Dyno Nobel Asia Pacific Pty Ltd v Environment Protection Authority

1. [1]

   SIMPSON JA: On 6 May 2016 Dyno Nobel Asia Pacific Pty Ltd (“Dyno”) entered pleas of guilty to two charges brought against it in the Land and Environment Court under the Protection of the Environment Operations Act 1997 (NSW) (“the PEO Act”) by the Environment Protection Authority (“the EPA”). The first charge was brought under s 64 of the PEO Act, for contravention of a condition of a licence issued under the PEO Act. The second was of pollution of waters, brought under s 120(1). Each offence was alleged to have been committed between 18 and 25 February 2015. By ss 64 and 123 respectively, each offence, when committed by a corporation, is subject to a maximum penalty of a fine of $1 million. (In each case, provision is also made for further penalties where the offence is a continuing one, but that is of no present materiality.)

2. [2]

   Penalty proceedings took place in the Land and Environment Court on 13 and 14 March 2017. After further submissions were provided, Moore J (“the primary judge”) delivered judgment on 31 May 2017. In respect of the licence contravention offence, he imposed a fine of $60,000. In respect of the waters pollution offence, he imposed a fine of $400,000. He made additional orders, that Dyno pay the EPA’s legal costs of $72,000, and investigation costs of $750, and that Dyno cause, at its own expense, publication in three different newspapers of a notice disclosing the offences.

3. [3]

   Dyno now appeals against each fine, asserting that the penalty proceedings were infected by identifiable error, with the result that the penalties imposed were manifestly excessive. It does not seek to disturb the additional orders. By ss 5AA and 5AB of the Criminal Appeal Act 1912 (NSW) the appeal lies as of right.

4. [4]

   Dyno is an Australian registered company, the wholly owned subsidiary of Incitec Pivot Ltd (“IPL”), a multinational company headquartered in Australia. Dyno’s business is the manufacture of ammonium nitrate emulsions, for which it holds an Environment Protection Licence issued under Pt 3 of the PEO Act. The licence, which permitted Dyno to produce and store chemicals, was subject to conditions, both general and specific. An “operating condition” numbered O1.1 required Dyno to carry out its licenced activities in a competent manner, which was specified to include:

5. [5]

   For the purposes of its business operations, Dyno occupied rural premises at Warkworth in the Hunter Valley. The manufacturing process generated quantities of waste water, which was captured and stored in two dams on the premises, known as the “Old Dam” and the “New Dam”. In 2015 Dyno was taking steps to upgrade the New Dam so that it could replace the Old Dam, and, for this purpose, between 21 January and 2 February 2015, pumped the waste water then stored in the New Dam into the Old Dam. Due to significant rainfall around the same period, the water level of the Old Dam had risen to such a level that a decision was made to reduce the water level through the use of evaporation sprays. The evaporation process began on 18 February 2015 (a Wednesday) and continued until Friday, 20 February, when it was turned off for the weekend. It recommenced on Monday, 23 February. At some point during that time, a valve failed, causing release of the contaminated water. The contaminated water flowed through a gully, into a culvert, and onto a neighbouring property. The neighbouring property was a farm operated by Mr Jason Rumbel for cattle grazing and cropping. The waste water flowed over Mr Rumbel’s property, and into a dam used by him for stock watering purposes.

6. [6]

   On 20 February 2015 Mr Rumbel moved 60 to 80 cattle onto the paddock where the dam was. He did not return to the paddock until 24 February. When he did so, he found that five of the cattle were dead. One had partly aborted a calf that it was carrying. All five had foaming salivation around their mouths and noses, and were puffed up and swollen. The surviving cattle appeared to be “very hollow” and thirsty. The pasture in the paddock was waterlogged and was starting to turn brown.

7. [7]

   Mr Rumbel arranged for an agronomist (Mr Kyle Ropa) and a veterinarian (Mr Thomas Prichard) to attend, which they did on the same day. The following day Mr Rumbel notified Dyno that waste water was flowing from its property onto his. Dyno’s acting site manager (Mr Frizell) took immediate action to halt the discharge by switching off the pump and isolating the valve. An employee took samples of the waste water discharge. On the same day Dyno reported the incident to Enviroline.

8. [8]

   Subsequently, Dyno paid Mr Rumbel $76,000 by way of compensation for the losses and damage. There was no information before the Court as to how that figure was made up.

9. [9]

   An investigation was conducted into the cause of the valve failure, but was inconclusive.

The charges

1. [10]

   Both charges to which Dyno pleaded guilty arose out of the incident described above. The s 64 count was particularised as a contravention of the licence condition that required Dyno to carry out its activities in a competent manner, including the manner in which materials and waste were managed. The s 120 count was particularised as the discharge of the contaminated water into the stock watering dam on Mr Rumbel’s farm.

Relevant sentencing principles

1. [11]

   The parties proceeded (correctly) on the basis that general sentencing principles, including ss 3A, 21A, and 22 of the Crimes (Sentencing Procedure) Act 1999 (NSW) (“the Sentencing Procedure Act”) governed the penalty decision. Also to be applied in the sentencing decision was s 241 of the PEO Act.

2. [12]

   Section 3A of the Sentencing Procedure Act provides as follows:

3. [13]

   Section 21A relevantly provides:

4. [14]

   Before a sentencing court may take into account any aggravating factor, it must be proved beyond reasonable doubt: The Queen v Olbrich (1999) 199 CLR 270; [1999] HCA 54 at [27]-[28].

5. [15]

   By s 22, where an offender has pleaded guilty to an offence the court must take into account that fact, the time at which the plea was entered or indicated, and the circumstances in which it was indicated, and may accordingly reduce the sentence it otherwise would have imposed.

6. [16]

   Section 241 of the PEO Act provides:

The proceedings in the Land and Environment Court

1. [17]

   As mentioned above, Dyno entered a plea of guilty to each charge. Evidence was put before the primary judge in the form of a lengthy and detailed Statement of Agreed Facts, affidavits deposed by officers or employees of Dyno, and officers of the EPA. Three witnesses gave oral evidence and were cross-examined. These were Mr Drew O’Brien, a senior environmental adviser employed by Dyno’s parent company, Dr Fleurdelis Pablo, a senior scientist in the Office of Environment and Heritage NSW and Mr Neil Sutherland, an environmental scientist and hydrographer engaged on behalf of Dyno. Both Dr Pablo and Mr Sutherland were qualified as expert witnesses and gave their oral evidence concurrently.

2. [18]

   Both parties provided extensive written submissions and developed their arguments orally.

3. [19]

   A major issue in the proceedings concerned the extent of actual harm caused. This was treated as directly relevant to whether the harm caused was substantial, an aggravating circumstance under s 21A(2)(g) of the Sentencing Procedure Act. The competing positions of the parties were reflected in their written submissions. The EPA argued that the deaths of five cows were directly attributable to the discharge from Dyno’s dam into Mr Rumbel’s dam and that the harm caused was therefore substantial. While Dyno expressly accepted the probability that the deaths had been caused by the contaminated water, it argued that the primary judge could not be satisfied beyond reasonable doubt that that was the case, such as to warrant a finding that the harm caused was substantial. (It appears to have been accepted that, if the deaths of the cows could be brought home to the Dyno discharge, then it followed that the harm caused was substantial, and the aggravating factor proved.)

4. [20]

   Evidence as to the cause of death was given in a report by Associate Professor John House of the Veterinary Faculty of the University of Sydney. Associate Professor House was not required for cross-examination and did not give oral evidence. He was asked a number of questions in writing, concerning the cause of the cows’ deaths. In part, his answers were:

5. [21]

   This issue appeared to evaporate when, in oral submissions, senior counsel for Dyno acknowledged that Dyno’s discharge would have been a contributing factor to any blue-green algae toxicosis. (Notwithstanding that concession, senior counsel who appeared for Dyno maintained that the primary judge could not be satisfied beyond reasonable doubt that the deaths were caused by the discharge of Dyno’s waste water.)

6. [22]

   There were also some disputed issues arising out of the evidence of Dr Pablo and Mr Sutherland. These appeared primarily to relate to a suggested effect on aquatic life, and on Mr Rumbel’s pasture lands.

7. [23]

   A vice-president of Dyno (Mr Andrew Gardner) swore two affidavits. The first conveyed a resolution of the Board of Dyno, and expressed Dyno’s contrition and remorse for the incident. The second attested to the IPL Group’s values as a corporate citizen. Annexed to the affidavit was a bulky promotional brochure produced by Dyno. Mr Gardner was not required for cross-examination.

The judgment

1. [24]

   The primary judge set out the facts and circumstances of the offences in a manner that has not attracted criticism. He resolved the issues of difference between Dr Pablo and Mr Sutherland as follows:

2. [25]

   The most significant area of contention concerned whether the primary judge could be satisfied beyond reasonable doubt that the cattle deaths had been caused by the toxicity of the water attributable to Dyno’s discharge. As mentioned above, while senior counsel for Dyno accepted the probability of that causation, he contested a finding to that effect beyond reasonable doubt. That question potentially had a significant impact on whether the offences were (or either of them was – the debate did not differentiate) aggravated in the way envisaged by s 21A(2)(g).

3. [26]

   The primary judge found that the cause of the deaths had been proved beyond reasonable doubt, and that, therefore, the harm to the environment was substantial. He identified two separate routes to the conclusion. On the cause of deaths, Professor House had been asked to identify the effects on pregnant cattle of ingesting water, on the one hand contaminated by the chemicals in the Dyno discharge, and on the other affected by blue-green algae. In relation to the first, he answered that cows in the later stages of pregnancy might abort; in relation to cows that ingested blue-green algae affected water, he would have expected the same effects as on non-pregnant cows. The fact that one of the dead cows had partially aborted indicated to the primary judge that the cause of that cow’s illness was the Dyno contamination. The second factor leading to the same conclusion was the concession made by senior counsel for Dyno that, even if blue-green algae toxicosis was the cause of the deaths, that in itself was caused or contributed to by the Dyno contamination.

4. [27]

   Accordingly, the primary judge found that the aggravating factor stated in s 21A(2)(g) was made out. In assessing the degree of aggravation, he had regard to the likelihood that the cattle had suffered prior to their deaths.

5. [28]

   He expressly found that none of the remaining aggravating factors stated in s 21A(2) was applicable. For the purposes of considering relevant mitigating factors specified in s 21A(3), he noted a submission that Dyno had no prior history of environmental offences, and that it had been, and was, “a good corporate citizen”: see s 21A(3)(f). He referred to the affidavit evidence of Mr Gardner and said:

6. [29]

   He specifically directed his attention to each of the five matters specified in s 241 of the PEO Act. He repeated that the actual harm to the environment was substantial and therefore to be treated as a matter of aggravation. He considered that the potential harm was “self-evident”, reasonably foreseeable, and that Dyno had failed to take appropriate preventative steps to avoid it, and that Dyno had “complete control in all relevant respects” over the causes of the discharge.

7. [30]

   The primary judge noted the expressions of remorse and contrition, and that Dyno had made reparation to Mr Rumbel.

8. [31]

   He noted the early pleas of guilty and determined, in accordance with s 22 of the Sentencing Procedure Act and the principles stated in R v Thomson; R v Houlton (2000) 49 NSWLR 383; [2000] NSWCCA 309 that they warranted reduction of 25 per cent in the penalty that would otherwise have been imposed.

9. [32]

   He noted a schedule of what was said to be comparable cases but considered them to be of little assistance because none involved a factor of aggravation comparable to that which he had found in the present case.

10. [33]

    He then turned to assess the objective gravity of each offence separately. Of the waters pollution offence, he said:

11. [34]

    Of the licence contravention offence, he said:

12. [35]

    He therefore determined that the starting point for the penalty in respect of the waters pollution offence was $650,000, and that for the licence contravention offence was $100,000. However, he then determined that the penalty should be further reduced so that the total reduction was 33.3 per cent. That produced a penalty in respect of the waters pollution offence of $433,334, and, for the licence contravention offence, of $66,667. It may be that this approach discloses error of the kind described as a “two-stage approach” to sentencing: see Wong v The Queen; Leung v The Queen (2001) 207 CLR 584; [2001] HCA 64; Markarian v The Queen (2005) 228 CLR 357; [2005] HCA 25 at [37], but no complaint to this effect was made by either party. He then turned his attention to questions of accumulation and totality and arrived at the ultimate penalties set out above, of $400,000 and $60,000.

13. [36]

    He then resolved issues (no longer in dispute, if they ever were) concerning additional matters, such as legal costs, investigation costs, and the publication of notices disclosing the offences and penalties.

The appeal

1. [37]

   Dyno has identified seven grounds of appeal. They are:

2. [38]

   Some of the submissions advanced on behalf of Dyno may be disposed of at once. The proposition that it was not open to the primary judge to be satisfied beyond reasonable doubt that the cattle deaths were caused by their consumption of the contaminated water is not sustainable. No argument of any substance was directed to this proposition on appeal; written submissions filed on behalf of Dyno merely adopted those arguments that had been put to the primary judge. These were no more enlightening, and suffered from the undoubted problem that they recognised that probably the only potential alternative cause of the deaths was blue-green algae, to which, it was acknowledged, the Dyno discharge would have been a contributing factor.

3. [39]

   In considering the question of the cause of the deaths, the primary judge was entitled to take a realistic view of the evidence: March v E & MH Stramare Pty Ltd (1991) 171 CLR 506; [1991] HCA 12; Royall v The Queen (1991) 172 CLR 378; [1991] HCA 27. The Agreed Facts stated that when Mr Rumbel moved the cattle into the paddock the water in the dam was clear. When he returned the water was discoloured and five cattle were dead. One had partially aborted. Professor House effectively eliminated any alternative causes, and considered it “likely” that the contaminated water was the cause of the deaths. It defies common sense to suggest that there was any reasonably supportable hypothesis to explain the deaths other than the contamination that had entered the dam by reason of Dyno’s offences.

4. [40]

   Ground 2 of the appeal was directed to this finding. Accordingly, in my view, it ought to be rejected.

5. [41]

   Another submission that can be disposed of briefly was that Dyno should be afforded credit because the motivating factor for the transfer of water from the New Dam to the Old Dam was environmental concern. When pressed, senior counsel could identify no source material in the evidence for this proposition. This may have been intended to be supportive of Ground 4; if so, I would reject that ground. No other submissions were advanced that supported Ground 4, which should therefore be rejected.

6. [42]

   A third submission was that Dyno had expended “several hundred thousand dollars” by way of amelioration. Again, the evidence to support this assertion could not be located. The only evidence to which this Court’s attention was drawn was the payment of $76,000 compensation to Mr Rumbel. It may be taken that this submission was directed to Ground 5, which therefore should also be rejected.

7. [43]

   In support of Ground 6 (failure to take sufficient account of Dyno’s good character) the following was submitted:

8. [44]

   With the exception of the plea of guilty, and possibly cooperation with the prosecution, these, it seems clear to me, are all things that Dyno was obliged to do. It is not entitled to additional credit for taking steps to rectify the damage it had done, nor for complying with its obligations under the PEO Act. It is also clear that the primary judge did give appropriate credit for Dyno’s prior history; having allowed a reduction in sentence of 25 per cent referable to the pleas of guilty, he increased that reduction to 33.3 per cent. It is apparent that Dyno’s “good character” was at least one of the reasons for that additional reduction. Ground 6 should be rejected.

9. [45]

   Another submission that should be rejected is that expressed in Ground 3 – that the primary judge failed to pay “due regard to the prior learning of the Court in assessing the level of [Dyno’s] criminality and of the seriousness of the offence.”.

10. [46]

    I take this to be a proposition more conventionally framed as, by reference to comparable decided cases, that the penalties imposed were outside the range legitimately available.

11. [47]

    It is well established in criminal law that a sentencing judge, in the interests of consistency, may have regard to previously decided cases in order to assess the appropriate range in which to sentence: see Hili v The Queen; Jones v The Queen (2010) 242 CLR 520; [2010] HCA 45.

12. [48]

    One difficulty with the proposition in this case is that only one prior case was cited in support. That was Environment Protection Authority v Custom Chemicals Pty Ltd [2016] NSWLEC 146. It is true that the primary judge was also provided with a schedule of previously decided prosecutions, but, as he pointed out, in virtually all, the element of substantial harm was absent. Moreover, this Court was not provided with sufficient detail of the facts and circumstances of the cases to make a proper evaluation of an available range. A single decision is a flimsy basis on which to postulate the available range of sentences: R v Nakash [2017] NSWCCA 196 at [21], [83], [95]. It cannot be said that the primary judge was in error in failing to have regard to material that was not placed before him. I would reject Ground 3.

13. [49]

    That leaves only Grounds 1 and 7. With respect to Ground 1, complaint as to the assessment of objective seriousness, it is to be observed that such an assessment lies classically within the role of the sentencing judge: R v KB; R v JL; R v RJB [2011] NSWCCA 190 at [51]-[53]. A range of factors constitute the mix from which the assessment is made. These include the objective nature of the offending and the consequences of the offending. In this case, there is little doubt that the consequences were serious. It may be accepted that the offences were committed inadvertently. However, I would not consider that fact sufficient to warrant interference with the assessment of the primary judge. Indeed, it is not clear that the primary judge did not proceed on that basis. I would therefore reject Ground 1.

14. [50]

    A further submission directed to both Grounds 1 and 2 should be noted, but which may also be disposed of briefly. This was a submission that the primary judge erred in taking account of the manner of the death of the cattle when evaluating whether there had been significant harm caused. In written submissions, the appellant stated that “His Honour seems to have elevated the death of the cattle by an emotional response of his own into an aggravating factor”. Indeed, a submission was put in the proceedings on sentence that the primary judge should be cautious of having an emotive response to any pre-mortem suffering of the cows.

15. [51]

    In his remarks on sentence, the primary judge noted the submission, but confirmed that his consideration of the manner of the deaths was confined to a “dispassionate noting” of the suffering of the cattle.

16. [52]

    Given the primary judge’s comments, a submission that the primary judge was motivated by emotion cannot be maintained. There was no error in considering the manner of the cows’ death for the purposes of assessing the harm caused. To do so is both open to a sentencing judge under s 21A(2)(g) of the Sentencing Procedure Act, and under s 241 of the PEO Act and the definition of “environment” to which I have referred earlier. In doing so, a sentencing judge is merely having regard to all the circumstances of the offending and the impact of the offending.

17. [53]

    Notwithstanding that, I have come to the view that the total of the penalties ultimately imposed was manifestly excessive. Before I proceed to explain why that is so, it is worthy of note that in neither the Notice of Appeal nor in the written (or oral) submissions, was any attempt made to differentiate between the objective seriousness of the two offences. Both, in fact, stem from a failure of maintenance which may be taken to have been ongoing. The offences were, however, isolated, single incidents committed over a relatively short period of time (the time frame specified in each summons). The waters pollution offence was undoubtedly the result of inadvertence. The area of impact of the offences was confined, limited to a single property, and therefore remediable. That is not to underestimate the impact on Mr Rumbel, but to recognise that, had the contamination flowed into streams or rivers, the effect would have been far worse. I accept that, once notified of the pollution, Dyno took those steps that were reasonably open (and that it was obliged to take) promptly, including notifying Enviroline. I accept that Dyno accepted responsibility, by compensating Mr Rumbel. I accept that Dyno had no prior convictions for environmental offences. None of these conclusions is in any way inconsistent with the findings of the primary judge.

18. [54]

    As mentioned above, the maximum penalty prescribed for each offence was $1 million. The starting point stated by the primary judge for the waters pollution offence was 65 per cent of that maximum. I have come to the view that that was a manifestly excessive starting point for an inadvertent offence, even with the serious consequences that it had.

19. [55]

    One difficulty in the primary proceedings, and on appeal, is that there was no evidence of the financial position of Dyno. What is known is that Dyno (or its parent company) is a multinational company. In order to establish its corporate citizen credentials, Dyno placed before the Court promotional material about it and its activities. From this a reasonable inference may be drawn that its financial position is sound.

20. [56]

    However, while an offender’s ability to pay a fine is relevant to the quantification of that fine, the fine must still bear a reasonable relationship to the maximum penalty available.

21. [57]

    A survey of the previously decided cases identified in the schedule provided by the EPA to the primary judge reveals that the fines that have been imposed are substantially less than those imposed on Dyno. However, as the primary judge observed, in only one of those cases (Environment Protection Authority v Orica Australia Pty Ltd (the Evaporator Incident) [2014] NSWLEC 104), was there evidence of any degree of actual environmental harm, and that was characterised as “moderate” (although there was also potential for harm to human health). The fine there imposed (in respect of an offence that involved a “plume of ammonium nitrate emitted into atmosphere effecting staff and local residents”) was $122,500.

22. [58]

    The only other case cited as comparable was Environment Protection Authority v Custom Chemicals Pty Ltd [2016] NSWLEC 146, where the offence (also of waters pollution, but of a pond and creek) took place over a period of just under a year, and was constituted by the offender “deliberately and repeatedly pumping liquid containing a chemical mixture … into the pond” that was partly on the offending company’s premises, and partly on adjoining land. Water in a creek was also polluted. The chemicals in the mixture were all classified as hazardous and dangerous goods. The pollutants were extremely toxic to aquatic life. The actual harm to the environment of the pond and creek was assessed as “significant”. By its conduct Custom Chemicals saved the substantial costs of the proper removal of the material.

23. [59]

    After allowing a reduction of 25 per cent referable to Custom Chemical’s plea of guilty, Preston CJ imposed a fine of $360,000. The starting point, therefore, was $480,000.

24. [60]

    Although, as I have said, a single decision is inadequate to establish a range of sentences that would be appropriate, some limited guidance may be obtained from that case. It would be difficult to draw any real comparison of the degree of environmental harm in the two cases. However, it cannot be overlooked that the period of offending in the Custom Chemicals case was very nearly a year, the conduct was deliberate and repeated, and the offending company derived financial gain by saving the expense of transportation of the chemical waste.

25. [61]

    I have concluded that an appropriate starting point in respect of the waters pollution offence is a fine of $400,000. From that should be deducted 25 per cent in recognition of Dyno’s plea of guilty, yielding $300,000. In making the assessment I have taken into account all of the objective circumstances, the aggravating factor that substantial harm was caused, and the mitigating factors. It is therefore unnecessary (and inappropriate) to make any further reduction.

26. [62]

    I would not interfere with the fine applicable to the licence contravention offence, nor with any of the additional orders (except to the extent that the notices that Dyno is required to publish be adjusted to incorporate the reduction in the fine imposed in relation to the waters pollution offence).

27. [63]

    The orders I propose are:

28. [64]

    R A HULME J: I agree with Simpson JA.

29. [65]

    WILSON J: I agree with Simpson JA.