This is a claim by a public authority to recover a statutory debt under s 105(1) of the Protection of the Environment Operations Act 1997 (POEO Act). The claim is for reasonable costs and expenses of taking clean-up action in respect of pollution incidents resulting from the deposit of asbestos at a waste facility (the Premises) during the currency of the lease of the Premises to the first respondent or the currency of a later lease to a company of which the respondents were the only directors and shareholders. The amount claimed is $1,291,728.26. The applicant is Kempsey Shire Council. The respondents are Michael Slade and his father Barry Slade.
Annexed to this judgment is a map prepared by an expert retained by Council showing where he found asbestos on the Premises after they were vacated by the respondents.
In accordance with an order of the Court and as agreed by the parties, this judgment determines all issues except quantum. If Council is successful at this stage, quantum will be as assessed or agreed between the parties.
The statutory debt is said to arise under the pollution clean-up and cost recovery scheme created by ss 92, 104 and 105 of the POEO Act. The most remarkable aspect of the scheme is that it is based merely on reasonable suspicion and is therefore undemanding. Relevantly, if:
1. the Environment Protection Authority (EPA) reasonably suspects that a pollution incident has occurred or is occurring: s 92(1);
2. the EPA directs, by notice in writing, a public authority to take clean-up action (a "clean-up notice": s 92(1));
3. the public authority takes that clean-up action, as it is required to do: s 92(1);
4. the public authority, by notice in writing (called a "compliance cost notice"), requires the person whom the public authority reasonably suspects of having caused the pollution incident to pay all or any reasonable costs and expenses incurred by it in connection with the clean-up action: s 104(2)(b);
then the public authority may recover any unpaid amounts specified in the compliance cost notice from the recipient of the compliance cost notice as a debt in a court of competent jurisdiction: s 105(1). The Land and Environment Court is a court of competent jurisdiction for this purpose: Environment Protection Authority v Mistring Pty Ltd [2013] NSWLEC 9, 82 NSWLR 784 (Biscoe J).
Thus, at that cost recovery stage the law seizes on any person who stands in the spotlight of suspicion even though they may be innocent of causing the pollution incident.
However, if the recipient of a compliance cost notice complies with it but was not the person who caused the pollution or pollution incident, the recipient may recover the cost of complying from the latter as a debt: s 105(2). It is only at this final stage in the statutory scheme that the factual issues whether, first, there was in fact a pollution incident and, secondly, who in fact caused it squarely fall for determination. The earlier stages are concerned with reasonable suspicion by different entities - the EPA and the public authority - as to different subject matters: in the case of the EPA that a pollution incident has occurred, in the case of the public authority that a particular person (or persons) caused the pollution incident. Each may reasonably suspect the relevant subject matter, yet at the final stage it may be found that it was not the fact.
The statutory scheme employs a stick and carrot method. A stick is applied to the public authority, for it must clean up at its cost even though it had nothing to do with the pollution. The public authority is then given a carrot for it may recover its reasonable costs from anyone whom it merely suspects reasonably of having caused the pollution or the pollution incident, although it bears the risk of insolvency of that person. A stick is applied to that person if in fact he did not cause the pollution incident or pollution, for he must pay the reasonable costs to the public authority. He then bears the burden of recovering the costs from the person who in fact did cause it, and bears the risk of the latter's insolvency.
A "pollution incident" is defined in the Dictionary to the POEO Act as an incident or set of circumstances during or as a consequence of which there is or is likely to be a deposit of a substance, as a result of which pollution has occurred or is occurring or is likely to occur. It includes an incident or set of circumstances in which a substance has been placed or disposed of on premises. "Pollution" is defined to include "land pollution", which is defined in two ways, both of which Council submits are satisfied in this case. First, it is defined to include placing, or otherwise introducing onto, the land (whether through an act or omission) any matter that causes or is likely to cause degradation of the land, resulting in actual or potential harm to the health of human beings that is not trivial. Secondly, it is defined to mean matter that is of a prescribed nature, description or class or that does not comply with any prescribed standard. Prescribed matter includes "more than 10 tonnes of asbestos waste", which is defined to mean "any waste that includes asbestos": cl 109(1)(c) and (2) Protection of the Environment Operations (General) Regulation 2009 (POEO Regulation).
The Premises have an area of 5,500 square metres and are located on part of a rubbish depot reserve.
In 2011 Council leased the Premises to Michael Slade trading as Mid Coast Skip Bins and Metal Recycling for use as a commercial waste facility. At that time the Premises were a meadow on top of capped and rehabilitated landfill. Six months later, it was substituted by a second lease for the same use from Council to a newly created company, Mid Coast Skip Bins and Metal Recycling Pty Ltd (the Company). The respondents founded the Company and were its only directors and shareholders. About seven months later, the Company vacated the Premises during the term of the second lease, which Council then terminated. The EPA soon found asbestos on the Premises. A subsequent investigation by an expert retained by Council found asbestos in many locations, as indicated on the map annexed to this judgment.
It is common ground that:
1. asbestos was deposited at the Premises during the occupancy under the two leases, as a result of which there were pollution incidents;
2. reasonably suspecting that pollution incidents had occurred at the Premises, the EPA gave Council a clean-up notice under s 92(1) of the POEO Act;
3. Council complied with the clean-up notice, as it was obliged to do under s 92(1), and thereby incurred costs and expenses in connection with the clean-up action;
4. suspecting (it says reasonably) that the respondents had caused the pollution incidents, Council gave the respondents compliance cost notices under s 104(2)(b) requiring them to pay reasonable costs and expenses incurred by Council in the sum of $1,291,728.26;
5. the respondents have not paid any of the costs and expenses;
The issue, which arises under s 104(2)(b), is whether Council's suspicion that the respondents caused the pollution incidents was reasonable. This largely turns on the difference between the parties as to when the pollution incidents occurred and, to an extent, their nature. Sub-issues include: whether a pollution incident could reasonably be suspected of having been caused by the respondents during the currency of the first lease to Michael Slade or during the currency of the second lease to the Company; and (if it arises) attribution of the Company's conduct to either of the respondents such as to visit them with reasonable suspicion that they caused the pollution incidents.
[2]
SUBMISSIONS
In summary, Council's main case is as follows. It was reasonable to suspect that asbestos was introduced onto the Premises during the currency of the first lease to Michael Slade and that that was when the pollution incidents occurred. The asbestos resulted in "land pollution" in two legislatively defined ways. First, the matter containing the asbestos placed on the land was of a prescribed nature, description or class, namely, asbestos waste exceeding a prescribed weight. Secondly, it caused or was likely to cause degradation of the land, resulting in potential harm to the health of human beings. Before and throughout the period of occupancy under the leases, the respondents held out to Council that they both governed and operated the business, and both were involved in asbestos management at the Premises. In the circumstances, Council's suspicion was reasonable that the respondents caused the pollution incidents.
In summary, the respondents submit that only the Company could have been reasonably suspected of causing the pollution incidents and that Council's suspicion that the respondents caused them was not reasonable. The respondents' main argument is along the following lines. There was no pollution incident so long as the Premises were used for the authorised activity of a waste facility under the leases because asbestos deposited at that time would not degrade the land. The pollution incidents occurred when the Premises ceased to be used for that purpose; that is, when it was vacated and piles of waste containing asbestos were left on the Premises in a way that could degrade the land. As the Company was the lessee at that time, it was only the Company that could be the subject of reasonable suspicion that someone had caused the pollution incident. The corporate veil protects the respondents from liability. One of the respondents' other contentions is that the asbestos could not have polluted the land unless it made actual physical contact with the land; there is no evidence that asbestos found in stockpiles of waste on the Premises made actual physical contact with the land; therefore to that extent no land pollution has been proved.
[3]
THE POEO ACT
The POEO Act provides:
91 Clean-up by occupiers or polluters
(1) Notices
The appropriate regulatory authority may, by notice in writing, do either or both of the following:
(a) direct an owner or occupier of premises at or from which the authority reasonably suspects that a pollution incident has occurred or is occurring,
(b) direct a person who is reasonably suspected by the authority of causing or having caused a pollution incident,
to take such clean-up action as is specified in the notice and within such period as is specified in the notice.
…
(4) Recovery by person given notice
If the person given a clean-up notice complies with the notice but was not the person who caused the pollution incident, the cost of complying with the notice may be recovered by the person who complied with the notice as a debt in a court of competent jurisdiction from the person who caused the pollution incident.
…
92 Clean-up by public authorities
(1) Directions to public authorities to take clean-up action
If the EPA reasonably suspects that a pollution incident has occurred or is occurring, the EPA may, by notice in writing, direct a public authority to take such clean-up action as is specified in the notice. The public authority is authorised and required to take that action.
(2) Voluntary clean-up action by public authorities
If a public authority reasonably suspects that a pollution incident has occurred or is occurring, the public authority may take such clean-up action as it considers necessary. The public authority is authorised to take that action, whether or not it is directed to take clean-up action under subsection (1).
…
104 Compliance cost notices
…
(2) Clean-up by public authority
A public authority that takes clean-up action under section 92 may, by notice in writing, require:
(a) the occupier of the premises at or from which the authority reasonably suspects that the pollution incident occurred, or
(b) the person who is reasonably suspected by the authority of having caused the pollution incident,
or both, to pay all or any reasonable costs and expenses incurred by it in connection with the clean-up action.
…
105 Recovery of amounts
(1) Recovery of unpaid amounts
A regulatory authority or public authority may recover any unpaid amounts specified in a compliance cost notice as a debt in a court of competent jurisdiction.
(2) Recovery by person given notice
If the person given a compliance cost notice complies with the notice but was not the person who caused the pollution or pollution incident, the cost of complying with the notice may be recovered by the person who complied with the notice as a debt in a court of competent jurisdiction from the person who caused the pollution or pollution incident.
The Dictionary to the POEO Act includes the following definitions:
pollution incident means an incident or set of circumstances during or as a consequence of which there is or is likely to be a …deposit of a substance, as a result of which pollution has occurred, is occurring or is likely to occur. It includes an incident or set of circumstances in which a substance has been placed or disposed of on premises...
pollution means [inter alia] land pollution.
land pollution… means placing in or on, or otherwise introducing into or onto, the land (whether through an act or omission) any matter, whether solid, liquid or gaseous:
(a) that causes or is likely to cause degradation of the land, resulting in actual or potential harm to the health or safety of human beings, animals or other terrestrial life or ecosystems, or actual or potential loss or property damage, that is not trivial, or
(b) that is of a prescribed nature, description or class or that does not comply with any standard prescribed in respect of that matter,
…
premises includes…land or a place (whether enclosed or built on or not)
occupier of premises means the person who has the management or control of the premises.
waste facility means any premises used for the storage, treatment, processing, sorting or disposal of waste (except as provided by the regulations).
Council relies on both or either of paragraphs (a) and (b) of the definition of "land pollution". Relevantly to paragraph (b) of the definition of "land pollution", cl 109(1)(c) and (2) of the POEO Regulation provide:
109 Definition of "land pollution"
(1) For the purposes of paragraph (b) of the definition of land pollution …in the Dictionary to the Act, the following matter is prescribed:
…
(c) more than 10 tonnes of asbestos waste,
…
Note. Placing smaller amounts of asbestos waste or waste tyres on land may fall within paragraph (a) of the definition of land pollution in the Dictionary to the Act and may also give rise to water pollution.
(2) In this clause:
asbestos waste [has] …the same meaning[s] it has in Schedule 1 to the Act.
Schedule 1 cl 50 of the POEO Act defines "asbestos waste" as "any waste that contains asbestos"
[4]
MEANING OF REASONABLE SUSPICION
The meaning of reasonable suspicion has not previously been considered in the context of ss 92 or 104 of the POEO Act. Under s 92(1), the EPA may direct a public authority to take clean-up action if the EPA "reasonably suspects" that a pollution incident has occurred - and the public authority must comply. Section 104 authorises a public authority that takes clean-up action under s 92 to require the occupier of the premises at which the authority "reasonably suspects" a pollution incident occurred or the person who is "reasonably suspected" by the authority of having caused the pollution incident, or both, to pay all or any reasonable costs and expenses incurred by the public authority in connection with a clean-up action.
Legislatures often vest powers in administrative officers that are exercisable when the officer has a "reasonable suspicion" that specified factual circumstances prevail: Ruddock v Taylor [2005] HCA 48, 222 CLR 612 at [70]. In George v Rockett [1990] HCA 26, 170 CLR 104 at 115-116 the High Court considered a statutory power to issue a search warrant if "it appears to a justice, on complaint made on oath, that there are reasonable grounds for suspecting that there is in any" premises a prescribed thing. In a unanimous judgment, the High Court distinguished between suspicion and the firmer mental state of belief:
…it is necessary to bear in mind that suspicion and belief are different states of mind…
Suspicion, as Lord Devlin said in Hussien v. Chong Fook Kam (1970) AC 942, at p 948, "in its ordinary meaning is a state of conjecture or surmise where proof is lacking: 'I suspect but I cannot prove.'" The facts which can reasonably ground a suspicion may be quite insufficient reasonably to ground a belief, yet some factual basis for the suspicion must be shown. In Queensland Bacon Pty. Ltd. v. Rees [1966] HCA 21; (1966) 115 CLR 266, a question was raised as to whether a payee had reason to suspect that the payer, a debtor, "was unable to pay (its) debts as they became due" as that phrase was used in s.95(4) of the Bankruptcy Act 1924 (Cth). Kitto J. said (at p 303):
A suspicion that something exists is more than a mere idle wondering whether it exists or not; it is a positive feeling of actual apprehension or mistrust, amounting to "a slight opinion, but without sufficient evidence", as Chambers' Dictionary expresses it. Consequently, a reason to suspect that a fact exists is more than a reason to consider or look into the possibility of its existence. The notion which "reason to suspect" expresses in sub-s.(4) is, I think, of something which in all the circumstances would create in the mind of a reasonable person in the position of the payee an actual apprehension or fear that the situation of the payer is in actual fact that which the sub-section describes - a mistrust of the payer's ability to pay his debts as they become due and of the effect which acceptance of the payment would have as between the payee and the other creditors.
The objective circumstances sufficient to show a reason to believe something need to point more clearly to the subject matter of the belief, but that is not to say that the objective circumstances must establish on the balance of probabilities that the subject matter in fact occurred or exists: the assent of belief is given on more slender evidence than proof. Belief is an inclination of the mind towards assenting to, rather than rejecting, a proposition and the grounds which can reasonably induce that inclination of the mind may, depending on the circumstances, leave something to surmise or conjecture.
It is necessary to identify the subject matter of suspicion and the subject matter of belief…
In the context of a statutory power to stop, search and detain a person whom a police officer "reasonably suspects" of having a stolen thing, in R v Rondo [2001] NSWCCA 540, 126 A Crim R 562 at [53] Smart AJ (Spigelman CJ and Simpson J agreeing) concluded that the following propositions concerning "reasonable suspicion" emerge from the authorities (including George v Rockett):
(a) A reasonable suspicion involves less than a reasonable belief but more than a possibility. There must be something which would create in the mind of a reasonable person an apprehension or fear of one of the state of affairs covered by [the statutory provision]. A reason to suspect that a fact exists is more than a reason to consider or look into the possibility of its existence.
(b) Reasonable suspicion is not arbitrary. Some factual basis for the suspicion must be shown. A suspicion may be based on hearsay material or materials which may be inadmissible in evidence. The materials must have some probative value.
(c) What is important is the information in the mind of the police officer stopping the person or the vehicle or making the arrest at the time he did so. Having ascertained that information the question is whether that information afforded reasonable grounds for the suspicion which the police officer formed. In answering that question regard must be had to the source of the information and its content, seen in the light of the whole of the surrounding circumstances.
In my opinion, adapting the authorities in other contexts on "reasonable suspicion", the following principles of interpretation relevantly emerge in relation to s 104(2)(b) of the POEO Act:
1. The public authority must have formed a genuine suspicion that a particular person (or persons) caused the pollution incident.
2. A reasonable suspicion involves less than a reasonable belief but more than a possibility.
3. The public authority's suspicion must be reasonable in that there is some objective and factual basis for the suspicion, which would create in the mind of a reasonable person in the position of the public authority an apprehension that that person caused the pollution incident to which the s 92 clean-up order relates. A reasonable suspicion may be based on hearsay material or material that is inadmissible in evidence but it must have some probative value.
4. The objective circumstances do not have to establish on the balance of probabilities that that person in fact caused the pollution incident nor that there has in fact been a pollution incident.
Under s 104(2)(b), a public authority's reasonable suspicion that a person has caused a pollution incident is a jurisdictional fact because it enlivens the authority's power to issue a compliance cost notice. The jurisdictional fact is partly subjective and partly objective. The subjective criterion is the mental state of suspicion as to the subject matter. The objective criterion is whether the suspicion was reasonable. If the word "reasonably" was absent from s 104(2)(b), judicial review would be limited to determining, first, whether the mental state of suspicion that the person caused the pollution incident existed and, secondly, whether that mental state was manifestly unreasonable in the Wednesbury sense (Associated Provincial Picture Houses Ltd v Wednesbury Corp [1948] 1 KB 223): Calardu Penrith Pty Ltd v Penrith City Council [2010] NSWLEC 50 at [39] (Biscoe J); Terranora Group Management Pty Ltd v Director-General Office of Environment & Heritage [2013] NSWLEC 198, 200 LGERA 1 at [48] (Biscoe J); Agricultural Equity Investments Pty Ltd v Westlime Pty Ltd (No 3) [2015] NSWLEC 75 at [156]-[160] (Pepper J). The injection of the word "reasonably" into the statutory provision requires the Court on a judicial review to determine objectively the reasonableness of the suspicion (not merely whether it was manifestly unreasonable in the Wednesbury sense), on the evidence before the Court. That accords with the submissions of both parties. The facts before the Court at trial were mostly also before Council when it issued compliance cost notices to the respondents. Both parties propose that the evidence to which the Court should have regard should not be limited to the latter facts but should extend to the former facts. Whether, absent the parties' agreement, that would be the appropriate approach does not matter because, as it happens, my conclusion expressed below as to the reasonableness of the suspicion is the same in either case.
[5]
LEGAL PRINCIPLES ON CAUSATION
The words of s 104(2)(b) are "the person who is reasonably suspected by the authority of having caused the pollution incident". The common law concept of causation is concerned with determining whether some breach of a legal norm was so significant that, as a matter of common sense, it should be regarded as a cause of damage. Because the present task is one of statutory construction, the common law concept of causation must yield to the context and the statutory terms or objects: cf Allianz Australia Insurance Ltd v GSF Australia Pty Ltd [2005] HCA 26, 221 CLR 568 at [41] per McHugh J. The context is a statute relating to safeguarding the environment and the public from pollution. It is an example of a strict liability, public welfare law, regulatory in substance, where principles of vicarious liability are readily imposed (other examples are consumer protection and fair trading laws) and there is no need to prove intention, any other mental element or negligence in order to establish liability: Tiger Nominees Pty Ltd v State Pollution Control Commission (1992) 25 NSWLR 715 at 718-719 per Gleeson CJ (Mahoney JA and Campbell J agreeing). In Tiger Nominees the Court of Appeal held that as a matter of statutory construction, s 16(1) of the Clean Waters Act 1970, which made it an offence "to pollute any waters", could operate to make a master vicariously responsible for the conduct of an employee: at 720. So too, in my opinion, under s 104(2)(b) of the POEO Act.
In environmental legislation, "cause" has been interpreted broadly and in a common sense way as involving some act of operation or chain of operations involving as the result pollution: Alphacell Ltd v Woodward [1972] UKHL 4, AC 824 at 834 per Lord Wilberforce; followed by this Court in State Pollution Control Commission v Tiger Nominees Pty Ltd (1991) 72 LGRA 337 at 342, affirmed by the Court of Appeal in Tiger Nominees Pty Ltd v State Pollution Control Commission.
In Alphacell the corporate appellant unsuccessfully appealed against its conviction for causing polluted matter to enter a stream. The appellant had conducted a business operation on the banks of a stream. Part of the process involved washing fibres with water, which thereby became polluted. The process was to conduct the polluted water into settling tanks and to recycle the polluted water by pumping back into the works. On one occasion the pumps failed to work properly and the polluted water overflowed from the tanks and into the stream. Lord Wilberforce held at 834:
In my opinion, "causing" here must be given a common sense meaning and I deprecate the introduction of refinements, such as causa causans, effective cause or novus actus. There may be difficulties where acts of third persons or natural forces are concerned but I find the present case comparatively simple. The appellants abstract water, pass it through their works where it becomes polluted, conduct it to a settling tank communicating directly with the stream, into which the polluted water will inevitably overflow if the level rises over the overflow point. They plan, however, to recycle the water by pumping it back from the settling tank into their works: if the pumps work properly this will happen and the level in the tank will remain below the overflow point. It did not happen on the relevant occasion due to some failure in the pumps.
In my opinion, this is a clear case of causing the polluted water to enter the stream. The whole complex operation which might lead to this result was an operation deliberately conducted by the appellants and I fail to see how a defect in one stage of it, even if we must assume that this happened without their negligence, can enable them to say they did not cause the pollution. In my opinion, complication of this case by infusion of the concept of mens rea, and its exceptions, is unnecessary and undesirable. The section is clear, its application plain. I agree with the majority of the Divisional Court, who upheld the conviction, except that rather than say that the actions of the appellants were a cause of the pollution I think it more accurate to say that the appellants caused the polluting matter to enter the stream.
In Tiger Nominees the Court of Appeal dismissed an appeal by two corporations, which were the managers and operators of a council owned rubbish tip, against their conviction for an offence against s 16(1) of the Clean Waters Act. Under s 16(2) a person was deemed to pollute waters if he caused or permitted any matter to be placed in a position where it falls and descends, or is likely to fall or descend, into any waters. "Pollute" was defined to mean either to place matter in or on waters, or otherwise introduce matter into or onto waters: s 5. The defendants employed Tracey as foreman of the tip and Hunt as a bulldozer operator at the tip. Under the contract with council, a leachate dam at the tip was not to exceed 75 percent of its capacity. Tracey instructed Hunt to lower the level of the leachate in the dam by breaching its wall with a bulldozer, rather than by the orthodox method of lowering the dam by pumping. The wall was breached by Hunt and leachate flowed out of the dam into a creek, which consequently was polluted. At first instance in Tiger Nominees, Hemmings J found the defendants vicariously liable for the actions of Hunt and Tracey, their actions being within the scope of their authority or so connected as to be modes of performing authorised duties. Hemmings J found that Tracey and Hunt caused and permitted the liquid in the leachate dam to be placed in a position where it fell and descended or was likely to fall and descend into such waters so as to pollute them: at 343. His Honour said at 342:
"Cause" has also been interpreted liberally by this Court and given a common sense meaning recommended by Lord Wilberforce in the interpretation of other similar legislation. It was explained that when used in an environmental law, "cause" may merely involve some active operation or chain of operations resulting in the pollution of the waters. Whilst "permit" probably must require knowledge and involves a failure to prevent the pollution, "knowingly" is not an element of "cause" or "causing": see Alphacel Ltd v Woodward [1972] AC 824 and Cooper v ICI (Australia) Operations Pty Ltd (1987) 64 LGRA 58.
Hunt was separately found guilty of three offences including an offence against s 16(1) of the Clean Waters Act: State Pollution Control Commission v Hunt (1990) 72 LGRA 316. The council was also prosecuted for an offence as the owner of the substance that escaped from the leachate dam but the charge was dismissed for the reason that it had no vicarious responsibility for the wrongful acts of servants employed by an independent contractor: State Pollution Control Commission v Blue Mountains City Council (1991) 72 LGRA 345.
The terms of s 104(2)(b) of the POEO Act are broad. The objects of the POEO Act include to protect and restore the quality of the environment, to reduce risks to human health and to rationalise, simplify and strengthen the regulatory framework for environment protection: s 3. The objects touch upon the health of the environment and of the people. The purpose of ss 92 and 104-105 is to provide simple and strong machinery for clean-up of pollution by a public authority where there is a reasonable suspicion that a pollution incident has occurred, even though the public authority had nothing to do with the pollution, and for the public authority to recover its reasonable costs from anyone it reasonably suspects of having caused the pollution incident even though that person may not in fact have caused it. It is the latter who, if he did not in fact cause the pollution or the pollution incident, then bears the burden of recovering those costs from the person who in fact did.
In the water pollution case of Environment Agency v Empress Car Co (Ambertillery) Ltd [1999] UKHL 5, 2 AC 22, the House of Lords was concerned with the issue of causation under s 85(1) of the Water Resources Act 1991 (UK), which provided:
A person contravenes this section if he causes or knowingly permits any poisonous, noxious or polluting matter or any solid waste matter to enter any controlled waters.
The defendant company maintained a diesel tank in a yard which drained into controlled waters (a river). A pipe from the tank led to a drum which was outside the spillage bund around the tank. The tap governing the outlet from the tank had no lock. The tap was opened by a person unknown. There was no finding as to whether this had been done by an employee or a stranger, although there was clearly some reason to think that it might have been done by a stranger. The entire contents of the tank ran into the drum, overflowed into the yard and passed down the drain into the waters. The defendant company was convicted of causing the pollutant to enter the waters. Its only act was to bring the diesel onto the land adjoining the waters and to establish the system I have described. Its appeal against conviction was dismissed. In the House of Lords Lord Hoffman observed, at 29:
The first point to emphasise is that common sense answers to questions of causation will differ according to the purpose for which the question is asked.
His Lordship illustrated that point with the example of the careless owner and the thief. Whilst the thief would be held criminally liable for stealing an item carelessly left unattended, the careless owner would be held, at a common sense level, responsible for allowing the theft to occur by failing to secure the item. His Lordship continued, at 30:
Not only may there be different answers to questions about causation when attributing responsibility to different people under different rules (in the above example, criminal responsibility of the thief, common sense responsibility of the owner) but there may be different answers when attributing responsibility to different people under the same rule.
His Lordship illustrated that point by reference to the sewage treatment plant operator held liable for the release of noxious material from its plant, although it was unaware that an unknown person had unlawfully discharged that material into its plant. His Lordship concluded (on this point):
What these examples show is that it is wrong and distracting, in the case of a prosecution under section 85(1) … to ask "What caused the pollution?" There may be a number of correct answers to a question put in those terms. The only question which has to be asked for the purposes of section 85(1) is "Did the defendant cause the pollution?" The fact that for different purposes or even for the same purpose one could also say that someone else caused the pollution is not inconsistent with the defendant having caused it.
The Empress principles were adopted in Premier Building and Consulting Pty Ltd v Spotless Group Ltd & Ors [2007] VSC 377, 64 ACSR 114. That case concerned the Victorian statutory regime for pollution clean-up and cost recovery. Cost recovery under the Victorian regime is far more difficult than under the NSW POEO Act regime because it is not based merely on reasonable suspicion. Under the Environment Protection Act 1970 (Vic), if the Environment Protection Authority issues a clean-up notice to the occupier of contaminated land (in this case companies known as Premier and North Suburban), the occupier may recover the reasonable costs incurred in good faith of the clean-up action from "the person who caused or permitted the pollution to occur": s 62A(2) (in this case companies known collectively as the Spotless Parties, comprising the ultimate holding company known as Spotless and subsidiary holding companies including Spotless Services). At the bottom of the Spotless group of companies were operating companies (known as Spotless Laundry and Spotless Supply) that operated laundry and dry-cleaning businesses using chemicals (white spirit and PCE). The chemicals escaped resulting in land pollution. The occupiers' claim against the Spotless Parties succeeded only against the ultimate holding company (Spotless) because it exercised absolute control. In considering who may be considered the "person who has caused" pollution for the purposes of s 62A, Byrne J extensively considered Empress and applied its principles: at [447]-[459]. His Honour held:
[444] …Take the case where the pollution arises from the discharge of a quantity of a noxious chemical from a tank. The person who actually opened the valve is, obviously enough, a person who caused the pollution. So too, may be the person who directed the other to open the valve. A manager with authority to stop the discharge, who just stood by and watched it happen, might also be a person who permitted the pollution to occur. Any or all of those persons would be liable to receive a clean up notice under s 62A(1) and it is not at all surprising, given the nature and purpose of the legislation, that any or all of them might be called upon pursuant to s 62A(2) to compensate the occupier of the polluted land who has incurred the cost of compliance with a clean up notice served upon him or her. The legislation does not, however, address how their respective responsibilities should be reflected in the compensation order.
[462] The answer offered on behalf of Premier and North Suburban was that the operations of the operating companies were so intertwined with those of the holding companies and that the direction and control over their activities by the holding companies was so absolute that I should conclude that, as a matter of ordinary English usage, the holding companies in fact caused the events which these operations brought about. By way of illustration, I return to the situation which I posed at the commencement of this discussion. Suppose the manager directed the workman to open the valve. In such a case the manager would fall into the class of persons who caused the pollution. This is not by reason of the application of any legal principle such as vicarious responsibility for the acts of the agent, but because, in ordinary usage, the expression "a person who caused the pollution" would include the person who directed the act which led to the pollution.
[466] … the control of Spotless was absolute and …it exercised this control widely; it made decisions as to operational matters, directly or through its budgeting decisions or through the involvement of its own senior managers and employees in the operation of the subsidiaries and their plant including the maintenance of the plant. While I do not conclude that every delivery of white spirit to the Barkly St factory was the result of a specific decision by Spotless, I find that orders for this chemical were placed with suppliers, that deliveries were made and paid for and that it was used in the laundry and dry cleaning operations on the Spotless land - all of these matters were the direct consequence of the decisions by Spotless, and that the implementation of those decisions were reported on to and monitored by the parent company.
[467] I therefore conclude that Spotless caused white spirit to be brought upon the Spotless land …and that it caused white spirit to be stored there and used in the dry cleaning operations conducted there by its subsidiary Spotless Laundry. And, having concluded that a normal consequence of this state of affairs is that the chemical will leak and spill into the soil, I conclude therefore that Spotless caused this white spirit pollution.
[468] The position with respect to PCE is much more straightforward. The decision to use the ALMI machine and PCE was that of the Spotless board for which Spotless claims credit in its report to shareholders, and I accept that this was the case. This decision involved the installation and operation of the ALMI machine on the Spotless land... It involved, inevitably, that PCE was delivered to and stored on site for use with the machine.
[469] I conclude from this that the decisions …to establish the new dry cleaning activities at Barkly St were made at the level of the ultimate holding company. I conclude that Spotless caused the PCE to be brought onto the Spotless land and later onto the Premier land and to be stored and used there. I conclude also, from the fact that leakage and spillage were the normal consequence of this, that Spotless caused the PCE pollution on each site.
[470] Have regard to the evidence of the place of Spotless Services in the Spotless Group structure and to its role in the activities of the subsidiaries, I do not find that the decisions which I have referred to were its decisions, except insofar as it made decisions to implement those of the ultimate holding company. I do not find that Spotless Services caused the PCE pollution during the period that it was the parent of the operator.
[471] These conclusions mean that the Court may order that Spotless make compensation to North Suburban and Premier as occupiers of the Spotless land and the Premier land respectively pursuant to s 62A(2). I will make such an order. The amount of this compensation is the amount of costs incurred by each of them complying with the clean up notices.
In an analogous public welfare legislation context, the United States Supreme Court has held that corporate officers can be held individually liable for breaches of public health legislation on the basis of their authority and responsibility to prevent or to correct the conduct constituting the breach: United States v Park 421 US 658 (1975). A large corporation (with 36,000 employees, 874 retail outlets and eight warehouses) and its president, Mr Park, were convicted of violating the legislation in that they caused food shipments being held in one of the corporation's warehouse to be exposed to rodent contamination. The corporation pleaded guilty; its president pleaded not guilty. At trial he conceded that he was "responsible for the entire operation of the company", and said that it was one of the many phases of the company that he assigned to "dependable subordinates". The United States Supreme Court upheld his conviction, holding that:
1. corporate employees who have "a responsible share" in the furtherance of the transaction which the statute outlaws are subject to its criminal provisions. Central to that conclusion is the reality that the only way in which a corporation can act is through individuals who act on its behalf;
2. a prima facie case is established by evidence sufficient to warrant a finding by the trier of the facts that the defendant had, by reason of his position in the corporation, responsibility and authority either to prevent, or promptly to correct, the violation complained of, and that he failed to do so (at 673-674);
3. the issue was not the defendant's position in the corporate hierarchy, but rather his accountability, because of the responsibility and authority of his position, for the conditions which gave rise to the charges against him;
4. the statute does not require that which is objectively impossible. The theory upon which responsible corporate agents are held criminally accountable for "causing" violations of such a statute permits a defence to be raised that the defendant was "powerless" to prevent or correct the violation - where the defendant has the burden of coming forward with evidence. The concept of a "responsible relationship" or "responsible share" in violation of the statute imports some measure of blameworthiness;
5. the defendant's defence of reliance on his system of delegation to dependable subordinates made admissible in rebuttal the prosecutor's evidence that he had earlier been advised by a government agency of unsanitary conditions in one of the corporation's warehouses and therefore he must have been aware of the deficiencies of the system.
Under other analogous public welfare statutes, United States v Park has been applied to civil liability: United States v Hodges X-Ray Inc 759 F. 2d 557 (6th Cir. 1985); United States v Universal Management Services Inc and Monea 191 F. 3d 750 (6th Cir. 1999); and to criminal liability: United States v Hong 242 F. 3d 528 (4th Cir. 2001). In the second of those cases (Hodges) a father and a son who both managed a corporation that sold adulterated devices in breach of legislation were both found liable for the breach. The father may have had ultimate authority but the son was in charge of managing day to day activities and had supervisory and various forms of independent authority. The third case (Hong) concerned water pollution by the acts of a corporation's employees: Mr Hong was convicted mainly because he in fact substantially controlled its operations, notwithstanding that he went to great lengths to avoid being formally associated with the corporation.
In Michigan Natural Resources Commission v Arco Industries Corporation 723 F. Supp. 1214 (W. D. Mich, 1989) the court dealt with the liability of corporate officers and directors to pay for clean-ups of corporate waste. Enslen DJ cited many cases where American courts had held corporate officers individually liable for hazardous waste clean-up under legislation. His Honour said in a passage (later quoted with approval in the Ontario pollution case of R v Bata Industries Ltd [1992] O.R. (3d) 329 where a corporation and two of its directors were convicted of causing or permitting pollution):
The parties in this action have asked the Court to clarify a more exact legal standard by which corporate officers and directors may be held personally liable…a court under the circumstances before me should weigh the factors of the corporate individual's degree of authority in general and specific responsibility for health and safety practices, including hazardous waste disposal. These factors should be applied in order to answer the question of whether the individual… could have prevented or significantly abated the hazardous waste discharge that is the basis of the claim…
This Court will look to evidence of an individual's authority to control, among other things, waste handling practices-evidence such as whether the individual holds the position of officer or director, especially where there is a co-existing management position; distribution of power within the corporation, including position in the corporate hierarchy and percentage of shares owned. Weighed along with the power factor will be evidence of responsibility undertaken for waste disposal practices, including evidence of responsibility undertaken and neglected, as well as affirmative attempts to prevent unlawful hazardous waste disposal…
…both parts of this test boil down to corporate and societal responsibility-responsibility implicitly undertaken by the acquisition of increased power or authority within the corporation and responsibility explicitly undertaken by job description or agreement. Such a liability standard here will encourage increased responsibility as an individual's stake in the corporation increases…as power grows, the ability to control decisions about waste disposal increases; and second, as one's stake in the corporation increases, the potential for benefiting from less expensive (and less careful) waste disposal practices increases as well…
This standard…requires more than mere status as a corporate officer or director, …The test-whether the individual in a close corporation could have prevented or significantly abated the release of hazardous substances-allows the fact-finder to impose liability on a case-by-case basis, a result I favor in this area due to the seriousness of the potential liability. The test for liability of corporate individuals…is thus heavily fact-specific, requiring an evaluation of the totality of the situation.
…this standard will encourage increased responsibility with increased authority within a corporation. I take this to be a positive result, and thus a better standard than one which measures only the most direct knowledge or involvement in waste disposal activity, because it encourages responsible conduct instead of causing high level corporate individuals "not to see" and "to avoid getting involved with waste disposal at their facilities. Indeed, where a close corporation produces or handles hazardous waste products, the message is quite the opposite.
Control over operations, particularly by those in charge of business activities, as a basis of liability for breach of public welfare legislation, was emphasised by the Supreme Court of Canada in R v Sault Ste. Marie (1978) 85 DLR (3d) 161, 2 S.C.R. 1299. The respondent City of Sault Ste. Marie contracted with a company for the disposal of all refuse originating in the City. The method of disposal chosen by the company polluted springs that flowed into a creek. The company and the City were both convicted of a breach of s 32(1) of the Ontario Water Resources Commission Act, RSO, 1970, which provided that every municipality or person that (inter alia) "causes" the discharge or deposit of any material into a water course is guilty of an offence. Delivering the judgment of the Supreme Court of Canada (in which a new trial of the City was ordered), Dickson J held, at 1322:
The element of control, particularly by those in charge of business activities which may endanger the public, is vital to promote the observance of regulations designed to avoid that danger. This control may be exercised by "supervision or inspection, by improvement of his business methods or by exhorting those whom he may be expected to influence or control": Lord Evershed in Lim Chim Aik v. R., [1963] A.C. 160 at 174, [1963] 1 All E.R. 223 (P.C.). The purpose, Dean Roscoe Pound has said (The Spirit of the Common Law (1906)), is to "put pressure upon the thoughtless and inefficient to do their whole duty in the interest of public health or safety morale" As Devlin J. noted in Reynolds v. G. H. Austin & Sons Ltd., [1951] 2 K.B. 135 at 149, [1951] 1 All E.R. 606: "a man may be made responsible for the acts of his servants, or even for defects in his business arrangements, because it can fairly be said that by such sanctions citizens are induced to keep themselves and their organizations up to the mark." Devlin J. added, however: "if a man is punished because of an act done by another, whom he cannot reasonably be expected to influence or control, the law is engaged, not in punishing thoughtlessness or inefficiency, and thereby promoting the welfare of the community, but in pouncing on the most convenient victim."
That passage was approved in URS New Zealand Ltd v The District Court at Auckland [2009] NZHC 1778 at [50] per Harrison J (a pollution case). His Honour recognised that there can be more than one cause and more than one party of liability: at [53].
In summary, in my opinion, there can be more than one person who causes a pollution incident, and a person who causes a pollution incident includes:
1. a person, including a workman or stranger, who did the act that led to the pollution incident (eg the bulldozer operator in Tiger Nominees and the stranger or employee who turned on the tap in Empress);
2. a person who directed the act (eg the foreman in Tiger Nominees);
3. a person who established the system that enabled the act to occur (eg Empress); and
4. a person with sufficient control over operations to be held responsible for the act or with responsibility and authority to prevent or correct the act (eg the ultimate holding company in Premier, the president of the corporation in United States v Park and the individuals referred to in Michigan Natural Resources Commission v Arco Industries Corporation). Such persons may be corporate directors, officers or managers, or even a person with no formal association with the corporation that did, or also caused, the act (eg United States v Hong). The corporate veil is of no avail.
Since the only way in which a corporate principal, and often a non-corporate principal, can act is through individuals, a principal may be vicariously liable for the causative act of an employee or, in some circumstances, an independent contractor. The basis of vicarious liability for an independent contractor arises when the principal directly authorises the relevant act or has direct control over the manner in which the work is to be performed and/or the means to be employed in the doing of the work: Stoneman v Lyons [1975] HCA 59, 133 CLR 550, 573-574; Walker Corporation Pty Ltd v Director-General Department of Environment Climate Change and Water [2012] NSWCCA 210, 82 NSWLR 12, 12, 31; Environmental Protection Authority v McConnell Dowell Constructions (Aust) Pty Ltd [2003] NSWLEC 70, 128 LGERA 240, 258-262 per Pearlman J; North Sydney Council v Moline (No 2) [2008] NSWLEC 169 at [114] per Preston CJ of LEC; Tiger Nominees; Leichhardt Council v Geitonia Pty Ltd (No 6) [2015] NSWLEC 51 at [116] per Biscoe J.
The respondents seek to bypass the causation principles, formulated in the context of public welfare legislation summarised above at [40], by submitting that instead the principles in Botany Bay City Council v SAAB Corporation Pty Ltd [2011] NSWCA 308, 82 NSWLR 171 at [113]-[119] are apposite - and lead to the conclusion that it is only the Company which could be visited with liability under s 104(2)(b) of the POEO Act. I do not accept the submission. In my opinion, that decision is distinguishable because it was made in a different statutory context. It dealt with s 124 of the Environmental Planning and Assessment Act 1979 (EPA Act), which empowers the Court to remedy or restrain a breach of the EPA Act. A council had granted development consent subject to conditions including a condition that above ground cables be replaced by an underground cable. The corporate defendants implemented the consents but did not comply with the condition. Individual defendants were their directors. The applicant council sought declarations that all were in breach of the condition, and therefore in breach of s 76A(1)(b) of the EPA Act. Tobias AJA (Basten and MacFarlan JJA agreeing) observed that it was only the person who carried out a development in breach of a consent who was amenable to an order under s 124: at [115]. It did not follow that because individual directors were performing positive acts in their capacity as directors and implementing the consent that they, rather than the companies, were carrying out the development the subject of the consent: at [116]. Something more was required to make the individual directors liable: at [118]. Just because a director is the agent by which a company does an act, does not make the director the actor. The actor is the corporation notwithstanding that it acts through the director: at [110]. The individual respondent, assuming a breach of the condition, could not be the subject of a s 124 order, which lay only against the companies of which they were the directors.
The POEO Act contains provisions that impose liability upon directors and managers for offences of the corporation attracting special executive liability: ss 169, 169A, 169B. On the premise that the pollution incidents were caused by the Company (at the end of occupancy under the second lease), the respondents submit that had it been intended that liability would be attributed to directors personally in respect of ss 104 and 105, it is to be expected that the legislature would have similarly provided; and the fact that it did not do so is indicative of an intention not to lift the corporate veil. The issue does not arise because, as I find below, it was reasonable for Council to have suspected that the pollution incidents were caused during the currency of the first lease to Michael Slade. Even if I am in error such that the Company could have been a subject of reasonable suspicion as to causation, I would not accept the submission. Sections 104 and 105 are costs recovery provisions. There is no need for special provisions imposing liability on directors or managers in their case. The causation question posed by s 104 is framed so widely as to be capable of catching both a corporation and its directors, or either. Even in circumstances where the corporate veil may apply, the general law can provide for its lifting in restricted circumstances.
[6]
FACTUAL BACKGROUND
Council is the manager of a reserve trust known as South West Rocks Rubbish Depot Reserve (R 84045) Trust. The Trust is a corporation established as a reserve trust under s 92 of the Crown Lands Act 1989 and has been appointed as trustee of the Reserve. The Reserve is owned by the State of New South Wales. Council operates the South West Rocks Transfer Station, located in the centre of the Reserve, which was, and still is, used as a waste transfer station to receive waste from domestic residents in South West Rocks. The Premises, leased initially to Michael Slade then to the Company, are on the Reserve and north of the South West Rocks Transfer Station. The balance of the Reserve is maintained as vacant land.
For many years Council used part of the Reserve as a licenced landfill. In about 2004 Council capped and rehabilitated the landfill and covered it in grass. The Premises are located on this capped and rehabilitated area. Capping a former landfill typically involves covering the land with uncontaminated earth, covering that earth with a layer of geo-tech mesh, and covering that layer with more uncontaminated earth - in the present case to a depth of 300 mm plus 50 mm of shredded green waste as an erosion protection layer - before planting vegetation - in the present case grass - on top. The entire perimeter of the Reserve was fenced with an 8 feet high wire mesh fence with one access gate.
From July 2006 to May 2008, Michael Slade owned and operated a material recycling business in partnership with another under the registered Australian Business Name "Mid Coast Skip Bins and Metal Recyclers" at Lindsay Noonan Drive, South West Rocks, a short drive from the Reserve. The partnership was dissolved in May 2008. Michael Slade continued to operate the business as a sole trader until the ABN was cancelled on 1 July 2008. From 9 July 2008 Michael Slade operated a skip bins and recycling business under the slightly different business name "Mid Coast Skip Bins and Metal Recycling". He cancelled this ABN from 30 June 2012. Until April 2011 this business also operated at Lindsay Noonan Drive, South West Rocks. Thereafter until 30 April 2012 the business operated at the Premises.
The customers of the business were mainly building construction companies. The business involved delivery of empty skip bins to customers, collection and unloading of skip bins filled with construction waste, and sorting, stockpiling, recycling and disposal of the waste. There were 14 part time employees and three full time employees, plus Barry Slade.
The Council officer who mainly had dealings with the respondents in relation to the leases of the Premises was Mr Robert Scott. His point of contact was Barry Slade. If he required any action to be taken or to be provided with information, he always contacted Barry Slade first as it was his experience that Barry Slade always knew what was occurring and that he was the person who could get things done. At his meetings with the respondents, Barry Slade did the majority of the talking. Having observed Mr Scott and the respondents give evidence, I prefer Mr Scott's recollection where it conflicts with that of the respondents, as it did in a few respects.
On 18 November 2010 Barry Slade wrote to Council saying "I" would prefer to manage the transfer station (at the Reserve).
In a letter to Council of 2 March 2011 (erroneously dated 2010), Barry Slade referred to ceasing operations on "our" site (at Lindsay Noonan Drive) and continued in similar vein:
…the only hope I have for a site suitable for our recycling business is the South West Rocks Transfer Station. I have no plan "B" other than to abandon recycling, fire the personnel, and go back to taking all material to landfill…The sooner we can move, the sooner we can regain some efficiency as the current situation is costing us dearly…Plans are well advanced for the move and the only delay is beyond my control. I'm as keen to move as the Council and local residents are to see us move. Putting a deadline of 7th March 2011 will put unnecessary stress on us and benefit no one".
On 21 March 2011 Barry Slade wrote to Council referring to "our" business and the lease for "our" business.
In late March 2011 Council executed a lease of the Premises to Michael Slade trading as Mid Coast Skip Bins and Metal Recycling for a term of five years commencing on 10 April 2011 and terminating on 9 April 2016 (the first lease). Upon Ministerial approval of the first lease on 24 May 2012, it became effective. The permitted use was a "commercial waste sorting, resource recovery and recycling centre". The lessee's "contact" persons nominated in the first lease were Michael Slade and Barry Slade. The first lease included the following obligations on the lessee:
Clause 26.2 requires the lessee to rehabilitate the premises to their original position, to comply with any environmental law and to keep the Premises clean and tidy.
Clause 35 prohibits the causing by the lessee of any nuisance, or the carrying onto the Premises of any noxious or offensive substance.
Clause 44.1 provides an indemnity from the lessee to the benefit of the lessor for any claims arising out of the lessee's use or occupation of the Premises.
Clause 55 provides that the lessee is to comply with all environmental laws in his occupation of the Site.
Clause 56 provides that the breach of any law in relation to the occupation of the Site amounts to a breach of the lease.
Clause 57 provides an indemnity to the lessor in relation to any non-compliance by the lessee of any legislative requirement.
Clause 58 provides an indemnity to the lessor against claims arising from the breach of any environmental law by the lessee in respect of his occupation of the Premises.
[7]
The business moved to the Premises in or about late March 2011. A fence was erected around the Premises so that it was a separately secured area. Mr Scott of Council understood that it was erected by the respondents.
Once the business moved to the Premises, the first priority was to construct the hardstand in order to create a suitable platform for stockpiling of waste material. Early in the term of the first lease, hardstand was constructed from the access gate in the north-west corner across the north-west quadrant to the north-east quadrant and Stockpile 1 was created in the north-east quadrant from waste material relocated from Lindsay Noonan Drive. Thereafter, construction of hardstand elsewhere on the Premises was an ongoing process. Hardstand construction involved laying of geo-fabric prior to packing of bricks, waste concrete, crushed rocks etc.
On 6 June 2011 Barry Slade wrote to Mr Scott at Council stating that he had paid the rent, and concluding: "Now that we have the lease in place I trust we will enjoy a working relationship for a long time". The letter enclosed documents titled "Safe Work Method Statement" (SWMS) and "Site Induction Checklist". The SWMS identifies the potential hazards arising from activities carried out on the Premises and the measures to be put in place to control the risks. The SWMS lists Michael Slade as the person responsible. One of the identified hazards is the handling of various materials including asbestos. The controls to be implemented to minimise or eliminate the risk do not address asbestos directly, but note that personal protective equipment is to be worn while sorting materials. The SWMS identifies the risk rating of the asbestos hazard as "5", which indicates that the risk is "Unlikely. Could happen, but only rarely". The Site Induction Checklist provided instructions to employees as to how activities on the Site were to be carried out, in accordance with occupational health and safety requirements. In relation to hazardous substances including "all types of asbestos", when a hazardous substance is identified or found "the Site Manager is to be notified and all work stopped until appropriate Hazard identification procedures are carried out". The checklist does not identify what the appropriate hazard identification procedures are. According to Michael Slade's oral evidence, he prepared the SWMS and the checklist and Barry Slade helped in preparing "all the manuals and safety procedures".
On 10 June 2011 Barry Slade wrote to Council providing information required by the NSW Office of Environment and Heritage.
On 21 June 2011 Mid Coast Skip Bins and Metal Recycling Pty Ltd (the Company) was registered as a company. The respondents were its only directors and equal shareholders and Barry Slade was its secretary.
On 5 July 2011 Barry Slade wrote to Mr Scott at Council asking him to note that "we" have now become a company, requesting an assignment of the lease to the Company, and noting that the directors and only shareholders were Michael Slade and Barry Slade.
On 6 July 2011 Barry Slade wrote to Council in response to Council concerns about potential breaches of the lease, which he referred to as "our" lease.
On 1 September 2011 Council wrote to Barry Slade recording observations during an inspection of the Premises by Council officers and the respondents on 12 August 2011 with regard to compliance with lease conditions, including the following:
4. Access is available to the main gate, however, the alternative gate appeared to be more heavily utilised. This access point is not covered by the lease and should not normally be used. Access should be via the primary access point.
5. Development is generally in accordance with the approved plan, however, the lack of suitable hard stand area on the site has significantly affected establishment. This has effectively prevented the processing of wastes and at present material is being stockpiled in addition to the material being relocated from your old premises. In this regard, any new waste shall not be temporarily stockpiled on the site until the processing capability is available. New waste should be disposed of at an alternative facility.
9. Two of the material stockpiles (the newly received waste stockpile and the waste from your previous premises stockpile) were observed to be significantly higher than the adjoining fences and are observable from the road.
[emphasis added]
The reference to "waste from your previous premises stockpile" is to Stockpile 1. The reference to "newly received waste stockpile" is probably to Stockpile 7. Both stockpiles are marked on the map annexed to this judgment.
On 9 September 2011 in response to a Council letter, Barry Slade wrote:
…your letter raised some questions about several matters related to our progress towards full implementation of the plans for the Material Recycling Facility...Since your visit we have had delivered another 150 m3 of bricks. When we have completely spread these out and compacted them we should come close to completing the hardstand areas. We have erected the production sorting conveyors, trommel, etc. We are wiring up and running tests on the system today. We should have this going for your inspection next Tuesday…I will address the matter of processing capacity during your next inspection.
On or about 21 September 2011 the Minister's necessary consent was endorsed on a new lease of the Premises to the Company (the second lease). It was expressed to be for a term of five years commencing on 1 July 2011 and terminating on 30 June 2016. The obligations imposed on the lessee were virtually the same as under the first lease. The permitted use was a "waste and resource transfer station".
On 5 October 2011 Council wrote to Barry Slade stating:
As previously advised, until such time as the processing equipment is commissioned, no further waste is to be stockpiled on site…Council will require submission of documentary evidence to verify that any waste received following Council's previous formal advice was disposed of at an appropriate waste management facility.
[emphasis added]
On 12 December 2011 Council wrote to Barry Slade noting that work to complete establishment of the hardstand area had progressed and stating:
Council has previously advised that the fines excluded from the waste stream by the trommel should be treated as contaminated waste and disposed of to a licensed landfill activity. Council will be seeking documentary evidence of this…Please find attached photographs of the waste stockpiles between visits by Council staff in August, September and October 2011. These photos demonstrate the addition of material to the stockpiles between visits and are not consistent with Council's previous direction in this regard.
By 12 January 2012 the processing equipment (the trommel) was operational, enabling a start on processing some of the construction waste. On that date Barry Slade sent an email to Council stating: "If we now focus on the material from Lindsay Noonan Dr. This material has much more fines in it than our other stockpile…Should we schedule your next visit to say later next week. It would enable us to finish off the remainder of the current stockpile and make a start on the Lindsay Noonan material". The reference to the "Lindsay Noonan Drive material" is to Stockpile 1, created early in the term of the first lease. Thus, processing of Stockpile 1 had apparently not commenced as at 12 January 2012.
On 31 January 2012 the EPA wrote to Council with its observations at an EPA inspection of the Premises, including the following:
The EPA's primary concern is that the Site is overcrowded with a variety of solid waste and there is poor thoroughfare throughout the Site. It is therefore likely to be difficult to manoeuvre equipment, keep waste types segregated and prevent litter and dust from emanating from the Site. The proximity to the road and waste screening processes also mean that nearby receptors are subject to noise.
…
Ground disturbance over capped landfill - Disturbance of the ground surface due to machinery was difficult to assess at the time of the inspection due to the quantities of waste present. However the intensity and type of machinery used at the Site combined with a lack of proper hardstand in part of the site means that this issue continues to be a concern to the EPA.
Unbeknown to Council, on 31 January 2012 Barry Slade ceased to be a director and the secretary of the Company, and Michael Slade became the secretary.
On 2 February 2012 Barry Slade sent a particularly significant email to Mr Scott at Council stating (inter alia):
Michael and I have decided to close our business. Effective immediately we will cease trading. We have made this decision in view of Council's insistence in September that we cannot bring new waste to the site for processing and that all new waste is to be transferred to landfill. We have complied with Council's direction…We estimate it will take 1-2 months to wrap things up and vacate the site. I will keep you advised as to progress.
On 15 February 2012 Barry Slade emailed Council in relation to complaints. He wrote in respect of a complaint of windblown litter, "I am doubtful this is ours". In relation to complaint about a microwave outside the fence, he wrote: If "I ever had title to this, which I doubt, I don't want it back".
On 22 March 2012 Council gave the respondents written notice of the intention to terminate the lease on or before 30 April 2012 and requested that the Premises be vacated before that date. Council was apparently still unaware that Barry Slade had resigned as a director because the letter was marked for the attention of both respondents as directors of the Company.
The Premises were vacated by 30 April 2012. Before then the respondents removed the equipment on it as well as the site office and the fencing around the Premises.
As the entire boundary of the Reserve was secured by a fence, Council thereafter installed a red mesh fence around the Premises. The Reserve was open to the public only during specified times and there was always a Council employee there at those times.
On 9 May 2012 EPA officers found asbestos on the Premises.
On 16 May 2012 Council gave the Company notice of termination of the second lease and wrote to the Company noting that it had vacated the Site but had not removed stockpiled material.
In May 2012 the plant and equipment used at the Premises were sold at auction for about $212,800. The auctioneer's written account of the sale proceeds dated 24 May 2012 was addressed to "Michael Slade trading as Mid Coast Skip Bins". The affidavit evidence of Barry Slade at trial suggested that the Company owned the plant and equipment, that the proceeds of sale went towards repaying an amount of $225,000 owed by the Company for the plant and equipment, and that after the auction he rang Mr Scott at Council and said that after paying expenses and taxes there was no money left in the Company. However, in cross-examination Michael Slade said that he owned the plant and equipment and leased it to the Company; and in re-examination he said that he had borrowed $200,000 to buy the plant and equipment.
In August 2012 the EPA gave the Company a clean-up notice under s 91 of the POEO Act. The notice recounted that on 9 May 2012 Council officers had inspected the premises and observed material suspected to be asbestos; and that three samples potentially containing asbestos from the ground surface between stockpiles were analysed and one was found to contain asbestos. The notice recorded that the EPA reasonably believed that a pollution incident(s) had occurred. The notice stated that Michael Slade is the occupier of the Premises and that the Company was the operator of Mid Coast Skip Bins and Metal Recycling at the Premises and the EPA reasonably suspected that the Company had caused the pollution incidents.
The Company did not comply with the clean-up notice. On 5 September 2012 Michael Slade applied for voluntary deregistration of the Company. On 7 November 2012 the Company was deregistered. On 9 October 2014, on the application of its workers' compensation insurer, the Company was restored to the register in order to defend a workers' compensation claim.
In December 2012 Mr Ellis and his team carried out a detailed investigation of asbestos contamination and waste classification at the Premises, and found asbestos littered throughout the Premises. The locations of the asbestos are marked on his map annexed to this judgment. I consider his report in more detail below.
On 17 January 2013, the EPA issued a clean-up notice to Council under s 92(1) of the POEO Act. The notice recited that the EPA reasonably suspected that a pollution incident had occurred and/or is still occurring. It included requirements to immediately take action to ensure that dust generation at the Premises is prevented and suppressed, to submit an "asbestos assessment report", to remove and/or remediate soils where it is evident that soils have been potentially contaminated, and to rehabilitate disturbed ground including the capping to the old landfill. Mr Ellis' report appears to be an "asbestos assessment report".
On 4 March 2013 the EPA revoked its clean-up notice to the Company.
On 17 April 2013 the EPA varied its clean-up notice to Council to allow more time for compliance.
Council complied with the clean-up notice and thereby incurred costs and expenses.
On 7 November 2013, Council issued a compliance cost notice to each of the respondents, pursuant to s 104(2) of the POEO Act. The notices include recitals that the result of the inspection of the Premises by EPA officers in May 2012 was that asbestos had been detected at the Premises; that the EPA had issued the January 2013 clean-up notice to Council; that Council had incurred costs and expenses in complying with the clean-up notice; and that for various reasons the respondents were responsible for the deposit and stockpiling of the waste that resulted in Council being issued with the EPA clean-up notice. The notices required the respondents to pay reasonable costs of expenses of $1,291,728.26, comprising the costs and expenses of the clean-up action less an amount of $25,000 held as a bond under the first lease and released to Council on or about 21 June 2012. Among the costs claimed were the costs of Mr Ellis' report.
[8]
ASBESTOS DEPOSITED ON THE PREMISES
As noted earlier, in May 2012 EPA officers found asbestos on the Premises and in December 2012 Mr Ellis and his team identified visually and through laboratory testing of samples that asbestos was littered throughout the Premises. The asbestos locations are indicated on a marked-up map in his report dated April 2013: a copy of the map is annexed to this judgment. It was generally referred to at trial as the "master map".
Where asbestos was found in a test pit and confirmed by laboratory testing, it was marked on the master map as indicated in the legend. Where asbestos was found outside a test pit, it was marked on the master map with a red cross. Of the many asbestos fragments found within the soil material, 48 samples were taken of which 28 were sent for laboratory analysis. The following is a summary of the test results from the hardstand:
1. The sample from test pit 01 was taken from 30 centimetres below the surface. No asbestos was detected.
2. The sample from test pit 02 was not tested.
3. There were 2 samples from test pit 03, from 10 and 20 centimetres below the surface. The 10 centimetre sample was a bonded fragment of asbestos. The 20 centimetre sample contained no detected asbestos.
4. The sample from test pit 04 was taken from 0.0 below the surface, that is, from on the surface. That sample was a bonded fragment of asbestos.
5. The sample from test pit 05 was taken from 10 centimetres below the surface and appeared from visual inspection to be asbestos (hence the red bordered icon as per the legend on the master map), but returned no asbestos detected.
6. The sample taken from test pit 06 was taken from 30 centimetres below the surface and returned no asbestos detected.
7. The sample taken from test pit 07 was from 50 centimetres below the surface and was a bonded fragment of fibrous cement.
8. The sample taken from test pit 09 was from 10 centimetres below the surface and was a bonded fragment of asbestos.
9. The sample from test pit 10 was taken from 10 centimetres below the surface. It was a bonded fragment of asbestos.
10. There were 2 samples taken from test pit 12, one from the surface which was a bonded fragment of asbestos, and one from 30 centimetres below the surface that returned no asbestos detected.
11. The samples taken from test pits 13 and 14 were not tested.
12. The sample taken from test pit 28 was from 20 centimetres below the surface and contained fibres in soil.
13. The sample taken from test pit 26 was from 10 centimetres below the surface and was a bonded fragment of asbestos.
14. The sample taken from test pit 23 was from 10 centimetres below the surface and was a bonded fragment of asbestos.
The laboratory summary indicates that asbestos was also found in Stockpiles 1, 6 and 8 and in the trommel waste stockpile.
The Ellis report concluded with this observation:
Chemical analysis of a range of potential contaminants of concern indicated that the material is suitable for classification as General Solid Waste, however given that asbestos has been identified on the surface and within the material stockpiles the material is considered to be General Solid/Asbestos Special Waste in accordance with the NSW EPA (DECC) Waste classification Guidelines (2009). It is considered that the asbestos materials encountered are widespread throughout the stockpiles and material types such that segregation or selective picking would not be feasible. There may be some potential to remove large metal or timber items for separate disposal, however it is considered that the remaining material should be disposed of as General Solid/Asbestos Special Waste to an appropriately licensed facility.
Denzil Searle gave evidence for Council, which I accept. He said that he worked as a truck driver for the business from April 2008 to 13 July 2011. On occasions he saw asbestos material when he emptied skip bins from customers next to a pile of waste at the Premises. The respondents told him to push it back in the skip bin (to return to the customer) and push whatever was left into the pile. This was done with a bobcat or by hand. He saw lots of small fragments of asbestos that were not collected and pushed back into the bin but instead pushed into the existing pile. I consider his evidence in more detail later.
[9]
POLLUTION INCIDENTS
It is convenient to repeat the statutory definitions of "pollution incident" and "land pollution":
pollution incident means an incident or set of circumstances during or as a consequence of which there is or is likely to be a leak, spill or other escape or deposit of a substance, as a result of which pollution has occurred, is occurring or is likely to occur. It includes an incident or set of circumstances in which a substance has been placed or disposed of on premises, but it does not include an incident or set of circumstances involving only the emission of any noise.
land pollution… means placing in or on, or otherwise introducing into or onto, the land (whether through an act or omission) any matter, whether solid, liquid or gaseous:
(a) that causes or is likely to cause degradation of the land, resulting in actual or potential harm to the health or safety of human beings, animals or other terrestrial life or ecosystems, or actual or potential loss or property damage, that is not trivial, or
(b) that is of a prescribed nature, description or class or that does not comply with any standard prescribed in respect of that matter,
…
It is common ground, and I agree, that there were pollution incidents at the Premises. That is, there were incidents during or as a consequence of which asbestos was deposited, as a result of which land pollution occurred, was occurring or was likely to occur.
The parties differ as to where and when land pollution occurred. As to where land pollution occurred, the respondents submit that the asbestos found in the stockpiles (as distinct from in the hardstand) did not constitute land pollution because the definition requires the asbestos itself to be in direct physical contact with the "land", and there is no evidence that asbestos in the stockpiles, as opposed to other waste in the stockpiles, made direct physical contact with the land beneath the stockpiles. I reject the submission. Suppose a pile of waste is dumped in a paddock and comprises pure asbestos fibres except for a thin layer of soil, being the bottom layer of the pile, between the asbestos and the surface of the paddock. It cannot have been the legislative intention to say that there is no land pollution. In my opinion, the creation of a stockpile containing asbestos on land constitutes depositing or introducing asbestos onto the land.
For the purposes of para (b) of the definition of "land pollution", "more than 10 tonnes of asbestos waste" is a prescribed standard: cl 109 of the POEO Regulation. "Asbestos waste" is defined as "any waste that contains asbestos": Sch 1 cl 50 POEO Act. On the unchallenged expert evidence of Mr Ellis, all the material on the Premises, with the exception of some large metal or timber items, was waste that contained asbestos. That is, it was asbestos waste (see above at [88]). The compliance cost notices evidence that 6,044.5 tonnes of waste were removed from the Premises. As it was asbestos waste, there was land pollution within paragraph (b) of the definition.
In my opinion, paragraph (a) of the definition of "land pollution" is also satisfied. Asbestos can cause mesothelioma and asbestosis. As is common ground, asbestos only becomes harmful when fibres become airborne by being cut or broken. The EPA in May 2012 and Mr Ellis in December 2012 both found asbestos on the Premises. The asbestos samples found by Mr Ellis were broken and comprised bonded fragments, fibres in soil or dust, or bonded fibres. They ranged in size from fragments bigger than a human hand to tiny fragments ground into dust. As they were broken asbestos, they had potential to release fibres into the air
Asbestos, albeit in small quantities, is likely to degrade land, resulting in at least potential harm to human health that is not trivial. This is common ground but the parties differ as to when it occurred in this case.
The respondents' written submission was that until the Premises were vacated on 30 April 2012 the asbestos on the Premises did not degrade and was not likely to cause degradation of the land, resulting in potential harm to human health. Whilst accepting that the presence of asbestos in small quantities may be regarded as likely to cause degradation of land is some cases, the respondents submitted that that was not so in the case of the Premises until they were vacated and ceased to be used as a waste facility because the Premises had already been degraded by its former use for land fill and subsequent use for receiving, sorting and processing of waste. However, in closing oral submissions the respondents conceded that asbestos on the Premises degraded the land but submitted that it was not likely to have caused potential harm to human health until the Premises were vacated. The aim of the submission is to have the Court find that the only the Company could have caused the pollution incidents - and that the respondents are protected by the corporate veil - because the Company was the lessee when the Premises were vacated.
I do not accept the submission. Depositing asbestos on land that has already been degraded by use for land fill or waste receipt degrades the land further. In any event, the prior degradation premise of the submission is incorrect for Council had capped and rehabilitated the Premises before the first lease commenced. There is no evidence of asbestos on the Premises, certainly not above the capping, when the first lease commenced. When the Premises were vacated the following year, they were littered with actual and suspected asbestos.
There is a change of language between the description of the permitted use in the first lease and its description in the second lease, which has not been explained. Each description of the permitted use appears to bring it within the definition of "waste facility" in the POEO Act. The description of the permitted use in each lease conveys a sense of transience concerning waste brought onto the Premises. This is especially so when contrasted with the concept of landfill, which conveys the notion of discarding material permanently. What was authorised under the leases was for waste to be brought onto the Premises, sorted and disposed of. It was not a waste storage facility.
A normal consequence of operating a transient waste facility such as this is that asbestos may from time to time be found in waste when it is unloaded. If not promptly removed, it will degrade the land resulting in a pollution incident. That is, it is likely to result in potential harm to human health. The asbestos pieces could become airborne if cut or broken. The potential harm to human health was underlined by the presence of vehicles and machinery working the Premises. What was done in this case was to deposit asbestos and large volumes of asbestos waste on the Premises, which had previously been an uncontaminated field, and leave it there. Contrary to the respondents' suggestion, there was no legislative blank cheque to leave asbestos on the Premises until the lessee eventually vacated the Premises or got around to processing material containing asbestos.
I do not accept the respondents' submission that this conclusion is avoided in the case of the "bonded" fragments, as distinct from the asbestos "fibres", analysed by Mr Ellis and by the small size of his samples. In my view, they all degraded the land, resulting in potential harm to human health.
The respondents submit that Council road making materials (gravel) stored on the Premises at the commencement of the first lease was probably the source of some of the asbestos found in the hardstand on the northern half of the Premises. As I understand it, the respondents focus ultimately on the laboratory analysis of the Ellis sample in test pit 7 recording an asbestos fragment mixed with gravel (and other material) at a depth of 0.5 metres. Therefore, the respondents submit, it was not reasonable for Council to suspect that they caused the pollution incident there.
I do not accept the submission. Condition 14 of the first lease permitted the lessee to use road making materials stored at the Premises for the purpose of establishing a working area:
14 - EXISTING MATERIALS ONSITE
14. The lessee may utilise the existing road making materials being stored on the area subject to the lease for the purpose of establishing a working area within the leased site.
Earthworks undertaken upon the site shall not reduce the cover to the existing landfill.
The stored bridge timbers are to be relocated to an alternate location outside of the area of the lease as agreed by the lessee and lessor. The cost of relocation is to be born [sic] by the lessee. The timbers are not to be utilised or disposed of by the lessee.
It was put to Mr Scott in cross-examination and he agreed that the road-making materials were "a gravel stockpile". He indicated without challenge that this gravel stock pile was located on the western boundary of the Premises. Later, Michael Slade gave oral evidence in chief (over objection) that there were also on the Premises at the commencement of the first lease other piles of "gravel road base which is a mixture of dirt and rock". As the respondents conceded in closing submissions, the difference between Mr Scott and Michael Slade as to the location of the road-making materials at the commencement of the first lease and whether they were in one pile or in a number of piles does not matter for present purposes.
This gravel was used as "skimming layer" over the top of the hardstand created on the north-western part of the Premises, overlapping and similar to the hardstand on that part denoted on an aerial photograph in Mr Scott's evidence. I therefore do not see how it could have ended up at a depth of 0.5 metres in test pit 7.
More fundamentally, there is no evidence that the road-making material onsite contained any asbestos. Given its nature, there is no reason to suppose that it may have done.
The respondents also advance three other hypotheses. First, some asbestos may have been brought up from the landfill beneath the capped level as a result of disturbance. Secondly, some fragments of asbestos (on Mr Searle's evidence in-cross-examination) would be pushed into the ground by the bobcat when the bobcat was used to reload into a skip bin waste that had been unloaded and seen to contain asbestos. Thirdly, some asbestos may have been introduced by other employees or by trespassers after the Premises were vacated on 30 April 2012 and left unfenced.
In my opinion, none of the hypotheses are sufficiently strong to negate a reasonable suspicion that the respondents caused the pollution incidents. As for the first hypothesis, the respondents point to the EPA letter to Council of 31 January 2012 (quoted earlier) following an EPA inspection, that disturbance of the ground surface due to machinery was difficult to assess due to the quantities of waste present, but was of concern to the EPA. This is an insufficiently firm evidentiary basis for the submission, particularly as there is no evidence of asbestos beneath the capping. Even if there were such evidence, it is unlikely that the asbestos found by Mr Ellis in the hardstand was brought up from the landfill beneath the capping given that the asbestos found in the hardstand was nearly all within 0.1 metres of the surface. As for the second hypothesis (which was the fact) of pushing some asbestos into the ground with the bobcat in the process of reloading skip bins, I do not see how this assists the respondents. Indeed, it was Michael Slade who usually operated the bobcat to undertake such a task, and both respondents gave instructions in that regard. Since the evidence indicates that that process occurred right next to stockpiles, I cannot see how it can explain asbestos found in hardstand well away from stockpiles. The hypothesis of other employees or trespassers depositing some of the asbestos is too speculative.
Most of the asbestos found by Mr Ellis was in the hardstand area in the northern half of the Premises and Stockpile 1, together comprising approximately the northern half of the Premises. They were created early in the term of the first lease. The hardstand was created first, across the majority, if not the whole, of the northern half of the Premises, then Stockpile 1 was placed on top, in the north-eastern quartile of the Premises. Among the material used in that hardstand area was gravel (road base) already on the Premises that the lessee was permitted to use under the terms of the first lease. During the first week after commencement of the first lease, and on later occasions during the term of the first lease, Barry Slade told Mr Scott of Council they had purchased bricks to increase the hardstand area. The hardstand was initially installed at the front gate and extended to an area in the middle of the Premises, and later towards the rear of the Premises.
Stockpile 1 was created from material transported from the former Site of the business at Lindsay Noonan Drive. It seems that another stockpile, probably Stockpile 7, was also created during the term of the first lease.
Mr Ellis found asbestos in the trommel stockpile. The trommel, for processing non-recyclable material, was operational and processing commenced by 12 January 2012. The respondents submit that because processing was commenced during the second lease, the asbestos found in the trommel stock pile must have been placed there by the Company and that therefore the Company caused the resultant pollution incident. I do not accept the submission. An email of 12 January 2012 from Barry Slade to Council said that Stockpile 1 (the material from Lindsay Noonan Drive) had more fines in it than our other stockpile, and indicated that within the next week they would be able to finish processing the current stocks and "make a start on the Lindsay Noonan material". On 2 February 2012 Barry Slade told Council that Michael and he had decided to close their business and effective immediately they would cease trading. Having regard to this correspondence, in my view it was reasonable for Council to suspect that the asbestos found in the trommel stockpile came from Stockpile 1, which was placed on the Premises early in the term of the first lease.
In Barry Slade's letter to Council of 2 February 2012, he stated that they had complied with Council's 1 September 2011 direction that they not bring new waste to the Site for processing and that all new waste be transferred to landfill: above at [60], [69]. Although Council's 12 December 2011 letter suggests that this statement may not have been entirely correct, nevertheless, on the basis of this statement, it was reasonable for Council to suspect that the materials on the Premises when they were vacated at the end of April 2012, were all placed there before the Council's 1 September 2011 direction and during the currency of the first lease.
Even if, as the respondents submit, Stockpile 1 was added to after the second lease was concluded, it was still reasonable for Council to suspect that the asbestos found there by Mr Ellis was in the material from Lindsay Noonan Drive.
Mr Denzil Searle gave evidence that asbestos was left on the Premises early in the term of the first lease and the involvement of the respondents in that process. He worked as a truck driver for the business from 2008 to 13 July 2011. His primary duties were the pickup and delivery of skip bins. He testified, and I accept, that:
1. He collected full skip bins from customers and brought them to the Premises.
2. When there was no immediate need for an empty skip bin, he would remove the full skip bin from the back of the truck and leave it on the ground at the Premises.
3. When there was a shortage of skip bins to be sent out to customers:
1. he would back the truck up to within a couple of metres of an existing pile of waste and empty the skip bin on the ground;
2. he would then load the empty skip bring back on the truck and take it to a customer that needed an empty skip bin.
1. There were times when he emptied the skip bin and he could see what appeared to be asbestos material, which had been in the bottom of the bin and only became visible when it was emptied.
2. When he identified material that appeared to be asbestos in the waste emptied from the skip bin, the first thing he did was go and see one of the respondents and tell them about it. That respondent would then come over to the pile of waste with the material and tell him and other staff what to do about it.
3. On multiple occasions the respondents said words to the effect: "Pick up as much of the asbestos as you can and put it back in the skip bin. Whatever is left over just push it into the pile."
4. The material was scooped up using a bobcat or by hand. The times that he helped clean up material that appeared to be asbestos, he could see there were lots of smaller fragments of material that were not collected and put in the skip bin, but were pushed into the larger piles of waste.
In cross-examination and submissions, challenges were made to the accuracy and reliability of Mr Searle's evidence and otherwise as to his credit, including whether he held a grudge against Barry Slade such as to influence his adverse evidence. The respondents in evidence disputed a number of aspects of Mr Searle's evidence including his evidence as to the verbal instruction they gave and his evidence that he picked up pieces of asbestos by hand and scooped up material with a bobcat. Their evidence indicated that if there was asbestos was found, the process was to reload the bin and send it back to the customer. In large measure that is consistent with Mr Searle's evidence. I have taken all this into account but am left with the impression that Mr Searle was a reliable witness whose evidence I should prefer where it conflicts with the respondents' evidence. However, in relation to the use of the bobcat to scoop up material containing asbestos and return it to the skip bin, Mr Searle said he sometimes used the bobcat whereas Michael Slade said it was he who always operated the bobcat. I find that Michael Slade usually operated the bobcat, but there were occasions when Mr Searle operated it.
It is convenient at this point to summarise the main aspects of the respondents' evidence:
1. Barry Slade was an employee of Michael Slade during the time that the latter was the proprietor of the business:
2. Barry Slade drafted much of the correspondence to Council and the EPA etc and handled negotiations with those parties.
3. Barry Slade made all procedural manuals, including instructions for truck drivers in the handling and inspection of skip bins, including the handling of asbestos.
4. After Michael Slade signed the first lease, the process of the construction and implementation of the site plan in running the business was Michael Slade's job. Over the first nine months, Barry Slade developed a large number of procedural documents including procedures for transporting and the safe handling and unloading of skip bins, and procedures for the inspection, discovery and handling of asbestos in skip bins.
5. Barry Slade recalled dealing with the general public for the transfer of asbestos on a couple of occasions. People other than licensed builders were usually dissuaded from bringing asbestos to the site due to the amount they were charged for dealing with it. The potential problem with asbestos came from owners on small renovation jobs. All truck drivers had instructions on what to look for on these jobs. On returning bins to the yard they were inspected on the top for anything suspicious, they were then turned over and anything on the bottom of the bin became instantly obvious. Barry Slade testified that if "we" discovered asbestos, all the material was scooped up by the bobcat and shovel and put back in the skip and returned to the client. Michael Slade operated the bobcat. Barry Slade remembered four skip bins being discovered with asbestos in them. On one of those occasions he contacted the EPA seeking advice and in relation to that occasion he said "we" took them back and the client sorted out the asbestos and "we" took the rest of the rubbish to landfill.
6. Barry Slade negotiated the purchase of two other businesses and provided $25,000 for the bond under the first lease.
7. From about August 2011 both respondents had discussions with Mr Scott of Council on the latter's inspections of the Premises in relation to compliance with requirements of the leases.
8. In June 2011 Barry Slade purchased the Company and they both became directors because at that time Barry Slade thought that a company required two directors and he did not realise it only needed one until about December 2011.
9. Notwithstanding the formation of the Company and the second lease to the Company and the fact that the respondents were equal shareholders, Michael Slade's evidence was that: "The business essentially remained mine".
[10]
REASONABLE SUSPICION THAT RESPONDENTS CAUSED POLLUTION INCIDENTS
This case is not concerned with determining with whether the respondents caused the pollution incidents, and it is therefore inappropriate to make any findings in that regard. This case is concerned with determining whether Council's subjective suspicion that the respondents caused the pollution incidents was objectively reasonable.
As I have earlier held, the operation of the waste facility on the Premises caused asbestos to be left littered throughout the Premises resulting in pollution incidents, and it was reasonable to have suspected that the asbestos or most of it was deposited on the Premises and pollution incidents occurred during the currency of the first lease and before September 2011, and much of it early in the term of the first lease: above at [108]-[113]. However, in my view, it makes no difference when during the currency of the two leases the asbestos was deposited on the Premises and pollution incidents occurred because the control, responsibility and authority of the respondents in relation to asbestos was the same throughout the currency of both leases. As the legal principles on causation reviewed earlier show, the corporate veil provides no defence in this context and the status of the proprietor as incorporated or unincorporated is irrelevant where an individual is the target of liability and has control or authority and responsibility to prevent and correct the relevant act.
This was a small business and throughout the term of both leases the respondents were, and appeared to be, its only managers. Michael Slade was the formal owner of the business at the commencement of the first lease. The lessee of the second lease was the Company, of which the respondents were the only directors and equal shareholders. Notwithstanding that the second lease was to the Company and that letters were written on the Company letterhead, the evidence is unclear as to whether, in addition to becoming the second lessee, the Company ever did take over and operate Michael Slade's business. According to Michael Slade's evidence, notwithstanding the advent of the Company the business remained essentially his. The correspondence from Barry Slade to Council reviewed earlier created the impression that the respondents were both in charge of operations, and justified suspicion that they were. The respondents both had management authority and responsibility for asbestos removal practices. Barry Slade wrote the practices. They were both involved in implementing them. Michael Slade generally operated the bulldozer used to implement the practices. When an employee operated the bulldozer, they gave him instructions as to what to do.
The waste facility operation involved bringing waste onto the Premises which, as the respondents were well aware, from time to time included asbestos. The respondents created, adopted and were involved in the implementation of procedures for the inspection, discovery, handling and removal of asbestos. That system failed to prevent asbestos being left on the Premises, resulting in pollution incidents. Just as in Alphacell the failure of pumps to prevent overflow from settling tanks led to the discharge of polluted water into a stream, so in this case the failure of asbestos removal procedures to prevent asbestos from being left on the Premises led to pollution incidents. The respondents had, and it was reasonable to suspect they had, authority and responsibility to prevent or correct asbestos being left on the Premises, and failed to do so. They are accountable because of the responsibility and authority of their positions for the conditions that gave rise to the pollution incidents. It is unnecessary to go further but, in addition, Michael Slade usually operated the bulldozer that did not always return asbestos found in waste to the skip and they both gave instructions to another operator of the bulldozer that was causative of asbestos remaining on the Premises.
The fact that someone else (the Company, another employee) also caused the pollution is not inconsistent with the respondents having caused it. As Lord Hoffman observed in Empress, it need not be either a company or its directors who caused the pollution incident: all may have done so. The question is whether it was reasonable for Council to suspect that the respondents caused the pollution incident. In my opinion, the answer is in the affirmative.
It is unnecessary but for completeness I address and reject a further discrete submission by Council. On the premise (which I have not accepted) that only the Company could have been reasonably suspected of causing a pollution incident, Council submits that the corporate veil should be lifted so as to place liability on the respondents as its directors and shareholders on the discrete basis that the Company was formed with the dominant purpose of avoiding Michael Slade's obligations under the first lease: Al-Shennag v Statewide Roads Ltd [2008] NSWCA 300 at [42]. The submission is based on three matters. First, the proposition that by the time the first lease terminated in September 2011, Michael Slade was in breach of a number of its conditions. Secondly, Barry Slade's notes of a meeting with the EPA in August 2012 where he said that when the EPA went on Site on 9 May 2012 "we were not the occupiers of the site", Council had taken a bond to remediate the Site and it was therefore a commercial matter between Council and the Company over the site clean-up. Thirdly, the Company in May 2012 apparently had no assets following the auction sale of the plant and equipment used at the Premises and discharge of liabilities relating thereto. I reject the submission because I am not satisfied that the Company was formed for the alleged purpose. In July 2012 Barry Slade requested assignment of the lease to the Company. The Council agreed to the second lease, and the Minister consented in September 2012. Council conceded in submissions that if Michael Slade was in breach of the first lease, he remains liable for any breach. Moreover, Council entered into the second lease with its eyes open. There is no element analogous to fraud. The mere fact that the Company was apparently insolvent at the end is not of itself sufficient.
[11]
ORDERS
The orders of the Court are as follows:
1. Judgment for the applicant against the respondents for a debt under s 105(1) of the Protection of the Environment Operations Act 1997 in an amount to be assessed by the Court or as agreed by the parties.
2. Order that the respondents pay the applicant's costs of the proceedings except in relation to the issue of quantum.
3. The exhibits and the Court Book are to be returned.
4. The matter is to be listed on 28 August 2015 for directions in relation to a trial on the issue of quantum.
[12]
ANNEXURE 40313-14 Kempsey SC v Slade [2015] NSWLEC 135 (2.87 MB, pdf)
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 24 August 2015
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Category: Principal judgment
Parties: Kempsey Shire Council (Applicant)
Michael Phillip Slade (First Respondent)
Barry Phillip Slade (Second Respondent)
Representation: COUNSEL:
M W E Maconachie (Applicant)
A M Pickles and N G Hammond (Respondents)