Crowns special manager added headache for casino board

Crown Resorts directors could be put in an untenable position of having decisions they believe are in the best interests of the scandal-plagued company overridden by the new “special manager” appointed to monitor its Melbourne casino, legal experts say.

Victoria on Tuesday appointed former public sector corruption watchdog Stephen O’Bryan to be embedded in Crown’s flagship Southbank complex for the next two years to ensure it reforms itself, after the state’s royal commission ruled it unfit to run a casino.

Crown Melbourne.Credit:Jason South

Mr O’Bryan will have unfettered access to all areas of the casino, its records and board meetings, and after two years will decide whether Crown’s licence should be cancelled.

He will also be able to veto board decisions and issue directions to the company, which the state government said makes him the “ultimate decision-maker” at the casino.

Ian Ramsay, director of Melbourne University’s Centre for Corporate Law, said Mr O’Bryan would have “unprecedented” powers over a solvent company, which would be “exceptionally challenging” for Crown’s directors, practically and legally.

“Directors have a duty to exercise discretion, but here, they’re going to be told by statute to comply with the directions of the special manager,” Professor Ramsay said.

“If I was an independent director on the board I’d really want to be thinking carefully and getting some good legal advice about how this new system fits with my core obligations under the Corporations Act to be exercising independent judgment, knowing that tomorrow I could be told what to do.”

Professor Ramsay said a director would have no choice but to resign if they believed their decisions made according to their fiduciary duties conflicted with Mr O’Bryan’s directions.

“I’m not saying it can’t work, but this is new territory,” he said.

University of Sydney corporate law professor Jason Harris said Crown’s directors would be in a similar situation to those at insolvent companies under administration, where their duties still applied but were watered down because a third party had ultimate control.

“In this sort of situation you’re almost half pregnant - that’s going to be a challenge for the directors,” he said. “But they had little choice because the other option was completely killing the business.”

Helen Bird, a corporate governance expert at Swinburne University, said there was tension in Mr O’Bryan’s role as both a decision-maker at Crown and also the person who will decide whether it should keep its licence in two years’ time.

“The problem that I foresee going ahead, is if some of this is not fixed, will some of that blame be apportioned to the government representative?” she said. “Does he take on, in a sense, some of the problems?”

More details about Mr O’Bryan’s role and powers were revealed on Wednesday with the tabling of draft legislation amending Victoria’s gambling and casino laws, including that he must report back to the casino regulator every six months on Crown’s rehabilitation and that he will be able to appoint outside experts to help carry out his work.

Commissioner Ray Finkelstein’s final report, released on Tuesday, found Crown had engaged in “disgraceful” behaviour including praying on patrons with a gambling addiction; knowingly breaking laws and regulation; dodging tax; and bullying the state’s gambling regulator.

But the former Federal Court judge did not recommend Crown be immediately stripped of its licence because of the economic harm that would inflict on Victoria, and the extensive reforms underway which include an almost complete cleanout of executives and directors over the past two years.

Crown’s shares jumped 8 per cent on the back of the news on Tuesday, and on Wednesday slid 1.9 per cent to $10.30.

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