Raising the bar: EPA v Grafil and a much tougher burden of proof for waste offences

A recent decision in the NSW Land and Environment Court decisively lifts the standard of proof for waste dumping offences, with  Justice Pain finding that the EPA needed to prove beyond reasonable doubt that the site in question was being used as a waste facility without lawful authority. This marks a clear departure from the 2015 Foxman case, where proof was only required to be on the balance of probabilities, and will most likely mean more work for the EPA in future prosecutions for waste offences (Environment Protection Authority v Grafil Pty Ltd; EPA v Mackenzie [2018] NSWLEC 99).

Investigation of Grafil Pty Ltd

Grafil Pty Ltd, trading as Macka's Sand and Soil Supplies, was investigated by the Environment Protection Authority (EPA) as part of a large investigation known as "Operation Trojan". An EPA officer had raised concerns about stockpiles of woodchips, chicken manure, bricks and demolition waste at a site occupied by Grafil in Salt Ash, near Port Stephens.

The EPA formed the view that Grafil was using the site as a waste facility without authority. This is a contravention of section 144(1) of the Protection of the Environment Operations Act 1997 (POEO Act). Grafil claimed that it was using the site as resource recovery, not for waste dumping. Under the legal regime for waste processing, there are specific exemptions for resource recovery activities.

The EPA needed to prove that:

1. Grafil used the site as a waste facility; and
2. that this use was without lawful authority.

In order to establish (a), the EPA needed to show that the material placed on the site was waste and the site was used as a facility for storage and disposal in respect of that waste.

A further issue was that testing of the stockpiles revealed that they contained asbestos, and exceeded the chemical maximums permitted by the resource recovery exemptions.

Was the material “waste”?

Grafil did not dispute that it had stockpiles of material, as recorded by the EPA in its investigations. However, it claimed that the material was not waste.

Waste is comprehensively defined in the POEO Act. The relevant part of the definition for these circumstances was part (d), which provides that waste includes "any processed, recycled, re-used or recovered substance produced wholly or partly from waste that is applied to land, or used as fuel, but only in the circumstances prescribed by the regulations".

Grafil argued that the material was not “waste” as defined under the POEO Act because under paragraph (d), recovered material only becomes waste when it is "applied to land" or "used as fuel". The court accepted this. The material in this case was intended to be used for a road, but due to the intervention of the EPA, this did not occur. Therefore, it was not “waste”. The temporary stockpiling of the material did not constitute being “applied to land”.

Importantly, Justice Pain referred to the “almost identical” factual circumstances of Environment Protection Authority v Foxman Environmental Development Services [2015] NSWLEC 105, where similar material was found to be “waste” because the material was surplus and unwanted by the processor. She considered that the approach in Foxman was incorrect, and noted that Mr Foxman’s lack of legal representation in that case may have prevented proper consideration of the complex statutory scheme.

Was the site used as a “waste facility”?

The EPA needed to establish beyond reasonable doubt that the land was being used as a waste facility in the charge period. As the material in the stockpiles was not waste, use of land as a waste facility did not arise. Therefore, the section 144(1) offence was not made out.

Use without lawful authority

Since it had been determined that the land was not used as a waste facility, the s 144(1) offence could not succeed. However, for completeness, Justice Pain went on to consider the remaining element of the offence: whether the use was “without lawful authority”. Section 144(2) of the POEO Act is relevant here. It states that the defendant bears the onus of proving that the place to which the waste was transported can lawfully be used as a waste facility.

As noted above, Grafil was relying on certain resource recovery exemptions as a source of lawful authority. Prior to this decision, Justice Sheahan in Foxman had made it clear that section 144(2) meant the defendant (in this case, Grafil) had  to prove, on the balance of probabilities, that the lawful authority element was satisfied. The EPA relied on this interpretation.

Grafil argued instead that the EPA had to prove beyond reasonable doubt that the exemptions did not apply. The words in section 144(2) only required the defendant to prove the existence of an authority that could apply, such as an EPL or a development consent. This approach, Grafil argued, maintained the presumption of innocence instead of placing the burden of proof on the defendant.

Justice Pain accepted Grafil’s argument, stating unequivocally that the conclusion in Foxman on this point “is wrong and should not be followed”.

Therefore, the proper interpretation of section 144(2) was held to be as follows:

• the EPA proves that a particular lawful authority is required;
• the defendant must then prove on the balance of probabilities that the particular authority is in existence and in force;
• the EPA must then prove beyond reasonable doubt that any relevant exemptions do not apply.

The EPA was unable to prove these elements to the required degree. Therefore, Grafil could rely on the lawful authority of the resource recovery exemption.

Asbestos in the stockpiles

Under the resource recovery exemptions, there are “generators” or “processors” of waste, which generate material for supply to “customers”. It was determined that Grafil was a "customer" under the exemptions. All processors have conditions in their EPLs that prohibit them from receiving asbestos, and processors must certify to customers that the processed material meets the exemption testing requirements. This was important for Grafil’s liability, because it meant that Grafil, as a customer, was not responsible for the asbestos in the stockpiles.

What does this mean for future EPA investigations and prosecutions?

Justice Pain noted that parties’ arguments reflected “entirely different constructions of the system of waste regulation in NSW”. For example, the EPA made no reference in its principal case to the resource recovery exemptions, because it considered that Grafil bore the onus of proving that those exemptions applied. Generally, the EPA had based its case on a much lower burden of proof than was ultimately required.

This decision will likely require the EPA to overhaul the way it investigates and prosecutes waste-related offences. The EPA will have to more rigorously prove the elements of waste offences in order to succeed. It should be noted, however, that the EPA may seek to appeal the decision.