Where to Next? Native Title Compensation following Timber Creek
This is the first of two posts AUSPUBLAW is featuring on the High Court’s Timber Creek decision. Sean Brennan’s accompanying post is here.
Aaron Moss & William Isdale
03.04.19
In Griffiths v Northern Territory [2019] HCA 7 (Timber Creek), the High Court delivered its first judgment regarding the compensation provisions in Part 2 of the Native Title Act 1993 (Cth) (the NTA), ending the long-running saga of the first contested determination of compensation in Australian history.
The judgment generated extensive media attention, and has been variously described as “the most significant case concerning Indigenous land rights since Wik and Mabo“, opening a “can of worms“, marking “a shift in Australia’s native title journey“, and demonstrating the “immeasurable value of the justice system in providing a place for people to tell their stories, and find redress“.
The decision marks the start of what is likely to be a lengthy process of resolving the outstanding compensation liabilities owed by the Commonwealth and the States. As one of the authors has said elsewhere, it is also likely to “trigger political debate about the economic, budgetary and social implications” of the significant number of compensation claims which are anticipated in its wake.
Although the decision provides some guidance about how compensation claims can be resolved, it is far from the final word on the issue. In that context, this article discusses some noteworthy aspects of the decision, and identifies two key “battlegrounds” that are likely to emerge following it: the role of intuition, and the relationship between the NTA’s compensation provisions and the “acquisition on just terms” guarantee in s 51(xxxi) of the Constitution.
The “bifurcated” approach taken
Unanimously, the Court indicated that the assessment of the “compensation” payable under s 51(1) of the NTA required a separate assessment of the “economic loss” and “cultural loss” suffered by the native title holders as a consequence of the compensable acts (See Kiefel CJ, Bell, Keane, Nettle and Gordon JJ (the Majority Reasons) at [86], Gageler J agreeing at [240], and Edelman J agreeing at [270]-[271], subject to some reservations at [253] (“there is no single correct methodology of valuation”)).
This “bifurcated” approach was adopted by the parties and undertaken by the trial judge (Mansfield J) at first instance. Notably, however, the Full Federal Court (North ACJ, Barker and Mortimer JJ) queried whether an alternative approach might be more appropriate, observing:
Native title rights and interests are of such a different type and significance to the holders that it may well be appropriate to loose the assessment from the shackles of Australian land law and approach the compensation exercise without dividing value into economic and non-economic components. It might rather be more appropriate to seek to place a money value as best as can be done on the one indissoluble whole. ([144])
The High Court’s rejection of this so-called ‘holistic approach’ is to be welcomed for three related reasons: firstly, because it promotes transparency of reasoning; secondly, as it will provide a more certain body of case law that can guide parties in negotiating future awards (and thereby avoid the need for litigation); and thirdly, as the High Court observed, because such an approach somewhat prevents awards being “largely dependent on idiosyncratic notions of what is fair and just” (Majority Reasons at [86]). Those considerations are especially important given the highly intuitive approach that the courts have endorsed (discussed further below).
Notably, although the Court explicitly eschewed any comparison to the calculation of damages for personal injury (Majority Reasons at [187] and Edelman J at [314]), the bifurcated approach to damages is also consistent with assessment of “heads of damage” in that sphere. This is something to be considered by any personal injury defense lawyer in similar cases.
Economic Loss
Six members of the Court (Gageler J dissenting), indicated that the approach to the assessment of economic loss essentially required:
First, ascertainment of the “freehold value” of the affected land (which provides the measure of economic value for ‘exclusive’ native title rights and interests); and
Secondly, in the case of non-exclusive native title rights, application of a “percentage reduction” to reflect “the comparative limitations of the Claim Group’s rights and interests relative to full exclusive native title” (Majority Reasons at [67]-[70], [295]-[303], but see Gageler J at [241]-[250]).
In this case, the Court held that the native title rights and interests held by the Ngaliwurru and Nungali Peoples in the affected areas were “essentially usufructuary, ceremonial and non-exclusive” and could therefore be valued at “no more than 50 per cent” of the freehold value of the land. In doing so, the Court found that the Full Court of the Federal Court’s valuation (at 65% of freehold value), and the trial judge’s valuation (at 80% of freehold value), were manifestly excessive (Majority Reasons at [106]-[107]).
Less than 50% for non-exclusive rights in the future?
The Court’s findings in relation to the value of the non-exclusive rights in this case are perhaps the least welcome aspect of the Court’s decision for native title holders. Not simply because the 50% deduction represents a significant reduction compared to the amounts determined in the previous judgments, but because the High Court implied that an even lesser amount may have been appropriate. The 50% figure was not reached as a considered figure by the High Court, but instead because, as set out in the Majority Reasons at [107]:
… no party suggested that the percentage should be set at below 50 per cent, it can be accepted for the purposes of the disposition of these appeals that 50 per cent is the figure.
These observations may be read as an invitation by lower courts to reach far lower values, and may encourage respondents to take an aggressive approach to negotiation and litigation concerning non-exclusive native title. Such a consequence is particularly likely given the High Court’s particularly sparse reasoning as to why the previous deductions were “plainly so high … as to bespeak error of principle” (Majority Reasons at [106). Inevitably, though, the relevant deduction depends greatly on the nature and characterisation of the rights and interests held by the Claim Group, and the degree to which those rights approach the rights held by freehold owners.
Cultural Loss
Turning to the “cultural loss” element of the award, the task was variously described as attempting to compensate the Ngaliwurru and Nungali Peoples for their “loss of cultural and spiritual connection with land” (Majority Reasons at [152]), “loss of attachment to country and rights to live on, and to gain spiritual and material sustenance from, the land” (Edelman J at [312]), for damage to country, and for the “resulting sense of failed responsibility” which produced “emotional, gut?wrenching pain” (Majority Reasons at [194]).
The Court held that calculating compensation for “cultural loss” required identification of the native title holders’ connection with land and waters by their laws and customs, and then a consideration of the effects of the compensable acts on that relationship (Majority Reasons at [224], with Gageler J agreeing at [240]). In light of that comparison, the Court must determine “a monetary figure … of what, in the Australian community, at this time, is an appropriate award for what has been done; what is appropriate, fair or just” (Majority Reasons at [237]). As the Court observed, any such assessment will be intrinsically fact-specific, guided by the evidence before it, and limited by the “subject matter, scope and purpose” of the NTA (Majority Reasons at [218]-[219]; see also, Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24).
The High Court did not disturb the trial judge’s figure for this component of the award, which was in the amount of $1.3 million. Although the figure was challenged by the Northern Territory and the Commonwealth on various grounds, including that the award was manifestly excessive; erroneously compensated for future generations; overlooked the continued availability of alternative spiritual sites; and failed to consider the Claim Group’s alleged approval of acts (by way of commercial agreements) on their land, each of these challenges was rejected (Majority Reasons at [211]).
In contrast to the economic loss assessment, the reasoning concerning cultural loss was an emphatic triumph for Claim Groups. The Court’s award of a significant amount of compensation for cultural loss goes some way to vindicating the significant intangible harms experienced by Claim Groups who lose native title rights. By rejecting the Government respondents’ submissions to the effect that any such award should be “nominal”, the Court’s decision emphasises, both practically and symbolically, that cultural loss is often likely to be the most significant aspect of harm caused by acts affecting native title interests.
Battleground #1: The role of Intuition
Apart from the guidance now achieved, a number of issues remain outstanding or require further guidance. In our view, there are two major ‘battlegrounds’ that require such further guidance. The first concerns the role of intuition.
The Court repeatedly recognised in its reasons that the identification and assessment of any deduction from full freehold value is a “broad-brush exercise” which is essentially “evaluative” in nature and “not one of precision”, but must be anchored in an assessment of the nature of the native title rights and interests held (Majority Reasons at [67], [87] and Edelman J at [301]-[302]). In this regard, compared to valuation of more conventional land interests in compulsory acquisition jurisprudence (which the Court purported to adapt and apply, see the Majority Reasons at [66], [85], Gageler J at [245] and Edelman J at [279]-[280]), this component of the award is highly intuitive. Further, for the reasons set out above, an award for cultural loss is even more driven by intuitive considerations.
We accept that, to some extent, the role of intuition in any assessment of compensation is unavoidable. Unlike other property rights, the legal incidents of which are well-known and understood, every bundle of native title rights is unique, because it is grounded in the traditional laws and customs of the Claim Group. Accordingly, the High Court considered that the intuitive reduction from full freehold value for non-exclusive rights was “an unavoidable consequence of the statutory scheme” (Majority Reasons at [87]).
Nonetheless, the dependence on intuition endorsed by the High Court in Timber Creek is, in our view, a troublesome aspect of the decision. Absent any certainty about the awards that will be reached by the courts, parties are less likely to reach consensual agreements for compensation. This has the perverse consequence of encouraging the complex, lengthy, and expensive litigation that the Majority Reasons expressed a desire to avoid (Majority Reasons at [92]).
Courts have grappled with the role of intuition in many other areas of law, for instance, in criminal sentencing and assessment of personal injury damages. It is why people go to find a personal injury lawyer online in most cases, due to the complexity involved.
Ultimately, no one likes to think too much about the possibility of being unable to work as the result of an injury. However, if you are ever unlucky enough to be unable to work as the result of an injury then there is almost always a possibility that you might be able to claim damages if a negligent party can be held legally responsible for your injury. Correspondingly, you can learn more here about the legal arguments that can be used when filing for damages.
Going back to the earlier point though, in both of those fields, the challenge has been responded to in two ways: firstly, by outlining overarching principles to guide the exercise of discretion (e.g. deterrence as a relevant consideration in sentencing; and the ‘compensatory principle’ in awards of damages) and through accumulating data about how cases are resolved (so guidance can be derived from past sentences, or damages awards, arrived at in similar circumstances).
In our view, Timber Creek was a missed opportunity to articulate some of the principles or factors which influence the intuitive calculation of an award of compensation for acts affecting native title. The Court gave some limited guidance (e.g. by confirming that the ‘inalienability’ of native title interests is not a relevant consideration) (Majority Reasons at [99]-[102]). However, many unanswered questions remain.
A clear example of an issue requiring further guidance is the relevance of future generations of title holders. The High Court confirmed that the effects of the acts on future generations were compensable, noting that the entitlement to compensation is a “communal or group entitlement” and the loss is “permanent and intergenerational” (Majority Reasons at [229]-[230]).
However, the majority provided no instruction about what this means in practice: are future losses only compensable if they are foreseeable? Do such losses need to be discounted to factor in the possibility that the native title might be lost or diminished in the future, or because future title holders may not experience the loss as keenly? Does this “future” loss have to be converted to a “present value”? Overall, more questions in this regard have been raised than answered.
It may be accepted that many of these matters were not fully argued before the Court. In circumstances where Timber Creek was the first time these issues were ventilated, we remain optimistic that further principles (or at least data) concerning native title compensation will emerge.
Battleground #2: The Constitutional issues
The second key battleground concerns the role of s 51(xxxi) of the Constitution in cases where native title rights have been “acquired” by the Commonwealth. That section provides that the Commonwealth has power to acquire “property”, provided such an acquisition is made “on just terms”. It thus provides a “constitutional guarantee” of just terms compensation to property owners whose rights are acquired by the Commonwealth (Bank of New South Wales v Commonwealth (Bank Nationalisation Case) (1948) 76 CLR 1, 349 (Dixon J)).
Plainly, not every act affecting native title will be attributable to the Commonwealth, nor will it necessarily constitute an “acquisition” for the purposes of s 51(xxxi). Indeed, Gummow J (in obiter) has expressed the view that native title is “inherently defeasible” and is thus incapable of constituting “property” capable of being acquired, within the meaning of s 51(xxxi) (Newcrest Mining (WA) Limited v Commonwealth (1997) 190 CLR 513, 613). However, this issue has not been finally determined, and some argue convincingly to the contrary, including Professor Sean Brennan from UNSW, in the Melbourne University Law Review.
This is significant as s 51A of the NTA provides, subject to a provision ensuring that “just terms” compensation is provided where constitutionally required (in s 53), that the total compensation payable for a compensable act under the NTA “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”.
The s 51A ‘cap’ did not operate to reduce the award payable in Timber Creek. It remains to be seen whether, or how frequently, it will limit awards in the future. If it does, the question of whether the provision is constitutional, and/or whether the top-up provision in s 53 of the NTA will operate to ensure Constitutional “just terms” will arise (see Timber Creek Majority Reasons at [49]-[50], and Edelman J at [329]-[330]).
The Constitutional issues will also be significant because the s 51(xxxi) guarantee may allow claims for compensation outside the scheme of the NTA. For example, as one of the authors noted elsewhere, it may permit compensation for losses occurring prior to 31 October 1975 (the commencement date of the Racial Discrimination Act 1975 (Cth), on which the NTA’s compensation provisions hinge):
If that were the case, for example, actions by the Commonwealth in the Northern Territory (which achieved self-government only in 1978) that extinguished or affected native title, all the way back to Federation in 1901, could be compensable.
Furthermore, the Court’s traditionally broad interpretation of “just terms” in s 51(xxxi), which is not necessarily limited by “market value” and permits consideration of the “special property interests” held by Indigenous Australians as an aspect of their “identity, culture and spirituality”, may give the Court significantly more flexibility when calibrating the assessment of compensation (see Nelungaloo Pty Ltd v Commonwealth (1948) 75 CLR 495; Clunies-Ross v Commonwealth (1984) 155 CLR 193 and Wurridjal v Commonwealth (2009) 237 CLR 309, 425). As Dixon J noted in Nelungaloo at 569, “[u]nlike ‘compensation’, which connotes full monetary equivalence, ‘just terms’ are concerned with fairness”. This could see larger awards being made under the constitutional framework.
Ultimately, these issues were not determined in Timber Creek (Majority Reasons at [112]). As a result, they are likely to be the subject of further argument in the near future, which may produce further uncertainty and political furore reminiscent of that brought about by the Wik decision.
Conclusion
Timber Creek required the High Court to confront, for the first time, a number of complex theoretical and practical questions regarding compensation for loss suffered by native title holders. Unfortunately, but perhaps unsurprisingly, it also leaves many significant questions unanswered and unexplored. As we have discussed, some of the key issues surround the significant reliance on intuition, and the relationship between the NTA’s compensation scheme and the constitutional requirement for “just terms” for any acquisitions of property by the Commonwealth.
Many of these issues are difficult to resolve, and that difficulty was heightened by the limited previous consideration by courts, of which the Court was acutely aware (Majority Reasons at [2], [27], [153], [216], [222], and Edelman J at [311]). We are hopeful that many of the questions raised by the Timber Creek judgment will be resolved incrementally over coming years, as expected further compensation claims are made and determined.
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Aaron Moss is a lawyer with Clayton Utz, Sydney, a casual academic at University of Technology, Sydney, and an adjunct researcher at the University of Tasmania. William Isdale is a lawyer with MinterEllison in Brisbane and a PhD student at the University of Queensland.
Suggested citation: Aaron Moss and William Isdale, Where to Next? Native Title Compensation following Timber Creek, on AUSPUBLAW (03 April 2019)