"On just terms": High Court ruling brings (some) certainty to Native Title compensation

14 Mar 2019

Governments, project proponents and Native Title parties alike can now approach their Native Title negotiations with the benefit of the principles for assessing the amount of compensation payable for impacts on Native Title having – for the first time – been authoritatively established by the highest Court in the land (Northern Territory v Mr A. Griffiths (deceased) and Lorraine Jones on behalf of the Ngaliwurru and Nungali Peoples [2019] HCA 7).

The High Court has confirmed that the correct approach, when assessing the compensation payable for extinguishment and other impairment of Native Title rights and interests, is to be guided by the principles that would apply where equivalent non-Native Title rights and interests are extinguished or otherwise impaired.

These principles require, where there has been Native Title extinguishment:

  • an assessment of the economic value of the extinguished Native Title rights and interests (with a discount to be applied where the Native Title in question is "non-exclusive"); and
  • additionally, an estimation of any "non-economic or cultural loss" caused to the Native Title holders by the relevant extinguishing acts.

The Court also found that it was appropriate to apply simple interest on the economic component of the compensation sum from the date of extinguishment to the date of assessment.

While there are helpful clues in the judgment, what the High Court did not do was deal in any detail with how Native Title compensation is to be assessed where the impact on Native Title is caused by the grant of mining or petroleum tenements, or by any other acts that, although they might result in an impairment of Native Title rights and interests, do not extinguish them.

The claim by the Ngaliwurru and Nungali peoples

The "Timber Creek" decision in 2016 was the first Federal Court assessment and subsequent determination of compensation under the Native Title Act 1993 (Cth) (NTA)

The case concerned a claim made by the Ngaliwurru and Nungali peoples (Holders), once they had been determined to hold Native Title in relation to the township of Timber Creek in the north-west of the Northern Territory (NT), for compensation for the impact on their Native Title of various governmental acts.  Most of the acts in question had resulted in the extinguishment of the Holders' Native Title rights and interests.

At first instance, Justice Mansfield assessed compensation as being due under three categories: economic loss, interest and non-economic loss (which it described as intangible loss or solatium), and awarded:

  • $512,000 for the economic value of the extinguished Native Title rights;
  • $1,488,261 in interest; and
  • $1,300,000 for non-economic/intangible loss or solatium.

Justice Mansfield derived the economic value using the freehold value of the land as a benchmark, and applying a 20% discount to reflect the non-exclusive nature of the affected Native Title (the result of the fact that (non-compensable) partial extinguishment of the Native Title had already occurred when the relevant compensable acts were done).

On appeal, the Full Court largely declined to disturb Justice Mansfield's first instance judgment – except for finding that the appropriate discount to freehold value where Native Title rights are non-exclusive is 35%, not 20% (largely because it considered that the trial judge had erred in not further discounting to take into account the inalienability of the Native Title), and reducing the economic loss and interest components of the award accordingly.  The Full Court found that Justice Mansfield had not erred in exercising his discretion to fix the award for solatium.  

Appeals to the High Court were lodged by the:

  • Holders (who argued that there should be no discount to reflect the non-exclusive nature of their Native Title, and that compounding interest would have been appropriate);
  • NT (who argued that Justice Mansfield's assessment of $1.3m for non-economic loss was manifestly excessive); and
  • Commonwealth (who additionally argued that the relevant discount should have been 50%, and that interest should not have been awarded as part of the compensation).

Two elements of assessing compensation for extinguishment of Native Title

The High Court found that the proper approach to assessing compensation for the impact of extinguishing acts on Native Title will typically be two-pronged (or "bifurcated"), comprising:

  • an element relating to the economic value of the Native Title; and
  • an additional component reflecting the "cultural loss" (the High Court thought it was inappropriate to think of this as "solatium") brought about by the reduction the relevant acts had caused to the Holders' connection to country.

The High Court did note concerns that using freehold value as a reference would result in Native Title in metropolitan areas being given a greater economic value than Native Title in remote areas, but it considered that this effect could be ameliorated by the likelihood that (conversely) Native Title holders in remote areas are more likely to be able to show greater cultural loss resulting from reduction in connection to country than their counterparts in metropolitan areas.

The High Court agreed with both the trial judge and the Full Court that:

  • the economic component is to be assessed by reference to the unencumbered freehold value of the underlying land, and capped at that value (essentially an assessment of what the Holders could have demanded for agreeing to the extinguishment of their Native Title); and
  • it is appropriate, where the affected Native Title rights and interests are non-exclusive, to discount this amount.

However, the High Court held that the Full Court was incorrect to view the inalienability of Native Title rights and interests as a relevant discounting factor in the assessment of their economic value.  The Court also found that the extinguishment of the Holders' ability to control access to their country that had left them with only limited non-exclusive Native Title was so significant as to make the Full Court's 35% legally incorrect.  Given these limitations, the High Court agreed with the Commonwealth that the appropriate discount for prior partial extinguishment was in fact 50%.

Is interest payable on the compensation?

The High Court agreed that it was appropriate to award interest on the economic component of the assessed compensation amount from the date on which the relevant acts were done to the judgment date, but rejected the Holders' arguments for seeking compound interest.

Assessing compensation for cultural loss

In terms of cultural loss, the High Court agreed with Justice Mansfield that the task was to "determine the essentially spiritual relationship which the [Holders] have with their country and to translate the spiritual hurt from the compensable acts into compensation".  This will need to be determined on a case-by-case basis, and will necessarily vary between different groups.  For present purposes, the Court found that the "reasoning of the trial judge did not reveal legal error".

What is still to be determined with assessing compensation

One issue that the High Court did not have to consider was how to assess compensation that might be payable for acts (including "future acts") that affect Native Title rights and interests without extinguishing them.  Examples of these acts would be the grant of resources tenements or other such authorities.  The High Court specifically noted that none of the compensable acts in the appeals fell within section 51(3) of the NTA, which involves acts that satisfy the "similar compensable interest test" in section 240 of the NTA.  It is likely, applying the principles discussed in the High Court's decision, that the economic component of any such compensation could not exceed the relevant unencumbered freehold value. 

It is also likely, however, that there will be a reduction in that value to account for the fact that Native Title has not been extinguished.  The quantum of that reduction is not clear from the High Court's decision.  Whether there will also be an element to reflect any cultural loss caused by the relevant future act may also depend, consistently with the "similar compensable interest test", on the terms of the relevant legislation.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.