Environment Protection Authority v Hochtief AG and Thiess Pty Limited

KEY ISSUES: Prosecution :- sentence - pleas of guilty to pollute waters offence by joint venture partners - record of prior convictions - mitigating circumstances

LEGISLATION CITED: Crimes (Sentencing Procedure) Act 1999 s 3A(b), s 21A(2)(d), s 21A(3)(k), s 21A(4), s 22 Protection of the Environment Operations Act 1997 s 120(1), s 123(a), s 241, s 250(1)(a)

Axer Pty Ltd v Environment Protection Authority (1993) 113 LGERA 357; Environment Protection Authority v Hochtief; Thiess Pty Ltd [2005] NSWLEC 506; Environment Protection Authority v Hochtief AG [2006] NSWLEC 200; CASES CITED: Environment Protection Authority v Waste Recycling and Processing Corporation (2006) 148 LGERA 299; R v Johnson [2004] NSWCCA 76; R v Thomson (2000) 49 NSWLR 383; Regina v Darrell Terry McNaughton (2006) 163 A Crim R 381

PROSECUTOR Ms K Healey (solicitor) SOLICITORS LEGAL REPRESENTATIVES: Department of Environment & Conservation

DEFENDANT Ms P McDonald SOLICITORS Blake Dawson Waldron

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

ENVIRONMENT PROTECTION AUTHORITY Prosecutor

ENVIRONMENT PROTECTION AUTHORITY Prosecutor

1 Thiess Pty Ltd and Hochtief AG (the defendants) are joint venture partners for the purpose of the construction of the Epping to Chatswood component of the Parramatta rail link. The construction activities, particularly tunnelling operations, generate wastewater. Wastewater treatment plants treat the wastewater. On the morning of 15 December 2005, one of the wastewater treatment plants, installed at a construction site near Wicks Road, Macquarie Park, malfunctioned. A valve opened but failed to close, so that the entire sludge blanket in the clarifier discharged into the sludge tank, which then overflowed. The overflow then breached secondary containment measures. About 36.75 cubic metres (36,750 litres) of turbid wastewater flowed into Porters Creek. Thiess and Hochtief have each pleaded guilty to the offence of polluting waters (s 120(1) of the Protection of the Environment Operations Act 1997). I must now determine sentence.

2 The maximum penalty for an offence under s 120(1) is $250,000 (s 123(a) of the Protection of the Environment Operations Act).

3 Most of the facts were agreed. Waters laden with sediment generated by construction are pumped to a sediment pond (pond B) and then to the wastewater treatment plant. In the wastewater treatment plant the wastewater is first subjected to chemical treatment to correct its pH level and bond suspended solids so that they drop out of the wastewater stream. The chemically treated waters are then passed through a sludge blanket clarifier. From the clarifier the waters pass to clear water tanks, through sand filters and to a licensed discharge point within Porters Creek. The environment protection licence under which the defendants carry out the construction regulates various concentration limits, including the concentration of total suspended solids within the discharged water (50mg/L).

4 The sludge blanket in the clarifier needs to be replaced regularly. Valve SV 41, when open, dumps the sludge from the clarifier to the sludge tank below the clarifier. Valve SV 41 is an eight inch valve. The opening of valve SV 41 needs to be controlled, as the clarifier has a capacity of 105 cubic metres and the sludge tank a capacity of only 6 cubic metres. A timer regulates the valve so that it opens for a pre-set period of less than one minute to dump a quantity of sludge. For example, if the valve remained open for 10.5 minutes, the entire contents of the clarifier would be dumped into the sludge tank.

5 At about 3.21am on 15 December 2005, valve SV 41 opened but did not close. The entire contents of the clarifier were dumped into the sludge tank, from which they overflowed. The contents also overflowed the 15 cubic metre bund around the sludge tank. The overflow ran down the access road. Part of the overflow was diverted into a swale drain about 40 metres down the access road. The swale drain contained a diversion bund to sediment pond A. Some of the overflow was diverted to this sediment pond. Some was also diverted by approximately 5 rows of sandbags between the diversion bund and Porters Creek. The balance, estimated to be about 36.75 cubic metres, flowed into Porters Creek. Porters Creek is a moderately impacted system, impaired by surrounding land uses, which has historically experienced nitrogen and phosphorous pollution.

6 A security guard noticed the material on the access road between about 3.30am and 3.45am. The guard notified the defendants' personnel. An electrical hand arrived at about 4.00am and pressed the emergency stop button on the wastewater treatment plant. He then notified his superiors. At about this time employees placed a temporary sand bund across the access point into the wastewater treatment plant and sandbags in the creek to contain the sediment. Mr Howard Chemney, the defendants' environment manager, arrived at about 6.00am. Mr Peter Chatburn, the construction director, arrived at about 7.30am. The Department of Environment and Conservation was notified at about 9.00am.

7 Mr David Gathercole, regional operations manager for the Department, arrived at about 9.45am. He saw a white/grey substance in the swale drain and within the bund of the wastewater treatment plant. At Porters Creek, looking downstream from the authorised discharge point, he saw a thick white/grey substance. The spread of the substance was as wide as the creek (about 2 metres wide). He saw sandbags at the stormwater culvert just upstream of the licensed discharge point, as well as about 5 and 20 paces downstream of that point. He walked downstream and saw that the white/grey substance extended for about 50 paces, becoming less obvious after about 30 paces. The creek water was clear upstream of the discharge point. He took seven samples, upstream and downstream of the discharge point.

8 At about 11.30am Mr Chemney told Mr Gathercole he had arranged a sucker truck to clear the sediment from the creek. The truck arrived around midday. It had a capacity of 10,000 litres. Mr Gathercole saw the truck pump water, including the white/grey substance, from the creek. Employees stirred the water with shovels to facilitate pumping of the white/grey substance. The water turned a dark blackish colour as a result, due to the presence of sediments. The truck continued this activity until 10.00pm, removing at least 5 full loads (50,000 litres) from the creek. Mr Gathercole returned the following day. He saw that some of the white/grey substance still remained in the creek for a distance of about 30 paces downstream from the discharge point, but estimated that about 90% of the substance had been removed. The sandbags remained in place. The clean-up was completed by 11.30am on 16 December 2005.

9 The wastewater that entered Porters Creek contained high levels of total suspended solids and elevated conductivity. The amount of sediment that entered the creek is not known. The solids in the wastewater stream were deposited on the creek bed and did not remain in suspension. Estimates involve a range of from 0.003T/hr to 1.6T/hr, but there is dispute about the reliability of this range, particularly the upper estimate. The water samples contained between 3 and 26 mg/L of total suspended solids (the latter in the swale) other than sample 3 (10 metres downstream from the discharge point), which contained 2200 mg/L. Sediments from the creek bottom may have affected this sample. The parties agree that, while sample 3 shows elevated total suspended solids, the precise measurement at this sample point is not known. Two of the samples downstream of the discharge point also show salinity levels above ANZECC Guidelines. The clean-up effort effectively contained and limited downstream impacts. While elevated total suspended solids and conductivity involve a wide range of potential adverse biological effects on Porters Creek (such as smothering of aquatic vegetation and bottom dwelling organisms, loss of suitable habitat and mortality of aquatic species, reduction in the abundance, diversity and reproductive capacity of species, particularly salt sensitive species), the actual effects are not known in this case, but would have been largely short term and thus minimal.

10 The prosecutor did not know the cause of the valve remaining open and noted that the defendants had initially identified four possible causes. The defendants considered that the valve remained open due to a wiring error made during modifications to the wastewater treatment plant carried out in November 2005. The purpose of the rewiring was to integrate the low level alarm on sediment pond B with the timer on valve SV 41 so that when the low level alarm was activated, the valve would not open (thereby preventing the operation of the valve when there was no wastewater in the plant). However, an electrician connected a wire in the valve control system to a relay that was normally open, rather than a relay normally closed. The modified system was not tested after the modifications.

11 After the incident, the defendants reduced the size of valve SV 41 to 4 inches. They installed a diversion drain across the access ramp to prevent overflows reaching the access road and installed a number of flow reduction bunds in the drain leading to pond A to reduce the flow of any overflow from the bund. The defendants also increased the capacity of the dam that diverts flows into the drain through the diversion pipe into pond A to prevent overtopping during massive flows. Finally, they checked and tested the electrical systems.

12 Mr John Court, environmental engineering consultant, prepared an affidavit on behalf of the prosecutor. Mr Court was not cross-examined. He concluded that each of the four possible causes of the incident the defendants initially identified were foreseeable. Mr Court observed that, if the wastewater treatment plant had been attended after the modifications had been carried out, then the discharge to Porters Creek would most probably have been prevented. He characterised the circumstance of leaving the wastewater treatment plant unattended, after untested modifications had been carried out, as "not…a cautious decision". A high-level alarm had been installed in the sludge tank, but was not commissioned at the time of the incident. Mr Court noted that, had this alarm been commissioned, the activation of the alarm might have given sufficient warning time to lessen the impacts of the incident. He concluded that, provided a thorough risk analysis had been carried out to ascertain the worst overflow situation likely to arise, the steps taken by the defendants after the incident should be adequate to prevent any recurrence.

13 Mr Howard Chemney prepared an affidavit on behalf of the defendants. He was not cross-examined. In addition to matters in the agreed facts, Mr Chemney explained that the presence of electrical equipment in the wastewater treatment plant limited the capacity of the bund, as did the amount of land available given the significant construction activities occurring in this area. Increasing the size of the bund thus presented significant engineering and practical difficulties. The defendants provided secondary containment measures for this reason (namely, an arrangement intended to ensure that any overflow travelled down the swale drain to the diversion bund, for collection and diversion to pond A). A HAZOP report had identified the overflow risk and the proposed method to address the risk by secondary containment. Additionally, valve SV 41 closed when there was no power as an extra precaution. Further, it was not the defendants' practice to check the operation of the wastewater treatment plant after every wiring change (particularly a minor change) given the difficulties of shutting the plant down. A computerised system continuously monitored the plant's operation. Given the semi-automated operation of the plant, the defendants had not considered it necessary for the plant to be supervised during the night, although it was regularly inspected. Eight people carried out the clean up over a period of 20 hours and at a cost of about $8000 (including the hire of the sucker truck). In light of the incident, the defendants accepted that there was insufficient capacity in the primary and secondary containment systems, which (I infer) led to the further modifications identified above.

14 Mr Chemney noted that, since the incident, the tunnelling operations had ceased, causing a steady reduction in water generation. The environmental aspects of the construction were monitored by a comprehensive environmental management system. As part of that system, the personnel operating the wastewater treatment plant had received environmental training for the project generally, for the particular construction site and for the operation of the plant. The actions of personnel after the incident complied with its emergency response plan requirements. The NSW business unit of Thiess is also certified to international standard (ISO 14001/1 1996). Mr Chemney, an experienced environmental manager, considered that the defendants had demonstrated their commitment to good environmental management throughout the project. Mr Chemney also conveyed in his affidavit the defendants' regret and remorse for the incident.

15 A fundamental consideration for the purpose of sentence is the maximum penalty for an offence of polluting waters ($250,000 under s 123(a) of the Protection of the Environment Operations Act).

16 Section 241 of the Protection of the Environment Operations Act specifies matters to be considered in imposing sentence for an offence against that Act. I deal with those matters, as relevant, in turn.

17 The agreed facts disclose that the actual harm to the environment is not known, but would have been of limited duration and thus minimal. The prosecutor submitted that the potential for harmful biological effects (as summarised in the agreed facts and referred to above) was high. The defendants submitted that the notion of a high potential for harm was speculation, not established by the evidence. Moreover, the amount of sediment estimated to have entered Porters Creek was small, with the upper range based on sample 3, which was patently unreliable.

18 The potential for harm to the environment in this matter does not involve speculation. The agreed facts identify the potential harm involved in the spill of wastewater laden with sediment into the creek system. I am satisfied beyond reasonable doubt that the overflow of such wastewater to Porters Creek carried a materially higher potential for harm than the harm in fact caused in this case, primarily due to the swift and effective remedial action the defendants implemented. It is not necessary to know the precise quantity of sediment that escaped in order to reach this state of satisfaction. The fact is that wastewater laden with sediment did overflow into the creek. The impacts of the overflow were apparent on visual inspection up to a distance of about 50 paces down the creek from the discharge point, the solids having settled to the bottom rather than remaining in suspension.

19 The prosecutor also referred to the observations made by this Court that the degraded state of receiving waters cannot constitute a mitigating factor (see the authorities collated in Environment Protection Authority v Waste Recycling and Processing Corporation (2006) 148 LGERA 299 at [149]). As the decisions disclose, the condition of the receiving waters is relevant to the assessment of the harm or likely harm caused by the commission of the offence. In this case, the actual harm was minimal due to the defendants' swift and effective clean up, whereas the potential for harm was greater despite the somewhat degraded nature of the receiving waters.

20 I accept that the defendants had considered the risk of an overflow from the wastewater treatment plant and taken steps to minimise that risk. I also accept that the size of the bund around the wastewater treatment plant was limited by reason of the practical difficulties identified by Mr Chemney. Nevertheless, the incident not only demonstrated the inadequacy of the measures taken, but also led to the introduction of further measures (as identified above). Those further measures were practical, apparently relatively simple to implement and, as Mr Court indicated, would have been likely to be effective in avoiding or reducing the impacts of the overflow on 15 December 2005 had they then been in place. Moreover, the wiring modifications were not checked and the operation of the wastewater treatment plant was not supervised at night after the modifications. Both of these circumstances were within the control of the defendants and both contributed to the commission of the offence. These circumstances are ameliorated to some extent by Mr Chemney's evidence about the continuous computerised monitoring of the plant, the small nature of the wiring alteration as part of the larger overall modification, the difficulty of shutting down the plant to carry out checks, the regular inspections of the plant during the night, and the apparently satisfactory operation of the plant after the modifications. I also accept the defendants' submission that the prosecutor's reference to Australian Standards for bunds around tank storage facilities was not to the point, given the nature of the wastewater treatment plant.

21 The prosecutor emphasised another pollution of waters offence committed by the defendants involving the same wastewater treatment plant (Environment Protection Authority v Hochtief; Thiess Pty Ltd [2005] NSWLEC 506). I consider the prior conviction relevant to the operation of s 21A(2)(d) of the Crimes (Sentencing Procedure) Act 1999 rather than s 241(1)(b) of the Protection of the Environment Operations Act.

Foreseeability (s 241(1)(c)) 22 The defendants submitted that, although the harm caused by an overflow generally was foreseeable, the harm caused by the particular circumstances of 15 December 2005 was not reasonably foreseeable. They stressed that the wiring changes were a small part of a larger modification to a continuously monitored plant, carried out by electricians, and that the plant operated normally after the modifications (in November 2005) until the incident (15 December 2005).

23 The defendants approach to s 241(1)(c) is inappropriately narrow. No doubt the defendants did not foresee that an electrician would incorrectly connect wiring in the precise manner that occurred, but s 241(1)(c) operates at a higher level of generality. The defendants had experienced a spill from the same wastewater treatment plant to Porters Creek. They had implemented primary and secondary containment measures to address the foreseeable risk of an overflow to Porters Creek. The measures proved inadequate. Accordingly, the harm caused or likely to be caused to Porters Creek by reason of an overflow from the wastewater treatment plant was reasonably foreseeable, as was the risk of the valve failing to close as required.

24 As a corollary of their position on reasonable foreseeability, the defendants submitted that while they controlled the wastewater treatment plant, electricians carried out the electrical works.

25 I am satisfied the defendants had control over the causes that gave rise to the commission of the offence for the purposes of s 241(1)(d). They controlled the construction site, the operation of the wastewater treatment plant, and the nature and extent of the primary and secondary containment. They also controlled the modifications proposed, the manner in which they were carried out, decisions about checking the modifications, the reliance on the computerised monitoring system after the modifications and the nature and intensity of supervision of the plant during night time operations.

26 Under s 21A(2)(d) of the Crimes (Sentencing Procedure) Act, a record of previous convictions is a relevant aggravating factor. I accept the defendants' submission that this section does not act on the objective seriousness of the offence and cannot be applied in manner that results in a penalty disproportionate to the present offence, particularly having regard to s 21A(4). The record of prior convictions, however, is relevant to my assessment of the appropriate weight to be given to other sentencing considerations, particularly deterrence (Regina v Darrell Terry McNaughton (2006) 163 A Crim R 381; R v Johnson [2004] NSWCCA 76 at [32] to [36]).

27 In addition to certain penalty infringement notices, the defendants were each convicted of a breach of s 120(1) of the Protection of the Environment Operations Act in September 2005 (Environment Protection Authority v Hochtief; Thiess Pty Ltd [2005] NSWLEC 506). The earlier offence occurred shortly after the wastewater treatment plant had been commissioned. The plant's operations were not properly synchronised so the pH tank overflowed. The bund would have been adequate to contain this overflow of sludge, but an electrical contractor had rerouted an electrical cable through the bund wall and had not sealed the hole. The sludge flowed through the hole and made its way into Porters Creek. The amount that entered the creek was estimated to be not more than 4.5 tonnes. No actual environmental harm was known to have resulted. The defendants pleaded guilty. Bignold J held that because the defendants' levels of culpability were inseparable, he should determine a single penalty to be apportioned equally between the defendants. The prosecutor and defendants agree that this approach should also be applied to the facts of this matter. Bignold J determined penalty in a total amount of $40,000, which he reduced by 40% on account of all mitigating factors, resulting in a fine of $12,000 for each defendant. Hocthief was also convicted of two noise pollution offences with respect to the same project in April 2006 (Environment Protection Authority v Hochtief AG [2006] NSWLEC 200). The nature of those offences and the circumstances in which they were committed bear no real resemblance to the present case. No other aggravating factors within s 21A(2) were apparent.

28 Under ss 21A(3)(k) and 22 of the Crimes (Sentencing Procedure) Act a plea of guilty, and the timing of the plea, are mitigating factors to be taken into account on sentence. Both defendants entered a plea on the first return date. I am satisfied that their pleas had material utilitarian value. The proceedings were conduced efficiently, being commenced on 5 December 2006, with a first return date of 2 February 2007 and were heard on 27 March 2007. Other than the affidavits of Mr Court and Mr Chemney, referred to above, the facts were agreed and conveniently set out in a statement of agreed facts. In these circumstances, I consider the defendants should have the benefit of a discount of 25% on account of the utilitarian value of their early guilty plea (R v Thomson (2000) 49 NSWLR 383 at [151] - [161]).

29 The defendants accepted that considerations of general and specific deterrence were relevant (and they are expressly provided for in s 3A(b) of the Crimes (Sentencing Procedure) Act). They submitted that specific deterrence considerations were not particularly material given the steps taken to prevent recurrence of the incident, the cessation of tunnelling, the resulting significantly reduced water flows and the defendants' manifest commitment to sound environmental performance.

30 Fines play an important deterrent function in "persuading the industries concerned to adopt preventive measures" (Axer Pty Ltd v Environment Protection Authority (1993) 113 LGERA 357 at 359). I accept the defendants' submissions that the size and complexity of the construction project should be given weight in assessing the materiality of the prior convictions and the defendants' overall environmental performance. I also give weight to the defendants' overall commitment to sound environmental management and training, consistent with their general good character. Nevertheless, their environmental record is not unblemished, with the earlier offence also having involved, as one of its causes, work by an electrical contractor to the same wastewater treatment plant. Specific deterrence considerations, accordingly, should be taken into account, in addition to the important matter of general deterrence.

31 The agreed facts disclose the prompt and effective action the defendants took to protect the environment from harm once they became aware of the overflow. Those immediate actions, consistent with the emergency response plan, contained the area of the overflow within the creek. The actions within the subsequent hours were also efficiently implemented. Those actions, and the defendants' conduct at all other times in connection with the offence and in its dealings with the prosecutor, disclose their remorse and contrition consistent with the information set out to that effect in Mr Chemney's affidavit. The steps the defendants took to prevent any recurrence also weigh in their favour. These are relevant mitigating factors.

32 As part of the pattern of co-operation with the prosecutor, the defendants have agreed to pay the prosecutor's costs in the sum of $24,000.

33 The prosecutor sought an order under s 250(1)(a) of the Protection of the Environment Operations Act that the defendants publicise the offence and its circumstances in the Sydney Morning Herald. The defendants submitted that the prosecutor had not established adequate grounds to warrant such an order. They submitted that the offence occurred some 15 months ago so that there would be little utility in publishing such a notice. The offence did not result in any significant harm to the environment. The tunnelling had ceased so the wastewater treatment plant, while still operating, was dealing with much lesser quantities of water. The fines imposed could meet considerations of general deterrence.

34 Although the prosecutor had notified the defendants that such an order would be sought, the prosecutor did not provide the defendants with the actual form of the order until the hearing. Accordingly, further written submissions were required due to concerns about the cost and practicality of the orders sought by the prosecutor, and the terms of the proposed orders. Those submissions led to the prosecutor altering its position, as it had originally sought publication in two major newspapers. The defendant submitted that if, contrary to its submission, any publication requirement was imposed the additional cost to comply ($5425.20 plus GST for one notice) should be taken into consideration.

35 If a prosecutor proposes to seek a publication order, defendants should be given notice in advance of the precise terms of the order proposed. If this is not done then, as here, the parties may be put to further expense by the need to make inquires about the practicality, cost and terms of the orders sought. In this case, despite the prosecutor's late notice with respect to the actual terms of the order, I consider the circumstances warrant the making of a publication order. The offence resulted in obvious visual harm to Porters Creek. The offence occurred as part of a large construction project carried out pursuant to the authority of an environment protection licence. The passage of time has not undermined the general and specific deterrence functions of requiring a publication order. However, I accept the defendants' submissions about the terms of the order, which should be confined to the particular offence and its circumstances.

36 Although the defendants referred to a number of other decisions relating to offences of polluting waters, none were directly analogous to the present circumstances. I have taken into account the range presented by those decisions and the decisions referred to by the prosecutor. I consider that the circumstances disclose an offence of moderate objective seriousness. There are substantial subjective factors in mitigation. The previous offence involving the same wastewater treatment plant should also be taken into account in assessing the relative weight of these factors together with the need for general and specific deterrence. I do not consider that the costs of the clean-up, the publication order and the proceedings should lead to any particular discount of the penalty otherwise appropriate in all of the circumstances. I consider a total fine of $60,000 is warranted. The defendants should be given a discount of 25% on account of the utilitarian value of their early guilty pleas, leading to a total fine of $45,000. Consistent with the common position of the prosecutor and the defendants, that fine should be apportioned equally between the defendants in the amount of $22,500.

37 Accordingly, I propose to make the following orders: Proceedings 50041 of 2006

(1) The defendant is convicted of the offence charged. (2) The defendant is fined the sum of $22,500. (3) The defendant is to pay the prosecutor's costs as agreed in the sum of $12,000. (4) The defendant, within 28 days of this order, is to place a notice in the first 12 pages of the early general news section of the Sydney Morning Herald at a minimum size of 10cm by 20cm in the form of annexure A. A joint notice with the defendant in proceedings 50042 of 2006 will satisfy this order. (5) The exhibits are returned.

(1) The defendant is convicted of the offence charged. (2) The defendant is fined the sum of $22,500. (3) The defendant is to pay the prosecutor's costs as agreed in the sum of $12,000. (4) The defendant, within 28 days of this order, is to place a notice in the first 12 pages of the early general news section of the Sydney Morning Herald at a minimum size of 10cm by 20cm in the form of annexure A. A joint notice with the defendant in proceedings 50041 of 2006 will satisfy this order. (5) The exhibits are returned.

Thiess Hochtief convicted of water pollution offence

On 27 March 2007 the Land and Environment Court of New South Wales found Thiess Pty Limited and Hochtief AG guilty of water pollution. The EPA prosecuted the companies for polluting a tributary of the Lane Cove River at North Ryde with 36,750 litres of untreated turbid water in December 2005. This occurred from a worksite used for construction of the Epping to Chatswood rail link project. The companies pleaded guilty. As a result of the defendants' prompt clean-up, the environmental harm was minimal.

The companies were fined $22,500 each for the offence and ordered to place this notice by the Land and Environment Court. They were also ordered to pay the EPA's costs.

The EPA is part of the Department of Environment and Conservation (NSW).

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.