Employer found liable for employee’s breach of the Environment Protection Act & General environmental defence fails on appeal

In a recently reported judgment, the Supreme Court has upheld a decision of the Environment, Resources and Development Court (ERD Court), previously detailed in the following article.

The decision affirms that, when relying on the general defence under section 124 of the Environment Protection Act 1993 (Act), it falls upon the defendant to establish all elements of the defence on the balance of probabilities. The case also provides a pertinent reminder of the significant degree of liability that attaches to employers when an employee’s actions result in a breach of the Act.

Background

In 2020, the Environment Protection Authority (EPA) successfully prosecuted Ashton Valley Fresh Pty Ltd (Ashton Valley) for breaching the Environment Protection (Water Quality) Policy 2003 (and therefore contravening section 34(2) of the Act).

The offending resulted from the actions of an employee of Ashton Valley, who opened a tap to an on-site wastewater treatment plant (WWTP) on Ashton Valley’s property, releasing untreated wastewater into a watercourse.

Ashton Valley relied on the general defence under section 124 of the Act but was ultimately found guilty[1] and fined $3,500 for its offending.[2] Ashton Valley appealed the conviction to a single Justice of the Supreme Court (Justice Lovell).

The General Defence

The general defence applies to both criminal and civil proceedings where the defendant can establish (on the balance of probabilities) that the alleged contravention of the Act did not result from any failure on the defendant’s part to take all reasonable and practicable measures to prevent the contravention from occurring.[3]

Furthermore, by relying on this defence, Ashton Valley (as an employer) had to establish that:

• proper workplace systems and procedures were in place designed to prevent a contravention, including proof that proper systems or procedures were in place for employees to promptly report suspected contraventions to their employer or governing body of the employer (or someone with a right to report to the employer or governing body of the employer); and
• proof that Ashton Valley actively and effectively promoted and enforced compliance with the Act and with all such systems and procedures.[4]

Full discussion of the general defence is contained in our previous article.

Grounds of appeal

Ashton Valley argued multiple grounds of appeal, most relevantly that:

• the Trial Judge (Durrant DCJ) erred in holding that the general defence had not been proved as he could not be satisfied that the employee had opened the tap; and
• the Trial Judge erred, when considering the alternative scenario that the employee had intentionally opened the tap without authority, in holding that the general defence had not been proved in that he was not satisfied that Ashton Valley had taken all reasonable and practicable measures to prevent the contraventions.

Section 127

Section 127 of the Act relevantly holds that in proceedings for offences or civil penalties, the conduct and state of mind of an employee acting within the scope of his or her actual, usual or ostensible authority will be imputed to the body corporate.[5]

Ashton Valley argued that there was no interplay between section 127 and section 124 of the Act and that the Trial Judge was wrong to consider section 127 in assessing the whether the general defence was established.

His Honour, Justice Lovell, stated that section 127 is simply a recognition of the general law of vicarious liability. Although section 127 creates an additional burden for the defendant to establish the general defence, it does not render it impossible for the defence to be made out. As such, the Trial Judge was correct in finding that section 127 was relevant to the application of the general defence.

Acting within the Scope of Employment

Ashton Valley argued that its employee was not acting within the scope of his actual, usual or ostensible authority when he opened the tap but was instead on “a frolic of his own”.

In making this argument, Ashton Valley described the scope of its employee’s duties as being to pump wastewater into the WWTP, and further, that he was not authorised to discharge wastewater before it was treated. Ashton Valley referred to its detailed “training and procedures” manual and argued that, while the employee was trained to operate WWTP, this training contained no details concerning the use of the tap. As such, Ashton Valley argued that the employee was not authorised to do more than that contained within the limitations of his training.

His Honour dismissed this very limited description of the scope of the employee’s authority as unreasonable. It was apparent from the evidence that the employee’s duties were much wider than merely pumping wastewater into the WWTP; the true extent of his responsibility was to monitor and keep the amount of wastewater within the WWTP at manageable levels. As such, by opening the tap to the WWTP he would have been acting within the scope of his employment in keeping the levels of wastewater within the WWTP manageable. Irrespective of whether the action was directly authorised, the employee likely believed that what they doing was for the benefit of their employer and within the general scope of their employment.[6]

While an assessment of whether an employee is acting within the scope of their actual, usual or ostensible authority will need to be undertaken on a case-by-case basis, it is apparent from this decision that Courts will adopt a broad view in determining whether section 127 of the Act applies. It is likely that any actions carried out by an employee in the course of their duties for an employer, unless so far removed from what is expected of them, will fall within the ambit of section 127.

Findings on the General Defence

The Trial Judge was not obligated to resolve every issue raised by Ashton Valley in determining whether the employee had been acting outside the scope of his employment when he opened the tap to the WWTP. As such, it was open to the Trial Judge to conclude that the liability for the employee’s actions attached to Ashton Valley as an employer (in accordance with section 127 of the Act). Therefore, the Trial Judge did not err in concluding that the general defence was not made out as Ashton Valley had not met its evidentiary burden (on the balance of probabilities).[7]

In considering the alternative scenario, again the Trial Judge’s reasoning was sound in establishing that Ashton Valley had not taken all reasonable and practicable measures to prevent the contravention. It was open for the Trial Judge to conclude that the systems and procedures in place were inadequate to meet the requirements of the general defence.

Overall, His Honour found that the findings of the Trial Judge, including the findings of guilt, were “not only open but were correct”.[8]

Learnings

This decision highlights that employer liability under the Act can attach to a multitude of actions performed by employees. The scope of an employee’s work can be wide and far-reaching, and even actions that are not directly authorised may vicariously attach to the employer in the event of a breach of the Act. Training of employees for specific duties may not be enough in itself to limit the employer’s liability for actions outside the confines of the training. If those actions can be seen to be done within the scope of employment, the breach of the Act is still imputed.

While it is not often possible or practical to include every single duty on an employee’s position description as roles evolve over time, employers should include as much detail as possible as to what duties will be expected of employees in performing their role.

Safe Operating Procedures should also be in place and communicated to relevant staff in respect of how to properly use and maintain plant and equipment. For example, if in this decision the employer had in place a Safe Operating Procedure which stipulated that wastewater cannot be discharged before treated, a different outcome may have been reached.

The general defence will only be established where all reasonable and practicable measures are taken to avoid polluting the environment. While the Act does not prescribe what ‘reasonable and practicable measures’ are, employers should consider these measures in conjunction with their obligations under the Work Health and Safety Act 2012 (SA) (WHS Act) to employees and other persons. Under the WHS Act, what is ‘reasonably practicable’ in ensuring health and safety will depend on, among other things:

• The likelihood of the hazard or the risk concerned occurring;
• The degree of harm that might result from the hazard or risk;
• What the person concerned knows, or ought reasonably to know about the hazard or the risk and ways of eliminating or minimising the risk.

Furthermore, it falls on the employer to prove that workplace systems and procedures are in place and that employees are acting in accordance with those systems in procedures in the scope of their employment. This obviously casts a wide net for employer liability that employers should take careful notice of and incorporate into regular training, procedures and general policies for new and existing staff.

It is also worth noting that the general position, as per the Civil Liability Act 1936 (SA), is that employees are not required to indemnify employers in circumstances where employees commit a tort for which their employers are vicariously liable. The exception to this general position, which may differ depending on specific legislation, is where an employee has engaged in serious and wilful misconduct.

For more specific information on any of the material contained in this article please contact Peter Psaltis on +61 8 8210 1297 or ppsaltis@normans.com.au, Lincoln Smith on +61 8 8210 1203 or lsmith@normans.com.au, Anastasia Gravas on +61 8 8217 1331 or agravas@normans.com.au, or Nicholas Munday on 8217 1381 or nmunday@normans.com.au.

[1] Dolan v Ashton Valley Fresh Pty Ltd (ACN 129 405 410) [2020] SAERDC 15.

[2] Dolan v Ashton Valley Fresh Pty Ltd (ACN 129 405 410)(No 2) [2020] SAERDC 24.

[3] Environment Protection Act 1993 (SA) s 124(1).

[4] Environment Protection Act 1993 (SA) s 124(3).

[5] Ibid s 127(1)(a).

[6] His Honour drew a comparison with the NSW case of Tiger Nominees Pty Ltd v SPCC (1992) 25 NSWLR 715 in which employees tasked with keeping a stormwater dam below 75% capacity did so using a bulldozer to breach the wall of the dam (instead of pumping the excess water out). Although this was not an authorised action, the employees were acting within the scope of their employment in attempting to keep the dam below capacity.

[7] His Honour also referred to the Briginshaw standard for assigning evidentiary weight when the penalty or gravity of the consequences is serious (see Briginshaw v Briginshaw (1938) 60 CLR 336 at 362 (Dixon J)), although in application this did not impact on the result of the appeal.

[8] Ashton Valley Fresh Pty Ltd v Dolan [2021] SASC 44 at [159].