In October of this year, in the case of Precision Products (NSW) Pty Limited v Hawkesbury City Council  NSWCA 278, the New South Wales Court of Appeal (Court of Appeal) ruled that Hawkesbury City Council (Council) did not owe a duty of care to the appellant when issuing a clean-up notice under section 91 of the Protection of the Environment Operations Act 1997 (NSW) (POEO Act).
In dismissing the appeal brought by Precision Products (NSW) Pty Limited (Precision Products), the Court of Appeal stated that the exercise of the power in section 91 of the POEO Act is one of judgment for the regulatory authority. The Court of Appeal stated that it is not a power exercised for the benefit of either the occupier of the premises or the person to whom the notice is given, rather the exercise of the power is only for the benefit of the public by dealing with or preventing the escape of polluting substances. To infuse common law duties and the recovery of damages in such a field as the issue of notices under section 91, where governmental and legal controls already exist, would introduce an undesirable incompatibility and lack of coherence to the regime of environmental protection.
However, despite no duty of care being found, the Court of Appeal was critical of some aspects of the section 91 notice that was issued in this case, particularly finding that no procedural fairness was afforded by Council. The Court of Appeal found that this could have been a basis for challenge in the Land and Environment Court or meant that the notice could have been ignored as an invalid administrative act.
Whilst this case clearly provides that no duty of care is owed by a Council when issuing a clean-up notice under section 91 (or a prevention notice under section 96 or a prohibition notice under section 101), care must be taken when issuing such notices. Whilst no action for damages in negligence for breach of a duty of care will be available to the recipient of a notice, a person issued with an invalid notice will have a reasonable excuse not to comply and may bring an action for judicial review in the Land and Environment Court. The drafting of such notices should be undertaken with care to ensure that they are within power and are reasonable in the circumstances.
Persons in receipt of notices that they suspect may be invalid should seek legal advice on their options prior to complying with the notice.
This was an appeal from orders made by the District Court dismissing a claim by Precision Products for damages as a consequence of the alleged negligent exercise of statutory power by Hawkesbury City Council. Precision Products alleged that the Council's action caused damages to its business by requiring it to cease the use of, and to remove stock from, the premises.
From August 2001, Precision Products occupied premises in South Windsor and carried out a business of chemical warehousing and blending. On 30 April 2002, the property was inspected by officers of Hawkesbury City Council and three weeks later a notice was sent by the Council purporting to be under section 91 of the POEO Act. This notice stated that the premises were being utilised for the processing of hazardous chemicals in a manner where there was potential to cause danger to the environment and public health and where a development application had not been approved. The notice required, in part, that Precision Products cease the use of the premises for the processing of hazardous chemicals and remove all chemicals from the site.
Between 22 May and 8 July 2002, Precision Products ceased using the premises and removed chemicals from the premises. This, it was asserted, caused economic loss.
Precision Product's argued that the notice issued by the Council was invalid because no procedural fairness was afforded, the notice did not identify pollution incidents within the meaning of section 91, the work required was not 'clean-up' action within the meaning of section 91 and, in effect, amounted to a notice prohibiting business which the Council had no power to issue. As such, Precision Products argued that the Council was negligent in that it breached its duty of care by issuing an invalid notice.
Judge Gibb, hearing this matter at first instance in the District Court, found that the Council did not owe a duty of care and that, even if there was, section 43A of the Civil Liability Act 2002 (NSW) applied to protect the Council. The primary judge concluded that the proceedings were in substance to review a function of the Council and so were exclusively within the jurisdiction of the Land and Environment Court and the District Court has no jurisdiction to hear it. This argument on jurisdiction was, however, later conceded by the Council and the appeal to the Court of Appeal proceeded.
Precision Products argued that the primary judge was wrong in finding no established category of duty applied and that the Caledonian Collieries Limited v Speirs  97 CLR 202 (a decision of the High Court of Australia) was not given proper consideration, especially where their Honours said the following:
"The well settled principle applies that when statutory powers are conferred they must be exercised with reasonable care, so that if that those who exercise them could by reasonable precaution have prevented an injury which has been occasioned and was likely to be occasioned by their exercise, damages for negligence may be recovered."
Precision Products submitted that it was vulnerable because no warning was provided regarding the inspection of the premises, it was given no opportunity to comment, it was not told of any specific pollution incidents and the Council indicated that no development consent had been issued.
Council argued that a duty of care should not be imposed upon a public authority if the observance of such a duty would be inconsistent with, or have a tendency to discourage, the due performance of a public authority's statutory duties. The avenue of public law remedies in the courts to review unlawful decisions and relieve individuals of the consequences of them indicated, it was submitted, that no additional overlay of remedy based on the tort of negligence would apply unless misfeasance in public office could be established.
The Court of Appeal agreed with the Council's argument that no duty of care applied and that earlier cases do not provide a basis for concluding that whenever an authority decides to exercise any statutory power, it owes a duty of care to any person who might foreseeably be detrimentally affected in any way by the exercise of the power. The existence and scope of any duty must be analysed by reference to the principles governing such tasks and be harmonious and compatible with the legislative framework. In addition, the fact that the Environmental Protection Authority has an over-arching role in supervising public authorities in the exercise of their functions concerning the environment was of significance.
The Court of Appeal made the following comments about notices issued under the POEO Act:
- the exercise of the power in section 91 of the POEO Act is one of judgment for the regulatory authority and is not a power exercised for the benefit of either the occupier of the premises or the person to whom the notice is given, but is only for the benefit of the public by protecting the environment
- the nature of the possible action contemplated by the phrase 'clean-up action' in section 91 is likely to place a financial burden on the person obliged by the notice to act and must be complied with unless the person has a reasonable excuse
- the circumstances that give rise to a clean-up notice under section 91, a preventative notice under section 96 or a prohibition notice under section 101 are not clearly segregated and there is a potential for overlap. All, however, are concerned with the public good by protecting the environment
- the relevant suspicion or belief as to the occurrence of a pollution incident, or the carrying out of an activity in any environmentally unsatisfactory manner, includes the occurrence of a pollution incident or a serious manner of environmental concern. The relevant state of apprehension or belief is not one required to be judged having regard to the interests of the person or persons to whom the notice is directed
- the financial consequences of the notices are dealt with. Parliament has not sought to create a statutory avenue for compensation, and
- the power in section 91 is compulsory and enforced by the criminal law and, as such, an obligation to consider the interests of the person to whom the notice is directed may be seen as inherently in conflict with the direction and focus of compulsory State power.
The Court found that no duty of care applied due to the absence of the crucial elements of reliance, the assumption of responsibility and vulnerability. With regard to vulnerability, the Court provided that:
"The powers [under the POEO Act] are to be used to protect the environment and the public. [It] does not require the interests of those who are suspected, or believed, to be responsible for, or be able to remedy, the pollution to be taken into account for the purposes of a common law duty of care. ..to do so would, to a degree, be incompatible with the responsibilities under the Act..."
In conclusion, it was held that to infuse common law duties and the recovery of damages in such a field as the issue of notices under section 91 where governmental and legal controls already exist would introduce an undesirable incompatibility and lack of coherence to the regime of environmental protection.
Despite the above, the Court found that the obligation to afford procedural fairness existed and that the Council should have clearly enunciated its concerns to Precision Products. The failure to afford procedural fairness in this case resulted in the notices being invalid and there was a reasonable excuse for Precision Products not to comply and this could have provided a defence to any prosecution pursuant to the notice. The terms of the notice also went beyond dealing only with pollution incidents as, implicit within any section 91 notice, is a reasonable degree of proportional relationship between the pollution incidents and the clean-up action required. Here the reach of the notice was far greater than the incidents and the notice exceeded any proportional and reasonable response to the incidents.
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.