Environmental chain of responsibility – do you know your obligations?15 March 2021 Authored by: Leanne O'Neill | Topics: Agribusiness, Compliance and corporate governance, Construction and infrastructure, Energy and resources, Insolvency and restructuring, Native title and cultural heritage, Planning and environment, Property and planning law
The amendments to the Environmental Protection Act 1994, which established the environmental chain of responsibility laws in Queensland, have been in place for nearly five years. However, the legislation is continually evolving. This bulletin is a timely reminder of the implications of these laws.
Liability of related persons
The chain of responsibility amendments to the Environmental Protection Act 1994 (Qld) (EPA) were introduced on 27 April 2016. The amendments expanded the State’s powers, allowing the Department of Environment and Science (DES) to issue environmental protection orders (EPOs) to hold to account ‘related persons’ of a company.
To whom does this apply?
‘Related persons’ is broadly defined to cast a wide net and includes any person who has a ‘relevant connection’ to a company that is carrying out the relevant activity and has the capacity to influence the extent of the company’s environmental compliance. This includes persons that significantly benefit (or persons capable of significantly benefitting) financially from the relevant activities of the company. With such a big net, the following persons (Related Persons) can be held liable under the chain of responsibility laws:
- office holders including managers, employees
- holding companies
- joint venture partners
- bodies corporate
- financiers and investors
- mortgagees exercising power of sale
- receivers and administrators
Implications for Related Persons
Where the Related Person has participated in, benefited from, or is in in a position to influence the environmental breaches, the DES may impose any requirement on a Related Person that is being, or has been, imposed on the company, as if the Related Person were the company. This may include imposing a requirement to:
- take action to prevent or minimise environmental harm and rehabilitate or restore the relevant land
- ensure compliance with environmental obligations
- provide security for environmental obligations.
This means that parties who may not have been involved in causing the environmental harm or in the failure to initially comply with environmental obligations may now be required to comply with EPOs. The costs in complying with these orders, such as rehabilitating affected land, can be significant.
The penalties that may be imposed on a Related Person for a breach of the relevant provisions are significant. For example, the contravention of an EPO gives rise to an offence that carries a financial penalty for a company of $3 million (22,500 penalty units for a company). Where there is a wilful contravention of an EPO by a company, the penalty is over $4.15 million (31,250 penalty units for a company) or five years’ imprisonment.
How can the risk be mitigated?
Related Persons now have a vested interest in ensuring that companies satisfy their environmental obligations. In deciding whether to issue an EPO to a Related Person, the DES will consider whether the Related Person took reasonable steps to ensure the company complied with its obligations under the Act, and made adequate provision to fund the rehabilitation and restoration of the relevant land due to the environmental harm.
Managers, receivers, liquidators, mortgagees in possession and persons acquiring any pecuniary interest (such as investors in a mining or resource tenement) should be careful to ensure that they have the appropriate environmental, corporate and contractual protections to manage their personal and financial exposure under the chain of responsibility laws.
Accordingly, to ensure that all parties comply with their environmental obligations, it is now of the highest importance for companies to have a holistic environmental management program in place, with appropriate channels of communication and reporting to relevant company officers.
Please contact Graham Roberts or Leanne O’Neill if you would like further information or advice on any aspect of this bulletin, or join us for our complimentary webinar Chain of responsibility laws – the practical implications five years on 31 March 2021.