On 24 August 2016, the Honourable Justice Mansfield of the Federal Court of Australia handed down the first decision that orders a State or Territory to pay compensation for loss or impairment of native title rights and interests pursuant to the provisions of the Native Title Act 1994 (Cth) (NT Act), namely Griffiths v Northern Territory of Australia (No 3) [2016] FCA 900.

The decision relates to areas within and surrounding the township of Timber Creek in the Northern Territory. The town of Timber Creek had previously been the subject of a native title determination by the Federal Court of Australia recognising that native title rights and interests continued to exist for the township of Timber Creek and were held by the Ngaliwurru and Nungali Peoples (Griffiths v Northern Territory of Australia (2006) 165 FCR 300).

Following the native title determination, the native title holders made an application for compensation for areas where native title had been extinguished due to previous grants of the Northern Territory or the construction of public works.

The ultimate result of the case was that the Northern Territory must pay $3.3 million in compensation for the loss or impairment of non-exclusive native title rights and interests.

In the decision, His Honour identified four primary areas of dispute, namely:

Decision at a glance

  • The date when the entitlement to compensation arises is the date the act (grant, permit, licence, authority etc) is done not the date it is validated. (Para 126 to 132)
  • Value of exclusive native title is equivalent to freehold value (Para 213)
  • The value of non-exclusive native title cannot be freehold but nevertheless, the fact that native title cannot be sold is not of itself a significant discounting factor (para. 225).
  • The value of non-exclusive native title is 80% of the freehold value (para. 232). His Honour Justice Mansfield described this “as an intuitive decision” (para. 233). This is the economic value only, “not cultural or ceremonial significance” (para. 234). His Honour rejected the use of the usable value of assessing each right in the bundle of native title rights and calculating each of those rights’ economic values, which the Territory had argued (para. 243).
  • Was the interest component on the damages compound or simple? His Honour found that because the claim group distributed money and did not invest it on previous occasions, it was not entitled to compound interest (para. 275 to 277). Therefore, simple interest is the basis for calculating the interest payable on the compensation in this case (para. 279).
  • Calculating non-economic loss. His Honour favoured an intangible disadvantages test over a special value test (para. 292). He described the intangible disadvantages test as solatium (para. 300). Again, this was “an intuitive process”. His Honour said “compensation must be assessed having regard to the spiritual and usufructuary significance and area of the land affected, but relative to other land that remained available to the claim group for the exercise of the native title rights and interests” (para. 302).
  • His Honour did not favour any claim in personal injury or tort because those claims focused on personal, not communal losses. The intangible disadvantages test was about the loss of the communal native title rights and interests (para. 309). Curiously though, hurt feelings seem to come back in in the context of the concept of solatium (para. 323).
  • The assessment of compensation for non-tangible disadvantages was an assessment of three things:
    • Specific distress caused by the effect on Dreamings (para. 378);
    • Effect on an area around the specific areas as well as specific areas themselves (para. 379); and
    • An adverse effect on the spiritual connection with particular allotments (para. 381).

Relevant date for determining value of land

Issue

The parties to the proceedings disagreed on whether the valuation of the land compensation should be assessed at the date of the particular Act or when the Act was validated by the provisions of the NT Act.

Decision

Whilst the Acts which extinguished native title were validated under provisions of the NT Act and the Validation of Titles and Actions Amendment Act 1998 (NT) (VTAA Act) on 10 March 1994, the relevant provisions of the VTAA Act provide that the act is deemed to always have been valid. On this basis, His Honour found that the relevant date for valuation of the land that has been subject to the extinguishing act is the date on which that act occurred.

The value of native title

Issue

Compensation for extinguishment of native title under the NT Act is payable for acts that occur after the introduction of the Racial Discrimination Act 1975 (Cth) on 31 October 1975. As the township of Timber Creek was proclaimed on 10 May 1975 and this proclamation had extinguished any exclusive native title rights and interests, all that remained after that date was “non-exclusive” native title rights and interests. As such, His Honour was required to assess the value of “non-exclusive” native title rights and interests. Subject to complying with the constitutional requirements of providing “just terms” compensation, the NT Act provides that the total compensation payable for an act that extinguishes all native title, including exclusive native title rights and interest, in relation to land or waters must not exceed the amount that would be payable for a compulsory acquisition of a freehold estate.

Decision

His Honour found that there was no reason why the value of the complete extinguishment of exclusive native title rights and interests should not be taken as the equivalent of freehold value. When determining the value of non-exclusive native title rights and interests, it is necessary to arrive at a value which is less than the freehold value and which nevertheless recognises and gives effect to the nature of those rights. His Honour stated that this was essentially an “intuitive decision” and decided to attribute a value of 80% of the freehold value of the relevant land.

Calculation of interest

Issue

As the relevant acts that gave rise to the entitlement to compensation occurred a relatively long time ago, it was accepted that interest was payable on the value of extinguished native title rights and interests. However, the parties disagreed on the method of calculating that interest.

Decision

His Honour found that the native title holders failed to successfully argue that the principles allowing the Court to apply compound interest applied. In such circumstances, His Honour ordered that interest would be calculated in accordance with the Federal Court’s practice note of applying a simple interest calculation.

Compensation for non-economic loss

Issue

The parties did not dispute that a payment by way of compensation for non-economic loss was not payable. Rather, the dispute related to the quantum of that compensation.

Decision

His Honour accepted the arguments that the compensation was in relation to “intangible disadvantages” suffered by the native title holders as a result of the extinguishment of their native title rights and interests. In relation to the assessment of the quantum of those damages, His Honour indicated that the quantification process required was complex but essentially an, again, “intuitive one”. His Honour analysed the factual evidence presented to him in relation to the impact of the extinguishment of native title on the native title holders and noting that the “selection of appropriate level of compensation is not a matter of science or of mathematical calculation” determined an appropriate award for the non-economic or solatium component of the compensation should be $1.3 million.

The implications of this decision

The provisions relating to payment of compensation for loss or impairment of native title rights and interests have existed in the NT Act since its introduction in 1994. The obligation to pay that compensation has similarly rested with the Commonwealth and States and Territories since that time.

However, a number of previous applications for compensation have failed due to the fact that the claimants have failed to demonstrate that they are the holder of native title rights and interests. This decision provides the first judicial analysis of how the compensation will be assessed.

Whilst, given the importance of the decision, there is a significant chance of appeal, the decision crystallises a liability of the Commonwealth, States and Territories which has in existence for some time but never quantified.

Whilst there has been extensive reporting of this decision in the media which points to significant areas of land that have been determined to be subject to native title and raises the prospect of significant liability arising for the Commonwealth, States and Territories, it is appropriate to remember:

  • that the liability will not apply to areas where exclusive native title rights and interests exist;
  • where exclusive native title rights and interests do not continue to exist, a compensation liability only arises if:
    • native title claimant has proved it has met statutory requirements for demonstrating continued “connection” to the land; and
    • the extinguishment of those rights occurred after 31 October 1975.