Liability for Environmental Incidents – Are You In Control?

by Andrew Petersen and Irene Wales

Whilst there are numerous pieces of legislation governing environmental liability, the concept of “control” is a common thread running through them. For the construction industry the relevant question is who is in control of the site or the relevant work when an incident occurs. If a principal can be regarded as being ‘in control’ of work that leads to an environmental incident, even though a contractor is executing the work, then the principal may be found vicariously liable for the incident.

However, what level of “control” is required?

The issues of vicarious liability and ‘control’ over building work in terms of environmental protection were discussed by Pearlman J in a judgment handed down on 31 March 2003 – Environment Protection Authority v McConnell Dowell Constructors (Aust) Pty Ltd [2003] NSWLEC 70.

The case concerned the release of a substantial amount of oil into Woolloomooloo Bay after pipes were damaged during re-development of the Finger Wharf (“the polluting event”). Multiplex Constructions Pty Ltd (“Multiplex”) was under contract to develop the wharf. Multiplex entered into a subcontract with the McConnell Dowell Constructors (Australia) Pty Ltd (“McConnell Dowell”) to carry out works, including the demolition of the wharf structure. In turn, McConnell Dowell had subcontracted with Moltoni Corporation Pty Ltd (“Moltoni”), to demolish the wharf substructure.

McConnell Dowell was charged with an offence against the Environmental Offences and Penalties Act 1989 for polluting waters contrary to s16 (1) of the Clean Waters Act 1970. McConnell Dowell pleaded not guilty.

The test applied by the Land and Environment Court was whether McConnell Dowell had sufficient “power of control” over the work of the independent subcontractor (Moltoni) so as to render it vicariously liable.

The test involves analysis of whether the principal has:

  1. a right to direct the subcontractor in circumstances where the right is capable of exercise and is, or is likely to be effective; and
  2. actual control of a course of action taken by the independent subcontractor; ie, control over the way in which the tasks are to be performed or how they are to be carried out.

In other words, it is critical whether the principal controls how the work is carried out. In this case, the Court ruled that although McConnell Dowell:

“could, and did, direct what was to be done, where it was to be done, and when it was to be done … it could not, so far as Moltoni was concerned, direct it as to how it was to be done.”

Accordingly, McConnell Dowell was found by the Court to be not liable for the actions of Moltoni.

Owners and contractors are therefore well advised to agree on, and to document carefully, who is responsible for how work on the site and activities such as waste leaving a site are to be carried out. The appropriate party should then price the risk accordingly.


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