The Full Federal Court has now outlined relevant considerations with respect to compensation for the loss, diminution, impairment or other effect of certain acts on native title. How do these apply to mining and other resources projects? 

To date, the Federal Court has made only one contested determination of compensation under the Native Title Act 1993 (Cth) (NTA): the "Timber Creek" decision by Justice Mansfield in August 2016.

An appeal against the Timber Creek was heard by the Full Court over five days in February 2017, and the appeal decision was handed down on 20 July 2017. We discuss the major lessons from that appeal decision below.

Separately, but also on 20 July 2017, Justice Rares of the Federal Court handed down his decision in Warrie (formerly TJ) (on behalf of the Yindjibarndi People) v State of Western Australia [2017] FCA 803. In that decision, which has received a good deal of press coverage, his Honour found that the Yindjibarndi people held exclusive native title rights and interests over a large area that included the site of the Solomon Hub Mine, a multi-billion dollar iron ore mine owned by Fortescue Metals Group (FMG). In other words, his Honour held that the Yindjibarndi had the right to exclude from their claim area (for any reason or for no reason) any person who was not a Yindjibarndi person.

His Honour reached his conclusion notwithstanding that the same Yindjibarndi had previously been determined only to hold non-exclusive native title rights and interests in relation to an area (Moses Land) directly to the north of the present claim area. These non-exclusive rights did not entitle them to exclude strangers (whom they called "manjangu") from their country (see Daniel v State of Western Australia [2003] FCA 666, Daniel v State of Western Australia [2005] FCA 536 and Moses v Western Australia [2007] FCAFC 78 (Moses Determination)).

The press has reported certain Yindjibarndi identities having long promised to pursue FMG for "hundreds of millions of dollars" in compensation if they were able to prove that they had exclusive native title rights.

Yindjibarndi Decision

The matters that fell to be decided by Justice Rares included whether:

  • the Yindjibarndi were entitled to a native title right, equivalent to a right of exclusive possession, over all or any part of the claim area;
  • any prior extinguishment of native title in relation to unallocated Crown land (UCL) in the claim area (including the UCL on which the Solomon Hub Mine was situated) was to be disregarded under section 47B of the NTA; and
  • it was an abuse of process for the Yindjibarndi to seek exclusive native title rights over the claim area when it had been held in the Moses Determination that they only held non-exclusive rights.

Exclusive possession

Justice Rares was persuaded by evidence that the Yindjibarndi had always required manjangu to obtain permission before entering Yindjibarndi land. His Honour found that this requirement was more than a matter of "respect", as had been found in the Moses Determination, and instead flowed from "spiritual necessity" because of the harm that would be inflicted on "the country" upon unauthorised entry. His Honour considered that this spiritual necessity, which reflected important traditional laws and customs that had been continuously acknowledged and observed by the Yindjibarndi since sovereignty, gave rise to a right of exclusive possession.

Prior extinguishment

Relevantly under section 47B of the NTA, any extinguishment of native title in relation to areas of UCL is to be disregarded if, when a native title claim is made:

  • the area is not covered by a permission or authority of the Crown under which all or part of the area is to be used for a particular purpose; and
  • one or more members of the native title claim group occupy the area.

Justice Rares found that miscellaneous licence 47/47 did provide for the licence area to be used for a particular purpose (related to railway construction). Accordingly, prior extinguishment over this area was not to be disregarded.

On the other hand, six exploration licences (including one held by FMG) were held, relying on existing Full Court authority in Banjima People v State of Western Australia [2015] FCAFC 84, to be in general terms and not to require the affected land to be used for a particular purpose. Having also found that visits by various Yindjibarndi to the relevant areas from time to time to camp, or to exercise traditional rights, rites and practices, amounted to "occupation", his Honour held that any prior extinguishment over the area covered by the exploration licences was to be disregarded.

Although we have not considered the relevant licences in any detail, there are potential difficulties with his Honour's finding in this respect. On the one hand, the finding that the exploration licences did not require the affected land to be used for a particular purpose relied on the consideration that, because the licences on their own did not authorise the licensees to do more than traverse and take samples from the land and waters, they did not give an interest in the land or the right to use it for exploration. However, there are a myriad of situations (including in the case of mining leases that also need an environmental approval and subsequent approvals of development plans from relevant Ministers) in which the holder of a statutory approval requires additional authorisation in order to fully utilise the permission or authority granted by the approval. The exception in section 47B(1)(b)(ii) of the NTA could become relatively meaningless if none of these types of approvals would be caught.

Similarly, it is uncontroversial that, in appropriate cases, the grant of an exploration licence will be a future act that will be invalid unless, before it is granted, one of the paragraphs of section 28 of the NTA is satisfied. If it were really the case that an exploration licence on its own did not give an interest in the land or the right to use it for exploration, it is difficult to see how many exploration licences could "affect" native title to the extent required to make it a future act (except, perhaps, in the context of exclusive native title rights and interests). It may also be considered somewhat inconsistent that His Honour found that the licences themselves may not have created an entitlement to explore for minerals but separately found that a section 29 notice was required with respect to the grant of the licence and was invalid seemingly on the basis that the licence created a right to mine (as defined by the NTA which includes a right to explore).

Further, it is not clear that the activities his Honour considered to amount to "occupation" were those that Parliament intended should trigger the operation of section 47B. Clauses 5.56 - 5.57 of the Explanatory Memorandum to the Native Title Amendment Bill 1997 (Cth) explain section 47B as a statutory mechanism designed to allow native title claimants who are in occupation of UCL to overcome the effect of past extinguishment and have their claim determined by the court. The amendment was said to flow from the recommendation of the Majority Report of the Parliamentary Joint Committee on Native Title and the Aboriginal and Torres Strait Islander Land Fund on the Bill that:

"governments should deal sensitively and on a case-by-case basis with those situations where Indigenous people continue to live on [UCL] but are unable to register native title applications [because of past extinguishment]."

With respect, if spiritual and emotional connection to country and a duty to care for it under traditional law were enough to establish "occupation", it would often be the case that the whole of the claim area is occupied. If that had been Parliament's intention, there would arguably have been no need to enact section 47B(1)(c).

It is also not clear, given the plain text of section 47B, that his Honour was correct to find that occupation would be established provided any part of the claim area was being occupied - that is, that occupation did not need to be limited to the particular UCL in question.

Abuse of process

As to whether seeking exclusive native title rights over the claim area when only non-exclusive rights had been found in the area of the adjacent Moses Determination, his Honour found that the broad power conferred on the Court by section 86 of the NTA to consider evidence from other proceedings and draw from such evidence "any conclusions of fact … that it thinks proper" could not be interpreted to mean that the Court could only draw conclusions consistent with the earlier findings.

Similarly, his Honour considered that any narrow construction of section 86 would be contrary to the purpose evident from section 13(1)(b), which gives the Court the power to revoke or vary an earlier native title determination, either because events have shown the earlier determination to be incorrect or because the interests of justice require the revocation or variation.

In any event, his Honour found that the fact that the grant of a pastoral lease had partially extinguished native title over the Moses Land, leaving only non-exclusive rights, did not prevent the Yindjibarndi seeking a determination of exclusive native title over the balance of their country where no such prior extinguishment had occurred (or was to be disregarded).

Compensation ‒ the Timber Creek Appeal

There are press reports of Morgan Stanley having calculated that:

  • based on a 0.5% royalty, FMG could be forced to pay $US84 million in back-payments and $US15 million a year going forward; and
  • in its worst-case scenario of a possible, but unlikely, 5% royalty, FMG could be liable for back-payments of $US840 million and an ongoing annual royalty of $US150 million.

The question arises whether there is any basis in law for thinking that resource companies could be found liable to pay these sorts of amounts in compensation for the impairment of exclusive native title rights and interests caused by their resource projects.

In Timber Creek, Justice Mansfield had awarded the native title holders $3,300,261 in compensation, comprising:

  • $512,000 for the economic value of their extinguished native title rights (being 80% of the total freehold market value of the affected lots, with the discount being attributed to the fact that the grant in 1882 of Pastoral Lease 366 had partially extinguished native title in relation to Timber Creek, leaving only non-exclusive native title rights and interests in place);
  • $1,488,261 in simple interest on this sum (there being no basis on which to justify an award of compound interest); and
  • $1,300,000 for non-economic/intangible loss or solatium (being additional compensation awarded to the native title holders for the loss, they had sustained, and the "intangible disadvantages" they had experienced, because of the extinguishment and impairment of their native title).

In partially allowing the appeals by the Northern Territory and the Commonwealth (see Northern Territory of Australia v Griffiths [2017] FCAFC 106 (Timber Creek Appeal)), the Full Court found that:

  • the economic value of the extinguished native title rights was 65% of the value of freehold title;
  • the award of simple interest (on the lesser sum) continued to be appropriate as this case did not fall within the limited class of cases (including fraud) where equity has intervened to award compound interest; and
  • taking into account a number of matters including a number of examples from overseas jurisdictions in which amounts had been awarded to indigenous people by way of compensation for non-economic losses, Justice Mansfield had not erred in exercising his discretion to fix the award for solatium.

Implications for FMG and other resource companies

Grants of resources tenements will typically be covered by Part 2, Division 3, Subdivision M of the NTA. Under section 24MD(3) of the NTA, compensation for such grants will be covered by Part 2, Division 5 of the NTA where the State or Territory legislation authorising the grant does not specifically provide for compensation to the native title holders.

The Full Court in the Timber Creek appeal also noted that the way compensation was to be assessed was governed by section 51 of the NTA, which provides that compensation for the extinguishment or other impairment of native title by past, intermediate period and future acts is an entitlement to compensation on just terms. Section 51 is in Part 2, Division 5.

Relevantly to FMG and other resource companies, particularly in those jurisdictions such as Western Australia where the State or Territory government has passed liability to pay native title compensation through to the holders of affected resource tenements, section 51(3) of the NTA provides that, in assessing compensation for acts that do not involve compulsory acquisition, the principles that are set out in the applicable resources legislation for assessing compensation payable to freehold owners should be applied to the assessment of native title compensation.

However, section 51 of the NTA is subject to section 51A, which provides that the total compensation payable for an act that extinguishes all native title in relation to particular land or waters must not exceed the amount that would be payable if the act were instead a compulsory acquisition of a freehold estate in the land or waters.

On that basis, it is difficult to comprehend estimates that resources companies might be liable to pay "hundreds of millions of dollars" in native title compensation.

The "similar compensable interest test" referred to above would require native title compensation for the grant of FMG's exploration licences and mining leases to be assessed in accordance with the provisions of Part VII of the Mining Act 1978 (WA). For other resource companies, the relevant compensation provisions under the State or Territory mining regimes would apply. However, whatever amount is awarded could not (based on section 51A, but subject to the terms of any legislation specifically providing for native title compensation) exceed the freehold value of the affected land. And, given that exploration licences (and mining leases) are both subject to the "non-extinguishment principle", one would have thought that the quantum of whatever compensation FMG becomes liable to pay may in fact be less than the freehold value of the site of the Solomon Hub Mine.

We acknowledge that section 51A of the NTA is subject to section 53, which provides for there to be added to an assessment of compensation an additional measure required to ensure that just terms is provided. However, section 53 only applies to an act that would result in an acquisition of property under paragraph 51(xxxi) of the Commonwealth Constitution. Neither the grant of an exploration licence, nor that of a mining lease, would appear to result in such an acquisition.

In any event, in light of the various references to royalty payments, we note that section 123 of the Mining Act relevantly provides that (noting that other resources legislation throughout the country contains similar provisions):

"(1) … in so far as the mineral is by virtue of section 9 the property of the Crown or the mining is authorised under this Act no compensation shall be payable in any case, and no claim lies for compensation, whether under this Act or otherwise -

(b) in respect of the value of any mineral which is or may be in, on or under the surface of any land; or

(c) by reference to any rent, royalty or other amount assessed in respect of the mining of the mineral…"

Following the Timber Creek Appeal, one might also allow for the imposition of simple interest on assessed compensation from the date of the grant of the relevant tenement to the date of the award of compensation.

Questions may be raised about whether solatium and similar type claims could arise. For example, the Mineral Resources Act 1987 (Qld) contains compensation provisions that provide for a minimum 10% to be added to compensation awards to reflect the compulsory nature of the grant of a mining lease, and include claims for possible premiums based on status and use being made of the land.

The interaction between these provisions and those in Part 2, Division 5 of the NTA will no doubt be subject to judicial consideration in the future. Clayton Utz had to consider some of these issues in the only mining lease native title compensation case to be heard in Australia (RAG Australia Coal Pty Ltd & Anor v Barada Barna Kabalbara & Yetimarla People & Ors [2003] QLRT 65) under the old Queensland alternative right to negotiate regime. The Tribunal in that case ultimately determined that the claimants had not adduced sufficient evidence as to their rights for the Court to award compensation and therefore did not need to consider the detailed submissions made by our client and the State in that case. It may now be time to revisit those submissions.

Way forward for resources companies

Companies would be well advised to ignore the alarmist headlines relating to the Yindjibarndi Decision and possible compensation consequences for resources companies and focus on the established legal principles including:

  • the principles outlined in the Timber Creek Appeal;
  • the terms of sections 51 and 51A of the NTA; and
  • the provisions of the relevant resources legislation - with particular reference to whether such legislation contains specific provision for:
    • the payment of native title compensation; and
    • "pass through" of liability to pay native title compensation to tenement holders.