The Victorian Civil and Administrative Tribunal (VCAT) recently varied the Environment Protection Authority’s (EPA) decision to amend conditions on an operating licence held by Monsbent Pty Ltd (Monsbent), on the basis that section 357(2) of the Environment Protection Act 2017 (Vic) (EP Act) did not empower the making of amendments for purposes outside of achieving the EPA’s objective.[1] This case is important because it confirms that EPA powers must be exercised in context of what is reasonably practicable to reduce a risk of harm, and that there is no intent for an absolute elimination or reduction in the risk of harm to zero. The EPA’s power to impose licence conditions is not unfettered.[2] The EPA cannot use the imposition of tightened licence conditions to focus a person’s attention on better compliance following a history of non-compliance unless those conditions are reasonably practicable and reduce the risk of harm.
The new EP Act commenced operation on 1 July 2021, granting the EPA new compliance and enforcement powers, to fulfil its responsibility of “monitoring environmental quality identifying and responding to harm and risks of harm to human health and the environment”.[3] The Monsbent decision is the first case to consider, in a substantive way, the powers and functions of the EPA under the reformed EP Act licence regime.[4] It also provides guidance on the appropriate powers for the EPA to use to encourage greater compliance with the general environmental duty (GED).[5]
The EPA has not lodged an appeal against this decision, and the timeframe for doing so has elapsed.
We expect the Monsbent decision will cause the EPA to –
- Provide clearer explanations for how the exercise of their powers is for the purpose of protecting human health and the environment by reducing harmful effects of pollution and waste, in line with the EP Act’s objective,[6] focusing on risk reduction, rather than just the reduction of pollution and waste itself; and
- Pay more attention to the intended uses of its powers and give greater consideration to using the most appropriate power when enforcing compliance with the GED.
The Monsbent decision also demonstrates that in determining whether a power has been exercised properly, the EPA must consider relevant contextual factors, namely the nature of the power exercised, the nature of the activity conducted, and the nature of the waste or pollutant from which the risk arises. As VCAT noted, ‘applying the principles of environmental protection set out under the EP Act requires an integrated [approach] and balancing a range of considerations’.[7]
Monsbent argued the condition limits were not justified, as they did not further the EPA’s objective
Monsbent manufactures particleboard, which results in air emissions regulated by an operating licence, which it has held since 1987.
On 21 July 2022, Monsbent sought amendments to its operating licence conditions. On 20 December 2022, the EPA decided to amend the licence, but imposed additional changes. Contentious amendments included the imposition of a lower discharge limit for one discharge point, and the removal of another discharge point, effective immediately.
The EPA justified the amendments on the basis that they were necessary to “protect human health and the environment”, and therefore in furtherance of the EPA’s statutory objective.
Monsbent did not contest that the EPA had the power to amend licences, and add conditions,[8] but disagreed on the merits of these specific amendments. Monsbent submitted that the changes were not justified; the reduced emissions limits did not fulfil the EPA’s objective because they did not actually reduce the relevant risk of harm. Therefore, Monsbent sought a review of the EPA’s decision to amend and add licence conditions in VCAT.[9]
The EPA’s powers must only be exercised when doing so can actually reduce the risk of harm to human health or the environment
The EPA is empowered to amend licences ‘subject to any conditions it considers appropriate’. However, VCAT has clarified that the exercise of this power is limited. VCAT noted that the EPA “must exercise its powers and perform its duties and functions … for the purposes of achieving the objective set out in [s 357(1)] to the extent that it is practicable to do so, having regard to the nature of the power being exercised, or the duty or function being performed”.[10]
Section 357(1) provides that the proper purpose of an exercise of power is the “protection of human health and the environment by reducing harmful effects of pollution or waste”.
VCAT stated that the requirement in section 357(2), that powers be exercised to achieve the EPA’s objective “to the extent… practicable” means that the EPA is required to reduce the risks of harm, to the extent that it is capable of doing so, using the relevant power. It does not empower the EPA to exercise its powers to the extent that it subjectively believes it “needs” to do so, if that action does not reduce the risk of harm.[11]
To determine whether the relevant action will reduce the relevant risk of harm to a contextually acceptable level, the EPA will need to consider:
- The nature of the power exercised (in this case, the ability to amend licence conditions);
- The nature of the activity conducted; and
- The nature of the waste or pollutant from which the relevant risk (i.e., the risk which the EPA is seeking to manage through the exercise of its powers) arises.[12]
The EPA’s focus should be on whether amending the licence would eliminate, or if this is not possible, reduce the risk of harm. VCAT found that the EPA made the error of conflating the reduction of pollutant emissions with the reduction of the risk of harm.
The Tribunal noted that in this case, the reduction of emissions that would be created by the amendment would not quantifiably reduce the risk of harm. Therefore, the amendments were not part of what was “practicable” to reduce the risk of harm and went beyond the scope of what the EPA is empowered to do.
A factor in VCAT’s reasoning noted that a proportionate response to the risk of harm is required, and this can include weighing up economic and social considerations.[13] Monsbent submitted the EPA conditions would impact its ability to keep operating. VCAT accepted its evidence that there are economic and social benefits for Monsbent to keep operating due to it providing regional employment and provision of product for use elsewhere in Victoria. VCAT distinguished between this economic benefit to wider society, as compared to direct financial benefit to a company.[14]
The EPA must use the proper powers to ensure compliance with the GED
The EPA submitted that the amendments were still justified, despite not reducing the risk of harm, as they would cause Monsbent to pay more attention to compliance with the licence, and therefore, help ensure compliance with the GED. Further, it had exercised the power to amend the licence in a manner that fulfilled its duty to ensure compliance with the EP Act,[15] including the GED.
The Tribunal rejected this on the grounds that nothing in the EP Act or Environment Protection Regulations suggests that compliance with a licence will be taken as compliance with the GED. The Tribunal found that if the EPA wanted parties to focus on GED compliance, in response to a belief that there has been a contravention of the GED or other duties, the appropriate course of conduct would have been to issue remedial notices,[16] not to use other powers for this purpose.[17]
Interestingly, VCAT reached this view despite the fact remedial notices had clearly been ineffective in eliciting compliance from Monsbent, which has been the recipient of 13 regulatory notices since 2009 and has also been subject to successful criminal prosecution.
VCAT’s ultimate decision
After applying the above principles, VCAT ultimately varied the EPA’s decision to amend Monsbent’s operating licence, adopting Monsbent’s desired (higher) emission limits with minor modifications, as that would “reduce the risks to the extent practicable”, and thus constitute a valid exercise of power.
We will continue to monitor subsequent cases further clarifying the scope of the EPA’s powers in the wake of Monsbent.
Monsbent Pty Ltd v Environment Protection Authority [2024] VCAT 302.
Monsbent Pty Ltd v Environment Protection Authority [2024] VCAT 302, at [73].
Second Reading Speech Environment Protection Amendment Bill 2008, Legislative Assembly, 20 June 2018, Lily D’Ambrosio, MP, 76.
Other VCAT cases brought under the EP Act 2017 include Wyndham CC v Environment Protection Authority (Red Dot) [2022] VCAT 1061, which considered whether the EPA has the power to revoke a notice to investigate, after an application to review that notice has been lodged; SBI Landfill Pty Ltd v Environment Protection Authority [2023] VCAT 417, which considered whether the EPA had the power to issue a notice of suspension stating a period of suspension that began prior to the notice being given; and AA Recycling Pty Ltd v Environment Protection Authority [2024] VCAT 354, which considered whether requirements in a revised notice to investigate were appropriate and proportionate to the potential risk of harm.
A duty imposed under the Environment Protection Act 2017 (Vic), s 25.
Environment Protection Act 2017 (Vic), s 357(1).
Monsbent Pty Ltd v Environment Protection Authority [2024] VCAT 302, at para [27].
Under the Environment Protection Act 2017 (Vic), s 57(4)(b) or s 58(1)(c).
Exercising the statutory right to review conferred under the Environment Protection Act 2017 (Vic), s 430 and the Victorian Civil and Administrative Tribunal Act 1998 (Vic), s 42(1). VCAT was constituted by Senior Member Ian Potts.
Environment Protection Act 2017 (Vic), s 357(2). Monsbent Pty Ltd v Environment Protection Authority [2024] VCAT 302, at [38].
Monsbent Pty Ltd v Environment Protection Authority [2024] VCAT 302, at [70].
Monsbent Pty Ltd v Environment Protection Authority [2024] VCAT 302, at [72].
Based on the principles of environment protection contained in the Act at sections 13 to 23.
Monsbent Pty Ltd v Environment Protection Authority [2024] VCAT 302, at [133]-[134].
Environment Protection Act 2017 (Vic), s 358(l).
Environment Protection Act 2017 (Vic), Chapter 10.
Monsbent Pty Ltd v Environment Protection Authority [2024] VCAT 302, at [140].
