The operator of Queensland’s container deposit scheme (CDS), Container Exchange (COEX), is being sued for $19 million, after an undercover sting that found it cancelling contracts, following allegations baled aluminium cans were being accepted at refund depots.

Baled aluminium cans are cubes containing tens of thousands of machine-crushed and tightly pressed cans, which makes transportation simpler, but is considered a fraud risk as there is a chance that they have already been recycled and money already paid by another CDS.

COEX now finds itself at the centre of two unrelated civil cases in the Supreme Court.

Firstly, United Scrap Metal Traders is claiming more than $10 million in damages, with court documents revealing COEX wrote to United director Steve Henderson to allege the company accepted several tonnes of baled cans from Bundaberg.

According to the report, these were then “broken apart and mixed in with other cans to conceal the processing of the ineligible cans from COEX”.

COEX alleged a United employee declined to buy the bale, but then told the undercover investigator he could instead “use a crowbar to chip it apart, and then recycle the individual cans”.

In response, United denies any wrongdoing, claiming employees had never purchased or processed any large bales. Instead, United says they only took small tablets that were loosely compressed for easy transportation.

“These small 8kg tablets were broken up for several reasons – to confirm containers were eligible and to be mixed with other containers so that they could be baled properly at the COEX/Cleanaway processing centre,” Henderson wrote.

Next up, COEX alleges that Zelcliff accepted baled cans, sold baled cans to another company, then processed refunds in small transactions to avoid detection.

According to Brisbane Times, the private investigator then went to Zelcliff to try and sell a bale of cans on January 29, 2019. Allegedly, the employee refused to accept the bale. The investigator later returned with a bag of machine-pressed cans, which was accepted.

In its legal action scrap metal recycling business Zelcliff is claiming almost $9 million in damages, after its contract was cancelled in 2019.

Zelcliff’s legal team disputes all the allegations that COEX made in cancelling its contract, it claims cans were sold to another company for scrap metal, and not as part of the refund scheme.

“If the company’s defence is unsuccessful, the potential financial impact may include payment of damages of up to approximately $19.5 million and legal costs to the claimants,” COEX wrote in its latest annual report.

“Due to the nature of the matters, the possibility of financial settlement ahead of trial is considered to be remote.”

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