Watt v Southland Regional Council [2012] NZHC 3062 (16 November 2012)

Last Updated: 17 December 2012

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

CRI-2012-425-43 [2012] NZHC 3062

BETWEEN GILBERT ANDREW WATT Appellant

AND SOUTHLAND REGIONAL COUNCIL

_Respondent

Hearing: 6 November 2012

Counsel: R T Chapman for Appellant

B J Slowley for Respondent

Judgment: 16 November 2012

_{JUDGMENT OF MILLER J}

Introduction

[1] Mr Watt, a dairy farmer, pleaded guilty to one charge of discharging dairy effluent onto his land in circumstances that resulted in it entering a nearby waterway called Sandstone Creek.[1] The discharge came from a failed coupling on a travelling irrigator, from which effluent was pumped onto the land for several hours before the failure was noticed.

[2] Mr Watt was responsible for the system, which did not include the failsafe device required under his resource consent, but he did not manage it on a day to day basis. His contract milker and co-offender Tony Cabral did that. Mr Cabral had not followed operational procedures which anticipated that he would monitor the

_{travelling irrigator occasionally during its run.}

WATT v SOUTHLAND REGIONAL COUNCIL HC INV CRI-2012-425-43 [16 November 2012]

[3] Both men were sentenced in the Environment Court. In Mr Watt’s case Judge Dwyer adopted a starting point of $60,000 for the fine, while in Mr Cabral’s case Judge Harland had earlier adopted a starting point of $35,000. The fines imposed after personal circumstances and mitigating factors were $48,000 and $5,000 respectively.

[4] Mr Watt now appeals his sentence. He says that the disparity in starting points was unjustified, and that comparable cases show his starting point was too high.

The nature of Mr Watt’s liability

[5] It was not in dispute that an offence was committed when effluent was discharged onto land so as to contaminate Sandstone Creek. Mr Watt was held vicariously liable under s 340(1) of the Resource Management Act:

340 Liability of principal for acts of agents

(1) Where an offence is committed against this Act—

(a) by any person acting as the agent (including any contractor) or employee of another person, that other person shall, without prejudice to the liability of the first-mentioned person, be liable under this Act in the same manner and to the same extent as if he, she, or it had personally committed the offence....

[6] Mr Watt unsuccessfully invoked a statutory defence available to a principal under s 340(2)(a)(i)(A), saying that he did not know, and could not reasonably be expected to have known, that the offence was being committed:

340 Liability of principal for acts of agents

(2) Despite anything in subsection (1), if proceedings are brought under that subsection, it is a good defence if—

(a) the defendant proves,—

(i) in the case of a natural person (including a partner in a firm),—

(A) that he or she did not know, and could not reasonably be expected to have known, that the offence was to be or was being committed; or

(B) that he or she took all reasonable steps to prevent the commission of the offence; [and]

(b) the defendant proves that the defendant took all reasonable steps to remedy any effects of the act or omission giving rise to the offence.

The offence

[7] The facts were the subject of detailed findings on two occasions. Mr Cabral was sentenced first, and a disputed facts hearing was held. Mr Watt pleaded not guilty and was convicted after a defended hearing. In both cases the issue was whether Mr Cabral deliberately disconnected the effluent pipe on the preceding day. Both Judges rejected that allegation. The following narrative is drawn from the Environment Court record in Mr Watt’s case (including Judge Harland’s sentencing notes) and the submissions of counsel.

[8] Mr Watt owned adjoining dairy farms near Riversdale. He lived on one, and the other was carrying 450 cows which were being milked by Mr Cabral. Mr Cabral in turn employed Corey Marsh to assist him.

[9] Sandstone Creek runs within several hundred metres of the dairy shed. It is a modest watercourse with a catchment of about 2,850 hectares. It leads to the Waimea Stream, which in turn forms a major tributary of the Mataura River. Sandstone Creek is significant in that it is one of three waterways subject to a living streams accord run by the informant Council. A number of farmers, notably including Mr Watt, have co-operated in fencing and planting along the stream to protect it from contamination.

[10] I need not describe the farm’s effluent system in detail, for the Council accepts that it was generally of sound design and was vulnerable to discharges in only one respect. It relied upon a travelling irrigator to spread effluent from collection ponds near the shed. Travelling irrigators are prone to trouble. This one was connected to the effluent pump by pipes joined with Hansen couplings, which are an alkathene fitting. There was evidence that these particular couplings had failed in the past.

The system also lacked a failsafe device, which works by stopping the pump when it detects a major loss of pressure.

[11] The resource consent under which Mr Watt had operated the travelling irrigator since 2008 expressly required that he “install and maintain an alarm and automatic switch off system as a contingency measure in the event of irrigator stoppage or breakdown”. This failsafe requirement is now a standard condition of the Council’s resource consents for travelling irrigators.

[12] Mr Watt deposed that that he did not realise his resource consent required a failsafe device. The condition was new in 2008. There is evidence that he has reading difficulties. Judge Dwyer was content to sentence on the basis that Mr Watt carelessly failed to check and meet the conditions of his resource consent. Mr Slowley characterised that approach as generous, but the Judge had the advantage of hearing Mr Watt and might accept that he did not breach deliberately. To say that, of course, is not to suggest that carelessness in such matters can be excused. It is merely to point to the absence of an aggravating factor. Mr Watt had a duty to identify and meet the terms of his resource consent. His failure to do so is distinctly blameworthy, no less so because Council staff who checked the system from time to time also overlooked the noncompliance.

[13] Mr Watt did know about failsafe devices. He had told the Council in 2008 that he intended to install one soon. He conceded in evidence that he had chosen not to incur the expense of about $5,000.

[14] Mr Watt’s evidence was that he relied instead upon his milker to monitor the travelling irrigator. He said that he had given instructions that it was to be watched in operation. It would be turned on after the morning milking, in daylight hours, so the milker could see it as he went about his other business in the shed, from which vantage point the irrigator could generally be seen. With no apparent sense of irony Mr Watt explained that he kept a copy of the resource consent in the shed and expected the milker to read it. Mr Cabral confirmed that it was his practice to set the alarm on his cellphone so that it would go off when the irrigator reached the end of its run, following which he would switch the irrigator off and reset it for its next run.

It appears that so long as these practices were followed scrupulously Mr Watt could avoid any discharge substantial enough to reach the waterway.

[15] On the morning of 30 March 2011 Mr Cabral switched the irrigator on when the milking began at 5.00 am and then presumably turned his attention to the cows. It was not only dark but also foggy, so he could not see the irrigator in any event. He did not check it at all. He knew it lacked a failsafe device. After the milking he went home for breakfast at about 7.30 to 8 am. He soon got a text from Mr Marsh saying that the irrigator pipe had blown apart. A pipe had disconnected at a Hansen coupling and was discharging effluent into the paddock near the dairy shed, from whence it flowed via a swale to Sandstone Creek.

[16] Mr Watt and Mr Cabral then did all they reasonably could to minimise the damage, but a substantial quantity of effluent entered the creek. Judge Harland described the environmental effect as “reasonably significant”. The contamination was obvious, and samples taken three kilometres downstream showed that the contaminants were present in high levels.

[17] In Mr Watt’s case, Judge Dwyer heard detailed evidence from Mr Watt and Mr Cabral and Mr Marsh, among other witnesses. It is evident from the transcript that Mr Watt was much inclined to blame it all on Mr Cabral. The Judge preferred Mr Cabral’s account to that of Mr Marsh, whose belief it was that Mr Cabral had deliberately disconnected the pipe when he re-set the irrigator the evening before and that the pump had been running all night. Mr Cabral’s account was corroborated by reliable and independent evidence which confirmed the timing of the discharge. The statutory defence accordingly failed. The Judge’s liability findings are not in issue on appeal.

The sentencing decisions

[18] Sentencing Mr Cabral on 29 June 2012, Judge Harland accepted that the faulty equipment was a partial cause of the discharge, but the Judge also found Mr Cabral’s management less than satisfactory. He failed to check that the irrigator was properly operational, but his behaviour was careless and unwise rather than deliberate. His

culpability was moderate. The very substantial reduction from the starting point of

$35,000 was attributable to his personal circumstances, his guilty plea and his previous good character.

[19] Sentencing Mr Watt on 22 August 2012, Judge Dwyer summarised the facts and placed Mr Watt’s offending at the higher end of the moderately serious category.[2] Two factors led the Judge to that conclusion: the discharge could have been avoided had the effluent system incorporated a failsafe device as required under the resource consent, and the creek is a valued stream subject to a community improvement project (the living streams accord). Mr Watt’s failure to provide a

failsafe device elevated his offending above that of Mr Cabral.

[20] The Judge accepted that the discharge had been of limited duration. It discernibly affected Sandstone Creek but its effect on the wider water system could not be quantified and would have been much diminished by the time it entered the Mataura River. That said, this offending was yet another example of a one-off discharge polluting a minor water body and the cumulative effect of numerous such discharges was of real concern. Deterrence had assumed considerable significance in dairy effluent cases, where a small minority of dairy farmers continued to offend, and it was an important consideration in Southland. The Judge accordingly adopted a starting point of $60,000, finding that broadly consistent with current starting

points in similar cases,[3] including the very recent decision of his own in Taranaki

Regional Council v Hinton.[4]

[21] Turning to mitigating factors, the Judge recognised that Mr Watt has a good compliance record, and further that he has participated significantly in the living streams accord. Since 2007 he had fenced off 2,790 metres of Sandstone Creek and installed one culvert. He would soon plant a 550-metre section of the stream. He

_{had also installed a K-line effluent irrigation system on his home farm (not the farm}

in issue in this case). For these reasons the Judge reduced the starting point to arrive at the fine of $48,000.

Disparity of starting points

[22] Mr Chapman argued that Mr Cabral was the more culpable offender. He was responsible for the day to day operation of the effluent system, and he knew the Hansen couplings sometimes failed. He did not follow the procedures established by Mr Watt. On the other hand, Mr Watt has a reading difficulty and did not appreciate that the Council had inserted the new condition about a failsafe device when it renewed the resource consent in 2008. The Council not only failed to draw the condition to his attention but also overlooked the omission when its staff checked the system on three occasions since 2008. After the discharge Mr Watt immediately installed a failsafe device. Mr Slowley responded that the discharge resulted from equipment failure and the real cause was the want of a failsafe device, not Mr Cabral’s management.

[23] Mr Watt and Mr Cabral both had an excellent opportunity to prevent the discharge, Mr Watt by installing a failsafe device and Mr Cabral by following operating procedures. In these circumstances little is gained by trying to assess which was the “real” cause. Each man had different responsibilities,[5] and each man’s culpability must be separately assessed. I agree with the Judge that Mr Watt’s culpability was greater, for several reasons all of which distinguish his case from that

of Mr Cabral.

[24] First, he chose to use a travelling irrigator which, while permissible, carried with it a significant risk of accidental discharges from the Hansen couplings.

[25] Second, quite independently of the resource consent Mr Watt chose to avoid the cost of the failsafe device, relying instead upon management practices which could never be a complete substitute. A failsafe device was a reasonable precaution.

_{He doubtless thought that the risk of serious discharge was low, but the fact remains}

that he took an environmental risk for financial gain. That invites a penalty which eliminates any such incentive.

[26] Third, the failsafe device was an express condition of the resource consent and Mr Watt’s failure to realise that and comply with the condition was seriously careless. This consideration too invites a deterrent penalty.

Starting point too high?

[27] For the reasons just given I accept Mr Slowley’s submission that Judge Dwyer was correct to place this offending in the moderately serious category. I accept too that the affected waterway is a significant one because it is part of a living streams accord.

[28] Mr Chapman argued that in other cases the Environment Court has adopted lower starting points for more serious offending. He highlighted the Judge’s own very recent decision in Taranaki Regional Council v Hinton Contracting Limited, arguing that the Judge was wrong in this case to characterise Hinton as less serious. In this case the Judge considered that the nature of the receiving environment – that is, the Sandstone Creek – put the offending into a different category. Mr Chapman argued that the waterway contaminated in Hinton is also significant because it forms a tributary of a river with high natural, ecological and amenities values. Mr Slowley responded that this case is distinguishable because Mr Watt had failed to comply with a positive requirement of his resource consent, and deterrence has assumed particular significance in Southland, where the relatively recent growth of the dairy industry seems to have been associated with many discharges, principally involving mismanagement of travelling irrigators.

[29] In a 2010 decision, Yates v Taranaki District Council, MacKenzie J reviewed the level of penalties.[6] He found that the cases evidence increasing concern about the incidence of dairy effluent offending and a growing emphasis on deterrence, and he drew attention to a substantial increase in the maximum fine in 2009. Those

_{observations remain relevant in this case. They invite caution when evaluating an}

argument that this court should reduce the sentence by reference to previous first instance decisions. I observe too that in this case there was a defended hearing, so the Judge was in a good position to assess Mr Watt’s culpability.

[30] That said, a starting point of $60,000 for a single offence of carelessness does appear stern when compared to some other moderately serious offences. The same starting point was adopted for two separate careless breaches by a farmer in Taranaki Regional Council v Lilley, for example.[7] Although Hinton is a decision of the same Judge, there is also something in Mr Chapman’s argument that the distinction he drew here does not compellingly explain the difference in starting points. The offender there was an agricultural contractor which was spreading effluent by truck. It held a resource consent the conditions of which the offender

breached on a single occasion by spraying effluent onto elevated land so that it could and did enter a waterway, which ultimately led to a river having high environmental values. The offending was very careless, and the discharge caused significant adverse effects although it was only of about three hours duration. The starting point adopted was $35,000.

[31] However, the offender in Hinton may have been fortunate, for the Judge adopted the informant’s recommended starting point and it does not appear that he was referred to comparable decisions. Further, the starting point chosen here is not exceptional. Notably, what amounts to the same starting point was adopted for each of two similar offences in Southland Regional Council v MacPherson.[8] The starting point here is also comparable to the aggregate starting point for a single incident in Canterbury Regional Council v Townshend and Charlann Ltd.[9]

[32] I conclude that the starting point was within the high end of the range currently available for moderately serious offending. As such it was available to the Judge. I

_{observe that to some extent Mr Chapman’s submissions on this issue assumed}

Mr Watt’s culpability was lower than that of Mr Cabral. For the reasons given earlier, I do not accept that submission. Having regard to Mr Watt’s failure to take a reasonable and required precaution, general deterrence assumed importance in his case.

Mitigating factors

[33] Mr Chapman accepted that the credit of 20 per cent given for mitigating factors was reasonable. But his written submissions did highlight the substantial mitigating factors in this case and it is right to record some of them. Mr Watt is a person of good character with no previous convictions of any sort and he has otherwise been conscientious in his compliance with environmental obligations. He has voluntarily participated in a substantial way in the living streams accord, which is an important mitigating factor in itself. He was remorseful. The discount of 20 per cent is conservative in the circumstances.

[34] Mr Chapman’s written submissions also pointed out that Mr Watt is only one of the beneficiaries under the trust which owns the farms, and he noted that for the past three years Mr Watt has had no taxable income and only one modest recorded asset. But absent evidence to the contrary it is reasonable to assume that the fine would be treated as a liability of the trust, which Mr Watt admittedly controls, and the absence of personal taxable income and assets is no guide to Mr Watt’s true wealth. In such circumstances, a court might reasonably insist upon a full statement of assets and liabilities, including those of the trust, before accepting that the offender’s means warrant some reduction in the fine that would otherwise be imposed.

Decision

_{[35] The appeal is dismissed.}

_{Miller J}

Solicitors:

Cruickshank Pryde, Invercargill for Appellant

---

[1] _{Resource Management Act 1991, s 338(1)(a).}
[2] _{Waikato Regional Council v G A and B G Chick Limited (2007) 14 ELRNZ 291 (DC).}

[3] Taranaki Regional Council v Sullivan DC New Plymouth CRI-2012-021-267, 21 August 2012;

_{Taranaki Regional Council v Lilley DC New Plymouth CRI-2010-021-472, 16 November 2010.}

[4] Taranaki Regional Council v Hinton Contracting Limited DC New Plymouth CRI-2012-021-

176, 28 May 2012.

[5] Taranaki Regional Council v Sullivan DC New Plymouth CRI-2012-021-267, 21 August 2012 at [16].

[6] Yates v Taranaki Regional Council HC New Plymouth CRI-2010-443-8, 14 May 2010.
[7] _{Taranaki Regional Council v Lilley DC New Plymouth CRI-2010-021-472, 16 November 2010.}

[8] Southland Regional Council v MacPherson DC Invercargill CRI-2010-025-3422, 19 January _2011.

[9] Canterbury Regional Council v Townshend and Charlann Ltd DC Christchurch CRI-2011-003-

902, 903, 7 May 2012. Separate starting points for a company and its controlling shareholder were calculated by effectively treating them as a single individual.