11 May 2006
Sydney, 11 May 2006: Companies in New South Wales along with their management teams have been hit by yet another round of regulation that could leave them seriously 'hanging out to dry'.
New pollution laws that have come into effect in NSW not only substantially increase the penalties for corporations guilty of environmental offences but also expose directors and senior managers to a much greater risk of personal liability for offences of the company with the potential to result in substantial fines and/or prison sentences, a leading environment lawyer warns.
Peter Briggs, a partner in the Planning & Environment practice at national law firm Clayton Utz, says that changes to the Protection of the Environment Operations Act 1997 (NSW) mean that directors and managers who fail to ensure their companies have proper environmental management systems in place may be at risk of being held personally liable when their company commits a pollution offence - even where the director or manager had no knowledge of it.
"The amendments to this legislation raise the bar for directors and senior managers of companies that are at risk of committing a pollution offence, which includes companies engaged in property and development, construction and manufacturing," Mr Briggs says.
Under the personal liability provisions of the Act, Mr Briggs says he believes that the scope of available defences has been narrowed by the removal of the defence of "no knowledge " that had previously been available.
"The only practical defence for a director is to demonstrate "all due diligence". This brings the Act into line with the personal liability regime under NSW's current Occupational Health and Safety laws," Mr Briggs says.
As a result of the changes, Mr Briggs advises directors and senior management to take a more pro-active interest in environmental management, which will probably mean more than simply issuing policies and directions.
"Directors and managers should seek advice about whether they can make out a due diligence defence if they or their company are prosecuted."
Under the new laws, the maximum penalties for 'Tier 1' pollution offences - the most serious offences involving 'wilful' or 'negligent' conduct - are up to $5 million for a corporation and $1 million (up from $250,000) for individuals and/or seven years' imprisonment. 'Tier 2' offences, which are strict liability offences, attract fines of up to $1 million for a corporation, and $250,000 and/or 4 years' imprisonment for individuals.
Mr Briggs warns that directors and managers should also be concerned about the significant management time and costs involved in a Department of Environment & Conservation (DEC) investigation following a pollution incident. "The Environment Protection Authority has wide-ranging investigation powers, such as the power to interview, which can potentially cause significant impacts on management time," Mr Briggs says. "In addition, the cost to a company's or individual's reputation of a successful prosecution are hard to measure."
There are also new provisions in the Act that introduce alternatives to prosecution. "The DEC can now require an offender to give enforceable undertakings in relation to matters such as training programs or compliance systems," says Mr Briggs.
