Directors and others involved in the management of organisations must take active steps to ensure that a corporation complies with environmental obligations imposed in relevant environment protection licences, conditions of development consent and general environmental law or risk personal prosecution with heavy penalties and possible imprisonment for breaches committed by a corporation.
Directors or others “concerned in the management of the corporation” may be personally liable under environmental legislation and can be personally prosecuted for offences committed by a corporation. The phrase “concerned in the management” has been interpreted broadly at times to extend to persons who carry on a management role over a part of a company’s operations (for example, managers of sites, general managers and environment managers).
Under the Protection of the Environment Operations Act 1997 (NSW) (POEO Act) as well as other environmental legislation, director and manager liability for environmental offences is divided into special executive liability for more serious offences and executive liability for less serious offences. Where a corporation commits a special executive liability offence, each person concerned in the management of the corporation is taken to have contravened the same provision unless the person can satisfy the Court of certain matters.
The prosecution of directors or managers personally for environmental offences (including seeking the imposition of heavy fines and possible imprisonment) is not limited to prosecution following the commission of pollution incidents or wilful environmental crimes such as the dumping of waste.
Special executive liability extends to offences that on their face appear to be less environmentally significant. For example, a director who provides false or misleading information pursuant to an environmental protection licence annual return (whether knowingly or unknowingly) will be taken to have carried out an offence pursuant to section 66(2) of the POEO Act which is a special executive liability offence and may be liable for a penalty of up to $250,0000.
Special executive liability, executive liability and the presumption of responsibility
For special executive liability offences, if a corporation commits an offence 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 and a director or manager carries the burden of satisfying the court that, the director:
- was not in a position to influence the conduct of the corporation in relation to the offence; or
- exercised all due diligence to prevent the contravention by the corporation.
Special executive liability offences in the POEO Act include (but are not limited to):
- carrying on a scheduled activity without holding an environment protection licence that authorises that activity to be carried on: section 49(2);
- contravening a condition of an environment protection licence: section 64(1);
- the holder of an environment protection licence supplying information that is false or misleading in a material respect: section 66(2);
- wilfully or negligently disposing of waste in a manner that harms or is likely to harm the environment: section 115(1);
- polluting any waters: section 120(1); and
- polluting land: section 142A(1).
For executive liability offences, the prosecutor is generally required to demonstrate that the manager or director:
- knew, or ought reasonably to have known, that the offence would be or is being committed; and
- failed to take all reasonable steps to prevent or stop the offence being committed.
The EPA (or the local Council) may prosecute a director or manager and that person may be convicted under a special executive liability or executive liability offence provision whether or not the corporation has been proceeded against or has been convicted. This circumstance may arise, for example, in the event that a corporation has been wound up.
Director accessorial liability for offences of corporation
In addition to special executive liability and executive liability offence provisions, a director or other individual involved in the management of the corporation may be personally liable if a corporation commits an offence under the POEO Act (a Corporate Offence) and, the person:
- aids, abets, counsels or procures the commission of the Corporate Offence;
- induces the commission of the Corporate Offence;
- conspires with others to effect the commission of the Corporate Offence; or
- is in any other way, whether by act or omission, knowingly concerned in, or party to, the commission of the Corporate Offence.
Unlike in relation to special executive liability offences, the prosecutor bears the legal burden of proving the elements of the offence in relation to accessorial liability offences.
Tips for directors
Directors and others involved in the management of organisations should take active steps to ensure that environmental compliance programs are implemented by employees within an organisation and by contractors and others operating on a site. This includes appropriate inductions for new staff and regularly training staff in identifying potential environmental breaches and compliance issues.
Environmental compliance programs must be targeted to the individual requirements of each jurisdiction in which an entity operates. Further, compliance systems should be periodically reviewed and updated in the event of legislative or regulatory amendments. Environment protection licence conditions and conditions of development consent should also be reviewed and included in compliance programs.
Clear records of audit and compliance programs must be retained to assist to demonstrate that all due diligence has been used to prevent to commission of an offence.
It is essential that the corporate culture of an organisation encourages compliance and does not tolerate breaches of provisions or internal policy. Internal processes for notification of breach of procedure or notification of environmental incidents (e.g. of potential pollution events or contamination of land) should be clear and understood within the organisation. Clear lines of organisational responsibility and reporting should also be devised and communicated within the organisation.