to the recommendations in the report, starting with the high rated items.

Ms Martin noted that the next steps are for management to complete its review of the report (considering the scope of the review and extent of the fieldwork) and respond, complete the management agreed action plan and finalise legal advice on any issues of compliance with the Act. Management will then present a report to the Committee addressing all these components.

The Committee noted KPMG’s report was delivered to management very close to the meeting time. However, for the Committee to adequately assess the review outcomes, it is necessary for the Committee to be presented with complete review outcomes, including management actions in response and assurances in relation to implementation. In addition, some language in the summaries in the report is concerning in the limited context presented.

Following discussion, the Committee noted the extracts presented and noted that management is however continuing work with KPMG and will revert to the Committee further.

The Committee requested management provide progress updates to the Chair of the Committee prior to the next scheduled meeting and, if considered necessary by the Chair, schedule an additional meeting of the Committee.

693    Considering Ms Martin’s comments at the Audit Committee meeting, I infer that this included telling the other members of the Committee that management was still reviewing the KPMG Reports, who believed that there were some aspects of the content and the bases for some opinions that may be contested.

694    Mr Bekier recalls that Ms Martin (who had the full KPMG Reports by this time) said that there were some matters that needed to be clarified with KPMG, particularly about junkets (see Mr Bekier’s affidavit at [315]). Mr Bekier’s recollection is that management thought KPMG had misunderstood some aspects of Star’s processes around junkets and junket participants, although he could not be certain whether this was raised in the meeting or with him directly.

695    The full KPMG Reports were not provided to the non-executive directors during the Relevant Period. Although the minutes of the Audit Committee meeting held on 23 May 2018 state that “the full version of each report has been uploaded to the Board portal”, this had not in fact occurred. During the hearing, ASIC issued a notice to Star under s 1317R of the Corporations Act requiring Star to identify, inter alia, when, if at all, the KPMG Reports were uploaded to the Board portal (which utilised the “Diligent” platform). It is uncontroversial that in response, Star explained that the KPMG Reports “were not uploaded to Diligent in the Relevant Period” and were “first uploaded to Diligent on or about 13 October 2021”. Ms Martin corroborated that evidence, testifying that the full KPMG Reports were not provided to the Audit Committee (T1120.42-43).

696    On 24 May 2018, a Board meeting was held. Each of Mr O’Neill, Mr Bekier, Mr Sheppard, Ms Lahey, Mr Bradley, Ms Pitkin, Mr Todorcevski and Mr Heap were present, and Mr Hawkins, Mr Theodore and Ms Martin were in attendance.

697    At the Board meeting, Mr Todorcevski, in his capacity as Chair of the Board Audit Committee, advised the Board that the Audit Committee had considered the Internal Audit Status Update paper and key review findings. In particular, he noted that the Audit Committee had considered the “high rated findings” in the AML/CTF Programme Review (this being a reference to the KPMG Reports). The “high rated findings” included KPMG’s findings concerning deficiencies. He also noted the actions being taken in response.

698    Mr Todorcevski, as Chairman of the Audit Committee, received and read both the KPMG Reports prior to the Audit Committee meeting on 23 May 2018 and spoke with Mr McWilliams and Ms Martin about them. Indeed, he noted in an email sent to Mr McWilliams and Ms O’Neil on 22 May 2018 that he was “concerned about the two AML/CTF reports from KPMG” and that he knew the reports “were published after our call last week”. Further, he could not have properly advised the Board that the Audit Committee (which included himself) had considered the “high rated findings” in the KPMG Reports without having read them. He met with Mr McWilliams and Ms Martin about the KPMG Reports again in June 2018, and he met with KPMG on 25 July 2018.

J.10     Further suspicious cash transactions at the Salon 95 Service Desk and the Second Warning Letter

699    In late May and early June 2018, further suspicious transactions yet again occurred in Salon 95.

700    On 29 May 2018, one of Star’s cash services duty managers sent an email to Star’s generic AML email address. He reported having been called to “do a cash deposit” of $60,000 to a “local player”. He said that the cash had been presented “in a black square paperbag” with most of it “sealed in a thick clear bag with bundles of $50’s in $5k lots rubber banded”.

701    The duty manager recounted that the Suncity junket had requested the funds be used for a “buy-in”, and that he had tried to ascertain which Suncity junket player the funds were for, and that after he was given a name, he was unsatisfied with the answer. As a result, after the deposit was completed, the duty manager asked the surveillance team to follow the junket staff and player to determine if the player was playing. He observed that the Suncity staff put the chips in a drawer, and the player who made the deposit left Salon 95, which was empty, and no play could be seen. He reported that the funds appeared to go through Suncity staff hands, be given to the player to deposit, and the player then returned them to Suncity.

702    On 4 June 2018, a meeting was scheduled at 6:00pm, with the subject “Salon 95 – update on recent developments and decision around next steps”. The “required” attendees were Mr White, Mr Power, Mr Brodie, Mr Mugnaini, Mr Houlihan, Mr McWilliams and Mr Hawkins. Mr White, Mr Power and Mr Houlihan each directly reported to Ms Martin. Ms Martin was one of the “optional” attendees. Ms Martin could not recall if she attended this meeting (see Ms Martin’s affidavit at [284]). It does not really matter, because she accepted that, if she did not attend, one of her direct reports would have told her what occurred (T959.1-2).

703    On 5 June 2018 at 6:40pm, Mr Hawkins sent an email to Ms Martin and others 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”. Ms Martin replied to this email at 8.11pm stating, “[n]o problem, happy to help”, and subsequently visited Salon 95 with Mr Mugnaini the next day on 6 June 2018.

704    On 7 June 2018 at 3:29pm, Mr McGregor sent an email to several NSW Police officers, attaching a document entitled “Pit 95”. “Pit 95” was the term Mr McGregor used for Salon 95 (T962.32-36). That document summarised several suspicious transactions that had been conducted in Salon 95 and Mr McGregor’s investigation of them. The summary included a description of the transaction on 29 May 2018. It also identified that $2.57 million in cash had been deposited in Mr Iek’s account on 3 June 2018, which had been brought into Salon 95 from The Darling Hotel, in a suitcase. Mr McGregor concluded his summary with the following statement:

I think it’s possible that bulk cash is continuing to be brought into both the salon and a hotel room discreetly, where it is recounted, bundled and package before being deposited in program accounts linked to IEK.

705    On 7 June 2018 at 4:58pm, Mr Brodie sent an email to Mr McWilliams (copying Mr Power and Mr Hawkins). In this email, Mr Brodie:

(a)    expressed concern that “a number of the large cash transactions originating from people associated with the Sun City junkets might have increased our risks in respect of layering type activity”. (“Layering” is a recognised money-laundering method, where illicit funds are moved or dispersed in a way that conceals their origin);

(b)    reported that “an unusually large proportion of the Suspicious Matter reports made this month (June)” by Star Sydney was related to Suncity;

(c)    explained that the “volume of cash transacted along with the final destination of some money creates uncertainty about whether these transactions might be related to offenses”;

(d)    expressed the view that these matters ought to trigger “enhanced customer due diligence [ECDD] inquiries”, and that Star “should be establishing a clearer probity profile and a much better understanding of the source of wealth”; and

(e)    recommended that Star commence ECDD process on the principals involved in SMRs made in June that relate to Suncity.

706    At 5:08pm, Mr McWilliams replied to Mr Brodie, copying Mr Hawkins and Mr Power. He expressed agreement with Mr Brodie that “the pattern of money flows is unusual enough to warrant a more detailed analysis”.

707    Sometime between 5 June and 4:30pm on 8 June 2018, Mr Hawkins signed a letter addressed to Mr Iek (the Suncity junket operator) dated 5 June 2018 (Second Warning Letter). In this letter, Mr Hawkins:

(a)    referred to the First Warning Letter and stated that he was writing because of “further non-compliance”;

(b)    noted that Mr Mugnaini had provided the Salon 95 Service Desk Processes to Suncity representatives and that the that document had also been communicated to other Suncity employees;

(c)    noted that he understood that, on 29 May 2018, certain material aspects of the Salon 95 Service Desk Processes had not been followed; and

(d)    stated that Star viewed the breach “very seriously” and that any further breaches 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.

708    On 8 June 2018, Mr Mugnaini handed the Second Warning Letter to the Suncity Service Team Manager in Sydney.

709    Mr Bekier gave evidence that he was aware that, in the weeks following his receipt of the Power Email (on 16 May 2018), Star and Star Sydney had taken a number of steps with regard to the compliance issues, including “issuing Suncity a formal warning letter identifying the relevant non-compliance with the rules”, and that as best as he can recall he “was informed of these steps by Mr Hawkins” during their regular discussions (see Mr Bekier’s affidavit at [299]–[300]).

710    Mr Bekier accepted in cross-examination that he did not know what was involved in the formal warning letter and he did not know what laws Mr Power had suggested in the Power Email had been the subject of non-compliance (T560.25-561.17). He accepted that he did not in fact “form an independent view as to whether” the warning letter that was sent “was an appropriate and adequate response” and instead “trusted Mr Hawkins to have known the primary facts and [to] have responded appropriately” (T561.23-26).

711    Ms Martin accepted that she became aware that another warning letter had been issued (T958.23-26). She said she recalled that, in around early June, she knew that there were “discussions happening about Salon 95 again” (T959.4-9). Although she could not recall being informed of the transactions in Salon 95 recounted in the summary Mr McGregor provided to NSW Police on 7 June 2018 (T964.1-4), or that an unusually large proportion of SMRs made in early June 2018 related to Suncity (T964.41-44), Ms Martin also agreed it was likely that, prior to a weekly catch-up she had scheduled with Mr Bekier on 13 June 2018, she would have received an update from her direct reports, including Mr Power and Mr Houlihan.

712    On 8 June 2018, a Detective Senior Constable, from the Casino & Racing Investigation Unit (CRIU) within the Organised Crime Squad of the NSW Police, sent an email to Mr McGregor and Amanda Judd, another member of Star’s investigations team. The detective referred to a meeting with Mr McGregor and Ms Judd earlier that day regarding the “Suncity Group / IEK junket matter”, and said that, after speaking with a Detective Acting Inspector Child, he wanted to advise Mr McGregor and Ms Judd that NSW Police were planning to conduct some surveillance on the Suncity group and requested notification when a particular person checked in.

J.11     Star and Suncity enter into a new agreement, further suspicious conduct by Suncity, and NSW Police surveillance – June and July 2018

713    At 11:54am on 13 June 2018, a paralegal in Star’s legal team sent an email to Mr Whytcross, Mr White and Mr Hawkins, attaching a copy of a proposed “Win/Loss Rebate and Exclusive Access Agreement with IEK Kit Lon” and a “Contract Summary Form” relating to that proposed agreement. The proposed agreement was like the agreement Star had entered with Mr Iek in June 2017 (see [463] above), although the new proposed agreement added Star Qld as a party.

714    The “Contract Summary” form provided Mr Hawkins with the proposed new agreement, set out information concerning Star’s existing relationship with Suncity, and the key terms in the proposed new agreement. It described Suncity as “the largest and most compliant junket”. Mr Hawkins provided his approval for the new agreement.

715    The proposed new agreement with Suncity, between Star Sydney, Star Qld and Mr Iek, was executed on 21 June 2018 (2018 Suncity Agreement). The following terms should be noted:

(a)    Clauses 1 to 4 set out terms, among other matters, as to the commissions, rebates and allowances (to cover items such as food and beverages) that Star Sydney would pay in respect of gaming by Suncity players, provided that gaming play by Suncity players reached a minimum monthly turnover figure of $100 million. (The minimum monthly turnover figure in the agreement from 2017 was $50 million);

(b)    Clause 6 provided that Star Sydney would provide the Suncity promoter with exclusive access to Salon 95, subject to Star Sydney retaining “sole operational and management control” of Salon 95;

(c)    Clause 6 required junket representatives to conduct all activities in Salon 95 in accordance with the Salon 95 Service Desk Processes, granted a right to Star Sydney to audit Suncity’s activities at the Salon 95 Service Desk in accordance with the Salon 95 Service Desk Processes at any time, and to restrict the activities permitted at the Salon 95 Service Desk or remove its availability if Star Sydney found non-compliance with those processes; and

(d)    Clause 10(n)(iv) provided 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 (as the holder of the CCF for the junket) or any other related entity or individual acted in a manner that brought or was likely to bring Star Sydney, or any other casino operated by entities related to the Star into disrepute or was likely to be adverse to their interest.

716    In the little over a week between Mr Hawkins approving the terms of the 2018 Suncity Agreement and execution, further suspicious transactions occurred in Salon 95.

717    On 15 June 2018, one of Star’s surveillance managers sent an email reporting “more suspicious activity” by Suncity. This involved a patron being “led out to the balcony” and outside of camera view, only to emerge “a short time later with a bag”.

718    On 18 June 2018, Mr McGregor sent an email reporting that incident to Mr Power (among others). Mr McGregor reported that the footage suggested to him that a Suncity staff member had concealed $35,000 in chips in his pocket, and directed a customer onto the balcony of Salon 95, where he and the customer “intentionally stand beneath the camera … Each person on the balcony looks at the camera before moving out of view and there appears to be smiles and giggles exchanged”. Mr McGregor also stated he was concerned that Suncity staff were “still making serious efforts to avoid supervision and detection.” Mr McGregor reported the incident to NSW Police officers in the CRIU.

719    On 19 June 2018, an employee in Star’s investigations team sent an email to Mr McGregor and NSW Police. She reported that the same patron had deposited $170,000 in cash into his front money account, that the cash was “brought all in $50 notes in a Star Paper bag and was bundled in rubber bands”, and that the patron had been escorted by Suncity representatives to conduct the transactions.

720    On 11 July 2018, Detective Sergeant Child of NSW Police’s CRIU sent an email to Mr Houlihan and Mr McGregor, noting that he had spoken with Mr Houlihan that morning about the Suncity junket. He then said:

In short I have some concerns about the source and distribution of cash at The Star with some of the participants, and people perhaps linked with Suncity. I know this is a broad statement, but in some of the initial investigations around some of the large cash deposits, which have been viewed as suspicious, Suncity is a common denominator.

I understand the junket operation has a number of wealthy individuals, and many of them no criminality exists on their behalf. As discussed with Kevin given the scope a pro-active approach with those involved in the suspicious transactions is more appropriate. Once approached and if grounds exists with those individuals, i.e. money laundering consider exclusion.

721    DS Child explained that his team would conduct some surveillance in the following week.

722    On 16 July 2018, Mr Houlihan and Mr McGregor exchanged emails in respect of steps to assist DS Child (“Childsy”) concerning DS Child’s surveillance of and possible meetings with persons associated with Suncity. Mr Houlihan noted that he had spoken with Mr Power (“AP”) and that he was planning on having a telephone call with Ms Martin (“Paula”) that day, to “keep them up to date”. As recorded in an email on 19 July 2018, Shannon Hewitt, in Star’s investigations team, had assisted the NSW Police with their investigation. Ms Martin gave evidence that, around this time, she had a conversation with Mr Houlihan, who informed her that NSW Police intended to “conduct investigations in relation to individuals, including some associated with incidents in Salon 95”.

723    Ms Martin also gave evidence that she could recall several conversations with Mr Bekier in July 2018 (T816.1-10). Her evidence was as follows:

One that I recall that’s relevant to these proceedings was calling Mr Bekier to provide him with notification that the New South Wales Police were conducting a covert – or – yes, covert operation on the property at the Star Sydney premises, and they – the New South Wales Police were liaising with the Investigations team in order to conduct that investigation, that it related to a number of people and the people of interest to police did include some of those associated with the Suncity room or Salon 95.

724    It was put to Ms Martin, by Mr Bekier’s Senior Counsel, that this conversation did not occur (T1144.44-45). Indeed, Mr Bekier’s evidence was that he could not recall receiving any further update from Mr Hawkins, Ms Martin or anyone else “about any ongoing compliance issue regarding Salon 95 or Suncity following the issues that were reported to me in May 2018” (see Mr Bekier’s affidavit at [339]).

725    However, the contemporaneous documentary evidence shows that “Salon 95” was a recurring item (although described sometimes in different terms) on the agenda for Mr Bekier’s and Ms Martin’s weekly catch-ups on 13 June 2018, and on 18 July 2018, and “Salon 95 – FYI” was on the agenda for their catch-ups on 25 July 2018 and 1 August 2018. It is more likely than not that some update was given, although the precise terms of what was said are unknown.

J.12     Board and Board Committee meetings in July and August 2018

J.12.1    The July 2018 Board Meeting

726    On 26 July 2018, a Board meeting was held. Mr Bekier, Mr O’Neill, Mr Sheppard, Ms Lahey, Mr Bradley, Ms Pitkin, Mr Todorcevski and Mr Heap was present, and Ms Martin and Mr Hawkins were in attendance.

727    One of the papers taken as read was entitled “The Star Entertainment Group Limited Managing Director & CEO Report May 2018” (May 2018 CEO Report). Mr Bekier explained that CEO reports were a record of “all significant financial, operational and strategic matters” and that each Executive Committee member, or their team members, drafted the text for the section or sections of the CEO report that related to their business function. For example, he said that Ms Martin was responsible for the legal and regulatory section of the CEO reports, and that Mr Hawkins was responsible for the section addressing the performance of Star Sydney. However, Mr Bekier also said that he reviewed drafts to ensure he was “comfortable with the content” and to “confirm the report appropriately reflected [his] understanding of the various matters it contained” (see Mr Bekier’s affidavit at [49]–[51]). The evident purpose of these reports was to inform the other directors of Star of significant matters that had arisen within Star’s business in the month to which the report related. Mr Bekier retained ultimate responsibility for ensuring each such report achieved that purpose.

728    The “Legal and Regulatory” section of the May 2018 CEO Report, under the sub-heading “Projects & Commercial Matters”, contained the following statement:

> Sydney

•    Planning advice: Further advice is being provided on planning pathways to allow the business to convert existing retail outlets to F&B [ie, Food & Beverage]. The F&B strategy now necessities the delivery of additional restaurants and bars as a priority

•    EGM Controls: Advice is being provided in relation to Internal Controls relating to the management and operation of gaming machines. Audit is undertaking a review to identify opportunities to strengthen those controls. There is also a proposal to try and update some of the more prescriptive controls as part of the modernisation review referred to above

•    Digital Host Application: Advice is being provided on a proposed new mobile application being developed for use by hosts to better service their premium members

•    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 representative 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

•    Management of IP Portfolio: Management is investigating the use of the name “THE STAR CLUB” by a cinema in Brisbane to promote its loyalty program, and will likely issue a cease and desist letter.

…

(Emphasis added).

729    The emphasised paragraph concerning Salon 95 was drafted by Mr White. On 23 May 2018, Ms McIntosh (Ms Martin’s executive assistant) sent an email to Ms Martin’s director reports, including Mr White, with a copy of the CEO report for April 2018, asking them to “update with your May content and return to me …”. Mr White sent an email to Ms McIntosh on 29 May 2018, attaching the “Legal and Regulatory” section, with deletions and additions marked-up. One of the marked-up additions was the passage concerning Salon 95, in the same terms that appeared in the May 2018 CEO Report.

730    Ms Martin’s evidence was that she would have reviewed the draft before it went to Mr Bekier and could have added or changed what Mr White had written if she thought it was wrong, incomplete or inadequate (T1128.4-5). She agreed that because she made no changes she was content that the disclosure accurately and fairly disclosed the nature of the issues as she understood them (T1128.7-9).

731    On 27 June 2018, Ms McIntosh sent a soft copy of the Legal and Regulatory section of the May 2018 CEO Report to Ms Martin’s direct reports, Mr Power and Mr White. In her email, Ms McIntosh stated that she attached the “May report for updating for June”, and requested contributions by close of business on 4 July 2018. On 3 July 2018, Mr White responded to Ms McIntosh stating “[p]lease see my input attached”, attaching a Word document with the “Legal and Regulatory” section of the May 2018 CEO Report, with deletions and additions. In that marked-up report, the passage concerning Salon 95 had been deleted.

732    Ms Martin agreed that her ordinary process would have been to review this draft before it went to Mr Bekier (T1129.18). She agreed that she or Mr Power could have added anything to the draft (T1129.26-27). She also agreed that, in accordance with her usual practice, the fact that the Salon 95 update was removed suggests that her view at the time was that nothing had occurred in June regarding Salon 95 which she knew and thought was material (T1129.33-37).

733    The final version of the Managing Director and CEO report for June 2018 (June 2018 CEO Report), which was also taken as read at the Board meeting held on 26 July 2018, contained no reference to Salon 95 or Suncity. As I indicated above, the text concerning Salon 95 that had been included in the May 2018 CEO Report was removed from the from the June 2018 CEO Report.

734    Ms Martin gave evidence that during her weekly meetings with Mr Bekier in June and July 2018, she disclosed certain matters about Suncity’s conduct in Salon 95. Mr Bekier’s evidence was that he did not recall being given any new information about Salon 95 during this time, beyond what Mr Hawkins had relayed to him.

735    Mr Bekier spoke to both the May 2018 CEO Report and the June 2018 CEO Report at the Board meeting which was held on 26 July 2018. The minutes of that meeting do not record that Mr Bekier, or anyone else, said anything about Salon 95 or Suncity. Mr Bekier does not recall any discussion of Salon 95 or Suncity at this meeting and I conclude nothing was said.

736    Later in the same meeting, there was a non-executive only session to address the “KPMG AML Review Update”. The minutes of the meeting record that:

(Non-executive directors only present for this discussion.)

The Chair of the Audit Committee updated the Board on the additional work conducted by KPMG on the AML Review since the last Audit Committee [meeting]. Each of the Managing Director and CEO and Chair of the Audit Committee also met with KPMG to receive a briefing on the conduct of the audit and the findings relative to KPMG’s experience with other similar audits. KPMG confirmed that the findings and recommendation items in their original report will stand and commended management on their response to the findings.

The Board noted that management will present a detailed action plan, along with a brief summary of the prior independent review of the Company’s AML/CTF Program[me], at the next Audit Committee meeting.

737    The May 2018 CEO Report referred to “[a]ctions under way to adopt KPMG’s recommendations from their independent internal audit report about effectiveness of SGR’s AML program[me]” and the June 2018 CEO Report also identified that one of the “actions” being taken to address “compliance risk” was the adoption of KPMG recommendations.

J.12.2    The Audit Committee meeting on 16 August 2018

738    On 16 August 2018, a meeting of the Audit Committee was held. Mr Todorcevski, Mr Bradley, Mr Sheppard, Ms Pitkin, Mr Heap and Mr O’Neill were present at this meeting, and Ms Lahey, Mr Bekier and Ms Martin were in attendance.

739    One of the papers tabled and taken as read at the meeting was entitled “Compliance Assurance Process” (August 2018 BAC Compliance Report). That paper outlined a process that had been undertaken for the purpose of Mr McWilliams, in his capacity as Star’s CRO, informing the Board as to the effectiveness of Star’s risk management and internal control processes, and foreshadowed that a similar paper would be provided to the Board prior to approval of Star’s financial statements. The paper attached a table, which set out a summary of “potential” operational, commercial and compliance issues that had been identified during that process. In the “General Counsel” section of that table, one of the issues identified, and categorised as a “compliance issue” was:

Third Party agreement related to Salon 95 creating some compliance risk increases.

740    This was presented in the context of other, minor compliance issues including “Noise issues emerging in relation to Garden Kitchen Bar” and “Boat – RMS prohibition notice issued”.

741    The paper explained the process that Mr McWilliams had followed in providing his statement of assurance to the Audit Committee. The process involved “Senior Management Compliance Assurance” questionnaires being distributed to each member of the executive team, asking them to provide, inter alia, a narrative summary of material operational issues affecting the executive’s area of business responsibility and any significant breaches of relevant statutory obligations. The test of materiality was stated to be “whether the Exco member would reasonably expect that the Managing Director would want to be informed about the particular matter”. Mr McWilliams then met with each Executive Committee member to confirm no material matters had been omitted and to understand how the executive satisfied themselves that relevant statutory obligations had been the subject of compliance. Mr McWilliams stated that, based on those processes, he was satisfied that the Star’s risk management and internal control processes had been effective.

742    Ms Martin’s signed questionnaire for this period is not in evidence; however, there was a draft of the questionnaire that Ms Martin sent to her direct reports, including Mr Power and Mr White, on 22 July 2018. The draft indicates that the issue raised by Ms Martin was “Operational change – junket promoter operations of Salon 95” and that the current state of the issue was “Compliance and legal working with IRB and junket promoter on internal controls, procedures and training”. The draft further discloses that the questionnaire required Ms Martin to obtain individual assurances from each of her direct reports (which included Mr Power) that Star had effective compliance controls, that they had not identified any material incidents or breaches which placed the business at significant risk which had not been previously reported to the Board, and were not aware of any matters or circumstances that may significantly affect the ongoing compliance of the organisation since the end of the reporting period.

743    This assurance process is significant as it indicates that, by August 2018, Mr Hawkins and Ms Martin had confirmed to Mr McWilliams, and through him to Mr Bekier and the Audit Committee, that there were no significant breaches of relevant statutory obligations within their area of responsibility. This included the issues that had been addressed in respect of Suncity’s conduct in Salon 95. The effect of the compliance assurance process was that Ms Martin had not only identified the potential risk but had confirmed that this incident did not involve a breach of any relevant statutory obligations.

744    While Mr Bekier and the Audit Committee members are not recorded as asking questions about Ms Martin’s entry in the compliance assurance statement at the meeting, it is safe to assume Mr Bekier and the Audit Committee would have understood that Mr McWilliams was providing an assurance, based on his discussions with Ms Martin, that there was no significant breakdown in Star’s controls or breach of statutory obligations in respect of this incident.

745    Another paper that was taken as read and the subject of discussion at the Audit Committee meeting held on 16 August 2018 was entitled “AML/CTF Program[me] Review – Status Update”. This paper provided an update to the Audit Committee on the actions Star was taking to adopt the recommendations KPMG had made in its review of Star’s Joint AML/CTF Programme, in the KPMG Reports. It recorded that “[a]ll high-rated recommendations” in the KPMG Reports were being “addressed as a priority”. The paper appended an “Action Plan”, which set out each recommendation KPMG had made, specified whether it was rated “high”, “moderate” or “low”, and set out the actions Star was taking to give effect to them. This included, in relation to junkets, the following four recommendations, each of which was rated as “high”:

(a)    “Develop a risk assessment methodology for junkets”;

(b)    “Consider how best to enquire about source of funds and wealth for junket operators and participants”;

(c)    “Require senior management approval where information as to source of funds and wealth cannot be obtained from junket operators or participants”; and

(d)    “Develop procedures to ensure junket participants are subject to ECDD as required by the Program[me]”.

746    Each of those recommendations corresponded with the KPMG recommendations (see [654]). As to developing a risk assessment methodology for junkets, the Action Plan recorded that a risk methodology was “to be developed” and “will be applied to Junkets as a whole and to new Junkets as they apply”. Regarding the recommendation that Star consider how best to enquire about source of funds and wealth for junket operators and participants, the Action Plan recorded that this was complete (subject to Board consideration) and that the proposed solution was to strengthen the ECDD process to include review of occupation and Google searches, with additional enquiries from the patron or “international AML person” if those initial searches did not provide a reasonable level of comfort.

747    At the meeting, the Audit Committee recorded the actions being taken to effect KPMG’s recommendations. It noted that, because the Action Plan had now been developed, it would monitor the “close out” of the actions, and the Risk and Compliance Committee would pursue “key points and coverage”. By the time of the meeting, Star had accepted that the findings in the KPMG Reports were correct and that KPMG’s recommendations based on those findings should be adopted.

J.12.3    The Risk and Compliance Committee meeting on 16 August 2018

748    Also on 16 August 2018, a meeting of the Risk and Compliance Committee was held. Each of Mr Bradley, Ms Lahey, Mr Sheppard, Mr Todorcevski, Mr Heap and Mr O’Neill were present, and Ms Pitkin, Mr Bekier, and Ms Martin, among others, were in attendance. At the meeting, a paper entitled “Regulatory Matters Update” prepared by Ms Martin was taken as read. That paper purported to “provide an update on casino related (and other key) regulatory matters and engagement for the reporting period 12 May 2018 to 3 August 2018 … [and] a high-level assessment of the FY18 year with respect to the working relationships and engagements with the New South Wales and Queensland casino and liquor regulatory authorities”.

749    The paper did not mention Salon 95 or any related “compliance risk increases”. It advised the committee that “generally positive compliance standards were maintained during the year”. There is no basis to find anything contrary to this representation was said to the meeting. Consistently with this, at the same meeting, Mr McWilliams advised the Risk and Compliance Committee that “the Company is considered to be operating within its approved risk appetite”.

J.12.4    The August 2018 Board Meeting

750    On 23 August 2018, a Board meeting was held. Mr Bekier, Mr O’Neill, Mr Sheppard, Ms Lahey, Mr Bradley, Ms Pitkin, Mr Todorcevski and Mr Heap was present at the meeting, and Ms Martin and Mr Hawkins were in attendance.

751    A paper entitled “Compliance Assurance and Management Representation Letters” (August 2018 Board Compliance Report) prepared by Mr McWilliams was taken as read. This paper was substantially the same as the earlier paper provided to the Audit Committee, save that it contained a statement from Mr McWilliams, in his capacity as Star’s CRO, assuring the Board as to the effectiveness of Star’s risk management and internal control processes. As with the earlier paper provided to the Audit Committee, the table attached to the paper identified, in the “General Counsel” section, the following “potential issue” arising during the six months to 30 June 2018:

Third Party agreement related to Salon 95 creating some compliance risk increases.

752    Again, this was presented in the context of other, relatively minor compliance issues including “Show cause notices relating to responsible service of alcohol (minor financial penalties)”, “Noise issues emerging in relation to Garden Kitchen Bar” and “Boat – RMS prohibition notice issued”.

753    The minutes of the Board meeting held on 23 August 2018 do not record that any director (or anyone else) asked any questions about what compliance risk had increased in connexion with Salon 95.

J.13     Further developments relating to Suncity in 2018

754    On 10 September 2018, Mr Theodore (then Head of Strategy and Investor Relations) sent an email to Mr Bekier, Mr Barton, Mr Hawkins and others that passed on comments he had received from Kenneth Fong, an analyst from Credit Suisse who “had Suncity present at their conference last week”. The key points included that the top three junkets (including Suncity) were “growing well” and had balance sheets “in good shape”. The email also noted that Mr Fong expected that there would be “more noise on cracking down on outflows to scare people from taking money out of China”. He explained that limiting capital outflows was high on the Chinese government’s agenda because of “rate differential with US, trade balance, CPI higher than expected, inability to print money and the China de-leveraging focus”.

755    On 11 September 2018, Danny Huang (General Manager – Strategy & Investor Relations) responded to Mr Theodore’s email (copying everyone on the initial email) supplying a Deutsche research report released that morning.

756    Mr Hornsby then replied to Mr Huang’s email (again, copying everyone on the initial email). He set out “feedback” he had received on liquidity issues facing major junkets from “various sources” in North Asia. The relevant part of the email concerning Suncity read:

Overnight I have also researched the below feedback from various sources in Nth Asia.

SUNCITY - there has been a recent run on cash withdrawals in their junket cages reducing their current liquidity. This means there is some market uncertainty thus SUNCITY has delayed paying out some clients for a small period of time.

News circulating that CEO Alvin Chau has been refused Visas to Australia and perhaps some other countries. There is concern that if Mr Chau is uncontactable for a 24 hour or more, that he may be detained. This is yet to happen but if it does, this will create a meltdown in the junket world.

757    During cross-examination, Mr Bekier accepted he would likely have read Mr Theodore’s original email but could not recall receiving Mr Hornsby’s email and does not know if he read it at the time (T633.15-23). I think it is far more likely than not that he would have read Mr Hornsby’s email, and it is not correct to dismiss the information by suggesting “this whole email chain really deals with the probability of us getting repaid” (T634.30-31). Although the information was being provided by Mr Hornsby, a manager in the credit team, whom Mr Bekier knew liked to report on “industry chatter” (T635.42-636.16), the information from “various sources” was that there was “news circulating” that Mr Chau had been refused a visa to Australia. There was then speculation that if Mr Chau was uncontactable for 24 hours or more, he could have been detained and that would create a “meltdown in the junket world”. Mr Bekier’s evidence was that this kind of information would not have excited significant concern on his part, if he had read it. I do not accept this evidence. This was far from insignificant information. Without taking the trouble to investigate, given its potential importance, it was less than satisfactory to dismiss it simply because it was “industry chatter” (T635.42-636.16).

758    On 19 September 2018, Heidi Huang (Star’s Senior Vice President, VIP International Operations) sent an email to Mr Hawkins, reporting that “Suncity owner Chau Cheok Wa has been declined of [sic] Australian visa by immigration due to significant seized cash in hotel room safe previously”.

759    On 22 November 2018, CRIU informed Star’s Investigations Team that they were preparing applications for directions to be given by the Commissioner of NSW Police to Star Sydney pursuant to s 81 of the CCA NSW, in respect of 13 persons connected to suspicious transactions in Salon 95, including six Suncity representatives of employees. Mr Houlihan briefed Ms Martin regarding this development on 28 November 2018. Ms Martin gave evidence that around this time, Mr Houlihan told her that NSW Police were preparing applications for the exclusion of several people, including some who were associated with Salon 95 (see Ms Martin’s affidavit at [341]).

J.14     Events relating to Suncity and Salon 95 in 2019 – prior to the Crown Allegations

J.14.1    The Stevens Review of Salon 95

760    During May 2019, Mr Graeme Stevens (Star’s Regulatory Affairs Manager) conducted a review of Suncity’s compliance with the Salon 95 Service Desk Processes (Stevens Review). Mr Stevens concluded that Suncity’s “overall control environment” was “satisfactory” and that there was “no evidence” of the conduct that had “raised a concern around the operation of [Salon 95] in 2018”. Mr Stevens also reported that cash transactions with junket players for “buy-in” were being conducted at Star’s cage and not at the Salon 95 Service Desk, and he said that this provided a “more effective control than that contained in the SOP”.

761    A meeting of Star’s Board Risk and Compliance Committee was held on 21 May 2019. Mr Bradley, Ms Lahey, Mr Sheppard, Mr Todocevski, Mr Heap and Mr O’Neill were present, and Mr Bekier, Ms Pitkin, Mr Hawkins and Ms Martin were in attendance.

762    One of the papers taken as read at this meeting was a paper entitled “Regulatory Matters Update” (May 2019 Regulatory Matters Update Paper), from Ms Martin. This paper reported that “a plan of regulatory reviews” was being carried out “to provide comfort as to compliance with obligations under the internal controls”. It identified one of those reviews as being of the “Salon 95 Suncity Processes”, which was a reference to the Stevens Review (T1021.35-1022.41). As to that review, the paper reported that the outcome was:

[N]o significant issues found. Suncity have been conducting all transactions through The Star’s Cage providing a much higher level of oversight.

763    However, importantly, approximately two weeks after Ms Martin reported to the Board Risk and Compliance Committee that “no significant issues” had been found in Salon 95, Ms Martin received reports from Mr McGregor which identified that, contrary to the conclusions in the Stevens Review, Suncity staff were in fact not complying with the Salon 95 Service Desk Processes, there had been numerous suspicious transactions conducted in Salon 95, and Suncity staff in Salon 95 were making a concerted effort to conceal their suspicious conduct and to thwart Star’s ability to identify and investigate it.

764    Although Mr Bekier gave evidence he understood from Ms Martin’s update that the compliance issue in Salon 95 that had been raised with him by Mr Hawkins in May 2018 had been addressed and there were no ongoing issues, this struck me as reconstruction, it is uncorroborated by any contemporaneous note, and I am unpersuaded by this evidence.

J.14.2    The Operation Lunar Information Notes

765    On 3 June 2019 at 5:47pm, Mr Houlihan sent an email to Ms Martin, attaching a “draft information report” from Mr McGregor, which Mr Houlihan said related to Mr McGregor’s “interaction with Sun City last Friday evening”. The draft information note concerned “Op LUNAR”, which was said to deal with law enforcement agency interest in SMRs relating to Salon 95 and Suncity (Draft Operation Lunar Note). Ms Martin’s evidence was that it is likely that she read this note when she received it (T1023.38-40).

766    Under the heading “Background”, Mr McGregor set out the following:

Operation LUNAR 2018 (Op Moneybags) and inquiries conducted by police from the Casino Racing and Investigations Unit (CRIU) and Detective from the Organised Crime Squad (OCS), last year saw several individuals from Sun City, including their staff and customers being interviewed. Police have previously seized cash and chips from a few people within the casino and preferred charges in accordance with Proceeds of Crime Act (POCA) and Anti Money Laundering (AML) legislation.

Negotiated changes saw cash removed from the Salon 95 environment mid-last year in response to highlighted issues and perceived issues between The Star and Sun City (the agreement). (Emphasis in original).

767    Beneath the heading “Details”, Mr McGregor identified that, since 20 May 2019, Star Sydney had submitted six different SMRs arising from cash transactions concerning Mr Iek’s junket (i.e., Suncity) totalling $915,000. He also noted that the police had commenced enquiries. Mr McGregor also reported that in relation to five of the six transactions, cash ranging in amounts of $100,000 to $200,000 “appears to have come out of the closet room behind the Sun City service desk”.

768    Mr McGregor also reported that:

Concerning to investigators is that Sun City staff appeared to make efforts to conceal their activities by obscuring the view of the CCTV cameras. This was achieved by repackaging the cash into different bags, operating in the closet room which is out of view and or shrouding their actions with a blanket.

769    In the balance of the Draft Operation Lunar Note, Mr McGregor described his attempts to investigate the most recent transaction, involving $200,000 in cash. He reported that the Suncity employee he first spoke to was “guarded, extensively refusing to answer my questions” and did identify his supervisor. When Mr McGregor went looking for the supervisor minutes later, he had “unexpectedly left the building”. After Mr McGregor arranged for the supervisor to return, the supervisor told him that he “had not been able to convince any of the staff involved in these transactions to meet with me”.

770    Mr McGregor reported that he was only able to obtain the supervisor’s consent to inspect the closet room “after a significant negotiation and delay”, and that even then, “I was allowed 30 seconds upon condition that I didn’t touch anything inside”. He reported that he saw there were “countless” shopping bags like the ones seen to contain the $200,000, but that:

… as I wasn’t allowed to touch anything I couldn’t see adequately what else was in the room or within the bags. On CCTV earlier, I had seen two Sun City employees wholly enter this room closing the door behind before re-emerging with a bag of cash.

771    The remarkable Draft Operation Lunar Note made clear that (a) that there had been, in a short period of time, multiple cash transactions in Salon 95 that were suspicious enough for the police to commence an investigation; and (b) Suncity staff were uncooperative with and obstructive of attempts by an investigator employed by Star to obtain information. To say the least, the contents of Mr McGregor’s draft note should have been alarming to any person who also understood Star’s legal and regulatory obligations. Even Ms Martin conceded, with considerable understatement, that the contents were “concerning” (T1028.1-11).

772    At 6:34pm on 3 June 2019, Ms Martin replied to the email Mr Houlihan had sent with the Draft Operation Lunar Note. She said she would review the draft information note that evening, and requested Mr Houlihan “[p]lease continue to send through the updates as Andrew Mc[Gregor] continues on this”.

773    In evidence, there is an agenda for the weekly catch-up between Ms Martin and Mr Bekier on 5 June 2019. An item was added to that agenda in handwriting, which stated: “Salon 95 – watching brief”. Ms Martin said that had been added because of the Draft Operation Lunar Note she had received on 3 June 2019 (T1032.9-20).

774    On 5 June 2019 at 1:31pm, Mr McGregor sent an email to Mr Houlihan and Mr Power, copying Ms Martin, to which he attached an updated version of the draft information note Mr Houlihan had provided to Ms Martin on 3 June 2019 (Operation Lunar Information Note).

775    The Operation Lunar Information Note contained the information that was in the draft. Mr McGregor added to the “Background” section the following statement:

The key reasons for my response to this so far is to mitigate the reputational harm to The Star Entertainment Group, which is likely, if external stakeholders investigate these suspicious transactions.

It is clear that Sun City is not currently complying with the agreed key processes for; provision of service and buy-in drawer operations.

776    Mr McGregor had also added a “Postscript”. There, he reported that it appeared that Suncity associates “bring cash into Salon 95 concealing it in a few ways and that this concealment has thwarted casino surveillance’s efforts to track its source and or arrival time”. He also reported that:

(a)    the Suncity supervisor said that Crown Melbourne searched Suncity employees to combat the concealing of cash;

(b)    it appeared that as newer people had moved into roles with Suncity, and behaviours that had been “discouraged” in 2018 “are returning”;

(c)    the supervisor also “basically describes himself as a lame duck with no real ability to direct/supervise other people from their finance and operations teams, as those directions come from outside Sydney”.

777    Mr McGregor also included an analysis of the conduct relating to the suspicious transactions against specific requirements set out in the Salon 95 Service Desk Processes. He identified failures to comply with four of the “Key Principles”, and six of the requirements concerning buy-in drawer transactions and included a number of matters in a section headed “Follow Up / Recommendations”: first, he noted that CCTV footage of Salon 95 had been retained, and that Mr Tomkins (a Star employee who had roles in compliance and regulatory affairs: T1043.3-8) was receiving a months’ worth of additional footage; and secondly, Mr McGregor reported that several Suncity staff were being considered for exclusion, and NSW Police had provided Star with a list of Suncity associates they were considering for exclusion.

778    During the trial, Ms Martin repeatedly and unconvincingly insisted that she could not recall whether she read the Operation Lunar Information Note (T1038.20-22; T1039.30-34; T1040.9; T1041.43-44; T1042.16-18). This was despite it being apparent that upon receiving the draft version of the Note, Ms Martin requested Mr Houlihan to continue to send updates to her, and the item “Salon 95 – watching brief” was added to the agenda for Mr Bekier’s and Ms Martin’s weekly catch-up. That contemporaneous documentary evidence plainly demonstrates awareness on Ms Martin’s part of the issues raised by Operation Lunar, and supports a finding that Ms Martin read the updated Operation Lunar Information Note she received on 5 June 2019. It would be quite extraordinary if she did not.

779    There is no allegation that Mr Bekier or any other member of the Board saw or received the Operation Lunar Information Note.

J.14.3    The Hong Kong Jockey Club Report

780    On 12 June 2019, Mr Angus Buchanan (Star’s Due Diligence Program Manager) sent an email to Ms Martin, Mr White and Mr Houlihan, attaching a copy of the Hong Kong Jockey Club Report.

781    Mr Buchanan had commenced at Star on 6 May 2019. His role was to improve Star’s due diligence processes, particularly as to foreign individuals, such as junket promoters, junket representatives and junket funders, who operated at Star’s casinos (T1017.40-1018.8).

782    Prior to joining Star, Mr Buchanan had worked for three years as the Executive Manager, Anti-Bribery & Integrity Assurance, in the Security and Integrity Department of the Hong Kong Jockey Club. Before that, he worked in investigatory roles at the Australian Crime Commission, and with the South Australia Police, the Strathclyde Police in the United Kingdom, and the Royal Hong Kong Police. Ms Martin interviewed Mr Buchanan in early 2019 and offered him the job (T1017.11-26; T1019.13-24).

783    In his email to Ms Martin, Mr White and Mr Houlihan attaching the Hong Kong Jockey Club Report, Mr Buchanan described the report as being “comprehensive”. He explained that he had been prepared “due to the potential threat Sun City posed/poses to the integrity of racing in Hong Kong” and that he suspected “certain aspects” of it “may be of interest” to Star. Mr Buchanan also explained that the report had been provided to “senior management” in the Hong Kong Police, Hong Kong ICAC, the Australian Criminal Intelligence Commission (ACIC), and the AFP due to “overlapping interests”. Mr Buchanan also noted that because the report was confidential, he would appreciate it not being distributed beyond the group of people to whom he had sent it.

784    The Hong Kong Jockey Club Report contained a covering memorandum addressed to executives of the Hong Kong Jockey Club, from the club’s Director of Security & Integrity, Mr Martin Purbrick. Mr Purbrick stated that the report, which was from Mr Buchanan’s team, summarised “Australian federal law enforcement interest in Suncity” and stated that while Australian authorities had taken a “long term approach” to investigations into Suncity’s activity, they were “very keen to take enforcement action”. Mr Purbrick also stated that Suncity “clearly involves a number of criminal enterprises”, and that its main principals had a background in triad societies.

785    The Report identified, at paragraph one in the Introduction, that its purpose was to provide an update and overview of Suncity’s business operations, key personalities and links to organised crime in Hong Kong and overseas.

786    In relation to Mr Chau, the Report stated that Mr Chau was alleged to be a member of the Macau faction of the 14K triad society and a “follower of former 14K leader Wan Kuok Koi (aka “Broken Tooth Koi”)”. It also recorded Mr Chau was reported to have been the recipient of a portion of funds stolen in a cyber-attack from accounts of the Bangladesh Bank held at the Federal Reserve of New York, and that no charges had been laid as the FBI continued its investigation. The report recorded that lawyers for Suncity had indicated they would submit a report to the Philippines Senate once they had accounted for the funds, suggesting that Suncity may have been assisting in the investigation. This incident had been reviewed by Mr Lisle in 2016 who had concluded that there was “no evidence of malfeasance on the part of CHAU or Suncity”.

787    The Report stated that Cheng Ting Kong, Mr Chau’s major business partner (with whom Mr Chau had 11 common directorships), was believed to be a member of the 14K triad society in Hong Kong and was reported by intelligence sources to be involved in illegal bookmaking, drug trafficking and large-scale money laundering activities.

788    The Report noted that Australian law enforcement sources had informed the Hong Kong Jockey Club in May 2017 that two persons of interest to Australian authorities (including Xu Xiao Guang, referred to as “Xu”) had been involved in making a cash deposit of $403,000 into an account at the Sydney Casino, which was then immediately transferred to Mr Chau’s account at Star Sydney. However, the Hong Kong Jockey Club Report did not indicate that there was any evidence that this payment was illegitimate, or that Mr Chau was knowingly involved in any wrongdoing by Xu.

789    The Report also recorded, at paragraph 57 the following information, which was identified as being sourced from Australian law enforcement authorities in May 2017:

Suncity Group is of interest to Australian law enforcement authorities in relation to suspected large scale money laundering activities. Money is laundered, via a myriad of methods, from Australia to both Hong Kong and Guangdong Province, China. One of Cheng’s Hong Kong based associates, Dan Cheng Kwan Tan, orchestrated this activity in Sydney. Dan Cheng purportedly managed a number of Hong Kong citizens and directed their money laundering activities whilst they were temporarily resident in Australia. During 2013 to 2105, the group was believed to be laundering up to AU$2 million a day through various money laundering methodologies.

790    In its Conclusion, the Report identified that the Suncity Group posed several “major risks”. One such risk was that its key personalities, including Mr Chau and his business partner, Mr Cheng, had “demonstrated links” to triad societies and organised crime figures. Another major risk was:

Reliable intelligence indicates that Cheng is an Australian law enforcement person of interest due to money laundering and drug trafficking activity which he reportedly orchestrates from Hong Kong.

791    The Report concluded, at paragraph 111 that as a result, it assessed that Suncity’s controlling entities, being Mr Cheng and Mr Chau, “would pose tangible criminal as well as reputational risks to the Club, and indeed racing integrity in Hong Kong, should they, or their associates, become Members and horse owners”.

792    Needless to say, the Hong Kong Jockey Club Report was expressed in strong terms and levelled seriously adverse allegations against Suncity and Mr Chau. While its contents suggest that some of its findings were based on dated media reports of which Star’s investigators (including Mr Lisle) had been aware, it included allegations, based on Australian law enforcement sources, that Suncity was suspected by law enforcement authorities of presently conducting “large-scale money laundering activities” and “clearly involved in a number of criminal enterprises”.

793    Ms Martin gave evidence in her affidavit (at [380]) that Mr Buchanan told her it was difficult to obtain “credible information” on junket groups and VIP players from some jurisdictions, because it could be difficult to access corporate and court records, and media reporting could be unreliable. She also gave evidence that Mr Buchanan told her that the “most credible information” about junkets came from law enforcement officials. Ms Martin said she asked Mr Buchanan what information he had used for the Hong Kong Jockey Club Report, and that he told her that he had used his “law enforcement agency contacts”, media sources and corporate registry searches.

794    During cross-examination, Ms Martin said Mr Buchanan told her that the Hong Kong Jockey Club Report was an “important piece of work that he did for the Hong Kong Jocky Club at that time”. She also said she understood from him that “some” information in it was based on sources that, “at an investigative level, would not necessarily be considered strong sources” (T1046.23-29).

795    Ms Martin’s account as to what Mr Buchanan told her about how he prepared the Hong Kong Jockey Club Report, and the sources he had used, did not involve Mr Buchanan telling Ms Martin that he considered the Hong Kong Jockey Club Report to be unreliable or lacking in credibility. While on Ms Martin’s account, Mr Buchanan had acknowledged that it could be difficult to obtain information, and that the sources used for some information would not be considered strong, he had also told her that he has used his contacts in law enforcement to obtain some information, and they were, as he had explained to her, the most credible information source about junkets.

796    Further, in the covering email on 12 June 2019 when Mr Buchanan sent the Hong Kong Jockey Club to Ms Martin, Mr Buchanan gave no indication that he considered the information in it was unreliable or lacking in credibility. Indeed, to the contrary, he described the Report as “comprehensive”, expressed the opinion that “certain aspects of the report may be of interest to The Star”, and said it had been disseminated to senior management in several law enforcement agencies in both Hong Kong and Australia.

797    Ms Martin gave evidence that she could not recall reading the Hong Kong Jockey Club report in 2019 (see Ms Martin’s affidavit at [383]). She explained that upon receiving it, she was “not particularly interested in reading the detail” in it, for several reasons listed in her affidavit (at [383]). Those reasons, considered individually or collectively, provide no credible explanation for why Star’s most senior solicitor would not read a due diligence report on the probity of Star’s largest junket customer, which had been completed only a little over 12 months earlier (April 2018), and which had been prepared by the person Star hired to improve its due diligence processes in respect of its foreign customers (including persons associated with junkets) (T1017.40-1018.8) because of his expertise, and experience and investigative skills (T1019.13-24).

J.14.4    Mr Buchanan’s memorandum regarding due diligence on junkets

798    On 12 June 2019, Mr Buchanan sent an email to Mr Houlihan attaching a memorandum entitled “Preliminary Review of Employee and Junket Related Due Diligence Processes” (Due Diligence Memorandum). In his email, Mr Buchanan said, “[p]lease find attached the final version of the DD report … As Paula advised she wanted the report by mid-June, suggest we forward same tomorrow”.

799    In the memorandum, Mr Buchanan provided his “interim findings” from a review he conducted of Star’s existing employee and junket related due diligence processes. Regarding junkets, Mr Buchanan identified several weaknesses in Star’s due diligence processes.

800    First, Mr Buchanan noted that, in Queensland, OLGR, as opposed to Star, conducted the due diligence checks before approving junket operators and representatives. He also noted that, after approval, no subsequent probity checks were conducted by either OLGR or Star. He expressed doubts as to how comprehensive OLGR’s overseas background checks were on the basis that it would be difficult for OLGR to validate aspects of the information the applicant provided on their application form. Mr Buchanan expressed the view that, because of the opaque environment in which junket operators based in Macau and Hong Kong conducted their business, due diligence conducted without an independent intelligence perspective was “particularly one-dimensional”. He subsequently recommended that, as a risk mitigation strategy, Star complete third-party intelligence checks on all potential overseas-based junket operators and representatives in tandem with the OLGR approval process.

801    That said, Mr Buchanan also noted that approximately 90% of Queensland approved junket operators were also approved in NSW, and accordingly, were also subject to Star’s internal due diligence checks prior to being approved to operate in NSW (in relation to NSW, it was Star and not the regulator who granted the approvals). Mr Buchanan stated that, in addition to those due diligence checks, third-party intelligence checks were also conducted as required. He expressed his view that this was a “commendable risk mitigation strategy”.

802    Secondly, Mr Buchanan stated that the database checks Star conducted on junket operators and representatives in relation to NSW were “rather rudimentary”, and that consideration should be given to conducting more thorough online searches using databases that covered Hong Kong, China and Macau.

803    Thirdly, Mr Buchanan stated that the existing due diligence procedures that Star used concerning junket participants to determine their source of wealth could be improved, in that more comprehensive checks should be carried out and there was presently an over-reliance on the World Check database.

804    Fourthly, Mr Buchanan recommended that, in addition to existing ECDD processes, Star should consider identifying and utilising additional overseas-based third-party intelligence providers regarding the junket participants, particularly in relation to Hong Kong-based junket participants given that Hong Kong police did not provide criminal history antecedents.

805    It is evident that, more than a year after Star had received the KPMG Reports, Mr Buchanan identified several weaknesses in the processes Star used to conduct due diligence on persons associated with junkets.

806    Ms Martin said she did not know when she read Mr Buchanan’s Due Diligence Memorandum and said it may have been as late as October 2019 (see Ms Martin’s affidavit at [393]). However, Ms Martin also stated that, in early July 2019, she had a conversation with Mr Buchanan during which he informed her, “at a high level”, of the contents of his due diligence review, and that he recommended the use of additional third party consultants to provide due diligence reports, establishing a broader network of contacts in law enforcement and the casino industry in Macau and Hong Kong, and the use of additional online databases for conducting searches, including Chinese language databases. Ms Martin’s evidence was that she thought Mr Buchanan’s recommendations were consistent with KPMG’s recommendations (T1048.17-30 and Ms Martin’s affidavit at [396]).

J.14.5    Reports of Suncity having engaged in illegal conduct overseas

807    At 8:58am on 10 July 2019, Mr Buchanan forwarded to Ms Martin and Mr Houlihan an email he had received the previous day from Detective Superintendent Damien (Des) Appleby of the AFP, who was the AFP’s senior liaison officer for Hong Kong, Japan, South Korea, Macau and Taiwan.

808    In his email to Mr Buchanan, D/Supt Appleby had told Mr Buchanan he was “good to catch up next week”, and that he was “[h]appy to share what we have with respect to junkets”. In addition, in bold, red text, D/Supt Appleby said:

As a heads up – you will see a 4 Corners story on 21 July re Crown and Suncity. Reuters are also doing a piece on casinos and junkets – which I think will mention the Star in a minor way.

809    Ms Martin was aware, from the time she received this email, that there was going to be some reporting concerning connexions between Crown and Suncity, which might involve Star in a minor way (T1051.37-1052.3).

810    On 10 July 2019, Mr Peter Jenkins (Star’s General Manager of Media and Communications) sent an email to Mr Bekier, Mr Theodore, Mr Hawkins, Mr Barton and Ms Martin, into which he had copied a media article entitled “Suncity Group denies online gaming, proxy betting in China”. The article reported that China’s state-run press had made allegations against Suncity of running online gaming and proxy betting in China, through offshore online casinos. The allegations were reported to include that underground banks were involved, to move capital out of China.

811    Mr Bekier accepted that it is likely that he read this email, and that it made him aware of accusations about Suncity that were being made (T640.7-25). Ms Martin recalled being aware of this media report at this time (T1052.3-12).

812    On 11 July 2019, Mr White sent an email to Ms Martin, in which he forwarded an email he had received from Mr Lisle of Lisle Security (the firm that had prepared reports for Star concerning Mr Qin and Mr Chau). In his email, Mr Lisle had copied the text of, and provided hyperlinks to, several media articles concerning Suncity. Mr Lisle also summarised the notable matters in those articles, which included that a Suncity VIP room account manager had advised a customer as to how to gamble online in mainland China through a Suncity gaming platform, and that one of the articles was published on a website that was operated by Xinhua News Agency, the state-run press agency of China.

813    Mr Lisle also stated that Mr Chau had been called for a meeting with Macau’s Gaming Inspection and Coordination Bureau (DICJ), and said that “obviously”, despite Suncity’s denials, the story was true, in that Suncity was “running such gaming platforms and facilitating underground banking and illegal gaming in the PRC out of their sites based in the Philippines (and according to a source [in] Cambodia)”.

814    During cross-examination, Ms Martin said that she had not understood Mr Lisle himself to be saying, based on information he had, that it was obviously true that Suncity was facilitating underground banking and illegal gaming in China, and that instead, she understood him to be saying there was another media article saying the allegations in this regard were true (T1053.31-1054.10). I do not accept this implausible evidence.

815    Mr White also forwarded Ms Lisle’s email to Mr Hornsby (Star’s General Manager VIP Credit and Collections) and Mr Whytcross (with a copy to Ms Martin), and asked them to consult their networks about the reports. Mr Hornsby replied on 12 July 2019 at 9:26am (copying Ms Martin). He expressed a view which indicated that, like Mr Lisle, he understood it to be true that Suncity was operating online in China and this activity was outside the law. He said:

I believe this is a very serious warning to Suncity to cease their Online activity into the Mainland and a message to others that no one is above the law.

816    On 12 July 2019, Mr White sent another email to Ms Martin, forwarding a further email he had received from Mr Lisle. In his email, Mr Lisle provided a hyperlink to a further media article about Mr Chau and Suncity. Mr Lisle provided a summary of that article, which was that Macau’s DICJ had met with representatives of junkets and Macau’s gaming operators where “stressed the need to adhere to local and foreign laws on gambling and the promotion of games of chance”.

J.14.6    The NSW Commissioner of Police’s exclusions of Suncity associates

817    On 22 July 2019 at 9:57am, Mr Brodie sent an email to Mr Hawkins and Ms Martin. In his email, Mr Brodie stated that Star had received correspondence from the NSW Commissioner of Police advising of a number of exclusions, and attached a list of those persons. Mr Brodie also said that, as he understood it, “6 of these are associated with SunCity”.

818    Mr Brodie explained that the correspondence from the Commissioner did not articulate any reasons for the exclusions; however, he then said:

The considerations of the Commissioner can be summarised as: a person might be excluded by the Commissioner if he is satisfied they have committed a serious crime or are associated with people engaged in ongoing serious crimes.

819    Mr Brodie identified that prior suitability inquiries (“s 31 inquiries”) had identified that in addition to exclusions being based on a person’s criminal history and associations, the Commissioner also assessed whether to exclude a person by considering if they had a gambling problem, or if they were the subject of a Court order that directed them not to enter or attend a licensed premises or casino.

820    Ms Martin’s recollection was that she advised Mr Bekier that these exclusions had been issued, and that Mr Hawkins had already told Mr Bekier (T1054.25-27). She said that the only other steps she took were discussing with Mr McWilliams and Mr Brodie what the exclusions meant in terms of their AML risk ratings on individuals, and briefly discussing with Mr Hawkins how the exclusions would be delivered (T1054.28-34). Under the CCA NSW, the Commissioner had power, under s 81, to direct the casino operator to give an exclusion order to the person to be excluded. It was then the casino operator which, pursuant to s 79, issued the exclusion order.

J.14.7    Mr Hawkins’ “Board Talking Points” email of 22 July 2019

821    On 22 July 2019 at 5:44pm, Mr Hawkins sent an email to Mr Bekier, copying Ms Martin, with the subject line “Board Talking Points – Macau Junkets and Suncity”. At the start of the email, Mr Hawkins stated:

Matt/Paula - I plan to be in Qld with Marcus L to meet with our current IRB group, subject to timing I should be able to attend the Board meeting (or part).

822    Mr Hawkins then addressed two matters in the balance of his email, under the headings “Macau Junket Situation” and “Sydney Suncity Personnel Exclusions”.

823    As to the “Macau Junket Situation”, Mr Hawkins noted that all of the junket operators in Macau “received a formal warning from the DICJ of the possible revocation of their junket licences if they conduct active selling/promotion of overseas casino play” and that “Suncity were singled out in the Chinese media as an example of a business presenting gambling experiences (online/proxy) to mainland Chinese which is in direct contravention of Chinese law”. He then identified several ways in which he considered those matters may impact Star’s business and its relationship with Macau-based junkets.

824    Regarding the “Sydney Suncity Personnel Exclusions”, Mr Hawkins reported that Star had recently received correspondence from the NSW Commissioner of Police advising of several exclusions. Mr Hawkins observed that while that “in itself is not abnormal”, in this instance the persons excluded included six people “associated with SunCity”. Mr Hawkins noted that the correspondence from the Commissioner did not state reasons for the exclusions, but observed that “typically these type of exclusions may be related to parties involved in organised criminal activities”. Mr Hawkins then repeated the explanation Mr Brodie had given him earlier that day as to reasons the Commissioner required the exclusion of persons.

825    Mr Bekier agreed that it was highly likely he read Mr Hawkins’ email (T641.1-13). Curiously, however, Mr Bekier did not accept, based on the subject line of Mr Hawkins’ email (“Board Talking Points – Macau Junkets and Suncity”) and Mr Hawkins’ statement that he may not be able to attend the Board meeting, that Mr Hawkins considered that Mr Bekier or Ms Martin may need to address the Board on the topics in his email. Mr Bekier insisted that he would not normally relay the talking points of his team to the Board (T641.15-41). He conceded, however, that it would be fair to say that when he read the subject line of the email, he would have thought that Mr Hawkins believed these were points that ought to be raised with the Board (T643.32-35). Clearly this was the case.

J.14.8    Mr Houlihan and Mr Buchanan confirm Australian law enforcement interest in Suncity

826    On 23 July 2019, Mr Buchanan sent an email to Ms Martin, attaching a “brief synopsis” of meetings he and Mr Houlihan had conducted in Hong Kong and Macau between 16 and 18 July 2019. The purpose of those meetings had been to determine whether certain third-party intelligence providers had the capability to support Star’s revised due diligence framework, to re-establish conducive working relationships with “international service providers who have coverage in Hong Kong, Macau and Singapore”, and to broaden Star’s external networks at a senior level, with relevant law enforcement agencies and with security and integrity personnel at casino and gaming enterprises based in South East Asia.

827    In his synopsis, Mr Buchanan summarised a meeting he and Mr Houlihan had with AFP’s liaison officer (Superintendent Des Appleby) in Hong Kong. Mr Buchanan explained that he had established a “solid working relationship” with him, and that as a result, he was “open in discussing an ongoing, multi-jurisdiction drug trafficking operation in South East Asia”, and the discussion turned to the subject of drug trafficking groups who sought to use “Australian based casinos to launder their tainted cash”. Mr Buchanan reported that Star was “considered by law enforcement as being a ‘good corporate citizen’ and, as such, Des would like to maintain ongoing contact”. Mr Buchanan also reported the following:

During the meeting, we discussed Suncity including their attempts to legitimise their business and mask their criminal antecedents. It was apparent that the Suncity group continues to be of interest to the AFP both domestically and offshore.

828    Ms Martin accepted that, at around the time of Mr Buchanan’s email and synopsis, she was aware “of law enforcement interests in the Suncity Group more broadly, both domestically and offshore” (T1055.17-19).

829    In her affidavit, Ms Martin stated she was aware, from discussions with Mr Houlihan and Mr Buchanan, of reports that Australian federal law enforcement bodies had an interest in Suncity. She said, however, that did not cause her to be concerned about dealing with Suncity junkets, because Mr Houlihan and Mr Buchanan had told her that the law enforcement interests related to activities of Suncity that had no connexion with Star (see Ms Martin’s affidavit at [387]). Ms Martin said that Mr Houlihan told her that it was conduct in Victoria unconnected with Star’s business that had “prompted concern from the AFP”, and that she understood from Mr Buchanan that “some interest lay regarding different associates connected with Suncity based in Asia and, again, not in connexion with their business at the Star” (T1049.3-10).

830    Ms Martin accepted it was possible that, if Suncity were engaged in criminal conduct, even if it was not at Star, that could be information relevant to whether it was of good repute (T1049.12-14). But she refused to accept the fact that conduct of concern to law enforcement (albeit occurring elsewhere) meant she should have been uncomfortable in dealing with Suncity junkets (T1049.30-33). This view was apparently justified on the basis that law enforcement had not expressed direct concern to Star about Star’s dealing with individuals associated with Suncity (T1049.33-38). Further, Ms Martin did not accept that the combination of her knowledge of law enforcement interest in Suncity in respect of conduct elsewhere, and her knowledge of suspicious conduct occurring in relation to Suncity in Star’s casino (as set out in the Operation Lunar information notes) should have indicated to her that Suncity was not of good repute (T1050.11-20). Her evidence as to her sanguine approach seems to me to be either false, as she well knew by this stage that the activities of Suncity were deeply worrisome, or, at the very least, a counterintuitive view for an experienced solicitor to take.

J.14.9    The Board meeting on 24 July 2019

831    A Board meeting was held on 24 July 2019. The minutes record the following, in connexion with the June 2019 Managing Director and CEO Report:

Mr Bekier spoke to the performance of the International VIP business over June and July to date, noting the significant group of players that have arrived on property into the Gold Coast (outlined further below), with Greg Hawkins and Marcus Lim in attendance during the visit.

832    When giving evidence in chief, Ms Martin was asked whether she could recall any further detail about what Mr Bekier said on this topic at the meeting. Ms Martin’s response was as follows (T818.10-42):

Yes, I recall Matt spoke about the performance of the VIP business over the – not just the June and July date mentioned there but also the entirety of the FY19 year. And in that discussion, Mr Bekier noted that there had been some impacts on the VIP business and that it had been softening or declining and that those impacts included some market factors – I guess “market factors” were the words that I recall and they included regulatory and licensing processes in Macau and – primarily Macau. And that that had had an impact on the amount of players being organised for visits to other jurisdictions by junket groups, and that in addition, there had been media in Macau, and I also think other jurisdictions around that time, like China, about junket groups and that that too was having that impact on the market. And that, relevantly for the Star, that the media and that licensing process in Macau that was coming up soon was impacting on Suncity, a junket operator or business that the Star did business with, and that it was having a particular impact on Suncity for two reasons. One was Suncity had been identified in the negative media with allegations of illegal conduct, and also that that was a distraction for Suncity because they were interested in participating in the Macau casino licensing process. As a result, their focus had not been on bringing business to the Star as much. And also Mr Bekier mentioned that the Star’s business – my apologies, Suncity’s business at the Star was decreasing as a result of some other challenges they had had with operating their fixed room or Salon 95 at the Star in terms of meeting the compliance requirements for operating the room, and that recently they had lost some of their team resources as a result of police exclusions that had affected Suncity’s operations in Australia. Apologies, New South Wales Police exclusions.

833    Ms Martin was also asked if Mr Bekier had “the assistance or benefit of any material in giving his presentation”. She said her recollection was that Mr Bekier “had notes from Mr Hawkins, or Greg. Mr Bekier also had his own notebook” (T818.44-46).

834    Ms Martin’s account of what Mr Bekier said at the Board meeting corresponds with the two topics addressed in Mr Hawkins’ email to her and Mr Bekier on 22 July 2019 regarding the “Board Talking Points”.

835    Mr Bekier did not recall reporting those two matters to the Board at this meeting, and he said it was “unlikely” that he did, and that “[i]t was not my habit to read out my – my team’s speaking notes” (T643.6-13). Mr Bekier said that the first topic in Mr Hawkins’ email, the “Macau Junket Situation”, was relevant to the direction of the business, and he thought that either he or Mr Barton addressed the meeting regarding Star’s budget and five-year plan, so the points in Mr Hawkins’ email on that topic “would have been covered broadly in terms of the direction of the business” (T643.20-25). Mr Bekier also said that there was going to be another Board meeting “within two weeks’ time” – which must have been a reference to the Board meeting scheduled for 15 August 2019 – and so the matters in Mr Hawkins’ email were ones that Mr Hawkins could raise at that meeting (T643.39-46). I considered this evidence in the section of these reasons concerning Mr Bekier’s credibility.

836    The minutes of the meeting record that, in respect of the proposed budget for the 2020 financial year, Mr Barton noted:

the budget breakdown across the properties and International VIP business (slide 13 of the paper) noting key drivers and key areas of differential as compared with FY19 preliminary results

837    There is a conflict between Ms Martin’s evidence (which is to the effect that Mr Bekier essentially read out the matters set out in Mr Hawkins’ email) and Mr Bekier’s evidence (which is that he cannot recall informing the Board of those matters, and that it was not his practice to read out the talking points of his team members). Ms Martin appeared to have a remarkably detailed recollection of what occurred at this meeting that involved Mr Bekier reading out Mr Hawkins’ notes. I have already pointed out the significant degree of detail with which Ms Martin claims to recall the Board meeting is at odds with her claimed lack of recollection of other significant, Suncity-related matters from more than five years ago.

838    That consideration, together with my acceptance of the evidence of Mr Bekier’s lack of recollection of informing the Board of the matters in Mr Hawkins’ email and his further evidence that it was “unlikely” that he did, results in the conclusion it is more likely than not than the Board was not told of the matters canvassed in Mr Hawkins’ email at the Board meeting on 24 July 2019.

J.15     The Crown Allegations and the response of Star’s Senior Management and Board

J.15.1    Introduction

839    During the period between 27 July 2019 and 9 August 2019, several allegations concerning the way Crown conducted its casino business were published in The Sydney Morning Herald and The Age newspapers and broadcast on the television programme 60 Minutes. These included allegations concerning Crown’s business associations with junkets that were alleged to be involved in or associated with organised crime and money laundering. I refer to the allegations described in [841]–[845], [857]–[862], [909], [915]–[917], [947]–[950] as the Crown Allegations. As the Crown Allegations developed, they began to implicate Star and its relationships with junkets referred to in the media reporting. Suncity and Mr Chau featured significantly in that reporting, particularly from the broadcast on the 60 Minutes episode on the evening of 28 July 2019.

840    Star’s Board met on three occasions to discuss the Crown Allegations, starting with an informal Board call on 30 July 2019, and two Board meetings on 7 and 15 August 2019. On each occasion, the allegations made in the media about Crown were the subject of discussion and consideration. Those events are described below. What occurred during the three Board meetings was addressed in the evidence of Mr Bekier and Ms Martin. In some respects, they agreed that certain things were disclosed to the Board at these meetings. But in many other respects, Mr Bekier and Ms Martin disagree.

J.15.2    The Crown Allegations commence and Suncity is named

841    On Saturday, 27 July 2019, three articles were published (one twice) which alleged that Crown had done business with various persons and entities that were engaged in, or had links to, organised crime.

842    First, an article entitled “Crown casino’s links to Asian organised crime exposed” was published in The Age and The Sydney Morning Herald. The article contained images which it was contended were of a junket representative, Roy Moo, picking up a bag of money for laundering through Crown Melbourne. It further alleged that he was ultimately gaoled for laundering almost $1 million for “The Company”, said to be “an Asian organised crime conglomerate run by triad bosses”.

843    Secondly, an article entitled “Gangsters, gamblers and Crown casino: How it all went wrong” was published in The Sydney Morning Herald. This article also referred to “The Company” and its alleged use of Mr Moo to launder its cash. The article stated:

“The Company” is an international drug trafficking and money laundering syndicate first identified by the FBI as part of a 1996 operation codenamed Sunblock. One former Australian Federal Police officer estimates this one syndicate has been responsible for up to 70 per cent of all drugs trafficked into Australia over the past two decades…

844    As to Mr Moo, the article stated:

Moo was [gaoled] in late 2013, but it was a pyrrhic victory for police. Multiple regional law enforcement sources say it prompted The Company to then rely on its own, in-house junket, named after a Macau hot pot restaurant chain. The Hot Pot junket was promptly licensed by Crown. For every dollar the junket arranged to be gambled over the casino’s Australian tables, Crown would pay a commission.

This arrangement represented an extraordinary truth: Crown was effectively making payments to an organised crime syndicate. For The Company, it was a lucrative side venture alongside its main criminal enterprises.

845    The article then contended that The Company was connected to Suncity as follows:

According to official sources across the region, some of The Company’s members and associates ultimately affiliated with Macau’s biggest and most successful junket operator, SunCity. This coincided with a directive from a Crown senior manager to Crown’s Chinese staff to also get close to SunCity.

Macau’s largest junket was about to become Crown’s business partner.

846    Thirdly, an article entitled “This woman was [gaoled] in China because she worked for Crown casino” was published in The Sydney Morning Herald. It focussed on the experience of a former employee of Crown, Jenny Jiang, who had been gaoled for her role in seeking to attract high rollers from China to Crown.

J.15.3    Star’s response

847    At 7:36am on 27 July 2019, Mr O’Neill received an email from “SMH Subscriptions” notifying him that there would be a significant story in The Sydney Morning Herald that weekend concerning Crown and involving “a brave former insider, the corruption and the cover-ups”. The email stated that the story would be “rolling out on the Sydney Morning Herald online and in print this weekend, along with a collaboration with 60 Minutes on Sunday night”.

848    At 7:52am, Mr O’Neill sent an email to Mr Bekier, Mr Hawkins and Mr Jenkins containing a hyperlink to one of the articles published in The Sydney Morning Herald, being the article entitled “Crown’s casino’s links to Asian organised crime exposed”. This article did not mention Suncity or Mr Chau. In his email, Mr O’Neill said “No doubt this will lead to questions about our relationship with junkets?”.

849    At 7:57am, five minutes later, Mr O’Neill sent a further email to the same group, as well as adding Ms Martin, this time including a hyperlink to another article published in The Sydney Morning Herald. This article indicated that the story the subject of the article would also feature on the 60 Minutes programme, on Sunday. In this email, Mr O’Neill said “Well someone is talking? I wonder if the various regulators will be watching this on Sunday night?”. This article also did not mention Suncity or Mr Chau.

850    At 8:06am, Mr Bekier emailed Ms Martin and Mr Hawkins, forwarding a link to the article published in The Age entitled “Crown casino’s links to Asian organised crime exposed”. In his email, he asked: “[d]o any of these characters have links to Star?”. At 11:40am, Mr Hawkins responded and said that the junket Mr Moo had been a representative of was not active in Sydney “but may be related to our Lim junket (low level)”. He said he had no knowledge of “The Company” and then said:

Suncity matter as you are aware of.

851    At 11:33am, Mr O’Neill sent an email to all of Star’s non-executive directors, copying members of management (including Mr Hawkins, Ms Martin and Mr Theodore). The subject line of the email was “1. Rejection of Riz Carlton tower at PYRMONT. 2. Crown Casino expose in SMH & 60 minutes.” In the body of the email, Mr O’Neill referred to the media articles that had been published that day, and foreshadowed that on the next evening (a Sunday), 60 Minutes would be broadcasting a programme relating to Crown. He said that:

The Crown expose [scil exposé] was news to us. Our team will obtain as much information, beyond that which is in the SMH, and tune in to the 60 minutes show tomorrow night, with an objective of assessing whether Star has or has had any involvement with the parties and/or junkets mentioned. This forensic examination will take a few days.

Naturally, the various regulators across the 3 jurisdictions will be on the case as well.

It would make sense for a Board conference call to be arranged early next week, so management can fully brief us on proposed tactics and strategies for both topics [the other topic being the rejection of the Ritz Carlton tower proposal].

852    Importantly, Mr O’Neill noted that the media articles would likely invite scrutiny from Star’s various regulators and proposed “a Board conference call to be arranged early next week, so management can fully brief us on proposed tactics and strategies”.

853    At 11:43am, Mr Bekier responded to Mr O’Neill’s email of 11:33am (after he had separately received Mr Hawkins’ email at 11:40am), copying Ms Martin, to inform him that having “checked with the IRB staff and to the best of our knowledge, the people referenced in the CWN article are not active in Sydney”. Mr Bekier was asked, given Mr Hawkins’ response regarding Suncity, why he had not referred to it in his email to Mr O’Neill, and his response was “this is probably just loose language, but I focussed this whole exchange on names that we were not familiar with because I knew that the chairman and everyone on the board knew that we had dealings with Suncity” (T659.4-8). I am far from confident the explanation for no reference being made to Suncity was just loose language, but it is unnecessary to make a finding. In any event, at 12:05pm, Mr O’Neill forwarded Mr Bekier’s email to the other non-executive directors, with the message “FYI”.

854    At 12:09pm, Ms Martin responded to Mr Hawkins’ email of 11:40am, which was addressed to Mr Bekier. She said that Mr Moo did appear to have been connected to the Ang junket which was active at Star from 2013 to 2016, but no dealings had been identified since 2016 when his AML rating was raised to “Critical”. She also said that no records on “The Company” had yet been located and said:

Suncity – nothing additional

855    In her email, Ms Martin said a note was “being pulled together on the detail we have, so we have this to hand if needed”.

856    During cross-examination, Ms Martin could not recall if there was a reason why she did not identify the information from the Operation Lunar information notes in her email. Her explanation was that her recollection was that these matters had been discussed with Mr Bekier “well prior to this media” (T1056.1-19).

J.15.4    The 60 Minutes broadcast

857    On 28 July 2019, a further article was published entitled “Crown’s unsavoury business links: how Australia’s casino got tied up with criminals”. This article focussed on Tom Zhou, who was referred to as “Mr Chinatown”.

858    In the evening of 28 July 2019, the 60 Minutes television programme was broadcast. During the programme, it was alleged that Crown had a business arrangement with Suncity, which included providing Suncity with its own “high roller room” at Crown’s casino in Melbourne, and Suncity (described as “Macau’s biggest junket operator”) Mr Chau were identified alongside other junkets referred to in the programme:

859    Nick McKenzie, the journalist who presented the story, reported that 60 Minutes had obtained a copy of the Hong Kong Jockey Club Report, which had stated that key Suncity personalities had demonstrated links to numerous triad societies and organised crime figures; and Suncity or persons associated with it were of interest to Australian authorities, in relation to money laundering activities, and that as a result, the Hong Kong Jockey Club had “black banned” Suncity.

860    A page from the Hong Kong Jockey Club Report was displayed with the following quote extracted on screen:

861    Mr McKenzie also asserted, regarding Suncity, that Crown was “providing the junket with its very own high roller room at Crown Melbourne”.

862    In addition to Mr Zhou, who was again identified as “Mr Chinatown”, the 60 Minutes programme also identified another junket operator, Simon Pan. As to Mr Pan, the following was said in the broadcast:

Crown has also jumped into bed with the Melbourne brothel boss with links to alleged sex trafficking. As well as running his prostitution business Simon Pan is also one of Crown’s junket operators.

McKenzie (voiceover): We’re just a stone’s throw from Crown casino. There’s number 39, Simon Pan’s brothel.

Court files reveal he runs a notorious prostitution business repeatedly investigated by the federal police and which has been implicated in organised crime and the suspected trafficking of women from Asia.

Courtney Keith: I think it’s extremely disturbing that the casino would have a contractual relationship with someone implicated in human trafficking.

McKenzie (voiceover): Anti-trafficking advocate Courtney Keith says a simple Google search reveals federal police were forced to rescue trafficked women from Pan’s brothel. She says it beggars belief that Crown wouldn’t know about Simon Pan.

McKenzie: What was going on inside its four walls?

Courtney Keith: There’s been more than one AFP raid resulting in the rescue of at least two women and this is all publicly available and it has all the hallmarks of a human trafficking situation.

863    Mr Bekier recalls watching the 60 Minutes programme when it aired. His impression was that the programme focussed on Crown and other individuals of which he was unaware. However, he does remember it mentioned Suncity and repeated rumours he had heard about Suncity having links to organised crime. He says the only new information he recalls seeing was the Hong Kong Jockey Club Report.

J.15.5    The Board call is arranged

864    Late in the evening of 28 July 2019, Mr O’Neill sent an email to Star’s non-executive directors, forwarding an email he had received that contained the text of an editorial in “tomorrow’s” (that is, Monday 29 July 2019) Sydney Morning Herald, entitled “Keep black cash out of Australia’s casinos”.

865    At 9:15am on Monday, 29 July 2019, Mr O’Neill sent a remarkable email to Mr Bekier, copying Ms Martin, Mr Hawkins and Mr Jenkins. At this time, it will be recalled, Suncity, was Star’s largest junket customer. The subject line of the email was “Fwd: 1. Rejection of Ritz Carlton tower at PYRMONT. 2. Crown Casino expose in SMH & 60 minutes”. Mr O’Neill said:

When do you think you and the team will be in a good position to brief the Board on these 2 topics?

Having watched the 60 minutes programme last night, there were 2 junkets, Sun City and Chinatown, mentioned, which Star has or has had, a relationship with. Sun City is still current, I think, and I recall we had a brief and unfortunate relationship with Chinatown, which we ended sometime ago.

(Emphasis added).

866    It is not necessary for a chairman to be across the granular details of the customers of a public company, but whatever way one looks at this email, it appears to reflect a disconcerting lack of knowledge of, or interest in, the identity of those customers then doing business at Star.

867    At 9:19am, Mr Bekier replied to Mr O’Neill and asked what worked for Mr O’Neill and said that he and his team would be ready “from tomorrow late afternoon”. Mr Hawkins replied only to Mr Bekier to state that his team was bringing “together a status [of] individuals and junkets, in conjunction with Paula M”. He also said that “coincidentally” he was meeting with Jason O’Connor that day, who had been the former head of Crown’s IRB business and who had been arrested during the Crown Arrests. Mr Bekier replied, copying Ms Martin and Mr Jenkins, and proposed that they catch up that afternoon.

868    Mr Bekier also sent an email to Ms McIntosh at 9:38am asking her to organise the Board call, copying Ms Martin and stating: “Paula – this is not a Board meeting but an information update?”. Ms Martin replied that she agreed that it was an information update and stated:

If there is anything from this call the Board wants management to follow up / address in a paper, we could cover this at the August Board meeting.

869    At this stage, the Board had been scheduled to meet on 15 August 2019. This was recorded in the minutes of the Board meeting held on 24 July 2019.

J.15.6    Verification process    

870    After the Crown Allegations broke, Star set about investigating the allegations, for the purpose of ascertaining whether they could be substantiated. Ms Martin gave essentially unchallenged evidence about those processes in her affidavit:

[446] The verification of media reports involved several processes. In relation to individual customers, verification involved searches of The Star’s key databases to confirm whether individuals were customers of The Star and if so, when and what information was held about them. I understood that gaming and IRB team members conducted searches of the gaming system, members of the compliance and AML team, including Ms Arnott, conducted searches of the exclusions database, compliance incident reporting database and AML customer risk registers (in the Protecht system) and investigators (including Mr Houlihan) conducted searches of the investigations database (Ibase). Mr Houlihan and Ms Arnott also conducted additional WorldCheck database searches and internet searches to check publicly available information about individuals reported. This was repeated as new pieces of information were reported in the media.

[447] In relation to reports of law enforcement agency activity or information, I am aware that Mr Houlihan and Mr Buchanan contacted the relevant law enforcement agencies as part of the verification process. Those agencies included AFP, ACIC and CRIU. The government relations team also made direct enquiries of relevant government agencies including ACLEI to verify media reports.

[448] HKJC Report content reported in the media was checked by Mr Houlihan, Ms Arnott and Mr Buchanan against the report and Mr Buchanan’s knowledge.

[449] Ms Arnott also checked The Star’s AUSTRAC reporting information in relation to specific matters reported in the media to have occurred at The Star’s properties.

J.15.7    The 30 July Board call

871    On 30 July 2019 at 5:00pm, a “Board briefing call” was held by way of teleconference, concerning the two topics to which Mr O’Neill had referred in his email the previous day, being the rejection of a planned Ritz Carlton tower at Pyrmont, and the allegations that had been published in the media about Crown. Mr O’Neill, Mr Sheppard, Mr Heap, Ms Pitkin, Ms Lahey, Mr Todorcevski, Mr Bekier, Ms Martin, Mr Hawkins and Mr Jenkins joined the call. Ms Martin’s evidence was that Mr Bradley did not attend. There are no minutes or contemporaneous notes of the matters discussed on this call in evidence.

872    The fact that this out-of-session Board call was arranged reflected the seriousness of the Crown Allegations. Mr Bekier’s evidence was that out-of-session Board calls were arranged if “urgent or critical matters or risks emerged”, to brief the Board on such developments. He said that, in respect of this Board call, the “urgent or critical matter” that had emerged was as follows (T668.21-42):

The risk that I perceived at the time was that a whole number of names had been raised during the Crown investigation, that some of the names were relevant to us, because – particularly Suncity, and because we needed to make ourselves comfortable that we didn’t have the same exposure as Crown did to the same risks that had been described in that programme.

J.15.7.1    Mr Bekier’s evidence

873    Mr Bekier’s affidavit evidence was that the Board call was “a long call and ran well over the allocated 30 mins” and that “Mr Hawkins and Ms Martin had the main speaking roles” (at [364]). In his affidavit, Mr Bekier did not identify anything that Ms Martin said during the call. Mr Bekier said that Mr Hawkins spoke about each of the junket operators referred to in the media.

874    Mr Bekier also gave evidence in his affidavit by reference to some draft speaking notes prepared by Mr Hawkins. His evidence was that Mr Hawkins’ practice for Board and Committee meetings was to speak from prepared notes. While he could not recall “precisely” what Mr Hawkins said during the call, he said that Mr Hawkins’ notes “are consistent with [his] recollection that [Mr Hawkins] discussed with the Board each of the junkets referred to in the media with which The Star had a relationship” (at [365]).

875    Mr Hawkins’ notes are a five-page document. They commence with:

Quickly recap the allegations made in the 60 minutes expose then review the relationship of the individuals mentioned with our Group

876    The notes then contain a table that explains each of the allegations, the risk or vulnerability that it reveals and Star’s existing process regarding it. For example, the table identified that one of the allegations was that Crown was “wilfully blind to the source of funds and the source of wealth of junkets and key people” and identified the risk or vulnerability as:

A money laundering method applied cash raised from drug dealing in Australia to facilitate gambling with associated debts being paid in [C]hina. This allows crime proceeds to be moved to China without any trace in banking or financial system.

877    The Star process identified as to this is that “large cash buys ins” are reported to local police, Star makes SMRs to AUSTRAC, and that “[t]he new AML/CTF program[me] includes enhanced due diligence processes which seek to establish satisfactory source of wealth and source of funds evidence”.

878    Another allegation identified was that Crown was “wilfully blind” to the criminal activity of key business partners, particularly junket operators, and that these allegations had included claims related to the Hong Kong Jockey Club Report about Suncity. The table identifies the risk or vulnerability as:

Failure to identify and cease trading with criminals might expose a casino to exploitation related to a range of criminal activity.

This issue can be difficult if the information about criminal activity is solely contained in law enforcement intelligent systems.

879    The Star processes identified regarding this were that Star had “detailed cease to trade policies embedded in the AML/CTF Program[me]”, which have resulted in “Star banning people on a monthly basis”, and that Star’s “[j]unket operator approval process includes criminal history checks and other background checks in country of origin”.

880    The note then addressed the persons named in the media allegations. It identified that:

(a)    Simon Pan was a “[b]rothel owner and [j]unket [o]perator” who had operated “both domestic and IRB programmes in Sydney managed under his own name and that of his sister”, with a turnover of approximately $1.1 billion since the 2014 financial year. It noted that Mr Pan held a CCF of $1.5 million with Star which was “currently suspended based on recent media”;

(b)    Tom Zhou “Mr Chinatown” was not an approved junket operator himself, but Chinatown had a “permanent room” in Sydney under two junkets and these were a “large contributor across FY 16 and 17”. The notes identified another person, potentially Mr Zhou’s nephew, as the holder of a CCF with a $75 million approved limit. The notes record that Mr Zhou was “excluded in September 2016 for undesirable behaviour (staff physical and verbal abuse)” and that the arrangement with Chinatown had ended in December 2016;

(c)    Roy Moo was a “Sovereign member” but was “never issued with a credit line” and that his AML status had been raised to “critical” in November 2016 and his Sovereign Room access revoked in 2017 because of his “inability to provide source of funds evidence”.

881    As to Suncity, the note records the following:

Alvin Chau - CEO holds the CCF of 80m

Under pressure globally due to PRC call out recently WRT proxy betting and marketing in PRC

Lek Kit Lon primary junket operator with Sio Peng Tong also a junket playing in the room

Permanent room established in early 2018

Recent NSW PC exclusions for a number of associated persons with this room

Oversight of cash/chip management and transactions in the room has been an ongoing focus to ensure compliance

Very close watch and follow up with our risk, compliance and investigations team

5.8b of cash T/O in FY19

882    The second and fifth points in this list reflect the topics that were in Mr Hawkins’ “Board Talking Points” email of 22 July 2019. This reflects the information that ASIC defines as the “Suncity Overseas Contraventions” and the “NSW Police Suncity Exclusions”, which it is alleged that Mr Bekier and Ms Martin failed to disclose at the 15 August 2019 meeting.

883    Finally, Mr Hawkins’ notes provided a summary of Star’s junket approval process. This included noting that, as part of that process, “[s]hould there be negative information, further investigation is undertaken by The Star Investigations team. This may include discussions with Police” and “The Investigations team will then make a recommendation to GM VIP International”.

884    Mr Bekier also gave evidence on this topic. He was asked, by reference to Mr Hawkins’ “Board Talking Points” email of 22 July 2019, whether the involvement of Suncity in providing online or proxy gaming services in China was discussed with the Board. He said that he had “a sense that we discussed everything that was known to us about Suncity, but I cannot put my finger on a specific meeting that this was discussed at” (T420.35-37).

885    Mr Bekier was also asked whether the topic of the exclusions by the NSW Police of six people associated with Suncity was discussed with the Board in July or August 2019 (T420.39-44). He said that he believed that was “one of the topics that would have been raised in one of those meetings, as we discussed Suncity” (T420.43-44; T775.21-27). His evidence was that Mr Hawkins “would have led that discussion” (T421.1-3). Mr Bekier appeared to emphasise why this would have been raised in the context of Suncity in these meetings on the basis “that was pretty much all we talked about” (T420.45-47). However, in cross-examination, he strangely stated that he would have looked at the exclusions associated with such a significant and now controversial customer like any of the “other hundreds of exclusions that the police made every year” (T652.23-31). In cross-examination, he also sought unconvincingly to minimise the notion that the exclusions raised a concern about Suncity, emphasising that the concern the NSW Police raised was not about Suncity, but about six individuals (T652.37-40).

J.15.7.2    Ms Martin’s evidence

886    Ms Martin also gave evidence about what she recalled being discussed during the 30 July Board call. In her affidavit, she said that she understood the call was to address the two topics of the NSW Government declining approval for the Ritz Carlton tower and the media allegations about Crown (at [463]). In her oral evidence in chief, Ms Martin said that Mr O’Neill opened the call and said that the media allegations about Crown would be discussed by Mr Bekier and the members of the executive team present (T819.25-32). Ms Martin said that Mr Jenkins then spoke and summarised the allegations and the topics raised by them being “incidents of money laundering and prostitution and Asian crime association allegations for particular individuals” (T819.34-42). She said that Mr Jenkins said that, while the focus had been on Crown, he was receiving some enquiries from media outlets. In her affidavit, Ms Martin says that she does not recall the Board “expressing shock or surprise” at the contents of the media reports during the call (at [472]).

887    Ms Martin gave evidence that Mr Bekier then said that Star’s management team was “reviewing the media and looking to confirm [the] accuracy of the reports” (T819.44-46). She could not recall Mr Bekier mentioning any customers, but that he asked Mr Hawkins to “speak to the customers that had been referred to in the media”, and Mr Hawkins mentioned Simon Pan, the Chinatown junket and Mr Zhou and “the Suncity junket” (T820.8-15). She said that Mr Hawkins told the Board that “Suncity junkets were still operating at the Star and that, at that time, the Suncity junkets were being held in their exclusive-use room under an agreement for the exclusive-use room and that that had continued to be the case” (T820.17-23). On this topic, Ms Martin’s evidence was that Mr Hawkins said (T820.23-27):

And that it was the use of that exclusive-use room that had given rise to some challenges with the Star’s dealings with Suncity in relation to Suncity’s compliance in the conduct of their operations in that room, and that also there had been challenges for Suncity in that room with some exclusions of their team members that had recently been carried out.

888    Ms Martin was asked whether she could recall saying anything “in relation to the media allegations or Suncity” (T820.29-30). She said she could recall “talking to the verification activities or actions that members of my team were responsible for conducting at that time” (T820.30-32). In particular, she could recall telling the Board that:

(a)    Mr Houlihan was Star’s primary contact for liaising with law enforcement agencies, particularly police, and was contacting “police directly to confirm what was being reported in the media” (T820.32-35); and

(b)    her team was assisting with verification in relation to the Hong Kong Jockey Club Report because (T820.35-41):

Mr Buchanan, who had joined my team, had been responsible for authoring or had a key role in authoring that report and was able to assist the Star, now that he was working with us, with verifying its extracts and that to the extent that contact needed to – or was useful to be made with police or law enforcement in Hong Kong and Macau, that Mr Buchanan was able to make that contact.

889    Ms Martin was then asked whether she could recall any particular questions raised by the Board during the call. She said that she could recall a question, most likely from Mr O’Neill, as to whether Star had received any correspondence from regulators or law enforcement agencies, and she advised that Star had received a letter from L&GNSW (T820.43-821.2). When asked if she could recall any other questions from Mr O’Neill or any other member of the Board, she answered as follows (T821.4-8):

During the end of the call, I think again the chairman asked management to keep the board informed or to provide a list of the customers and what the Star knew about it. I think that was on that call.

890    Ms Martin also gave evidence that Mr O’Neill asked management to keep the Board informed, and provide the Board with a list of all customers identified in the media allegations, and information as to whether they were current customers of Star and how Star was dealing with information about them (at [471]; T821.4-8).

891    Ms Martin was asked whether any Board member “raised a particular question in relation to what had been in the media, either the print media or television media, in the last few days”. Her answer was (T821.10-28):

In relation to the footage from the 60 Minutes show, I recall there was a question, but I don’t recall who it was from around the board table, as to whether the images that were shown that showed a man with bags of what appeared to be cash being moved around the casino property was something of the sort that could or had happened at the Star. And I recall there was a discussion about that. The piece of the discussion I recall is that I commented that that was possible at the Star, and the Star had experienced instances from time to time of such suspicious conduct being identified through surveillance and the investigators seeing activity on site or receiving reports of it on site, and that those events or actions by individuals had been witnessed, as I recalled, in the retail precinct area at the Star Sydney, and also some of the premium gaming areas including Salon 95. And that they were the sorts of incidents that the investigators called to the New South Wales Police to work with them, then, to identify individuals involved on a relatively regular basis and that – that the investigators would work with police on those matters. And that in addition to that, there was other reporting that occurred to regulators, but that was usually done outside of my team.

892    By this evidence, Ms Martin suggested she had told the Board about “bags of cash” being identified in Star’s retail precinct and its premium gaming areas, including Salon 95, during the 30 July Board call. However, when asked in cross-examination whether the 30 July Board call was the first time that she had told the Board about the suspicious transactions that had occurred in Salon 95, she said that it was her recollection that it was Mr Hawkins who had raised this and she did not believe she did at that meeting (T1062.8-25), although when then shown the transcript of her evidence in chief, she reaffirmed that she had said this to the Board during the call (T1063.5-1064.2). I found her evidence in this regard to be unconvincing.

J.15.7.3    Conclusion on the 30 July 2019 Board call

893    There are obvious differences in the evidence given by Mr Bekier and Ms Martin as to what occurred on the call.

894    Mr Bekier’s affidavit and oral evidence indicated that he did not have a good recollection of what had occurred. In particular, his evidence that Mr Hawkins’ notes are “consistent with [his] recollection” does not go higher than saying each junket with which Star had a relationship was discussed on the call, and his evidence about the discussion around the police exclusions was expressed in terms of a belief that the topic would have been raised, rather than an actual recollection (T420.39-44). Ms Martin’s account of what occurred during this call was given at a level of precision which it is difficult to conclude involves actual recollection, given her generally credibility problems, the fact it occurred over five years ago, and noting her lack of recollection regarding other matters relating to Suncity during the same period.

895    It is clear from Ms Martin’s evidence, as well as from the minutes of the Board meeting held on 7 August 2019 (see [919]–[921] below), that the Board requested that it be kept informed and provided with a Board paper addressing the Star’s customers who had been named in the Crown Allegations. One of the customers was Suncity. It is likely that anything that Mr Bekier, Mr Hawkins or Ms Martin told the Board in the call on 30 July 2019 would have been reflected in the Board paper prepared in accordance with this request. That paper (Crown Allegations Board Paper) was ultimately provided to Board, after Mr Bekier’s review of it, for its meeting on 15 August 2019.

896    I am satisfied to that, on this call, the Board was updated in general terms about the nature of the Crown Allegations and the steps that management was undertaking in response, namely that the management team was investigating whether the allegations reported in the media could be substantiated, including by liaising directly with law enforcement agencies.

897    At this juncture, it is unnecessary to engage further with the factual dispute between ASIC, Mr Bekier and Ms Martin as to the precise contents of the 30 July 2019 Board call in circumstances where the Crown Allegations Board Paper exists and it is likely that anything of any substance Mr Bekier, Mr Hawkins or Ms Martin told the Board in the call on 30 July 2019 would have been reflected in it. This is because this document was prepared at the specific direction of the Board at the 7 August 2019 meeting to address the topic of the Crown Allegations, and “also details of interactions with regulators on junket operations more generally”. That is, it was intended to consolidate in a formal Board paper, for further consideration at the Board meeting held on 15 August 2019, the matters that had been discussed informally on 30 July 2019 and orally on 7 August 2019.

J.15.8    Subsequent enquiries and the Hong Kong Jockey Club Report

898    Following the 30 July 2019 Board call, Ms Martin and Mr Hawkins continued to consolidate more detailed information on the Crown Allegations and their relevance to Star’s business. Mr Bekier’s affidavit evidence is that he had multiple conversations with Ms Martin and Mr Hawkins about this work (see Mr Bekier’s affidavit at [367]).

899    Mr Bekier also gave affidavit evidence that he made his own enquiries (at [368]). He recalls speaking to Mr Hawkins, Mr Quayle and Mr Lim to understand whether Star had the same problems as Crown. His evidence was that he spoke to those executives because they had all previously worked at Crown and would understand Crown’s processes.

900    Mr Bekier gave the following account of his conversation with Mr Hawkins in his affidavit (at [369]):

Me:        “Could anything like this happen at the Star?”

Hawkins:    “No. It is the same industry but we have different processes. We are a totally different company to Crown”.

Me:    “How are they different?”

Hawkins:    “Crown is super aggressive, to the point of flouting AML rules. They push sales hard without regard for compliance”.

901    He gave evidence that he does not recall the specifics of his conversations with Mr Quayle and Mr Lim, but says they were to a similar effect (at [370]).

902    Mr Bekier sought to give the general impression that he thought Star’s systems were much better than those of Crown and it was not facing the same issues that were being reported in the press. In particular, he said he understood that, unlike Crown, Star Sydney had a robust security presence in terms of staff and CCTV across the entire casino, including in private gaming salons, and that all cash transactions were conducted through Star Sydney’s Cage (at [370]). He continued to believe that the Star was running a “good, clean operation” (T631.13-14).

903    This evidence was uncorroborated, and although it was not the subject of direct challenge by ASIC, and he may have got some reassurances as to differences between Crown and Star, Mr Bekier knew at this time of at least the pleaded Power Email Information, KPMG Junket Risk Information, Salon 95 Concerns, Chau Visa Refusal Information, Suncity Overseas Contraventions, NSW Police Suncity Exclusions, and had watched the 60 Minutes programme (see [1377]–[1379], [1415]–[1417], [1443]–[1448]). Contrary to Mr Bekier’s evidence, the Power Email referred to the concern that cash for chip transactions were taking place at the service desk, as opposed to Star Sydney’s cage (see [1392]), and the KPMG Reports identified real deficiencies in Star’s AML/CTF systems and procedures, particularly in relation to junkets. Considering all the information which Mr Bekier knew, there was hardly a secure basis for Mr Bekier to believe Star was running a “good, clean” operation or to otherwise feel sanguine about these matters.

904    Separately, Mr Bekier also gave evidence that following further references to the Hong Kong Jockey Club Report in the media in early August 2019, he sought to obtain a copy. Mr Bekier’s evidence was “that when the Hong Kong Jockey Club was first kicked around in the media and reported on, I went on a chase to get a copy and ask a bunch of people within the organisation to get one” (T418.40-42). At that time, he said recalled speaking to Mr Lim and Star’s public affairs team to obtain a copy of the report. To be frank, I am simply unsure whether this took place.

905    As explained in the section of these reasons concerning Mr Bekier’s credibility, Mr Bekier also purportedly asked Mr Buchanan for a copy of the report at this time but I am unpersuaded of this evidence given it is inconsistent with previous representations that he thought he asked Mr Buchanan for a copy of the report in January or February 2022.

906    Certainly, Mr Bekier could not recall whether he asked Ms Martin for a copy of the Hong Kong Jockey Club Report at this time. Ms Martin’s recollection was that he did make that request on a call with her, Mr Jenkins, Mr Theodore and Mr Hawkins immediately after the 30 July 2019 Board call. Her evidence was that she responded that it was “confidential”. That evidence was not challenged by ASIC. In cross-examination by Mr Bekier’s counsel, she elaborated:

At this time, I’m not sure I had registered I even had the copy of it, but the point I was making to Mr Bekier at this time, as I recall, is that it had been provided on a confidential basis by Angus Buchanan, and I wasn’t even sure that the Star should have it and that Mr Buchanan was available to be spoken to directly in relation to its content.

(T1165.5-9)

907    This evidence is itself curious as it suggests that Ms Martin had some hesitation about the use of confidential information contained in the Hong Kong Jockey Club Report while, at the same time, advising Mr Bekier that Mr Buchanan was able to be spoken to about the information directly. That strikes me as an odd approach for a solicitor to take to the use of confidential information. Again, I am unsure about this evidence. Mr Bekier might have made this request of Ms Martin and perhaps she said something along the above lines. That said, irrespective of whether the conversation between Mr Bekier and Mr Buchanan occurred as recounted, it is of no real significance to the case against Mr Bekier.

J.15.9    Publicity concerning Crown from 31 July 2019

908    On 31 July 2019, Crown published a response to the recent media allegations. Mr Bekier forwarded a copy of Crown’s response to Mr O’Neill, who in turn forwarded it to the other non-executive directors.

909    On 31 July 2019, an article was published in The Age entitled “Crime agency reveals a major investigation into organised crime at casinos”. The article reported that ACIC had announced an investigation into organised crime in Australian casinos, in the wake of adverse media concerning Crown’s dealings with junket operators. The article reported comments made by ACIC Commissioner, Michael Phelan, including that:

(a)    Commissioner Phelan told The Age and The Sydney Morning Herald that “investigators across state and federal police and intelligence agencies have uncovered damning insights into vulnerabilities … within casinos located in Australia”;

(b)    Commissioner Phelan had announced that ACIC was currently conducting an “Targeting Criminal Wealth” inquiry, and which extended to probing junkets “responsible for bringing high roller clients into casinos, usually from offshore, to gamble”, and that while Commissioner Phelan did not name which casino operators were being examined, his statement raised the possibility that the investigation could include Crown’s main domestic rival, Star;

(c)    “the lack of transparency of casino junket operations, anonymity of participants and obscurity around beneficial ownership, source and distribution of junket funds provide opportunities for criminal exploitation”; and

(d)    “the structure of junket operations enables opaqueness around the source of beneficial ownership of funds ... and represents a significant money laundering risk”.

910    The next day Mr O’Neill sent a further email to Star’s other non-executive directors forwarding an email he had received from Mr Jenkins which contained the full text of the article and stating: “FYI. Suspect we will receive some attention”.

J.15.10    1 August 2019 meeting with ILGA

911    As I have already noted (at [296]), on 1 August 2019, Mr O’Neill met with Mr Phillip Crawford, Chairman of ILGA, to discuss the recent media coverage of Crown. Ms Martin prepared a briefing note for Mr O’Neill and provided it to him on the morning of the meeting. Ms Martin also provided Mr O’Neill with a copy of the letter from ILGA dated 29 July 2019 (received by Star on 30 July 2019).

912    The letter from ILGA, authored by Natasha Mann (Executive Director, Liquor, Gaming and Racing) stated, relevantly:

I refer to the allegations raised in media reports over the weekend about connections between Crown Resorts and criminal figures. In particular, the media reports raised allegations relating to suspicious junket arrangements in China and Australia, and questioned the suitability and conduct of some junket operators and their representatives.

…

I am writing to request that The Star undertakes a risk assessment of its practices and procedures which mitigate against the types of issues raised in the media reports, and reports the findings to Liquor & Gaming NSW. Specifically, I request that The Star details what steps it takes to ensure that only suitable operators and representatives operate junkets in its casinos.

I also request that The Star reviews any current associations or arrangements with junket operators or related individuals to ensure the suitability of any existing relationships. I note that a more specific discussion around the individuals and organisations identified in the reports is to take place between L&GNSW and Mr Graeme Stevens, Regulatory Affairs Manager, in a meeting to be held this week.

913    The briefing note indicated that Star had already provided an “initial response” to ILGA, which noted that Star had updated its AML/CTF risk assessment and its AML/CTF Programme, and proposed further discussions with ILGA to address matters including enhanced due diligence on “key junket groups and individuals” and “[o]ngoing intelligence sharing with law enforcement”.

914    Following the meeting with Mr Crawford, Mr O’Neill shared the briefing note prepared by Ms Martin with Mr Crawford.

J.15.11    Publicity concerning Crown from 1 to 5 August 2019

915    The same day an article was published in The Age entitled “Key Crown junket partner blocked from Australia”. The article contained the following:

The head of Crown Resorts’ major junket partner, Suncity, has been banned from entering Australia as investigators across the region probe the Macau-based company’s alleged links to organised crime.

Suncity chief executive Alvin Chau has been blocked by Home Affairs from entering the country, according to official sources who spoke on condition of anonymity. But Crown Resorts is still allowing the junket to host its own high-roller gaming room inside Crown Casino Melbourne.

Suncity, the biggest junket operator in Macau, also provides VIP gambling tours to casinos run by Crown’s rival, The Star.

916    The article then reported the following concerning the Hong Kong Jockey Club Report (that is, the report Mr Buchanan had provided to Ms Martin, Mr White and Mr Houlihan on 12 June 2019):

Leaked reports from the Hong Kong Jockey Club reveal club officials were briefed by “Australian Law Enforcement” in May 2017 about their concerns about Mr Chau. Among the concerns was suspected “large-scale money laundering activities”.

The report also states that “Suncity Group’s controlling entities ... [including] Alvin Chau ... pose tangible criminal and reputational risks to the [Hong Kong Jockey] club and indeed racing integrity in Hong Kong.”

“Suncity key personalities have demonstrated links to numerous triad societies and organised crime figures,” said the intelligence report, adding that Mr Chau and a colleague were reportedly members of the 14K triad society.

“Other Suncity entities are connected to known triad figures,” it found.

917    The article also reported on Star’s relationship with Suncity, as follows:

According to the Hong Kong Jockey Club’s intelligence report, obtained by The Age, The Sydney Morning Herald and 60 Minutes, Mr Chau received $403,000 placed into his account at The Star casino in Sydney from a suspected money-launderer in 2012.

The Star on Thursday confirmed it deals with junket operators and had done so for more than 10 years but it would not discuss individuals or groups. In a statement, The Star said it had not been contacted by ACIC about its casino junkets investigation.

918    On 5 August 2019, a further article was published in the Australian Financial Review, entitled “Crown’s web of influence runs deep”. The article reported that the Commonwealth Attorney-General had referred the recent allegations about Crown to the Australian Commission for Law Enforcement Integrity. The article stated that the Commission “will hopefully probe whether or not there was a soft touch approach to regulation and law enforcement”. Mr O’Neill forwarded the article to the other non-executive directors that same day.

J.15.12    The 7 August 2019 Board Meeting

919    On 7 August 2019, a Board meeting was held “additional” to the ordinary scheduled meetings of the Board. It was convened by Mr O’Neill for the Board to receive “timely briefs from management on recent key matters”. Mr Bekier described the purpose as being “so that the management team could provide an update to the Board on the developments and media coverage in relation to the Crown reports”.

920    Mr Bekier, Mr O’Neill, Mr Sheppard, Ms Lahey, Mr Bradley, Ms Pitkin, Mr Todorcevski and Mr Heap were present, and Ms Martin was in attendance. Mr Theodore, Mr Downy (General Manager, External Affairs) and Mr Jenkins (General Manager Media and Communications) were also in attendance for part of the meeting.

921    The minutes of the meeting record:

(a)    Star’s management spoke about the recent media coverage of Crown. This included discussion of “government and other agency responses” that had been reported in the media, including ACIC’s “Targeting Criminal Wealth” review, which was the subject of the article published on 31 July 2019 (see [909] above);

(b)    the Board “requested to be kept briefed on all significant regulator correspondence (including receiving copies of all correspondence) and responses on this topic”;

(c)    the Board “requested that management prepare a paper on this topic in the papers for the Board meeting on 15 August 2019, which should include also details of interactions with regulators on junket operations more generally, including training provided”: and

(d)    Mr O’Neill “provided an overview of his informal meeting” on 1 August 2019 with the Chairman of ILGA (the meeting is incorrectly referred to in the minutes as occurring on 6 August 2019, but the evidence shows that the meeting occurred on 1 August 2019).

922    In his affidavit, Mr Bekier referred to the Board’s request for the paper but did not otherwise give evidence as to what was said at the meeting. He also gave evidence that, following the meeting, he agreed with Ms Martin and Mr Hawkins that they would take responsibility for preparing the paper the Board had requested.

923    Ms Martin gave oral evidence about the meeting. She said Mr Jenkins gave updates on key allegations and that, as to Star’s customers, he noted there had been media relating to Suncity and Mr Chau, including that Mr Chau had been banned from entering Australia and also that there had been reports of Suncity and Mr Chau being investigated concerning online gambling practices (T822.38-44). Ms Martin said she told the Board that Star had confirmed Mr Chau was not banned from entering Australia and that it had obtained that advice from the relevant government department (T822.44-47). Ms Martin said she told the Board that “Suncity had made announcements and was reported in the media also as providing some denials in relation to Alvin Chau’s banning and level of investigation by authorities” (T823.5-9). She also said she told the Board that Star had considered extracts from the Hong Kong Jockey Club Report “and that the Star’s review of those pieces of content from the Hong Kong Jockey Club report had confirmed that they were reported accurately” (T823.9-12). Ms Martin then said she told the Board that Ms Arnott and Star’s AML team were “already aware of [the] content” of the Hong Kong Jockey Club Report and it had been “considered previously by the AML team” (T823.12-16). Ms Martin then said (T823.16-23):

But I did not have first-hand knowledge of that, so I reported on what Ms Arnott had told me and her views on the nature of some of the, I guess, sources from the media that had been used in preparing the Hong Kong Jockey Club report. And that Ms Arnott considered that some of those sources weren’t as reliable as the Star would use to verify the sorts of information that was being reported and that there were subjective views in that report. And that the report had been prepared for purposes for the Hong Kong Jockey Club’s use, not all of which was relevant to the Star’s interests.

924    Ms Martin’s oral evidence about what she said occurred at this meeting cannot be accepted in preference to the record provided by the contemporaneous minutes, for the following reasons (leaving aside for a moment my concerns about her general credibility).

925    First, Ms Martin’s evidence addresses topics that do not find any reflection in the minutes, which she drafted, such as the allegations that Mr Chau had been denied a visa to enter Australia and her commentary on the Hong Kong Jockey Club Report.

926    Secondly, Ms Martin’s evidence that she told the Board that Suncity was reported in the media as denying that Mr Chau was banned from entering Australia cannot be reconciled with the contemporaneous documentary evidence. In its announcement to the Hong Kong Stock Exchange on 5 August 2019 concerning “certain media articles recently published”, Suncity did not in fact deny that Mr Chau had been denied entry, but rather stated that Mr Chau had no intention of coming to Australia.

927    Thirdly, Ms Martin’s evidence that she advised the Board that Star, on the advice of the relevant government department, confirmed Mr Chau was not banned from entering Australia is also inconsistent with the information available within Star’s IRB business. Heidi Huang, Star’s Senior Vice President, VIP International Operations, informed Mr Hawkins by email on 19 September 2018 that Mr Chau’s visa had been declined “due to significant seized cash in hotel room safe previously”. Ms Martin based her evidence on a conversation she asserts she had with Mr Houlihan in the first week of August during which he said he had spoken to a representative of the Department of Home Affairs, who had confirmed that Mr Chau had not been banned from Australia. There is no other evidence of this conversation.

928    Fourthly, Ms Martin’s evidence that she advised the Board that Ms Arnott had told her that the AML team had already considered the Hong Kong Jockey Club Report and that Ms Arnott considered that the report: (a) was based on sources not as reliable as the sources Star would use; (b) contained subjective views; and (c) was “prepared for purposes for the Hong Kong Jockey Club’s use, not all of which was relevant to [Star’s] interests”, was implausible, inconsistent with other evidence she gave, and irreconcilable with contemporaneous documentary evidence. Ms Martin’s evidence was that she had previously told the Board on 30 July 2019 that it was Mr Buchanan, who had a key role in authoring the report, who was able to verify its contents, including with law enforcement. It therefore makes little sense that Ms Martin would present Ms Arnott’s views to the Board. Further, Ms Martin’s evidence is that she did not read the whole of the Hong Kong Jockey Club Report at this time, only the extracts that were reported in the media (T1046.13-16), and, while that evidence is difficult to accept, it is even more difficult to believe that Ms Martin would address the Board about the Hong Kong Jockey Club Report without actually reading it. In addition, Ms Martin’s evidence that she spoke to Ms Arnott about the Hong Kong Jockey Club Report is implausible (see Ms Martin’s affidavit at [475]). There is no evidence that Ms Arnott received the Report, and Ms Martin claimed in her affidavit to have been surprised to receive the Report from Mr Buchanan and to have been of the view it should not even have been shared with her, on the basis that it was confidential (at [383]). And even though I am unsure whether the conversation occurred, it is also noteworthy Ms Martin said she declined to give Mr Bekier a copy of the Report, apparently on something like the same basis (see [906]–[907] above).

929    There is also further contemporaneous documentary evidence inconsistent with Ms Martin’s twin contentions that Ms Arnott, if she received the Hong Kong Jockey Club Report, was: (a) dismissive of the weight that should be placed on its contents by citing concerns about its reliability and purpose; and (b) viewed it as only confirmatory of information that Star already had and considered. In particular:

(a)    on 24 June 2019, Mr Tomkins sent Ms Arnott an email, copying Mr Stevens, summarising the results of his review of the CCTV footage of suspicious conduct in Salon 95 (a review that was referred to in the final Operation Lunar Information Note). Mr Tomkins identified several suspicions transactions (including three people going into the computer cupboard where it appeared Suncity was storing cash) and described attempts by Suncity representatives to hide their activities from surveillance; it is difficult to accept that Ms Arnott would not have been concerned about the involvement of Suncity in money laundering and its connexions with organised crime, given the highly suspicious conduct that was occurring in the Sydney Casino itself, of which she was aware;

(b)    on 9 August 2019, Ms Arnott received the details about Mr Chau stored in Star’s database; this revealed that, as at April 2016, there had been a report in World Check that Mr Chau had reportedly received 903 million Philippine pesos which were stolen from the Central Bank of Bangladesh; it also identified Mr Chau as directly connected with six suspicious transactions that had taken place in the Sydney Casino between 4 September 2017 and 24 March 2018, including a suspicious cash transaction on 8 September 2017 to settle, in whole or part, Mr Chau’s CCF; I do not accept that Ms Arnott would have dismissed the information in the Hong Kong Jockey Club Report given Star already possessed World Check information and had identified its own suspicious transactions involving Mr Chau, which were consistent with the allegations of connexions to money laundering in Australia contained in that Report.

J.15.13    The 7 August 2019 Audit Committee Meeting and preparation of Board paper on Crown Allegations

930    On 7 August 2019, a meeting of the Audit Committee was held. Mr Todorcevski, Mr Bradley, Mr Sheppard, Ms Pitkin, Mr O’Neill, Ms Lahey and Mr Heap were present. Mr Bekier, Mr Barton and Ms Martin were in attendance.

931    At this meeting, the Audit Committee approved the financial statements for the financial year ended 30 June 2019 for recommendation to the Board. At the meeting, a paper entitled “Compliance Assurance Process”, prepared by Ms Martin, was taken as read. That paper gave the Audit Committee a statement from Ms Martin, the CLRO, regarding the effectiveness of Star’s risk management and internal control processes in identifying and disclosing any material issues that may have a bearing on the financial statements. The paper also attached draft declarations from Mr Bekier and Mr Barton that Star’s risk management and control processes were effective.

932    Ms Martin spoke to the paper, noting that, in her capacity as CLRO, she was satisfied that Star’s risk management and internal control processes were operating effectively for the financial year ended 30 June 2019, and that “there were no items of note from a materiality perspective in connection with the preparation of the FY19 full year financial statements”. The paper attached a “summary of potential issues” that had been identified following a process by which each member of the Executive Team was asked to identify “material operational issues”, “material commercial issues” and “any significant breaches of relevant statutory obligations”. None of the potential issues identified in the table referred expressly to Suncity. The only “issue” relating to junkets was “continuing monitoring of on-property single junket operator rooms”.

933    On 8 August 2019, Ms Martin sent an email to Mr Brodie and Mr Whytcross noting the directors had a “brief session discussing recent media reports on the CWN allegations and related matters, including ACLEI and ACIC reviews” and that “[f]ollowing on from the call we had with the Board last Tues [i.e. 30 July 2019], they have now asked for a paper to be included on this topic for next week’s Board meeting”. Her statement that the discussion occurred at the Audit Committee meeting is not consistent with the minutes of that meeting, which contain no reference to such a discussion. That meeting commenced at 2:30pm. Ms Martin must have been referring to the Board meeting held on the same day, at 1:30pm, and as set out above, the minutes for it record that the Board requested a paper regarding the Crown Allegations.

934    In her email, Ms Martin asked for help from Mr Brodie and Mr Whytcross in preparing the paper the Board had requested (which would become the Crown Allegations Board Paper). She identified what it should cover as follows:

The paper will need to cover:

•    the CWN allegations in key media stores

•    Any individuals and junkets that may also do business with The Star (or did in the past) raised in those stories and our risk mitigation/compliance efforts in these areas, including the licensing/approval approach for junkets (I think the summary prepared last week will be a good base for an attachment to the paper)

•    what has been the regulators’ and other agencies response so far – ACLEI; ACIC; AUSTRAC; gaming regulators in Vic, NSW, Qld

•    our engagement with regulators’ and other agencies, including AUSTRAC meeting already in for 21 Aug

•    comment on our interaction with our gaming regulators on the topic of junkets generally – eg regularly reviewed in both Qld and NSW; do training and tours in NSW; note in Qld OLGR licences junket

•    what we are doing internally in response to the reports, incl. monitoring external regulatory/agency activity; assessing any updated DD required; any other control review, training etc

935    This summary reflects what Ms Martin understood was necessary for the paper to address (following the Board meeting held on 7 August 2019 and her discussion with Mr Bekier and Mr Hawkins). Mr Whytcross sent Mr Brodie and Ms Martin a draft structure for the paper the same day.

936    The minutes of the Board meeting held on 7 August 2019 and Ms Martin’s email collectively demonstrate that the Board requested management prepare a paper based on the Crown Allegations, that included information as to each of the individuals and junkets who did business with Star, and as to each entity, what steps Star had previously needed to take, from a “risk mitigation/compliance” perspective, and what information Star presently had, from a regulatory and due diligence perspective, relevant to the allegations made in the media.

J.15.14    Other articles published

937    On 8 August 2019, The Age published an article entitled “Why Not?: Star CEO sticks with junket operator Suncity despite alleged criminal links”. The article included statements from Mr Bekier as follows:

… Matt Bekier says the casino will continue to partner with Macau junket operator Suncity, despite the group’s alleged links to organised crime.

Mr Bekier also said The Star would not be reviewing its use of junkets despite a recent investigation into Crown's use of allegedly criminal-linked junkets.

‘We are always looking at policies, and we are always under continuous review with our regulators, so to me, that is not something that we just do because our competitors have done something differently,’ he said.

When asked why The Star was still using the alleged-crime associated junket group Suncity, Bekier counter-asked: ‘Why not?’

‘Suncity is the largest junket operator in the world … and we work in a very a prescribed and lawful way with junkets that are credible and have been improved, in some states, by the regulators,’ he said.

…

Star chief executive Mr Bekier would not comment on the allegations against his competitor but said he felt his business was run in a ‘very clean and legal’ way.

‘I feel that what we do is both lawful and is executed in a way that should give us and our investors confidence that we are doing right,’ he said. ‘We have a dedicated team of compliance officers who track everything … we are being audited, like the banks and everyone else, so I feel pretty comfortable that we are doing a good job.’

(Emphasis added).

938    Mr Bekier gave evidence that he said “why not” in response to a journalist’s question as to why Star was still doing business with Suncity, as he was leaving the Bloomberg Asia Briefing Live conference.

939    Apart from demonstrating insouciance concerning Star continuing to deal with an alleged crime-associated junket group, this incident is of little moment. ASIC only relies on it to establish that Mr Bekier was taking particular interest in the media reporting of the Crown Allegations at this time, which is not in dispute.

940    On 8 August 2019, Mr Jenkins sent an email to Mr O’Neill, copying Mr Bekier, setting out questions that Mr Jenkins had received from Nick Toscano, a reporter from The Age, whose by-line had been on several of the articles containing the Crown Allegations. Mr Toscano asked several pertinent questions, including about Star’s relationship with Suncity and Mr Chau:

4. In light of reports that Suncity is involved in organised crime, that Suncity is black-banned by the Hong Kong Jockey Club and its CEO Alvin Chau is now banned from entering Australia, what checks, if any, will Star Entertainment undertake in respect of its dealings with Suncity?

5. An alleged money launderer Benny Liu Xu Xiong (arrested December 2011 by the federal police) placed $403,000 in January 2012 in the Star bank account of Alvin Chau, CEO of Suncity. Mr Liu Xu Xiong pleaded guilty to money laundering on 13 April 2012. What action if any has been taken by Star Entertainment in respect of Mr Chau s dealings- via the casino - with a money launderer?

6. Has Star Entertainment sought briefings from the Hong Kong Jockey Club, ACIC or AFP about Suncity and if not, why not?

941    Mr Jenkins said to Mr O’Neill that he would “touch base tomorrow when responses finalised”.

942    On 9 August 2019, ILGA sent a further letter to Star, which was addressed to Mr Power. It requested, among other matters, that Star identify whether any of the entities or individuals listed in the annexure are or had been authorised as junket operators, promoters or representatives with Star, and asked what steps had been taken “to mitigate ongoing risk” relating to them. The annexure identified “Suncity Group Holdings Ltd and its subsidiaries” and Mr Chau. It also identified Ming Chai, Roy Moo, Simon Pan, Tom Zhou, Andrew Ure and Greg Leather.

943    On 9 August 2019, Mr Jenkins sent his draft response to the questions from Mr Toscano of The Age to Ms Martin, Mr Power, Mr Hawkins, Ms Brodie, Mr Houlihan, copying Mr Bekier. It was evasive and did not engage directly with the questions about Suncity and asserted that Star “wants to make clear that junkets are legal, they are permitted under the Act, and they have been part of the global casino industry for more than a decade. Further, in Queensland, all junket operators involved with The Star, including Suncity, are licensed by the regulator” (emphasis added). Mr Bekier responded that he thought the draft response read well.

944    Mr Jenkins circulated a further draft a few hours later which included input from Ms Martin and Mr Power. This deleted any reference to Suncity and inserted a comment that through due diligence checks and ongoing monitoring of junket operators, Star was “able to assess its ongoing dealings with individual junket operators, including making decisions as to whether to exclude individuals from attending [its] properties”. The final version of the response included the following statements:

(a)    “The Star wants to make clear that junkets are legal, they are permitted under the Casino Control Act, and they have been part of the global casino industry for decades. Further, in Queensland, all junket operators involved with The Star are approved to operate by the regulator. It is also worth noting that in all States in which The Star operates, any person including individuals involved with Junkets, may be subjected to an exclusion order issued by The Star, by Police or by the casino regulator”;

(b)    Star had a “comprehensive AML/CTF Program[me] that is regularly reviewed by AUSTRAC” and that as part of that programme, “The Star conducts due diligence on all junket operators and their representatives. As a result of the due diligence checks, and the ongoing monitoring of junket groups, The Star is able to assess its ongoing dealings with individual junket operators, including making decisions as to whether to exclude individuals from attending The Star Entertainment Group’s properties”;

(c)    there had been successive positive s 31 reviews including the Horton Report which made “no recommendations in relation to junkets, being satisfied that … junket programmes appear to be conducted properly, honestly and with proper protections by The Star, and that their settlement is reliable and honest”; and

(d)    Star “ha[s] always, and will always, work closely with authorities including law enforcement agencies and regulators to ensure compliance within the industry”.

945    Mr O’Neill forwarded the responses to the other non-executive directors and to Mr Crawford of ILGA.

946    In the evening of 9 August 2019, Mr Brodie sent a draft of the Crown Allegations Board Paper to Ms Martin, copying Ms Arnott. In that draft, it stated:

Sun City is controlled by Alvin Chau who has [been] accused of associations with organised crime figures and membership of a triad. Management understands that no law enforcement agency has advised The Star of concerns about Mr Chau

947    In the evening of 9 August 2019, The Age published another article, which focussed on Star. It was entitled “The Star casino roped into Crown controversy over links to junkets”. This article included the following, which was based on information in the Hong Kong Jockey Club Report:

An Asian money launderer used a Star Entertainment casino account in Sydney to send more than $400,000 offshore in a transaction tracked by Australian Federal Police investigators.

The money was destined for Macau multi-millionaire casino tycoon, Alvin Chau, whose high-roller travel business, known as a junket, is licensed [sic] and paid huge commissions to lure the wealthiest Chinese gamblers to casinos.

A 2018 report by Hong Kong gambling and racing authorities shows that in January 2012, federal police officers in Sydney identified two alleged money launderers making “a cash deposit of AUD$403,000 into an account at Star Casino in Sydney.”

“The money was then immediately transferred to The Star Casino account of Alvin Chau,” the report notes.

948    The article then reported:

The revelations of the 2012 transaction are contained in a confidential report, and widen the focus on Australia’s casino industry from just Crown Resorts, which has been at the centre of explosive revelations about its business dealings with junket operators with links to suspected Asian crime bosses and Chinese Communist Party influence agents.

Mr Chau has since been blocked from entering Australia, and the Hong Kong Jockey Club has banned his junket, Suncity, over its links to drug trafficking and money laundering.

But Star Entertainment, which runs Sydney’s premier casino, The Star, has signalled it is still keen to do business with the junket. Asked on Thursday if he would continue to partner with Suncity, Star Entertainment Group's CEO Matt Bekier said “Why not?”.

“Suncity is the largest junket operator in the world … and we work in a very prescribed and lawful way with junkets that are credible and have been approved, in some states, by the regulators”.

…

949    The article also reported that a person who was involved in the $403,000 transaction, Mr Xiong, had his apartment raided by the AFP eight weeks before the transaction, after the AFP had observed him launder $5 million in proceeds of crime via banks in Sydney, and that Mr Xiong had subsequently pleaded guilty to dealing in proceeds of crime totalling over $5 million.

950    The article also recorded the following:

Mr Chau is not only Star royalty but is the chief executive of the biggest high-roller operation in the world.

But in an internal intelligence report in 2018, the Hong Kong Jockey Club reported that “Suncity Group’s controlling entities ... [including] Alvin Chau ... pose tangible criminal and reputational risks to the club and indeed racing integrity in Hong Kong”.

Mr Chau’s Suncity Junket is listed on the Hong Kong stock exchange and they deny all allegations of impropriety. However, the Hong Kong Jockey Club report said: “Suncity key personalities have demonstrated links to numerous triad societies and organised crime figures”, and that Mr Chau and a colleague were reportedly members of the 14K triad society.

951    On 10 August 2019, Mr O’Neill sent an email to Star’s non-executive directors. In his email, he forwarded an email that he had received from Mr Jenkins, which contained the full text of the article published in The Age on 9 August 2019.

J.15.15    Mr Bekier’s conversation with Mr Buchanan about the Hong Kong Jockey Club Report

952    As I explained in the section of these reasons concerning Mr Bekier’s credibility, Mr Bekier gave evidence that at some point in August 2019, when “the Hong Kong Jockey Club [Report] was first kicked around in the media” he spoke with Mr Buchanan about getting a copy (T418.36-44).

953    It will be recalled that Mr Bekier gave evidence on oath, in May 2022, when he recounted that it was in “January or February of this year”, that is, 2022, that he had asked Mr Buchanan directly for a copy of the report. As I have already explained, Mr Bekier’s prior evidence as to when the alleged conversation occurred is probably better than his recollection of those events some three years later (T689.25-27).

954    The case against Mr Bekier does not turn on whether Mr Bekier in fact asked Mr Buchanan for a copy of the Hong Kong Jockey Club Report in August 2019, or whether that conversation or other discussions in 2019 relating to the report occurred.

955    ASIC’s pleaded case against Mr Bekier is that he did not know of the Hong Kong Jockey Club Report, as is apparent from its absence from the knowledge pleadings. Rather, the pleaded case is that he breached his duty by not asking questions which would have elicited it. That case goes nowhere.

J.15.16    The preparation of the Crown Allegations Board Paper

956    On 12 August 2019, Mr Brodie sent a further draft of the Crown Allegations Board Paper, and the six proposed attachments to it, to Ms Martin. The first page of the draft Board paper stated:

Alvin Chau received a $403,000 payment from Benny Xiong who was apparently being actively monitored by the Australian Federal Police (AFP) at the time. Mr Xiong was subsequently convicted of a money laundering offence. Mr Xiong is the subject of an exclusion. The Star has records of providing information to the AFP about this transaction.

957    In a section headed “Key Junkets Adversely Named”, the following was stated about Suncity:

Chau Cheok Wah (Alvin) is the Chief Executive Officer of Suncity, and currently holds a CCF of AUD$80 million. Suncity connected junket operators were the largest contributor at The Star in FY19, with turnover increasing from $4.0 billion in FY18 to $5.9 billion. Chau Cheok Wah has been accused of associations with organised crime figures and membership of a triad however Management has not been made aware of concerns by law enforcement agencies.

958    Later that day, Ms McIntosh emailed the Board, copying Mr Bekier and Ms Martin, to inform them that the Board papers for the 15 August 2019 meeting had been uploaded. As to the Crown Allegations Board Paper, Ms McIntosh said:

Paper 5.3 (Crown Resorts media and related matters) will be uploaded tomorrow so that [it] captures the most up to date information for consideration at the Board meeting.

959    On 13 August 2019, Ms Martin emailed Mr Power, Mr Houlihan and Mr White, stating that she was “doing substantial ed[it]s on the paper so probably best to discuss with me before you do any substantive edits”.

J.15.17    Suncity ceases operations in Salon 95 and considers withdrawing from the Australian market

960    On 12 August 2019, Star’s Senior Vice President VIP International Operations, Ms Heidi Huang, was informed that Suncity had made nearly all “Salon VIP” staff in Melbourne redundant, and would decide about its Sydney operations on 13 August 2019. This information was passed on to Ms Martin immediately, via Mr Kevin Houlihan and, on 13 August 2019, to Mr Hawkins.

961    On 13 August 2019, following discussions between Marcus Lim (President, International VIP Sales), a colleague and Mr Chau, it was agreed that Suncity would cease using Salon 95. It was proposed, however, that Star would permit Suncity to continue junket visits at Star.

962    Considering the contemporaneous documentary evidence, the departure appears to have been initiated by Suncity. Mr Bekier’s recollection is the departure was a “mutual decision”. It is unclear to me why that would be an accurate characterisation in the light of the materials in evidence; but in any event, he gave evidence he agreed with the decision, having regard to the media allegations about Suncity which were in the course of being investigated.

963    Also on 13 August 2019, Star was informed (through Mr Theodore) that Suncity was reportedly considering withdrawing from Australia altogether, because of the recent media coverage. Mr Theodore immediately passed this information on to Mr Bekier. It appears that similar information was relayed to Star by one of the journalists that had been covering the Crown allegations.

J.15.18    The final Crown Allegations Board Paper

964    On 14 August 2019 at 11:49am, Ms Martin sent Mr Hawkins the proposed draft of the Crown Allegations Board Paper. She said in her covering email:

Here is the proposed draft of the Board paper. Attachment 2 is still being finalised, but will be a stripped back version of the detailed table prepared for your reference ahead of the Board call on 30 July. (I have the pen on that currently.)

The initial draft was prepared by Micheil B and Michael W and I have added to the background and streamlined some of the content.

Please let me know if you have any comments / concerns on the draft before we finalise it this afternoon.

965    The draft Board paper stated that Attachment 2 “lists the key personalities/groups identified in the Nine Media reporting about Crown and provides information about the person, including any history and current status at The Star properties”. The section headed “Key Junkets Adversely Named” had been redrafted as follows:

The Crown allegations name a number of individuals, some of whom are associated with currently active junket operators (i.e. Suncity and Simon Pan). The Chinatown group was historically associated with The Star however the arrangement ceased on 2 December 2016 following the exclusion of Zhou (Tom) Juiming. Additional detail is in the table at Attachment 2.

966    Accordingly, the more expansive detail about Suncity and Mr Chau contained in the earlier drafts sent by Mr Brodie to Ms Martin (see [946] and [956]–[957] above), including the (incorrect) statement that management was not aware of law enforcement interest in Suncity and Mr Chau, was removed. The version of Attachment 2 that Ms Martin circulated was blank, with the text “[to be inserted]”.

967    Mr Hawkins provided comments to Ms Martin by email on 14 August 2019 at 12:03pm. Mr Brodie incorporated the change that Mr Hawkins had requested, through the inclusion of the statement “The Star has ceased trading with junkets associated with Pan”.

968    The final version of a paper entitled “Crown Resorts Ltd – Media and Related Matters” from Mr Hawkins and Ms Martin was uploaded at around 8:57am on 15 August 2019 and was made available in hard copy in the boardroom.

969    The paper was marked “[f]or information” and did not call for a decision by the Board.

970    The stated purpose of the Crown Allegations Board Paper was to provide “a summary of allegations made in respect of Crown Resorts Ltd (Crown) in recent media and related matters and provide … a brief to the Board on potential key risks and implications for The Star Entertainment Group”.

971    The paper noted that the media “has also turned to The Star and its International VIP business, particularly where there are overlaps in junket operators or individuals across Crown and The Star properties”.

972    The Crown Allegations Board Paper identified that the Crown Allegations concerned “two basic issue areas”, being: first, wilful disregard of anti-money laundering and counter-terrorism related risk associated with the transactions and activity of casino customers; and secondly, systemic disregard for the suitability of the individuals with whom Crown was trading and the conduct of those people.

973    The paper advised the Board that:

Management has and will continue to monitor media reports on the Crown allegations and related matters and a media response plan is in place.

Management has also formed a focus group comprised of senior leaders from operational areas, finance, compliance, legal and regulatory (including AML/CTF team) areas to monitor media, assess unfolding information, update risks assessments on areas of potential vulnerability, action recommendations arising from a review of the Crown allegations and co-ordinate responses to regulator requests for information. This group is reporting to the authors of this paper.

974    This indicated to the Board that Mr Hawkins and Ms Martin were continuing to coordinate a response to the media reports. It suggested that they were continuing to assess the media and unfolding information, and were updating Star’s risk assessments and action recommendations.

975    As had been requested by the Board, the paper also summarised Star’s engagement with regulators in relation to the matters raised in the recent media. The paper advised the Board that:

Liquor and Gaming NSW (L&G NSW) have written to The Star (Attachments 3 and 4) seeking:

•    information about the commercial relationship with people adversely named in the Crown allegations including historical status as operators or representatives;

•    advice in respect of mitigations taken to reduce risk from people named in the Crown allegations;

•    details on the current procedures and controls in place in respect of junkets; and

•    a copy of the AML/CTF Program[me].

On 13 August, L&G NSW also wrote to The Star informally requesting a list of all approved junkets and advice as to whether each currently remains approved. On 14 August, L&G NSW issued a formal notice requesting this information from The Star by 20 August (Attachment 5).

At the time of writing, there have been no requests for information from the Queensland Office of Liquor and Gaming Regulation (OLGR). On 13 August 2019, Mike Sarquis, Acting Deputy Director General Department of Attorney General and Justice (with oversight of OLGR) was reported in media as saying the following in relation to the Queensland regulator’s approach –

“In a direct sense there is nothing that we have a specific incentive to look at but whenever anything like this happens we step back and look at the control processes we have in place, make sure we’re comfortable with those both from our point of view and from Star’s point of view and make doubly sure that controls are appropriate. We liaise with other regulators and other organizations and just make sure there are no red flags there. Of course we’ll keep an eye on the Crown investigation and make sure there are no issues highlighted there either.”

The Victorian Commission for Gambling and Liquor Regulation (VCGLR) is conducting an inquiry into the matters raised in relation to Crown. The Star has had no contact from the VCGLR at the time of writing.

976    The paper also advised the Board of “[c]urrent key processes which reduce risk in respect of junkets” and “[r]elevant action areas already part of the risk mitigation plan associated with the recently approved AML/CTF Program[me]”. The latter included an “updated AML/CTF risk assessment of Suncity including consideration of enhanced compliance assurance procedures”.

977    There were six attachments to the Crown Allegations Board Paper.

978    Attachment 1 was entitled “Summary of allegations made against Crown (and The Star) in media as at 29 July”. The paper itself said that this attachment: (a) listed the main allegations made in the media; (b) identified the “key risk or vulnerability associated with each claim”; and (c) summarised the key control processes in place at Star that was said to mitigate against those risks. The allegations addressed in Attachment 1 included the following:

(a)    An allegation that Crown was “wilfully blind to the criminal activity of key business partners”, particularly regarding junket operators. It was noted that the allegations in this regard related to the “Hong Kong Jockey Club ban on Suncity”. The risks and vulnerabilities associated with this were that a failure to identify and cease to trade with criminals might expose casinos to criminal activity. The “existing processes” Star was said to have, included a “detailed cease to trade” policy in its AML/CTF Programme, and the process to approve junket operators includes “criminal history and other background checks in country”.