Game Changing Reform to NSW Environment Protection Laws

• New power for the EPA and other environment regulators to issue clean-up notices and prevention notices to:
  • current and former directors and persons concerned in management; and
  • related bodies corporate, of companies responsible pollution or contamination, if the company does not comply with notices issued to it.
• Making it an offence for a:
  • director or person concerned in management;
  • related body corporate; or
  • director or person concerned in management of a related body corporate,

to receive or accrue a monetary benefit as a result of certain proven environmental offences by a company.

• New and expanded powers for the EPA and other prosecutors to obtain monetary benefit orders requiring:
  • directors or persons concerned in management;
  • related bodies corporate; and
  • directors or persons concerned in management of related bodies corporate,

to repay monetary benefits accrued as a result of certain proven environmental offences by a company.

If passed, the Bill will significantly increase potential liability of those concerned in the management of companies (including related bodies corporate) who commit environmental offences or fail to comply with environment protection notices in NSW.

Managers, directors and related bodies corporate could be put on the hook:

• to clean up pollution or contamination caused by a company;
• to carry out works required by a prevention notice to ensure that activities of the corporation are carried on in future in an environmentally satisfactory manner; and
• to repay “monetary benefits” received as a result of any proven offence.

The proposed measures are not entirely unique to NSW. Queensland passed “chain of responsibility” environment legislation in 2016 and put it to use in the long-running Linc Energy matter.

However, the proposal for directors and related bodies corporate to be automatically liable for an offence if they profit from a proven offence of a corporation under environment protection legislation is likely to be the source of significant concern. This is especially the case as the Bill does not propose any defences. This means that a director or person concerned in management could potentially be liable even if they have taken all due diligence to prevent the commission of the offence by the company, although the EPA is unlikely to commence a prosecution in such circumstances.

• New powers for the EPA to issue clean-up notices and prevention notices as soon as the EPA is notified of contamination of land, even before the EPA has determined that the land is “significantly contaminated”.
• New power for the EPA to require financial assurances to ensure compliance with under ongoing maintenance orders, restrictions and public positive covenants.

• The Bill includes a new general offence of giving information to the EPA that is false or misleading in a material respect.
• A defence applies where the person took all reasonable steps to ensure the information was not false or misleading in a material respect.
• Greater penalties apply where the false or misleading information is provided knowingly.
• Directors and other persons involved in the management of the corporation will be liable for any offence committed by the company under the new provision if they ought reasonably to know that the offence would be committed and failed to take all reasonable steps to prevent the provision of false and misleading information.

This new false and misleading information offence is significant because it applies regardless of whether the information was provided:

1. voluntarily; or
2. in circumstances where the information was known to be false or misleading.

The new offence is an apparent response to the decision in Environment Protection Authority v Eastern Creek Operations Pty Limited [2020] NSWLEC 182, where the defendant successfully resisted an EPA prosecution which alleged that the provision of false or misleading information by establishing that the notice in response to which the information was provided was legally invalid.

The new offence would create material new risks for entities regulated by the EPA, and highlights the need to take great care in taking “all reasonable steps” to ensure that information provided to the EPA is not false or misleading.

• Substantial increases to some maximum penalties for offences under environment protection legislation, including the CLM Act, to more than double the current maximum penalties.

• New power for the EPA and other environmental regulators to issue a clean-up notice to persons who is “reasonably suspected of contributing”, to any extent, to a pollution incident.
• New powers for public authorities to recover costs and expenses of taking clean-up action from persons the authority “reasonably suspects contributed” to the pollution incident, in addition to occupiers and persons the authority reasonably suspects caused the pollution incident.
• New right for person issued a clean-up notice to recover costs from others who caused or contributed to pollution incidents as a debt.

These new provisions are likely to be of significant concern, as they enable the EPA to issue clean-up notices requiring alleged contributors to pollution incidents to clean-up all of the pollution, at its cost. This has the potential to lead to the unintended result that:

•  suspected contributors could be made liable for clean-up costs far exceeding their actual contribution; and
• the EPA may seek to regulate the potential contributor with the “deepest pockets” – rather than the person most directly responsible.

While the Bill includes a right for a contributor to recover costs from others who caused or contributed to the pollution incident as a debt, this offers very limited protection to suspected contributors issued a clean-up notice, particularly if the person responsible or other persons responsible have limited financial capacity.

• The Bill includes a new power for the EPA to require restrictions on the use of land or pubic positive covenants to enforcing environment protection licence conditions (including conditions imposed on the suspension, revocation or surrender of the licence). In line with this, the Bill also includes new provisions to enable a person other than the holder, or former holder, of a licence, to apply to vary the conditions of the suspension, revocation or surrender of the licence.
• New ability for the EPA to deny environment protection licences to corporations where current or former directors of the corporation, related bodies corporate or for current or former directors of related bodies corporate have contravened relevant legislation.

• Additional powers for public authorities including the EPA or other persons to recover costs, expenses and compensation from offenders in the Land and Environment Court.
• Additional powers for the Land and Environment Court to make specific kinds of orders where environment offences are proven.

• The Bill contains a new offence of delaying, obstructing, assaulting, threatening or intimidating an authorised officer in the exercise of the officer’s powers, in addition to the existing offence of wilfully delaying or obstructing an authorised office.

This is an apparent response to the McClelland and Turnbull matters which involved the assault or delay of environment protection officers. The new offence is significant because the EPA would not be required to prove that the relevant delay or obstruction was willful, and so a person could be held liable for unintentional delays or obstructions.

• Expanded power for the Minister to issue prohibition notices to occupiers of a class of premises or to a class of persons.
• Expanded power to issue prohibition notices to directors, former directors or related bodies corporate of a corporation who has not complied with a prohibition notice.

• The Bill also proposes a range of administrative The most notable reform is to considerably reduce the Minister’s control of the EPA so that the EPA is no longer subject to the control or direction of the Minister, and that the Minister only has a limited power to issue directions of a general nature to the EPA.