Supreme Court New South Wales Medium Neutral Citation: Environment Protection Authority v Condon [2013] NSWSC 777 Hearing dates: 21/05/2013 Decision date: 14 June 2013 Jurisdiction: Equity Division - Corporations List Before: Young AJ Decision: Appeal against rejection of proof of debt dismissed with costs Catchwords: ENVIRONMENT LAW - waste dumping levy - no records kept - levy made by calculation under regulation - calculation not made in accordance with the legislation Legislation Cited: Corporations Act 2001 (Cth) Protection of the Environment Operations Act 1997 (NSW) s 88 Protection of the Environment Operations (Waste) Regulation 2005 (NSW) Cases Cited: Commissioner of Stamps (South Australia) v Telegraph Investment Co Pty Ltd (1995) 184 CLR 453 Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355 Shanahan v Scott (1957) 96 CLR 245 South Australia v Tanner (1989) 166 CLR 161 Utah Construction & Engineering Pty Ltd v Pataky [1965] NSWR 1397 (PC) Category: Principal judgment Parties: Environment Protection Authority (Plaintiff) Schon G Condon as liquidator for Orchard Holdings (NSW) Pty Limited (in liquidation) (Defendant) Representation: Counsel: J C Giles (Plaintiff) R D Glasson (Defendant) Solicitors: Office of Environment & Heritage (Plaintiff) ERA Legal (Defendant) File Number(s): 2012/248190 Judgment 1HIS HONOUR: This is an application to reverse a proof of debt in the liquidation of Orchard Holdings (NSW) Pty Ltd. 2The parties have agreed on a statement of facts. I will set out the key facts. 3Orchard Holdings (NSW) Pty Ltd (In Liquidation) ("Orchard Holdings") was the registered proprietor of certain lands at Orchard Hills near Penrith from around 2001 until July 2008. The company went into liquidation on 19 December 2007. 4Between 2002 and about 12 April 2007, Erskine Park Quarry (NSW) Pty Ltd ("Erskine Park Quarry"), now in liquidation, held an Environmental Protection Authority licence number 11706 ("the licence") which permitted the conduct of "extractive industries" on the property. Clause L5.1 of the licence forbad the licensee from causing, permitting or allowing any waste generated outside the premises to be received at the premises for storage, treatment, processing, repossessing or disposal. 5On about 12 April 2007 the licence was transferred to Orchard Holdings. 6Between December 2002 and 4 August 2007 the total increase in volume (in cubic metres) of bund walls 1, 3 and 4 as identified in the report of Mr Survey Matthew Freeburn for 644,366 cubic metres. Bund walls 1, 3 and 4 contained waste which was not generated at the property and also excavated natural material from the property itself. 7No levy under s 88 of the Protection of the Environment Operations Act 1997 (NSW) was ever paid by Orchard Holdings or any other entity for any waste at the property. 8On 2 July 2008 the plaintiff, the Environmental Protection Agency ("EPA") lodged a proof of debt in the liquidation in the amount of $49,745,055.00. The proof was for a "waste levy" that the EPA had asserted was payable by Orchard Holdings under s 88 of the Protection of the Environment Operations Act 1997 (NSW) (the "POEO Act"). 9The liquidator rejected that proof of debt on 27 July 2012. 10The EPA says, and indeed what is before me confirms, that the property contains a quarry. The bund walls around the quarry contained a substantial amount of "waste" (as defined in the dictionary to the POEO Act) some of which has been brought onto the property from other locations. However the bund walls contain, as accepted by both parties, a mixture of material excavated from the property and also waste that has been received at the property from outside. 11It would appear that neither Orchard Holdings nor Erskine Park Quarry kept any, or any adequate, records of what materials were received on the site from outside the property. 12Section 88 of the POEO Act, which is admittedly applicable in this case, provides so far as is relevant as follows: 88 Contributions by licensee of waste facility (1) ... (2) The occupier of a waste facility to which this section applies is required to pay to the EPA in respect of all waste received at the facility such contribution as is prescribed by the regulations. ... (5) The regulations may: (a) provide for contributions to be calculated on such basis (including such estimates), and in accordance with such factors, as may be specified or described in the regulations, and (b) provide for the exemption of specified occupiers, or specified classes of occupiers, from the requirement to pay contributions... ... (6) Any contribution payable under this section becomes, if it is not paid in accordance with this section and the regulations, a debt due to the EPA that is recoverable in any court of competent jurisdiction. 13Mr McElwain, who said that he is the manager of waste and resource strategy at the EPA, made an affidavit (which is undated but which was filed on 9 August 2012) in which he deposed that after inspection of the premises and the issuing of statutory notices to Eskine Park Quarry and Orchard Holdings requiring production of records he concluded that there were no adequate records and thus that the provisions of cl 6 of the Protection of the Environment Operations (Waste) Regulation 2005 (NSW) were triggered. He then said a volumetric survey of the bund walls was carried out by Matthew Freeburn and, based upon that survey, the calculation using the formula prescribed in the said cl 6 was made. 14He says that details of the calculation are set out in the correspondence which was exhibited. 15I was handed a copy of the Protection of the Environment Operations (Waste) Regulation 2005 (NSW) as at 7 September 2012 and it would appear that cl 6 remained unamended at the time the levy was made. 16The regulation says, so far as it is relevant: 6 Contributions payable in relation to scheduled waste facilities where inadequate records kept ... (1) Despite clause 5, the contributions payable for the purposes of s 88(2) of the Act by the occupier of a scheduled waster facility are to be calculated by the EPA in accordance with this clause if there are no records, or inadequate records, of the tonnage of waste received by the waste facility in the relevant year. ... (3) The EPA is to estimate the tonnage of waste at the scheduled waste facility taking into consideration all or any of the following as the EPA considers appropriate in the circumstances: (a) in respect of waste other than liquid waste, a volumetric survey of the facility concerned carried out by a qualified surveyor; (b) available records in respect of the facility concerned... ... (4) If the EPA decides to base its estimate of tonnage of waste received at the waste facility on a volumetric survey, it may (but need not) give the occupier of the waste facility a notice in writing... ... (6) Any estimation of the tonnage of waste at a waste facility made for the purpose of this clause is to use the following formula in converting cubic meters of waste to tonnes of waste: T = V x 2 where: T is the amount in tonnes of waste received. V is the volume in cubic meters of the waste determined by the volumetric survey. 17Clause 9 exempts certain occupiers in respect of, inter alia, "premises used to dispose of only slags or virgin excavated natural material (or any combination of those types of waste)". That material is sometimes referred to as "VENM". 18The submissions made by the liquidator were that cl 9 refers to VENM from both in and outside the site. 19The levy was actually made by the Department of Environment, Climate Change and Water, which claims to be the successor to the EPA. The levy was made on 14 April 2008, purportedly pursuant to s 88 of the POEO Act. The levy referred to the EPA estimates of the tonnages of waste received at the facility based on a volumetric survey, noting that the survey had determined that 644,366 cubic metres of waste had been added to the bund walls between December 2002 and 4 August 2007. The levy was then calculated by doubling that figure and multiplying it by the then current levy rate of $38.60. 20Some very interesting points could have emerged in this case. I mentioned some of them during argument but was politely told that the parties, particularly the liquidator, did not rely on them. 21The first was whether the levy or tax had been properly imposed by the legislation. It appears in an operations Act rather than in an Act imposing the tax. Secondly, there is a problem as to whether it might be an incontestable tax and so void vide: see Commissioner of Stamps (South Australia) v Telegraph Investment Co Pty Ltd [1995] HCA 44; 184 CLR 453 at 466 and cases there referred to. 22Thirdly, the levy appears to be the source of the company's liability to pay. However, the levy was not imposed until after the date of liquidation. 23Fourthly, there was the question as to how far a State statute can, after the date of liquidation, impose a liability on a company in liquidation which will alter the priorities given to the ranking of claims as at the date of the liquidation under the Corporations Act 2001 (Cth). None of these matters were points which the liquidator wished to argue. I state them merely to show anyone reading these reasons that I was not unmindful of them. However, my duty is to decide the questions that are put by the parties and none other. 24That said, certain aspects of those points did come up in the argument. It was pointed out by the liquidator that cl 6 must be read as permitting a calculation to be made in accordance with the Act and if it set out some other calculation then it was pro tanto inoperative. Again, it was pointed out that the vital date was the date of making the levy. There was some discussion in argument as to how this could operate unfairly. If A, B and C held the land for two years each, during which time there was some deposit of waste material on it, and then D became the owner and occupier for two years, and during her two-year occupancy a levy was made, then D would be liable for the whole of the waste deposited by A, B and C as well as herself. The answer given by Mr Giles who appeared for the EPA said that this just meant that D should have been more careful to conduct her searches before buying the land to make sure there was no latent liability for waste committed by her predecessors. 25This may be right, but does sound a rather harsh answer and seems to constitute another tear in the flesh for the doctrine of indefeasibility of title. 26In rejecting the proof of debt, the liquidator gave three pages of reasons. I will summarise these by noting the high points and those matters which were argued before me: (1) the bund walls were likely to contain significant amounts of VENM and overburden from the quarry operations. Thus it was inappropriate simply to estimate volume by assuming that all material in the bund walls was waste. The liquidator suggested that it would be more accurate to estimate the waste tonnage by taking random core samples. However, the EPA had rejected such a suggestion on the basis that it was "beyond doubt" that waste other than VENM had been received onto the property, and once some waste other than VENM had been received, the levy was calculated on the basis of all waste received whether or not it was VENM; (2) in the public examinations of various truck drivers held before the Senior Deputy Registrar Musgrave there was no evidence that any material other than VENM material had been received onto the site. (This was not relied on in these proceedings.) (3) the prescribed formula, T = V x 2, must be construed as meaning that V (waste) was waste received and not waste on the site whether or not it was received; and (4) the regulations only permitted an estimate of waste "received" at a facility and not waste simply "at" the facility at the time of the estimate. The liquidator invited the EPA to lodge an amended proof of debt - an invitation is it has never accepted. 27The oral hearing took place before me on 21 May 2013. Mr J C Giles of counsel appearing for the EPA and Mr R Glasson of counsel for the liquidator. I am indebted to both of them for their submissions. 28As Mr Giles pointed and as was accepted, the court's role in an application under s 1321 of the Corporations Act 2001 (Cth) for an order setting aside the liquidator's decision on the proof of debt is to determine the application anew, though Mr Giles says that it would appear that the issue raised focussed on the liquidator's decision as to the proper construction of the regulation made under the POEO Act. 29Mr Giles' argument is rather simple. 30He says that under s 88(2) of the POEO Act: (a) the occupier of a waste facility is required to pay the EPA in respect of all waste received as a facility, as prescribed by the regulations. (b) the regulations provided for how the amount was to be calculated if, as was clearly the case here, no proper records were kept. (c) the regulations provided that the amount was T = V x 2. (d) V had been calculated under a volumetric survey by a qualified surveyor. (e) Section 88(6) then made the amount calculated a debt due to the EPA. 31It is of course necessary for the person lodging the proof of debt to justify the proof and not for the liquidator to prove that it is not a proper claim. 32The argument for the liquidator is a little more complex. One must construe the Regulations as fleshing out the Act and not going further than the Act in imposing a liability. As Mr Glasson put it (see T15:14-16): "The stream cannot rise higher than its source and the source is s 88(2) which in its terms expressly refers to a requirement to pay a contribution in respect of waste received at the facility." 33See generally Shanahan v Scott (1957) 96 CLR 245 at 250 per Dixon J, Utah Construction & Engineering Pty Ltd v Pataky [1965] NSWR 1397 (PC), Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355, and South Australia v Tanner (1989) 166 CLR 161. 34The calculation made by the EPA is based on the material that was actually present on the facility at the time when the measurement was made, rather than material that was "received at" the facility from outside. 35One must consider that at least one of the aims of the legislation is to discourage land-filling and so promote waste recycling by making land-filling relatively more expensive, by charging a fixed amount per tonne for any waste received at a waste facility that is required to be licensed under the POEO Act. 36I take this from the affidavit of Mr McElwain of 9 August 2012, paragraph 17 although that paragraph was not actually read. It is in any event a fair assumption from the way the legislation is put together. The Operations Act deals with the operations of a waste facility. Its prime aim is not to raise revenue but rather to deal with the protection of the environment. 37One can well understand why making sure it is expensive to dump waste material other than VENM on a site from which it does not derive is a proper application of the principal Act. It is however difficult to see how it possibly could be within that purpose to charge a levy on people moving waste from one part of their land to another. 38Accordingly, it seems to me one should approach cl 6 bearing in mind not only what is in s 88(2) but also the basal purpose of the legislation: the protection of the environment. 39Section 88(2) of the POEO Act requires the occupier to pay: "in respect of all waste received at the facility". 40Although s88(5) allows contributions to be calculated in such manner as may be specified or described in the regulations, the calculation must be in respect of what is set out in s 88(2); that is, "all waste received". Clause 6 (2) makes the levy payable in the year in which the EPA makes the determination. It is doubtful to my mind whether this is justified by s 88(2), but that is not a matter I have to decide. 41Clause 6(3) requires the EPA to estimate the tonnage of waste "at" the scheduled waste facility. 42Clause 6(4) refers to that estimation but says that if the EPA estimates the tonnage of waste "received at" the waste facility through a volumetric survey then certain things happen. Were it not for a matter I will come to shortly, one would have thought that this means that one must read the word "at" in cl 6(3) as if it were "received at", and likewise in cl 6(6). 43However, the matter in which makes one hesitate is cl 6(2B). That subclause refers to cl 5(2), which provides that the contribution is $38.60 for each tonne of waste received. Then cl 6(2B) says: The contribution payable in respect of waste the subject of clause 5(2) is ... $38.60 in relation to each tonne of the waste that is estimated by the EPA under subclause (3) as being at the waste facility concerned when the estimation is made. 44That would seem to suggest that in cl 6(3) the word "at" does not mean "received at" but rather is "is at" at the relevant date. 45Mr Giles refers to cl 6(2B) as the deeming provision. 46If the deeming provision means as Mr Giles says, it seems to me that there is a difficulty. Section 88(5) allows the regulations to provide for contributions to be calculated on such basis (including such estimates) as may be specified or described in the regulations. The regulations are to provide for the calculation of the contributions. 47A calculation does not involve a deeming provision, though the legislature has been very careful in s 88(5) to make sure that estimates can be used in a calculation, as without what is in that subsection one would not have thought that estimates are necessarily involved in a calculation. However, one cannot make a calculation by deeming something to be something it is not. 48What the regulation has purported to do is to deem what is at a site to be what is received at the site over the period of time. To my mind, that is outside the mandate given to the maker of the regulation. That mandate is to calculate the material received at the site, not to deem what is now on the site as being received at the site. 49Thus cl 6(2B) cannot assist when one is making the calculation required by s 88 of the POEO Act. 50Accordingly, in my view the liquidator was justified in rejecting the claim. I do not know the present state of the liquidation. It may be that a proof of debt put in now would be too late to receive any distribution, or it may be that although a claim anywhere like $49 million is not likely to be paid anyhow it would still be open to the EPA to put in a proof of debt based on a proper calculation of the material that was received on the site. 51I should say one further thing. The liquidator took the view that cl 9(b) meant that one did not take account of any VENM which was received at the site. The EPA took the view that cl 9(b) only provided an exemption if the only material that was moved onto the site was slags or VENM. In my view the EPA's construction of cl 9(b) is correct. 52Accordingly, I order that the proceedings be dismissed and that the EPA pay the liquidator's costs of the proceedings. ********** 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. Decision last updated: 14 June 2013