New year - new laws on directors' environmental liability

Environment eBulletin - 14 January 2013

Summary

This year will bring significant changes to the legal regime for directors' liability across Australia. The changes will apply to the type of directors' liability that arises when directors are liable for offences committed by their corporation (known as "deemed" or "derivative" liability"). Following reform led by the Council of Australian Governments (COAG), states and territories are introducing new laws to reduce this type of directors' liability provision, and in some cases, change the burden of proof, which applies when directors seek to defend their innocence. 

On Friday 11 January 2013, the NSW Miscellaneous Acts Amendment (Director's Liability) Act 2012 came into force. Similar legislation (currently at the Bill stage) is to be enacted in Queensland, Tasmania, and the ACT, with other jurisdictions likely to follow suit later this year. 

The changes to directors' liability laws will reduce the number of liability provisions across many areas of law, but directors' liability for environmental offences will remain as onerous and complex as ever. Directors, and in some cases managers, will still be subject to liability for the environmental offences of their corporation. Accordingly, environmental compliance should be a top priority for corporations with exposure in 2013.

 

Quick links:

 

Directors' and managers' liability for environmental offences

Each of the main environment protection laws in the states and territories includes provisions that impose personal criminal liability on directors for offences committed by their corporations. In some jurisdictions, liability also extends to executive officers or managers. Commonly, this type of provision will hold a director personally liable for the offences committed by the corporation unless he or she can demonstrate having taken "reasonable steps" or exercised "due diligence". 

The COAG reform is directed at reducing the occurrence of this type of directors' liability, but it does not seek to change the law on liability where a director is liable for an offence that they have personally committed or where they are liable as an accessory. 

COAG identified three main "types" of directors' liability provisions of concern to directors in relation to their liability for the offences of their corporation:

  • Type 1 - the director is presumed to be innocent and the prosecution must prove each element of the offence has been committed. The director's failure to take reasonable steps or exercise due diligence is an element of the offence, which the prosecution must prove.
  • Type 2 - the director is deemed to be guilty of the offence, unless the director can demonstrate that a defence applies. If evidence of a defence is provided, the prosecution has the onus of proving that the defence does not apply. 
  • Type 3 - the director is deemed to be guilty of the offence unless the director can prove that one or more defences apply. 

Directors' liability provisions that adopt the format of Types 2 and 3 liabilities are most onerous for directors, as they automatically deem that the director is guilty of the offence, unless the director can demonstrate that a defence applies. For this reason, the COAG reform broadly seeks to remove or replace Type 2 and 3 liability provisions in existing legislation and to ensure that new legislation adopts Type 1 liability provisions.

 

What are the changes?

In short, the regime for liability in environmental offences remains largely unaffected by the reform to directors' liability. 

Whilst New South Wales has amended, and ACT proposes to amend, environment protection laws to align more with Type 1 liability provisions, Queensland and Tasmania do not propose to change their main environment protection laws. Victoria, South Australia, Western Australia and the Northern Territory are expected to implement changes to directors' liability legislation over the course of the year. However, in the majority of jurisdictions, there remain strong laws placing liability on directors, and in some cases managers, for offences of their corporations. 

The table below shows the current regime and proposed amendments. 

Environment eBulletin table

* Note that other natural resource management laws (for example, regarding water, mining, heritage, native vegetation and weeds) often also contain directors' liability provisions.

^ top

Bottom line for directors and managers

Liability in environmental matters remains subject to strict and onerous evidential and legal burdens. Offences and defences are different in each state and territory, so directors need to ensure that environmental compliance programs are tailored for each jurisdiction in which their corporation operates. If prosecuted, directors and others need to have sufficient evidence to support a defence. The ability to invoke defences to environmental prosecutions depends on having effective environmental compliance measures in place. 

Typically this should include ensuring that:

 

  • environmental compliance systems are current and reviewed regularly; 
  • reasonable steps are undertaken or due diligence is exercised and documented; and
  • directors' and officers' liability cover is obtained.

If you require assistance to navigate your way through the various duties under Australian environmental law or to establish environment compliance systems, contact a member of our Environment team.

^ top

All information on this site is of a general nature only and is not intended to be relied upon as, nor to be a substitute for, specific legal professional advice. No responsibility for the loss occasioned to any person acting on or refraining from action as a result of any material published can be accepted.

Find Publications

Keyword
Topic