Bartter Enterprises Pty Ltd v Environment Protection Authority

1. [1]

   BASTEN JA: The appellant, Bartter Enterprises Pty Ltd, operates a poultry processing business in Beresfield, north-west of Newcastle. Part of the facilities included a blast freezer and cold store building for processed poultry meat awaiting distribution. On 29 June 2018, while new fan-coil units were being installed, there was a release of ammonia into the atmosphere. Some two weeks earlier, the supply line piping liquid ammonia through the freezer had been evacuated and shut down. A flange, known as a “base plate”, at the bottom of the suction valve had been removed, so that the valve remained open. When the contractor responsible for replacing the fan-coil units had completed its work, an employee opened a “liquid stop valve” which released liquid ammonia from the plant room into the “southern circuit”. No check was made before taking that step to see that the circuit was otherwise intact so as to prevent the release of ammonia directly into the atmosphere. In fact, the base plate had not been replaced in the suction valve, so that the system was not intact. Further, a valve which permitted the outward-bound ammonia to be diverted directly across to the return pipe was not closed, so that the newly circulating ammonia was almost immediately released into the atmosphere.

2. [2]

   The immediacy of the release allowed the employee who had opened the stop valve to reverse the action, with the result that the ammonia release lasted for only some 10 seconds. The possibility of a serious threat to human health was thus brought under control.

3. [3]

   The appellant operated the plant as the holder of an Environmental Protection Licence No 1329 (“the licence”) issued under the Protection of the Environment Operations Act 1997 (NSW) (the Operations Act). Section 64(1) of the Operations Act makes it an offence by the holder of the licence if any condition of a licence is contravened by any person. Pursuant to an amended summons filed in the Land and Environment Court, the Environment Protection Authority (EPA) brought proceedings against the appellant alleging a contravention of a term of the licence dealing with the maintenance of plant and equipment.

4. [4]

   On 12 August 2020 the trial judge, Duggan J, delivered a judgment finding the appellant guilty of the charge and standing the matter over for a further hearing on sentence. [1] Sentence proceedings took place in March 2021 and the appellant was both convicted and sentenced, by way of a fine, on 21 May 2021. [2]

5. [5]

   Pursuant to a notice of appeal filed on 6 July 2021, Bartter challenged the finding of guilt on three grounds, all of which focused on four paragraphs in the judgment finding that the offence had been committed. The point raised is a narrow one, concerning the proper construction of the licence condition and the scope of the charge. For the reasons set out below, the appeal must be dismissed.

Licence condition and charge

1. [6]

   It is convenient to commence by setting out both the licence condition and the charge laid by the EPA.

2. [7]

   The licence condition read as follows:

3. [8]

   The charge alleged that Bartter committed an offence against s 64(1) of the Operations Act “in that it was the holder of a licence, a condition of which was contravened by a person.”

4. [9]

   The particulars identified the relevant licence condition as O2.1(a). The person who contravened the condition was said to be Bartter’s contractor, Gordon Brothers Industries Pty Ltd, or an employee or person associated with the contractor. The “manner of breach” was particularised as follows:

5. [10]

   As the trial judge noted:

6. [11]

   Those two paragraphs accurately stated the scope of the issues on the appeal. Nevertheless, it is convenient to set out in full the grounds of appeal, as they articulate the errors alleged in the impugned passages of the judge’s reasoning.

7. [12]

   So far as the charge was concerned, the critical elements were the identification of the offence and the specification of the condition said to have been contravened. As the judge noted:

Reasoning of trial judge

1. [13]

   It is convenient to turn next to the central parts of the judge’s reasoning. Before coming to the passages which were said to reveal error, it is convenient to set out the judge’s reasoning with respect to the scope and operation of Condition O2.1(a). This was as follows:

2. [14]

   The judge then turned to the submissions as to the function the plant was designed to perform. She commenced with the prosecutor’s submissions, which were summarised as follows:

3. [15]

   The judge then turned to Bartter’s submissions stating:

4. [16]

   The judge made “Findings on purpose of plant” at [61]-[70], and as to the language of the charge at [71]-[72]. Dealing with the question of purpose, the judge commenced:

5. [17]

   With one qualification, the challenges raised by the appellant did not focus on the passages set out above. The qualification is that the judge’s approach at [61], treating the refrigeration system as “a single integrated whole”, was said to be erroneous because she should have addressed separately the individual parts of the system. The appellant’s primary focus was upon the following finding, dealing with Bartter’s principal contentions at trial:

6. [18]

   The final two passages challenged in the grounds of appeal were [71] and [72]. There was also a challenge to [73] which may be set out, but was merely conclusory. Indeed, as the oral submissions for the appellant recognised, the reasoning in the last three paragraphs was contingent upon the findings made at [64]. Nevertheless, they should be set out:

Addressing the appeal

1. [19]

   The fundamental proposition raised by the appellant was that the conduct which was alleged to give rise to the release of ammonia was the opening of the stop valve by which the ammonia was allowed to travel from the plant room into the circuit where it would, if the plant were operating, act as a refrigerant. Whether or not it could be said that this involved the operation of the plant otherwise than in a proper and efficient manner was not in issue because the charge did not allege a contravention of condition O2.1(b). What could be said, and what should have been found, according to the appellant, was that the act of opening the stop valve had nothing to do with the condition of the plant and equipment, or maintaining its proper and efficient condition. To assess the validity of these propositions it is necessary to address the construction of the licence condition adopted by the trial judge and, in particular, the relationship between pars (a) and (b) of the condition.

2. [20]

   It is convenient to start by identifying the scope of the qualifying phrase “proper and efficient”, which appears in both paragraphs. It is a phrase which has a history, as used in environmental control legislation. The trial judge referred in her reasons to Genkem Pty Ltd v Environment Protection Authority, a judgment of this Court in 1994 dealing with offences under the Clean Waters Act 1970 (NSW), the Clean Air Act 1961 (NSW) and the Pollution Control Act 1970 (NSW). In particular, Genkem held a licence under the Pollution Control Act which stated: [4]

3. [21]

   In dealing with the licence condition, Gleeson CJ stated: [5]

4. [22]

   There was challenge in Genkem to the validity of the licence condition on the basis of its uncertain operation. In rejecting that challenge, Powell JA stated: [6]

5. [23]

   The context of condition O2.1 should be identified. There are five “O” conditions which appear in a section of the licence titled “Operating Conditions”. Condition O1 required that licensed activities “must be carried out in a competent manner.” The condition covered “the processing, handling, movement and storage of materials and substances used to carry out the activity” and of waste products generated by the activity. Condition O3 dealt with establishing an emergency response plan to cover types of incident which might occur at the premises “and which are likely to cause harm to the environment.”

6. [24]

   Consistently with Genkem, the phrase “proper and efficient” in condition O2.1 must be understood as referring to the maintaining of plant and equipment and the use of plant and equipment having regard to possible environmental consequences arising from failure to maintain or use the plant and equipment in such a way as to minimise or avoid those risks. It was not in dispute that release of ammonia into the atmosphere was a relevant environmental consequence which was to be avoided.

7. [25]

   It is evident that there is no bright line to be drawn between the circumstances in which par (a) may be engaged and those in which par (b) may be engaged. That is, the manner of operation of the plant must be assessed in relation to its condition, which may, in turn, be dependent upon the way in which the plant is expected to be operated. Further, par (a) refers to maintaining the plant in a particular condition, rather than carrying out maintenance work on the plant. That is consistent with the purpose of the licence which is to protect the environment from harm. Risks may inhere in plant and equipment whether or not it is in active operation. Faulty electrical wiring, for example, may pose a risk of fire even if the plant is not in use. If a fire breaks out during the operation of the plant, for example when a switch is operated, it may be possible to characterise the cause of the fire as an act undertaken in the operation of the plant, but the cause is also the faulty condition of the electrical system.

8. [26]

   In the present case, the trial judge described the “design function” of the piping system as that of “containing ammonia.” [7] The appellant criticised this language on the basis that the design function of the plant was not primarily directed to environmental protection, but rather the efficient operation of a refrigeration process. It did not cease to serve that function whilst it was offline and work was carried out on it.

9. [27]

   While it is true that the term “efficient” envisages a purpose, or at least a standard of measurement, the language of “design function” finds no ready basis in the terms of the licence (or in earlier legislative provisions). Perhaps ironically, the phrase seems to have been used in the appellant’s submissions at trial. [8] Rather, consistently with Genkem, the question was whether the plant was maintained in a condition which would minimise possible environmental consequences. One harmful environmental consequence which came to pass was the release of ammonia gas. As the trial judge reasoned, the plant was not in a condition to prevent the release of gas at the relevant time. The events in question demonstrated that fact. Gas was released into the pipe-circuit at a time when it was not maintained in a condition to retain gas.

10. [28]

    If the offence depended on a finding of fault by one person or another, there may have been difficult factual questions to be resolved; however, the offence did not involve such a finding. As counsel for the EPA accepted in the course of oral argument in this Court, the pleading that the appellant’s contractor failed to maintain the plant, for example, by not conducting a leak test using dry nitrogen, was mere surplusage: the judge made no findings in respect of such particulars and no complaint is made of that. However, the particulars as to “manner of breach” were largely a distraction, although no doubt the matters raised would have been relevant in determining penalty. Describing the failure to maintain the plant in a particular condition “by opening” the stop valve and allowing ammonia to escape was confusing. Rather, the condition of the plant was (as the appellant accepted) ineffective for containing ammonia gas if it were to be released at that time into the system of pipes constituting the southern circuit.

11. [29]

    One aspect of the appellant’s submissions entailed the proposition that the plant could not be maintained in operating condition at all times. That submission should be accepted. Thus, whilst the repairs were being carried out, that part of the plant constituted by the southern circuit was not physically capable of containing ammonia. Nevertheless, there were mechanisms by which the ammonia was contained, effectively, throughout that process.

12. [30]

    The appellant’s submission may reflect the distracting use of the term “design function” as if it were to be implied that the relevant plant had to be capable of containing ammonia at all times. Clearly that was not so: if the plant were to be taken offline and the ammonia removed from the circuit pipes, the plant would nevertheless be maintained in a proper and efficient condition. That is, the character of the condition of the plant depended upon the function it was serving at a particular time. Indeed, there is an easy assumption that, because a particular state of a part of the plant led to a discharge, the plant was not maintained in a proper condition. As noted above, the proper condition of the plant depended on its use at a particular time. It may be accepted that the licence required that ammonia not be released into the atmosphere, but the licence said nothing about how it was to be contained. The challenge to the licence condition considered in Genkem was that it was vague and uncertain. However, although such a condition left uncertain the steps which the licence holder was required to take, as Gleeson CJ observed: [9]

13. [31]

    The correct conclusion was that the appellant’s plant may have been in a proper and efficient condition when no ammonia was present in the southern circuit, but immediately a step was taken to release ammonia into the southern circuit, the condition of the plant no longer satisfied the requirement of licence condition O2.1(a). The conclusion of the trial judge that there was a breach of that condition must be upheld. The appeal must be dismissed.

14. [32]

    The parties did not address costs, although the trial judge made an order as to the costs of the trial. If costs are sought, and the appropriate order is not agreed, either party can make an application within 14 days of this judgment.

15. [33]

    DAVIES J: I have had the advantage of reading in draft the judgment of Basten JA. I agree with his Honour’s proposed orders and his reasons.

16. [34]

    A significant, but inappropriate, focus on the part of the appellant, both at the trial and in the appeal, was the notion that the design function with which the licence condition O2.1 was concerned was each of the constituent parts of what was referred to at the hearing before the trial judge as the Southern Circuit. In the submissions filed in this Court the applicant said:

17. [35]

    On that basis the appellant argued that the ammonia supply valve was clearly in a condition in which it fulfilled its design function and, in that way, was maintained in a proper and efficient condition. The appellant went on to submit,

18. [36]

    The relevant plant and equipment referred to in the licence was the blast freezer and the ammonia refrigeration system. That system had to be viewed as a whole, both because of what it was designed to achieve and for the possible environmental consequences arising from it, either from a failure to maintain it or to operate it in a proper and efficient manner. As the trial judge correctly said, the Southern Circuit was an integrated system relying upon a series of valves and pipes to allow the function of refrigeration of the building whilst containing the refrigerant (ammonia) within that circuit. Her Honour, correctly in my opinion, went on to say:

19. [37]

    Once it is accepted, as it must be, that the plant and equipment was the whole system, the conclusion is inevitable that there was a failure to maintain the plant and equipment in a proper and efficient condition, for the reasons more particularly explained by Basten JA.

20. [38]

    DHANJI J: I agree with Basten JA and with the additional observations of Davies J.