F. RELIEF AND THE RUSAL GROUP UNDERTAKING
411 It follows from the findings I have made and the conclusions I have reached that, in respect of the period to the date of this judgment, the applicants are not entitled to any declaratory or injunctive relief or an award of damages on the grounds of breach of contract. Their application in that respect should be dismissed with costs.
412 The only question that remains to be determined is whether the Court should accept the Rusal Group Undertaking and give declaratory and/or injunctive relief on the basis of the prospective effect of the Undertaking. It is convenient to reproduce the terms of the Undertaking:
Each of the Applicants, United Company Rusal IPJSC (UC Rusal), Libertatem Materials Limited, United Company Rusal Alumina Limited and RTI Limited, by their counsel, undertakes to the Court that until further order, whether by themselves, their servants, agents, associates or otherwise:
1. they will not supply any alumina that is supplied to the first applicant (ABC) by the first respondent (QAL):
a. to UC Rusal or any of its subsidiaries; or
b. to, for use in or for the benefit of Russia or part of Russia;
2. they will not enter into or perform any swap or other arrangement, the effect of which is to provide that upon any alumina supplied to ABC by QAL being supplied by ABC to the counterparty under that arrangement, the counterparty shall supply an equivalent quantity of alumina:
a. to UC Rusal or any of its subsidiaries; or
b. to, for use in, or for the benefit of Russia or part of Russia;
3. all alumina supplied to ABC by QAL will be sold by ABC directly to third parties located outside of Russia, on terms that:
a. prohibit the buyer of such alumina from transferring such alumina, and/or any resultant aluminium refined from such alumina, to, for use in, or for the benefit of Russia or part of Russia; and
b. require that the buyer of such alumina, in the event of on-sale by that person of such alumina and/or any resultant aluminium refined from such alumina, sell only on terms of sale containing the prohibition in paragraph 3(a) above;
4. they will not act on or otherwise seek to enforce or perform the contract of sale, being Contract No. ABC/RT/05 dated 15 September 2005 between ABC and Rual Trade Limited, and novated by deed of novation dated 5 December 2012 by between ABC (as Seller), Rual Trade Limited (as Buyer) and RTI Limited (as New Buyer); and
5. ABC will not declare and distribute any dividends.
413 In so far as it concerns the Rusal Group Undertaking, I understand that the applicants seek that the Court grant prospective declaratory relief, conditional on the Undertaking having been given, to the following effect: that the acceptance of bauxite by QAL from ABC, the refining of alumina by QAL for ABC, and the delivery of alumina by QAL to ABC for sale to third parties outside Russia, would not amount to a contravention by QAL of the Russia Sanctions. The applicants also seek injunctions restraining QAL and RTA from relying on the contractual rights previously asserted, which have been considered in these reasons.
414 The parties advanced only brief submissions concerning the power of the Court to grant relief of that kind conditional upon the acceptance of the Rusal Group Undertaking. The focus of the submissions largely concerned the terms of the Undertaking and the exercise of the Court's discretion to accept it. Nevertheless, it is appropriate to give some consideration to the question of power as this aspect of the relief sought by the applicants is unusual. It is a declaration as to future rights the factual basis for which is largely founded on an undertaking being offered to the Court.
415 Sections 21 and 23 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) confer broad powers on the Court to make orders and grant relief of various kinds. Section 21 empowers the Court to make binding declarations of right. Section 23 empowers the Court, in relation to matters in which it has jurisdiction, to make such orders as the Court thinks appropriate. Although the conferral of power is broad, the Court's power is nevertheless restricted to making the kinds of orders which are capable of being seen as "appropriate" to be made by the Court in the exercise of its jurisdiction: Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 622 (Deane J); Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 at [35] (Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ); Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at [27] (Gaudron, McHugh, Gummow and Callinan JJ). The broad powers conferred by ss 21 and 23 of the FCA Act are supported by rr 1.32 and 1.33 of the Federal Court Rules 2011 (Cth). Rule 1.32 states that the Court may make any order that the Court considers appropriate in the interests of justice. Rule 1.33 states that the Court may make an order subject to any conditions the Court considers appropriate.
416 In Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581-82, the plurality (Mason CJ, Dawson, Toohey and Gaudron JJ) summarised the principles concerning the power to grant declaratory relief in the following terms (references omitted):
It is a discretionary power which "[i]t is neither possible nor desirable to fetter ... by laying down rules as to the manner of its exercise." However, it is confined by the considerations which mark out the boundaries of judicial power. Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions. The person seeking relief must have "a real interest" and relief will not be granted if the question "is purely hypothetical", if relief is "claimed in relation to circumstances that [have] not occurred and might never happen" or if "the Court's declaration will produce no foreseeable consequences for the parties".
417 The distinction between a declaratory judgment and a hypothetical or advisory opinion was explained by the majority (Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ) in Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 (Bass) at [45] and [47]-[49] as follows (citations omitted):
45 The purpose of a judicial determination has been described in varying ways. But central to those descriptions is the notion that such a determination includes a conclusive or final decision based on a concrete and established or agreed situation which aims to quell a controversy. In R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd, Kitto J said:
"[J]udicial power involves, as a general rule, a decision settling for the future, as between defined persons or classes of persons, a question as to the existence of a right or obligation, so that an exercise of the power creates a new charter by reference to which that question is in future to be decided as between those persons or classes of persons ... [T]he process to be followed must generally be an inquiry concerning the law as it is and the facts as they are, followed by an application of the law as determined to the facts as determined; and the end to be reached must be an act which ... entitles and obliges the persons between whom it intervenes, to observance of the rights and obligations that the application of law to facts has shown to exist."
…
47 Because the object of the judicial process is the final determination of the rights of the parties to an action, courts have traditionally refused to provide answers to hypothetical questions or to give advisory opinions. The jurisdiction with respect to declaratory relief has developed with an awareness of that traditional attitude. In In re F (Mental Patient: Sterilisation), Lord Goff of Chieveley said that:
"a declaration will not be granted where the question under consideration is not a real question, nor where the person seeking the declaration has no real interest in it, nor where the declaration is sought without proper argument, eg in default of defence or on admissions or by consent."
By "not a real question", his Lordship was identifying what he called the "hypothetical or academic". The jurisdiction includes the power to declare that conduct which has not yet taken place will not be in breach of a contract or a law and such a declaration will not be hypothetical in the relevant sense. Barwick CJ pointed this out in The Commonwealth v Sterling Nicholas Duty Free Pty Ltd. However, that is not the present case.
48 It is true that some have seen the use of the declaratory judgment as little more than the giving of an advisory opinion. However, one crucial difference between an advisory opinion and a declaratory judgment is the fact that an advisory opinion is not based on a concrete situation and does not amount to a binding decision raising a res judicata between parties. Thus, the authors of one recent text on declaratory judgments emphasise that, where the dispute is divorced from the facts, it is considered hypothetical and not suitable for judicial resolution by way of declaration or otherwise. They say:
"If ... the dispute is not attached to specific facts, and the question is only whether the plaintiff is generally entitled to act in a certain way, the issue will still be considered theoretical. The main reason for this is that there may be no certainty that such a general declaration will settle the dispute finally. Subsequent to that declaration a person (the defendant himself or someone else) may be adversely affected by a particular act of the plaintiff. It may then be doubtful whether this act is covered by the declaration. In such a case the affected person will probably be entitled to raise the issue again on its special facts. Indeed, such a declaration will in effect be a mere advisory opinion."
49 As the answers given by the Full Court and the declaration it made were not based on facts, found or agreed, they were purely hypothetical. At best, the answers do no more than declare that the law dictates a particular result when certain facts in the material or pleadings are established. What those facts are is not stated, nor can they be identified with any precision. They may be all or some only of the facts. What facts are determinative of the legal issue involved in the question asked is left open. Such a result cannot assist the efficient administration of justice. It does not finally resolve the dispute or quell the controversy. Nor does it constitute a step that will in the course of the proceedings necessarily dictate the result of those proceedings. Since the relevant facts are not identified and the existence of some of them is apparently in dispute, the answers given by the Full Court may be of no use at all to the parties and may even mislead them as to their rights. Courts have traditionally declined to state - let alone answer - preliminary questions when the answers will neither determine the rights of the parties nor necessarily lead to the final determination of their rights. The efficient administration of the business of courts is incompatible with answering hypothetical questions which frequently require considerable time and cause considerable expense to the parties, expense which may eventually be seen to be unnecessarily incurred.
418 As the majority expressly recognised in Bass (at [47]), the jurisdiction to make a declaratory judgment includes the power to declare that conduct which has not yet taken place will not be in breach of a contract or a law and such a declaration will not be hypothetical in the relevant sense. In Commonwealth v Sterling Nicholas Duty Free Pty Ltd (1972) 126 CLR 297 (Sterling Nicholas) at 305, Barwick CJ observed:
The jurisdiction to make a declaratory order without consequential relief is a large and most useful jurisdiction. In my opinion, the present was an apt case for its exercise. The respondent undoubtedly desired and intended to do as he asked the Court to declare he lawfully could do. The matter, in my opinion, was in no sense hypothetical, but in any case not hypothetical in a sense relevant to the exercise of this jurisdiction. Of its nature, the jurisdiction includes the power to declare that conduct which has not yet taken place will not be in breach of a contract or a law. Indeed, it is that capacity which contributes enormously to the utility of the jurisdiction.
419 Similarly, in Australian Gas Light Co v Australian Competition and Consumer Commission (No 2) [2003] FCA 1229; (2003) ATPR 41-962 (AGL (No 2)) at [40], French J said:
The making of a declaration as to the lawfulness of future conduct has long been accepted as an exercise of judicial power. The fact that declaratory relief relates to future conduct does not place it outside the bounds of federal jurisdiction. If the claim for the declaration arises out of a contemporary controversy in which a party's freedom of action is challenged in some way, that controversy can constitute a matter for the purposes of the exercise of federal jurisdiction. Whether or not there is a real controversy is a question of judgment. In the present case, in my opinion, there is a real controversy about the right or freedom of AGL to proceed with the proposed acquisition in relation to the Loy Yang A power station and the coal mine. Its freedom to do so has been challenged in a very practical way by the regulator in correspondence and most explicitly in its defence where it denies that the proposed acquisitions would not contravene s 50 of the Trade Practices Act. Reservations about or opposition to a proposed acquisition expressed by the regulator can have very concrete commercial consequences and may in some, if not most, cases effectively prevent an acquisition from proceeding.
420 In many contexts, the Court may decline to give declaratory or injunctive relief sought under ss 21 and 23 of the FCA Act on acceptance of an undertaking by a respondent if the undertaking is appropriate. The present case involves the opposite: the applicant is seeking declaratory (and injunctive) relief with respect to the lawfulness of future conduct on the basis of an undertaking with respect to that future conduct. The factual foundation on which the declaration is sought is the assumed future compliance with the terms of the Rusal Group Undertaking by the applicants and the other bodies corporate referred to in the Undertaking.
421 The grant of declaratory relief on the basis of an undertaking given to the Court by an applicant is not without some precedent. For example, in Australian Gas Light Company v Australian Competition and Consumer Commission (No 3) (2003) 137 FCR 317, French J accepted an undertaking from an applicant as a condition of declaring that a proposed acquisition would not contravene s 50 of the Competition and Consumer Act 2010 (Cth). In that case, however, his Honour concluded that the proposed acquisition would not contravene s 50 and that it was appropriate to make a declaration to that effect. His Honour also found (at [10]) that that "conclusion is reinforced by the structural arrangements which are the subject of the undertaking offered by AGL to the ACCC and which AGL has in turn offered to the Court. The declaration which I make is subject to that undertaking …" and (at [614]) that "the undertaking is … an appropriate condition for the grant of the declarations". Thus, it was apparent from his Honour's reasons that the undertaking was accepted as a condition of making the declaration under s 21 of the FCA Act. No argument appears to have been raised that the Court lacked power to accept the undertaking.
422 The respondents did not advance a submission that the Court lacked power to accept the Rusal Group Undertaking. The respondents argued that the Court should refuse to accept the Undertaking as a basis for granting declaratory relief in the exercise of the Court's discretion. For the reasons that follow, I agree with that submission. Accordingly, it is unnecessary to reach a concluded view about the Court's power to grant declaratory relief on the basis of the Undertaking.
423 The foregoing discussion highlights, however, a significant difficulty with this aspect of the relief sought by the applicants. The applicants request the Court to declare that the future delivery of alumina by QAL to ABC would not contravene the Russia Sanctions in circumstances where, in the future, the Rusal Group complies with the Rusal Group Undertaking. In order for the Court to make such a declaration, at the very least the Court must be satisfied that:
(a) first, that the obligations assumed under the Rusal Group Undertaking are clear and certain; and
(b) second, that compliance with those obligations removes any risk of a contravention of the Russia Sanctions.
424 For the following reasons, I am not satisfied in respect of either of those matters.
425 As to the first matter, an undertaking to the court is treated as the equivalent of an injunctive order of the court and may be enforced by proceedings for contempt. As such, the principles which govern the grant of an injunction by a court must guide the court in deciding whether it should accept an undertaking: Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 at 165 (Gibbs CJ, Stephen, Mason and Wilson JJ). A finding of contempt will not be made where an injunction is ambiguous or lacks precision: Australian Consolidated Press Ltd v Morgan (1965) 112 CLR 483 at 515-16 (Owen J). An undertaking, as for an injunction, must therefore be drafted in clear and unambiguous terms which leave no room for the persons to whom they are directed to wonder whether or not their future conduct falls within the scope or boundaries of the undertaking: ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 at 259 (Lockhart J). In Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc [1999] FCA 18; (1999) 161 ALR 79 at [26], French J observed:
Once an undertaking is accepted by the court or a consent order made, their breach is enforceable by proceedings for contempt. The undertakings and orders must therefore be formulated with precision so that they are capable of being readily obeyed. Undertakings or orders which are likely to involve vague evaluative judgments or significant debates on their interpretation are not likely to be given the court's sanction. Similarly, undertakings or orders which are likely to require the court to be concerned with the ongoing supervision of the conduct of the parties to them will also raise serious questions as to their appropriateness.
426 There are a number of aspects of the Rusal Group Undertaking that lack sufficient certainty. Most significantly, each of paras 1, 2 and 3 are framed in the language of the prohibition against sanctioned supplies in regs 4(1) and 12(1) of the Autonomous Sanctions Regulations. Specifically, those paragraphs of the Undertaking prohibit various forms of transaction if and to the extent the transactions result in alumina being supplied to Russia, for use in Russia or for the benefit of Russia. As these reasons demonstrate, the meaning and effect of those prohibitions can give rise to substantial debate. In effect, those paragraphs are little more than an undertaking to comply with the Export Sanction, but they are given in circumstances where the parties are in conflict with respect to the reach of the Export Sanction, particularly the prohibition of the transfer of alumina for the benefit of Russia. In the exercise of discretion, I would not accept an undertaking in that form.
427 As to the second matter, the Rusal Group Undertaking does not address the Designated Person Sanction, save perhaps in para 5 by which ABC promises not to declare and distribute any dividends. I have found that the production of alumina by QAL for ABC and the delivery of the alumina to ABC would have been contrary to the Designated Persons Sanction because, by operating the Gladstone Plant pursuant to the contractual arrangements governing the Gladstone alumina joint venture, QAL indirectly makes the Gladstone Plant available for the benefit of Messrs Deripaska and Vekselberg. The benefits are not merely trading benefits to ABC which flow through to the ultimate shareholders of the Rusal Group. The benefits include the improved trading conditions for UC Rusal's aluminium smelters in Russia, as explained earlier in these reasons. Even in the case of trading benefits to ABC, the retention of profits by ABC does not remove the financial benefit obtained by UC Rusal and its ultimate shareholders; the retention of profits results in an increase in value in ABC which is a benefit to UC Rusal and its ultimate shareholders. It follows that compliance with the terms of the Rusal Group Undertaking does not remove the risk of a contravention of the Russia Sanctions.
428 There are two further factors that weigh against the acceptance of the Rusal Group Undertaking.
429 The first factor is the difficulty of framing undertakings that successfully remove the risk that the delivery of alumina by QAL to ABC would in the future contravene the Russia Sanctions. The evidence of Mr Clark, which I have largely accepted, is that alumina delivered by QAL to ABC could arrive in Russia through several different means, including:
(a) a series of subsequent on-selling transactions following the original purchase;
(b) through a swap arrangement;
(c) through blending the QAL alumina with alumina from another source; and
(d) following long-term storage in a bonded warehouse (ie a warehouse located in a jurisdiction that has not cleared any customs).
430 Mr Clark expressed the opinion that monitoring or ensuring compliance with contractual prohibitions on supply to Russia would not be possible. While monitoring and ensuring compliance with such contractual restrictions (or undertakings) may not be impossible, I accept that it would be very difficult. There is nothing in the Rusal Group Undertaking that seeks to address such problems. In my view, it would be inappropriate for the Court to declare, on the basis of the Rusal Group Undertaking, that the future delivery of alumina by QAL to ABC would not contravene the Russia Sanctions when the Undertaking contains no mechanism for monitoring and ensuring compliance.
431 The second factor, which is related to the first, is that the Rusal Group Undertaking has been offered to the Court by the applicants and the following members of the Rusal Group that are not parties to this proceeding: UC Rusal, Libertatem, United Company Rusal Alumina Limited and RTI. All are foreign companies and, as far as the evidence establishes, only ABC has a business presence in Australia. The respondents did not submit that the Court is unable to accept an undertaking from a foreign company. Nevertheless, the fact that the Rusal Group Undertaking is offered (and is necessarily offered) by foreign companies which have no business presence in Australia increases the Court's concern with respect to monitoring or ensuring compliance with the terms of the Undertaking, and therefore the appropriateness of granting declaratory relief on the basis of the Undertaking.
432 For those reasons, I refuse to accept the Rusal Group Undertaking. It follows that I refuse the prospective declaratory and injunctive relief sought by the applicants.
433 As a final observation, reference has been made earlier in these reasons to reg 18 of the Autonomous Sanctions Regulations which empowers the Minister to grant to a person a permit authorising the making of a sanctioned supply that would otherwise contravene reg 12(1) and the making of an asset available to a designated person or entity that would otherwise contravene reg 14(1). The Minister is expressly empowered by reg 18(4) to grant permits subject to conditions. By s 16(6) of the Autonomous Sanctions Act, it is a criminal offence if a body corporate contravenes a condition of an authorisation. As far as the evidence revealed, the applicants have not applied for a permit in respect of the acquisition of alumina by ABC from QAL pursuant to the Gladstone alumina joint venture. It would be open to the applicants to make such an application on the basis of conditions that satisfied the Minister that it would be in the national interest to grant the permit. The formulation of detailed undertakings to prevent the delivery of alumina by QAL to ABC contravening the Russia Sanctions, including with respect to monitoring and ensuring compliance, is more readily achieved through the exercise of executive power granted by legislation than by the exercise of judicial power in proceedings such as the present.
434 In conclusion, I dismiss the applicants' amended originating application with costs.
I certify that the preceding four hundred and thirty-four (434) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Bryan.