Environment Protection Authority v Shell Co of Australia Ltd - [2000] NSWLEC 132

Land and Environment Court

of New South Wales

CITATION: Environment Protection Authority v Shell Co of Australia Ltd [2000] NSWLEC 132

PARTIES:
PROSECUTOR:
Environment Protection Authority
DEFENDANT:
Shell Company of Australia Ltd (The)

FILE NUMBER(S): 50071 of 1997

CORAM: Bignold J

KEY ISSUES: Environmental Offences :- Negligently cause substance to leak in a manner likely to harm the Environment. Hydrocarbon contamination of Service Station site. Circumstantial evidence case—whether there is a reasonable doubt that Defendant did not commit offence.

LEGISLATION CITED: Environmental Offences and Penalties Act 1989 s 6(1)

CASES CITED: Burnie Port Authority v Gerard Jones Pty Ltd (1994) 179 CLR 520;
Empress Car Co (Abertillery) Ltd v National Rivers Authority (1998) 1 AllER 471;
Environment Protection Authority v Multiplex Constructions Pty Ltd (2000) NSWLEC 6;
Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336;
Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336 at 343;
Jones v Dunkel (1959) 101 CLR 298;
Kondis v State Transport Authority (1984) 154 CLR 672;
New South Wales Sugar Milling Co-Operative Ltd v Environment Protection Authority (1992) 75LGRA 320;
Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313· Shepherd v The Queen (1990) 170 CLR 573 at 578

DATES OF HEARING: 18/11/99-30/11/99, 1/12/99-17/12/99, 31/01/00, 02/02/00-04/02/00

DATE OF JUDGMENT:
06/30/2000

LEGAL REPRESENTATIVES:

PROSECUTOR:
Mr D Buchanan SC with Mr D Jordan, Barrister
SOLICITORS
Solicitor for the EPA
DEFENDANT:
Mr G Miller QC with Mr I Hemmings, Barrister
SOLICITORS
Coudert Bros

JUDGMENT:

IN THE LAND AND Matter No . 50071 of 1997
ENVIRONMENT COURT OF Coram : Bignold J.
NEW SOUTH WALES 30 June 2000

ENVIRONMENT PROTECTION AUTHORITY

Prosecutor

THE SHELL COMPANY OF AUSTRALIA LIMITED

Defendant

JUDGMENT

Bignold J:

A. INTRODUCTION

1. This is a defended charge of an offence against the Environmental Offences and Penalties Act 1989 s 6(1) (the EOP Act).

2. By the Prosecutor’s amended summons filed pursuant to order of the Court on 16 August 1999, the Defendant is charged with the aforesaid offence in that “between 1 January 1991 and 15 July 1994, at Cooma in the State of New South Wales it committed an offence….in that it did, without lawful authority, negligently cause a substance to leak in a manner which was likely to harm the environment….”

3. Particulars endorsed on the amended summons noted that the relevant “substance” was

hydrocarbons from the underground storage tanks and pipes at the Shell Service Station situate at 48-52 Sharp Street, Cooma and known as Snowy Mountains Autoport

4. Section 6(1) of the EOP Act relevantly provides as follows :

(1)

If a person, without lawful authority, wilfully or negligently causes any substance to leak, spill or otherwise escape (whether or not from a container) in a manner which harms or is likely to harm the environment:

(a)

the person, and

(b) if the person is not the owner of the substance, the owner,

are each guilty of an offence.

(The expressions “ harm ” and “ environment ” are each defined in comprehensive terms by s 4(1) of the EOP Act ).

5. It is to be noted that the Defendant is charged qua “the person” (subsection (1)(a)) who negligently caused the substance to leak rather than qua “the owner” of the substance (subsection 1(b)). The liability of the latter appears to be based upon “status” whereas the liability with which the Defendant is charged is based upon the commission of the proscribed act. It is common ground that the offence charged is not a strict liability offence, inasmuch as “negligence” (as an alternative to “wilfulness”) by the accused must be proved an essential ingredient of the offence. In respect of the element of “negligence”, it is accepted that the decision of the Court of Criminal Appeal in New South Wales Sugar Milling Co-Operative Ltd v Environment Protection Authority (1992) 75LGRA 320 establishes that the essential ingredient of “negligence” is to be determined upon an objective basis. At 321, the Chief Judge at Common Law said:

In considering whether a defendant has acted negligently, the issue is decided upon an objective basis. What must be considered is whether the risk of such harm was foreseeable to the reasonable person in the position of the defendant, not whether the defendant subjectively foresaw the risk himself:

(1980) 146 CLR 40 at 44, 47-48; 60 LGRA 106 at 107, 109-110. That, of course, was a civil case, but the criminal law has also adopted an objective test:

[1977] VR 430 at 445 and

[1983] 1 NSWLR 658 at 675.

6. According to the further particulars supplied by the Prosecutor ( Exhibit C )—

(i.) the hydrocarbons that relevantly leaked were “ benzene , toluene, ethyl benzene xylene and total petroleum hydrocarbons ”;

(ii.) the aforesaid hydrocarbons leaked from (a) any or all of three underground storage tanks (UST’s) situate at SMAP and which when exhumed, displayed corrosion perforations and (b) appurtenant pipework, and in particular a 100 mm diameter fill pipe connected from the remote fill point to a 15,000 litre UST situate in the north eastern sector of the underground tank pit or farm situate near the street frontage of SMAP;

(iii.) the amount or quantity of leaked hydrocarbons was unknown; and

(iv.) the leaked hydrocarbons commenced leaking from the mid 1970s.

7. Notwithstanding particular (iv), it is to be noted that the charge is limited to the period 1 January 1991 to 15 July 1994 (the charge period). The commencing date of that period was deliberately chosen by the Prosecution as coinciding with the commencement of s 6(1) of the EOP Act in the form that has been recited. (There had been an earlier version of the section in the Act as originally enacted in 1989, but it had been repealed and replaced by the section in the terms recited.)

8. The terminating date of the charge period coincides with the closure of SMAP in circumstances presently to be related.

9. There are two important consequences of the charge alleging an offence over the charge period involving some 3 1/2 years while particularising that the relevant leaking of hydrocarbons commenced many years before the charge period—one legal and the other evidentiary.

10. Firstly, as to the legal consequence, at the commencement of the trial, the Defendant sought to have the charge struck out on the ground that s 6(1) did not create a “continuing offence”, or alternatively, that the charge was legally flawed for duplicity.

11. In my judgment ((1999) NSWLEC 286) delivered on 4 November 1999, I held (i) that the section was capable of providing for a continuing offence; and (ii) that the charge did not involve duplicity because it charged a continuing offence or it charged multiple acts involving the same criminal enterprise or activity.

12. A separate and very obvious legal consequence of the particulars alleging the commencement of the leaking many years before the charge period is that activity cannot attract any legal liability under the EOP Act s 6

13. The other consequence of the particulars (being the evidentiary consequence) is that any proof of hydrocarbon substance leaking from the UST, at SMAP before the charge period, does not per se prove the offence charged. Moreover, the fact (if it be established as the fact) of prior leaking of hydrocarbons is a potentially complicating fact in the unravelling of the evidence in order to determine whether the Prosecution has established beyond reasonable doubt a leaking of hydrocarbons from the USTs and pipework in the charge period. This potential complication is compounded by virtue of the fact that the Prosecution does not rely upon the fact (established by the evidence) that diesel leaked from the Above Ground Diesel Storage Tank at SMAP, being a separate installation to the USTs situate at the street frontage of the site, by virtue of the bund surrounding that tank not having an impervious floor area.

14. When the original summons alleging the offence was filed in Court on 10 July 1997, the EOP Act (containing s 6(1) as I have recited it) was in force. However, that Act was repealed on 1 July 1999 upon the commencement of the Protection of the Environment Operations Act 1997: vide s 324. Section 326 of the latter Act enacts in Schedule 5 savings and transitional provisions which have been supplemented by the Protection of the Environment Operations (Savings and Transitional) Regulations 1998: in particular see cl 17.

15. However, criminal liability created by s 6(1) of the EOP Act is preserved by the Interpretation Act 1987 s 30(1) which relevantly provides as follows:

(1) The amendment or repeal of an Act or statutory rule does not:

…………

2 affect any right, privilege, obligation or liability acquired, accrued or incurred under the Act or statutory rule, or

(a) affect any penalty incurred in respect of any offence arising under the Act or statutory rule, or

1 affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability or penalty,

and any such penalty may be imposed and enforced, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, as if the Act or statutory rule had not been amended or repealed.

16. As will presently be shown, the Prosecution case is fundamentally based upon circumstantial evidence , there being no direct observation evidence of the leaking of hydrocarbons from the UST’s and appurtenant pipework at SMAP during the charge period. However, additionally, the Prosecution has relied upon admissions said to have been made on behalf of the Defendant, either by its employees or by experts who had been engaged by the Shell (as I will generally hereafter refer to the Defendant at all relevant times prior to the present charge being laid against it) to investigate the contamination of the site of SMAP and the two neighbouring properties (situate immediately west of the SMAP site) and to remediate the contaminated sites.

17. The defence as conducted on behalf of the Defendant has put in issue three aspects of the charge, namely—

(i.) whether the Defendant was relevantly “ the person ” who negligently caused the substances to leak (because separate legal entities were involved in the operation of SMAP during the charge period);

(ii.) whether the Prosecution has established beyond reasonable doubt that hydrocarbons leaked from corrosion caused perforations in the UST’s and appurtenant pipework at SMAP (inasmuch as it claimed that the Prosecution has not negatived or excluded beyond reasonable doubt several reasonable alternative hypotheses raised at the trial which are said to be consistent with the Defendant’s innocence); and

(iii.) whether the Prosecution has established beyond reasonable doubt that the Defendant was relevantly “negligent” in failing to prevent the alleged leaking of hydrocarbons from the UST and appurtenant pipework at SMAP by virtue of corrosion perforations occurring in the underground installations.

18. Each of these matters that are put in issue, of course, constitutes an essential ingredient of the offence charged. Another essential element of the offence, namely absence of “ lawful authority ” is not put in issue, the Defendant so conceding in the course of its final address: see Transcript of 2 February 2000 at p 1035 . The remaining essential element of the offence, namely “ harm or likely harm to the environment ” was not, as I understood the defence, independently contested by the Defendant, if the Prosecution had relevantly established the three disputed matters.

19. Accordingly, I propose to consider the matters in issue in the following fashion. Firstly, I shall consider whether the Defendant is relevantly the person properly charged with the offence, meaning by that whether it has been proved to be “the person” referred to in s 6(1) of the EOP Act who “commits” the proscribed act.

20. This question can properly be considered on the assumption that the proscribed act has been committed, the crucial question then being— Is the Defendant relevantly “the person who did the proscribed act?”

21. If that question is determined in favour of the Defendant, the charge obviously must fail at that very threshold point and there will be no need or occasion to proceed to determine the other matters in issue.

22. However, if the question is determined in favour of the Prosecution, it will be necessary to consider the next question, namely whether the hydrocarbons leaked into the environment from corrosion perforations in the USTs and appurtenant fill line at SMAP during the charge period. If this question is determined in favour of the Defendant, the charge obviously must fail at that point and there will be no need or occasion to consider the third matter in dispute, namely whether the leak of the substance from the USTs etc at SMAP was caused by the Defendant’s negligence.

23. However, if the question is answered in favour of the Prosecution, then it will be necessary to consider the question of the alleged negligence of the Defendant, by virtue of failing to take precautionary action to avoid the USTs etc developing corrosion perforations.

24. As I have stated, a conviction of the Defendant in respect of the charge will be justified only if the Prosecution establishes each of the disputed ingredients of the offence, to the criminal standard of proof ie proof beyond reasonable doubt.

B. AN OVERVIEW OF THE PROSECUTION EVIDENCE

25. Although it will be necessary to examine in closer detail the evidence relevant to each of the three matters in dispute, it will be helpful at this stage if I provide an overview of the Prosecution evidence, noting that the Defendant did not call any witnesses and confined its evidence to some limited documentary material. However, as I have noted, the Defendant raised in the Prosecution case, a number of matters which it ultimately said founded alternative hypotheses based upon the circumstantial evidence, consistent with the Defendant’s innocence, which hypotheses the Defendant claimed, had not been excluded by the Prosecution beyond reasonable doubt.

26. In addition to the very extensive documentary evidence (which includes the admissions made on behalf of the Defendant), the Prosecution called 29 witnesses whose evidence can be broadly classified as follows:

(i.) The EPA investigating officer (Mr Bell) who investigated the pollution incident as originally reported to the EPA by Shell in July 1994. He conducted interviews (or unsuccessfully sought interviews) with many persons involved with the pollution incident and many persons historically involved with the conduct of the service station at SMAP. He was principally responsible for the service on Shell of a number of statutory notices issued pursuant to the Environmentally Hazardous Chemicals Act 1985, the Clean Waters Act 1970 , and the Pollution Control Act 1970 in connection with the remediation of the contaminated site and the EPA’s investigation of the incident . Although originally principally concerned with the remediation of the contaminated site, he soon became vitally involved in the investigation of the incident, recognising as early as October 1994, the possibility that Shell had committed an environmental offence.

(ii.) Persons who discovered in June 1994 the presence of contamination (thought to be apparently by diesel) of groundwater and possibly subsurface soil of the premises (the Cooma Ski Hire Shop) immediately adjoining the SMAP on its western boundary (Messrs Thorn, Burgess, Williams, Wren).

(iii.) The person who operated the excavator in the exhumation of the USTs and in the removal of contaminated soil from SMAP (Mr Schouten).

(iv.) Persons who had successively operated SMAP as lessees or agents/managers for Shell for the continuous period from 1978 until the SMAP was closed in July 1994 (Messrs Mandlik, Corbett, Askell, Gibbons, Dann (Wise) and Ms Lester) or who had worked as an employee of some of those operators (Mr Chilcott).

(v.) Persons who in mobile tankers had delivered bulk fuel product to SMAP at various times during the period 1955 to 1993 (Messrs Pendergast, Gerathy and Rutter).

(vi.) The person whose business received for scrap metal purposes the USTs that were exhumed from the SMAP in August 1994, three of which tanks being alleged to have leaked hydrocarbons during the charge period (Mr Knight).

(vii.) Corrosion experts (Dr Wallwork, Dr Potter, Dr Roper and Mr Martin).

(viii.) A groundwater expert (Mr Jacobson).

(ix.) A dangerous goods consultant (Mr Grainger).

(x.) Tank testing consultants (Messrs Gurton and Raymond).

(xi.) Environmental scientists (Dr Markey and Dr Muir).

(xii.) An employee of Shell who had since 1994 been involved in devising for Shell a tank leak detection programme based upon Statistical Inventory Analysis (Mr Vial).

27. An overview of the totality of the Prosecution evidence (documentary and testimonial) indicates the following relevant facts.

28. In 1954 Shell purchased the site of SMAP. In 1955 Shell developed the Sharp Street sector, involving an area of some 1,200 m², being a little less than 50 per cent of the total area of the site, as a service station, providing a workshop, sales office, a hoist and lubrication bay, canopied fuel bowser area and underground fuel storage facilities involving four buried tanks located underneath a concrete forecourt near the fuel bowsers located near the street frontage of the site. The four underground tanks, having respective storage capacities (expressed in metric measurement) of 2,000 litres, 5,000 litres and two x 15,000 litres, were filled by virtue of a system of remote fill points located near the western boundary of the site which were connected to the various tanks by underground fill lines. Suction lines from the various tanks to the fuel bowsers enabled fuel products to be dispensed to customers at the bowsers.

29. The underground fuel storage tanks were constructed of mild steel with (at least in the case of the two larger tanks) a protective paint coating. The appurtenant pipework comprised galvanised iron. The four tanks stored leaded petrol, Super petrol, diesel and kerosene respectively. In the early 1980’s, diesel ceased to be stored in one of the underground tanks and was stored in an above ground tank located at the rear of the garage building. In 1986, a large 42,000 litre underground storage tank was installed along the western boundary to store unleaded petrol. This tank is physically separate from the tank pit near the street frontage containing the original storage tanks. Unlike the original tanks, this tank was installed with cathodic protection to protect the tank from the effects of corrosion.

30. SMAP was operated as a conventional service station continuously from the time the site was developed in 1955 until Shell closed it in June (or July) 1994.

31. The actual operation of SMAP was conducted by a succession of lessees or managers/agents of Shell. At least for 20 years prior to the commencement of the charge period, the successive operators (Messrs Baron, Mandlik and Corbett) were lessees of Shell.

32. In terms of the relevant leases, the lessee was bound to notify Shell of “any damage to, defect in, deterioration of or loss or theft of, the demised premises” but was not responsible, in the absence of negligence, for “damage arising form inherent fault, fair wear and tear….” and Shell “may at its own cost repair or replace any part of the premises where such damage has occurred”.

33. During the charge period, SMAP was successively operated by the following persons, in the respectively stated capacities and for the respectively stated periods—

(i.) Mr Askell , an employee of Beasam Pty Ltd trading as Southern Petroleum (an agent of Shell) managed SMAP in addition to managing, on behalf of Beasam, the Shell Cooma Depot, also located in Cooma but in separate premises from SMAP, from January 1991 to July 1991 ;

(ii.) Mr Gibbons, an employee of Beasam Pty Ltd (an agent of Shell) managed SMAP in addition to managing the Shell Cooma Depot from July 1991 to October 1991;

(iii.) Mr Dann (Wise) as lessee of Shell or sub-lessee of Beasam Pty Ltd, from November 1991 to February 1993; and

(iv.) Ms Lester, an employee of Beasam Pty Ltd (an agent of Shell) managed SMAP in addition to managing the Shell Cooma Depot from February 1993 to June 1994.

34. In June 1994, the owner of the adjoining Cooma Ski-Hire premises, Mr Thorn hired a local builder, Mr Burgess, to build an awning structure at the street frontage of the Ski-Hire premises. When Mr Burgess was drilling four holes for the awning support structures to a depth of some 1.5 m, they began to fill up with a black fluid which smelt like diesel fuel. Mr Thorn contacted the Cooma Council which came and removed, by a suction machine, the contents from the drilled holes and disposed of them.

35. Mr Thorn took a sample of the fluid to Ms Lester and asked her to have it tested. Shell’s Engineer, Mr Knight wrote to Mr Burgess and advised him that the awning structures could be safely placed in the drilled holes.

36. Shell immediately retained the services of OTEK Australia Pty Ltd to undertake an environmental site assessment at SMAP and in particular, to evaluate the nature and extent of petroleum hydrocarbon contamination to the subsurface soils and groundwater. In fact Shell had, in March 1994, invited OTEK and other consultants to tender for the job of conducting an environmental assessment of SMAP in anticipation of its closure at the end of the 1994 winter season.

37. On 15 July 1994, Ms Ogden, an employee of Shell at its Clyde Refinery in Sydney telephoned the Queanbeyan office of the EPA advising that following the discovery of fuel in the footings of the proposed building extensions to the Cooma Ski Hire premises, Shell had engaged a Consultant to undertake investigations to assess the extent of the contamination. Test bores had been undertaken both on and off site and Shell was shortly expecting a report from its consultant.

38. Ms Ogden advised that Shell had intended closing SMAP at the end of the year but that decision had now been brought forward. She advised that Shell intended to remove the underground tanks “over the coming weekend” and have them cleaned and inspected. (In fact, that activity was undertaken in mid August 1994.)

39. Mr Bill Knight, an officer of the EPA at Queanbeyan told Ms Ogden to give formal notice to the EPA of the incident and of the action proposed by Shell whereupon the EPA would decide whether to give notice pursuant to the Environmentally Hazardous Chemicals Act 1985 s 35.

40. On 22 July 1994, Ms Ogden officially advised the EPA that Shell had engaged a consultant to carry out an environmental site investigation of SMAP and that steps were being taken to close the site. The motor spirit had been pumped from the site.

(It was about this time that Mr Bell who had just recently joined the EPA Queanbeyan Office was given the task of investigating the case. His original concern was with the remediation of the contaminated site and although that involvement continued over the next two ensuing years, his task was broadened at an early stage following the report of the incident to include investigating a possible offence against the EOP Act.)

41. On 1 August 1994, the EPA wrote to Shell asking that it provide a brief written report as soon as possible covering the following matters:

(i.) details of the extent and volume of the leakage, the substances leaked, a history of the discovery and Shell’s response, and details of the preliminary investigation program;

(ii.) details of the results of the investigation to date; and

(iii.) timetable of investigations yet to be completed.

42. On 17 August 1994, Ms Ogden wrote to the EPA providing a “ Summary Report ” of the incident and advising that following further investigations, a site remediation proposal would be developed for approval by the EPA.

43. The Summary Report included the following details—

extent of contamination

a plume of hydrocarbon contaminants extends beyond the south-western site boundary shared with the adjacent ski hire business;

(b) Volume of contaminant

Based on estimates from consultants, the volume of contaminants in both soil and groundwater is between 9,000 and 11,000 litres. This “…..is an overestimation due to the difficulty of delineating the plume exactly”;

(c) type of contaminant

The contamination identified is motor spirit, kerosene and distillate. However only motor spirit and kerosene have impacted off site.

(d) history of the discovery of the leak and Shell’s actions in response

After reciting matters (that I have earlier summarised) the Summary Report includes the following:

The site was closed on the weekend of 16 and 17 July and all fuel was pumped from the facility.…….

……..

Four underground storage tanks were removed from the facility on August 15 and inspected. Three of the tanks were perforated.

44. The Summary Report proceeds to give details of the results of OTEK’s investigation. These matters will be examined more closely in relation to the disputed question whether the hydrocarbons leaked from corrosion perforations in the UST’s at SMAP.

45. On 31 August 1994 Shell forwarded to the EPA a copy of the first Report prepared by OTEK (Exhibit 4)

46. It is to be noted that this Report is dated 17 July 1994 which of course predates the exhumation (on 15 August 1994) of the four tanks located under the concrete forecourt near the street frontage of SMAP.

47. Thereafter, on 30 September 1994, Shell wrote to the EPA providing comprehensive details of the tank exhumation process. The letter included a copy of the second Report of OTEK (Exhibit 7) which fully describes the exhumation process and the consultant’s observations of that process, together with proposals for a Remedial Action Plan to treat the contamination of subsurface soil and groundwater.

48. Again, I shall defer referring to the details of the second OTEK Report until I come to consider the second matter in dispute.

49. A few days following receipt of the second OTEK Report Mr Bell accompanied by Mr Featherstone, another EPA officer, attended the SMAP site on 5 October 1994 and met, as previously arranged, with Mr Knight and Mr Allen and Ms Ogden representing Shell. In par 15 of his affidavit sworn on 12 June 1997, Mr Bell states that words to the following effect were stated by the Shell representatives (although Mr Bell could not recall “exactly who said what”):

The installation is about 30 years old and has always been owned by Shell. The corrosion of the underground pipes and tanks is due to poor installation. The last operator, Kelly Lester, had poor stock control and reconciliation. Fuel comes from the Canberra Depot to the Cooma Depot to the Snowy Mountains Autoport. Shell knew about three years ago that they’d been losing kerosene and ceased using that tank but had no idea of any other problems. Independent operators are bound by Shell rules and terms and conditions of lease. Tanknology had tested the diesel lines in late June. Testing of old installations is based on risk assessment. Retail sites are listed for closure on the basis of a number of things including age, but generally volume of sales is the cause of closure. The Snowy Mountains Autoport was listed for closure after the ski season. Shell has no records of the clays on the site or of the installation.

50. Thereafter, on 13 October 1994, the EPA served upon Shell a Notice (pursuant to the Environmentally Hazardous Chemicals Act 1985 s 35) directing Shell, inter alia, to submit for review by the EPA a Remedial Action Plan for the SMAP site by 30 November 1994 and to submit to the EPA the results of all soil and water tests on the site and of the adjacent lands contaminated by petroleum hydrocarbons.

51. On 28 October 1994, Shell forwarded the EPA will the third OTEK Report (in draft form): Exhibit 14.

52. Over the ensuing 18 months period, the EPA and Shell continued to liaise in respect of the remediation by Shell of the SMAP site and the three neighbouring sites. Earlier in that period, the EPA issued further statutory notices to Shell pursuant to the Clean Waters Act 1970 and the Pollution Control Act 1970, in aid of the EPA’s investigation of the incident. Shell provided the EPA with a considerable body of documentary materials pursuant to the statutory notices, including three reports from Groundwater Technology Australia Pty Ltd which had been retained by Shell to prepare the Remedial Action Plan and to supervise the decommissioning of SMAP (Exhibits 26, 27 and 87). The remediation process continued in accordance with a Site Management Plan (Exhibit 29), prepared on behalf of Shell and approved by the EPA, culminating in the submission to the EPA in April 1996 of the validation assessment prepared by CMPSF Environmental on behalf of Shell (Exhibit 42).

53. Following the completion of remediation process in 1996, Mr Bell continued his investigations into the incident, obviously directed to the possible prosecution of Shell for an environmental offence. Having concluded that part of his investigation involving interviewing persons who had some association with SMAP (noting that a number of persons involved in the decommissioning of SMAP had declined to provide statements or to be interviewed because of their business relations with Shell), Mr Bell carried out research into the available literature concerning problems caused by leaking underground fuel storage facilities. That investigation principally revealed a number of publications produced by the United States Environmental Protection Agency in the 1980s and early 1990s, (the existence of which the Prosecution relies upon in respect of the alleged negligence of the Defendant).

54. Some time in the first half of 1997, the EPA consulted four experts in corrosion (Dr Wallwork, Dr Potter, Dr Roper and Mr Martin) seeking their advice “on the likelihood of corrosion of underground tanks and pipes in service stations and in particular, in relation to the incident that occurred at SMAP” (see for example, par 3 of Dr Wallwork’s affidavit dated 2 June 1997).

55. Each of the consulted experts was supplied with at least one of the OTEK Reports, namely Exhibit 7 which described the tank exhumation process and the observations made of the exhumed USTs and pipework. Each of the four experts provided a statement (in the form of an affidavit or report or both) which was tendered in evidence (Exhibits 80, 83, 94 and 96). Additionally, each of the four experts gave oral testimony.

56. Each expert had assumed from the OTEK Report that the contamination of the soil and groundwater at SMAP and the adjoining properties had emanated from the holes caused by corrosion that had been detected in three of the four tanks when exhumed in August 1994 and from the holes caused by corrosion in the fill line, likewise detected after exhumation. Dr Wallwork relied upon the chemical analysis of the soil and groundwater samples contained in the OTEK Report in expressing his opinion “it is evident that most of the contamination was coming from the vicinity of the 5,000 and 2,000 litre tanks (these being the severely corroded tanks) and from the fill line in the same vicinity”. (It is to be noted that the samples referred to are all samples taken from the floor and walls of the excavated tank pit from which the four USTs had been exhumed.)

57. Dr Wallwork also expressed the opinion “that the severely corroded galvanised pipes could well have been a major source of the leakage….”

58. Dr Wallwork also opined “from the size of the holes in the pipes (that) they certainly would have leaked some fuel over a long time, with the amount of fuel increasing as the holes developed”.

59. Dr Potter described the corrosion process in these words (par 14 of Exhibit 83):

A perforation due to advance of pitting almost invariably begins as a tiny hole, invisible under corrosion product (eg clinging rust). Ongoing corrosion gradually enlarges the tiny hole and provided the perforation is lower than the liquid level, the initial oozing fuel leakage matures into an active seepage, and eventually into a continual trickle that stands to create a fuel filled cavity, having pushed away the clayey corrodent (the soil)

60. Dr Potter also expressed the opinion that “ the first perforation could have taken place 10 to 15 years before the autoport closure in mid 1994, the perforations enlarging on a scale of years to a maximum hole size around 10 years later, but supplemented in the meantime by other more leisurely pits becoming perforations ”: par 16 of Exhibit 83 .

61. Dr Roper opined from the OTEK Report (Exhibit 7) that “it was obvious that perforations at corrosion sites in both tanks and pipework contributed to the leakage from UPSS in question”.

62. He too expressed the opinion that it was “probable that leakage had been increasing over a period of many years, as perforations of the type shown described by OTEK were not likely to have developed over a short period of time”.

63. Mr Martin read the OTEK Report as indicating “that the tanks and pipework were perforated by corrosion and as a result, caused petroleum hydrocarbon contamination of soil and groundwater”.

64. All four experts in corrosion expressed the opinion that Shell ought to have foreseen the risk of corrosion of unprotected underground storage tanks and appurtenant pipework given their age of some 40 years, and accordingly, ought to have taken earlier action to guard against the realisation of that risk eg by test bore monitoring, cathodic protection retro fitting etc.

65. Dr Muir, a groundwater specialist employed by the EPA was asked by the EPA to prepare a report on the environmental effects of the leakage from SMAP. He too relied upon the OTEK Report (Exhibit 7), together with other expert reports that had been submitted to the EPA by Shell in connection with the remediation of SMAP and in response to the statutory notices that EPA had given to Shell. He expressed the opinion inter alia that the contaminants had “presented a toxicity problem to people on the (SMAP) site and in the immediate vicinity of the site”.

66. Dr Biswas, an Environmental Scientist employed by the EPA also was asked to prepare a statement of environmental effects relating to the leakage from SMAP. His Report (Exhibit 111) was also founded upon the OTEK Reports.

67. He expressed opinions on the risk to public safety of exposure to the hydrocarbon contaminated soil and groundwater.

68. Sometime a little later in 1997, the EPA decided to prosecute Shell for an offence against the EOP Act, s 6(1), the summons commencing the present proceedings being filed in this Court on 10 July 1997. In that summons, there was an endorsement conformably to s 12(3) of the EOP Act to the effect that the date on which evidence of the offence first came to the attention of any relevant authorised officer of the EPA was 15 July 1994.

69. At the outset of the trial, Shell moved for the summary dismissal of the charge on the ground that the proceedings had been commenced beyond the statutory three year period for the commencement of proceedings.

70. In my judgment delivered on 15 November 1999, (1999) NSWLEC 288), I held that the EOP Act, s 12(3) created a conclusive statutory presumption subject to defeasance only if Shell could establish on the balance of probabilities that the date upon which evidence of the offence first came to the attention of the EPA was not the date endorsed upon the summons but was some earlier date that fell outside the three year limitation period.

71. In this respect, I held, as a matter of probability, that evidence of the offence first came to the attention of the EPA officers on 15 July 1994 (being the date endorsed on the summons). Accordingly, I rejected Shell’s Motion for summary dismissal of the charge.

72. Subsequent to the filing of the summons, the EPA obtained various expert opinions, including that of Mr Jacobson, a groundwater expert, on the likely migration in subsurface soils and groundwater of hydrocarbons from SMAP. In his Report (Exhibit 85) he expressed the opinion of “a slow build-up of leaked products in the continuing silting clay, then with continued corrosion on the tanks and expansion of the leaks, more rapid growth of the pollution plume in the last few years”.

73. Like the corrosion experts, he expressed the opinion that:

Leakage may have started about 27 years prior to 1994, that is about 1967. The rate of leakage increased as corrosion increased, towards discovery in 1994

74. Other expert opinions were obtained by the EPA from a Dangerous Goods consultant (Mr Grainger) and from two persons trained in tank pressure testing, (Messrs Gurton and Raymond). They gave evidence of the availability in Australia during the charge period (1991-1994) of tank testing procedures.

75. I shall not include in this overview of the Prosecution evidence, the testimony of the various operators of SMAP and of tanker drivers who made deliveries of bulk product to SMAP. The evidence will be examined more closely when considering the question of whether the contaminant leaked from corrosion perforations in the UST’s and appurtenant pipework at SMAP during the charge period.

76. Nor shall I include in this overview a summary of the very extensive evidence (principally documentary) concerning the risk of underground storage tanks and appurtenant pipework developing corrosion holes through which petroleum products may leak into the subsurface soil. All this evidence is more particularly relevant to the disputed issue of negligence by Shell.

77. Having provided the foregoing overview of the Prosecution evidence, I am now in the position to proceed to determine each of the three disputed issues. In this process, it will be necessary at times to examine more closely than I have done in my overview, the details of the evidence relevant to each of the disputed issues.

C. ISSUE 1—IS THE DEFENDANT RELEVANTLY THE PERSON WHO COMMITTED THE OFFENCE CHARGED?

78. As I have earlier indicated, this question can be conveniently determined on the assumption that the proscribed act was committed, the relevant question then simply being—was it committed by the Defendant?

79. In contending for a negative answer, the Defendant relies upon the fact that during the charge period legal entities separate from Shell were relevantly involved in the management and operation of SMAP. In so contending, the Defendant repeats the submissions it made in its “no case” to answer submissions at the close of the Prosecution evidence (which I rejected on 17 December 1999—see transcript at p 904). Those submissions are encapsulated in the following propositions:

1. The Prosecution evidence proves no more than that SMAP (including its tanks, pipes and equipment) during the charge period was occupied and/or operated and/or used by—

(c) Beasam Pty Ltd trading as Southern Petroleum.

2. The individual leases recite a conveyance to the lessee of property which included the underground tanks and pipework.

3. There is no evidence to establish that ownership of the petroleum products delivered to SMAP did not pass upon delivery.

4. There is no evidence to enable the Court to infer that (i) the financial and business transactions as between Shell and Beasam Pty Limited were

(c) not in the ordinary course of business;

or (ii) the same could not be said of the business dealings between the lessees/sub lessees and Shell.

5. The presumption of law is that each company is a separate legal entity.

1. There is no justification in the present case of “lifting the corporate veil”.

80. The evidence establishes, beyond reasonable doubt, the following facts—

(i.) Shell acquired the site of SMAP by Transfer dated 27 January 1955 and registered by the Registrar General on 6 January 1956 ( Exhibit 51 );

(ii.) Shell’s ownership of SMAP continued from that time, including throughout the charge period;

(iii.) Sometime in 1955, the front half of the site (involving an area of some 1,200 m2) was developed by Shell as a service station with access from Sharp Street (being part of the Monaro Highway as it passes through the township of Cooma). The development involved a building accommodating a retail shop, lubitorium, workshop, storerooms, staff room and amenities. A canopied bowser area was served by four underground storage tanks which were filled at a remote fill point situate near the western boundary of the site. The forecourt area comprised a concrete surface with driveways and the concrete covering was continued around the building. At the rear of the building there remained an area in its natural state (ie without concrete covering) and beyond that section, the site comprised an undeveloped area, being a little more than 50 per cent of the total area of the site. This rear undeveloped section has no relevance to the facts of this case.

(iv.) Following its construction, SMAP was continuously used as Shell Service Station being operated and managed by successive lessees and/or managers or agents.

(v.) In particular, during the charge period, SMAP was successively operated or managed by the following persons:

(a) by Mr Askell from January 1991 to July 1991 , who also managed the Shell Depot situate in Cooma township, as an employee of Beasam Pty Ltd, trading as Southern Petroleum;

(b) by Mr Gibbons from July 1991 to October 1991, who also managed the Shell Depot situate in Cooma township, as an employee of Beasam Pty Ltd trading as Southern Petroleum;

(c) by Mr Dann (Wise) from November 1991 to February 1993 either as a lessee of Shell or as a sub-lessee of Beasam Pty Ltd, but without any written form of lease or sub-lease; and

(d) by Ms Lester from February 1993 to June 1994, who also managed the Shell Depot situate in the Cooma township, as an employee of Beasam Pty Ltd trading as Southern Petroleum.

(vi) Each of the successive operators/managers of SMAP, during the charge period (1991 to 1994), considered that maintenance of the petroleum facilities and installations at SMAP was the responsibility of Shell, and in particular of Shell’s Area Manager, Mr Brett Townsend.

(vii) It was Shell that reported in July 1994 to the EPA the discovery of hydrocarbons in the drilled holes at the front of the adjoining Cooma Ski Hire shop and it was Shell that liaised and cooperated with the EPA in the ensuing environmental assessments and investigations and remediation of the contaminated SMAP site and three neighbouring sites. It was Shell that decided to close SMAP.

(viii) In the course of its liaison with the EPA, Shell, when asked to estimate product losses, advised “we have contacted the former operator of the site (Southern Petroleum) and requested the stock loss information which you are seeking. When received, we will forward a copy of their response to you” (Exhibit 17).

(ix) In its later letter dated 7 December 1995 (Exhibit 32), in response to the EPA’s statutory notice given pursuant to the Pollution Control Act 1970, Shell advised, inter alia—

(a) that in June 1992 it had issued a memorandum to all staff, franchisees, lessees and dealers, of the policies and procedures to be adopted in the case of a report to Shell by-operators “ of unusual or significant levels of underground product stock variances ” ( Exhibit 34 ) which included the requirement that Shell’s Territory or Area Manager attend the outlet and do a complete reconciliation of the stock records over the previous three months and that if initial investigations did not achieve “ an acceptable readout….then the engineering manager should be immediately advised to organise the appropriate further investigation…. ”

(b) that its policy required “the audit of our service station facilities twice annually”.

(x) During Mr Dann’s (Wise) operation of SMAP, he received in September 1992 from Mr Brett Townsend, Area Manager for Shell, a Risk Assessment Program—Field Survey in respect of SMAP, which Mr Dann completed and returned to Mr Townsend.

(i.) Beasam Australia Pty Limited is a registered company, wholly owned by Shell Australia Limited (Exhibit 49).

(ii.) Shell is a registered Australian Public Company, wholly owned by Shell Australia Limited (Exhibit 50).

(iii.) Southern Petroleum is a registered Business Name, the business of which, is carried on by Beasam Pty Ltd (Exhibit 50).

(iv.) In each of the annual reports for the years 1991, 1992, 1993 and 1994 of Shell Australia Limited both Shell and Beasam Pty Ltd are included in the list of companies styled “controlled entities”: Exhibits 74, 75, 76, and 77 and both Companies are stated therein to be wholly owned subsidiaries of Shell Australia Limited.

81. From the foregoing primary facts I infer that at all relevant times during the charge period (1991-1994), Shell, by virtue of the following circumstances operating in concert, namely, (i) its ownership of SMAP; and (ii) its control of the management and operation of SMAP by Beasam Pty Ltd trading as Southern Petroleum; and (iii) its ultimate responsibility for the maintenance of the plant and fixtures at SMAP, including in particular, its responsibility for investigating and remediating any loss of containment of petroleum product, relevantly is the person committing the offence created by the EOP Act s 6(1) (remembering that for present purposes, there is simply the assumption of the commission of that offence).

82. In so concluding, I do not think that the doctrine of lifting or piercing the corporate veil has any relevance or application. Nor in that respect, do I think that there is any real significance in the fact that both Shell and Beasam Pty Ltd were wholly owned subsidiaries of Shell Australia Limited. I accept that Beasam Pty Ltd (whose business included that carried on under the registered name “Southern Petroleum”) is generally to be regarded as a separate legal entity from Shell. However, what I do find to be crucial in the present case, is the actual relationship between Beasam Pty Ltd and Shell in the operation of SMAP in which Shell relevantly exercised control of, and responsibility for, the operation of SMAP. Clearly, that relationship contemplated at least the following two significant features (that support the inferred ultimate fact) namely—

(i.) that SMAP would be managed and operated as a Shell Service Station serving Shell petroleum products; and

(ii.) that Shell remained wholly responsible for the maintenance of the plant and fixtures of SMAP with particular responsibility for investigating and remedying any detected problem of loss of product containment.

83. It is these features of the arrangement between Shell and Beasam Pty Ltd which justify the ultimate inference that I make, that Shell was ultimately responsible for the operation of SMAP and in particular, was responsible for the maintenance of its plant and equipment and that Beasam Pty Ltd did not fulfil any conventional lessee role in respect of SMAP. Rather, its role was more akin to that of an agent for Shell in the management and operation of SMAP.

84. In its response to the EPA’s statutory notice given pursuant to the Pollution Control Act 1970, Shell advised (Exhibit 32) inter alia:

….our records indicate the site lessees/managers as below:

May 1985-Dec 1987

A Mandlik

Dec 1987 - Dec 1990

R & B Corbett

Jan 1991 - June 1991
June 1991 - September 1991
September 1991-February 1993
February 1993 - July 1994

Shell Co. of Australia Ltd
Beasam Pty Ltd
D Dann

Beasam Pty Ltd

85. It is clear that in the years before the commencement of the charge period, both Mr Mandlik and Mr Corbett held written leases from Shell. However, no other lease documents were provided by Shell to the EPA. It is also clear that during the charge period there were no written leases. Indeed, it is doubtful if there were any leases at all. Rather (and this accords with Shell’s letter which lists the succession of “ site lessees/managers ”) it is probable that Beasam Pty Ltd (trading as Southern Petroleum) and those persons employed by it who successively managed SMAP, at the same time that they managed the Shell Cooma Depot as employees of Beasam Pty Ltd, namely Mr Askell, Mr Gibbons and Ms Lester, operated SMAP as managers or agents for Shell rather than as Shell’s lessees. Notwithstanding Shell’s advice that it operated SMAP from January to June 1991, it is clear that in this period, Mr Askell managed SMAP and that he was an employee of Beasam Pty Ltd. The precise nature of the terms of Mr Dann’s operation of SMAP is a little less certain—he thought he leased it from Shell (although there was no written lease) and Ms Lester thought that he sub-leased it from Beasam Pty Ltd. He too, probably, was an agent for Beasam Pty Ltd which in turn was an agent for Shell.

86. These findings, which reflect some uncertainty about the precise nature of the legal occupation of SMAP throughout the charge period, are not determinative of, or crucial to, my ultimate finding that Shell maintained relevant control and responsibility for SMAP during the charge period. Rather, they indicate that the successive managers/operators of SMAP during the charge period were, in some manner the agents of Shell. So conceived, their relationship with Shell (and with SMAP) was not that of a lessee enjoying exclusive occupation of the site with the usual lessee obligations. In these circumstances, my ultimate finding that it was Shell which relevantly (i) owned the SMAP; (ii) controlled its operation as a service station; and (iii) was responsible for the maintenance of the plant and fixtures at SMAP and that therefore it was Shell who relevantly committed the offence charged (still assuming that such an offence was committed) does not involve a conclusion that in a conventional lease arrangement (where the lessee enjoys conventional exclusive occupation of the premises and is bound by the usual covenants for repair etc), it would be the lessor, (qua lessor) who would be relevantly responsible for an offence against the EOP Act s 6(1) arising out of the normal operation of the service station by its lessee.

87. For completeness, I would add the observation that my ultimate conclusion that it was the Defendant who relevantly committed the offence (on the assumption that such an offence was committed) does not depend upon any acceptance of the Prosecution submission that the Defendant could be held to have relevantly “negligently caused the leak etc” upon some analogous basis or principle to “causing pollution” as expounded by the House of Lord’s decision in Empress Car Co (Abertillery) Ltd v National Rivers Authority (1998) 1 AllER 481. The offence expounded in that decision was an offence of strict liability, which is clearly distinguishable from the offence created by the EOP Act s 6(1). On this ground alone, in my judgment, it is neither necessary nor desirable for a proper understanding of the present charge, to seek assistance from the decision in Empress Car.

88. Finally, and again for completeness, I should say that in view of my ultimate finding that it was the Defendant who relevantly committed the offence (still on the assumption that such an offence was committed) does not require me to consider the alternative basis for finding the Defendant responsible for the charge that was advanced by the Prosecution, namely that it was not open to Shell to delegate to other persons the duty imposed by the EOP Act s 6(1). In advancing this argument, the Prosecution relied upon a number of decisions of the High Court of Australia involving cases of tortious liability for negligence eg Kondis v State Transport Authority (1984) 154 CLR 672; Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520; and Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313.

89. In my respectful judgment, the Prosecutor’s argument raises matters of considerable difficulty, not only in terms of translating into the criminal law general principles developed in respect of tortious liability for negligence, but in the particular application of such principles to the offence created by the EOP Act s 6(1) which in terms, imposes liability upon “any person who wilfully or negligently causes a substance to leak etc”.

90. In passing, I note that very recently, Lloyd J has given detailed consideration to the question whether the principle of non-delegability of a civil duty of care can be applied to the strict liability offence created by the Clean Waters Act 1970 s 16 (“a person shall not pollute waters”), concluding that the principle did not apply to such an offence: see Environment Protection Authority v Multiplex Constructions Pty Ltd (2000) NSWLEC 6. In my respectful opinion, his Honour’s reasoning leading to that conclusion would appear to apply a fortiori to the offence created by the EOP Act s 6(1).

D. ISSUE 2—WERE THE HYDROCARBONS PRESENT IN THE SUBSURFACE SOILS AND GROUNDWATER BY VIRTUE OF HAVING LEAKED FROM PERFORATIONS CAUSED BY CORROSION IN THE UST’S AND APPURTENANT PIPEWORK AT SMAP DURING THE CHARGE PERIOD?

91. As I have earlier noted, the Prosecution evidence on this issue is circumstantial. However, it also relies upon admissions said to be made by Shell in its several communications with the EPA following the discovery in June 1994 of hydrocarbons in the subsurface soils and groundwater of the adjoining Cooma Ski Hire Shop premises and by vicarious admissions contained in the several reports that Shell obtained from experts in investigation and remediation of contaminated land, notably the reports of OTEK Australia Pty Ltd (Exhibits 4, 7 and 14) (OTEK) and the reports of Groundwater Technology Australia Pty Limited (Exhibits 26, 27 and 87). (Groundwater).

92. Indeed, not only does the Prosecution rely upon these expert reports as providing vicarious admissions, but as I have earlier indicated, the expert opinion evidence of the four corrosion experts and the expert opinion evidence of the two environmental scientists and the expert opinion evidence of the groundwater expert are all founded upon the assumption that the contents of the reports of OTEK and Groundwater that were briefed to each expert are reliable and are correct. It is of interest to note here, that none of the Prosecution expert witnesses had considered the totality of the expert reports that had been supplied by Shell to the EPA over the period of 18 months.

93. Accordingly, in examining all of the Prosecution evidence, on this issue, it is logical to commence with an examination of the admissions. Unfortunately, the documents are voluminous, especially the expert reports of OTEK and Groundwater, and it will be necessary to recite lengthy extracts from them in order to appreciate the true extent of the vicarious admissions, and in order to ultimately evaluate their weight. These extracts must include both inculpatory and exculpatory contents: see Cross on Evidence 5^th Australian Edition (1996) at par 33455.

94. In this respect, I should at once note the disadvantage experienced by the Court in not receiving any expert evidence that could explain the meaning and significance of the content of the OTEK and Groundwater Reports. The Prosecution did not call the authors of these reports. An explanation was provided as to why Mr Borg, the principal author of the OTEK Reports was not called, namely that he now worked for Shell and declined to give Mr Bell any interview. However, no explanation was provided why the authors of the Groundwater Reports were not called. Moreover, none of the expert witnesses called by the Prosecution, who had relied upon the OTEK and Groundwater Reports in providing their respective expert opinions—eg on corrosion of the USTs and pipework or groundwater pollution migration from the source of the pollution etc. professed any expertise in the specialised area of contaminated site investigation and remediation. It will be necessary later in these reasons to return to this matter in evaluating the strength of the Prosecution case.

95. At the outset of this examination of Shell’s admissions, I should recall that at the trial, the Defendant had asked the Court to exclude, pursuant to the Evidence Act 1995, s 90 any of the admissions that had come about by virtue of Shell furnishing documentary materials pursuant to statutory notices that the EPA had given to Shell, those notices being respectively—

(i) Notice dated 13 October 1994 pursuant to Environmentally Hazardous Chemicals Act 1985 s 35;

(ii) Notice dated 28 July 1995 pursuant to the Clean Waters Act 1970, s 27A; and

(iii) Notice dated 25 October 1995, pursuant to the Pollution Control Act 1970 s 24.

96. In my judgment delivered on 22 November 1999 (1999) NSWLEC 289, I held that the furnishing by Shell of documents to the EPA pursuant to the three statutory notices could not in law be regarded as involuntary. I further held that since no separate reason had been advanced by the Defendant which would justify exclusion of the admissions, the Defence submissions must be rejected and that the documents were admissible as admissions within the meaning of the Evidence Act Pt 3.4 .

97. For completeness, I should note that not all the admissions relied upon by the Prosecution came about by virtue of Shell’s compliance with the several statutory notices. In particular, the first and second OTEK Reports (Exhibits 4 and 7) both had been submitted to the EPA by Shell before the issue of the first of the three statutory notices issued by EPA.

98. Similarly, the admissions said to have been made on behalf of Shell in the course of the discussion held at Cooma on 5 October 1994 between Mr Bell and another EPA officer with three representatives of Shell occurred before the issue of the first statutory notice by the EPA. Indeed, it was following that discussion that Mr Bell decided to recommend that the EPA issue the statutory notice pursuant to the Environmentally Hazardous Chemicals Act s 35. That notice was issued on 13 October 1994.

99. Finally, it should be noted that all the admissions relied upon by the Prosecution were made at times well before the decision was taken by the EPA to prosecute Shell for the offence against the EOP Act s 6(1). That decision was not taken until 1997, although Mr Bell, in his oral evidence said that it was as a result of something that the Shell representatives had said to him in the discussion at Cooma on 5 October 1994 that he first realised that an offence might have been committed by Shell.

(I) THE DEFENDANT’S ADMISSIONS

100. The content of the admissions made by Shell can be most conveniently summarised in the chronological sequence in which the admissions were made.

(i) July 1994: The Incident is reported to EPA by telephone call from Shell

101. According to the file note of Mr Bill Knight, an employee of the EPA at the Queanbeyan Office (Exhibit 12), Ms Shayna Ogden, from Shell’s Clyde Refinery telephoned him on 15 July 1994 and advised as follows:

During extensions work on the Ski Hire next door to the station, fuel was detected in the footings excavation. Shell has employed a consultant to undertake investigation to assess extent of the contamination, they have drilled numerous bores on and off site, with extensive co-operation from Council. Shell is expecting a report in the near future.

It was intended to close the station at the end of the year, however, that will now be brought forward. In the interim, some clients who bulk purchase diesel will continue to be accommodated from an overhead tank which has been visually inspected and found to be sound. The remaining two underground tanks will be removed over the coming weekend, cleaned and inspected. This will give a better indication of the extent of the problem, and some idea of what may be missing.

102. Mr Knight’s file note states his response in the following terms:

I advised her that formal notification of the event was necessary. Initially she will supply detail of the background to the event, action proposed and underway to investigate and assess the extent of contamination, and future proposed action. I told her to send this to this office and we would make an assessment of whether a Section 35 Notice was appropriate

(ii) July 1994 - Shell informs EPA of Incident by letter

103. Ms Ogden, Environmental Engineer, wrote a letter (on Shell letterhead) advising that Shell “ is carrying out an environmental site investigation ” of SMAP and that it had engaged OTEK Pty Ltd, environmental consultants to conduct the investigation.

104. The letter continued:

Presently, steps are being taken to close the site as part of our divestment program. All motor spirit has been pumped from the site, however we intend to supply diesel in the short term

(iii) August 1994 - Shell advises EPA of results of preliminary investigation

105. Ms Ogden’s letter in response to the EPA’s request for specific information designated in its letter dated 1 August 1994 ( Exhibit 2 ) encloses a “S ummary Report ” based upon data obtained during the preliminary investigation. (As will presently appear, it is apparent that the “ Summary Report ” was based upon the first and second OTEK Reports ( Exhibits 4 and 7 ) and probably was prepared for Shell by OTEK.)

106. The Summary Report is in the form of answers to the specific information sought by the EPA, namely—

(1) Known details of:

(a)

extent of the contamination;

(b)

volume of the contaminant;

(c)

the type of contaminant;

(d)

a history of the discovery of the leak and Shell’s actions in response.

(2) Details of the preliminary investigation.

(1) Details of the results of the investigation to date; and

(2) Details of investigations that are yet to be completed, including a timetable.

107. Since the information supplied under headings (2) and (3) is obviously a summary of the first and second OTEK Reports (which will be examined presently), it is only necessary to set forth the following contents of the Summary Report—

(1) Known details of:

the extent of the contamination,

Based on data obtained during the preliminary investigation, a plume of hydrocarbon contaminants extends beyond the southwestern site boundary shared with the adjacent ski hire business .

b) volume of the contaminant,

Based on estimates from our consultants, the volume of contaminants in both soil and groundwater is between 9000 and 11,000 litres. This volume is an over estimation due to the difficulty of delineating the plume exactly.

(c) the type of contaminant,

The contamination identified is motor spirit, kerosene and distillate. However only motor spirit and kerosene have impacted offsite,

(d) a history of the discovery of the leak and Shell’s actions in response.

In June 1994 the owner of a ski hire business adjacent to the Shell Snowy Mountains Autoport, Mr Keith Thorne, discovered petroleum hydrocarbon contaminated soil and water in the foundation excavations that were being dug to erect an awning at the front of his ski hire business. Mr Thorne informed both Shell and the Monaro Council.

Shell immediately engaged OTEK Pty Ltd. environmental consultants to undertake an initial environmental site assessment and brought forward the planned closure of the site from later this year. The site was closed on the weekend of the 16th and 17th of July and all fuel was pumped from the facility.

The EPA was informed of the situation both by phone and in writing in July.

Four underground storage tanks were removed from the facility on August 15 and inspected. Three of the tanks were perforated. The site was also fenced off from the public and made secure.

(4) Details of investigations that are yet to be completed, including a timetable

The scope of a phase two assessment is now being determined. It is envisaged to include pump and chemical testing of groundwater. Together with the information given above, the results of this additional testing will provide a basis upon which a remediation proposal will be developed. It is anticipated that the tender documents for the phase two assessment and subsequent remediation proposal will be discussed with the EPA by August 30, 1994. We intend to review our remediation proposal with the EPA as soon as the information is available. Subject to the approval of the EPA we would commence remediation work.

(iv) August 1994 - Shell furnishes EPA with First OTEK Report

108. The first OTEK Report ( Exhibit 4 ) is styled an “ Environmental Site Assessment ” and is dated July 1994.

109. The Report states its “Purpose” as follows:

OTEK was contracted by Shell to perform an environmental site assessment (ESA) at the Shell Snowy Mountains Autoport in Cooma, New South Wales. The purpose of the ESA was to evaluate the nature and extent of petroleum hydrocarbon contamination to the subsurface soils and groundwater.

110. Section 1.2 of the Report outlines the activities undertaken by OTEK during the ESA which included conducting a soil vapour survey, sinking nine exploratory soil borings and installing five groundwater monitor/recovery wells.

111. The activities undertaken by OTEK are said to have included “Developed conclusions concerning the presence, general extent, impact and possible sources of petroleum hydrocarbons in the soils and groundwater at the site based on data obtained”.

112. Section 2.4 of the Report identifies as “potential receptors for petroleum hydrocarbons emanating from the facility”—

underground utilities;

stormwater drains;

groundwater

Cooma Creek

113. Section 2.5 of the Report deals with Potential Off-site Sources . It states the following:

Potential off-site sources of petroleum hydrocarbon contamination include other fuel storage facilities. In the immediate vicinity of the site there are four service stations: Shell opposite the site on Sharp Street; Caltex neighbouring the auto electrician immediately to the northeast; BP opposite Caltex to the northeast on the corner of Sharp and Baron Streets; and Ampol diagonally opposite Caltex on the northern corner of the intersection of Sharp and Baron Streets. These service stations are located up slope and up hydraulic gradient of the site.

114. Section 2.6 deals with “ Potential On-site Sources ” and it states the following:

Potential sources of petroleum hydrocarbons contamination from the facility are loss of product from: faulty distribution lines; the tank system; dispenser leakage; or spillage during deliveries and day-to-day operational activities.

At the time of investigation the fuel storage system consisted of four active USTs, one disused UST, and one active AST. The disused T2 kerosene UST was recently taken out of service. The T13 diesel AST is located within a brick bunded area. The base of this bund is not lined with concrete. Significant surface staining was noted within the bunded area and on both the inside and outside of the bund wall.

Remote fill points for the USTs had no spill containment system in place. As a result any product spilled during filling of the USTs would have entered the subsurface soils. Other potential sources include the former hydraulic hoist, the grease and petrol arrester and the car wash.

115. Section 3.0 describes the following field activities undertaken by OTEK on 24 and 25 June 1994 :

(i.) Soil vapour survey— to detect the presence and extent of volatile organic compounds in the subsurface. This survey was conducted at 22 locations on or adjacent to the SMAP site at a depth of 0.5 m and 1.5m.

(ii.) Soil boring programme—to determine geologic and hydrogeologic conditions at the site. Twelve bores were sunk—nine on SMAP and three offsite.

(iii.) Groundwater monitor well programme—This involved converting five of the soil bores into monitoring wells.

(iv.) Phase-separated hydrocarbon observations—No phase-separated hydrocarbons were observed in any of the bore holes or monitoring wells. A distinct petroleum hydrocarbon odour and sheen was noted in three of the groundwater monitoring wells.

(v.) Level survey—This was undertaken to determine the relative levels of each of the soil bores and groundwater monitoring wells.

116. Section 4 of the Report deals with laboratory testing of soil and water samples.

117. Twenty one soil samples and seven water samples were obtained and submitted for analytical testing.

118. The samples were analysed for “benzene, toluene, ethyl benzene, total xylenes (BTEX) and total petroleum hydrocarbons (TPH)”.

119. Analytical tests of soils indicated BTEX concentrations ranging from non-detect to a maximum of 605 mg/kg at Bore 4. TPH concentrations also ranged from non-detect to 4,100 mg/kg in Bore 4. (The location of Bore 4 is near the street frontage of SMAP alongside the common boundary with the Cooma Ski Hire Shop). A copy of Figure 3 to the Report (site Map) showing the locations of the soil bores, groundwater monitoring wells and soil vapour survey points is annexed hereto and marked “A”. (It also shows in plan form the service station building and the location of the underground and above ground petrol storage and dispensing facilities).

120. Analysis of groundwater samples indicated non-detect concentrations of BTEX and TPH compounds in Monitoring Wells 1, 5, 11 and 12. BTEX and TPH were detected in Monitoring wells 2, 3 and 4 with the maximum concentrations being 3.15 mg/L(BTEX) and 10 mg/ L(TPH) in Monitoring Well 2. (That is the monitoring well installed in Soil Bore 4.)

121. Section 5 of the Report deals with “Site Conditions”.

122. Section 5.1 contains the following summary of “the visual assessment”.

While at the facility, visual observations were performed to determine site conditions. Minor petrol staining was noted in the vicinity of the dispensers beneath the canopy at the facility. Significant diesel staining was observed in and around the southwestern end of the AST where the inlet and outlet valves were located.

The bund wall was constructed of concrete bessa blocks which were stained both inside and outside the wall. No concrete lining was noted within the bunded area beneath the AST. The ground surface was saturated with diesel at the southwestern end of the bund area. The concrete pavement outside the bund area was also stained.

No spill containment or runoff control and treatment was evident at the site. All runoff from the paved areas went straight to stormwater drains on Sharp Street and terminated in Cooma Creek.

123. Section 5.2 of the Report deals with “ Soil Conditions ” and includes the following:

The soil boring program provided information pertaining to the subsurface soil conditions at the site and extending to Cooma Creek. Soil properties testing performed by Regional GTS, at the request of OTEK, on selected soil samples collected during this program provided physical analysis of the soils. Soil properties tested were Atterberg Limits and particle size distribution. Atterberg Limits measures the plasticity and liquid limits of fine grained soils (silt and clay). These properties are used to classify the soil as per the Unified Soil Classification System. Particle size distribution provides a physical percentage (by weight) of the soil constituents in the categories of gravel, sand, silt and clay.

Field classification of soil samples obtained during the soil boring program identified four stratum. Below the concrete pavement, sand and gravel fill material were encountered to depths ranging from 0.5 to 1.5 metres. Below this fill material, clayey silt strata was encountered. This strata (classified CL-ML) contained varying amounts of sand and gravel which increased with depth. The soil was black with organic matter and generally exhibited low plasticity and was sticky when wet. This strata was encountered to depths of between 2.5 and 3.0 metres.

Sand-silt-clay strata (classified CL) was encountered below the clayey silt strata. This strata was noticeably less organic and contained prominent grains of the mineral mica (in the form of plate-like flakes). This strata was encountered to total depth in borings B-1, B-3 to B-8, B-10 and B-12. In soil borings B-2 and B-9 this strata terminated at 4.8 and 3.5 metres respectively. In these borings an underlying clayey gravel and sand strata was encountered to depths of 5.5 (total depth) and 4.0 metres (total depth) respectively.

Soil boring B-6 and B-7 encountered a distinct interval of saturated clayey silty gravel between 2.5 and 3.0 metres depth. This interval marked the boundary between the upper clayey silt strata and the lower sand-silt-clay strata described above.

124. Section 5.3 of the Report deals with “ Groundwater conditions ” and includes the following:

Groundwater was encountered at approximately 2.0m in all borings except B-11, where it was found at approximately 0.5m. Boring B-10 did not encounter groundwater. Soil boring B-10 was left open for several hours on completion, but no groundwater accumulated in the borehole. Groundwater monitor wells MW-1 to MW-5 were installed in B-1, B-4 to B-6 and B-9 respectively. Standing water levels (SWLs) in the monitor wells ranged between 1.640 and 2.720m as measured from the top of the well casing on 12 July 1994. Correlating the depth to water data and the results of the level survey indicate an hydraulic gradient at the site of approximately 1 in 292 (0.003) to the south (towards Cooma Creek). Groundwater appears to exist in unconfined aquifer (water table) conditions within the clayey silt strata. The deeper sand-silt-clay strata appears to form a confining (or semi-confining) layer between the overlying clayey silt strata and the deeper saturated clayey gravel and sand strata encountered in B-2, B-9 and B-11. The degree of hydraulic connection between the two water bearing zones is unclear. The fine grained nature of the unconfined aquifer implies a naturally low permeability of the strata. The saturated clayey gravel strata encountered between 2.5 and 3.0m in B-6 and B-7 suggest interbedded lenses of this strata may contribute significantly to the groundwater encountered in the clayey silt strata.

125. Section 5.4 of the Report deals with “ Site Impact ”. This section contains OTEK’s interpretation of the soil vapour surveys and the analytical tests of the soil samples and groundwater samples. It also contains OTEK’s conclusions as to (i) the extent of the contamination; and (ii) the apparent source of the contamination.

126. Because of its importance, the whole of the content must be recited:

The SVS indicated elevated concentrations of VOCs in the subsurface in the vicinity of the USTs and the dispenser islands. The maximum VOC concentration detected at a depth of 0.5m was 94.4 ppm (parts per million) in the soil vapour point SP-11 located adjacent to the remote fill points for the USTs. At a depth of 1.5 the maximum VOC concentration detected was 240 ppm in SP-9 located immediately to the southwest of the kerosene tank. VOC concentrations were greatest in the northwest corner of the site between the USTs and the property boundary with the ski hire business. Concentrations were significantly greater at 1.5m than they were at 0.5m.

Analytical testing of the soil samples collected from the soil borings confirmed the results of the SVS. Elevated VOC concentrations detected while field screening soil samples collected from B-1, B-2 and B-3 appear to represent naturally occurring VOCs in the organic subsurface soils. Analytical testing of soil samples from these borings did not detect BTEX or TPH compounds in the soil samples submitted for analysis from these borings. Soil borings, B-4, B-5 and B-6 all contained BTEX and TPH compounds in excess of threshold concentrations outlined in Draft Environmental Guidelines for the Assessment and Management of Former Service Station Sites (New South Wales Environment Protection Authority, October, 1993). Boring B-4 contained 4,100 mg/kg of TPH and 605mg/kg of BTEX compounds respectively at a depth of 2.0m. At 4.0m in B-4 BTEX and TPH compounds were not detected. Similar trends were also noted in B-5 and B-6. In B-5, BTEX concentrations detected were 312 mg/kg at 1.5m and 38 mg/kg at 4.0m. The same samples also contained 1,600 mg/kg and 180 mg/kg of TPH respectively. Soil samples from B-6 from depths of 2.0 m and 4.5m respectively were analysed with the results indicating 60 mg/kg (BTEX) and 1,400 mg/kg (TPH) at 2.0m and not detected for both BTEX and TPH at 4.5m.

The vertical profile of TPH and BTEX contaminant concentrations in B-4, B-5 and B-6 coupled with the field screening readings in the borings indicates that petroleum hydrocarbon contaminants are concentrated above the water table. These results are supported by the results of the SVS where greater VOC concentrations were detected at 1.5m than 0.5m. Qualitative analysis of gas chromatographs for soil samples analysed from B-4, B-5 and B-6 by comparison with chromatographs produced during the analysis of petrol, kerosene and diesel standards indicated, that the potential products detected in the respective borings were: petrol in B-4; petrol and kerosene in B-5; and kerosene in B-6.

BTEX and TPH concentrations in the soil samples submitted for analysis from B-7 to B12 and HA-1 (hand auger 1) were not detected with the exception of B-7 at 1.5m and B-8 at 2.0m. The analytical data indicated TPH and BTEX concentrations of 1,600 mg/kg and 4mg/kg respectively in B-7 and 170 mg/kg and not detect respectively in B-8. Qualitative analysis using the chromatographs indicated the probable contaminant was diesel. Boring B-7 was located in the immediate vicinity of the suction lines from the diesel AST and dispensers while B-8 was located several metres to the southwest of the diesel AST bund wall. The Subsurface Conditions Map (Figure 4) provides a summary of the analytical data for the soil boring program on a map depicting the locations of the borings.

Analysis of the groundwater samples collected from monitor well MW-1 to MW-4, B-4 and B-12 confirmed the results of the SVS and soil analytical results. BTEX and TPH contaminants were not detected in MW-1, MW-5, B-11 and B-12. Concentrations of these contaminants detected in MW-2 to MW-4 ranged from 10 mg/l in MW-2 to 1.5 mg/l in MW-3 for TPH and 3.15 mg/l in MW-2 to 0.52 mg/l in MW-4 for BTEX. The Groundwater Conditions Map (Figure 5) summarises the analytical data on a map which depicts the locations of the wells and the estimated direction of the groundwater flow.

Based on the data obtained during this investigation a plume of petroleum hydrocarbon contaminants extends beyond the southwestern site boundary shared with the ski hire business owned and operated by Mr Keith Thorn. The source of the contamination appears to be the UST system installed when the service station was first built. Qualitative analysis suggests the contaminants in the plume extending off-site are petrol and kerosene. Diesel contamination was also detected in the vicinity of the suction lines and AST bund area. Contamination from the diesel storage and delivery systems appears to be of limited extent and has not entered the groundwater.

395. The Defendant submitted that there were numerous sources of causes of the hydrocarbon contamination other than that advanced in the Prosecution case (ie USTs and pipework leaking product via corrosion perforations). These included the following:

(i.) spillages of fuel at the remote fill point in the course of bulk deliveries in circumstances where that remote fill point was not protected by a bund or otherwise;

(ii.) spillages of diesel during bulk deliveries to the Above Ground Diesel Storage tank at SMAP for many years until a safety valve was installed sometime after 1990;

(iii.) spillages at the bowsers from customers filling their vehicles;

(iv.) leaking bowsers, sumps, hoists and other equipment installed at SMAP during the 35 years of its operation prior to the charge period;

(v.) the existence of an unsealed portion of the site of SMAP (at the rear) which would receive any contaminated washdown from the workshops etc; and

(vi.) the close proximity to SMAP of other service stations, eg the Caltex Service Station almost next door and the Shell Region Service Station opposite SMAP on the northern side of Sharp Street.

396. The Defendant supported by reference to the evidence, these alternative potential sources or causes of the hydrocarbon contamination of the SMAP site and three neighbouring sites.

397. In particular, reliance was placed on Ms Lester’s evidence for potential source (i) and (ii) on Mr Rutter’s evidence for potential source (iii).

398. In addition to the lay testimony, the Defendant relied upon the expert testimony of Dr Roper and Mr Martin, reflecting the findings contained in the USA Environmental Protection Agency Publication “Causes of Release from UST Systems” (Exhibit E) that spills and overflows are the most common cause of petrol releases into the environment.

399. Additionally, the Defendant relied upon Mr Jacobson’s 1983 article “Pollution of a fractured rock aquifer by petrol—a case study” (Exhibit 86) and in particular, upon the following statement:

It is inevitable that underground fuel storage tanks and pumping systems will corrode in time and leak. It is also inevitable that spillages of fuel will occur during filling operations. Every service station or other establishment with underground fuel tanks doubtless has its pollution plume, which will only be detected by investigations following the recognition of leakage.

400. To similar effect was the following testimony of Mr Jacobsen under cross-examination of p 608 of the transcript.

Q Would I correctly understand this to be the current state of your belief that any service station which has been operative for say of the order of 40 years, which has had deliveries in the normal course of events where there for example may have been the occasional spill, there may be a spill of product, driveways may have been hosed down but it hasn't got a leaking tank underneath. Nonetheless from the matters of which you've spoken to you would not be surprised to find on exhumation a pollution plume in that site, would you accept that?

A. Yes.

401. In response to the Prosecution submission that there was a concentration of hydrocarbon contamination in the vicinity of the site of USTs located near the street frontage of SMAP, the Defendant submitted that overall, the evidence did not support a finding that there was such a concentration of contamination, although it was clear that the soil and groundwater sampling revealed in the earlier OTEK Reports ( Exhibits 4 and 7 ) concentrated in that area. It wasn’t until the third OTEK Report ( Exhibit 14 ) that there was extensive soil and groundwater sampling off the SMAP site and that sampling was concentrated on or near the Cooma Ski Hire Shop and the immediately neighbouring premises to the west.

402. If, however, the fact be that there was a concentration of contamination in the vicinity of the USTs at SMAP, a ready explanation of such a physical phenomenon was provided by the fact that the underground pipework from the remote fill points to the USTs and from them to the bowsers was concentrated in that section of the SMAP site, and because the network of pipework traversed predominantly the clayey soils located immediately below the filled land (which had a variable depth of between 0.5 m and 1.5 m) that network provided a natural channel system leading to the USTs along which any surface spills of hydrocarbons which had penetrated the subsurface soils would be likely to migrate. In this respect, the Defendant relied upon the testimony of Mr Jacobson under cross examination at p 607 - 608 of the transcript:

403. The Defence submissions, in respect of potential alternative sources of the hydrocarbon contamination of the subsurface soils and groundwater at SMAP and the immediate neighbouring properties to the west, founded as they are on the evidence cited, may also be usefully compared with s 2.5 and s 2.6 of the first OTEK Report (Exhibit 4) dealing respectively with “Potential Off-Site Sources” and Potential On-Site Sources” of hydrocarbon contamination. These sections are quoted at par 113 and par 114 of these reasons.

404. In respect of “potential offsite sources”, the Report noted the existence of four existing service stations located in very close proximity to SMAP all of which “are located upslope and up hydraulic gradient” of the SMAP site.

405. In his submissions in reply, Senior Prosecuting Counsel submitted that the Defence submissions, in respect of the undisputed fact that the subsurface soils and groundwater at SMAP and the neighbouring properties situate to the west, were contaminated by hydrocarbons, depended upon a finding being made by the Court that the volume of hydrocarbons in the soil and groundwater was relatively small or insignificant, eg the 677 litres that Shell had estimated in its advice to the EPA as “product loss to off-site” (Exhibit 19) revising its earlier estimate of between 9,000 and 11,000 litres, being “an overestimate” (Exhibit 3).

406. There is a difficulty for the Prosecutor in making this submission because of its implicit suggestion that the Defendant has the onus of proving the fact of the volume of hydrocarbons in the subsurface soils and groundwater at SMAP and the properties immediately to its west. The Defendant, of course, has no such onus. However, it remains true that any hypothesis that there are alternative sources or causes of the hydrocarbon contamination (other than that advanced by the Prosecution) upon which the Defendant relies, must be a reasonable and rational hypothesis—or to put the matter more simply, any doubt in the Prosecution case that the Defendant can point to, and rely upon, must be reasonable.

407. Thus, if to take an example from the present case, the Defendant relies upon the ordinary incidence of surface pollution created in the normal operation of a service station for a continuous period of 40 years and the evidence was overwhelmingly to the effect that the nature and degree of the hydrocarbon contamination far exceeded any such contaminated level that may be derived from the normal incidences of conducting a service station, it might be ultimately concluded that the Defendant’s hypothesis was simply not a reasonable hypothesis.

408. However, the evidence in the present case falls very far short of excluding the alternative hypothesis. The whole question has already been extensively discussed and determined at par 215 to 230 of these reasons. In truth, it is the Prosecution case which suffers from the lack of evidence of the volume of hydrocarbon.

409. In his submissions in reply, Senior Prosecuting Counsel, aware that the question of the volume of hydrocarbons in the subsurface soils and groundwater of SMAP and the adjoining properties situated to the west was not answered in the expert evidence (indeed, it had not even been addressed therein), was driven to rely upon the lay evidence of Mr Schouten as to what he had observed and experienced when involved in the exhumation of the USTs at SMAP in August 1994 and again in the exhumation of the 42,000 litre UST in May 1995 and of Messrs Burgess and Wren when they encountered hydrocarbon contaminated groundwater in the drill holes at the front of the Cooma Ski Hire Shop in June 1994. Founding himself of their evidence, Senior Prosecuting Counsel urged the Court to find “severe contamination”.

410. But, with respect, what would such a finding really mean? Again, with great respect, resort to a mere adjectival finding in relation to such a complex subject as hydrocarbon contamination of subsurface soils and groundwater, is a hopelessly inadequate measure of quantification (particularly when scientific quantification probably existed but was not adduced in the Prosecution evidence).

411. In any event, I am not prepared to make even an adjectival finding on the basis of the lay evidence. In particular, the submission that such a finding could be based, in part, upon the momentary experience of the persons who had observed four drill holes 1.5 m deep at the front of the Cooma Ski Hire Shop, borders on the ridiculous.

412. Senior Prosecuting Counsel next urged a “commonsense” approach to the evidence, submitting that acceptance of the Defence hypothesis that the hydrocarbon contamination was the result of “the ordinary operations” of a service station, including spillages, “would require a conclusion that a plume of polluted soil and groundwater like this, sits underneath and adjacent to almost every service station in Australia which has operated for 20 years or more”.

413. However, the obvious flaw in this somewhat flourishing submission lies in the fact that the expression “pollution plume like this” is simply not quantified by any scientific or meaningful measure.

414. The submission continued:

It would require a conclusion that fuel which spilt somehow penetrated the concrete forecourt

Exhibits 8 and 12

travelled to a depth of between 1.5 and 2 m, and then moved sideways to sit under not one, not two, but three adjacent properties. Neither the evidence nor commonsense support such conclusions

415. In rejecting this submission, I note the following:

(i.) There was simply no evidence (except for the photographs which show the concrete forecourt but only in an incidental manner) of the impenetrability of the concrete forecourt. The photographs also show a large section at the rear of the SMAP site which is not covered by concrete. They also show the bunded area around the Above Ground Diesel Tank with an earth floor within the bund.

Moreover, there is evidence in the first OTEK Report (Exhibit 4) that surface spills of product would enter the subsurface soils:

Remote fill points for the USTs had no spill containment system in place. As a result any product spilled during filling of the USTs would have entered the subsurface soils. Other potential sources include the former hydraulic hoist, the grease and petrol arrester and the car wash

Exhibit 111

Exhibit 85

(i)

(ii)

Exhibit 85

When petroleum product is spilled or leaked it migrates downwards by gravity to the water table. It may then spread laterally on top of the water table, mainly in the direction of the hydraulic gradient. The lighter hydrocarbon fractions tend to be soluble in water and migrate with the water. The heavier hydrocarbon fractions are less soluble and may migrate more slowly as free product on the water table.

416. Next, Senior Prosecuting Counsel submitted that the “ strongest indication ” in rebuttal of the Defence hypothesis that a potential source of the hydrocarbon contamination was the ordinary operation of SMAP involving surface spills over the period of 40 years was the fact that the expert reports of OTEK and Groundwater had indicated that the contamination “ sat, not immediately below the surface, but instead at the same depth as the bottom of the USTs ”.

417. In my opinion, this submission is not supported by the expert evidence. Firstly, it totally ignores the evidence of Dr Biswas and Mr Jacobson that hydrocarbons in soil migate downwards by gravity to the water table.

418. Secondly it does not accurately reflect the content in Section 5.4 of the first OTEK Report (Exhibit 4) which is fully recited at par 126 of these reasons where it is noted that VOCs were detected at a depth of only 0.5 m although concentrations in the VOCs at 1.5 m depth “were significantly greater than they were at 0.5 m”.

419. The OTEK Report concluded that “petroleum hydrocarbon contaminants are concentrated above the water table”.

420. The submission that the contamination in the subsurface soils “sat at the same depth as the bottom of the USTs” overlooks the fact, established by the evidence, that the base of the USTs were at a level below the level of the groundwater contained in the upper unconfined aquifer.

421. Turning to the Defence hypothesis that other nearby service stations were potential sources or causes of the hydrocarbon contamination, Senior Prosecuting Counsel submitted that this hypothesis had been excluded by virtue of the evidence concerning the negative results of testing undertaken at the Shell Region Service Station (directly opposite SMAP) and by the non-detect results of the soil and groundwater samples taken on the northern or north-eastern boundary of SMAP (so far as concerned the Caltex Service Station).

422. It is necessary to examine a little more closely the evidence cited by Senior Prosecuting Counsel.

423. Firstly, in relation to the tests at Shell’s Region Service Station, the only evidence of such testing is found in Mr Bell’s testimony.

424. Under cross-examination, Mr Bell said that he had not conducted an investigation into the operation of the Region Service Station, but that he was aware of an investigation in relation to it. It had not been as a result of any enquiries made by the EPA: p 238 of transcript.

425. In re-examination, Mr Bell gave the following testimony (transcript p 251):

Q. You said that you were aware of an investigation as to whether the Region Shell Auto Port across the road was connected in any way with the subject matter of these proceedings but it wasn't an investigation conducted by the EPA?A. Yes.

Q. By whom was it conducted so far as you're aware?

A. By Shell or The Shell Company of Australia Limited, or perhaps I should be more accurate, by a consultant working for The Shell Company of Australia Limited.

Q. And is there any reason why the EPA so far as you are concerned hasn't followed that up?

A. Again there was no evidence of contamination nor any complaints and in addition the EPA was verbally advised by--

OBJECTION. ALLOWED.

WITNESS: The EPA was verbally advised by Shell to the effect that they did not discover any contamination in their soil borings or groundwater monitoring on that site.

BUCHANAN: Q. Now, just in fairness, do you know who it was who said that?

A. I'm not certain, I think it was Ross Knight.

426. In relation to the Caltex Service Station, one property removed from SMAP to the east, Mr Bell, under cross-examination said that he did not conduct any investigation of the Caltex Service Station and he was not aware of any investigation into it by the EPA: p 237 of transcript .

427. In re-examination, Mr Bell gave the following testimony at pp 250 - 251 of transcript:

Q. Was there any reason why you did not conduct or cause to be conducted any investigation during the relevant period of operations of the Snowy Mountains Auto Port as to whether the Caltex service station was implicated in the subject matter of these proceedings?

A. There was from the sampling no evidence of contamination on the north-western side of the Shell site, the Snowy Mountains Auto Port site, nor on the uphill portion of the footpath or road reserves. There were no complaints, allegations or suggestions at the time and nor was there any other evidence that suggested there was a need to investigate.

428. The only evidence of sampling that could be relevant to the Caltex site is that contained in the expert reports of OTEK and Groundwater. OTEK installed only one soil and groundwater bore (B-1, M/W-1) near the eastern boundary of SMAP about 10 m from its street frontage. The test results were “ no detection ” of hydrocarbons in either soil or groundwater. (The Groundwater tests were subsequent ot the removal of the contaminated soil and groundwater from SMAP and therefore do not assist the present enquiry.)

429. In my judgment, this evidence provides an inadequate basis to found the Prosecution submission that the Defence hypothesis that these existing service stations were another potential source or cause of the hydrocarbon contamination of subsurface soils and groundwater at the SMAP site and the neighbouring sites situate to the west. This is particularly so, having regard to what is said in the first OTEK Report (Exhibit 4) that these (and two other proximate service stations) were located upslope and up hydraulic gradient of the SMAP site.

430. It is to be noted in this respect that there is nothing in any of the expert reports subsequent to the first OTEK Report (Exhibit 4) that indicates that any investigation was undertaken into these “potential offsite sources”. Although no reason for this state of affairs is provided in the evidence, it may perhaps be inferred that the reason why no such investigations were undertaken was the opinion expressed by Shell in its letter dated 29 September 1994 to the EPA, following receipt of the second OTEK Report (Exhibit 7) that “the onsite soil and groundwater contamination probably (is) emanating from the UST system located at the front of the site”.

431. Be that as it may, the lack of proper investigation into the four nearby existing service stations inevitably means that a doubt exists as to whether any or all of them were a source or cause of the hydrocarbon contamination of the subsurface soils and groundwater at SMAP and the adjacent properties situate to the west of SMAP.

(iii) The fact of the opinions of the corrosion experts

432. The Defence response to this evidence is simply this—all the corrosion experts merely assumed (i) that when the tanks and pipework were buried in situ they had the corrosion perforations in them that had been discovered after the exhumation and cleaning down process and (ii) that the product stored in the tanks or passing through the fill line had leaked form such corrosion perforations.

433. Moreover, in making those assumptions, none of the corrosion experts had seen the tanks or pipework containing the corrosion perforations.

434. None of the corrosion experts knew that the two smaller USTs had not been used during the charge period.

435. Both Mr Wallwork and Mr Martin had acknowledged the possibility of a corrosion perforation being completely plugged.

(iv) The experience of the persons who had operated SMAP

436. The Defence response to the evidence of these persons was that their experience at SMAP had revealed—

(i.) no fuel losses that were not within the normal range of variances in the stock reconciliation system employed at SMAP;

(ii.) no reports of odour escape, except for the one occasion in 1987 when Mr Thorn’s complaint was investigated and no problem was revealed;

(iii.) no visible evidence of fuel leaks until the discovery in June 1994 of contaminated groundwater in the drill holes at the Cooma Ski Hire Shop; and

(iv.) no detection in the course of water testing, of any water ingressing the fuel tanks.

(IV) EVALUATION OF THE EVIDENCE

437. For completeness, I propose to undertake my evaluation of the totality of the evidence relevant to this disputed issue in a three stage process, namely

(b) on the basis of the Defendant’s admissions alone; and

(c) on the basis of the circumstantial evidence and the admissions in combination.

438. In the ensuing evaluations, I call up all earlier findings that I have made in these reasons without repeating them here . In consequence, I can here briefly state my evaluations in the form of my ultimate conclusions.

(a) The circumstantial evidence

439. For all of the reasons that I have previously given, I find that reasonable doubt exists as to whether the hydrocarbon contamination of the subsurface soil and groundwater at SMAP and the adjoining properties situate to the west was the result of leaking from corrosion perforations in the USTs and appurtenant pipework.

440. In particular, reasonable doubt exists as to whether the corrosion perforations in the appurtenant pipework and in particular, the fill line to one of the 15,000 l USTs that were observed following the exhumation and cleaning down processes were not caused by the exhumation process, rather than being in existence prior to that process.

441. In particular, reasonable doubt exists as to whether the one corrosion perforation observed following the exhumation and cleaning down process is one of the 15,000 l USTs was not caused by the cleaning down process when employing a shovel to remove from the tank adhering clay, by virtue of the action of the shovel perforating a corrosion site on the UST that was covered by adhering clay.

442. In particular, reasonable doubt exists as to whether any leakage of product occurred from the two smaller USTs by virtue of those USTs not being used throughout the charge period. This finding includes the unspecified period of approximately two months when Mr Dann (Wise) said that he hand pumped into the smallest tank, on two separate occasions, 400 l of kerosene.

443. I did not find the testimony of Mr Dann (Wise) to be very clear or ultimately satisfactory on this matter. Firstly, he does not refer to it in his affidavit (Exhibit 107). Secondly, in his evidence in chief (transcript p 785) he had said that he had used the tank “very, very briefly” and that he had experienced “degrees of variances in that tank while using it”. He said that he had “water dipped the tank at one stage and had water in it”. He then stopped using the tank.

444. Then in re-examination, he affirmed telling Mr Bell in his interview that he (Mr Dann) estimated that he lost 150 l on each of the two occasions that he had hand pumped 400 l of kerosene into the tank.

445. However, even if Mr Dann’s (Wise) testimony on this issue were accepted, I do not think it establishes that product was lost from the kerosene tank, the capacity of which was 2,000 l. This is because of the probability of hydrostatic pressure allowing the ingress of water into the tank (earlier discussed) by virtue of the groundwater level on the outside of the tank being consistently higher than the low level of kerosene in the tank (presumably limited throughout the entire charge period to that unspecified quantity below the seal point augmented on two separate occasions by the 400 l hand pumped into the tank by Mr Dann).

446. In particular, reasonable doubt exists even assuming that the one corrosion perforation existed in the 15,000 l UST when it was buried in situ, whether product leaked from that perforation because of the reasonable possibility that that corrosion perforation was completely plugged by virtue of adhering clay or the corrosion product.

447. The likelihood of plugging of that corrosion perforation is reinforced by virtue of the fact that water had never been found in the UST in the course of routine daily water paste dipping of the tank when (if the corrosion perforation had not been plugged) water would have been likely to have ingressed into the tank from time to time by the application of hydrostatic pressure brought about by the level of groundwater outside the UST being higher from time to time than the corresponding level of product inside the UST.

448. In particular, doubt exists that the hydrocarbon contamination may not have been caused by product leaking from the corrosion perforation in the 15,000 l UST by virtue of the existence of other sources or causes of that contamination. Such other sources include the ordinary operation of SMAP for a continuous period of 40 years eg surface spills from bulk deliveries and from the bowsers etc. Additionally, there is the evidence of spills from the Above Ground Diesel Tank, and of the fill line from that tank being twice repaired or replaced in the 1980s. None of these sources or causes of contamination is comprehended by the present charge. Moreover, there is the reasonable possibility of leakage from the two smaller USTs when they were in regular use at SMAP before the commencement of the charge period (where such leakage would not have continued in the charge period because the tanks were not used).

449. Moreover, there is the reasonable possibility of hydrocarbon contamination emanating from the SMAP installations and facilities otherwise than by leaking from corrosion perforations in the USTs and appurtenant pipework, this alone being the exclusive focus of the Prosecution case.

450. Yet another potential source or cause of the hydrocarbon contamination is the four existing service stations located in very close proximity to SMAP, all being up slope and up the hydraulic gradient of the SMAP site (see first OTEK Report (Exhibit 4) Section 2.4). These potential offsite sources or causes of the contamination were not properly or fully investigated so as to provide a reasonable basis for concluding that they were not implicated in the contamination.

451. All of the foregoing doubts that the hydrocarbon contamination was not caused by product leaking from the corrosion perforations in the USTs and appurtenant pipework are corroborated by the evidence of the experience of the successive operators of SMAP, and especially the fact that daily stock reconciliation systems employed at SMAP did not reveal abnormal stock losses. Any such abnormal variances would be almost certain to be manifested if product was leaking from the corrosion perforations in the USTs or the fill line, for example at the rate accepted by Dr Potter of unimpeded leakage from a perforation 20 m in diameter, namely a tank containing 5,000 l of product would empty its content in 3 1/2 hours.

452. In my judgment, the Prosector has not excluded any of these reasonable doubts, especially to the required standard of proof ie beyond reasonable doubt, with the inevitable consequence that the circumstantial evidence does not support, as the only rational inference, a finding that the hydrocarbon contamination in the subsurface soils and groundwater of SMAP and the adjoining sites, leaked from corrosion perforations contained in the USTs and appurtenant pipework.

(b) The admissions

453. The entire content of the sources said to give rise to relevant admissions has been recited at pars 100 - 165 of the reasons. Although in par 166 I deferred my evaluation of the evidence pertaining to the admissions I expressed in pars 166-174 a number of intermediate findings which are relevant to my ultimate evaluation of the admissions.

454. In my ultimate evaluation of the weight to be given to the Defendant’s admissions, I have concluded, having regard to (i) their content (there must be some doubt about the precise content of the conversation held on 5 October 1994 that Mr Bell has deposed to); (ii) their timing; (iii) their context and (iv) their purpose, in what was undoubtedly an evolving task of investigation of a hydrocarbon contaminated site and its remediation (which was the priority task in the period immediately following the discovery in June 1994 of contaminated groundwater on the Cooma Ski Hire premises) that the weight to be given to the admissions is not greater than the weight that is properly to be given to the two undisputed circumstantial facts—(i) the hydrocarbon contamination of the subsurface soil and groundwater of SMAP; and (ii) the discovery after exhumation and cleaning of the USTs and pipework of corrosion perforations in three of the USTs and a fill line.

455. Indeed, the inevitable inference to be drawn from the original ascertainment of those two circumstantial facts is that firstly OTEK (which ascertained them) and secondly Shell (OTEK’s client) concluded that the two facts were causally related in that “it appeared” that the hydrocarbon contamination had been caused by the leaking of product in the USTs and fill line via the corrosion perforations.

456. No doubt at the time, the assumption appeared to be a reasonable one, in much the same fashion as the Prosecution’s case based upon the circumstantial evidence has been principally founded upon those two circumstantial facts.

457. However, one apparent consequence of the early forming of this reasonable assumption by OTEK and by Shell was that investigation of other potential sources of the hydrocarbon contaminant (such as those outlined in s 2.4 and s 2.5 of the first OTEK Report (Exhibit 4) did not proceed.

458. Moreover, the same assumption simply appears to have been carried forward in all expert Reports subsequent to the second OTEK Report (Exhibit 7) that Shell provided to the EPA, in much the same manner that the corrosion experts and groundwater experts and environmental scientists who gave evidence for the Prosecution all had made the same assumption.

459. However, the assumption has been challenged by the Defendant in its defence of the charge brought against it by the EPA (some three years after the assumption had been first communicated by Shell to the EPA). In this respect, it is really not to the point for the Prosecutor to say—why did not Shell from the very beginning raise the same doubts concerning the validity or legitimacy of the assumption as it has done during this extended trial? The answer is obvious, the contexts and stakes are entirely dissimilar.

460. Moreover, the admissions do not gain greater strength by virtue of the fact that they were not qualified or doubted in the manner that the Defendant, at its trial, has challenged the assumption (or ultimate inference that the Prosecution urges the Court to adopt on the circumstantial evidence). Nor can the admissions be given decisive weight in view of the Court’s evaluation of the circumstantial evidence adduced in this case when that circumstantial evidence involves the very same circumstantial facts that gave rise to the assumption as originally expressed by OTEK and Shell in its communications with the EPA and which are relied upon by the Prosecutor as constituting the relevant admissions.

461. In all the circumstances, I find that the admissions to not form a satisfactory or reasonable basis for a finding that the contamination was sourced in the USTs and fill line leaking product from corrosion perforations.

(c) The circumstantial evidence and the admissions in combination

462. In my judgment, and having regard to my separate evaluations of (i) the circumstantial evidence; and (ii) the admissions, there is nothing in the combined force or effect of the evidence that overcomes or excludes (beyond reasonable doubt) the reasonable doubts that I have found to exist concerning the Prosecution case that the hydrocarbon contamination was caused by any of the USTs and /or appurtenant pipework leaking product through corrosion perforations in those USTs and pipework.

463. The result of this evaluation of the evidence on this issue is that the Prosecution has not established an essential ingredient of the offence as charged and that accordingly, the Prosecution has not proved the Defendant’s guilt beyond reasonable doubt. This conclusion, which of course is independent of any consideration of the negligence alleged against the Defendant, means that it is not necessary for me to proceed to determine that final issue in dispute.

E. CONCLUSIONS AND ORDERS

464. For all the foregoing reasons, I find that the Prosecution has not proved the Defendant’s guilt beyond reasonable doubt.

465. As requested by the Prosecutor, I stand the proceedings over for two weeks for the purpose of then making final orders disposing of the proceedings.

PLEASE VIEW THE ICONS BELOW FOR ANNEXURES A-D

ANNEXURE E

CITATION:	Environment Protection Authority v Shell Co of Australia Ltd [2000] NSWLEC 132
PARTIES:	PROSECUTOR: Environment Protection Authority DEFENDANT: Shell Company of Australia Ltd (The)
FILE NUMBER(S):	50071 of 1997
CORAM:	Bignold J
KEY ISSUES:	Environmental Offences :- Negligently cause substance to leak in a manner likely to harm the Environment. Hydrocarbon contamination of Service Station site. Circumstantial evidence case—whether there is a reasonable doubt that Defendant did not commit offence.
LEGISLATION CITED:	Environmental Offences and Penalties Act 1989 s 6(1)
CASES CITED:	Burnie Port Authority v Gerard Jones Pty Ltd (1994) 179 CLR 520; Empress Car Co (Abertillery) Ltd v National Rivers Authority (1998) 1 AllER 471; Environment Protection Authority v Multiplex Constructions Pty Ltd (2000) NSWLEC 6; Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336; Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336 at 343; Jones v Dunkel (1959) 101 CLR 298; Kondis v State Transport Authority (1984) 154 CLR 672; New South Wales Sugar Milling Co-Operative Ltd v Environment Protection Authority (1992) 75LGRA 320; Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313· Shepherd v The Queen (1990) 170 CLR 573 at 578
DATES OF HEARING:	18/11/99-30/11/99, 1/12/99-17/12/99, 31/01/00, 02/02/00-04/02/00
DATE OF JUDGMENT:	06/30/2000
LEGAL REPRESENTATIVES:	PROSECUTOR: Mr D Buchanan SC with Mr D Jordan, Barrister SOLICITORS Solicitor for the EPA DEFENDANT: Mr G Miller QC with Mr I Hemmings, Barrister SOLICITORS Coudert Bros