In what is said to be one of the most important rulings regarding native title since Mabo -v- Queensland (No 2) and Wik -v- State of Queensland, the High Court delivered its long awaited Timber Creek decision on 13 March 2019. This is the first time that the High Court has considered the calculation of compensation for the extinguishment of native title under the Native Title Act 1993 (Cth) (Act).
The High Court unanimously determined the compensation payable to the Ngaliwurru and Nungali Peoples (Claim Group) for the extinguishment of their non-exclusive native title rights and interests at 50 percent of the freehold value of the affected land. The High Court also determined that the Claim Group was entitled to $1.3 million in compensation for cultural loss. The compensation awarded totalled $2,530,350 including simple interest.
The Claim Group were determined to hold native title over and around the township of Timber Creek, an area in the north-western corner of the Northern Territory, about halfway between Katherine and Kununurra. Between 1980 and 1996, the Northern Territory was responsible for 53 compensable acts on 39 lots and four roads, comprising various grants of tenure and the construction of public works which were held to have impaired or extinguished native title.
The total area of land affected by the compensable acts comprised roughly 127 hectares and represents close to 6 percent of the total area over which native title was determined to exist.
Brief litigation history
The Claim Group instituted proceedings for a determination of native title to land within the boundaries of the town of Timber Creek. The native title determination was finalised in 2007, following which a claim for compensation was brought under Part 2 of the Act.
At first instance, the trial judge awarded compensation assessed at 80 percent of the freehold value of the land affected by the compensable acts, with simple interest on that sum calculated from the date of extinguishment until judgment. A further $1.3 million was awarded for non-economic cultural loss, with total compensation assessed at $3,300,661.
On appeal to the Full Court of the Federal Court, the Claim Group’s compensation award was reduced from 80 to 65 percent of the freehold value of the affected land. The trial judge’s decision to award $1.3 million in compensation for cultural loss was upheld, with the total compensation amount being reduced to $2,899,446.
On appeal to the High Court, the Claim Group contended that economic loss should have been determined to be the full freehold value of the affected land and that compound interest was payable on the award.
The Northern Territory and the Commonwealth argued that economic loss should not be valued at more than 50 percent of the freehold value of the land affected by the compensable acts. In addition, the Northern Territory and the Commonwealth submitted that an award of $1.3 million for cultural loss was manifestly excessive.
A new approach to determining compensation
In considering the correct approach to the calculation of compensation payable under the Act, the High Court held that section 51 comprises a two stage exercise, requiring:
- An objective or economic assessment of the infringement of native title rights, being what the claimants could have fairly and justly demanded in agreement for the infringement of their rights (economic loss); and
- An assessment of the cultural loss, being an assessment based on the sense of loss of connection to country (non-economic loss).
The majority held that assessing the value of the economic loss was analogous to the principles used in the assessment of compensation on the compulsory acquisition of land. That is, the value of the land is to be calculated at its highest and best use, being a value that a willing but not anxious purchaser would pay to a willing but not anxious vendor.
In considering economic loss, non-exclusive native title rights must be compared to, and assessed as a percentage reduction of, exclusive native title rights. That percentage is then applied as a reduction to the full freehold value of the land to determine the appropriate level of compensation. In this case, the Court determined that as the Claim Group had only non exclusive native title rights and interests, that were ‘devoid of rights of admission, exclusion and commercial exploitation’, economic loss was worth no more than 50 percent of the freehold value of the affected land, being $320,250.
Non-economic cultural loss
The High Court confirmed that the calculation of non-economic or cultural loss under s51(1) of the Act does not require any direct detrimental consequences to have arisen due to a compensable act. It does, however, require the assessment of a number of separate but inter-related steps:
- Identification of the compensable acts;
- Identification of the connection with the land or waters by the claimant’s laws and customs; and
- Consideration of the particular and inter-related effects of the compensable acts on that connection.
Importantly, the Court held that the consequences of each compensable act are ‘incremental and cumulative; the ancestral spirits, the land and everything on it are organic parts of one indissoluble whole’.
It was held that the quantum of compensation awarded should be a result of a social judgment which the Australian community, at the time, considers an appropriate ‘fair and just’ award for what has been done. On this basis, the High Court considered that there was no reason to reduce the award of $1.3 million.
The Court also considered the correct assessment of interest payable on the economic loss component of compensation. In the absence of a recognised juridical basis for the award of compound interest on compensation for the unlawful extinguishment of land title, the court held that simple interest should be awarded.
Accordingly, the Court calculated the interest payable at the Pre-Judgment Interest Rate as defined in the Federal Court of Australia’s Practice Note CM16, being $910,100.
This article was written by Philip Hunter and Paul Lalich, Partners, Lara McQuaid, Senior Associate, Andrew Scully, Associate and Edward Jude and Mitchell Wilson, Law Graduates.
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