Directors’ duties and the use AI – Court case example

Oren Polichtuk

Senior AssociateAitken PartnersView Profile

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

This recent Federal Court decision highlights the growing use of AI by company directors and boards, and the risks of relying on technology to meet governance obligations. While AI can be a useful tool for reviewing and summarising information, directors remain personally responsible for exercising informed judgment and overseeing risks. In this article, we explore the key findings of the decision and the practical implications for directors considering how to use AI effectively while still meeting their legal duties.

Key take aways

1. Directors must actively engage with board materials and cannot rely on information overload as an excuse.
2. Boards must ensure they absorb and focus on the information necessary to identify material risks.
3. AI may be used as a tool to assist understanding, but directors must independently evaluate the output.
4. Reliance on AI does not provide a defence to a breach of their duty of care and diligence under s 180(1) of the Corporations Act.
5. Boards should consider implementing governance frameworks to guide the use of AI in board and management processes.
6. Human judgment remains the cornerstone of directors' duties under Australian law.

The Federal Court decision of Bekier concerned ASIC's civil penalty proceedings against former directors and senior executives of The Star Entertainment Group concerning Star's dealings with junket operators, anti-money laundering risks, and misleading representations connected with payment arrangements.

Justice Lee delivered a lengthy judgment regarding directors' duties and board oversight and ultimately found that the former CEO and former Chief Legal and Risk Officer/Company Secretary breached their duty of care and diligence under s 180(1) of the Corporations Act. However, ASIC’s claims against the non-executive directors failed.

The judgment reinforces that:

(a) executive officers with operational responsibility are expected to know more and do more;

(b) non-executive directors are not guarantors of management conduct; and

(c) liability depends on the responsibilities actually held by the particular officer or director.

Justice Lee emphasised that directors cannot be passive recipients of board papers and that they must read and understand material provided to them, engage critically with information, ask questions where risks are apparent and take reasonable steps to place themselves in a position to guide and monitor management.

The Court rejected any suggestion that directors can excuse inattention by pointing to the sheer volume of material they receive or that boards can simply accept management's framing of issues. Directors are expected to exercise control over what information comes before the board, how risks are escalated and whether reporting systems are adequate.

The decision also appears to be one of the instances of judicial comments on directors' use of generative AI by directors. Justice Lee recognised that modern directors face an enormous volume of information and that technology may help them process it. However, he rejected the notion that information overload can excuse a failure to engage with board materials. Directors remain personally responsible for understanding the matters on which they are required to make decisions.

Justice Lee noted AI may help directors comprehend and organise information, but it cannot substitute for human judgment.

“directors cannot content themselves by being passive recipients of information. An important initial step in taking an intelligent interest in the information relevant to guiding and monitoring management is exercising control and preventing Brobdingnagian electronic document dumps masquerading as board packs. Those observations were made conscious of the contemporary reality that individual public company directors are now commonly making use of artificial intelligence to assist them in navigating material provided by management. This cannot be politely overlooked. There is nothing inherently objectionable in obtaining such assistance, but what ought not occur is that this development becomes an excuse for a failure to instil discipline in the provision of information to directors or leads to a quiet normalisation of private reliance by them upon computer-generated distillations, unregulated by any agreed policy. Proper collective governance requires transparency about how information is being reduced and relied upon in either the preparation of board packs by management, or their digestion by directors. The use of technology may assist comprehension, but it cannot displace judgment. The statutory obligation imposed by s 180(1) remains personal, and it requires informed human judgment.”

The Court recognised that directors may utilise AI tools to summarise lengthy board papers, identify themes and issues and assist directors in navigating large datasets. But the legal obligation imposed by s 180(1) remains a personal obligation of the director. Delegating analysis to AI does not transfer responsibility.

In practical terms, where a director relies on an AI-generated summary that omits a critical risk, the director is unlikely to avoid liability by arguing that the AI failed to identify the issue. Responsibility for compliance with s 180(1) remains with the director.

The judgment can also be seen as a warning against informal or unsupervised use of generative AI by directors and the Court’s observations suggest that boards should consider implementing formal AI-use policies, establishing controls on confidentiality and data input, training for directors regarding AI limitations and implementing procedures requiring human review before decisions are made. AI should operate as an aid to, not as a substitute for governance.

As artificial intelligence becomes increasingly embedded in corporate decision-making and governance processes, boards and directors face new legal, regulatory and risk-management challenges.

At Aitken Partners, we assist boards and senior executives to navigate these challenges by advising on directors' duties, AI governance frameworks, board protocols, risk management processes and the development of tailored AI-use policies.

We help organisations implement practical governance structures that support innovation while maintaining appropriate oversight, accountability and regulatory compliance, enabling boards to leverage AI confidently and responsibly.

Get in touch with us if you would like to know more.