Environment Protection Authority v Shoalhaven Starches Pty Ltd

The agreed facts 6 The parties filed a statement of agreed facts. However, both parties relied upon additional evidence. 7 The prosecutor produced a document entitled "Guideline to Prosecutor's case" which contained various paragraphs extracted from several affidavits that the prosecutor had filed and served and which also contained references to the full content of some other affidavits that it had filed and served. The prosecutor's intention was that it would base its case on this "guideline", rather than formally read each affidavit in full. The defendant did not object to the additional prosecution evidence being adduced in this way, but objected to some of the clauses and to some of the affidavits in their totality. The basis of its objection was generally relevance and weight. In particular, it objected to evidence about matters occurring on dates other than those specified in relation to each charge. 8 Neither party sought an immediate ruling on the individual objections raised, but instead were prepared to proceed on the basis that the defendant's objections were noted and considered. I do not propose in this judgment to rule on each objection individually, but I have considered the evidence adduced by the prosecutor in the light of each objection and, where such objection has been made, I have taken into account only such evidence as I consider relevant.

Background 9 The defendant operates a large industrial plant at 160 Bolong Road, Bomaderry. The industrial plant is located on about 13 hectares of land and the defendant also has about 1000 hectares of land zoned for rural use which is located to the north and east of the industrial plant. 10 The defendant processes flour into starch, syrups and ethanol. The plant operates continuously 24 hours per day, seven days per week. 11 The process produces large volumes of wastewater which have progressively increased over recent years. The wastewater as finally processed contains dissolved organic solids (comprising mainly flour proteins) which has a biochemical oxygen demand ("BOD") of about 15,000 mg/L. The defendant concedes that the high organic content of the wastewater means that there is a potential for odour to be produced in certain conditions. But it is to be noted, and it is common ground, that the wastewater is not toxic. 12 The plant has operated since about 1970, and, until about the mid 1980's, wastewater was permitted by the regulatory authorities to be discharged into the Shoalhaven River. After that time, the defendant commenced to discharge its wastewater by spray irrigation to an area of about 540 hectares, part of what is known as "the Environmental Farm". The wastewater is pumped from the production plant to the Environmental Farm for irrigation. The defendant runs beef cattle on the Environmental Farm, but the Environmental Farm principally produces silage which is grown with the benefit of the irrigated wastewater and which is sold as animal feed to local producers. 13 Within the irrigation area, there are 27 paddocks, each with a particular name for irrigation purposes. The paddocks are irrigated by using pivot irrigators or travelling irrigators. In those paddocks in which travelling irrigators are used, there are a number of "irrigation runs" served by irrigation hydrants and to which the travelling irrigators are connected. The travelling irrigators are meant to move at a regular pace, automatically along an irrigation run.

14 During wet weather conditions, the wastewater is pumped to one of six wet weather storage ponds located on the Environmental Farm. When conditions allow, the wastewater stored in the ponds is mixed with "fresh" wastewater from the production plant and irrigated on to the irrigation area.

The first incident 15 Between 10 June 2001 and 14 June 2001 about 65 mm of rain fell on the area of the Environmental Farm. On 15 June 2001, the Environmental Farm manager, Mr Hill, entered on the irrigation records the words "Farm very wet". 16 On 16, 17 and 18 June 2001, wastewater was applied to Morschells Paddock by a travelling irrigator. 17 At around that time, the amount of wet weather storage available was 256 ML in volume or 62% of capacity. 18 Morschells Paddock is located on the northern side of the Environmental Farm. It comprises an area of approximately 32.15 hectares of which an area of approximately 22.45 hectares is used by the defendant for irrigation of wastewater. At the time of the first offence, Morschells Paddock contained eight irrigation runs, each run being approximately 400 metres in length. The defendant's irrigation records showed that the irrigation of Morschells Paddock occurred: · Once on 16 June 2001 (run 1); · Twice on 17 June 2001 (run 8 and run 4); and · Five times on 18 June 2001 (runs 2, 3, 5, 6 and 7). 19 On 19 June 2001, Mr P M Jamieson and Mr B G Blunden, both environment protection officers in the employ of the prosecutor, inspected Morschells Paddock in response to complaints made to the prosecutor. The inspection disclosed significant areas of ponded wastewater. The irrigation runs where ponding was greatest were run 8 and run 4. Run 8 had ponding white liquid that contained a high amount of solids and there was extremely wet ground for basically all the eastern half of run 8. The ground in run 4 was damp to wet, and there were solids sitting in depressions across the run. Mr Jamieson took a number of photographs which showed ponded white liquid in areas of Morschells Paddock, especially in runs 4 and 8. 20 The officers noted that, at the time of their inspection, a very slight south-east breeze was blowing. Both officers were affected by a bad, sour, off-cheese type of odour, and both felt nauseous.

The second incident 21 The irrigation records for the Vege Paddock showed that it had been irrigated with a travelling irrigator, twice on 27 November 2001, twice on 28 November 2001, and twice on 29 November 2001. 22 There had been no rainfall on these dates, but 8 mm of rain had fallen on 30 November 2001. Complaints about odour had been made to the prosecutor. Mr Jamieson inspected the Vege Paddock on 30 November 2001. He could see numerous areas where there was considerable ponded effluent, and near these areas, he observed dying grass. The Vege Paddock was saturated and wet underfoot, and in many places there was ponded liquid and ponded slush. Mr Jamieson's boots sank 100 mm to 200 mm as he walked through the Vege Paddock. Mr Jamieson took a number of photographs of the Vege Paddock which showed large areas of ponding and slush to considerable depth. 23 At the time of the irrigation of the Vege Paddock, the available wet weather storage was about 529 ML, or about 57% of the available storage. 24 During his inspection, Mr Jamieson noticed a very strong vomit odour.

Section 241 matters 25 Section 241(1) of the POEO Act requires the Court to take into consideration a number of matters, so far as they are relevant, in imposing a penalty for an offence. I deal with each in turn. 26 (a) the extent of the harm caused or likely to be caused to the environment by the commission of the offence.

Environmental harm is not an element of each of the offences with which the defendant has been charged. But s 241(1)(a) requires the Court to consider the environmental harm caused by the commission of the offences. And in this connection, the width of the relevant definitions should be noted. The expression "harm to the environment" is defined in the dictionary to the POEO Act as including "… any direct or indirect alteration of the environment that has the effect of degrading the environment …" . The term "environment" means "components of the earth" and it includes "land, air and water" and "any layer of the atmosphere". 27 There is no doubt that the commission of the offence on each occasion caused harm to the environment in the form of an offensive odour. The defendant has conceded, as I noted in par 11, that the ponded wastewater has a potential for odour, and a strong and offensive odour was observed by each of the officers on each occasion, and both felt nauseous. 28 There is evidence from neighbouring residents of the impact of odour. Mr and Mrs Taylor live at Morschels Lane, Meroo Meadow. Mrs Taylor described the odour which she experienced on 17 June 2001 as "a terrible strong stench that smelt like vomit". She went on to say that it made her want to vomit, and she got a headache from the smell on that day. She experienced a "really bad smell" on 19 June 2001, and she said that it was "disgusting". Mr Taylor had a similar experience on 17 June 2001. He described the smell as "a sickly/vomit smell". He said that it gave him nausea and made him want to vomit. On 19 June 2001, he found the smell "overpowering", "a horrible stench" and "unbearable". On each of the days which they describe, Mr and Mrs Taylor stayed inside their house, closed windows and doors and switched on their air conditioning. 29 Ms C Wills lives at 92 Morschels Lane. She stated that the odour on 17 June was "bad", and the smell got into the house and "hung around the house for a couple of hours". Ms R K Lenehan lives at 48 Morschels Lane. On 17 June 2001, she smelt an odour which she described as "very pungent, like stale vomit". She said, however, that though it was "bad", it was not the worst odour she had experienced. She smelt it again on 18 June 2001, describing it as "very whiffy". Ms K E Showell, who lives at 86 Morschels Lane, gave similar evidence of her experience on 17 and 18 June 2001. She said that the odour was "really, really bad" and that she found it "unpleasant" and it was "everywhere, including in the house". Ms D M O'Neil lives at 31 Morschels Lane, and she experienced the smell on either 16 or 17 June 2001 as "overwhelming". Mr G Morschel, who lives at 150 Morschels Lane and was the former owner of Morschells Paddock, stated that the odours on 17 to 19 June 2001 "were the strongest I had smelt for some time", and that the windows and doors were closed to keep the smell out of the house. 30 As to the impact of odour arising from the second incident, other neighbouring residents gave evidence. Ms M M Robson, who lives at 13 Mulgan Crescent, Bomaderry, stated that the smell was "very bad" on 29 November 2001. Mr P R Berryman, who lives at 5 Herbert Close, Bomaderry, said that the smell on 28 and 29 November 2001 was "disgustingly terrible and nauseating". He said that he and his wife had to shut up their house to prevent the odour from getting inside. Mr H S Brasche, who lives at 3 Tanang Street, Bomaderry, smelt a smell on 29 November 2001 like the smell from the blood and bone section of an abattoir, but "more rotten." Mr W Kershaw, who lives at 235B Backforest Road, Berry, also experienced the smell on 26 and 27 November 2001. He described it as a "strong unpleasant fermenting grain smell" and as "offensive". 31 I find, that on the dates of each incident, harm was caused to the environment by each offence, in the form of an offensive and invasive odour. The evidence which supports this finding is the evidence of the neighbouring residents outlined in pars 28 - 30. I have placed no weight on the more general expert evidence of odour impact set out in the affidavit of Mr R S Kenyon in view of the defendant's objection to its relevance. 32 (b) the practical measures that may be taken to prevent, control, abate or mitigate that harm

One measure that could have been adopted by the defendant on the occasion of each incident was to store the wastewater and not irrigate. A more immediate measure that could have been adopted was to shut off the travelling irrigator. A further measure would have been a system of regular inspection whilst irrigating so that any problems could be detected early in the irrigation operation. None of these measures were taken. 33 There are also more long term measures. On 30 January 2002, after considerable discussion and communication between the prosecutor and the defendant, Pollution Reduction Program No 7 ("PRP 7") was inserted in the licence. It includes a program for the investigation of options for upgrading wastewater management, the environmental outcomes that should be achieved, and a time frame for their implementation. An upgraded wastewater management system is to be constructed and commissioned by 31 December 2003. 34 Development consent for the works associated with the upgrade of the wastewater management system has been granted. The statement of agreed facts records that the new wastewater management system should remove, by mechanical separation, in new decanters, the coarse solids and should also remove, by evaporation and distillation, fine, suspended and dissolved solids. The remaining wastewater should contain only a small amount of ethanol and acetic acid with a total BOD of 150 ppm and will not contain any other substances which can cause odour. 35 (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

The defendant conceded that the harm caused to the environment by the commission of each offence was reasonably foreseeable. It has admitted that ponded wastewater had a potential to cause odour, which could be offensive to neighbours. 36 The prosecutor drew particular attention to correspondence between the defendant and the prosecutor in November 2001. The first letter was from the defendant to the prosecutor dated 21 November 2001 acknowledging the irrigation problems which had been discussed in a conference between representatives of the parties on the previous day. The prosecutor responded with a letter dated 29 November 2001 outlining, amongst other things, what it termed as "deterioration" in the defendant's performance and compliance with licence conditions. In the submission of Mr Leggat, appearing for the prosecutor, the Court should place some weight on the fact that the letters, and the conference to which they refer, took place in close proximity to the dates upon which the second incident occurred. 37 I accept the defendant's concession that the harm was foreseeable, and I take into account, in relation to the second offence, the fact that contemporaneous discussions had been taking place outlining the very problems that the commission of the second offence involved. 38 (d) the extent to which the person who committed the offence had control over the causes that gave rise to the offence

The defendant frankly admitted that it did not know what had caused the ponding that occurred on each occasion. Mr Morris QC, appearing for the defendant, conceded that it could have been caused by mechanical failure of the travelling irrigator or by employee lapse. 39 There is some suggestion that that the travelling irrigator did not move along the run as expected, but instead remained stationary, so that the wastewater was discharged in the one spot. On 17 June 2001, for example, Mr Morschel noticed a travelling irrigator in Morschells Paddock remaining stationary for about three hours. 40 Mr Leggat submitted that each offence occurred because of mismanagement by the defendant. At the time of both incidents, there was capacity in the storage ponds for the wastewater to be stored until conditions were suitable. At least in respect of the first incident, it is safe to draw the inference that the conditions were not suitable for irrigation, because there had been prior rain and the Environmental Farm had been noted as being very wet.

Prior convictions 41 The defendant does not have a good record. Between 1978 and 2001, it has been convicted of 16 environmental offences, either by way of conviction in the local court or in this Court, or by way of penalty infringement notice ("PIN"). 42 Five of those convictions were for pollution of waters, two were for failure to maintain control equipment, and the remainder, nine, were for contravention of a licence condition. 43 There are a number of matters to note about those prior convictions:

(1) Five of the offences arose out of the same incident which occurred on 9 March 1989 and which involved a discharge of effluent. The details can be found in State Pollution Control Commission v Shoalhaven Starches Pty Ltd (Stein J, NSWLEC, 4 April 1990, unreported). The defendant was convicted of one charge of polluting waters, two charges of failure to maintain control equipment in efficient condition, and two charges for contravention of conditions of a licence. The defendant was fined $35,000 for the first offence, $1000 respectively for each of the next two offences, $10,000 for the next offence, and $5000 for the last offence, a total of $52,000.

(2) Similarly, in relation to an incident which occurred on 17 February 1993, the defendant was convicted of a charge of polluting waters and a charge of contravention of its licence. In proceedings no 50002 of 94 and 50003 of 1994, Bannon J fined the defendant $25,000 and $5000 respectively.

(3) Two of the prior convictions related to odour. One was Environment Protection Authority v Shoalhaven Starches Pty Ltd (Bignold J, NSWLEC, 14 October 1997, unreported) where the defendant was convicted of a charge that it contravened a condition of its licence which required it to ensure that odours due to effluent storage or irrigation not be detectable beyond the boundary of the approved irrigation area. The defendant was fined $30,000 (being 24% of the maximum fine then applicable). The other was a PIN issued in respect of the same condition breached on 2 January 2001.

(4) Four of the PINs related to breach of a condition similar to the condition breached in this case. 44 In taking all the prior convictions into account, I note two other matters. The first concerns the annual return which the defendant is required by the conditions of its licence to furnish to the prosecutor. There are a number of entries in the annual return where non-compliance with condition 08.1(ii) have been recorded, involving ponding of wastewater. The prosecutor acknowledged that no charges have been laid in respect of any of these disclosures. 45 Secondly, and in the same vein, Mr Leggat drew the Court's attention to the whole of the evidence adduced by the neighbouring residents whom I have referred to in pars 28 - 30. Some of that evidence seeks to show that the various persons suffer continuously (and not just on the dates of the two incidents the subject of the charges) from offensive and unpleasant odours emanating from the defendant's irrigation area. 46 I take into account the defendant's prior convictions, and the entries in its annual return, as showing that the contraventions of conditions of its licence to which the defendant has pleaded guilty are not uncharacteristic aberrations or isolated incidents (Veen v The Queen [No 2] (1988) 164 CLR 465). The defendant does not have an unblemished record of environmental behaviour and is accordingly not entitled to any leniency in this regard.

47 I place less weight on the assertions of neighbouring residents, not because I am unsympathetic to their views, discomfort and concerns, but because their concerns are much more general in tenor and not directly related to the particular offences with which the defendant is charged.

Other matters 48 Under s 241(2), the Court may take into consideration other matters that it considers to be relevant. 49 One of those matters is the notion, long held in this Court, that contravention of a pollution licence involves a breach of public trust. The many cases in which such an approach has been taken are collected in Environment Protection Authority v Port Kembla Copper Pty Ltd (2001) 115 LGERA 391 at pars 23 - 25. The defendant is entrusted, by its pollution licence, to pollute and that places it in a special category so far as other members of the public are concerned. But that permission is conditional upon the standards and limits specified in the pollution licence, and that carries with it certain obligations of compliance in the public interest (State Pollution Control Commission v CSR Ltd (1989) 75 LGRA 1). 50 Mr Morris submitted that the Court should take into account, in mitigation of penalty, the fact that the licence contemplates that odours from wastewater may occur. However, in my opinion, this is not a matter in mitigation. Rather, it exemplifies the approach which I have outlined in the preceding paragraph. Thus condition 010.1 deals with a requirement to ensure that offensive odours are not detectable beyond the boundary of the approved irrigation area, but, as condition 010.2(a) provides, it is not a breach of condition 010.1 if the defendant takes all practicable measures to manage, maintain and operate the approved irrigation area to minimise offensive odour. Condition 010.6 defines "practicable measures" to include management of the approved irrigation area in accordance with condition 08.1. These provisions support the inference that the licence authorises the disposal of wastewater by means of irrigation, but that authorisation is dependent upon operating conditions which must be observed.

Upgrading wastewater management 51 Mr G Grace is an industrial chemist who is at present the technical manager of the Manildra Group, of which the defendant is part. His affidavit set out a number of factors which I take into account in mitigation of penalty. They are as follows:

(1) The disposal of wastewater in an environmentally sensitive way has been a problem associated with the defendant's operations for many years. Since 1985, the defendant has expended a great deal of time and considerable money in research and development designed to provide solutions to the problem and to achieve best practice results. It has done so in consultation with the prosecutor and its predecessor, with other statutory bodies and with experts in the various fields;

(2) PRP 7 (which I have described in par 33) is designed to achieve a new wastewater management system. The result should be clean water available for irrigation;

(3) The total cost of the new wastewater management system will be approximately $38.5 million;

(4) Installation and commissioning will be completed by 31 December 2003.

(5) Two new appointments have been made - an Environmental Farm manager, responsible for management of the Environmental Farm including wastewater storage and irrigation; and an Environmental Scientist, responsible for providing scientific support and advice.

Other matters in mitigation 52 There are a number of other matters in mitigation which I take into account. 53 First, Ms G H Lugg, who has been appointed as the defendant's environmental scientist, gave evidence about a number of matters which have been put in place by the defendant since the incidents. She described work carried out on both Morschells Paddock and the Vege Paddock designed to ensure that ponding does not occur. She also set out the pre-irrigation checks and procedures in place for travelling and pivot irrigators, and the steps taken by the defendant to improve education and communication among the defendant's irrigation operators. 54 Secondly, I take into account that the defendant operates what Mr Morris termed a "core industry". Mr Grace gave evidence that the defendant is a major employer in the Shoalhaven region, that it expends significant sums in New South Wales on major capital items, raw materials, freight and utilities, and that it is a major supplier of products to both Australian and overseas markets. 55 Thirdly, I take into account the defendant's contrition and remorse for both incidents and their consequential harm. This was expressed forcefully by Mr Morris on its behalf, but it was also expressly set out in Mr Grace's affidavit. 56 Fourthly, I take into account the fact that the defendant entered a plea of guilty to each offence on the second return date for each proceedings. That is early in the proceedings, and must be regarded as attracting a discount for the utilitarian value of the plea in accordance with R v Thomson (2000) 49 NSWLR 383. 57 Finally, I take into account the fact that the defendant has agreed to pay the prosecutor's costs in the sum of $30,000.

The totality principle 58 When sentencing for two or more offences, the Court is required to apply the totality principle, which requires a broad evaluation of the overall criminality involved, and the determination of what, if any, downward adjustment is necessary so that the aggregate sentences achieve an appropriate relativity: Camilleri's Stock Feeds Pty Ltd v Environment Protection Authority (1993) 32 NSWLR 683 at 703 - 704. 59 Mr Leggat submitted that, in this case, no downward adjustment is necessary because, first, the offences were separated by a period of about five months, and, secondly, they occurred in relation to two different paddocks in the irrigation area. 60 However, I consider that the totality principle must be applied in this case, and a downward adjustment is required. The offences are identical and they both derive from the same process in the defendant's operations. It is proper, in my view, to regard them as connected and to consider what penalty is called for in the whole of the circumstances.

Conclusion 61 The offences to which the defendant has pleaded guilty must be regarded as serious. Each offence led to actual physical harm to neighbouring residents and to the prosecutor's officers who inspected the irrigated area. Furthermore, they were not isolated incidents; they are indicative of a pattern of non-compliance with licence conditions, and they each involved a breach of public trust in the sense I have outlined in par 49. 62 Mr Morris placed particular emphasis on the steps the defendant is currently taking which are likely to remove the risk of odour emission. The new wastewater system will involve advanced technology and will cost the defendant many millions of dollars to install. Whilst I place some weight on this submission, it does not outweigh all other facts. That is because submissions in a similar vein were put to Bignold J in 1997 in Environmental Protection Authority v Shoalhaven Starches Pty Ltd (see pp 4 - 5), and because, to adapt the comment of Mahoney JA in relation to pollution generally in Axer Pty Ltd v Environment Protection Authority (1993) 113 LGERA 357 at 359, business must be arranged and precautions taken so as to ensure that environmental harm does not occur. 63 I turn to the appropriate penalties for each offence. The maximum penalty in each case is $250,000. Taking into account all the facts and circumstances of each offence and all the matters in mitigation, I consider that an appropriate penalty in each case would be $125,000 or 50% of the maximum. I apply to that penalty, in each case, a discount of 20% to reflect the defendant's early plea of guilty, reducing each penalty to $100,000. Applying the totality principle, I consider that the first offence should carry a penalty of $100,000 (being 40% of the maximum) and the second offence should carry a penalty of $60,000 (being 24% of the maximum), making a total of $160,000.

Orders 64 In accordance with the foregoing, I make the following orders:

In respect of proceedings 50061 of 2002 (the first offence): (1) The defendant is convicted of the offence with which it is charged. (2) The defendant is fined the sum of $100,000 to be paid to the Registrar of the Court within one month of the date of this judgment.

In respect of proceedings 50090 of 2002 (the second offence): (1) The defendant is convicted of the offence with which it is charged. (2) The defendant is fined the sum of $60,000 to be paid to the Registrar of the Court within one month of the date of this judgment.

In respect of both proceedings: (1) The defendant must pay the costs of the prosecutor in the sum of $30,000. (2) The exhibits may be returned.

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