Good faith tested: Wake-up call for project proponents

By Mark Geritz, Tosin Aro and Georgia Davis
09 Dec 2021
Failure to respond to requests for information within a reasonable time, or to provide sufficient information in response to such requests, may lead the NNTT to conclude that a mining or petroleum project proponent has not conducted native title negotiations in good faith.

A proposed mineral or petroleum exploration or production tenement can only be validly granted over areas where native title has not been extinguished if an appropriate native title procedure is first followed. One such procedure is the “right to negotiate” (RTN), which requires the State and the relevant mining or petroleum project proponent (the “grantee” of the proposed tenement) to negotiate in good faith with the applicable native title parties with a view to obtaining their agreement to the grant of the tenement.

If, after at least six months of negotiations, no such agreement has been made, an application can be made to the National Native Title Tribunal (NNTT) for a determination that the tenement can be granted despite no agreement having been reached between the proposed resource tenement holder and the native title party. However, the NNTT will not have power to make such a determination if it is satisfied by any of the “negotiation parties” that the State or the grantee party (the proponent) did not negotiate in good faith. In these circumstances, the good faith “power point” is often taken by native title parties as a first step in responding to a “future act determination application” (FADA).

Two recent decisions of the NNTT have provided a wake-up call for project proponents as to the requirements for negotiating in good faith, particularly when it comes to the choice – with which project proponents are often faced – between providing sufficient information to ensure counterparties understand their position and ensuring that internal sensitive information is not divulged. The decisions are:

  • Sunstate Sands Bundaberg Pty Ltd and Another v First Nations Bailai, Gurang, Gooreng Gooreng, Taribelang Bunda People Aboriginal Corporation RNTBC [2021] NNTTA 44 (24 August 2021) (Sunstate); and
  • David Trow and Trojon Enterprises Pty Ltd v Aaron Banderson & Another on behalf of the Wagiman People and Another [2021] NNTTA 68 (12 November 2021) (Trojon Enterprises).

Good faith generally

The NNTT has repeatedly held that:

  • the requirement of good faith is directed towards “the quality of a party's conduct”;
  • the requirement is “to be assessed by reference to what a party has done or failed to do in the course of negotiations and is directed to and is concerned with a party's state of mind as manifested by its conduct in negotiations”; and
  • while negotiations are not required to have reached any particular stage before a future act determination is sought, “it is not sufficient for good faith negotiations [for a party] to merely ‘go through the motions’ with a closed mind or a rigid or predetermined position”.

It is in this context that the NNTT assessed the conduct of the grantee parties in Sunstate and Trojon Enterprises.

Delays in providing information – How long is too long?

In Sunstate, the grantee party lodged a FADA after failing to obtain the agreement of the native title party for the Bailai, Gurang, Gooreng Gooreng, Taribelang Bunda People (BGGGTB Party) to the grant of a mining lease over an area near Bundaberg.

Topics for the negotiations between Sunstate and the BGGGTB Party included the development of an ancillary agreement (which was to have contained details of the benefits payable by Sunstate in consideration for the agreement of the BGGGTB Party) and a cultural heritage management agreement (proposed CHMA). It seems that negotiations had reached a sufficiently advanced stage for Sunstate to believe that the proposed CHMA was to be tabled for execution when the BGGGTB Party discovered the existence of a cultural heritage management plan (existing CHMP) that covered the project as a whole.

The BGGTB Party asked Sunstate to disclose the existing CHMP, so it could be reviewed against the proposed CHMA – primarily, to assess the extent to which the existing CHMP reflected (or had been updated to capture) the BGGGTB Party’s preferred cultural heritage management practices (as outlined in the proposed CHMA). In light of its concerns regarding past cultural heritage management in the wider project area, the BGGTB Party indicated it would not execute the proposed CHMA until the existing CHMP had been disclosed. However, Sunstate only disclosed the existing CHMP after lodging its FADA – “approximately 12 months” after disclosure had been requested.

In determining that negotiations had not been conducted in good faith, the NNTT held that Sunstate acted unreasonably by not responding, within a reasonable timeframe, to the BGGGTB Party’s reasonable request for disclosure of the existing CHMP. The NNTT found that:

“the extent to which a grantee party actively participates and provides information in a timely manner, or gives clear reasons as to why information could not be provided, is important for a native title party to be able to participate in the negotiations”.

As such, proponents involved in native title agreement negotiations should be seeking to provide relevant information in a timely manner to native title parties when requested.

Disclosing financial information – how much is required?

In Sunstate, over the course of offers and counter offers between the parties, the grantee party made representations that terms proposed for the ancillary agreement by the BGGGTB Party "were not economically viable for the grantee". The parties communicated about the disclosure of supporting evidence and information as to why the terms were in fact not economically viable.

The documents provided by Sunstate to the BGGGTB Party to explain the issue of economic viability were found by the NNTT to be "at best, opaque". Importantly, the NNTT found that while Sunstate provided reasons why it was unable to provide financial information (such as administrative difficulties in generating specific information for Sunstate, which was only one part of a consolidated group of companies), it did not provide a substantive explanation for why the ancillary agreement terms proposed by the BGGGTB Party were not economically or financially viable. The NNTT therefore found that the failure to provide the requested information was “not reasonable in all the circumstances”.

In Trojon Enterprises, the project proponent (grantee party) was Trojon Enterprises Pty Ltd. Trojon sought to develop a gold mining project and commenced negotiations with the Wagiman People native title party (Wagiman Party) in July 2019. Trojon opened negotiations by providing the Wagiman Party with a draft mining management plan and, shortly thereafter, the Wagiman Party countered by providing Trojon with a draft Mining and Infrastructure Deed. These documents set out the basis of negotiations between the parties.

Asserting that its mining operation was small scale and part time in nature, and therefore it did not have the resources to fund “additional commercial terms” proposed by the Wagiman Party, Trojon:

  • initially offered the Wagiman Party a one-off payment of $6,000 under a Small Scale Mining Deed (later increased to $10,000); but
  • agreed to discuss the potential (under the Deed) for further payments to be triggered whenever significant changes to the project result in the project enjoying “windfall years”.

Ultimately, the parties did not reach agreement on either the Deed or Small Scale Mining Deed, including because Trojon considered that the “trigger” for “windfall” payments under the Deed in any given year should be $500,000 in revenue from the mine (pleading that the project would be “uneconomic” if payments were required below this amount), whereas the Wagiman Party considered the threshold should be $150,000. The Wagiman Party asserted that Trojon did not negotiate in good faith because it refused to provide information to explain its insistence on the higher trigger amount – instead arguing that such information was both commercially sensitive and “unrelated to the effect of the [project] on registered native title rights and interests”.

Noting that there are mechanisms that allow the exchange of information on a confidential basis, the NNTT held that, by failing to provide information in a timely manner or to give proper reasons as to why information could not be provided, Trojan had not allowed the Wagiman Party to properly participate in the negotiations and, as such, had not acted in good faith.

(We should note that Trojon was not assisted by its assertion that its “willingness to consider financial compensation was an act of goodwill on its behalf”. In response, the NNTT made it clear that native title holders’ entitlement to compensation for activities that diminish or damage their native title rights and interests has nothing to do with goodwill.)

What project proponents need to know

The following lessons from the two NNTT decisions discussed above should be heeded by proponents of resources projects:

  • Resources proponents engaged in native title negotiations will run the risk of being found not to have negotiated in good faith if they engage in conduct that is “unreasonable”, “unexplained” or “unnecessary”, or if they fail to actively participate in negotiations – including by making proposals and providing information.
  • In particular, failure to respond to requests for information within a reasonable time, or to provide sufficiently clear reasons for not providing information, may be found to show a lack of good faith.
  • While a grantee party does not need to “lay bare its financial situation”, it does need to actively participate in negotiations and explain its position sufficiently clearly to enable a native title party to provide meaningful responses on their part.

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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.