The liability of parent companies for environmental offences committed by their subsidiaries is set to widen in Queensland under amendments to section 492 of the Environmental Protection Act 1995 (the Act). The purpose of the amendments, which were assented to on 18 November 2005, is to provide a definition clarifying that a company representative also means a representative of the parent or controlling holding corporation.
The amendments appear to have been introduced following on from civil and criminal charges laid by the Queensland Environmental Protection Agency (EPA) in February 2005 against three subsidiaries of a corporate group, including the parent company, for environmental offences relating to the disposal of effluent into Brisbane’s Bremer River. In this matter, only civil and not criminal charges were made against the parent company. Under the present legislation, it would be difficult for the regulatory authority to bring criminal charges against a holding company for breaches of environmental regulation by the subsidiary company.
The action launched by the EPA on the holding company arises out of the controlling interest that it has over the subsidiary. It has previously been found by the Courts that the conduct of the affairs of one company can also be the affairs of the parent company where the parent company has been conducting the affairs of the corporation (Re Dernacourt Investments Pty Ltd (1990) 2 ASCR 553). However, this principal has not been tested in relation to environmental offences committed by a subsidiary company. By widening the definition of representative in the Act to include parent company, the new definition provides the EPA with a greater certainty in bringing criminal charges against a holding company.
The significance
The change in legislation highlights the growing need for parent companies to be aware of the environmental activities and responsibilities of their subsidiaries.
The change in legislation signals that environmental regulators are challenging the concept that parent companies have limited liability when it comes to environmental management. More than ever, companies need to review their structures to ensure that they have appropriate management practices in place and are aware of the environmental responsibilities of their subsidiary companies. At the same time, subsidiary companies should also review their ability to meet environmental obligations.
