Environment Protection Authority v Baiada Poultry Pty Ltd

SOLICITORS: Mallesons Stephen Jaques

IN THE LAND AND Matter No. 50003 of 2000 ENVIRONMENT COURT Coram: Talbot J OF NEW SOUTH WALES Decision Date: 16 October, 2000

Environment Protection Authority Prosecutor v Baiada Poultry Pty Ltd Respondent

The defendant appears to answer the charge that from 15 February 1999 until 5 March 1999 at Tamworth it committed an offence against the Environmental Offences and Penalties Act 1989 in that it was the occupier of scheduled premises and was not the holder of a licence issued in respect of those premises contrary to s 10 of the Clean Air Act 1961 ("the Clean Air Act").

The offence attracts a penalty in the sum of $125,000 and a further penalty at the rate of $60,000 a day which the prosecutor says applies for the 18 days between the dates referred to in the charge.

That would be a total maximum penalty, if the prosecutor was successful in persuading the Court to apply such a penalty, of $1,205,000. It is not suggested that this defendant is exposed to a penalty in that order. Nevertheless, the extent of the penalty to which the defendant is liable is an indication of the seriousness of the offence.

The premises are scheduled premises as rendering or fat extraction works in which animal, presumably in this case poultry, or other matter is processed or is capable of being processed by rendering or extraction or other means to produce alone or in the aggregate, in excess of 50 tonnes per annum of tallow or fat in accordance with s 10 and cl 1 of the schedule to the Clean Air Act 1961.

The Minister for Urban Affairs and Planning granted development consent for the poultry processing complex at Tamworth on 9 February 1998. The consent was modified in an immaterial respect for present purposes on 9 February 1999.

On or about 22 July 1998 the defendant made application to the Environment Protection Authority (EPA) for approval under the Pollution Control Act 1970 to construct the plant at a place near Tamworth, known as Oakburn.

On 15 December 1998 the EPA issued an approval to the defendant. The approval was accompanied by advice of the need to comply with the conditions of the pollution control approval and made particular reference to condition 6 which required the defendant to certify that it had complied with all the conditions of Category 1 before the works "are used regularly" .

On 5 February 1999 the EPA received an application from the defendant for a pollution control licence under the Pollution Control Act 1970. Previously, a consultant had advised the defendant that applying for the licence to operate the plant would be sufficient to allow the operation of the plant. The consultant further advised that this view was based on a consideration that the approval already issued would still be in force until such time as the licence was granted.

The defendant had previously occupied and operated a protein recovery plant at Coonabarabran and it was proposed that when the new plant at Oakburn operated the Coonabarabran plant would cease operation.

The Coonabarabran plant was approximately 30 to 40 years old and the equipment was 20 years old.

It is agreed that the Oakburn plant has been constructed with an extensive odour control system to capture odours from all parts of the process by removing the air from each unit through PVC piping and drawing it into an air washer where it is treated with a sodium hydrochloride solution. The intention is to remove the odorous compounds and the exhaust is then passed to the atmosphere via a stack.

The defendant closed down the Coonabarabran plant on 12 February 1999 and from 15 February commenced a commissioning process in relation to the Oakburn plant. That appears to account for the commencing date for the charge referred to in the summons.

The commissioning process was intended to test the operation of the new plant to enable the plant's performance parameters to be ascertained. It was anticipated that testing process would take a number of months.

Once the testing process commenced following the closure of the Coonabarabran plant the only means by which wastes could be treated by the defendant was by using the new plant at Oakburn.

During the period when it is alleged the offence took place the prosecutor estimates that product to the value of $40,000 was produced and that, accordingly, the defendant's actions must be regarded as being intended to create a profit from the operation of the plant.

On 24 February 1999 Tamworth City Council received two complaints about odour. Neither of these were sourced and the evidence therefore does not establish that the subject plant was the cause of those complaints.

On 5 March 1999 the EPA and Tamworth City Council officers inspected the premises. That inspection revealed that some aspects of the plant were incomplete or not fully operational.

During the inspection the officers observed that a strong cooking odour was present. The plant, particularly in the main building, seemed generally complete and was operating but it was observed in another building that the dissolved air flotation (DAF) building was still under construction and that door openings existed on the west and east sides of the building but no doors were fitted. Before entering that building the officers detected a strong odour.

A further inspection took place on 16 March. That inspection, of course, was after the time during which the offence is alleged to have occurred but it is important to note, nevertheless, that on that day the defendant voluntarily closed the plant.

On 17 March outstanding requirements of the EPA in relation to the application for licence made on 5 February 1999 were satisfied. A licence was issued on 19 March 1999.

The defendant has two previous recorded offences for this type of matter. It would appear that one occurred prior to 1999 and the other offence occurred on 24 August 1998.

The prosecutor's solicitor, Mr Kelly, has drawn the Court's attention to the matters which the prosecutor says should be taken into account pursuant to s 341 of the Protection of the Environment Operations Act 1997. He concedes that there is no evidence of actual harm but there was a real potential for more offensive odours to escape because of openings to the air in the receival areas, some sections of the product press and the door openings of the DAF building.

The practical measures which the defendant may have taken to prevent, control, abate or mitigate the harm do not readily arise given that there is no particular instance of harm identified in this case, but certainly the potential for harm might arguably have been overcome if the operation of the plant had been delayed until such time as the pollution control approval had been issued and all of the pollution control equipment been installed.

The prosecutor submits that the potential environmental harm was reasonably foreseeable. Arguably that is right but, as I said, there was no harm and the failure to obtain a licence, particularly in the circumstances as I have outlined them in this case, was not necessarily a critical factor which could give rise to harm to the environment. Obviously the defendant had total control over the plant, equipment and personnel.

The defendant entered a plea of guilty on the second occasion the matter was before the Court. That was at an early stage of the proceedings and it is conceded by the prosecutor that this was effectively at the earliest opportunity.

Mr Kelly raised the issue as to whether in the circumstances the defendant would be entitled to the full discount identified by the Court of Criminal Appeal in the guideline judgment of R v Thompson; R v Houlton [2000] NSWCCA 309 in respect of the utilitarian value of the plea of guilty where, as is the case here, there was such a strong case against the defendant.

Mr Preston makes what I accept as being a reasonable argument to the contrary by pointing out one of the reasons, if not the main reason, the EPA has such a strong case against the defendant is that the defendant did everything within its power to cooperate with and assist the investigation and to provide the information that laid the basis for such a strong case.

On the other hand, it might be said that the operation of the plant without a licence is not a matter that required the cooperation of the defendant to any great extent. It either had a licence while the plant was operating or it did not.

There are some matters in that regard which I will deal with when I come to the formal submissions made by Mr Preston but I should say while dealing with Thompson that I am satisfied in the particular circumstance as to the applicability of the maximum discount of 25 per cent identified by the Court of Criminal Appeal.

In answer to the prosecutor's submission that the defendant's attempts to rely upon the advice from its consultant is an attempt to explain the reason for failure to obtain a licence is an aggravating feature of this case, Mr Preston has made detailed submissions and, indeed, raises 12 separate points in answer to that claim.

First of all, he reasons that the omission to obtain a licence before commencing operations was really a question of timing. There was a pressing need to close the outdated plant at Coonabarabran. The defendant had the benefit of written advice from its consultant. It was reasonable to accept that advice in the context of the application having been made for a licence to operate the plant and the reference in the letter which accompanied the issue of the original licence on 15 December 1998 which referred to compliance with the matters referred to in condition 6 before the works are used regularly.

It was only after the defendant applied for a pollution control licence on 5 February 1999 that the commissioning process was commenced on 15 February. That process ceased only after there had been contact with the EPA and Tamworth City Council. Following a realisation that the requirements that were outstanding could not be provided on 15 March 1999 the operation ceased voluntarily.

It is reasonable I think, reading the letter of 15 December 1998, that there was a reasonable expectation that the EPA had it in mind there would have to be a process of commissioning. That understanding or appreciation is also heightened, although provides no excuse, by reference to the conditions of the pollution control approval issued on 15 December 1998.

These conditions, without going into detail talk about certain action being necessary within, for example, 60 days after commencing operation.

There is also a requirement that directs the applicant for the licence to certify in respect of certain matters before the planned equipment or construction is put into regular operation.

There is language within the existing licence which could be construed as anticipating that the commissioning process might be covered by the first pollution control approval.

That, as I said, is not an excuse for the offence as charged but nevertheless it does provide some explanation as to why it was that the defendant went ahead with the commissioning process pending the approval of its application lodged at the beginning of February 1999.

It also provides some explanation or answer to the allegation that the commencement of operations was directed towards the generation of profit for the defendant company.

Firstly, there is no evidence before the Court that that was the case and, secondly, such agreed facts as there are display only what the return was from the generation of product out of the process during that period without any reference to the cost of generating that return.

Obviously the defendant was aware of the potential for odour emissions, that being a fundamental matter addressed not only in the development consent but in the initial approval. It is a matter that the Court infers is to the forefront of the mind of an operator of this type of plant and would be inherent in running a business of that nature in this day and age.

However, Mr Preston points out that the defendant was proceeding on the basis that it understood the plant was state of the art and, as the defendant has explained in a letter addressed to the Court, the urgent commissioning of the plant was done with the best of intentions. As the company says in the letter, " evidenced by the fact that the modern equipment on the new Oakburn plant is the most up to date in Australia, if not the world" .

Furthermore, the company has also advised the Court in a further letter (which was admitted without objection) that when it commenced commissioning the Oakburn complex an engineer from the company responsible for installation was working full time on site and the defendant was anticipating that the odour control system would fulfil its expectations on the basis that it had received assurances from that company, which manufactures and supplies odour control equipment. Within those assurances was an assurance that the plant would be odour free.

Accordingly, Mr Preston submits that this is not a case where the company has ignored its environmental responsibilities, as the prosecutor contends. The factors that have been identified in the evidence, mainly comprised in the statement of agreed facts, are all mitigating factors rather than aggravating factors as Mr Kelly contends.

There were some problems with staff and changeover between staff at the time but the evidence in that regard does not appear to provide any significant contribution to the decision that the Court must make although Mr Preston made some play of it.

As I said earlier, Mr Kelly conceded there was no actual harm.

In terms of practical measures Mr Preston reiterated that the actual operation of the plant by way of commissioning was arguably the only way in which the defendant could take the necessary steps to ensure that the plant (a) complied with the controls that the EPA were seeking to impose and (b) achieved an odour free operation.

In any event, all of the matters that were required to be done by the prosecutor were completed within two weeks of the complaint on 5 March and the licence was issued within that time, on 19 March.

I agree with Mr Preston that the whole of the circumstances ranging from the misunderstanding of the true position based to a large extent on erroneous advice from the consultant, the practical measures that had to be taken in order to commission the plant and the actual consequences, together with the cooperation of the defendant and its employees, are matters which the Court can take into account in determining the penalty to be imposed by way of mitigation.

I have not gained a great deal of assistance from other cases to which I have been referred. That certainly is not intended as any criticism but merely a confirmation of what has been said on many occasions, namely, that it is difficult to make a direct comparison between one case and another.

However, as I said earlier, this is not a case of deliberate flouting of the law. Notwithstanding the two earlier offences and the real potential for serious environmental harm, the Court accepts the defendant's explanation of how the offence was committed as being a plausible one.

I also accept that it was necessary to produce product in order to test the process effectively and that the submission by the prosecutor that the breach occurred only in the pursuit of profit must be weighed against the practical aspect of what the defendant was doing, quite apart from the earlier finding I made that the submission about profit is not supported by the evidence in any event.

I find that the offence has been proved and that the offence committed was in accordance with the charge set out in the summons, that is, that between 15 February 1999 and 5 March 1999 the defendant did operate the plant at Tamworth without a licence which it required to carry out that operation in accordance with s 10 of the Clean Air Act.

The offence is serious. Setting aside for the moment the question of any daily penalty, an appropriate penalty without taking account of any mitigating factors would in the Court's view have been in excess of $30,000.

Having regard to the early plea of guilty I am prepared to allow the maximum discount of 25 percent in that respect identified by the Court of Criminal Appeal in Thompson . The defendant's cooperation with the prosecutor prior to the laying of the charge is also relevant in this respect.

I am also prepared to take into account the mitigating factors which were raised by Mr Preston and which I outlined in the course of these reasons.

The appropriate penalty, having regard to the whole of the circumstances, is $18,000.

That then leaves the question of whether or not the defendant should also be required to pay a daily penalty.

Having regard to the whole of the circumstances of the case, the defendant did not continue to operate for any significant length of time after the issue of the absence of a licence was raised.

During the whole of the time that the plant operated without a licence the defendant was under the apprehension that it was doing so under the umbrella of the existing approval. Ultimately, the defendant ceased operations until such time as the licence that had been applied for was issued.

There is no evidence which justifies the Court finding that the defendant was doing anything more than commissioning the plant during the period after 15 February and before the licence was issued or, more particularly, between 15 February and 5 March.

In those circumstances I do not propose to impose a daily penalty.

The defendant has agreed to pay the prosecutor's costs in the sum of $8,000.

Although I did not specifically mention the fact when determining the penalty, I have also taken into account the fact that the Court has had to deal with this defendant on two previous occasions.

The formal orders of the Court are:- 1. I find the offence proved. 2. The defendant is convicted. 3. The defendant is ordered to pay a penalty by way of a fine in the sum of $18,000. 4. The defendant is ordered to pay the prosecutor's costs in the sum of $8,000.

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