Henny Penny and native title compensation – is the sky really falling?

Gilbert + Tobin partner Marshall McKenna predicts what the future of native title rulings will hold, following the recent land mark native title decision.

(Opinion) -- The recent Griffiths v Northern Territory [2016] FCA 900 decision has been a landmark ruling in awarding compensation for the extinguishment of native title. The case has attracted immediate and expansive national press to the effect that a wave of other native title compensation claims were likely to exceed $1 billion dollars and that State Governments would claw back such sums from miners.

While likely to be true to an extent, these headlines have overlooked key realities in the case:
  1. Most historical impacts on native title are not going to be the subject of compensation;
  2. For native title agreements that have been entered into already, compensation has been paid, with the highest exposure to compensation being circumstances where native title rights were affected by acts that were allowed after arbitration;
  3. The State legislation and agreements allowing ‘flow through’ of native title compensation to mining and other tenure holders is directed at the compensation payable in relation to specific tenure, whereas the compensation for native title is assessed by courts on a global basis; and
  4. Without minimising the impact of the decision or the importance of native title rights and interests, the quantum per hectare arising under the case is (including the component for injury to feelings of indigenous people) relatively modest.
Significantly, native title compensation is applicable only to acts that impacted native title rights and interests where those acts occurred on or after 31 October 1975, the date that the Racial Discrimination Act 1975 came into effect.  The vast majority of improved and therefore more valuable land in Australia was alienated by the Crown prior to 1 January 1975, outside the statutory protection of the Racial Discrimination Act and thus in a period where the States had the legislative power to acquire native title without compensation.

In terms of resolving future acts on the basis of native title agreements, there have been no reliable statistics . Anecdotally, more than half and most likely over three quarters of future acts (i.e. grants made after 1 January 1994, the commencement of the Native Title Act 1993) have been compensated by miners and other proponents already.  However, there are comparatively few agreements dealing with the period from 31 October1975 to 1 January 1994 despite the bulk of the ‘uncompensated’ acquisitions of native title rights being attached to grant of rights in that period.  It remains to be seen how many compensable acts occurred in that timeframe.

Further, there is a potentially insurmountable problem as to the proposition that the States will seek recovery of compensation paid from the holders of relevant tenure.  The States’ ‘recovery’ legislation and agreements generally seek to flow through compensation payable in relation to the particular tenure held. Unfortunately (or fortunately for the tenure holder) the assessment of native title compensation  does not work on that ‘lot by lot’ approach.  In Griffiths, the assessment of compensation was undertaken on an ‘in globo’ approach.  Put another way, the basis of the proposed government ‘flow through’ approach is incompatible with the Court approach.

That is not to say that the Government will not seek to levy a recovery for any compensation to which it is liable.  However, it is more likely that the State will take the approach of recovering native title compensation though indirect mechanisms such as increased rents and fees applicable to relevant tenure.  Instead of directly impacting miners or other tenure holders whose interests have affected native title rights and interests but who have not made a contribution to compensation, this approach will potentially spread costs across the industry.

Finally, there are two observations to be made about the quantum.

First, there does not appear to be a linear connection between the two types of impact – damages for loss of connection to country is likely to depend on the cultural importance of the land rather than its economic value. Accordingly, in Griffiths, the relatively modest compensation for economic value of the land ($512,000) is reflective of the limited value of remote and isolated land whereas the more significant component of ‘solatium’ ($1.3M) is for loss of connection to country based on strong evidence of traditional connection. 

Second, the overall compensation (based on land area) is less than $1,400 per hectare. While not insignificant, if one considers the compensation agreements that have been entered into with private landholders and pastoralists, the quantum in question is not especially generous.

Compensation in relation to native title rights will take some time to be ascertained and it is not yet clear where the ultimate liability will lie.  It is also an irony of the system that compensation will likely be denied to the most heavily affected native title claim groups.  For example, the Larrakia people of Darwin failed in their claim because of the impact of settlement, and are thus not entitled to any compensation.  Additionally, destruction of native title rights in the most arable areas of Australia largely occurred in the 19th and early 20th centuries, well before the Racial Discrimination Act triggered the need to compensation native title holders for the destruction of their rights.

By Marshall McKenna, pre-eminent native title practitioner and partner at Gilbert +Tobin.

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