Trust but verify: The perils of providing false and misleading information to the NSW EPA
Clayton Utz
Australia August 8 2019
Providing information to the NSW Environment Protection Authority (NSW EPA) is a common task for many corporations who hold an environment protection licence (EPL). That information can come from various sources within your organisation, and you won't (and can't) be the expert in all of them.
The recent decision in Environment Protection Authority v Davis [2019] NSWLEC 79 is a reminder that directors and others concerned in the management of corporations need to exercise care and diligence to ensure that false or misleading information is not provided to the NSW EPA. Those who do not do so risk prosecution, even if they are not aware that false or misleading information has been provided.
Mr Davis, the general manager of an abattoir, was convicted of five offences under section 66(2) of the Protection of the Environment Operations Act 1997 (POEO Act), for the provision by his employer of false and misleading information to the NSW EPA in contravention of its EPL. He was ordered to pay more than $50,000 in fines and legal costs.
Mr Davis was prosecuted despite there being no evidence that he created any of the false information the subject of the charges against him and despite admissions by one of his former colleagues that they created and submitted some of the false information. Although the court acknowledged that there was no evidence that Mr Davis was aware that false information was being supplied to the NSW EPA on any occasion, he was found to have committed the offences because of his status as 'a person concerned in the management' of the corporation pursuant to the special executive liability regime in Part 5.9 of the POEO Act.
How the false and misleading information got to the NSW EPA
Wollondilly Abattoirs Pty Ltd is the occupier of a licensed abattoir premises at which "scheduled activities" under the POEO Act (that is, activities which need an EPL) are carried out. Those activities involve the slaughter and processing of animals, which result in the discharge of contaminated wastewater.
Wollondilly's EPL requires it to perform periodic effluent water and soil sampling and to have that sampling analysed by an accredited laboratory for specified pollutants. The conditions of the EPL also require the results to be published in quarterly reports and provided to the NSW EPA.
Mr Davis, as general manager, was responsible for the general running of the abattoir, overseeing and running the plant, authorising payments and overseeing all staff.
In 2017, one of Mr Davis's colleagues, an office manager, submitted four quarterly reports to the NSW EPA on behalf of Wollondilly, but in Mr Davis' name. Each of those reports attached a fabricated certificate of analysis, purporting to have been issued by an accredited laboratory.
In November 2017, the office manager submitted an annual return which contained further false information, including fabricated monitoring and sampling data.
The NSW EPA subsequently became aware that the accredited laboratory who had purportedly prepared the certificates had not done so, and had not conducted any business with the abattoir for approximately 18 months.
In a failed attempt to alleviate the NSW EPA's suspicions and to cover up the fact that samples were not analysed as required by the EPL, Wollondilly provided the NSW EPA with falsified invoices and doctored bank records purporting to show payments for the analysis which it claimed had been carried out by the accredited laboratory. This supply of information to the NSW EPA was not the subject of a charge against Mr Davis (but was against Wollondilly).
Repercussions for Mr Davis
Mr Davis was prosecuted and sentenced despite there being no evidence that he created, submitted or even knew of the creation or submission of any of the false information, and despite admissions by the former office manager that he created and submitted some of the false information.
It had also been acknowledged that Mr Davis was overworked, had an unsustainable job, and did not have the technical capabilities required to edit and doctor documentation.
He was nevertheless found to have committed the offences because of his status as "a person concerned in the management" of the corporation pursuant to the special executive liability regime in Part 5.9 of the POEO Act. Being in a position to influence the conduct of the corporation in relation to the contraventions, his culpability arose from his failure to exercise due diligence in managing the process for complying with the EPL.
Some key take-home lessons for executives of corporations who deal with the NSW EPA
There has been a lot of discussion recently about the breadth of various directors' duties and the need to scrutinise information at the senior executive or Board level, a point recently emphasised by both the Financial Services Royal Commission and the ASX Corporate Governance Principles and Recommendations.
Although there has been a lot of progress in recent years in harmonising the laws imposing liability on directors and managers across Australia, the NSW executive liability laws are among the toughest in the country.
Environment Protection Authority v Davis serves as a powerful reminder to those concerned in the management of a corporation that they must, if they are in a position to influence the conduct of the corporation in relation to compliance with an EPL:
ensure they have a good understanding of the EPL and its conditions; and
exercise all due diligence to prevent a contravention of the EPL.
Lack of knowledge is not a defence.
Directors and managers who have responsibility for maintaining regulatory compliance with an EPL should, among other things:
take appropriate steps to satisfy themselves of the accuracy of any information to be provided to the NSW EPA in connection with an EPL before that information is provided;
have the corporation's EPL compliance processes and systems periodically audited to ensure that they are effective and adequate; and
ensure that staff involved in administering an EPL are appropriately trained and supervised.
Clayton Utz - Nick Thomas, Wagih Doueihi and Laura Purcell
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