In a recent decision in the NSW Land & Environment Court, Environment Protection Authority v Davis  NSWLEC 79, the general manager of an abattoir was convicted and fined for five offences of providing false or misleading information to the NSW Environment Protection Authority (EPA), despite claiming no knowledge that false information was being provided.
This case is an important reminder that company directors and other persons concerned in the management of corporations must exercise all due diligence to prevent the corporation's contravention of the Protection of the Environment Operations Act 1997 (POEO Act). Although the case involves the law of NSW, similar provisions are in place in most Australian jurisdictions and as a result, the case is a salutary lesson for directors and environmental managers across the board.
Mr Davis was convicted of all of the five offences and fined $10,000 for one of the charges and $500 for each of the other four charges. It was taken into account that Mr Davis had agreed to pay the EPA's costs of $40,000.
Background to the case
Mr Davis was the general manager of Wollondilly Abattoirs, which was charged with five offences of providing false or misleading information to the EPA under s 66(2) of the POEO Act.
Mr Davis was a person "concerned in the management" of Wollondilly Abattoirs. Under s 169(1) of the POEO Act, if a corporation contravenes designated provisions of the Act that attract special executive liability, each person who is a director of the corporation or concerned in the management of the corporation is taken to have contravened the same provisions (unless, relevantly, the person used all due diligence to prevent the corporation by the person). Section 66(2) is a designated provision of the POEO Act that attracts special executive liability.
Pursuant to s 169(1) of the POEO Act, Mr Davis was taken to have contravened the same provisions as Wollondilly Abattoirs, and charged with five offences against s 66(2) of the POEO Act. Mr Davis pleaded guilty to all of the five charges.
The five s 66(2) charges related to the provision of four quarterly reports and one annual return that contained false and misleading information, all of which were required to be submitted as a condition of Wollondilly Abattoirs' environment protection licence for livestock processing activities. Each of the quarterly reports attached a false certificate of analysis that contained false results of water quality, surface soil and subsurface soil analysis. The certificates were purported to be prepared by and bore the logo of ALS Environmental, but were prepared and falsified by Wollondilly Abattoirs. The annual return contained similar false information relating to monitoring data and samples as well as failures to report breaches of conditions of its environment protection licence.
Evidence was presented that Mr Davis knew the company had an environmental protection licence but was not aware of all its conditions, although he was the employee responsible for ensuring compliance with it. The procedure to insure compliance involved:
- Mr Davis taking the required samples;
- the office manager organising for the samples to be couriered to Australian Laboratory Services Pty Ltd (ALS) for analysis;
- ALS emailing an invoice to Wollondilly Abattoirs (generally to the Mr Davis' email address);
- following payment of the invoice, ALS emailing the test results to Wollondilly Abattoirs (generally to the Mr Davis' email address); and
- the office manager preparing the quarterly report.
Key findings relating to Mr Davis' liability
Mr Davis pleaded guilty to all of the five charges and therefore the elements of his five charges were not contested. In sentencing Mr Davis, Justice Pain nevertheless made a number of findings relating to Mr Davis' liability.
First, Pain J found that there was no evidence that Mr Davis was aware that false information was being supplied to the EPA on any of the five occasions. The office manager admitted to creating two of the false quarterly reports and the false annual return.
Second, Pain J found that Mr Davis' behaviour could not be characterised as reckless or negligent to the criminal standard. Nevertheless, Mr Davis should have been alerted to issues in the preparation of the quarterly reports, because he did not receive any invoices or results from ALS, despite being adamant that he had collected the appropriate samples over the period. Mr Davis should have exercised greater due diligence given his role within the company. Pain J commented on the unusual circumstances in which the facts were not caused by Mr Davis’ actions, however "his culpability arises from his failure to exercise due diligence in managing the process for complying with the licence conditions over a lengthy period of 12 months".
Third, Pain J found that the five offences did not cause actual environmental harm, however the primary harm caused was the "undermining of the efficacy of the environmental protection legal framework".
Company directors and other persons concerned in the management of a company (which could include senior environmental managers, for example) have a positive obligation to ensure that their company complies with its obligations under environmental law. It is important that persons concerned in the management of a company exercise all due diligence to avoid personal liability. Practically, this may involve taking a number of steps.
First, persons concerned in the management of a company should be aware of the company's obligations under environmental law and the licences and approvals under which the company operates.
Second, where there is a statutory requirement for reports and returns to be submitted to a regulator, persons concerned in the management of a company should personally review such reports and returns for accuracy and completeness before they are submitted. Where directors and company secretaries are signing forms prepared by employees, they should satisfy themselves that information contained in the forms is true and correct.
Third, persons concerned in the management of a company should implement appropriate governance systems and processes to ensure that the company complies with its environmental law obligations and staff members fulfil their responsibilities relating to compliance. These systems and processes should include triggers that bring possible non-compliances to the attention of persons concerned in the management of a company and processes to ensure that remedial steps are taken as appropriate.
In this regard, environmental management systems should be easy to understand, effectively implemented and regularly updated. Systems should also identify, assess and address specific environmental risks likely to be faced as a result of the company's activities. The development of a compliance register to track compliance with licence conditions can be helpful, particularly when a company is operating across a number of premises and under multiple licences and approvals. Regular environmental audits are also a useful tool to benchmark performance. In all cases, appropriate oversight of staff should be exercised by managers and staff training undertaken.