Managing and protecting benefits

10.94   The authorisation of an applicant has the predominant purpose of ensuring that a claim is made with the authority of the claim group. It also creates an entity to perform the functions and responsibilities associated with that claim under the Native Title Act.^[121] However, the Act not only gives the applicant powers to deal with the claim,^[122] but also creates opportunities for the applicant to receive funds that are intended for the native title group.^[123] For example, the applicant must be a party to an area ILUA^[124] and is a negotiation party for future acts.^[125] Some state legislation also creates opportunities for an applicant to enter into an agreement on behalf of the group.^[126] The Act does not regulate how funds arising from these agreements are held or disbursed. Representation in relation to future acts is sometimes provided by native title representative bodies (NTRBs) or native title service providers (NTSPs), which are not for profit and closely regulated. It may also be provided by lawyers, who are subject to professional regulation, and non-lawyers, who may be unregulated.^[127]

10.95   There are some concerns that funds are not always held for the benefit of the entire native title group, particularly when the applicant is represented by private agents rather than representative bodies.^[128] The ALRC has not consulted on this issue and does not express a view as to whether there are widespread problems with private agents or applicants dealing inappropriately with the proceeds of future act agreements.

10.96   Two recent inquiries have considered the arrangements for managing benefits, and the ALRC was directed to consider their findings in this Inquiry.^[129]

Taxation Working Group

10.97   The Taxation of Native Title and Traditional Owner Benefits and Governance Working Group (the Taxation Working Group) considered ‘the adequacy of current arrangements for holding, managing and distributing (native title) benefits’ and made recommendations to the Government on those matters in 2013.^[130] Its key recommendation was for statutory support for an income tax exempt, not-for-profit entity with deductible gift recipient status, to be known as an Indigenous Community Development Corporation (ICDC). The ICDC would invest in community development and for the long-term economic development of Indigenous people.^[131]

10.98   The Taxation Working Group also recommended that the Government:

• ‘take urgent steps to regulate private agents … involved in negotiating native title future agreements’;

• refer the following matters for consideration by the Review of the Roles and Functions of Native Title Organisations: the establishment of a statutory trust to hold native title agreement funds; and a process for the registration of s 31 future act agreements;

• ‘take urgent steps to amend the Native Title Act … to clarify that the native title holding community is the beneficial owner of funds generated by native title agreement … and that the named applicant is in a fiduciary relationship to the native title holding group’.^[132]

10.99   The Government indicated that it supported these recommendations, and would do further work on the development of an ICDC, a register for s 31 future act agreements and amendments to the Native Title Act regarding a fiduciary duty.^[133]

Review of Native Title Organisations

10.100         The Review of the Roles and Functions of Native Title Organisations reported in May 2014. It was a policy review, rather than a law reform project.^[134] It noted that ‘there is no comprehensive evidence base in regard to the level of any unscrupulous behaviour by private agents’.^[135] However, the Review found examples of instances where the actions of private agents, engaged by applicants, did not appear to be in the best interests of the claim group.^[136] The Review outlined some structural features of the native title system that create vulnerability for native title holders.^[137] Five options for reform were proposed for the consideration of Government:

• a registered list of native title practitioners;

• an accreditation system encouraging native title solicitors to gain specialised accreditation;

• reporting of fees paid to native title service providers over a minimum threshold amount;

• an introduction of an appeals mechanism for unethical behaviour; and

• amendment of the Native Title Act to clarify the fiduciary duty of the applicant.^[138]

The duties of the applicant

10.101         Several stakeholders considered that this Inquiry offered an opportunity to give further consideration to the duties of the applicant,^[139] and suggested that the Act should be amended to impose an express fiduciary relationship on the applicant.^[140] The ALRC supports the recommendations of the Taxation Working Group that there should be statutory clarification of the duties of the applicant, and recommends that the Native Title Act should provide that a member of the applicant must not obtain an advantage or benefit at the expense of the common law holders.

10.102         In consultations conducted for this Inquiry, there was widespread agreement that the applicant has fiduciary duties.^[141] The Federal Court said that ‘the authorisation of an applicant to make a native title application and to deal with matters arising in relation to it under s 251B has hallmarks of a fiduciary relationship’,^[142] and that ‘the native title parties entering into such arrangements ultimately do so for and on behalf of only the true owners of any native title rights and interests that exist’.^[143]

10.103         A fiduciary duty forbids the fiduciary from acting ‘in any other way than in the interests of the person to whom the duty to so act is owed’.^[144] With regard to agents, the duty is said to be ‘a general obligation on agents not to profit from their position’.^[145] That is, fiduciaries have negative, rather than positive obligations.

10.104         If an applicant breaches fiduciary duties owed to the native title group, remedies such as declarations, specific performance, injunction, restitution, damages, or account of profits may be available.^[146] There may also be liability for third parties who knowingly participate in a breach of fiduciary duty.^[147]

10.105         There are difficulties with relying on fiduciary duties to regulate the conduct of applicants. It is not completely clear whether those duties are owed to the claim group (which may change from time to time) or to the native title holders as finally determined, or both.^[148] Actions in equity are complex and expensive, and may be beyond the resources of claim groups and NTRBs. The jurisdiction of the court hearing a native title claim to make orders regarding funds received by way of native title agreements has been challenged.^[149] The applicant is not a legal entity that is capable of being sued.^[150] Only individual members of the applicant can be sued.

10.106         A statutory duty on each member of the applicant to avoid obtaining a benefit at the expense of the native title holders would avoid some of these difficulties. After the registration of a claim, the applicant is known as ‘the registered native title claimant’,^[151] and it is envisaged that the statutory duty would be owed by members of the applicant when they are performing their functions as registered native title claimant.

10.107         The ALRC considers that a statutory duty, like the equitable fiduciary duty, should be framed as a negative obligation. As discussed earlier, many native title claim groups do not delegate full decision-making power to the applicant, but invest this power in a steering committee or retain this power for the entire group. A duty on the applicant to avoid obtaining an improper benefit would be consistent with these governance arrangements. However, a positive duty, for example, to act in the best interests of the claim group, would potentially conflict with these governance arrangements. It might impose decision-making responsibilities on the applicant that the group does not intend the applicant to have. The applicant might have to consider whether to act as directed by the group, or to act in the best interests of the group as the applicant perceives them.

10.108         Further, a duty to avoid obtaining a benefit directly addresses the specific mischief that the reform is intended to address, that is, the potential for applicants to deal inappropriately with the proceeds of future act agreements.

10.109         Other models of statutory duties include a statutory duty on each member of the applicant to act in the best interests of the native title holders. Examples of statutory duties to act in the best interests of another are common in Commonwealth laws.^[152] Another model is the duties of directors. Directors of corporations have a statutory duty to exercise their powers with care and diligence, to act in good faith and for a proper purpose, and to avoid using their position to gain an advantage or to cause detriment to the corporation.^[153]  

10.110         The duty should be owed to the common law holders of the rights and interests claimed, because it is their interests that are at risk of being harmed by an applicant that acts inappropriately. Some stakeholders have indicated a preference for a statutory duty that is owed to the claim group,^[154] either because this group is more clearly identifiable prior to a determination, or because it is the claim group that authorised the applicant. However, a person who is in the claim group, but who does not in fact hold native title rights and interests at common law, does not have any interests to be protected by a statutory duty. One advantage of the negative duty, that is, the duty to avoid obtaining a benefit, is that precisely identifying the members of the group to whom the duty is owed is of less relevance. If a positive duty to act in the best interests of the group was being imposed, it would be more important to be able to identify exactly who is in the group.

10.111         While the draft Terms of Reference for this Inquiry included a reference to ‘access to and protection of native title rights and benefits’, the final Terms of Reference did not. Accordingly, this Inquiry has only considered the protection of benefits insofar as this issue intersects with the authorisation of the applicant. The introduction of a statutory duty is only one way to protect benefits, and should not be seen as resolving the issue. Other methods, including the regulation of private agents, the introduction of an ICDC, the registration of future act agreements and statutory trusts, may well be necessary to complement the statutory duty.^[155]