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Telling porky pies to the EPA: Abattoir fined for false and misleading information

  • Legal Development 20 六月 2019 20 六月 2019
  • 亚太地区

  • 监管法规与调查

The NSW Land and Environment Court has handed down a judgment that provides a timely reminder not to provide false or misleading information to the Environment Protection Authority.

Telling porky pies to the EPA: Abattoir fined for false and misleading information

In Environment Protection Authority v Wollondilly Abattoirs Pty Ltd [2019] NSWLEC 72, Wollondilly Abattoirs Pty Ltd (Wollondilly Abattoirs) pleaded guilty to five charges concerning the supply of false reports required by conditions of an environment protection licence (EPL) to the Environment Protection Authority (EPA). This was in contravention of s 66(2) of the Protection of the Environment Operations Act 1997 (POEO Act), which provides a maximum penalty of AUD1,000,000 for a corporation and AUD250,000 in the case of an individual.

A separate prosecution was brought against the then general manager of the abattoir in Environment Protection Authority v Davis [2019] NSWLEC 79. Mr Davis likewise plead guilty to the same five offences.

Employee deliberately provides the regulator with false and misleading information

A condition of the EPL held by Wollondilly Abattoirs was to take an effluent quality sample from a specific pond on its premises once each quarter, have the samples analysed for certain pollutants, and provide the results of analysis to the EPA in a quarterly report and its annual return.

In 2017, Wollondilly Abattoirs provided to the EPA four quarterly reports which all attached a false certificate of analysis containing fabricated results for the samples required by the EPL. The certificate claimed to have been created by 'ALS Environmental', which is a trading name of Australian Laboratory Services Pty Ltd. However, the certificates were fraudulent as they had not been produced by or on behalf of ALS. The fraudulent certificates were prepared by an office manager of the Abattoir without the knowledge or authorisation of management.

The abattoir subsequently submitted to the EPA an Annual Return that contained false monitoring data for the effluent samples, surface soil samples and subsurface soil samples. One of the directors who signed the Annual Return conceded that he did not read the document before signing it.

When the offences occurred, the then general manager Mr Davis was aware that Wollondilly Abattoirs held an EPL, but was not aware of all of its conditions even though it was his responsibility for ensuring compliance with the EPL. Mr Davis also failed to notice during an extended period that the usual invoices were not being received by Toll (the courier) and ALS for any sampling.

Wollondilly Abattoirs had a history of non-compliance, with 11 penalty notices and five official cautions or warnings issued since 2002. Wollondilly Abattoirs was convicted under s 66(2) and s 221(2) of the POEO Act for supplying false and misleading information to the EPA and for furnishing information in purported compliance with a requirement made under the POEO Act, knowing that it was false or misleading in a material respect. Mr Davis also plead guilty and was convicted of five offences, being liable pursuant to s169(1) of the POEO Act as a person concerned in management of the Abattoir.

Orders made by the Court

The Abattoir successfully sought an order under s10A of the Crimes (Sentencing Procedure) Act 1999, for the proceedings to be disposed of without imposing any other penalty. Justice Pain did order the abattoir to pay AUD40,000 for the EPA's costs. Justice Pain recognised a number of objective and subjective factors, including that the offence was due to the actions of an employee, the financial situation of the company, cooperation with regulators, contrition, and measures taken following the incident to improve compliance. Justice Pain noted that any fine would have been minimal and would have had little deterrence value.

Mr Davis was fined a total of AUD12,000 and ordered to pay AUD40,000 for the EPA's costs. Justice Pain acknowledged the matter arose from unusual circumstances which (on the agreed facts) were not caused by Mr Davis’ actions, rather, his culpability arises from his failure to exercise due diligence in managing the process for complying with the licence conditions over a lengthy period of 12 months.

The relatively modest penalty ordered against Mr Davis may reflect the decision made by the EPA to pursue him under s169, not s169B of the POEO Act. An interlocutory decision was made in Environment Protection Authority v Wollondilly Abattoirs Pty Ltd; Environment Protection Authority v Davis [2019] NSWLEC 26 relating to the admissibility of evidence suggesting that Mr Davis was knowingly involved in the fraud. This was found by Justice Pain to be inadmissible on the basis of the principles in R v De Simoni (1981) 147 CLR 383 that circumstances of aggravation not alleged in the relevant indictment cannot be relied upon for purposes of sentence if those circumstances could have been made the subject of a distinct charge. Knowingly fraudulent behaviour is not an element of the executive liability provisions relied upon by the EPA, rather are elements of a separate offence in s169B of the POEO Act.

Recent trends to enforce 'false and misleading' disclosures to the EPA

The EPA's recent enforcement action shows that where the EPA detects falsehoods or misleading omissions, it is willing to take enforcement action. This is even where there is no evidence of environmental harm resulting from the falsehood. That the Abattoir was able to successfully obtain a s10A order in these proceedings is an unusual outcome, and likely reflective of the unusual circumstances where the senior management was unaware of the fraud. In the past, the Courts have issued penalties ranging from AUD4,000 - $80,000.

In Environment Protection Authority v Transpacific Industries Pty Limited; Environment Protection Authority v Transpacific Refiners Pty Limited [2010] NSWLEC 85 Transpacific Industries Pty Ltd (Transpacific) was prosecuted for providing inaccurate information in its annual return. The NSW Land and Environment Court found that the annual report was “materially false” due to the omission of particular sample results. Although the company did not intend to mislead the EPA as it was believed that the information was inaccurate so ought to be omitted, Justice Pepper considered that the Transpacific should have reasonably foreseen that the omission of the results would result in providing the EPA with false and misleading information. They were fined AUD30,000 and ordered to pay the prosecutor's costs of AUD40,000, and publish in three newspapers details of their offence.

Recently, the NSW EPA issued two fines of AUD8,000 each to Environmental Consulting Services Pty Ltd (ECS) due to providing the EPA with a report containing two false statements about waste characterised as excavated natural material[1]. The consultants also omitted to test for a number of substances required by the EPA.

Key takeaways for disclosures to the EPA

Environment Protection Authority v Wollondilly Abattoirs Pty Ltd is a cautionary tale for corporations and directors interacting with the EPA.

Some key lessons from this recent enforcement activity include;

  • It is important to disclose honest and accurate information to the EPA. If false and misleading information is reported, including by omission, a holder of an EPL who supplies the information or on whose behalf information is supplied could be fined a maximum of AUD1,000,000 in the case of a corporation.
  • The POEO Act also contains a number of other provisions which prohibit providing false or misleading information to the EPA. For example, s211(2) which requires that information or records provided to the EPA further to their investigation powers (such as a s191 notice) must not knowingly be false or misleading in a material respect.
  • The relevant directors and managers of a company holding an EPL should familiarise themselves with any licensing conditions. Directors and managers should exercise proper review and consideration of annual returns before signing them, and ensure there are proper processes for how annual returns or other information provided to the EPA are prepared.
  • Directors and managers should be aware of their personal duties of directors and managers under s 169 of the POEO Act, and potential for personal directors liability for the false and misleading offence under s 66. They should be aware of the due diligence standards expected of directors. The basis of Mr Davis' liability was a failure to exercise due diligence in properly making himself aware of licence conditions or notice fraudulent activity.
  • Companies should ensure that employees who are responsible for complying with EPLs are aware of their contents.
  • Companies should be mindful of the reputational risks of providing false and misleading information to the EPA. Irrespective of whether the EPA takes enforcement action, this has potential to undermine the confidence of the EPA in the company and the working relationship between staff and officers. This may sound in stricter licensing conditions, greater oversight by the EPA, or a failure to meet the requirement of being a "fit and proper" person to receive an EPL.
  • Similarly, even where the Court decides to issue a s10A order or relatively modest penalty, there can be other financial or commercial implications of such a conviction. This includes potentially having to disclose the offence in tenders or licence applications, or to insurers.

Please contact Jacinta Studdert or Kristyn Glanville from our regulatory & investigation team if you require any assistance concerning EPA investigations and environmental licencing conditions.

Footnote:
1. EPA NSW 'Environmental Consulting Services Pty Ltd fined for providing false waste report' (https://www.epa.nsw.gov.au/news/media-releases/2016/epamedia16082902)

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