14 Mar 2013

Consultants prosecuted for providing false and misleading information

by Nick Thomas, Claire Smith

The NSW EPA's successful prosecution of another environmental consultant for making a false statement about asbestos shows it's taking waste management laws very seriously.

The NSW EPA has successfully prosecuted another environmental consultant for making a false statement about asbestos, in a signal that the EPA is taking waste management laws very seriously. It's a timely reminder for land owners, occupiers and developers to take care in engaging consultants and reviewing their work, and for consultants to ensure their work is true and accurate and withstands scrutiny, even if they are only trying to assist their clients.

The Court's decision in late February in Environment Protection Authority v Aargus Pty Ltd [2013] NSWLEC 19 also indicates the tough line the EPA is taking in alternative sentencing options, with potentially severe commercial consequences, and the Court's preparedness to consider those options.

Be careful what (and whom) you bring on site!

The owner of a large rural/residential holding in western Sydney was looking for some additional topsoil to complete its landscaping project. It located some soil via an earthmover's recommendation and imported about 160 tonnes of soil which it believed was suitable. For reasons which are not revealed in the Court's judgment, the stockpiles of imported soil attracted the attention of the local council, whose officers inspected the stockpiles and observed construction and demolition waste and suspected asbestos. The council officers instructed the property owner to stop importing the suspect soil and to stop spreading it on the property.

The property owner then engaged consulting firm Aargus, which was introduced by the same earthmover. An Aargus project manager inspected some of the stockpiles and observed two pieces of suspected asbestos fibro cement, but he saw no other asbestos materials. He removed the pieces of suspected fibro and took samples of the remaining soil stockpile. The analysis of the soil samples found no asbestos.

As a result, the project manager issued a Soil Classification Report (for the purpose of the EPA's Waste Classification guidelines) and an Asbestos Clearance Certificate stating the at the stockpiles contained no asbestos, and Aargus' environmental manager counter-signed the Report and Certificate. Importantly, the suspected asbestos material was not tested by Aargus and instead was placed in a designated asbestos bin outside its office.

About two weeks later the council officers re-inspected the property and saw several pieces of suspected asbestos in the stockpiles. They then accompanied the Aargus project manager back to the site, where he explained that the stockpiles looked different from how they appeared at his initial inspection, and attributed this to recent heavy rain. At the council's request, Aargus prepared another report, called a Site Remediation and Validation Report, which referred to the presence of asbestos in the stockpiles and recommended remediation.

EPA intervention

About a month later, the EPA inspected the stockpiles and subsequently issued a clean up notice to the earthmover. The EPA also seized the pieces of possible asbestos in the bin outside the Aargus office which tested positively for chrysotile and crocidolite asbestos. It then prosecuted Aargus, its project manager and its environmental manager for breach of section 144A of the Protection of the Environment Operations Act 1997, which states that:

"a person who supplies information, or causes or permits information to be supplied, that is false or misleading in a material respect about waste to another person in the course of dealing with the waste is guilty of an offence".

The defendants pleaded guilty and so the Court case was concerned with the appropriate penalty.

What was wrong with the environmental consultant's conduct

The focus of the prosecution was on the fact that, although the defendant's conduct did not cause any environmental harm (most likely because there was insufficient time before their error was corrected for their conduct to have any significant consequence), "there was a real and not remote chance" that environmental harm could have been caused.

The defendants tendered a report by another independent expert which concluded that their inspection, sampling and report had been completed satisfactorily and competently". Although the Court intuitively doubted that conclusion, it did not find against the defendants on this basis since the prosecution did not challenge that report. The project manager did, however, admit that the statements in the first Report and Clearance Certificate that no asbestos fibro was observed was misleading as he had in fact observed two pieces of suspected asbestos fibro in his first site visit.

The Court agreed and held that the statements in the first Report and Clearance Certificate in light of the project manager's actions amounted to misleading information. The environmental manager was also guilty because he was aware of the asbestos sheet removal and yet counter-signed the first Report and Clearance Certificate. In the course of his EPA interview, the project manager said:

"At the end of the day we're there to help the owners. We are engaged by the owners of the site, and it wasn't my intent to be misleading."

The environmental manager made similar comments, emphasising a desire to minimise cost to the client.

These comments resonated with the Court, which did not approve of the consultants' approach.

The EPA's proposal for a "draconian" penalty

The Court imposed modest, but substantial, fines on each of the three defendants, and ordered them to pay the EPA's costs.

The EPA sought an order requiring Aargus to publicise the conviction on its website for 12 months. This followed "widely publicised" media releases which the EPA had issued during the prosecution. Aargus opposed this, calling the proposal "draconian, oppressive and disproportionate to the offence", and claiming that such an order would destroy its business. Instead, Aargus proposed that it publicise the conviction once in a well-recognised trade magazine.

The Court accepted Aargus's submissions, but only because the offence in this case was "towards the low end of the scale". The Court then noted that "if it were at a higher level then there might be some justification for the course which the prosecutor advocates".

What this means for land owners, occupiers and developers

The clear message for land owners, occupiers and developers is that they must take care with the consultants they engage. The role of a consultant in a contamination or waste management project is extremely important, as the consultant's findings can guide the direction and outcome of the project. An incorrect statement in a consultant's work could have significant adverse consequences for the commercial outcome of a project, and could also lead to regulatory enforcement action (even prosecution, in some cases) of the land owner, occupier and/or developer.

Even the most well meaning consultants can cause difficulties for other stakeholders, so it is critical that these stakeholders ensure:

  • the consultant's terms of engagement and scope are appropriate;
  • the consultant's insurance and liability arrangements are adequate;
  • the consultant is accompanied by a site representative, where possible, during his site visit; and
  • the consultant's work is adequately reviewed.

What this means for consultants

Consultants need to be extremely careful to ensure that sampling and testing is carried out (in accordance with relevant statutory guidelines where relevant) and that the results are accurately reported in their report and certification documentation. It is not good enough to try to rely on limitation wording in reports.

What this means for all stakeholders

The EPA's prosecution and the Court's decision also highlight the significant commercial risks which breaches of environmental laws can carry. Publication of an offence on a person's website could have major consequences for the person's business, which go well beyond the cost of a fine or other payment.

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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.