20 October, 2015
With an increasing number of successful native title claims, and the Federal Court close to making the first assessment of native title compensation, we may soon know the basis upon which native title is valued. The key issue for AMPLA attendees will be the extent to which Governments and/or project proponents may be liable for this compensation.
An introduction to native title compensation
It is well over twenty years since Mabo was decided, however compensation for extinguishment or impairment of native title remains a completely untested area of law.
Initially, native title compensation attracted a high level of interest1, however this waned over time. In the last few years, only a couple of cases have considered – but not decided – the issue of native title compensation. Recent developments have prompted a renewed interest by governments and project proponents, and the Australian Law Reform Commission expects that "many compensation applications will be filed in the future."2
This article provides a brief overview of this still untested, but crucially important, area of native title law.
Who is responsible for paying native title compensation?
The right to seek compensation for the extinguishment or impairment of native title is a creature of the Native Title Act 1993 (Cth) (NTA).3
The NTA provides that the Commonwealth is liable to pay compensation for acts attributable to it, while the States and Territories are liable to pay compensation for such acts attributable to them. However, this liability may be "passed on" to resources and infrastructure companies in some circumstances (either by legislation or contract).
For example, in Western Australia and New South Wales the relevant mining legislation transfers liability for some native title compensation to the entity that applies for the grant of a mining lease.4
On 3 February 1994, Prime Minister Keating wrote to the States pledging that, notwithstanding the provisions of the NTA, the Commonwealth would cover 75% of the States' liability to pay native title compensation. This pledge was affirmed by Prime Minister Howard in 1998. However, in 2011, the informal arrangement was discontinued by Prime Minister Gillard. Given that most of the acts affecting native title are attributable to the States, the majority of the liability to pay native title compensation rests with them.
Key insights
The Commonwealth initially offered to cover the lion's share of native title compensation, however this offer was withdrawn in 2011. The Commonwealth's residual liability to pay native title compensation is described in the 2015 Federal Budget Papers as "unquantifiable [and] contingent … owing to uncertainty about the number and effect of compensable acts and the value of Native Title affected by those acts."
The Treasury Departments of the various State Governments will be forced to face this contingent liability.
We are aware of examples where State Governments have sought to pass on native title compensation to project proponents with respect to major projects, for example through long term leases.
Critically, this liability has included compensation for all historical acts in the project area, even those unrelated to the project. Many proponents do not appreciate the extent of the possible liability exposure they are assuming when agreeing to such clauses. Unless you are satisfied that there is no basis for native title compensation in a project area, you should be hesitant to agree to accepting this liability without fully understanding the financial risk of doing so.
How is native title compensation assessed?
Native title compensation is assessed by the Federal Court in accordance with section 51 of the NTA.
While the NTA makes it clear that compensation can only consist of monetary payments, section 51(3) allows the claimant to request that the compensation (or part of it) should include the transfer of property or the provision of goods and services.
Section 51A of the NTA purports to limit the total native title compensation payable to the market value of the underlying land.
However, it is far from certain that the market value of the underlying land will actually be the ceiling for native title compensation. Section 51A is subject to section 53 which provides that compensation must be made on "just terms". This just terms override ensures that the provisions of the NTA that extinguish or impair native title are consistent with section 51(xxxi) of the Constitution, which requires the Commonwealth to provide "just terms" for compulsory acquisition of property.5
The obligation to pay just terms in exchange for acquiring land flows from the proposition that "the costs of pursuing public purposes should not fall unjustly on those whose property is acquired."6 "Just terms" is concerned with fairness, and so is different from the idea of "compensation", which is directed at pricing what has been lost.7 To determine what constitutes "just terms", a court may consider a range of estimates of the value of the property acquired. As a result, when assessing just terms for extinguishment or impairment of native title, a court may consider a range of bases for assessment of the value of the native title that has been extinguished or impaired.8
Why has it taken so long for compensation to be back on the agenda?
Native title practitioners have been saying for more than 15 years that native title compensation is the next big thing. Progress has been slow, in part, because:
- compensation claims cannot be finalised until the corresponding native title claim has been determined, the native title holders (or former holders) have been determined and the impact on native title of all land dealings and public works has been determined (ie the extinguishment question); and
- the Federal Court has set an extremely ambitious timetable for the resolution of native title claims across Australia, leaving little time or money for any stakeholders to dedicate to preparing or progressing compensation applications.
Compensation claims fast facts
There are currently six compensation claims on foot across Australia:
- Tjayuwara Unmuru claim (SA) (De Rose Hill #2)
- Town of Timber Creek claim (NT)
- Bodney (Burswood), (Bold Park) and (Kings Park) claims (WA)
- Gibson Desert Nature Reserve claim (claimants in this claim sought leave to discontinue) (WA).
The Timber Creek compensation claim (NTD18/2011) is the most progressed. For information about the its status, along with orders and interlocutory judgements, click here.
31 of the 38 compensation claims made under the NTA date back to 1998 or prior. All of these have now been withdrawn, discontinued or dismissed.
Most of the current native title compensation claims were filed after June 2011.
Difficulties in assessment
To date, there has been only one case (in South Australia)9, in which native title compensation has been awarded. Frustratingly, this case provides no guidance about the calculation of compensation because the Court did not assess compensation itself; it merely endorsed a confidential sum agreed between the parties in settlement of the litigation.
There are several key difficulties associated with assessing native title compensation:
- The value of native title rights and interests is unlikely to be represented adequately by the market value of the land in question. This is because native title rights and interests commonly relate to remote land whose market value is very low.10
- Native title rights and interest are difficult to value objectively. There is no "market" for native title rights and interests and native title rights and interests may have a spiritual dimension that is difficult to value economically.
- Extinguishment or impairment of native title rights and interests may result in cultural harm. As Noel Pearson has said11, impairment of native title involves "not simply a loss of real estate, it [involves] a loss of culture." This cultural cost may be difficult to represent in dollar terms.
- Native title rights and interests are fundamentally different from "property" rights as traditionally understood by the common law.
As Hayne J observed in Queensland v Congoo12:
Native title rights and interests "may not, and often will not, correspond with rights and interests in land familiar to the Anglo-Australian property lawyer" and "[t]he rights and interests under traditional laws and customs will often reflect a different conception of 'property' or 'belonging'". The error of seeking to transfer common law ideas about real property and trespass to native title rights and interests is most starkly exemplified by the attempt to transform the spiritual attachment to land which underpins native title rights and interests into money damages for the tort of trespass. (footnotes omitted)
These difficulties make it difficult to assess the amount of compensation that a court may award.
Current trends and issues in practice
States control the risk
The States have taken a number of steps to manage liability for native title compensation. For example, standard form section 31 agreements (eg allowing the grant of a mining lease at the end of a right to negotiate process) regularly include a native title compensation release. Such a release is also a regular feature of many indigenous land use agreements.
Some States have actively sought to manage their native title compensation liability by timely agreement making with native title claimants. For example:
- Western Australia: the South West Native Title Settlement provides for a detailed benefits package in exchange for the native title parties agreeing to release the State of Western Australia from any compensation liabilities.13
- Victoria: the Gunaikurnai Recognition and Settlement Agreement under the Traditional Owner Settlement Act 2010 (Vic) included recognition of native title by consent, the grant of Aboriginal title in 10 parks and reserves, the establishment of joint management arrangements and a financial contribution14 in exchange for the settlement of the State's native title compensation liability.
- Queensland: when agreeing to a comprehensive settlement package as part of the claim resolution process, the State of Queensland may require a release from the native title holders for historical compensation liability.
- New South Wales: until recently, native title claims were not as prevalent in NSW as other States and less than 1% of the State is subject to a determination of native title. However, there has been a recent surge in claims, with approximately 33% of the State now subject to claim. The Federal Court is pushing for the resolution of these claims as quickly and efficiently as possible, so it will not be long before native title compensation issues raise their head in this State.
- South Australia: the South Australian Government has an established policy of resolving compensation liability as part of its native title determination application settlement negotiations. Since 2014, eleven claims have been resolved by consent determinations. Of these, six have involved comprehensive settlement agreements that address broader issues including compensation, sustainability of the Prescribed Body Corporate, and future act issues.15
Challenge to the threshold for exclusive native title
The extinguishment of exclusive native title rights and interests is likely to trigger higher compensation in most cases than non-exclusive native title. Such rights are analogous (but not identical) to the rights of a freehold landowner who can occupy their land to the exclusion of all others.
In 2007, the Full Court of the Federal Court held in Griffiths v Northern Territory of Australia16 that a traditional custom by which persons were expected to seek permission before entering land – so as to gain spiritual protection – gave rise to exclusive native title rights. This outcome is now being challenged by the State of Western Australia in another case.17
If Western Australia's challenge to Griffiths ultimately fails, more claims to exclusive native title rights are likely to be made (or existing claims amended to include these rights), particularly in Western Australia. If that occurs, the ultimate outcome is an increase in native title compensation liability for the States (and those proponents to which the obligation to pay native title compensation has been transferred by statute).
Recognition of commercial native title rights and interests
In 2013, the High Court recognised that native title can comprise rights of a commercial nature.18 The Australian Law Reform Commission recommended that the definition of native title be amended to reflect this.19
This too may increase native title compensation liability, particularly in areas rich in valuable natural resources.
Conclusion
With an increasing number of successful native title claims, and the Federal Court close to making the first assessment of native title compensation, we may soon know the basis upon which native title is valued. The key issue for AMPLA attendees will be the extent to which Governments and/or project proponents may be liable for this compensation.
For further information, please contact:
Clare Lawrence, Partner, Ashurst
clare.lawrence@ashurst.com
