Environment Protection Authority v Hanson Precast Pty Limited

Environment Protection Authority v Hanson Precast Pty Limited - [2008] NSWLEC 285 - NSWLEC 2008 case summary — Zoe

[13]

15 As a result of the serious nature of the information provided to the prosecutor's investigators by Mr Kinny, no record of interview was conducted with Mr Vernon in this matter. The incident - Tuesday, 17 April 2007 16 On Tuesday, 17 April 2007, only Beds 1 and 2 were in operation at the premises. At 6:30pm, the low oil level alarm was activated on the heating system and the system automatically shut down. A noticeable oil smell was observed adjacent to Bed 1. The oil leak was thought to be beneath Bed 1. Accordingly, oil to Bed 1 was shut off. Hanson thought the leak had been contained, and an additional 300 litres of heat transfer oil was added to the heating system and it was restarted. 17 The heating system then operated throughout the night on Tuesday, 17 April 2007 on Bed 2 only. Wednesday, 18 April 2007 18 On Wednesday, 18 April 2007, production occurred on Beds 2 and 4 only. The boiler was started at 2:30pm. At 5:00pm, the boiler was inspected by the maintenance manager before leaving the premises and appeared to be functioning normally. Sometime after 5:00pm, the low oil level alarm was again activated on the heating system and the system automatically shut down. Thursday, 19 April 2007 19 On the morning of Thursday, 19 April 2007, the concrete on Bed 1 had sufficiently cured and stripping was commenced. An oil smear was then noticed in the settling pit adjacent to the heating system boiler. 20 An oil soak boom was placed across the outlet of the settling pit and the controlled discharge pit adjacent to the boundary was inspected. Actions were then immediately taken to bund stormwater outlets to prevent possible leaked oil escaping offsite. Hanson was notified by Hawkesbury Council that an oil spill had occurred. At 12:59pm on 19 April 2007 Hanson reported the incident to the Department of Environment and Climate Change (DECC) Environment Line. 21 Further investigation by Hanson revealed that a pipe in the service trench supplying heat transfer oil to Bed 4 was leaking due to a pipe having corroded. 22 Hanson then determined that Bed 1 had been incorrectly identified as the source of the heat transfer oil leak as there was oil found inside the service trench between Bed 1 and Bed 2. This resulted in heat transfer oil from the corroded pipe in the service trench draining into the oil trap pit. 23 The oil trap pit relies on oil floating on top of water contained in the base of the pit. Due to an extended period of dry weather, the oil trap pit was dry and therefore the baffle system was not functioning. The heat transfer oil should have been retained by the baffle. However, as the baffle was dry, the heat transfer oil passed under the baffle and into the offsite stormwater system discharging into an unnamed culvert at Industry Road, Mulgrave. Volume spilt 24 It is estimated that between 200 and 300 litres of heat transfer oil entered the off site stormwater drain. The low level alarm 25 The heating system shuts down automatically if the low oil level alarm is activated. Once the low oil level alarm has been activated, the heating system can only be restarted manually after adding more heat transfer oil. A float switch prevents the operation of the high temperature oil pump if there is insufficient oil in the tank. Cause of the incident 26 The incident was caused by:

[20]

38 The heating pipes beneath the casting beds are inspected when a leak occurs. However, they cannot be inspected whilst there is concrete curing on the beds, as the presence of concrete restricts access beneath the beds. Therefore, inspection can only take place after the concrete is lifted, but the concrete can take several days to cure if the heating system is disabled. 39 There was a noticeable smell next to Bed 1 on 17 April 2007. However, it is not possible to physically check whether there is an oil leak beneath that bed if there is concrete curing on it. 40 The cover on the oil trap pit is a heavy concrete lid which requires a crane to lift it. Removal of the cover needs to occur after hours as the process of lifting cannot occur during normal operation of the premises. 41 The settling pit and the service trench are inspected, maintained and cleaned by the defendant or contractors on a regular basis. Prior to this incident, that occurred approximately every six months. 42 Based on information from Mr Vernon during the course of Mr Kinny's investigation, Mr Kinny satisfied himself that over the past 25 years there had been ten leaks in the pipes beneath the casting beds and on each occasion the oil had been contained and did not leak into the service trench or oil trap pit. Again that evidence is hearsay but it was admitted as evidence of Mr Kinny's state of mind and as indicative of an aspect of the investigation that he undertook. 43 The post-incident works and procedures described in the agreed facts were undertaken by the defendant to eliminate the possibility of a repeat of the incident. 44 In the course of an interview by investigators on behalf of the prosecutor in October 2007, Mr Kinny described the oil trap pit and the settling pit. He said that the settling pit had a steel grate on it so that you can see into the base, and that even in dry weather there was almost always a small flow of water, which the defendant thought seeped into the drainage system from ground water. On the occasion of the incident, the oil trap pit had a cover on it and was far more awkward to investigate. 45 Mr Kinny told the investigators that there was a baffle in the oil trap pit which was intended to work by water being above the base of the baffle so that if any oil flowed into the pit then, being lighter than water, the oil would be retained by the baffle on the plant-side of the pit. He informed the investigators that that particular pit appears to have been dry when this incident occurred, possibly because of an extended drought. 46 It is apparent that there was an overflow of oil from the oil trap pit through a pipe to the settling pit and thence into the stormwater drainage system. Other evidence 47 On 6 July 2007 the defendant wrote a letter to the prosecutor in response to a statutory notice. Amongst the information provided in that letter was the following: The pipes under the casting beds are inspected when a leak appears to be evident as the pipes are sealed below steel beds up to 170 metres long. Over the last 20 years there have only been six leaks in the pipes under the casting beds and the oil was contained in those beds and did not escape. There was no intention or expectation that oil from the heating system should ever have accessed the stormwater drainage system.

[24]

(i) pollution prevention… (ii) the reduction to harmless levels of the discharge of substances likely to cause harm to the environment,… (iv) the making of progressive environmental, improvements including the reduction of pollution at source,… 53 The defendant compromised the objects of the POEO Act by failing to protect the quality of the environment to the extent that the oil travelled some 200 metres in the watercourse or drain and caused actual harm to the environment as well as other potential harm. However, the defendant submits, in effect, that those objects have not been greatly compromised having regard to the fact that the discharge was into an industrial drain and was contained over a relatively short distance. There is no suggestion that the incident permanently degraded the environment. 54 A stern policy against pollution lies behind the legislation. In Axer Pty Ltd v Environment Protection Authority (1993) 113 LGERA 357 at 359, Mahoney JA held: The community has adopted a stern policy against pollution. The legislative scheme requires that proper, and strict, precautions be taken by those whose activities may cause proscribed pollution. The quantum of the fines which may be imposed evidences this: for the present offence, a maximum fine of $125,000 [now $1 million] was available. The quantum of the fines which the legislation allows to be imposed has no doubt been fixed not merely to indicate the seriousness with which such pollution is regarded but also to deter those engaged in such activities and to procure that they will take the precautions necessary to ensure that it does not occur. ... The legislation does not seek merely to prevent deliberate or negligent pollution. It envisages that, at least in many cases, proper precautions must be taken to ensure that pollution does not occur. Experience has shown that it is not enough merely to take care: accidents will happen. The legislation envisages that in many cases care must be supplemented by position precautions; business must be arranged and precautions taken so as to ensure that pollution will not occur.

[39]

64 Apart from the maximum penalty, s 241 of the POEO Act requires the Court to take into account a number of matters relevant to objective seriousness, which I address below. There are two components to the assessment of those matters and to the assessment of objective seriousness of an offence generally: an examination of the precise acts or omissions of the offender, and the consequences of those acts or omissions: R v Carroll [2008] NSWCCA 218 at [39]. That examination has been conducted earlier in this judgment. Environmental harm 65 An indicator of objective seriousness of a pollution offence is whether there has been any actual environmental harm, and if so, its seriousness: s 241(1)(a) POEO Act. The spill caused actual harm and potential further harm to the environment (see [27] - [29] above). There was substantial short-term environmental harm but there are no long-term harmful effects. 66 Although the condition of the receiving waters is not a mitigating factor, it is relevant to the assessment of the harm or likely harm by the commission of the offence: Environment Protection Authority v Waste Recycling and Processing Corp (2006) 148 LGERA 299 at [149]; Environment Protection Authority v Hochtief AG and Thiess Pty Ltd [2007] NSWLEC 177 at [19]. Whilst conceding that there is no doubt that there has been environmental harm, the defendant points out that the oil spilt was about the equivalent of the contents of a 44 gallon drum and submits that it is significant that the discharge went into a drain and was confined. That is so. However, the oil spilt was still substantial and over a substantial distance; the drain was in the nature of an open watercourse; and, as the defendant acknowledges, the oil damaged reeds, killed mosquito-eating fish and stained rocks. Practical measures 67 An indicator of objective seriousness of a pollution offence is the practical measures that may be taken to prevent, control, abate or mitigate the harm to the environment: s 241(1)(b) POEO Act. The prosecutor submits that obvious practical measures could have been taken prior to the incident. They include the measures taken by the defendant following the incident in order to prevent any recurrence (see [30] above); ceasing production until the source of the leak had been correctly identified or a safe system implemented; and measures to ensure that if the leak was not in the pipes of Bed 1 that a procedure was in place to prevent a spill. The prosecutor submits that it was not acceptable for the defendant to operate its business, even for a temporary period, without taking reasonable precautions. 68 I accept the thrust of the prosecutor's submissions. It seems to me that if the baffle control in the oil trap pit was to be used as the control mechanism to prevent oil entering the drainage system, then there should have been a system in place for being able to check readily whether there was water in the oil trap pit because, without such water, the baffle control was useless. Foreseeability 69 An indicator of objective seriousness of a pollution offence is the extent to which the person who committed it could have reasonably foreseen the harm caused or likely to be caused to the environment by the commission of the offence: s 241(1)(c) POEO Act. The prosecutor submits that the harm and likely harm could and should reasonably have been foreseen, based upon a number of matters including the following:

[40]

(a) the defendant should have been aware that the trap pit was connected to the stormwater system that ultimately flowed to the unknown watercourse; (b) the defendant was aware that liquids could escape the premises from the oil trap pit; (c) the defendant's employees were not aware of the actual location or cause of the leak for almost two days before the oil escaped, during which time production continued; (d) 300 litres of oil was added to a closed system by an employee of the defendant with only minimal investigation being carried out into its possible causes; (e) the only means of preventing oil in the oil trap pit from entering an offsite stormwater drain was a baffle which was not functioning. The oil trap pit was inspected infrequently and no other measures were in place; (f) the defendant's employees failed to inspect the service trench, the oil trap pit, the settlement pit or the control discharge pit or any other area once the incorrect belief had been formed that the leak was under Bed 1; and (g) a low level alarm in the heating system should have been investigated properly and decisive action taken to rectify the cause prior to restarting the system. 70 I accept the thrust of the prosecutor's submissions. In particular, the defendant knew that without water in the oil trap pit, the baffle control to prevent oil entering the drainage system would not work. The defendant knew that if the baffle control did not work and sufficient oil entered the pit then the oil could escape into the drainage system. The very existence of the oil trap pit and its baffle control demonstrates the foreseeability of what occurred. Control over the causes 71 An indicator of objective seriousness of a pollution offence is the extent to which the defendant had control over the causes that gave rise to the offence: s 241(1)(d) POEO Act. It is agreed that the defendant had control over the causes. Conclusion as to objective seriousness of offence 72 Overall, in my opinion, the objective seriousness of the offence is more towards the lower end of the scale. Subjective considerations 73 The following mitigating subjective matters should be taken into account in the defendant's favour:

[41]

(a) the defendant has no record of prior convictions: s 21A(3)(e) Crimes (Sentencing Procedure) Act 1999 ; (b) the defendant is a corporation of good character: s 21A(3)(f); (c) the defendant has given full assistance to the prosecutor: ss 21A(3)(m) and 23; (d) the defendant pleaded guilty at the earliest time: ss 21A(3)(k) and 22. Consequently, the defendant is entitled to the full discount of 25 per cent on sentence; (e) the defendant has shown remorse, has provided evidence that it accepts responsibility for its actions and has acknowledged the damage caused: s 21A(3)(i). Remorse has been expressed convincingly on behalf of the defendant by Mr Kinny, the defendant's manager at its Mulgrave and Riverstone sites, who was a reliable and careful witness. He said that everyone concerned with the defendant had been devastated by this incident and that all of the team who reported to him in relation to the matter were quite distressed. Indeed, the maintenance manager has had a significant medical condition as a result of the incident. The defendant sincerely regrets what has happened; (f) the cleanup was efficiently handled by the defendant once notified by the council and has cost the defendant over $63,000; Deterrence 74 The prosecutor submits that there is a role for specific deterrence in relation to the defendant because of the failure of the systems it had in place. I do not consider that there is a strong case for specific deterrence. My assessment is that the defendant was conscientious about environmental safety and has responded well to this incident, both in the cleanup and in working out systems which can prevent a recurrence. There should also to be taken into account in the defendant's favour that an incident like this was unprecedented and that Bed 1 had just resumed operation. There was therefore potential, as occurred, for the defendant to make a mistaken assumption initially about the cause of the incident. That is not to say that the conduct of the defendant should be excused. Such is the premium which has been placed by the community, through the legislature, on the avoidance of pollution, that the failure to take practical measures which could and should have been taken to avoid this incident, to which I have referred earlier, should not be excused. 75 There is a stronger case for general deterrence to deter others from committing a similar offence: I do not understand that to have been disputed by the defendant. Even-handedness 76 The prosecutor referred to the penalties in a few other oil pollution cases, but the parties placed no particular reliance upon them in the divergent circumstances of the present case. Conclusion 77 In my opinion, an appropriate penalty for the offence warrants a fine of $50,000, after discounting by one-third for all mitigating factors including a 25 per cent discount for the utilitarian value of the early plea of guilty. The orders of the Court will be as follows:

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