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Restructure of Director and Manager Liability for Environmental Offences


Directors and managers liability for corporate environmental offences have been harmonised across Australia, with some amendments to make them a bit tighter, and some to make them more relaxed. The law will now focus on management systems, staff training, workplace culture and professional assistance in environmental management. The message: make sure you have the risk covered at all levels.

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Hunt & Hunt

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In this newsletter we look specifically at how the new nationalised regime affects pollution laws and contaminated land laws.  

The Miscellaneous Acts Amendment (Directors' Liability) Bill 2012 (Act) amended 46 separate Acts and Regulations by varying the instances in which directors and managers may be held automatically criminally liable for an offence committed by a corporation.

The Act implements the Council of Australian Governments' (COAG) guidelines that set out the circumstances in which directors' liability should apply.  Similar legislative reforms have been adopted across Australia in an effort to develop a "nationally consistent and principle-based" approach to laws governing the criminal responsibility of directors and managers for corporate offences.

In relation to environmental offences committed by a corporation, the Act introduces three new types of director and manager liability:

  1. Executive liability, which creates an offence on the part of a director or manager when a corporation commits an offence similar to existing rules;
  2. Special executive liability, which applies to the most serious environmental offences under the Protection of the Environment Operations Act 1997 NSW (POEO Act); and
  3. Accessorial liability, which creates an offence for a director or a manager who actively participates as an accessory to the corporate offence.

POEO Act

Previously, a director or manager was presumed to be criminally liable for the corporation's offence unless:

  1. the person could satisfy the court that he or she was not in a position of influence or control of the corporation; and
  2. took all due diligence to prevent the corporation from contravening the POEO Act. 

However, with the introduction of the Act, the presumption of director and manager liability has changed for some environmental offences under the POEO Act.

Executive liability offences

The new regime reverses the presumption of liability for executive liability offences. Nowadays, to be guilty of an executive liability offence, the Prosecution must prove to the court that:

  1. the person is a director, or is involved in the management of the corporation who is in a position to influence the conduct of the corporation in relation to the commission of the executive liability offence; and
  2. the director or manager knows or ought to have reasonably known that the executive liability offence would be, or is being, committed, and
  3. the director or manager fails to take all "reasonable steps" to prevent or stop the commission of that offence.

"Reasonable steps" are defined under the POEO Act to include, but are not limited to, such action (if any) of the following kinds as is reasonable in all the circumstances:

  • action towards assessing the corporation's compliance with regards to the executive liability offence, and ensuring that the corporation arrange regular professional assessment of its compliance with the provision giving rise to the offence.
  • action towards ensuring that the corporation's employees, agents and contractors are provided with information, training, instructions, and supervision appropriate to them to enable them to comply with the provision creating the executive liability offence so far as the provision is relevant to them.
  • action towards ensuring that any plant, equipment and other resources, and the structures, work systems and other processes that are relevant to compliance with the provision creating the executive liability offence are appropriate in all the circumstances.
  • action towards creating and maintaining a culture that does not direct, encourage, tolerate or lead to non-compliance with the provision creating the executive liability offence.

Executive liability applies to 20 environmental offences under the POEO Act. Offences that attract executive liability under the POEO Act include the carrying out of scheduled development works without a licence, failure to comply with clean up notices or a prevention notices, or providing misleading information about waste.

Special executive liability offences

Special executive liability however, retains the presumption of director and manager liability, and applies to 19 most severe environmental offences under the POEO Act. These include the failure to comply with prohibition notices and licence conditions, polluting land and air, use of land for a waste facility without lawful authority and failure to notify the EPA of pollution incidents.

For special executive liability offences, directors and managers must prove their innocence, and satisfy the court that:

  1. he or she was not in a position to influence the conduct of the corporation in relation to its carrying out of the special executive liability offence;
  2. he or she, if in such a position, used all due diligence to prevent the offence by the corporation.

The POEO Act does not define "due diligence".  However some guidance as to the meaning of due diligence may be ascertained from the definition of "reasonable steps" for executive liability offences.  Past case law also dictated that due diligence required directors to actively take an interest in the conduct of company affairs.

If found guilty of an a special liability offence, a director or manager can be fined up to $1,000,000 and/or 7 years imprisonment where the offence relates to a Tier 1 offence.

Accessorial liability

The Act inserts a new provision into the POEO Act for accessorial liability.  Section 169 of the POEO Act now states that a director or manager may be held liable as an accessory to a corporate offence if the individual:

  1. aids, abets, counsels or procures the commission of the corporate offence, or
  2. induces, whether by threats or promise, of otherwise the commission of the corporate offence, or
  3. conspires with others to effect the commission of the corporate offence, or
  4. is in any way, whether by act or omission, knowingly concerned in, or party to, the commission of the corporate offence.

The Prosecution has the onus of proving each element of the accessorial liability offence beyond reasonable doubt.

Contaminated Land Management Act 1997

The Act has also amended director and manager liability for a corporate offence under the Contaminated Land Management Act 1997 (CLM Act). 

Specifically, the Act reduces executive liability offences to three offences under the CLM Act.  These offences relate to a director or manager's requirement:

  1. to comply with a management order served on it.
  2. to comply with an ongoing maintenance order that is served on the person.
  3. notify the EPA in writing if land has been contaminated, as soon as practicable after the person becomes aware of the contamination.

The Prosecution must satisfy the court of the same elements for an executive liability offence under the POEO Act (stated above) for an offence under the CLM Act.  Similarly, the CLM Act includes a provision for accessorial liability of a director or manager for a corporate offence.

Other environmental legislation

The Act has also established executive liability offences and accessorial liability relating to environmental offences in each of the following environmental statutes:

  • Environmentally Hazardous Chemicals Act 1985,
  • Heritage Act NSW 1977 (only in relation to accessorial liability offences),
  • National Parks and Wildlife Act NSW 1974,
  • Pesticides Act NSW 1999,
  • Native Vegetation Act NSW 2003, and
  • Threatened Species Conservation Act NSW 1995.

What these changes mean for directors and managers

Although the Act reduces the circumstances that a director or manager may be held criminally responsible for an environmental offence committed by a corporation, a director and manager should not become complacent especially in relation to environmental offences under the POEO Act.

Directors and managers should ensure that a corporation under their management and control is compliant with all of its statutory obligations and conditions. This includes carrying out regular assessments of plant, premises and work systems. Further, directors and managers should be vigilant in ensuring that they are provided with and abreast of all relevant information regarding the environmental operation of the corporation at all times.

Should you require any further information, please contact our team below.

Contacts

Ned Boyce, Sydney +61 2 9391 3001 eboyce@hunthunt.com.au
Mark Byers, North Ryde +61 2 9804 5777 mbyers@hunthunt.com.au
Bill Hazlett, Melbourne +61 3 8602 9259 bhazlett@hunthunt.com.au
Egils Olekalns, Adelaide +61 8 8414 3342 eolekalns@hunthunt.com.au
Darren Miller, Perth +61 8 9488 1300 darren.miller@culshawmiller.com.au
Antony Logan, Hobart +61 3 6210 6213 alogan@hunthunt.com.au
Christine Osborne, Darwin +61 8 8924 2600 cosborne@huntnt.com.au

 

 

                   
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