QUEENSLAND-headquartered law firm Cooper Grace Ward is warning company officers, financiers, shareholders and other related people that they can now be personally liable for company breaches under the Environmental Protection Act 1994 (Qld).

On April 22, the Queensland Government passed the Environmental Protection (Chain of Responsibility) Amendment Act 2016 to drastically broaden the application of the Act. 

According to Cooper Grace Ward co-founder David Grace, the amendments were triggered as a consequence of concerns that taxpayers may end up paying for the costs of environmental rectification works at the Queensland Nickel refinery near Townsville, as a result of the Clive Palmer-owned operator of the refinery being placed in administration.

Mr Grace said before the amendments, the Department of Environment and Heritage Protection could generally only issue an environmental protection order to companies or individuals who caused environmental harm or failed to comply with environmental conditions imposed by the Department under the Act.

Under the recent amendments, the Department can now issue an environmental protection order to related bodies corporate, executive officers, secured parties, mortgagees, financiers, shareholders, and ‘related persons’, such as holding companies and landowners.

“This means that parties that had no involvement in causing the environmental harm or failing to comply with environmental obligations can now be required to comply with environmental protection orders,” Mr Grace said. “The costs in complying with these orders, such as rehabilitating affected land, can be significant.”

Mr Grace said as the Department could consider matters arising prior to April 20, 2016, in determining “whether a person constitutes a related person, people who may be at risk should consider whether they have sufficient contractual protection under existing insurances, leases, sale contracts and joint ventures if environmental harm is caused”.

He said ‘at risk’ parties could minimise their exposure through appropriately drafted obligations in leases and other contractual arrangements.

www.cgw.com.au

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RECENT media statements by senior company directors distancing themselves from ‘toxic’ corporate cultures within the organisations they govern – examples include the 7Eleven staff underpayment inquiry and Commonwealth Bank’s insurance revelations – have come under heavy attack from Australia’s The Ethics Centre.

The Ethics Centre executive director, Simon Longstaff, said the “disgraceful” views of a number of senior company directors, who are excusing themselves and instead attacking the Australian Securities and Investments Commission (ASIC)  for  “suggesting that company directors might, in some circumstances, be held liable if a pernicious corporate culture is directly linked to wrong-doing”. 

“That they should adopt this aggressive stance against responsibility, especially in the wake of a growing number of corporate scandals, is quite remarkable,” Dr Longstaff said.

“After all, shareholders enjoy the privilege of limited liability only because they have delegated, to boards, the power to direct the affairs of companies. If company directors are not ultimately responsible for the most important factor in shaping the conduct of a corporation – culture – then who is?

“Do these few, influential directors want the liability to fall back on shareholders? Or do they think that nobody should be held to account?”

Dr Longstaff pointed out that the character of a corporation’s culture has been a feature of Australia’s criminal law since 1996.

“That is, the concept of corporate culture has been a defined legal term for twenty years. Not once, in all of that time, has a company director expressed public concern,” Dr Longstaff said.

“Indeed, the alarm was only raised after ASIC proposed, in quite general terms, that the ‘culture provisions’ of the Commonwealth Criminal Code Act should be extended to encompass the Corporations Law. Only then did company directors start to pay attention to legal concepts that they had happily ignored (or lived with in blissful ignorance) for two decades.

“ASIC has been accused of trying to specify a blue print for corporate culture. That accusation has no foundation.

“Like APRA has already done, in its risk culture standard CPS220, ASIC was merely flagging its intention that company director should be clear and explicit about the character of the corporate culture that they intend to see established – and that they should monitor and remediate any gaps between the ideal culture (as specified by the board – not ASIC) and the actual culture as ‘lived’ and experienced.”

Dr Longstaff posed the question: Why does this matter so much?

“The ‘culture provisions’ of the 1996 law were enacted for a very good reason,” he said. “Up until then, Australian companies had been able to hide behind formal systems of compliance in which all of the boxes had been ‘ticked’. Meanwhile, the culture would either be indifferent to – or encouraging of – illegal conduct.

“That is when bad things happen – and no amount of regulation and surveillance can prevent the harm that follows.

“The worst of this is that ASIC has not been given the chance to develop its proposals. For example, it is likely that directors would only be held liable if recklessly indifferent to the culture of a corporation or if actively encouraging a culture of non-compliance – as they should be,” Dr Longstaff said.

““This is especially worrying as all of the tools needed for the accurate measurement and assessment of corporate culture are well-developed and in use.

“Fortunately, the Australian Institute of Company Directors (AICD) has recognised the central role that directors must play in setting the foundations for and in monitoring the corporate culture developed by management. Thank heavens for that!”

www.ethics.org.au

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QUEENSLAND'S mine objection laws "open the floodgates for anti-resources activists, from Broome to Berlin, to disrupt and delay projects" according to the Queensland Resources Council (QRC).

QRC chief executive Michael Roche said, "The Palaszczuk Government’s Mineral and Other Legislation Amendment Bill (MOLA) passed today, overturns aspects of Newman government legislation that was set to streamline the objection process for mining projects in Queensland." 

Mr Roche claimed the new law was "yet another to add to the stack that made it harder to get on with business in the state, despite the resources sector being one of the heavy lifters in the economy, generating one in every six jobs and injecting $2.1 billion in royalties over the past financial year alone". 

"The QRC understands that MOLA delivers the Palaszczuk Government’s election promise to wind back amendments made by the Newman government to streamline the objection process for mining projects in Queensland," Mr Roche said.

"We agree the community should have an avenue for their concerns to be heard about mining projects, however this should not equate to multiple years in the Land Court spent frustrating and delaying what is supposed to be an administrative process only, not a Hollywood-style courtroom hearing."

Mr Roche said there were currently multiple pathways available to object about a project and the QRC supported the previous government’s efforts to provide clarity to objectors as to the appropriate pathway where there were concerns about a mining project.

"QRC maintains that an objection right under the mining legislation is an unnecessary double-up of the environmental objection under environmental legislation in Queensland," Mr Roche said.

"The government must act to protect future investment in the resources sector for all Queenslanders as we are at a crossroad where every new project could be held up in court for several years. 

"At a cost of about $1 million a day spent in court, this is an unacceptable message to send out to investors and potential investors in Australia and overseas.

"To make matters worse, under this law you don’t even have to be a resident of Queensland to object to the grant of a mining lease in Queensland. You could be living in another state or in a foreign country and be able to lodge an objection.

"The QRC once again calls on the Palaszczuk Government to urgently overhaul the Land Court system so that resource projects are not subject to onerous delays that are holding up job-creating projects for Queensland."

www.qrc.org.au

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FROM July 1 this year, a new 10 percent withholding tax will apply to acquisitions of Taxable Australian Real Property (TARP) or Indirect Australian Real Property (IARP) interests.

The withholding is based on 10 percent of the purchaser’s capital gains tax (CGT) cost base for TARP or IARP and must be paid to the Australian Taxation Office (ATO) on or before the settlement date.

“The ramifications for a purchaser in failing to withhold are severe so they will need to be thorough in their due diligence, be clear about their withholding obligations, negotiate withholding and settlement terms with the vendor and seek adequate protections in contractual agreements,” RSM Australia partner Simon Aitken said.

“The measures could have flow-on effects for related GST and stamp duty liabilities if there are tax gross-up clauses in the purchase agreement. A prudent course for a purchaser of TARP or IARP is to assume a withholding applies unless the vendor can prove otherwise.”  

Mr Aitken said Taxable Australian Real Property is defined as real property, including a lease, within Australia. The definition does not carve out residential property or a mining, quarrying or prospecting right within Australia.

“The new measures will impose a non-final withholding tax, meaning the vendor will still have an obligation to lodge a tax return in relation to the CGT event but they’ll be entitled to a tax credit and perhaps even a tax refund (where relevant) for the withholding,” he said.

“RSM Australia expects that the ATO will be vigilant in chasing delinquent vendors who do not lodge tax returns disclosing CGT events for their disposal of TARP or IARP.”

RSM Australia is an industry expert member of Victorian Leaders, the organisation helping to foster the next generation of leading businesses based in Victoria.

www.rsm.global/australia

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