On 24 August 2016, the Federal Court handed down the first compensation determination for the extinguishment of native title in Griffiths v Northern Territory of Australia (No 3) [2016] FCA 900 (Mansfield J) (Griffiths). Griffiths resulted in the claimants being awarded $3.3 million in compensation for the extinguishment of their native title, including $1.3 million for ‘solatium’ (i.e. hurt feelings evoked by extinguishment of native title). Gilbert + Tobin’s detailed summary of the decision can be found here.

The provisions of the Mining Act 1978 (WA) provide that the State will seek to pass on any native title compensation claims to mining companies. Similar provisions appear in State and Federal petroleum legislation and in a number of leases and other land tenure agreements with the Crown in right of various States and the Commonwealth.

In this update, we reflect on when compensation may be payable, how much compensation may be payable (in light of Griffiths) and by whom.

How is compensation calculated?

Compensation for the extinguishment of native title addresses both ‘economic loss’ and ‘solatium’. The compensation for ‘solatium’ is significant and, in Griffiths, was more than the value attributed to the ‘economic’ component. As solatium is dependent on the importance of the native title rights and interests impaired, it appears that assessment of solatium and assessment of economic loss are separate and unrelated exercises.

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.

In what circumstances is compensation payable?

Firstly, most impacts on native title are not going to be the subject of compensation. Native title compensation is applicable only to acts that impacted native title rights and interests where those acts occurred on or after 31 October 1975.  The significance of this date is that it is the date the Racial Discrimination Act 1975 came into effect.  Absent the Racial Discrimination Act and the statutory protection against discrimination it contains, it was within the legislative power of the States to acquire native title without compensation.  The vast majority of improved (and thus more valuable) land in Australia was alienated by the Crown prior to 1 January 1975.

Secondly, quite a lot of compensation has been paid under native title agreements that have been entered into already.  The circumstances giving rise to the highest exposure to compensation are likely to be where native title rights were affected by acts that were allowed after compulsory processes (for example, where the ‘right to negotiate’ or the ‘infrastructure’ process under s24MD(6B) resulted in a grant without an agreement being in force). This is partly due to the likelihood that solatium will be higher where there was resistance to a grant that was overridden through statutory processes.

There are no reliable statistics in relation to what proportion of future acts have been resolved on the basis of native title agreements.   Anecdotally, however, it would appear that more than half and probably in excess of three quarters of future acts (i.e. grants made after 1 January 1994) have been compensated by miners and other proponents already.  There are comparatively few agreements dealing with the period from 31 October 1975 to 1 January 1994 (the commencement of the Native Title Act 1993), and so the bulk of the ‘uncompensated’ acquisitions of native title rights are those that attach to grant of rights between 1975 and 1994.  It remains to be seen how many compensable acts occurred in that timeframe.

How much compensation is payable?

Griffiths sets out a guide for determining how much compensation may be payable. Mansfield J held that compensation for the extinguishment of native title comprises both economic loss and solatium (being the damages for the pain and suffering of loss of connection to country as a result of the extinguishment).  

Economic loss

His Honour determined that the economic loss component is calculated by reference to the freehold value of the land. If a claimant group holds exclusive native title rights they are entitled to the full freehold value of the land. In the case of a claimant group that holds non-exclusive native title rights, Mansfield J determined that the appropriate amount for economic loss should be 80% of the land’s freehold value. His reasoning for selecting such a relatively high figure was that the existence of native title rights would significantly impair the use to which land could otherwise be put.  Since the applicants enjoyed non-exclusive native title rights, his Honour awarded $512,000 for economic loss, being 80% of the freehold land value.

Solatium (loss of connection to country)

The applicants in Griffiths were able to lead strong evidence of their traditional connection to the land and the effects of that loss of country and were awarded $1.3 million for solatium.  Where evidence of connection to land is weaker, or the importance of the land or the sites on it are less significant, the solatium component will be lower.

In regards to the calculation of the solatium component, his Honour acknowledged that the process required is complex but is essentially intuitive, and that it must reflect the loss or diminution of traditional attachment or connection to land arising from the extinguishment. Evidence about the relationship with country and the effects of acts on that relationship were said to be ‘paramount’. His Honour also held that the loss is to be assessed with respect to the entire native title claim area rather than by reference to loss caused in relation to specific blocks of land

Who is liable to pay compensation?

The States’ ‘recovery’ legislation seeks to flow through compensation payable in relation to the particular tenure held. Unfortunately (or fortunately for the tenure holder) the assessment of native tile compensation was not undertaken on a ‘lot by lot’ approach.  The assessment of compensation in Griffiths was undertaken on an ‘in globo’ approach (that is, with respect to the entire area).  Put another way, the basis of the proposed government ‘flow through’ approach is incompatible with the Court approach.

That is not to say that the Government will not seek to levy a recovery for any compensation to which it is liable.  However, it is more likely that the State will take the approach of recovering native title compensation though increased rents and fees applicable to relevant tenure.  This may therefore be reflected across industry rather than specifically against miners or other tenure holders whose interests have affected native title rights and interests, but who have not made a contribution to compensation. Griffiths simply provides a base level of compensation payable by the States for the extinguishment of native title.