Insights from the Timber Creek decision on native title compensation
Northern Territory ordered to pay over $3.3 million in compensation Griffiths v Northern Territory of Australia (No.3) [2016] FCA 900
What you need to know
- The Federal Court has ordered the Northern Territory Government to pay $3,300,261 to the Ngaliwurru and Nungali Peoples as compensation for the impact of land grants and public works on their native title (Griffiths v Northern Territory of Australia (No.3) [2016] FCA 900).
- This is the first ever assessment of native title compensation in Australia, but it will not be the last. Many compensation issues will eventually be considered by the Full Federal Court or High Court, either as an appeal from this decision or another future compensation claim.
- The Court said that the compensation was made up of three elements:
- $512,000 for economic loss (80% of the freehold land value, on the basis that the native title holders held only non-exclusive native title rights and interest that were not equivalent to full freehold value);
- $1,300,000 for non-economic loss (caused by a loss of traditional attachment to the land); and
- $1,488,261 for simple interest on the economic loss component of the compensation from the time of the extinguishment some 30 years ago until the date of judgement.
The Court also ordered the Northern Territory to pay $48,597 in damages to the native title holders for the effect of three invalid grants of freehold in 1998 that were made without compliance with the Native Title Act 1993 (Cth). This was calculated by reference to 80% of the freehold value of the land, plus simple interest.
What this means for the assessment of future claims and who will be liable
This Alert identifies some key learnings from the decision for the assessment of native title compensation in other areas and contains our observations about how future claims may be managed and assessed.
We discuss the implications of this decision, and in particular the issue of who is liable for native title compensation, in our earlier Native Title Alert Timber Creek Compensation – native title worth $3.3 million, dated 24 August 2016.
For further background information about native title compensation, see our Native Title Alert Compensation for native title – are you liable? dated 15 October 2015.
Background
Timber Creek is a small town in the Northern Territory, located on the Victoria Highway 285 km west of Katherine.
The Ngaliwurru and Nungali Peoples hold native title over the town area, having proved their native title as a result of their successful claim in 2007 (Griffiths v Northern Territory (2007) 165 FCR 300).
In 2011, they filed a native title compensation application pursuant to the Native Title Act 1993 (Cth) (NTA) for compensation for the effect of around 60 land grants and public works on their native title rights and interests. The NTA provides that these claims can only be made after native title has been determined to exist.
Liability was determined in 2014 (Griffiths v Northern Territory [2014] FCA 256), leaving the assessment of compensation to be determined in this decision. The compensation claim had three elements: economic loss, non-economic loss and interest.
Because the Applicants presented a number of alternative arguments, their total claim ranged between $4.76 million and $22.5 million. The Commonwealth calculated the total compensation liability at $1.4 million.
How is native title compensation assessed?
The NTA provides very little guidance about the assessment of native title compensation.
The overarching theme is "just terms". Section 51 of the NTA provides that the entitlement to compensation:
"…is an entitlement on just terms to compensate the native title holders for any loss, diminution, impairment or other effect of the act on their native title rights and interests."
Although "just terms" is not defined in the NTA, the standard is one of fair dealing. The only other criteria referred to in the NTA is that, subject to the overarching "just terms" requirement:
- the Courts may have regard to the principles for determining compensation in the relevant State/Territory's compulsory acquisition laws (sections 51(2), (3) and (4) NTA); and
- the total compensation for an act that extinguishes native title must not exceed the amount that would be payable if the act was the compulsory acquisition of the freehold estate in the land (section 51A NTA).
The decision - $3,300,261 payable by the Northern Territory
In a decision handed down on 24 August 2016, the Federal Court ordered the Northern Territory Government to pay $3,300,261 to the Ngaliwurru and Nungali Peoples as compensation for the impact of land grants and public works on their native title (Griffiths v Northern Territory of Australia (No.3) [2016] FCA 900) (Timber Creek).
The Timber Creek decision is the first ever assessment of native title compensation in Australia.
The Court's findings about each limb of the claim are set out below.
Economic Loss - $512,000 payable
Non-exclusive native title rights worth 80% of the freehold value of the land in this case
The Court valued the native title holders' economic loss at 80% of the freehold value of the relevant land at the time of extinguishment and ordered that $512,000 be paid for this component.
Justice Mansfield made it clear that exclusive native title should be valued the same as freehold title.
The Court held that freehold value is the appropriate starting point because section 51A of the NTA puts it at the upper limit. However, there must be some deduction where there are only non-exclusive rights.
His Honour determined that the deduction in this case should not be great, because there was no meaningful restrictions of the native title holders' use and enjoyment of the land and the native title rights were very substantial.
His Honour concluded by noting that the decision on the amount of the deduction was an intuitive one, not a matter of careful calculation. He also made it clear that it did not include an allowance for cultural elements, as those factors would be taken into account in the non-economic loss component.
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The Court left no room for future arguments that exclusive native title is worth less than freehold value. However, the 80% of freehold formula used in this case to value the non-exclusive native title rights is not necessarily a benchmark for other claims. Each group's native title rights and interests are different. |
The "timing issues" – a technical legal argument with significant monetary implications
The Court comprehensively rejected the Applicants' primary claim for economic loss, which was based on the argument that compensation should be assessed at the date of the validation of the compensable acts by the NTA and associated Territory native title legislation (ie 1994) and not the date that the acts in fact occurred (predominantly the 1980s).
Although this was a technical legal argument, it had a significant impact on the quantum of economic loss claimed, both in terms of the market value of the land at the relevant time and the fact that improvements to the value of $2.4 million had been constructed on the land after the compensable acts had taken place. The native title holders' claimed the value of these improvements in their economic loss claim.
Justice Mansfield held that compensation should be assessed at the date that the acts occurred because this was the date on which native title was extinguished.
Interest – $1,488,261
Simple interest payable in this case, but compound interest possible in future claims
The Court ordered the payment of $1,488,261 for simple interest on the economic loss component of the compensation from the time of the extinguishment until the date of judgement, calculated in accordance with Federal Court Practice Note CM16. This figure is almost three times the economic loss because of the approximately 30 years since the compensable acts took place.
Although the Court rejected the native title holders' arguments for compound interest in this case, Justice Mansfield noted that there was nothing precluding the Court from awarding compound interest if that was appropriate in order to secure fair compensation on just terms.
His Honour considered the evidence of the native title holders' previous financial dealings and was not satisfied that they would have made the most beneficial use of the money if it had been awarded to them at the time of the compensable acts, such that compound interest was not necessary.
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Justice Mansfield left open the possibility of interest being awarded on a compound basis in circumstances where the native title holders could show that they would have invested the funds from the time of the compensable acts, or used them in some other way that would have provided a significant return. It is likely that future compensation claims will re-agitate this issue in light of the enormous sums that comprise compound interest over such long periods between the compensable acts and the date of the decision. |
Non-economic loss – $1.3 million payable
The Court ordered the Northern Territory to pay an "in globo" sum of $1,300,000 for non-economic loss (caused by a loss of traditional attachment to the land).
Solatium held to be the right approach
Justice Mansfield began his consideration by noting that it was not in dispute than an award for solatium was appropriate in this case. The term "solatium" is used to describe compensation for injured or hurt feelings.
Secondly, Justice Mansfield held that a parcel by parcel approach to assessing non-economic loss was not appropriate and that an "in globo" assessment was necessary. This was because "one cannot understand hurt feelings in relation to a boxed quarter acre block…" (at [325]).
The Court adopted the evidence and findings in the hearing of the original native title claim about the native title holders' relationship with the claim area. This included evidence from elders and anthropological experts about significant sites and the travels of major Dreamings through the claim area. The Court particularly noted the strong and compelling evidence about several events that had (or would have) harmed or interfered with Dreamings or sites.
Justice Mansfield noted (at [350] and [351]):
"… loss of and damage to country caused emotional, gut-wrenching pain and deep or primary emotions…. This gut wrenching feeling was accompanied by anxiety."
The Court acknowledged the need to take into account the history of the claim area prior to the compensable acts, but held that the significant series of compensable acts from the early 1980s progressively further impaired the remaining native title rights and interests in the claim area.
In conclusion, Justice Mansfield said there were three particular considerations of significance to the assessment of the non-economic loss, all of which had been experienced by the native title holders for 30 years:
- the construction of the water tanks on the path of the dingo Dreaming, a line of particular spirituality, that has caused clearly identified distress and concern;
- the extent to which certain of the compensable acts impaired the use of a ritual ground; and
- the fact that each of the compensable acts "chipped away" at the geographical area over which native title rights could be exercised, which adversely affected the spiritual connection with country. Associated with this is the sense of failed responsibility for the obligation, under the traditional laws and customs, to have cared for and looked after that land and preserve it for future generations.
Justice Mansfield ended by noting that (at [382] and [383]):
"The selection of an appropriate level of compensation is not a matter of science or of mathematical calculation."
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The findings of non-economic loss are the most important elements of this decision because the NTA provides no guidance on this topic. Commentators have ruminated for two decades about the various assessment methodologies with no guidance from the Court. Justice Mansfield's findings are a resounding rejection of the Northern Territory's argument that the award should be modest, to reflect the way solatium is dealt with in some statutory compulsory acquisition regimes. This award for non-economic loss is not a precedent for other parts of Australia. Justice Mansfield relied on very particular evidence unique to this group of native title holders, particularly the "gut wrenching" impact of the compensable acts on the native title holders and their Dreaming lines. Just as the content of the native title rights and interests is different for each native title group across the country, so too is the history of the claim area and the impact of compensable acts on the group. It also remains to be seen how non-economic loss will be calculated in more developed urban areas. |
Damages for invalid future acts
The native title holders claimed damages for trespass from the Northern Territory under general law for three invalid future acts, namely the grant of three freehold land parcels in 1998 over land where the native title holders held non-exclusive native title rights and interests.
Because residential dwellings have been constructed on the lots, the native title holders claimed damages in lieu of an injunction to restrain the invalid acts. The claim was for either mesne profits evidenced by market rental or the improved freehold value of the land at the time of the freehold grants, plus, in either case, non-economic loss and interest.
Justice Mansfield declared that the three freehold grants were invalid future acts within sections 24AA(2) and 233 of the NTA.
His Honour adopted the second formula submitted by the native title holders, and valued the damages by reference to 80% of the freehold value of the three lots at the time of the grants in 1998, namely $19,200 (plus interest).
The Court ordered the Northern Territory to pay damages totalling $48,597 (comprising $19,200 for economic loss and $29,397 for interest). There was no separate component for solatium.
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| It is worth noting that the damages awarded for the invalid acts were no greater than the compensation that would have been payable if the NTA had been complied with before the grant, and had no punitive element. Further, this order does not validate the grants – they remain invalid to the extent that they affect native title. |
Insights
No guidance on compensation assessment for non-extinguishing grants
The Timber Creek decision did not address the assessment of compensation for acts that do not wholly extinguish native title (eg mining and petroleum tenements and many types of leases) or acts that grant only a short term interests.
It is not known whether compensation for such acts will be based on market rental/mesne profits or some other formula related to freehold value.
How will compensation be assessed where there has been a consent determination?
Justice Mansfield had the benefit of the detailed evidence presented at the trial of the native title claim in determining the impact of the compensable acts on native title rights and interests. There was also a detailed tenure history completed and findings made about liability after a hearing on this issue.
Many native title determinations across Australia are made by consent, in circumstances where far more limited evidentiary material (if any) has been provided to the Court. Further, land parcels where native title has been extinguished are routinely excluded from native title claim areas (or the final determination area). More evidence will be needed, particularly around non-economic loss, in order for compensation claims by these native title holders to be determined, whether by trial or consent.
Changed expectations in commercial negotiations
The Timber Creek decision will need to be taken into account when negotiating the financial component of future native title agreements, whether in the right to negotiate or ILUA context. It may seriously change the expectations of native title parties in these contexts.
The importance placed on cultural heritage values in calculating non-economic loss
The Court's findings on non-economic loss were greatly influenced by the impact of the compensable acts on the cultural heritage values of the claim area.
This may influence the way that traditional owner groups seek to manage cultural heritage in future project negotiations.
Further judicial consideration likely
The Timber Creek decision will not be the final word on the assessment of native title compensation.
The valuation methodology established by Justice Mansfield will no doubt eventually be considered by the Full Federal Court or High Court, either as an appeal from this decision or another future compensation claim.
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