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Major court ruling redefines asbestos waste and obligations under resource recovery exemptions

A major court ruling, handed down on August 2, 2019, will impact on recyclers in NSW, particularly those dealing with construction and demolition (C&D) waste, those that may have exposure to asbestos risks, and all parties dealing with resource recovery exemptions – including consumers and transporters.

The NSW Court of Criminal Appeal (CCA) overturned an earlier Land and Environment Court (LEC) decision regarding waste-related legislation in NSW, and in doing so, has redefined how the meanings of “waste” and “asbestos waste” are understood, and obligations related to resource recovery exemptions under NSW environmental legislation. The decision means that the courts have now endorsed a zero-tolerance approach to the presence of asbestos in waste, which is likely to have serious consequences to the recycling industry – especially C&D recycling.

The NSW Environment Protection Authority (EPA) succeeded on all grounds in EPA v Grafil Pty Ltd; EPA v Mackenzie [2019], overturning almost all of the original findings of Justice Pain in EPA v Grafil Pty Ltd; EPA v Mackenzie [2018] NSWLEC 99.


The defendants, Grafil Pty Ltd and its director, owned a property in NSW. Grafil accepted thousands of tonnes of material from a number of recyclers for the building of an access road. That material was supplied under two resource recovery exemptions (which are exemptions that allow waste to be reused without the normal licensing requirements etc, if the generator has first carried out required testing, and certified that the material meets the relevant chemical and other criteria).

Grafil received material over a period of months, always with a certificate from reputable recyclers stating that the material had been tested, met all requirements, and therefore fell under resource recovery exemptions. However, when the EPA attended the site (months after some material had been received), it tested a range of stockpiles, and alleged that some of the material did not meet the relevant criteria, and moreover, since limited amounts of asbestos had been located (634.64 grams in 44,000 tonnes – representing some 0.000000014 per cent), not only did the material not fall under the exemptions, but it was “asbestos waste”.

The EPA prosecuted Grafil for unlawfully using its land as a waste facility without a licence – an offence under the Protection of the Environment Operations Act 1997 (POEO Act).

In the Land and Environment Court, Justice Pain found Grafil and its director not guilty. This turned on a number of key points, three of which were the subject of the appeal – firstly, she found that the material was not “waste” under the POEO Act. Secondly, she found that the material was not “asbestos waste”. Finally, she held that since it is the generators that are required to carry out testing, it would be an unfair and unreasonable operation of our laws to hold the consumers of that material criminally liable if it turned out not to meet the criteria.

In a highly technical decision, but one with big implications, the Court of Criminal Appeal roundly overturned Justice Pain’s decision – and in doing so, changed the landscape for waste in NSW.

Is the material “waste”?

Under the POEO Act, “waste” is defined in the following way: “waste includes…(a)…, or (b)…., or (c)…., or (d)….”. In the LEC, Grafil successfully argued that the use of “or” between the sub-definitions to “waste” meant that the definition is fairly narrow, as it can only fall within one, or the other sub-definition – but not both. This narrower meaning would mean that in some cases it would be uncertain if material was actually waste – and therefore, whether the POEO Act applies at all.

However, the CCA disagreed. It stated that the definition of “waste” is intended to be wide – and so, the word “or” is actually to be read “and/or” – that is, it can fall within one, or many sub-definitions.

The upshot is that if it walks, talks, and quacks like a duck – then it’s waste. If there is ever any doubt whether material may or may not be waste, this judgment means that it is safest to assume that it is waste.

Is it “asbestos waste”?

Possibly the most controversial aspect of the judgment, and with far-reaching consequences, is how the court approached the meaning of “asbestos waste”.

Under the POEO Act, “asbestos waste” is defined as “any waste that contains asbestos”. This definition is unfortunately extremely vague – there is no suggestion as to how much asbestos deems an entire stockpile or load as asbestos waste.

The NSW EPA has always adopted a zero-tolerance approach – any asbestos presence, even a microscopic amount, means that the entire stockpile/load is “asbestos waste”. This has serious implications, as a stockpile of, say, 1,000 tonnes of recyclable material with 0.2mg of asbestos would need to be disposed of as asbestos waste instead of being recycled/reused.

In the LEC, the trial judge adopted a pragmatic approach in stating that it is a matter of fact and degree in each case – that is, it would depend on the particular circumstances, such as the source, nature and volume of the waste in question.

The CCA overturned this. It held that if any amount of asbestos is present whatsoever – then the entire load/stockpile is classified as asbestos waste. Again, it is worth noting that the amount of asbestos discovered in the bulk samples in this case was 634.64 grams, representing an “incredibly minor” (per Justice Pain) amount in comparison to the per estimate of 44,000 tonnes of materials in the stockpiles – amounting to 0.000000014 per cent of all material.

This has significant implications for the exposure of recyclers, transporters and others in the waste industry to asbestos risks. The industry now has to assume that the presence of even a fraction of a per cent can deem an entire load of waste to be “asbestos waste” – and manage the risks accordingly. This includes re-examining due diligence and testing regimes, contamination and rejection clauses under contracts, protocols for checking and rejecting loads, as well as environmental insurance.

Are consumers to be liable?

The CCA did not explicitly look at the specific issue of whether it is a fair use of our criminal laws to make “innocent” consumers liable when they receive certificates stating that material has been tested, and meets all relevant criteria under a resource recovery exemption. But this is the implication of its decision – even an innocent consumer who has done all that is required of them under the POEO Act by ensuring that all material is supplied with certificates certifying that the material has been tested and meets the requirements of a resource recovery exemption – can nonetheless be criminally prosecuted, and/or ordered to remediate the site and dispose of the material at great cost – notwithstanding that it was the generator, not the consumer who was actually at fault.

This has significant implications for the resource recovery industry. If consumers receive no real protection by fulfilling their obligations to receive certificates, then will those consumers continue to receive material under resource recovery exemptions at all? And if these risks dampen enthusiasm for the resource recovery exemption – where is the material to go?

Watch this space

This decision means that the regulatory regime for waste in NSW has become tougher, and risks to all in the industry, as well as consumers, have increased – at an especially difficult time for the industry. However, Grafil may appeal the decision to the High Court of Australia – which would settle some of these issues once and for all.

Gavin Shapiro is a partner at Hones Lawyers. He specialises in the waste industry, including waste contracts, waste legislation, EPA investigations and prosecutions, and operational issues.