Negotiating in good faith - what is the test?

The Gomeroi People submitted that the NNTT erred by only considering Santos’ knowledge of their own offers to the Gomeroi People, rather than holistically considering good faith during negotiations.^[1] The Gomeroi People also contended that Santos turned a ‘blind eye’ and the NNTT erred by focusing on whether Santos provided ‘fair value’ rather than focusing on Santos’ subjective intentions.^[2] They argued that the NNTT neglected the evaluation of a suitable response from Santos to information and evidence provided.^[3] The NNTT did not focus on the addition of expert evidence which highlighted poor compensation offered by Santos which in the Gomeroi People’s opinion would be enough evidence to demonstrate a lack of good faith.

Santos argued that s 31(1) of the NTA only requires that the negotiation be assessed objectively on whether it has been conducted in good faith, rather than be assessed as objectively reasonable overall.^[4]

Chief Justice Mortimer stated that in assessing good faith, the NNTT focuses on 'assessing the course of a negotiation, measuring it objectively against a standard of honesty, open mindedness and willingness to listen.'^[5] The NNTT had carefully considered each of the stages of negotiations as articulated by the Gomeroi People, and considered good faith at each stage, and then, at the conclusion of its reasons, the NNTT considered the conduct globally over all stages of the negotiation.^[6]

Her Honour stated that an unreasonable offer can arise from good faith or unfair negotiations and it will depend on the evidence and circumstances. The FFC concluded that the NNTT’s original decision was correct, as their assessment of Santos’ actions were not unjust or lacking honest or unwillingness to deal fairly. Chief Justice Mortimer rejected the Gomeroi People's contentions.^[7]

Environmental Matters and Public Interest

The FFC’s decision confirms that environmental factors are relevant considerations for the NNTT when considering the public interest on mining and petroleum.

In Santos NSW Pty Ltd and Another v Gomeroi People and Another [2022] the NNTTA 74 found that it was inappropriate for it to consider climate change which had already been evaluated by the ‘relevant state agencies’, and stated that it was not in the NNTT’s jurisdiction.^[8] The Gomeroi People appealed as they believed that the expert evidence was qualified by s 39(1)(e) of the NTA, as the observations fell under the scope of ’public interest‘.

The Gomeroi People argued that s 39(1)(e) of the NTA, which requires the NNTT to take into account ‘any public interest in the doing of the act’, required the NNTT to consider whether the Narrabri Gas Project is in the public interest, having regard to its expected greenhouse gas emissions and their contributions to global warming.^[9]

Chief Justice Mortimer found that the NNTT erred in its decision to not consider information from Professor Steffen, a climate and earth system scientist.^[10] Professor Steffen warned of environmental problems caused by Santos’ greenhouse gas emissions.^[11] Her Honour stated that public interest concerns relating to native title in s 39(1)(e) of the NTA are not limited by previous authorities and should be considered by the NNTT.^[12]

Interestingly, Rangiah J dissented, and took a more black letter law approach. In his Honour's view, the provision should be interpreted based on its grammatical meaning – that an arbitral body only needs to consider public interest ‘that favours or supports the doing of the proposed future act’.^[13]

Key takeaways

This decision highlights the need to be open minded and willing to listen when negotiating in good faith, as parties will be measured objectively against a standard of honesty. During negotiation, a perfect outcome cannot always exist for both parties. An unreasonable outcome in particular circumstances may or may not indicate a lack of honesty. It is all dependent on the evidence and circumstances.

This decision also demonstrates that the NNTT is required to consider a wide range of public interest issues, including climate change, global warming and other environmental factors and cannot rely alone on what government authorities have determined, but must turn its mind to those matters. This case highlights the broad range of matters that proponents will need to address if they face the NNTT.

^{[1] Gomeroi People v Santos NSW Pty Ltd and Santos NSW (Narrabri Gas) Pty Ltd [2024] FCAFC 26 [71]-[72].
[2] Ibid [73]-[75].
[3] Ibid.
[4] Ibid [72].
[5] Ibid [96].
[6] Ibid [82] – [83].
[7] Ibid [95]-[98].
[8] Ibid [194]; Santos NSW Pty Ltd and Another v Gomeroi People and Another [2022] NNTT 74 [976].
[9] Gomeroi People v Santos NSW Pty Ltd and Santos NSW (Narrabri Gas) Pty Ltd [2024] FCAFC 26 [169].
[10] Ibid [172].
[11] Ibid.
[12] Ibid [233].
[13] Ibid [246].}