A recent decision handed down by Justice Pain of the Land and Environment Court has changed the way that waste laws in NSW are applied by overturning a seminal waste case and providing guidance on how waste provisions in the relevant legislation should be interpreted. In particular, it has, for the first time, construed important parts of the recovered fines exemption for recycled material, explained the legislative policy behind these exemptions, and resolved the question as to whether compliance is a producer or consumer responsibility. Environment Protection Authority v Grafil Pty Ltd; Environment Protection Authority v MacKenzie [2018] NSWLEC 99 were proceedings commenced by the EPA in relation to the use of an extractive sand quarry in Port Stephens, NSW (the Premises). Grafil Pty Ltd (Grafil) was charged with operating a waste facility without lawful authority and Mr Mackenzie, as director of Grafil, was charged with a consequential executive liability offence of operating a waste facility. Both were found not guilty by the Court.

The Facts

The defendants own and operate a sand quarry near Williamtown in Port Stephens. It is a long standing operation, and has the benefit of state significant development approvals. At all relevant times during the charge period (being from around 29 October 2012 to around 15 May 2013) Grafil held a development consent and an environment protection licence (EPL) for the extraction of sand and to operate as a sand mine. The development consent also allowed for the creation of access roads on the Premises. Two approvals under the former Part 3A allowed for the construction of long access or haul roads on the property.

In addition to the quarry operations at the Premises, the defendants also received materials from recycling depots operated by several well-known major skip bin companies in Sydney. These materials were recovered fines which had been processed and recycled from building and demolition waste (generally from skip bins) received by the recyclers in Sydney, and for which there was no market for re-sale at the time (due to the high volumes of such material produced by the recycling industry). This material was trucked to the Premises by transporters from the recyclers and placed in mounds or stockpiles on the Premises. Grafil was not charged for these materials, but was assured that they were recovered fines or ENM which fell within the applicable EPA exemptions. Processors who provided this material to the defendants were required to certify that it met certain resource recovery exemptions under the POEO Act. The defendants intended to use these materials for the construction of the internal road on the Premises approved under the former Part 3A. Charges were brought by the EPA before construction commenced and while the recycled material was stockpiled at the Premises, pending use.

The Charges

As part of a broad investigation into the dumping of waste known as “Operation Trojan”, the EPA became aware of the stockpiling of materials on the Premises. The EPA then brought charges against the defendants for using the Premises as a waste facility without lawful authority in contravention of s144(1) of the Protection of the Environment Operations Act 1997 (POEO Act) by depositing and/or spreading waste material and therefore applying it to the land. Charges were brought against Mr Mackenzie for the status offence under s169(1) POEO Act as he was director of Grafil during the charge period. Both defendants pleaded not guilty to the charges.

In order to successfully prosecute the defendants, the EPA needed to show the following three elements of the s144(1) offence:

  1. That the defendants were the occupier of the premises. This issue was not in contention;
  2. That the Premises were used as a waste facility. In order to prove this, the EPA needed to show that the material placed on the Premises was ‘waste’ and that the Premises were used as a ‘waste facility’, meaning that it was used for the storage and disposal of waste; and
  3. That the use of the waste facility was without lawful authority. The EPA had to prove that either development consent or an EPL was required for the storage and disposal of the recycled material. If the EPA proved this, the Defendants would need to prove that they had these approvals. Whether an EPL was required was determined by whether the recycled material fell within the recovered fines or ENM exemptions.

Under the POEO Act, ‘waste’ is relevantly defined in the dictionary as:

(a) ……

(b) any discarded, rejected, unwanted, surplus or abandoned substance, or

(c) ……

(d) any processed, recycled, re-used or recovered substance produced wholly or partly from waste that is applied to land, or used as fuel, but only in the circumstances prescribed by the regulations, or

(e) ……

Under clause 3B of the Protection of the Environment Operations (Waste) Regulation 2005 (Waste Reg), it is prescribed that waste is applied to the land when it is sprayed, spread or deposited on the land. Under the Waste Reg, the EPA can grant exemptions in relation to certain categories of waste and if such an exemption applies, an EPL is not required and the storage and disposal requirements in the POEO Act do not apply. The defendants relied on two such resource recovery exemptions, the Excavated Natural Material (ENM) exemption 2012 and, in particular, the ‘Continuous Process’ Recovered Fines (CPRF) exemption 2010.

The Defence

The Defendants pleaded not guilty to all of the charges. The defendants did not dispute that there were stockpiles of materials received from processors in Sydney on the Premises during the charge period. However, the defendants argued that the Premises were not used as a waste facility and relied on the waste recovery resource exemptions as the basis for not needing an EPL for the stockpiles of materials received from recycling depots.

The Court Findings

In considering this case, Justice Pain noted that the parties had entirely different constructions of the system of waste regulation in NSW underpinning the s144(1) charge and therefore two very different approaches to the operation of the system. The Waste Avoidance Resource Recovery Act 2001 was relied on by the Defendants as explaining the policy behind the exemptions, in submissions that were accepted by the Court. As the first element of the offence was not in contention, Justice Pain was only required to consider whether the second and third elements of the offence were proved.

Was the material waste?

Her Honour held that the second element of the s144(1) offence requires proof beyond reasonable doubt that, firstly, the materials placed in the stockpiles was waste and, secondly, that Grafil used the Premises as a waste facility.

Justice Pain rejected the EPA’s argument that the material in the stockpiles was waste because it was rejected, unwanted or surplus to the needs of the original owners. Grafil was not required to pay for the materials just because it was hard to get rid of the material in the market. Justice Pain found that the EPA was erroneously interpreting the definition of ‘waste’ in the POEO by considering whether the materials met the definition of waste in subsection (b) and thereby considering both subsections (b) and (d) of the definition together when determining whether something was waste. Her Honour held that limb (d) of the definition of waste was the limb that applied to recycled material and had been specifically adapted to define recycled material as waste but only when applied to land. Therefore, it was limb (d) that determined whether the stockpiled material was waste, and in determining whether materials fell within the definition of waste in subsection (d), it was not relevant to consider whether the materials were rejected, unwanted or surplus substances.

The EPA also noted that in Environment Protection Authority v Foxman Environmental Development Services [2015] NSWLEC 105 (Foxman), the Court (Justice Sheahan) found that material almost identical to that stockpiled on the Premises was in fact ‘waste’ under the POEO Act. Her Honour disagreed with the approach adopted by Justice Sheahan in Foxman (noting that Mr Foxman had been unrepresented in that case and the Court had not had the benefit of legal argument between counsel on key issues) and held that the material in the stockpiles was not ‘waste’ as defined under the POEO Act. Her Honour accepted Grafil’s submission that recovered fines and ENM are only ‘waste’ under the POEO if:

  • They are applied to the land or used as fuel; and
  • If this is done in the circumstances prescribed by the Waste Reg.

In coming to this conclusion, Justice Pain considered the construction of the POEO Act and found that there was a clear Parliamentary intention that recovered fines will only amount to waste if they are used in the two qualified ways above. The legislative purpose derived from the Waste Recovery and Avoidance Act 2001 and its objects and the associated policies, which explained that recycling was to be encouraged to assist in effectively managing the waste stream for environmental reasons. This was the first case to analyse the relationship between the POEO Act exemptions and this other fundamental legislation dealing with recycled materials.

Importantly, Justice Pain distinguished two seminal waste cases, EPA v Terrace Earthmoving Pty Ltd (2013) 84 NSWLR 679 (Terrace Earthmoving) and Shannongrove Pty Ltd v EPA (2013) 84 NSWLR 668 (Shannongrove) on the basis that neither of these cases involved recovered fines prepared in accordance with a resource recovery exemption. Justice Pain also accepted that extrinsic material, including government policies on resource recovery exemptions under the WARR Act, could be considered when looking at the definition of waste. On this basis, Her Honour held that waste was intended to be exempted from the regulatory regime if it was recycled material that was not applied to land, or if it was if it fell within the criteria in the exemptions. As the waste received by defendants met the resource recovery exemption and was to be used for a new road but had only been stockpiled and not yet applied to land, Her Honour found that the material received and stockpiled at the Premises was not waste for the purposes of the POEO Act and even if it was waste, was exempt and did not require an EPL. Therefore, the Premises were not used as a waste facility, or were not used as a waste facility without lawful authority, as no EPL was required and all relevant planning approvals were in place.

Justice Pain noted that the only case with factual similarities to the current case was Foxman. In Foxman, Justice Sheanan found that construction and demolition waste that may have fallen under a resource recovery exemption was waste because it was ‘discarded, rejected, unwanted, surplus or abandoned substance’ and was also waste within paragraph (d) of the definition. Justice Pain found that this approach to the definition of waste was incorrect. Her Honour agreed with Grafil’s construction that the material only became ‘waste’ when it was applied to the land in the circumstances prescribed by the Waste Reg. Her Honour also noted that Mr Foxman did not have any legal representation so there was effectively no counter-argument to the EPA’s construction argument in Foxman.

Was the material applied to the land or temporarily stockpiled?

As the material in stockpiles at the Premises only becomes waste once it has been applied to the land, the next issue became whether the material in the stockpiles had been applied to the land. Justice Pain rejected the EPA’s submission that the material was applied to the land when it was placed in stockpiles on the land in preparation for it to be used for a road construction. As there is no definition of ‘application to land’ or ‘storage’ in the POEO Act or Waste Reg, the words should be given their ordinary meaning in their statutory context.

Her Honour found that, if stockpiling was considered to be applying materials to the land then the POEO Act would not permit any temporary stockpiling as permissible, an outcome which Her Honour found to be impractical and unacceptable. Her Honour found that this construction would mean that there was no distinction between clause 39 (application of waste to land) and clause 42 (waste storage) in the Waste Reg. Her Honour therefore found that the EPA had not established beyond reasonable doubt that the material was waste disposed of by application to the land.

Given that Her Honour found that the material in the stockpiles on the Premises was not waste in the charge period, and disposal (application to land) and storage did not apply on the facts of the case, use of the land as a waste facility did not arise. Her Honour held that as the material temporarily stockpiled on the Premises was not waste applied to land, the EPA had not established that the second element of the POEO Act offence had been met. As such, Grafil was found not guilty of the charge. Consequently, Mr Mackenzie was also not guilty of the charge.

Was there lawful authority for the stockpiling of the materials at the Premises?

Although Justice Pain was not required to consider the third element of the offence (as the second element was not proven), her Honour chose to nonetheless consider this element. Her Honour therefore considered whether an EPL was required for the stockpiling of materials at the Premises or whether a resource recovery exemption applied. Her Honour rejected the EPA’s argument that the notes at the end of each exemption were part of the exemption. This had the consequence that asbestos, referred to in the CPRF exemption’s notes only, was not a material regulated by that exemption.

Importantly, Her Honour also considered who bears the onus of proving that the terms of the resource recovery exemption have been satisfied. Justice Pain found that s144(1) requires the EPA to prove that a defendant lacks lawful authority to operate a waste facility. Therefore, failure to fall within a resource recovery exemption is an element of the offence and must be proved by the EPA. This means that the EPA must:

  • Prove that the defendant is required to hold an EPL; and
  • Establish that the resource recovery exemptions do not eliminate the need to hold an EPL.

In this case, the EPA did not consider the resource recovery exemptions as they deemed that the onus of claiming these exemptions fell on the defendant. Justice Pain has made it clear that this is not the correct approach and that the EPA is required to prove that any exemptions do not apply as part of providing that there was no lawful authority for the depositing of the waste. In coming to this conclusion, Justice Pain again overturns Foxman. In doing so, her Honour again notes that Mr Foxman did not have the benefit of legal representation in the Foxman case.

Importantly, Justice Pain found that compliance with the exemptions was a producer or recycler responsibility, and that consumers or those receiving waste from recyclers as exempt material could not be expected to again submit the material for “continuous process” testing that could only properly be done at the point of production. In this, her Honour rejected a key submission of the EPA and adopted a quite different analysis of the exemptions to the regulator.

Her Honour ultimately found that the resource recovery exemptions applied so the defendant was not required to hold an EPL. Her Honour also found that there was a valid development consent for the stockpiling of the material. As such, the EPA did not establish an absence of lawful authority, the third element of the s144(1) offence.

What does this case mean for waste disposal in NSW?

The case is significant for waste offences in NSW for the following reasons:

  • It overturns the Foxman case as it finds that recovered fines and excavated natural materials fall within the definition of ‘waste’ in subsection (d) of the definition in the POEO Act and may be subject to a resource recovery exemption;
  • It confirms that when determining whether material meets the definition of waste in one part of the definition under the POEO Act, it is not relevant to consider other parts of the definition. For example, when considering whether material meets the definition of waste under subsection (d) (any processed, recycled, re-used or recovered substance produced wholly or partly from waste that is applied to land, or used as fuel), it is not relevant to consider whether the material is ‘discarded, rejected, unwanted, surplus or abandoned substance’ as per subsection (b) of the definition of waste;
  • It confirms that the act of stockpiling materials is not considered to be an ‘application to the land’ for the purposes of the POEO Act or Waste Reg;
  • It highlights that resource recovery exemptions should be given their intended beneficial effect and that compliance with the exemptions is a producer rather than a consumer responsibility; and
  • It shows that, for s144(1) offences, the EPA has the onus of proving that a resource recovery exemption does not apply as this is part of proving that the defendant lacked lawful authority to operate a waste facility.

It remains to be seen whether the EPA will state a case to the Court of Criminal Appeal following the decision of Justice Pain. However, notwithstanding any stated case, this case will now be one of the leading judgments regarding waste offences in NSW for some time to come, and will inevitably result in a significant change in the EPA’s approach to waste investigations and prosecutions.