New environmental responsibilities for corporates, officers, financiers and others in Queensland

In brief

The Queensland Government proposes new powers to compel related bodies corporate, executive officers, financiers and shareholders, and a select category of 'related persons', to satisfy the environmental obligations of companies operating in Queensland. The Chain of Responsibility concept has been proposed in response to concerns arising from recent events in Queensland such as the difficulties of the Yabulu Nickel Refinery. Partner Bill McCredie and Senior Associate Gobind Kalsi report. 

What does it mean for you?

Currently, the Queensland Department of Environment and Heritage Protection (EHP) may issue environmental protection orders to a person undertaking environmentally relevant activities to secure its compliance with environmental obligations.

The proposed changes, in a Bill introduced to Parliament yesterday¹, will significantly broaden the range of entities and persons that are exposed to receiving environment protection orders by which those parties will become directly liable to satisfy environmental obligations in Queensland.

Failure to comply with an environmental protection order is an offence, and also enables the EHP to recover the costs of addressing the environmental issue from the person issued with the order.

Further, the EHP will also be able to unilaterally impose conditions requiring financial assurance to secure compliance with environmental obligations on transfer of an environmental authority (subject to appeal rights).

Who is a 'related person'?

The proposed scope of who may be a 'related person' to a company issued with an environmental protection order is very broad and may extend to related bodies corporate, executive officers, financiers and shareholders, and a potentially wider group of other 'related persons' as determined by the EHP having regard to prescribed factors.

Related persons are:

• holding companies (with the same meaning as under the Corporations Act 2001 (Cth)); and
• owners of land on which the company carries out, or has carried out, the relevant environmental activity.

The proposal extends to a wider group of potentially related persons, subject to assessment by the EHP, that may include:

• a person capable of benefiting financially from the company that has not complied with its environmental obligations; or
• a person who in the past two years has been in a position to influence the company's compliance with its environmental obligations (whether acting alone or jointly with other related bodies corporate, or giving a direction, or making funding available).

The range of factors that may be considered by the EHP in determining whether a person has a 'relevant connection' with a company, sufficient for it to constitute a related person, include:

• the extent of the person's control of, or financial interest in, the company;
• whether the person is an executive officer of the company or a holding company (for example a director, or a person concerned with, or who takes part in, the corporation’s management);
• whether the person has had dealings with the company, including for the purpose of providing finance, including the taking of security; and
• the extent to which a legally recognisable structure or arrangement makes it possible for the person to receive a financial benefit from the company undertaking the environmentally relevant activity. A 'financial benefit' relevantly includes receiving, whether directly or indirectly, a profit, revenue, income, dividend or distribution, or an advantage or preference.

Under the proposed transitional arrangements, decisions about whether entities constitute related persons may take into account circumstances occurring prior to the commencement of the amending legislation.

Related persons of 'high risk companies'

A new power is also proposed for the EHP to issue an environmental protection order to a related person of a 'high risk company'.

A 'high risk company' is a company that is externally administered as defined under the Corporations Act or is a related body corporate of such a company.

Critically, the environmental protection order can be issued:

• even if the high risk company hasn't been issued with an order; or
• even if the high risk company has stopped holding an environmental authority.

The explanatory notes to the Bill suggest that this provision is intended to address circumstances where the relevant environmental authority has been disclaimed or otherwise ceased to be in force.

In addition, the EHP can require the related person issued with an order to provide a bank guarantee or other security to secure the related person's compliance with the order.

The way forward

Although it is clear that the Queensland Government has proposed the legislative changes in response to recent events where there is a risk of the Government having to step-in and bear the cost of addressing environmental contamination, the proposed legislation has a very broad potential application.

If the proposed legislation passes Parliament in its present form, related bodies corporate, executive officers, financiers, shareholders and other 'related persons' will have a heightened interest in ensuring that companies operating in Queensland satisfy their environmental obligations. The Bill introduces scope for those 'related persons' to become personally liable for the satisfaction of the relevant environmental obligations.