08 May 2008

But I didn't know! A manager's responsibilities under environment protection legislation

by Jonathan Greenacre

The courts will take a punitive approach to managers' responsibilities under the Protection of the Environment Operations Act, whether or not they were aware of them, so they must actively learn about and act upon their environmental protection obligations.

The courts will take a punitive approach to a manager's responsibilities under the Protection of the Environment Operations Act 1997 (NSW) (the POEO Act), whether or not he or she was aware of them. As such, managers must actively learn about and act upon their environmental protection obligations.

If a corporation breaches a provision of the POEO Act, section 169 of the Act provides that a person who is a director of the corporation, or who is concerned in the management of the corporation, is taken to have breached the same provision.

Many managers are unlikely to be absolutely up to date with all of their company's environmental responsibilities. What approach will a court take when the company and its main manager clearly contravene the Act? Can the manager say "I didn't know"? The LEC's recent case of Environment Protection Authority v Hogan [2008] NSWLEC 125 provides some guidance on these questions.

The manager, the landfill, the waste and the EPA

David Hogan was the general manager of Riverstone Earth Moving Pty Ltd. The Environment Protection Authority granted an licence to Riverstone to operate a solid waste landfill, but then suspended it. Waste, particularly virgin excavated natural material ("VENM"), continued to be delivered to Riverstone's landfill.

This was a breach of section 144 of the POEO Act which states that a person (which includes a company) who is the owner or occupier of any land and who uses the land, or causes or permits the land to be used as a waste facility without lawful authority is guilty of an offence. This is a strict liability offence, meaning that the prosecution does not need to prove that the person had knowledge that it was committing an offence by performing certain acts.

The Land and Environment Court of NSW found that Riverstone clearly breached the Act by permitting trucks to enter and deposit waste without a licence. The main issue in the case was Hogan's liability under section 169.

The Court found that Hogan was in breach of the Act regardless of his beliefs (albeit mistaken) of his responsibilities, however genuine those beliefs were. The Court described Hogan's general argument that he did not knowingly commit a breach as a "serious misunderstanding" of the environmental compliance requirements of the Act.

The Court found that Riverstone's environment protection systems were "extraordinarily poor". Even though the company was on notice of the proposed suspension of its licence, no steps were taken to ensure that anyone read and understood the notice of suspension when it arrived. No-one asked the EPA to resolve any uncertainty about the date the suspension took effect or whether the suspension allowed VENM to be brought into the premises.

The Court attributed much of the responsibility for this inadequacy to Hogan. He knew that he was the nominated contact person for the EPA, had communicated with the EPA about the waste facility and was generally in a position to influence the conduct of the corporation.

Despite this obvious responsibility, Hogan "did not use all due diligence to prevent the contravention." For example, although Hogan knew that the company's waste licence had been suspended, he did not take "adequate" steps to inform himself about its requirements. He also did not ensure that other, less senior managers were fully apprised of the situation. Hogan also negotiated waste prices with many of the trucks entering the premises to deposit waste after the licence was suspended.

But I did nothing wrong

Hogan argued that, under his reading of the legislation, he was not liable because VENM does not constitute "waste", as defined under the Act. Unlike other waste, VENM can be reused. The Court disagreed, pointing out that the Act defined waste as something which might be "processed, recycled, reused or recovered".

But I didn't know

Hogan argued that his liability should be limited to trucks that he knew were entering the waste facility with VENM. The Court was particularly troubled by this lack of understanding of the nature of his obligations and was at pains to point out that his lack of knowledge was irrelevant to the charge, because the offence is "strict liability".

Considering the Court's uncompromising stance towards Hogan's mistaken beliefs about his environmental responsibilities, he may have expected to receive a heavy penalty. However, the Court reduced the penalty on the grounds that Hogan was of good character, was an undischarged bankrupt and had changed his plea from not guilty to guilty on the second day of the hearing on the basis that although he believed VENM was not waste, he accepted that he had not made sufficient inquiries of the supervisor of the waste facility to satisfy himself that certain loads of waste were VENM. He was still fined $18,000 and ordered to pay the EPA's costs, as agreed or assessed. These were estimated by the EPA to be approximately $30,000.

Significance

Hogan demonstrates the punitive approach that the court will take to a manager for a clear breach of the Act. The Court clearly places the burden of understanding environment protection regulation on the company and the managers of such companies. The defences open to managers are limited. The Court clearly restated that under section 169, a manager is liable for the company's environmental offence unless the person can establish that he or she was not in a position to influence the conduct of the corporation in relation to its contravention of the provision or were in such a position but used all due diligence to prevent the contravention by the corporation.

In light of this limited defence, managers should be proactive in learning about environmental protection obligations. The degree of understanding that a manager must have of the company's environmental obligations is unclear from the case, however it appears that he or she must know whether the company has a licence, the conditions of that licence, the type of materials which can be dealt with or activities authorised under the licence and, if relevant, when a termination or suspension of a licence takes effect.

Further, as licence holders must lodge annual returns certifying compliance, the manager must know whether there have been any non-compliances or, at the very least, have in place a robust system for identifying and reporting non-compliances.

Finally, it appears that a manager needs to take responsibility for ensuring the company complies with its own environmental policy. In this case, the Court was highly critical of Riverside's poorly co-ordinated attempts at conforming with the relevant environmental policy and Hogan's efforts at ensuring his company's compliance with that policy.

While the Court did not state what Hogan should have done to ensure the company complied with its policy, other cases suggest that a manager needs to perform the following to be able to argue that he or she exercised all due diligence to prevent the company's contravention of its environmental obligations and thus, access the defence provided by section 169:

  • implement the policy in a way which creates a culture of environmental compliance
  • reinforce the policy through staff training programs to ensure staff are aware of the company's environmental program and understand the environmental risks associated with activities carried out on site; and
  • regularly monitor the policy; and regularly review the policy to ensure that it is operating effectively and improving it where necessary to address increasing standards or to ensure that environmental issues are brought to the attention of the company or its officers.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.