Bartter Enterprises Pty Ltd v Environment Protection Authority [2022] NSWCCA 43 | Case summary

Judgment (6 paragraphs)

[1]

Solicitors: Hones Lawyers (Appellant) Legal Services Branch, Environment Protection Authority (Respondent) File Number(s): 2019/201063 Decision under appeal Court or tribunal: Land and Environment Court Jurisdiction: Class 5 Citation: [2020] NSWLEC 114 Date of Decision: 12 August 2020 Before: Duggan J File Number(s): 2019/201063

[2]

Judgment

BASTEN JA: The appellant, Bartter Enterprises Pty Ltd, operates a poultry processing business in Beresfield, north-west of Newcastle. Part of the facilities included a blast freezer and cold store building for processed poultry meat awaiting distribution. On 29 June 2018, while new fan-coil units were being installed, there was a release of ammonia into the atmosphere. Some two weeks earlier, the supply line piping liquid ammonia through the freezer had been evacuated and shut down. A flange, known as a "base plate", at the bottom of the suction valve had been removed, so that the valve remained open. When the contractor responsible for replacing the fan-coil units had completed its work, an employee opened a "liquid stop valve" which released liquid ammonia from the plant room into the "southern circuit". No check was made before taking that step to see that the circuit was otherwise intact so as to prevent the release of ammonia directly into the atmosphere. In fact, the base plate had not been replaced in the suction valve, so that the system was not intact. Further, a valve which permitted the outward-bound ammonia to be diverted directly across to the return pipe was not closed, so that the newly circulating ammonia was almost immediately released into the atmosphere.

Reasoning of trial judge

It is convenient to turn next to the central parts of the judge's reasoning. Before coming to the passages which were said to reveal error, it is convenient to set out the judge's reasoning with respect to the scope and operation of Condition O2.1(a). This was as follows: "[40] The text of the condition should be the starting point of any construction of its meaning. Where a term is not defined it is to be given its ordinary meaning, determined by the text and context. In this case, whilst the focus is upon the word 'maintained' that word cannot be properly construed without reference to the whole of the condition, importantly, the balance of the phrase in which it is found. The pairing of the term 'maintained' (the action) with the objective of 'a proper and efficient condition' indicates the meaning of the term used. It is intended, by the text, to be an act (maintained) that produces a state of affairs (condition). That textual indication is consistent with the term 'maintained' being a reference to the preservation of the state of 'proper and efficient condition'. [41] The condition, when read as a whole, reinforces the appropriateness of that construction. Condition O2.1 indicates that the provision of subparagraph (a) is different to that referred to in subparagraph (b). Subparagraph (a) directs attention to the plant being maintained in a …condition; whereas sub-paragraph (b) directs attention to the plant being operated in a …manner. That distinction in terms is identifying a difference in the meaning such that subparagraph (a) is looking to the state of the plant and the plant being preserved in that state; whereas subparagraph (b) is directed at the manner in which that plant is used and whether such use is appropriate to the purpose for which it was designed. The first is an assessment of what was the state the plant at the relevant date - and the second is whether the plant was being used to achieve its design purpose in a way that was appropriate for its design purpose at the relevant date. [42] Condition O2.1 requires both maintenance and operation to be proper and efficient, however, in this case the Defendant has only been charged with respect to the condition of the plant, that is, relating to how the plant was maintained as opposed to operated. That is why it is necessary in this case to only ask whether the contravention of condition O2.1 was as a result of the plant not being maintained in a proper and efficient manner. [43] The state in which the plant is to be maintained is also to be derived from the text and context of the legislative provision. As has been observed, the reference to proper and efficient condition must be read as not being at large but rather referring to the environmental protective functions of that plant and equipment…. [3] The fact that the condition, in the context of the EPL as a whole, is intended to control or limit the capacity of the plant and equipment to cause an unacceptable environmental impact indicates that it is appropriate to constrain the meaning of those words to that object, as opposed to the efficiency being measured by some ancillary desire or function of the user - for example, in this case, the plant achieving a desired temperature range within the Premises. [44] The reference to maintaining the plant in a certain condition must also be construed consistent with that context. That is, the plant must be preserved in a state that it is able to perform the function of environmental protection that it was designed to perform."
The judge then turned to the submissions as to the function the plant was designed to perform. She commenced with the prosecutor's submissions, which were summarised as follows: "[50] The Prosecutor contends that the Southern Circuit is to be viewed as a whole and that the design purpose of that circuit is to contain ammonia so that it was not released to the atmosphere. [51] The Prosecutor submitted that by opening the ammonia supply valve whilst the PM suction valve was missing its Base Plate the Southern Circuit was not 'maintained' in a proper and efficient condition as it did not have the physical integrity to contain the ammonia within the circuit. As a consequence, the Southern Circuit was not, at the relevant time, maintained (preserved) in a proper and efficient condition (a state capable of containing liquid ammonia without release). [52] The Prosecutor also submitted that the release occurred as a consequence of conduct that itself comprised maintenance of the plant by Gordon Bros within the meaning of the word in condition O2.1(a). [53] If, contrary to the Prosecutor's submission, the act of opening the valve is found to comprise the operation of the plant as referred to in condition O2.1(b), such a finding would not preclude a finding that by the same conduct Gordon Bros failed to maintain the circuit in a proper and efficient condition."
The judge then turned to Bartter's submissions stating: "[54] If the Southern Circuit is viewed as a collection of individual elements, each of the elements performed the purpose that they were designed to serve. In this case, the ammonia supply valve that introduced ammonia into the Southern Circuit did not malfunction, as it released the ammonia into the circuit. The PM suction valve with the removed Base Plate permitted the release of the ammonia into the atmosphere, however, the venting of gases within the Southern Circuit during the carrying out of works was what that particular component was intended to achieve at the relevant time - it too had not malfunctioned but had performed its design purpose. The Defendant says that it was the action of Mr Hayes of turning the properly functioning ammonia supply valve that caused the escape of ammonia, not the state of the plant. To that extent, if any characterisation is to be placed on that event it is manner of operation rather than maintenance of the plant. [55] Inherent in the Defendant's submission is that the relevant plant is to be considered in its constituent parts."
The judge made "Findings on purpose of plant" at [61]-[70], and as to the language of the charge at [71]-[72]. Dealing with the question of purpose, the judge commenced: "[61] The Southern Circuit was an integrated system. It relied upon a series of valves and pipes to allow the function of refrigeration of the building whilst containing the refrigerant (ammonia) within that circuit. Each of the separate elements of the circuit must, therefore, be considered the relevant plant for the purposes of the present circumstances. To view the individual elements of that circuit, valve by valve and pipe by pipe, is inappropriate when the plant operates as a circuit and each element performs part only of the function for which the circuit was designed. This is not a case where a single isolated piece of plant is able to operate, in isolation, in order to achieve the design purpose. This clear design interdependence between the composite parts in this case has the consequence that the Southern Circuit as a whole must be considered as the relevant plant for the purposes of condition O2.1(a). To consider the plant as separate components would fail to recognise that the independent parts cannot achieve the design purpose of the plant as an individual element. Each component part has a role to play in achieving the design purpose and therefore must be treated as parts of a single integrated whole."
With one qualification, the challenges raised by the appellant did not focus on the passages set out above. The qualification is that the judge's approach at [61], treating the refrigeration system as "a single integrated whole", was said to be erroneous because she should have addressed separately the individual parts of the system. The appellant's primary focus was upon the following finding, dealing with Bartter's principal contentions at trial: "[64] The Defendant's contention that 20. It is true to say that, at the time of the incident, the PM Suction Valve was not able to perform its operating design function, because its base plate had been removed. However, the circumstance that the base plate had been removed cannot be said to constitute a failure to maintain the plant in a proper and efficient condition. That is because the requirement to maintain plant in a proper and efficient condition cannot sensibly apply when the plant has been taken out of service. 21. The base plate had been deliberately removed by Tony Mitchell of Sprint during the period the unit was out of service for the venting of any residual ammonia. It was fulfilling the function it was designed to fulfil while the unit was out of service. Moreover, the charge does not focus on the removal of the base plate, but, rather, on the opening of the ammonia supply valve while the base plate was removed and it is not alleged that Sprint or Mr Mitchell contravened the obligation to maintain the plant in a proper and efficient condition. Indeed, the prosecutor acknowledged this to be the case in address, and does not allege that the leaving off of the base plate was a failure to maintain in proper and efficient condition. focusses on the reason or manner of the contravention rather than whether the contravention of condition O2.1(a) did in fact occur. As noted above, it is true to say that whilst the Southern Circuit was off-line the removal of the Base Plate could not be a contravention. This is so because the ammonia was being contained within the circuit at the point of the closed ammonia supply valve and, therefore, was able to perform the design function of containing ammonia. That state was achieving the design function. However, with the ammonia supply valve open the lack of a Base Plate on the PM suction valve had the consequence that the Southern Circuit was not able to perform its design function. The Defendant's distinction in its submissions at [20] (recited above) that the PM suction valve was unable to perform its 'operating' design function is importing into the words of the condition a limitation that is not apparent from the text or context. The Southern Circuit, properly and efficiently maintained, must at all times perform its design function of containing ammonia. Whilst this design function may be achieved through different means when the plant is operating or when it is off-line, the design function must still be met in order that the terms of condition O2.1(a) not be contravened."
The final two passages challenged in the grounds of appeal were [71] and [72]. There was also a challenge to [73] which may be set out, but was merely conclusory. Indeed, as the oral submissions for the appellant recognised, the reasoning in the last three paragraphs was contingent upon the findings made at [64]. Nevertheless, they should be set out: "[71] The question then arises whether the release of the ammonia to the atmosphere on the relevant date was a consequence of a failure to comply with the provisions of condition O2.1(a), in that it resulted from a failure to maintain the plant, being the Southern Circuit refrigeration plant, in a proper and efficient condition. [72] For the reasons outlined above, condition O2.1(a) required the Southern Circuit to be in a physical state that it was capable of containing ammonia within that circuit without release to the atmosphere. It was not as at the time ammonia was introduced into the Southern Circuit … in a physical state that allowed that ammonia to be contained within the Southern Circuit. Therefore, at the relevant time, the relevant plant comprised by the Southern Circuit, was not in a state that enabled it to achieve its design purpose. The introduction of the ammonia into the Southern Circuit was carried out by a person, namely, Gordon Bros employee. As a consequence, I find that there was a breach of condition O2.1(a) of the EPL. Conclusions and Orders [73] For the reasons outlined above, the Court finds that the offence has been proven beyond reasonable doubt, that contrary to the provisions of s 64 of the POEO Act: (1) The Defendant was the holder of an EPL; (2) A person, being the Defendant's contractor Gordon Bros, did fail to maintain the plant comprising the Southern Circuit in a proper and efficient condition in that: (a) It introduced ammonia into the Southern Circuit when that circuit was not capable of containing ammonia within the circuit; and (b) The ammonia was released from the Southern Circuit into the atmosphere."

Addressing the appeal

The fundamental proposition raised by the appellant was that the conduct which was alleged to give rise to the release of ammonia was the opening of the stop valve by which the ammonia was allowed to travel from the plant room into the circuit where it would, if the plant were operating, act as a refrigerant. Whether or not it could be said that this involved the operation of the plant otherwise than in a proper and efficient manner was not in issue because the charge did not allege a contravention of condition O2.1(b). What could be said, and what should have been found, according to the appellant, was that the act of opening the stop valve had nothing to do with the condition of the plant and equipment, or maintaining its proper and efficient condition. To assess the validity of these propositions it is necessary to address the construction of the licence condition adopted by the trial judge and, in particular, the relationship between pars (a) and (b) of the condition.
It is convenient to start by identifying the scope of the qualifying phrase "proper and efficient", which appears in both paragraphs. It is a phrase which has a history, as used in environmental control legislation. The trial judge referred in her reasons to Genkem Pty Ltd v Environment Protection Authority, a judgment of this Court in 1994 dealing with offences under the Clean Waters Act 1970 (NSW), the Clean Air Act 1961 (NSW) and the Pollution Control Act 1970 (NSW). In particular, Genkem held a licence under the Pollution Control Act which stated: [4] "CONDITIONS For the purpose of preventing, controlling or mitigating the pollution of the environment, this licence is granted subject to the following conditions: … L6 Matter and substances on the premises shall be processed, handled, moved and stored in a proper and efficient manner." Section 14(3) of the Clean Air Act created an offence committed by an occupier of certain kinds of premises who caused air pollution "by reason of his failure to process, handle, move or store those materials in a proper and efficient manner."
In dealing with the licence condition, Gleeson CJ stated: [5] "When regard is had to the legislative power pursuant to which condition L6 was imposed, and to the preamble to the licence conditions quoted above, as well as to the immediate context of the condition, it becomes reasonably apparent that the reference to 'matter and substances' is a reference to matter and substances capable of polluting the environment. … For the same reasons, an issue as to whether there had been failure to deal with matter and substances in a proper and efficient manner would fall to be considered according to the possible environmental consequences of the acts or omissions in question. Conduct which had no possible environmental consequences, but was related solely to the profitability of the appellant's business, would be outside the purview of the condition."
There was challenge in Genkem to the validity of the licence condition on the basis of its uncertain operation. In rejecting that challenge, Powell JA stated: [6] "[W]hile the words 'efficient manner' and 'proper and efficient manner' may, when standing alone, be of uncertain content, they are capable of taking colour from the context in which they are used, it following, in my view, that when used in the context of statutes such as those with which we are now concerned, they carry with them the flavour of 'use in such a manner as to prevent or to minimise pollution or the risk of pollution'."
The context of condition O2.1 should be identified. There are five "O" conditions which appear in a section of the licence titled "Operating Conditions". Condition O1 required that licensed activities "must be carried out in a competent manner." The condition covered "the processing, handling, movement and storage of materials and substances used to carry out the activity" and of waste products generated by the activity. Condition O3 dealt with establishing an emergency response plan to cover types of incident which might occur at the premises "and which are likely to cause harm to the environment."
Consistently with Genkem, the phrase "proper and efficient" in condition O2.1 must be understood as referring to the maintaining of plant and equipment and the use of plant and equipment having regard to possible environmental consequences arising from failure to maintain or use the plant and equipment in such a way as to minimise or avoid those risks. It was not in dispute that release of ammonia into the atmosphere was a relevant environmental consequence which was to be avoided.
It is evident that there is no bright line to be drawn between the circumstances in which par (a) may be engaged and those in which par (b) may be engaged. That is, the manner of operation of the plant must be assessed in relation to its condition, which may, in turn, be dependent upon the way in which the plant is expected to be operated. Further, par (a) refers to maintaining the plant in a particular condition, rather than carrying out maintenance work on the plant. That is consistent with the purpose of the licence which is to protect the environment from harm. Risks may inhere in plant and equipment whether or not it is in active operation. Faulty electrical wiring, for example, may pose a risk of fire even if the plant is not in use. If a fire breaks out during the operation of the plant, for example when a switch is operated, it may be possible to characterise the cause of the fire as an act undertaken in the operation of the plant, but the cause is also the faulty condition of the electrical system.
In the present case, the trial judge described the "design function" of the piping system as that of "containing ammonia." [7] The appellant criticised this language on the basis that the design function of the plant was not primarily directed to environmental protection, but rather the efficient operation of a refrigeration process. It did not cease to serve that function whilst it was offline and work was carried out on it.
While it is true that the term "efficient" envisages a purpose, or at least a standard of measurement, the language of "design function" finds no ready basis in the terms of the licence (or in earlier legislative provisions). Perhaps ironically, the phrase seems to have been used in the appellant's submissions at trial. [8] Rather, consistently with Genkem, the question was whether the plant was maintained in a condition which would minimise possible environmental consequences. One harmful environmental consequence which came to pass was the release of ammonia gas. As the trial judge reasoned, the plant was not in a condition to prevent the release of gas at the relevant time. The events in question demonstrated that fact. Gas was released into the pipe-circuit at a time when it was not maintained in a condition to retain gas.
If the offence depended on a finding of fault by one person or another, there may have been difficult factual questions to be resolved; however, the offence did not involve such a finding. As counsel for the EPA accepted in the course of oral argument in this Court, the pleading that the appellant's contractor failed to maintain the plant, for example, by not conducting a leak test using dry nitrogen, was mere surplusage: the judge made no findings in respect of such particulars and no complaint is made of that. However, the particulars as to "manner of breach" were largely a distraction, although no doubt the matters raised would have been relevant in determining penalty. Describing the failure to maintain the plant in a particular condition "by opening" the stop valve and allowing ammonia to escape was confusing. Rather, the condition of the plant was (as the appellant accepted) ineffective for containing ammonia gas if it were to be released at that time into the system of pipes constituting the southern circuit.
One aspect of the appellant's submissions entailed the proposition that the plant could not be maintained in operating condition at all times. That submission should be accepted. Thus, whilst the repairs were being carried out, that part of the plant constituted by the southern circuit was not physically capable of containing ammonia. Nevertheless, there were mechanisms by which the ammonia was contained, effectively, throughout that process.
The appellant's submission may reflect the distracting use of the term "design function" as if it were to be implied that the relevant plant had to be capable of containing ammonia at all times. Clearly that was not so: if the plant were to be taken offline and the ammonia removed from the circuit pipes, the plant would nevertheless be maintained in a proper and efficient condition. That is, the character of the condition of the plant depended upon the function it was serving at a particular time. Indeed, there is an easy assumption that, because a particular state of a part of the plant led to a discharge, the plant was not maintained in a proper condition. As noted above, the proper condition of the plant depended on its use at a particular time. It may be accepted that the licence required that ammonia not be released into the atmosphere, but the licence said nothing about how it was to be contained. The challenge to the licence condition considered in Genkem was that it was vague and uncertain. However, although such a condition left uncertain the steps which the licence holder was required to take, as Gleeson CJ observed: [9] "Equally, however, it is understandable that both the Authority and a holder of a licence might desire to avoid detailed prescription by the Authority in respect of matters which, subject to certain minimum standards, should be left to the commercial judgment of the licence holder." Particularly is that so where circumstances affecting the use of the plant may vary over time.
The correct conclusion was that the appellant's plant may have been in a proper and efficient condition when no ammonia was present in the southern circuit, but immediately a step was taken to release ammonia into the southern circuit, the condition of the plant no longer satisfied the requirement of licence condition O2.1(a). The conclusion of the trial judge that there was a breach of that condition must be upheld. The appeal must be dismissed.
The parties did not address costs, although the trial judge made an order as to the costs of the trial. If costs are sought, and the appropriate order is not agreed, either party can make an application within 14 days of this judgment.
DAVIES J: I have had the advantage of reading in draft the judgment of Basten JA. I agree with his Honour's proposed orders and his reasons.
A significant, but inappropriate, focus on the part of the appellant, both at the trial and in the appeal, was the notion that the design function with which the licence condition O2.1 was concerned was each of the constituent parts of what was referred to at the hearing before the trial judge as the Southern Circuit. In the submissions filed in this Court the applicant said: 44. Nor was it correct, it is submitted, for the trial judge to have attributed a design function to 'the Southern Circuit" which is somehow distinct from, or additional to, the design functions of the constituent items of the plant which that label describes. In focussing on "the Southern Circuit" and by attributing to it a design function suggested to be distinct from or additional to the design function of the constituent items of plant, it is submitted the trial judge was diverted from the necessary inquiry as to whether any particular items of plant compendiously described as "the Southern Circuit" failed to perform the function it was designed to serve. If each of the constituent items of plant was capable of performing its design function, it cannot properly be said that the offence was proved referable to the inability of "the Southern Circuit" to fulfil some other, overarching design function attributed to it.
On that basis the appellant argued that the ammonia supply valve was clearly in a condition in which it fulfilled its design function and, in that way, was maintained in a proper and efficient condition. The appellant went on to submit, [I]t begs the question posed by the Appellant (rhetorically) at trial: what item or items of plant was in a condition such as to be incapable of performing its design function? which it then answered, "none". The trial judge noted that submission as Basten JA has set out at [15] of his judgment.
The relevant plant and equipment referred to in the licence was the blast freezer and the ammonia refrigeration system. That system had to be viewed as a whole, both because of what it was designed to achieve and for the possible environmental consequences arising from it, either from a failure to maintain it or to operate it in a proper and efficient manner. As the trial judge correctly said, the Southern Circuit was an integrated system relying upon a series of valves and pipes to allow the function of refrigeration of the building whilst containing the refrigerant (ammonia) within that circuit. Her Honour, correctly in my opinion, went on to say: [61] …To view the individual elements of that circuit, valve by valve and pipe by pipe, is inappropriate when the plant operates as a circuit and each element performs part only of the function for which the circuit was designed. This is not a case where a single isolated piece of plant is able to operate, in isolation, in order to achieve the design purpose. This clear design interdependence between the composite parts in this case has the consequence that the Southern Circuit as a whole must be considered as the relevant plant for the purposes of condition O2.1(a). To consider the plant as separate components would fail to recognise that the independent parts cannot achieve the design purpose of the plant as an individual element. Each component part has a role to play in achieving the design purpose and therefore must be treated as parts of a single integrated whole.
Once it is accepted, as it must be, that the plant and equipment was the whole system, the conclusion is inevitable that there was a failure to maintain the plant and equipment in a proper and efficient condition, for the reasons more particularly explained by Basten JA.
DHANJI J: I agree with Basten JA and with the additional observations of Davies J.

Bartter Enterprises Pty Ltd v Environment Protection Authority

At a glance

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Judgment (6 paragraphs)

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Legislation Cited (5)

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