Environment Protection Authority v Hardman Chemicals Pty Ltd

Land and Environment Court (NSW)|2020-02-12|Before: Robson J

: C Trahanas (Prosecutor) M J Astill (Defendant)

Solicitors: Environment Protection Authority (Prosecutor) Storey & Gough (Defendant) File Number(s): 2019/00135816 Publication restriction: Nil

Judgment

The defendant, Hardman Chemicals Pty Ltd (ACN 167 987 064) ('Hardman Chemicals'), has pleaded guilty to one charge against s 64(1) of the Protection of the Environment Operations Act 1997 (NSW) ('POEO Act') in that it failed to undertake chemical production waste generation and dangerous goods production at 11 Boden Road, Seven Hills ('Premises') in a competent manner, contrary to a condition in an Environment Protection Licence it held.
Section 64(1) of the POEO Act provides: 64 Failure to comply with condition (1) Offence If any condition of a licence is contravened by any person, each holder of the licence is guilty of an offence. Maximum penalty: (a) in the case of a corporation - $1,000,000 and, in the case of a continuing offence, a further penalty of $120,000 for each day the offence continues,… …
The contravention arises from an incident occurring on 3 May 2018, in which chlorine gas was emitted into the atmosphere from the Premises ('Incident').
By way of Summons filed on 1 May 2019 and served on Hardman Chemicals on 7 May 2019, the Environment Protection Authority ('EPA') commenced Class 5 prosecution proceedings in relation to the Incident.
On 14 June 2019 Hardman Chemicals entered a plea of guilty.
A sentence hearing was held on 12 February 2020. Hardman Chemicals is now to be sentenced for the offence it committed.

Evidence

The Court received detailed evidence comprising a lengthy Statement of Agreed Facts incorporating an extensive bundle of background documentation.
Hardman Chemicals reads the affidavits of Mr Isaac Gatt and Mr Simon Henry, both sworn 13 September 2019. Mr Gatt is the General Manager and Mr Henry is the owner and a director of Hardman Chemicals. The prosecutor relied on the expert report of Dr Michael Robertson filed 26 July 2019.

Background

The background facts in relation to the offence are largely uncontested and are summarised as follows.
Hardman Chemicals is a chemical manufacturing company. It produces chemicals for use in the treatment of drinking water, and in pharmaceutical, construction and agricultural industries.
At the time of the offending conduct, Hardman Chemicals owned and occupied the Premises and was the holder of Environment Protection Licence No 141 ('Licence'). The Licence authorised Hardman Chemicals to carry out "chemical production waste generation" and "dangerous goods production" under cl 8 of Sch 1 of the POEO Act, to the scale specified in the Licence, at the Premises.
Condition O1.1 is an operating condition of the Licence, which states: Licensed activities must be carried out in a competent manner. This includes: (a) the processing, handling, movement and storage of materials and substances used to carry out the activity; and (b) the treatment, storage, processing, reprocessing, transport and disposal of waste generated by the activity.
One of the main operations carried out by Hardman Chemicals is production of a range of aluminium chlorohydrate ('ACH') products. The ACH production process involves the following: 1. Reactors, which are rubber-lined mild steel tanks, are used to contain the chemical reaction between liquid hydrochloric acid ('HCl') and aluminium metal. Hardman Chemicals has seven reactors (identified as R101, R102, R103, R104, R105, R106 and R107), all of which are located in the yard of the Premises and each has a capacity of 30,000L; 2. Storage tanks, which store liquid HCl prior to its transfer into a dosing tank. Hardman Chemicals has two storage tanks (identified as T100 and T108), both of which are located in the yard of the Premises and each has a capacity of 25,000L; 3. Dosing tanks, which are used to control the rate at which HCl is introduced into a reactor. Hardman Chemicals has three dosing tanks (identified as T104, T137 and T301), all of which are located in the yard of the Premises. Dosing tanks T104 and T301 have a capacity of 8,000L and dosing tank T301 has a capacity of 20,000L; and 4. A scrubber, which is an apparatus used to remove harmful chemicals contained in any fumes emanating from HCl and therefore prevents their release into the atmosphere. Hardman Chemicals has one scrubber, located in the yard of the Premises, which is connected to the storage tanks and to dosing tanks T104 and T107.
Briefly stated, the production of ACH requires aluminium metal and water to be placed into a reactor, after which liquid HCl is progressively introduced at a controlled rate through the use of a dosing tank. This reaction causes the dissolution of the aluminium metal and results in the generation of ACH products.

Circumstances prior to the Incident

For several months prior to the Incident, Hardman Chemicals was concerned about an odour described as sulphur or rotten eggs occurring at the Premises. Hardman Chemicals had also been made aware of complaints made to the EPA in relation to the odour.
On 1 May 2018, Mr Gatt met with Dr Lakshman Jayaweera, a chemical engineer who consulted to Hardman Chemicals. Mr Gatt and Dr Jayaweera formed the view that the odour may have been emanating from the HCl.
Dr Jayaweera suggested introducing hydrogen peroxide to the ACH production process so as to neutralise the odour.
On 2 May 2018, Mr Gatt conducted small-scale laboratory tests at the Premises. These tests involved mixing various small quantities of hydrogen peroxide with 1L of HCl. Mr Gatt did not take any notes, nor did he observe any changes in the HCl solution resulting from the introduction of the hydrogen peroxide.
Following Mr Gatt's laboratory tests on 2 May 2018, Gary Gillot, the Operations Manager of Hardman Chemicals, instructed Martin Brandjes, a plant operator, to add hydrogen peroxide to reactor R103. Mr Brandjes and Troy Spring, Hardman Chemicals' plant and maintenance operator, refused to perform this action due to safety concerns. Following a decision by Mr Gatt, Mr Gillot and Phillip Barlocher, another plant operator, that the proposed action was safe to perform, Mr Barlocher proceeded to add 160L of hydrogen peroxide to reactor R103. The odour then disappeared.
During the afternoon of 2 May 2018, Dr Jayaweera conducted three laboratory tests of a similar nature to those earlier performed by Mr Gatt. These tests involved introducing 10ml, 15ml and 30ml quantities of hydrogen peroxide to 1L of HCl. The results of these tests were as follows: 1. When 30ml of hydrogen peroxide was added to 1L of HCl, bubbling was observed; 2. When 15ml of hydrogen peroxide was added to 1L of HCl, a slight yellow colour was observed. There was no bubbling or smell of chlorine; and 3. When 10ml of hydrogen peroxide was added to 1L of HCl, a slight yellow colour was observed. There was no bubbling.
Dr Jayaweera did not make any notes in relation to the above tests until approximately three to four days later, following a request from Mr Gatt. However, on the basis of the laboratory results described at [20] above, Dr Jayaweera determined that hydrogen peroxide could be added directly to a storage tank in a ratio of 150L of hydrogen peroxide to 10,000L of HCl. However, in forming this opinion, Dr Jayaweera: 1. Did not consult any literature or Safety Data Sheets maintained by Hardman Chemicals relating to the reaction between hydrogen peroxide and HCl, including the potential for chlorine gas generation; 2. Did not undertake a job safety analysis or risk assessment as required by Hardman Chemicals' Job Safety and Environmental Risk Analysis Procedure ('JSERA'); 3. Did not investigate the consequence of adding hydrogen peroxide to HCl in higher quantities; 4. Did not investigate how the speed and manner of the introduction of hydrogen peroxide may affect the reaction; 5. Did not conduct investigations into the extent of dilution that should occur when mixing hydrogen peroxide with HCl; and 6. Did not recognise that laboratory test conditions were different to the scaled up conditions present when adding hydrogen peroxide to reactor R103.

The offence

By the morning of 3 May 2018, the odour of sulphur or rotten eggs had returned to reactor R103.
Mr Gillot, in consultation with Dr Jayaweera, decided to add hydrogen peroxide directly to a storage tank. They considered this to be a more effective means of neutralising the odour than adding the hydrogen peroxide to a reactor.
At around 10.30am on 3 May 2018, Mr Brandjes and Mr Barlocher were directed by Mr Gillot to add approximately 160L of hydrogen peroxide to storage tank T100, which then contained around 10,000L to 12,000L of HCl. Prior to placing the hydrogen peroxide in the storage tank, Mr Barlocher questioned Mr Gillot as to whether the procedure was safe, to which Mr Gillot confirmed that the procedure had been tested in a laboratory. Mr Brandjes and Mr Barlocher then proceeded to transfer the hydrogen peroxide into the storage tank over a period of three to five minutes. Both employees were not wearing respirators at the time.
Within minutes, yellow-green fumes with an odour of chlorine and rotten egg began escaping from storage tank T100. Mr Brandjes turned on the scrubber in an attempt to contain the fumes.
From around 10.40am to 11.15am, approximately 10kg of chlorine gas and 85.5kg of oxygen gas, at a minimum, was discharged from the Premises during the Incident. The fumes were emitted from three points: the scrubber; an overflow point fitted to the storage tank; and the top of a cooling tower servicing several of the reactors.
In the immediate aftermath of the Incident, Mr Brandjes and Mr Barlocher attempted to minimise the dissemination of the gas by hosing the fumes with water for approximately 30 seconds to 1 minute. Following a change in wind direction, the fumes began moving toward Mr Brandjes, Mr Barlocher and Mr Gillot, who were immediately affected by the chlorine gas. Mr Spring, who was nearby in the yard, was also affected. These employees were then forced to move to other areas of the Premises to escape the fumes.
In total, 10 employees of Hardman Chemicals reported symptoms resulting from exposure to the chlorine gas. In particular, Mr Brandjes felt overcome by the toxic gas, experienced breathing difficulties and felt a burning in his nose and throat. He started coughing violently. Mr Barlocher experienced choking, coughing and dry retching, whilst Mr Spring experienced prolonged coughing to the extent that he felt he could have "coughed out his lung". Mr Gillot also started coughing.
Personnel located in the office at the Premises were also affected by the chlorine gas, with symptoms including irritation to eyes and nose, as well as coughing. The expert report of Dr Robertson filed 26 July 2019 notes that these symptoms are indicative of an exposure to chlorine gas with an approximate concentration of 30 parts per million.
At approximately 11.00am, Mr Gillot drove Mr Brandjes, Mr Barlocher and Mr Spring to Blacktown Hospital where they were kept overnight for observation with each being placed on a ventilator to aid in lung recovery. Each of these employees took Ventolin for four to six weeks following the Incident, but none reported any long-term symptoms arising from the Incident.
The emission of chlorine gas resulting from the Incident also affected 14 individuals working in a number of nearby businesses. The expert report of Dr Robertson opines that the exposure to individuals of these businesses, which are predominantly located south to south-east of the Premises, was a consequence of the gas being carried approximately 150m by a slight northerly wind.
At around 11.00am on 3 May 2018, the owner of a neighbouring business, Mr Robert Vide, reported a chemical smell to emergency services. At around 11.15am, NSW Police, Fire and Rescue and NSW Ambulance arrived at the Premises.
At around the time of the Incident, 14 employees from neighbouring businesses noticed that the air had an unpleasant taste and a chlorine smell. These individuals experienced a range of symptoms, including breathing difficulties, burning sensations, coughing, irritated eyes, headaches and other discomfort. In particular: 1. Timothy McLean, a mechanic employed at John Vawser Motors Pty Ltd, began coughing, experienced sinus irritation and had difficulty breathing. Mr McLean had a sore throat and lungs for the remainder of the day, with his sore throat persisting for three days following the Incident. Two other mechanics also began coughing and gasping. 2. Robert Vide, the owner of Powers Road Smash Repairs, felt a burning sensation in his nose, throat and eyes. Mark Speirs, an employee of Mr Vide, was overcome by the strong chlorine smell and was unable to breathe. Another of Mr Vide's employees also experienced breathing difficulties. Mr Vide and his employees left the workshop and then returned to work by 2pm that afternoon. 3. Lincoln Coleman, a laboratory supervisor at Resource Laboratories Pty Ltd ('RL'), felt his throat and nose burning and experienced coughing, eye irritation and breathing difficulties. Nicole Greely, also employed by RL, experienced light-headedness and blurred vision. Another employee, James Gammidge, similarly experienced light-headedness along with chest discomfort, sinus irritation, coughing and itchy eyes. Esteban Maldonado, a laboratory supervisor, could feel his nostrils burning and felt dizzy. The employees of RL evacuated just after 11:15am-11:20am, returning to work around 12:45pm-1:00pm. The symptoms of Mr Maldonado continued for the remainder of the afternoon while Ms Greely's symptoms included a sore throat, aches and exhaustion which remained for the entire weekend. 4. Dennis Panagopoulos, the Managing Director of Powerhouse Auto Electrical Pty Ltd, experienced symptoms including light-headedness and a tingling sensation in his chest. He left work for approximately one hour and continued to feel light-headed for several hours after the Incident. 5. Brent Hogan of Westcon Landscaping felt light-headed and developed a headache. He continued to feel unwell until arriving home in the evening. 6. Graham Byrnes, an employee of Pneumatic and Automation Equipment Pty Ltd, felt that he was unable to breathe and suffered soreness in his eyes, nostrils and throat. Mr Byrnes' throat remained sore for about three days following the Incident. Branislav Mitkovic, another employee, experienced a slight cough and irritation and felt better after receiving oxygen. Both employees were checked by an ambulance officer following the Incident. 7. James Canterbury of Blue Glue experienced discomfort in his throat and nose. 8. Matthew Nichols of Don Kyatt Spare Parts experienced light-headedness and a burning sensation in his lungs.
No long term symptoms of any of the persons affected by the Incident have since been reported.
Between 11.00am and 11.30am, Mr Gatt called WorkCover. At around 11.30am, Mr Gatt reported the Incident to the EPA.
On 4 May 2018, Mr Gatt sent an email to an officer of the EPA briefly outlining the Incident and noting that all personnel were in good health.
In the week following the Incident, Mr Gatt held a meeting at the Premises to discuss the Incident, personal protective equipment, and safety. Hardman Chemicals holds fortnightly meetings with employees and managers to discuss issues that may have arisen.
Also following the Incident, Mr Gatt arranged for the testing of Hardman Chemicals' supply of HCl. Hardman Chemicals received testing results from both an independent company and the supplier of the HCl, following which Hardman Chemicals ceased ordering HCl from the same supplier.
On 15 May 2018, Hardman Chemicals provided an Incident Report to the EPA.
On 15 May 2018, SafeWork NSW conducted an inspection of the Premises. SafeWork NSW subsequently issued Hardman Chemicals with an Improvement Notice on 21 May 2018.
Between June and September 2018, six employees of Hardman Chemicals participated in refresher Dangerous Goods Training and two employees participated in First Aid Training.
On 22 January 2019, Hardman Chemicals provided a Revised Incident Report to the EPA.
The affidavit of Mr Gatt filed 18 September 2019 details the actions taken by Hardman Chemicals after the Incident, including that it carried out 'a complete overhaul of its safety systems' following the Incident. As considered below, this included introducing new procedures and reviewing "the entire Integrated Business Management System".

Sentencing principles

The sentence imposed by the Court must reflect and be proportionate to the objective circumstances of the offence and the subjective circumstances of the offender. An instinctive synthesis method is to be applied, requiring the Court to identify the facts relevant to the sentence and weigh their significance to arrive at an appropriate sentence.
While Hardman Chemicals' plea of guilty to the charge entails an acceptance of the proof beyond reasonable doubt of the elements of the offence, the prosecutor still carries the onus of proving beyond reasonable doubt any aggravating factors for the purposes of sentencing, and for mitigating factors the onus of proof lies upon the offender on the balance of probabilities: R v Olbrich (1999) 199 CLR 270; [1999] HCA 54 at [27].

Legislative framework

In sentencing Hardman Chemicals, I have had regard to: the purposes of sentencing as set out in s 3A of the Crimes (Sentencing Procedure) Act 1999 (NSW) ('Sentencing Act'), particularly subpars (a), (b), (e), (f) and (g); the aggravating, mitigating and other factors of relevance as set out in ss 21A and 22 of the Sentencing Act; the objects of the POEO Act as set out in s 3 thereof; and the relevant matters in s 241 of the POEO Act. These provisions are set out below.

Sentencing Act

Section 3A of the Sentencing Act relevantly provides: Part 1 Preliminary ... 3A Purposes of sentencing The purposes for which a court may impose a sentence on an offender are as follows: (a) to ensure that the offender is adequately punished for the offence, (b) to prevent crime by deterring the offender and other persons from committing similar offences, … (e) to make the offender accountable for his or her actions, (f) to denounce the conduct of the offender, (g) to recognise the harm done to the victim of the crime and the community.
Sections 21A(2) and 21A(3) of the Sentencing Act set out aggravating and mitigating factors the Court must take into account insofar as they are relevant. These sections relevantly provide: Part 3 Sentencing procedures generally ... 21A Aggravating, mitigating and other factors in sentencing … (2) Aggravating factors The aggravating factors to be taken into account in determining the appropriate sentence for an offence are as follows: … (g) the injury, emotional harm, loss or damage caused by the offence was substantial, … The court is not to have additional regard to any such aggravating factor in sentencing if it is an element of the offence. (3) Mitigating factors The mitigating factors to be taken into account in determining the appropriate sentence for an offence are as follows: (a) the injury, emotional harm, loss or damage caused by the offence was not substantial, … (e) the offender does not have any record (or any significant record) of previous convictions, (f) the offender was a person of good character, (g) the offender is unlikely to re-offend, … (i) the remorse shown by the offender for the offence, but only if: (i) the offender has provided evidence that he or she has accepted responsibility for his or her actions, and (ii) the offender has acknowledged any injury, loss or damage caused by his or her actions or made reparation for such injury, loss or damage (or both), … (k) a plea of guilty by the offender (as provided by section 22), … (m) assistance by the offender to law enforcement authorities (as provided by section 23), …
Section 22 of the Sentencing Act sets out factors that the Court must take into account in relation to Hardman Chemicals' guilty plea: 22 Guilty plea to be taken into account for offences not dealt with on indictment (1) In passing sentence for an offence on an offender who has pleaded guilty to the offence, a court must take into account - (a) the fact that the offender has pleaded guilty, and (b) when the offender pleaded guilty or indicated an intention to plead guilty, and (c) the circumstances in which the offender indicated an intention to plead guilty, and may accordingly impose a lesser penalty than it would otherwise have imposed. ...

POEO Act

The objects of the POEO Act are stated in s 3 and relevantly include: 3 Objects of Act … (a) to protect, restore and enhance the quality of the environment in New South Wales, having regard to the need to maintain ecologically sustainable development, … (d) to reduce risks to human health and prevent the degradation of the environment by the use of mechanisms that promote the following: (i) pollution prevention and cleaner production, (ii) the reduction to harmless levels of the discharge of substances likely to cause harm to the environment, (iia) the elimination of harmful wastes, … (iv) the making of progressive environmental improvements, including the reduction of pollution at source, (iv) the making of progressive environmental improvements, including the reduction of pollution at source, … (e) to rationalise, simplify and strengthen the regulatory framework for environment protection, (f) to improve the efficiency of administration of the environment protection legislation[.] ...
Section 241 of the POEO Act provides: Part 8.2 Proceedings for offences ... 241 Matters to be considered in imposing penalty (1) In imposing a penalty for an offence against this Act or the regulations, the court is to take into consideration the following (so far as they are relevant): (a) the extent of the harm caused or likely to be caused to the environment by the commission of the offence, (b) the practical measures that may be taken to prevent, control, abate or mitigate that harm, (c) the extent to which the person who committed the offence could reasonably have foreseen the harm caused or likely to be caused to the environment by the commission of the offence, (d) the extent to which the person who committed the offence had control over the causes that gave rise to the offence, (e) whether, in committing the offence, the person was complying with orders from an employer or supervising employee, ... (2) The court may take into consideration other matters that it considers relevant.

The objective circumstances of the offence

The principal factor the Court considers in sentencing is the objective gravity or seriousness of the offence. This involves consideration of various elements.

Nature of the offence

The nature and purpose of the statutory provision that has been contravened and its place in the statutory scheme are illustrative of the objective seriousness of environmental offences: Chief Executive, Office of Environment & Heritage v Orica Pty Ltd; Environment Protection Authority v Orica Pty Ltd [2015] NSWLEC 109 at [59] and Chief Executive of the Office of Environment and Heritage v Cory Ian Turnbull [2017] NSWLEC 140; (2017) 227 LGERA 290 at [22]. A fundamental consideration is the degree to which, having regard to the maximum penalty prescribed in the statute of the offence, the offender's conduct would offend against the legislative objective expressed in the offence: Water NSW v Barlow [2019] NSWLEC 30 at [17].
Conditions imposed upon an environmental protection licence traverse a spectrum of obligations. Some are procedural, the consequences of non-observance of which are not necessarily adverse to the environment, while others are regarded as more fundamental in the control of the regulated activity: Environment Protection Authority v Huntsman Corporation Australia Pty Ltd [2011] NSWLEC 39 ('Huntsman') at [65]. I consider that the condition the subject of the current offence, being one requiring that licensed activities be conducted in a competent manner, is a condition of the latter kind such that failure in the present circumstances to observe the requirements involved a system-based failure.
I note and adopt the comments of Pepper J in Environmental Protection Authority v Orica Australia Pty Ltd (the Nitric Acid Air Lift Incident) [2014] NSWLEC 103; (2014) 206 LGERA 239 ('EPA v Orica') at [104] that: …Compliance with licence conditions is the price that entities must pay for permission to engage in potentially polluting manufacturing processes. The conditions imposed in any licence are aimed at maximising beneficial environmental outcomes and minimising environmental harm. They represent a balancing exercise between fostering economic growth and development, on the one hand, and protecting and preserving the environment now and for the future, on the other. Strict compliance with the conditions of any environmental licence is therefore necessary to ensure that this balance is achieved and that the objectives of the POEOA are met.
The prosecutor further submitted that the offence ought to be characterised as objectively serious in light of the potentially high toxicity of chlorine gas.
Hardman Chemicals submitted that the objective gravity of the offence ought to be characterised by reference to a standard of "competence", as opposed to a standard of perfection. As such, Hardman Chemicals submits that the act constituting the offence was only marginally incompetent, therefore falling at or near the low end of objective seriousness. Hardman Chemicals notes the following.
First, Hardman Chemicals was initially motivated by the desire to eliminate an odour which was not caused, nor contributed to, by anything Hardman Chemicals did; second, neighbours had complained about the odour; third, to have done nothing to abate the odour may, of itself, have constituted a breach of Hardman Chemicals' Licence; and fourth, the employees of Hardman Chemicals comprising the plant operators, Mr Gillot and Mr Gatt, had attempted to identify the cause of the odour.
Hardman Chemicals further relied upon the fact that it consulted Dr Jayaweera, an experienced chemical engineer who suggested adding hydrogen peroxide to the process. Dr Jayaweera had previous experience in similar procedures to remove odour from HCI that had not had negative effects. Further, Mr Gatt conducted a number of small-scale tests in the laboratory, using different quantities and different concentrations of HCI, hydrogen peroxide and water, without adverse effect. Then, after 160L of hydrogen peroxide was added to reactor R103, the odour (temporarily) disappeared without any other adverse effect. Following this, Dr Jayaweera conducted further laboratory tests using different quantities and concentrations of HCl and hydrogen peroxide before the chemical reaction which led to the emanation of chlorine gas was undertaken.
The prosecutor further submitted, and I accept, that the condition requiring licensed activities be carried out in a competent manner is fundamental in the control of activities regulated by the Licence. It is also reflective of the environmental and health risks associated with the licensed activity. Further, I accept and endorse the comments of Preston CJ of LEC in Director-General of the Department of Environment and Climate Change v Rae [2009] NSWLEC 137; (2009) 168 LGERA 121 at [19] as follows: Offences which undermine the integrity of the regulatory system are objectively serious. Use of criminal law ensures the credibility of the regulatory system.

Maximum penalty for the offence

The maximum penalty for the offence is $1,000,000.
The maximum penalty for an offence reflects the public expression by Parliament of the seriousness of the offence. The task of the Court is to assess the relative seriousness of the offender's particular offence in relation to a worst case for which the maximum penalty is provided: Camilleri's Stock Feeds Pty Ltd v Environment Protection Authority (1993) 32 NSWLR 683 ('Camilleri's Stock Feeds') at 698. In considering an appropriate sentence, I am conscious that the High Court has cautioned against giving undue weight to considerations of maximum penalty if that would result in an unduly severe sentence: Elias v The Queen; Issa v The Queen (2013) 248 CLR 483; [2013] HCA 31 at [27] (French CJ, Hayne, Kiefel, Bell and Keane JJ).

Harm to the environment

The harm caused by the commission of the offence is relevant in determining the objective seriousness of an offence under s 241(1)(a) of the POEO Act and ss 21A(2)(g) (if the harm was substantial) and 21A(3)(a) (if the harm was not substantial) of the Sentencing Act.
In considering the extent of the harm caused or likely to be caused to the environment by the commission of the offence under s 241(1)(a) of the POEO Act, "harm" is defined to include "any direct or indirect alteration of the environment that has the effect of degrading the environment and, without limiting the generality of the above, includes any act or omission that results in pollution". The concept of harm in the context of environmental offences is broad and it includes the potential or risk of harm, not merely actual harm: Environment Protection Authority v Waste Recycling and Processing Corporation [2006] NSWLEC 419; (2006) 148 LGERA 299 ('Waste Recycling') at [145].
While harm to the environment is not a discrete element of the offence in s 64 of the POEO Act, if contravention of a licence condition results in environmental harm, the offence is aggravated: Environment Protection Authority v Ballina Shire Council [2006] NSWLEC 289; (2006) 148 LGERA 278 at [99].
Although Hardman Chemicals accepts that actual harm resulted from the commission of the offence, it notes that the effects were short term and that future adverse effects are unlikely. As such, Hardman Chemicals submits that the harm caused by the commission of the offence was not substantial for the purposes of s 21A(2)(g) of the Sentencing Act.
The prosecutor submitted that the harm caused was substantial for the purposes of s 21A(2)(g) of the Sentencing Act. In detailing its position, the prosecutor drew the Court's attention to the following: 1. As a result of exposure to chlorine gas, 10 Hardman Chemicals personnel were adversely affected by the chlorine gas. Seven of these employees either went to hospital or saw their general practitioner; 2. The offence caused a loss of amenity to surrounding businesses, as a number of those employees left work for a period of time; 3. Approximately 14 employees from surrounding businesses experienced discomfort and were adversely affected by the chlorine gas. In one instance, the symptoms endured for approximately 3 days; 4. There were likely other individuals nearby to the Premises that may have been exposed to chlorine gas; and 5. The offence caused harm to the community.
Both parties made reference to Waste Recycling, albeit at different paragraphs, in characterising the extent of the environmental harm resulting from the commission of the offence. The relevant paragraphs of Preston J's judgment are reproduced below: [145] Harmfulness needs to not only be considered in terms of actual harm, the potential or risk of harm should also be taken into account: Axer Pty Ltd v Environment Protection Authority (1993) 113 LGERA 357 at 366 and Bentley v BGP Properties Pty Ltd [2006] NSWLEC 34 (6 February 2006) at [175]. Harm should not be limited to measurable harm such as actual harm to human health. It can also include a broader notion of the quality of life. [146] Harm can include harm to the environment and its ecology. Harm to an animal or plant not only adversely affects that animal or plant, it also affects other biota that have ecological relationships to that animal or plant: Bentley v BGP Properties Pty Ltd [2006] NSWLEC 34 (6 February 2006) at [174]. [147] Harm can be direct or indirect, individual or cumulative. Activities that contribute incrementally to the gradual deterioration of the environment, even when they cause no discernable direct harm to human interest, should also be treated seriously. [148] The culpability of the defendant depends in part on the seriousness of the environmental harm. Sentencing courts have exercised their discretion in relation to penalty on the principle that the more serious the lasting environmental harm involved, the more serious the offence and, ordinarily, the higher the penalty: Camilleri's Stock Feeds Pty Ltd v Environment Protection Authority (1993) 32 NSWLR 683 at 701. If the harm is substantial, this objective circumstance is an aggravating factor: s 21A(2)(g) of the Crimes (Sentencing Procedure) Act 1999.
In Environment Protection Authority v Environmental Treatment Solutions [2015] NSWLEC 160 ('ETS') at [73]-[74], Pepper J found that limited and temporary harm caused by exposure to hydrogen sulphide gas was substantial, even though the Incident in that case was of a temporary nature, in light of the potential of hydrogen sulphide gas to cause far more serious and potentially lethal harm at higher concentrations.
In the present circumstances, I consider that the harm caused by the Incident was substantial and serious for the following reasons: first, 10 Hardman Chemicals personnel were adversely affected by chlorine gas, in particular the symptoms expressed by, at least, Mr Brandjes, Mr Barlocher and Mr Spring, such as feeling overcome by toxic gas, breathing as if their throat and nose were burning, coughing violently, chocking and dry retching, and running away to get fresh air, with each ending up in hospital on a respirator, and others who were required to seek medical advice without hospitalisation; second, the fact that 14 employees from surrounding businesses were adversely affected (including 2 employees for 3 days); third, a number of employees were kept away from their work; fourth, it was likely that other individuals nearby to the Premises may have been exposed to the chlorine gas; and I accept that the offence caused harm to individuals both within the Premises and in the wider community.

State of mind in committing the offence

While the offence against s 64(1) of the POEO Act is a strict liability offence, the state of mind of the offender at the time of an offence may make the offence objectively more serious such that a strict liability offence that is committed intentionally, negligently or recklessly will be objectively more serious than one committed accidentally: Gittany Constructions Pty Limited v Sutherland Shire Council [2006] NSWLEC 242; (2006) 145 LGERA 189 at [123].
The Court was not presented with any evidence, nor was it suggested by the Prosecutor, that Hardman Chemicals committed the offence intentionally, recklessly or negligently.

Reasons for committing the offence

The reasons underlying the commission of an offence are relevant to an assessment of the criminality involved, which is measured not only by the seriousness of what actually occurred but also by reference to the reasons for its occurrence: Axer Pty Ltd v Environment Protection Authority (1993) 113 LGERA 357 at [366] and Bentley v BGP Properties Pty Ltd [2006] NSWLEC 34; (2006) 145 LGERA 234 ('Bentley') at [237]. An offence committed for financial gain is objectively more serious than one which is not. In the present matter, the actions of Hardman Chemicals were not motivated for any apparent reason such as financial gain that would increase the objective seriousness of the offence.

Foreseeability of risk of harm

The extent to which the environmental harm caused was reasonably foreseeable by Hardman Chemicals is a relevant sentencing consideration that may increase the objective seriousness of an offence: ETS [83], Camilleri's Stock Feeds at 700. The question is to what extent, if any, a reasonable person in the position of the offender could have foreseen the harm caused or likely to be caused by the commission of the offence.
While I accept and Hardman Chemicals concedes that the risk was reasonably foreseeable, I consider the following matters are relevant to both foreseeability of the risk of harm and the conduct of Hardman Chemicals.
First, Hardman Chemicals, as the holder of an environment protection licence, was clearly on notice of the possibility of harm to the environment occasioned by its licensed activities; second, HCl and hydrogen peroxide are dangerous goods in and of themselves and pose a risk of harm to the environment (the information contained in the Safety Data Sheets for each of these chemicals provided warnings concerning the potential generation of chlorine gas and harm to the environment when combining HCl and hydrogen peroxide); third, Hardman Chemicals was aware that the combination of HCl and hydrogen peroxide could cause harm to the environment, evidenced by the small-scale testing conducted by Mr Gatt and Dr Jayaweera prior to the Incident; and fourth, two of the plant operators, Mr Brandjes and Mr Spring, expressed concerns about the safety of placing hydrogen peroxide into reactor R103 and Mr Barlocher also questioned Mr Gillot on the correctness of the procedure.

Practical measures to prevent risk of harm

As prescribed by s 241(1)(b) of the POEO Act, the availability of practical measures to Hardman Chemicals that may have been taken to prevent, mitigate, abate or control the harm is a relevant factor that the Court must consider.
The prosecutor submitted that Hardman Chemicals could have first, undertaken a job safety and risk assessment in accordance with its adopted internal procedures; second, reviewed literature regarding the potential for chlorine gas generation; third, recognised that issues may result by significantly increasing the quantity of reactants; and fourth, investigated how changing the speed of placement or the dilution of chemicals may affect a reaction. Furthermore, harm to the plant operators could have been avoided through the wearing of respirators.
Hardman Chemicals submitted that it took measures which were considered to be appropriate at the time, such as: 1. Relying on the experience of Dr Jayaweera, who advised that he had carried out a similar operation; 2. Conducting small-scale testing to investigate any possible adverse impacts of adding hydrogen peroxide; 3. Relying on the joint view of Dr Jayaweera and Mr Gatt, in light of their testing and the experience of Dr Jayaweera, that no adverse consequences would result from the addition of hydrogen peroxide; 4. Using a scrubber connected to the reactor to remove harmful chemicals from any gas leaving the reactor; and 5. Training of employees to deal with escaping gases, as evidenced by the initial spraying of water when it first left the reactor.
Hardman Chemicals further submitted that, although the prosecutor identified additional measures that may have prevented or abated the harm, the identification of these steps through the benefit of hindsight should not be given significant weight in determining a sentence as the standard of performance required by Hardman Chemicals was one of competence rather than perfection.
I find that there were practical measures available to prevent the risk of harm and, in addition to the matters noted at [78] above, I accept the submissions of the prosecutor generally to the effect that Hardman Chemicals could have recognised possible issues arising from significantly increasing the quantities involved in the reaction, and that the speed and manner in which the hydrogen peroxide ought to be added to the HCl could also have been investigated. I do not accept the submission that these available practical measures were matters of perfection.

Control over causes of the offence

While Hardman Chemicals accepts that it had relevant control over the causes of the harm, it denies the prosecutor's assertion that the harm was the result of broader systematic and procedural failures which, in turn, resulted in the specific failures by individuals in carrying out their duties in relation to the licensed activities.
The prosecutor notes that Hardman Chemicals was also responsible for ensuring: first, that dangerous goods and hazardous waste were properly and safely mixed during the carrying out of the licensed activities; second, that practical measures and procedures, such as those described above at [78], were implemented to ensure that the licensed activities were carried out in a competent manner; and third, that the JSERA was complied with.
I find, as conceded by Hardman Chemicals, it had relevant and appropriate control over the causes of the harm.

Conclusion on objective seriousness

While the prosecutor submits that the offence is in the mid-range of objective seriousness, Hardman Chemicals contends that the case can properly be considered as being at or near the low end of objective seriousness.
Although specific characterisation of objective seriousness is not a necessary component of the sentencing task because it "…is rarely definitive of that part of the sentencing exercise that requires the sentencing judge to make an evaluative assessment of the gravity of the particular offending or the culpability of the offender", it is still a useful descriptor in the instinctive synthesis exercise: R v DP [2019] NSWCCA 55 at [42] and Environment Protection Authority v Sydney Water Corporation [2019] NSWLEC 100 at [279].
Taking into account the matters above, including the nature of the offence, the maximum penalty, the environmental harm caused by the commission of the offence, the foreseeability of risk of harm, practical measures to prevent risk of harm, and reasons for committing the offence, I consider the subject offence to be within the low to middle range of objective seriousness for offences against s 64(1) of the POEO Act.

Plea of guilty

Hardman Chemicals pleaded guilty to the offence, a mitigating factor pursuant to s 21A(3)(k) of the Sentencing Act. In determining the discount that should be applied to the sentence for the utilitarian value of Hardman Chemicals' plea, regard is given to the timing and circumstances. As Hardman Chemicals entered its plea of guilty at the earliest reasonable opportunity, I find that the full utilitarian value of a guilty plea of 25 per cent discount should be afforded.

Contrition and remorse

Pursuant to s 21A(3)(i) of the Sentencing Act, remorse will only be a mitigating factor if: (i) the offender has provided evidence that he or she has accepted responsibility for his or her actions, and (ii) the offender has acknowledged any injury, loss or damage caused by his or her actions or made reparation for such injury, loss or damage (or both),
The prosecutor acknowledges that both Mr Gatt and Mr Henry each expressed regret regarding the offence in their respective affidavits sworn 13 September 2019.
I have considered the evidence of Mr Gatt and Mr Henry in relation to both the circumstances surrounding the Incident and the steps taken to improve the systems at Hardman Chemicals. In particular, I note the acceptance of the offence and the apology proffered to the Court and the manner in which Hardman Chemicals expressed its regret for the harm that arose from the Incident. I also note that Mr Gatt and Mr Henry were in attendance throughout the hearing.
In consideration of these statements, and in light of the subsequent actions taken by Hardman Chemicals described at [37]-[43] above, I am satisfied that Hardman Chemicals has expressed genuine contrition and remorse for the offence and the harm it caused to employees and others.

Lack of prior criminality

Hardman Chemicals has no prior convictions for any environmental offences. This is therefore a mitigating factor: s 21A(3)(e) of the Sentencing Act. I also am aware that Hardman Chemicals has been operating in the chemical industry since 1948.

Assistance to authorities

Assistance by the offender to law enforcement authorities (as provided by s 23) is a mitigating factor under s 21A(3)(m) of the Sentencing Act.
The prosecutor acknowledged that Hardman Chemicals has cooperated with and provided assistance to the EPA in its investigation of the offence. This included Hardman Chemicals notifying the EPA of the Incident as well as its staff providing information to the EPA and attending interviews. I take this assistance into account as a mitigating factor.

Likelihood of re-offending

The prosecutor made no submissions in relation to the likelihood of Hardman Chemicals reoffending, however conceded that Hardman Chemicals has engaged in actions following the commission of the offence including: first, in the week following the offence, holding an all-staff meeting at the Premises to discuss the Incident; second, arranging for supplies of the HCl used to be tested (for possible impurities) and consequently changing both its supplier and its stocks of HCl; third, conducting refresher first aid and dangerous goods training; and fourth, implementing changes to ensure similar incidents are prevented in the future, including introducing a "management of change" procedure.
In light of the steps taken by Hardman Chemicals since the Incident and the evidence of both Mr Gatt and Mr Henry noted above, I find that the likelihood of Hardman Chemicals reoffending is low. This is therefore a mitigating factor.

Deterrence

The imposition of a sentence serves a number of purposes including retribution and denunciation, as well as deterrence, both general and specific. While specific deterrence is less relevant given my finding regarding Hardman Chemicals' likelihood of re-offending, I find that general deterrence is an important consideration.
I consider that the penalty must be sufficient to deter others who, by oversight or inadequacy in process systems, run the risk of committing an offence against the POEO Act in the hope that should an oversight or inadequacy be exposed, only nominal penalties will be imposed: Huntsman at [119] and Bentley at [139]-[141]. Further, as noted above, I consider that the integrity of the system of licencing is fundamental in giving effect to the objectives of the POEO Act and that the importance of compliance with those conditions must be emphasised by the imposition of an appropriate penalty that serves to deter others: Huntsman at [120].

Even-handedness

In determining the appropriate penalty for the offence, the Court should be consistent with any patterns of sentencing for like offences. The prosecutor directed the Court to various relatively recent cases concerning contraventions of s 64 of the POEO Act including ETS, Environment Protection Authority v GrainCorp Operations Limited [2019] NSWLEC 143, Environment Protection Authority v Morgan Cement International Pty Ltd [2016] NSWLEC 140, Environment Protection Authority v Nulon Products Australia Pty Ltd [2015] NSWLEC 153, EPA v Orica, Environment Protection Authority v Ridley AgriProducts Pty Limited [2019] NSWLEC 119 and Environment Protection Authority v Whitehaven Coal Mining Limited [2019] NSWLEC 27; (2019) 239 LGERA 31 ('Whitehaven').
I have had regard to the matters considered by the Court in the decisions to which I have been referred, including the objective and subjective circumstances thereto. I have given close consideration to the facts of each of the cases as well as the summaries of a number of other comparable cases undertaken by Pepper J in Whitehaven at [263] and ETS at [122]-[126].
I am conscious of the fact that each case turns upon its particular facts and caution must be exercised in considering other cases because of the "…inevitable disparity between subjective and objective circumstances applicable to those cases, compared to the same circumstances found to exist in this case": Environment Protection Authority v Borg Panels Pty Ltd [2016] NSWLEC 71 at [45]. The sentence that I consider appropriate to be imposed for this offence is not inconsistent with the sentences imposed in the matters to which I have been referred.

Costs

Hardman Chemicals accepts that it is appropriate for the Court to make an order that it pay the prosecutor's legal costs which are agreed at $100,000 and asks the Court to take this into account when imposing penalty: Environment Protection Authority v Barnes [2006] NSWCCA 246 at [78].
In determining the appropriate penalty to impose on Hardman Chemicals, I consider it legitimate to take into account the associated costs order and publication order (discussed further below): Harris v Harrison (2014) 86 NSWLR 422; [2014] NSWCCA 84 at [100]. However, I consider an order for costs is not a reason to reduce a penalty to a lower amount than that suggested by the general pattern of sentencing for the relevant offence. Nevertheless, if an offender voluntarily agrees to pay the prosecutor's costs then this may be considered as a mitigating factor: Whitehaven at [265].

Publication and apology

Publicising sentences for environmental offences improves the deterrent effect of sentencing by bringing broader attention to the consequences of such conduct: Waste Recycling at [242] and Environment Protection Authority v Dyno Nobel Asia Pacific Pty Ltd [2017] NSWLEC 64 at [163]. Accordingly, I find that it is appropriate to make the publication order set out in annexure "A" to this judgment which, subject to minor changes to reflect my findings, is substantially in the form suggested by the prosecutor and not opposed by Hardman Chemicals.
The prosecutor has proposed, and Hardman Chemicals has accepted, that a letter pursuant to s 250(1)(b) of the POEO Act be sent by a senior officer of Hardman Chemicals to 23 named persons offering a specific apology for the impact of the Incident on them. A copy of that letter, in the form as agreed between the parties, is annexure "B" to this judgment. I am satisfied that it is appropriate that an order pursuant to s 250(1)(b) of the POEO Act be made.

The appropriate sentence

Adopting an instinctive synthesis approach and considering the relevant and different objective and subjective circumstances in relation to the offence and the purposes of sentencing, I find that the appropriate penalty for the offence is $80,000. The amount should be reduced for the utilitarian value of the early guilty plea which, as noted above, I assess to be 25%. This results in a figure of $60,000.
The prosecutor has proposed that the monetary penalty be paid to Blacktown City Council for two specified projects pursuant to s 250(1)(e) of the POEO Act. Having been informed that the prosecutor is satisfied that the projects fall within the requirements of that section, I consider it appropriate to make the order.

Orders

The orders of the Court are: 1. Hardman Chemicals Pty Ltd is convicted of an offence against s 64(1) of the Protection of the Environment Operations Act 1997 (NSW) as charged. 2. Hardman Chemicals Pty Ltd is to pay the prosecutor's legal costs as agreed in the sum of $100,000. 3. Hardman Chemicals Pty Ltd is to pay the prosecutor's investigative costs in the amount of $335. 4. Pursuant to s 250(1)(e) of Protection of the Environment Operations Act 1997 (NSW), in lieu of a fine, Hardman Chemicals Pty Ltd is ordered to pay, within 28 days of the date of this order, the amount of $60,000 to Blacktown City Council for the purposes of the projects "Cooling our streets through sustainable stormwater management" and the "2020 Eco-Active Schools Program". 5. Hardman Chemicals Pty Ltd is, at its own expense and within 28 days of the date of this order, to cause a notice in the form of annexure "A" to this order to be placed within the first 11 pages of the following publications, at a minimum size of 14cm x 19cm, pursuant to s 250(1)(a) of the Protection of the Environment Operations Act 1997 (NSW): 1. The Blacktown Advocate; 2. The Sydney Morning Herald; and 1. Hardman Chemicals Pty Ltd is, within 28 days of the date of this order, to cause a notice in the form of annexure "A" to this order to be placed on the "home" section of its website https://www.hardman.com.au/ pursuant to s 250(1)(a) of the Protection of the Environment Operations Act 1997 (NSW) for a minimum of 30 days. 2. Within 35 days of the date of this order, Hardman Chemicals Pty Ltd must provide to the prosecutor a complete copy of the pages of the publications and website in which the notices have appeared pursuant to Orders (5) and (6). 3. Pursuant to s 250(1)(b) of the Protection of the Environment Operations Act 1997 (NSW), Hardman Chemicals Pty Ltd is to take specified action to notify the following persons aggrieved by the offender's conduct in the form of annexure "B": 1. Phillip Barlocher 2. Martin Brandjes 3. Troy Spring 4. Gary Gillot 5. Sok Meach 6. Desire Wilton 7. Bruna Fang 8. Paul Stainsby 9. Antonio Codina 10. Lakshman Jayaweera 11. Timothy McLean 12. Robert Vide 13. Mark Speirs 14. Lincoln Coleman 15. Nicole Greely 16. James Gammidge 17. Esteban Maldonado 18. Dennis Panagopoulos 19. Brent Hogan 20. Graham Byrnes 21. Branislav Mitkovic 22. James Canterbury 23. Matthew Nichols

Annexure A (119 KB, pdf) Annexure B (56.7 KB, pdf)

Amendments 20 February 2020 - Amendment to Order (8) as requested by the parties and consequential amendment to par [106]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 February 2020

Environment Operations Act 1997(NSW)ss 3, 64, 241, 250, Sch

(1993) 113 LGERA 357

(2006) 145 LGERA 234

(2017) 227 LGERA 290

(2009) 168 LGERA 121

(2006) 148 LGERA 278

(2006) 148 LGERA 299

(2014) 206 LGERA 239

(2006) 145 LGERA 189

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