New South Wales Land and Environment Court extensively considers the "fit and proper person" test for issuing an environment protection licence in Crush and Haul Pty Ltd v Environment Protection Authority [2023] NSWLEC 1367

In brief 

The case of Crush and Haul Pty Ltd v Environment Protection Authority [2023] NSWLEC 1367 involved a class 1 merits review in the New South Wales Land and Environment Court (Court) relating to the deemed refusal of an application for an environment protection licence (EPL) for "crushing, grinding or separating" and "extractive activities" (Activities) at a quarry in Dirty Creek, near Coffs Harbour.

The sole issue of dispute before the Court was whether the applicant, Crush and Haul Pty Ltd (Applicant), was a "fit and proper person" under section 45(f) of the Protection of the Environment Operations Act 1997 (NSW) (POEO Act).

This question is becoming increasingly prominent in EPL applications, and so provides some helpful judicial guidance as to how the "fit and proper person" test is to be applied in an environmental context.

Background

On 20 September 2022, the Applicant lodged an application for an EPL with the Environment Protection Authority (EPA) to carry out the Activities as listed in schedule 1 of the POEO Act. The consequence of the EPA not issuing an EPL was that the Activities could not lawfully be carried out above the relevant threshold identified in schedule 1 of the POEO Act.

On 21 November 2022, the Applicant commenced class 1 proceedings appealing the EPA's deemed refusal of the EPL application pursuant to section 287 of the POEO Act. Generally, under this section, the EPA has 60 days to determine an application for an EPL before it is deemed to be refused. The applicant can then file a class 1 appeal where the Court metaphorically steps into the decision maker's shoes to make or remake the decision.

The only issue in dispute was whether the Applicant was a "fit and proper person" to hold an EPL under section 45(f) of the POEO Act. The term "fit and proper person" is not defined in the POEO Act. However, when determining whether an applicant is a "fit and proper person", the appropriate regulatory authority, being the EPA in the first instance and the Court on appeal, is to take into consideration any or all of the matters identified in section 83 of the POEO Act which is a lengthy, non-exhaustive list of discretionary matters. Such matters include whether the person, or any current or former directors if the person is a corporation, has contravened environment protection legislation, whether the management of the activities will be in the hands of a technically competent person, as well as any financial circumstances of relevance. 

Consideration of meaning and scope of term "fit and proper person"

The Court had regard to the following in determining whether to grant an EPL:

• The circumstances and facts of the case.

• The legislative context of the term "fit and proper person".

• The three characteristics of "fitness" for office, being honesty, knowledge, and ability.

Having regard to the evidence led by the parties and the above considerations, the Court upheld the appeal and issued the EPL to the Applicant for the following reasons identified at [178] of the Court's judgment:

• The Applicant had only one prior conviction under section 48(2) of the POEO Act for carrying out a scheduled activity without an EPL that did not result in environmental harm. Whilst the Court held in the case of Environment Protection Authority v Crush & Haul Pty Ltd; Environment Protection Authority v Cauchi [2022] NSWLEC 113 (Conviction Decision) that the offence was carried out recklessly, it was deemed to be of low to medium objective seriousness.

• The current director of the Applicant had only one prior conviction which was an executive liability offence under section 169A(2) of the POEO Act following the Conviction Decision and was also found to be of low objective seriousness. 

• The current director was found to be honest, genuine and remorseful for the Applicant's 2022 convictions.

• The Court placed significant weight on the current director's evidence that he would have sole control of the Applicant, was aware of his obligations as a director, and wished to abide by the law.

• The Court also acknowledged the "more concerning compliance history" of the former director, but did not assign it material weight and found that there was no evidence that refuted the current director's intentions in controlling the Applicant moving forward.

• No evidence was led by the EPA to suggest that there would not be a technically competent person managing the Applicant and so the Court accepted that the Activities would be managed by a technically competent person.

• Similarly, the EPA did not contend that the Applicant lacked the financial capacity to comply with its obligations imposed under the EPL and so the Court accepted that the Applicant had the financial capacity to comply.

• The Applicant's outstanding costs of 2016 were given little weight as they were not pursued by the EPA. The outstanding costs from the previous matters were only six months old, and the current director gave undisputed evidence that the costs would be paid.

In addition to the above, the Court also found as follows:

• The two penalty notices issued to the Applicant in 2016 did not establish a pattern of non-compliance with environmental legislation and were given little weight.

• It was accepted that the other entities (Wyanga Holdings Pty Ltd, Rixa Quarries (No 2) Pty Ltd, and J&L Cauchi Civil Contracting Pty Ltd) with contentious histories were not "related bodies corporate" for the purpose of the definition of the POEO Act and section 50 of the Corporations Act 2001 (Cth). However, given section 83(2) of the POEO Act is not an exhaustive list of matters to be considered when determining whether someone is a "fit and proper person", the Court considered the compliance history of the other entities that had the same former director of the Applicant. Ultimately, the compliance history was not given material weight.

Conclusion

This is the first case to extensively consider the application of the "fit and proper person" test in the granting of an EPL. Previously, other cases have not rigorously applied the non-exhaustive list of considerations in section 83 of the POEO Act.

This case highlights the wide discretionary powers that are available to the EPA and the Court when considering whether an applicant is a "fit and proper person". The discretion was held by the Court to be constrained by reasonableness and must be based on "evident and intelligible justification". The general conclusion that can be drawn is that just because an applicant has contravened environmental legislation in the past, even "recklessly", it does not automatically rule an applicant out from being a "fit and proper person". However, each case will depend on its facts.

Whilst the discretion did not go beyond the list of matters for consideration in section 83 of the POEO Act, applicants should be aware that the EPA and the Court can consider other matters of relevance as the list is not exhaustive.

Whilst this case related to the application of the "fit and proper person" test under the POEO Act, a similar test is also applied by decision makers under the Home Building Act 1989 (NSW), the Mining Act 1992 (NSW), and the Petroleum Act (Onshore) 1991 (NSW) to applicants for or holders of authorisations, licences or certificates under those Acts. Decision makers have the power to refuse to issue an authorisation or to suspend or cancel an authorisation if the decision maker is of the opinion that the applicant or authorisation holder is not a fit and proper person. The findings of the Court in this case may have some influence on how the test is applied under other similar legislation.