Key takeaways
Officers, including insolvency appointees, may personally contravene environmental legislation in Victoria if their company has been issued with compulsory notices by the Environmental Protection Authority Victoria (EPAV), but due to insufficient funds, they fail to comply with those notices. Expending funds otherwise available to pay creditors may be acceptable in these circumstances.
Lessors generally are at risk of assuming environmental law obligations for their lessee's hazardous waste because of terms commonly found in leases about abandoned goods. Under those terms, ownership of abandoned goods passes to the lessor if a liquidator abandons leased premises. Lessors of such premises need to be proactive in understanding and managing such risks.
In depth
Managing Liquidators' and other insolvency appointees' risk from compulsory environmental notices1
ACB Group Pty Ltd (In Liq) (ACB) operated a dangerous goods facility, manufacturing chemicals for automotive use. A serious fire in July 2024 destroyed the factory, leaving significant hazardous waste at the site. At the time of entering liquidation in December 2024, the Company had been issued notices by the EPAV (in October and November 2024) ("Notices") pursuant to the Environment Protection Act 2017 (Vic) ("EP Act"). These required the removal of fire-impacted hazardous waste and the preparation of reports. Compliance with the Notices was due by late February and early March 2025.
The liquidator sought directions that funds held by ACB (mostly insurance proceeds) could be spent in complying with the Notices, those funds otherwise being available to pay creditors. The court made a direction sanctioning the use of those funds for compliance with the Notices.
Failure to comply with the Notices would have been an offence of ACB attracting civil penalties (Part 10.8 of the EP Act). The fact those penalties were not recoverable as a debt in a liquidation, of itself, might seem to be a reason for the liquidator to ignore such a notice. However, under the EP Act, a person concerned in, or a party to, a contravention also contravenes the EP Act. Where ACB itself commits an offence, a liquidator authorising, permitting or being knowingly concerned in that contravention would also commit an offence. The EP Act also enables the re-direction of an obligation under a notice to officers of ACB. Given those potential exposures for the liquidator, the Court was satisfied that the expenditure of the funds was justified.
The decision is a timely reminder of the personal exposures that insolvency appointees, as well as directors, may face as a result of enforcement action by environmental authorities in Victoria and in other Australian jurisdictions.
Lessor's risk sand Liquidator's opportunities flowing from standard lease terms when dealing with hazardous waste2
In another case, the liquidator of a manufacturer of paints and solvents abandoned various materials and equipment at leased premises in Victoria. That material included hazardous waste. For good measure, the liquidator also served a disclaimer notice to further escape any environmental law consequences flowing from the company's ownership of those materials.
The State of Victoria was concerned that the obligation to dispose of the hazardous waste would fall on it, along with ownership of the hazardous waste, after the disclaimer notice took effect. It brought proceedings to challenge the notice.
The Court noted that a disclaimer notice operates to release future rights and obligations of the company in liquidation. However rights which do not need to be terminated to release the company from future liability survive the disclaimer notice. Under this lease, ownership of goods not removed from the premises after the end of the lease (or lease termination) passed to the lessor. In this case, ownership of the hazardous waste passed to the lessor before the service of the disclaimer notice. Therefore, the Court determined that ownership (and therefore the environmental law obligations to deal with the hazardous waste) fell to the lessor, not the State of Victoria.
Critical observations
Liquidator's and other insolvency appointees' exposure to statutory penalties may be a reason for them to expend funds, otherwise available for creditors, to address environmental obligations. These cases did not consider the effect of a disclaimer of property or the consequences of a potential shortfall in funds to pay other priority creditors, as raised in the previous Linc Energy decisions: Australia: Missing Linc - Queensland Court of Appeal rules environmental protection order ineffective after liquidators' disclaimer - Global Restructuring & Insolvency
Lessors are at risk of assuming additional environmental obligations where their lessees undertake businesses involving the manufacture, storage or handling of hazardous waste, and their standard lease terms pass ownership of abandoned goods to the lessor. Consideration should be given to this risk at the time of drafting each lease.
1 Re ACB Group Pty Ltd (In Liq) [2025 FCA 83]
2 Re Fordex Pty Ltd (In Liq) [2025] VSC 180
