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In Brief

A recent prosecution of a company and its directors is a reminder that all information provided to the NSW Environment Protection Authority (EPA) must be true and not false or misleading.

What Has Happened?

The NSW Land and Environment Court (LEC) in EPA v Wyanga Holdings; EPA v Cauchi [2014] NSWLEC 68 recently found a company and its directors guilty of supplying the EPA with misleading information in its Annual Return. The LEC held that this amounted to a breach by the company and each of its directors of s 66(2) of the Protection of the Environment Operations Act 1997 (NSW) (POEO Act), which carries penalties of up to AUD 1m for corporations and penalties of up to AUD 250k for directors, rather than the lesser offence of submitting a false and misleading certificate. The penalties for the company and its directors are still to be determined by the LEC.

Who Needs To Know?

All companies with an Environment Protection Licence (EPL) and their directors.

What Are The Lessons?

• Directors incur individual liability under the POEO Act in certain circumstances. 
• All information supplied to the EPA in relation to an EPL must be true and not be false or misleading. Otherwise, the company and its directors each face the significantly higher penalties imposed by s 66(2) of the POEO Act.
• Directors must ensure that comprehensive review mechanisms are in place before submitting any information to the EPA, including information in relation to Annual Returns.

Background

The directors submitted an Annual Return in accordance with the EPL, but failed to disclose that the company had extracted 96,597 tonnes of gravel and rock, exceeding the 50,000 tonnes limit in the EPL. Justice Craig held “the failure to disclose the non-compliance … was misleading in a material respect” both because it implied that the company had complied with the condition and because of the scale of the breach.

The company and its directors were each charged separately under s 66(2) of thePOEO Act for providing false and misleading information to the EPA in the Annual Return. They attempted to defend the charge by arguing that because the information was contained in an Annual Return, the EPA should have charged them under the provision in s 66(4) of the POEO Act, of providing false and misleading certificates. This charge carries a significantly smaller maximum penalty of AUD 250k for a corporation and AUD 120k for individuals. Justice Craig rejected this argument, finding that s 66(2) could extend to all information provided to the EPA. Justice Craig explained that the difference between the two sections was that s 66(2) applied to holders of an EPL, while s 66(4) applied to persons who gave a certificate but were not necessarily the holders of the EPL.

What Should Directors And Corporations Do?

This decision involves a relatively small company but the principles apply equally to large corporations. Directors and senior management need to put in place appropriate:

• systems,
• procedures,
• training, and
• audits

in relation to all information which is provided to the EPA. It is important to remember that failing to give a complete picture, including by withholding information which is known to the company, can amount to providing misleading information. This has important implications in relation to disclosure obligations under an EPL in the event of an environmental incident.

For further information, please contact:

Peter Briggs, Partner, Herbert Smith Freehills

[email protected]

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