What you need to know
- The High Court handed down its first ever decision relating to native title compensation on Wednesday 13 March 2019.
- The High Court reduced the native title compensation awarded to the Ngaliwurru and Nungali Peoples for the effect of land grants and public works on their native title rights from approximately $2.9 million to just over $2.5 million (Northern Territory of Australia v Mr A Griffiths (deceased) and Lorraine Jones on behalf of the Ngaliwurru and Nungali Peoples & Anor; Commonwealth of Australia v Mr A Griffiths (deceased) and Lorraine Jones on behalf of the Ngaliwurru and Nungali Peoples & Anor; Mr A Griffiths (deceased) and Lorraine Jones on behalf of the Ngaliwurru and Nungali Peoples v Northern Territory of Australia & Anor [2019] HCA 7) (Timber Creek). Importantly, the High Court upheld the award of $1.3 million for cultural loss (or loss of spiritual attachment to the land).
The decision under appeal
In August 2016, the Federal Court awarded approximately $3.3 million compensation to the Ngaliwurru and Nungali Peoples for the effect of around 60 land grants and public works on their native title rights in the town of Timber Creek in the Northern Territory. The award related to an area of approximately 1.26km2 within the town (Griffiths v Northern Territory of Australia [2016] FCA 900).
The award was comprised of $512,000 for economic loss (calculated by reference to 80% of the freehold value of the land as at the date of the relevant grant/public work), $1.3 million for loss of spiritual attachment and $1.488 million for simple interest (rather than compound) on the economic loss. It was common ground that liability rested with the Northern Territory.
In an appeal from this decision, the Full Federal Court decreased the compensation to approximately $2.9 million (Northern Territory v Griffiths [2017] FCAFC 106). The Full Court upheld most of the trial judge's findings, including the award for $1.3 million for loss of spiritual attachment. However, it reduced the award for economic loss from 80% to 65% of the freehold value of the relevant land at the time of the compensable acts. The award of simple interest on the economic loss remained the same, although the Court said that compound interest may be appropriate in other circumstances.
High Court's decision
All parties appealed to the High Court on almost all grounds. The appeal was heard by the Full Bench of the High Court in Darwin in September 2018.
The High Court held:
- Economic loss: The High Court reduced the award to $320,250. This represents 50% of the freehold value of the land and a reduction from the 80% awarded by the trial judge and 65% awarded by the Full Court. The native title holders' appeal (seeking 100% of freehold value) was dismissed.
- Interest: The High Court upheld the award of simple interest on the economic loss component. The native title holders had argued for compound interest at the risk free rate of yields on long term government bonds. This would have amounted to over $4 million interest on the economic loss component if 100% of freehold value had been adopted by the High Court.
- Cultural loss (new term for non-economic loss): The High Court upheld the trial judge's award of $1.3 million for cultural loss. This was a significant win for the native title holders. The Commonwealth had argued that the award should be reduced from $1.3 million to $230,000. The Northern Territory had argued the award should be 10% of the economic loss award ($130,000).
Observations
A formula for calculating economic loss: The High Court said that the standard valuation of land process is appropriate to determining economic value. The steps to assessing economic loss are:
- identify the native title rights and interests in question and in particular, whether they are exclusive or non-exclusive;
- if the native title rights and interests amount or come close to a full exclusive title - they will have an objective economic value similar to freehold value;
- if they are not exclusive - compare the native title rights and interests with full exclusive native title and make an evaluative judgement of the appropriate percentage reduction to reflect the more limited nature of the non-exclusive rights; and
- apply the percentage reduction to the "full freehold value" (ie the market value at the time of the compensable act).
50% of freehold value is not necessarily a benchmark for future cases: The High Court seemed willing to award less than 50% of freehold value because the native title rights in that case were so limited, but accepted 50% because no party suggested it should be lower. It will be open to parties to argue for more or less than 50% of freehold value in the case of non-exclusive native title, depending on the rights and interests in each case.
Compound interest not ruled out: The High Court did not rule out compound interest if the facts supported it. In light of the exponential increase in the interest component when compound interest is awarded for compensable acts done so long ago, it is likely that there will be many more claims to compound interest in future native title compensation claims.
In globo amount for cultural loss is appropriate: The High Court's decision to uphold the trial judge's $1.3 million award for non-economic loss is without a doubt the most significant part of this decision. The High Court said that this component of native title compensation is not solatium. It is about the particular effect of the compensable act on the native title holder's cultural or spiritual connection with the land. The steps for assessing this component of the compensation are:
- identify the compensable acts;
- identify the native title holders' connection with the land or waters by their laws and customs; and then
- consider the particular and inter-related effects of the compensable acts on that connection.
More information about the Timber Creek Compensation Case
We have published a number of Native Title Alerts about the first instance and Full Court decisions, mostly recently in April 2018 in our Native Title Year in Review 2017 - Native title compensation.
Key points to note
- The High Court's decision in Timber Creek does provide greater certainty about how native title compensation should be assessed. More importantly though, it marks the beginning of a new phase in the relations between native title holders and the governments and third parties that deal with and use native title land.
- Liability for native title compensation is not just an issue between the Commonwealth and the States and Territories. This liability can be "passed on" to third parties in some circumstances (either by legislation or contractually). Some mining and petroleum tenement holders in Western Australia and New South Wales are already liable for compensation under the relevant State mining and petroleum legislation. New South Wales has recently passed on compensation liability in relation to Crown land in the Crown Land Management Act 2016. Some State governments have sought to pass on native title compensation to project proponents and infrastructure providers through the conditions of leases.
- The High Court's decision will mean that there is no longer any perceived barrier to new compensation claims. All stakeholders will need to confront the procedural complexities and cost of managing claims for native title compensation on a parcel by parcel basis. There is an added complexity in circumstances where liability for State action rests with a third party. It is not clear how the Federal Court will manage this potentially complex litigation.
- A methodology for determining the quantum of native title compensation is only one part of the picture. Now that the High Court decision has been handed down, the focus should move to efficiently managing the expected influx of claims from native title holders in the more than 370 determinations of native title around Australia. The certainty of the High Court's Timber Creek decision is likely to look illusory as the reality of prosecuting and responding to the myriad of factual circumstances that give rise to a native title compensation entitlement unfolds. A system will be established and things will normalise. In the meantime, the experience may not be dissimilar to the years of uncertainty that followed the enactment of the Native Title Act in 1994.
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