Polluter Pays: Environmental Protection Legislation Amendments in New South WalesApr 2022 | Planning & Environment
At the start of last month, the New South Wales government enacted the Environmental Legislation Amendment Act 2022 (NSW) (Act). The Act amends the environmental protection legislation1 in New South Wales to, among other things, impose financial and criminal liability on directors, related bodies corporate and directors of related bodies corporate who receive a financial or economic (a ‘monetary’) benefit from an environmental offence. A reference to director broadly extends to a person involved in the management of the affairs of the company.2
In the second reading speech, Felicity Wilson MP announced that, ‘[e]nvironmental legislation needs to be continually improved to ensure that those who commit crimes pay for them’. She stated that the environmental protection laws in New South Wales should be updated to address evolving criminal behaviours in the sphere which she described as ‘unscrupulous business models’. These practices have left the New South Wales Government (Government) with significant clean-up costs (with the Truegain Pty Ltd oil refinery site alone costing the Government $20 million in prevention and remediation efforts).
The amendments brought about by the Act create some of the strongest environmental liability provisions in the country.
Personal liability of directors and bodies corporate: what does this mean?
Previously in New South Wales, directors could be personally liable under sections 169A (executive liability generally) and 169B (accessory to the commission of offences) of the Protection of the Environment Operations Act 1997 (NSW) (PEOA) for offences by a corporation. Under these provisions, a director can be liable for the maximum penalty for the executive liability offence if committed by an individual.
The Act has extended directors’ personal liability for offences by a corporation to include the Environmental Protection Authority’s (EPA) ability to issue clean-up notices and prevention notices personally to directors and related bodies corporate. This is a significant increase in the extent of personal liability for directors and officers. The cost to comply with a clean-up notice is often significantly more than fines imposed on directors for breaches of environmental duties of the body corporate. It should also be noted that traditional insurance may not cover the extent of this liability, as it is not a fine or a penalty – it is an order to do something (i.e., stop a spill, clean up a site after an incident, etc.).
The Act also amends the environmental protection legislation to:
- increase the powers of the EPA to issue clean-up notices and prevention notices as soon as they are notified of contaminated land and to an increased range of persons including directors and related bodies corporate and persons reasonably suspected of having contributed to a pollution incident;
- allow the EPA to require financial assurances under ongoing orders, restrictions and public positive covenants;
- require the EPA to consider the financial capacity of a person before requiring financial assurance from the person;
- increase penalties for particular offences to reflect contemporary community expectations;
- enable the EPA to consider the conduct of current and former directors, related bodies corporate and current and former directors of related bodies corporate when determining whether a corporation is a fit and proper person when making a licensing decision;
- extend the offence of failing to comply with a condition of a licence to failing to comply with a condition of the suspension, revocation or surrender of a licence;
- allow the Minister to issue prohibition notices to occupiers of a class of premises or to a class of persons;
- extend a public authority’s ability to recover costs of a clean up action to persons reasonably suspected of contributing to or causing the incident and occupiers of the premises;
- extend the offence of transporting or depositing waste to also attach to the owner of the owner of the waste and the owner of the vehicle;
- create new offences for giving and knowingly giving false or misleading information to the EPA (also extended to be executive liability offences);
- provide repeat waste offences for: willfully or negligently disposing of waste in a manner that harms or is likely to harm the environment; and providing information to another person in the course of dealing with waste that is false or misleading in material respect;
- provide that restraining orders may be made in relation to a person against whom proceedings have commenced which may result in the person being required to pay amounts representing monetary benefits due to the commission of an offence; and
- enable a person (other than the holder or former holder) to apply to vary the conditions of the suspension, revocation or surrender of a licence.
How should you respond to the changes?
Companies should review the amendments and consider what it means for their operations and future expansion projects. Internal environmental compliance protocols and risk management strategies should be reviewed and updated. The scope and adequacy of insurance coverage for directors and officers should be considered in the context of an order to personally respond to a clean up order, as many Directors and Officers policies may not respond. Climate and environmental risks require commercial consideration and directors and officers should adopt a probative and proactive approach to managing and mitigating environmental risks.
If you would like to know more about how the Act affects you and your business, please contact our Planning and Environment Team.
1 The Act amends the: Contaminated Land Management Act 1997 (NSW); Land and Environment Court Act 1979 (NSW); Pesticides Act 1999 (NSW); Protection of the Environment Administration Act 1991 (NSW); Protection of the Environment Operations Act 1997 (NSW); and Radiation Control Act 1990 (NSW).
2 This definition is broader than the definition of director in s 9 of the Corporations Act 2001 (Cth).
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The material contained in this publication is in the nature of general comment only, and neither purports nor is intended to be advice on any particular matter. No reader should act on the basis of any matter contained in this publication without considering, and if necessary, taking appropriate professional advice upon their own particular circumstances.