The Queensland government has proposed new laws to expand liability for environmental compliance and clean-up costs to ‘related persons’ of companies that hold environmental approvals. The proposed ‘chain of responsibility’ laws aim to stop avoidance with environmental approvals by companies claiming a lack of funds or resources to comply with their obligations.

Proposed Chain of Responsibility laws

The Environmental Protection (Chain of Responsibility) Amendment Bill 2016 has been introduced into the Queensland Parliament to target non-compliance with environmental approvals by companies claiming financial distress.

Under the proposed laws, new powers will be introduced to issue environmental protection orders (EPOs) to companies and related persons to require compliance with environmental approvals and recover costs if companies or related persons fail to comply.

The proposed laws are intended to apply to ‘high risk companies’ and ‘related persons’ and will expand the range of persons who may be given an EPO to require action to protect the environment from the risk of environmental harm or take action to rehabilitate or remediate contamination. The new laws also allow compliance and clean-up costs to be imposed on related persons.

Environmental Protection Orders

Under the Environmental Protection Act 1994 (EP Act), the administering authority may give a person an EPO to, among other things, comply with an environmental authority (EA) or the general environmental duty (GED).

However, where a company that holds an EA or is subject to the GED is in financial difficulty, the company may have limited ability to take action in respect of an EPO. Where a company does not or cannot take required action to protect the environment, the administering authority may be forced to take action imposing costs on the Queensland government and taxpayers.

To reduce the risk of the government having to step-in and assume the liabilities and costs of a defaulting company, the Bill proposes to extend the liability for compliance with an EPO to related persons who have a financial interest in or control over the company.

What is a high risk company

A high risk company is an ‘externally-administered body corporate’ or an ‘associated entity’ as those terms are defined under the Corporations Act 2001 (Cth).

Who is a related person 

A person is a ‘related person’ of a company if:

  • The person is a holding company of the company; or
  • The person owns land on which the company carries out, or carried out, a relevant activity; or
  • The administering authority decides the person has a relevant connection with the company.

What is a relevant connection

The administering authority may decide a person has a relevant connection with a company if it is satisfied that the person:

  • Is capable of benefiting financially, or has benefited financially, from the carrying out of a relevant activity by the company; or
  • Is, or has been at any time during the previous 2 years, in a position to influence the company’s conduct in relation to the way in which, or extent to which, the company complies with its obligations under the EP Act.

In deciding whether a person has a relevant connection, the matters that the administering authority may consider include:

  • The extent of the person’s control of the high risk company;
  • Whether the person is an executive officer of:
    • The first company; or
    • A holding company or other company with a financial interest in the first company;
  • The extent of the person’s financial interest in the first company;
  • The extent to which a legally recognisable structure or arrangement makes or has made it possible for the person to receive a financial benefit from the carrying out of a relevant activity by the first company;
  • Any agreements or other transactions the person has entered into with a company;
  • The extent to which dealings between the person and company are:
    • At arm’s length; or
    • On an independent, commercial footing; or
    • For the purpose of providing professional advice; or
    • For the purpose of providing finance, including the taking of a security;
  • The extent of the person’s compliance with a requirement under section 451 notice to give information relevant to making a decision.

The meaning of ‘control’ and ‘financial benefit’ are broadly defined.

Orders that may issued

When issuing an EPO to a company, or if an EPO is already in force, the administering authority may also issue an EPO to a related person of the company which may impose any requirement on the related person that is being, or has been, imposed on the company, as if the related person were the company.

The administering authority may also issue an EPO to a related person of a high risk company, whether or not an EPO is being issued, or has been issued, to the high risk company. The order may impose any requirement on the related person that could be imposed on the company.

An EPO may also be issued to a related person even if the high risk company has stopped being the holder of an EA.

Further, an EPO may require a related person to take action to:

  • Prevent or minimise the risk of serious or material environmental harm; or
  • Rehabilitate or restore land because of environmental harm; or
  • Give the administering authority a bank guarantee or other security for the related person’s compliance with the EPO.

Joint and several liability

If a requirement is imposed on 2 or more related persons of a company, the EPO(s) issued to them may provide that the related persons are jointly and severally liable for complying with the requirements, including the costs of compliance.

Taking action in place of a related person

If an EPO is issued to a related person and the related person either fails to comply with the order or the operation of the order is stayed, the administering authority may take action to comply with the order and recover its costs from the related person.

Next steps

The Bill has been referred to the Agriculture and Environment Standing Committee for consideration with the Committee required to report back to Parliament by 15 April 2016.

If the Bill is passed, it is proposed that the new laws will apply as from 15 March 2016 when the Bill was introduced into Parliament.