Native Title - Compensation for Economic Loss

National Judicial College of Australia - 30th Anniversary of Mabo Conference
Sunshine Coast

Justice Jagot * 3 June 2022

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The High Court’s decision in Timber Creek is the first to consider the assessment of compensation under the Native Title Act 1993 (Cth) for acts which extinguish native title rights and interests. The decision establishes a number of propositions fundamental to the operation of the compensation provisions of the Act. The decision leaves for future resolution a range of other equally important issues. This article identifies and examines some of those issues.

I. Overview

The Timber Creek decision[1] is the first to consider compensation for acts which partially or totally extinguish native title rights and interests under the Native Title Act 1993 (Cth) (the NTA).

In Timber Creek, the High Court confirmed that the assessment of compensation under the NTA must include components for both economic and non-economic loss. The High Court distinguished between economic loss as reflecting the loss of capacity to use land, and non-economic loss as reflecting the loss of cultural connection to land (also described as “cultural loss” and “spiritual loss”).[2]

The majority of the High Court in Timber Creek decided that the market value of native title rights and interests (the loss of capacity to use land) should be assessed according to the approach in Spencer’s case[3] involving the determination of the price at which an hypothesised willing but not anxious seller, and hypothesised willing but not anxious buyer, would meet to enable the partial or total extinguishment of the native title rights and interests.[4] They assessed the market value of the extinguished native title rights and interests in that case as 50 per cent of the freehold value on the basis that the native title rights and interests involved were not exclusive and, accordingly, could not be worth as much as full and exclusive native title rights and interests potentially equivalent in value to a freehold interest in the same land.[5]

Many issues were not raised for consideration in and therefore remain undecided by Timber Creek. The extent to which Timber Creek resolves issues at the level of principles capable of general application is also open to debate. This is not surprising. Not many cases are an appropriate vehicle for the resolution of issues of principle. Further, the arguments put in Timber Creek appear to have been confined in scope.

This article examines some of these unresolved issues.

First, in distinguishing between economic and non-economic loss, it is important that the labels of “cultural loss” and “spiritual loss” not become matters for recitation obscuring whatever underlying reality might be exposed by the evidence in the particular case.

Partial or total extinguishment of native title rights and interests is itself a form of legal shorthand. It means that the act has had the effect that the common law ceases to recognise the native title rights and interests.[6] The practical effect of the common law ceasing to recognise the native title rights and interests should not be underestimated, however. At one level it is true that “to tell a group of Aboriginal people that they may not hunt or fish without a permit “does not sever their connection with the land concerned and does not deny the continued exercise of the rights and interests that Aboriginal law and custom recognises them as possessing””.[7] However, for Aboriginal people to obtain (and have to obtain) a permit which enables them to practise and, critically, transmit their culture to the next generation involves numerous complexities. Without the capacity to practise and transmit culture, the culture is inevitably diminished and, ultimately, may be destroyed, despite the Aboriginal people’s ongoing sense of connection to the land which has been subject to the extinguishment. This may be the reality which underlies the label “cultural loss”.

Second, extinguishment may involve at least two kinds of “cultural losses”.

One kind of “cultural loss” (the apparent focus of the evidence and arguments in Timber Creek) is a loss suffered only by the holders of the native title rights and interests. It involves both their unique loss of their capacity to practise and transmit their culture in relation to the land the subject of the extinguishing act and the associated consequences of this for them. As a one-sided experience, this kind of cultural loss or harm forms no part of the two-sided hypothetical transaction relevant to market value under Spencer’s case.

It is difficult for people not being the holders of native title rights and interests to characterise and describe this loss. A loss of capacity to practise and transmit culture and the harm to land enabled by an extinguishing act may have far-reaching communal and individual consequences for the native title holders. Even the label “native title rights and interests” underpinning the NTA fails to capture something essential about the body of traditional laws and customs from which such rights spring. It is that the core of traditional laws and customs is as much about responsibilities as rights. Even brief exposure to evidence about traditional laws and customs of Australia’s First Nations peoples shows that it is a deeply held moral, spiritual, and existential responsibility of the bearers of the traditional culture to protect the land from harm, to nurture the land, to protect and nurture the culture, and to transmit the knowledge to enable this protection and nurturing of land and culture to continue from time immemorial.

In the common law, the nearest but inadequate and inaccurate equivalents of these unique and one-sided consequences of extinguishment for the holders of the native title are pain, suffering, loss of amenity, loss of expectation of life, and loss of reputation, all of which are orthodox compensable heads of damage. In Timber Creek the High Court recognised that these attempted analogous descriptions of this kind of loss are inadequate and inaccurate.[8] This is because the holders of the native title were and are the recipients of a continuous rich, vibrant, diverse, complex and all-encompassing way of life and being which has evolved over tens of thousands of years as a unique manifestation of human relationships with the Australian continent. They, the holders of the native title, were subject to the European colonisation of their continent. They, the holders of the native title, were displaced. It was their way of life and being which was destroyed, disrupted, diminished, and degraded. It was their world which was ruptured. Yet they and their culture survive.

Viewed in this context, compensation for the non-economic loss suffered by the holders of native title for the extinguishment of their rights and interests should be understood as compensation for whatever further pain, suffering, hurt, humiliation, diminution, degradation and even destruction of these people, their inherited way of life, and their way of being in relationship to their country may be caused by an act which partially or totally extinguishes their rights and interests arising under their traditional laws and customs.

The labels “cultural loss”, “loss of cultural connection” or “spiritual loss” are all thin descriptors for this potential kind of loss, in which an act enabling harm to country is also an act both embodying potential harm to the holders of native title in relation to that country and denying them the capacity to practise and transmit their culture in relation to that land. This is not a mere potential hurt to “feelings” or “spiritual” loss. It is a potential harm to, and destruction of, a way of life and a way of being in the world. This potential harm, depending on the evidence about the nature and effects of the act, may be existential. It may involve a wound or trauma to the capacity to exercise rights and responsibilities springing from the body of the traditional laws and customs too great for those laws and customs ultimately to survive.

Of its nature, this first kind of loss is non-economic loss. It is, as the High Court described in Timber Creek, properly compensable as non-economic loss on the basis of what the Australian community would consider as appropriate, fair and just in the circumstances.[9] It is also, as the High Court observed in Timber Creek, important not to take this kind of loss into account in assessing economic loss, because to do so would offend against the basic principle against double-compensation.[10]

It is critical that the appropriateness, fairness and justice of compensation for such non-economic loss in every case is evaluated on the evidence on the basis of the true non-economic effects of an extinguishing act, unconfined by labels such as “cultural loss” or “spiritual loss”. The labels are convenient, even necessary, provided they do not diminish an appreciation of the true effect of the evidence in any case.

Another possible kind of “cultural loss”, which appears not to have been the subject of evidence and submissions in Timber Creek, may be relevant. This potential kind of cultural loss is not unique to the holders of native title. It is a shared loss experienced by all, including the government body responsible for the act partially or wholly extinguishing native title and the people that government body represents. This potential kind of loss may be capable of reflection in the Spencer’s case hypothesis of a hypothetical sale of the rights between a willing but not anxious seller and a willing but not anxious buyer. If so, this potential kind of loss is economic loss. This potential kind of loss recognises that ways of life and ways of being, that culture itself, both tangible and intangible, has economic value. They are things for which people are willing to pay.

The potential economic value of tangible cultural objects, remnants and fragments is repeatedly demonstrated. Museums and other places are filled with tangible cultural objects, remnants and fragments routinely described as priceless but which, in fact, have a value.

The potential economic value of intangible cultural manifestations (languages, rituals, practices, beliefs) is also readily demonstrable. People, be it governments or others, pay to preserve, support and facilitate the survival and continuation of intangible cultural manifestations, particularly where they are threatened or rare. They do so because they recognise that the fact that the culture is not shared does not negate its value both to the holder of the culture and the non-holder of the culture. The survival and continuation of the culture (its languages, rituals, practices, and beliefs) is recognised to be the world of the cultural holder and to be part of and add to the world of all others. Again, although often described as priceless, these intangible aspects of a culture have a value.

Once it is acknowledged that the extinguishment of native title may involve the diminution or eradication of the capacity of the holders of native title to practise and transmit their culture to the next generation in relation to the land the subject of the extinguishing act, and that the act may enable harm to the land which undermines the significance of an aspect of the culture, it is not difficult to accept that the effect of the act may involve this two-sided form of “cultural loss”. This involves no more and no less than acknowledging that the world as a whole, particularly, the Australian experience of the world, is likely to be reduced and impoverished by the reduction and impoverishment of the culture of Australia’s First Nations peoples.

On this basis, this second kind of potential “cultural loss” is suffered by both parties in the notional transaction required by Spencer’s case. If so, it may then be part of the price which the willing but not anxious buyer would pay to the willing but not anxious seller to secure the required extinguishment, recognising that the world as a whole, and the Australian experience in particular, may be diminished by the extinguishing effect of the compensable act. This potential kind of economic loss did not arise for consideration in Timber Creek. Accordingly, assuming that “cultural loss” is incapable of constituting economic loss reflects only a consideration of the first, and not the second, potential form of “cultural loss”. It follows that while the principle against double-compensation is fundamental, that principle is not necessarily engaged by considering the second form of “cultural loss” in evaluating economic loss. [11]

Third, Timber Creek did not provide an occasion to explore the potential relevance of the fact that s 51 of the NTA (the entitlement to compensation for the effect of an act on native title) appears to be (and in Timber Creek was apparently assumed to be) inconsistent with the application of the Pointe Gourde principle.[12] The Pointe Gourde principle is that any decrease or increase in the value of the right or interest acquired as a result of the scheme of which the acquisitions forms part must be disregarded. In Timber Creek, the High Court implicitly recognised that the Pointe Gourde principle was excluded by accepting that the benefit of the extinguishment to the governing body responsible for the extinguishing act could inform the amount the body would have been prepared to pay for the consensual extinguishment of the rights and interests.[13] This apparent exclusion of the Pointe Gourde principle may be significant for future compensation claims.

Fourth, Timber Creek did not raise for consideration the potential relevance of special value as a component of economic loss caused by a compensable act. The potential relevance of special value in the context of the extinguishment of native title remains for future exploration. Special value reflects the fact that compensation must be for the economic value to the owner of the extinguished rights and interests. Special value reflects the fact that because the rights and interests may give the owner a potential to use or exploit the land in a way not shared by others, the economic value of the rights and interests to the owner is greater than its value to the rest of the market (that is, market value as determined under Spencer’s case). Special value, accordingly, is economic value over and above the market value of the land. It is not difficult to envisage that the extinguishment of native title rights and interests (such as for resource use and trade) may give rise to claims for special value as a component of economic loss.

Fifth, Timber Creek did not raise for consideration the potential relevance of severance, injurious affection and disturbance as components of economic loss caused by a compensable act. Given that native title rights and interests generally cover large swathes of land without reference to lot or other boundaries, it is again not difficult to envisage that native title rights and interests may give rise to claims for severance, injurious affection, and disturbance as components of economic loss.

Sixth, Timber Creek did not raise for consideration or explore any potential conceptions of the economic value of native title rights and interests by reference to criteria other than a hierarchy descending from exclusive to non-exclusive rights and interests. Reflecting the competing cases for the parties, exclusive rights were characterised as potentially equivalent to 100 per cent freehold value, with non-exclusive rights necessarily being worth less than this 100 per cent freehold value.[14] However, there are other potential axes of economic value unconnected to the exclusivity/non-exclusivity of the rights not explored in Timber Creek. These would include (a) the potential for special value claims, (b) the nature of the native title rights (commercial or not, frequency, intensity), (c) the importance of the native title rights in the overall system of traditional laws and customs, and (d) “cultural loss” as involving a two-sided loss experienced by all (of the second kind described above), being a form of economic loss.

Seventh, the reasoning in Timber Creek proceeds on the basis that s 51A of the NTA operates on the method of assessment of compensation to be carried out under s 51 by requiring that the native title rights and interests be conceived of in a manner analogous to western common law hierarchical property rights descending from a fee simple interest at the top, to a mere non-exclusive equity of some kind at the bottom. On this basis, the reasoning process in Timber Creek focused on the non-exclusivity of the native title rights and interests and conceived of them as essentially usufructuary, akin to a common law easement or profit à prendre, which fell to be valued accordingly.[15]

One issue which arises from this is whether, by capping the maximum compensation to the freehold value of the land the subject of the native title rights and interests as if the land had been compulsorily acquired, s 51A operates either: (a) on the method of assessment itself (by requiring the conception of native title rights as existing on a scale descending from exclusive rights the equivalent of a fee simple interest to non-exclusive rights the equivalent of a non-exclusive easement or profit à prendre) which was the basis for the reasoning in Timber Creek, or (b) as a mere cap on an assessment to be carried out in accordance with s 51 by reference to the native title rights and interests as they are manifested in and by the evidence in the particular case, in which the concepts of exclusivity and non-exclusivity of the native title rights and interests may be of no particular significance to their value.

A related issue arising is if s 51A does operate on the method of the assessment required under s 51 and not as a mere cap then, and in any event, the orthodox approach to judicial valuation is not to reject any method of valuation “that, in expert hands, is capable of yielding a result within bounds that are not unreasonable”.[16] The reasoning in Timber Creek does not suggest any departure from this principle, thereby leaving it for future consideration whether valuation methods other than those considered in Timber Creek may be useful.[17]

Another related issue is that if the analogy of non-exclusive native title rights and interests to a form of non-exclusive easement or profit à prendre is appropriate on the evidence in any particular case, it is not self-evident that the economic value of a non-exclusive easement or profit à prendre would be determined solely by reference to the exclusive or non-exclusive nature of the interest. Other considerations would be relevant. These considerations might include: (a) the net present value of any economic activity authorised by the interest, (b) any potentiality of the land the subject of the interest which the owner alone can exploit (a special value style consideration), and (c) any relationship between the capacity to exploit the interest and the capacity to exploit other land (a severance style consideration). It is not immediately apparent why similar considerations might not also be relevant to any claim relating to the extinguishment of native title rights and interests, whether exclusive or non-exclusive.

A further related issue is the importance of the fact that s 51A of the NTA does not cap the compensation payable as the market value of the land the subject of the native title rights and interests. The cap in s 51A is the value of the land the subject of the native title rights and interests which is subject to total extinguishment of native title by the compensable act as if it were a compulsorily acquired freehold estate. The market value of land is only one component of the freehold value. As noted, the freehold value can include special value severance value, injurious affection value, and disturbance.

Eighth, valuation law has always distinguished between valuation for the purpose of revenue collection and valuation for the purpose of compensation. In respect of the former, the approach is informed by the need to be conservative so there is no over-payment to the government. In respect of the latter, the approach has always been beneficial and liberal so there is no under-payment to the dispossessed person. This principle is not discussed in Timber Creek. The principle is important because it informs both the range of reasonable values and the selection of the value within that range. This further informs the identification of error of principle by an appellate court, such as the High Court’s conclusion of manifest excessiveness in Timber Creek. [18]

These issues, and no doubt others, are all significant and remain for future consideration. Timber Creek is the start of the development of legal principle for the assessment of compensation under the NTA, not the end.

II. The common law approach to judicial valuation

The common law reasoning process is infinitely adaptable. If a dispute is justiciable and within jurisdiction, the common law does not permit a court to shirk its duty. It must decide. There is no “too hard” basket into which judges may cast the imponderable, the indeterminate or the inscrutable. The common law reasoning process always finds a way.

Given this, it is not unexpected that lack of certainty is accommodated in judicial valuation. Judges involved in any form of judicial valuation accept that:

  • “…mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best it can” ;[19]
  • the “assessment of damages ... does sometimes, of necessity involve what is guess work rather than estimation” ;[20] and
  • “[i]t may be that, in at least some cases, it is necessary or desirable to distinguish between a case where a plaintiff cannot adduce precise evidence of what has been lost and a case where, although apparently able to do so, the plaintiff has not adduced such evidence. In the former kind of case it may be that estimation, if not guesswork, may be necessary in assessing the damages to be allowed. References to mere difficulty in estimating damages not relieving a court from the responsibility of estimating them as best it can may find their most apt application in cases of the former rather than the latter kind”. [21]

Consider too the common law’s ready acceptance that:

Valuation is not a science. It is an imprecise, opinionative activity involving the consideration of many variables, sometimes with equally legitimate outcomes.[22]

The common law also accepts that:

…in all valuations, judicial or other, there must be room for inferences and inclinations of opinion which, being more or less conjectural, are difficult to reduce to exact reasoning or to explain to others. Everyone who has gone through the process is aware of this lack of demonstrative proof in his own mind, and knows that every expert witness called before him has had his own set of conjectures, of more or less weight according to his experience and personal sagacity. In such an inquiry as the present, relating to subjects abounding with uncertainties and on which there is little experience there is more than ordinary room for such guesswork; and it would the very unfair to require an exact exposition of reasons for the conclusions arrived at.[23]

The common law has also long recognised that compensation, whatever its context, may include compensation for loss logically incapable of reduction to a monetary equivalent. For example, in the law of defamation, damages for non-economic loss include injury to reputation and injury to feelings. Damages must both vindicate the plaintiff’s reputation and compensate for the hurt occasioned by the tort. In the law of negligence causing personal injury, damages for non-economic loss include compensation for pain and suffering, loss of enjoyment of life (which includes the objective loss and the subjective perception of the loss), and loss of the expectation of life.

Reputation, feelings, hurt, pain and suffering, loss of enjoyment of life, loss of the expectation of life – placing a monetary value on these matters is to determine the indeterminate and measure the immeasurable. The common law does not blink or hesitate. It absorbs and expands as the occasion requires. And along the way, it develops principle to explain the apparently inexplicable.

III. Timber Creek – economic loss (market value and more)

The High Court in Timber Creek accepted that just terms compensation to native title holders for any “loss, diminution, impairment or other effect of the act on their native title rights and interests” as required by s 51(1) of the NTA required an assessment of economic and non-economic loss.[24] This reflects the orthodox approach of common law reasoning by analogy to other forms of compensation, be they non-statutory or statutory.

For the same reasons, the fact that, for assessing economic loss, the majority reasoning of the High Court in Timber Creek (that of Kiefel CJ, Bell, Keane, Nettle and Gordon JJ) adapted the fundamental principle of market value established in Spencer’s case should not have been unexpected.[25] The notional bargain approach to market value established by Spencer’s case is now deeply rooted in common law psyches.

The hypothetical nature of Spencer’s case means it too is infinitely adaptable. The full statement of principle, best stated by Isaacs J in Spencer’s case, is worth repeating. It is that, at the day of the required assessment and that day alone:

…is the opinion regarding the fair price of the land, which a hypothetical prudent purchaser would entertain, if he desired to purchase it for the most advantageous purpose for which it was adapted. The plaintiff is to be compensated; therefore he is to receive the money equivalent to the loss he has sustained by deprivation of his land, and that loss, apart from special damage not here claimed, cannot exceed what such a prudent purchaser would be prepared to give him. To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.[26]

Another salient point which Isaacs J made about market value in Spencer’s case is also worth reiterating:

[…the question is] what is the point at which the parties would meet; what is the sum the one would be willing to give and the other to take? That is practically the same as asking what is the highest sum such a purchaser would give, because we must assume the owner would be willing to take the best he can get. The best he can get in those circumstances is the test of what he loses, and it is his loss which must be replaced. [27]

It is apparent that in this formulation:

  • while referring to the taking of a fee simple interest, the approach is capable of being applied to any proprietary or quasi-proprietary right or interest;
  • the approach is based on a hypothetical sale of the right or interest on the relevant date;
  • the hypothetical sale is from a hypothetical seller to a hypothetical buyer;
  • the knowledge attributed to the hypothetical seller and hypothetical buyer about the right or interest is also hypothetical – they are each attributed with equal perfect knowledge of the available information about the right or interest at the day of the hypothetical sale;
  • the assumed nature of the hypothetical sale is voluntary and not forced, and willing but not anxious; and
  • the hypothetical sale is on the basis of the highest and best use of the land, and not its actual use at the relevant date because prudent sellers and buyers are assumed to consider the potentialities of the land.

Another important valuation principle is that because the current owner may also be a potential hypothetical buyer, just terms compensation is based on the value to the owner. What this recognises is that land (or an interest in land) may have a value to a current owner over and above its market value. This special value is what a willing but not anxious buyer, including the current owner, would pay for the land rather than fail to attain it.[28] However, this special value to the owner is confined to economic value only (and not, for example, “sentimental” value). Special value is described as the particular potentiality of the land which the current owner alone can exploit for monetary gain, or the additional economic advantage an owner obtains by reason of ownership.[29] As observed by Dixon CJ in Turner v Minister for Public Instruction:

Indeed Spencer’s Case itself does not provide the ultimate test of compensation. An observation made in Minister for Public Works v Thistlethwayte [[1954] AC 475, 491] show that it does not. “It must not be forgotten”, said Lord Tucker for the Privy Council, “that it is the value of the land to the owner that has to be ascertained, and that the willing seller and purchaser is merely a useful and conventional method of arriving at a basic figure to which must be added in appropriate cases further sums for disturbance, severance, special value to the owner and the like”.[30]

It will be apparent that the High Court’s insistence[31] that it is necessary to identify the date of the required assessment of compensation and the nature of the affected native title rights and interests also involves an orthodox approach to the valuation of land and interests in land.

The date is critical because the hypothetical exercise required by Spencer’s case is to be carried out at that date assuming perfect and equal knowledge about the land (or interest) then available to the hypothetical seller and buyer. The relevant date is the date of the extinguishment or other inconsistency with the continued existence, enjoyment or exercise of native title resulting from the act for which there is an entitlement to compensation.

The affected native title rights and interests are critical because what is required is an assessment of “any loss, diminution, impairment or other effect of the act on [those] native title rights and interests”.[32] Chief Justice Kiefel, Bell, Keane, Nettle and Gordon JJ also said in Timber Creek that “it is the incidents of native title rights and interests and not the way in which they might be or not be exercised that is determinative of their nature and thus their economic value”.[33] This should not be misunderstood. Their Honours mean that the issue is what uses are authorised by traditional laws and customs, not what uses were in fact made of the land at the relevant date. This too is orthodox in valuation law. It reflects that compensation is to be assessed by reference to all potentialities of the land or interest in land at the acquisition date (the highest and best use principle),[34] not the actual use made of the land at that date.

IV. Sections 51 and 51A of the Native Title Act

a. The provisions

Section 51 of the NTA (the entitlement to just terms compensation) is to be understood in the context of s 51A.

As noted, the just terms compensation entitlement in s 51(1) of the NTA is for “any loss, diminution, impairment or other effect of the act on their native title rights and interests”. This compensation “may only consist of the payment of money” unless the claimant requests otherwise.[35]

Section 51A(1) provides that:

The total compensation payable under this Division for an act that extinguishes all native title in relation to particular land or waters must not exceed the amount that would be payable if the act were instead a compulsory acquisition of a freehold estate in the land or waters.

As apparent from the discussion above, the freehold value of land is not confined to its market value. The freehold value of land may be reflected in its special value to the owner, and also must include other permissible heads of compensation (which usually extend to severance, injurious affection, and disturbance).

Section 53 also provides for additional compensation to be paid if the compensation otherwise payable would not amount to just terms compensation if the act would result in any acquisition of property other than on just terms as required by s 51(xxxi) of the Constitution.

b. Spencer’s case again

A critical aspect of the reasoning of the majority in Timber Creek is that they accept that Spencer’s case requires the assessment of the compensation required by s 51 for economic loss to result from a two-sided notional transaction for the extinguishment of native title rights and interests. The hypothetical sellers are the native title holders. The hypothetical buyer is the government body wishing to extinguish (in whole or part) the native title rights and interests. Spencer’s case posits that in the notional transaction (in this case for the extinguishment of native title rights and interests) the subject of the transaction (the native title rights and interests) has economic value to both the hypothetical seller and the hypothetical buyer.

This strand of reasoning, that the native title rights and interests have an economic value to both the holders of the rights and interests and to the government body, is apparent throughout the majority judgment. For example, their Honours say:

  • “just as it is necessary to determine the nature and extent of common law proprietary rights and interests as a first step in their valuation, it is necessary to identify the native title rights and interests in question as the first step in their valuation”;[36]
  • “the Claim Group’s rights and interests were essentially usufructuary, ceremonial and non-exclusive. The Claim Group’s rights and interests were perpetual and objectively valuable in that they entitled the Claim Group to live upon the land and exploit it for non-commercial purposes”;[37]
  • “[t]he economic value of the Claim Group’s native title rights and interests fell to be valued accordingly”;[38]
  • “the equality of treatment mandated by s 10(1) of the Racial Discrimination Act, as reflected in s 51 of the Native Title Act, necessitates that the assessment of just compensation for the infringement of native title rights and interests in land include both a component for the objective or economic effects of the infringement (being, in effect, the sum which a willing but not anxious purchaser would have been prepared to pay to a willing but not anxious vendor to obtain the latter’s assent to the infringement, or, to put it another way, what the Claim Group could fairly and justly have demanded for their assent to the infringement) and a component for non-economic or cultural loss (being a fair and just assessment, in monetary terms, of the sense of loss of connection to country suffered by the Claim Group by reason of the infringement)”;[39] and
  • “…the native title rights and interests unquestionably existed and they had a recognisable economic worth which lay in the sum that might fairly and justly have been demanded for their lawful extinction in favour of the Crown. In those circumstances, it is no more artificial to seek to assess their economic value by means of the Spencer test of what a willing but not anxious purchaser would have been prepared to pay to a willing but not anxious vendor in order to buy them (or, more accurately, to obtain the latter’s assent to their extinguishment) than it is to apply the Spencer test to the assessment of just compensation for the compulsory extinguishment of, say, a general law easement or profit à prendre”.[40]

In contrast, Edelman J considered that Spencer’s case had to be adjusted to reflect the fact that the holders of native title would never be willing to sell their rights and interests. As such, his Honour said that s 51 required a “valuation of title which is of great value to the dispossessed party but of no particular significance to the party obtaining the benefit of the extinguishment”.[41] As a result, Edelman J considered that the only relevant aspect of Spencer’s case in the context of s 51 of the NTA was the “price that a person in the position of the Northern Territory would reasonably pay for a surrender of the native title rights”.[42] That is, his Honour posited a one-sided notional transaction involving only the perspective of the government body as notional buyer of extinguishment as the sole determinant of economic value.

The majority view, however, properly reflects:

  • the hypothetical nature of the transaction required by applying Spencer’s case;
  • the infinite adaptability of Spencer’s case to market value; and
  • the scheme of the NTA to recognise and protect native title rights and interests.

The majority approach in Timber Creek also properly reflects that, as Latham CJ observed in Commonwealth v Reeve, it is fundamental that while a seller will never get more than what a buyer is prepared to pay, what a buyer is prepared to pay “is not unaffected by what the [seller] is prepared to take”. [43]

c. How do ss 51 and 51A operate together?

To reiterate, s 51(1) of the NTA specifies the entitlement to compensation – which is an entitlement to just terms compensation for the effect of the act on the holders’ native title rights and interests.

Section 51A(1) applies to the compensation payable – relevantly, for an act which extinguishes all native title rights and interests over land, the total compensation payable is confined to the amount that would be payable if the act were instead a compulsory acquisition of a freehold estate in the land or waters.

In introducing s 51A as an amendment to the NTA in 1998, Senator Minchin said:

…the issue of compensation, when it is dealt with, can take account of the nature of the rights granted and the doing of the activity.[44]

This reflects the fact that the entitlement to compensation is for the effect of the act on the holders’ native title rights and interests.

Accordingly, in the context of s 51(1) of the NTA, there appears to be no room for any equivalent to the Pointe Gourde principle[45] which, in compulsory acquisition law, requires any increase or decrease in value resulting from the government scheme of which the compulsory acquisition forms part to be disregarded. The majority of the High Court in Timber Creek implicitly accepted this when they said “the benefit of extinguishment to the Northern Territory was relevant only in so far as it would have informed the amount that the Northern Territory, as the sole, hypothetical willing purchaser, would have been prepared to pay for the consensual extinguishment of the native title rights and interests”.[46] The fact that ss 51 and 51A of the NTA appear to operate differently in this respect from other compensation statutes may be significant in future claims depending on the value of the extinguishment to the government body.

Senator Minchin also said:

The sort of underlying premise of the Native Title Act is to equate native title with freehold for the purposes of dealing with native title and freehold is the appropriate estate to compare it with. It can amount to, ultimately, a freehold estate, which is the highest estate we recognise.

…Of course, it is not the market value of the freehold. As in the general law in relation to compulsory acquisitions, it can take account of not only the market value but also compensation for severance, injurious affection, disturbance, special value and solatium or other non-economic loss. We are talking about the bundle of compensation payable for an acquisition of freehold.[47]

The Explanatory Memorandum to the Native Title Amendment Bill 1997 says:

This provision [s 51A] equates native title with freehold title for the purposes of the compensation provisions but it does not mean that native title will be regarded in all circumstances as equivalent to freehold. …The compensation needs to be assessed on a case-by-case basis having regard to the nature of the native title rights and interests affected.[48]

In Timber Creek, Kiefel CJ, Bell, Keane, Nettle and Gordon JJ recognised that native title rights and interests involve being connected to land and, by reason of that connection, the capacity to do things on land.[49] Their Honours saw the words “or other effect” in the phrase “any loss, diminution, impairment or other effect of the act on their native title rights and interests” as operating to ensure that the requirement for just terms compensation applied to both an effect on connection and an effect on capacity.[50] They subsequently treated an effect on capacity to use the land as potential economic loss and an effect on connection (referred to as “cultural loss”) as potential non-economic loss.

The majority refers to the parties having agreed on the “bifurcated approach to valuation”, and also said this “was an appropriate way to proceed”.[51] As noted, the bifurcation into economic and non-economic loss is orthodox in valuation law.

An issue for further consideration is whether the first component, economic loss, necessarily excludes any sum reflecting “the sense of loss of connection to country suffered by the Claim Group by reason of the infringement”.[52] What is not self-evident from Timber Creek is the extent to which the allocation of all aspects of “cultural loss” to the non-economic loss component of compensation reflects only the approach of the parties and the evidence they adduced or some broader principle.

To the extent the “sense” of “cultural loss” of the holders of native title caused by an extinguishing act involves the further pain, suffering, hurt, humiliation, diminution, and degradation of these people, their inherited way of life and their way of being in relationship to their country, it is not foreign to our law to enable redress in the form of monetary compensation for this (properly characterised) non-economic loss. It is right that the potential compensation payable includes money for this kind of non-economic loss, as the reasoning in Timber Creek acknowledges.

But it does not follow from accepting that compensation is payable for this kind of loss, that “cultural loss” is wholly and only one-sided (from the perspective of the holders of the rights and interests) and non-economic.

As discussed, there is another potential aspect of “the sense of loss of connection to country suffered by the Claim Group”. It involves recognising that the sense of loss is not a mere “sense” (as in a perception or feeling) at all. That is, the loss is not merely subjective, experienced only by the holders of the native title. It involves an actual and objective loss experienced by all.

The proposition that a person need not share a culture for the person to accept that the continued existence, vitality and richness of the culture has economic value does not seem inherently radical. So conceived of, “cultural loss” can be an objective mutual loss experienced by both the holders and the government body causing the extinguishment which represents the people of the State, Territory or country. As discussed, the potential value of tangible cultural objects, remnants and fragments is repeatedly demonstrated by everyday experience. The potential value of intangible cultural manifestations (languages, rituals, practices, beliefs) is also readily demonstrable. While routinely described as priceless, these tangibles and intangibles have a value which our law has never flinched from assessing.

On this basis, an extinguishing act may result in another form of “cultural loss” experienced by the holders of the native title, the government body wishing to extinguish the native title, the people that government body represents, and indeed the world at large. The loss is the potential impoverishment of the world, particularly the Australian experience of the world, by the diminution or destruction of the capacity of the native title holders to practice and transmit their culture in relation to the land the subject of the extinguishing act, and the associated diminution and potential ultimate destruction of that culture.

Importantly, and as discussed, Spencer’s case attributes to both notional seller and notional buyer equal knowledge of what was available to be known about the interest to be acquired at the relevant time (in this case, knowledge of the native title rights and interests). The notional buyer will therefore be taken to know:

  • the content of the native title rights and interests (what do they permit and authorise to be done on the land, including in terms of the nature of the rights and the frequency and intensity of uses involved);
  • the importance of the particular land to the system of traditional laws and customs continuing and retaining vitality and meaning, including the capacity for rights under those laws and customs to continue in a meaningful way in relation to other land;
  • the supply of land available and suitable for the observance and exercise of the native title rights and interests; and
  • the supply of land available and suitable for implementation of the act which is not subject to native title rights and interests.

Accordingly, the government body as notional buyer wanting to extinguish the native title rights and interests is not taken to be ignorant of the effect of what it is doing. It is taken to know the effect and, subject to the cap in s 51A of the NTA, is taken to have proceeded with the act knowing that it must justly compensate the owners for that effect.

If attributed with knowledge of the overall nature and function of the native title rights and interests partly or wholly extinguished as Spencer’s case requires, why would the potential objective effect of the act as one involving a mutual loss of the continued existence, vitality and richness of the holders’ culture not be a form of economic loss? In the context of the NTA, the culture diminished by extinguishment is that of Australia’s First Nations peoples. Given their history, their place in Australia is unique, as the Preamble to the NTA recognises. Their history is Australia’s history. Their cultures are the unique manifestation of Australia’s landscapes. The continued existence, vitality and richness of those cultures has meaning and value to all.

One reason this is worth further consideration is that approaching “cultural loss” as if it was a subjective experience only of the holders of the native title creates a form of zero sum transaction in which the “loss” of the holders of the native title equals the “gain” of the government body wishing to extinguish the native title and the people that government body represents. This fails to recognise that the people that government body represents includes the holders of the native title. It also assumes that for the government body and the people that government body represents who are not the holders of the native title, the continuing existence, vitality and richness of the traditional laws and customs of Aboriginals and Torres Strait Islander peoples which are the source of the native title are of no potential significance in the hypothetical transaction required by Spencer’s case. But what is the evidentiary or other basis for the proposition that native title rights and interests are “of no particular significance to the party obtaining the benefit of the extinguishment”?[53] If the objective and shared aspect of “cultural loss” is part of economic loss to be assessed by application of the hypothesis in Spencer’s case, that assessment will properly reflect the two-sided nature of the hypothetical transaction.

Another reason this is worth further consideration is that the proper characterisation of the components of the loss involves fundamental considerations of human dignity, both of the holders of the native title and of the other people that the government body represents. If, as the Preamble to the NTA says, the legislation is to “ensure that Aboriginal peoples and Torres Strait Islanders receive the full recognition and status within the Australian nation to which history, their prior rights and interests, and their rich and diverse culture, fully entitle them to aspire”, our law should not turn its face from the full consequences of “cultural loss”, “loss of cultural connection” or “spiritual loss” to all of us. It also should not unintentionally diminish the economic value of what has been lost by reducing to a merely one-sided and subjective experience what is in fact a potential objective loss of tangible and intangible culture experienced by us all.

In dealing with economic loss in Timber Creek, Kiefel CJ, Bell, Keane, Nettle and Gordon JJ said (emphasis added):

Whether or not the value of any given native title is to be equated to freehold value for the purposes of assessing just compensation must depend on the exact incidents of the native title rights and interests. If the native title rights and interests amount or come close to a full exclusive title, it is naturally to be expected that the native title rights and interests will have an objective economic value similar to freehold value. By contrast, if the native title rights and interests are significantly less than a full exclusive title, it is only to be expected that they will have an objective economic value significantly less than freehold value. There is nothing discriminatory about treating non-exclusive native title as a lesser interest in land than a full exclusive native title or, for that reason, as having a lesser economic value than a freehold estate. To the contrary, it is to treat like as like.

… it is plain from the holding in Ward that, because the non-exclusive native title rights and interests in that case did not amount to having “lawful control and management” of the land, the native title holders were not to be assimilated to “owners” but could at best be regarded as “occupiers” and thus could be compensated only at the lesser rate applicable to occupiers.[54]

Their Honours expanded on this later in these terms (emphasis added):

…As was earlier explained, 51A of the Native Title Act read in context and with regard to the purpose of Div 5 of Pt 2 of the Native Title Act equates the economic value of full exclusive native title to the economic value of a freehold interest

Consistently with the aim of the Native Title Act that the economic value of full exclusive native title in land be equated to the economic value of a freehold title in that land, the economic value of non-exclusive native title in land falls to be determined by making an evaluative judgment of the percentage reduction from full exclusive native title which properly represents the comparative limitations on the non-exclusive title relative to a full exclusive native title and then applying that percentage reduction to the economic value of a freehold estate in the land as proxy for the economic value of a full exclusive native title in the land.[55]

Again, their Honours say (emphasis added):

…although native title rights and interests are inalienable, s 51A of the Native Title Act equates the economic value of full exclusive native title to the economic value of unencumbered, freely alienable freehold title and thus, in practical terms, deems the inalienability of full exclusive native title to be irrelevant to the assessment of its economic value. Similarly, just as the inalienability of full exclusive native title is deemed to be irrelevant to the assessment of its economic value, so too must it follow that the inalienability of non-exclusive native title is irrelevant to its economic value; for the latter, as has been explained, falls to be determined by applying the appropriate percentage to the economic value of a freely alienable freehold title.[56]

See, to the same general effect, Gageler J, characterising the valuation as a negotiation “somewhere between the usage value and full value of the freehold title”[57] and Edelman J, by determining the “exchange value” of native title rights by analogy with valuing an easement.[58]

Western Australia v Ward[59], relied on by the majority in Timber Creek, concerned the Mining Act 1978 (WA) which provided for compensation to the owner and occupier for loss and damage resulting from mining operations. “Owner” was defined to include the “person who for the time being, has the lawful control and management” of the land. The High Court accepted that native title rights and interests may satisfy this definition, but in that case the definition was not satisfied as previous grants of pastoral leases had extinguished that right. In this statutory context, the High Court said that the native title holders were not entitled to compensation as owners (in contrast to potential occupiers) of the land.[60]

The majority said in Timber Creek that the reasoning in Ward is to the effect that what the Racial Discrimination Act 1975 (Cth) (emphasis added):

…requires in its application to native title is parity of treatment and there is no disparity of treatment if the economic value of native title rights and interests is assessed in accordance with conventional tools of economic valuation adapted as necessary to accommodate the unique character of native title rights and interests and the statutory context. [61]

A number of questions arise from this:

  • does the reasoning in Ward require native title rights and interests for the purpose of the assessment of compensation under ss 51 and 51A of the NTA (as opposed to the purposes of the Mining Act 1978 (WA)) to be treated as if they exist on a hierarchical scale descending from exclusive (meaning the capacity to exclude others from accessing or using the land) to non-exclusive rights;
  • given that valuation cases tend to be highly fact specific and that (subject to procedural fairness obligations) the judicial valuer is entitled to both adopt, modify or reject parts or all of the valuation approaches of the parties or to deal with the case within the conceptual framework presented by the parties, does the reasoning in Timber Creek focusing on a hierarchical scale of rights from exclusive to non-exclusive simply reflect its immediate context (such as the particular nature of the claims, the evidence, and/or the way in which the first instance hearing and appeals were conducted) or some broader principle; and
  • what might parity of treatment require on the evidence in any particular case which extends beyond the conception of native title rights and interests as existing along a single axis from exclusive to non-exclusive?

What is clear is that the “conventional tools of economic valuation” do not confine an assessment of value to the consideration of the exclusive or non-exclusive nature of the rights compulsorily acquired. If native title rights and interests are conceived of as akin to an easement or profit à prendre because they are non-exclusive rights, the value of that kind of right is not necessarily dictated by its exclusivity or non-exclusivity. The valuation methods appropriate to be applied would depend on the nature of the highest and best uses authorised by the rights. Depending on the authorised uses, the methods may include assessments of: (a) the net present value of any economic activity authorised by the interest, (b) any potentiality of the land the subject of the interest which the owner alone can exploit (a special value style claim), and (c) any relationship between the capacity to exploit the interest and the capacity to exploit other land (a severance style consideration).

Other considerations are also relevant.

The concept of “full exclusive native title” is not to be found in the NTA or the explanatory material relating to the introduction of s 51A. It is derived from Ward, which involved a compensatory scheme for the owner and occupier of land “according to their respective interests…for all loss and damage suffered or likely to be suffered by them resulting or arising from the mining”.[62]

In observing that the “sort of underlying premise of the Native Title Act is to equate native title with freehold for the purposes of dealing with native title”,[63] Senator Minchin was reflecting the scheme of the NTA which recognises and protects native title from extinguishment other than in accordance with the NTA. He was not saying that, for the purposes of assessing compensation, it must be assumed that native title rights and interests themselves reflect the kind of proprietary hierarchy that the common law recognises, with the fee simple legal interest at the top and a mere equity of some kind at the bottom. Nor was he saying that it was necessary that native title rights and interests be assessed to determine how nearly they equate to a freehold interest. He was saying that native title rights and interests should have the same potential maximum value as a freehold interest subject to compulsory acquisition (where, as noted, compensation is not limited to the market value of the interest acquired).

Spencer’s case also does not dictate that native title rights and interests are to be categorised as if non-exclusive rights are always of lesser economic value than exclusive rights (assuming the rights relate to the same land). Under Spencer’s case, whether that is so in any case would depend on, at the least, the nature of the rights otherwise (that is, what do they permit and require), as well as the position of the holder of the rights in respect of other land potentially affected by the acquisition of the rights.

It has also long been recognised that assumptions about native title rights and interests being equivalent to common law estates should not be made. In Amodu Tijani v the Secretary, Southern Nigeria, Viscount Haldane said:

There is a tendency, operating at times unconsciously, to render that title conceptually in terms which are appropriate only to systems which have grown up under English law. But this tendency has to be held in check closely…

… [there is a] necessity for getting rid of the assumption that the ownership of land naturally breaks itself up into estates, conceived as creatures of inherent legal principle.[64]

Given this, conceiving of native title rights and interests as if they exist only along one vertical axis with exclusive rights at the top and non-exclusive rights at the bottom may reflect the conceptual framework the parties presented in Timber Creek, but may not otherwise reflect the full circumstances relevant to any particular case. In Mabo (No 2), Brennan J said that:

…there is no reason why the common law should not recognize novel interests in land which, not depending on Crown grant, are different from common law tenures.[65]

Justices Deane and Gaudron also said in Mabo (No 2) that:

The preferable approach is that adopted in Amodu Tijani …at p 403 and by Dickson J in the Supreme Court of Canada in Guerin v The Queen (1984) 13 DLR (4th), at p 339, namely, to recognize the inappropriateness of forcing the native title to conform to traditional common law concepts and to accept it as sui generis or unique.[66]

It follows that other axes for assessing the potential economic value of native title may be available. Exclusivity/non-exclusivity may be one relevant axis. In ascertaining a meeting point between a notional seller and notional buyer for the extinguishment of the native title rights and interests, other potential axes of economic value could include (by way of example only):

  • the content of the native title rights and interests (what do they permit and authorise to be done on the land, including in terms of the nature of the rights and the frequency and intensity of uses involved);
  • the importance of the particular land to the system of traditional laws and customs continuing and retaining vitality and meaning, including the capacity for rights under those laws and customs to continue in a meaningful way in relation to other land; and
  • the supply of land available for both the exercise of the native title rights and interests and the implementation of the act.

As also discussed, special value may be of particular significance in a case of commercial rights which the native title holders alone can exploit (eg, fishing rights). This potential special value, irrespective of the exclusivity or otherwise of the rights, may exceed the mere market value of the land, but this special value is itself part of the overall freehold value of the land for which there is to be compensation under ss 50 and 51A of the NTA.

Turning to the statutory provisions again, s 51A does not amend s 51. Section 51 still provides that:

…the entitlement to compensation under Division 2, 2A, 2B, 3 or 4 is an entitlement on just terms to compensate the native title holders for any loss, diminution, impairment or other effect of the act on their native title rights and interests.

The focus of s 51A is not “the entitlement to compensation”. Section 51A focuses on the compensation payable. This indicates that there is an issue about the operation of s 51A. The issue is whether s 51A is a starting point from which the assessment of compensation to be carried out under s 51 is to begin, or a finishing point which caps the payment that may be made as a result of an assessment of compensation under s 51.

Timber Creek pre-supposes that s 51A is the starting point for any assessment, but again this may reflect no more than the framing of the arguments and evidence in that case. In any event, on this approach, as in Timber Creek, the freehold value of the land subject to total extinguishment must be assessed first. With that maximum starting point fixed, the only possible direction for the assessment thereafter in Timber Creek was downwards, necessarily resulting in compensation below (and not, for example, at) the s 51A cap. Considerations arguably supporting this approach include that:

  • the attribution of monetary value to the effect of an act on native title rights and interests is necessarily evaluative and judgemental, and by s 51A the legislature has determined that the maximum value of those rights in relation to any land cannot exceed the freehold value of that land. Effect must be given to this apparent legislative intention in the assessment of the entitlement to compensation under s 51 and not merely the payment of compensation under s 51A; and
  • if, as is the case, s 51A fixes the maximum compensation for extinguishment of all native title rights and interests as the freehold value of the land to which the act relates, then it logically follows that compensation for partial extinguishment must reflect that approach, despite s 51A not applying to partial extinguishment.

If, however, s 51A were to be treated as a finishing point, the entitlement to compensation would be assessed in accordance with s 51. If s 51A is engaged, the cap would apply to the payment of compensation for that act. If the assessment under s 51 is greater than the freehold value of the land subject to total extinguishment, the payment would be confined to that freehold value. Considerations arguably supporting this approach include that:

  • s 51 provides for an entitlement to compensation not by reference to the freehold value of the land to which the act relates, but by reference to the effect of the act on native title rights and interests of the holder. The concept of “effect”, even on the narrowest conception of economic value, is not confined to the land to which the act relates but may extend to the effect on the economic value of native title rights and interests in other land. Whether that is so or not would be fact-dependent; and
  • s 51A says nothing about the value of native title rights and interests or how that should be assessed. It says only that if it applies, the payment of compensation must not exceed the freehold value of the land subject to total extinguishment of native tile rights and interests by reason of the act.

The majority in Timber Creek said that “it is neither irrational nor surprising that the economic value of native title rights and interests in developed areas should, in many cases, prove to be greater than the economic value of comparable native title rights and interests in a remote location” because it may be taken that:

a willing purchaser would be likely to pay more to achieve the extinguishment of native title rights and interests over high-value land in a developed area (given that the economic potential of that kind of land is likely to be greater) than for the extinguishment of native title rights and interests over low-value land in a remote area (where the economic potential of the property is likely to be sparse).[67]

These observations are valid because, in accordance with the Spencer’s case hypothesis, they recognise that both notional seller and buyer are taken to know what can be known about the land and the market as a whole at the date of the act.

Another orthodox observation is made in Timber Creek when their Honours said:

…the benefit of extinguishment to the Northern Territory was relevant only in so far as it would have informed the amount that the Northern Territory, as the sole, hypothetical willing purchaser, would have been prepared to pay for the consensual extinguishment of the native title rights and interests.[68]

In Timber Creek the primary judge was found to have erred in principle by not sufficiently recognising that the native title rights and interests were:

essentially usufructuary, ceremonial and non-exclusive, without power to prevent other persons entering or using the land or to confer permission on other persons to enter and use the land, without right to grant co-existing rights and interests in the land, and without right to exploit the land for commercial purposes.[69]

The majority said further that the primary judge’s estimate that the native title rights and interest should be assessed as 80% of the freehold value was manifestly excessive. Their Honours continued:

Granted, the determination of the appropriate percentage calls for an evaluative judgment about which reasonable minds might sometimes differ. But here, given the native title was devoid of rights of admission, exclusion and commercial exploitation, a correct application of principle dictates on any reasonable view of the matter that those non-exclusive native title rights and interests, expressed as a percentage of freehold value, could certainly have been no more than 50 per cent. The Full Court’s estimate of 65 per cent was plainly so high relative to the limited extent of the native title rights and interests as to bespeak error of principle.[70]

This reflects the single conceptual axis for economic value by reference to the exclusive/non-exclusive nature of the rights which underpins the Timber Creek decisions.[71] As the majority of the High Court observed in Timber Creek: “simplicity and economy is surely to be encouraged”. But, as discussed, depending on the evidence, the required statutory task of “assessing the freehold value of the subject land and applying the appropriate percentage discount according to the nature of the native title rights and interests in suit” [72] may not be capable of analysis along the single economic value axis of exclusive/non-exclusive rights.

One further observation which should be made is this – because the context is the taking of a right or interest (that is, extinguishment) and s 51A of the NTA specifically refers to “the amount that would be payable if the act were instead a compulsory acquisition of a freehold estate”, another principle applies. It is that doubts are to be resolved in favour of the dispossessed. Justice Dixon (as his Honour then was) explained this principle in Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co of South Australia Limited in these terms:

…there is some difference of purpose in valuing property for revenue cases and in compensation cases. In the second the purpose is to ensure that the person to be compensated is given a full money equivalent of his loss, while in the first it is to ascertain what money value is plainly contained in the asset so as to afford a proper measure of liability to tax. While this difference cannot change the test of value, it is not without effect upon a court’s attitude in the application of the test. In a case of compensation doubts are resolved in favour of a more liberal estimate,

in a revenue case, of a more conservative estimate.[73]

Valuation processes always involve a reasonable range. The principle of liberality in the compensation context applies to both the range and the ultimate determination of a value within that range.

V. Conclusions

Unsurprisingly, given that valuation cases are highly evidence and fact dependent, many questions remain after Timber Creek.

The observations of Callinan J in Boland v Yates below will continue to be important for future cases:

…There is no legal principle that purports to, or could close for all times the categories of methods of valuation which might be acceptable in a particular case… Valuation practice is, however, like legal practice an evolving discipline.

Wells J recognised the availability of different methods of valuation in Bronzel v State Planning Authority [(1979) 21 SASR 513, 516]:

“… I am not disposed to reject any method of valuation adopted by either valuer on the ground that it is not worth considering; it seems to me that if Spencer’s case … is to keep its practical worth in this jurisdiction, this Court should be slow to reject any method that, in expert hands, is capable of yielding a result within bounds that are not unreasonable. The limitations of every method must, of course, always be kept clearly in mind. I am of the opinion that the approach likely to result in the most direct and reliable resolution of the outstanding differences between the valuations is to consider the particular features of each valuation that are capable of yielding to adverse criticism.” [74]



This paper will be published in a forthcoming edition of the Australian Law Journal.

**Judge, Federal Court of Australia. Aspects of this article were originally presented at the National Judicial College of Australia’s 30th Anniversary of Mabo Conference on the Sunshine Coast on 3 June 2022. I wish to thank my Associate 2022/2023, Amelia Loughland, for research and other assistance in the preparation of this paper.

[1] Northern Territory v Griffiths (2019) 269 CLR 1 (Timber Creek).

[2] Timber Creek (2019) 269 CLR 1, 46 [54] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).

[3] Spencer v The Commonwealth (1907) 5 CLR 418 (Spencer’s case), Timber Creek (2019) 269 CLR 1, 43–44 [44]–[46], 56–57 [84] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).

[4] Timber Creek (2019) 269 CLR 1, 50 [66], 57–58 [85] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).

[5] Timber Creek (2019) 269 CLR 1, 53– 54 [76], 65–66 [106]–[107] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).

[6] Akiba v Commonwealth (2013) 250 CLR 209, 219–220 [10] (French CJ and Crennan J).

[7] Akiba v Commonwealth (2013) 250 CLR 209, 219–220 [10] (French CJ and Crennan J) citing Yanner v Eaton (1999) 201 CLR 351, 373 [38] (Gleeson CJ, Gaudron, Kirby and Hayne J).

[8] Timber Creek (2019) 269 CLR 1, 95 [187] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ): “Spiritual connection identifies and refers to a defining element in a view of life and living. It is not to be equated with loss of enjoyment of life or other notions and expressions found in the law relating to compensation for personal injury. Those expressions do not go near to capturing the breadth and depth of what is spiritual connection with land”.

[9] Timber Creek (2019) 269 CLR 1, 109–110 [237] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).

[10] Timber Creek (2019) 269 CLR 1, 65 [105] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).

[11] Cf Timber Creek (2019) 269 CLR 1, 65 [105] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).

[12] Pointe Gourde Quarrying & Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565 (Pointe Gourde).

[13] Timber Creek (2019) 269 CLR 1, 65 [104] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).

[14] See the discussion in T Dews, ‘Mabo and the Valuation Vibe: Substantive Equality in the Timber Creek Compensation Case’ (2021) 43(3) Sydney Law Review 391, in respect of the alignment of this approach with the requirement of substantive, as opposed to formal, equality.

[15] Timber Creek (2019) 269 CLR 1, 51 [69]–[70], 57–58 [85] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).

[16] Bronzel v State Planning Authority (1979) 21 SASR 513, 516 (Wells J) cited by Callinan J in Boland v Yates Property Corp Pty Ltd (1999) 167 ALR 575, 653 [283] (Boland v Yates).

[17] The majority in Timber Creek (2019) 269 CLR 1, 59–61 [88]–[94] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ) rejected the method of Mr Lonergan, valuer, as it was based on the valuation of land other than the land the subject of the native title rights and interests. See, however, n 43 in relation to the potential use of the reinstatement method of valuation for the assessment of compensation.

[18] Timber Creek (2019) 269 CLR 1, 65–66 [106] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).

[19] Commonwealth v Amann Aviation Pty Ltd (1992) 174 CLR 64, 83 (Mason CJ and Dawson J).

[20] Jones v Schiffmann (1971) 124 CLR 303, 308 (Menzies J).

[22] Electricity Commission of New South Wales (t/as Pacific Power) v Arrow (1994) 85 LGERA 418, 419 (Meagher JA).

[23] Secretary of State for Foreign Affairs v Charlesworth, Pilling & Co (1901) AC 373, 391 (Lord Hobhouse).

[24] Timber Creek (2019) 269 CLR 1, 43–44 [44]–[46], 56–57 [84] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).

[25] Timber Creek (2019) 269 CLR 1, 50 [66], 57–58 [85] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).

[26] Spencer’s case (1907) 5 CLR 418, 440–441.

[27] Spencer’s case (1907) 5 CLR 418, 441–442.

[28] Pastoral Finance Corporation v The Minister [1914] AC 1083, 1088 (Lord Moulton).

[29] Raja’s Case [1939] AC 302, 312 (Lord Romer); Housing Commission of New South Wales v Falconer [1981] 1 NSLWR 547, 572–573 (Mahoney JA); Boland v Yates (1999) 167 ALR 575, 654 [292] (Callinan J). The reference in Timber Creek (2019) 269 CLR 1, 57 [84] to special value being a “subjective or non-economic component” of compensation may be a slip.

[30] Turner v Minister of Public Instruction (1956) 95 CLR 245, 267.

[31] See Timber Creek (2019) 269 CLR 1, 46 [55] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).

[32] Native Title Act 1993 (Cth) s 51(1).

[33] Timber Creek (2019) 269 CLR 1, 55–56 [81].

[34] Turner v Minister of Public Instruction (1956) 95 CLR 245.

[35] Native Title Act 1993 (Cth) s 51(5)–(6).

[36] Timber Creek (2019) 269 CLR 1, 50–51 [68].

[37] Timber Creek (2019) 269 CLR 1, 51 [69].

[38] Timber Creek (2019) 269 CLR 1, 51 [70].

[39] Timber Creek (2019) 269 CLR 1, 56–57 [84].

[40] Timber Creek (2019) 269 CLR 1, 57–58 [85].

[41] Timber Creek (2019) 269 CLR 1, 113 [251].

[42] Timber Creek (2019) 269 CLR 1, 122 [281].

[43] (1949) 78 CLR 410, 418. It will be apparent that I take a different view about the use of Spencer’s case from that in W Isdale, Compensation for Native Title (Federation Press, 2022) 83–84. Isdale considers that the High Court’s adaptation of Spencer’s case was mistaken. The reasons given for that view are that the adapted Spencer’s case improperly looks to the gain made by the acquirer and does not focus on value to the owner. First, Spencer’s case does not look to the gain made by the acquirer. It focuses on the point at which the seller and acquirer would meet having regard to the highest and best use of the land. Further, the Pointe Gourde principle would ordinarily preclude focus on any gain that is a result of the scheme of which the acquisition forms part. It is the terms of the Native Title Act 1993 (Cth) s 51 which enable consideration of the value of the act to the acquirer. Second, Spencer’s case does not exclude consideration of value to the owner. Spencer’s case includes the owner as a hypothetical acquirer of the interest and, accordingly, if there is special value to the owner, that special value has always been accepted to be compensable. Otherwise, it is not possible, within the confines of this article, to discuss Isdale’s overall proposition that reinstatement value should be the preferred method for valuation of native title rights and interests under the NTA. Reinstatement value is rarefied in valuation principle. Numerous questions would arise if a claim were made on that basis. It may be that reinstatement value could function as a potential check on compensation under the NTA, as Isdale posits at 108, but this too would require further exploration. I agree with another of Isdale’s key propositions that much remains in the development of jurisprudence in this area, to which Isdale has made a significant contribution.

[44] Commonwealth, Parliamentary Debates Senate, 3 December 1997, 10231 (Nick Minchin).

[45] Pointe Gourde [1947] AC 565.

[46] Timber Creek (2019) 269 CLR 1, 65 [104] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).

[47] Commonwealth, Parliamentary Debates Senate, 3 December 1997, 10231 (Nick Minchin).

[48] Explanatory Memorandum, Native Title Amendment Bill (Cth) 244 [24.8].

[49] Timber Creek (2019) 269 CLR 1, 38 [23], 43 [44]–[45].

[50] Timber Creek (2019) 269 CLR 1, 43–44 [45]–[46].

[51] Timber Creek (2019) 269 CLR 1, 56–57 [84].

[52] Timber Creek (2019) 269 CLR 1, 56–57 [84].

[53] Timber Creek (2019) 269 CLR 1, 113 [251] (Edelman J).

[54] Timber Creek (2019) 269 CLR 1, 53 [74]–[75].

[55] Timber Creek (2019) 269 CLR 1, 60 [90]–[91].

[56] Timber Creek (2019) 269 CLR 1, 64 [101].

[57] Timber Creek (2019) 269 CLR 1, 112 [248]–[249].

[58] Timber Creek (2019) 269 CLR 1, 124–129 [288]–[303].

[59] (2002) 213 CLR 1, 168–171 [317]–[323] (Gleeson CJ, Gaudron, Gummow and Hayne JJ) (Ward).

[60] Ward (2002) 213 CLR 1, 168–169 [317] (Gleeson CJ, Gaudron, Gummow and Hayne JJ).

[61] Timber Creek (2019) 269 CLR 1, 53–54 [76] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).

[62] Ward (2002) 213 CLR 1, 167–168 [313] (Gleeson CJ, Gaudron, Gummow and Hayne JJ).

[63] Commonwealth, Parliamentary Debates Senate, 3 December 1997, 10231 (Nick Minchin).

[64] [1921] 2 AC 399, 403.

[65] Mabo v Queensland (No 2) (1992) 175 CLR 1, 49 (Mabo No 2).

[66] Mabo No 2 (1992) 175 CLR 1, 89.

[67] Timber Creek (2019) 269 CLR 1, 61–62 [96] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).

[68] Timber Creek (2019) 269 CLR 1, 65 [104] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).

[69] Timber Creek (2019) 269 CLR 1, 65–66 [106].

[70] Timber Creek (2019) 269 CLR 1, 65–66 [106].

[72] Timber Creek (2019) 269 CLR 1, 60–61 [92] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).

[73] (1947) 74 CLR 358, 373–374.

[74] (1999) 167 ALR 575, 653 [280].


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