Yesterday, the Federal Court delivered its first determination of compensation payable in relation to the extinguishment of native title.1

In some respects, this decision answers the long unanswered question ‘how much is native title worth’. The answer, unfortunately, is (not unexpectedly) complex. Nevertheless it gives good guidance as to the principles to be applied in assessing compensation and the amounts that may need to be paid by development proponents.

Summary

Compensation for extinguishment of native title addresses both ‘economic loss’ and ‘solatium’ (i.e. hurt feelings evoked by the extinguishment of native title).

The compensation for solatium is significant and may be more than the value attributed to the ‘economic’ component.

Compensation is payable by the relevant grantor (i.e. the Crown in right of the State, Territory or Commonwealth as applicable).

To the extent that there are indemnities or other mechanisms to pass compensation obligations to tenure holders, there are likely to be difficulties in attributing compensation arising for solatium to any particular parcel of land, and provisions purporting to do so may not be effective.

The Timber Creek decision

The claim was for compensation for extinguishment of native title rights and interests in relation to an area of the Northern Territory.

The key points arising from the decision are:

  1. The amount of compensation for the economic value of exclusive native title rights in land ($512,000) is reflective of the freehold value of the land;
  2. Given that much compensation is historical, the interest component is likely to be significant ($1,488,261); and
  3. The compensation for solatium was by far the most significant component of the compensation sum ($1,300,000).

It would be an error, however, to consider that this decision is suggestive of a principle that native title compensation will be several fold the value of equivalent freehold interests in all cases.

First, the judge acknowledged that ‘The process required [to make an assessment of solatium] is a complex, but essentially an intuitive, one.'2 That means that the assessment is subjective, but likely to be tied to the importance of location in Aboriginal culture rather than to the value of the land. That is, it is likely that the ‘economic’ and ‘solatium’ components of native title compensation are not interrelated concepts.

Second, any ‘intuitive’ process is likely also to be subjective. That means that an appeal court (if the matter is appealed) or another judge in different circumstances might be less (or more) generous in that assessment.

Accordingly, it is likely that the approach to assessment of land will need to assess:

  1. The economic value of the land for the assessment of the economic component of compensation; and
  2. The Indigenous importance of the land assessment of the solatium component.

Additionally, the judge decided that the loss for solatium ought not to be undertaken on a ‘parcel by parcel’ basis. Rather that assessment is made on a global basis taking into account the way in which the grant in question had an impact the native title holders. Further, the assessment of solatium takes into account any impairment of attachment or any loss or destruction of significant places that was unconnected with the grant).

Accordingly, while the economic value of a specific parcel of land is capable of being assessed, it is not possible to attribute a value of the solatium applicable ‘to a boxed quarter acre block’.3

This is likely to cause some difficulty in applying ‘flow through’ provisions in legislation and agreements. Compensation is payable by the granting party (i.e. the Crown in right of the State, Territory or Commonwealth as applicable). Some legislation and some lease agreement conditions seek to pass the liability obligation to the grantee party.4 However, these provisions usually address the compensation attributable to the grant. For the reasons above, it appears that it is not possible or appropriate to apportion solatium to specific grants.

What is next

Assessment of compensation for native title will not be a quick or easy process. Putting aside that the decision is likely to be appealed, there are three major hurdles to obtaining a compensation award:

  1. It is a precondition of being compensated for extinguishment of native title rights and interests that the relevant group has established that they have such rights;
  2. It is important to identify in all cases the grant that extinguished native title as compensation is attributable to the act of extinguishment rather than the existence of a current title; and
  3. The inherently subjective nature of assessing ‘solatium’ means that there will need to be significantly more guidance on the range of compensation that will be available.

Attribution of compensation to particular tenure holders is a further step in the process. Many tenure holders who hold grants that have extinguished native title may be at risk of being asked to contribute to any compensation payable, but this is likely mitigated by both the difficulty in attributing solatium to particular tenure and the prevalence of native title agreements in the context of grants, which are likely to offset or even exceed compensation payable in some circumstances.