Land and Environment Court of New South Wales CITATION : Environment Protection Authority v North Coast Plywood Products Pty Limited [2002] NSWLEC 236 PROSECUTOR Environment Protection Authority PARTIES : DEFENDANT North Coast Plywood Products Pty Limited FILE NUMBER(S) : 50065 of 2002 CORAM: Cowdroy J KEY ISSUES: Prosecution :- breach of licence condition LEGISLATION CITED: Crimes (Sentencing Procedure) Act 1999, s 10, s 22 Protection of the Environment Operations Act 1997, s 64(1), s 241 Cameron v R (2002) 187 ALR 65; Camilleri's Stock Feeds Pty Ltd v Environment Protection Authority (1993) 32 NSWLR 683; CASES CITED: Newcastle City Council v Pace Farm Egg Products Pty Ltd [2002] NSWLEC 66; R v Sharma (2002) 54 NSWLR 301; R v Thomson; R v Houlton (2000) 49 NSWLR 383 DATES OF HEARING: 20/11/2002 DATE OF JUDGMENT: 12/13/2002 PROSECUTOR Mr D Samuels (Solicitor) SOLICITORS Environment Protection Authority LEGAL REPRESENTATIVES: DEFENDANT Mr P Larkin (Barrister) SOLICITORS Lestar Manning Lawyers JUDGMENT: IN THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES 50065 of 2002 COWDROY J 13 December 2002 ENVIRONMENT PROTECTION AUTHORITY Prosecutor v NORTH COAST PLYWOOD PRODUCTS PTY LIMITED Defendant Judgment Introduction 1 By summons dated 10 September 2002 the Environment Protection Authority ("the EPA") charges North Coast Plywood Products Pty Limited ("the defendant") with an offence ("the offence") against s 64(1) of the Protection of the Environment Operations Act 1997 ("the POEO Act") in that it contravened a condition of Environment Protection Licence 3667 ("the licence"). The defendant has pleaded guilty to the charge and agreed to pay the EPA's costs of these proceedings in the amount of $8,000. Accordingly the Court is only required to determine the issue of penalty. Defendant's Operations and Premises 2 The defendant operates a factory manufacturing plywood at Lot 413 Murwillumbah Road, Kyogle ("the premises"). It is the second largest manufacturer of plywood in Australia and the largest employer in the Shire of Kyogle. The defendant has operated the factory since its inception in 1990 under the continued direction of its Managing Director, Mr Gregory Smith. 3 The factory is situated on land approximately 7 hectares in area. It comprises a plywood mill, staff car park, a log yard, log vat, stormwater dams and open spaces. There are also two boilers located on site. Water used in the manufacturing process is supplied by groundwater bores and wastewater is treated on site or stored for irrigation of adjoining pastures. The Offence 4 Section 64(1) of the POEO Act provides as follows:- (1) If any condition of a licence is contravened by any person, each holder of the licence is guilty of an offence. 5 The offence related to the breach of Condition O2 of the licence issued to the defendant which provides:- O2 Maintenance of plant and equipment O2.1 All plant and equipment installed at the premises or used in connection with the licensed activity: (a) must be maintained in a proper and efficient condition; and (b) must be operated in a proper and efficient manner. 6 The offence was discovered on 7 August 2001 when Kyogle Shire Council ("the council") informed the EPA that dark coloured water containing tannin ("the discharge") was found in waters in a roadside drain ("the receiving waters") on Fawcetts Plain Road, Kyogle. Council employees including the Senior Environmental Health Officer, Mr Michael Skinner, observed the discharge and noted an associated smell. They followed the path of the discharge and intermittently took samples of it. Tracing the flow path of the discharge they eventually ascertained that it was emanating from the defendant's property. Cause of the Discharge 7 The discharge resulted from a crack in the wall of a log vat used in the plywood manufacturing process. Logs must be debarked and softened in a heated water log vat as a preliminary stage of processing plywood sheets. The log vat is located on the premises above ground level and comprises a concrete walled open tank having a volume of 20,000 litres. Water in the vat is heated by means of steam circulated in pipes embedded in the walls of the vat. Two such log vats are located on the premises. 8 In July 2001 the defendant observed that a steam pipe embedded inside a vat had deteriorated and ruptured causing the concrete around the pipe to fracture. As a permanent repair of the vat required the plant to be shut down for several weeks a temporary repair was effected by securing a metal plate over the fractured concrete. In addition an instruction was issued that the vat was to be only half filled in order to prevent the water level reaching the metal plate. These measures were considered to be adequate to prevent the escape of liquid until permanent repairs could be undertaken during the shutdown of the plant in December 2001. 9 The discharge is believed to have resulted from the dislodgement of the temporary metal plate by a log, which then became wedged beneath the pipe resulting in water being forced up through the fracture and resulting in the discharge. The defendant concedes that it did foresee the metal plate could become dislodged but it denies the actual means by which water escaped was foreseeable. Matters to be considered in the assessment of penalty 10 Section 241 of the POEO Act prescribes various matters which the Court must consider in assessment of penalty. Relevantly to the present proceedings these factors are extent of harm caused, practical measures that may have been taken to prevent harm, foreseeability of that harm and extent of control over the causes of the offence. Section 241(2) allows the Court to consider any other matter which it considers to be relevant. Extent of harm caused or likely to have been caused by the offence (s 241(1)(a)) 11 The EPA concedes no actual environmental harm occurred to the receiving waters. Despite this concession the EPA maintains there remained the possibility of harm from the discharge. The authorities indicate that 'likely' in this context means a real chance or possibility environmental harm resulted from the offence: see Newcastle City Council v Pace Farm Egg Products Pty Ltd [2002] NSWLEC 66. 12 Ms Stephanie Wallace, an EPA environmental scientist who visited the site, reached the conclusion that the concentrations of tannin in the discharge were high and had the possibility of adversely affecting the receiving waters. However insufficient evidence was presented to the Court for it to determine beyond doubt that the offence was likely to have caused environmental harm. Practical measures that may have been taken to prevent, control, abate or mitigate the harm (s 241(1)(b)) 13 As detailed above the defendant took various temporary measures in order to avoid leakage from the tank. The evidence indicates these measures were a reasonable response to the fracture of the vat wall at the time they were implemented. The liquid contained in the vat was not of a hazardous nature. Although this fact does not negate the need for effective preventative measures, it is relevant to the determination of the practical measures which should reasonably have been taken. The temporary measures implemented were genuinely believed by the defendant as being sufficient to prevent any leakage. While in hindsight the measures proved to be inadequate the Court finds that the defendant acted reasonably to prevent leakage in the short term. 14 The fractured pipe was discovered less than a month before the offence took place and permanent repairs were planned for December 2001. Although the Court has not been provided with evidence of the precise cost of the permanent measures, it is accepted that they have now been carried out. Accordingly, it cannot be said that the defendant was careless in implementing permanent repairs. Foreseeability of harm likely to have been caused by the offence (s 241(1)(c)) 15 The Court is required to consider the foreseeability of contaminated water escaping from the vat and causing adverse environmental impact. The defendant foresaw the risk of water escaping through the damaged wall of the vat. However the installation of the metal plate and the operating instructions relating to the water level in the vat were intended to prevent water escaping from the vat. Although the evidence establishes it was foreseeable that a log could dislodge the metal plate, such occurrence alone would not have allowed water to escape. The escape resulted from a combination of factors, being the displacement of the metal plate and the jamming of a log in the vat. Even the lowered water level was inadequate to prevent the discharge. 16 Accordingly it was unique circumstances which allowed water to escape from the vat which were not foreseeable. Such conclusion is consistent with the Court's earlier finding that the defendant believed it had implemented appropriate measures to contain any leakage in the short term. The extent to which the defendant had control over the causes that gave rise to the offence (s 241(1)(d)) 17 The defendant does not deny that it had ultimate control over the maintenance and repair of facilities within the factory. Mitigation 18 The defendant has not been convicted previously of any environmental offences. The EPA had issued the defendant with two infringement notices prior to the offence. The first related to a failure to operate pollution control equipment on 8 April 1998 resulting in a fine of $500 and the second for a breach of condition O2 of the licence on 25 July 2000 which resulted in a fine of $1,500. The Court notes that the second infringement occurred in relation to a breach of the very same condition of licence as is the subject of these proceedings. The Court accepts that each infringement is of a relatively minor nature. 19 The defendant entered a plea of guilty at an early stage and assisted the EPA in its investigations. The utilitarian value of a plea of guilty will generally entitle a defendant to a discount in penalty: see s 22 of the Crimes (Sentencing Procedure) Act 1999; see also R v Thomson; R v Houlton (2000) 49 NSWLR 383 (especially at 416-417); Cameron v R (2002) 187 ALR 65; R v Sharma (2002) 54 NSWLR 301. The defendant has also expressed contrition and remorse for the offence. 20 Since the incident and before the Christmas 2001 shutdown, the factory was closed to permit permanent repairs to be conducted. Furthermore, the defendant has commissioned environmental scientists to implement a stormwater management strategy. The defendant has agreed to pay the EPA's costs of these proceedings in the amount of $8,000. Penalty 21 The maximum penalty prescribed for the offence by s 64(1) of the POEO Act is $250,000 for a corporation. Such a substantial penalty indicates the seriousness of the offence with which the defendant is charged: see Camilleri's Stock Feeds Pty Ltd v Environment Protection Authority (1993) 32 NSWLR 683 per Kirby P at 698. Considering the lack of environmental harm and other circumstances referred to above the offence is not considered by the Court as one falling within the worst category of cases. 22 No application has been made for dismissal of the charge under s 10 of the Crimes (Sentencing Procedure) Act 1999. 23 The Court considers that a penalty of $20,000 is appropriate and this penalty will be reduced to $15,000 in recognition of the defendant's plea of guilty. Orders 24 Accordingly the Court makes the following orders: 1. The defendant is convicted of the offence as charged. 2. The defendant is fined the sum of $15,000 which is to be paid within 28 days. 3. The defendant pay the prosecutor's costs of $8,000. 4. The exhibits 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.