Owners' Corporation Avoids Penalty for Contempt of Court

It is a very rare event when a defendant to an enforcement action in the Land and Environment Court is lucky enough to emerge from the proceedings without having to pay a fine. That is especially so when the charge brought by the prosecutor alleges that a contempt of court has occurred, and the contempt has arisen due to an admitted failure by the defendant to comply with a court order. 

Therefore, when the Court decides not to impose a monetary penalty, an understanding of the circumstances can provide an invaluable learning opportunity: one person's good fortune may not be repeated in the future, particularly if the lessons of past cases are not studied carefully and usefully applied.

Excellent guidance can be taken from Justice Pepper's recent judgement in Council of the City of Sydney v Owners Corporation - Strata Plan 18945 (2011) NSWLEC 79, a case where the council sought to enforce court orders that required compliance with a fire safety order that had been issued under
the Environmental Planning and Assessment Act. The court orders had been made with the consent of the Owner's Corporation, and required them to do 3 things in 3 months time: install a sprinkler system and building occupant warning system in the basement car park of their apartment building; remove security screens from the entry doors to the apartments; and complete a fire safety audit of the building and provide the council with a new fire safety certificate.

Although the consent orders were made in August 2010 and allowed until November 2010 for compliance, the Owners Corporation did not approve a contract for the installation of the sprinkler system until late October - leaving less than a month before the final due date. A series of delays then ensued, which prompted the council to file the contempt proceedings in January 2010. The installation of the sprinkler system was not completed until May 2011, just a few days before the hearing on the contempt action was heard.

Justice Pepper determined that it was sufficient punishment to convict the Owners Corporation of contempt, and to require it to pay the council's professional costs, but did not find it appropriate to impose a fine.  Her Honour gave the following reasons for her decision:

* The principal cause the breach of the court orders was unreasonable delay by the contractors that had been hired by the Owners to carry out the installation of the sprinklers.

* The contempt on the part of the Owners was no the product of an intention to defy the Court's authority; while the Owners had a "genuine desire to achieve compliance" they were unable to do so because of their own initial delay in hiring the contractors, and the subsequent delays that were apparently wholly the fault of the contractors.

* By the time that the proceedings were heard by the Court, the installation of the sprinklers had been completed and the Owners had thus purged themselves of contempt.

* The Owners provided an affidavit to the Court in which they apologised for their failure to comply with the orders and expressed contrition.

A number of important morals can be drawn from the outcome of this case. 

First of all, a party that enters into consent orders before the Land and Environment Court must be aware that very serious consequences will attach to any non-compliance. It is therefore critical that the party that accepts obligations under consent orders reviews the practical considerations associated with compliance and ensures that the orders allow sufficient time to carry out any required work. 

Secondly, any contractors that are needed must be engaged at the earliest possible date, informed of the compliance deadlines that are fixed by the court orders and monitored closely to enure that they are making satisfactory progrgress.

Thirdly, the regulator overseeing compliance with the court orders should be informed of any delays, the reasons that they have occurred, the actions that will be taken to cure any non-compliance, and the anticipated date when completion of the required work will occur. Full, frank and open dialogue and cooperation with the regulator may be a successful way to avoid adverse enforcement action if unforeseen circumstances prevent strict compliance with the terms of a court order.

Chemical Company Sentenced to Fund Costs of Environmental Improvement Project

Section 250(1)(e) of the Protection of the Environment Operations Act gives the Land and Environment Court discretion to adopt a "creative" approach to sentencing for environmental crimes. Under this section, the Court can order an offender to pay for the costs of a project to restore or enhance the environment either as an alternative to, or in addition to, a standard monetary fine. 

This approach has long been in use in the United States, where the performance of "environmentally beneficial projects" is often accepted as part of a negotiated settlement for an environmental "violation".  Although not yet commonplace in NSW, the Court has required such projects in a number of cases, and is likely to do so in appropriate circumstances in future prosecutions.

A recent prosecution by the NSW EPA, Environment Protection Authority v Huntsman Corporation Australia Pty Ltd, (2011) NSWLEC 39 was concluded by the making of this type of innovative order. Huntsman was prosecuted for an incident involving the accidental release to the atmosphere of a toxic air pollutant, ethylene oxide from a chemical manufacturing plant in Matraville. The Court determined that a penalty of $28,000 was warranted for the offence. The company was required to pay this amount to Randwick City Council to partially fund a storm water harvesting and recycling project at a council-owned sports reserve.

The prosecution by the EPA was founded on the allegation that the company had breached a condition of its environment protection licence which required it to carry out its operations "in a competent manner". The proceedings were brought following the malfunction of a device that measured the amount of a catalyst that was being introduced into a chemical reactor. The malfunction initiated a series of events resulting in the emission of about 475 kilograms of ethylene oxide directly to the air through a stack. The emissions occurred over a period of several hours on a single night. It was alleged by the EPA that the pollution incident occurred due to the company's failure to have back up systems to alert plant personnel that insufficient amounts of catalyst were being placed into the reactor vessel.

A noteworthy aspect of this case is the relatively low penalty that the company was required to pay.  Although the pollutant that was released into the air from Huntsman's plant has been classified as a carcinogen by the World Health Organisation and is also capable of causing short-term health impacts such as eye and skin irritation as well as headaches and nausea, the penalty of $28,000 represents less than 2.8% of the maximum fine of $1.1 million that could have been imposed under the POEO. 

The amount of the fine reflects the Court's conclusion that the incident was only of "low to moderate" seriousness (due to the fact that the emissions were not caused deliberately and that the company did not gain any commercial advantage by committing the offence).

It seems clear that if the incident had lasted for a longer period of time, or if it had actually caused adverse health impacts to residents of the community that is located near the plant, the penalties that would have been assigned by the Court would have been significantly higher.

The Court's judgement can be found at:

http://www.austlii.edu.au/au/cases/nsw/NSWLEC/2011/39.html

Forestry Commission Receives Small Fine For Destroying Habitat of Endangered Mouse

A recent prosecution for an offence involving the destruction of habitat of the critically endangered Smoky Mouse has highlighted weaknesses in the enforcement regime under the NSW National Parks and Wildlife Act.

The Smoky Mouse is listed as an endangered species under both Commonwealth and state legislation in NSW. The total number of mature Smoky Mice in NSW has been estimated to be less than 50. Sightings of the mouse have been limited to an area in the Nullica State Forest and the adjacent South East Forests National Park.

The Forestry Commission of NSW is responsible for the management of 2.1 million hectares of native forests.  It held a licence under the Threatened Species Conservation Act which prohibited it from carrying out any bush fire hazard reduction work in an "exclusion zone" that had  been established in the Nullica State Forest to protect Smoky Mouse habitat.

However, in April and May 2009, the Forestry Commission carried out a hazard reduction burn in a section of the Nullica State Forest that was adjacent to the exclusion zone. The Commission's employees who started the burn were apparently unaware of the proximity of the hazard zone, due in part to deficiencies in the markings on burn plan mapping. No measures were put in place by the Commission to prevent the hazard reduction burn from spreading to the exclusion zone. After starting the burn, the Commission's employees left the area and did not return until most of the exclusion zone had been burnt.

The area that was destroyed by the burn was the only known habitat in the northern section of the distribution of the Smoky Mouse that had not been burned or logged within the previous 10 years. It provided the mouse with both a potential refuge and food resources.

Officers of what was then known as the Department of Environment, Climate Change and Water (now the Department of Environment and Heritage) observed the fire in the exclusion zone. An investigation followed, which resulted in the prosecution before the Land and Environment Court, Director-General, Department of Environment, Climate Change and Water v Forestry Commission of New South Wales [2011] NSWLEC 102.

It is of interest that in considering the appropriate sentence, Justice Pepper observed that the Forestry Commission's environmental record (which included convictions for 8 prior offences and the issuance of numerous penalty notices by the DECCW) reflected "a reckless attitude towards compliance with its environmental obligations". It is also remarkable that prior to the incident, the DECCW had issued a formal warning letter to the Commission concerning breaches of the Smoky Mouse exclusion zones that had involved spreading of mining debris and storing harvesting machinery; the warning letter requested that the Commission "educate and inform" all its staff and contractors about the exclusion zones before carrying out activities in adjacent areas.

Notwithstanding these circumstances, the penalty that the Court imposed on the Forestry Commission was only $5,600. It appears that this low fine a function of the fact that the maximum penalty available for a breach of a condition of a Threatened Species Act licence is only $22,000 under the National Parks and Wildlife Act. The penalty also is a product of the Court's conclusion that the overall seriousness of the offence was of "low to moderate" gravity.

As Justice Pepper noted in her judgement, the penalties for breach of a Threatened Species Act licence are "exceedingly low" compared to penalties that can be imposed for other environmental offences - for example, it is common for air and water pollution offences under the Protection of the Environment Operations Act to carry maximum fines of $1.1 million.

It is to be hoped that the Parliament of NSW will take notice of the result in this case, recognise the seriousness of conduct that poses harm to endangered species, and bring the penalties under the NPWA into line with other environmental legislation. 

Only by doing so will Parliament ensure that there is a strong deterrent that will protect rare and endangered wildlife in NSW.  

The link to the Court's judgement is: http://www.caselaw.nsw.gov.au/action/PJUDG?jgmtid=152716 

Unsuccessful Applicant Ordered To Pay Costs In Trees Act Case

It is well known that the Land and Environment Court has a strong predisposition against making costs orders in cases arising under the Trees (Disputes Between Neighbours) Act.   The award of costs in Trees Act cases is governed by Rule 3.7(2) of the Court’s Rules.  This Rule provides that an order for costs should not be made in cases that fall within “class 2” of the Court’s jurisdiction – which includes applications under the Trees Act – unless the Court considers that it is “fair and reasonable” to do so in the circumstances.  Furthermore, it is usual for costs orders to be confined to reimbursement of moneys expended for legal representation.  Since it has been commonplace for litigants in Trees Acts disputes to act without the assistance of a lawyer, claims for costs have not featured in these types of proceedings.

Consequently,  Justice Craig’s judgment in the case of Bailey v Gould, (2011) NSWLEC 96 is especially noteworthy.  The case represents the very first occasion where costs have been awarded in a Trees Act dispute. 

The order for costs was made in favour of the “respondent” in the proceedings -  the owner of the property on which the trees that were the subject of the Trees Act application were growing two Jacaranda trees located near the common boundary).  This respondent  (Gould) acted for himself, so there was no issue of legal costs.  Nonetheless, the Court saw fit to require the proponent of the application (Bailey) to pay the fees of Gould’s consulting arborist. Bailey was also ordered to pay additional miscellaneous costs, including the cost of having affidavits and other materials copied as well as the Court filing fee for the costs application.

Justice Craig concluded that it was appropriate to grant a costs order because he determined that the  Trees Act application that had been made by Bailey was so deficient that it did not have “reasonable prospects of success”.   His Honour commented that Bailey’s application consisted of what he described as a ”shopping list” of complaints about the Jacaranda trees, none of which had any substance.  For example, one of Bailey’s allegations related to a small stem that had grown only to the height of the dividing fence. The commissioners who presided over the hearing on the application described Bailey’s claim that this stem had damaged the fence as entirely fanciful”.  Another complaint related to alleged damage from the leaves, fruits, fronds and flowers of the jacarandas; however the commissioners found that Bailey was unable to identify any specific damage that these elements of the tree had caused.

Justice Craig observed that Bailey did not have an arborist’s report prepared in support of her claim.  While His Honour noted that it was likely that such a report would have been “dismissed out of hand” by the commissioners in the circumstances of the case, Bailey’s failure to obtain the report undoubtedly damaged her position with respect to the costs application.

The moral that should be taken from this costs judgement is very clear: A person who is considering filing a Trees Act application must carefully consider whether she/he has a sustainable case before commencing action in the Court.  It is advisable that no action be started until a report that supports the case has been prepared  by a properly qualified.  Because more and more litigants in Trees Act disputes are engaging lawyers to represent them before the Court, the adverse financial consequences of proceeding with a baseless case can be substantial.

Plywood Manufacturer Fined For Spill Caused By Employee's Malicious Acts

A recent judgement by Justice Pepper of the Land and Environment Court has again re-enforced how strongly the concept of strictly liability will be applied in pollution prosecutions in New South Wales. The case, Environment Protection Authority v Big River Group Pty Ltd [2011] NSWLEC 80, illustrates that the operator of a manufacturing plant may be convicted of a criminal offence and required to pay substantial penalties even where the ultimate causes of a pollution incident can be traced to the deliberate actions of a rogue employee.

The proceedings in Big River involved a spill of an estimated 6000 litres of a resin from the company's plywood manufacturing plant in Wagga Wagga. The resin was kept in large storage tanks in a bunded room at the plant premises, and was used to glue layers of wood veneer together to produce structural plywood.

The spill that led to the prosecution occurred when an employee gained access to the plant premises during the middle of the night and activated a pump that was used to transfer the resin to a mixing tank. The pump ran unattended for about an hour, causing the resin to overflow from the mixing tank. It then flowed under a gap between the floor and the wall of the room where the mixing tank was located and entered the plant's internal stormwater system.  Ultimately, the resin entered into external stormwater pipes and ran into a freshwater wetland.

A few months before the spill that occasioned the prosecution, there had been another incident in which resin had been found in the stormwater system outside the plant. Following this earlier event, the Department of Environment Conservation and Climate Changed had warned that it would take regulatory action if resin were to be found again in the stormwater system. Thus, following the major spill of resin into the wetland, the DECC prosecuted Big River for a water pollution offence under section 120(1) of the Protection of the Environment Operations Act.

Justice Pepper determined that it was appropriate to impose fines on the plant operator, despite the fact that the chain of events that led to the spell was caused by the deliberate misconduct of an employee.  Her Honour found that as a result of the previous incident, it should have been forseeable that resin could flow into the external stormwater system if the contents of the mixing tank overflowed.  Justice Pepper also determined that practical measures could have been taken to prevent the spill, including enclosing the internal stormwater system at the plant.

Although the company had spent nearly $130,000 cleaning up the spill and another $45,000 to implement measures to prevent a recurrence of the incident, the Court nonetheless concluded that the offence warranted penalties of $100,000, which was discounted to 67,000 to take account of various mitigating factors. An order was also made requiring to pay the prosecutor's professional costs of $35,000 and investigative costs of nearly $25,000.

The result in this case teaches important lessons for manufacturers and other businesses that are involved in handling potentially polluting substances, namely:

* Penalties may be imposed even where a spill is completely accidental or is caused by the intentional misconduct of an employee if the business operator has not taken adequate measures to contain any possible spillage and to prevent a water pollution incident. 

* Thorough environmental audits must be conducted - especially in the case of older facilities, or when existing plants are purchased by new operators - to ensure that areas where polluting substances are handled have sufficient bunding and other containment measures and that stormwater drains are protected against the accidental inflow of pollutants.

Damages Awarded Against Council Following Fatal Dog Attack

In a groundbreaking case, the District Court of NSW has found Warren Shire Council guilty of negligence for failing to make a dangerous dog declaration under the Companion Animals Act. 

The finding was made in a lawsuit brought by the father and young brother of a four year old girl, Tyra Kuehne, who was mauled to death by a pack of pig hunting dogs  The dogs were kept in a neighbour's yard, and the fatal attack happened after the girl wandered into the yard by herself. The evidence before the Court did not indicate precisely how the girl managed to enter the yard. 

The council was ordered by the Court (Justice Elkaim) to pay the plaintiffs more than $120,000 in damages for "nervous shock" injuries (psychological trauma) that they suffered as a result of the girl's sudden and violent death. The family did not sue the neighbour who owned the dogs.  Justice Elkaim's judgement notes that the reasons why action was not taken against the neighbour are not known.

The Court held the Council liable on the basis that it was on notice that the neighbour's dogs were problematic and potentially dangerous, yet had failed to use its powers to make a dangerous dog delcaration to ensure that the dogs were kept under proper control.

The evidence that was heard by the Court disclosed that before the attack occurred, the Council was aware that a large number of hunting dogs were kept on the neighbour's property; that the dogs frequently escaped into the surrounding neghbourhood; that the Council had received complaints that the dogs were often seen roaming free on the street and had, on at least one occasion, chased a child; that the Council had taken no enforcement action against the owner of the dogs, aside from issuing several penalty infringement notices; and that despite the issuance of the penalty notices, the problems with the dogs continued for a number of years.
 
The Court also received evidence from a number of local residents concerning their experiences with the neighbour's dogs. The residents accounts indicated that some of the dogs had repeatedly engaged in aggressive behavior, including an incident where one of the dogs had bitten a person. On other occasions, the dogs had snapped, snarled or growled at people who were walking through the neighbourhood. However, it is not apparent from the Court's judgement whether these incidents were reported to the Council before Tyra Kuehne was fatally mauled.
 
Justice Elkaim determined that the council was not entitled to the protections from a civil damages claim that would ordinarily be availabe to a local government authority under the Civil Liability Act 2002. Section 43A of the CLA provides that a council may be held liable for failure to exercise a statutory power (such as the power to make a dangerous dog declaration) only where the failure to act is so unreasonable that no reasonable council would have not have refrained from taking action (Wednesbury unreasonabless). The District Court held that the council's failure to make a declaration with respect to the neighbour's dogs, which it characterised as "trained hunting machines", crossed this high threshold of unreasonableness. 

It is noteworthy that the Court held the council liable even though the dogs that were found in the neighbour's yard at the time that Tyra Kuehne was fatally mauled had not been "individually and reliably" identified as the same dogs that had been earlier observed roaming in the streets or engaging in the aggressive behaviours that had been attested to by the local residents, and even though the Court acknowledged that a dangerous dog declaration can be made only with respect to an individual dog. 
 
Reports in the media suggest that Warren Shire Council may be considering an appeal against the Court's judgement. It appears that Justice Elkaim's conclusion that no reasonable council would have failed to make a dangerous dog declaration may be vulnerable to challenge, given the unavailability of evidence that any of the particular dogs found on the neighbour's property at the time of the attack could be identified as having previously engaged in aggressive behaviour. 

As a matter of fact, it appears that given this lack of evidence of prior history, it may well have been very difficult for the council to defend a dangerous dog declaration made with respect to any of the individual dogs. The council might not have been able to successfully defend dangerous dog declarations without evidence that each individual dog kept by the neighbour had  been involved in attacks or other aggressive behaviour.  It is therefore entirely possible that, on appeal, a finding may be made that, contrary to the determination of the District Court, no reasonable council would have made a dangerous dog delcaration in the circumstances (due to the possibility that such a declaration might have been found to be beyond the council's powers under the Companion Animals Act and thus might have been overturned by a Local Court). 

Despite the prospect that the District Court's judgement may be reversed if an appeal is taken, the result nonetheless demonstrates that councils face the risk of damages if they become aware of a risk to public health and safety that is within their power to address and fail to take sufficient action to eliminate the risk.

Thus, notwithstanding the ultimate outcome, the strong moral of the case is that councils must be vigilant to investigate complaints about potentially dangerous conditions - be they from dogs, unclean food premises, unstable trees, or other causes - and to exercise their authority promptly and effectively to remedy the danger.

After the terribly tragic attack on this innocent small child, the Companion Animals Act was amended to enable councils to declare dogs to be dangerous simply on the basis that they kept or used for the purposes of hunting (see section 33(1)(c).  As a fitting memorial, these changes to the law were called "Tyra's amendments".  The amended legislation can be found at: 

 http://www.legislation.nsw.gov.au/maintop/view/inforce/act+87+1998+cd+0+N.

The link to the judgement in the Kuehne case is:

http://www.caselaw.nsw.gov.au/action/pjudg?s=1349411223,jgmtid=152149