Environment Protection Authority v New Generation Beverages Pty Limited & Anor

PROSECUTOR: S C Simington (solicitor) SOLICITORS: S Garrett

LEGAL REPRESENTATIVES: DEFENDANTS: B J Preston SC SOLICITORS: Mallesons Stephen Jaques

IN THE LAND AND Nos: 50084 & 50085 of 1999 ENVIRONMENT COURT Coram: Lloyd J OF NEW SOUTH WALES Decision date: 12 May 2000

New Generation Beverages Pty Limited ACN 057 096 036 Defendant

Pepsi Seven-Up Bottlers Australia Pty Limited ACN 003 853 736 Defendant EXTEMPORE JUDGMENT

HIS HONOUR:

1. The defendant, New Generation Beverages Pty Limited, and the defendant, Pepsi Seven-Up Bottlers Australia Pty Limited, have each pleaded guilty to separate offences that on or about 12 November 1998 at Huntingwood in the State of New South Wales they committed an offence against the Environmental Offences and Penalties Act 1989 in that they did pollute waters contrary to section 16(1) of the Clean Waters Act 1970. Although the Clean Waters Act and the Environmental Offences and Penalties Act have both been revealed since the commission of the offences those offences are preserved by dint of section 30(1) of the Interpretation Act 1987.

2. The relevant facts are largely contained in an agreed statement of facts tendered by consent and supplemented by some other material. Both defendants were engaged in partnership in a business trading as Pepsi-Cola Bottlers Australia. The partnership operated a soft drink manufacturing factory at 27 Huntingwood Drive, Huntingwood. As at 12 November 1998 both defendants were the holders of a licence under the Pollution Control Act 1970. A condition of that licence was that the holder of the licence shall not pollute any waters. In that respect the condition is no different from section 16(1) of the Clean Waters Act which provides a person shall not pollute any waters.

3. In about June 1998 the partnership wished to improve the yields and quality of soft drink production at the premises by reducing and controlling the alkalinity levels in the soft drink production water process. The partnership obtained all of its bulk chemicals from Campbell Brothers Limited. At about that time Mr M Johnston of the partnership requested that Campbell Brothers Limited advise it on the options available to reduce and control alkalinity levels in the process water.

4. Campbell Brothers Limited then introduced the partnership to Mr D Avgerinos, an employee of Environmental Technology Pty Limited, which was in turn an agent of a company known as Industrial Solutions Australia Pty Limited. Mr Avgerinos and Industrial Solutions Australia Pty Limited were experienced in water treatment particularly water chemistry in industrial water processes. Mr Avgerinos recommended, and the partnership agreed, that the partnership authorise Industrial Solutions Pty Limited to conduct a trial treatment process for processed water. It was recommended that the processed water be pre-treated with a number of chemicals including ferric chloride to create a flocculation blanket in the water. The flocculation blanket would act as a filter, thereby working to stabilise the alkalinity of the water within acceptable limits to the partnership.

5. On 5 August 1998 a meeting was held between Mr Avgerinos and officers of the partnership during which Mr Avgerinos became aware of the existence of a tank at the premises which could be used for the storage of ferric chloride for the trial process. After inspecting the tank and the adjoining area Mr Avgerinos said to Mr Johnston words to the following effect: You need to do a safety audit of the area. Can you get the Campbells people to come and check whether they can get a truck into the area, whether they can safely deliver the ferric chloride into it and whether the tank is appropriate to hold the material.
6. On 11 August 1998 a Mr Avgerinos, on an Industrial Solutions Australia Pty Limited letterhead, wrote to the partnership and advised the partnership that its consulting work included process and equipment design, commissioning, operating manuals, contingency procedures, site personnel training, monitoring and response procedures, monthly program review with management and travel and accommodation amongst others.

7. On 7 September 1998 Mr Avgerinos sent a facsimile to the partnership attaching a check list of items to be supplied and a diagram of what was to be done. The items included amongst other things a hose for ferric chloride discharge which he indicated he would bring with him. On 19 September 1998 a trial of the process was conducted at the partnership's premises. Ferric chloride was sourced for this process from an "IBC Bulky Tank" which had been delivered by Campbell Brothers Limited to the partnership premises, that is, a large plastic container that can be transported on a truck. The results of the trial were considered to be positive and the partnership approved the conduct of a second trial.

8. On 19 September 1998 in a conversation between Mr Avgerinos and officers of the partnership the issue of providing bunding, either temporary or permanent, around the tank was raised. Subsequently a number of other employees of the partnership inspected the tank. According to an internal file note of the partnership the question of bunding was discussed on 28 October 1998. It was recognised that the material was to be stored in an area that was not bunded. Ms Pullen, an officer of the partnership, suggested that the area have some sort of bunding to contain the ferric chloride in the event of a spill.

9. The file note contains a discussion with Mr David Clay by Ms Pullen. The file note continues: I also asked David about installing some form of bunding for the ferric chloride. David advised that as this was not a permanent process (still trialing) that bunding would be an expensive option. I suggested that some sort of bunding (pallet trays, sand-bagging) should be installed as we would have no means of containing a spill if it occurred.
10. The issue was apparently not resolved prior to the spill which led to these prosecutions and which occurred on 12 November 1998. On 16 October 1998 there were further meetings involving employees of the partnership and Mr Avgerinos. The minutes of those meetings are before the Court and they show that the question of preparing a hazard analysis was raised. At some time prior to 12 November 1998 and probably on 12 October 1998 and at the request of Mr Johnston on behalf of the partnership Campbell Brothers Limited inspected the tank. Campbell Brothers Limited advised Mr Johnston that it was suitable for the storage of ferric chloride.

In the past the partnership had obtained advice from a firm known as "Phoenix" in respect of dangerous goods stored on the premises. Following receipt of the advice from Campbell Brothers Limited the partnership was satisfied that no further advice was required in respect of the storage of ferric chloride on the premises and no such further advice was obtained. Campbell Brothers Limited then delivered approximately 6000 litres of ferric chloride to the tank.

In the first week of November 1998 Mr Avgerinos noticed a slow leak of ferric chloride from the suction side of the ferric chloride pump line to the tank. Mr Avgerinos states that he had a conversation with an employee of the partnership in which it was said that it looked like a faulty fitting. Mr Gordon Clement was a person who at all relevant times was employed by the partnership as an operator and holds a trade qualification in fitting and whose duties include the repair of machinery at the premises. Mr Johnston requested Mr Clement to carry out the necessary repairs to rectify the leak noted by Mr Avgerinos. Mr Clement then removed a brass fitting which he saw was leaking. The fitting that he removed was directly connected to the pipe from the tank to the pump. In carrying out this repair Mr Clement noticed that the brass fitting that he removed had been leaking and was corroded. The partnership did not have a poly-fitting to replace the connector in stock so Mr Clement installed an identical brass connector fitting to replace the leaking fitting as an interim measure. He then advised Mr Johnston that a poly-fitting was required as he, that is Mr Clement, was not sure of the chemical make-up of the substance in the tank and was therefore not satisfied that a brass connector fitting was appropriate.

A stainless steel fitting was also on the pump line when Mr Clement installed the new brass connector. Mr Clement did not see any sign of corrosion on the stainless steel fitting in the same pipe-line. Mr Clement had no concern as to the stainless steel fitting because as he says it was stainless steel. Mr Clement did not make any inquiries as to whether the material in the tank was corrosive. When interviewed he conceded that he saw corrosion in the brass fitting which he had removed. He said that he was concerned about the corrosive prospects of the chemical but when he saw the stainless steel fitting there he thought it must be alright.

On or about 2 November 1998 Mr T Robinson, who was employed by the partnership in the same capacity as Mr Clement, installed a poly-fitting on the pipe-line which, I assume, was in place of the brass fitting that had been placed there by Mr Clement. Mr Robinson did not notice any corrosion of the stainless steel fitting. After installation of the poly-fitting Mr Avgerinos was satisfied that there were no longer any leaks from the system.

At about 5 am on 12 November 1998 an employee of the partnership was checking a clarifier located close to the tank which contained the ferric chloride but he did not notice any liquid leaking from the tank or any odour at that time. Mr Johnston arrived at work just prior to 7 am on 12 November and he immediately went to inspect the clarifier. He had his back to the tank for about fifteen to twenty minutes while he inspected the contents of the clarifier. When he turned round he noticed liquid leaking out of the hose connected to the tank. He immediately attempted to isolate the leaking hose. He closed a valve on the tank but that had no effect and the leak continued.

Mr Johnston found that the leak was coming from the stainless steel fitting, which had a hole in it. At about 7.25 am he closed a red butterfly valve at the outlet to the tank and that stopped further liquid coming out of the stainless steel fitting. He then went back into the premises to obtain a materials safety data sheet in respect of ferric chloride and to contact the plant manager. Mr David Cliff, an effluent technician employed by the partnership was notified by Mr Johnson of the leak. He came and saw that the leaked liquid had spread across concrete beyond a white fence to a gutter and that it was entering a drain. It had started to rain and the flow to the gutter increased. Mr Cliff had employees place "Autodry" bags in the gutter to dam the gutter and prevent flow into the drain.

Between 7.30 and 7.40 am absorbent material was spread to absorb the liquid that had leaked from the tank. Mr Johnston by that time had obtained the materials safety data sheet for ferric chloride which he then printed from the computer system of the partnership. Mr Johnston then went back to the area of the leak and saw that the material had entered a drain at the premises. He was advised that the drain went to storm water. Mr Cliff and Mr Johnston went to the unnamed tributary at Huntingwood Drive and saw that there was some discolouration in the water in the creek. Mr Cliff took a sample of the water to test for alkalinity. The pH was found to be lower than five.

The fire brigade was then contacted between about 7.45 am and 8 am and the prosecutor was contacted at about 8.10 am. The fire brigade arrived at the premises at about 8.25 am and commenced clean up activities. An officer of the prosecutor arrived at about 9.25 am. There was then heavy rain falling at that time. The officer of the prosecutor, Mr Durrington, saw a dark brown coloured liquid exiting out of the drain pipe at the head wall of Huntingwood Drive and into the creek.

An office of the fire brigade, Mr Tapper, took a pH reading of the water in the creek using a piece of litmus paper. The litmus paper was placed in the area of the creek that was coloured and the colour of the litmus paper matched a colour on a colour chart for the litmus paper that corresponded with a pH of two to three. A discussion took place between Mr Durrington and a number of fire brigade officers as a result of which the liquid within the subject premises was mixed with soda ash in an attempt to neutralise the pH of the material before it was released. Approximately 3.5 kilograms of soda ash was used in this mixing process. Mr Durrington noted that the tank was not located within a bunded area and that the metal connector to which I have referred had a corroded hole in it.

Thereafter the defendants arranged for a liquid waste tanker to empty the storage tank of ferric chloride and remove it from the premises. Mr Durrington took samples of water from various locations. The partnership has calculated that the amount of ferric chloride unable to be accounted for was approximately 200 litres. Ferric chloride has not since been stored on the premises.

In August 1998 the partnership had commenced the implementation of a chemical management system for the premises known as Chem Watch. The system consists of a customised data base of material safety data sheets relating to the specific chemicals used on the premises as well as a further data base of some other material safety data sheets. In addition, in order to ensure the effective implementation of the Chem Watch system key employees of the partnership were provided with training with respect to the system. The partnership has also since 12 November 1998 accelerated the full implementation of the Chem Watch system including training of employees in respect to the storage and use of chemicals. In particular, the partnership issued revised hazardous substances and dangerous goods procedures on the premises, it issued revised spills standard operating procedures and it issued revised emergency response procedures. Further employees of the partnership have been trained in the Chem Watch system.

Training has been carried out for the day and afternoon shift production technicians employed at the premises in respect of the revised hazardous substances and dangerous goods procedures. Further training has been carried out for all night shift production technicians, maintenance personnel and the remaining production technicians employed at the premises in accordance with the revised hazardous substances and dangerous goods procedures, and further training has taken place in respect of chemical safety and handling and new product instructions on hazards has been carried out for the plant manager of the premises and others.

Dr F Pablo, an exotoxicologist employed by the prosecutor, has furnished an affidavit which outlines the nature of the substance and the effect of what happened on the local environment. Dr Pablo states that ferric chloride is soluble in water, is used in various industrial processes including use as a coagulant and deodoriser in the treatment of industrial and municipal wastes and sewage. Ferric chloride reacts with water and produces a toxic and corrosive acid in the form of hydrochloric acid. When ferric chloride solution reacts with water in an open system such as in a creek or a river system the hydrochloric acid concentration in the solution will initially increase and be high for a while and will then gradually decrease with time. The acid in the solution does not build up to high concentrations because there are processes that lead to its gradual decrease. These processes are lost by evaporation and/or dilution in water. In effect, the concentration of acid will be high initially and gradually decrease with time as it evaporates or is diluted with the mixing flow.

Dr Pablo inspected the area on 6 July 1999 with Mr Durrington and noted that the bottom of the creek was natural sediment with occasional growth of grass. At the time of the visit the creek was dry. Samples taken upstream in the creek from the creek bed disclosed several species of worms, the larvae of flies, snails, gravid and immature leeches and dragon fly.

The ferric chloride solution which the defendants had on the premises was of a concentration of 41 to 43 per cent weight by weight of water. It is darker in colour than turbid water hence its presence in creek water would have been visible while at high concentration, but would have gradually blended in with the sediment colour with reaction and dilution as it flowed down the stream.

The concentration of acid in the original ferric chloride solution contained in the holding tank would have corresponded to a pH of 4.2. A pH of seven is considered neutral. Lower values than seven are acidic, higher values are basic. When the ferric chloride solution leaked from the holding tank at the subject premises Dr Pablo states that she would expect the solution would give rise to a distinct acid smell in the immediate vicinity. Initially upon release the pH of the solution would have temporarily decreased and would be likely to be as low as three. This I note is consistent with the measurement of the pH in the creek taken by the fire brigade officer.

In order to neutralise 200 litres of ferric chloride solution 42 per cent by weight of water, an amount of 78.5 kilograms of soda ash or sodium carbonate would have been required. Clearly a large amount of the ferric chloride that was spilt was not neutralised when it reached the creek and flowed downstream. Dr Pablo states that the normal pH of fresh water that supports a healthy aquatic life is 6.5 to nine. The decrease in pH values below 6.5 would certainly cause, in her opinion, adverse effects to any aquatic organisms present in the water column or in the sediment. Assuming that the volume of ferric chloride solution that spilled is 200 litres in order to achieve a pH of 6.1 and assuming no sodium carbonate was added, the dilution required would have been on the order of approximately 29 thousand cubic metres of water, equivalent to fourteen and a half times the volume of an Olympic size pool.

In her conclusion Dr Pablo notes that the pH of water would drop to values close to three initially because of the formation of acid and, as already noted, the increase in acid concentration in water would have acute adverse effects physiologically to aquatic organisms present in the creek. However she would expect that a mixing effect about the discharge point and some evaporation of generated acid as hydrochloric acid would somewhat alleviate the effects to aquatic organisms.

In considering the question of penalty I am required to have regard to the heads of consideration set out in section 241 of the Protection of the Environment Operations Act 1997. The first consideration is the harm caused or likely to be caused to the environment by the commission of the offence. I accept the submission of the defendant that the discharge did not occur for very long and that not all of the 200 litres that was lost was discharged into the drain which led into the creek. I note that the pH at the site of the discharge into the creek had returned to a level of 8.5 at 12.40 pm on the day of the spill which is relatively close to its normal range. Whether this was as a result of the rain which, I note, was described as heavy, or as a result of the soda ash that had been applied I do not know, or it may have been a combination of both.

The evidence shows that this is an industrial area and the particular waterway is a constructed channel. It was dry when inspected by Dr Pablo and is now affected by other earth works. The only evidence of plant life seen by Dr Pablo was grass, although I think it can be assumed that the fauna which she observed above the discharge point may have been present in the creek at the time of the discharge. The harm was temporary and I accept the submission of the defendant that it cannot be said that there is any evidence of serious or lasting environmental harm. I also accept the submission of the defendant that there is no evidence that the creek was valued for its aesthetic quality. That is to say, the effect of this incident on the environment was not one which was significant.

The next consideration is the practical measures that may be taken to prevent, control, abate or mitigate that harm. The defendant submits that it reasonably relied upon an expert external consultant, Mr Avgerinos, of Industrial Solutions Pty Limited. There was nothing in the initial data sheet furnished by Mr Avgerinos to the defendants to indicate that ferric chloride was corrosive. There was no evidence when Mr Clement was replacing the brass fitting of any corrosion on the stainless steel fitting which subsequently did corrode and gave rise to the leak. Mr Avgerinos, who had inspected the area, did not draw attention to the inappropriateness of the steel fitting. The defendant however was aware of some sort of a risk of a spill and gave consideration to the installation of some sort of bunding, either permanent or temporary. The internal memorandum to which I have referred shows clearly that bunding was considered but was rejected as being an expensive option. It is likely that had bunding been in place the spill would have been largely if not totally contained.

In Axer Pty Limited v Environmental Protection Authority , Court of Criminal Appeal, 22 November 1993, unreported, Mahoney JA said: The legislation does not seek merely to prevent deliberate or negligent pollution. It envisages that at least in many cases proper precautions must be taken to ensure that pollution does not occur. Experience has shown that it is not enough merely to take care, accidents will happen. The legislation envisages that in many cases care must be supplemented by positive precautions. Business must be arranged and precaution taken so as to ensure that pollution will not occur. .... I believe legislation of this kind contemplates that in general the costs of preventing pollution will be absorbed into the cost of the relevant industries and in that way will be borne by the community or by that part of it which uses the product which the industry produces. 33. In assessing the quantum of a fine considerations of this kind are to be taken into account. The fine should be such as will make it worthwhile that the cost of precautions be undertaken. I am therefore not prepared to accept that it was reasonable for the defendants to abandon the suggestion of bunding on the ground that it would be an expensive option.

34. The next consideration is 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. The submission of the defendant is that it took steps in accordance with Mr Avgerinos' advice, which advice was itself, it seems, defective or insufficient. That is to say there was a deference to the expert consultant. It seems to me, however, that since Mr Clement noticed the corrosion of the brass fitting the defendant ought to have been alerted to the possible corrosive nature of the material in the tank. The possibility of some harm was foreseen in the event of a spill as recognised by the discussion about bunding to which I have previously referred.

35. The next consideration is the extent to which the person who committed the offence had control over the causes which gave rise to the offence. The considerations under this head have largely been discussed. They include the fact that the stainless steel fitting must, it seems, have been installed in the first place by someone employed by the defendant. I do not think that the defendant can rely entirely upon Mr Avgerinos in view of that fact and in view of the fact there had already been the discovery of a corroded fitting on the same pipe line before this incident.

36. There are a number of other matters which must be taken into consideration. The first is the fact that the defendant has pleaded guilty at an early stage and has thus exhibited remorse and contrition. There is a formal letter which has been tendered on behalf of the defendants signed by the plant manager in which an expression of deep regret has been expressed and that the matter is taken very seriously. I am required by section 22 of the crimes (Sentencing Procedure) Act 1999 to reduce the penalty which would otherwise be imposed in the light of both the plea of guilty and the expression of contrition and remorse which accompanies it.

37. There is the fact that the defendant co-operated fully with the prosecutor both in its investigation and in a prompt clean-up. There have been no prior convictions for an environmental offence although the defendant was issued with a penalty infringement notice in October 1997 in the sum of $500 in relation to a breach of its licence under the Pollution Control Act 1970. The particular breach on that occasion was that it failed to report as soon as practicable an event that either caused or was likely to cause harm to the environment, being a discharge of a solution of water and caustic soda into a storm water drain.
38. I take into account the fact that the defendant has implemented new procedures, created new manuals and documents and trained its employees in the handling of hazardous substances. I also take into account the fact that there was no serious and lasting environmental harm in this case.

39. I am required to have regard to the principle of even-handedness. That is to say, full weight is to be given to the collective wisdom of other sentencing judges in interpreting and carrying into effect the policy of the legislature. One must have regard to the general pattern of sentences being passed in cases which can be recognised as being relevant to the case in hand.

40. The prosecutor submits that since there are two separate charges against two separate defendants then the penalty that would be otherwise imposed should be imposed on both of them in equal amounts. As I understand the submission, that would result in a total fine greater than would be the case if the offence had been committed by a single defendant. This is a novel approach to me. I am unaware of any case in the past where that has been done. The prosecutor has been unable to identify any authority where such an approach has been adopted in this Court, or for that matter, in any other court. The fact is that the activities being conducted on the land are being conducted by a partnership of Pepsi Seven-Up Bottlers Australia Pty Limited and by New Generation Beverages Pty Limited. It is the partnership that is carrying on a single business. The defendants are not carrying on separate businesses or engaged in separate enterprises. I am not persuaded that the submission of the prosecutor should be accepted.

41. I have referred to the judgment of Mahoney JA in Axer . I return to it and quote from the same judgment, The object of the legislation is to prevent pollution and to do this, inter alia, by the deterrent effect of a substantial fine and by, in consequence, persuading the industries concerned concern to adopt preventive measures
42. I understand this statement to mean that sentencing, or imposing penalties, must embrace powerful considerations of general deterrence. In adopting the principle of even-handedness to which I have referred it is always difficult in attempting to compare the penalty in one case with the penalty in another because of the wide divergence of facts and circumstances. It seems to me, however, that the facts in this case are very similar to a case that I decided recently in Environment Protection Authority v Timber Industries Limited [2000], NSWLEC 39, unreported. That was a case involving the spill of a chemical into a drain and which did not have any lasting or significant environmental effect. In that case I imposed a penalty of $15,000. I think that is the kind of penalty that is appropriate in this case. I note that costs are agreed.

43. This means that the formal orders are as follows: No. 50084 of 1999
44. The defendant is convicted of the offence as charged. 2. The defendant must pay a penalty of $7500. 3. The defendant must pay the prosecutor's costs in the sum of $4475. 4. The exhibits may be returned. No.50085 of 1999:
45. The defendant is convicted of the offences charged. 2. The defendant must pay a penalty in the sum of $7500. 3. The defendant must pay the prosecutor's costs in the sum of $4475. 4. The exhibits may be returned. I

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43. This means that the formal orders are as follows:

1. The defendant is convicted of the offence as charged.

3. The defendant must pay the prosecutor's costs in the sum of $4475.

1. The defendant is convicted of the offences charged.

2. The defendant must pay a penalty in the sum of $7500.

3. The defendant must pay the prosecutor's costs in the sum of $4475.