Minister for Planning v Coalpac Pty Limited

Bentley v BGP Properties Pty Ltd (2006) 145 LGERA 234 CASES CITED: Camilleri's Stock Feeds Pty Limited v Environment Protection Authority (1992) 32 NSWLR 683 Director of Public Prosecutions (Commonwealth) v Said Khodor El Kahani (1990) 21 NSWLR 370 Penrith City Council v 24/7 Waste Bins Pty Limited [2002] NSWLEC 186

APPLICANT: Mr I Lloyd QC with Mr M Seymour SOLICITORS: Holding Redlich LEGAL REPRESENTATIVES: RESPONDENT: Mr T Howard SOLICITORS: Sparke Helmore

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

JUDGMENT 1 HIS HONOUR: Coalpac Pty Limited has pleaded guilty to a charge that between 7 September 2006 and 6 September 2007 it committed an offence contrary to s 125 of the Environmental Planning and Assessment Act 1979 (EPA Act). The offence is that on land known as Lot 1 DP 180204 and Lot 113 DP 877190 Part Ben Bullen State Forest, also known as the Invincible Colliery, Coalpac carried out development under a project approval contrary to condition 6 of schedule 2 of the approval in that it produced more than 350,000 tonnes of saleable coal in a year. Agreed facts 2 There is an agreed statement of facts, as follows. 3 The defendant owns and operates the Invincible Colliery at Bullen Bullen about twenty kilometres north-west of Lithgow. 4 The Invincible Colliery is located on the western slopes of the Great Dividing Range on an elevated plateau intersected by rugged cliff-line valleys. To both the north and west of the site, the topography rises relatively steeply. The colliery can be accessed by its main entrance from the Castlereagh Highway. 5 On or around 31 October 2005, pursuant to Part 3A of the EPA Act, the defendant lodged a major project application dated 27 October 2005. In or around November 2005, the prosecutor determined that the application was subject to Part 3A. The prosecutor considered the application to be duly made on 16 February 2006. The application sought approval for the proposed extension of the Invincible open cut mine and rehabilitation activities (the project). 6 On 7 September 2006, the prosecutor granted project approval (the approval) to the defendant for the project. Condition 6(a) of schedule 2 of the approval provides: The proponent is permitted to:

(a) produce up to 350,000 tonnes of saleable coal a year from the project. 7 For the purposes of these proceedings, the annual production of coal permitted by condition 6(a) of schedule 2 of the approval is measured during the period between 7 September 2006 and 6 September 2007 (approval year). 8 The amount of saleable coal produced by the defendant in the approval year was 635,277 tonnes. This was reported to the Department of Planning in accordance with condition 4 in schedule 5 of the approval in the defendant's Annual Environmental Management Report. 9 The total daily deliveries from the project for the approval year were 597,129.9 tonnes as reported in the verified statement of total daily amounts dated 5 June 2008 by the defendant. A further 39,773.6 tonnes was purchased by the defendant for delivery during the approval year, whereby total deliveries on behalf of the defendant during the approval year were 636,903.5 tonnes. 10 On or around 4 April 2007, an application for modification dated 21 March 2007 was lodged with the prosecutor by the defendant (modification 1). Modification 1 was to allow the processing (washing) of coal recovered from the project at the on-site coal preparation plant. On 4 June 2007, the application for modification was approved by the prosecutor. 11 On or around 11 April 2007, an application for modification dated 4 April 2007 was lodged with the prosecutor by the defendant (modification 2). Modification 2 was to allow the introduction of auger mining techniques to improve coal recoveries and an increase in approved coal production from 350,000 to 500,000 tonnes a year from the project. On 6 December 2007, this application for modification was approved by the prosecutor. Additional conditions relating to community enhancement contributions, noise mitigation measures, a pollution reduction program, transport route restrictions, and land acquisition requirements were inserted into the approval. 12 On or around 6 September 2007, a major project application for the Invincible open cut coal mine - extension (the proposed project) dated 17 August 2007 was lodged with the prosecutor by the defendant. The proposed project was to allow an increase in annual coal production from 500,000 to 900,000 tonnes a year over a maximum period of eight years, expanding open cut and auger mining activities, crushing and processing coal on site, and trucking coal to Mount Piper. The proposed project has not been determined by the prosecutor. 13 It is not alleged that the defendant is in breach of any conditions in schedules 2 to 5 of the approval other than condition 6(a) in schedule 2. 14 The adverse environmental impact generated by the circumstances identified in the prosecutor's summons and charge was the lost opportunity for prior environmental assessment before the activity was carried out. The environmental assessment carried out for the project approval application, particularly in relation to impacts associated with traffic, dust and noise, was based upon the proposed rate of extraction. 15 The defendant has co-operated to the fullest extent with the enquiries made by the prosecutor in relation to the offence. 16 There is no record of any prior environmental offence by the defendant. 17 The defendant's profit and loss statement for the approval year is in evidence and I consider it below. Mr Follington's evidence 18 The following evidence was given by Mr Ian Follington, who has been the managing director of the defendant since November 2006 when a new major shareholder of the defendant came upon the scene. I accept his evidence. 19 In November 2006, the defendant prepared a document called "Overview of Existing Planned Developments for 2006 to 2012" which it lodged with the Department of Planning to initiate discussion regarding increased production. A presentation was made to officers of the Department prior to lodgement. The document contemplated production at the rate of one million tonnes per annum. There was dialogue between the defendant and the Department thereafter. One of the issues canvassed was the option of seeking to increase production by modifying the existing Part 3A project approval.

20 In early 2007 Mr Follington came to the understanding that the Department would be prepared to treat an application to increase production up to 500,000 tonnes as a modification but that anything greater than that would need a new Part 3A project approval. He believed at that time that an application to modify the existing Part 3A approval would be determined much faster than a fresh Part 3A application.

21 Accordingly, once the defendant became aware that it could apply for an increase in production of up to 500,000 tonnes per annum by way of a modification application, it decided to make that application and then follow it up with a new application to increase the annual tonnage to about one million tonnes. Mr Follington says that the reason why the defendant decided to take it in two steps was because it was aware of its contractual supply obligations and thought that it could obtain approval initially to produce up to 500,000 tonnes to enable it to meet its immediate supply obligations to Delta Electricity pending determination of a fresh application to produce up to about one million tonnes per annum.

22 In about March 2007, it became clear to Mr Follington that production for the year ended June 2007 could exceed 350,000 tonnes per annum. A formal application for approval to mine coal at the rate of 500,000 tonnes per annum was lodged with the Department in April 2007. Mr Follington's belief at that time was that the defendant could obtain an approval of the modification application within a couple of months. He accepts that in hindsight his expectation was unrealistic. In any event, relying upon the expectation that by about June 2007 the defendant would have an approval to produce up to 500,000 tonnes per annum, Mr Follington made the decision to maintain the level of production. He was aware by the end of June that it would exceed the 350,000 tonne limit but acted on the expectation that it would be within the anticipated 500,000 tonne limit. The amount of saleable coal in fact produced in the year ending 30 June 2007 was 450,684.1 tonnes.

23 The strategy to which Mr Follington referred was supported by his fellow directors whom he kept informed. The defendant purchased all additional tonnages of coal available in the market at that time from a third party and was thereby able to limit the saleable production from the Invincible Colliery to below 500,000 for that financial year. Mr Follington is confident that the defendant has satisfied the requirements of the Department in respect of the pending application to increase production to 900,000 tonnes per annum. He notes that there is an issue that remains to be resolved as to how much land the defendant would be required to provide as an offset to the proposed proposal, and this is the subject of some consultation at the moment.

24 Mr Follington says, and I accept, that the defendant now recognises that it was under an obligation to constrain its output within the terms of the condition of the approval that production be limited to 350,000 tonnes per annum and that the judgment it exercised to allow production to exceed that limit pending further approval was in error. The defendant has subsequently taken formal steps to regularise the amount of permissible production in order for it to be consistent with its contractual commitments. He notes that there are no identified adverse environmental impacts as a consequence of the breach so far as he is aware. He also notes that the company has provided modest support to some community organisations, which he particularises.

Revenue gained 25 The defendant's verified statement of total profit made from the sale of coal from the Invincible Colliery for the period September 2006 to October 2007 forms part of the agreed facts. It is not a detailed document and is not audited. It shows for the approval year gross revenue of approximately $23.4 million less cost of goods sold of approximately $19.9 million, giving a gross profit from trading of approximately $3.5 million. It then shows expenses of approximately $4.4 million, resulting in a loss before income tax of a little over $908,000.

Principal facts 26 Perhaps the principal facts emerging to this point are these:

(a) project approval for the operation of the colliery was issued on 7 September 2006; (b) condition 6 of schedule 2 imposed a limitation on the maximum amount of saleable coal that could be produced under the approval in the amount of 350,000 tonnes per year; (c) in the year following the issue of the approval, the defendant produced more than 350,000 of saleable coal, namely 635,277 tonnes, an amount roughly eighty per cent more than permitted, which contributed to the revenue referred to at [25] above.

The offence 27 Section 75D of the EPA Act provides: Minister's approval required for projects

(1) A person is not to carry out development that is a project to which this Part applies unless the Minister has approved of the carrying out of the project under this Part.

(2) The person is to comply with any conditions to which such an approval is subject. 28 By force of condition 6 of schedule 2 of the approval, the carrying out of development on the site that produced more than 350,000 tonnes of saleable coal would amount to a carrying out of development without the approval of the Minister contrary to s 75D(2) of the EPA Act. That is sufficient to attract criminal liability under s 125. 29 The defendant pleaded guilty to the charge at the first return of the order on 11 July 2008. 30 This is the first occasion that the Court has been required to penalise a person for an offence under s 125 relating to a charge of failing to carry out a project in accordance with an approval. Nature of the offence 31 The prosecutor submits that an offence involving a major project under Part 3A of the EPA Act should be viewed more seriously than an offence involving a development under Part 4 of the EPA Act because major projects have the potential to generate huge revenues and profits. The defendant, on the other hand, submits that:

(a) the subject offence has the same character as an offence of contravening a condition of development consent issued under Part 4 of the EPA Act ; (b) although Part 3A is reserved for major projects, the contravention of a condition of a Part 3A consent in terms of general characterisation is neither more nor less serious than contravention of a condition of a Part 4 development consent; (c) the same maximum penalty applies. The objective seriousness in any particular case, whether for contravention of a Part 3A approval or a Part 4 consent, will turn principally upon the nature and purpose of the condition contravened, and the consequences of the contravention. 32 I consider that the defendant's submissions are to be preferred subject to one significant qualification. Major projects under Part 3A certainly have the potential to generate huge revenues and profits. If substantial revenues and profits are generated as a result of an offence, or they are the motive for an offence, that may bear adversely upon the defendant in sentencing. Nature of the condition contravened 33 The condition contravened was one of exceeding authorised production. The condition imposed an annual production limit of 350,000 tonnes of saleable coal from the Invincible Colliery. It is common ground that there was a very substantial exceedence of this limit during the charge period in the order of eighty per cent. 34 The determination of objective seriousness warrants consideration of why that annual production limit was imposed. The environmental assessment which supported the original Part 3A application indicates that the proposal for that limit was market driven. That is to say, it was a limit nominated by the defendant on the basis of it being sufficient to enable it to fulfil the contracts it won or thought it would win for the ensuing three year period. The defendant submits, without contest, that it was not a limit which was set because of any identified environmental constraints. I accept the submission. 35 It appears also from the environmental assessment which accompanied the original Part 3A application that under previous operations and consents prior to the colliery temporarily ceasing production in 2001, the colliery had been permitted to transport, and therefore it seems must have been permitted to produce, two million tonnes of coal per annum.

36 It is common ground that if a higher production limit had been applied for in a timely way it would have been granted subject to environmental assessment, and there is little doubt that the environmental assessment would have been satisfactory. Objective considerations 37 The original development application for production of up to 350,000 tonnes per annum was such that the environmental assessments which were carried out in relation to dust, noise and traffic impacts to support it were based upon the premise that that would be the maximum extraction from the mine in a year. The prosecutor submits, and I accept, that it was for this reason that condition 6 of schedule 2, which contains the production limitation, was imposed. There was no environmental assessment carried out to assess the impacts of producing more than 350,000 tonnes in a given year. As it turns out, the only environmental impact caused by the commission of the offence is the lost opportunity for prior environmental assessment before the increased production was carried out. The commission of the offence did not cause nor was it likely to have caused any substantive harm to the environment. 38 In that regard it may be noted that in December 2007, the Minister approved the defendant's application to increase annual production to 500,000 tonnes per annum, and currently the Minister is considering a further application to increase production to 900,000 tonnes per annum. Although the Department of Planning has not completed its assessment, there has nevertheless been an extensive and detailed environmental assessment submitted in support of the application, which has concluded that the proposed increase would not have any unacceptable impacts on the environment nor any unacceptable amenity impacts. That also appears to have been the Department of Planning's assessment of the defendant's earlier proposal to increase production to 500,000 tonnes prior to the Minister's approval of that proposal. 39 There is no suggestion that anyone has complained about this offence. Rather, the prosecution has been brought as a consequence of the Department of Planning acting upon the exceedence as disclosed by the defendant as part of its annual reporting.

40 There are other objective features, as follows: (a) the maximum penalty for this offence prescribed by Parliament under the EPA Act ; (b) the need for general deterrence; (c) the need for specific deterrence; (d) the gravity of the offence that was committed. Maximum penalty 41 The maximum penalty for an offence under s 125 of the Act is provided for under s 126 and is a fine not exceeding $1,100,000. The prescribed maximum penalty "reflects the public expression of Parliament of the seriousness of the offence": Camilleri's Stock Feeds Pty Limited v Environment Protection Authority (1992) 32 NSWLR 683 at 698. In Director of Public Prosecutions (Commonwealth) v Said Khodor El Kahani (1990) 21 NSWLR 370 at 380, the Court of Criminal Appeal held: As in all matters of sentencing for offences provided by statute, it is essential first to determine the maximum sentence which may be law be imposed. Not only does this identify any alternatives provided by Parliament. It indicates to the Court, in a general way, the seriousness with which Parliament, representing the people, has viewed the offence. 42 The maximum penalty provided under s 126 was increased from 200 penalty units to 1,000 penalty units in 1992 and to 10,000 penalty units in 1999. An increase in the statutory maximum sentence is a significant matter to take into account when exercising the sentencing discretion. It represents a change in the community expectation as to the appropriate sentence. General deterrence 43 The prosecutor submits that there is a need to impose a penalty that will act to generally deter others from carrying out development otherwise than in accordance with development approvals granted under the EPA Act, and that is one of the main purposes why Parliament has created the offence. I accept the submission. In Bentley v BGP Properties Pty Ltd (2006) 145 LGERA 234 at [139] - [140] Preston CJ said: A sentence must serve the purpose of general or public deterrence. It is the duty of the court to see that the sentence which is imposed will operate as a powerful factor in preventing the commission of similar crimes by those who might otherwise be tempted by the prospect that only light punishment will be imposed.

This factor is particularly relevant to environmental offences. Persons will not be deterred from committing environmental offences by nominal fines.

(citations omitted) 44 At stake is the integrity of the planning system which is harmed when a person carries out development before undertaking the required assessments and receiving approval. Individual deterrence 45 For reasons which are to me unclear, the defendant at the time focused on production for the financial year ended 30 June 2007 rather than the approval year which ended in September. It did make real endeavours to keep its production for the financial year below the 500,000 tonne modification approval for which it had applied and which was then pending. Even though the production reached in that financial year was still in breach of that existing production limit, I accept that the defendant was genuinely attempting to keep within the new limit for which it had applied and which it had mistakenly assumed would be granted by June 2007. 46 However, the defendant must have deliberately continued to produce between June and the end of the approval year, knowing that it would exceed even the new 500,000 tonne limit for which it had applied. Its motive was financial and, presumably, a desire to avoid being in breach of a supply contract. 47 I do not think this can be explained away, as the defendant has submitted, as merely a serious error in judgment in exceeding its production limit while awaiting permission to increase that limit to a higher level. It is a circumstance which I think does go to the need for individual deterrence. It is an aggravating feature. However, it is tempered by the fact that if the defendant had applied for an adequate increase in the production limit in a timely way, it seems that it would have been granted.

48 The prosecutor submits that, in addition to the commission of the offence for financial gain, an aggravating factor is that the offence involved ongoing activity which would fall within the description of a "series of criminal acts": s 21A(2)(m) Crimes (Sentencing Procedure) Act 1999. That was explained, I think, on the basis that from March 2007 the defendant was acting in an unbridled way knowing that it was committing a criminal act. I have earlier analysed that although that is in a sense true, I think the real sting in the defendant's conduct arises after June of that year.

Mitigating circumstances 49 The prosecutor acknowledges that of the mitigating factors described in s 21A(3) of the Crimes (Sentencing Procedure) Act 1999, the Court should have regard to the lack of a significant record of previous convictions and the plea of guilty. The defendant points to a number of matters which go beyond those two matters and which I accept. The defendant is now genuinely remorseful for having committed this offence. Its contrition has been conveyed directly to the Court by its managing director, Mr Follington, and is also evidenced by its plea of guilty and co-operation in respect of the investigation and proceedings. 50 There are, as the defendant submits, good prospects of rehabilitation and a low prospect of a recurrence of the offending conduct. However, as I think I have made plain, I am somewhat troubled by the conduct of the defendant particularly after June 2007. Nevertheless, I will take into account the company's contrition and its insight into the commission of this offence. It would appear, and I take into account, that the defendant has taken steps to ensure that it has remained within its production limit for the approval year from September 2007 to September 2008.

51 The prosecutor submits that no significant weight should be given to the absence of any record of other convictions. I do not accept the submission. It seems to me that a defendant who appears before the Court with an unblemished record is entitled to have that taken into consideration as of some significance. It appears also that the defendant is otherwise of good corporate character. The defendant, it seems, has co-operated fully with the prosecutor in relation to the investigation and also in relation to the preparation of agreed facts for the purpose of these proceedings. The prosecutor submits that such assistance does not make the defendant a person of positive good character or represent any particular assistance to authorities beyond that which is generally expected of the community. While it may not make the defendant a person of positive good character, I think that steps such as the defendant has taken are to be encouraged and should be taken into account in its favour. 52 As I have said, the defendant has pleaded guilty at the first available opportunity on the first return of the summons, and it is common ground that it is entitled to the maximum discount of twenty-five per cent for the utilitarian value of that plea.

Parity 53 The defendant's research indicates that the highest fine that has been imposed for any offence under the EPA Act is $95,000. That was in Penrith City Council v 24/7 Waste Bins Pty Limited [2002] NSWLEC 186, where the fine was imposed on a director of the corporate offender. That was a case in which the offender had used land for the purpose of sorting and storing waste without development consent over a period of several months. 54 It has not been suggested to me that any discernible pattern of sentencing by reference to characteristics of offences emerges in the authorities, other than the maximum penalty to which I have referred. I do not think that I derive much assistance from knowing what the maximum penalty has been in the past given the great variety of circumstances which arise in the cases. Conclusion 55 In the present case, notwithstanding the absence of actual environmental harm, there has been damage to the integrity of the planning system. The defendant acted quite intentionally over a significant period of time, particularly after June 2007, in committing this offence, in order to obtain a financial advantage. 56 Importantly, the defendant has, as a result, derived gross revenue amounting to millions of dollars. The defendant submits, and I accept, that the financial information before the court does not permit a reliable assessment to be made of the bottom line financial benefit to the defendant from the course of conduct in which it engaged beyond saying that it is in the hundreds of thousands of dollars rather than millions. It is plain that the defendant has derived substantial financial advantage from its conduct.

57 It is suggested on behalf of the prosecutor that on a scale of 1 to 10 the appropriate sentence is about 3 (i.e. towards the top of the bottom third of the range). One can see that if such a penalty were to be imposed, the defendant is quite likely to be ahead financially. Nevertheless, I accept in principle that, having regard to the totality of sentencing considerations, this case does belong more towards the lower than the upper end of the range.

58 In all the circumstances, in my opinion, a fine of $200,000 should be imposed. 59 The prosecutor seeks an order, which is unopposed, pursuant to s 122 of the Fines Act 1996 that half of the fine be paid to the prosecutor. I propose to make that order. The defendant has also agreed to pay the prosecutor's costs in the sum of $55,000. Orders 60 The Court makes the following orders:

1. The defendant is convicted as charged.
2. The defendant is fined the sum of $200,000.
3. Half of the said fine is to be paid to the prosecutor pursuant to s 122 of the Fines Act 1996.
4. The defendant is to pay the prosecutor's costs in the sum of $55,000.
5. The exhibits may be returned.

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.