On 13 March 2019, the High Court of Australia handed down the Timber Creek decision, and for the first time provided a method to calculate compensation for the extinguishment of native title rights.
The right to compensation for impacts on native title rights has existed since the introduction of the NTA; however, the High Court has not considered it until now. This considerable delay can be attributed to a range of reasons, not least of which include the many delays and hurdles that native title holders face in achieving resolution of their claims.
In this case, Mr A. Griffiths (deceased) and Lorraine Jones brought proceedings on behalf of the Ngaliwurru and Nungali Peoples, for the loss of their native title rights over an area of 127 hectares in and around Timber Creek, a remote community about 600km south of Darwin. In short, the High Court found that compensation for extinguishment should be calculated on the basis set out below (with the amounts awarded in parentheses):
- 50% of the freehold value of the land ($320,250);
- Interest payable from the date of the act, which will ordinarily be simple interest, but may in some cases maybe compound interest (simple interest amounting to $910,100); and
- An amount for the cultural and spiritual loss to be assessed by considering "what the Australian community" would regard as "appropriate, fair or just" (an amount of $1.3 million, upholding the amount awarded in the courts below).
While the Timber Creek decision is a significant advance in native title law, it should be noted that it only applies to extinguishment acts taking place after 31 October 1975. This is the date of commencement of the Racial Discrimination Act 1975 (Cth) (RDA), prior to which it is conventionally understood that the extinguishment of people’s rights on the basis of race was legal, and non-compensable. We note this conventional understanding of how the RDA interacts with native title compensation is currently under challenge before the courts.5
5 Galarrwuy Yunupingu (on behalf of the Gumatj clan or estate group) v Commonwealth & anor NTD43/2019.
The Settlement Act and standard form templates pre-date the Timber Creek decision, and accordingly do not reflect the findings in the decision. On that basis, payments made under Settlement Act agreements are not expressed as being compensation, even though they have a compensatory effect, and act as consideration for Traditional Owners agreeing to bring no further claims under the NTA.
Payments made under Settlement Act agreements fall into two categories:
- Various payments, funds or land parcels made available at the commencement of the RSA, as set out in Figure 1 under the heading ‘Financial Component’ (Settlement Sum).
- Payments made to Traditional Owners when development or use of Crown land occurs, and which interferes with or extinguishes Traditional Owner rights. These payments are calculated in accordance with the ‘Community Benefits Formulae’ contained in Schedule 7 of the Land Use Activity Agreement (LUAA) and are analogous to payments made under the future acts regime under the NTA (Community Benefits).
Pre-dating the Timber Creek decision, the quantum of the above payments are not calculated in accordance with native title compensation principles. Instead the Settlement Sum is based on the State’s “Resourcing Traditional Owner Settlement Act Agreements, dated May 2019” (Resourcing Policy), and the formulas underpinning Community Benefit payments were developed by the State in 2012.
The Resourcing Policy examines what is required for a TOGE to be “sustainably funded to deliver a TOS Act settlement’s benefits to members.”
The FPRC and EPOF have differing views as to the impact and effect of the Resourcing Policy:
- The FPRC believes the Resourcing Policy makes clear that the Settlement Sum is designed to be, and in fact must be, utilised in full by the corporation to service the operation of the RSA. In other words, the payments received under the agreement can in practice not be used for any purpose other than implementing the agreements, with little or no scope for wider Traditional Owner aspirations or self-determination.
- The EPOF notes that the Resourcing Policy contains generic modelling about corporation revenue requirements. Corporations retain discretion in how they spend their revenue. The Settlement Sum is clearly designed to be retained in real terms (indexed for inflation) forever, and its investment returns to be used for both core operations and to deliver improved economic, cultural and social outcomes into the future.
The Resourcing Policy considers that a TOGE may adopt either a ‘core’ or ‘optimal’ staffing profile.
A ‘core’ staffing profile includes only 4 positions: (i) CEO; (ii) Admin assistant; (iii) Cultural Heritage Officer; and (iv) Executive Officer. An ‘optimal’ staffing profile includes an additional 4 roles: (i) Business Development Manager; (ii) Compliance Officer; (iii) an officer to oversee the LUAA; and (iv) an officer to oversee the NRA.
The FPRC disputes that officers to oversee compliance, the LUAA and the NRA are ‘optimal’ and instead, at the levels suggested by the Resourcing Policy, do not meet the most basic requirements for the minimal functioning of the RSA. In any event, the costs of an ‘optimal’ staffing profile, plus related admin costs, is estimated as $1.1 million annually. As such, this is the amount of annual income assessed as necessary for the corporation to operate sustainably.6
In order to achieve an annual income of $1.1 million, the Resourcing Policy concludes:
- Settlements should provide $21,000,000 (with $8 million in trust, and $13 million provided as cash); and
- If the entirety of this amount is invested, there is an estimated return of approximately $840,000.
While this does not achieve the required $1.1 million, to make up the shortfall, the Resourcing Policy includes a further $260,000 of annual funding provided to TOGEs to provide separate functions under the Aboriginal Heritage Act 2006 (Vic).
The EPOF states that a TOGE is under no obligation to use its funds in accordance with the Resourcing Policy. While this may be technically true based on the wording of the agreement, the FPRC asserts that:
- The RSA imposes obligations on both the State and the TOGE for implementation of the agreement, noting that all relevant State agencies, and State corporations have access to flexible and regular resources to meet their obligations, while TOGE’s are expected to agree to one off lump sum payment to meet their ongoing and expanding obligations;
- If a TOGE does not engage staff into each of the roles contemplated by the Resourcing Policy (both those listed as ‘core’ and ‘optimal’), it is clear that the RSA would fail and be unable to function as intended; and
- The Resourcing Policy significantly underestimates the required level of resourcing to ensure the minimum TOGE obligations arising under the RSA are able to be met.
This also highlights a significant conceptual difference between Traditional Owners and the State. The State appears to view the RSA as simply recognising rights, which provides Traditional Owners certain opportunities, such as the opportunity to comment or negotiate an agreement with respect to works on Crown land, or to contribute to the development of natural resources policy. While the RSA provides these legal openings, it does not provide resources to exercise the minimum recognised rights (or to meet obligations), and assumes Traditional Owners should make an assessment, within the limits of their resources, and prioritise which rights they would like to exercise.
Conversely, Traditional Owners consider that they are custodians of the land under traditional law and custom and are culturally obligated to care for Country. This means the view that a TOGE should prioritise some rights, and forgo others, does not work in the full factual context. It is FPRC’s view that if TOGEs are provided a range of rights, but only the resources to exercise some of them, the full aspirations of the agreement can only ever be partially realised.
A current example of the inadequacy of the State’s understanding of the current resourcing model has been provided by Taungurung Land and Waters Council (TLaWC). TLaWC have undertaken an assessment of their rights and obligations arising under the Taungurung RSA and have identified at least 230 actual and implied obligations for TLaWC in implementing the Taungurung RSA. TLaWC is required to engage through the LUAA notification process with over 18 different State agencies (including 2 different regions and 5 districts within DELWP alone), State Authorities and State Corporations, 11 Local Governments and currently over 20 Mining Companies, in assessing notifications and ensuring compliance with the Settlement Act and LUAA requirements. Between August 2020 and 30 June 2021, TLaWC received over 150 LUAA notifications for Advisory and Negotiation issues with over a third of the notifications subject to ongoing discussions around the appropriate categorisation of the activities notified. All activity is being directed by the State with no current scope for exploration and implementation of Taungurung aspirations and cultural obligations through the LUAA process. The notion that an ‘optimal staffing profile’ allowing for ‘an officer to oversee the LUAA’ is arguably disrespectful to TOGE’s and shows no genuine understanding of the scale of the obligations and volume of work required by TOGE’s to meet State agencies expectations of the LUAA process. That the NRA officer is also listed as an ‘optimal’ and not ‘core’ position, again fails to respect or appreciate the huge volume of work required by this officer to address the most basic of the remit under the NRA, noting that for each project provided to the TOGE there is generally an entire team of staff within the relevant State agency progressing the project. Parity in resourcing for TOGE’s with resourcing of the agency teams progressing NRA projects should be a minimum requirement.
The LUAA and NRA are the agreements in which Traditional Owners receive the vast bulk of their rights under an RSA. Without appropriate resourcing Traditional Owners are unable to exercise or access these rights or meet their obligations. Accordingly, to suggest the corporation has discretion in relation to these roles misrepresents the true position.
The FPRC acknowledge the State’s position that the Resourcing Policy is out of date, and that if the recommendations of this review are implemented, it will have a confined role in determining payments made to Traditional Owners. However, in the event the recommendations of this review are not implemented, it seems likely that an updated version of the Resourcing Policy will be applied to future settlements. In those circumstances, the FPRC wishes to record the faults in its design, including its failure to comply with wider State compensation principles, in neither advancing the right of self-determination nor empowering economic, cultural and social development.
6 The Resourcing Policy was developed without the input of Traditional Owners, or their relevant corporations. As such, the FPRC is not satisfied that the policy accurately reflects the costs likely to be incurred by a TOGE.
The quantum of the Settlement Sum is not calculated in accordance with NTA tenure-based compensation provisions. Instead, it is arrived at by negotiation. To determine its negotiation position, the State uses its 2018 principles that the Settlement Act should:
- Offer an attractive and fair alternative to settling claims through the NTA;
- Advance the right of self-determination by empowering a Traditional Owner group to determine its own form of economic, cultural and social development;
- Enable the achievement of Traditional Owner corporation sustainability;
- Achieve equity or appropriate parity between groups;
- Encourage the optimal use of Crown land;
- Consider the broader benefits available under the TOS Act framework; and
- Consider the financial impact on the State.
To assist with the corporation sustainability principle, the State developed the Resourcing Policy. The Resourcing Policy notes that the Settlement Sum is arrived at by negotiation and is based in large part on sufficient cash or land ($21.8 million using 2018 investment rates) being used to generate approximately $840,000 per annum, ongoing. Combined with existing ongoing RAP program funding for core operations, the Resourcing Policy estimated that a corporation which is a RAP and has an RSA may require about $1.1 million (indexed for inflation) revenue. The Policy’s investment return estimates and quantum amounts are updated regularly, based on independent advice, prior to new offers being made to a Traditional Owner group.
The Resourcing Policy anticipates the Settlement Sum maintaining its real value in perpetuity. This achieves the sustainability purpose of the policy. Consistent with the self-determination principle, corporations determine how to spend the investment earnings derived from the Settlement Sum. The RSA template or Settlement Act do not compel corporations to spend their Settlement Sum investment earnings in accordance with the Resourcing Policy or solely on RSA-related business. The Resourcing Policy assumes corporations with RSAs will require core funding to meet their Traditional Owner community’s expectations and may want to spend additional income on NRA and LUAA officers or economic development officers or similar to enhance benefits for their members from the agreements.
The Settlement Sum annual revenue is not the sole revenue available to corporations with RSAs. The RSA template includes approximately $330,000 per annum (indexed for inflation) amount paid to corporations for natural resource management purposes. In addition, agencies doing activities under the LUAA that require the consent of the corporation must pay the corporation’s reasonable negotiation costs (the ‘Reasonable Costs’ Regulations, 2017). Costs associated with joint management of Aboriginal title land is also funded separately through the RSA.
In commencing the First Principles Review, EPOF acknowledged that the Resourcing Policy was out of date based on changes in market investment conditions, the actual implementation experience of corporations and their feedback received. This feedback included that it may require amendment to better reflect the self-determination principle, such as removing the policy to invest a certain proportion of the Settlement Sum in the Victorian Traditional Owners Trust (VTOT). If the recommendations of this review are adopted, the Resourcing Policy should be re-purposed to meet the operational requirements payment component of Settlement Act funding. If it continues to have a similar purpose as it does now, it should be updated based on corporation experience and feedback.
The Template Review Committee first requested that the State’s principles for calculating the Settlement Sum and Community Benefits be reviewed in light of the Timber Creek judgment.
However, applying the principles of the Timber Creek decision to a holistic regime as represented in the Settlement Act is not a simple or straightforward process. Particularly difficult is the incorporation of the concept of ‘cultural loss’ into a standardised and universal process such as that established by the LUAA. This is because the calculation of this component, seeking to compensate for spiritual and cultural damage, has been approached by the courts as a complex, but ultimately ‘intuitive’ process.7
For this reason, the Review approached the issue in the following way:
- (Principles underpinning the calculation of payments) The parties attempted to agree on 10 principles put forward by the FPRC which would underpin any agreed approach to calculating payments in accordance with the principles established in the Timber Creek decision. The parties achieved some success in this regard.
- (Compensation Model and Expert Terms of Reference) The parties attempted to agree the basic structure for a potential compensation model, and to identify complex issues, or areas of disagreement, to be referred to an expert or experts, to aid further discussion. The parties made significant progress on developing a draft model, including advancing a draft terms of reference for potential expert advice. The FPRC puts the results of this work forward as an Individual Recommendation. The EPOF endorses further exploration of the Model but considers that additional information is required.
- (Interim Community Benefits Formulae) The parties attempted to agree adjustment of the Community Benefits Formulae which are contained in Schedule 7 of the LUAA on an interim basis, until a final position could be reached. The parties were successful on reaching a temporary without prejudice position.
Each of these issues is further described below.
7 Griffiths v Northern Territory of Australia (No 3) [2016] FCA 900 at [302]
Set out below are the ten principles developed by the FPRC to underpin the basis on which the Settlement Sum and Community Benefits should be calculated.
Principle 1: Settlements should be based on the principle that they represent a fair and just settlement
Joint or Individual Recommendation
This is a joint recommendation.
Recommendation 1
Settlement Act agreements should represent a fair and just settlement for Traditional Owners, as assessed against the listed criteria below.
Joint Comments
The States compensation principles currently require that a settlement proposal ‘offer an attractive and fair alternative’ to settling claims through the NTA. However, the NTA is not, by itself, the measure for the suitability of an offer of settlement, and should instead be measured against an overall assessment of what is fair and just, as defined in the criteria below:
- The offer complies with, and in practice implements, the UNDRIP as it relates to land justice.
- The offer meets or exceeds the rights and compensation that would otherwise be available if the Traditional Owner group obtained a positive determination of native title.
- The offer is consistent with the principles of self-determination, and promotes the self-determination of the Traditional Owner group, and provides sufficient resources to allow the Traditional Owner group to:
- exercise all of the rights obtained through the agreement; and
- build an economic base that allows them to improve the lives of their members.
- During the course of negotiations, the Traditional Owner group has had an adequate opportunity to advance its individual aims and aspirations, which have been considered by the State in good faith, and:
- the Traditional Owners have had the opportunity to speak directly to decision makers (being Cabinet or government ministers, and any departments or agencies identified by the Traditional Owner group) to put forward their position, and the State’s negotiation team will facilitate meetings with, and ensure the active participation of such decision makers in negotiations;
- the State has been transparent about the lines of decision making, and any issues that may preclude them from accommodating the request; and
- if the State is unable to accommodate the request, the decision maker will meet with the Traditional Group, and provided its reasons in writing, in a timely manner, and where possible, offered alternatives and / or a commitment to continue to work towards the aim or aspiration.
EPOF Comments
The EPOF considers that, additional to the joint comments above, that the ‘fair and just’ principle should also encompass a concept of parity and equity between groups. EPOF notes that parity and equity are already State settlement principles.
Principle 2: The calculation of compensation should not be limited to activities occurring post-1975
Joint or Individual Recommendation
This is an individual recommendation of the FPRC and is not supported by the EPOF.
Recommendation 2
Calculation of compensation should not be limited to activities occurring post-1975.
FPRC Comments
A majority of four out of seven judges in Mabo and Others v Queensland (no. 2) (1992) 175 CLR 1 decided that there is no compensation payable under the common law of Australia for the extinguishment of native title. Although Mabo was not directly concerned with issues of compensation, this has led to the conventional legal understanding that native title compensation is not available for acts that occurred before 31 October 1975, this being the date when the Racial Discrimination Act 1975 (Cth) (RDA) became law, and only then did acts of extinguishment or impairment of native title became unlawful racial discrimination.8 However all aspects of this question have not yet being directly determined, and this issue is currently the subject of Federal Court proceedings.9
The FPRC believe that limiting the availability of compensation until after the enactment of the RDA is entirely arbitrary, inequitable, and unjust, and recommend that it should be abandoned by the State.
The colonisation of Victoria and the dispossession of Aboriginal people from their lands largely took place prior to 1975, and while the State continues to rely on this arbitrary date to shield itself from liability for admittedly racially discriminatory acts, it fails to fully address the injustices done to the First Peoples of Victoria.EPOF Comments
The EPOF is unable to support Principle 2 in the current Review. This is because one of EPOF’s key mandates in this Review is to respond to the Timber Creek decision. That decision did not consider or change the law as understood by EPOF to be established by the High Court in Mabo. EPOF understands and acknowledges the justice principle at stake and therefore recommends that the issue be referred to the Minister for Aboriginal Affairs for potential progression through the Treaty process, which has a wider mandate than this Review.
Additionally, it is foreseeable that compensation for loss or impairment of rights as a result of actions prior to 1975 might form part of future Treaty negotiations. Should consideration via the Treaty process recommend that pre-1975 compensation be addressed via the TOS Act, EPOF suggests that this recommendation may be further considered by the proposed Settlement Act forum.8 Sean Brennan, ‘Timber Creek and Australia’s Second Chance to Grasp the Opportunity of Mabo’ on AUSPUBLAW (03 April 2019).
9 Galarrwuy Yunupingu (On Behalf Of The Gumatj Clan Or Estate Group) V Commonwealth Of Australia & Anor ) No: NTD43/2019.Principle 3: That money paid under a Settlement Act agreement is compensation, and should be treated as such
Joint or Individual Recommendation
This is a joint recommendation.
Recommendation 3
The Review recommends that money paid under a Settlement Act agreement should include:
- Compensation, being payment for loss of rights with no conditions governing its purpose;
- On-going operational funding for dedicated purposes to support corporations to meet the cost of establishing and operating settlements, including, to participate in natural resource management and joint management; and
- Commitment of on-going funding for departments to meet the cost of establishing and operating components of the settlements.
Joint Comments
The Settlement Sum paid under a Settlement Act agreement should be recognised as compensation for the historical extinguishment and impairment of native title rights.
A Settlement Act agreement recognises rights that Traditional Owners already hold. The agreement sets out the agreed method by which the State and Traditional Owners will interact around these pre-existing rights.
Had Traditional Owners been properly compensated at the time rights were extinguished, they would have had the opportunity to build intergenerational wealth, and to overcome historical exclusion from economic participation. Compensation paid under the Settlement Act should be viewed in this light, as an attempt to return Traditional Owners to a position of financial security and prosperity.
To this end, (i) compensation should be paid to Traditional Owners for the historical loss of rights; and (ii) separate and recurring funding should be provided for the operational needs of TOGEs, including but not limited to funds to participate in State processes of land and water management, policy and strategy development.
Additionally, Traditional Owners should have options in relation to compensation funding, including but not limited to: payments directly to the TOGE, funding paid into the VTOT, or economic development land. Operational funding should be considered separately and negotiated based on the anticipated costs of the Corporation.
Finally, the successful implementation of a Settlement Act agreement also depends on government departments being able to actively engage with TOGEs and being able to adapt their systems and processes to reflect the rights of Traditional Owners. Without dedicated funding for this purpose, it will not be possible for the State to meet its contractual obligations, or for Settlement Act agreements to be fully realised. Accordingly, such funding should be assured.
FPRC Comments
The current Resourcing Policy requires what should be compensation to be used to service the agreement. Rather than compensating Traditional Owner loss, funds are required to be used to access pre-existing rights. In addition, the State receives direct benefit from the agreement, through an efficient and legally valid land management regime, and access to Indigenous knowledge to develop effective and responsible natural resource conservation and management practices. Provided that the anticipated operational costs of TOGEs are accurately and realistically assessed, this recommendation recognises and remedies this issue, and for that reason is wholly endorsed by the FPRC.
Principle 4: A Settlement Agreement is not full and final
Joint or Individual Recommendation
This is an individual recommendation of the FPRC and is not supported by the EPOF.
Recommendation 4
Settlement Act agreements should not be full and final in respect of native title compensation, and instead a method should be adopted to allow for compensation to be increased if developments in the common law would otherwise so entitle Traditional Owners.
FPRC Comments
Currently a Settlement Act agreement provides full and final settlement of native title for the agreement area. The State is freed from any and all future liability for native title compensation,10 and the Traditional Owner group agrees not to bring any further native title proceedings.11
Notwithstanding the contractual position, the State’s current policy is to re-open negotiations with Traditional Owner groups, when or if it becomes apparent that original settlement terms were insufficient. Adoption of this recommendation would simply formalise this position. Because Traditional Owners have been required to forgo their underlying rights, these negotiations have to date been conducted on a goodwill basis. Adoption of this recommendation would ensure negotiations proceeded on a framework of legal rights and reduce disparity in the bargaining position of the parties.
While the Timber Creek decision has resolved or clarified some central issues around the calculation of native title compensation, other issues remain unresolved. As such, there is an environment of uncertainty, which is not conducive to full and final settlement.
Furthermore, a requirement of ‘full and final’ settlement is appropriate for the end of a dispute, but not for the beginning of a new relationship of partnership and trust. In those circumstances it is not justifiable to require one party to completely relinquish all legal rights, and to become completely reliant on the goodwill of the other party.
Traditional Owners are anxious about the finality of resolving their claims, particularly where settlements are imperfect and may not meet community expectations. Dispensing with a ‘full and final’ requirement with respect to compensation presents minimal risk to the State, however the comfort provided to Traditional Owners is substantial. Knowing that some legal rights are retained will make achieving settlements easier and more efficient. It will also assist in agreeing an overall method of compensation, as it is a less fraught task if Traditional Owners are able to address any unforeseen issues at a later date.
EPOF Comments
The EPOF is unable to support this principle and recommendation. The aim of an out-of-court settlement policy should be to provide full justice, and the end of Native Title Act litigation. The EPOF considers it is possible to ensure Victoria’s Settlement Act keeps up with developments in Australian law, and proposes an alternative recommendation as follows:
- The proposed Settlement Act forum is to consider amendments to the Settlement Act to guide what VCAT takes into account, such as whether 56(d) of the Settlement Act “reasonableness of any offer … as to … community benefits” clearly includes taking into account developments in Australian native title law.
- The proposed Settlement Act forum is to work on an independent process to establish if a Settlement Sum based on the Compensation Model is no longer just and fair due to significant developments in Australian law and an uplift payment is required. If independently recommended, the State must negotiate in good faith the amount of uplift payment to be made.
- Traditional Owners currently have the option to not use the Formulas and instead seek VCAT determination of the amount of community benefits payments. This appears to meet the Traditional Owners position that they have recourse to an independent decision-maker. To further meet the Traditional Owners’ position, recommendation (a) is a review of the Settlement Act to ensure VCAT takes into account developments in Australian law when making its determinations. Recommendation (b) would extend the Settlement Act agreement’s mandatory review clause to ensure that Settlement Sum payments can be uplifted due to significant developments in Australian law.
EPOF notes that the government may consider the compensation model alongside compensation that may be available under Victoria’s treaty process.
10 See clause 9 of the Indigenous Land Use Agreement, which forms part of the suite of agreements making up a settlement package.
11 Ibid. See clause 16.Principle 5: Compensation should be paid for both extinguishment and impairment of native title rights
Joint or Individual Recommendation
This is an individual recommendation of the FPRC and is not supported by the EPOF.
Recommendation 5
Compensation for historical impairment (along with extinguishment) of native title rights should form part of the Settlement Sum. Compensation for historical impairment should be calculated:
- on the basis of newly negotiated Community Benefits formulas, applied retrospectively, where the activity would be compensated in accordance with a Land Use Activity Agreement (LUAA) following settlement; and
- on the basis of individual negotiation, where the activity would not be compensated under the LUAA, but has otherwise had, or continues to have, a significant impact on the ability of Traditional Owners to exercise Traditional Owner Rights over, or in relation, to the relevant land.
FPRC Comments
This Recommendation builds on Principle 3, which advocates for the Settlement Sum to be calculated as compensation under the NTA, calculated in accordance with an agreed method, informed by the Timber Creek decision.
Whereas the Timber Creek decision was only concerned with compensation for acts of extinguishment of native title, Principle 5 seeks to ensure the calculation method adopted for the Settlement Act also incorporates compensation for historical impairment of native title rights, noting that both extinguishment and impairment are compensable under the NTA.
In doing so, it is first necessary to define the term ‘historical impairment’ and exactly what is to be compensated. The State already has a longstanding position on the appropriate compensation amounts for certain acts impairing native title rights. In the language of the Settlement Act, these are called Land Use Activities, and are compensated by the application of the Community Benefits Formulae contained in the LUAA. However, the FPRC recommends that, in the historical context, it is necessary to expand this definition to include other significant impacts on native title rights. This is broadly designed to capture not only intentional acts, but also negligent acts, such as the contamination of land and waterways.
Accordingly, the recommendation is that historical impairment should be calculated as follows. Where the historical act:
- would, if it had occurred post-settlement, be compensated under the LUAA, it should be compensated in accordance with the re-negotiated Community Benefit Formulas, applied retrospectively;
- would not be compensated under a LUAA, but has had, or continues to have, a significant impact on the ability of Traditional Owners to exercise Traditional Owner Rights over, or in relation, to the relevant land, be compensated as negotiated; and
- interest and payment for cultural loss should also be applied.
EPOF Comments
The EPOF is broadly in support of this principle, as it is consistent with compensation provisions in the NTA, and consistent with community benefits payments being made in relation to activities that impair rather than end Traditional Owner rights. However, EPOF does not support the Recommendation as stated because it considers further information and analysis is required about the records of historical land use activities, and the practicality of including all activities in a Calculation Method. EPOF recommends that this is a matter that should be referred to the expert commission.
Principle 6: Interest should be calculated as compound interest
Joint or Individual Recommendation
This is an individual recommendation of the FPRC and is not supported by the EPOF.
Recommendation 6
Compensation should include interest on all compensable acts, calculated as compound interest.
FPRC Comments
The Timber Creek decision has not provided a final or clear basis for the calculation of interest on compensable acts under the NTA. While the claimants in that matter where awarded simple interest, the majority judgment made clear that compound interest could be awarded in some circumstances, such as ‘if the evidence established that, upon earlier payment of the compensation, the Claim Group would have put the compensation to work at a profit, or perhaps used it to defray costs of doing business.’12
While the claimant group in the Timber Creek decision had a history of distributing compensation funds directly to claim group members, this is not, and has never been, a common practice in Victoria. Indeed, there is no example of which the FPRC is aware where this has occurred, and in each case where a substantial compensation or other payment has been received it has been put to work at a profit or used to meet the costs of group business.
In these circumstances, it would seem clear that many groups could readily prove a commercial and financial history that would likely entitle them to compound interest. Where a group could not so prove, it would likely be because they have never received compensation for their loss of rights, and they should not be penalized for the State’s delay in resolving native title compensation. Further, Justice Mansfield, hearing the Timber Creek decisions at first instance, made clear that (i) a claim group should not be disadvantaged by a lack of evidence from periods when they did not receive compensation; and (ii) it may be possible to infer from contemporary evidence of commercial activity, that such activity would have occurred at an earlier time, if the group was given the opportunity.13
While the EPOF recommends that the assessment methodology be developed to accommodate both simple and compound interest calculations, and it be individually negotiated with Traditional Owner groups, this is not supported because: (i) the law on this issue is still in development, and any process of assessment will be uninformed by settled case law; (ii) it will likely be weighted against those groups who have not previously received compensation, meaning they will be further penalized for the failure of the State to compensate them in the past; and (iii) the assessment would be time consuming, potentially require extensive evidence, and lead to an increase in delay and costs.
On that basis the universal application of compound interest is to be preferred as it avoids these issues. Calculation on this basis is also simple and efficient, and achieves equity between groups that have, and have not, previously received the benefit of native title compensation. Finally, given EPOF’s rejection of Principle 4, the interest calculated may be full and final, meaning that the principles contained in the Timber Creek decision should be implemented at their highest to offset any risk that the settlement package is later revealed as deficient.
EPOF Comments
EPOF does not support this recommendation as there is limited case precedent either in the Timber Creek decision or elsewhere to support its wholesale adoption in Victoria. Instead, EPOF recommends that the Calculation Model to be developed should be able to accommodate both simple and compound interest calculations. This would leave it as an issue to be negotiated by a Traditional Owner group and used in later consideration if developments in Australian law promote a change in approach for groups, as per EPOF’s proposed recommendation in principle 4.
12 Timber Creek decision at [133].
13 Griffiths v Northern Territory of Australia (No 3) [2016] FCA 900 at [272-275]. Neither the Full Federal Court nor the High Court contradicted Justice Mansfield on this issue.
Principle 7: The State will need to resolve data issues, and promote data sovereignty
Joint or Individual Recommendation
Joint recommendation.
Recommendation 7
Expert advice should be sought with respect to data issues, and the promotion of data sovereignty within the compensation process.
Joint Comments
Any assessment of compensation will require examination of data recording historical acts of extinguishment and impairment. However, all of this data is held by the State and largely inaccessible to Traditional Owners. In addition, there are known flaws and inaccuracies within existing data.
Accordingly, the FPRC put forward Principle 7, on the basis that to establish a functional and transparent compensation process, it will be necessary to rectify known issues with the data, and to allow equal access to Traditional Owners.
EPOF acknowledges these issues and proposes that through an expert commission to determine an efficient methodology for resolving issues with respect to data, to which the FPRC agreed.
Principle 8: Where any issues arise around the availability or accuracy of data, it should be resolved with a presumption in favour of Traditional Owners
Joint or Individual Recommendation
Joint recommendation.
Recommendation 8
Where any issues arise around the availability or accuracy of data, it should be resolved with a presumption in favour of Traditional Owners.
Joint Comments
This recommendation builds on Principle 7, advocating that where data cannot be rectified, or data cannot be located, as a result of a deficiency in the State’s record keeping, there should be a presumption in favour of Traditional Owner interests.
The parties agree that the underlying issue can be addressed on the same basis as Principle 7, through an expert commission to determine an efficient methodology for resolving issues with respect to data.
Principle 9: Compensation should also take into account activities carried out by the Commonwealth
Joint or Individual Recommendation
Joint recommendation.
Recommendation 9
The State should work with Traditional Owners to advocate for the Commonwealth to (i) meet any native title compensation liabilities it may have; and (ii) contribute to the State’s native title liability, in accordance with previous commitments.
FPRC Comments
Historically and currently, various significant parcels of land around Victoria are owned by or have otherwise been impacted by the Commonwealth. Given that they are not a party to a Settlement Agreement, and not subject to its terms, Traditional Owners receive no compensation or rights in relation to these activities.
The State should commit to working with Victorian Traditional Owners to ensure that the Commonwealth pays any direct liability it may have in the area covered by the Settlement Agreement and recognises Traditional Owner rights and interest over any lands it currently holds.
Furthermore, the Commonwealth has previously agreed to contribute to settlement amounts but has not made any contributions in recent years. The State and Traditional Owners should work together to ensure that the Commonwealth meets any native title compensation liabilities it may have.
Principle 10: Moratorium on Crown land sales where Traditional Owners are without rights
Joint or Individual Recommendation
This is an individual recommendation of the FPRC and is not supported by the EPOF.
Recommendation 10
That a moratorium on all Crown land sales be initiated in all areas where the Traditional Owner groups do not have rights to either provide or withhold consent to the sale.
FPRC Comments
Protections are in place around the sale, lease or transfer of Crown land for both Traditional Owner groups with a Settlement Agreement, and those groups that are in active negotiations with the State. While these groups are required to consent to such activities, this also gives them access to other procedural rights which allows the group to be confident that they are being properly compensated. This includes things like the ability to interrogate valuations, and to do basic due diligence, such as ensuring the sale is an arm’s-length transaction.
However, many groups around Victoria are years away from entering negotiations, let alone finalising a Settlement Agreement. In the meantime, they are left wholly without rights, and Country can be diminished without their consent, or even their knowledge. Accordingly, the State should agree to cease granting leases, selling or otherwise transferring Crown land in those areas where Traditional Owners are yet to enter negotiations, and do not yet have access to procedural rights around sales.
EPOF Comments
The EPOF considers Principle 10 as beyond the terms of reference of the Review and instead recommends that the issue be referred to the Minister for Aboriginal Affairs for potential progression through the Treaty process.
Compensation Model and Expert Terms of Reference
Background
While discussing the various principles underpinning the approach to calculating compensation, and noting the complexity of the issues, the parties began to discuss the potential for an expert or experts to develop a methodology for assessing the likely parameters for a compensation award. The parties subsequently formulated draft terms of reference for the potential expert/s, which are focused in particular on methodologies for calculating cultural loss and the resolution of issues around data analysis and assessment. Together with the Terms of Reference (Appendix 2), the FPRC and EPOF began to define the broad mechanics of a compensation process and the components on which the parties could, and could not, reach agreement. This led to the development of the Draft Compensation Model (Appendix 6).
The Compensation Model sets out a process for the calculation of compensation, which would form the Settlement Sum under a Settlement Act agreement. It is envisaged that it would apply following the renegotiation of the Community Benefits formulae contained in Schedule 7 of the LUAA, so that those formulae are consistent with the principles of the Timber Creek decision. In summary, the Compensation Model would operate as follows:
- (Community Benefits Formulae) The principal method by which new standards would be embedded into the compensation model would be through the re-negotiation of the Community Benefits formulae, following receipt of expert advice, to be sought in accordance with the Expert Terms of Reference.
- (Settlement Sum) Once final Community Benefits formulae are agreed, the Settlement Sum would be calculated by applying the LUAA to the agreement area from 31 October 197514 to the date a Settlement Act agreement is entered into, with the Settlement Sum being the total payment due for all historical Land Use Activities15 (Retrospective LUAA Method).
- (Minimum Settlement Sum) If the application of the Retrospective LUAA Method would result in the Settlement Sum falling below a specified minimum amount, the quantum of which is to be agreed, the State will pay the specified minimum amount.
Joint or individual recommendation
Individual recommendations.
Recommendation 11
FPRC recommendation
The FPRC endorses and recommends the Compensation Model and the Expert Terms of Reference, until such time as negotiations with respect to pre-RDA liability can be progressed.
EPOF recommendation
EPOF endorses the Expert Terms of Reference and further exploration of the Compensation Model; however, it considers that additional information is required, including in relation to:
- the comprehensiveness and reliability of data to be relied upon in the application of a retrospective LUAA;
- the feasibility of including Land Use Activities such as major public works and public land authorisations in such a model (for which the data availability is currently unknown).
The State is enquiring into these issues through a Scoping Study, the terms of reference for which are set out at Appendix 8.
EPOF suggests that further exploration of the Compensation Model should have regard to compensation being considered through Victoria’s treaty process, noting the work of the expert should be informed and align with progress in the treaty process.
Interim Community Benefits Formulae
Background
Compensation was the most complex and pressing issue considered by the Review. Extensive discussion was held over several meetings and via exchange of correspondence. While a final and definitive joint recommendation could not be reached, the parties agreed that an interim Community Benefits formulae be put in place while the issue is resolved, so as to lessen the impact of any delay on Traditional Owner groups.
Joint or individual recommendation
Joint recommendation.
Recommendation 12
The parties jointly recommend that the interim Community Benefits formulae (Appendix 9) be adopted.
Condition
EPOF comments
EPOF supports the Interim Community Benefits Formulae (ICBF) as it provides an appropriate interim response to the Timber Creek decision and enables Traditional Owners to receive increased community benefits, though EPOF notes the ICBF are likely to have significant financial and budgetary impacts on major projects/public works and delegated land managers’ retained revenues state-wide. State agencies should not be adversely financially impacted for undertaking essential public works on Country, for example: fire tracks, walking/rail trails, water retardation basins, etc. For a retrospective change to the community benefits regime, this must be accompanied by additional funding, particularly for existing initiatives.
The recommendations are best understood as a macro economic reform and need to be accompanied by an enabling revenue model that is able to match the scale of this reform. Such a model would provide an avenue to address significant cost impacts for providers of essential services (and their customers) and decrease risks to essential service delivery. Essential services often need to be delivered in specific locations, owing to natural landscape features, and there is potential for significant cost escalations arising from increased community benefits that need to be built into revenue models agreed across all relevant portfolios. In addition, as part of Government’s consideration of the First Principles Review recommendations, EPOF should seek Government approval of:
- ‘no net loss of retained revenue’ principle for land managers to ensure that land continues to be well managed for future generations.
- ‘factoring Community Benefits liabilities for major public works/ projects’ principle into State Budget project funding allocations.
- implementing transitional financial arrangements for major public works with approved budgets impacted by the interim Community Benefits formulae.
FPRC comments
The FPRC does not support the condition put forward by EPOF, noting:
- The first time this condition was raised was in the final drafting of this report, during late September 2021.
- It is not appropriate to make the payment of compensation to Traditional Owners conditional upon Cabinet also agreeing to reimburse those currently deriving income from land, originally stolen from Traditional Owners.
- The level of compensation should be determined by an assessment of the impact on Traditional Owner rights, and an application of the principles in the Timber Creek decision. EPOF produced and offered, the formulae in Appendix 9, presumably having formed the view they represented fair and just compensation (at least on an interim basis).
- EPOF now seeks to withhold this appropriate compensation unless some internal financial accounting occurs to ensure its member departments and agencies are not impacted. This is an internal State matter, and the payment of appropriate compensation to Traditional Owners should not be dependent on its resolution.
Finally, the only ‘retained revenue’ likely to be impacted by the Interim Community Benefit Formulas are rents and fees paid in respect to leases, licences, and permits over Crown land (defined as ‘Public Land Authorisations’). However, the condition put forward by EPOF does not just apply to Public Land Authorisations, but if not met, would see the withdrawal of EPOF support for all of the Interim Community Benefits Formulas, including those covering Major Public Works, the sale of Crown land, and major commercial works. At the very least, the condition should only be made applicable to Public Land Authorisations.
14 As the EPOF does not endorse Principle 2 (to examine compensation prior to the enactment of the RDA) the FPRC agreed to progress the compensation model on this basis for the purposes of facilitating further discussion. The FPRC continues to assert that compensation prior to the enactment of the RDA must be assessed and paid.
15 The Compensation Model also allows for the different treatment of Historical Land Use Activities, as opposed to current Land Use Activities, in some respects. These differences are (i) the calculation of interest for historic acts; (ii) acts of contamination or environmental degradation that in practice extinguish or impair rights, will be treated as historical Land Use Activities.
Updated