07 Apr 2010

Accidental breach of section 77A notice leads to $40,000 fine

by Rachel Baird

The breach of the section 77A Notice could have been avoided through the implementation of a robust environmental compliance system.

The recent Federal Court case, Minister for the Environment, Heritage and the Arts v PGP Developments Pty Limited [2010] FCA 58 (12 February 2010) is the first instance in which the Minister has sought a penalty and declaration in relation to a section 77A Notice under the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act). The case was prosecuted even though no damage to the Great Barrier Reef was identified.

The Development and the section 77A notice

Back in 2004, PGP Developments referred stage 2 of an 8 stage residential development to the Environment Minister. Stage 2 involved the construction of around 160 residential blocks over an 18 hectare site very close to the boundary of the Great Barrier Reef World Heritage Property. The decision made by the Minster's delegate on 11 November 2004 was that the action was not a controlled action if it were undertaken in a particular manner. This decision was made under section 77A of the EPBC Act and a Notice was issued to PGP Developments to that effect.

This section provides that an action is not a controlled action if it is taken in a particular manner as provided for in the Notice.

As long as the construction and development was undertaken in accordance with the conditions specified in the Notice, PGP Developments would not breach any controlling provision of the EPBC Act. The importance of acting in compliance with the Notice is underscored by the offence provision in section 77A(2) of the Act which imposes a maximum corporate penalty of $1,100,000 for taking any action that is inconsistent with the Notice.

The lagoons

The Notice required PGP Developments to construct two lagoons to provide for the settlement of sediments prior to discharge to Edgecombe Bay, to protect the Great Barrier Reef and marine ecosystems from sediment laden run off during the wet season.

one of the directors of PGP Developments marked out the area of the two lagoons and initial construction commenced immediately. A survey showed the volume of both lagoons was inadequate. A method to enlarge both lagoons was agreed upon between the director and civil engineering company and further earthworks were undertaken in early December 2004.

A Department of Environment and Heritage survey in late January 2007 found lagoon number 2 had a capacity of 450m3 well short of the 2,300m3 required under the conditions. It was not disputed that PGP Developments voluntarily and at its own expense carried out the required remediation works to increase the capacity of the lagoon. It was also agreed that the failure to meet the conditions of the Notice was the result of "inadequate attention being given to the design and construction of the lagoon."

Setting the penalty

In considering the amount of the penalty Justice Stone noted that: "[T]he amount of the penalty imposed in respect of other contraventions provides little guidance as to the permissible range here because, as the parties submit, they involve different provisions with different maximum penalties."

Justice Stone took into account a number of factors including the significant risk of damage to the Great Barrier Reef (although no damage was identified); the fact that the nature and extent of the damage caused by the contravention was at the low end of possible contraventions of section 77A(2) of the EPBC Act; the lack of evidence to suggest that the contravention was conscious or deliberate or motivated by commercial interests and the full co-operation of PGP Developments in the investigation and in conducting the remediation work required to increase the capacity of the lagoon.

Although specific deterrence was not a significant factor in the case, Justice Stone did note the need for general deterrence such that "[t]he penalty must not invite potential contraveners to discount the consequences of contravention."

She accepted the amount of $40,000 submitted by the Minister and PGP Developments was an appropriate penalty in the circumstances, and also made a declaration that PGP Developments had breached the Notice.

What this case means for other proponents

This case sends a clear signal to proponents that the Department of the Environment, Waters, Heritage and the Arts is prepared to investigate and prosecute breaches of the EPBC Act. In this instance PGP Developments did not deliberately set out to contravene the Notice and was not motivated to do so to save costs.

Despite this, PGP Developments' error cost it $40,000. It's the sort of mistake that should be prevented by a robust environmental compliance program, and this decision serves as a good reminder to review your compliance system.

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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.