Native Title Year in Review 2017 -Native title agreement making

The following articles appear below:

• Full Court overturns long held view on "negotiation in good faith" in the RTN context
• Remember - native title agreements are contracts!
• Claimant ordered to repay $370,000 to claim group

 Full Court overturns long held view on "negotiation in good faith" in the RTN context

Charles, on behalf of Mount Jowlaenga Polygon #2 v Sheffield Resources [2017] FCAFC 218

In a majority decision handed down on 20 December 2017, the Full Federal Court found that the obligation to negotiate in good faith continues to apply to negotiations conducted after a future act determination application has been made.  In doing so, the Court overturned the long held view that the good faith obligation ceases to apply once an arbitration application has been made.

Background 

On 24 October 2016, after almost 18 months of negotiations with the Mount Jowlaenga Polygon #2 claimants (traditional owners), Sheffield Resources Limited (Sheffield) made an application to the National Native Title Tribunal (NNTT) under section 35 of the Native Title Act 1993 (Cth) (arbitration application) for a determination that the future act, being the grant of a mining lease, might be done.

Initially, the parties had established a negotiation protocol whereby Sheffield had agreed to negotiate only with the native title party's legal representatives.  However, after Sheffield made its arbitration application, Sheffield departed from that protocol and began contacting the traditional owners directly. In response, the traditional owners argued that Sheffield had failed to meet its obligation to negotiate in good faith under section 31 of the Native Title Act and, accordingly, that the NNTT was prevented from making a determination of Sheffield's application.

The NNTT followed earlier NNTT decisions and held that there was no legal obligation to negotiate in good faith once an arbitration application was made, and that Sheffield had negotiated in good faith (Sheffield Resources Limited v Charles, on behalf of Mount Jowlaenga Polygon #2 [2017] NNTTA 25 (22 May 2017). It went on to find that the mining lease may be granted ([2017] NNTTA 34 (14 June 2017)).

The traditional owners appealed the NNTT's decision on good faith to the Federal Court. Justice Barker dismissed the appeal. The Court held that the conventional understanding reflected in the earlier NNTT decisions, that there was no obligation to negotiate in good faith after the making of the  arbitration application, was correct (Charles, on behalf of Mount Jowlaenga Polygon #2 v Sheffield Resources Limited ([2017] FCA 1126).

The traditional owners appealed to the Full Court.

Full Court's decision on appeal

The central issue in the appeal was whether the obligation to negotiate in good faith only applies to negotiations preceding the making of an arbitration application.

The Full Court held that the good faith obligation imposed by section 31 of the Native Title Act continues to apply to negotiations conducted after an arbitration application has been made.

In their majority judgment, Justices North and Griffiths found that the obligation to negotiate in good faith "is not explicitly subject to any particular point in time or cut-off date" (at [50]), and that "merely because there is no obligation on the Government party or a grantee party to continue to negotiate once a s 35 arbitral determination has been made does not necessarily mean that the obligation to negotiate in good faith...does not apply as a matter of implication where the parties do agree to continue to negotiate" (at [59]).

The Full Court held that the primary judge's decision did not promote the purposes and objects of the Native Title Act.  Justices North and Griffiths at [64] asked:

"In short, given that the possibility of voluntary ongoing negotiations occurring after the making of a s 35 application, what purpose is served by freeing such negotiations from the constraints and requirements (or standards) which apply to negotiations conducted in the period before the making of the s 35 application? Why should the native title parties in particular lose the protections which they enjoy in respect of negotiations carried out in that earlier period?"

The Full Court allowed the appeal and ordered that Sheffield (and the State of Western Australia) pay the traditional owners' costs of the appeal. It set aside the decisions of the primary judge and the NNTT on the good faith issue, and ordered that the good faith issue be remitted back to the NNTT for re-hearing. The Full Court also stayed the implementation and operation of the NNTT's decision that the mining lease may be granted.

Sheffield has announced that it continues to actively engage with the representatives of the traditional owners in seeking a mutually acceptable native title agreement (see 14 February 2018 media release). The good faith challenge has been sent back to the NNTT for re-hearing. 

Implications of the Full Court's findings

The Full Court's decision resolves any speculation that the good faith obligation ends once an arbitration application is made. While there is no obligation to continue to negotiate after an arbitration application has been made, any negotiations voluntarily conducted after the arbitration application must be conducted in good faith.

The primary judge was concerned that a continuing obligation to engage in good faith negotiations post the making of an arbitration application could “complicate” and “possibly muddy” the decision-making process in respect of an arbitral determination (ie, by requiring the decision maker to consider conduct up to the point of making the determination). The majority of the Full Court dismissed that concern, noting that under the primary judge's preferred construction, a negotiation party's post- arbitration application conduct is already relevant to the assessment of its pre-application conduct.

Accordingly, while not obliged to continue negotiations, the grantee party is still held to the good faith standard in respect of any voluntary negotiations. If the grantee party does not intend to continue to negotiate after making the application, perhaps the most prudent course of action is to ensure that position is clearly communicated to the other parties.

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Remember - native title agreements are contracts!

Two recent decisions serve to remind stakeholders that agreements with native title parties are subject to the same rules of interpretation as ordinary contracts. In Bidjara People Claim Group v PAPL (Upstream Pty Ltd) [2017] QLC 44 the Queensland Land Court held that the dismissal of the relevant native title claim frustrated a right to negotiate agreement with the native title claimants. In Buurabalayi Thalanyji Aboriginal Corporation v Onslow Salt Pty Ltd [2017] FCA 1240 the Court was required to consider a stay of proceedings for failure to comply with a dispute resolution clause in a native title agreement.

RTN agreement frustrated when Bidjara claim dismissed

Although hundreds of agreements have been reached through the Native Title Act right to negotiate process over the last 20 years, the effect of the dismissal of the relevant native title claim on right to negotiate agreements has had little judicial consideration.

In Bidjara People Claim Group and Ors v PAPL (Upstream Pty Ltd) and Ors [2017] QLC 44, the Queensland Land Court confirmed that the issue is simply one of contractual interpretation.

The Bidjara Claimants and Santos entered into a right to negotiate agreement pursuant to which Santos was required to pay $1,250,000 to the native title parties over a five year period. Subsequent to the agreement, the Bidjara Claimants' native title claims were dismissed, and their appeal rights exhausted.

Santos said the dismissal of the native title claim frustrated the agreement, effectively relieving it from any obligation to make the remaining payments. The Bidjara Claimants argued the dismissal of their claim was irrelevant to the continued operation of the agreement.

In approaching the issue, the Land Court found that the Bidjara Claimants' status as Registered Native Title Claimants and the Claim Group's formal status under the Native Title Act were central to the agreement because of the context in which the agreement was negotiated and the particular features of the agreement itself.

The agreement was negotiated and entered into in accordance with the right to negotiate provisions of the Native Title Act. The fundamental purpose of the agreement was to compensate the claim group for the impact valid future acts would have on the group's native title rights and interests. The compensation agreed involved compensation for ongoing obligations relating to the coexistence of Santos' activities with the group's native title rights and interests. It was the Bidjara Claimants' status as Registered Native Title Claimant that allowed them to provide consideration for the compensation offered by Santos. The dismissal of the native title claim, and its subsequent impact on the claimants' status as a Registered Native Title Claimant under the Native Title Act, meant there was a fundamentally different situation to that contemplated by the agreement. This was sufficient for the court to find that the agreement was frustrated.

The case serves as a reminder that like ordinary contracts, native title agreements can include provisions contemplating changed or unexpected circumstances.  Indeed, given the shifting of native title landscape, they probably should.

Federal Court required to consider whether to stay proceedings by Aboriginal Corporation for failure to comply with dispute resolution clause in native title agreement 

The Buurabalayji Thalanyji Aboriginal Corporation (BTAC) commenced proceedings on various grounds against Onslow Salt Pty Ltd and the State of Western Australia relating to the Onslow Salt Mine in the Pilbara (Buurabalayi Thalanyji Aboriginal Corporation v Onslow Salt Pty Ltd [2017] FCA 1240). The mine is located beside Chevron's Wheatstone LNG Project.  

BTAC claimed that excavation agreements (for fill material) entered into between Onslow Salt and Chevron were "sham agreements". They allege that Onslow Salt drafted the agreements and sought the State's approval for the works on the basis that they were for flood water mitigation purposes and for no consideration. They allege that the true purpose of the agreements was for Chevron to remove 10 million cubic metres of fill material from the salt mining area in return for payment of $75 million to Onslow Salt.

BTAC claimed that these arrangements amounted to a "future act" which required compliance with Native Title Act procedures. Failure to comply resulted in the native title holders suffering loss and damage, being the loss of a chance to negotiate with Onslow Salt and enter into an ILUA to consent to the "future act". BTAC claimed it would have received approximately $12 million had such an agreement been negotiated.

However, in 1996 Onslow Salt entered into the Development Deed with the native title claimants (who are now represented by BTAC). Onslow Salt sought a stay of BTAC's proceedings because it failed to comply with the requirements of a dispute resolution clause within the Deed.

BTAC argued that the nature of the dispute was not one to which the clause was directed and further that it would be impossible on any realistic assessment for an expert to resolve the issues raised in the dispute (as required by the clause).

Ultimately, the Court agreed and refused to grant the stay of proceedings. Costs were ordered against Onslow Salt.

The Court acknowledged that "contracting parties should be held to the terms of their bargain". In Savcor Pty Ltd v New South Wales (2001) 52 NSWLR 587 it was held that if parties to a commercial contract agree on a particular dispute resolution method, that method must be adhered to unless the Court can be convinced there is good cause to abandon it.

The Court observed that a dispute resolution method is an "entirely commendable process" which has and should be recognised and respected by the Courts except in exceptional circumstances. This case was deemed to fall within the exceptional category as the lengthy pleadings were of an extremely complex nature that involved third parties and questions of both law and fact. 

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Claimant ordered to repay $370,000 to claim group

Gebadi v Woosup [2017] FCA 1467

In the first case of its kind, the Federal Court in Gebadi v Woosup [2017] FCA 1467 has ordered a native title claimant to repay $370,000 of misappropriated payments to the claim group on whose behalf he received the benefits under a native title agreement.

The payments of money under the native title agreement 

The proceeding was brought by seven members of the Ankamuthi native title claim group (now determined native title holders) (Current Applicants) against Mr Larry Woosup and Ms Beverley Tamwoy.

On 4 December 2013, Mr Woosup and Ms Tamwoy entered into a right to negotiate agreement under section 31(1)(b) of the Native Title Act with Gulf Alumina Limited on their own behalf and on behalf of the Ankamuthi People. The Agreement permitted Gulf to conduct the Skardon River Bauxite Mining Project and provided for royalty payments to the Ankamuthi People. 

At that time, Mr Woosup and Ms Tamwoy were two of the original members of the Applicants authorised to prosecute the native title determination application on behalf of the Ankamuthi People. The Current Applicants were joined as members of the applicant a year later in December 2014.

Between November 2013 and July 2014, Gulf Alumina Limited paid $371,267 under the Agreement. The money was paid into the account of the Ankamuthi Western Cape Community Trust which was operated by Mr Woosup. Mr Woosup withdrew the money from this account by way of cash withdrawals and made transfers into his personal bank account.

The Current Applicants sought to recover the full amount from Mr Woosup.

Federal Court orders the money to be repaid

Following a forensic review of bank records, the Court determined that Mr Woosup had misappropriated all of the money paid under the Agreement and used it in furtherance of his own interests in derogation and disregard of the interests of the Ankamuthi claim group.

The Court determined that where an agreement under section 31(1)(b) of the Native Title Act confers a right, benefit or entitlement on a native title party, the right or benefit is enjoyed by all persons who hold the common law group rights and interests comprising the particular native title as claimed.

The Court ordered that Mr Woosup:

• account for the misappropriated money to the Ankamuthi native title holders;
• be prohibited from exercising any power or authority to effect transactions on accounts held by the trustee for the Ankamuthi native title holders; and
• Ms Tamwoy pay the Applicants' legal costs.

Fiduciary obligations owed to claim group

Justice Greenwood found that Mr Woosup and Ms Tamwoy were in a fiduciary relationship (ie a relationship of trust or confidence) with the members of the Ankamuthi claim group, thereby owing fiduciary obligations to the claim group not to:

• place themselves in a position where their private or personal interests conflict with the interests of the claim group; 
• pursue and secure a personal benefit for themselves;
• profit from their position of trust without the express informed consent of the claim group; and
• place themselves in a position where their personal interests or duties conflict with the duties owed to the claim group.

Establishing a breach

The Court held that Mr Woosup and Ms Tamwoy breached their fiduciary duties by negotiating and entering into the Agreement without holding a community authorisation meeting to obtain the authority of the Ankamuthi claim group and furthermore, by failing to inform members of the Ankamuthi claim group of the existence of the Agreement.

Mr Woosup also breached his fiduciary obligations to the group when he misappropriated the royalty payments, essentially "treating his people's money, benefits and compensation, as his own." 

Funds held on constructive trust

Justice Greenwood declared that, from the moment the benefits were paid to Mr Woosup under the Agreement, the funds were held on constructive trust for and on behalf of the Ankamuthi native title claim group, who were beneficially entitled to the funds. As it was unclear whether Mr Woosup still controlled the funds, a declaration of a constructive trust was held to be the most appropriate remedy. As a consequence of the declaration of constructive trust, Mr Woosup is personally liability for the breach of trust (and must account to the Ankamuthi native title claim group for the financial benefits he derived), and proprietary remedies may be available in respect of the trust property even if it is in third party hands.

Law reform proposed

The Federal Government's November 2017 Options Paper for reforms to the Native Title Act 1993 (Cth) proposes that the Native Title Act should be amended to expressly provide that a member of the applicant must not obtain an advantage or benefit at the expense of the common law holders. This recommendation repeats similar recommendations made in the Taxation of Native Title and Traditional Owner Benefits and Governance Working Group Report published in 2013, the Forrest Review of the Roles and Functions of Native Title Organisations Report published in 2014 and the Australian Law Reform Commission June 2015 Report Connection to Country: Review of the Native Title Act 1993 (Cth). We discuss native title law reform further in Update on Native Title Reforms.