Liability of company directors and managers for environmental offences – Environment Protection Authority v Hogan [2008] NSWLEC 125 (Hogan’s case)
Introduction
On 31 March 2008, the Land and Environment Court (New South Wales) concluded that David Hogan, General Manager of Riverside Earthmoving Pty Ltd (Riverside), was personally responsible for Riverside’s unlawful disposal of waste.
The judgement provides significant insight into the following:
- personal liability of directors and higher level management for corporate environmental offences
- the consequences of misunderstanding or misconstruing your legal environmental obligations, and
- what courts will require in order to establish a defence of due diligence.
While the case considered company director and manager environmental liabilities under New South Wales legislation, the principles it considered are equally applicable to most Australian states and territories.
Scope of personal liability for directors and higher level managers
Under section 169 of the Protection of the Environment Operations Act 1997 (NSW) (POEO Act), a director or other person concerned with the management of a corporation may be personally liable for environmental offences committed by the corporation. Two exceptions to this liability are:
- if the person was not in a position to influence the conduct of the corporation, or
- if the person used all due diligence to prevent the contravention.
This means that higher level management have a personal responsibility to ensure the company in which they hold office carries out its activities in compliance with all relevant environmental protection licences, statutory procedures and regulations.
Mr Hogan was found to have ‘a lack of understanding of the system of environmental regulation in New South Wales and his personal responsibilities under the POEO Act as the general manager of a corporation.’ He was therefore held to be personally liable for the offence committed by Riverside.
This highlights the need for directors and higher level managers to:
- be aware of the company’s environmental obligations and responsibilities, especially if they have direct management responsibilities for the company’s activities which have potentially significant environmental impacts, and
- implement and maintain adequate environmental compliance procedures that ensure ‘all due diligence’ is used to mitigate the possibility committing an environmental offence.
Consequences of misunderstanding your legal environmental obligations
Riverside permitted the disposal of virgin excavated natural material (VENM) at its unlicensed waste disposal facility, which was to be used as capping material. Management was of the opinion that VENM was not a ‘waste’ as defined by the POEO Act, and hence the unlicensed disposal of VENM did not constitute an offence. In support of his argument he pointed to the fact that Schedule 1 of the POEO Act defines ‘waste facilities’ in a manner that excludes VENM from the calculation of tonnages for various classes of facility.
However the court disagreed with this interpretation, pointing out that:
- the exclusion of VENM in Schedule 1 operates for the purpose of identifying waste facilities that require a licence only
- if a facility requires a licence then the relevant definition of ‘waste’ is that contained in the dictionary to the POEO Act
- the dictionary definition is inclusive and expressly contemplates that ‘waste’ might be ‘processed, recycled, re-used or recovered’
- the VENM imported to the waste facility was unwanted and surplus to those who had excavated it, explaining why those people were willing to pay to truck it to the waste facility and deposit it, and
- the fact that Riverstone wished to re-use some or all of that material did not alter its character as ’waste‘ within the meaning of the definition.
This highlights the need for company management to be very clear on their legal obligations and responsibilities, as mistakes or misunderstandings about the company’s legal obligations can be expensive. In Hogan’s case, the penalty imposed was $18,000 on Mr Hogan personally. This was reduced from the maximum of $250,000 because of several specific factors such as the minimal environmental harm resulting from the breach and the limited duration of the breach.
Liability can be avoided by ensuring adequate environmental compliance procedures
In Hogan’s case it was held that Riverside had inadequate environmental due diligence procedures to mitigate against committing an environmental offence. This was coupled with ‘insufficient experience’ in managing environmental risk and ‘inadequate training to ensure [environmental] legal compliance.’
The case does not provide much indication of what will suffice as ‘adequate due diligence’ in order to escape personal liability, though ensuring managers and staff are trained and competent to manage the company’s environmental risk are obviously important themes to emerge from the case. Furthermore, the section 169 due diligence defence is likely to require (at a minimum) that:
- the corporation’s environmental management system is sufficient to mitigate against non-compliance with any environmental law, and
- the corporation’s environmental management system is up to date with all key environmental legislative changes.
Contacts
Freehills has extensive experience in:
- advising on environmental management systems and corporate environmental responsibilities, and
- defending corporations and individuals against charges for environmental offences.
More information
For information regarding possible implications for your business, contact a member of the Environment & Planning team.