Services

Federal Court makes first ever assessment of Native Title compensation - 24 April 2017

Almost 25 years after the decision in Mabo v Queensland (No 2),[1] the Federal Court for the first time articulates principles for assessing compensation payable to traditional owners for the extinguishment or impairment of native title rights and interests.

On 24 August 2016 the Federal Court handed down its first assessment of compensation in Griffiths v Northern Territory of Australia (No 3) [2016] FCA 900 (Timber Creek decision) awarding $3,300,261 to the Ngaliwurru and Nungali people comprised of:

  • $512,000 for economic loss;
  • $512,000 pre-judgment interest; and
  • $1,300,000 the loss of connection with/attachment to the land (what Justice Mansfield called ‘solatium’).

The compensation claim the subject of the Timber Creek decision was brought by Alan Griffiths on behalf of the Ngaliwurru and Nungali people and followed an earlier determination[2] of native title over areas of land in and around Timber Creek, Northern Territory. The claim concerned areas of land where both exclusive and non-exclusive native title interests existed. Until now there had only been one case to award compensation to native title holders, however, the amount of compensation agreed between the parties in that case was confidential. [3]

Under the Native Title Act 1993 (Native Title Act), compensation is payable to native title holders for certain acts that impair or extinguish their native title rights or interests where there has been a determination of native title. The Native Title Act provides no guidance on how to calculate compensation other than expressly providing that compensation may only consist of the payment of money and that the maximum compensation payable is the freehold value of the land. However, this is subject to the requirement to provide compensation on ‘just terms’. [4]

The decision of Mansfield J – 24 August 2016

Justice Mansfield identified four primary issues in dispute in the Timber Creek decision:

  • the relevant date on which the right to compensation arises (and accordingly, the date on which the value of freehold land should be assessed);
  • the value to be ascribed to exclusive or non-exclusive native title rights that were extinguished or impaired;
  • the basis for calculating an award of compensation for solatium; and
  • whether interest (simple or compound) should be awarded.

Date of valuation

The Native Title Act does not prescribe a date from which a right to compensation arises. Justice Mansfield concluded, based on the intention and construction of the Native Title Act, that it’s the date of the act which fixes the date at which compensation is to be assessed. While the acts were validated at a later date, the legislation expressly provides that the acts have always been valid. [5] The Applicants contended that valuation should be at the date of validation to ensure just terms because the value of the land may have increased as a result of the improvements made by the acquirer. Justice Mansfield rejected the Applicant’s argument relying on Justice Sackville’s judgment in Jango v Northern Territory of Australia [6] where Justice Sackville held that compensation assessed at the date of the validating enactment may result in a substantial and inappropriate windfall benefit to the native title holder where there had been a significantly increased value to the land by the construction of public works or other improvements after the extinguishing acts.[7] Justice Mansfield also noted that the separate interest component of compensation would ensure that compensation is on just terms.[8]

Economic loss

While the Native Title Act sets the maximum compensation at freehold value, Justice Mansfield considered that exclusive native title should, as a starting point, be valued at the equivalent of freehold value. The Commonwealth argued that the value of native title rights should be assessed by comparing the rights attaching to a fee simple holder of freehold title with the bundle of rights held by native title holders at the time of the acts. [9] The Territory argued that compensation should be valued by assessing the usage available to native title holders, identify the closest conventional comparator in terms of usage value, and to adopt the market value of that comparator. The Territory also emphasised the distinction between freehold and non-exclusive native title rights which cannot be alienated, have no value on the open market and do not carry the right of exclusive possession. [10] Justice Mansfield rejected the arguments of the Territory and the Commonwealth noting that it’s not appropriate to treat native title right as though they were rights conventionally held by a land holder because it fails to take into account the real character of native title.[11] His Honour also rejected the argument that because native title rights are inalienable and non-transferable, they should have a lesser value than freehold title. This is consistent with the approach adopted by the High Court (in relation to an acquisition of land from traditional owners in New Guinea), the Privy Council and various United States Courts. [12]

Having regard to the nature and extent of non-exclusive native title rights enjoyed by the Ngaliwurru and Nungali people, Justice Mansfield held that the appropriate valuation of non-exclusive native title rights and interests is 80% of the freehold value. Justice Mansfield was careful to note that percentage does not reflect an allowance for the elements which are related to the cultural or ceremonial significance of the land, or the very real attachment to the land that the native title claimants or native title holders have (which is separately compensated under the solatium component). Ultimately, his Honour expressly acknowledged that his decision is an intuitive one based on all the evidence and reflects a focus on the entitlement to just compensation. [13]

Solatium

The biggest issue before the Court was how to quantify the loss or diminution of spiritual, cultural and social connection with or attachment to the land. The Appellant cited principles from decisions awarding non-pecuniary loss in other areas including personal injury and defamation. Justice Mansfield noted that it was not appropriate to be guided by the principles in those decisions because they concerned awards of damages for personal rather than communal losses.

Justice Mansfield acknowledged that the process of assessing compensation for solatium is complex but essentially an intuitive one. [14] Evidence about relationship to country and the effect of acts on that connection are paramount. Solatium should be assessed having regard to the communal native title and collective ownership of the native title rights and interests; reflect the loss or diminution of traditional attachment to the land arising from the extinguishment or impairment in question; and must be assessed having regard to, in this case, the non-exclusive nature of the native title rights and interests in question. [15]  In making the ‘in globo’ award of compensation, his Honour referred to evidence that ‘one cannot understand hurt feelings in relation to a boxed quarter acre block.  Rather, the effects of acts have to be understood in terms of the pervasiveness of Dreaming.’[16]  Accordingly, the size of the land in question is not relevant to the question of compensation for solatium.

Compensation for solatium was assessed on the basis of the past three decades or so of the loss of cultural and spiritual relationship with the lots affected by the compensable acts, and for an extensive time into the future. Of particular significance was the cumulative effect of the construction of water tanks along the path of dingo Dreaming, the impact generally of the acts on native title rights and interest together with a sense of failed responsibility and the diminishment of the geographical area over which those rights and interest are held. [17]

Interest

While the Native Title Act is silent on the issue of the calculation of interest it does not preclude the Court from awarding compound interest where appropriate and to ensure compensation is on just terms. Interest may be awarded as part of compensation, not interest on the compensation. Justice Mansfield rejected the Applicant’s contention that where the claim group has waited a considerable period for compensation that means that interest should be assessed on a compound basis. The evidence which lead to the decision that simple interest was appropriate in the circumstances included that the Ngaliwurru and Nungali people generally used funds received towards activities for their benefit rather than investing them.[18] Even if the funds were invested he considered that the proceeds would have been distributed to the community, rather than reinvested.[19] Whether the appropriate interest should be simple interest or compound interest will depend on the evidence[20] including evidence of the potential investment or commercial application that might have been made of the compensation by the relevant claim group from the time of the compensable act.

Invalid future acts

Interestingly, Justice Mansfield also awarded damages of $48,597 (including interest) for the three acts attributable to the Territory that were invalid future acts done in 1998 in the nature of trespass. In doing so, his Honour noted that each act purported to extinguish native title but because the acts were done invalidly, the acts did not have that effect. As there are no provisions in the NTA that deal with compensation for invalid future acts, these matters are governed by the general law, which Justice Mansfield found the Federal Court had the jurisdiction to determine. The Applicants were awarded:

  • $19,200 being the value of native title rights impacted; and
  • $29,397 for pre-judgment interest.

Impact

Given its significance, it’s unsurprising the Northern Territory and Commonwealth have appealed the Timber Creek decision. The Territory and Commonwealth, among other things, are in search of clarity around the methodology for valuing non-economic loss. In light of this, the impact of the decision on future compensation applications remains to be seen. Still, Justice Mansfield articulates the key principles applicable to valuing the loss or impairment of native title rights. The fundamental issue concerning mining proponents is the apportionment of liability between tenement holders in a determination area over which compensation is awarded. Justice Mansfield’s ‘in globo’ approach to the award of compensation is incommensurable with section 125A of the Mining Act 1978 (Mining Act) which deals with liability on a tenement by tenement basis. It remains to be seen what approach the State will take in apportioning liability among tenement holders. The Mining Act states that compensation is payable by “the applicant for the grant of or the holder of the mining tenement at the time the determination of compensation is made.” However, consideration may also need to be given to whether liability for separate future acts taken by different holders of the same tenement will be apportioned according to the name of the act done and the extent of its impact on extinguishing or impairing native title. Mining proponents should continue to be aware of native title compensation as an evolving area of the law, both in relation to ensuring the validity of proposed future acts and when considering their exposure to pay compensation for the extinguishment or impairment of native title.

For more information or discussion, please contact HopgoodGanim Lawyers’ Resources and Energy team.


[1] (1992) 175 CLR 1.

[2] Griffiths v Northern Territory of Australia (2006) 165 FCR 300.

[3] De Rose v State of South Australia [2013] FCA 988.

[4] The just terms requirement in section 51A of the Native Title Act reflects section 51(xxxi) of the Constitution which provides a guarantee that the Crown must pay compensation on just terms for the acquisition of property.

[5] Ss14 and 22B NTA, ss19 and 22F NTA and s4 VNTA

[6] [2006] FCA 318.

[7] Ibid at [772].

[8] Timber Creek decision at [171].

[9] Timber Creek decision at [190] to [192].

[10] Timber Creek decision at [193] – [195].

[11] Relying on Geita Sebea v Territory of Papua (1941) 67 CLR 544 and Amodu Tijani v Secretary, Southern Nigeria [1921] 2AC 399.

[12] Timber Creek decision at [183] to [188].

[13] Timber Creek decision at [233].

[14] At [302].

[15] Timber Creek decision at [301].

[16] Timber Creek decision at [325].

[17] Timber Creek decision at [378 to 381].

[18] Timber Creek decision at [277].

[19] Ibid at [278].

[20] Timber Creek decision at [263] and [268].


HopgoodGanim Lawyers is a full service commercial law firm. Our firm has 41 partners and more than 280 staff. We operate nationally and internationally with a focus on Asia from our two key locations of Brisbane and Perth. We offer highly skilled and agile legal teams across key sectors and areas of practice. In all of our areas of speciality, our lawyers are recognised by legal publications as leaders in their fields.