ENVIRONMENT PROTECTION AUTHORITY v MIDDLE HARBOUR CONSTRUCTIONS PTY LIMITED

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF CRIMINAL APPEAL No: 60197/01 BEAZLEY JA HULME J BARR J

Monday, 8 April 2002 ENVIRONMENT PROTECTION AUTHORITY v MIDDLE HARBOUR CONSTRUCTIONS PTY LIMITED

1 BEAZLEY JA: I have had the advantage of reading in draft the judgment of Hulme J. His Honour has set out the facts and I do not need to repeat them. 2 The respondent pleaded guilty to an offence under s 120 of the Protection of the Environment Operations Act 1997 (NSW) (the Act). That section provides:

(1) Prohibition on polluting A person must not pollute any waters.

(2) Prohibition on causing pollution A person must not cause any waters to be polluted.

(3) Prohibition on permitting pollution A person must not permit any waters to be polluted.

(4) Offence A person who contravenes this section is guilty of an offence." 3 Section 241 specifies matters to be taken into account in imposing a penalty for an offence. To the extent relevant those have been considered by Hulme J in his judgment. 4 The maximum fine which may be imposed for an offence under the Act is $250,000. This penalty provision doubled the previous penalty imposed by the Environmental Offences and Penalties Act 1989 (NSW). 5 The Environment Protection Authority (EPA) has appealed against the inadequacy of the penalty imposed. In its written submissions, the EPA relied additionally upon specific errors in his Honour's sentencing remarks. These matters are referred to by Hulme J. I am in general agreement with Hulme J in relation to those issues, except in relation to Ground 3(ii), in respect of which I agree with the EPA's submission, that it is a party's environmental record which is the relevant issue. Having said that, I should add that there was absolutely no reason why his Honour should not have accepted Mr Burridge's evidence. Notwithstanding the different position I have taken on this issue, I do not consider that the complained of reference to Mr Burridge had any appellable impact on his Honour's determination of the appropriate fine. I wish to address more particularly, however, the question whether the penalty imposed was inadequate. 6 As I have said, the respondent pleaded guilty to an offence under s 120 of the Act, the objects of which are specified in s 3. They include:

"(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 the 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,

…" 7 The Act is the latest statutory enactment reflecting the community's increasing awareness of and concern for the environment and for its control. In Axer Pty Ltd v Environment Protection Authority (2001) 113 LGERA 357, Mahoney JA said at 359:

"In determining the fine appropriate to an offence of pollution, two things are to be borne in mind: the seriousness with which the community regards pollution of this kind; and the purposes sought to be achieved by the imposition of fines in cases such as these.

The community has adopted a stern policy against pollution. The legislative scheme requires that proper, and strict, precautions be taken by those whose activities may cause proscribed pollution. … The quantum of the fines which the legislation allows to be imposed has no doubt been fixed not merely to indicate the seriousness with which such pollution is regarded but also to deter those engaged in such activities and to procure that they will take the precautions necessary to ensure that it does not occur." 8 The Act imposes strict liability in respect of offences committed under it. Accordingly, it catches a wide range of conduct from deliberate offending to accidental acts, the result of which may be anything from minimal to significant harm to the environment. This raises a particular problem when seeking to determine an appropriate penalty, and in particular one which accords with an appropriate range of sentences. Badgery-Parker J adverted to this problem in Axer when he said:

"There is always a difficulty in attempting to compare the penalty in one case with the penalty in another because of the wide divergence of facts and circumstances …" 9 In Environment Protection Authority v Orange City Council (unreported, Land and Environment Court of New South Wales, 23 June 1995), Stein J said at page 6:

"I have said before and I repeat, that in cases which involve the imposition of a monetary penalty only, particularly in strict liability cases, the Court has a difficult task in determining what penalty to impose. The Court can gain some assistance from past cases, although one has to take great care … because every case has different facts." 10 His Honour attempted to grapple with this problem by an approximate characterisation of offence as being at various levels on a scale from the lowest to the highest end of the scale. He said at page 7:

"Mr Ayling urges the Court to conclude that the penalty to be imposed should be in the lower end of the range. Mr Rushton, on behalf of the prosecutor, makes the submission that the offence should be seen as a very serious one.

What one means by the 'lower end of the range' or the 'higher end of the range' is problematic. These expressions are quite frequently used in pleas and also to some extent by Judges in decisions. I have given some thought to what between nought and $125,000 (the [then] maximum penalty …) may be regarded as within these words.

The lowest end of the range should be seen as between 0 and 10% … The highest end of the range may be seen as between 80 and 100% …

Between these ranges, lowest to highest, there might be seen to be a mid-range of penalty available. This perhaps would include between say 30 to 60% … this leaves in between two other zones or areas. One would be between 60 and 80%, which I suppose could be termed, for want of a better word, mid to high.

The other, from the lowest to the mid-range of between 10 and 30%." (emphasis added) 11 The characterisation used by Stein J has often been utilised. See for example Environment Protection Authority v Transfield Pty Ltd [2001] NSWLEC 45 per Sheahan J at para 37. In Cabonne Shire Council v Environment Protection Authority (2001) 115 LGERA 304, Giles JA referred, without particular comment, to submissions which had been made in that regard to the trial judge. His Honour then went on to consider the utility of comparison with other cases for offences under s 120, noting that the EPA had provided the Court with a list of over 100 cases where penalties had been imposed for breach of s 120 and its predecessor s 16 of the Clean Waters Act 1970 (NSW). His Honour observed at 312:

"Indiscriminate reference to other cases is of no utility and should be discouraged. Even discriminating reference is likely to be of no utility because the facts in cases such as the present will almost always be peculiar to the individual case." 12 His Honour also drew attention to the manner in which a court should consider the question of what is an appropriate penalty when the legislature has acted to increase the maximum penalty for a particular offence:

"The courts must, of course, recognise the maximum penalty provided for an offence, and with an increase in the maximum penalty there will come the imposition in some cases of higher penalties: see R v Slattery (1996) 90 A Crim R 519 at 524. It does not follow, as the respondent's submissions appeared to suggest, that every offence for which a fine of $X would have been imposed under s 16 of the Clean Waters Act should result in a fine of $2X under s 120 of the Act. Offences of low criminality remain offences of low criminality even if the maximum penalty is increased, and the increase can readily be recognised as operating as a deterrent to wilful disregard of statutory obligations. It remains necessary to address the facts of the particular case, with due regard to the current maximum penalty and the seriousness of the offence and the need for deterrence thereby indicated together with all other relevant matters." 13 I would add to this that an increase in the maximum penalty may be directed not only as a deterrence to wilful disregard of statutory obligations. In many if not most cases it would be intended to deter negligent disregard as well, as I consider is the case with the increase in penalty under s 120. This follows directly from the objects of the Act, themselves being a reflection of the community's "stern policy against pollution". 14 In the present case, the appellant submitted before the trial judge that this case fell "in the low range but not the lowest range of penalty". Counsel for the respondent submitted that the range was within the 0 - 10% category, or to adopt Stein J's terminology, a penalty at the lowest end of the range. 15 It needs to be stressed that Stein J's reference to a percentage scale in EPA v Orange City Council was a guarded attempt to articulate the degree of seriousness of the offence he had under consideration, and presumably, to provide some guidance in other matters. His Honour's remarks were not intended to be prescriptive and should not be so understood. 16 What is necessary in each case is to determine what is the appropriate penalty taking into account all relevant matters, being the matters prescribed by statute and any aggravating or mitigating circumstances of the offences. Those matters were referred to by the trial judge and have been covered by Hulme J in his reasons. For myself, however, I consider the penalty imposed by Sheahan J to be inadequate and manifestly so. 17 Nearly half a million litres of waste water overflowed from the respondent's property contrary to its licence conditions. The time over which the discharge occurred was at least two hours and may have been longer. There were two reasons for the breach. First, there was a breakdown in the respondent's work system, that is, its employee was delayed in checking the site on the morning in question in accordance with normal practice. There was no suggestion this was a systemic lack of diligence, but its seriousness lies in the fact that a simple such omission had a substantial impact. 18 His Honour also found that the canal from the overflow area had become blocked due to operations on the site, which was a contributing cause of the overflow. This, in my opinion, indicates a failure to either implement a system to ensure the canal did not become blocked given the nature of the works being carried out, or a breakdown in whatever system was implemented. In either case the failure was serious. 19 The principal of the respondent company was not directly liable for these failures. He lived a long distance from the site and entrusted its operations to employees. However, that does not absolve the respondent of ultimate responsibility: see Cripps CJ at 4 in Foley v Shell Refining (Australia) Pty Limited (unreported, Land and Environment Court of New South Wales, 24 October 1986). 20 The penalty imposed by the trial judge did not, in my opinion, reflect the objective seriousness of the offence, the extent to which an entity must ensure that its operating systems function so as to minimise error and/or breach and the need for penalties to act as a general deterrent as well as being a personal deterrent to the wrongdoer. 21 Taking into account these matters, the plea of guilty and the concept of double jeopardy, I consider that the penalty which should be imposed is $20,000.00. 22

HULME J: On 21 October 1999 the Respondent to this Crown appeal committed an offence against Section 120(1) of the Protection of the Environment Operations Act 1997 in that it polluted waters. 23 It pleaded guilty and on 13 March, 2001 Sheahan J in the Land and Environment Court imposed a fine of $10,000 and ordered the Respondent to pay the prosecutor's costs agreed in the amount of $3,500. The Environment Protection Authority has appealed to this Court pursuant to Section 5D(1A) of the Criminal Appeal Act upon the ground that the sentence is inadequate. The maximum penalty prescribed under section 120 is, in the case of a corporation, $250,000. It is appropriate to note that in the case of an individual, the maximum penalty is $120,000 and there are also additional penalties for continuing offences. 24 The circumstances of the offence were as follows. The Defendant conducted a quarry from which, inter alia, sand was extracted. In the south-western corner occupying about 7 hectares were stock piles, processing equipment and hard stand areas and a small unquarried area. The lowest part of the quarry was in the north-western corner to which storm water and ground water were directed into a pond described as pond B. The north eastern corner was occupied by pond A into which, from time to time, water was pumped from pond B. The pump had a capacity of 60 litres a second. 25 Immediately to the south of pond A was a discharge channel which led, via a closable pipe, to a creek which ran along the eastern boundary of the quarry. To the south of the channel and occupying the south eastern corner of the quarry was an area described in a plan which was in evidence as the overflow area. This area was bisected by a road and at the southern extremity of the area was a drain which also entered into the creek to which reference has been made. 26 There was a canal from the overflow area back into the extraction area. The topography of the site was such that in ordinary circumstances any water outside the confines of pond A and the discharge channel would flow into pond B. Its movement into each of pond A, the discharge channel and the creek was controllable. 27 The Defendant had a licence to discharge water from the site into the creek at a rate not exceeding 400 kilolitres a day and so long as the pH value of the water was not below 6.5 or greater than 8.5 pH units. The area in which the quarry was situate contained what are known as potential acid sulphate soils. Water passing through such soils once they are disturbed is liable to be acidic, ie have a low pH value. That could be changed by the addition of lime and in the normal operations of the quarry water in the discharge channel was analysed and, if necessary, treated with lime before discharge. 28 On 21 October 1999, Mr Small, an employee of the Applicant attended upon the site of the quarry to carry out a periodic inspection. He observed water flowing across the road in the overflow area in a southerly direction towards the drain. Over the next hour and a half, he continued inspecting the site and concluded or observed that water was overflowing part of the wall surrounding pond A into the discharge channel, then over the southern boundary of that channel into the overflow area and thence to the drain. Mr Small also observed that water was being pumped from pond B to pond A, that pond B was nearly empty and its water level about 4 metres below the height he had observed on previous occasions. The canal from the overflow area into the extraction area was also observed to have been blocked by mounds of dirt. 29 A sample of water taken by Mr Small from water entering the drain revealed a pH of 4.3. A sample taken some distance upstream from this revealed a pH of 6. 30 At the conclusion of his inspection, Mr Small then spoke with a Mr Clay Baddonock who was the person on site in charge of the quarry operations at the time. Mr Small advised Mr Baddonock to take appropriate action to prevent further waste water discharge. In the course of the conversation as deposed to by Mr Small, Mr Baddonock disclosed that waste water had been pumping into pond A for about 2 days. 31 However, in correspondence which ensued from the Respondent's side of the record, it was asserted that the continuous length of time the pump had been operating prior to 11.45am on 21 October was approximately 1½ hours 32 Mr Small estimated the volume of water which overflowed into the drain at about 432,000 litres - an estimate which seems to have been accepted by both parties. 33 Evidence before His Honour established that the proximate cause of the discharge was the pumping of water on the morning of 21 October into pond A at a time when it was full. Evidence showed that it was normal for the father of Mr Clay Baddonock to check the site each morning before the commencement of operations but that on the day in question he was delayed. The fact that the canal from the overflow area back into the extraction area had become blocked due to operations on the site was a second contributing factor. Mr Burridge who was one of the two directors of the Respondent suggested that a third contributing factor was the leaving open of a pipe from pond A into the discharge channel. However, the evidence of Mr Small to the effect that pond A was overflowing on its western side and no evidence from either of the Messrs Baddonock corroborating Mr Burridge's suggestion, leaves me unpersuaded that what he said was in fact the case. 34 The attack on the sentence imposed had a number of prongs. It was submitted:-

1. That the penalty of $10,000 representing only 4% of the maximum prescribed demonstrated its own inadequacy and demonstrated that His Honour had failed to have regard to the doubling of the maximum penalty which had occurred in 1997, and "the community's stern stance against pollution, reflected in that maximum penalty and the purpose sought to be achieved by the imposition of fines" - Axer Pty Limited v Environment Protection Authority (2001) 113 LGERA 357 at 359.

2. That His Honour's expressed view that the Respondent should be fined "at the lower end of the scale" gave insufficient weight to the fact that the Respondent had been the subject of a penalty infringement notice on 19 August 1999 for a similar offence and failed to take into account the fact that the Respondent was the holder of a licence under the POEO Act and thus subject to a higher standard of care.

(i) In saying that the real issue on sentence was "the question of control. (ii) In taking into account the fact that Mr Burridge was a "well respected solicitor of the Supreme Court of long standing". (iii) In taking into account that Mr Burridge lived some 300kms away and relied upon a site manager. (iv) In finding as a mitigating factor that the pH limits had been self reported. (v) In finding that there was only a potential for environmental harm and none in fact. (vi) In the weight given to the potential for environmental harm rather than to the circumstances leading to the offence. (vii) In taking into account an agreement by the Respondent to pay the prosecutor's costs. (viii) In taking into account a finding that there was an unlikelihood of further offences in these types. 35 It is convenient to defer consideration of the first ground. Ground 2 36 The circumstances which led to the penalty infringement notice referred to in this ground were that the stop gate which controlled discharges had not been shut properly and had inadvertently come open. A small flow of water escaped. Changes were then made by the substitution of an improved valve. There may also have been some further earth works to improve the control over discharges. 37 The penalty infringement notice was in the sum of $1,500 so the fine the subject of the appeal was in excess of a 6 fold increase. I do not see in the earlier matter anything which argues significantly for the penalty of $10,000 being too low. 38 The proposition that because the Respondent was the holder of a licence under the Protection of the Environment Operations Act it was subject to a higher obligations or standard of care is also not one which I am prepared to accept, certainly insofar as any relevant to this case is concerned. Counsel for the Applicant referred in this connection to remarks of Cripps CJ of the Land and Environment Court in State Pollution Control Commission v CSR Ltd (1989) 75 LGRA 1. That was a case where there was a licence to pollute and the conditions of the licence in this regard had been broken. In the instant case the Respondent's licence was to discharge water of a pH which did not pollute. In effect it was simply a licence to discharge. The existence of the licence had nothing whatsoever to do with the offence and I regard the existence of the licence as irrelevant. The Respondent would have been just as culpable and its criminality as great whether or not it had the license to discharge. In the circumstances of the case, s257 and 258 of the Act, much relied on by the Applicant, take the matter no further. Ground 3 (i) 39 His Honour did say that "At the end of the day the real issue on sentence is the question of control of the operation which miscarried at the relevant time, such that some 432,000 litres of offending waters overflowed the site and …". In that this statement suggests that control was the only or principal issue on sentence, I would, with respect disagree. There were a variety of other issues and, although his Honour addressed them, the passage to which exception is taken does suggest his Honour gave to the topic of control undue weight. 40 That said, the matter of control did raise a substantial issue. The transcript of the submissions before Sheahan J was contained in the Appeal Books provided to this Court and shows that the issue of control was one which was the topic of significant debate there. This was not in the sense that the Respondent was seeking to avoid liability - it had pleaded guilty - but rather on the issue of the extent of fault or omissions contributing to the offence by those in charge of the Respondent as distinct from fault on the part of simple employees, Mr Clay Baddonock and his father. That this is a relevant issue is apparent from s241 of the Act which provides:-

(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. 41 There are numerous decisions under environmental legislation which demonstrate the same point. 42 I regard this ground as made out. Ground 3 (ii) His Honour erred … in taking into account the fact that Mr Burridge was a "well respected solicitor of the Supreme Court of long standing" 43 Mr Burridge gave evidence as to steps taken to ensure compliance with, and avoid offences under, the environmental laws. Such evidence was relevant to matters arising under s241(1)(d). It was also relevant, under general principles of sentencing, to the issue of likely repetition and protection of the community. The fact that Mr Burridge was a "well respected solicitor of the Supreme Court of long standing" was clearly relevant to the last of these and to the credibility of his evidence concerning the first. 44 It was submitted on behalf of the Applicant in relation to this ground that "the only issue was the prior environmental record of the Respondent." In terms of antecedents of the offender, I am content to assume this is so. However, as I have indicated in the immediately preceding paragraph, that is not the end of the matter. 45 This ground fails. Ground 3 (iii) His Honour erred … in taking into account that Mr Burridge lived some 300kms away and relied upon a site manager. 46 This matter was relevant to the issue of control to which I have referred under ground 1(i) above. This ground fails. Ground 3(iv) His Honour erred … in finding as a mitigating factor that the pH limits had been self reported. 47 In paragraph 22 of his remarks on sentence, his Honour did make a statement to the effect the subject of this ground. It was submitted on behalf of the Respondent that his Honour's remark related to not the subject of the offence but to other environmental practice of the Respondent. However, having regard to the position in his remarks where the observation the subject of this complaint occurred, it seems to me that the probabilities are against this. Thus I would regard this ground of complaint as established. Ground 3(v) His Honour erred … in finding that there was only a potential for environmental harm and none in fact. 48 What his Honour said in this regard was:-

The scientific expert, Mr Roach, reported, on affidavit, his interpretation of the test results. In essence, his evidence is of no actual environmental harm, but a potential for harm. He says (in par12): "Given this information and the possibility that the discharge only occurred for 2 hours, though it is possible it may have been longer, then it is difficult to be emphatic about the likelihood that some impact occurred. As discussed above the pH of the water was at a level where there was a potential for environmental effects if it had discharged into a relatively undisturbed environment. Secondly it adds, albeit to a small degree, to cumulative environmental impacts from acid water discharges in the Tweed River generally which is widely considered to be a significant environmental problem in the catchment." 49 The information to which Mr Roach had been referring related, inter alia, to the water flow and pH of watercourses connected with the creek into which the discharge had occurred. He had also observed that he would have expected small fish to have been present but no dead organisms were in fact noted. 50 It was submitted on behalf of the Applicant that "the offence did cause actual environmental harm to the extent that it added to the cumulative environmental impacts from water discharge in the Tweed River generally. Reliance was placed on the statement "A Defendant discharging acidic waters into waters already so degraded should not be given any advantage by way of mitigation simply because the receiving waters are in a degraded state. In such circumstances, the enforcement of the State's anti-pollution laws ought to be attended with greater rigour and enthusiasm to bring about an improved state of affairs in an already degraded water environment" - State Pollution Control Commission v White Wings Limited (unreported, Bignold J, 1 November 1991). 51 Despite these remarks, s241 obliged his Honour to take into account - it being clearly relevant - the extent of the harm actually caused. When regard is had to his Honour's use of the expression "In essence" and his quotation from the report of Mr Roach, it is impossible to conclude that his Honour misapprehended the impact of the Respondent's offence on the environment. Ground 3(vi) His Honour erred … in the weight given to the potential for environmental harm rather than to the circumstances leading to the offence. 52 His Honour properly dealt with both of these topics in his remarks and there is nothing but the size of the fine imposed to support this ground. It does not. Ground 3 (vii) His Honour erred … in taking into account an agreement by the Respondent to pay the prosecutor's costs. 53 What his Honour said was that "I also taken into account (the Respondent's preparedness to pay the Prosecutor's costs, and the unlikelihood of further offences of this type in all the circumstances." 54 Liabilities such as costs or the cost of rectification consequent on an offence are relevant in any consideration of the size of any fine to be imposed. However, it is difficult to see how in accordance with normal principles an order for the payment of costs would not have been made in any event and thus I doubt whether the Respondent's simple "preparedness" was of significance. However, his Honour's reference in the same sentence to the possibility of further offences does raise the question whether the reference the subject of this ground was directed to the topic of contrition or further offending rather than to the size of the fine directly. However I am prepared to assume the ground is made out. Ground 3 (viii) His Honour erred … in taking into account a finding that there was an unlikelihood of further offences of these types. 55 An assessment of the likelihood of further offending is relevant to considerations of personal deterrence, and protection of the community, 2 of the 5 purposes to which criminal punishment is directed - Veen v R (1987-1988) 164 CLR 465 at 476. It may be, as the Applicant submitted that the finding may have been based on evidence from Mr Burridge that the sand mine had been sold but that does not make the matter one to which no, or lesser, weight should be given. A person who has offended against the drink driving legislation is entitled to have taken into account in mitigation a sale of his motor vehicle effected in order to reduce the likelihood of repetition of offending. 56 This ground fails. Ground 1 57 This submission takes too simplistic a view of the significance of the maximum penalty provided. Environmental offences are liable to be committed by a wide variety of persons - from lowly paid employees to the largest corporations in the State. They are liable to be committed in a wide variety of circumstances including by accident and even despite a great deal of care: They may be committed deliberately after a cost/benefit analysis by the perpetrator. They may result in no, or alternatively a great deal of, environmental damage. To ensure all such persons and situations are covered, to ensure that penalties are sufficient to hurt even very large corporations and to induce the taking of precautions, even costly precautions, the maximum must be high. 58 Recognition must be given to the situation of an offender. A fine which would operate as no significant imposition on a large corporation might well ruin a smaller one. $10,000 is no insubstantial sum and the fact that it was imposed on a corporation and is but 4% of the maximum does not of itself demonstrate that it was inadequate, particularly appellably inadequate. Nor does it show that his Honour did not pay regard to the increase in the maximum penalty in 1997. 59 In that connection, it must not be forgotten that there were a number of matters on which the Respondent could rely in mitigation. Some are referred to above. Another which merits specific mention is the Respondent's plea, albeit it must be acknowledged that the Respondent was caught red-handed and the Crown case very strong. Other Matters 60 The Notice of Appeal which was filed stated as the sole ground of appeal that the sentence was inadequate. The Crown has established some of its more particular complaints and thus the discretion of this Court to interfere is enlivened. However it is common ground that the usual principles of double jeopardy apply. The errors which did occur were, in the context of the whole of his Honour's judgment, of relatively little significance. I am not persuaded that the sentence was one which was outside the legitimate exercise of his Honour's sentencing discretion. In these circumstances, I am not persuaded that the Court should interfere. 61 I would dismiss the appeal. 62 BARR J: I agree with Hulme J.

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