In July 2025, it was reported in the Australian media that a shareholder of the SkyCity Entertainment Group had sought leave to commence proceedings in the name of the company against former executives and directors of the company, an operator of casinos in Australia (Adelaide) and New Zealand.
The shareholder, Stephen Wright, has sought leave from the NSW Supreme Court for the filing of an application in relation to failures by the casino operator to comply with anti-money laundering and counter-terrorism financing (AML/CTF) laws in its Adelaide casino, which led to SkyCity paying an $67 million penalty to Australia’s financial crimes regulator, AUSTRAC, last year.
The action foreshadowed by the shareholder is a statutory derivative action under section 236 of the Corporations Act 2001 (Cth). This provision allows persons, such as current or former members (shareholders) or officers of a company, to bring proceedings. A court is required to grant leave if satisfied that:
- it is probable that the company will not itself bring the proceedings;
- the applicant is acting in good faith;
- it is in the best interests of the company that the applicant be granted leave;
- the applicant has provided adequate notice to the company or it is otherwise appropriate for leave to be granted; and
- there is a serious question to be tried.
If leave is granted, the shareholder’s application would therefore be brought effectively on behalf of the company, in this case SkyCity Adelaide, and any penalties which may result would be paid to SkyCity Adelaide, less costs and any amounts paid to litigation funders.
The shareholder has targeted eight former executives and directors of the SkyCity Entertainment Group and alleges that they breached their duties of care and diligence to act in good faith and in the best interests of the corporation during the period from 7 December 2016 to 14 December 2022. The application seeks to recoup some or all of the $67 million fine paid to AUSTRAC last year.
The $67 million fine underpinning the application by the shareholder was the result of an agreed penalty in Federal Court proceedings in which SkyCity admitted that it had breached its AML/CTF obligations in relation to its Adelaide casino operations by failing to implement proper ongoing customer due diligence, knowingly allowing high-risk clients to transact in ways which obscured the source and ownership of funds and failing to adhere to adequate board-level oversight of its AML/CTF framework. Wright has claimed that the losses suffered by SkyCity were caused or overseen by the relevant former executives and directors and are equal to the amount of the $67 million AUSTRAC penalty.
If leave is granted for Wright to proceed with his application, and particularly if a judgment is awarded in the company’s favour, the potential effects on gambling industry participants (including directors and officers of those participants) are significant.
This potential dual exposure arising from both regulatory enforcement and shareholder-led recovery actions materially elevates the risk environment for directors and senior officers of gambling organisations. This is because, except in the case of egregious failures by executives, it has traditionally been the case that the financial burden for compliance failures principally rests with the corporate entities rather than directors and officers personally. The application sought to be lodged by the shareholder demonstrates a potential shift – individuals may now face an increased risk of personal liability for failing to discharge their governance duties, particularly where those failures are seen to contribute to regulatory breaches, in addition to reputational harm or adverse media publicity.
The context of the shareholder’s application is also of interest. This is occurring amid intense scrutiny of the gaming and gambling sector in Australia, particularly given the recent enforcement actions taken against other Australian casino operators, Crown Resorts and Star Entertainment. Crown, for example, agreed with AUSTRAC settlement of enforcement proceedings which involved the payment of a penalty of $450 million for its AML/CTF breaches, while Star is facing multiple inquiries and enforcement action likely to result in substantial fines, being possibly well in excess of $100 million, in both New South Wales and Queensland, and is currently the subject of independent regulatory management. Australia’s corporate regulator, the Australian Securities and Investments Commission (ASIC), is also currently pursuing 11 current and former directors and officers of Star Entertainment in civil penalty proceedings in the Federal Court. ASIC is alleging that the directors and officers failed to adequately attend to risks that Star Entertainment’s casinos were being used to facilitate money-laundering through its junket programs.
If the shareholder’s application succeeds in effectively shifting regulatory loss back onto individuals via a derivative action, this may change how AML/CTF failures and compliance more broadly are handled by gambling organisations in the future. It is also notable that the company has apparently resisted the opportunity to comment on this matter.
In this case, SkyCity has already been penalised by AUSTRAC to the tune of $67 million. Now, former directors and officers are – potentially – being pursued by a shareholder for their alleged role in the conduct that led to the AUSTRAC penalty. There may therefore be a persisting sense of cumulative punishment in relation to the application sought by the shareholder.
There is a distinction here between corporate liability for regulatory non-compliance and personal liability for breaches of directors’ duties (being a separate civil law obligation), even though both forms of liability arise from the same circumstances. As noted above, this highlights the growing perception that directors and officers may increasingly face parallel and compounding forms of accountability: one regulatory, one fiduciary. We would expect that this would be likely to have an impact on the willingness of people to put themselves forward to be directors and officers of gambling organisations, as well as the way in which the responsibilities of those persons are carried out.
The issues involved would be considered in the context of relevant insurance cover – it would normally be expected that coverage would extend to certain civil claims for directors duties, but it is less clear whether coverage would extend to claims arising from a failure of the company to comply with criminal or quasi-criminal obligations (such as failures to comply with AML/CTF obligations).
At the time of writing, the court has not yet decided whether to grant the shareholder leave to proceed with his application. We are monitoring this with interest. What is clear already, however, is that there is an overlap between the duties of directors and compliance culture; something which is relevant not only for the gambling industry. Where the facts permit, courts and regulators are clearly willing to treat AML/CTF failures as not just technical breaches of the law, but also as governance and compliance failures at the board level. The recent investigations into Crown and Star have also shown that remedial steps which are delayed or superficial will not be sufficient; genuine cultural and systematic reform is critical. It is also clear that robust AML/CTF frameworks and documented board oversight are essential for not only ensuring regulatory compliance, but also for mitigating the risk of shareholder litigation.