Legal Insights

Environmental liabilities for insolvency practitioners – amendments to the Environment Protection Act 2017 to reinforce personal liability

By Sam Kingston, Melissa Jeremiah, Cara Thompson

• 15 December 2022 • 1 min read
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On 6 September 2022, amendments to the Environment Protection Act 2017 (Vic) (EPA) were made, reinforcing the potential personal liability for insolvency practitioners for environmental clean-up costs. The amendments follow the recent decision in The Australian Sawmilling Company Pty Ltd (in liq) & Ors v EPA & Anor [2021] VSCA 294.

Section 297 allows the Environment Protection Authority (Authority) to recover reasonable costs incurred by the Authority including when taking any prescribed action such as cleaning up contaminated sites. Section 297(2)(a) allows the Authority to recover these costs from ‘the owner or occupier of the premises where the circumstances exist'. The new section 297(5) provides that the section will apply ‘despite anything to the contrary in Chapter 5 of the Corporations Act’.

While the amendments are yet to be tested, their purpose is to elevate section 297 above the Corporations Act and ensure that liquidators cannot use disclaimers to avoid hefty environmental costs, even if an indemnity has not been provided. The practical consequence will be that clean-up costs must be paid in priority to other unsecured claims and priority costs, including a liquidator’s remuneration.

Insolvency practitioners should be aware that the amendments are aimed at preventing liquidators from disclaiming liability for environmental clean-up costs and liquidators should consider potential environmental clean-up costs before accepting any appointment.

Read more articles from The Annual Return: 2022 in Review.

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