Are you personally liable? Lessons on environmental law and personal exposure
Oct 2016 |
Introduction
Individuals within corporate structures are not necessarily protected from exposure to personal liability where the company breaches its environmental obligations.
Mr Philip Foxman, and two companies of which he was the ‘directing mind and will’ for, were recently prosecuted and sentenced for waste related offences in NSW. Mr Foxman’s prosecution was based on his role as a director of both defendant companies.
Legislation – Queensland, Victoria and NSW
In all three east coast states, directors and officers who are in a position to influence the actions of a company can be found personally liable for acts of that company.
In Queensland, s 493 of the Environmental Protection Act 1994 (Qld) (EPA) states that where an executive officer of a company is in a position to influence the company in relation to an offence, they also commit an offence and will be liable to the penalty relevant to the contravention by an individual (including jail time). In addition, the scope for personal liability has been further expanded by the introduction of the Chain of Responsibility legislation,1 which allows the regulator to issue environmental protection orders directly against individuals that have a ‘relevant connection’ to a company, in certain circumstances.
In NSW, certain breaches of legislation can attract ‘special executive liability’. In those cases, directors and anyone concerned in the management of the corporation are taken to have also contravened the legislation, subject to certain limited exceptions.2 A person can be prosecuted under this provision regardless of whether the corporation has or has not been proceeded against or convicted.
In Victoria, the legislation is nearly identical to NSW, other than that directors and anyone concerned in the management of the company can be found guilty of an offence for the company’s breach of any provision of the Environmental Protection Act 1970 (Vic).3 It is not limited to ‘special executive liability’ provisions.
EPA v Foxman
The recent decision in EPA v Foxman Environmental Development Services; EPA v Botany Building Recyclers Pty Ltd; EPA v Foxman (No 2)4 is an interesting NSW judgment that demonstrates how an individual can be prosecuted alongside defendant companies that contravened environmental legislation.
Philip Foxman and the two defendant companies were successfully prosecuted by the Environment Protection Authority on six charges brought under the Protection of the Environment Operations Act 1998 (NSW) (PEOA) concerning the unlawful transportation and disposal of construction and demolition waste and asbestos. The charges resulted in a series of court orders imposed on the defendants including fines, costs of proceedings and investigation, publication of the offence, and remediation orders.
The facts
Botany Building Recyclers Pty Ltd (BBR) owned and operated a materials processing plant at Banksmeadow from which, on two separate occasions, 15,900 tonnes of waste contaminated by asbestos, lead and other foreign matter was transported to land owned by Foxman Environmental Development Services (FEDS), known as ‘Foxman’s Valley’. Foxman’s Valley was held to have been used as an unlawful waste facility.
Foxman conceded that he was the ‘directing mind and will’ of both BBR and FEDS and had ‘complete control’ over the actions taken by himself and the two corporate defendants. As such, he attracted special executive liability under s 169(1) PEOA for each of the defendant companies’ offences, being breaches of ss 143(1) and 144(1) for, respectively, transporting waste to a place that cannot be lawfully used as a waste facility and use of land as a waste facility without lawful authority.
Sentencing considerations
In his judgment, Sheahan J discussed the various considerations relevant to sentencing the offenders found in ss 3 and 241(1) PEOA and ss 3 and 21A of the Crimes (Sentencing Procedure) Act 1999 (NSW), as well as the necessity to consider both aggravating and mitigating circumstances in arriving at an appropriate sentence.
His Honour concluded that the objective seriousness of the offences were moderate to high, given the level of harm caused to the environment. The seriousness of the offences was increased given Foxman intended to transport the offending material and was reckless as to the presence of asbestos in the material.
Sheahan J also concluded that Foxman’s late expression of remorse was the only mitigating factor against the aggravating factors of substantial environmental harm, financial gain, and lack of regard for public safety.
FEDS was fined $100,000 for its waste facility offence, and BBR was fined $15,000 and $25,000 for its two transportation offences. As Sheahan J stated at paragraph 121, ‘the major burden should fall on Foxman, as the author and chief manager of the scheme’. In this regard, Foxman was personally fined, under s 169, $100,000 for the waste facility offence and $75,000 for each of the transportation offences (a total of $250,000). Orders for costs and investigation expenses, publication and remediation works were also made. Foxman’s estimates of remediation works exceeded $10 million.
Although the offences did not attract the maximum penalties allowed, they were imposed with the purposes of future deterrence, environmental protection and fostering a compliant attitude with EPA’s regulatory system.
Conclusions
Piercing the corporate veil and attaching additional pecuniary penalties for certain environmental offences demonstrates the hard-line approach of the EPA and the courts in ensuring proportionate punishment, particularly for intentional offences.
This decision serves to reinforce the serious level of personal exposure that can arise for directors or those concerned with the management of a company that commits environmental offences.
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1 Please see Carter Newell’s other newsletters regarding this legislation in March 2016 titled ‘Has the Queensland Government overreached in its battle with Clive Palmer?’ and April 2016 titled ‘Chains of Responsibility – Queensland Government passes amendments to Environmental Protection Act’.
2 Protection of the Environment Operations Act 1998 (NSW) s 169.
3 Environmental Protection Act 1970 (Vic) s 66B.
4 [2016] NSWLEC 120.
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