Polluters’ Hip Pocket Targeted, Corporate Veil Pierced: Amendments to the Protection of The Environment Operations Act 1997 In NSW

Companies found harming the environment will soon have to cough up a maximum penalty of $5m, five times the current maximum. The heavy hand of regulation will also strike at directors' liabilities – directors and managers will face a greater risk of being personally prosecuted for pollution offences.

Late last year, the NSW Government passed a bill that will significantly change the Protection of the Environment Operations Act 1997 (NSW) (POEO Act). These reforms are contained in the Protection of the Environment Operations Amendment Act 2005 (NSW) (Amendment Act), which received assent in November 2005 and is expected to commence in May this year. Three of the most significant and controversial changes include hefty increases to maximum penalties for offences, increased risk for directors and managers of polluting corporations, and the broadening of waste offences including a new offence for land pollution. These changes are described below.

Penalties will significantly increase when the Amendment Act comes into operation, in some cases by as much as five times the current penalties under the POEO Act.

For example, Tier 1 offences such as disposing of waste in a manner harmful to the environment, or wilfully or negligently causing any substance to leak or spill that is likely to harm the environment, currently carry maximum penalties of $1m for corporations and $250,000 and/or seven years’ imprisonment for individuals. Under the Amendment Act, these penalties will increase for corporations to $5m for an offence committed wilfully or $2m for an offence committed negligently. For individuals, the penalties will increase to $1m and/or seven years’ imprisonment for an offence committed wilfully or $500,000 and/or four years’ imprisonment for an offence committed negligently.

In the case of Tier 2 offences such as water or air pollution, the maximum penalties will increase from $250,000 to $1m for corporations, plus further penalties of $120,000 for each day the offence continues. For individuals, the maximum penalty will increase from $120,000 to $250,000, with further penalties of $60,000 for each day the offence continues.

Given the drastic increase in these penalties, it appears the intention is that even for minor contraventions, corporations and individuals will face significant monetary penalties.

Directors face increased risks of being personally prosecuted for environmental offences as a result of changes included in the Amendment Act.

Under the POEO Act, corporations may be found vicariously liable for the acts of their employees and even the acts of contractors in certain circumstances. A corporation may also be held liable for pollution where the corporation was the "occupier" (as defined in the POEO Act) of the premises where the pollution occurred. Accordingly, corporations are already highly susceptible to prosecution for pollution offences.

Directors and managers are considered to be as guilty as their corporation. They can be personally prosecuted for pollution offences. However, as the Act currently stands there are defences available to directors and managers. The most significant of these defences is the "No Knowledge Defence" which is available where the director or manager had no actual, imputed or constructive knowledge of the corporation’s contravention.

Motivated by concern that the "No Knowledge Defence" was encouraging directors to deliberately ignore pollution caused by their corporation and to take a "head in the sand" approach to environmental responsibility, the Amendment Act deletes the "No Knowledge Defence". As a result, the "No Control Defence" (available where the director or manager was not in a position to prevent the corporation’s contravention) and the "Due Diligence Defence" (available where the director or manager used all due diligence to prevent the contravention) will be the only remaining defences available under section 169(1) of the POEO Act.

The Amendment Act also extends a corporation’s knowledge to include not only the intention of its officers, employees or agents but also their knowledge, opinion, belief and purpose.

As a result of these changes, directors and managers would be well advised to protect against personal prosecution by ensuring that they proactively prevent the corporation from polluting the environment. This will require directors and managers to actively establish and implement environmental management systems aimed directly at preventing environmental harm.

The Amendment Act creates a new offence for land pollution. Currently the POEO Act addresses land pollution by providing offences against the harmful disposal of waste. However, there was concern that polluters were able to avoid this offence on a technicality by arguing that the harmful substance was not "waste" as defined under the POEO Act. Accordingly, it was considered necessary to provide a separate offence for land pollution.

Under the Amendment Act, a person who pollutes land or causes land to be polluted is guilty of an offence and is liable for the maximum penalties for Tier 2 offences, described above. Defences available include instances of where the pollution resulted from an activity authorised under an environmental protection licence or under the regulations.

Given that land pollution is defined very broadly under the Amendment Act and that this is a strict liability offence, it would be prudent for those undertaking activities which may fall within the definition of land pollution to review their licence conditions or obtain a licence to ensure that a defence is available to them. Legal advice is also recommended in order to clarify the definition of land pollution.

Under the POEO Act as it currently stands the emission of odour is specifically excluded from the definition of a "pollution incident". Under the Amendment Act, this exclusion has been removed and therefore odour pollution may constitute a pollution incident.

Accordingly, the provisions of the POEO Act relating to pollution incidents will now apply to odour pollution. Most significantly, this means clean-up notices will be able to be issued in regard to odour pollution.

The Amendment Act introduces a myriad of changes to the POEO Act that will greatly influence the environmental policies of corporations and the consequences of polluting the environment. For information on changes not covered in this article, please contact us – refer to the contact details above.

The changes made in the Amendment Act are significant, wide-ranging and highly technical. As the changes are anticipated to soon come into force, we recommend that corporations consider their current activities and how the amendments will impact on those activities as soon as possible. Further, corporations should review their environmental strategies, ensuring they are appropriate for the activities being conducted and that they are being implemented at all levels. Legal advice should be sought where appropriate.
By Anthony Whealy and Kersten King, Sydney

This publication is provided to clients and correspondents for their information on a complimentary basis. It represents a brief summary of the law applicable as at the date of publication and should not be relied on as a definitive or complete statement of the relevant laws.