Land and Environment Court New South Wales Medium Neutral Citation: Environment Protection Authority v Coe Drilling Australia Pty Limited [2005] NSWLEC 719 Hearing dates: 05/12/2005 Decision date: 05 December 2005 Jurisdiction: Class 5 Before: Preston CJ Decision: (1) The defendant is convicted of the offence as charged. (2) The defendant is fined the sum of $18,000. (3) The defendant is to pay the prosecutor's legal and investigation costs in these proceedings in the agreed sum of $20,000, such costs to be paid within three months of today. Catchwords: Prosecution :- Plea of guilty - pollution of waters - application for unconditional discharge of defendant without conviction - offence not trivial either in nature or circumstances of case - contractual and commercial pressures not extenuating circumstance - obligation on contractor to comply with law irrespective of principal's conduct - foreseeable risk of harm - practical measures to avoid risk - environmental harm material but short term - financial capacity of corporate defendant to pay fine. Legislation Cited: Clean Waters Act 1970 s.16 (1) Crimes (Sentencing Procedure) Act 1999 s.3A, s.10(1), s.10(3), s.10(3)(c), s.21A(2)(g), s.21A(2)(k), s.21A(3)(a), 21A(3)(e), 21A(3)(i), s.22, s.23 Fines Act 1996 s.6 Protection of the Environment Operations Act 1997 s.3(a), s.3(d), s.3(e), s.20, s.20(1), s.120, s.120(1), s.241(1)(a), s.241(1)(b), s.241(1)(c), s.241(1)(d), s.241(1)(e), s.250(1), s.250(1)(a), s.250(1)(c) Cases Cited: Axer Pty Limited v Environment Protection Authority (1993) 113 LGERA 357; Camilleri's Stock Feeds Pty Limited v Environment Protection Authority (1993) 32 NSWLR 683; Environment Protection Authority v Capdate Pty Ltd (1993) 78 LGERA 349; Environment Protection Authority v Douglass (No 2) [2002] NSWLEC 94; Environment Protection Authority v Emerald Peat Pty Ltd (in Liq) [1999] NSWLEC 147; Environment Protection Authority v Le Dome Pty Limited (2002) 125 LGERA 121; Filipowski v Cadem Shipping Pty Ltd [2005] NSWLEC 552; Filipowski v Frey [2005] NSWLEC 661; Hoare v R (1989) 167 CLR 348; Inkson v R (1996) 88 A Crim R 334; Mosman Municipal Council v Menai Excavations Pty Ltd [2002] NSWLEC 132; Neal v R (1999) 149 CLR 305; R v Gallagher (1991) 23 NSWLR 220; R v H (1980) 38 A Crim R 53; R v Nichols (1991) 57 A Crim R 391; R v Paris [2001] NSWCCA 83; R v Rushby [1977] 1 NSWLR 594; R v Sharma (2002) 54 NSWLR 300; R v Thomson (2000) 49 NSWLR 383; Ryan v R (2001) 206 CLR 267; Thorneloe v Filipowski (2001) 52 NSWLR 60; 116 LGERA 56; Veen v R (No.1) (1979) 143 CLR 458; Veen v R (No.2)(1988) 164 CLR 465; Webb v Cheung [2002] NSWLEC 135 Category: Sentence Parties: PROSECUTOR Environment Protection Authority DEFENDANT Coe Drilling Australia Pty Limited Representation: PROSECUTOR Mr T Howard SOLICITORS Environment Protection Authority DEFENDANT Mr I Hemmings SOLICITORS Colin Biggers & Paisley File Number(s): 50010 of 2005 Judgment HIS HONOUR: 1. The defendant, Coe Drilling Australia Pty Limited ("Coe Drilling"), has pleaded guilty to an offence against s.120 (1) of the Protection of the Environment Operations Act 1997 ("POEO Act"). 2. Section 120 of the POEO Act provides: "(1) A person who pollutes any waters is guilty of an offence. (2) In this section: waters includes cause or permit any waters to be polluted." 1. Coe Drilling caused water pollution on or about 7 April 2004 in that, during the course of underground drilling by the defendant to build a water pipeline ("the work") underneath part of a wetland listed under State Environment Planning Policy No. 14 - Coastal Wetlands ("SEPP14"), namely SEPP14 Wetland No. 545 at Coopernook, adjacent to road works for the Pacific Highway Coopernook Bypass, it caused a pollutant to be introduced into the waters. 2. The relevant facts are not in dispute. They are derived from: an agreed statement of facts, with an annexed bundle of documents; two records of interview, one with a person associated with the defendant, Mr T Foley, and the other with a person associated with MidCoast Water ("MCW"), the principal for whom the defendant performed the works, Mr D Brauer; two affidavits of persons associated with the defendants, Mr T Foley and Mr S Coe; and some additional documentary material. The waters polluted 1. The waters polluted were part of SEPP14 wetland No. 545 near Coopernook Creek. Two vegetation communities occurred in the SEPP14 wetland, namely Casuarina / Melaleuca swamp forest and sedgeland. The pollutant 1. The pollutant was drilling fluid (water) containing bentonite. Bentonite is used as drilling mud and has a grey powder consistency before use. It is insoluble and practically non-toxic. It is a natural clay compound. The defendant 1. Coe Drilling carries on the business of design and construction of horizontal directional drilling in relation to the installation of steel or high density polyethylene pipes or conduits in the oil, gas, waste water and telecommunications industries. Essentially, Coe Drilling undertakes trenchless drilling projects for the installation of various pipelines underground. 2. Coe Drilling is often employed to carry out horizontal directional drilling in sites that are environmentally sensitive. 3. Coe Drilling acts as a specialist contractor for principals who are undertaking the installation of pipelines underground. The contract works 1. Early in 2004, MidCoast County Council trading as MCW built a water pipeline near Coopernook to service the town of Harrington and the surrounding area. The water mains were 400 millimetres and 500 millimetres in diameter respectively. Underbore construction of the new water main, where it crossed the wetland, was approximately 570 metres in length and was done using a technique called horizontal directional drilling. The drilling ran parallel to and about 20 to 30 metres from the RTA Pacific Highway Coopernook Bypass. 2. MCW specified the location of the pipeline. MCW engaged Coe Drilling to undertake the design and construction of the two parallel water main pipelines under the wetlands. The work was done by Coe Drilling under a contract with MCW, contract number 0101067 ("the contract"). The contract originally covered works by Coe Drilling for MCW in the Tea Gardens and Taree areas. The contract was extended to cover the Coopernook Creek and wetland drilling operations as well as similar works by Coe Drilling at Lansdowne River. 3. The contract price was approximately $500,000. 4. Clause 27.1 of the contract provided that MCW would give possession of the site to Coe Drilling to execute works under the contract. 5. The contract placed obligations on Coe Drilling to undertake the works specified in the contract. Mr Richard Powell was appointed by MCW as the superintendent of the contract. 6. Coe Drilling was required to take all steps necessary to protect the environment and, in particular, to comply with the requirements of the section of the contract on environmental protection (cl. 2 of section 4 of the contract). 7. Coe Drilling was specifically directed under the contract to the POEO Act. 8. Coe Drilling was required to adopt such measures as may be necessary for erosion, contamination and sediment control during construction (cl. 2 of section 4 of the contract). 9. Coe Drilling was required to undertake necessary measures to minimise the quantity of sediment that might be deposited in watercourses as a result of operations associated with the works in the contract (cl. 8.1 of section 4 of the contract). 10. Coe Drilling was required to take all possible care to prevent contamination of waterways, foreshores or other lands. Should contamination result from Coe Drilling's operations, Coe Drilling was immediately required to remove such contamination at its own expense, and make good any damage arising from such contamination or its removal to the complete satisfaction of the Environment Protection Authority (cl. 9 of section 4 of the contract). 11. In addition, Coe Drilling was required to comply with directions given by the superintendent, Mr Richard Powell (cl. 23 of section 1 of the Contract). 12. No environment protection licence was required or issued in relation to the works. Horizontal directional drilling 1. Mr Foley, who was the contracts manager for Coe Drilling and who has worked in the directional drilling industry for ten years, explained the nature of horizontal directional drilling. 2. Horizontal directional drilling is a trenchless construction method used to minimize the disturbance normally associated with open cut trench construction methods for the laying of pipelines and cables. 3. It requires two sites to be set up, one at either side of the crossing or waterway, thereby avoiding the obstacle in between and allowing the pipeline to be placed beneath the obstacle without lengthy construction periods and with minimal effect on the environment. 4. In this particular case, the drilling entry site was approximately 800 square metres in area and the exit site was approximately 300 square metres. For a project of this size, this compares to an open trench site that would impact on in excess of 10,000 square metres of ground and wetland. 5. The method of construction is one whereby a drilling rig creates a borehole beneath the ground and the same drill rig then pulls a pipeline into and through the borehole. 6. Directional drilling uses a mud system to aid the drilling operation. The mud system has 3 components as follows: 1. A main tank that has a storage capacity of approximately 30,000 litres. Dry bentonite powder is added to the tank and mixed with water to make a bentonite slurry of varying viscosity; 2. A pumping unit that pumps the bentonite slurry from the main tank to the drill pipe and through the drill bit; and 3. A cleaning system to which some of the bentonite slurry returns for cleaning and recycling. 1. Bentonite slurry is used as a lubricant in the drilling process and as a mould to maintain the profile of the borehole. The bentonite slurry is piped through the drill bit in front of the drill pipe to line the inside of the bore hole as the drill bit forms it. Carrying out of the works 1. Coe Drilling set up the drilling equipment on a platform just adjacent to the wetland in March 2004 and began the work on 27 March 2004. As part of the drilling works being undertaken by Coe Drilling, bentonite was pumped under pressure to the drill head to seal the bore as it bored. 2. The Roads and Traffic Authority ("RTA") Coopernook site office provided geotechnical information to MCW relating to the construction of the Pacific Highway Coopernook Bypass. This information indicated that within the route of the highway, sandstone rock lay at a depth of up to approximately 3 metres under the alignment of the bypass itself. This information was subsequently provided to Coe Drilling by MCW. No geotechnical information was provided in relation to the MCW chosen route for the pipeline under the SEPP14 wetland. 3. Coe Drilling knew, in late February and early March 2004, that there was a risk that bentonite could discharge into the wetland as a result of fractures in the bed of the wetland resulting from the drilling works they would be undertaking. Coe Drilling advised MCW of this in March 2004 but after discussions between them, decided to proceed with the work. 4. Under the contract, an Environmental Management Plan ("EMP") was to be prepared. The EMP was written by both Coe Drilling and MCW. Under the heading "Landscape Disturbance", the EMP provided that the drilling operation would be continually managed by the project manager (Mr Brauer of MCW) and routinely inspected by an Environmental Representative. The Environmental Representative was Mr Rob Booker of ERM Pty Limited. Mr Booker acted as environmental consultant for the RTA and had, until 6 April 2004, been engaged by MCW to act as environmental representative under the EMP. From that date, he was engaged by MCW on an "as needed" basis. 5. The EMP provided that "should slumping of the landscape be identified, the Environmental Representative will investigate and access the need for employment of mitigation measures" (EMP, p. 2). 6. Under the heading "Water Control", the EMP specifically provided that: "(1) Profile designs will maintain maximum cover within economic sense where possible to allow work to proceed. Drilling will be suspended should fractures occur and the client advised. Re-design of profiles may be required as the remedial action to prevent further fracture of the ground. (2) Should drilling fractures within the SEPP14 zone be identified by the agitation of sediment and / or release of drilling fluid, the Environmental Representative [Mr Booker] will investigate and assess the need for the employment of mitigation measures" (EMP, p. 3). 1. Further, the EMP contained an Environmental Checklist that provided for daily monitoring of the MCW site for "Landscape Disturbance / Water Control". 2. On 6 April 2004, MCW wrote to Mr Booker. The letter stated: "…the engagement of an EMR [Environmental Management Representative] would be unwarranted on this project given the implementation of the Environmental Management Plan (EMP), as prepared by Coe Drilling Pty Ltd, will provide adequate management of environmental impacts during the current directional drilling operation at Coopernook Creek". 1. During the works and in late March and in early April 2004, approximately 40 tonnes of bentonite was used. As noted above, bentonite is used as drilling mud. It has a grey powder consistency before use. It is insoluble and is practically non-toxic. It is used to help keep the drill hole open by sealing the sides as the tunnel is drilled. Bentonite hardens when dry. It is a natural clay compound and is used for, amongst other things, drilling to provide greater viscosity which is important in keeping the drill head cool during drilling and to facilitate removal of rock and dirt from within a drill hole. 2. At the Coopernook works, the bentonite was mixed at a rate of 40 to 60 kilograms per cubic metre with fresh water such that 800 cubic metres of bentonite fluid was used for the construction of the two pipelines under the wetland. 3. The drilling mud system had the capacity for bentonite to be returned from the drill pipe to a cleaning tank for cleaning and recycling. The quantity of bentonite that is returned from the pipeline is dependant on the nature of the soil being drilled through. In some soils, bentonite is absorbed by the soil. Pollution of waters occurs 1. On 7 April 2004, Kevin Stelling, a RTA technical officer noticed discoloured water when he looked out over the wetland from the RTA bridge construction works. On close examination, Mr Stelling determined that the discolouration was caused by the presence of bentonite in the water. Mr Stelling took a number of photographs of the wetlands. He took nine water readings in different locations within the wetland using a water quality analyser and also took a water sample. Mr Stelling noted that the water level in the wetland was relatively high. His photographs show the presence of bentonite in the wetland as a muddy discolouration of the water. The results for readings 7, 8 and 9 which were taken in areas affected by bentonite show high turbidity (NTU) of 392.2, 434.7 and 520.4 respectively. 2. On the same day, Mr Stelling notified Mr Rob Booker. Mr Booker then notified Mr Brauer later on 7 April 2004. Mr Brauer and Mr Booker undertook an inspection of the site reported by Mr Stelling but could not locate site of the incident. Subsequent events 1. On 8 April 2004, Mr Brauer inspected the site of the incident and after discussion with Mr Booker determined that the best means of controlling the spillage would be with the installation of a silt fence. Coe Drilling was notified of the suggested control measure. Coe Drilling stated they would investigate the site before the installation of any structure. 2. Subsequently, Coe Drilling advised Mr Brauer that the installation of silt fencing within the wetland would cause greater impact and further leakage. Due to the sensitivity of the wetland and the inert nature of the bentonite, it was resolved that a "do nothing" approach would be the most appropriate. 3. Upon further inspection by Mr Booker and Mr Brauer, it was discovered that the bentonite was lying in the wetland just under water level. It was assumed that bentonite had broken through the floor of the wetland in at least two places. As the water level in the wetland was relatively high at that time, the extent of the bentonite spill was not realised for some time (over a period of many weeks), until the water level dropped. 4. The incident was reported to the Grafton Office of the Department of Environment and Conservation ("DEC") by MCW at about 5pm on 15 April 2004. Mr Brauer also emailed Coe Drilling on 15 April 2004. 5. On 20 April 2004, Mr Brauer sent an interim report to Mr Mark Hartwell, a DEC regional operations officer. The interim report detailed the actions taken by MCW and Coe Drilling. 6. On 22 April 2004, Mr Hartwell attended the site of the incident and met with Mr Brauer. From his position at the RTA road works, Mr Hartwell saw an area of discoloured water in the wetlands, which was approximately 300 metres long and 100 metres wide. The discolouration was light brown in colour. 7. Mr Hartwell then accompanied Mr Brauer to the drill rig site, where he saw a material that was light brown in colour and had the consistency of thick mud in a drum. Mr Brauer informed Mr Hartwell that the material was bentonite drilling slurry. 8. After a further inspection of the wetland, Mr Hartwell recommended to Mr Brauer that MCW commence a pump out of the water that contained the bentonite while maintaining the natural water balance of the wetland by replacing the water extracted out with water from Coopernook Creek or another water source containing a similar pH to the wetland. 9. Mr Hartwell then proceeded to the drilling site itself and saw the mud plant and bags containing bentonite powder. 10. Mr Hartwell then met with Mr Stelling at the RTA Coopernook Bypass site office. Mr Stelling gave Mr Hartwell a plastic bottle containing a sample taken by Mr Stelling from the wetland on 7 April 2004. The sample was analysed on 10 June 2004. The sample showed total solids of 160,000 milligrams per litre. 11. On 23 April 2004, MCW contracted a specialist waste removal company, JR Richards, to commence the removal of the bentonite from the wetland. 12. On 18 May 2004, Mr Hartwell returned to the wetland and met with Mr Brauer. Mr Hartwell noticed that the water level of the wetland had dropped significantly since his initial visit on 22 April 2004. He was therefore able to enter the wetland and undertake a close inspection of the area affected by the spill. Mr Hartwell determined that the pale mud ranged in thickness from 100 millimetres to 300 millimetres and the affected area was approximately 300 metres long and 100 metres wide. 13. Mr Hartwell then advised Mr Brauer that, as the bentonite had covered the bottom of the wetland, he would need to consider using sludge tankers to remove the bentonite as quickly as possible. 14. On 28 May 2004, Mr Hartwell again inspected the wetland. He saw large areas of thick pale mud in the wetland. He collected two samples of the pale mud from the eastern and western edges of the area. The samples were analysed. 15. On 24 June 2004, Mr Hartwell attended the wetland and noticed that while the thick pale mud layer had been removed from some of the affected area, areas near the edges and around the base of the trees in the affected area were still covered by the material. 16. On 19 July 2004, Mr Hartwell received a copy of a report prepared by MCW entitled "Lower Manning Water Supply Augmentation, Coopernook Creek SEPP14 Bentonite Drilling Fluid Spill, Incident Investigation Report, July 2004" ("the MCW Report"). 17. On 5 August 2004, John Wilson Partners ("JWP") and Project Solutions Australia Pty Ltd were engaged by MCW as independent engineers and provided a report on the bentonite spill in August 2004 ("the JWP Report"). Causes of the incident 1. The JWP Report discussed the causes of the bentonite spill and stated: "The bentonite spill into the wetland area was caused by a number of factors: 1. Fractures in the sub-strata caused by the drilling process provided a path for the bentonite fluid to escape to the surface. 2. The design of the HDD [Horizontal Directional Drilling] crossing involved a minimum cover of 3.92 metres. The final bore depth resulted in a nominal cover of only 1.88 metre. It is considered that the reduced depth of the bore resulted in insufficient cover to contain the bentonite fluid. 3. The loose saturated soils of the depth of the drill did not contain the fluid within the borehole. 4. The drill head movement and thrusting forward under fluid pressure at this shallow depth may have created a heave effect in the soil and increased the risk of fracture. It cannot be determined if one factor was dominant. For example, it is possible that the spill would not have occurred if the pipes had been constructed at the minimum design depth of 3.92 metres, although it is not possible to determine this" (p. 14). 1. The MCW Report stated that the spill was caused because: "The low coherence of the soil structure in the wetland reduced the resistance against the fluid pressure during drilling and also during the pipe installation. There was very little Coe Drilling could do to avoid this, it is a function of the existing soil structure. Although it was intended to be deep, controlling the depth in these types of soils is very difficult" (p. 4, para 3.1). Extent of the spill 1. The MCW Report estimated that a total of 429 cubic metres of bentonite fluid was lost in the soil structure and a portion of that amount surfaced in the wetland (p. 4, para 3.2). 429 cubic metres is the equivalent of 429,000 litres. A ground survey across the wetland indicated an area of approximately 1,711 square metres over the four primary bentonite pools had been affected. With an average depth of 200 millimetres, this area translates to an approximate volume of 342 cubic metres of water contained in the wetland that was impacted by bentonite. 342 cubic metres of water is the equivalent of 342,000 litres. Since the commencement of the removal of the bentonite from the wetland on 23 April 2004 until 14 July 2004, 234,500 litres of bentonite fluid was extracted (p. 6, para 3.4.1 of the MCW Report). 2. The JWP Report estimated the volume of drilling fluid lost into the soil structure of wetland was approximately 429 cubic metres (or 429,000 litres) (p. 4 of the JWP Report). 3. As noted earlier, Mr Hartwell determined on 18 May 2004 that the area of pale mud which ranged in thickness from 100 millimetres to 300 millimetres was approximately 300 metres long and 100 metres wide. Environmental harm 1. The extent of the environmental harm was assessed by three consultants, namely Geolyse Pty Ltd, Ms Joanne Ling and Dr Michael Mahony. 2. First, Geolyse Pty Ltd ("Geolyse") was engaged by MCW as an independent ecologist. They provided a report entitled "Ecological Assessment Report: Coopernook Bentonite Spill Investigation" ("the Geolyse Report"), dated July 2004. 3. Geolyse identified two vegetation communities in the SEPP14 wetland that had been impacted upon by the bentonite spill, Casuarina / Melaleuca swamp forest and sedgeland. Within the swamp forest community , large extrusions and subsequent flows of bentonite were observed. These extrusions varied in depth, with the maximum depth recorded being approximately 300 millimetres. The bentonite was observed to inundate the ground cover throughout much of the low-lying areas of this community (page 3.1 of the Geolyse report). The sedgeland community was also observed to have been impacted by the bentonite. Bentonite flows and extrusions had covered some of the vegetation, however, this was primarily confined to the edges of this vegetation type (p. 3.1 of the Geolyse Report). 4. The Geolyse Report discussed the impacts of the bentonite spill. 5. In relation to physical impacts, the Geolyse Report stated: "The bentonite spill was observed to have visible physical impacts on the wetland community. These visible impacts were the physical damage to vegetation due to the flows of the bentonite. The impacts were a direct result of the bentonite smothering vegetation or damage resulting from the flows of bentonite, which caused the mortality of some groundcover plants. As the depth of flows were greater than 300mm in areas, if left on site, the bentonite could potentially create a physical barrier to the regrowth of vegetation, however a slight covering of bentonite remaining after the clean-up proceeds are considered unlikely to result in any impacts on the regrowth potential of the vegetation. The spill is also likely to slightly increase the turbidity of the waterway although this was only evident in small areas of the wetland at present. The turbidity of the creek was relatively high however it was not possible to determine whether this was as a result of the bentonite spill or other activities within the area, such as the construction works for the Pacific Highway upgrade" (p. 4.1 of the Geolyse Report). 1. In relation to chemical impacts, the Geolyse Report said: "As bentonite (Sodium Montmorillonite) is a naturally occurring clay compound which is relatively benign, the chemical impacts are considered to be minimal. The compound has a low anion exchange capability, however Sodium Montmorillonite may exchange cations in suitable conditions. … Based on the chemical formula of Sodium Montmorillonite…it is unlikely to increase the key nutrient loading in the wetlands… According to the product data sheet for the bentonite used in the drilling works the pH is 9 which is far higher than the pH recorded in the adjoining areas or areas unaffected by the spill. The occurrence of the bentonite could potentially affect the pH of the surrounding waters in the short term, however, when considering the relatively small volumes of the bentonite remaining after extraction compared to the large area of the wetland, the change in pH is expected to be minimal. As the pH of the wetland soils is expected to have a buffering capacity, it is expected that the remaining bentonite will have negligible effect on this pH in the long term…The pH readings taken during the site inspections were not found to increase as a result of the bentonite during the two short periods between the two inspections" (p. 4.1 of the Geolyse Report). 1. In relation to ecological impacts, the Geolyse Report stated: "The bentonite was observed to have visible physical impacts on the wetland community. The visible impacts were the physical damage to vegetation due to the flows of the bentonite and the smothering of some vegetation. Once removal had been undertaken a light coating of bentonite was observed to remain above the ground surface. This level of bentonite is not considered to have any long term ecological impacts as it would not create a barrier to vegetation regeneration" (p. 4.2 of the Geolyse Report). 1. The Geolyse Report then analysed in more detail the particular impacts on vegetation, amphibians, non-flying mammals, flying mammals, birds, reptiles and aquatic fauna (pp. 4.2 – 4.4). 2. Finally, the Geolyse Report dealt with cumulative impacts stating: "The impacts of the bentonite spill on the wetland would have resulted in additional short term impacts on the SEPP14 wetland which has been extensively disturbed during the construction works associated with the Pacific Highway upgrade. The cumulative impact of the bentonite spill, due to the benign nature of the compound is considered unlikely to be of such a duration that it would result in long term ecological changes to the wetland" (p. 44 of the Geolyse Report). 1. Ms Joanne Ling was engaged by the DEC to assess the potential environmental impacts of the spill on aquatic plants and macro invertebrates in the wetland. She prepared a report entitled "Assessment Report to the Bentonite Spill at the SEPP 14 Wetland at Coopernook – Aquatic plants and Macroinvertebrates" ("the Ling Report), dated May 2005. 2. Ms Ling's opinion was that the impacts of the bentonite spill on the aquatic plants and aquatic macroinvertebrates would be short term and localised, and that the residual bentonite should have no significant long-term effects to the wetland plant and macroinvertebrate community. 3. Ms Ling also expressed the opinion that "there will not be large quantities of bentonite re-suspended in the water column for prolonged periods" and that accordingly, she predicted that "the long-term impacts of the bentonite spill on the biota will be insignificant" (p. 10 of the Ling Report). 4. Ms Ling recommended that: "Although long term impacts are unlikely, a monitoring program should be implemented to verify that no unforeseen impacts have occurred. This monitoring program would ascertain the recovery of the aquatic plants and macroinvertebrates in the spill area and adjacent communities. It would also provide a time-scale in which the plants were recovering and associated populations of fauna" (p. 10 of the Ling Report). 1. The third report was prepared by Dr Michael Mahony. Dr Mahony was engaged by the DEC to assess the potential environmental impacts on amphibian fauna in the wetland. On 18 May 2005, Dr Mahony submitted a report entitled "Assessment of Environmental Impacts on Amphibians of the Bentonite Spill at Coopernook" ("the Mahony Report"). 2. Dr Mahony concluded that, in his opinion, there was no apparent negative chemical impact from the spill and that the physical impact of the bentonite on the frogs, tadpoles and their habitats would be minimal both in the short and long term. Dr Mahony stated: "Presence of adult frogs active at the site and tadpoles in the water nearby the spill site indicates that the spill did not have a significant short or long-term impact on individuals or the environment used by amphibians at the site" (p. 2 of the Mahony Report). 1. In regards to the habitat of the two threatened species identified as occurring in the wetlands, Dr Mahony expressed the view that "the spill was not likely to produce a significant or long-term effect" (p. 14 of Mahony Report). 2. As to the bentonite that remained in the wetland after the removal process had been undertaken, Dr Mahony did not view it as presenting a long-term impact to the frog community or their habitats at the site. However, he did state that there was a need to continue to monitor the site. 3. Subsequently in April 2005 and August 2005, Geolyse provided a second ecological assessment report and a further monitoring report respectively. In the Geolyse April 2005 Report, Geolyse noted that: "The overstorey trees were generally healthy and no die back or effects observed in the canopy. Such health was evident as there were no changes in leaf colour of regenerative foliage. The wetland areas directly affected by the bentonite spill through smothering were observed to have regrowth of all dominant plant species such as ferns and sedges. While some small patches of bentonite were observed, the remaining residual amounts of bentonite in general were barely visible. Some pooled areas were observed to be slightly turbid with a milky colour due to the bentonite being suspended in the water. Despite this, the concentration of bentonite within the water bodies appears to be low. There was also little or no coating of bentonite visible on the regenerating leaves for the ground cover species" (p. 7 of the Geolyse April 2005 Report). 1. In the conclusion, Geolyse stated: "The results of the initial surveys for the 2005 BSMP identified that the disturbed vegetation within the study area is regenerating naturally and appears to be in good health. The bentonite appears to have caused a short term disturbance to the vegetation. Given the health of the vegetation within the study area, it is considered unlikely that the small quantity of bentonite remaining within has adversely affected the regeneration of vegetation in the long term" (p. 10 of the Geolyse April 2005 Report). 1. In the Geolyse August 2005 Report, Geolyse stated: "The results of the 6 month monitoring identified that natural regeneration within the study area is continuing, and the vegetation within the disturbed areas appears to be healthy. ... It is therefore considered that the wetland vegetation within the affected areas is recovering from the bentonite spill, and the vegetation establishment and growth observed within the study area is considered to be satisfactory. In addition, the vegetation within the study area is considered to be regenerating in a manner that resembles natural vegetation progression in wetlands" (p. 12 of the Geolyse August 2005 Report). 1. In the conclusion, Geolyse stated: "The impacts caused by the spill are considered to be limited and are short term in nature. It is considered that the small quantity of bentonite that remains is unlikely to significantly retard the regeneration rate and natural vegetation progression that has been observed at the study area during the monitoring surveys" (p. 15 of the Geolyse August 2005 Report). Prosecutor's submissions 1. Mr Howard, counsel for the prosecutor, made the following submissions. 2. First, Mr Howard said that in this case there was a need for general deterrence. Mr Howard referred to the dicta of Mahoney JA in Axer Pty Ltd v Environment Protection Authority (1993) 113 LGERA 357 at 359-360. 3. Secondly, it was important that the sentence of the Court send a message to contractors that they too have an obligation under a contract, independent from that of the principal, to comply with duties under environmental legislation, and in particular under the POEO Act. A contractor cannot escape its obligation to comply with the law, including the POEO Act, by reason of contractual or commercial reasons to perform a contract with a principal. 4. Thirdly, the defendant ought to have taken steps to ensure that it did not breach its obligations under the POEO Act. The defendant foresaw that there was a high degree of risk that fracturing of the soil could occur during the drilling operation and that bentonite would escape into the wetland with adverse consequences. It is true that the defendant did warn the principal, MCW, of that risk which the defendant foresaw as being entirely likely. The high point of the warning was the email from Mr Foley to Mid Coast Water dated 18 March 2004 stating: "It is a real possibility with the nature of the ground that fracturing will occur and that we will not be responsible for any clean-up costs if it does occur". 5. However, the defendant took the matter no further with the principal. Mr Howard submits that the defendant was obliged to do so. The defendant should have trenchantly apprised the principal of the risk and the consequences that would occur if those risks eventuated. 6. It is also true that the defendant suggested to the principal, MCW, alternatives which might be undertaken to avoid the risk. These included moving the alignment of the tunnel to the western side of the Pacific Highway Coopernook Bypass, away from the wetland. Alternatively, if the eastern alignment was to remain, the tunnel could be drilled deeper through the rock rather than through the loose saturated soil, although this would cost four to five times more than drilling through the soil as was proposed. These alternatives were rejected by MCW. 7. However, Mr Howard submits that if the defendant had methodically and thoroughly disclosed the true risks and consequences of continuing with the original proposal, and of not pursuing one of the alternatives, then the principal may not have rejected the alternatives. But in any event, Mr Howard submits that the obligation on the contractor was to refuse to perform the contract as proposed where to do so would involve breaching the law. The defendant would have been entitled to do so for two reasons. First, a party can never be obliged by contract to commit a criminal offence. Secondly, the contract in fact expressly required the defendant to comply with all laws relating to environmental protection and specifically referred to the POEO Act. Accordingly, the defendant would not be in breach of the contract had it observed the contractual provision that it comply with the law. 8. Mr Howard submits that an important purpose of sentencing in cases such as the present is that of public deterrence of contractors. Contractors must be deterred from performing contracts that will involve breaching environmental legislation. The sentence that the Court ought to impose should ensure that contractors comply with environmental laws. 9. Fourthly, Mr Howard submits that the reasons for the defendant failing to comply with the law are important. In this respect, reference can be made to the dicta of Badgery-Parker J in Axer Pty Ltd v Environment Protection Authority (1993) 113 LGERA 357 at 366 that : "the criminality is to be measured not only by the seriousness of what occurred, but by reference to the reasons of its occurrence." 1. Mr Howard submits that the defendant has allowed contractual and commercial considerations to loom large in its decision to carry out the work. These considerations overwhelmed the defendant's obligations under law and under the contract to comply with the law. The culpability of the defendant is thereby increased. 2. Fifthly, Mr Howard referred to the matters under s. 241(1) of the POEO Act. 3. The first of these matters is the extent of harm under s. 241 (1)(a). Mr Howard submitted that there was actual harm to the environment. There was increased turbidity of the waters of the wetland. There was smothering of vegetation with the bentonite sediment. The area over which there was an effect was material. The environment within which the pollution occurred was of some significance, namely being a wetland listed under SEPP14. The effects persisted for many months, although they decreased over time. However, Mr Howard conceded that, according to the evidence, there is unlikely to be any long-term damage to the SEPP14 wetland or its component biota. 4. In relation to the matter under s. 241 (1)(c), Mr Howard submits that the risk of escape of bentonite into the wetland as a result of carrying out of the works was eminently foreseeable, as was the fact that any such escape would cause harm to the wetland environment. 5. In relation to s. 241 (1)(b), Mr Howard submits that there were practical measures that the defendant could have taken. First, the defendant could have refused to carry out the works in circumstances where it was highly likely that the carrying out of the works would result in a breach of the POEO Act. Secondly, the defendant could have more methodically and directly put the risks and the consequences to the principal, MCW. 6. In relation to s. 241 (1)(d), Mr Howard submits that the defendant had control over the causes of the offence that led to the harm. The defendant was a specialist drilling contractor upon which the principal, MCW, relied to carry out the drilling work. The defendant was used to carrying out works in sensitive sites. Under the contract, the defendant had the obligation to perform the works and had possession of the site in which the works were to be carried out. 7. In relation to s. 241 (1)(e), Mr Howard submitted that it is inapplicable. 8. Sixthly, Mr Howard referred to the principle of evenhandedness and cited the decisions in Lowe v R (1984) 154 CLR 606 and Oliver (1982) 78 Crim R 174. 9. Mr Howard handed up as an aide memoire an indicative table of sentences imposed in 2004 and 2005 for pollution of water offences by this Court. In particular, Mr Howard referred to the decision of Shoalhaven v DP Druce [2005] NSWLEC 123, Bignold J ($40,000 before discount reducing to $30,000 after discount) and Environmental Protection Authority v Olex Australia Pty Ltd [2005] NSWLEC 475, Bignold J ($30,000 before discount reducing to $15,000 after discount). Mr Howard submitted that the former decision was closer to the facts of the subject case. 10. Seventhly, Mr Howard conceded that there were a number of matters in mitigation to be taken into account. The defendant had been co-operative with the DEC in relation to the investigation into the matter. The defendant had complied with a notice to provide documents to the prosecutor and had made staff available for interviews conducted by the DEC officers. Mr Howard noted that the defendant has agreed to pay the prosecutor's legal and investigation costs of $20,000. 11. Eighthly, Mr Howard noted that the court is obliged to consider the defendant's capacity to pay under s. 6 of the Fines Act 1996. Mr Howard cited the decisions of Environment Protection Authority v Douglass (No.2) [2002] NSWLEC 94, particularly at [15] and [16] per Lloyd J andEnvironment Protection Authority v Capdate Pty Ltd (1993) 78 LGERA 349 at 353 per Stein J. 12. Mr Howard submitted that it was relevant that the defendant was a corporation and not a natural person, a factor taken into account by Stein J in Environment Protection Authority v Capdate Pty Ltd. Furthermore, as in Environment Protection Authority v Capdate Pty Ltd, the evidence of the defendant's capacity to pay is largely indefinite. 13. In conclusion, Mr Howard submitted that the offence in this case, having regard to both the objective and subjective circumstances, should be seen to fall in the lower of the middle range of the offence. Defendants' submissions 1. Mr I Hemmings, counsel for the defendant, made the following submissions. 2. First, Mr Hemmings referred to the purposes of sentencing and the need to balance those purposes, citing Veen v R (No.2) (1988) 164 CLR 465 at 476: "The purposes of criminal punishment are various: protection of society, deterrence of the offender and of others who might be tempted to offend, retribution and reform." 1. Dealing with these purposes, Mr Hemmings submitted that: 1. The protection of society is not a relevant consideration. 2. In relation to "reform", the Court would be satisfied from the evidence of Messrs Foley and Coe that the taking of the proceedings themselves have led to reform and there is no need for the punishment to reflect this purpose. 3. In relation to "retribution", this must be considered in light of the objective gravity of the offence, particularly having regard to the lack of lasting environmental harm. 4. In relation to "specific deterrence", Mr Hemmings submitted that it is unnecessary for a conviction to be recorded, and a penalty to be imposed, in order to specifically deter the defendant. 5. In relation to "general deterrence", Mr Hemmings submitted that, in the circumstances of this offence, there is no utility in imposing an additional punishment on the defendant by way of general deterrence. Mr Hemmings also submits that the Court cannot use the principle of general deterrence to increase the penalty above the objective circumstances of the case, citing R v Ireland (1987) 29 A Crim R 353. 1. Secondly, Mr Hemmings referred to the principle of proportionality which requires that the sentence be proportionate to both the objective circumstances and the subjective circumstances of the defendant. Mr Hemmings stated that the objective circumstances set the outer boundary for a sentence, citing Hoare v R (1989) 167 CLR 348 at 354. 2. Thirdly, in relation to the objective gravity of the offence, Mr Hemmings noted that the maximum penalty for the offence is $250,000. The importance of the maximum penalty is that it reflects the public expression by Parliament of the seriousness of the offence. Mr Hemmings referred to the dicta of Kirby P in Camilleri's Stock Feeds Pty Limited v Environment Protection Authority (1993) 32 NSWLR 683 at 698. 3. Fourthly, Mr Hemmings noted that in sentencing, the Court has invoked the principle that "the more serious the lasting environmental harm involved the more serious the offence and, ordinarily, the higher the penalty": Camilleri's Stock Feeds Pty Limited v Environment Protection Authority (1993) 32 NSWLR 683 at 701. Conversely, Mr Hemmings said the less serious the lasting environmental harm involved the less serious the offence. 4. Mr Hemmings referred to the fact that, although the wetland is listed under SEPP14, nevertheless a decision was made by the RTA to construct the Pacific Highway Coopernook Bypass through part of the wetland, thereby causing some environmental harm to the wetland. 5. Mr Hemmings also submitted that the environmental harm caused by the works was short-term with no lasting long-term harm. Mr Hemmings referred extensively to the Geolyse Report of July 2004 and Geolyse's subsequent reports of April 2005 and August 2005 as well as to the reports of Ms Ling and Mr Mahony. 6. Fifthly, Mr Hemmings submitted that the defendant had performed its duties under the contract. One qualification that of course had to be made by Mr Hemmings to that submission was in respect of the failure of the defendant to comply with the obligation under the contract to comply with all laws, including the POEO Act. However, apart from this, Mr Hemmings submitted that the defendant had participated in the preparation of the EMP and had carried out monitoring pursuant to the EMP. 7. The reporting of the environmental incident to the DEC was not done by the defendant, but rather by the principal, MCW. Mr Hemmings submitted however, that this was understandable having regard to the fact that under the contract the person responsible for reporting environmental incidents was Mr Booker, the Environmental Representative under the EMP. 8. Sixthly, in relation to the matters for consideration under s. 241(1) of the POEO Act, Mr Hemmings largely agreed with the submissions of the prosecutor, although submitting that the environmental harm was even less significant than that submitted by the prosecutor. 9. Seventhly, Mr Hemmings submitted that this was a case where it was appropriate to exercise the discretion under s. 10(1) of the Crimes (Sentencing Procedure) Act 1999. Mr Hemmings cited the Court of Criminal Appeal's decision in Thorneloe v Filipowski (2001) 52 NSWLR 60 at 78 [201] and 79 [204]; 116 LGERA 56 at 85 [201] and 86 [204] and in R v Paris [2001] NSWCCA 83 at [42]. 10. Mr Hemmings submitted, in relation to paragraph (a) of s. 10(3) of the Crimes (Sentencing Procedure) Act, that the defendant has a clean record which was relevant to the defendant's character. 11. In relation to paragraph (b) of s. 10(3), Mr Hemmings accepted that neither the offence nor the circumstances of the offence could be said to be trivial. However, Mr Hemmings submitted, relying upon the decisions in Thorneloe v Filipowski and R v Paris, that merely because the offence could not be categorised as trivial, did not disentitle the Court from exercising the discretion under s. 10(1). 12. In relation to paragraph (c) of s. 10(3), Mr Hemmings submitted that there were extenuating circumstances. In particular, Mr Hemmings referred to the fact that the defendant was placed in a conundrum concerning compliance with the contract with the principal, MCW. The defendant had foreseen the risk of escape of bentonite into the wetland and had warned the principal of that risk. The defendant had also made suggestions as to alternatives, being to remove the location of the alignment of the tunnel to the western side of the Pacific Highway Coopernook Bypass, or alternatively to drill deeper through rock. Both of these suggested alternatives had been rejected by the principal. In these circumstances, Mr Hemming submitted that the defendant felt obliged to perform the contract as originally specified, notwithstanding that this may result in a risk of breaching the law. 13. Mr Hemmings also submitted that it was relevant that this was not a fresh contract but rather was a continuation of existing contractual relations between the defendant and MCW. This placed more pressure on the defendant to perform the contract, notwithstanding the risk that a breach of the law might be occasioned. 14. Finally, Mr Hemmings submitted the defendant had no capacity itself to agree to pursue any one of the alternatives; only the principal MCW could agree to those alternatives. Section 10 of the Crimes (Sentencing Procedure) Act 1. Section 10 of the Crimes (Sentencing Procedure) Act provides in part: "(1) Without proceeding to conviction, a court that finds a person guilty of an offence may make any one of the following orders: (a) an order directing that the relevant charge be dismissed, (b) an order discharging the person on condition that the person enter into a good behaviour bond for a term not exceeding two years, (c) an order discharging the person on condition that the person enter into an agreement to participate in an intervention program and to comply with an intervention plan arising out of the program. ... (3) In deciding whether to make an order referred to in subsection (1), the court is to have regard to the following factors: (a) the person's character, antecedents, age, health and mental condition, (b) the trivial nature of the offence, (c) the extenuating circumstances in which the offence was committed, (d) any other matter that the court thinks proper to consider." 1. In Thorneloe v Filipowski (2001) 52 NSWLR 60; 116 LGERA 56, the Court of Criminal Appeal noted that s. 10 is as applicable to environmental offences as it is to the general run of offences to which it applies. A court should not start from any presumption that it will be a rare case in which s. 10 will be applied to an environmental offence. Rather, the Court ought to look primarily at the considerations which arise in the particular case. "These will, of course, include the nature of the offence as defined in the statute creating it and the penalty provided together with the perceived object of the relevant statutory provision": Thorneloe v Filipowski (2001) 52 NSWLR 60 at 78 [201] per Hulme J. Of course, consideration of such matters in each case may have the consequence that there ends up being few cases in which s. 10 (1) is applied for environmental offences: see Thorneloe v Filipowski (2001) 52 NSWLR 60 at 74 [165] - [170] per Spigelman CJ and 78 [201] per Hulme J. 2. I turn now to consider each of the factors in s. 10(3). (a) Character and Antecedents of Defendant 1. The defendant has no prior convictions for environmental matters. Other than this fact, however, no evidence was adduced as to the defendant's character. (b) "Trivial nature of the offence" 1. The offence with which the defendant is charged is not trivial, either as a general proposition, in terms of the place of s. 120 (1) of the POEO Act in the overall scheme of the POEO Act, or in the particular circumstance of the defendant's culpability in the commission of the admitted offence. 2. The protection of waters from pollution is an integral part of the legislative scheme established under the POEO Act. 3. The seriousness of the offence created by s. 120(1) of the POEO Act is manifest in the prescribed maximum penalty of $250,000. Case after case has emphasised the seriousness of the offence against s. 120(1) of the POEO Act. For example, in Axer Pty Limited v Environment Protection Authority (1993) 113 LGERA 357 at 359, a penalty of $125,000 for the offence of water pollution against s. 16(1) of the Clean Waters Act 1970, a predecessor to s. 120(1) of the POEO Act, was seen to be large and to reflect the seriousness with which the community regards pollution of this kind. Mahoney JA stated: "The community has adopted a stern policy against pollution. The legislative scheme requires that proper, and strict, precautions be taken by those whose activities may cause proscribed pollution. The quantum of the fines which may be imposed evidences this: for the present offence, a maximum fine of $125,000 was available. The quantum of the fines which the legislation allows to be imposed has no doubt been fixed not merely to indicate the seriousness with which such pollution is regarded but also to deter those engaged in such activities and to procure that they will take the precautions necessary to ensure that it does not occur": at 359. 1. The maximum penalty has been increased by Parliament from $125,000 to $250,000 for an offence against s. 120(1) of the POEO Act. 2. As Bignold J noted in Environment Protection Authority v Le Dome Pty Limited (2002) 125 LGERA 121 at 132 [80], a proper understanding of the purpose of creating offences against an environmental statute, here the POEO Act, is assisted by consideration of the express objects of the statute. The objects of the POEO Act in s. 3 include: "(a) to protect, restore and enhance the quality of the environment in New South Wales, having regard to the need to maintain ecologically sustainable development, … (d) to reduce risks to human health and prevent the degradation of the environment by the use of mechanisms that promote the following: (i) pollution prevention and cleaner production, (ii) the reduction to harmless levels of the discharge of substances likely to cause harm to the environment, (iia) the elimination of harmful wastes, … (iv) the making of progressive environmental improvements, including the reduction of pollution at source, (v) the monitoring and reporting of environmental quality on a regular basis, (e) to rationalise, simplify and strengthen the regulatory framework for environment protection,…" 1. The offence created by s. 120(1) of the POEO Act has an important function in the overall framework of the statute of prohibiting the pollution of waters, except if a licence is first obtained and any pollution occurs strictly in accordance with the terms of any such licence. Compliance with this regulatory scheme is vital if the objects of the POEO Act are to be achieved. 2. In the circumstances, the offence charged against the defendant cannot be considered to be trivial in nature. 3. The objective and subjective circumstances of this case also establish that the commission of the offence by the defendant is not trivial. 4. As I will set out further below, the consequences of the commission of the offence by the defendant included actual and material environmental harm, albeit more in the short-term rather than the long-term. The offence was foreseen, to some extent negligent, and in part, the consequence of conduct which was intended. The reason for committing the offence was to perform contractual obligations for commercial gain. These circumstances speak against any categorisation of the offence in this case as being trivial. 5. I should note that the defendant, by its counsel, does not submit that the offence should be categorised as trivial in the circumstances of this case. (c) "Extenuating circumstances" 1. The primary extenuating circumstance relied upon by the defendant is that the defendant was placed in a conundrum under its contract with the principal, MCW. To perform its contract would involve a highly foreseeable risk of escape of bentonite into the wetlands, thereby causing pollution of waters contrary to s.120 (1) of the POEO Act. The defendant had warned the principal of this risk. The defendant had suggested alternatives which would avoid the risk, namely moving the alignment of the pipeline to the west of the Pacific Highway Coopernook Bypass or, if the alignment were to stay to the east, drilling deeper into rock. However, the principal had refused to accept the defendant's suggestions and had insisted the defendant carry out the works under the contract as originally specified. In these circumstances, the defendant submits, the defendant had no choice but to perform the contract, even if this risked environmental harm. 2. I reject the submission. All persons under a contract, whether a principal or a contractor, are obliged to obey the law, including in this context, the statutory obligation under the POEO Act not to pollute waters. The fact that one party to a contract refuses to take action to avoid breaching the law, here to avoid pollution of waters, does not exculpate or relieve another party from its obligations to comply with the law. 3. Here both parties were on notice that there was a highly foreseeable risk that pollution of waters would occur if the contract was performed in the manner originally proposed. Practical alternatives were available to avoid that risk. Both parties were obliged to comply with the law including the statutory obligation under the POEO Act not to pollute waters. 4. In the circumstances, this required both parties either to agree to one of the alternatives suggested by the defendant or otherwise not to perform the contract as originally specified. A failure by the principal, MCW, to pursue one of the suggested alternatives of action could in no way relieve the defendant as the contractor from its obligation to comply with the law, including the statutory obligation not to pollute waters under the POEO Act. If the principal would not agree to pursue one of the suggested alternative means of installing the pipe, the contractor was obliged not to perform the contract as originally specified. There was no legal conundrum. 5. To find the defendant's conduct in the circumstances of this case an extenuating circumstance would be to undermine the regulatory scheme established under the POEO Act. The system of pollution control would become ineffective. The dicta of Mahoney J in Axer Pty Ltd v Environment Protection Authority (1993) 113 LGERA 357 at 359, quoted in part above, emphasises this point. 6. The circumstances of this case are distinguishable from the cases involving pollution of waters from a ship where waters were polluted in circumstances where the relevant accused could not, as a matter of practical reality, have done anything to ensure that the offence, or the adverse consequences of the conduct which led to the offence, did not occur: see Thorneloe v Filipowski (2001) 52 NSWLR 60 at 74-75; Webb v Cheung [2002] NSWLEC 135 (22 August 2002) at [32] and Filipowski v Cadem Shipping Pty Ltd [2005] NSWLEC 552 (7 October 2005) at [54]. Contrast Filipowski v Frey [2005] NSWLEC 661 (30 November 2005) at [88]. 7. There is a need to impose a conviction and a penalty which reflects, amongst other purposes, a general deterrent and to reinforce the obligations on contractors such as the defendant: see Mosman Municipal Council v Menai Excavations Pty Ltd [2002] NSWLEC 132 at [35] where similar matters were taken into account. (d) "Any other matter … proper to consider" 1. Relevant here are a number of mitigating factors, considered in greater detail below: 1. The defendant entered a plea of guilty at the earliest opportunity; 2. The defendant has assisted in the cleanup and has incurred costs of $46,413.33; 3. The defendant, through its officers, has expressed contrition and remorse; 4. The defendant has co-operated with the regulatory authority, DEC, in the investigation of the offence and in the efficient presentation of the case at trial; and 5. The defendant has agreed to pay the prosecutor's legal and investigation costs in the agreed sum of $20,000. Conclusion on s. 10(1) 1. On balance, the factors discussed above in relation to the non-trivial nature of the offence and the lack of extenuating circumstances outweigh the defendant's lack of antecedent criminal history and other mitigating circumstances. Accordingly, I am not satisfied that it is appropriate to either unconditionally or conditionally discharge the defendant without proceeding to conviction pursuant to s. 10(1) of the Crimes (Sentencing Procedure) Act. 2. I therefore proceed to consider the purposes of sentencing and the objective and subjective circumstances of the offence and the subjective circumstances of the defendant. Purposes of sentencing 1. Section 3A of the Crimes (Sentencing Procedure) Act 1999 states the purposes for which the Court may impose a sentence on the defendant to be as follows: "(a) to ensure that the offender is adequately punished for the offence, (b) to prevent crime by deterring the offender and other persons from committing similar offences, (c) to protect the community from the offender, (d) to promote the rehabilitation of the offender, (e) to make the offender accountable for his or her actions, (f) to denounce the conduct of the offender, (g) to recognise the harm done to the victim of crime and the community." 1. In Veen v R (No.2) (1988) 164 CLR 465 at 476, Mason CJ, Brennan, Dawson and Toohey JJ stated: "The purposes of criminal punishment are various: protection of society, deterrence of the offender and of others who might be tempted to offend, retribution and reform. The purposes overlap and none of them can be considered in isolation from the others when determining what is an appropriate sentence in a particular case. They are guideposts to the appropriate sentence but sometimes they point in different directions." 1. In this case, the purposes in paragraphs (a), (b), (e), (f) and (g) of s. 3A are of relevance. 2. The sentence must serve as a general or public deterrent. It is the duty of the Court to see that the sentence which is imposed will operate as a powerful factor in preventing the commission of similar crimes by those who might otherwise be tempted by the prospect that only light punishment will be imposed: R v Rushby [1977] 1 NSWLR 594 at 597-598. This factor is particularly relevant to environmental offences. Persons will not be deterred from committing environmental offences by nominal fines: Environment Protection Authority v Capdate Pty Ltd (1993) 78 LGERA 349 at 354. The deterrent effect of a fine must send an important message that laws requiring the protection of the environment must be complied with. 3. The sentence of the Court is an important denunciation of the conduct of the defendant. A court, by its sentence, must show its denunciation of the crime committed. The moral outrage of the community must be taken into account: R v Nichols (1991) 57 A Crim R 391 at 395; Inkson v R(1996) 88 A Crim R 334 at 344–346, 352 and 355-357. 4. Retribution or the taking of vengeance for the harm which has been done by an offender will also be an important aspect of sentencing in environmental offences. The community must be satisfied that the offender is given his just desserts. Public confidence in the administration of justice depends, at least to some extent, on the courts not failing to have regard to the community's persistently punitive attitude towards the sentencing of offenders: Ryan v R (2001) 206 CLR 267 at 282-283 [46]. Approach to sentencing 1. A basic principle of sentencing law is that the sentence must reflect the objective circumstances of the offence and the personal or subjective circumstances of the defendant: Veen v R (No.1) (1979) 143 CLR 458 at 490 and Veen v R (No.2)(1988) 164 CLR 465 at 472. This is the proportionality principle. Objective circumstances 1. A sentence "should never exceed that which can be justified as appropriate or proportionate to the gravity of the crime considered in light of its objective circumstances": Hoare v R (1989) 167 CLR 348 at 354. Maximum penalty 1. The first of the objective circumstances relevant to determining the gravity of the crime is the maximum statutory penalty: Camilleri's Stock Feed Pty Ltd v Environment Protection Authority (1993) 32 NSWLR 683 at 689; R v H (1980) 38 A Crim R 53 at 65; Axer Pty Ltd v Environment Protection Authority (1993) 113 LGERA 357 at 359. 2. For an offence against s. 120(1) of the POEO Act, the maximum penalty for a corporation is $250,000. Objective harmfulness 1. A second objective circumstance relevant to determining the seriousness of the crime is the objective harmfulness of a defendant's action. Harmfulness in the case of an offence against s. 120(1) of the POEO Act is the adverse impacts on the environment, including persons and the biota in it, resulting from the commission of the offence. The culpability of a defendant depends, in part, on the seriousness of the environmental harm. The more serious the lasting environmental harm involved the more serious the offence and, ordinarily, the higher the environmental penalty: seeCamilleri's Stock Feeds Pty Ltd v Environmental Protection Authority (1993) 32 NSWLR 683 at 701 and s. 21A (2)(g) and (3)(a) of the Crimes Sentencing Procedure Act 1999. 2. This objective circumstance is given statutory form in s. 241(1)(a) of the POEO Act, namely "the extent of the harm caused or likely to be caused to the environment by the commission of the offence". 3. In this case, there was actual environmental harm. The environmental harm that was caused by the commission of the offence is material for the following reasons. First, the environment in which the pollution occurred is a natural wetland of sufficient significance to be listed under SEPP14 – Costal Wetlands. The aim of SEPP14 is to ensure that the coastal wetlands are preserved and protected in the environmental and economic interest of the state: cl. 2 of SEPP No 14. 4. Secondly, the amount of the pollutant and the area and volume of the wetland affected by the pollutant were material. 429 cubic metres or 429,000 litres of bentonite fluid was lost in the soil structure and a portion of that amount surfaced in the wetland. An area of approximately 1,711 square metres over four pools in the wetland were affected by bentonite. This translates to a volume of 342 cubic metres or 342,000 litres in the wetland that was affected by the bentonite. Further, bentonite mud was observed, ranging in thickness from 100 millimetres to 300 millimetres over an area of approximately 300 metres long and 100 metres wide. 5. Thirdly, there was short term, physical impact on the water and the vegetation of the wetland. Significant work needed to be done to pump the discoloured water out of the wetland and to remove the bentonite sludge from around vegetation and the floor of the wetland. This took a period of many weeks. 6. Fourthly, the bentonite sediment remained in the wetland for at least a couple of months until it was mostly removed. It has continued to have some effect, although this appears to be insignificant according to the subsequent monitoring reports of Geolyse. 7. By reason of the nature of the pollutant and the remedial action taken to remove it, there fortunately appears to have been no long-term impact on the wetland. However, this does not mean that the actual, material, short-term impacts of the pollution of the wetland are not of significance. Foreseeability of harm 1. Under s. 241(1)(c) of the POEO Act, the Court must take into consideration "the extent to which the person who committed the offence could reasonably have foreseen the harm caused or likely to be caused to the environment by the commission of the offence." 2. In this case, the harm was clearly foreseeable. The defendant did actually foresee the risk and advised the principal, MCW, in the email of 18 March 2004. Furthermore, under cross-examination, Mr Foley accepted that there was a high risk of the escape of bentonite into the wetland and of causing adverse impacts by carrying out the drilling operation. 3. The extent to which the offences were foreseen, negligent or the consequence of conduct which was intended is relevant: Camilleri's Stock Feed Pty Ltd v Environment Protection Authority (1993) 32 NSWLR 683 at 700. 4. In this case, the offence was foreseen. To some extent, it was negligent in the sense that there was a foreseeable risk of harm which could have been avoided by the taking of practical measures. It was also in part the consequence of conduct which was intended. Practical measures 1. Under s. 241(1)(b) of the POEO Act, the Court is required to take into consideration "the practical measures that may be taken to prevent, control, abate or mitigate that harm." 2. In this case, there were practical measures suggested to avoid the foreseeable risk of escape of bentonite into the wetland and of consequential harm to the wetland. These included moving the alignment of the tunnel to the western side of the Pacific Highway Coopernook Bypass thereby avoiding the wetland or alternatively, if the alignment were to remain on the eastern side, drilling deeper through rock thereby avoiding the risk of fracture in the loose, saturated soil and the escape of bentonite into the wetland. 3. It is true that these measures could not be taken unilaterally by the defendant. The principal, MCW, had to agree to the change. However, I accept the prosecutor's submission that the defendant could have more forcefully and comprehensively exposed to MCW the risks of pursuing the original proposal of drilling through the soil under the wetland, rather than pursuing the alternatives, and also of the consequences if those risks were to eventuate, including that both the principal and the contractor would be in breach of the POEO Act and possibly other environment statutes as well. 4. Ultimately, however, the most practical measure was for the defendant to refuse to carry out the works under the contract in circumstances where there was a real and foreseeable risk that to do so would involve a breach of the POEO Act. The general law and the contract in particular both required compliance with the law including the POEO Act. 5. It is relevant to note that s. 120(1) of the POEO Act is not limited to preventing deliberate or negligent pollution. The comments of Mahoney J in Axer Pty Limited v Environment Protection Authority (1993) 113 LGERA 357 at 359-360 are apposite: "The legislation does not seek merely to prevent deliberate or negligent pollution. It envisages that, at least in many cases, proper precautions must be taken to ensure that pollution does not occur. Experience has shown that it is not enough merely to take care: accidents will happen. The legislation envisages that in many cases care must be supplemented by positive precautions; business must be arranged and precautions taken so as to ensure that pollution will not occur. Precautions may be costly. The cost of precautions to avoid pollution will no doubt become accepted, in due course, as an ordinary cost of operating in an industry where, absent precautions, pollution may occur. The legislature was no doubt conscious of the effect which increased costs may have in a market; what I have said is expressed in general terms and is, of course, subject to the circumstances of each case. But I believe legislation of this kind contemplates that, in general, the cost of preventing pollution will be absorbed into the costing of the relevant industries and in that way will be borne by the community or by that part of it which uses the product which the industry produces. In assessing the quantum of a fine considerations of this kind are to be taken into account. The fine should be such as will make it worthwhile that the cost of precautions be undertaken. As the learned judge indicated, in the present case, in order to prevent pollution of the river, it was necessary, inter alia, that the company delay spraying until the conditions were appropriate for it. No doubt that delay cost money. Ordinarily, the fine to be imposed should be such as to make it worthwhile that costs of this kind be incurred. I do not mean by this that the legislature saw the legislation as providing, by payment of a fine, a licence to pollute. In the end, the object of the legislation is to prevent pollution and to do this, inter alia, by the deterrent effect of a substantial fine and by, in consequence, persuading the industries concerned to adopt preventive measures. In assessing the fine in an individual case, it is proper to bear in mind the economic realities upon which such legislation is based." Control over Causes 1. Section 241(1)(d) of the POEO Act requires the Court to take into consideration "the extent to which the person who committed the offence had control over the causes that gave rise to the offence." 2. The defendant had clear control over the causes. The defendant was a specialist drilling contractor who often was called upon to perform drilling operations on sensitive sites. Under the contract, it was to perform the works using its specialised knowledge and experience. The defendant was given possession of the site to carry out the work. Orders from an employer 1. Section 241(1)(e) of the POEO Act requires the Court to take into consideration "whether in committing the offence, the person was complying with orders from an employer or supervising employee." This consideration does not apply in this case. The contractor was employed as a specialist drilling contractor. He was not required to comply with any direction by MCW as to the manner of performance of the work. The contract did not (and could not) require the defendant to breach the POEO Act. Reasons for commission of offence 1. The criminality involved in the commission of the offence is also to be measured by reference to the reasons for its occurrence: Axer Pty Ltd v Environment Protection Authority (1993) 113 LGERA 357 at 366 per Badgery-Parker J. 2. I accept the prosecutor's submissions that the defendant allowed contractual and commercial considerations to loom large in its decision to carry out the work. These considerations overwhelmed the defendant's obligations under law and under the contract to comply with the law. 3. The contract was a valuable one to the defendant, with the contract price being approximately $500,000. It was a continuation of contractual relations between the defendant and the principal, MCW. However, these matters cannot be allowed to justify a breach of the law by the defendant. Conclusion on objective circumstances 1. Having regard to the objective gravity or circumstances of the offence that I have described above, the offence should be considered as being, as the prosecutor has submitted, at the lower end of the middle range of offences. An appropriate penalty that would reflect the objective circumstances would be $30,000. Subjective circumstances of the defendant 1. A proportionate sentence not only depends on the objective circumstances of the offence but must also be appropriate to the particular defendant. This requires the Court to take into account any personal mitigating factors present: Veen v R (No.1)(1979) 143 CLR 458 at 490; Veen v R (No.2) (1988) 164 CLR 465 at 472; and R v Gallagher (1991) 23 NSWLR 220 at 222, 223 and 229-233. 2. The personal mitigating factors will include the nature or characteristics of the defendant and the defendant's responses to the charges. The nature of the defendant includes its character and prior criminality. The defendant's response to the charge includes its contrition or remorse, co-operation with the regulatory authorities and any offer of compensation of restitution. Nature of the defendant 1. The defendant has no prior conviction for any environmental offence. The lack of prior criminality is a factor in sentencing in this case:Camilleri's Stock Feeds Pty Ltd v Environment Protection Authority (1993) 32 NSWLR 683 at 701 and s. 21A(3)(e) of the Crimes (Sentencing Procedure) Act 1999. Plea of Guilty 1. The defendant has pleaded guilty at the earliest practicable opportunity. The summons was filed on 24 March 2005 with the first return being on 30 May 2005. The defendant entered the plea on the next return on 11 July 2005. 2. Accordingly, the defendant is entitled to a full discount of twenty-five per cent reflecting the utilitarian value of the plea: R v Thomson (2000) 49 NSWLR 383 at 419 [160], R v Sharma (2002) 54 NSWLR 300 at 315–316 [68] and ss. 21A(2)(k) and 22 of the Crimes (Sentencing Procedure) Act 1999. Contrition and remorse 1. In addition, the defendant has expressed remorse at the environmental consequences of the offence. This is a relevant factor entitling the defendant to a further discount: Neal v R (1999) 149 CLR 305 at 315; Camilleri's Stock Feeds Pty Ltd v Environment Protection Authority(1993) 32 NSWLR 683 at 700 and 21A(3)(i) of the Crimes (Sentencing Procedure) Act 1999. Both Mr Foley and Mr Coe in their respective affidavits have expressed their contrition and remorse at the occurrence of the events that constitute the commission of the offence and the environmental harm caused by the commission of the offence. 2. In addition, the defendant has participated in actions to remediate the environmental harm caused by the commission of the offence. The defendant has incurred costs involved in the cleanup of $46,413.33. These costs were essentially the costs of labour of employees and contractors whom the defendants caused to be employed in the cleanup carried out by the principal, MCW. Co-operation with regulatory authorities 1. The defendant has co-operated with the regulatory authority both at the time of commission of the offences and subsequently: Camilleri's Stock Feeds Pty Limited v Environment Protection Authority (1993) 32 NSWLR 683 at 700-701 and ss. 21A(3)(m) and 23 of the Crimes (Sentencing Procedure) Act 1999. The defendant has been co-operative with DEC in relation to the investigation into the commission of the offence. The defendant complied with a notice to provide documents to the DEC and made its staff available for interview conducted by the DEC. Furthermore, the defendant has co-operated in the hearing of the plea of guilty, including by agreeing a statement of facts. Finally, the defendant has agreed to pay the prosecutor's legal and investigation costs in the agreed sum of $20,000. Section 6 of the Fines Act 1996 1. Section 6 of the Fines Act 1996 provides: "In the exercise by a court of a discretion to fix the amount of any fine, the court is required to consider: (a) such information regarding the means of the accused as is reasonably and practicably available to the court for consideration, and (b) such other matters as, in the opinion of the court, are relevant to the fixing of that amount." 1. The information regarding the means of the defendant as is available to the Court for its consideration, is set out in the affidavit of Mr S Coe as follows: "8. The Defendant has ceased trading and is no longer conducting direct drilling projects in Australia or overseas. 9. The Defendant is currently involved in litigation in the District Court of NSW in relation to amounts that are outstanding pursuant to contractual works in New South Wales. 10. The Defendant is also currently involved in litigation in India with respect to hydraulic works arising from a contract performed in India. This litigation is substantial; a claim in the order of $2,000,000.00 has been made against the Defendant. The costs of defending this claim have placed strain on the financial capacity of the Defendant. 11. The financial position of the Defendant is that its liabilities substantially outnumber its assets... 12. I say that if the Defendant receives a large fine, it will have difficulty in paying the fine and costs to the applicant imposed by the Court". 1. In Environment Protection Authority v Capdate Pty Limited (1993) 78 LGERA 349 at 353, Stein J considered the significance of the fact that the corporate defendant in that case had ceased to trade. Stein J held: "Whether a person or company's financial circumstances will sound in mitigation of penalty however will very much depend on the particular facts and circumstances… So far as the company is concerned all I know is that it is no longer trading. It is difficult to see how its largely indefinite financial circumstances should mitigate the fine to any appreciable extent. It is not in receivership and could possibly trade again. In any event, the means of the company may not have the same impact on third parties as with an individual defendant." 1. In Environment Protection Authority v Douglass (No 2) [2002] NSWLEC 94, Lloyd J considered the issue of the utility of imposing a substantial penalty upon an impecunious defendant. Lloyd J stated at [16]: "The purpose of a penalty is not only to act as a specific deterrent but to act as a general deterrent, that is, to discourage others who might be minded to commit similar or like offences in the future. I also must have regard to the seriousness of the offence in this instance. Having regard to all of these considerations I am of the view that a penalty being some 75 per cent of the maximum is appropriate. That is a penalty of $45,000." 1. In the Environment Protection Authority v Emerald Peat Pty Ltd (In Liq) [1999] NSWLEC 147, the corporate defendant in that case was a company in liquidation. Talbot J held at [77]: "The evidence discloses that the offence must be regarded, as I have said, as extremely serious, but notwithstanding the present impecunious state of the company's financial affairs and the apparent lack of liquidity in so far as the ability to meet the commitment to a substantial fine is concerned, nevertheless a significant penalty for the offence and a further penalty for each of the 44 days during which the offence continued, is justified". 1. Talbot J ordered the defendant to pay a total fine of $217,000 in that case. 2. Mr Hemmings conceded that because the defendant is a corporation rather than a natural person, the factor of any hardship to the accused is less relevant. However, Mr Hemmings does submit that the defendant's capacity to pay, as disclosed in the evidence that I have quoted above, is of relevance. However, that evidence is not that the defendant cannot pay a fine at all, but rather, as Mr Coe says, that if it the defendant were to receive a large fine it will have difficulty in paying the fine as well as the costs of the prosecutor imposed by the Court. The evidence of the company's financial circumstances is also "largely indefinite": Environment Protection Authority v Capdate Pty Ltd (1993) 78 LGERA 349 at 353. Order under s. 250(1) of the POEO Act 1. Section 250(1) of the POEO Act permits the Court to make additional orders including the power to: "(a) order the offender to take specified action to publicise the offence and its environmental and other consequences and any other orders made against the person, ... (c) order the offender to carry out a specific project for the restoration or enhancement of the environment in a public place or for the public benefit". 1. In relation to an order under s. 250(1)(c), the prosecutor submitted that the defendant's lack of capacity to pay speaks against the Court making any order under s. 250(1)(c). The defendant, by its counsel, accepted that submission. In the end, therefore, neither party submitted that it was appropriate in the circumstances of this case to make an order under s. 250 (1)(c). 2. In relation to an order under s. 250(1)(a), Mr Hemmings submitted that the Court should give consideration to ordering the defendant to publicise the offence. No form of order was put forward at this stage. However, Mr Hemmings submitted that if the Court were to order the defendant to take action to publicise the offence, that would serve the purpose of sentencing of general deterrence. This could be done instead of the Court imposing a fine. 3. Mr Howard opposed the Court making an order under s. 250(1)(a) if either the Court were to make an order under s. 10(1) of the Crimes (Sentencing Procedure) Act or to impose a nominal fine. Mr Howard submitted that it would be counterproductive and in fact would not further the purpose of sentencing of general deterrence. 4. I agree with the prosecutor's submissions. Having regard to the matters that I have set out above, this is not a case where it is appropriate either to make an order under ss. 250(1)(a) or (c) of the POEO Act. Conclusion on subjective circumstances 1. Taking each of the subjective circumstances into account, it is appropriate to reduce the sentence that would reflect the objective gravity or circumstances that I have outlined earlier by $12,000. The appropriate sentence 1. Accordingly, having regard to both the objective circumstances of the crime and the subjective circumstances of the defendant, the appropriate sentence is a fine in the amount of $18,000. In addition, the defendant should pay the prosecutor's legal and investigation costs of $20,000. 2. The orders of the Court are therefore: 1. The defendant is convicted of the offence as charged. 2. The defendant is fined the sum of $18,000. 3. The defendant is to pay the prosecutor's legal and investigation costs in these proceedings in the agreed sum of $20,000, such costs to be paid within three months of today. ********** Amendments 20 August 2015 - Decision date changed from 12/05/2005 to 05 December 2005. 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: 20 August 2015