When ‘liabilities’ do not include all liabilities: A pollution prosecution ‘ended’ by a council amalgamation

The NSW Land and Environment Court has held that the Proclamation which merged Dubbo Council with Wellington Council, to become Dubbo Regional Council, ‘ended’ the prosecution proceedings that had been commenced by the Environmental Protection Authority (EPA) but not determined by the Court. The reason the prosecution ended was because the Proclamation did not have the effect of transferring criminal liability to the newly created Council.

Governments often dissolve and reconstitute departments, agencies, entities. Whilst it might seem obvious, the salient lesson in this case is that the terms of the legislative instrument or transitional provisions need to be carefully considered to determine what assets and liabilities are transferred to the new entity. In particular, the word ‘liability’ needs to be carefully considered. The word ‘liability’ is protean and its meaning will depend on the context in which it is used. It does not always include civil liability, criminal liability, contingent liability, potential liability and inchoate liability.

The Facts

In the case of Environment Protection Authority v Wellington Council [2017] NSWLEC 5, the EPA prosecuted Wellington Council for a water pollution offence under the Protection of the Environment Operations Act 1997 (POEO Act). The charge related to the discharge of 3 megalitres of untreated, or partly treated, raw sewage from its sewage treatment plant in May 2014. The sewage discharged into a local creek, then flowed into the Macquarie River.

On 21 August 2015 Wellington Council pleaded guilty to the offence and the matter was adjourned for the parties to prepare a statement of agreed facts in advance of the sentencing hearing.

On 12 May 2016, before the sentencing hearing had occurred, Wellington Council was dissolved and amalgamated to become part of Dubbo Regional Council (the new Council) under the Local Government (Council Amalgamations) Proclamation 2016 (the First Proclamation).

On 22 July 2016 the new Council (as intervenor) applied to have the proceedings against Wellington Council struck out, arguing that the First Proclamation did not transfer criminal liability for the pollution offence to the new Council.

On 9 September 2016 the matter was before the Court for the hearing of this application. On that same day, the Local Government (Bayside) Proclamation 2016 (the Second Proclamation) came into effect. The Second Proclamation amended the First Proclamation by providing that criminal proceedings instituted against a Council prior to amalgamation were continued against the new council.

The proceedings were adjourned to enable the parties the opportunity to consider the effect of the Second Proclamation.

The phrase ‘assets, rights and liability’ did not transfer criminal liability

When the hearing resumed on 29 November 2016, the parties were in agreement that the Second Proclamation did not have the effect of transferring criminal liability to the new Council. This was because s 736(2) of the Local Government Act 1993 limited the retrospective consequences of the Second Proclamation to consequences which the new Council consented to. The new Council did not consent.

The new Council maintained its application to strike out the proceedings, arguing that the clauses dealing with the transfer of ‘assets, rights and liabilities’ in the First Proclamation did not refer to or effect the transfer of criminal liability, but civil liability only. The language of the First Proclamation was clear, and there was no express statutory provision which displaced the plain language in the First Proclamation. The new Council sought its costs.

The position of the EPA was that the new Council should be substituted as the defendant. Wellington Council’s act of pollution, submission to the jurisdiction of the Court and their plea of guilty, created liability in the nature of a ‘provisional conviction’. The EPA argued that the effect of clauses 17, 32 and 33 of the First Proclamation effectively attached that liability to the new Council. Having  ‘provisionally convicted’ Wellington Council, the Court was able to make appropriate orders against the new Council.

The parties agreed that fresh proceedings against the new Council were not possible because the 12 month limitation period in the POEO Act had expired.

The EPA argued:

  • the effect of the act of pollution, submission to the jurisdiction of the Court and early plea of guilty by Wellington Council had resulted in a ‘provisional conviction’ of Wellington Council. Wellington Council had made admissions regarding the factual elements required to prove the offence, an admission of criminal responsibility and acceptance of that criminal responsibility;
  • that liability for the provisional conviction transferred from Wellington Council to the new Council as a result of the combined reading of clauses 17, 32 and 33 of the First Proclamation;
  • orders under Part 8.3 of the POEO Act and costs under the Criminal Procedure Act 1986 (CP Act) are ‘protective, restorative and compensatory’ in nature, not punitive, and do not require a (final) conviction to be made by the Court but rather the Court may make those orders ‘in connection with an offence’;
  • on its face the First Proclamation is ‘readily capable’ of transferring liability to orders that have protective, restorative or compensatory effect;
  • costs orders for prosecuting the polluting conduct are in the nature of a civil debt, transferred under the terms of the First Proclamation.

Justice Moore accepted the argument of the EPA that Wellington Council had been provisionally convicted. However, he did not accept that the new Council was criminally liable for the acts and omissions of Wellington Council. Justice Moore concluded that he could not make orders under Part 8.3 of the POEO Act or costs orders under the CP Act against the new Council in consequence of a provisional conviction. Part 8.3 orders under the POEO Act required the Court to find the offence against the Council, and costs orders under the CP Act required a ‘conviction or order’. The new Council had not committed a criminal offence.

While the Court found that there was no legal basis upon which it could make orders under the POEO Act or CP Act against the new Council, the First Proclamation does expressly transfer civil liability to the new Council. This leaves open the possibility of civil proceedings relating to the pollution incident being brought against the new Council, if brought in time.

Lessons from this case

This case highlights that the word ‘liability’ does not necessarily include all types of liability. This is consistent with other cases where the courts have held that the word ‘liability’ is protean and its meaning will depend on the context in which it is used. Accordingly, whilst in some contexts ‘the ordinary or natural meaning’ is limited to ‘actual’ rather than ‘potential liability’, in other contexts the meaning of ‘liability’ will be wide enough to embrace a ‘contingent’, ‘potential’ or ‘inchoate’ liability. What matters is the context and purpose of the provision.

This blog was prepared by Michael Winram and Caroline Nuttall

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