26 Jun 2014

Take care when providing information to the EPA

by Nick Thomas

A NSW Court has found a company and its directors guilty of giving the Environment Protection Authority misleading information in its Annual Return, sending a powerful message that information given to the EPA must not be false or misleading.

The NSW Land and Environment Court has found a company and its directors guilty of providing misleading information to the NSW Environment Protection Authority (EPA), in the company's Annual Return under its environment protection licence (EPA licence).

The decision in EPA v Wyanga Holdings; EPA v Cauchi [2014] NSWLEC 68 demonstrates the importance for EPA licence holders, and anyone else who provides information to the EPA, of ensuring that the information they provide to the EPA is not false or misleading, not only in what it says but what it doesn't say.

A problem with the Annual Return

Wyanga Holdings operated a quarry on the NSW north coast. Its EPA licence for the quarry specified a maximum annual extraction limit of 50,000 tonnes. However, the evidence indicated that Wyanga extracted almost twice that amount in the relevant year.

Wyanga's EPA licence contained a standard condition requiring it to provide an Annual Return, in a form provided by the EPA. That form included a "statement of compliance" with the EPA licence conditions and a certification of the "statement of compliance". Wyanga acknowledged in its Annual Return that it had not complied with two conditions of the EPA licence but did not refer to the extraction limit condition. Its directors signed the certification.

The Court found that the information in the Annual Return was misleading in a material respect, because it did not refer to the exceedance of the extraction limit.

Prosecution of the more significant offence

The EPA prosecuted the corporate licence holder and each of its two directors with the offence of providing false or misleading information under an EPA licence condition, under section 66(2) of the Protection of the Environment Operations Act 1997 (POEO Act), instead of the lesser offence of certifying a statement which is false or misleading, under section 66(4) of the POEO Act.

This is important because the offence under section 66(2) carries a much higher maximum penalty ($1 million for a corporation and $250,000 for an individual) than the offence under section 66(4) ($250,000 for a corporation and $120,000 for an individual).

The defendants argued that the appropriate offence was the lesser offence under section 66(4), and that the offence under section 66(2) applies only to the provision of monitoring information. However, the Court held that the section 66(2) offence can relate to any information provided under an EPA licence condition, and it found each of the defendants guilty of that offence.

A sentencing hearing is scheduled for next month.

Key lessons from the case

The case is another indication that the EPA is prepared to take strong action against a person it believes has provided false or misleading information, and to hold individual directors responsible for the actions of a company. The POEO Act also allows the EPA to prosecute individuals involved in the management of a company, and it has done so on previous occasions. Although the defendant in this case is a small company, the risk for directors and managers applies to all companies.

It also highlights the scrutiny which the EPA will apply to an EPA licence holder's Annual Returns.

Standard EPA licence conditions require licence holders to provide information to the EPA in a variety of situations, including a pollution incident, so licence holders should be careful about the information they provide to the EPA in all of these situations.

Directors and managers of companies which hold EPA licences, and all companies involved in environmentally sensitive activities, should ensure they have robust systems in place to collate and check information which is provided to the EPA. These systems should be backed by a sound understanding of legal compliance risks, and good training and internal audit programs.

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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.