Australia – Guide To Contaminated Land.

5 November, 2015

 

Legislative framework

 

1 Do you have any statutes specifically relating to land contamination?

 

There is no Commonwealth law that deals directly with contaminated sites, although there are a number of policy documents and guidelines that have influenced state laws.

 

Each state and territory in Australia regulates contaminated land. New South Wales (NSW) and Western Australia are the only states that have legislation specifically relating to contaminated land, while the rest of Australia’s states and territories regulate the issue with more general environmental protection and management Acts and subordinate legislation. The following table sets out the relevant Australian legislation. 

 

 

The state regimes all differ, but where a general principle can be extracted, this is noted in the answers below. Where state-specific examples are given to the questions below, the examples are drawn from states where foreign corporations are more likely to operate, namely: New South Wales, Victoria, Western Australia and Queensland.

 

2 Is there a definition of contaminated land in your laws?

 

The definition varies slightly in each jurisdiction. Generally, each jurisdiction in Australia uses a definition of contamination similar to “a condition of land or water where any chemical substance or waste has been added as a direct or indirect result of human activity at above background level and represents, or potentially represents, an adverse health or environmental impact.” (See National Environment Protection [Assessment of Site Contamination] Measure 1999, s 3.) 

 

Statutory responsibility for clean-up

 

3 Are there any cleanup or remediation laws with regard to contaminated land?

 

Yes, all states have laws with respect to cleanup and remediation of contaminated land. These laws are listed in the table set out above.

 

4 If so:

 

4.1  Who is primarily responsible for the cleanup?

4.2  If it is the polluter, what happens if the polluter cannot be found? Is the liability passed on to the owner or the occupier?

 

The answers to questions 4.1 and 4.2 are set out in the table that follows. 

 

 

 

 

4.3 If the polluters are both the owner and the occupier (e.g., the landlord and a tenant), how is the liability apportioned between them?

There is no statutory provision in any of the jurisdictions that apportions liability between the appropriate persons. Rather, each jurisdiction’s environmental authority is given discretion to apportion responsibility based on the facts, as is appropriate. 

 

4.4 Does the liability to clean up include historical contamination? If not, who pays for this cleanup?

Liability for a cleanup can extend to historical contamination. In NSW, in determining the appropriate person to serve with a management order, the EPA is, “as far as practicable,” to specify a person who is responsible for the contamination over the owner of the land or the notional owner of the land (such as a mortgagee in possession).

 

A similar principle applies in Western Australia, where the legislation establishes a hierarchy for determining responsibility for remediation, and allows for the transfer of that responsibility. In addition, in Western Australia, if an owner or occupier has changed or proposes to change how it will use all or part of the land, then the owner or occupier will be liable for remediation of the land to the extent that the remediation is required because of the change, or proposed change, of use. To the extent that remediation is required because of the change of use, the people who caused or contributed to the contamination, as well as the state, are released from any liability they may otherwise have had.

 

In Victoria, there is a greater risk to owners and occupiers of land. The Victorian Environment Protection Authority may serve a notice directing the recipient to clean up the contaminated area and the person so directed need not necessarily be the person who caused the contamination. There is no hierarchy of responsibility and the notice may be served on the occupier. The definition of occupier includes a controller of premises, which may be an owner or a lessee, and in certain circumstances, can include a financial institution that is a mortgagee in possession.

 

Cleanup standards

 

5 How is it decided whether cleanup is required? For example, are there regulations specifying limits to polluting substances that are permitted, or is some form of risk assessment carried out?

 

The relevant authority directs the cleanup process in accordance with regulations in each state. In general, the threshold test is whether contamination presents a significant risk of harm to human health and/or the environment.

 

In NSW, the EPA is able to require remediation of a site (among other powers) if it has reason to believe the site is contaminated and that the contamination is significant enough to warrant regulation. It must take into account various factors before making its decision, including whether the contaminating substances have or are likely to cause harm, the use of the site and surrounding sites, and whether the substances have migrated or are likely to migrate from the site.

 

In NSW, if the environment minister considers that it is not practicable to remediate the contamination within a reasonable time, the minister can enter into an offset arrangement with a person who is responsible for the contamination of land. An offset arrangement could, for example, require the person to carry out environmental projects or provide facilities or services to a local community.

 

In Victoria, the EPA may specify the method to be used for cleanup of contaminated land. Cleanup notices and environmental audits typically include risk assessment. The Victorian government is currently devising a contaminated environments framework to ensure that the effort spent in investigating and managing contaminated environments is commensurate with the risk they present and that those involved understand those risks.

 

6 What level of cleanup is required?

 

A cleanup is required to a suitable-for-use level, and therefore, there is a different level for industrial land to that required for land used for residential purposes. In most states, the public authority has issued guidelines to assist with determining levels of cleanup. 

 

7 Are there different provisions relating to the cleanup of water?

 

In general terms, the same principles as discussed above pertain to the cleanup of land and water.

Penalties, enforcement and third-party claims

 

8 Is it a criminal offense to contaminate land or to own contaminated land? If so, what are the penalties?

 

Most state environmental laws contain provisions enabling criminal prosecution to be brought by the administering authority for any contravention of legislation that results in serious environmental harm.

In Victoria, contamination of land is an indictable offense, the maximum penalty for which is presently AUD36,008, with a daily penalty of AUD182,004 for a continuing offense.

 

It is not in itself a criminal offense to own contaminated land, but a criminal offense may arise from the effects of contamination.

 

Owners generally have the obligation to inform the relevant state authority if they are aware of any site contamination. In NSW, this obligation to inform concerned authorities is extended to circumstances where the owner ought reasonably to have been aware of the contamination. There are significant penalties, amounting up to AUD1 million, for failing to report contamination.

 

In Western Australia, land owners or occupiers of contaminated sites, people who caused or contributed to the contamination of a site, and auditors engaged to provide a report with respect to a site, must report known or suspected contaminated sites. If these people fail to report sites that they know or suspect to be contaminated, they may be fined up to AUD250,000 and a daily penalty of AUD50,000 for a continuing offense.

 

9 Is it a criminal offense not to comply with the requirement to clean up? If so, what are the penalties?

 

Generally, failure to comply with a cleanup order is a criminal offense.

 

In NSW, it is an offense to fail to comply with an order to remediate land that has been declared a “significantly contaminated land.” The maximum penalty for failing to comply with such an order is presently AUD1 million for a corporation or AUD250,000 for an individual.

In Western Australia, if a company fails to comply with what a notice requires, it can be prosecuted for a criminal offense carrying a maximum penalty of up to AUD500,000, with daily penalties of up to AUD100,000.

 

In all states, in certain circumstances, directors and managers of corporations can be held personally liable for offenses committed by the corporation. This may include an offense of failing to comply with a cleanup order.

 

10 What authority enforces cleanup?

 

The particular state government’s EPA issues and enforces cleanup notices. Local councils may also deal with less serious contamination (such as contamination that has been determined not to present a significant risk of harm), generally when landowners need approval to undertake a new development project.

 

In some states, if a person fails to comply with a cleanup order, the EPA or another public authority can step in, carry out the works required themselves, and recover the costs from the person responsible. 

 

11 Are there any defenses?

 

In NSW, there may be a defense to some of the most serious pollution offenses if the person establishes:

 

• that the commission of the offense was due to causes over which the person had no control; and
• that the person took reasonable steps to prevent the contamination.

 

In Queensland, there are defenses for failing to comply with cleanup notices, including where the contamination was caused by a natural disaster, by a terrorist act or deliberate sabotage.

 

It is a defense to an offense of releasing a prescribed contaminant in Victoria, if the release occurred under an authorized person’s emergency direction.

 

In relation to the liability of directors and managers of corporations, in most states, in order to successfully defend a prosecution, the director or manager would need to prove either that they were not in a position to influence the conduct of the corporation or that they used all due diligence to prevent the commission of the offense by the corporation.

 

12 Can third parties / private parties enforce cleanup?

 

Generally, the regulatory authority enforces a statutory cleanup notice. However, in some states, for example, NSW, members of the public can bring proceedings to challenge or to enforce a decision made by the EPA under the legislation, such as a decision relating to a cleanup notice.

 

13 Can third parties claim damages?

 

Common law claims of negligence, nuisance and trespass have historically been made for breaches of general environmental duties, and have been used to claim damages. For example, if contamination was to migrate off a site onto adjoining land and:

 

• the contamination caused damage to the adjoining landowner’s property or business (by a diminution in the value of the land or actual harm to persons or property); and
• the owner was shown to owe the adjoining landowner a duty of care; and
• the owner was shown to have breached that duty, for example, by failing to appropriately
• monitor the contamination or take steps to prevent its migration off the land,
• then the adjoining landowner may be able to bring an action against the owner for damages and hold the owner liable for remediating the adjoining land.

 

These types of actions could potentially be maintained against a prior owner in relation to land it has previously disposed of, although a claimant may have more difficulty proving negligence in those circumstances.

 

These cases are typically based on the facts at hand in those circumstances, and they are complicated actions that are very expensive to defend. With the development of specialized contaminated land laws around Australia, common-law actions are being used less often in the resolution of contaminated land issues. 

 

Acquisition of contaminated land

 

14 Is it a legal requirement in your jurisdiction to conduct investigations for potential contamination in connection with the sale of property?

 

It is not a legal requirement, but it is prudent practice.

 

In Western Australia, any transaction that will involve the sale, lease or mortgage of a site that has been classified as contaminated or possibly contaminated under the relevant legislation must include formal disclosure of the contamination at least 14 days before completion.

 

In Queensland, it was recently held that a vendor is required to give written notice to any buyer or lessee of land that has been recorded on the Contaminated Land Register.

 

15 Can a party responsible for cleanup under statutory law pass on its cleanup liability to the purchaser?

 

15.1 Under the general law?

 

Ordinarily, liability is determined under the statute in each state and it is generally based on the “polluter pays” principle, so the owner or occupier of land who causes contamination is liable for the cleanup. There are exceptions to this principle. For example, if the polluter cannot be located or legal requirements have changed since the pollution occurred, a subsequent owner or occupier may be issued a cleanup order.

 

15.2 Contractually?

 

It is possible to provide contractually that the buyer accepts and undertakes cleanup requirements in some states. In Western Australia, responsibility for cleanup can be transferred with a written agreement and with the approval of the Department of Environment and Conservation.

 

Similarly, in South Australia and Tasmania, responsibility can be transferred to a purchaser if appropriate notices have been provided to the respective environment protection authorities.

Conversely, in NSW for example, a contract cannot operate to transfer liability for contamination under the Contaminated Land Management Act 1997.

 

In our experience, a purchaser will only take on contractual responsibility for contamination for which it is not responsible if it has confirmed the level of contamination (if any) and has been compensated appropriately for taking on that liability (whether by direct payment or by adjustment of the purchase price).

 

It is usual for landlords to take responsibility for existing contamination (as between the parties – a contract is not enforceable against persons who are not party to it) and for tenants to take responsibility for contamination they cause or to which they contribute (but only to the extent that they contribute). It is also common practice that each party agrees to indemnify the other for contamination for which they have agreed to be contractually responsible.

 

16 Is there anything else about contaminated land that you would bring to the attention of a potential purchaser of that land?

 

Contamination registers

 

Several states in Australia, including NSW, Western Australia, Victoria, Queensland and Tasmania, have a contamination register where the public can search for sites with known contamination. In general, these registers are not exhaustive. If a site is not listed in a register, this cannot be relied upon as conclusive evidence that the site is not contaminated, and conversely (as noted above), nor will listing a site in the register automatically satisfy disclosure obligations.

 

Importance of due diligence investigations

 

The “polluter pays” principle is the over-arching standard running through all contaminated land management legislation in Australia.

 

However, liability may flow to an owner or occupier who was not responsible for causing the contamination and, in some jurisdictions, this may result in charges being registered on the title and/or, in certain circumstances, obligations being imposed upon other entities that have a degree of control over the land, such as a financial institution that is a mortgagee in possession.

 

We stress the importance of conducting due diligence investigations when purchasing land or acquiring an entity that holds property assets. Where contamination is suspected, environmental audits can be carried out and can be a useful measure for the purposes of determining and allocating liability. 

 

For further information, please contact:

 

Jennifer Hughes, Partner, Baker & McKenzie

jennifer.hughes@bakermckenzie.com