Duty to notify contamination set to change

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Image:  EPA, West Footscray Fire

What is the issue?

At the present time, Victoria has the most limited duty to notify pollution or contamination.  That will soon change.

Currently, the obligation to report pollution or contamination is limited to environmental auditors engaged to undertake a statutory environmental audit where there is an imminent environmental hazard, and under some waste discharge licences issued under the Environment Protection Act 1970.

In addition, any annual report by directors submitted under the Corporations Act 2001 (Cth) must report on whether the entity’s operations have been subject to significant and particular state or Commonwealth environmental regulation and how the entity has performed.

From 1 December 2020, or sooner if proclaimed, Victoria will join other states in imposing a specific duty to report on ‘notifiable contamination’ to the EPA under the Environment Protection Act 2017 (new Act).  Notifiable contamination includes contamination for which the reasonable cost of action to remediate the land is likely to exceed $50,000.[1]

It would be prudent to obtain advice now on the duty to notify EPA of contamination before the new Act commences.  The new Act applies to land that is contaminated before or after commencement.[2]

What does it mean for me?

The new duty to notify contamination applies to a person in management or control of land.  EPA must be notified if the land has been contaminated by notifiable contamination as soon as practicable after the person becomes aware of the notifiable contamination, or reasonably should have become aware of the notifiable contamination.

The test of whether a person in management or control of land becomes aware, or reasonably should have become aware, of notifiable contamination is determined with reference to:

  • The person’s skills, knowledge and experience;
  • Whether the person could practicably seek advice regarding the contamination; and
  • Any other circumstances of the contamination.[3]

The duty applies to a person in management or control of land, including government land managers and corporate land managers.

The penalties are up to $19,342 for a natural person or $96,714 for a body corporate.  Significantly, the new Act purports to abrogate the privilege against self incrimination.[4]

What are the existing reporting duties?

Currently, all directors of companies (other than small companies limited by guarantee and small proprietary companies) required to submit an annual report under the Corporations Act 2001 (Cth) must give details of the company’s performance in relation to environmental regulation.[5]  This reporting obligation is triggered if the entity’s operations are subject to ‘any particular and significant environmental regulation’ under a law of the Commonwealth or of a State or Territory.[6]  The company’s performance must be detailed.

Accordingly, it would appear that any notification of significant contamination to the EPA under the new Act must also be reported on by directors in their annual report.

When does the new duty arise?

The circumstances in which a duty to notify a pollution incident arises was considered by the Land and Environment Court (NSW) [7] in a rare prosecution by the EPA for failure to notify a pollution incident.  The court considered that the duty to notify arose only when the defendant became aware that the clean-up operation would cost more than $10,000 with reference to the definition of material harm in the Protection of Environment Operations Act 1997 (NSW).  The defendant was found not guilty of the charge of failure to notify.  The court held that the respondent’s awareness of the bare fact that the pollution incident occurred did not trigger the duty to notify.

What are the next steps?

If you are concerned about a pollution incident, the discovery of contamination or legacy contamination it is prudent to obtain legal advice about your current and future reporting obligations and responsibilities.

Provision of false information is an offence under s 463 of the new Act, including concealing any materially relevant information or document.  This is an indictable offence which may also be heard and determined summarily.  The penalty is up to $80,595 for a natural person or up to $402,975 for a body corporate.[8]

[1] Section 37 Environment Protection Act 2017 (new Act)

[2] Section 38

[3] Section 40(3)

[4] Section 42

[5] Section 298 Corporations Act 2001 (Cth)

[6] Contravention of section 298 occurs when a director of the company, registered scheme or disclosing entity fails to take all reasonable steps to comply, or to secure compliance.  This is contravention of a civil penalty provision.

[7] Environment Protection Authority v Bulga Coal Management Pty Ltd (2014) 200 LGERA 235; [2014] NSWLEC 5.

[8] Calculated on the basis of the current penalty unit which may increase by the time the new Act commences.

© Eliza M Bergin 2019

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Review of land use classification in Victoria and South Australia

What is the issue?

Both Victoria and South Australia are undertaking unrelated but concurrent reviews of land use classification:

  • In Victoria, an Advisory Committee appointed under s 151 of the Planning and Environment Act 1987 (Vic) is considering improvements to land use terms and their definitions in Clause 74 of the VPP.
  • In South Australia, a review is being undertaken by the Department of Planning, Transport and Infrastructure into the definitions in the Development Act 1993 and Development Regulations 2008 as part of the process for development of the new Planning and Design Code.

What does it mean for me?

Both processes offer clients in each jurisdiction the opportunity to express their views about the approach to definitions of land use terms.  This can be an important consideration when preparing development proposals, being the difference between permit required, prohibited or permitted use (no permission required).

It has been suggested that the system in SA is tending towards the Victorian model of a uniform code which applies the same definition to land use classification across every municipality in the State.  In Victoria, users of the VPPs will be aware that clause 75 contains a series of nesting diagrams for particular land uses.  For example, the accommodation group spans land uses from camping and caravan park to host farms and retirement village (refer Figure One below).  The application of umbrella terms in the proposed Planning and Design Code under the new Planning Development and Infrastructure Act 2017 (SA) is one of the issues under consideration in SA. At the present time, SA does not apply the nesting diagram technique.

What are the next steps?

If these issues affect you or your clients you should consider making a submission to the relevant body.

  • In Victoria, the Advisory Committee is now seeking input on its discussion paper.

https://engage.vic.gov.au/land-use-terms-advisory-committee

  • In South Australia, you should write to the Engagement, Education and Communications Team, Planning and Development, Development Division, Department of Planning Transport and Infrastructure

DPTI.PlanningEngagement@sa.gov.au

Nesting Diagram for Accommodation Group

(c) Eliza M Bergin 2018

Capital value – Vast amounts of surface waste

What is the issue?

The Supreme Court of South Australia has recently clarified that the presence of substantial surface waste on an industrial site will have a negative effect on site value and capital value for the purposes of assessment by the Valuer-General.

What does it mean for me?

Owners of land affected by significant industrial or household waste or contaminated soil and groundwater may refer to the decision of the Justice Parker in Bosnakis v Valuer-General [2017] SASC 158 (3 November 2017) when seeking reassessment of site value or capital value for the purposes of rates notices.

What was decided?

The Court applied the test set down by the High Court in Spencer v The Commonwealth[1] on the proper approach to the meaning of market value.  The test is neatly stated as:

The value of land is the price arrived at by a willing but not anxious buyer negotiating with a willing but not anxious seller, both perfectly acquainted with the land and cognisant of all circumstances which might affect its value.[2]

The evidence established that the land in Para Hills was affected by vast surface debris.  Photographs showed a great variety and volume of waste on the land including tyres, concrete pipes, rubble, a large concrete slab, a septic tank, car parts, white goods, polystyrene foam, pallets, sheets of metal, used oil drums and a fibreglass pool shell.

The appellant’s and the Valuer-General’s expert witnesses agreed that the surface waste would impact upon site value and capital value.  There was a significant difference in capital value, with the Review Valuation being $1,050,000, the Valuer-General’s expert contending for $845,000 and the appellant’s expert arriving at a sum of $625,000,.  The two experts before the Court were agreed that the vast amount of rubbish would have a negative effect on what the hypothetical purchaser would be prepared to pay.

The argument by the Valuer-General that because the surface waste was a chattel, it ought not be taken into account because it was not relevantly ‘in the land’ was rejected by the Court.  The phrase ‘in the land’ was submitted to mean the land including all improvements and fixtures that are part of the land.  While the Court accepted the rubbish items were chattels rather than fixtures, he did not accept that the phrase ‘in the land’ was of assistance and distinguished the authority of CSL Limited v Valuer-General.[3]

The Court adopted the appellant’s site valuation of $416,000 at the valuation date.  The capital value was accordingly $625,000; a reduction of $425,000 from the Review Valuation.

What are the next steps?

Owners of land affected by surface contamination or soil and groundwater contamination should seek advice regarding their options for seeking review of valuations of land advised in rates notices if that notice does not consider the contamination.

[1] (1907) 5 CLR 418, 432 and 441 per Griffith CJ and Isaacs J.

[2] Commonwealth Custodial Services Ltd v Valuer-General [2006] NSWLEC 400, [13]

[3] CSR Limited v Valuer-General (1977) 17 SASR 446, 450, Wells J.

(c) Eliza M Bergin 2017

 

Polluter pays – Availability of reasonable costs of clean up

What is the issue?

On 26 July 2017, the Supreme Court of Victoria (Court of Appeal) upheld a key finding of Justice Riordan at first instance in Yarra City Council v Metropolitan Fire and Emergency Services Board.[1] The City of Yarra appealed on several grounds[2] from the decision of Justice Riordan, only one of which is discussed in this note.  The issue discussed here is recovery from the polluter of the reasonable costs of clean up conducted by a person who has been served with a notice by the Environment Protection Authority (EPA) under s 62A of the Environment Protection Act 1970 (EP Act) (s 62A notice).

As noted in my recent book review here, at first instance, Justice Riordan in Metropolitan Fire and Emergency Services Board v Yarra City Council & Ors[3] found that statutory liability under the EP Act for the cost of remediation of contaminated land subject to a notice under the EP Act remains with the polluter.  That finding, upheld by the Court of Appeal,[4] is important in the development of contaminated land law and highlights the practical importance of prudent due diligence in the context of buying and selling contaminated land, and considering options for recovery of reasonable clean up costs.

Image credit Burnley and Richmond Historical Society

What was decided?

The EP Act makes provision for EPA to serve a notice directing a person to take clean up measures.  An owner of contaminated land may then recover reasonable clean up costs from the polluter in responding to the s 62A notice.[5]

One finding the Court of Appeal confirmed was that the Metropolitan Fire and Emergency Services Board’s (MFESB) reasonable clean up costs for legacy contamination at the corner of Burnley Street and Barkley Avenue Richmond (Burnley Site) could be recovered.  The analysis required a detailed consideration of changes in site ownership from City of Richmond in 1919, which became the City of Yarra. The Burnley Site was then purchased by the State of Victoria in 2005.  City of Yarra was held liable for pollution at the Burnley Site.  The pollution source was tar found in a bluestone storage pit, identified on the Burnley Site in 2005.

What does it mean for me?

I am a purchaser or vendor (including a public authority) of potentially contaminated land

On the one hand, this decision clarifies the extent of liability for clean up costs which at least in theory should give parties to sale of land transactions comfort.  With increasing pressures on development and land use change at inner city industrial sites, it is less true than ever that contaminated land ought be regarded as ‘land locked’.  The clarity provided by the Court of Appeal gives parties an assurance, including that liability for remediation under the EP Act remains with the polluter where the EPA has issued a s 62A notice regardless of whether:

  • the site has been vacated, relinquished or sold;
  • other contractual arrangements exist dealing with potential land contamination, including with State government;
  • the pollution occurred prior to the EP Act’s inception in 1970;
  • the polluter no longer retains an interest in the property (MFESB v Yarra City Council [2015] VSC 773).

On the other hand, for parties such as the City of Yarra, the Court of Appeal decision is ‘bitterly disappointing’.[6]  In the aftermath, City of Yarra reported that it was considering all its options including appeal to the High Court.[7]  This report relates in particular to the underlying finding that City of Yarra caused or permitted the pollution to occur.  Recovery of reasonable costs of cleaning up land affected by a s 62A notice is only available from a person who ‘caused or permitted the pollution to occur’.

I am an owner of land with a contamination legacy

As an owner of contaminated land, if you propose a change in land use or development, it would be prudent to revisit any assumptions included in your real estate development matrix.[8]  In particular, consider:

  • Are any assumptions made at the time of acquisition of the land still correct?
  • Has a s 62A notice been served in relation to the land, and if not, whether there is a prospect of service of such a notice by EPA in the future in respect of clean up which you have not caused or permitted to occur?
  • Do you have accurate information about the contaminated land history of the land, and is it wise to make further inquiries?
  • Do any contracts allocate the cost of clean up pursuant to an existing s 62A notice and if so are they enforceable? Is the contract potentially inconsistent with any s 62A notice that has been served and therefore likely to be unenforceable in light of this decision?

Section 62A does not provide for any form of damages for consequential loss.  It provides only for actual costs incurred in meeting the requirements of a clean up notice.

Next steps

As noted above, adopting a prudent and on-the-front-foot approach to the management of any legal risk associated with cost of clean up of contaminated land may require consultation with existing commercial advisors.  This note is prepared in practical terms, and relies on assumptions about the particular ownership history at the Burnley Site.[9]  Your circumstances may differ from those discussed by the Court of Appeal, in important respects.

The Court of Appeal remitted the matter back to Justice Riordan for findings on the remaining issues, including the reasonable costs of clean up to be paid by City of Yarra to MFESB pursuant to s 62A.

POST SCRIPT:  City of Yarra recently applied for special leave to appeal to the High Court of Australia.  Special leave was refused on 16 November 2017.

Image Tar Pits Museum https://tarpits.com

© Eliza M Bergin

Liability limited by a scheme approved under professional standards legislation

[1] [2017] VSCA 194 (26 July 2017), [178] (‘Yarra v MFESB’)

[2] (1)  Was Yarra liable for the pollution caused by Richmond (Grounds 1, 2 and 3 – s 62A(1)(b)?

(2)  Is s 62A(2) impermissibly retrospective (Ground 4 – s 62A(2))?

(3)  Did Yarra appear to abandon the industrial waste in the bluestone pit when relinquishing possession of the Burnley Site to the State of Victoria in or about February 1996 (Grounds 5, 6, 7 and 8)?

(4)  Should an order or declaration under s 62A(2) have been made (Grounds 9 and 10 – s 62A(2))?

Yarra v MFESB [2017] VSCA 194, [87]

[3] [2015] VSC 773

[4] Yarra v MFESB [2017] VSCA 194 (26 July 2017)

[5] Section 62A(1)(b) provides that the EPA may issue a notice directing the person who has caused or permitted the pollution to occur to take the clean up and on-going management measures as specified in the notice.  On the application of the occupier of any premises which is the subject of a notice, a court of competent jurisdiction may order that the person compensate the occupier for any costs incurred by the occupier which the court is satisfied are reasonable and were incurred in good faith in complying with the notice.

[6] City of Yarra, Media Release: Supreme Court Appeal (27 July 2017).

[7] Ibid

[8] ‘The seven stages in the model are: land banking, land packaging, land development, building development, building operation, building renovation, and site redevelopment. Each stage in the process begins with the acquisition tasks and ends with the disposition tasks. Each stage must also address, to some extent, the following categories of tasks (many of which are done simultaneously): financing, market research, approvals, environmental, improvement construction, and transportation and accessibility concerns. As with all real world applications of conceptual models, the lines separating the stages and the categories can be fuzzy.’ Daniel Kohlhepp  ‘The Real Estate Development Matrix’ The American Real Estate Society Meetings St. Petersburg, Florida (2012)

[9] That is, the City of Richmond had controlled the land under a Crown grant since 1890 and by 1916 was operating:

  • an abattoir;
  • a quarry;
  • a stone crushing plant;
  • a ‘refuse destructor’; and, relevantly
  • a tar distilling plant with a 40,000 gallon blue stone lined storage pit for coal tar on the depot.