Environment Protection Authority v Sell and Parker Pty Limited

Axer Pty Ltd v Environment Protection Authority (1993) 113 LGERA 357; Cabonne Shire Council v Environment Protection Authority (2001) 115 LGERA 304; Environment Protection Authority v Metalcorp Recyclers Pty Limited [2000] NSWLEC 259; CASES CITED: Environment Protection Authority v Metalcorp Recyclers Pty Limited [2001] NSWLEC 253; Environment Protection Authority v Metalcorp Recyclers Pty Limited [2004] NSWLEC 14; Environment Protection Authority v Waste Recycling and Processing Corporation [2006] NSWLEC 419; R v Thomson; R v Houlton (2000) 49 NSWLR 383; Reg. v O'Neill [1979] 2 NSWLR 582

PROSECUTOR Mr D Samuels (solicitor) SOLICITORS LEGAL REPRESENTATIVES: Department of Environment & Conservation DEFENDANT Mr N Hemmings QC (solicitor) SOLICITORS Allens Arthur Robinson

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

ENVIRONMENT PROTECTION AUTHORITY Prosecutor

SELL AND PARKER PTY LIMITED Defendant

1 Sell and Parker Pty Limited operate a scrap metal shredder in Blacktown. It carries out this activity under authority of an environment protection licence granted by the Environment Protection Authority. On 24 June 2005, Sell and Parker's operations caused an explosion resulting in an airblast over pressure level exceeding 120 dB (Lin. Peak) when measured at the boundary of its premises, in breach of condition L8.1 of its licence. Sell and Parker pleaded guilty to this offence at the first opportunity. I must now determine the sentence to be imposed on Sell and Parker.

2 The maximum penalty for the offence is $60,000 (s 64(1) of the Protection of the Environment Operations Act 1997).

3 Most of the facts were agreed. Metal is delivered to Sell and Parker's premises. Once delivered, the metal is weighed and placed in stockpiles. One employee operates a crane. The crane grabs the metal, which is inspected by another employee - one grab at a time. The purpose of the inspection is to remove any potentially explosive materials, such as petrol tanks in cars and gas bottles. Metal approved for shredding by the inspector is placed into a second stockpile and inspected by another employee not involved in the initial inspection. The metal is then fed into the shredder via a conveyer belt.

4 Condition L8.2 requires Sell and Parker to implement all measures necessary to prevent explosions occurring. Condition L8.1 provides that the airblast overpressure level from explosions on the premises must not exceed 120 dB (Lin. Peak) when measured at the boundary. Sell and Parker monitors the levels of explosions via a blast meter.

5 On 24 June 2005, an explosion occurred. The explosion blew out the sacrificial plywood panels in the top of the cyclone and the rubber explosion relief curtains that cover the openings in the ductwork of the shredder leading to the cyclone. It also blew open a metal door on the side of the cyclone and two metal side panels from the top of the cyclone, one of which landed on the metal roof of an adjoining structure in Sell and Parker's yard, and the other on a nearby conveyer. This damaged the safety handrail around the walkway at the top of the cyclone. In addition, a metal plate, weighing 68kg and approximately 1.5m in diameter, was blown out of Sell and Parker's premises into adjoining premises to the west.

6 Employees at the western premises heard an extremely loud bang and felt the force of the explosion. The salvage manager said that the portable office he was sitting in shook. Pictures fell off the walls, and he was scared. It felt like a truck had hit his office and he was not sure what was going to happen next.

7 Employees on the premises immediately to the east also felt the explosion. It made the windows and walls of the factory shake. One employee got such a fright that his heart started to race. Another, operating an overhead crane at the time, said it seemed like a tremor or ground shock, which startled him. The general manager said that the explosion felt like a shock wave through his body.

8 The airblast overpressure level from the explosion was approximately 144 dB (Lin. Peak) measured by the blast meter at the boundary of Sell and Parker's premises.

9 Mr Luke Parker (Sell and Parker's managing director) gave evidence supplementing the agreed facts. Mr Parker explained that, prior to installing the shredder, he satisfied himself (by discussions with the manufacturer) that the shredder would conform to the licence conditions. The shredder was installed under the supervision of the manufacturer on 7 July 2002. Mr Parker ensured that all employees participated in training sessions about occupational health and safety practices, use of personal protective equipment, drug and alcohol use and task specific policies. Each employee was required to sign a copy of Sell and Parker's workplace policies, and to attend formal occupational health and safety refresher courses on a monthly basis. Mr Parker specifically instructed employees about the need to be constantly vigilant when inspecting scrap metal deliveries for potentially explosive materials.

10 After the installation of the shredder, Mr Parker sought to maintain and improve Sell and Parker's safety practices. He travelled extensively within Australia and overseas to examine and discuss practices and technology employed at similar processing facilities. Sell and Parker conduct quarterly audits and reviews of safety and inspection practices, and trial changes to improve safety as part of its continuous maintenance and improvement policy.

11 Before the explosion, Sell and Parker had taken various steps to maintain and improve safe operation of the shredder. Sell and Parker introduced a customer policy to ensure that customers were aware that they could not supply the shredder with any potentially explosive materials. From November 2002, customers were required to sign a declaration to this effect. The customer policy has been upgraded on a number of occasions, both before and after the explosion on 24 June 2005. These safety improvements were estimated by Mr Parker to have cost over $270,000 per annum.

12 In January 2005, Mr Parker became aware of the operation of a pre-shredder in use at a facility in Birmingham. He visited that facility for the specific purpose of determining whether it was suitable for installation at Sell and Parker's Blacktown premises. Prior to that, Mr Parker had not been aware of any pre-shredder facility that was of sufficient strength and power to operate effectively at its Blacktown premises. He attempted to negotiate with the manufacturer of the Birmingham pre-shredder to design and manufacture a version for Sell and Parker, but these negotiations were unsuccessful. When he returned to Australia, Mr Parker spoke to the original designer of the Birmingham pre-shredder to see whether a redesign was possible. On 26 January 2005, he received confirmation that the original designer could design, construct and deliver a pre-shredder with the required power level. He went to Taiwan (the location of the designer's offices) to continue negotiations, and placed an order for the design, construction and delivery of the pre-shredder on 23 February 2005. Contracts were entered into on 17 March 2005. Sell and Parker paid an initial deposit of $70,818 on 1 April 2005. It paid a second instalment of $139,710 on 11 May 2005 after receiving the final design drawings. Mr Parker consistently emphasised to the designer that it was essential that Sell and Parker take delivery of the pre-shredder as soon as possible. However, the pre-shredder did not arrive at its Blacktown premises until 20 January 2006, and was not commissioned until 7 March 2006. The total cost of installation of the pre-shredder was $2.6 million. Mr Parker's sole purpose in installing the pre-shredder was to minimise the risk of future explosions.

13 On 24 June 2005, Mr Parker was driving to Sell and Parker's offices at Botany. At about 11.00am, he heard the explosion. He drove to the Blacktown premises. On the way he telephoned the EPA (at about 11.40am). He arrived at about 11.50am and immediately began interviewing employees for the purposes of Sell and Parker's internal investigation. He spoke to Mr Dennis (the manager of the Blacktown premises) during the afternoon of 24 June 2005 to satisfy himself that Sell and Parker's inspection procedures were being complied with. He interviewed the other employees who had been working at the time of the explosions. He telephoned the representative of the shredder manufacturer within 8 hours of the explosion. He sought advice from the manufacturer to help minimise the risk and size of future explosions. The manufacturer made recommendations (increase the amount of venting, encase the silo in a steel cage and increase the number and strength of retaining devices). Mr Parker arranged for all of these improvements to be made to the shredder within 6 days of the explosion. He ensured that the shredder was not used during this 6 day period.

14 Mr Parker made the EPA officer who arrived on the day of the explosion aware of the damage caused by the explosion. He gave videotape to the EPA officer containing footage of the conveyer at the time of the explosion. Mr Parker also engaged in ongoing communication with the EPA officer about the EPA's investigation, and otherwise cooperated fully with the investigations by WorkCover, Quakers Hill Police and the New South Wales Bomb Squad. None of these investigations determined the cause.

15 Mr Parker said that he had been directed by Sell and Parker on its behalf, and on his own behalf, to express their concern and serious regret that the significant explosion occurred, in breach of the licence, and causing anxiety and distress to Sell and Parker's neighbours and staff. Mr Parker believed that the installation of the pre-shredder and the changes made to the design standards of the shredder since the explosion would enable Sell and Parker to conform to the licence. He confirmed that Sell and Parker would continue to be diligent and take all necessary steps to avoid the event being repeated.

16 Mr Parker was cross-examined about certain aspects of his affidavit. The fact that Mr Dennis was at the bank when the explosion occurred, and was not routinely in the yard area is immaterial. Mr Parker's prompt actions in interviewing all employees, including Mr Dennis, demonstrated Sell and Parker's immediate acceptance of the gravity of the situation. Mr Parker agreed that 9 explosions had occurred prior to the pre-shredder being installed. These explosions caused airblast over pressure levels of between 122 to 137 dB (Lin. Peak). Mr Parker agreed that the occurrence of explosions was not unforeseeable, but said that he had no reason to believe that an explosion of the magnitude that occurred on 24 June 2005 could occur. He explained that airblast overpressure is measured in a linear logarithmic scale, so that the explosion on 24 June 2005 was a "real outlier" at 144 dB (Lin. Peak). I accept Mr Parker's evidence.

17 The defendant tendered a summary of data from SMS messages received by Mr Parker when the blast meter was connected to his SMS service. The service would notify Mr Parker every time the blast meter recorded airblast overpressure exceeding the prescribed maximum. The summary shows that the blast meter could record levels in excess of 120 dB (Lin. Peak) when the shredder was not operating due to events such as wind.

18 Under s 241(1) of the Protection of the Environment Operations Act, I must take into consideration five matters so far as they are relevant. In summary, they are: - (a) the extent of harm caused or likely to be caused to the environment by the offence, (b) the practical measures the defendant could have taken to prevent or mitigate that harm, (c) the reasonable foreseeability of the harm or likely harm, (d) the extent of the defendant's control over the causes of the offence, and (e) whether a person who committed the offence was complying with orders from an employer or supervisor. Under s 241(2), I may also take into consideration other matters I consider relevant.

19 The general purposes of sentencing are set out in s 3A of the Crimes (Sentencing Procedure) Act 1999. These include the need for adequate punishment, deterrence (both specific and general), protection of the community, rehabilitation of the offender, making the offender accountable for their actions, denouncing the offender's conduct and recognising harm done to the victims of crime and the community.

20 Under s 21A of that Act, I must take into account any applicable aggravating factor (if any such factor has been proved beyond reasonable doubt - Reg. v O'Neill [1979] 2 NSWLR 582). In this case, the prosecutor did not identify any applicable aggravating factor. I must also take into account any applicable mitigating factors. Relevant mitigating factors agreed by the prosecutor include that Sell and Parker does not have any relevant record of previous convictions, was a person of good character and had entered a plea of guilty (s 21A(3) and s 22 of the Crimes (Sentencing and Procedure) Act). I am also satisfied that Sell and Parker has shown remorse for the offence by its conduct subsequent to 24 June (s 21A(3)(i)).

21 A number of circumstances are relevant to assessment of the objective seriousness of the offence. Those circumstances include the maximum penalty ($60,000), the purpose of the licence condition (which may be inferred to be protection of the environment, in terms of both safety and amenity), the magnitude of the breach, as well as the relevant factors in s 241.

22 Sell and Parker contravened the licence condition by causing an explosion that resulted in an airblast overpressure significantly exceeding the prescribed maximum. That explosion, in contrast to the previous explosions, caused serious damage to the shredder. Metal plates from the shredder were blown out, with a very large plate being blown out with sufficient force to land on the adjoining premises. The contravention was significant, not technical or trivial. I did not understand Mr Parker's evidence cavilled with that characterisation. Indeed, Mr Parker fully and frankly accepted the magnitude of the contravention, and its unacceptable consequences in terms of Sell and Parker's obligations under the licence, the safety of its own employees and those of its neighbours, as well as the integrity of its own operations. Mr Parker considered the 24 June 2005 explosion to be not only unprecedented, but also wholly unexpected in terms of its size. The contravention caused some actual harm to the environment as described above, albeit limited in extent and time. It also carried with it a risk of much greater harm, fortuitously avoided.

23 I accept that Sell and Parker relied in good faith on the advice of the manufacturer when it installed the shredder, and had taken many practical steps to prevent the shredder, and the potential for explosions inherent in its operation, causing harm to the environment. There were other practical measures that the manufacturer identified to the defendant as available, after the explosion had occurred. Commendably, Sell and Parker took all of those steps within 6 days of the explosion.

24 Given the risk of explosions, the risk of harm from parts of the shredder being damaged and dislodged was reasonably foreseeable. Nevertheless, I accept Mr Parker's evidence that nothing in the circumstances of previous explosions reasonably gave rise to an expectation of an explosion capable of causing the type of damage that in fact occurred on 24 June 2005. I have reached this conclusion in circumstances where I found Mr Parker to be a forthright witness, obviously aware of Sell and Parker's occupational health and safety and environmental obligations, and determined to take all steps in his power to ensure compliance.

25 There is no question that Sell and Parker had control over the shredder and its operation and, accordingly, had control over the causes that gave rise to the offence. In my view, the fact that no investigation has disclosed the actual cause of the explosion is a different consideration from that called up by s 241(1)(d).

26 The EPA submitted that there was a need for both specific and general deterrence. The EPA referred to Environment Protection Authority v Waste Recycling and Processing Corporation [2006] NSWLEC 419 at [229], where Preston J observed that the fine "must be substantial enough so as not to appear as a mere licence fee for illegal activity". This need to "bear in mind the economic realities upon which [environmental protection] legislation is based" (Axer Pty Ltd v Environment Protection Authority (1993) 113 LGERA 357 at 359 per Mahoney JA) will resonate to a greater or lesser extent depending upon the particular facts of the case. Sell and Parker's conduct both before and after the explosion satisfies me that specific deterrence is of limited relevance to the facts of this matter. General deterrence remains an important consideration.

27 The breach was significant. The objective gravity of the offence in all the circumstances should be characterised as moderate.

28 Many subjective circumstances reflect to the credit of Sell and Parker. It has no prior convictions for environmental offences. It is a person of prior good character. It entered a plea of guilty on the first return date. Its conduct shows how seriously it took its environmental obligations well prior to the explosion on 24 June 2005. For example, Sell and Parker's commitment to the pre-shredder (at a cost of $2.7 million) was entered into before the explosion. Sell and Parker had taken many other steps, all directed to ensuring environmental compliance, before that time as well. After the explosion, Sell and Parker acted swiftly and thoroughly to investigate the event, to find out what it could do to prevent any repeat of the event, and took all recommended steps within 6 days. Mr Parker's affidavit shows that he took responsibility to make sure all of those steps occurred, and I am satisfied that this was consistent with his conduct (and hence Sell and Parker's conduct) prior to the explosion.

29 I accept that Mr Parker has good grounds for his expectation that the further measures taken by Sell and Parker ought to be effective to prevent any repeat of the events of 24 June 2005, to ensure compliance with the condition and to minimise the effects of any explosion. The defendant, as I have said, fully cooperated with all authorities, including agreeing to pay the EPA's costs. Mr Hemmings QC also expressly accepted that a fine ought to be imposed, further evidencing Sell and Parker's recognition of its obligations to the community. In these circumstances, I accept that Sell and Parker's genuine contrition and remorse is demonstrated by its entire course of conduct since the explosion.

30 The EPA drew my attention to a number of decisions involving contravention of licence conditions similar to condition L8. I consider that the series of Metalcorp decisions are the most useful.

31 In the first Metalcorp decision, the maximum penalty was $30,000. It was the defendant's first offence in 22 years of operation. Lloyd J imposed a penalty of $5,000 on the basis that the offence should be characterised at falling at the lower end of the scale. See Environment Protection Authority v Metalcorp Recyclers Pty Limited [2000] NSWLEC 259.

32 The same defendant later appeared before the Court on seven charges when the maximum penalty was $60,000. Cowdroy J imposed penalties of $8,000 for one offence, $4,000 for another offence and $2,000 each for the balance. These penalties reflected the application of the principle of totality, and a 20% reduction in the penalty on account of the defendant's cooperation with the prosecutor (although pleas of not guilty had been entered for the purpose of the defendant raising a statutory defence). See Environment Protection Authority v Metalcorp Recyclers Pty Limited [2001] NSWLEC 253.

33 In the third decision, the same defendant was fined $15,000 for a breach of its licence, in circumstances where the Court found it difficult to "discern any substantial remorse arising out of the defendant's plea". See Environment Protection Authority v Metalcorp Recyclers Pty Limited [2004] NSWLEC 14.

34 Consistency in sentencing is an important principle. Environmental offences, however, frequently present facts "peculiar to the individual case" (Cabonne Shire Council v Environment Protection Authority (2001) 115 LGERA 304 at [32]).

35 Having regard to the objective gravity of the offence and the many and important subjective factors which reflect to the credit of Sell and Parker, I consider that a penalty of $10,000 should be imposed. I am satisfied that Sell and Parker ought also to be given a discount of 25% for its plea of guilty at the earliest opportunity which I consider fairly reflects its utilitarian value in the circumstances (R v Thomson; R v Houlton (2000) 49 NSWLR 383 at [160]).

36 Accordingly, the Court orders that: (1) The defendant is convicted of the offence charged.

(3) The defendant must pay the prosecutor's costs agreed in the sum of $12,000.

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