15 March 2019

Timber Creek native title compensation determination – High Court gives final judgment

This article was written by Scott Singleton, Nick Testro and Johnathon Hall.

On 13 March 2019, the High Court of Australia handed down its decision in the momentous Timber Creek native title compensation proceedings in Northern Territory v Griffiths [2019] HCA 7. The High Court partly allowed the appeals of the Northern Territory and Commonwealth, awarding a total of $2.5 million in compensation to the Ngaliwurru and Nungali Peoples (Native Title Holders) for various acts of the Northern Territory that had previously been found to be compensable under the Native Title Act 1993 (Cth) (Native Title Act).

The High Court’s decision confirms key applicable principles for determining compensation quantum for acts under the Native Title Act. The decision will be key for informing the value of native title compensation determinations in future, including those by consent and those that are litigated.  Importantly, the case did not include consideration of all types of compensable acts (most notably, mining interests and short term non-extinguishing acts), and so the applicable principles for such acts remain at large.

Federal Court and Full Federal Court decisions

In November 2007, the native title rights of the Native Title Holders were recognised by the Full Federal Court over an area within the township of Timber Creek,[1]  approximately 600km south of Darwin.

The Native Title Holders subsequently lodged a claim for compensation under section 61(1) of the Native Title Act against the Northern Territory in 2011, for fifty three acts that impaired or extinguished the native title rights of the Native Title Holders.

In 2016, Justice Mansfield held (in Griffiths v Northern Territory (No. 3) [2016] FCA 900) the Northern Territory was liable to compensate the Native Title Holders for:

  • economic loss – calculated at 80% of freehold value, in recognition of the non-exclusive nature of the native title rights affected;
  • simple interest on the economic loss component;
  • non-economic loss – calculated on an in globo basis by assessing the effects on the cultural and spiritual values of the Native Title Holders on the relevant area as a whole; and
  • damages –for trespass for the invalid grant of freehold over three lots.

The compensation awarded was calculated as at the date the compensable acts were done. Our previous alert of the Federal Court judgment can be found here.

On appeal, the Full Federal Court largely upheld the reasoning of Justice Mansfield (in Northern Territory v Griffiths [2017] FCAFC 106), although it reduced the economic loss component from 80% to 65% of the value of freehold title and overturned Justice Mansfield’s decision to award common law damages for invalid future acts.

Our previous alert of the Full Court decision can be found here.

The High Court appeal

In early 2018, the Native Title Holders, the Commonwealth and the Northern Territory all appealed the decision of the Full Federal Court to the High Court.  

The High Court allowed in part the appeals of the Northern Territory and Commonwealth and dismissed the appeal of the Native Title Holders. The High Court largely upheld the decisions of the lower Courts, imposing its own determination only in relation to economic loss.  In summary, the Court found as follows:

  • economic loss – 50% of the freehold value of the land, in recognition of non-exclusive native title rights ($320,250);
  • simple interest on the economic loss component – as there were no exceptional circumstances to justify interest on a compound basis ($910,100); and
  • non-economic loss – determined on the cultural loss of the Native Title Holders ($1.3 million).

Economic Loss

Like the Courts below, the High Court distinguished between exclusive and non-exclusive native title rights and interests for the purpose of determining economic loss, with the majority expressly rejecting a more “holistic” approach. The majority considered it appropriate to adopt conventional tools of economic valuation adapted to accommodate the unique character of native title rights and interests, in preference to any approach that would encourage the adversarial use of valuation experts.

They observed that freehold title confers the greatest power in relation to land, and therefore the greatest economic value.  The corollary is that rights less than freehold confer lesser economic value.  In this regard, as native title can be considered as a bundle of rights in the same way as applies in common law property principles, it is necessary to determine the nature and extent of the native title rights and interests in question as a preliminary step in the valuation process.  In this case, the native title rights and interests were limited usufructuary rights, and with no right to control access.  The Territory also retained the right to grant certain interests over the area. 

Ultimately, the majority held that where native title rights and interests amount to or come close to exclusive native title, the economic value would likely be the freehold value of the land.  Where the native title rights and interests are something less than exclusive, then the economic value will accordingly be less than the freehold value.  The inalienable nature of native title would not be a discounting factor in any case. While the majority conceded that assessing the discount rate of non-exclusive native title rights against the freehold value “necessitates making a fairly broad-brush estimate”, this is an unavoidable characteristic of the scheme under the Native Title Act.

The majority ultimately held that, as the non-exclusive native title was devoid of rights of admission, exclusion and commercial exploitation, the findings of 80% and 65% of freehold value by the Federal Court and Full Federal Court were manifestly excessive, and a reasonable assessment was 50% of freehold value. The majority suggested that in these circumstances, an even lower figure may have been appropriate, however no party had pressed for anything less than 50%.

Interest

The majority rejected arguments, including on the grounds of fiduciary duties and unjust enrichment, of the Native Title Holders that compound interest was necessary to achieve compensation on just terms as required under section 51(1) of the Native Title Act.

Accordingly, the Federal Court and Full Federal Court’s decisions to award simple interest was upheld.  The majority held that while simple interest was appropriate in this case, it did not rule out circumstances in which compound interest may be justified in other cases.

The Court further agreed with the Commonwealth’s submission that interest should be construed as on, rather than part of, the compensation.

Non-economic Loss

The High Court held that compensation for non-economic loss is for “that aspect of the value of land to native title holders which is inherent in the thing that has been lost, diminished, impaired or otherwise affected by the compensable acts”, which the majority describe as “cultural loss”.  The nature of the task required by section 51(1) is: “identification of the compensable acts; identification of the native title holders’ connection with the land or waters by their laws and customs; and then consideration of the particular and inter-related effects of the compensable acts on that connection”.

Impact on native title is not to be assessed on each individual act, but as cumulative of the acts performed over the broader area where the native title rights subsist.  To clearly demonstrate the nature of and rationale for the assessment required, the majority drew an eloquent analogy (at [205]):

The earlier acts, which were not compensable, punched holes in what could be likened to a single large painting – a single and coherent pattern of belief in relation to a far wider area of land. The subsequent compensable acts punched further holes in separate parts of the one painting, and the damage done was not to be measured by reference to the holes created by the compensable acts alone, but by reference to the effect of those holes in the context of the wider area.

Consistent with this analogy, the majority expressly rejected the grounds of appeal of the Commonwealth and the Northern Territory that section 51(1) of the Native Title Act requires the identification of a compensable act, and the assessment of the impact of that act, which is limited to the time the act was done and the specific location of the act.  In this regard, the majority held: “Section 51(1) provides for compensation on just terms for any loss, diminution, impairment or other effect of the act on native title rights and interests”. The majority similarly affirmed the earlier decisions to assess compensable losses having regard to the suffering of future descendants of the Native Title Holders, as the relevant effects on native title rights and interests were permanent and inter-generational.

The Court, deferring to the trial judge’s position of hearing and seeing the evidence first hand, found that the primary award of $1.3 million was not manifestly excessive as there was nothing to suggest that it would not be accepted by the Australian community as appropriate, fair or just.

Discussion

Although the High Court’s decision left the reasoning of the Federal Court and Full Federal Court decisions largely untouched, the judgment is significant as it represents the endorsement by the highest Court in the land of the applicable principles for determining native title compensation quantum.

A clear consequence of the approaches taken for assessing both economic and non-economic loss, expressly observed by the majority in several places in the judgment, is that while the value of compensation for economic loss may be higher in more developed areas (due to the higher freehold values) and the compensation for non-economic loss may be lower due to greater dislocation of Aboriginal people, the inverse will hold true for less developed areas. 

While this may be useful as a general principle of application in assessing the possible quantum of compensation liability in particular areas, further judicial authority is likely to be required to ascertain how those values might differ in more developed parts of the country (given the very fact-specific basis of this decision). 

However, what can be said is that because the majority of exclusive native title is generally limited to the more remote and regional parts of the country, the economic loss component of compensation for compensable acts is unlikely to exceed 50% of the freehold value of the land in most developed parts of the country.

In addition, the High Court’s decision cements Justice Mansfield’s approach to assessing non-economic loss on the basis of the impact of the compensable acts on native title rights and interests across the broader area, and not just in the immediate vicinity subject to the compensable acts.  This approach, like the other elements of the approach taken, has the potential for significant consequences not only for compensable acts that cover large areas, but also where there has been a series of smaller compensable acts, particularly where the areas of the compensable acts contain culturally significant sites.

As we have previously observed, this decision does not consider the impact of short term non-extinguishing acts on native title.  The three Category D past acts that were considered by Justice Mansfield that were, in effect, extinguishing because of their perpetual nature, were referred to by Justice Edelman in his separate judgment.  He noted that the parties had agreed to treat the acts in question as extinguishing, as the Territory had conceded that there was “no foreseeable prospect of the revival of the native title rights and interests”.  Justice Edelman endorsed this approach, though it was not otherwise referred to in the other two judgments.  For acts that are truly non-extinguishing and temporary in nature (including mining interests), further judicial consideration will clearly be needed.



[1] For further detail, see Griffiths v Northern Territory (2007) 165 FCR 391.



Key contacts

A Guide to Investing in Australian Real Estate

Investing Down Under offers a quick overview of the legal, taxation, FIRB and structuring issues you may encounter when investing in Australian real estate.

Investing in Australian Real Estate
Share on LinkedIn Share on Facebook Share on Twitter Share on Google+
    You might also be interested in

    Changes to the Queensland security of payment regime introduced by the Building Industry Fairness (Security of Payment) Act 2017 will commence on 17 December 2018.

    22 November 2018

    Exposure drafts of the Native Title Legislation Amendment Bill 2018 and the Registered Native Title Bodies Corporate Legislation Amendment Regulations 2018 have been released for public comment.

    02 November 2018

    Ministerial Direction No. 19 was recently issued by the Minister for Planning on the preparation and content of planning scheme amendments that may result in impacts on the environment, amenity and...

    29 October 2018

    The Queensland government has finalised guidelines to provide a framework for future large-scale solar projects in the State.

    12 October 2018

    You may also be interested in...

    Legal services for your business

    This site uses cookies to enhance your experience and to help us improve the site. Please see our Privacy Policy for further information. If you continue without changing your settings, we will assume that you are happy to receive these cookies. You can change your cookie settings at any time.

    For more information on which cookies we use then please refer to our Cookie Policy.

    Supported by Cheap Skip Bin Hire Melbourne - Hire Skip Bins Ltd