Director liability for environmental offences

Director liability for environmental offences

By Breellen Warry, Partner I Clara Klemski-Edwards, Senior Associate I  Olivia Lawrence, Graduate - Holding Redlich

Did you know that directors and managers can be liable for environmental offences committed by a corporation?

There are strong policy reasons for holding directors liable for environmental offences by corporations. 

To illustrate, in 2012 during a series of nationwide reforms of director liability provisions generally, the (then) Attorney General, Greg Smith, noted in relation to liability for environmental offences:[1]

…there are circumstances when it is right and proper that individual directors and officers should face criminal sanctions for offences committed by their corporations. Certainly where those individuals have personally aided and abetted, or been knowingly concerned, in the particular offence, no-one could reasonably argue that they should not be held to account. Further, where a corporation commits an offence as a result of any director breaching his or her fundamental duties as a director, then the director has no cause to complain if a prosecution is brought against him or her.

Further, there are circumstances where compelling public policy reasons justify the imposition of additional standards and obligations on directors under State legislation. We see this in areas like occupational health and safety and environmental legislation where public health and safety is potentially at stake.
In this article, we look at the categories of executive liability under the Protection of the Environment Operations.

Act 1997 (NSW) (POEO Act), the key piece of environmental protection legislation in NSW, and how you can manage your risk as a director or manager.

Two categories for executive libabliy offences

There are two categories of executive liability offences under the POEO Act. We discuss each in detail below.
  1. Special executive liability (SEL)

SEL applies to the most serious environmental breaches of the POEO Act, such as:
  • pollution of land
  • contravening a condition of an environmental protection licence
  • pollution of water
  • failure to notify pollution incidents in accordance with Part 5.

If a corporation contravenes, whether by act or omission, a provision attracting SEL, each person who is a director of the corporation or who is concerned in the management of the corporation is taken to have contravened the same provision, unless a defence is established.

If found guilty of a SEL offence, a director or manager can be fined up to $1,000,000 and/or seven years imprisonment (where the offence relates to a “Tier 1” offence).

Of note, the NSW Environment Protection Authority (EPA) Prosecution Guidelines state that the “EPA will institute proceedings under section 169 only where there is evidence linking a director or manager with the corporation's illegal activity. That link need not necessarily be of a positive (intentional) character but could be of a negligent nature.”

Establishing a defence

To defend a charge under s 169 of the POEO Act, a director or manager needs to satisfy the Court that:

  • the person was not in a position to influence the conduct of the corporation in relation to its contravention of the provision, or
  • the person, if in such a position, used all due diligence to prevent the contravention by the corporation.
Therefore, directors and managers need to ensure there are robust compliance procedures in place for those undertaking potentially environmentally risky activities to rely upon a defence to a SEL offence.
  1. General executive liability (GEL)

GEL applies to some of the less serious offences under the POEO Act, such as failure to:
  • prepare a pollution incident response management plan
  • keep the plan available
  • test the plan as required
  • implement the plan.
If a corporation has committed an executive liability offence under the POEO Act, a director or manager will be deemed to have committed an offence if:
  • the person knows or ought reasonably to know that the executive liability offence (or an offence of the same type) would be or is being committed; and
  • fails to take all reasonable steps to prevent or stop the commission of that offence.

Unlike for SEL offences, the onus to prove GEL is on the prosecutor. 

The POEO Act lists examples of what could be considered ‘reasonable steps’ to prevent the offence. This includes compliance monitoring, relevant training, ensuring appropriate plant, equipment, work systems and creating and maintaining a compliance culture.

Accessorial liability

A director or manager can also be liable for accessorial offences under section 169B, if the corporation commits an offence under the POEO Act, and the person:

  • aids or abets the commission of the offence;
  • induces the commission of the offence;
  • conspires with others to effect the commission of the offence; or
  • is in any other way, knowingly concerned in, or party to, the commission of the offence.

A person can still be found guilty regardless of whether the corporation has been prosecuted for, or convicted of the corporate offence.

What can I do?

Directors and managers are not protected by the corporate veil from being liable for certain environment offences and are exposed to the risk of prosecution or penalty where corporations breach the POEO Act.

Directors and managers should therefore ensure that their organisaztion is compliant with all relevant statutory obligations and applicable conditions and make an active effort to ensure all necessary procedures and plans are up to date and being implemented.

Finally, directors and managers should ensure that they are provided with relevant information regarding the environmental operation of the organistion. It is not enough to simply leave compliance with environmental laws to others – directors and managers need to take an active role.

 [1] Second Reading Speech, 17 October 2012, Miscellaneous Acts Amendment (Directors' Liability) Act 2012 (NSW)

The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.