The Timber Creek native title compensation appeals,[1] which were heard by the High Court in September 2018, are widely seen as one of the biggest test cases in Indigenous rights since Mabo. The High Court’s decision will set a precedent for calculating native title compensation under the Native Title Act 1993 (Cth) and will have significant consequences for the States and Territories, the Commonwealth, Aboriginal communities across Australia, and, in NSW, local government.

It is sometimes assumed that compensation for the extinguishment of native title rights and interests would be nominal, with the result that the issue of compensation does not receive a lot of attention in decisions and transactions which affect native title. However, these proceedings demonstrate that the compensation may be far from nominal. The Court’s impending decision is therefore of interest to both the public and private sector – in particular to people who have dealings with Crown land. One example is local councils participating in the current NSW Government program for vesting Crown lands in local councils. Under the vesting arrangements the responsibility for prior acts of the Crown are taken to have been prior acts of the vestee local council. The local council may therefore be taking on significant risk in respect of compensation under the native title legislation.

In anticipation of the decision, we look at the key points of the Timber Creek case.

Background

The case concerns compensation for a number of acts that took place in the 1980s and 1990s over a number of lots, comprising about 1.27km2 in and around the remote Northern Territory town of Timber Creek, over which the Ngaliwurru and Nungali Peoples held non-exclusive native title. The acts include the building of infrastructure and public works which extinguished the Ngaliwurru and Nungali Peoples’ native title.

The High Court proceedings appeal the 2017 decision of the Full Court of the Federal Court of Australia.[2] In that decision, the Full Court confirmed most aspects of the decision of trial judge Mansfield J,[3] which was the first determination in Australia of compensation for the doing of validated acts that affect native title. In particular:

  • Total compensation: The Full Court upheld the trial judge’s findings on non-economic loss and simple interest, but reduced compensation for economic loss from 80% to 65% of the freehold value of the land at the time of the compensable acts. As a result, compensation was determined as follows:
    • economic loss: $416,325 (reduced from $512,400);
    • interest on economic loss: $1,183,121 (previously $1,488,261, reduced to reflect the reduced quantum of compensation for economic loss); and
    • non-economic loss: $1,300,000 (no change).
  • Economic loss: The Full Court confirmed that the starting point for assessing the value of economic loss was an analogy of freehold title with exclusive native title rights in respect to the land. The freehold value was then adjusted to reflect restrictions and limitations applicable to the non-exclusive native title rights.[4] The Full Court held that the primary judge overvalued the economic loss when he ‘had regard to the race of the native title holders’[5] and the Claim Group’s deep spiritual attachment to the land.[6] The Full Court held that it was necessary to discount the value of the Claim Group’s rights and interests because those rights were inalienable[7] and non-exclusive.[8]
  • Non-economic loss: The Full Court concluded that the primary judge’s determination of $1.3 million was not manifestly excessive,[9] and confirmed that an ‘in globo’ assessment (rather than lot by lot)[10] and the use of intuition and judicial discretion were appropriate.[11] The Full Court also held that the limitations in State and Territory compulsory acquisition schemes on solatium awards did not restrain the amount for solatium in this context.[12] The relevant test is ‘just terms’, as provided for by the Native Title Act 1993, and whether the award for solatium would be judged by the Australian community as fair to the claim group.[13]
  • Interest: The Full Court confirmed the trial judge’s award of simple interest[14] on the economic loss component of the compensation, rejecting the native title holders’ argument that compound interest should be awarded, but leaving it open to a court to award compound interest in an appropriate case.[15]

Issues before the High Court

The Commonwealth, Northern Territory and the Ngaliwurru and Nungali Peoples appealed effectively all aspects of the Full Court’s decision. A number of other parties intervened.[16]

The grounds of appeal of the Northern Territory and the Commonwealth include:

  1. That the Full Court’s assessment, that the economic value of the non–exclusive native title rights should be 65% of the freehold value of the relevant land, was erroneous or manifestly excessive.
  2. That the Full Court erred in failing to find that the primary judge had erred in awarding interest as part of the compensation, rather than as interest on the compensation.
  3. The Full Court erred in failing to find that the primary judge’s solatium award of $1.3 million was manifestly excessive.

The grounds of appeal of the Claim Group include:

  1. That the Full Court, and the trial judge, when having regard to the market value of the land, should have held that the amount be assessed by reference to the freehold market value of the land, without reduction.
  2. The Full Court erred in allowing only statutory interest on compensation under s 51A of the Federal Court of Australia Act 1976 (Cth) calculated on a simple interest basis under Practice Note CM16.’

In support of the second ground above, the Claim Group submits:

The correct tool of analysis is exchange worth on a notional surrender of the native title upon which the Crown expands it [sic] title to absolute ownership and, in this case, grants freehold to others.’[17]

It also submits:

Inalienability was not a reason to deny that indigenous people owned their land, nor a restriction on their power of disposition by surrender, or a discounting factor.[18]

Significance of the case

It is expected that the High Court’s decision will provide guidance to State, Territory and Commonwealth governments on the amounts of compensation they may be liable to pay native title holders in the future. In NSW, the decision will be of interest to local government following the Crown land reforms which make councils liable for native title compensation in certain circumstances.

This case highlights the conceptual difficulty in translating cultural and spiritual harm into compensation,[19] where native title and freehold title are not commensurable but freehold title has been set as the reference point for valuing economic loss.

A question that might be asked is: Do conventional methods for valuing land need to be adapted (or discarded) to address the unique nature of native title rights, which differ from freehold? A further challenge to conventional valuation methods is that the content of native title differs from place to place and from group to group: in some places, the native title held by the Aboriginal people includes a right to exclusive possession, while in other places it may consist only of a right to fish in a particular location. And could it be the case that a right to conduct traditional ceremonies does not necessarily have less ‘value’ than the right to exclusive possession?

The Claim Group has made it clear that it does not view this case to be solely about monetary compensation. In its Outline of Oral Argument, the Claim Group states:

The normative loss inherent in the abrogation of the human right to own and inherit property equally with others is not expunged by validation.

We will be looking at the High Court’s decision for guidance on the following questions:

  • Non-economic loss: What principles guide the determination of compensation for loss of spiritual attachment? In particular, how will the High Court respond to the Claim Group’s submission that a normative or social assessment is needed, and the Northern Territory’s submission that compensation for intangible losses be fixed at 10 percent of the material loss?[20]
  • Economic loss:
    • Was the Full Court correct in holding that the trial judge erred by excluding a conventional approach to the valuation of interests in land established in Spencer v Commonwealth (1907) 5 CLR 418 (that is, to determine the value which would be paid by a willing but not anxious purchaser from a willing but not anxious vendor)?[21]
    • Despite being non-exclusive, were the Claim Group’s native title rights and interests ‘in a practical sense’ exercisable exclusively?[22]
    • Should the inalienability of native title be a ‘discounting factor’ to the assessment of economic loss?[23]
    • What ‘market’ should be referenced in determining market value – the price for which the Claim Group would have been prepared to surrender their title and the price the Northern Territory should be prepared to pay to acquire the rights by surrender (as the trial judge considered),[24] or a notional purchase of the native title rights by any third party on an open market?[25]
    • To what extent should the valuation of rights consider the basis on which native title is recognised and held by indigenous people?[26] How should any equation with other titles be carried out, if at all?[27] How will the High Court treat the evidence of the Northern Territory’s expert valuer?
    • How will the High Court treat the trial judge’s ‘intuitive’ reduction from freehold value?[28]
  • Interest:
    • Will the High Court confirm that compound interest is available in the appropriate case?[29] And if so, does the award of compound interest require that the Claim Group prove that it would have reinvested?[30]
    • Should the award of interest be in addition to or part of the compensation payable under s51(1) of the Native Title Act?[31]
    • How will the High Court treat:
      • the period of time between dispossession and the award of compensation, which is greater in native title cases than in compulsory acquisition of non-native title and was not due to the Claim Group’s inaction;[32] and
      • the absence of pre-acquisition processes;[33]
      • the benefits received by the Northern Territory in not paying compensation, saving on borrowing costs,[34] and receiving payments for the use of the land;[35]
      • the historical fact of invalidity, despite the retrospective validation;[36] and
      • the evidence on the rate of return.[37]