Wallace Corporation Limited v Waikato Regional Council HC Hamilton CRI 2008-404-404
[2010] NZHC 2002
•7 October 2010
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
CRI 2008-404-000404
CRI 2008-404-000405
CRI 2008-404-000406
UNDER the Summary Proceedings Act 1957
IN THE MATTER OF an appeal under s 116 of the Act
BETWEEN WALLACE CORPORATION LIMITED First Appellant
ANDNEVILLE KEITH CROSS Second Appellant
ANDBARRY JAMES DEW Third Appellant
ANDWAIKATO REGIONAL COUNCIL Respondent
Hearing: 27, 28, 29, 30 October 2009
10 December 2009
Counsel: M E Casey QC and B C Parkinson for the Appellant in CRI 2008-
404-404
C T Gudsell QC for the Appellant in CRI 2008-404-405
H B Leabourn for the Appellant in CRI 2008-404-406
T V Clark and S N Cameron for the Respondent on all three appeals(S N Cameron only on 10 December 2009) Judgment: 7 October 2010
JUDGMENT OF WILD J
WALLACE CORPORATION LIMITED And Ors V WAIKATO REGIONAL COUNCIL HC HAM CRI 2008-
404-000404 [7 October 2010]
Introduction ............................................................................................................... [1] Factual background ................................................................................................... [9] The District Court decision of 11 September 2007 on liability .............................. [20] Further evidence...................................................................................................... [46] WCL‟s appeal against conviction ..................................................................................
No discharge of PCBs ..................................................................................................... [50] No discharge into land.................................................................................................... [71] No continuing discharge ................................................................................................. [74] Discharge not by WCL, nor permitted by WCL .............................................................. [76] Failed to take all reasonable steps to remedy effects ..................................................... [97]
Mr Cross‟ appeal against conviction....................................................................... [98] The District Court decision of 17 November 2008 on sentencing and enforcement order ...................................................................................................................... [105] Mr Dew‟s appeal against sentence .................................................................................
Mr Dew’s submissions .................................................................................................. [136] The Council’s submissions............................................................................................ [146] My decision ................................................................................................................... [153]
Mr Cross‟ appeal against sentence .................................................................................
Mr Cross’ submissions.................................................................................................. [157] The Council’s submissions............................................................................................ [167] My decision ................................................................................................................... [168]
WCL‟s appeal against sentence .....................................................................................
WCL’s submissions ....................................................................................................... [172] The Council’s submissions............................................................................................ [177] My decision ................................................................................................................... [182]
WCL‟s appeal against the enforcement order ................................................................
WCL's submissions........................................................................................................ [195] The Council’s submissions............................................................................................ [196] My decision ................................................................................................................... [202]
Result .................................................................................................................... [234] Costs ...................................................................................................................... [239]
Introduction
[1] These are appeals against conviction and sentence by Wallace Corporation Limited (WCL) and two of its employees, Messrs Cross and Dew. Mr Dew appeals only against his sentence. WCL also appeals an enforcement order made against it.
[2] In an 11 September 2007 decision, the District Court convicted each appellant for discharging contaminants from industrial premises into land, contrary
to s 15(1)(d) Resource Management Act 1991 (the RMA). In the case of Mr Cross, his conviction was for permitting such a discharge.
[3] Subsequently, in a decision 14 months later on 17 November 2008, the District Court fined WCL $35,000, Mr Cross $45,000 and Mr Dew $45,000. Respectively, the appellants were also ordered to pay the prosecution costs of
$20,000, $7,500 and $2,500. The Court also made an enforcement order against
WCL to locate and remove the source of the contaminants, regardless of the cost.
[4] The case arises from the burial of some discarded electrical capacitors beneath the concrete floor of one of the buildings comprising WCL‟s Waitoa Works. The Court held that the capacitors, when buried, still contained polychlorinated biphenyls (PCBs). PCBs are both a toxic pollutant and a hazardous substance. Their use was phased out in New Zealand starting in the mid-1980s, and continuing through the 1990s. Wide publicity accompanied the phase out.
The issues
[5] These appeals raise three sets of issues.
Responsibility
[6] Was the District Court correct to hold WCL and Mr Cross responsible for discharging PCBs from the capacitors? (As mentioned, Mr Dew does not appeal the finding against him.)
Penalty
[7] Is the fine imposed on each appellant manifestly excessive? Similarly, is the costs order made against each appellant a proper one?
Enforcement order
[8] Was the enforcement order made against WCL correctly made in the circumstances?
Factual background
[9] WCL‟s Waitoa Works includes meat processing, offal rendering and a tannery. It is a large business employing up to 600 workers seasonally.
[10] In the mid-1990s WCL removed some of the electrical capacitors from its plant, because they were leaking. Mr Ellis, a storeman on the electrical and mechanical side at WCL, was involved in the removal. At Mr Dew‟s request, Mr Ellis gathered a sample of oil from these capacitors. He did that by drilling holes in two or three of the larger capacitors. The test results of 27 March 1997 confirmed the capacitors contained PCBs in the form of dielectric (ie non-conducting) fluids. Mr Ellis‟ evidence was that he then obtained a quote from Tredi New Zealand Limited (Tredi), a company expert in the safe disposal of PCBs. He said Mr Cross supplied him with Tredi‟s name, and the quote went to Mr Cross, who did not action because - Mr Ellis suggested - of the cost involved. This was strongly disputed by counsel for Messrs Dew and Cross, and Tredi had no record of quoting to WCL for disposal of PCBs in 1997.
[11] Over the first half of January 1998, WCL built the foundations for a new Dissolved Air Flotation (DAF) or flocculation plant. This processes waste water en route from the rendering plant to oxidation ponds. Before the concrete floor slab for the new DAF plant was poured, Mr Dew instructed Mr Ellis to dig a hole beneath where the slab was to be poured, and dump into it building debris and eight of the capacitors. When Mr Ellis refused to follow Mr Dew‟s instructions, Mr Dew instructed a contractor, Mr Malcolm Workman, who used his digger to excavate a hole and bury the debris and capacitors in it. The concrete slab floor was then poured over the buried debris and capacitors and the DAF plant completed and commissioned.
[12] Mr Ellis later informed WCL‟s Risk Compliance Manager, Mr Barry Oldridge, about what had happened. Mr Oldridge advised Mr Cross by memorandum dated 24 March 2000. Mr Cross acknowledged this in his own memorandum of 31 March 2000. He informed Mr Oldridge that he was investigating both the disposal of the remaining capacitors, and Mr Oldridge‟s claim that the other capacitors had been inappropriately disposed of in 1998.
[13] In April 2000 WCL contracted with Tredi for the disposal of the remaining capacitors. Declarations made to the Ministry of Health on 8 November 2000 show that Tredi took custody of those capacitors on 29 September 2000, and issued a “Certificate of Elimination” of those capacitors on 11 January 2001.
[14] Mr Ellis tendered his resignation to Mr Cross on 20 November 2003 stating, in his letter of resignation, that he was “no longer able to tolerate the people and the conditions [he] was working in”. Mr Ellis subsequently gave the documentation relating to the buried capacitors to another employee, who in December 2003 passed that documentation to Ms Anne-Marie McInally, a solicitor with the New Zealand Amalgamated Engineering, Printing and Manufacturing Union Inc. (EPMU).
[15] Fifteen months went by. In a letter on 21 March 2005, Ms McInally advised Mr Cross of the information that had been passed to her, and invited Mr Cross‟ comment. Mr Cross replied on 19 April 2005, enclosing a copy of the Certificate of Elimination and stating “we do not know of any batteries being buried under any building on site”. Ms McInally responded on 21 June 2005, enclosing a copy of Mr Oldridge‟s 24 March 2000 memorandum, which contradicted Mr Cross‟ statement. Ms McInally advised Mr Cross that she had referred the matter to the Waikato Regional Council (known as Environment Waikato) (the Council).
[16] A Council Resource Officer, Ms Jane Leeder, wrote to Mr Cross on 21 July
2005. She asked several questions about WCL‟s storage and disposal of its capacitors. Mr Cross replied on 11 August 2005, answering the questions and dealing specifically with Mr Oldridge‟s 24 March 2000 memorandum. Mr Cross rejected the Council‟s contention that WCL had not responded to that memorandum. He advised that WCL had investigated the alleged burial of some of the capacitors
and that, to WCL‟s knowledge, that had not happened. Mr Cross added that it would be prudent to conduct soil tests around the DAF plant and advised that WCL would arrange such tests. The results of those soil tests were released on 3 November 2005. They showed no traces of PCBs in the soil around the DAF plant.
[17] The Council continued to correspond and meet with WCL through 2005. In a letter dated 24 November 2005 to the Council, WCL accepted that capacitors had been buried. That letter annexed a 27 June 2005 memorandum from Mr Dew in which he admitted he had buried the capacitors. As a result, the Council laid informations against WCL and Messrs Cross and Dew on 19 December 2005. Each information alleged that the defendant had committed a continuing offence against s
338(1)(a) RMA by discharging PCBs from 1 January 1998 to 18 December 2005 in contravention of s 15(1)(d) RMA.
[18] Pursuant to an agreement between WCL and the Council, further soil tests were undertaken before the hearing. This time, the soil under the DAF plant was tested after a hole was cut in the concrete floor at the point Mr Workman believed he had dug the burial hole. The results, released on 20 September 2006, showed no evidence of capacitors or of material contaminated with oil, and no PCB concentrations at levels of concern. Ground water test results released on 1 and 8
March 2007 recorded PCB levels below the analytical detection limits.
[19] The hearing ran over 13 days in the District Court at Morrinsville, and then at Auckland, between February and April 2007. Judge McElrea delivered his decision on liability for the RMA charges on 11 September 2007. On 17 November 2008, after a further three day hearing, and further written submissions, spanning June- September 2008, Judge McElrea delivered his decision on penalty.
The District Court decision of 11 September 2007 on liability
[20] Judge McElrea began his judgment with an analysis of the scheme of the Act and the offences charged. Contravention of s 15(1)(d) RMA required proof of several elements. However, all had been admitted by the appellants (under the then
equivalent of s 9(2) Evidence Act 2006) except one: that PCBs had been discharged into the ground.
[21] The Judge noted that s 340 RMA imposes vicarious liability, but also affords a defence to those “concerned in the management” of WCL, if they did not know that the offence was being committed.
[22] Judge McElrea then commented on the form in which the Council had laid the charges, noting in particular that the informations alleged the appellants had committed a “continuing offence”. Section 339(6) RMA defines such offences thus:
The continued existence of anything, or the intermittent repetition of any actions, contrary to any provision of this Act shall be deemed to be a continuing offence.
[23] The Judge explained that a continuing offence requires proof beyond reasonable doubt that an original offence was committed at the specified time, plus proof that that offence continued over the specified period. By contrast, a representative offence requires proof that an offence was committed at least once during the specified period. The increased onus for a continuing offence is commensurate with the increased penalty; essentially one fine for the original offence and another for its continuation. Judge McElrea noted that the Council needed to prove that PCBs had been discharged on the original date charged, and were continuing to discharge into the ground.
[24] The Judge then proceeded to resolve several evidentiary issues. He accepted Mr Oldridge‟s 24 March 2000 memorandum as documentary hearsay, evidencing the state of knowledge of WCL and Mr Cross at the time they received it. In a careful and detailed assessment, he accepted, as credible and reliable, Mr Ellis‟ evidence, which was central to the prosecution case. He rejected the appellant‟s submissions that Mr Ellis‟ allegations were fabricated, and had been motivated by ill feeling on Mr Ellis‟ part toward the appellants resulting from the circumstances of Mr Ellis‟ resignation from WCL.
[25] Next, the Judge found (at [43]) “there is no doubt that there are capacitors buried under the DAF concrete floor slab. WCL admits this in its correspondence
with the Council”. After considering the available evidence, the Judge stated that nine or ten capacitors had “probably” been buried, and it could have been as many as
13. However, he concluded “I am prepared to proceed on a figure of eight capacitors”.
[26] The Judge then considered the accuracy of the 27 March 1997 test result of a sample of oil taken by Mr Ellis from the capacitors. He accepted Mr Ellis‟ evidence that he had drilled holes in two or three of the capacitors and poured oil from them into a single sterile sample bottle which he then sent to Hill Laboratories. The Judge upheld as accurate the 100% PCB oil test result, and rejected a “chain of custody” type challenge.
[27] The Judge next made a finding that some, if not most, of the buried capacitors will have leaked PCB oil. He based this on the fact that the capacitors dated from the 1950s-1970s era, and had been removed from service because they were leaking oil around their terminals. If the two or three capacitors into which Mr Ellis had drilled a sampling hole were lying on their sides, this leaking would be substantially increased.
[28] Judge McElrea then turned to the last factual issue concerning the PCBs, whether they were discharged “into land” when they leaked. This had been strenuously argued before him, including on an application for a ruling that there was no case to answer. He reiterated his findings that Mr Workman had excavated a hole about one metre deep, and that the building debris tipped into this hole along with the capacitors comprised flashing and wire offcuts and the like. Although there was evidence that some of the excavated soil had been replaced, the Judge proceeded on the basis that the hole had been back-filled with sand. He found the configuration of the ground would have been similar to that encountered when an excavation was made after cutting through the concrete floor slab of the DAF in an unsuccessful attempt by WCL to locate the capacitors. As indicated in [18], this excavation was at the position Mr Workman recalled burying the capacitors. Because of subsequent events (detailed in [46]-[49] below), the Judge‟s criticism about the location of this excavation is relevant. In footnote 46 to his judgment he stated:
I accept the evidence of Mr Ellis as to where the hole was dug, and it was very close to the position estimated by Mr Workman but slightly to one side (the west). I am very surprised that no attempt was made by WCL to look in that position at that time, since the Council had given WCL a copy of the floor plan marked by Mr Ellis.
[29] In its 20 September 2006 report on this August 2006 excavation, Sinclair Knight Merz (SKM) recorded the following sequence: concrete floor slab .1 metre thick; levelling sand layer .1 metre thick; pre-existing layer comprising .25 metres mixed sand and gravel over .15 metres clayey sand (together comprising the surface of the former truck yard); and the virgin ground below – dark brown silt topsoil, sandy silt and silty clay.
[30] The Judge therefore found that the capacitors had been dumped in a hole well below the original ground level and, by any definition, were “in the ground”. He rejected that the capacitors were “entombed in concrete” as advised by Mr Cross to the Council on 11 August 2005. Because the exact burial site had not been located, with the result that no tests had been done on the soil under that burial site, the Judge held that the fact that no PCBs had yet been detected in ground water or soil tests under or around the DAF plant was not evidence against his conclusion that the PCBs were free to migrate into the ground surrounding the burial hole, as well as down towards the ground water. In the case of the capacitors Mr Ellis had drilled into, the Judge held this migration would have occurred “very soon after burial”, and “within a matter of weeks or months for the remainder”. He therefore found it proved that the discharge into land first occurred not later than 31 March 1998.
[31] Next, the Judge dealt with the roles of Mr Cross and Mr Dew in the burial of the capacitors. Although Mr Workman could not remember who had instructed him to bury the capacitors, the Judge was satisfied that it was Mr Dew. Although he thought it likely that Mr Cross also knew of the burial of the capacitors at the time, he was not able to conclude that beyond reasonable doubt. He held that Mr Cross certainly knew when he received Mr Oldridge‟s 24 March 2000 memorandum, and found that Mr Cross‟ 19 April 2005 letter to the EPMU was an admission on his own and WCL‟s behalf that “there were (what he believed to be) PCBs on site”. The Judge accepted completely the evidence of the Managing Director of WCL, Mr James Wallace, that he had only heard of the burial of the capacitors after the
prosecution was brought. He accepted also that Mr Wallace would have taken immediate action, if informed in 2000. The Judge was critical of Mr Cross for keeping Mr Wallace and the other directors of WCL “in the dark in order to protect himself from criticism”. He made the point that WCL had gained nothing through the directors‟ ignorance, because he intended to hold the Company vicariously liable.
[32] The defence evidence was the next topic in the judgment. For several reasons the Judge firmly rejected expert evidence given by English qualified Mr Robotham of SKM. Mr Robotham had expressed the view that all reasonable steps had been taken to deal with any buried PCBs, essentially because they had not so far been detected and could be monitored. Subsequent events give particular relevance to this passage of the judgment:
[76] Frankly, I found this evidence astonishing. It seems to have been based on the unreasonableness of having to decommission the whole DAF building (and possibly the whole plant) to find the buried PCBs. Yet that is not necessarily the alternative, on the evidence before me. The site has been identified by Mr Ellis but WCL has not excavated at that limited point, although Mr Rowbotham would support that step if it was practicable. In my view it is, and always was, eminently practicable.
(I have corrected „Mr Workman‟ to „Mr Ellis‟ in this paragraph, because counsel, before me at 11 am on 28 October 2009, agreed that was an error. I have left the Judge‟s incorrect spelling of Mr Robotham‟s name.)
[33] The Judge equally firmly rejected Mr Robotham‟s view that it is responsible to wait for the PCBs to be found in the ground water. He said by then it may be too late as the flow of ground water is toward the river. He elaborated:
[77] ... The effects of any escape downstream could be practically and financially devastating for other users of the water (and ultimately, for WCL) – not to mention New Zealand‟s reputation as an exporter of primary produce. It could be years, even decades, before the PCBs enter the groundwater system, and by then the site may have changed hands with the then owner having no interest in monitoring WCL‟s problems. Such a “wait and see” approach in this case would be environmentally irresponsible.
[34] The Judge considered evidence from Mr Julian (who operated a capacitor disposal business) did not advance the case one way or the other, and considered that Mr Tapping (WCL‟s CFO and General Counsel) was not the right person to give the
evidence “he appeared to have been called to give”. However, the Judge was highly complimentary about the evidence of Mr Wallace of URS, the company which had done soil sampling tests around the DAF building in 2005 and ground water tests in February 2007. Those tests showed no evidence that PCBs had contaminated the soil or groundwater. The Judge expressed the view that this lack of evidence of contamination resulted from a combination of six factors:
[90] ...
The “dynamics of their release” (ie, their escape from the capacitors,
which although in my view inevitable, may be occurring slowly).
Relatively flat contours.
A relatively low-permeability aquifer.
Low mobility through lack of a ready medium such as water, given
the “shelter” effect of the floor slab and building.
Limited solubility (tendency not to dissolve in water). The depth of the groundwater.
Accordingly, the test results did not shift the Judge from his conclusion that PCBs had been discharged into land.
[35] Judge McElrea then applied the legal test under s 15(1)(b) RMA, as laid down by the Court of Appeal in McKnight v NZ Biogas Industries Ltd [1994] 2
NZLR 664. Following from the strict liability nature of the offence under s 341
RMA, the Court of Appeal held that it was not necessary to prove the defendant intended to commit the offence, which required proof that the person had caused the relevant contaminant to be discharged. Similarly, “allowing to escape” required proof only of an:
... awareness of facts from which a reasonable person would recognise that escape could occur. ... failure to investigate and take appropriate preventive steps would amount to allowing an escape should it subsequently occur (at
672).
[36] This important finding by the Judge followed:
[95] Applying this test, I find that a reasonably prudent person in the position of Mr Dew would have realised that an escape of contaminants
could occur and avoided burial altogether, or at least ensured that the capacitors, which had had holes drilled in them and were leaking around the terminals, did not still contain PCBs. A reasonably prudent person in the position of Mr Cross or WCL would have appreciated the same risk and removed the capacitors from the ground when their burial was discovered. By failing to take such precautions these defendants can both be said to have caused the discharge of PCBs.
[37] Acknowledging that a discharge of the PCBs continued only as long as they were in fact escaping, on all the evidence, the Judge found:
... that the discharge of PCBs will have commenced not later than 31 March
1998 and continued at least for the remainder of that year, and probably much longer.
[38] The Judge then considered Mr Dew‟s position. As Mr Dew had given the orders to bury the capacitors. The Judge found him guilty beyond reasonable doubt of discharging PCBs into ground, that offence continuing from 1 April to
31 December 1998.
[39] Dealing next with Mr Cross, the Judge found (at [102]) he was aware of the burial “not later than three months after the event, ie by 31 March 1998, and probably earlier”. He rejected the explanations proffered as to why Mr Cross had done nothing. The Judge was in no doubt that Mr Cross was legally obliged either immediately to have the PCBs removed, or to obtain both a resource consent under the RMA and an exemption under the Hazardous Substances legislation. He held Mr Cross personally responsible for doing nothing, taking the view that he hoped the problem “could stay „swept under the carpet‟”. He found it proved that Mr Cross had permitted discharge of PCBs into land, as a continuing offence, from 1 April to
31 December 1998. He considered Mr Cross guilty of “permitting” the discharge, even though technically he may have become a party to the offence of discharging the PCBs from the time he knew of it and decided not to remove the capacitors. In terms of culpability he considered there was no distinction.
[40] Section 340(1) RMA imposed vicarious liability on WCL for offences committed “by any person acting as the agent ... or employee” of WCL. Mr Cross and Mr Dew were both employees of WCL. As it stood at the time, s 340(2) afforded WCL a defence if:
(i) neither the directors nor any person concerned in the management of [WCL] knew or could reasonably be expected to have known that the offence was to be or was being committed; or
(ii) [WCL] took all reasonable steps to prevent the commission of the offence; and
(c) in all cases, that [WCL] took all reasonable steps to remedy any effects of the act or omission giving rise to the offence.
[41] The Judge held (at [111]) that Mr Cross was “certainly” concerned in the management of WCL. He was General Manager of the Rendering Division reporting directly to Mr Wallace. He attended Board meetings to report on the Company‟s Rendering Division. Accordingly, Mr Cross‟ offending rendered WCL liable as if it had itself committed the offence from 1 April 1998.
[42] Whether the same result could be reached because of Mr Dew‟s actions was a nicer issue that caused the Judge to consider a number of authorities, English and Australian, as well as New Zealand. The Judge also analysed the phrase “concerned in the management of” in the context of the Act. Assisted particularly by the approach of Ormiston J in Commissioner for Corporate Affairs (Vic) v Bracht [1998]
14 ACLR 728 at 735-736, the Judge concluded (at [127]) that there must be:
... some involvement of the individual in the decision-making process of the corporation, that some responsibility but not necessarily control must vest in that person, but that different types of activities will be relevant, such as giving advice, participating in decision-making, and execution of decisions beyond mere carrying out of directions.
[43] Given Mr Dew‟s title and responsibilities, his involvement in the earlier decision to dispose of the capacitors properly, and then his taking charge, as one of the “boss people”, of their incorrect burial, the Judge concluded that Mr Dew also was sufficiently “concerned in the management” of WCL to impute vicarious liability. In the result, via either Mr Cross or Mr Dew, WCL could not avail itself of the s 340(2) exception to vicarious liability.
[44] Even had neither Mr Cross nor Mr Dew been “concerned in the management of” WCL, the Judge held that WCL would not have been able to avail itself of the s 340(2) defence because it had not taken all reasonable steps to prevent the
commission of the offence or remedy its effects, as required by s 340(2)(c). First, given the position in WCL of Messrs Cross and Dew, their failure to prevent the commission of the offence was also WCL‟s failure. Secondly, the Judge rejected WCL‟s submission that there were no effects to remedy. The effects may have been “localised”, but they were nevertheless effects. The Judge rejected that the maxim “out of sight out of mind” had any application. He also regarded WCL‟s offer to take all necessary steps to address adverse effects if they should occur as inadequate, because the statutory obligation was to act and not simply to offer to act. Nor could WCL pass the obligation to the Council. WCL thus failed to meet all the requirements for the s 340(2) defence. Consequently, WCL was liable vicariously both for discharging a contaminant onto land (Mr Dew‟s offence) and permitting that discharge (Mr Cross‟ offence). As those two charges against WCL were in the alternative, and as he considered Mr Dew‟s the primary offence, the Judge convicted WCL of that.
[45] Finally, acknowledging that he had convicted the three appellants for offending different from that charged, the Judge made these comments at [138]:
[138] By way of explanation, I have not further amended the informations but have taken the course open to any Judge when something is proved that is less than what is charged, of finding the charge proved “but only in respect of” the lesser quantum (amount, time period, etc). That then becomes the substance of the offence for which the conviction is entered. ...
The Judge ended by requesting submissions on sentence.
Further evidence
[46] Pursuant to s 119(3) Summary Proceedings Act 1957, WCL applied to admit, as further evidence in support of its appeal against conviction, the report of URS dated 7 February 2008. The Council did not oppose this, and I received this further evidence. URS‟s report was before Judge McElrea at the sentencing stage in the District Court, so is already evidence on that part of the appeal.
[47] On 3 November 2007 URS undertook an excavation 1.5 metres deep beneath the floor of the DAF plant at the point marked by Mr Ellis on a floor plan (Exhibit 3)
at the hearing. No buried capacitors or buried building rubbish were uncovered. From this excavation two horizontal bores were drilled with a hand auger, approximately .5 metre and .6 metre beneath the coagulant mixing tank situated next to the excavation. These lateral auger holes did not detect evidence of ground disturbance ie they did not intersect the burial hole. 19 soil samples were collected and submitted for PCB analysis. The reported concentrations of PCBs for all 19 samples were below the laboratory method detection limits of 0.2 mg/kg. The analytical method used did not quantify all the theoretically possible 209 PCB congeners, but it did quantify those most commonly used in commercial PCB oil products. The laboratory tests detected four PCB congeners. The highest concentration detected was in congener PCB-180 at 0.038 mg/kg in soil sample SST899. This sample comprised silty clay from the undisturbed deeper third of the excavation, that is from beneath the surface of the former truck park. That reading is effectively 38 parts per billion. As no PCBs were detected in the eight soil samples collected from the lateral auger cores, USR reported that it was considered extremely unlikely that the PCBs detected in SST 899 had migrated laterally from another “source” area.
[48] In its report URS explained that commercial mixtures of PCBs used in capacitors were manufactured under the trade name Aroclor. Assuming an Aroclor or similar PCB product had been used in WCL‟s capacitors, URS expected that more than four congeners would be detected. That was because Aroclors contained between 75 and 99 of the theoretically possible 209 different congeners. However, in four of the seven Aroclors marketed commercially, the four congeners detected in soil sample SST899 were not present or were at very low concentrations. Their presence was thus unlikely to be associated with those Aroclors. However, the PCBs detected in SST899 were the four most common congeners in Aroclor 1260, making up 36% of the volume by weight of that Aroclor. There were 96 congeners in Aroclor 1260. The absence in SST899 of any of the other 92 congeners cast doubt on the veracity of the very low concentrations detected by the laboratory. URS concluded that they could result from cross-contamination, sourced from the laboratory or the field. URS gave a number of examples as to how that might have occurred. One was contamination transported on a truck or other vehicle from
another location into the truck park which had occupied the area before the DAF
plant was built.
[49] In summary, the investigation conducted by URS did not identify any evidence of buried capacitors or significant PCB contamination.
WCL’s appeal against conviction
No discharge of PCBs
[50] Mr Casey came close to challenging the Judge‟s finding that capacitors had been buried at all. He pointed to the Judge‟s heavy reliance on Mr Ellis‟ evidence as to the location of the burial hole. As I have mentioned in [47], Mr Ellis‟ evidence has since been proved wrong. Ms Clark countered that that did not adversely affect Mr Ellis‟ credibility, nor “the liability decision of the Judge and his reliance upon (the evidence of Messrs Ellis and Workman) concerning the location of the buried capacitors”. I am unsure quite what the last part of that submission means.
[51] I do not think Mr Casey really disputed that capacitors had been buried under the DAF building. Nor did he contest the Judge‟s finding that eight capacitors were buried; that finding is as favourable to WCL as the evidence permitted.
[52] The Council accepted that burying the capacitors was not itself a discharge into land. The Council needed to prove beyond reasonable doubt both that the capacitors contained PCBs when buried, and that following burial PCBs discharged from the capacitors into the land. The Judge found both points proved. His reasons (at [54]) for finding that there were still PCBs in the capacitors when they were buried were:
a) Only about eight months had elapsed from the time Mr Ellis took samples of oil from three of the capacitors in March 1997 until the eight capacitors were buried in early January 1998.
b)PCBs have a low rate of volatilisation ie losing molecules to the atmosphere.
c) There was no evidence of the capacitors doing anything except sitting, first on the floor of the switch room, and then on a pallet outside the electrical storeroom, from the time of their removal in the mid-1990s until they were buried in January 1998.
[53] The Judge (at [55]) gave three reasons for finding that the capacitors leaked after being buried:
a) All the capacitors on the pallet had been removed from the capacitor bank because they were leaking around their terminals, which are atop the capacitor.
b)For the two or three capacitors into which Mr Ellis had drilled sampling holes, the ability to leak further if tipped on their sides was substantially increased.
c) Mr Workman lifted the capacitors off the pallet into the bucket of his digger, and then tipped them off the bucket into the hole. Given the roughly “matchbox” shape of the capacitors, the chances of their remaining upright after being tipped into the hole were remote, and lying on their sides the prospect of leaking through the terminals and/or drilled holes would be much enhanced. The Judge concluded:
I am sure that at least some, if not most, will have leaked
PCB oil where they now lie.
[54] Mr Casey challenged both the Judge‟s findings. As his reasons overlap, it is easiest to deal with the findings together. First, he pointed out that Mr Ellis had not explained why he had drilled sampling holes into two or three capacitors, nor had he said whether there was any oil left in those capacitors after he had filled his sample bottle. Mr Ellis did say he had not sealed up the drill holes having collected his sample. As to the remaining capacitors, Mr Casey submitted there was no evidence about any of the following points:
a) Whether whatever was causing the leaking around the terminals while
the capacitors were still in use continued after they were
decommissioned (apart from evidence that PCBs were no more volatile when heated). b)
How the capacitors were stored. At [55], the Judge referred to the enhanced prospects of the capacitors leaking if they were lying on
their sides in the rubbish hole. Mr Casey pointed out that there was
no evidence as to whether they had been stored lying on their sides.
This point gained force because, in evidence (B of Exhibit 6) was a
photograph of capacitors stored at Tredi‟s premises awaiting disposal.
These capacitors were stacked on their sides, their terminals protruding horizontally. c)
That the capacitors had leaked while stored during the approximately three years that elapsed between their removal from the capacitor
bank and their disposal. Mr Casey allowed that the possible exception
to this was photograph 7 annexed to SKM‟s 20 September 2006
report, Exhibit F. This showed staining on the concrete floor within
the transformer building at WCL‟s works. The summary of findings
in SKM‟s report included this: The concrete stained with transformer oil could not be sampled due to underlying cables. The staining is considered minor and unlikely to have penetrated the concrete. Surface samples can be taken if required. [55]
Mr
Casey suggested that the prosecution case was that, because the
capacitors were leaking before being taken out of service, they leaked after they were buried. That meant they must have leaked during the approximately three years they were stored inside or outside the electrical storeroom. But there was no evidence of that, and therefore no basis for the Judge‟s finding that the capacitors continued leaking after burial. Mr Casey urged that the Judge had not attempted to reconcile his finding that “at least some, if not most” of the capacitors had leaked after being buried, with the lack of evidence that they had leaked while stored. At best, leakage after burial could only have occurred from capacitors which came to rest lying
horizontally, or with their terminals facing downward. There was no evidence about the probabilities of this occurring. Mr Casey accepted that the two or three capacitors with holes drilled were in a different category in terms of the likelihood of their leaking after they were buried.
[56] I have read through Mr Ellis‟ evidence, which runs to just under 100 pages. Mr Casey is correct in submitting that Mr Ellis gave no explanation as to why he drilled holes in two or three capacitors to gather his sample. Perhaps it was to obtain a representative sample. Perhaps it was because there was little or no oil left in the capacitors and he had to drill into two or three to gather sufficient oil to fill the sample bottle. Either conclusion was equally open, and therefore neither could be drawn. The result is that the Judge could not be sure that any oil remained in the three capacitors from which Mr Ellis gathered samples.
[57] Mr Casey sought to reinforce his argument by relying on the negative results of the various site investigations that have been undertaken. I think his detailed submissions about these are summarised in these end points:
a) Mr Casey accepts that the more probable position is that both Mr Ellis and Mr Workman were mistaken in their recollection of where the rubbish hole was dug ie the less likely position is that no capacitors were buried.
b)But the present position – that no rubbish hole with buried capacitors has been found – renders the Judge‟s finding that capacitors were buried under the DAF floor “unsafe”, because it substantially rested on Mr Ellis‟ evidence, now exposed as wrong.
c) Importantly, 10 years after the event there was still no evidence of PCB contamination in the soil or ground water tested under or around the DAF building. The two excavations made to date must be close to the burial site. Not only has the prosecution not proved escape of PCBs, the defence has provided evidence showing lack of escape.
[58] In response the Council submitted the circumstantial evidence overwhelmingly supported the Judge‟s findings that PCBs had leaked from the buried capacitors. The circumstances evidenced were:
a) All the capacitors had been removed because they were leaking from their terminals. Mr Ellis‟ evidence about that was not challenged. For example, he deposed that he had got oil on his leg when removing the capacitors from the capacitor bank in the main switch room, causing an unpleasant tingling or burning sensation.
b)Although Mr Ellis did not say why he drilled into more than one capacitor to gather his sample, he was not asked in cross-examination. Mr Casey‟s submission that the reason was, or may have been, to collect enough oil to fill his sample bottle lacked any evidentiary foundation. Indeed, Ms Clark went further and described it as “a misrepresentation” for Mr Casey “to suggest that the capacitors were drained”.
c) There was no suggestion or evidence – and certainly no defence evidence – establishing that the capacitors had leaked all their oil while stored. If the defence wanted to rely on this possibility, then it should have called evidence establishing it. For example, WCL did not sample and test the oil stains on the concrete floor referred to in SKM‟s 20 September 2006 report. Or, if it did, it did not call evidence as to the test results.
d)The two or three capacitors Mr Ellis took samples from still contained PCB oil. That sampling, in March 2009, was “only a matter of months” before the capacitors were buried.
e) WCL‟s disposal of the remaining capacitors through Tredi, following
their removal in 2000, confirms those capacitors contained PCBs.
Ms Clark drew these points together by submitting “it is sound however to conclude that in the circumstances, there is nothing to prevent the capacitors from leaking and in all of the known circumstances, they would have leaked”.
[59] I am not much impressed by the Council‟s submissions, which demonstrated two unhelpful tendencies. The first was a tendency to opaque generalisation, such as the one just quoted. The second was a tendency to attempt to transfer the onus of proof to WCL. [58]b) and c) are examples of that. Having laid these charges the Council needed to prove them. It did not do that by contending, where it had omitted to call evidence on a point, that WCL could or even should have called evidence on a point.
[60] Any Judge who tried this case could but suspect that the capacitors that had been buried under the DAF building leaked PCBs following their burial. That is probably what happened. But neither suspicion nor what is likely achieve the applicable standard of proof. Standing back, I have asked myself whether the evidence should have left Judge McElrea with a reasonable doubt whether the capacitors leaked PCBs following their burial. I consider it should. In my view, on all the evidence he heard, the Judge could not be sure that the capacitors leaked PCBs into the ground after being buried.
[61] I consider there are seven salient aspects to the prosecution case, every one of them demonstrating a lack of evidence sufficient to prove the point. First, it was established that 13 capacitors were decommissioned in the mid-1990s because they were leaking around their terminals, and were stored against the wall of the switchroom. However, there was no evidence about the cause(s) of the capacitors leaking while in service nor any evidence as to whether the cause(s) of the leaking ceased once the capacitors were decommissioned, or continued to cause the capacitors to leak while they were in storage. The only evidence was the staining on the concrete floor in the transformer building shown in photograph 7 annexed to Exhibit F (and referred to in [54]c)). Yet no sample of this staining was taken and there was no evidence as to the source or nature of the material that left the staining. The Court was left guessing about the position.
[62] Dr Kim, an environmental chemist employed and called by the Council, was cross-examined by Mr Casey about the volatisation of PCBs. He explained that volatisation is the transfer from a liquid to a gas. Although Dr Kim pointed to a slight technical distinction, he said “often volatisation has come to just simply mean evaporation” (at Transcript of Evidence (T) 193/21-22). While PCBs do not readily degrade in the environment, except in the presence of sunlight, Dr Kim accepted they can volatise. He accepted that the lower chlorinated congeners of PCBs are more volatile. He adopted (at T 195/10-20), as correct, a statement in the United Nations Environment‟s Programme, PCB Transporters and Capacitors, from management to reclassification and disposal:
Capacitors contain the lower chlorinated congeners of PCBs which are therefore more volatile. As capacitors are more likely to contain more volatile congeners, large spills or spills in confined spaces may require respiratory protection as well as skin protection measures.
Dr Kim added (at T 197/15-19) that he considered the word “likely” meant a 70%
likelihood, so he saw it as leaving “a lot of room for doubt about that”.
[63] Secondly, there was no evidence as to how the capacitors were stored, in particular as to whether they were stored standing upright (terminals upward) or were stored lying on their sides (terminals protruding horizontally). Had the Court been given an answer to the first point, this second point may have relevance to continued leaking of oil from the capacitors while they were stored. Under cross- examination Mr Ellis accepted that the capacitors could have been stored outside for a matter of months, although he could not recall for how long (at T 72/10-20). This point is far from a frivolous one, because (as I pointed out in [54]b)) photograph B of Exhibit 6 shows at least six capacitors stacked lying on their sides while awaiting safe disposal in Tredi‟s premises. My understanding is that that photograph was put in evidence by Mr Drummond of Tredi. Again, the Court was left to guess or make assumptions as to the position(s) in which the capacitors were stored.
[64] Thirdly, and a closely related point, the prosecution called no evidence as to whether or not the capacitors leaked while they were in storage and, if they did, the extent of that leaking. I have already referred (in [54]) to what appears to be the only evidence about this in SKM‟s 20 September 2006 report, and to the Council‟s
submission that the defence should have called evidence if they wanted to rely on
this “possibility”.
[65] Fourthly, there was no evidence at the liability hearing (although there was for sentencing), or certainly no adequate evidence, as to:
a) The volume of PCB oil in the capacitors at the time of their manufacture.
b)The actual or likely volume of oil left when they were decommissioned in the mid 1990s.
As to a), Mr Julian gave evidence for WCL that “in general terms” the volume of a capacitor would be around 10% oil (at T 282/33). Mr Julian‟s business included the collection and disposal of capacitors, but he had no experience with the Khatua Junker type of capacitor involved here. Mr Robotham, a scientist from SKM, also called by WCL “without expressing any view as to its correctness”, gave evidence on the assumption that the buried capacitors contained “up to about 10 litres of oil containing PCBs” (at T 255/33-256/3).
[66] As to b), Ms Leeder gave evidence for the Council about what was said during a conference call on 30 August 2005 involving, among others, Mr Cross and Mr Thomson of URS. The call had been convened by URS, which was concerned about the risk of disturbing the capacitors in the course of the test-pitting and soil sampling work it undertook the following day, 31 August 2005. She said that both men said during the conference that there was a maximum of three litres of oil in the buried capacitors (at T 213/33-214/5). She added that two days later, when he telephoned her with an offer that WCL put down monitoring bores and commit to a cleanup, Mr Cross had said that he thought “there was only a couple of cupfuls of PCB oil and that the risk is minimal” (at T 217/12-14). In the result, again, the Court was left with an evidentiary void on an important – really a critically important – point.
[67] Fifthly, Mr Ellis did not explain any of the following points in his evidence:
a) Why he drilled holes in two or three capacitors to gather a sample of the PCB oil. I have already made the point (in [56]) that two conclusions were equally open and therefore the Judge was not in a position to draw an inference.
b)Whether there was oil left in each or any of the two or three capacitors he drilled holes in.
c) The size of the sample of oil he gathered and sent to R J Hill Laboratories Ltd for testing. Exhibits 2A, 2C and 2D (part of the R J Hill Laboratories documentation) indicates that the capacity of the sample container was 250 millilitres. That is the capacity of the container, not how much oil was in it.
[68] Sixthly, Mr Workman certainly gave evidence that he loaded the capacitors off the pallet and into the bucket of his digger, and then tipped them off the bucket into the burial hole. The Judge must have concluded that one or more of the capacitors ended up on its side, or upside down (terminals facing down). However, there was no evidence as to whether that would happen for sure. Mr Casey submitted it was a matter of probability theory about which the Judge should have been informed. The Council cannot meet this point by objecting that it was not required to prove its case to a mathematical certainty. Mr Casey is not contending that the Council needed to do that. He is submitting that the Council needed to demonstrate that the Judge could safely conclude that one or more of the capacitors would end up on its side or face down. Even then, it does not follow that that capacitor or capacitors would then proceed to discharge oil from its terminals. That would only be the case if that particular capacitor(s) contained sufficient PCB oil to discharge in that way, and I have already made the point that the proof of that was deficient.
[69] Seventh and last, there is the fact that WCL sent the remaining 13 capacitors to Tredi for safe disposal when they were decommissioned in 2000. But I do not think the Judge had the sort of evidence that might have enabled him to place any reliance on that fact, in terms of proof of the charges. For example, were those
capacitors of the same type and age? Were they also leaking from around their terminals while still in use? Those sort of questions were not answered for the Judge.
[70] In the result, I conclude that the Judge erred in finding the Council had proved beyond reasonable doubt that PCBs were discharged from the capacitors following their burial in the rubbish hole, the discharge of the PCBs into land first occurring not later than 31 March 1998 (at [62]) and continuing at least for the remainder of that year, and probably much longer (at [96]). The consequence is that the convictions the Judge entered against WCL and Mr Cross cannot stand, and I quash them. Strictly, that renders it unnecessary to deal with the other aspects of the appeals, save Mr Dew‟s appeal against sentence. However, against the event that this case goes further, I intend dealing with the remaining aspects. I will do so comparatively briefly, particularly in relation to the appeals against sentence and WCL‟s appeal against the enforcement order.
No discharge into land
[71] The challenge here was to the Judge‟s finding (at [59]) that any discharge of PCBs from the capacitors was “into land” – the words from s 15(1)(d) of the RMA used in the charge. Mr Casey‟s argument to the Judge, repeated to me, was that the hole in which the capacitors were buried did not form part of the land. That was because it was filled with foreign material – building rubbish such as flashing off cuts, wire netting, building paper and the like. Mr Casey submitted that this building waste might have prevented the PCBs from spreading beyond the hole and “into land”. Mr Casey reinforced this argument by pointing to the fact that the hole was then filled with sand (which was used as a levelling underlay for the concrete floor slab), and was thus more part of the building than of the land.
[72] I agree with the Judge‟s rejection of this argument, and largely for the reasons he gave. The evidence was that the rubbish hole was between .5 and 1 metre deep. Measured against the profiles contained in SKM‟s report of 20 September
2006 ([29] above), that took the hole into virgin ground. There was no suggestion that the building rubbish, after being dumped into the hole, was then arranged so as
to line the hole in an attempt to contain any PCB oil that seeped from the capacitors. Even assuming the hole was filled with sand (as opposed to being back-filled with the soil excavated by the digger), it was a hole in the ground, and any discharge of PCBs was “into land”.
[73] Although it seems this argument was vigorously made to the Judge, I consider it lacked merit, and even threatened to detract from the WCL‟s better arguments.
No continuing discharge
[74] Mr Casey submitted that the evidence did not establish a continuing discharge over any relevant period. He did not develop this submission. Judge McElrea acknowledged that a discharge of PCBs continued only so long as they were “escaping” from the capacitors buried in the hole. He found (at [96]) that escape, at least for the capacitors without holes drilled in them, would have occurred slowly, for many months or probably years, but noted he had no evidence as to the likely duration of escape “if in fact it has finished”. He then said:
In those circumstances, if liability is established but the extent of the continuation is not clear, then the Court has to take the shortest period over which it is satisfied the discharge will have continued. In this case, based on all the evidence I am sure that the discharge of PCBs will have commenced not later than 31 March 1998 and continued at least for the remainder of that year, and probably much longer.
[75] Mr Casey focused his challenge on the Judge‟s finding that PCBs had been discharged into land. I have dismissed that challenge. Mr Casey did not specifically challenge the Judge‟s finding that discharge occurred from 31 March to 31
December 1998. That finding needs to be viewed in the context of the total quantity of PCB oil in the buried capacitors. In [65]-[66] I held that the Judge did not have reliable evidence about that. Nor did he have any evidence as to the rate at which the PCB oil would discharge from the capacitors. He was therefore not in a position to make a finding as to the duration of discharge of PCB oil from the buried capacitors. Although the Judge‟s finding as to the period of discharge could be viewed as a conservatively one, he lacked the evidence to make it.
Discharge not by WCL, nor permitted by WCL
[76] Notwithstanding that I have summarised the liability judgment in [20]-[45], I begin consideration of this submission by setting out the steps that led to the Judge‟s findings against WCL. I cross-reference each step to the judgment. These were the steps:
a) Mr Dew discharged PCBs into land. That is because “it must have been he” who instructed Mr Workman to bury the capacitors in the rubbish hole. Accordingly, Mr Dew committed a continuing offence from 1 April to 31 December 1998. (At [97]-[101])
b) Mr Cross became aware of the burial of the capacitors no later than 31
March 1998. By doing nothing once he became aware, but hoping any problem could stay “swept under the carpet”, Mr Cross permitted the discharge of PCBs into land to continue from 1 April to 31
December 1998. ([102]-[105])
c) Pursuant to s 340(1)(a) RMA, WCL was liable for Mr Dew‟s discharge of the PCBs unless it could bring itself within the defence afforded by s 340(2). ([106]-[110])
d)Mr Cross was certainly a person “concerned in the management” of WCL for the purposes of the s 340(2) defence. Accordingly, Mr Cross‟ actions as outlined in b) above disentitled WCL to rely on the s
340(2) defence. WCL was liable for Mr Cross‟ offending as if it had
personally committed that offending. ([111])
e) Mr Dew was also “concerned in the management of” WCL, especially as far as electrical equipment was concerned. Accordingly, his knowledge that the offence was committed becomes the knowledge of WCL. ([112]-[129])
f) Given the roles of Messrs Dew and Cross in the burial of the capacitors, and the continuing discharge of PCBs from those capacitors into land, and given that each was concerned in the management of WCL, there can be no suggestion that WCL “took all reasonable steps to prevent the commission of the offence”, in terms of s 340(2)(c). ([130])
g) WCL‟s submission that s 340(2)(c) was met because there were no “effects” to be remedied is untenable. The discharge of PCBs will “most certainly” have had effects on the land. But, because the burial hole has not been located, with the result that no soil samples from under and around the capacitors have been taken and tested, the extent of those effects has not been measured. The maxim “out of sight, out of mind” cannot be applied in this sort of case. ([132])
h)Any offer by WCL to take all necessary steps to identify and address adverse effects is insufficient. The statutory obligation is to act, not simply to offer to act. In any event, there is no evidence that WCL offered to locate and remove the buried capacitors, and it has not done so. ([133])
i)As WCL is vicariously liable for the acts of both Messrs Dew and Cross, it is guilty of the (different) offences committed by the two of them. But, as the two charges against WCL were in the alternative, only one conviction is possible and that should be for the primary offence – that committed by Mr Dew. ([135])
[77] I start with Mr Dew, and with the Judge‟s step e). Mr Casey put it to me that the Judge was wrong to reject Mr Casey‟s reliance on the House of Lords‟ judgment in Tesco Supermarkets Ltd v Natrass [1972] AC 153, applied by this Court (then called the Supreme Court) in New Zealand in Nordik Industries Ltd v Inland Revenue [1976] 1 NZLR 194, as propounding the appropriate test. I agree with the Judge that they do not, and for the reasons he gave. I share the Judge‟s view that the phrase “concerned in the management of” is most pertinently addressed in R v Newth
[1974] 2 NZLR 760 and Commissioner of Corporate Affairs (Vic) v Bracht (1998)
14 ACLR 728. At 761 in Newth Quilliam J said:
... The inquiry should be whether, upon the evidence, the accused took a hand in the real business affairs of the company.
Quilliam J was dealing with s 188(1) Companies Act 1955 which (save with the Court‟s leave) prohibited an undischarged bankrupt “directly or indirectly tak[ing] part in or be[ing] concerned in the management of any company”.
[78] Also at 761, Quilliam J observed “that the object of the statutory provision is
... the protection of the commercial community”. That focus on the purpose of the legislation resonates with equal force in the RMA context. Judge McElrea (at [120]- [127]) referred to s 5 RMA, in particular the objects of safeguarding water and soil, and avoiding or remedying adverse effects of activities on the environment. He pointed out that the narrow interpretation of s 340(2) contended for by Mr Casey would work “against the preventative purposes of the Act”, relieving a company from liability for the decisions of lower tier managers. In this case, it would relieve WCL of liability for Mr Dew‟s decision to bury the capacitors.
[79] Bracht involved the same fact situation as Newth, and an almost identical provision. Ormiston J followed Newth. He endorsed Quilliam J‟s observation that the section was essentially protective. After citing the passage I have set out in [77], Ormiston J said this at 735-736:
... Perhaps I have given the word “management” a somewhat wider meaning, but the level of participation to which the section refers may be relatively modest. ...
... I would see the prohibition as covering a wide range of activities relating to the management of a corporation, each requiring an involvement of some kind in the decision-making processes of that corporation. That involvement must be more than passing, and certainly not of a kind where merely clerical or administrative acts are performed. It requires activities involving some responsibility, but not necessarily of an ultimate kind whereby control is exercised. Advice given to management, participation in its decision- making processes, and execution of its decisions going beyond the mere carrying out of directions as an employee, would suffice. ...
[80] The Judge explained his reasons for holding that Mr Dew was involved in the management of WCL in these terms:
[128] Mr Dew‟s title was “electrical manager”; he was regarded as an expert in electrical matters and gave advice on such matters; he attended management meetings when such matters came up. He had responsibility for staff under him (Mr Ellis and the electrical apprentices); he was involved in the earlier decision that the capacitors were to be disposed of in the correct manner (that being communicated by both Mr Cross and Mr Dew); and he took charge, as one of the “boss people”, of the burial of the capacitors, first by instructing Mr Ellis to take the pallet over to the DAF site and, when he refused, by getting Mr Workman to do so. In my view his conduct in all respects was that of one concerned in the management of WCL, especially as far as electrical equipment was concerned.
[81] The Judge‟s reference to Mr Dew being one of the “boss people” is to Mr
Ellis‟ evidence. Asked if Mr Dew was his boss, Mr Ellis answered „Yes‟ (At T
96/30).
[82] As Mr Casey pointed out, the Judge‟s reasons do not expressly refer to the evidence of Mr James Wallace, the Managing Director of WCL, about Mr Dew‟s position in the Company. Coming from the CEO of WCL, this evidence must be significant. That is particularly so for two reasons. First, as the Judge observed (at [69]), Mr Wallace described himself as a very “hands on” Managing Director. So he certainly knew what Mr Dew‟s role in WCL was. Secondly, the Judge (at [70]) accepted completely the evidence of Mr Wallace that neither he nor the other directors of WCL were told of the burial of the capacitors until some years later. The evidence of Mr Wallace that Mr Casey drew to my attention was this:
Q. Now I‟d like to ask you questions about the role of Barry Dew in the company?
A. Barry Dew is the electrical manager dealing with electrical and associated projects. It‟s a technical role, he‟s not involved in the management of the division or of the corporation.
Q. Of the rendering division do you mean?
A. He‟s not involved in management of the rendering division, let alone management of the corporation.
Q. He sometimes attended meetings, the divisional meetings you talked about?
A. Ah yes, because he would –
THE COURT
A technical role, not involved in the management of the rendering division?
... Yep.
Q. Let alone the corporation? A. Yes.
Q. He attended meetings?
A. Yes, he was a vital attendee when we needed to be updated on the projects he was involved with, when I needed to be updated.
Q. In other words, when electrical matters came up?
A. Yes, the projects surrounding electrical and associated matters
(T 323/12-28)
And in answer to further questions from the Court about Mr Dew‟s role:
Q. So your answer was it had evolved? A. Yes.
Q. To a specialist area of electrical?
A. A specialist technical nature, electrical manager and associated projects, a technician in that area, an expert technician.
(T 330/4-7)
[83] In terms of what is required under s 340(2)(b)(i) to be “concerned in the management of” a company, the Judge was correct to adopt the approach of Ormiston J in Bracht. Chisholm J had done likewise in Thompson v District Court at Christchurch (2002) 9 NZCLC 262,824 at [24], as had Fisher J in Tregurtha v New Zealand Police HC Auckland AP123/93, 15 October 1993 at 6. Applying the Bracht formula, Mr Dew was “concerned in the management of” WCL. He had a level, albeit comparatively low, of management responsibility. His title “Electrical Manager” reflected that. He attended meetings of the management of the Rendering Division of WCL to give advice about electrical and associated matters. He made decisions and gave directions, including his direction to Mr Ellis, and following Mr Ellis‟ refusal to act on it, to Mr Workman, to bury the capacitors.
[84] Further, Judge McElrea was on firm ground in interpreting s 340(2) so as to achieve the aims of the RMA. Restricting those “concerned in the management of” WCL to those “directing the mind and will” of WCL (the Tesco test) would not be the purposive interpretation called for by s 5 Interpretation Act 1999. Lower level
managers such as Mr Dew are exactly the sort of people who make, for companies, decisions which effect the environment. It is not realistic to suggest that the decision to bury these capacitors would be taken by WCL at Board level. If the lower level managers who make those sort of decisions (and in this case did make the decision) are excluded for the purposes of the s 340(2) defence, then the purposes of the RMA will be thwarted.
[85] Accordingly, I uphold Judge McElrea‟s view that Mr Dew was “concerned in the management of” WCL. The consequence is that the Judge correctly held that the s 340(2) defence was not available to WCL in respect of Mr Dew‟s offending. And it was for the offence committed by Mr Dew that the Judge (at [135]) held WCL vicariously liable under s 340(1).
[86] The decision I have just made makes it strictly unnecessary to deal with the availability to WCL of the s 340(2) defence in relation to Mr Cross‟ actions. Again, I do so against the event of this case going further. Had I not already quashed Mr Cross‟ conviction, his culpability would remain relevant, because he appeals against his conviction, and his conduct has major relevance to WCL‟s appeal against the fine imposed on it. The issue is different in relation to Mr Cross. WCL accepts Mr Cross was “concerned in the management of” WCL. What it does not accept is the Judge‟s finding (at [102]) that Mr Cross “was aware of the burial not later than three months after the event, ie by 31 March 1998, and probably earlier”. The Judge‟s reasons for that conclusion are to be found earlier in his judgment:
[67] ... I base this conclusion about Mr Cross on his position as General manager, Rendering, and the fact that he had been involved with Mr Dew in discussing the results of the laboratory test of the capacitor oil and the need for correct disposal, had given Mr Ellis TREDI‟s details, and had received or been told of the price indicated by TREDI. He was the person to whom Mr Dew reported on such matters.
[87] Mr Casey is correct that all those reasons are based on the Judge‟s acceptance of Mr Ellis‟ evidence. In his written statement of evidence (paras 42-47) Mr Ellis said that he faxed Tredi requesting a quote, obtained one, and made Mr Cross aware of it. Mr Ellis said this occurred shortly after WCL received the sample analysis report dated 27 March 1997 from R J Hill Laboratories Ltd. Mr Ellis could not remember seeing a written quote from Tredi, so thought it may have been verbal
only. Although he could not recall the amount of the quote, he believed it was about
$3,000. He said he did not know if Mr Dew was made aware of the quote, but recalled either Mr Dew or Mr Cross commenting that the quote was “too expensive”, “we don‟t have the money to do that”. Ms Clark led further evidence from Mr Ellis about this aspect. Mr Ellis said he did not recall whether he discussed the Tredi quote with Mr Cross in 1997. He said he may have but added “I mainly dealt with Mr Dew” (at T 59/30, 61/30, 62/5). Mr Ellis was cross-examined at some length about this part of his evidence. He said he was “pretty sure” he had sent a fax to Tredi requesting a quote (at T 83/19, 85/30). He said he had not seen Tredi‟s quote and did not know or recall whether it was written or verbal (at T 82/19, 84/9). He believed the quote went to Mr Cross (at T 81/30, 82/20). Mr Ellis agreed he had no copy of a fax to Tredi (at T 84/15) or of a quote from Tredi (at T 86/1). In re- examination Mr Cross recounted a day when Mr Dew and he needed another file box, but one was not available. Mr Dew told him that the “stuff” in the file box marked “capacitors” stored in the rack above Mr Ellis‟ desk was no longer needed, and at that point the contents were discarded (at T 131/5-30).
[88] Judge McElrea dedicated a section of his judgment to the credibility of Mr Ellis ([33]-[42]). He started by recognising that Mr Ellis was the most crucial witness for the prosecution. He said “I found him a very impressive witness, a slow and careful man who seemed committed to the truth. He was patient under provocative cross-examination” (at [33]). At [42] the Judge concluded “all in all, I accept his [Mr Ellis‟] account of matters as set out in this judgment”.
[89] The constraints on an appellate Court in disturbing a credibility based finding of fact are well known. The Supreme Court‟s decision in Austin, Nichols & Co Inc v Stichting Lodestar [2008] 2 NZLR 141 at [13] is a recent re-statement of the position. The Supreme Court referred to the Court of Appeal‟s well known judgment in Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1998] 3 NZLR 190. Rae is an example of a finding of fact based purely on witness credibility. The case hinged on whether a Christmas Eve telephone conversation had taken place between Mr Rae and his insurance broker, Mr Kain. Mr Rae said it had; Mr Kain said it had not. There was no contemporaneous or later record of the conversation. Unsurprisingly, the Court of Appeal found that it was in no position to
disturb the credibility findings of the trial Judge, Heron J, who had heard and seen the two men give their evidence.
[90] Judge McElrea heard and observed Mr Ellis giving his evidence. I have not. The advantage that gives Judge McElrea is well appreciated by experienced trial judges, perhaps less so in other quarters. Accordingly, I decline to interfere with Judge McElrea‟s finding that Mr Ellis was a truthful witness.
[91] A quite different matter is the reliability of Mr Ellis‟ evidence about Mr Cross‟ involvement in the quote Mr Ellis says was obtained from Tredi in 1997 for the safe destruction of the 13 capacitors that had been decommissioned. I make these points about that evidence:
a) Mr Ellis was attempting to recollect events that had taken place a decade earlier. Many judges view that as well beyond the ability of an average witness accurately to recall routine events.
b)Mr Ellis was not certain in his recollection. That emerges from his evidence, as I have summarised it in [87].
c) Mr Drummond, the Managing Director of Tredi, gave evidence that Tredi‟s usual practice upon receiving a faxed request for a quote would have been to open a client file, just as it had done when it received WCL‟s request for a quote for safe disposal of the remaining capacitors in 2000. Although Mr Drummond said that Tredi‟s staff might on occasion give a verbal quote, he said this was not Tredi‟s usual practice. The detailed quote (covering letter enclosing Chemical Waste PCB Destruction Agreement, in all 14 pages – Exhibit 5) Tredi sent WCL on 13 April 2000 exemplified Tredi‟s usual practice. Mr Drummond said he had searched Tredi‟s records but found no evidence of a fax from Mr Ellis, or of a quote by Tredi to WCL, in 1997.
d)Mr Ellis‟ evidence about Mr Cross‟ involvement in obtaining, and then rejecting, a quote from Tredi for safe disposal of the capacitors is difficult to reconcile with his evidence that, following receipt of the Hill Laboratories sample report dated 27 March 1997, Mr Cross told Mr Ellis the capacitors should be disposed of in the correct manner.
e) There is no evidence that Mr Dew was reporting regularly to Mr Cross on the decommissioned capacitors. In particular there is no evidence of discussions between Mr Dew and Mr Cross over the nine months that elapsed from the receipt by WCL of the Hill Laboratories analysis report in April 1997 and the burial of the capacitors in January 1998. Nor, for that matter, is there any evidence of reporting or discussions by Mr Dew to Mr Cross following the burial of the capacitors. Indeed, the Judge appears to have found that the contrary was the position. At paragraph [97] of his judgment the Judge observed:
It seems that he (Mr Dew) set out to hide them from the authorities ...
f) Mr Ellis‟ evidence also cannot be reconciled with the memorandum dated 31 March 2000 Mr Cross sent Mr Oldridge. This memorandum was in reply to Mr Oldridge‟s 24 March 2000 memorandum to Mr Cross (which I set out in [93], which he sent after Mr Ellis had approached Mr Oldridge about the buried capacitors. In his reply memorandum, Mr Cross advised that he had spoken to “a PCB disposal expert from Power Waikato who would be reverting to him with a quote”, which he thought would be in excess of $10,000. He asked Mr Oldridge if he knew of any other companies who could provide a quote.
[92] Relevant in weighing up these points is the well documented difficulty in assessing witness credibility and reliability. Alive to this difficulty, judges tend to look for any independent indication that the judge can rely on what the witness is saying. Here, factors c) and f) fall into that category. Factor c) is a particularly
powerful indication that Mr Ellis is mistaken in his recollection. True, Tredi may have quoted verbally, but that is unlikely, as is demonstrated by the thorough written quotation Tredi sent WCL in 2000. Factor f) is less compelling, in that the 31 March
2000 memorandum is an internal one. But unless it was mischievously contrived by
Mr Cross, it also suggests Mr Ellis was mistaken.
[93] I consider the Judge erred in relying on this aspect of Mr Ellis‟ evidence, and thus in finding that Mr Cross was aware by 31 March 1998 of the burial of the capacitors. I hold that there is no reliable evidence that Mr Cross was aware of the burial before he received Mr Oldridge‟s memorandum of 24 March 2000. I set out again the relevant part of this memorandum:
Neville, I believe an error of judgment has occurred with the 13 disused capacitors buried beneath the DAF unit. This is a disaster waiting to happen. When these capacitors deteriorate we can expect a significant impact on the surrounding environment.
Neville, Isuggest: (1) Urgent action toward removal of the capacitors currently in use containing PCB‟s. (2)
Locate and retrieve the dumped capacitors beneath the DAF unit and dispose in the approved manner.
Neville, for Wallace Corporation‟s credibility we need to proceed with haste. Please present an action plan including timeframes at your earliest convenience so we can put this matter to rest.
[94] To summarise, points I have mentioned in [91]-[93] demonstrate in a convincing way that Mr Ellis was mistaken in his recollection that Mr Cross was involved in requesting, receiving and rejecting a quote from Tredi for safe disposal of the capacitors in 1997. His recollection is at odds with what documentary evidence is available, and not consistent with the lack of a record that was likely to have been there had Mr Ellis‟ recollection been correct. As Mr Casey submits, it is likely that Mr Ellis confused what did happen in 2000 with what he thought had also happened in 1997.
[95] In the result, I hold that the Judge erred in placing reliance on this aspect of
Mr Ellis‟ evidence, and I set aside his relevant findings.
[96] In relation to Mr Cross, the Judge found WCL vicariously liable because he found that Mr Cross was aware of the burial of the capacitors no later than 31 March
1998. I agree with Mr Casey that that finding rested substantially on his findings in respect of Mr Ellis‟ evidence, which I have now set aside. Consequently, insofar as WCL‟s liability rested on Mr Cross‟ knowledge, the conviction of WCL cannot stand. It can stand insofar as it rests on Mr Dew‟s offending.
Failed to take all reasonable steps to remedy effects
[97] This is the second limb of the s 340(2) defence, which I have set out in [40]. It is a requirement that must be met in addition to one or other of the alternative requirements set out in s 340(2)(b). As I have upheld the Judge‟s finding that the s 340(2)(b)(i) limb relied upon by WCL was not met, it is unnecessary to deal with this further requirement. It is, however, relevant to WCL‟s appeal against the fine imposed on it, and against the enforcement order made against it. I deal with it in relation to those appeals.
Mr Cross’ appeal against conviction
[98] For the reasons I gave in [60]-[70], I have already quashed Mr Cross‟
[194] In the result, had I been required to deal with WCL‟s sentence appeal, I
would not have allowed it.
WCL’s appeal against the enforcement order
WCL’s submissions
[195] Because I intend allowing this appeal, I give only a bare summary of the appeal points made by WCL:
a) The unchallenged evidence of Drs Wallis and Proffitt was that it was most improbable that any PCBs will reach the groundwater, and substantially less probable again that they will ever reach the Waitoa River.
b)WCL was not to be taken as acknowledging, as factual, the quantities of PCB oil assumed by Drs Wallis and Proffitt for the purposes of their respective risk analyses.
c) The Council applies for an enforcement order under s 314(1)(c) and (da). The Judge‟s interpretation of those two provisions was erroneous, in that he omitted to consider s 314(2)(b)(ii) which fills the gap the Judge considered would otherwise be left. The Judge‟s reasoning renders s 314(2)(b)(ii) meaningless. Section 314(1)(c) enables the Court to require remediation and/or mitigation. Subsection (da) enables the Court to require steps to be taken to avoid as well as remedy or mitigate but only where it is satisfied that such action is “necessary” and in respect of effects which are “actual or likely”.
d)The Judge erred in holding (at [103]) that the standard of proof was only on the balance of probabilities. The criminal standard applied because the Council, pursuant to s 339(5) RMA, had sought an enforcement order under s 314 RMA as part of the penalty. Section
24 Sentencing Act covering “sentence or other disposition of the case” therefore applied, in particular s 24(2)(c):
The prosecutor must prove beyond a reasonable doubt the existence of any disputed aggravating fact, and must negate beyond a reasonable doubt any disputed mitigating fact raised by the defence ...
e) In terms of s 314(1)(c), there are presently no actual “adverse effects” on the environment (other than de minimis, not requiring remediation), and the Court‟s power under s 314(1)(da) to make orders directed to the avoidance of potential future effects required proof as to what those effects were, that they were likely, and that the orders were necessary. The uncontroverted evidence of Drs Wallis and Proffitt established this, in particular that any PCBs were having no adverse effect on the environment simply by reason of their presence in soil beneath the DAF plant. This was supported by Dr
Kim‟s acceptance (in paragraph 8 of his second affidavit) that the
situation fell outside the definition of “contaminated land” in s 2
RMA.
f) In Shirley Primary School v Telecom Mobile Communications Ltd [1999] NZRMA 66 at (147) the Environment Court listed the sort of evidence that might establish “any potential effect of low probability which has a high potential impact”, in terms of s 3(f) RMA. No evidence of that type was advanced by the Council. Conversely, the evidence called by WCL established that there was no such potential effect here. That was because the evidence was that the potential for effects on the environment of high potential impact was below the measure of “low probability”. The Environment Court‟s decision in Clifford Bay Marine Farms Ltd v Marlborough District Council EC Christchurch 131/2003, 22 September 2003, particularly at [71] to [73] and the attached schedule suggests “low probability” indicates less than 50% but not so low as to be “very unlikely” or “exceptionally unlikely”.
g) The evidence showed that the potential for effects on the environment of high potential impact was below the measure of “low probability”.
h)The Judge‟s findings in his liability decision as to the “potential” for PCBs to render land and water unusable and dangerous to health were not supported by the evidence. Further, the Judge was wrong to say (in [101]) that those findings “were not contradicted by evidence called for sentencing and enforcement order purposes”.
i)The Judge made no attempt to determine the adverse effects and to quantify risk on the basis of the expert evidence he had, which was based on conservative assumptions. The Judge focused on every expression of reservation or uncertainty as the foundation for his view (already expressed in his liability decision) that the situation poses unacceptable risks, but without any analysis of proportionality.
j)The Judge erred in his repeated assertion that what differentiates the situation here is that the PCBs were placed there illegally. It cannot be correct that the determination of adverse effects and risks is influenced by the legality or otherwise of the situation.
k)In making his enforcement orders, the Judge paid no regard to WCL‟s evidence of the serious consequences to it of the steps he required it to take. None of those consequences were even touched on in the Judge‟s decision. He referred only to that part of Mr Carter‟s evidence that related to WCL‟s environmental performance.
l)The Judge‟s enforcement orders go well beyond what the Council ultimately sought, namely further excavation of the DAF floor where it would not impact on the DAF unit or the structural integrity of the building. In making that clear in paragraphs 11 and 16 of her affidavit for the Council, Ms Leeder did not identify what further areas could be excavated (and there are in fact none as WCL‟s Environmental Manager, Mr Carter, pointed out in paragraph 24 of his affidavit).
The Council’s submissions
[196] The Council identified the purposes of an enforcement order here as those in s 5(2) RMA, particularly:
(b) safeguarding the life-supporting capacity of air, water, soil, and ecosystems; and
(c) avoiding, remedying, or mitigating any adverse effects of activities on the environment.
In summary, the purpose was to impose appropriate action upon WCL as polluter to restore the environment, or undo the consequences of its pollution.
[197] The Council contended the civil standard of proof applied to an enforcement order because it was separately governed by ss 310-320 RMA, and s 24 Sentencing Act had no application. The Council submitted s 314(1)(c) does not require action to
be necessary, and applies to adverse effects widely defined: Canterbury Regional Council v Newman [2002] 1 NZLR 289 (CA) at 306; Dye v Auckland Regional Council [2002] 1 NZLR 337 (CA) at 348-349. By contrast, s 314(1)(da) required the Environment Court to regard action as necessary to avoid actual or likely adverse effects.
[198] Counsel for the Council summarised the evidence in 13 points, which included these:
(viii) ... The experts concede the possibility of PCBs reaching groundwater.
...
(x) The PCBs would be unlikely to dissolve in water, but would instead adhere to any sediments or particles in water.
...
[199] The Council made the point that legislation requires that all PCBs be removed from New Zealand by 2016, and submitted that the amount of PCBs buried is “... 1,000 times more than international standards permit”.
[200] The Council pointed out that the experts agree the capacitors and any contaminated soil ought to be removed, but differed as to when that removal should occur. The Council elaborated on its submission to the Judge that removal should be now, rather than later. It then outlined its fall back position in these terms:
364.For that reason, a passive monitoring regime ought to be the fall back position only if all reasonable efforts to locate and remove the capacitors have failed. Monitoring itself is neither remedying nor mitigating the problem, and will increase the risks of contamination spreading.
[201] It then repeated its submission (to which I referred in [179] and [188] above)
that WCL‟s actions to date were inadequate:
366.This is a company that needs to be required to take action. Despite illegally burying the capacitors a decade ago there was nothing done for 7 years after the event, a number of inadequate steps taken prior to the liability hearing and one excavation completed after convictions were entered when the attempt could be claimed as mitigating at sentencing.
My decision
[202] Two things about the Judge‟s enforcement order stand out to me. I have already referred several times to the first point. It is that the Judge conflated actual environmental damage with the risk of environmental damage, and exaggerated the risk, departing from the evidence. I intend going back to the evidence, particularly that of Drs Wallis and Proffitt.
[203] Secondly, WCL is on sound ground in complaining that the Judge did not so much as mention the evidence WCL had called about the consequences on it, and on others, of the enforcement order he made. So I will refer to that evidence.
[204] I see no need to resolve the opposing arguments as to the correct interpretation of s 314(1)(c) and (da) or the standard of proof which applies to an enforcement order, and will not be doing so.
[205] I deal first with Dr Wallis‟ evidence. His credentials as a soil scientist were not challenged. He gave, as the primary objective of his evidence, assistance to the Court to appreciate the potential extent of environmental effects that may result from the burial of the capacitors, in order to consider whether remedial action may be required to address any adverse effects.
[206] He made these assumptions as the basis for his opinion and recommendations:
a) Eight capacitors had been buried one metre below the surface of the ground (bgs).
b)Those eight capacitors contained in total between eight and three litres of 100% PCB oil.
c) Three of the eight capacitors had been drilled into by Mr Ellis.
d) Soil conditions as found by URS and described in detail in its report.
A particularly important assumption was that the soil type was predominantly silt textured with a total porosity of 50% by volume and an organic carbon fraction (foc) equal to 1.9% w/w (percent by weight). That was important because PCBs sorb strongly to organic matter, so the organic matter content of the soil will influence sorption and PCB migration.
e) Ground water levels as found by URS and described in its report.
That was a level of 5 m bgs. However, it was “not unreasonable to expect seasonal fluctuations of a few metres elevation”.
f) Thus, the vadose zone (area above saturated water) extended 0 to 5 metres.
g) Ground water flow was toward the Waitoa River.
h)The PCB oil comprised arochlor 1242 which had the highest solubility and therefore potential to migrate and had a relatively low sorption coefficient.
i)The entire quantity of PCB oil will leak into the subsurface over time, but the release will be “a slow, transient release pattern at approximately 1 m bgs into the soil matrix”.
[207] Dr Wallis then explained the chemistry of PCBs in the environment. This included pointing out that they bioaccumulate up the food chain, and are persistent in the environment. For example, over the potential 50 year life of the DAF plant building, PCBs would be subject to only negligible acrobial microbial decay.
[208] For the purposes of modelling the physical dynamics of the PCBs in the vadose zone, Dr Wallis adopted a conservative column of unsaturated soil below the capacitors measuring four square metres and extending from one to five metres bgs. The volume of that column was 16 cubic metres or 16,000 litres. That can be
compared with the maximum eight litres of PCB oil in the buried capacitors. That
16,000 litre column contains total pore space of 8,000 litres. Those capacities are conservative because:
In reality, the PCB contaminants will move laterally as well as vertically, and this is particularly the case at the Waitoa site because of the layered and lensitic geology within the vadose zone.
[209] The conclusions section of Dr Wallis‟ evidence includes this:
65.In my professional opinion, I consider that the PCB contamination at the site represents a very low probability and low magnitude effect upon the Waitoa River receiving environment. Given my calculations regarding PCB attenuation in the vadose zone, the same conclusion applies to shallow groundwater within the site.
[210] Against that paragraph in the Court‟s copy of Mr Wallis‟ statement of evidence the Judge has noted “Why?”. The answer, I think lies in these three earlier paragraphs in Dr Wallis‟ evidence:
55.Whether any PCB oil will, in fact, reach the groundwater table may also be influenced by the extent to which the groundwater table fluctuates in depth on a seasonal basis. Groundwater fluctuation has not been measured at the site because the monitoring wells installed by our company were only temporary. It is not unreasonable to expect seasonal fluctuations of a few metres elevation. Notwithstanding this, the potential volume of PCB oil that may ultimately reach the groundwater beneath the DAF Plant is likely to be very limited because:
(a) the initial volume of PCB oil is limited;
(b) most, if not all, of the PCB oil will remain entrained as residual DNAPL (disconnected blobs and ganglia of organic liquid) within the vadose zone soil; and
(c) the flux of PCB oil will be restricted by the low permeability soil lenses.
56.If PCB oil reaches groundwater, there will be further sorption of PCB contaminants and dispersion within the aquifer. If, in the unlikely event the PCBs ever reach the Waitoa River, there would also be considerable dilution and sorption to sediments within the river itself.
Conclusions
57.On the basis of the chemistry of PCB contaminants and the physical environment into which the discharge of PCB contaminants will occur, I find that most, if not all, of the PCB oil will be retained as
residual DNAPL within the vadose zone, and little, if any, is expected to reach the groundwater table. Even if that was to occur, only some of the PCB oil reaching the groundwater would be carried in the direction of the Waitoa River, and this is also a very slow process, during which it would tend to sorb to the aquifer matrix, and ultimately to river sediments.
[211] Dr Wallis then set out his recommendations for monitoring, which can be summarised thus:
Install four wells in the area of the DAF plant building, one up gradient and the three others down gradient. Take samples from these wells annually for five years, and then twice annually, unless or until a “trigger level” agreed with the Council was exceeded, in which
event the frequency of monitoring should be increased.
Remove the capacitors and any underlying soils found to be contaminated in excess of environmental guidelines when the DAF
plant building reaches the end of its design life (likely to be 50 years).
[212] I mentioned in [206]b) and [208] that Dr Wallis based his conclusions and recommendations on the assumption that the buried capacitors contained a maximum of eight litres of PCB oil. At the penalty hearing, Judge McElrea heard further and much better evidence as to the likely volume of oil in the buried capacitors. This came from Mr Drummond and Dr Kim, both again called by the Council. The Judge needed to consider that evidence along with the evidence he had heard at the liability hearing.
[213] In evidence at the liability hearing was a fax dated 31 March 2000 Mr Ellis had sent Mr Drummond of Tredi in relation to the disposal of the capacitors which had remained in WCL‟s capacitor bank, after the leaking capacitors had been removed and subsequently buried. This fax (Exhibit “Cross D”) lists Khatau Junker capacitors of two sizes: 470 x 260 x 120 and 380 x 260 x 120. These dimensions accorded roughly with the evidence Mr Ellis gave at the liability hearing (at T 54/23-
30) that some of the capacitors removed (and subsequently buried) were “maybe 400
high by about 300 wide by about 125 deep”, and some of them were smaller “about
300 high by 300 wide by 150 deep”.
[214] As part of his further evidence, Mr Drummond produced the United Nations Environment Programme (UNEP) Guidelines for the Identification of PCBs and Materials Containing PCBs. He drew the Judge‟s attention to a paragraph on p9 of these Guidelines which stated:
Power Factor Correction Capacitors. Power factor correction capacitors are large capacitors that are generally of uniform size (60 cm x 30 cm x 15 cm) and may contain about 1.4 kg of 100% PCB fluid. ...
Of this statement Mr Drummond then stated:
18.However in my opinion I would regard the UNEP estimate of 1.4 kg of fluid per capacitor as being at the lower end of what I would expect to see.
...
23. Because of the density of PCB fluid it is reasonable to estimate that
1.4 kg of 100% PCB fluid would equate to about 1 litre in volume.
24.The amount of free liquid inside the capacitor will likely be impacted by the amount of PCB fluid that is absorbed by the insulating material inside the capacitor. The insulating material used is often a type of kraft paper that will absorb some of the PCB fluid, thereby improving the electrical insulation properties of the paper.
[215] Those weight to volume (of PCB oil) conversions were endorsed by Dr Kim in his further evidence. He deposed that PCB oil has a density range of 1.182 to
1.566 kg/litre, meaning that each litre of 100% PCB oil would be expected to weigh between 1.182 and 1.566 kilograms.
[216] In his submissions for WCL on penalty, Mr Casey submitted that the capacitor referred to in the UNEP Guidelines had a capacity approximately double that of the average of the two sizes of capacitor that were buried. He contended that one-half of Mr Drummond‟s estimate of one litre of PCB oil should be adopted here ie 0.5 litre of PCB oil per buried capacitor. Multiplying that by the eight capacitors found by the Judge to have been buried gives a total volume of four litres of PCB oil. That is half the maximum volume assumed by Dr Wallis, and less than a third of the
13 litres assumed by Dr Proffitt (in [218] following). It significantly further diminishes the risk of PCBs contaminating the ground water.
[217] Dr Proffitt‟s qualifications and experience in contaminated site investigation
were also uncontested.
[218] Dr Proffitt‟s assumptions were more conservative than Dr Wallis‟:
13 capacitors possibly buried.
Ground water level rising in winter and early spring to 4 m bgs.
The very small part of the Waitoa River flow (perhaps 100,000th)
coming from groundwater flowing under the DAF plant.
[219] Dr Proffitt first expressed the view that there is no risk to workers at the Waitoa site provided the concrete floor of the DAF building remains in place. Even on his somewhat more conservative analysis, he then concurred with Dr Wallis‟ assessment of the environmental risk as low adding that he:
... would go so far as to suggest the risk is negligible under the current and foreseeable circumstances.
[220] Dr Proffitt then carried out an analysis of a soil column below the buried capacitors, as Dr Wallis had done. He used more conservative parameters: water table at 4 m bgs; the total volume of soil .75 m2 totalling about 3 cubic metres or
1700 litres; soil porosity of 0.4 yielding a theoretical volume of voids of 680 litres; residual saturation value for the site soils of 0.1 (or 10%); 13 litres of PCB oil available to leak into the soil, and a rapid release assumed.
[221] Adopting those conservative assumptions, Dr Proffitt then explained his analysis and conclusion:
7.16Thirteen litres is 19% of the 68 litre pore volume, available to retain the PCB oil in an immobilized state, as calculated in paragraph 7.14 above. Expressed another way, if the oil leaks over the assumed
0.75 m square area, at a residual saturation of 0.1 the oil will travel less than 1 m vertically downwards (theoretically 0.76 m) before
becoming immobilised (as explained above in paragraph 7.8). This is well above the assumed watertable location, and provides a several-fold buffer against uneven vertical migration (i.e. some fingers of fluid extending further down than average). If only 3 to 8 litres is available to leak, the vertically downward travel distance will be correspondingly less (in simple proportion).
7.17an alternative way to interpret this is that approximately five times more oil than is thought to have been contained in the maximum possible number of capacitors would have to have leaked into the soil before the estimated available pore space was used up between the burial location and the watertable.
7.18I conclude, therefore, that if all the PCB oil leaks from eight to 13 buried capacitors, it will not reach the watertable and therefore will not directly contaminate the underlying groundwater. The possibility of PCB oil indirectly contaminating the groundwater by being leached to the groundwater by infiltration can be dismissed as the DAF plant building will prevent any infiltration. The obvious further conclusion is that the nearby Waitoa River is not at risk from PCB-contaminated groundwater.
7.19Even if PCB oil was to reach the watertable, it would not travel far and presents no threat to the river. The concept of residual saturation continues to operate below the watertable (residual saturation values are typically higher, that is, mobility of a non- aqueous phase fluid is smaller, in the saturated zone compared with the unsaturated zone) and therefore migration as a liquid is greatly limited. However, any PCB oil below the watertable will provide an ongoing source for very small amounts of PCBs to dissolve into the groundwater as it flows past. This would go on for an extended period of time, given the low solubility and slow natural degradation rates of PCBs. However, as Dr Wallis points out, PCBs have a strong tendency to be absorbed to the organic fraction within the soil. This means that any dissolved PCBs will preferentially “partition” to the aquifer materials rather than staying in solution, in effect being “filtered” from the groundwater well before the groundwater could reach the river (although the partitioning process is not actually a mechanical filtering process rather than a physic- chemical process).
[222] Dr Proffitt endorsed the monitoring recommendations of Dr Wallis, with these qualifications or additional comments:
He recommended more frequent water level measurements in the groundwater monitoring wells over at least the first year (and longer if the first year is a dry year) to assess seasonal fluctuations of the water table level, and thus to confirm that the assumptions about that level are reasonable.
The trigger levels should be developed by calculating the PCB concentration in the groundwater at the DAF plant that would produce unacceptable concentrations in the river, as defined by surface water
aquatic protection guidelines.
[223] Dr Proffitt endorsed Dr Wallis‟ recommendation that the capacitors be located and removed at the end of the life of the DAF plant building. He added that immediate attempts to locate and remove the capacitors would be an inappropriate use of resources, given the negligible risk to human health or the wider environment.
[224] Evidence about the consequences for WCL and others of the enforcement order made by the Judge was given by Mr Carter, WCL‟s Environmental Manager. Mr Carter deposed that WCL‟s rendering plant at Waitoa processes annually 22,000 casualty cows and other animals (ie those that have died on farms etc), 160,000 casualty calves, by-products from WCL‟s own processing plant, by-products from six other such plants, three of which are substantial chicken processing plants. Over
100 tonnes of chicken offal and approximately 40 tonnes of chicken feathers are processed each day from the daily slaughter of 250,000 chickens. WCL‟s rendering plant processes up to 2,800 tonnes of renderable material each week, sourced from
over 50 suppliers. A breakdown of this tonnage is:
56% from major contracted external suppliers, including the chicken
processors.
26% from WCL‟s own meat processing plant.
8% from casualty cows.
8% from small and non-contracted suppliers eg butchers. 3% from casualty cows.2% from other rendering plants.
[225] Mr Carter‟s evidence was that over 99% of the inputs of each animal and of the by-products WCL receives is utilised in some way, and he listed those various ways. They included production of blood and bone and compost from the waste water system. Mr Carter then described that waste water recovery and treatment system. He outlined that the function of the DAF plant was to recover as much solids as possible from the waste water before it enters WCL‟s pond system. He said that the DAF plant achieves a recovery rate of between 85 and 97% of solids suspended in the waste water. He described the way the DAF plant operates to float and then skim off the solids.
[226] Next, Mr Carter described the operation of WCL‟s treatment ponds. The first an anoxic (no oxygen) collection pond, then an anaerobic pond followed by an oxidation process in oxygenated ponds.
[227] Mr Carter described the consequences of the need to decommission the DAF plant for a seven day period in November 2007, while the second excavation was made through the concrete floor of the DAF building. Decommissioning was necessary because one of the small tanks had to be removed. Within five days of the DAF plant being taken out of operation the effects on pond 2 (the anaerobic pond) were dramatic. The approximately five-fold increase in the food load going into the pond greatly increased the mass of bacteria damaging the pond and the covers. Emergency remedial work was required and it took several weeks before pond 2 was able to function properly again. Decommissioning of the DAF plant for a period longer than a week would, in Mr Carter‟s opinion, result in failure of the waste water disposal system and closure of the site. Mr Carter said that it would take several months before the site could resume at full capacity, because of the time it would take to re-establish the waste water treatment system.
[228] Mr Carter expressed the view that the enforcement order the Judge made would involve the DAF plant being out of commission for between two and six months, with the closure of operations at the Waitoa site for that period as well. He added that it would then take several more months before the site could resume at full capacity, because of the time taken to re-establish the waste water treatment system.
[229] In addition to the “considerable financial cost to WCL” if required to cease operations, Mr Carter outlined the affect on other people. This section of his evidence really needs to be set out in full:
39.WCL‟s Waitoa plant is the largest service rendering plant in the country and is by the far the largest processor of dead stock. Dead stock is collected from the Bay of Plenty, the Waikato and Northland. On average WCL receives over 400 casualty cows and over 3,000 casualty calves per week (seasonal). Those animals have to be processed within a short time of dying, optimally no more than
48 hours, after which they become decomposed to such an extent that they are hazardous to process. It is therefore likely that farmers and others will dispose of their dead cows inappropriately, such as by haphazard burial or in bush and streams. These disposal methods could be considered environmentally unfriendly with the potential to pollute both surface and ground water.
40.WCL would no longer be able to take and process the offal and other by-products from other meat processors, including the chicken plants referred to above. Closure of the WCL plant will have a significant impact on other processors, as there is insufficient spare capacity at other rendering plants. As over 60% of renderables is from outside WCL (see para 10 above) there will be waste disposal issues for some of WCL‟s renderable product suppliers. This could be a problem of regional significance as far as the managing of environmental effects from the disposal of this material.
41.The major plants that supply their renderables to WCL may need to cease operating or to severely curtail their operations to a level where their waste product could be disposed of elsewhere as there would be insufficient rendering capability.
42.Landfill operations can only accept a small amount of renderable material (compared to the amounts WCL currently processes) and would be of limited use in disposing of excess animal waste products. I consider it is wasteful to put into landfill the material that can be processed and used, as the adverse environmental effects of rendering are minimal compared to landfilling that material.
[230] From the evidence of Drs Wallis and Proffitt and Mr Carter these conclusions emerge:
a) While the DAF plant building remains in place, and its concrete floor remains intact, the PCB capacitors buried beneath the floor present no risk to the health and safety of workers at WCL‟s Waitoa site. Any PCBs leaking from the capacitors (and I assume some leakage) will contaminate the soil beneath the buried capacitors, but this contaminated soil will be fairly localised and can eventually be
removed and appropriately disposed of. That is the case even if all the PCB oil in the capacitors leaks into the soil.
b)The risk of PCB contamination getting into the groundwater below the buried capacitors is negligible. Although, with appropriate caution, neither Dr Wallis nor Dr Proffitt was prepared to entirely discount that risk, the reality is that the risk is non-existent.
c) Even if that negligible (or as I assess it non-existent) risk came to pass, the risk of any PCB contamination reaching the Waitoa River is still less, and the risk of that contamination getting any distance downstream less again still. Those risks are so remote that they can be discounted altogether.
d)In terms of environmental risk, the capacitors can safely be left in place until the DAF plant building reaches the end of its design life (about 50 years). The capacitors and any contaminated soil beneath them should then be removed.
e) Removal of the capacitors during the design/operational life of the DAF plant building will involve the closing down of the DAF plant for a reasonably lengthy period (though for one that cannot be determined with any precision).
f) The financial and environmental consequences of such closure will be very significant indeed. Those consequences will impact, not only on WCL itself, but on the businesses and farmers who supply dead animals, offal and other animal waste to WCL‟s rendering plant.
[231] Those conclusions point inexorably to the result that the enforcement order made by the Judge is not an appropriate one. I therefore set it aside.
[232] I substitute the following enforcement order:
a) WCL is to implement promptly a monitoring system designed and approved by both Drs Wallis and Proffitt. In other words, both those experts are to “sign off” the programme.
b) The results of that programme are to be reported promptly to the
Council.
c) Upon the decommissioning of the DAF plant, WCL or the then owner or operator of the DAF plant is to locate and remove the buried capacitors and all soil beneath those capacitors that is contaminated with PCBs, as assessed against internationally accepted soil contamination guidelines in force at the time of removal.
d)All the expenses of monitoring, reporting to the Council and ultimate location and removal are to the account of WCL and/or the owner or operator of the DAF plant at the time of removal.
[233] I deliberately have not provided for the Council to have input into the monitoring system. That is because I have stipulated that it is to be “signed off” by both Drs Wallis and Proffitt in whom Judge McElrea had confidence, as do I. They are both reputable and leading experts in the field. The ability of the Council to monitor the situation is taken care of by the reporting requirement. The Council‟s ability to take action should monitoring results suggest any contamination in the groundwater is taken care of by the Council‟s ability to make a fresh application under s 316(2) for an enforcement order. The concern that the ownership or control of WCL may change, and the problem be lost in the future, is taken care of by the certainty that the Council will have the presence of the capacitors (ie PCB contamination) noted on the relevant LIM. There is no need for any enforcement order to make a stipulation about that.
Result
[234] WCL‟s appeal against conviction is allowed. Its conviction is quashed [70].
[235] Mr Cross‟ appeal against conviction is allowed. His conviction is quashed
([101]).
[236] Mr Dew‟s appeal against sentence is allowed. The fine of $40,000 imposed by the District Court is set aside. A fine of $20,000 and a sentence of 200 hours community work are substituted ([156]).
[237] The enforcement order made by the District Court against WCL is quashed. An enforcement order in the terms set out in [232] above is substituted.
[238] I am conscious that the grounds on which I have allowed the conviction appeals by Mr Cross and WCL have equal application to Mr Dew, who did not appeal his conviction. If so advised, he can make appropriate application to this Court (to the Hamilton Registry where these appeals were heard) by 22 October
2010 ([156]).
Costs
[239] Any questions of costs are reserved for application, if thought appropriate.
Solicitors:
Crown Solicitor, Hamilton for the Respondent
Nielsen Law, Hamilton for the Appellant Mr Cross in CRI 2008-404-405
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