In brief: These proceedings concerned an appeal from the Full Court of the Federal Court allowing, in part, appeals from a single judge of the Federal Court as to how much compensation the Northern Territory was required to pay to the Ngaliwurru and Nungali peoples (“the Claim Group”) under Part 2 of the Native Title Act 1993 (Cth) (specifically under s51) and the Lands Acquisition Act (NT) in respect of loss, diminution, impairment or other effect of certain acts on the native title rights and interests of the Claim Group in the township of Timber Creek, NT ([1]). The plurality consisting of Kiefel CJ, Bell, Keane, Nettle and Gordon JJ (with Gageler and Edelman JJ agreeing but for different reasons), awarded compensation for economic loss relating to the native title rights and interests of 50% of the value of the unencumbered freehold title (reduced from the Full Federal Court’s award of 65%, which in turn was reduced from the Trial Judge’s award of 80%), and simple interest on that sum. The High Court upheld the award of compensation for non-economic loss of $1.3 million (as awarded by the Trial Judge and upheld by the Federal Court).
Bifurcated approach
Kiefel CJ, Bell, Keane, Nettle and Gordon JJ delivered a joint judgment. When determining compensation under s51 of the Native Title Act 1993, it was appropriate to adopt a bifurcated approach by (1) first assessing the economic value of the extinguished native title rights and interests and then (2) ascertaining “the additional, non-economic or cultural loss occasioned by the consequent diminution in the Claim Group's connection to country” ([84], [94]). The plurality dismissed the argument that the fair value of the Claim Group’s native title rights and interests should be ascertained by comparison with the freehold value of a nearby rural block without the benefit of services and surrounding infrastructure (“usage value”) with the addition of the difference between the market value of the land and the usage value of the native title rights and interests (“negotiation value”) ([88]-[94]).
Justice Edelman, in a separate judgment, agreed with the conclusions of the plurality ([360]). Justice Edelman was of the view that “[t]o say that the party obtaining the benefit of extinguishment, here the Northern Territory, should compensate a native title claimant, here the Ngaliwurru and Nungali peoples, solely by reference to the ordinary value of the native title to non-Aboriginal persons is absurd” ([252]). His Honour held that the parties erred in assuming that cultural loss should be assessed at the date of judgment ([253]). There was no suggestion that adopting a different methodology in this case would alter the result. Adopting this erroneous approach in other cases “could potentially lead to the systematic undervaluing of awards of native title compensation” and thus, it was relevant for Edelman J to address this in his reasons ([254], [320]-[324]). Justice Edelman held that the correct approach in determining the amount of compensation to be paid under s51(1) of the Native Title Act was to assess the value of the rights extinguished at the time of extinguishment, and the consequential loss suffered at the date of judgment ([263], [273]).
Economic loss
First, the plurality held that generally the objective economic value of the exclusive native title rights to and interests in land is equivalent to the objective economic value of an unencumbered freehold estate in that land. Where native title rights and interests fall significantly below full exclusive title, the objective economic value will accordingly be significantly lower than freehold value. In these proceedings, the objective economic value of the non-exclusive native title rights and interests is 50 per cent of the freehold value of the land ([3], [74]-[76], [106]-[107]). “[I]t is the incidents of native title rights and interests and not the way in which they might be or not be exercised that is determinative of their nature and thus their economic value” ([81]). The plurality referred to a test for assessing compensation for the “objective or economic effects” of the infringement of common law land title rights and interests as enunciated in Spencer v The Commonwealth (1907) 5 CLR 418 (the Spencer test) as “being, in effect, the sum which a willing but not anxious purchaser would be prepared to pay to a willing but not anxious vendor to achieve the latter's assent to the infringement” ([84]).
The plurality noted that there is some artificiality in adopting this test but did not dismiss the approach ([85]). Their Honours commented that:
"Consequently, it is neither irrational nor surprising that the economic value of native title rights and interests in developed areas should, in many cases, prove to be greater than the economic value of comparable native title rights and interests in a remote location” ([96]).
Justice Gageler agreed with the plurality’s proposed orders and with the principle that ordinarily the economic value of exclusive native title is equivalent to the freehold value of the land the subject of the native title rights. However, Gageler J adopted the conceptual framework of Mr Lonergan (an expert valuer) that the economic value of a native title right is comprised of the “usage value” and the “negotiation value” ([243]). Justice Gageler held that the determination of the economic value of such rights could be assessed by a “fairly straightforward adaption of the Spencer test” ([245]). Justice Gageler also agreed that the value of non-exclusive native title rights will ordinarily be lower than the full value of the freehold title and was 50 per cent of the full value in these circumstances ([249]-[250]).
Justice Edelman considered that: “Where a hypothetical negotiation is not an appropriate mechanism because no reasonable person in the claimant’s position would surrender the relevant rights, the exchange value is best measured by adapting the Spencer approach to focus only upon the price that a person in the position of the Northern Territory (as a willing but not anxious purchaser) would reasonably pay to obtain a surrender of the native title” ([280]). Justice Edelman was of the view that, in determining economic loss, the Court should only look to what the purchaser was willing to pay. What a person in the position of the Claim Group would demand is only relevant in assessing compensation for cultural loss. This was because:
“Other things being equal, in a hypothetical negotiation the party seeking to extinguish native title would pay more for the opportunity to use the land where it is located in a developed area. But a person in the position of the Claim Group might not demand as high a price if the development of the area meant that the loss of connection to country that would result from surrendering the rights was less significant" ([282]).
Edelman J held that to the extent that the Trial Judge and Full Federal Court focussed on the Claim Group in applying the Spencer test to determine the economic value, rather than solely considering what a reasonable person in the position of the Northern Territory would pay for the land, the judgments were erroneous ([284]). To determine the economic value of the Claim Group’s non-exclusive native title rights, Edelman J applied the method used to determine the price to be reasonably paid for the extinguishment of an easement ([288]-[292]). In these circumstances, this was 50 per cent of the freehold value of the land ([301], [303]).
Interest on economic loss
Secondly, the plurality determined that interest was payable on compensation for economic loss, and that such interest does not count as part of the “total compensation” for the extinguishment of native title within the meaning of s51A(1) of the Native Title Act ([141]), but rather is compensation for not having received that amount which the Claim Group should have at the time of extinguishment ([150]-[151]). In these proceedings, interest was determined on a simple interest basis to sufficiently compensate for the deprivation of the use of the compensation between the date of assessment and judgment ([3]). The Claim Group was not entitled to compound interest as the claim was not for a recovery due to fraud, breach of fiduciary duty or for unjust enrichment in which such an award would be appropriate ([109], [113]).
Justice Edelman agreed with the plurality that interest should be calculated on a simple rather than a compound basis because this is a claim for compensation and not for restitution or disgorgement ([255], [338]ff). Interest for delay of the payment of compensation is not part of compensation but is interest on the compensation. It still falls within the terms of s51 of the Native Title Act that require compensation to be on “just terms” ([343]-[345]).
Cultural loss
Thirdly, the plurality found that the Claim Group’s sense of loss of traditional attachment to the land or connection to country (“cultural loss”) was to be reflected by compensation of an “amount which society would rightly regard as an appropriate award for the loss”. In these circumstances the appropriate amount was $1.3 million ([3], [237]). The parties agreed that: compensation for cultural loss was to be assessed on an in globo basis to the Claim Group and distributed between community members; the award should reflect the number of native title holders at the time the native title was determined to have existed; and the consequences of the acts causing cultural loss cannot be separated from the traditional laws and customs that the Claim Group acknowledge and observe ([156]-[158]). The plurality held that the Trial Judge correctly undertook the task under s51(1) of the Native Title Act in identifying the compensable acts, and considering the compensable effects of the acts on the Claim Group by examining evidence about the Claim Group’s relationship with country and how that relationship was impacted by the compensable acts ([166], [218]). The plurality, citing Ward, noted “the connection which Aboriginal peoples have with ‘country’ is essentially spiritual” ([153]). The diminution in this connection “is not to be equated with loss of enjoyment of life and other notions and expressions found in the law relating to compensation for personal injury. Those expressions do not go near to capturing the breadth and depth of what is spiritual connection with land” ([187]).
The plurality drew the following analogy in commenting that the impact on native title rights and interests has to be considered in its entirety:
“Each act affected native title rights and interests with respect to a particular piece of land. But each act was also to be understood by reference to the whole of the area over which the relevant rights and interests had been claimed. As was explained earlier, each act put a hole in what could be likened to a single large painting – a single and coherent pattern of belief in relation to a far wider area of land. It was as if a series of holes was punched in separate parts of the one painting. The damage done was not to be measured by reference to the hole, or any one hole, but by reference to the entire work. Given those findings, it would be wrong to consider each compensable act in these appeals in isolation” ([219]).
The plurality commented that “depending on the facts of the case, the sense of connection to country may have declined in developed areas (with higher economic value) as a result of encroaching developments before the act of extinguishment or other compensable diminishment. Where that is so, the amount to be awarded for non-economic loss will be less” ([217]). The plurality held that the Trial Judge properly took into account the fact that the effect of the compensable acts was permanent and intergenerational ([230]).
Justice Edelman clarified that an award of compensation for loss of cultural value in addition to exchange value is not the same as compensation for the inconvenience and anguish resulting from the compulsory acquisition (otherwise referred to as “solatium”) ([312]). Justice Edelman considered that the assessment of cultural value at the date of judgment was a major flaw in the methodology adopted for valuing the native title rights in these proceedings ([318]). His Honour agreed with the plurality’s reasons for the award of $1.3 million for cultural loss ([326]) and noted that in all the circumstances it was “a reasonable, indeed a conservative, award” ([328]).
Appeal allowed in part
The plurality (Gageler and Edelman JJ agreeing) allowed the appeal in part in Matters D1 of 2018 and D2 of 2018, and ordered the NT to pay the Claim Group $320,250 compensation for economic loss, interest of $910,100 on this sum, and upheld the order for compensation for cultural loss at $1,300,000 ([238]). The Court dismissed the appeal in Matter D3 of 2018 ([239]).
Read the decision on the High Court of Australia website.
