Polluter pays principle in action

In brief

In a recent decision of the Victorian Supreme Court, a Melbourne municipal council was held liable to compensate a landowner for the costs that were incurred by the landowner in the course of complying with a clean-up notice issued under the Environment Protection Act 1970 (Vic), despite the pollution having occurred prior to the commencement of that Act. Partner Chris Schulz and Associate Kate Kirby discuss the key issues raised in the case.

Background

The relevant site located in Burnley, Victoria was Crown land in the possession of the City of Richmond (the predecessor to the Yarra City Council) (the Council). Around the turn of the century, the Council used the site as an abattoir and quarry. From around 1916, the Council relevantly built and operated a brick refuse destructor and tar distilling plant with a 'masonry' storage tank for coal tar on the site. From 1961, the abattoirs on the site were leased to a third party. Photographs of the site from 1964 show that the area where the storage tank was located was covered with rubble. The Council was required to relinquish possession of the site to the State of Victoria in 1996.

The site was sold by the State of Victoria to the Metropolitan Fire and Emergency Services Board (the Landowner) in May 2004, following the lodging of a planning permit application for a new community safety and training facility around six months earlier.

A planning permit was subsequently granted, but by July 2005, construction of the new facility had to be stopped when a test hole identified coal tar. The Victorian Environment Protection Authority (EPA) subsequently issued a clean-up notice which required the Landowner to engage an environmental auditor to submit an environmental audit report to the EPA.

The decision

Section 62A(2) of the Environment Protection Act 1970 (Vic) (the Act) provides that an occupier can make a claim for the cost of complying with a clean-up notice from a number of people including someone who caused or appears to have abandoned the pollution. The original form of this provision of the Act was first introduced by the Environment Protection (Review) Act 1984 (Vic), long after the Council had undertaken the relevant operations at the site, but before the Council relinquished possession of the site in 1996.

The court considered whether the Council was liable for the clean-up costs under s62A(2) on the basis that:

• s62A(2) applies with respect to pollution which was caused or permitted prior to the commencement of the Act (under s62A(1)(b)); and/or
• the Council 'abandoned' the industrial waste in the bluestone pit when it relinquished possession of the site in 1996 (under s62A(1)(c)).

Section 62A(1)(b): Did the Council 'cause or permit' the pollution?

Despite the passing of time, the court held that there was sufficient evidence to support the fact that the Council had used the bluestone pit for the storage of coal tar and that it had therefore caused or permitted the pollution.

A key issue for resolution was whether s62A(2) could apply to pollution that was caused prior to the introduction of the statutory provision. The Council submitted that because it was acting lawfully at the time that it caused the pollution, the legislative intent was that the provision should not apply retrospectively.¹ 

This question had previously been considered in Premier Building & Consulting Pty Ltd (receivers appointed) vs Spotless Group Ltd (2007) 64 ACSR 114, where Justice Bryne held that the presumption against the retrospective application of statues did not apply.² Therefore, similar to the fact that clean up notices could be issued to require the remediation of pollution that pre-dates the commencement of the statutory provision providing the power to issue the notices, so too the person responsible for the pollution under statute could 'be called upon to compensate the remediator'.³

Justice Riordan followed the reasoning in the Spotless case.⁴ Further, Justice Riordan held that consistent with the 'polluter pays principle' in s1F(2) of the Act, it was the statutory intent that 'the liability of the person who caused the pollution to compensate the innocent recipient of the notice would not be limited to pollution caused after the commencement of the Act.'⁵

Section 62A(1)(c): Did the Council appear to 'abandon' the industrial waste in 1996?

The court also considered whether the Council was liable for the remediation of the site on the basis that the action of vacating the site in 1996, without remediating the coal tar, constituted 'appearing to have abandoned' the industrial waste.

Despite the fact that the Council officers and employees were not aware of the coal tar in the bluestone pit at the time that the Council relinquished possession of the site, the court still held that the Council had 'appeared to abandon' the coal tar at the site. The court made this finding on the basis that:

• the Council was aware that there was contamination at the site, and did not clean it up at the time it vacated the site; and
• subjective knowledge is not required for abandonment.⁶

The court held that abandonment did not occur before the Council vacated the site, because it could have, at any time prior to this, dug out the bluestone pit and reused the coal tar.⁷ The fact that the Council was forced to relinquish possession of the site does not mean that it had not abandoned the waste, because although it was required to leave the site, it was not required to leave the coal tar.⁸

Other claims

The Landowner also made a variety of other claims against the Council regarding breach of statutory, planning and other duties, however, these claims were unsuccessful. In particular, the court held that individuals do not have a private right of action for breach of the pollution of land offences under the Act.

What does this mean for you?

This case is an example of the 'polluter pays principle' in action. Polluters, and former polluters, need to be aware that statutory liability for remediation remains with the polluter, regardless of whether the pollution occurred prior to the commencement of the Act, whether the site has been vacated, relinquished or sold and regardless of other contractual arrangements that may be in place dealing with any potential land contamination.

What's next?

The Council has reportedly confirmed that it will appeal against the decision.⁹ Allens will continue to monitor and report on any significant developments with respect to this appeal.