Environment Protection Authority v M A Roche Group Pty Ltd

Land and Environment Court (NSW)|2015-03-02|Before: Craig J

Solicitors: Office of Environment and Heritage (Prosecutor) N/A (Defendant in person) File Number(s): 50650 of 2014

EX TEMPORE Judgment

The Defendant, M A Roche Pty Ltd is the owner and operator of a quarry at Wauchope (the quarry) on the mid north coast of New South Wales. Its legal entitlement to operate that quarry is circumscribed not only by a development consent granted in 1995 but also, and relevantly, by a licence issued under the Protection of the Environment Operations Act 1997 (NSW) (the POEO Act).
The Defendant has pleaded guilty to an offence against s 64(1) of the POEO Act and is now to be sentenced for that offence. The charge to which the plea of guilty has been entered is that between 5 January 2013 and 4 January 2014 the Defendant contravened a condition of the environment protection licence issued to it that, in terms, limited 30,000 tonnes as the total tonnage of quarry materials that could be handled in any 12 month period. During the charge period the Defendant handled 62,475.11 tonnes of quarry material.
Section 64 of the POEO Act relevantly 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, …".

Background

The Defendant is a family company that has operated the quarry since 1998. It was represented at the hearing by Mark Andrew Roche who is the company's Managing Director. The only other Director of the company is Mr Roche's wife who takes no active role in the company's operations.
The Defendant conducts its business activities at the quarry under the trading name of "Volcanic Resources". Material won from the quarry includes topsoil, grey clay, gravel, black mudstone, grey sandstone and black basalt. These materials are extracted using a bulldozer before being sorted and processed at the quarry into a range of different products. Topsoil and clay are stockpiled without processing, while rock is crushed and sorted into different sized products with the use of a mobile rock crushing plant. The product of these operations includes the supply of road base, white scoria, landscape rock, drainage aggregate and select fill. The Defendant also sells a product known as "grey crusher dust" that is purchased by the Defendant from a supplier but not produced at the quarry site.
The Defendant both employs and subcontracts drivers to transport product to its larger customers while onsite staff include a front-end loader operator who sorts, stockpiles and loads material onto vehicles for customers.
Since about 2010 major roadworks have been undertaken in the mid north coast area involving an upgrade to the Pacific Highway, being part of a joint State and Commonwealth upgrade project. The undertaking of these works has created a significant increase in demand for extractive materials from suppliers in the area of those works. The Defendant has been the supplier of required extractive materials to a number of large companies involved in the Pacific Highway upgrade project.
The Defendant is the holder of development consent 252/95 granted by Hastings Council in September 1996 (the Development Consent). The Development Consent authorises the operation of the quarry but limits extraction of extractive material to 20,000m³ per annum. The parties agree that the limit of 20,000m³ of extractive material equates to 30,000 tonnes of such material. The Defendant accepts that any increase in the volume of material limited by the Development Consent would require further application for consent under the Environmental Planning and Assessment Act 1979 (NSW) (the EPA Act). If the quarry output exceeded 30,000 tonnes per year, the development would be designated development, necessitating the preparation of an environmental impact statement (EIS) (cf cl 4 and Sch 3 of the Environmental Planning and Assessment Regulation 2000).
Environment Protection Licence 12364 (the EPL) was issued to the Defendant under the POEO Act in 2005. The scheduled activities identified in that Licence are "Crushing, Grinding or Separating" at the quarry. The EPL was varied on 29 December 2010 to include the scheduled activity of "Extractive Activities (Land Based)", defined in the POEO Act as any activity with the capacity to extract, process or store more than 30,000 tonnes of extractive material per year, "either for sale or reuse, by means of excavation, blasting, tunnelling, quarrying or other such land-based methods". The expression "extractive materials" is defined in cl 19 of Sch 1 to the POEO Act to comprise clay, sand, soil, stone, gravel, rock, sandstone or similar substances that are not minerals within the meaning of the Mining Act 1992 (NSW).
Condition A1.2 of the EPL relevantly provided: "The Licensee must not; (a)… (b) undertake activities handling more than 30,000 tonnes of material within any 12 month period." Beneath Condition A1.2 of the Licence, it is noted that the limits on extraction "are based on the original consent granted by Hastings Council on 23 September 1996".

The offence

All of the facts that I have related to this point, together with the facts pertaining to the commission of the offence, are uncontentious. They are recorded in a Statement of Agreed Facts tendered as Exhibit A.
In August 2013 an officer of the Prosecutor was interviewing Mr Roche, as the Defendant's representative, in relation to the Defendant's activities between 2012 and 2013. At the conclusion of that interview Mr Roche was asked a question directed to the Defendant's activities in the period between January 2013 and January 2014. Mr Roche responded "we are going to go over [our limit]".
As a consequence of Mr Roche's statement, in January 2014 the Prosecutor issued a statutory notice to the Defendant, requiring production of all records of material handled at the premises during the period from 5 January 2013 and 4 January 2014. This is referred to in the evidence as the "Reporting Period", being the period identified as such in the EPL.
On 30 January 2014, the Defendant responded to the statutory notice, stating that it had sold 62,475.11 tonnes of material during the Reporting Period. Records were produced substantiating that figure. Mr Roche was subsequently interviewed "under caution" and confirmed the authenticity of the records that had been produced, establishing the sale tonnage of material to which I have already referred.

Sentencing considerations

The sentence to be imposed for the present offence must reflect both the objective gravity of the offence as well as the subjective circumstances of the Defendant. In that regard, I am required to consider, as I have done, the factors of relevance in s 21A of the Crimes (Sentencing Procedure) Act 1999 (NSW) (the Sentencing Act) as well as s 241(1) of the POEO Act.
The purposes for which a sentence may be imposed are those identified in s 3A of the Sentencing Act.

Objective gravity of the offence

The objects of the POEO Act cannot be removed from consideration when determining an appropriate sentence. The degree to which an offence undermines the objects of that Act is relevant when assessing the seriousness of an offence. Those objects, as stated in s 3, include not only protection, restoration and enhancement of the quality of the environment of this State, but also include the objects expressed in paragraphs (d) and (e) in the following terms: "(d) to reduce risks to human health and prevent the degradation of the environment by the use of mechanisms that promote the following: … (ii) the reduction to harmless levels of the discharge of substances likely to cause harm to the environment, … (e) to rationalise, simplify and strengthen the regulatory framework for environmental protection …".
As the Prosecutor submits, environment protection licences are the primary means of regulation under the POEO Act. Non-compliance with licence conditions fundamentally undermines the strength and effectiveness of the regulatory framework established by the POEO Act and the capacity of that mechanism to minimise and prevent environmental harm. As Pepper J observed in Environment Protection Authority v Orica Australia Pty Ltd (Nitric Acid Air Lift Incident) [2014] NSWLEC 103 at [104]: "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."

Maximum penalty

As s 64(1) of the POEO Act specifies, the maximum penalty imposed for an offence against the section by a corporation is $1,000,000. That maximum penalty is a reflection of the seriousness with which the commission of the offence is regarded by the legislature and, by projection, the community.

Environmental harm: s 241(1)(a) of the POEO Act

Section 241(1)(a) requires that when imposing a penalty for the present offence, the Court is required to take into account the extent of the harm caused or likely to be caused to the environment by the commission of that offence. The expression "harm to the environment" is defined in the Dictionary to the POEO Act 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 word "likely" has been determined to mean a real or not remote chance or possibility.
There is no evidence that this offence caused any actual harm to the environment. However, that is not the end of the matter. There was certainly the risk of harm occasioned by an output from the quarry that more than doubled the limit imposed both by the Development Consent and by the condition of the EPL. That risk or potential arises from the possibility of increased levels of dust, noise and impact upon existing water management facilities. There is undoubtedly harm occasioned by the undermining of the regulatory scheme imposed by the POEO Act as well as the lost opportunity for prior environmental assessment before production from the quarry was increased to the level that, in fact, occurred (Minister for Planning v Coalpac Pty Ltd [2008] NSWLEC 271 at [37]).
The potential for harm in all three respects that I have identified must be considered when determining an appropriate penalty.

Practical measures to prevent, control, abate or mitigate harm: s 241(1)(b) of the POEO Act

As is evident from the facts that have been accepted, there were two forms of authority that limited the production or output from the Defendant's quarry, namely the Development Consent and the EPL. Moreover, the need to adhere to the annual limit of 30,000 tonnes ought to have been manifest to the Defendant as a consequence of receiving a Penalty Infringement Notice issued by the Prosecutor to the Defendant on 29 July 2010. That Penalty Infringement Notice was founded upon a breach of s 64, because the Defendant exceeded the production limit from the quarry between 5 January 2009 and 4 January 2010. While that Penalty Notice is not treated by me as if it was a conviction for a prior offence, it is evidence of the Defendant being put on notice that compliance with the restriction on output from the quarry was required.
The evidence reveals that the business records of the Defendant included delivery dockets and invoices, recording the tonnage of material that was sold from the quarry. The Defendant therefore had readily available records that enabled it to track the progressive total tonnage of material being processed and sold. It clearly had measures available to control or prevent any harm being occasioned by reason of increased activity beyond that authorised by its licensed condition.

Foreseeability of harm or likely harm: s 241(1)(c) of the POEO Act

Those activities identified in Sch 1 to the POEO Act, being the activities carried out at the Defendant's quarry, and mandating the issue of a licence under Pt 3.2 of that Act, are so identified because of the potential they have to create environmental harm. As I observed in Environment Protection Authority v Centennial Newstan Pty Ltd [2010] NSWLEC 211 at [81]: "…the holder of an environment protection licence is clearly on notice of the possibility of harm to the environment occasioned by any of the activities which it carries out on the site to which that licence relates".
The EPL contains conditions that regulate water pollution, noise, hours of operation and dust emission. Given the terms of those conditions, the Defendant must be taken to be on notice that its activities had the potential to cause environmental and amenity issues, with the consequence that any increase in the scale of its activities had the potential to cause harm by exceeding any or all of the impact limits that the conditions had sought to address. Clearly, the possibility of harm was foreseeable.

Control of causes of the offence: s 241(1)(d) of the POEO Act

I have recorded that the Defendant both owned and operated the quarry, with the consequence that it had complete control over the manner in which quarry activities were undertaken. For reasons given in respect of the foreseeability of likely or potential harm, the Defendant had control over the causes that gave rise to the offence.
To those factors should be added the discussion between Mr Roche, on behalf of the Defendant, and the Prosecutor's investigator in August 2013. The acknowledgement, only seven months into the present charge period, that the tonnage limit was going to be exceeded during that period, identifies not only the knowledge that Mr Roche had of the quarry's output, but was sufficient to alert him to the opportunity to prevent or, at least, limit the exceedence that, in fact, occurred in the charge period. The invoices produced by him indicate that he continued to handle and deliver material from the quarry through to January of 2014. The Defendant's complete control over the causes of the offence is undeniable.

State of mind of the Defendant

The Defendant's state of mind is relevant to the assessment of the objective seriousness of the offence (Environment Protection Authority v Geoff Robinson Pty Ltd; Environment Protection Authority v Robinson [2011] NSWLEC 14 at [65]).
It is clear from the facts and events that I have already recited that Mr Roche, as the Defendant's Managing Director, understood that exceeding the limit of 30,000 tonnes to be handled in any 12 month period constituted a breach of the licence condition and therefore a breach of the POEO Act. In the face of the 2010 Penalty Infringement Notice, the statement made when interviewed by the investigator from the Prosecutor in August 2013 that the limit would be exceeded and the continued handling and sale of material thereafter, are all circumstances that can lead to the conclusion that his decision to breach the condition was deliberate. A claim that financial circumstances did, in effect, "compel" such action does not detract from the circumstance that the breach was deliberate.

Financial gain

The Prosecutor has submitted and I accept that in exceeding the limit imposed by the licence, the Defendant did derive a financial gain.
Mr Roche gave evidence that in 2012 the Defendant embarked upon the process of preparing a development application to Port Macquarie-Hastings Council for development consent to increase quarry production to a total of 490,000 tonnes per annum. To that end the Defendant engaged a firm of consultants to prepare an EIS to accompany the development application. The quote for preparation of that EIS exceeded $100,000. The Defendant was able to obtain a bank loan for $140,000 to assist in that regard.
However, before the preparation of the EIS was complete, the Defendant was charged by the Prosecutor with a water pollution offence arising from the operation of the quarry. When the possible fines and costs of those proceedings were appreciated, the Defendant halted further work on the EIS because it was unable to continue to fund that work as well as retain funds to meet those potential liabilities.
Ultimately, the Defendant pleaded guilty to the water pollution offence and was fined a total of $22,000 together with costs. The Defendant is presently paying that fine by instalments and, according to Mr Roche's evidence, has not yet paid the Prosecutor's costs.
Once those proceedings were concluded and the extent of its liability known, the Defendant renewed instructions for continued preparation of the EIS and development application seeking authorisation to increase the output from the quarry.
The Prosecutor accepts that the EIS supporting an application to increase the quarry output to 490,000 tonnes per annum was completed in November 2014. It also accepts that the development application seeking development consent under the EPA Act for that increased output was lodged with Port Macquarie-Hastings Council on 17 December 2014. That application has not yet been determined.
The thrust of the evidence given by Mr Roche was to the effect that the Defendant is in straightened financial circumstances and, at least by inference, the continuation of output from the quarry was intended to address the need to sustain the Defendant's business.
Mr Roche did not produce any financial accounts or records to support statements made in his evidence. He stated that for the last financial year, the Defendant had sustained a loss of about $200,000. He was not cross-examined on this or any other evidence that he gave.
Based upon the invoices produced by the Defendant, the detail of which included both the tonnage, date and amount charged to a customer, the Prosecutor estimated that the gross sum earned from the sale of quarry product that exceeded the 30,000 tonne limit was approximately $506,204. In addition, licence fees payable to the Prosecutor on the quantum of material that was handled during the charge period would have resulted in an additional fee of $4,950.
In his evidence, Mr Roche did not address the additional licence fee. While he did not challenge the figure of about $506,204, as being the sale price of materials produced in excess of the 30,000 tonne limit, his evidence is that the profit component on sales was approximately 10%, with the result that the net profit from those sales was about $50,000. He was not challenged on that statement.
In the circumstances, I accept that there was a financial gain occasioned by the commission of the offence. While, as I have already held, the continued supply of material above the limit was deliberate, nonetheless it was an attempt to reduce the Defendant's financial liabilities. In the absence of further evidence, I am unable to determine either the extent of those liabilities or of the overall financial position of the Defendant.

Conclusion on objective seriousness

Having considered all of the factors that weigh upon the objective seriousness of the offence, including the maximum penalty, matters identified for consideration under s 241(1) of the POEO Act, the Defendant's state of mind and its purpose in committing the offence, I conclude that its objective seriousness is in the range of low to medium. In so concluding, I accept the submission of the Prosecutor to that effect.

Subjective considerations

The Defendant, who has at all times been represented by Mr Roche, entered a plea of guilty at the earliest opportunity. So much is accepted by the Prosecutor. The Defendant is therefore entitled to a discount on any penalty imposed which I conclude should be a 25% discount.
The Prosecutor also acknowledges that the Defendant, through Mr Roche, was fully co-operative with it when investigating the offence, providing material conformably with the notice issued to the Defendant requiring information, participating in a voluntary interview and co-operating in the settling of the Statement of Facts that became Exhibit A. The Defendant's co-operation is a mitigating factor under s 21A(3)(m) of the CSP Act.

Prior offences

I have earlier referred to the fact that on 7 November 2013, the Defendant was convicted of offences against s 120 of the POEO Act and fined a total of $22,000. As I have also recorded, that offence arose from the operation of the quarry.
The Defendant was also convicted of an offence against s 64 of the POEO Act on 28 July 2014 (Environmental Protection Authority v M A Roche Group Pty Ltd [2014] NSWLEC 114). That offence arose in almost identical circumstances to the present, except that the period during which the Defendant exceeded the handling limit of 30,000 tonnes imposed by the EPL was in the year 4 January 2012 to 3 January 2013. For that offence a fine of $30,000 was imposed after allowing a discount of 40%. The Defendant was also ordered to pay the Prosecutor's costs.
While I do not consider the previous offences to be aggravating circumstances, the fact that these prior offences were committed only recently means the Defendant is not entitled to have its prior record considered as a mitigating circumstance.

Capacity to pay

The capacity of the Defendant to pay a fine is not determinative of the level of the fine but is a matter to which the Court is required to have regard by s 6(a) of the Fines Act 1996 (NSW).
The evidence given by Mr Roche, directed to the financial circumstances of the Defendant, was limited to the extent that no conclusion can be drawn as to the true financial position of the Defendant, such as to determine that its impecuniosity should result in any substantial discount to a penalty that is otherwise appropriate. Apart from the evidence given by Mr Roche and to which I have earlier referred, the only additional material elicited as a result of questions posed by me was that fines imposed for the matters in respect of which he has already been convicted are being paid by instalments.
The extent to which liability for payment of existing pecuniary penalties impacts upon the claimed impecuniosity of the Defendant is a factor to be treated with some caution. As was observed by Preston CJ in Bankstown City Council v Hanna [2014] NSWLEC 152, the existence of a financial burden created by the need to meet outstanding fines and costs, consequent upon the commission of offences against the POEO Act, must be seen as "self-inflicted". Particularly is this the case when one has regard to the circumstance that the present charge and the ground for it is precisely the same as that for which the Defendant was convicted in 2014. The only observation that can be made in favour of the Defendant in that context is that the proceedings giving rise to that charge had not been commenced before the end of the present charge period, albeit that investigations leading to that prosecution were, to the Defendant's knowledge, underway.

Deterrence

One of the purposes of imposing a sentence upon an offender, as identified in s 3A(b) of the Sentencing Act, is deterrence. Both specific and general deterrence must be considered in this context.
An offence of the present kind should be seen in the broader context as directed to pollution control and environmental harm. Where, as here, the objects of the legislation are undermined by breach of a condition of an environment protection licence, the imposition of a penalty that is significant is important. Unless the penalty imposed rises above a level that is seen to be tokenistic, others will not be discouraged from complying fully with conditions of a licence. This is relevant to general deterrence.
An element of the penalty to be imposed in the present case must, in my opinion, extend to specific deterrence. While I accept that the Defendant has taken steps to obtain a further development consent, enabling it to increase production and handling of materials from the quarry, that process has been a slow one. In the meantime, the issue of the infringement notice in 2010, coupled with the offences that have since occurred, identifies the need for an element of specific deterrence so that the Defendant is reminded of its need to comply with the law.

Evenhandedness

The principle of evenhandedness in sentencing requires that the sentencing court have regard to the general pattern of sentencing for offences of the kind under consideration. This said, care must be taken in undertaking that task, as the wide divergence of facts and circumstances, both objective and subjective, leading to the imposition of a penalty in a decided case will almost always militate against direct comparison with the case at hand.
The Prosecutor has identified several decisions that are said to reflect some comparability with the circumstances in which the present offence was committed. I have considered those decisions. Obviously, that which is most pertinent is the imposition of the penalty by Sheahan J that resulted in the Defendant being convicted for an identical offence on 28 July 2014. The objective circumstances were, with two exceptions, similar to the circumstances in the present prosecution.
The first added circumstance in the present case is the conversation between the Prosecutor's investigator and Mr Roche in August 2013 when the latter indicated that the Defendant would exceed the handling limit imposed by the condition of the Licence.
The second relevant circumstance is that in the prosecution before Sheahan J, his Honour accepted the evidence of the Prosecutor that the total tonnage handled in the 2012 - 2013 year was 88,949.10 tonnes whereas the total in the present case is 62,475.11 tonnes. In short, while the condition was breached, the extent of exceedence, although considerable, is less than that considered in the previous prosecution.
Like the present case, Sheahan J considered the financial evidence before him to be inadequate (at [29]), but nonetheless his Honour accepted "the stress of the Defendant's financial position".
After determining that an appropriate penalty would be $50,000, his Honour applied a discount of 40% to account for the early plea of guilty and other mitigating circumstances. In the result, the Defendant was fined the sum of $30,000 as well as being ordered to pay the Prosecutor's costs. His Honour also made a publication order under s 250 of the POEO Act. No such order is sought in the present case.
The Prosecutor in this case made no submission to the effect that the determination of an appropriate penalty in the case before Sheahan J was not truly reflective of an appropriate penalty for commission of the offence there being considered. In applying the principle of evenhandedness, I find that circumstance to be of some significance.

Appropriate penalty

Synthesising the objective circumstances of the offence, earlier described as being in the low to moderate range of objective gravity, and the subjective circumstances that I have identified, I consider that the appropriate penalty to be imposed would, subject to discount, be $80,000. While the penalty before discount considered appropriate by Sheahan J was $50,000, an additional factor that I must take into account is the fact of that conviction, resulting in the need for greater emphasis upon specific deterrence.
The sum of $80,000 should be discounted by 35% on account of the mitigating factors that I have identified, including the 25% discount for the utilitarian value of the Defendant's early plea of guilty. The fine to be imposed will therefore be a fine of $52,000.

Orders

For these reasons I make the following orders: 1. The Defendant is convicted of the offence as charged. 2. The Defendant is fined the sum of $52,000. 3. The Defendant must pay the Prosecutor's legal costs agreed in the sum of $9,750.65. 4. The Exhibits are to be retained.

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: 05 March 2015

Environmental Planning and Assessment Regulation 2000(NSW)

Environment Operations Act 1997(NSW)

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