The High Court has allowed two appeals in part and dismissed one appeal from a decision of the Full Federal Court on compensation payable for the extinguishment of native title rights and interests.
Between 1980 and 1996, NT was responsible for 53 acts of granting tenures and constructing public works in the town of Timber Creek that were held to have impaired or extinguished native title rights and interests held by the Indigenous townspeople (the Claim Group). Pursuant to s 51 of the Native Title Act 1993 (Cth), the Claim Group’s compensation claim was framed as including: first, compensation for economic loss of native title rights to be determined as if each act were equivalent to the NT compulsorily acquiring a freehold estate in the land; secondly, compound interest on that loss from the date of assessment until judgment; and thirdly, compensation for loss or diminution of connection or traditional attachment to land, and the intangible disadvantages from lost rights to live on and gain spiritual and material sustenance from the land, as assessed at the time of trial (see at ). Mansfield J, at trial, assessed the compensation amount at $3.3 mil: $512,000 as 80 percent of the total freehold estate value, $1.4 million in simple interest, and a cultural loss of $1.3 million. The Full Court reduced the economic loss factor from 80 percent to 65 percent, but otherwise affirmed Mansfield J’s conclusions.
Before the High Court, the NT and Commonwealth contended that the FCAFC erred in assessing the economic loss at any more than 50 percent of the freehold value and erred in upholding the $1.3 million cultural loss (see , ). The Claim Group contended that the FCAFC erred in further reducing the freehold value to 65 per cent, that the economic loss should be the freehold value without any reduction at all, and that the Full Court also erred in upholding the interest on a simple, rather than compound, basis (at ).
The High Court unanimously allowed in part the NT and Commonwealth’s appeals, holding that the economic loss compensation should be reduced to 50 per cent of the freehold value of the land. The Court rejected the appellants’ arguments against the cultural loss amount, upholding the trial judge’s original determination of $1.3 million. The Court also dismissed the Claim Group’s arguments against any reduction, and on compound rather than simple interest.
The joint judges (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ) first examined the legislative framework of the Native Title Act (at [19ff). The joint judges reiterated that native title rights and interests are bundles of rights, possessed under traditional law and custom, that have both physical or material aspects and cultural and spiritual aspects (at ), that extinguishment of these rights give rise to compensation, and that both the category of the extinguishment act, and the timing of that act, were important in dealing with the complex legislative system of assessing consequences and compensation (at –).
Section 51 is central to determining that compensation. Native title holders are entitled to compensation for ‘any loss, diminution, impairment or other effect’ following from an act that extinguishes native title rights and interests, and reiterates that those rights may be physical/material or spiritual/cultural and that the manner in which the act affects either of these kinds of rights may be different (at –). The joint judges stated (at ) that:
Section 51(1) thus recognises that the consequences of a compensable act are not and cannot be uniform. The act and the effect of the act must be considered. The sub-section also recognises not only that each compensable act will be fact specific but that the manner in which the native title rights and interests are affected by the act will vary according to what rights and interests are affected and according also to the native title holders’ identity and connection to the affected land. As the trial judge held, s 51(1) does not in its terms require that the consequence directly arise from the compensable act. The court’s task of assessment under s 51(1) is to be undertaken in the particular context of the Native Title Act, the particular compensable acts and the evidence as a whole.
Section 51A provides that the total compensation payable must not exceed the amount that would be payable if the act extinguishing native title were instead a compulsory acquisition of the freehold estate (at ). While Commonwealth, State or Territory statutes that set out principles or criteria for compulsory acquisition may be useful as guides, they are not determinative of the process in s 51(1) (at ). Moreover, the principles in English common law about non-economic loss that they might reflect can ‘deflect attention’ from the fact that native title compensation focuses on interests and rights that arise under traditional law and custom and a ‘different belief system’ (at ). The joint judges concluded here that compensation caps should be ‘measured by reference to, and capped at, the freehold value of the land together with compensation for cultural loss’ (at ).
Turning then to the economic loss claim, the joint judges emphasised that the date on which the value is to be assessed and the nature of the affected native title rights were central: here, the date was not in dispute (at ), but the assessment of their nature, and the application of conventional economic principles to understand the effect on them, was contested by the parties (at ). Because the Claim Group’s native title rights were essentially usufructuary, ceremonial and did not include the right to completely exclude others from the land, the economic value of these rights needed to be reduced by a percentage that reflected the limits of the Claim Group’s rights compared to full, exclusive native title (at , ).
The joint judges then rejected the Claim Group’s objections to this approach, namely that it ran contrary to the Racial Discrimination Act 1975 (Cth) in two ways. First, that the RDA prohibited valuing non-exclusive native title rights differently from exclusive native title rights (at ff). Second, that the approach took into account the Claim Group’s native title was ‘vulnerable to diminution’ by the NT granting lesser titles (at ff). On the first objection, the joint judges emphasised that the value of native title rights depend on their ‘exact incidents’: rights close to full title will have an economic value close to freehold value: ‘There is nothing discriminatory about treating non-exclusive native title as a lesser interest in land than a full exclusive native title or, for that reason, as having a lesser economic value than a freehold estate. To the contrary, it is to treat like as like.’ (at , and see –). On the second argument, the joint judges noted that certain kinds of grants — in particular, pastoral leases — could be made without necessarily extinguishing native title (at [80ff]). The joint judges also made the more general point that while the NT could grant rights that would extinguish specific rights, it is the ‘incidents’ of native title rights and interests — and not the way they might or might not be exercised — that indicates their nature, and hence their value (at ).
Moving then to determine the economic value of the native title rights and interests, the joint judges first held that the trial judge and Full Court had been correct to reject the expert evidence of Mr Lonergan that the value should be what the Claim Group would have been prepared to pay for similar rights in a different location (see at ). This approach did not assess the value of the actual rights and interests in the subject land, as required by the Act (at [89ff]). Second, the joint judges rejected the NT’s argument that the Full Court’s approach problematically put the value of development in nearby areas into the value of native title rights: it was ‘neither irrational nor surprising’ that the value of native title rights in developed areas should prove to be greater than those in remote areas (at ff). But the joint judges then held that the Full Court had erred in holding that the inalienability of native title rights and interests were relevant to discounts in assessing value: the Act equates full exclusive native title to unencumbered, alienable freehold title, which makes inalienability irrelevant to assessing value (at ).
Turning finally to the percentage difference from the rights here and the freehold value, the joint judges held that the trial judge’s 80 per cent calculation and the Full Court’s 65 per cent were both manifestly excessive. While the evaluation is one about which reasonable minds might differ, the rights here were usufructuary, ceremonial and non-exclusive: they did not allow rights of admission, exclusion or commercial exploitation, and so could not exceed any more than 50 per cent of the full freehold value (at ). As neither party suggested the percentage should be below 50 per cent, the joint judges declined to remit the matter back to the FCAFC for redetermination and set the figure at 50 per cent (at ).
Interest on Economic Loss
While the parties agreed that interest should be awarded on the economic loss to reflect the time gap between the entitlement to compensation and the judgment awarding that entitlement, the joint judges rejected the Claim Group’s argument that they were entitled to compound interest on the original loss (at –).
Although principles of equity allow for simple interest in cases of specific performance of contracts (at ff), and this had been extended to cases of compulsory acquisition (at ff), no authorities supported the Claim Group’s argument that it would be ‘consonant with equitable principle and just to award compound interest’ here (at ). Cases in which compound interest was awarded involved either the recovery of money obtained by fraud or withheld or applied in breach of trust or fiduciary duties, or specific cases of restitution (at ff), neither of which could be analogised to a native title claim (at ff). Finally, the joint judges rejected the third argument that a free-standing entitlement to compound interest was a means of redressing the injustice of the NT deriving rents and profits from the land. This argument likewise did not fit with the equitable principles around unjust enrichment or restitution (at  and ), and, more importantly, the statutory validity of the NT’s acts meant any benefit it derived ‘was not unjust’ (at ). The joint judges then concluded this section with remarks on practice note rates of interest (at ) and whether interest would be paid ‘on’ or as ‘part of’ compensation (at ff).
The joint judges began by noting that compensation for cultural loss focuses on determining the spiritual relationship between Indigenous peoples — here, the Ngaliwurru and Nungali Peoples — and their country, ‘to translate the spiritual hurt from compensable acts into compensation’ (at ). Reviewing the trial judge’s assessment of the evidence (at ), the joint judges noted that their own evaluation would follow the same categories: first, examining the connection to country, then ‘the effect, under their laws and customs, when country is harmed’, and finally the effects of the compensable acts (at ).
Here, the connection to country was ‘unique, deep and broad’ (at ). It included, among other things, rituals and ceremonies inextricably bound to the lands and waters in and around Timber Creek that have been practised for more than a century, four Dreaming sites, an extensive system of rights and obligations to country, the expectation that non-Indigenous people seek permission to enter country, and an ‘owner’s’ right to country that passes by descent (see ff). Several compensable acts created lots on sites of significance, including Dreaming sites (at ff). The effects under Ngaliwurru and Nungali traditional law and custom were illustrated by four events that were not direct results of compensable acts — the building of a causeway, a proposed Army bridge, a gravel scraping site, and a proposed diamond mine — all of which did or threatened to damage sites of Dreaming or other spiritual significance (at ff). These showed the Claim Group’s broad and deep spiritual connection to land, and the effects of loss of country (at ). Finally, the effects of the actual compensable acts included dispossession, serious and ongoing hurt to feelings of the claimants, the impeding of access to hunting grounds, damage to significant sites, and impeding the abilities of the claim group to practise traditions and customs (at ff), amounting to damage to the claimants’ ability to fulfil their duties to country (at [194).
Bringing these considerations together, the trial judge had emphasised ‘three particular considerations’ that led to his Honour’s assessment of cultural loss at $1.3 million. These were the construction of water tanks on the path of the Dingo Dreaming, the specific and general effects of compensable acts on the particular area of the act and the area more generally, and the fact that each compensable act ‘chipped away’ at the enjoyment of native title rights, leading to the Claim Group’s loss of spiritual connection as well as a sense of failure to care and look after the land, as required by traditional law and custom (at , and see at ff). Before the High Court, the NT and Commonwealth argued that the award was manifestly excessive, and that the trial judge’s emphasis on the ‘three particular considerations’ was misplaced and problematic (at ).
Before evaluating the NT and Commonwealth’s contentions, the joint judges made several ‘overarching observations’: that the parties were agreed that a cultural loss award was appropriate; that the award would be made to the Claim Group and its internal redistribution left to them; that the award need not reflect the number of native title holders at the time as the loss would be suffered by the native title holders as a whole; and that the assessment of cultural loss could not be divorced from the traditional laws and customs of the Claim Group (at ). The trial judge’s findings were based on extensive oral evidence, a visit to country, and his Honour’s assessment of the connection and harm (at ).
Whereas the trial judge correctly approached the task as determining the spiritual relationship to country and translating the harm caused by compensable acts into compensation (at ), in contrast, the Commonwealth and NT’s arguments ‘proceeded from a different, and incorrect, approach to the statutory task: that s 51(1) of the Act requires identification of a compensable act and, in assessing the effect of that act, s 51(1) imposes specific temporal and physical limits which do not extend to collateral detrimental effects. It does not.’ (at ).
Inquiries into loss and diminution will vary according to the acts, the identity of the native title holders, the connection to land, and the effects, and what might be an appropriate award may vary depending on these inter-related inquiries (at ). The assessment takes the evidence as a whole, and uses a series of separate but inter-related steps which must, as they were here, be backed by extensive findings (at , ). The joint judges likened the assessment of the compensable acts to examining holes in a painting (at ):
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.
The joint judges then focused on the Commonwealth and NT’s emphasis on the trial judge’s ‘three particular considerations’. This approach failed to acknowledge the complexity of the task of assessment: ‘focusing on one aspect of one part of the trial judge’s reasons is apt to result in error’ (at ). The ‘three particular considerations’ reinforced the trial judge’s earlier main points about the effect of the acts on the land (at ). Contrary to the Commonwealth and NT’s arguments, far from disclosing any legal errors (at ), the trial judge would have been wrong not to take account of the broader effects of specific acts on the wider geographical area, and the senses of incremental detriment and failed responsibility (at , ).
Finally, the award arrived at was not manifestly excessive in the sense of being extremely high or very small so as to seem an ‘entirely erroneous estimate’ of harm (at ). The trial judge heard and saw detailed evidence of the Claim Group’s connection to land and the harm done to it, reflected in his Honour’s detailed treatment of the evidence (at ). The joint judges noted that as this is the first compensation determination to be considered by the High Court, what is required is a figure reflecting an appropriate social judgment:
what, in the end, is required is a monetary figure arrived at as the result of a social judgment, made by the trial judge and monitored by appellate courts, of what, in the Australian community, at this time, is an appropriate award for what has been done; what is appropriate, fair or just. The trial judge was not bound to approach the assessment with particular restraint or limitation. An award of compensation of $1.3 million for the effects of the compensable acts on the Claim Group is an appropriate award. There is nothing to suggest that the trial judge’s award would not be accepted by the Australian community as appropriate, fair or just. The amount is not so large that it suggests a failure to apply proper principles by reference to relevant considerations. The amount awarded is not shown to be inconsistent with acceptable community standards, when it is recognised that this aspect of the award is compensation to the Claim Group, on just terms, for the effect of the compensable acts on their native title rights and interests — their cultural loss.
The joint judges then made orders, partly allowing the Commonwealth and NT’s appeals by reducing the economic loss sum to 50 per cent of freehold, and otherwise dismissing the other claims and the Claim Group’s appeal in full (at ).
Gageler J and Edelman J
Gageler J agreed with the joint judges’ orders and reasons, save for their Honours’ reasoning on the methodology for assessing the economic value of native title rights.
Gageler J agreed with the joint judges’ conclusion that the value of the non-exclusive native title rights here should be 50 per cent of the freehold value, but disagreed with their approach of determining that value ‘simply by discounting’ from the freehold value (at ). Gageler J instead adopted the two-part conceptual framework used by Mr Lonergan: first, the ‘usage’ value of commercial exploitation of the native title right, and, second, the ‘negotiation’ value of the native title holder’s capacity to surrender that right to grant someone else an ordinary title that would allow the land to be put to its highest and best commercial use (at ). This approach avoids the issue of treating a native title right as if it were alienable, but instead to ‘accept’ that it could be the subject of an ‘arm’s length transaction’ in which the holder can be hypothesised as willing but not anxious to surrender the right, and the potential buyer willing but not anxious to obtain it for commercial use (at –).
The first ‘usage’ value would usually be its full freehold value (at ), but the limited nature of a non-exclusive native title right means its usage value can ordinarily be seen as less than that full freehold value: ‘Negotiating in good faith, the parties can be expected to agree upon a price that lies somewhere between the usage value and the full value of freehold title. If each party is truly fair-minded, the price will be midway between the two.’ (at ). Here, the trial judge found that the non-exclusive rights did not have any significant usage value: their value was purely the second, ‘negotiation value’ kind, and the form of title needed for the highest and best commercial use was full freehold title, so ‘[t]reating the usage value of the rights as close to zero, the economic value of the rights is therefore appropriately assessed as 50 per cent of the full value of freehold title.’ (at ).
Edelman J also agreed with the conclusions of the joint judges. On the measure of interest, Edelman J agreed with the conclusions of the joint judges that simple not compound interest should be applied (at ). Edelman J held that while there is no single correct methodology of valuing economic or cultural loss, the assumption by both parties that cultural loss should be assessed at the date of judgment was ‘erroneous’ (at ) and that explaining that error was necessary because its application in other native title cases ‘could potentially lead to systematic undervaluing of awards’ (at ). After reviewing the acts and compensation requirements (at ff), Edelman J noted that the parties and courts below divided the s 51 assessment into economic loss, valued at the date of extinguishment, and cultural loss, valued at the date of judgment (at ff).
Stating that the methodology appeared ‘nonsensical’ for dividing economic values from cultural values of native title rights, Edelman J noted that the explanation was that ‘the two dimensions must be valued separately to achieve parity of treatment with other rights’; namely, their ‘exchange’ value and then their special, cultural value not captured by that exchange value (at ). The Spencer approach of evaluating what a willing but not anxious purchaser would pay to a willing but not anxious vendor in a hypothetical negotiation, a common method for calculating a basic economic value (see ff), should not be relied upon: the Claim Group were not willing to surrender their rights, and that is a reasonable approach for any person in their position to take, given the cultural value of those rights (at ). Edelman J also rejected the approach of Mr Lonergan because it was inappropriate to calculate a reasonable price for this land on the basis of what the Claim Group might have paid for land to which they had a different attachment (at ). Instead of the hypothetical negotiation, Edelman J proposed adapting the Spencer approach to consider what a person in the position of the NT would reasonably pay to obtain the native title rights (at  and see at ff on the advantages of this approach, and from ff for a comparison with easement extinguishment).
Turning to apply this methodology to the present case, Edelman J noted that while some native title rights would be functionally equivalent to freehold, in this case the facts that the rights were non exclusive, personal, and limited to particular purposes (see –) would reduce the price that the NT would be prepared to pay for them (at ), though that they were perpetual and extensive would strengthen their value (at ). The evaluation would be necessarily imprecise and ‘broad-brush’, but Edelman J concluded, following the easement examples, that the encroachment of native title on the fee simple of the land would be 50 per cent of the land’s freehold value (at ).
Moving to cultural value, Edelman J emphasised that the native title land has ‘special use’ value stemming from its use for cultural purposes, which should be reflected in its cultural value and not its exchange value (at ). As there are no comparable awards on cultural value in these appeals, the trial judge’s assessment from experience and the evidence is important (at ). While compensating cultural loss is not a form of ‘solatium’ (see ff), or analogous to mental harm in personal injury (at ), but it does, similarly to both, describe pain, distress and loss of the pleasure and fulfillment stemming from an amenity (at ).
Edelman J then moved to his contention that cultural value should be calculated at the date of extinguishment rather than judgment. First, this leads it to be compared with the freehold value at the time of extinguishment, leading it to seem excessive particularly due to the interest accumulated over time (see ). Secondly, if the value is measured at judgment then the award should differ according to distress suffered by the individual group members, and should increase with the increase in the number of people in the Claim Group, which both parties agreed should not affect it (at ). Thirdly, in describing the cultural value as ‘solatium’ the Claim Group conflated the concepts of loss of cultural value and the loss arising from the compulsory manner of extinguishment (solatium properly so-called), meaning there was no separate award for the additional distress of compulsory acquisition (at ). Edelman J noted that he agreed with the joint judges’ assessment of the primary judge’s reasoning, and emphasised that the total award was ‘plainly not excessive’ but rather a ‘reasonable, indeed a conservative, award’ (at , ). Edelman J then turned to s 51A’s limit on compensation, stating that the comparison in the section was not between combined cultural and exchange value of native title and the exchange value of freehold title, but rather only between the exchange value of the native title and the exchange value of the freehold (at ): ‘ A person holding freehold title with some special value would not have the special value ignored for the purpose of compensation any more than a person holding native title should have the special value ignored for the purpose of compensation.’ (at ).
Finally, Edelman J held that simple interest should be applied:while the interest for delay in payment is only interest on the compensation itself, it can still be seen as within the terms of s 51, which requires the compensation as whole to be paid on ‘just terms’ (at , ), and the cases relating to that obligation generally require interest on compensation, but not compound interest (at –), supported by considerations of clarity and stability (see ff).
|High Court Judgment|| HCA 7||13 March 2019|
|Result||Appeals allowed in part|
|High Court Documents||NT v Griffiths|
|Full Court Hearings|| HCATrans 176||6 September 2018|
| HCATrans 175||5 September 2018|
| HCATrans 174||4 September 2018|
|Directions, Nettle J|| HCATrans 104||30 May 2018|
|Special Leave Hearing|| HCATrans 28||16 February 2018|
|Appeal from FCAFC|| FCAFC 106||20 July 2017|
|Trial Judgment, FCA|| FCA 900||24 August 2016|