FMG Pilbara Pty Ltd v Cox

STATUTORY FRAMEWORK 6 Registered native title claimants or holders have the benefit of a negotiation procedure set out in ss 29-35 of the Act. It commences with the issuing of a notice, in this instance by the State, in a manner specified in s 29, of an intention to do a future act. 7 Section 31(1)(b) then obliges the negotiation parties as described in s 30A (in this case the State, PKKP, WGAC and FMG) to negotiate in good faith with a view to obtaining the agreement of each of the native title parties to the doing of the act (possibly with conditions). 8 By s 35(1), if no agreement is reached and at least 6 months have passed since the 'notification day' described in s 29, any negotiation party may apply to the Tribunal for a determination under s 38 in relation to the Act. 9 Significantly to this and all such negotiations, there is nothing to prevent the negotiation parties continuing to negotiate after an application under s 35 is lodged. Indeed the Act expressly contemplates that negotiations may continue (s 35(3)). 10 The Tribunal however must not make a determination if satisfied by a negotiation party that any other negotiation party (other than a native title party) did not negotiate in good faith - s 36(2) of the Act. 11 In the final paragraph of its decision, the Tribunal concluded that it lacked the jurisdiction to make an arbitral determination, due to the absence of good faith within the meaning of s 35(1) of the Act. PKKP contended (relying on Walley v Western Australia (1996) 67 FCR 366 at 373), that negotiation in good faith was a jurisdictional precondition. However the statutory prohibition at s 36(2) affects the 'power' of the Tribunal to make an arbitral determination rather than its 'jurisdiction'. The prohibition on exercise of the power only arises when the good faith point is both taken and taken successfully by a negotiation party. If there were no good faith but the point were not taken, the Tribunal would still have jurisdiction and power. The power to make a determination is a function of the jurisdiction conferred on the Tribunal. 12 This appeal (under s 169 the Act) is restricted to questions of law. There is no challenge to any of the facts found by the Tribunal.

THE TRIBUNAL DECISION AND THE BASIS OF APPEAL 13 FMG contends, contrary to the determination of the Tribunal, it complied with s 31(1)(b) of the Act in relation to both native title respondents. It points to the fact that the Tribunal found that: (a) FMG had negotiated with PKKP in good faith throughout the period between the s 29 notification day and the making of FMG's application under s 35 of the Act including diligently advancing negotiations over a draft LAA; (b) it was entirely appropriate for FMG to seek to negotiate a broader agreement involving all of its 'projects' in the relevant claim area (a 'whole of claim' agreement) as provided for in each draft LAA, as distinct from doing so on a proposed tenement by tenement basis; and (c) PKKP had agreed to the grant of the proposed tenement the subject of the future act determination (the Proposed Tenement) being covered by the draft LAA so that negotiations over the LAA would encompass those in respect of the Proposed Tenement. 14 From these findings it follows, according to FMG, that the Tribunal erred in two ways. First it erred in concluding that FMG was obliged both to continue to negotiate with PKKP beyond the six month period specified in s 35 of the Act in order to satisfy the requirements of good faith negotiation under s 31(1)(b) of the Act. Secondly, it is argued that the Tribunal erred in concluding that FMG was bound to negotiate with WGAC on the specific tenement the subject of the future act and the s 35 application, when negotiation on the 'whole of claim' basis failed. 15 On the first issue, the Tribunal concluded (at [91]) that although FMG had approached negotiations with PKKP in relation to the LAA in a manner which was reasonable and honest, it had not advanced those negotiations to a stage where it could be said that it had discharged its duty to negotiate in good faith. The Tribunal concluded that the duty to negotiate in good faith was not discharged where one party unilaterally concluded the negotiations which were at an embryonic stage before agreement could be reached. 16 On the second issue, (that FMG was in error in not also negotiating specifically about the grant of the Proposed Tenement), the Tribunal concluded the basis on which FMG formulated its offer was not unreasonable in relation to the financial package. Further, the Tribunal found that the evidence supported the contention that PKKP and WGAC had agreed to include negotiations about the Proposed Tenement in broader discussions. FMG points to the facts found by the Tribunal that the Proposed Tenement was contained within the LAA and that any terms of compensation expressed for the LAA would apply to the tenement. In attempting to negotiate those terms, FMG was found to have acted in good faith but without success. Financial offers and counter offers had been exchanged on three occasions between each of FMG and WGAC. FMG argued that there was no further obligation to revert to WGAC to negotiate specifically only in relation to the Proposed Tenement after negotiations in relation to the whole of claim covered by the draft LAA had broken down.

QUESTIONS OF LAW ARISING 17 In summary, the grounds of appeal raised the following questions of law: 1. whether on the proper construction of s 35 of the Act read with s 31(1)(b), the Tribunal has the power to make a determination under s 38 of the Act regardless of the stage at which negotiations had reached provided that the six month period referred to in s 35(1)(a) had expired and the negotiation party had negotiated in good faith during that period; 2. whether, if a negotiation party is required to negotiate 'about' or 'over' the future act in order to satisfy the requirements of s 31(1)(b), it can only satisfy those requirements by conducting negotiations specifically directed to that future act or whether in the circumstances of this case, FMG could satisfy the requirement to negotiate about the grant of the Proposed Tenement by negotiating on a whole of claim basis where the whole of claim included the grant of the Proposed Tenement.

GOOD FAITH AND THE STATE OF NEGOTIATIONS AT THE TIME OF THE S 35 APPLICATION 18 PKKP strenuously (and correctly) emphasises the beneficial nature of the rights conferred on native title parties under the Act. Correctly, PKKP argue that the right to negotiate regime is an element of the protection of native title which is one of the main objects of the Act and that it is not to be narrowly construed (Smith on behalf of the Gnaala Karla Booja People v State of Western Australia (2001) 108 FCR 442 at [23]). In light of the importance of that factor, the need genuinely to negotiate in relation to a prospective agreement was critical. It was contended that such negotiations must be more than simply 'introductory'. That this was the appropriate construction to be given to s 31 of the Act was clear from the beneficial nature of the rights given to native title parties under the Act. PKKP argues that every reasonable effort must be made to secure agreement through those special rights afforded to native title parties by statute. 19 The expression 'negotiate in good faith' is to be construed in its natural and ordinary meaning and in the context of the Act as a whole: Strickland v Minister for Lands for Western Australia (1998) 85 FCR 303at 319. Accordingly, the act of lodging an application under s 35, taken alone, cannot be relied upon in order to establish bad faith in the negotiating process (Strickland at 322). If negotiations reach a standoff, notwithstanding attempts in good faith to negotiate within the relevant six month period, there are no further obligations after the completion of the six month period on a party which wishes to lodge a notice under s 35 of the Act. There is no need, for example, to give further warning of the intention to do so. 20 It has been repeatedly recognised that the requirement for good faith is directed to the quality of a party's conduct. It is to be assessed by reference to what a party has done or failed to do in the course of negotiations and is directed to and is concerned with a party's state of mind as manifested by its conduct in the negotiations: see, for example, Brownley v Western Australia (No 1) (1999) 95 FCR 152 at [24]-[25] per Lee J, Strickland 85 FCR 303 at 319-320 and Western Australia/Thomas on behalf of the Walgen People/Anaconda Nickel Ltd [1998] NNTTA 8 at [7]-[18]. 21 The scheme of the relevant provisions of the Act recognises Parliament's intention that there must be a good faith period of negotiation in relation to the future act before there is any arbitral determination in relation to the future act. The period of six months provided for in s 35 of the Act ensures that there is reasonable time to enable those negotiations to be conducted. At the same time it permits the matter to be taken forward at the end of the six month period by way of an arbitral determination if the negotiations do not result in agreement. The ongoing protection provided for 'negotiation parties' as defined by s 30A of the Act is that if any such party satisfies the arbitral body, in this case the Tribunal, that another negotiation party (other than the native title party) did not negotiate in good faith, the arbitral body must not make the determination on the application: s 36(2). 22 There are two obligations, therefore, spelt out in the statutory scheme. The first is that the negotiations which are directed to reaching an agreement are to be carried out in good faith and the second is that a period of not less than six months has passed since the date on which the s 29 notice is given. 23 The Tribunal concluded, as PKKP asserted, that there cannot be negotiation for the purpose of s 31(1)(b) of the Act if the negotiations are only embryonic. We do not agree that there is a requirement for negotiations to have reached a certain stage. The Act makes no reference to the parties reaching any particular stage in their negotiations. The interpretation adopted by the Tribunal and contended for by PKKP is an additional requirement which is not to be found in the Act. It puts a gloss on the statutory provisions and places a fetter on a negotiation party's entitlement to make an application under s 35 in order to obtain an arbitral determination. 24 It may be accepted, as contended by PKKP, that it is not sufficient for good faith negotiations to merely 'go through the motions' with a closed mind or a rigid or predetermined position but there is no suggestion at all on the Tribunal's findings that that was the attitude taken by FMG. To the contrary, the Tribunal concluded that FMG approached its negotiations with both native title parties with an open mind. It did initiate communications, did make proposals and did punctually respond to communications. It organised and attended meetings, facilitated and engaged in discussions, made counter-proposals, sent properly authorised negotiators and did not adopt a rigid non-negotiable position ([91]). The Tribunal concluded that FMG had from the outset a genuine desire to reach accord with the native title parties ([75]). 25 Significantly, the conclusions the Tribunal drew were against the background of a contention by PKKP that FMG had 'engaged in disingenuous conduct amounting to obfuscation and pettifoggery'. The Tribunal expressly rejected that submission. 26 Had it upheld that submission, a conclusion of absence of good faith would not have been surprising. However, the Tribunal expressly concluded that FMG had 'discharged its duty fairly and conscientiously' concluding that there was no evidence that it had deliberately avoided negotiating about the Proposed Tenement or that it had engaged in deliberately misleading behaviour designed to avoid engaging in meaningful negotiations ([74]). Indeed, the Tribunal concluded that there had been productive negotiations on the LAA ([57]). 27 'Good faith' is to be construed contextually (that is, it is necessary to identify what the 'good faith' obligation is intended to achieve). That obligation is made obvious by the wording of the provision in which it is found within the context of the statutory scheme. There is no reason to think that the ordinary meaning of 'good faith' should not apply. In the present circumstances there could only be a conclusion of lack of good faith within the meaning of s 31(1)(b) of the Act where the fact that the negotiations had not passed an 'embryonic' stage was, in turn, caused by some breach of or absence of good faith such as deliberate delay, sharp practice, misleading negotiating or other unsatisfactory or unconscionable conduct. 28 The difficulty confronting PKKP is that the Tribunal quite reasonably concluded that FMG had negotiated in good faith during the six month period with a view to reaching the relevant agreement. There is nothing more under the statute that it was required to do. It is not surprising that the Tribunal reached that conclusion as the chronology of events makes it clear that from an early time an extensive draft LAA (exceeding 50 pages) was made available to PKKP dealing with all of the matters which would be expected to arise in such negotiations (as suggested by s 39 of the Act). FMG invited PKKP to participate in negotiations in relation to that draft LAA. Negotiations ensued. It was PKKP who suggested that there should be a negotiation protocol. FMG agreed. Much of the six month period was taken with addressing that topic but it was clearly directed to an attempt to reach agreement for the purposes of s 31(1)(b). 29 PKKP complains that there was only one meeting held following conclusion of the negotiation protocol and at which there was discussion about the sorts of activities that FMG proposed to carry out on its mining interests. FMG complains that PKKP exaggerates the suggestion that this was the only occasion on which there was negotiation as such. Either way, it is clear from the factual conclusions in the Tribunal's reasons that there had been conscientious and bona fide negotiation for a six month period directed towards the agreement required under s 31(1)(b). The conclusion that the negotiations had, notwithstanding their length, only advanced to an embryonic stage and therefore could not fall within the category of negotiations contemplated by s 31(1)(b) is, in our view, not supported by the statutory scheme. 30 The Tribunal made it clear that in the conventional sense there was no finding of an absence of good faith on the part of FMG. In those circumstances the fact that the negotiations had reached only a preliminary stage before expiry of the six month period and before it proceeded with an application under s 35 of the Act could not constitute a failure to negotiate in good faith for the purposes of s 31(1)(b).

INCORPORATION OF NEGOTIATIONS FOR THE FUTURE ACT IN A BROADER RANGE OF DISCUSSIONS 31 The Tribunal held (at [82]) that it would be unreasonable and contrary to the requirements of s 31(1)(b) of the Act for FMG to claim that it had fulfilled its duty to negotiate in good faith to obtain the doing of a future act when it relied upon failed general negotiations which never substantially addressed the specific Proposed Tenement. 32 FMG submits that the Act does not prescribe the manner in which the negotiations are to be conducted other than in requiring 'good faith' directed to achieving agreement. 33 In relation to WGAC, the Tribunal found that the negotiations had reached an impasse over compensation. It held that FMG should have revived limited and specific negotiations over the Proposed Tenement after that impasse. 34 There were very limited findings as to the terms of the three offers made by FMG. However, in a detailed judgment, the Tribunal concluded that the offers were appropriate at least in the sense that there was nothing about them which would lead to a conclusion that they were not made in good faith. Specifically, the Tribunal considered but (understandably) rejected an argument that to the extent that the offers were based on a percentage of compensation for actual production rather than actual profit, they were inappropriately based. 35 At the heart of FMG's appeal is the submission that the Act does not circumscribe the subject matter of the s 31(1)(b) negotiations provided that they are conducted in good faith with a view to obtaining the agreement of the native title party to the doing of the future act. There is some guidance from the statute as to the matters which might be canvassed in negotiations. Section 39 lists a variety of matters which, it has been held, may provide some guidance as to those that may reasonably be expected to form part of the negotiations (see Brownley 95 FCR 152 at [24]-[25]. However, the manner in which they are dealt with (apart from a good faith obligation with a view to obtaining agreement), is not prescribed. 36 It has not been suggested at any time that the native title parties were unaware that the negotiations in relation to each of the LAAs contemplated the grant of mining tenements. Nor is it suggested that they were unaware that amongst those possible tenements was the mining lease which is the Proposed Tenement. There was no doubt on the evidence that FMG provided information about the Proposed Tenement and made it clear that negotiations in relation to the Negotiation Protocol and the draft LAA with PKKP included negotiations for the proposed future act. The Proposed Tenement is included in the proposed future act. Neither of the native title parties raised any objection to the negotiations proceeding on a whole of claim or project wide basis pursuant to the LAA. 37 In Thomas [1998] NNTTA 8 it was observed that the act referred to in s 31(1)(b) of the Act comprises not only, for example, the grant of a mining lease but also rights attaching to it and the exercise of those rights by the lessees. Accordingly, treating a series of related acts which are part of a project 'as single events to be negotiated and arbitrated about separately or in isolation' does not fit well with the criteria to be taken into account in an arbitrated determination. In particular, the criteria relating to native title rights and interests; the way of life, culture and traditions; the development of social, cultural and economic structures of the native title parties are best considered not by approaching single acts as individual events but by considering the series of related acts taken together. 38 The Tribunal correctly accepted the conclusions in Thomas [1998] NNTTA 8 as to the desirability of whole of claim or project negotiations. It concluded (at [47]) that it was 'appropriate' for FMG to negotiate on that basis. Having so concluded, then to revert to negotiate specifically about the future act would impose an additional requirement under s 31(1)(b) of the Act which is not to be found in the section. The Act does not dictate the content and manner of negotiations by compelling parties to negotiate in a particular way or over specified matters. Providing what was discussed and proposed was conducted in good faith and was with a view to obtaining agreement about the doing of the future act, then the requirement under s 31(1)(b) will be satisfied.

ADDITIONAL ARGUMENT 39 WGAC advanced an additional argument, not considered by the Tribunal. WGAC contended that FMG erroneously seeks to conflate two processes: (a) negotiating in good faith with a view to obtaining the agreement of the native title party to the doing of an act, and (b) negotiating the content of an agreement of a native title party to forego procedural rights provided for under the Act. 40 It is common ground that the LAA was intended by FMG to have effect as an ILUA (as provided for in ss 24CA-24CL of the Act) and that were such an agreement reached, it would provide, in return for compensation from FMG, WGAC (and PKKP) foregoing native title benefits provided under the Act. 41 WGAC appears to contend that the negotiations on the terms of the draft LAA, because of their focus as an ILUA which would require WGAC to forego rights under the Act, could not also be relied upon to support a contention that they were negotiations conducted in good faith within the meaning of s 31(1)(b) of the Act. 42 We are unable to accept this contention. It is clear from the statutory framework and secondary materials such as the Explanatory Memorandum to the Native Title Amendment Bill 1997 that ILUAs are intended to be of mutual benefit. That is, they require consideration moving from each party to the other or others. ILUAs constitute a possible statutory solution 'to facilitate the negotiation of voluntary but binding agreements as an alternative to more formal native title machinery'. FMG's negotiation was directed towards achieving that statutory solution which also encompassed attempted agreement about the future act. To negotiate (as expressly held in good faith) for a period in excess of six months in order to reach an ILUA which also includes the future act can only be conduct within the requirements of s 31(1)(b) of the Act.

CONCLUSION 43 Neither of the substantive failings pointed to by the Tribunal could constitute a failure to comply with s 31(1)(b) of the Act unless it was brought about by a failure to negotiate in good faith. The findings reached could only demonstrate good faith. 44 For the foregoing reasons, the Court declares that: On the facts found by the National Native Title Tribunal, the applicant fulfilled its obligation to negotiate in good faith and the Tribunal had the power to conduct an inquiry and make a determination under s 38 of the Native Title Act 1993 (Cth). 45 The Court will order that: 1. The appeal be allowed and the decision of the National Native Title Tribunal made on 11 July 2008 be set aside. 46 In accordance with s 85A of the Native Title Act 1993 (Cth), the Court will order: 2. There be no order as to costs. I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Spender, Sundberg and McKerracher.

Associate: Dated: 30 April 2009 Counsel for the Applicant: EM Corboy SC with K Green

Solicitor for the First Respondents: Yamatji Marlpa Aboriginal Corporation

Counsel for the Second Respondent: GM McIntyre SC

Solicitor for the Second Respondent: Corser & Corser

Solicitor for the Third Respondent State Solicitor for Western Australia