INSIGHT

High Court delivers historic ruling on native title compensation

By Ben Zillmann
Environment & Planning Government Infrastructure Resources

In brief 7 min read

Yesterday the High Court delivered its eagerly awaited decision on compensation for the extinguishment of native title. This is the first time Australia's highest court has ruled on this issue. Partner Ben Zillmann and Senior Associate Giselle Kilvert summarise the key aspects of the decision.

Key takeaways

  • The court's decision in the so called 'Timber Creek' case is the first time the High Court has handed down a decision on how compensation for the extinguishment of native title rights is to be calculated.
  • That some form of compensation was awarded was neither surprising nor in dispute. The native title holders clearly had a right to be compensated for the past extinguishment of their native title, consistent with the provisions of the Native Title Act 1993 (NTA).
  • What was in question was the quantum of that compensation and how it should be calculated. The case therefore sets a precedent from the highest court in the country, providing guidance for calculation of compensation in similar native title compensation claims and the negotiation of compensation in 'future act' agreements.
  • Having said that, whilst the High Court has given guidance on the issues that need to be considered in assessing compensation, it is clear from the case that compensation will vary from case to case depending upon the specific factual circumstances, and, therefore, there is no formula that can simply be applied to every situation to determine compensation. 

Summary of the case

We first reported on this case on 25 August 2016 following the initial decision by the single Federal Court Judge. That decision was also a first of its kind in the Federal Court. By way of brief recap:

  • The Ngaliwurru and Nungali people had previously been determined by the court to hold native title in the area of Timber Creek, a small remote town in the Northern Territory.
  • A separate compensation claim by the native title holders followed the determination of the earlier native title claim. That claim related to 53 specific acts, on 39 lots and four roads within the town, where the native title rights had been extinguished, impaired or suspended by various prior land grants and public works.
  • The court at first instance determined compensation of approximately $3.3 million. This was at the lower end of the range that had been argued between the parties at first instance.
  • The $3.3 million was broken down approximately as follows:
    • $500,000 for economic loss, which was calculated by reference to 80 per cent of the freehold land value of the areas when native title had been extinguished;
    • $1.5 million in interest on that economic loss (recognising that extinguishment of native title had occurred many years ago), but was notably calculated on a simple interest basis, as opposed to a compound interest basis, thereby significantly reducing the award, as compared to the amount claimed by the native title holders; 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.
  • Each of the parties (the Commonwealth Territory and the native title holders) appealed that decision to the Full Federal Court, which slightly reduced the award of compensation given the Full Court assessed the economic loss at 65 per cent of the freehold land value.
  • Each of the parties, following the decision of the Full Federal Court, appealed again to the High Court.

High Court's ruling

The High Court determined the total compensation amount should be approximately $2.5 million (a reduction on the earlier rulings), broken down as follows:

  1. $320,250 as compensation for economic loss, based on 50 per cent of the freehold land value;
  2. interest on that sum of $910,100, which was calculated on a simple interest basis; and
  3. $1.3 million as compensation for 'cultural loss'.

Some of the key takeaways from the majority judgment (made up of five of the seven judges) are as follows:

Economic loss

The native title holders argued that the economic loss component of the compensation they should receive for the loss of their native title rights should be equated to the full freehold value of the land involved. The Northern Territory and the Commonwealth had argued that the economic loss component should not exceed 50 per cent of the freehold value of that land. The judgment of the majority suggested that, had a party argued for it, they may in fact have supported a view that the native title rights were worth less than 50 per cent of the freehold value of the land, but, nevertheless, settled on that figure because no party had argued for a percentage lower than 50 per cent.

The majority endorsed an approach for assessing economic loss attributable to the extinguishment of native title rights based on a comparison to land value. In summary, where native title rights are less than exclusive possession (which may be equated to freehold value), one is to compare the non exclusive native title rights to the rights that would be enjoyed by a freehold landowner, and then attribute a percentage to the freehold value accordingly.

This means that in any case, valuing native title compensation must begin with regard to the particular native title rights that would have existed over an area but for their extinguishment. In the Timber Creek case, the High Court assessed the non exclusive native title rights that had been extinguished as being devoid of rights of admission, exclusion and commercial exploitation of the areas, meaning, on any reasonable view of the matter, those non exclusive native title rights and interests, expressed as a percentage of freehold value, could certainly not have been equated to more than 50 per cent of freehold land value.

Interest

The native title holders argued that interest on their economic loss should be calculated from the point of extinguishment on a compound basis, which would have resulted in a substantially larger award of compensation. However, the High Court did not agree with those submissions and awarded interest on a simple basis only. The High Court did leave open the possibility that a compound interest award could be achieved if the native title holders could establish by evidence that, had they received appropriate compensation at the time of extinguishment, they would have invested that money to return a profit, or used it to defray the costs of doing business so as to achieve a higher return than that afforded by way of simple interest, but there was no evidence to support such an argument in this case.

Cultural loss

The court recognised a separate amount of compensation should be awarded for what it described as 'cultural loss'. This was the non-economic loss suffered by the native title parties which is attributable to the harm done to the native title holders' spiritual connection to the land. The court said this would not be the same for all claim groups as the cultural connection would vary between groups, and even suggested it may be less in more developed areas of the country than in the more remote, less developed ones – that is, any award of compensation for 'cultural loss' will vary from case to case, and depend upon the particular circumstances of the case.

Notably, the court held that, in assessing cultural loss, it is appropriate to consider that the consequences of acts done can be incremental and cumulative, and the compensatable effects of those acts are not necessarily direct or limited to the area of the particular acts concerned, but can affect a person's perception of, and engagement with, their cultural values generally. Moreover, it was appropriate to consider the loss caused can be permanent and intergenerational.

Ultimately, the court said what is required is 'a monetary figure arrived at as the result of a social judgment…of what, in the Australian community, at this time, is an appropriate award for what has been done; what is appropriate, fair and just'.

In this particular instance, the majority said there was no reason for them to form the view that the trial judge's assessment of compensation for cultural loss was 'manifestly excessive', or that 'such a sum would not be accepted by the Australian community as appropriate, fair or just', and, therefore, affirmed the award of $1.3 million for cultural loss.

Where to from here?

There are already several other native title compensation claims that have been filed in the courts, and their progress through the courts has largely been awaiting this decision of the High Court. It is expected those claims will now proceed, and other compensation claims will no doubt follow. This will be the 'second wave' of native title cases, with the 'first wave' having focussed on the establishment of native title rights, as opposed to compensation. Whilst one might argue such compensation claims and awards were largely inevitable, they will nevertheless present a challenge for government to both respond to, and fund, and have perhaps been out of sight (and therefore out of mind) for some time, given it has taken 25 years from the passing of the NTA until this first ruling of the High Court on the issue.