Contaminated Land Management Amendment Act 2008 (New South Wales) By Madeleine Perrignon | January 2009 Area of Expertise | Business & Property
Summary The Contaminated Land Management Amendment Act 2008 (‘the Act’) was passed on 10 December 2008. The Act gives additional powers to the Environmental Protection Authority (‘the EPA’) and will arguably lead to more land in New South Wales being declared contaminated.
Who Does This Impact? Land owners, Landlords and Tenants.
What Action Should Be Taken? If there is a possibility that land is contaminated, landowners should consider obtaining environmental audits. New occupants should consider conducting environmental audits in respect of the land they intend to occupy.
The amendments pursuant to the Act should be closely examined by anyone who owns or is considering purchasing contaminated (or potentially contaminated) land in New South Wales, as landowners in particular are now more exposed to penalties pursuant to the Act. These penalties include fines of up to $137,500 for failing to notify the EPA of contaminated sites, and daily fines of up to $66,000.
Increased Powers of the Environmental Protection Authority The Environmental Protection Authority (‘EPA’) now has increased powers which enable it to undertake investigation of contaminated land. Previously, the EPA could only issue an investigation order in respect of land contaminated in such a way as to present a significant risk of harm. Now, if the EPA merely has reasonable suspicions that there are contaminating substances, it can issue a preliminary investigation order. The effect of a preliminary investigation order is that the recipient must undertake an investigation to ascertain if the land is contaminated and provide the EPA with such information as it may require. Following the investigation, the EPA may declare the land to be significantly contaminated and may issue further orders including remediation orders. Previously, the EPA could issue investigation and remediation orders on the following types of people in the following sequence: (a) a person who has principal responsibility for the contamination; (b) an owner of land; or (c) a notional owner of land such as a mortgagee in possession. Now, in addition to owners or notional owners of land, preliminary investigation orders can also be issued on: (a) a person who the EPA reasonably suspects is responsible for the contamination; (b) a person who carried on activities of the sort that generate or consume the same type of contamination; or (c) a public authority.
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Also, the EPA can now issue the preliminary investigation order in any sequence. These amendments are important for several reasons: (a) As the EPA does not need to establish responsibility before it issues orders (it merely needs to have reasonable suspicions that the person is responsible for the contamination), the remediation process can commence earlier. As the Hon. Rick Colless (National Party member) stated on 2 December 2008 in the Second Reading of the Contaminated Land Management Amendment Bill 2008: Action can therefore be taken in a timely manner without the red tape associated with scientifically proving that a site has been contaminated.
(b) The fact that the EPA is not required to follow a prescribed sequence when choosing entities upon which to issue orders means that delay is minimised in that the EPA can issue orders on the landowner, for example, if they are unable to initially locate the person responsible for the contamination. (c) The landowner or notional landowner may be required to finance preliminary investigation orders, rather than the polluter. (The Act does contain offset provisions in that the person who is liable to undertake the preliminary investigation can recover the costs of so doing from the person found to be responsible for significant contamination.)
Constructive Knowledge Previously, the EPA could issue remediation orders on the following people: (a) a person who had principal responsibility for contamination of the land; (b) an owner of land; or (c) a notional owner of land such as a mortgagee in possession. Now, in addition to owners or notional owners of land, remediation or management orders can be served on persons who are responsible for significant contamination of the land. The threshold has therefore been reduced in that the EPA need not establish who had principal responsibility. They must merely establish who had significant responsibility. There could be several parties with significant responsibility which means that the Act recognises that more than one person may be responsible for contamination. What is of greater importance is the amendment to the definition of a ‘person responsible for contamination’. The definition now includes: (a) an owner or occupier of the land who knew or ought reasonably to have known that contamination would occur but who failed to take reasonable steps to prevent contamination; and/or (b) a person carrying out activities on land that generates or consumes the same substances as those that comprise the contamination unless they can establish that their activities did not cause the contamination.
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Previously, a person had to advise the EPA if their activities had contaminated land to such an extent that there was a significant risk of harm and they had actual knowledge of contamination. Now, businesses have an obligation to report a suspected contamination. Companies can no longer plead that they were unaware of the contamination. If the company ‘ought reasonably to have been aware of the contamination’, then they have a duty to advise the EPA. The difficulty is that ‘what is reasonable’ has not been defined. The person’s training and qualifications may be taken into account, and also whether they could reasonably have sought advice that would have made them aware of the contamination. This ambiguity means that landowners need to consider undertaking site environment audits to ascertain if land is contaminated. This becomes even more important now that landowners have a responsibility to report contamination even if it occurred before they occupied the land. Since landowners may be liable for contamination if they know or ought reasonably to have known that contamination had occurred and they had failed to take reasonable steps to prevent the contamination, this means that landlords including absentee landlords must be more vigilant to ensure that their tenants’ activities do not contaminate the land. Landlords also need to carefully examine indemnity provisions in leases to ensure that they are protected if their tenants contaminate the land.
Statutory Defences for Directors Have Been Limited Directors can no longer plead that they were unaware of the contamination. Previously, in order to escape conviction, they could plead that the company was guilty of contamination without their knowledge, that they were not in a position of power to influence the company’s conduct or that they used all due diligence to prevent the contamination. Now, if they ought reasonably to have been aware of the contamination, they will be guilty of contravening the Act and personally liable for prosecution.
Occupants Liable for Contamination Caused by Previous Occupants Now, incoming occupants who continue the same types of businesses or activities on the contaminated site as those carried out by the previous occupiers could qualify as persons responsible for the contamination. If faced with a remediation order, they would then have to prove that they did not cause all of the contamination. On their initial occupation of the land, tenants should therefore obtain site reports as a benchmark to ascertain if there is any preexisting contamination. This is particularly crucial for tenants conducting potentially contaminating activities. Otherwise, they may find themselves liable to remediate the land in respect of previous occupants’ activities.
New Tests to Determine What is Contaminated Land Previously, land was determined to be contaminated if the contamination posed a significant risk of harm to human health or the environment. Now, this threshold has been reduced in that the EPA need only consider whether the contamination is ‘significant enough’ to warrant regulation. ‘Significant enough’ is not defined, which means that potentially the EPA may declare more sites to be contaminated. (Although it should be noted that some bodies such as the Total Environment Centre of New South Wales consider that this amended definition will reduce the number of declared contaminated sites because it believes that deeming contamination as ‘significant enough’ to warrant regulation will be more difficult to prove than deeming it to cause a ‘significant risk of harm’.) Previously, the EPA was also required to undertake a technical assessment of certain criteria including whether or not the environment had already been harmed, were the substances toxic and had these substances contaminated other land. Now, it
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appears that the EPA has even greater scope to declare a site contaminated as the EPA need not undertake a technical assessment of the criteria before it can determine contamination. It must still refer to the criteria – but it need only ‘take it into account’. This appears to ‘soften’ the threshold and arguably, the EPA now has greater discretion to determine whether or not land is contaminated.
Inability to Contract Out of Contamination In the past, the EPA’s practice was to prosecute those parties responsible for the contamination, even if an owner had attempted to evade its liability by selling the land and contractually providing that another person was responsible for the contamination. The Act now specifically states that the person responsible for contamination will continue to be responsible and cannot attempt to contract out of its statutory obligations concerning remediation. This is of relevance to vendors who are disposing of contaminated land and who request indemnities and releases from incoming purchasers.
Removal of Certainty of Voluntary Remediation Proposal Previously, a party could enter into a voluntary remediation proposal (‘VRP’) with the EPA which meant that the EPA would agree not to issue an order against the party if the remediation was carried out in accordance with the VRP. This provided certainty to parties once the EPA had agreed to the VRP. Now, despite entry and compliance with the VRP, the EPA can still issue new orders. This is of significance when contaminated sites are being sold. If the vendor has entered into a VRP and sought an indemnity from the purchaser as they are entitled to do if they are not responsible for the contamination, then it may be prudent for the vendor to obtain a bank guarantee from the purchaser to secure possible future costs in case new orders are later issued by the EPA against the vendor.
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For more information, please contact:
Madeleine Perrignon Special Counsel T: 02 8257 5710 madeleine.perrignon@turkslegal.com.au
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