Put the calculators away: no easy sums in valuing native title

Key takeaways

The recent native title determination of Griffiths v Northern Territory is the first judgement to put a monetary value on native title rights. This article considers the important points of Mansfield J’s approach, and some of the potential consequences that may flow from the decision.

The value of ‘native title’ rights is a contentious issue for those developing agricultural, infrastructure and resources projects in Australia. Whilst native title rights have been formally recognised for 25 years, there has been little guidance as to the value, or compensation payable, for acts which extinguish or otherwise impact on native title rights. Some light is shed by a recent Federal Court decision involving the small township of Timber Creek in the Northern Territory. Timber Creek is situated between Katherine and Kunanurra in the north-western section of the Northern Territory.

Compensation was claimed for acts attributable to the Northern Territory which had occurred after 31 October 1975.¹

It was determined that compensation was payable in three parts:

1. compensation for the economic effect of extinguishment of native title of $512,000 being judged at 80% of the freehold value of the relevant land at the relevant time;
2. compensation for the loss of spiritual connection with the land, a ‘non-economic’ loss referred to in the judgement as a loss in the nature of solatium, of $1,300,000; and
3. interest on the economic loss, calculated at simple interest of $1,488,261.

Economic loss

In determining economic loss, Mansfield J took the view that the freehold value was an appropriate starting point, as the upper limit.²

Various submissions were made as to the calculation of the appropriate proportion of the freehold value which should be applied given that the native title holders did not hold exclusive possession (which might be seen as equivalent to freehold rights). In the result, Mansfield J determined that the appropriate proportion should be 80% of the relevant freehold value. The Court noted that this was an ‘intuitive decision’ focused on a comparison of the bundle of native title rights held as compared to rights which might include exclusive possession. That is, whilst the native title rights held did not allow exclusive possession, the bundle of rights held were sufficiently extensive that on a factual consideration those rights were close to the rights which might be seen to equate to freehold rights.

Compensation for spiritual connection

The Court turned to the more difficult task of determining the compensation payable for impacts of extinguishing acts on the spiritual, cultural and social connection which native title holders have with relevant land.³ With little precedent for guidance, the Court noted this was a complex and, also, intuitive process. It was considered appropriate to adopt the term ‘solatium’ to describe this compensation component. A number of relevant matters were noted including:

1. the compensation must reflect the loss or diminution of traditional attachment to the land arising from the relevant acts of extinguishment or impairment in question (rather than earlier or subsequent events affecting native title rights);
2. the exclusive or nonexclusive nature of the rights and interest in question should be considered;
3. compensation should be assessed having regard to the spiritual significance of the area affected but relative also to other land that remained available for the exercise of relevant native title rights and interests;
4. loss should be compensated on an ‘in globo’ basis for loss suffered by the native title holders as a whole (and should not necessarily be awarded to reflect the size of the native title holding group);
5. an assessment of the effects on native title holders cannot be divorced from the content of the traditional laws and customs acknowledged and observed by the claim group;
6. not all groups will be the same and not all areas will be of the same significance; evidence of the relationship with ‘country’ and the specific effects of extinguishing acts will be paramount;
7. it is not possible to establish the comparative significance of extinguishing acts over an extended period; the effects of the relevant extinguishing acts are ‘to be understood in terms of the pervasiveness of Dreaming’;
8. there should be no ‘double up’ of compensation payable for ‘economic loss’ and compensation payable by way of solatium.  

Having considered the relevant facts in some detail, and their particular impacts on spiritual connection with country, Mansfield J determined that $1.3 million would be an appropriate amount of compensation.

Impacts of judgement

It should be remembered that a determination of native title had already been found in 2014.⁴

This judgement, being essentially the first determination of the monetary value of native title rights, is a helpful guide for those involved in agricultural, infrastructure and resources projects, but should not be seen as providing any set formula, test or rule for determining the value of native title rights. Both the decision as to economic loss and the decision as to solatium were ‘intuitive’; so subjective in nature. Clearly, each case will have to be determined on a close examination of relevant facts.

As the case confirms, the primary liability for compensation rests with the relevant Government which has made the relevant extinguishing act. This liability may have been passed on to land holders or to holders of pastoral or resources leases under arrangements made at the time of grant or may become an issue on renewal (for example). There has also been some suggestion that the States may adopt other means to pass on any liability.⁵ Those holding relevant interests or investing in or financing, projects, particularly in rural Australia, should be aware of the potential risk of Governments seeking to pass on compensation liability.

Importantly, it is very clear that the amount of $3.3 million determined by Mansfield J should not be seen as reflecting a “value per square kilometre” figure. Rather, the decision reflects some very general guidelines for determining value based on the factual scenario and a subjective assessment.⁶

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¹ The commencement of the Racial Discrimination Act 1975 (RDA). It being accepted for this and previous decisions that no compensation was payable for acts before that date.
² Having regard in particular to s51A of the Native Title Act (NTA).
³ All parties accept that ‘non-economic’ compensation should be paid.
⁴ Griffiths v Northern Territory of Australia [2014] FCA 256. It was accepted that any compensation ruling will be dependent on such a finding.
⁵ See http://www.afr.com/news/politics/miners-to-help-pay-for-native-title-compensation-claims-20160825-gr0n7m
⁶ The Court also referred to the Lands Acquisition Act (NT), which itself provides guidelines on cost awards. To the extent this legislation and similar legislation in other States may be relevant, that legislation may also have to be considered.

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