Court determines Native Title compensation for the first time

In brief

Yesterday afternoon, the Federal Court handed down a decision which, for the first time, provided judicial consideration of how to calculate native title compensation. A decision on this issue has been long awaited, ever since the Native Title Act commenced in 1994. Partner Ben Zillmann, Senior Associate Emily Gerrard and Senior Associate Giselle Kilvert summarise the key aspects of the decision and its significance. 

What happened and why is this significant?

• The Federal Court made a ruling on the amount of compensation payable by the Northern Territory Government to native title parties in respect of certain areas of the town of Timber Creek in the Northern Territory.¹ The compensation award was for the loss suffered by the native title holders due to the extinguishment and impairment of their native title rights by past government acts, such as the grant of land tenures and establishment of public works.
• The award of compensation in itself was not surprising, as the right to compensation for the extinguishment of native title has always been entrenched in the Native Title Act 1993 (Cth).
• However, until now there has been no judicial guidance as to how native title compensation would be calculated. This decision is the first time the Federal Court has specifically considered this question.
• Therefore, this case will likely be seen as a precedent for the determination of native title compensation in other circumstances, whether that be compensation for past extinguishment of the native title rights of other native title groups, or in the context of negotiations for consent to 'future acts' that may impact upon native title.

Summary of the case

The Ngaliwurru and Nungali People had previously been determined by the court to hold native title in the area of Timber Creek, a small town in the Northern Territory. The separate compensation claim followed the determination of the earlier native title claim. It related to about 60 specific areas where those native title rights had been extinguished, impaired or suspended by various prior land grants and public works.

The court determined compensation of approximately $3.3 million. While significant, this was very much at the lower end of the range of compensation being argued for between the parties, with the native title holders having argued for total compensation potentially as high as approximately $22 million.

The $3.3 million contained a large component of interest and was broken down (approximately) as follows:

• $500,000 for 'economic loss', which was in essence calculated by reference to 80 per cent of the land value of the areas subject to the extinguishing acts;
• $1.5 million in interest on that economic loss (reflecting the extinguishment of native title had occurred many years ago); and
• $1.3 million for non-economic/intangible loss, or 'solatium', in recognition of the loss or diminution of connection or traditional attachment to the land.

What does this mean?

It is now almost 25 years since the High Court of Australia recognised native title in its decision in the Mabo case. It is also over 20 years since the Commonwealth Parliament passed the Native Title Act, which provided the statutory basis for native title holders to claim compensation for the extinguishment or impairment of native title rights.

This decision is the first real guidance from the courts as to how native title compensation is calculated.

Implications for government

It is likely that other native title groups' compensation claims will now follow. State governments, as well as the Commonwealth, will need to consider how it will respond to such claims. Under the Native Title Act, the primary liability for this compensation rests with the government that undertook the relevant extinguishing act – for example, the granting of freehold. It goes without saying that the total exposure of governments, collectively, will be considerable across the country as a whole.

Although not quantified, this liability was always known, but a question still remains as to how well prepared governments are to fund that liability. The Timber Creek judgement may sharpen government focus on such issues, and may, for example, affect their approach to the resolution of many native title claims that remain outstanding, which to date have often been accepted by governments in the form of consent determinations. There have been some examples of State governments already grappling with, and implementing, native title settlement agreements with claim groups, which address compensation for past impacts on native title, and this may become more prevalent.

There have also been limited circumstances to date where governments have sought to pass on native title compensation liability to individual parties, whether through contract or legislation. Those mechanisms may be re-visited, but that will not be a complete answer to the issue, as the main exposure to claims for native title compensation will relate to past acts involving land tenure grants and public works not associated with any proposed project development.

Implications for the private sector

For non-government entities, the decision is also relevant. The concept of native title compensation is not new to many involved in sectors such as mining, oil and gas, infrastructure and land development. Even in the absence of a court decision on native title compensation, industry has been negotiating agreements with native title parties for many years involving the payment of native title compensation, as a means to enable projects to proceed and to address social licence to operate considerations.

It is unlikely that projects subject to existing native title agreements will be impacted by this decision, although that will, ultimately, turn on the terms of any agreement. Quite often, the native title compensation in such agreements was primarily determined by reference to commercial parameters, especially in the absence of any yardstick provided by the courts. The Timber Creek case now provides one such yardstick. In negotiating for new rights and new projects, this will now need to be taken into consideration.

The way forward

Having said that, compensation in respect of any particular future act, or any particular case involving past extinguishment, will always turn on its own facts – most importantly, what native title rights exist (or existed) in the area in question, and the extent to which those native title rights are, or were, adversely impacted by the relevant act or grant?

While the Timber Creek case provides a useful starting point for consideration of the calculation of native title compensation, we recommend that caution is exercised in using the decision as a universal precedent for the resolution of such matters.  It remains to be seen if the decision in the Timber Creek case will be appealed by any party, and in any event, we anticipate that there will be further decisions from the court in coming years that will shape and provide further direction in regards to native title compensation.

The Timber Creek case is likely to be just the first step in a journey that has some distance to go.