Changes in NSW to liability of directors and managers for environmental offences

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15 January 2013

On 20 November 2012, the NSW Parliament passed the Miscellaneous Acts Amendment (Directors’ Liability) Bill 2012 (NSW) (Act) which aims to reduce the circumstances in which directors and managers (corporate officers) should face criminal sanctions for offences committed by their corporations.

The Act categorises offences into those that are more serious and those that are not. The onus of proof shifts back to the Prosecution for the less serious offences. The presumption of responsibility will continue to apply to some more serious environmental offences under the Protection of the Environment Operations Act 1997 (NSW) (POEO Act).   

Broad reforms introduced by the Act

The purpose of the Act is to implement the commitment by the Council of Australian Governments under the Seamless National Economy Partnership Agreement to establish ‘nationally consistent and principles-based reforms to the legislation governing criminal responsibility of directors and officers for corporate offences’.

The Act will reduce the number of offences to which ‘special executive liability’ provisions apply from over 1,000 to around 150. Of those that remain, the Act removes the presumption of responsibility for corporate officers in respect of offences committed by the corporation, with the exception of some more serious environmental offences under the POEO Act.

The Act does not remove the presumption of responsibility for the most severe environmental offences under the POEO Act.    

Liability of corporate officers under the POEO Act

The Act amends the POEO Act to introduce two categories of environmental offences, namely ‘special executive liability’ and ‘executive liability’. The Act also introduces accessorial liability for corporate officers for offences under the POEO Act.  

Special executive liability

The most serious offences under the POEO Act will attract ‘special executive liability’ for corporate officers and the presumption of responsibility will continue to apply (new section 169). 

There will be 19 ‘special executive liability’ offences comprising all of the Tier 1 offences (sections 115-117) and a number of Tier 2 offences including, for example, carrying on a scheduled activity without an environment protection licence (EPL) (section 49(2)), failing to comply with a condition of an EPL (section 64(1)), pollution of waters (section 120) and failing to notify a pollution incident (section 152). 

As such, the Act is unlikely to affect the prosecution of corporate officers in respect of the ‘special executive liability’ offences.   

Executive liability

For the less serious offences, corporate officers may face ‘executive liability’ for which the presumption of responsibility will not apply. 

There will be 20 ‘executive liability’ offences comprising a list of Tier 2 offences including, for example, occupying a premises at which scheduled development or scheduled activity is carried out without an EPL (sections 47(1) and 48(2)) and permitting the emission of an offensive odour (section 112).   

Following commencement of the Act, the Prosecution will need to establish all of the following elements (new section 169A):

  1. the corporation committed the offence; and
  2. the corporate officer:

(i) was involved in the management of the corporation and was in a position to influence the conduct of the corporation in relation to the offence committed;

(ii) knew or ought reasonably to have known that the offence would be or was being committed; and

(iii) failed to take all ‘reasonable steps’ to prevent or stop the offence from being committed.

The term ‘reasonable steps’ includes, but is not limited to, the following kinds of actions, depending on the circumstances (new section 169A(7)):

  • action towards assessing the corporation’s compliance with the provision creating the executive liability offence;
  • action towards ensuring that the corporation arranged regular professional assessments of its compliance with the provision;
  • action towards ensuring that the corporation’s employees, agents and contractors are provided with information, training, instruction and supervision appropriate to them to enable them to comply with the provision creating the executive liability offence;
  • action towards ensuring that relevant plant, equipment, structures and work systems are compliant with the provision; and
  • action towards creating and maintaining a corporate culture that does not direct, encourage, tolerate or lead to non-compliance with the provision creating the executive liability offence.

The Prosecution will bear the onus of proving all of the elements (previously presumed). Consequently prosecuting corporate officers for ‘executive liability’ offences is likely to be more onerous and costly. 

Accessorial liability

The Act introduces accessorial liability to both ‘special executive liability’ and ‘executive liability’ offences (new section 169). To prove this offence, the prosecution will be required to prove that the accused:

  1. aided, abetted, counseled or procured the offence;
  2. induced, whether by threats or promises or otherwise, the commission of the offence;
  3. conspired with others to effect the commission of the offence; or
  4. was in any other way, whether by act or omission, knowingly concerned in, or party to, the commission of the offence.

Other environmental legislation

The Act also amends the following environmental legislation to provide that offences committed by a corporation will attract the executive liability offence for corporate officers:

  • Contaminated Land Management Act 1997 (NSW);
  • Environmentally Hazardous Chemicals Act 1985 (NSW);
  • Forestry Act 1916 (NSW):
  • Heritage Act 1977 (NSW);
  • Mining Act 1992 (NSW);
  • National Parks and Wildlife Act 1974 (NSW);
  • Native Vegetation Act 2003 (NSW);
  • Pesticides Act 1999 (NSW);
  • Sydney Water Catchment Management Act 1998 (NSW);
  • Threatened Species Conservation Act 1995 (NSW); and
  • Water Industry Competition Act 2006 (NSW).

As with the POEO Act, the prosecution will bear the onus of proving all of the elements (previously presumed) for executive liability offences under the above Acts.

Implications

The Act significantly changes the landscape with respect to the personal liability of corporate officers under environmental legislation.  Under these reforms, the majority of the environmental offences for corporate officers will attract executive liability, so that the onus of proof rests with the Prosecution. Importantly the Prosecution will be required to prove the involvement (whether by act or omission) of the corporate officer in the commission of the offence.  One would expect that this shift in the onus of proof would reduce the number of prosecutions of corporate officers.


The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.


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