North ACJ, Barker, Mortimer JJ
On 24 August 2016, Justice Mansfield made orders against the Northern Territory and the Commonwealth on an application brought by the Ngaliwurru and Nungali Peoples (the claim group) for compensation and damages for the loss, diminution of, impairment or other effect of the act on their native title rights and interests: Griffiths v Northern Territory of Australia (No 3) [2016] FCA 900 (Griffiths No 3). He awarded the claim group $512,400 compensation for the economic value of their extinguished native title rights, interest on this sum of $1,488,261. He also awarded the claim group $1,300,000 for solatium for the loss or impairment of those rights and interests. The primary judge made a declaration that three grants of freehold interests made by the Northern Territory were invalid future acts, and he awarded $19,200 damages together with interest of $29,397, making a total of $48,597 damages for those acts.
These proceedings concerned an appeal by the Northern Territory, a cross appeal to that appeal by the claim group and a separate appeal by the Commonwealth in relation to the orders. On 20 February 2017, Central Desert Native Title Services and Yamatji Marlpa Aboriginal Corporation, the NTRB interveners, were granted leave to intervene without opposition by the parties.
For a full summary of Griffiths (No 3) see the August 2016 edition of What’s New in Native Title.
The source and entitlement of compensation under the Native Title Act (NTA)
The right to claim compensation depends on the character of the act which the NTA validates. The source of the entitlement depends on whether the act validated was a past act, an intermediate period act, or a previous exclusive possession act within the meaning of Part 2, Division 2, 2A, and 2B of the NTA.
Different consequences flow from validation depending on the classification of the act. Relevantly for the appeals, validation of an exclusive possession act results in the extinguishment of native title, and validation of a category D past act attracts the non-extinguishment principle in s 238 of the NTA.
All but three of the lots in issue were initially, or ultimately, affected by exclusive possession acts. The remaining three lots were affected by category D past acts and the non-extinguishment principle applies to them. The entitlement to compensation for exclusive possession acts is in s 23J of the NTA.
The framework for the assessment of compensation
Compensation was claimed under two heads. One head of claim was the economic loss caused by the acts which deprived the claim group of their native title rights and interests or impaired those rights and interests. The other head of claim was the non-economic effect of those acts on the claim group.
The basis for distinguishing between the two elements of compensation was said to flow from the different nature of each element. The economic element reflects the loss of the material asset which flows from the acts of extinguishment. The non-economic element reflects the effects on the connection of the native title holders with their country. The assessment of the non-economic impact of the acts of extinguishment requires an understanding of the intense bond between Indigenous people and their country. The evaluation of that element presents difficulty because of the unique nature of the spiritual link between the people and the land and the need to place a monetary value on the disruption to that connection. In this respect, their Honours considered it important to remember that the compulsory acquisition legislation is concerned with valuing land, whereas assessing compensation for the loss or impairment of native title rights and interests requires an evaluation of ‘emotional’ rather than pecuniary impact.
The Court questioned whether the bifurcated approach adopted by the parties in this proceeding to the assessment of compensation under the NTA is the preferable approach. Their Honours suggested that it might be more appropriate to seek to place a money value on the one indissoluble whole. Such an approach would not render the market value of freehold irrelevant to the exercise, but would avoid the arguments about whether there has been double counting as the result of including factors in both the economic and non-economic categories [144].
The issues on appeal
Six major issues arose for the appeal court’s consideration.
The first issue concerned Mansfield J’s assessment of the economic loss element of the award of compensation.
Each of the parties made a different challenge to the economic value of the claim group’s native title rights and interests determined by the primary Judge. Mansfield J assessed that element at 80% of the freehold value of the land – $512,400.[1]
The Full Court reasoned that the primary judge made a number of errors of principle which affected the valuation of the claim group’s non-exclusive native title rights and interests. The assessment did not take into account the extent of the limitations on those rights of the 1882 grant of pastoral lease PL366 and the consequences of the loss of the right to control access to and make decisions for the land. The assessment included elements which should have properly been part of the valuation of the non-economic component of loss. It wrongly valued the rights by reference to the practical exercise of the rights rather than the legal content of them. By regarding the Spencer v Commonwealth (1907) 5 CLR 418 (Spencer) approach as inappropriate, the assessment wrongly failed to take into account the inalienability of the rights as a discounting factor and wrongly took into account the value to the Northern Territory of the surrender of the rights [132].
Each of the errors identified had the effect of overvaluing the economic loss of the claim group [134]. The Court explained that the starting point is an analogy of freehold with exclusive native title. Then, the value of non-exclusive native title can be derived by adjusting freehold value to account for the restrictions and limitations applicable to the non-exclusive native title rights [137]. In this process of comparing the rights of the claim group with the rights of a holder of freehold title, no allowance is made for the attachment of the claim group to the land. The assessment of the economic element is confined to the material nature of the native title rights and interests [138]. Having identified the differences between the nature of the native title rights held by the claim group and the rights held by a holder of freehold title it is necessary to make an evaluative judgment of the reduction from freehold value which properly represents the comparative limitations on the native title rights and interests [139]. Contrary to the Commonwealth’s submissions, the Full Court considered the legal content of the non-exclusive native title rights and interests is not so insubstantial as to represent only half of the freehold value of the land in question. Balancing the nature of the restrictions on the claim group’s non-exclusive native title rights and interests, the economic value of those interests was reduced by the Full Court from 80% to 65% of the value of freehold title.
The second issue concerned the assessment of the value of some of the freehold lots.[2]
The full Court at [155] stated that the primary judge was entitled to accept the evidence of Mr Copland, the valuer for the Commonwealth.
The third issue concerned the prejudgment interest payable on the compensation awarded for economic loss.
Mansfield J held that the interest was part of the compensation and was to be calculated on the basis of simple interest at the rate set out in the Federal Court Practice Note CM 1. The claim group contended that interest should be calculated on a compound basis, either on the risk-free rate or the superannuation rate. The Commonwealth contended that the interest should have been awarded on, rather than as part of, the award of compensation. The Full Court agreed with the primary judge that the scheme for the payment of compensation under the NTA does not exclude an award of compound interest in an appropriate case [199], but held that the claim group had failed to establish that the primary judge erred in awarding simple, rather than compound, interest [213].
The fourth issue concerned the calculation of non-economic loss which the primary judge fixed at $1.3 million.[3]
The Court explained that the primary judge considered matters relevant to the assessment of solatium. He did not make any errors in the selection or evaluation of those matters [394]. Having found that the primary judge did not fall into error in fixing the award for solatium, no occasion arose for the Full Court to exercise its own discretion to fix the amount of the award for solatium [420].
The fifth issue concerned the order made by the primary judge, which provided for the Prescribed Body Corporate (PBC) to allocate the award monies within the claim group and to determine any disputes about entitlements to the monies.
The Commonwealth contended that s 94 of the NTA did not empower the Court to make that order. The Full Court determined that for the reasons expressed by the primary judge, there was no error in the making of the order to allocate the award monies within the claim group and to determine any disputes about entitlements to the monies [429].
The sixth issue concerned three invalid future acts.[4]
The issues raised by the damages claim were complex and novel. The Court explained that it is important that principles are established to deal with such circumstances [448]. The way in which the claims were made in this proceeding did not allow the Court to give proper consideration to the issues. The Court stated that although there may be good sense in the result arrived at by the primary judge, the Northern Territory and the Commonwealth were correct to identify the absence of a sound legal basis for his approach. On that basis the appeals against the order for damages for the invalid future acts was allowed [448].
The Court determined that the economic value of the native title rights and interests is 65% of the freehold value of the lots. The appeal against the damages claim for the invalid future acts was allowed; the remaining appeals and cross-appeal were dismissed. The parties were directed to file an agreed form of orders reflecting these reasons for judgment with the matter to return to the Court for case management on 17 August 2017.
[1] The Northern Territory contended that the appropriate measure is the sum of the usage value and the negotiation value. That method yields a value of $248,764. The Commonwealth contended that if all relevant factors were taken into account the native title rights and interests would have been assessed at about 50% of the freehold value of the land. The claim group contended that the appropriate measure of the value of their native title rights and interest was equal to the freehold value of the land.
[2] The Northern Territory contended that the primary judge should have preferred the valuation of Mr Wotton over the valuation of Mr Copland in respect of the two hectare lots (lots 20 – 23 and 26 – 32) and the large rural lots over four hectares (lots 16, 47, 75 and 79).
[3] The Northern Territory and the Commonwealth both challenged this amount and the reasoning by which the primary judge arrived at it. The Northern Territory contended that the amount should be 10% of the value of the land proposed by the Northern Territory producing a final figure of $93,848. The Commonwealth contended that, having regard to all the circumstances of the case, the amount of non-economic loss should have been assessed at $5,000 for each parcel of land, yielding a lump sum amount of $215,000.
[4] The Northern Territory contended that there was no basis for the making of orders for the payment of damages for those acts. Alternatively, if there was a basis, the Northern Territory contested the calculation of damages at 80% of the freehold value of the land. The Commonwealth contended that there was no basis for the primary judge to grant relief of any kind that does not have as its premise the continuing existence of the claim group’s non-exclusive native title rights and interests.