Australia: Far reach of chain of responsibility law in Queensland

Last Updated: 14 June 2017
Article by Brent Van Staden


The Department of Environment and Heritage Protection (EHP) has recently issued Guidelines that it must consider when issuing a protection order. We take a look at what they mean for company directors, shareholders, service providers, consultants, company secretaries, general counsel, risk officers and others who are involved in Queensland resource projects who may be at risk of personal liability if found to be a "related person", and what they can do to manage their risk.


It's been about a year since the chain of responsibility law was introduced in Queensland.

Previously, the EHP could issue environmental protection orders to a person undertaking environmentally relevant activities to secure its compliance with environmental obligations in Queensland.

The law now also subjects not only related bodies corporate of a company, but "related persons" of a company, being persons with a "relevant connection" to a company, to binding environmental protection orders from the EHP to satisfy the environmental obligations of the companies in Queensland. Recipients of such orders are liable to satisfy the environmental obligations of the company that holds an environmental authority in Queensland, thus negating limited liability protection.


Of interest to persons directly or indirectly involved in Queensland resource projects, is to what extent the Law exposes them to personal liability risk and how to manage that risk.

Recently, the EHP published Guidelines that must be considered when issuing a protection order.


The EHP may decide that a person has a relevant connection with a company if it is satisfied that the person:

  • is capable of significantly benefitting financially, or has significantly benefited financially, from the carrying out of a relevant activity by the company, or
  • the person is, or has been at any time during the previous two years, in a position to influence the company's conduct in relation to its compliance with obligations under the Act.

The determination by the EHP of whether a person has a relevant connection with a company will be made depending on the individual circumstances of each case. Departmental officers will investigate and collect a range of evidence to establish the relevant connection. A helpful list of potential indicators is included in the Guideline.


What constitutes a financial benefit is a factual question. The key issue is how to determine whether the financial benefit, is significant. The Guideline says, "in a general sense, something is 'significant' when it is important, notable, or of consequence, having regard to its context."

In addition, the Guideline says that the degree of significance may depend on:

  1. the proportion of the benefit relative to the total assets or benefit available from the activities carried out under the environmental authority, or
  2. the proportion of the benefit, relative to the costs of restoring or rehabilitating the environment, or protecting the environment from harm, or
  3. the abnormality of benefit received, for example where a benefit received as a wage was above normal market value

Only significant financial benefits from the period of time relevant to the causation (and, if relevant, mitigation) of the issue or incident being investigated will be considered.

This is not a test that easily lends itself to quantitative assessment, which means the liability risk is hard to assess. It may be that market value supplies of goods and services to a company will not be caught by (c), but (a) and (b) may still apply. Certainly, material shareholdings pose a real risk, as may significant mining services contracts. Many junior resource companies are closely held, amplifying the risk in that sector.


The Guideline articulates the test as follows: [a person occupies] any position in which a person is capable of influencing the decisions or actions of the company in relation to its compliance with the Environmental Protection Act whether in an official or unofficial capacity. This can include external administrators and financial institutions.

Matters to be considered by the EHP include:

  • the nature and duration of the relationship between the person and the company
  • the potential for the person to exercise decision making powers to direct the company's conduct
  • the potential for the person to provide advice or expertise to influence the company's conduct
  • any implications of other legislation or law on the exercise of powers by the related person (for example, the Corporations Act 2001 (Cth))

It is immediately apparent that significant shareholders, consultants and providers of finance are materially at risk. Some guidance may also be gleaned from instances where the courts have found persons to be shadow directors.


EHP must consider all reasonable steps taken

In considering whether to issue a protection order to a related person, the EHP delegate must consider whether the related person has taken all reasonable steps to ensure that the company has complied with the Act and that there has been adequate provision to fund rehabilitation.

What are reasonable steps will depend on the circumstances of the situation at hand and the extent to which the person was in a position to influence the company's conduct. The Guideline says:

What is reasonable for one related person will arise from the context of their specific role, powers, responsibilities or other relationship to the company and may differ greatly from the steps which would be reasonable for another related person. The department will also give consideration to:
  • the state of knowledge at the time, and in the lead up to, the issue or incident; and
  • the foreseeability and probability of the issue or incident occurring.

In assessing whether the related person took all such reasonable steps, the EHP must investigate the matter with reference to the following:

  • the legal and practical ability of the related person to influence the company's conduct in relation to its environmental activities - if a related person was in a position to make financial decisions for, or on behalf of the company at a time relevant to the particular matter, the department may consider any financial decisions made by the related person
  • the extent of actual and expected knowledge of the related person in relation to the environmental obligations of the company
  • whether the related person was in a position to and did influence in a positive or negative way to ensure environmental harm was avoided and adequate provision was made for rehabilitation
  • the reliance that the related person placed on others to ensure that the company complied with its obligations and adequately provisioned funds, and whether this was reasonable

Issues to consider

Being a related person does not of itself trigger the issue of a protection order – culpability of the related person must be established.

There is no pre-determined order in which the Department will pursue related persons. This means that one cannot rely on any automatic apportionment of the liability and where other related persons are outside Australia, the risk for the Australian-based parties is magnified.

If you are a director, there are a number of issues related to the law and your duties as a director, that need to be considered.


Company shareholders, directors, consultants, service providers, banks, executive officers, secured creditors, external administrators and others, are potentially related persons.

At risk persons should develop and implement an adequate due diligence, risk-assessment and management strategy, which includes:

  • taking all reasonable steps to ensure that the company has complied with its environmental obligations
  • ensuring, to the extent of their power, that there has been sufficient provision for the funding of any rehabilitation that might be required in the event of non-compliance with those obligations
  • ensuring that persons providing goods or services to the company enter into contracts that treat the risk represented by this law


Your action will depend on your relationship to the company.

For directors, a lawyer can assist you with integrating an appropriate risk management strategy into your risk matrix and risk manual, as well as implementation of that policy.

For consultants and service providers, a lawyer can assist you with amending your terms of trade or standard agreements to account for and manage your exposure.

For banks, a banking and finance legal expert can update your standard documents to provide for this risk.

Brent Van Staden
Corporate advisory
Colin Biggers & Paisley

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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