Romero v Farstad Shipping

Counsel for the Respondent: Mr F Parry QC, with Mr M Rinaldi

AND: FARSTAD SHIPPING (INDIAN PACIFIC) PTY LTD (ACN 105 011 989) Respondent

JUDGE: TRACEY J DATE OF ORDER: 20 FEBRUARY 2017

1. The applicant pay the respondent's party and party costs incurred on and after 18 December 2015.
2. All other costs claims be refused. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

TRACEY J: 1 On 8 December 2016, I delivered judgment in Romero v Farstad Shipping (Indian Pacific) Pty Ltd (No 3) [2016] FCA 1453 ("the principal judgment"). The procedural history of the matter is set out at [1]-[4] of that judgment. In particular, the following appears at [3]: "[The Full Court of the Federal Court] declared that Farstad had breached its employment contract with Ms Romero. The Court further ordered that '[t]he question of repudiation and any associated questions such as affirmation or election and the question of damages be remitted to a judge of the Court for rehearing'." 2 I held, in the principal judgment, that the Respondent ("Farstad") had not repudiated the contract of employment between it and the Applicant ("Ms Romero"). I awarded Ms Romero $100 by way of nominal damages in respect of the breaches found by the Full Court to have been committed by Farstad (as to which, see Romero v Farstad Shipping (Indian Pacific) Pty Ltd (2014) 231 FCR 403). 3 The question of costs remained outstanding. I ordered an exchange of submissions. Each party filed written submissions, and Ms Romero also filed submissions in reply to Farstad's submissions. 4 It is important to set out what costs are in issue. The Full Court ordered that "[Farstad] pay [Ms Romero's] costs of the appeal and cross-appeal". Those costs do not, therefore, concern me. The costs of the remitted hearing are in issue, as are the costs of the hearing before the previous docket judge (see Romero v Farstad Shipping (Indian Pacific) Pty Ltd (No 2) [2015] FCAFC 26). 5 For the reasons which follow, I have determined that Farstad should have its costs of the remitted hearing from 18 December 2015, on a party and party basis. There should be no other order as to costs.

Background 6 Ms Romero's originating application was dated 21 December 2012. In it, she sought, in respect of alleged breaches of the Sex Discrimination Act 1984 (Cth) ("SD Act") and the Disability Discrimination Act 1992 (Cth) ("DD Act"), an apology, and compensation for past economic loss (around $127,400), anticipated future economic loss (around $1.8M, subject to discounts for vicissitudes and net present value) and general damages for dislocation of life, pain and suffering, stress, anxiety, and depression, humiliation and damage to reputation ($250,000). 7 Ms Romero also sought the following: "1. An order pursuant to s. 46PO(4) of the Australian Human Rights Commission Act 1986 (Cth) declaring that the Respondent has committed unlawful discrimination and victimisation against the Applicant contrary to s 14(2) and s 94 of the Sex Discrimination Act 1984 (Cth) and/or s 15(2) and s 42 of the Disability Discrimination Act 1992 (Cth). 2. An order pursuant to s. 46PO(4)(d) that the Respondent pay to the Applicant damages by way of compensation for the loss and damages she has suffered by reason of the said unlawful discrimination and victimisation. 3. An order that the Respondent: (a) implement policies, practices and procedures in respect [of] sex discrimination and complaints of discrimination made to it on this ground; (b) implement risk management strategies to assist in the recognition and identification of discriminatory conduct (independent of whether a complaint is made); and (c) undertake regular management training in relation to the policies, practices and procedures referred to at (a) above." She claimed costs, interest, and such further or other relief as the Court saw fit. She sought, also, damages for breach of contract. 8 In her statement of claim dated 1 March 2013, Ms Romero pleaded contravention of the SD Act, DD Act, and breaches of contract. She pleaded, at [66], that she had suffered loss or damage arising out of those contraventions and breaches, particularised as follows: "(a) Offence, humiliation, distress, anxiety and depression (including sleeplessness, loss of motivation and self-esteem); (b) Dislocation to life; (c) Loss of income and other benefits as an employee of Farstad; (d) Damage to personal and professional reputation; (e) Further particulars to be provided prior to hearing" 9 On 24 September 2013, Farstad made an offer of compromise to Ms Romero under r 25.01(1) of the Federal Court Rules 2011 (Cth) ("the Rules"), the offer being that Farstad would pay to Ms Romero $40,000 inclusive of costs and interest. Ms Romero did not accept that offer. 10 On 18 October 2013, Ms Romero submitted a claim to Farstad under the Seafarers Rehabilitation and Compensation Act 1992 (Cth) ("SRC Act"). 11 On 23 October 2013, the then-docket judge ordered the exchange of contentions of fact and law. Ms Romero's were filed on 12 February 2014. Contention H was as follows: "Ms Romero suffered damage and loss as a result of Farstad's breaches of contract including; i. loss of 25% of her salary from December 2011 until May 2012; ii. loss of 100% of her salary from May 2012 to the present and ongoing; iii. retraining expenses; iv. medical expenses; Further particulars will be provided prior to trial." 12 On 17 February 2014, Ms Romero applied to the Administrative Appeals Tribunal ("the AAT") for review of a deemed refusal by Farstad of her claim under the SRC Act. 13 In amended particulars of loss dated 3 March 2014, Ms Romero claimed the following: (1) Lost wages and superannuation since January 2012: $370,975; (2) Costs of 2011 study thrown away: $62,542; (3) Study costs since 2013-February 2014: $19,986.16; (4) Estimated future study costs: $36,180; (5) Future wages loss: $1,336,804. 14 On 11 March 2014, Farstad again offered to settle the proceeding, this time on the basis of a payment by it to Ms Romero of $10,000, with no order as to costs. That offer, it appears, was made in a document entitled "Release and Discharge Deed" which Farstad sent to Ms Romero. The email to which that document was attached was dated 11 March 2014. It formed part of Ms Romero's submissions in reply on costs. The subject line of the email indicates that the email was sent "without prejudice" rather than "without prejudice save as to costs". For that reason, Ms Romero submits that the offer should be disregarded. I will return to this point later in these reasons. 15 Between 12 and 18 March 2014, the proceeding was heard by the then-docket judge. On 6 May 2014, his Honour handed down judgment. The costs order made at that time was varied in Romero v Farstad Shipping (Indian Pacific) Pty Ltd (No 2) [2014] FCA 526. On 22 December 2014, the Full Court allowed an appeal from his Honour's judgment. The orders made at the time as to costs were as follows: "3. The orders made by the Court dated 6 May and 22 May 2014 be set aside and in partial replacement thereof: (a) the Court declares that the respondent breached its employment contract with the applicant; (b) the respondent pay to the applicant the costs of the hearing. … 5. The respondent pay the applicant's costs of the appeal and cross-appeal." 16 On 6 March 2015, order 3(b) was varied to read as follows: "(b) the costs of the hearing before the primary judge be reserved to the judge to whom the further hearing of the proceeding below is remitted." 17 On 30 November 2015, Ms Romero and Farstad entered into a "Deed of Release" ("the Deed"). 18 At [23] of Ms Romero's principal written submissions on the remitted hearing, she set out the damages that she sought as follows: "• Loss of Salary and Superannuation 2012-2016 - $860,000 … ; • Less earnings since March 2013 - $13,978.26 … ; • Continuing loss of salary after graduation at the end of 2016 until Applicant's salary reaches level of earnings she could have received from Respondent; • Study costs pre November 2011 - $20,000 … ; • Income lost during study leave pre November 2011 $40,000 … ; • Study costs for Law Degree since March 2013 - $35,759.71 … ; • Further Study to complete degree and Practical Legal Training - est $20,000 … ." 19 The hearing of this proceeding on remittal occurred on 21 and 22 June 2016. During oral argument, it was conceded that, in the event that Ms Romero was successful in establishing repudiatory breach (so that the first bullet point was an available head of damages), the amount of $580,000 that she received under the Deed ought to be deducted. That had not previously been conceded. 20 My judgment was delivered on 8 December 2016. Ms Romero was awarded $100 by way of nominal damages. 21 The issues on remittal were not co-extensive with those in issue before the previous docket judge. On the first occasion that the case was argued, Ms Romero sought to establish both a claim based on breach of contract, and a claim based on breach of the SD Act. Both were unsuccessful: Romero v Farstad Shipping (Indian Pacific) Pty Ltd [2014] FCA 439. The SD Act claims were not the subject of appeal. 22 At the first hearing, there was also a "preliminary point" agitated by Farstad, namely that s 54(1) of the SRC Act was a complete bar to Ms Romero's case. That argument was unsuccessful at first instance, and on appeal. 23 On the remitted appeal, then, the SD Act points were not in issue, nor was the "preliminary point". It remained for me to consider whether the contract had been repudiated and to consider damages. It had been unnecessary for the original trial judge to deal with either of those questions.

Relevant legal principles 24 As Ms Romero submitted, s 43 of the Federal Court of Australia Act 1976 (Cth) provides the Court with a broad and unfettered discretion. The usual order, again as Ms Romero submitted, is that, absent special circumstances, the successful litigant will receive costs: Ruddock v Vardalis (No 2) (2001) 115 FCR 229. Ms Romero contended that she was the successful party and that the usual order should be made. Farstad disputed these propositions. The following issues thus arise: (1) What bearing, if any, does the award of nominal damages to Ms Romero have on her entitlement to costs? (2) What is the effect, if any, of the offer made by Farstad under Pt 25 of the Rules? (3) Can the settlement offer, made by Farstad on 11 March 2014, be taken into account? (4) If the answer to (3) is "yes", what are the costs consequences (if any) of that offer?

Nominal damages 25 The Court in Vardalis said, at [11], that "[o]rdinarily costs follow the event and a successful litigant receives costs in the absence of special circumstances justifying some other order." In cases in which only nominal damages are recovered the question arises whether the party who recovered those damages can be said to have been "successful". 26 An award of nominal damages has sometimes been a peg upon which costs hung (cf. Beaumont v Greathead (1846) 135 ER 1039 at 1041; 2 CB 494 at 499, Maule J), but certainly not always. McColl JA (with whom Ward JA agreed) summarised the guiding principles in State of New South Wales v Stevens (2012) 82 NSWLR 106 at [22]: "… As Campbell J (as his Honour then was) explained in Mid-City Skin Cancer and Laser Centre v Zahedi-Anarak [2006] NSWSC 1149 at [47]-[52] '[i]n an action for breach of contract, if a plaintiff establishes liability, and obtains an order for payment of nominal damages, that plaintiff is usually not to be regarded as the successful party in the action'. His Honour repeated this passage of his reasons in his judgment in Rockcote Enterprises Pty Ltd v FS Architects Pty Ltd [2008] NSWCA 39 at [100] where it was approved by Handley AJA and myself. One aspect of this passage which warrants repetition is his Honour's citation of Stephenson LJ's explanation in Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 WLR 394 at 401 that costs should be awarded against a plaintiff who has obtained an order for nominal damages because that award: '... was not the event at which the plaintiffs were aiming. They were aiming at £82,500, and the mere fact that they ultimately got something - token or nominal damages - does not enable me to regard them as remaining successful plaintiffs.' See also Motium Pty Ltd v Arrow Electronics Australia Pty Ltd (at [10])." 27 Farstad relied upon Motium Pty Ltd v Arrow Electronics Australia Pty Ltd (Supplementary Decision) [2011] WASCA 65, in which the Western Australian Court of Appeal (McLure P, Newnes and Murphy JJA) said (at [8] and [10]): "[8] While the court has a broad discretion as to costs, generally the successful party is entitled to its costs: Rules of the Supreme Court 1971 (WA), O 66 r 1(1). But it does not follow that a party which is awarded nominal damages is entitled to an order for the costs of the proceedings. The question is whether a party that is awarded nominal damages is to be regarded as the successful party. … … [10] While each case must depend upon its own facts, where it is not a primary purpose of proceedings simply to establish or vindicate some legal right but the primary purpose is to recover substantial damages, ordinarily an award of nominal damages will not entitle a party to the costs of the proceedings: see Thiess Contractors Pty Ltd v Placer (Granny Smith) Pty Ltd [2001] WASCA 166 [9]. In such a case, the party has obtained something of no real use to them and something which, if they had known it was all that was available, they would not have brought proceedings to recover. It would be contrary to modern notions of the efficient and cost-effective use of judicial resources to enable a party to recover its costs for a pyrrhic victory, having substantively failed in the action." 28 The issue was considered by a Full Court of this Court in Nexus Minerals NL v Brutus Constructions Pty Ltd [1997] FCA 926. There, Spender, R D Nicholson, and Finn JJ said (at 11-12): "The effect of his Honour's order was that the applicant was not to be regarded as successful in the claims it brought notwithstanding that it succeeded in proving a breach of contract that could have resulted in an award of nominal damages. To adapt the words of Stephenson LJ in Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 WLR 394 at 401 in a like context, 'the event of an award of nominal damages was not the event at which the applicant was aiming'. In Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873, Devlin J made these observations on the award of costs to a plaintiff who could have recovered only nominal damages (at 874): 'No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct. In applying that rule, however, it is necessary to decide whether the plaintiff really has been successful, and I do not think that a plaintiff who recovers nominal damages ought necessarily to be regarded in the ordinary sense of the word as a "successful" plaintiff. In certain cases he may be, eg, where part of the object of the action is to establish a legal right, wholly irrespective of whether any substantial remedy is obtained. To that extent a plaintiff who recovers nominal damages may properly be regarded as a successful plaintiff, but it is necessary to examine the facts of each particular case.' We respectfully agree with this: it has "the force of common sense": Alltrans Express Ltd v CVA Holdings Ltd, above, at 401. An award of nominal damages ought not today be regarded as a "peg on which to hang costs": cf Beaumont v Greathead (1846) 2 CB 494 at 499; see McGregor on Damages, paras 404-405, Sweet & Maxwell, London, (1988, 15th Ed); see also Burrows, Remedies for Tort and Breach of Contract, 269-270, Butterworths, London (2nd ed 1994)."

Offer to settle 29 There was no dispute that Farstad's first offer, communicated on 24 September 2013, was made consistently with the formal requirements of Pt 25 of the Rules and therefore that r 25.14(1) was relevant: "25.14 Costs where offer not accepted (1) If an offer is made by a respondent and not accepted by an applicant, and the applicant obtains a judgment that is less favourable than the terms of the offer: (a) the applicant is not entitled to any costs after 11.00 am on the second business day after the offer was served; and (b) the respondent is entitled to an order that the applicant pay the respondent's costs after that time on an indemnity basis." 30 In Rakic v Johns Lyng Insurance Building Solutions (Victoria) Pty Ltd (Trustee) (No 2) [2016] FCA 783 at [14]-[18], Bromberg J set out authorities relevant, in particular, to r 25.14(3). Like that sub-rule, and unlike sub-rule (2), there is no reference in r 25.14(1) to "unreasonable" failure to accept an offer, and so it appears to me that the principles relevant to the application of sub-rule (3) are equally applicable to sub-rule (1). Jagot J so held in Gorst v Sydney Equine Coaches Pty Ltd [2016] FCA 1067 at [14]. Bromberg J summarised the position thus, at [18] of Rakic: "The applicable principle … is that the position provided for in the rule should only be departed from for proper reasons, which in general arise only in exceptional cases. Although 'exceptional circumstances' is not the test, were a case wholly unexceptional, it is unlikely that proper reason would be shown to depart from the rule. In that way, whether circumstances are exceptional remains relevant." 31 Moshinsky J agreed with Bromberg J's analysis in Colin R Price & Associates Pty Ltd v Four Oaks Pty Ltd (No 3) [2016] FCA 1031. His Honour held, at [10], that: "The principles applicable to r 25.14 were discussed by Bromberg J in Rakic v Johns Lyng Insurance Building Solutions (Victoria) Pty Ltd (Trustee) (No 2) [2016] FCA 783 at [14]-[18]. If the elements of s 25.14(3) are established, this creates a rebuttable presumption that the applicant is entitled to an indemnity costs order. The Court has the power to depart from this position, arising from its power to dispense with the operation of any rule (r 1.34) and its power to make orders contrary to the rules (r 1.35). Generally, it will not be appropriate to dispense with the operation of r 25.14(3) unless there is a proper reason to do so and this will generally only be the case where exceptional circumstances are present: see Skyy Spirits LLC v Lodestar Anstalt (No 2) [2015] FCA 575 at [5], [7] per Perram J; Robinson v Kenny (No 2) [2015] FCA 2 at [17]-[18] per Farrell J."

"Without prejudice" or "without prejudice save as to costs" 32 The email of 11 March 2014 by which Farstad offered to settle in the terms proposed in an attached deed had, in its subject line, the words "without prejudice" and not "without prejudice save as to costs". Ms Romero relied upon that distinction in submitting that the deed should not have been disclosed to the Court. 33 That submission should not be accepted. At common law, there is a valid distinction between the two kinds of offer. As Megarry VC said in Computer Machinery Co Ltd v Drescher [1983] 1 WLR 1379 at 1383: "Whether an offer is made 'without prejudice' or 'without prejudice save as to costs,' the courts ought to enforce the terms on which the offer is made so as to encourage compromises and shorten litigation. The latter form of offer has the added advantage of preventing the offer from being inadmissible on costs, thereby assisting the court towards justice in making the order as to costs." (Emphasis added.) 34 The common law has, however, been displaced by s 131 of the Evidence Act 1995 (Cth) which provides (relevantly) as follows: "131 Exclusion of evidence of settlement negotiations (1) Evidence is not to be adduced of: (a) a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute; or (b) a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute. (2) Subsection (1) does not apply if: … (h) the communication or document is relevant to determining liability for costs; or" 35 I held in Alexander v Australian Community Pharmacy Authority (No 2) [2010] FCA 467 that s 131(2)(h) had the effect that without prejudice communications relating to costs were admissible as an exception to the proscription imposed by s 131(1). See also: Marks v GIO Australia Holdings Ltd (No 2) (1996) 66 FCR 128 at 135, Australian Competition and Consumer Commission v Australian Safeway Stores Pty Limited (No 3) [2002] FCA 1294 at [17]-[19], and Pinot Nominees Pty Ltd v Federal Commissioner of Taxation (2009) 181 FCR 392 at 397-8. 36 The March 2014 settlement offer may, therefore, be taken into account.

The Deed 37 It will become apparent in what follows that I view the execution of the Deed in November 2015 as being of some moment. If, properly construed, the Deed settled a claim or a head of damages that was part of the subject matter of this proceeding, it assumes some importance in determining whether Ms Romero can be said to have been successful in this proceeding, and whether Farstad has bettered its offers. For that reason, it is appropriate to deal with the effect of the Deed before deciding how the competing costs claims should be resolved. 38 The Deed recorded in its recitals, relevantly, the following: "A. [The Applicant] … claims that she suffered an adjustment disorder and/or a depressive anxiety condition and/or major depressive disorder … as a result of, or contributed to a material degree, by the Applicant's perception of unfair treatment by Mr Cameron Martin, Master of MV Far Swan as a result of directions or lack of directions made by, or other behaviour by, the said Master Martin about November/December 2011, simulation/course requirements and the subsequent complaint by the Applicant in respect of her perceptions, meetings with the Respondent, communications with the Respondent and a report consequent upon the complaint, when in employment of the Respondent. B. The Applicant sought compensation in respect of the adjustment disorder and/or depression and claimed; (i) benefits pursuant to Seafarers Rehabilitation and Compensation Act 1992 ('SRCA') including lost wages resulting from alleged incapacity to work; (ii) medical and related expenses. C. Liability to pay benefits in accordance with the SRCA in respect of the Applicant's claim for compensation was refused by the Respondent in the course of a decision deemed to have been made in or about February 2014 by the operation of section 79(6) of the SRCA ('Reviewable Decision'). D. The Applicant applied to the Administrative Appeals Tribunal ('AAT') in Application No. 2014/0999 for a review of the Respondent's Reviewable Decision in respect of the above claim. E. The Applicant also alleges that the adjustment disorder and/or depression was caused by the breach of her contract of employment with the Respondent and that she was, and is, entitled to claim damages for injury against the Respondent at common law as a result of breach of contract of employment constituted by the alleged actions and matters in paragraph A above and alleges claim [sic] to damages in respect the [sic] adjustment disorder and/or depression (hereinafter referred to as "common law claim") which allegations, and the right to make the common law claim, the Respondent denies." 39 Pausing here, what is apparent from these recitals is that Ms Romero claimed to have suffered mental harm, in consequence of which Farstad was liable both under the SRC Act and in contractual damages. The compensation claimed related, amongst other things, to lost wages arising from incapacity to work, caused by the disabling mental condition. 40 Clause 1.1 of the Deed contained a series of "representations" that had the effect of taking the claim out of the SRC Act jurisdiction. The definition of "injury" in s 3 of that Act excludes any "failure by the employee to obtain a … benefit in connection with his or her employment." The representation in cl 1.1(i) of the Deed was that Ms Romero's mental harm was caused by Farstad's failure to adopt a "style of enquiry", in a meeting of 16 December 2011, that accorded with Ms Romero's wishes, and by the failure by Ms Romero to obtain permission to undertake a particular course of study. Clause 1.1(ii) was a representation that those were benefits in connection with employment, and therefore that Ms Romero was not entitled to compensation under the SRC Act for mental harm. Clause 1.1(iii) was a representation that, apart from the aforementioned mental harm, Ms Romero had suffered no other injury arising out of her employment with Farstad. Clause 1.1(iv) is important and was a representation: "That including upon the resumption of the Applicant's part-heard proceeding for breach of contract in the Federal Court (TAD 72/2012), the Applicant will not seek damages from the Respondent in respect of loss arising from the adjustment disorder and/or depression, and the Federal Court proceeding TAD 72/2012 does not include any claim for such damages." 41 Farstad agreed by cl 4 of the Deed to pay to Ms Romero $580,000, on the basis that each party bear its own legal costs and disbursements in respect of the AAT application. Clause 5 provided that the settlement amount was paid: "… in consideration of the Applicant's agreement to the terms of the Deed … and also in consideration of the Applicant releasing the Respondent, its servants and agents from the common law claim, and also in full and final settlement of the common law claim (which settlement also includes payment as part of the settlement amount of damages to the Applicant within the meaning of that term in section 58, including section 58(4) of the SRCA and for the purposes of section 58 including section 58(4), and is not damages referred to in s 58(6)) and also with an express denial of liability by the Respondent in order to avoid the costs and risks of litigation but, subject to the Applicant's representation at 1.1(iv) above and paragraphs 8-10 below, without prejudice to the claim by the Applicant in Federal Court proceeding TAD 72/2012." 42 It is as well to interpose, so far as is relevant, s 58 of the SRC Act: "58 Compensation not payable if damages recovered (1) This section applies if: (a) an employee recovers damages in respect of an injury to the employee … being an injury, loss or damage in respect of which compensation is payable under this Act; or … (3) If, before the recovery of the damages by … the employee … , any compensation under this Act was paid to the employee in respect of the injury, loss or damage, … the employee … is liable to pay to the employer an amount equal to: (a) the amount of that compensation; or (b) the amount of the damages; whichever is less. (4) Compensation is not payable under this Act to the employee in respect of the injury, loss or damage … after the date on which the damages were recovered by the employee … . (5) Subsection (3) does not apply if the damages were recovered in proceedings instituted by the employee as a result of an election by the employee under section 55, or by way of a settlement of such proceedings. (6) Subsection (4) does not apply if the damages were recovered: (a) as a result of proceedings, or fresh proceedings, instituted by the employer under section 59; or (b) as a result of proceedings the conduct of which is taken over by the employer under that section; or (c) as a result of proceedings instituted by the employee as a result of an election by the employee under section 55; or (d) by way of settlement of those proceedings." 43 Clause 8 of the Deed provided as follows: "The Applicant agrees with the Respondent that by reason of the terms of this Deed and the provisions of the SRCA the Respondent … has and will have no obligations to the Applicant to make any payments of compensation to the Applicant under the SRCA or any other State compensation law or damages at common law or make any payments under any other statutory enactment or otherwise in respect of any adjustment disorder and/or depression nor any sequelae of any of the same and subject to the provisions of paragraph 5 above release the Respondent … to the extent permitted by law from all claims, demands and suits arising from her employment with the Respondent, including the matters in paragraph (A) of the preamble to this Deed including in respect of the adjustment disorder and/or depression." 44 The Deed contained, in cl 17, what was effectively a condition precedent, the condition being that the AAT make a decision in terms annexed to the Deed. The AAT did make such a decision, on 17 December 2015. The decision was to set aside Farstad's reviewable decision and to substitute the following decision: "(a) That the Applicant has suffered an adjustment disorder and/or depressive anxiety condition and/or major depressive disorder (the adjustment disorder and/or depression) in the course of, arising out of or contributed to a material degree, by the Applicant's employment with the Respondent. (b) That the adjustment order and/or depression have rendered her incapacitated for employment with the Respondent as a seafarer or in any other capacity and rendered her incapacitated for employment as a seafarer with any other employer from 16 December 2011 until 30 November 2015. (c) That the adjustment disorder and/or depression resulted from the failure by the Applicant to obtain in connection with her employment: (i) during a meeting on 16 December 2011, a style of enquiry by those present on behalf of the Respondent which accorded with her wishes; and; [sic] (ii) permission of the Respondent to undertake a course of study for Master's Certificate commencing January 2012, each of which constituted a benefit in connection with her employment as provided in the definition of "injury" in section 3 of the SRCA. (d) By reason of the matters in paragraph (c) above the Applicant is not entitled to receive any compensation pursuant to the SRCA (including in respect of any incapacity for employment or medical or like treatments) in respect of the adjustment disorder and/or depression." 45 The effect of the Deed is quite clear. By Ms Romero agreeing that the adjustment disorder and/or depression (which I will call "mental harm") fell within the exception to the definition of "injury" in s 3 of the SRC Act, it was removed from the purview of that Act. Therefore, it was open to the AAT to decide, which it did (by consent), that although Ms Romero had suffered the mental harm arising out of her employment with Farstad, the cause of the mental harm was excluded from the definition of injury and therefore Ms Romero was not entitled to compensation under the SRC Act. 46 The purpose of the Deed, as it appears to me, is to provide for the payment of $580,000 to Ms Romero in exchange for a release by her of Farstad in respect of any claims she may have arising out of the mental harm sustained by her. That includes claims that she may have under the SRC Act (and she acknowledges in the Deed, and the AAT decided, that she was not entitled to compensation under the Act in any case). It comprehends "common law" claims, including a claim for damages for breach of contract. In respect of such claims, she represented that she "[would] not seek damages … in respect of loss arising from the [mental harm]" in this proceeding, and that this proceeding "[did] not include" any claim for such damages. 47 It is clear that, at least up to the date of the Deed, Ms Romero's claim against Farstad did include a claim for such damages, or in any case that her claim for damages was broad enough to encompass a head of damages relating to incapacity for work caused by Farstad's alleged breaches of contract. That is clear from the passages that I have set out above from her originating application, statement of claim, contentions of fact and law, and amended particulars of loss. For that reason, I do not read the representation that "TAD72/2012 does not include any claim for such damages" as meaning that the proceeding "does not include, and never has included, any claim for such damages". Rather, I read it as meaning that the proceeding "does not, as at and from the date of this Deed, include any claim for such damages". 48 Accordingly, in consideration of receiving $580,000 from Farstad, Ms Romero agreed that she would no longer pursue the particular claim or head of damage the subject of the Deed in her proceeding in this Court. That agreement was recorded in the Deed.

Nominal damages 49 Ms Romero's primary submission on costs was that she had been "wholly successful on the issue of breach of contract", and that she should have her costs on a party and party basis. It was submitted that the SD Act claims, in respect of which she failed, were based on the same material as the contract claims and did not lengthen the trial. 50 Farstad submitted that Ms Romero had commenced the proceeding in order to recover substantial damages rather than to vindicate some right. It submitted that the vindication by Ms Romero of her legal right in the Full Court was not the end of the matter, and that, in the remitted proceeding, she had continued to pursue substantial damages. Farstad submitted that it followed that Ms Romero had not been successful "in any aspect of this proceeding so as to justify an award of costs in her favour". Instead, it contended, its success in the proceeding had been "to all intents and purposes entire", and it should have an award of the costs of the whole proceeding, on at least a party and party basis. 51 In reply, Ms Romero noted that the Full Court had originally determined that she should have her costs of the hearing before the original trial judge. This was said to be an indication that it "considered that [she] was successful to that date having attained a declaration for breach of contract regardless of any determination of the quantum of damages." 52 Ms Romero submitted also that Farstad never admitted, prior to the Full Court's determination, that it had breached her contract. It had never offered to pay her nominal damages plus costs, nor had it ever made an offer that would meet her costs. 53 Further, Ms Romero disputed Farstad's characterisation of her claim. She said that she had sought, in addition to damages, this relief: "i. 'an Apology from the Respondent'; ii. 'an order pursuant to s 46PO(4) of the Australian Human Rights Commission Act 1986 (Cth) declaring that the Respondent has committed unlawful discrimination and victimization against the Applicant contrary to s 14(2) and s 94 of the Sex Discrimination Act 1984 (Cth) and/or s 15(2) and s 42 of the Disability Discrimination Act 1992 (Cth)'; iii. 'An order that the Respondent: (a) Implement policies, practices and procedures in respect of sex discrimination made to it on this ground; (b) Implement risk management strategies to assist in the recognition and identification of discriminatory conduct (independent of whether a complaint is made); and (c) Undertake regular management training in relation to the policies, practices and procedures referred to at (a) above.'" 54 Accordingly, Ms Romero submitted, it was clear to Farstad that she "was seeking more than a mere monetary sum of damages in these proceedings. [Ms Romero] was seeking vindication of her position and seeking to ensure that [Farstad did] not treat other employees of its organisation [in] the way that [Ms Romero] had been treated." Further, "[r]ecognition that [Farstad's] actions were unlawful was a significant motivating factor for [Ms Romero] in commencing and continuing with the action." 55 Ms Romero submitted that she had been successful in establishing a breach of contract, a claim which had been disputed by Farstad. She had been vindicated by the declaration with the acknowledgement that she had sought: that the way in which she had been treated by Farstad was unlawful. After that determination, it was submitted, "the failure of [Farstad] to make any offer which included payment of [her] taxed costs left her and the Court with no choice but to proceed with the June 2016 hearing and assess damages." 56 Ms Romero relied upon the statement by Devlin J in Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 at 874, that a plaintiff may be regarded as successful "where part of the object of the action is to establish a legal right, wholly irrespective of whether any substantial remedy is obtained" (emphasis added). That passage was, as Ms Romero noted, relied upon by the court in Motium (as it was by the Full Court in Nexus). It does not, however, follow that, on all occasions that a legal right is acknowledged as part of the relief obtained, the plaintiff ought to be regarded as successful. The Court in Motium, having quoted Devlin J, said that, where the "primary purpose" of litigation is to recover damages rather than vindicate some legal right, the award of nominal damages will not entitle a party to costs (at [10]). This is the approach that, respectfully, I adopt. 57 The Full Court initially considered that Ms Romero should have her costs of the proceeding before Marshall J. Damages had not, of course, yet been assessed. On Farstad's application, the Court varied that order on the basis set out at [10] of Romero [2015] FCAFC 26: "It would be wrong for this Court to pre-empt the outcome of the further hearing by ordering the costs of the first trial when there is a theoretical chance, at least, of a judgment in favour of Ms Romero which is in less favourable terms than Farstad's offer." 58 The findings I made above, at [48], are here relevant. On 30 November 2015 - i.e., after the Full Court's decision, but before the remitted hearing before me - Ms Romero entered into the Deed. While it is true that I only awarded Ms Romero nominal damages, so that the amount of money that Ms Romero received by way of damages was less than the amount offered her by Farstad, in the meantime she had settled claims, including a claim that was part of the subject matter of this proceeding, for $580,000. 59 There was, ultimately, no determination of that claim in this proceeding, by Marshall J, by the Full Court, or by me on remittal. There is no basis for me to find that Ms Romero would have been awarded more, in respect of that claim, than the quantum of Farstad's offer and there is no basis for me to find that she would have been awarded less. The justice of the case appears to me to require that there be no order as to the costs of the hearing before Marshall J, nor as to the costs of the remitted hearing, up to the date of the fulfilment of the condition precedent to the Deed's operation, on 17 December 2015. The costs of the appeal have already been determined by the Full Court. 60 Accordingly, it remains to consider the claims for the costs of the remitted hearing, from 18 December 2015. 61 In my opinion, Ms Romero was not successful in the remitted hearing. 62 Ms Romero was substantially unsuccessful in obtaining the relief claimed by her in her originating application and statement of claim. As to the contractual breach claim in particular, Ms Romero's claim was that, in consequence of Farstad's breach and (alleged) repudiation, she had sustained loss or damage including by having been forced to change her profession. While Ms Romero was successful in establishing breach, she did not establish repudiation, and the loss or damage upon which she relied was found to be too remote. Ultimately, having sought damages on the basis of breach and repudiation, Ms Romero established only non-repudiatory breach and received a miniscule percentage of the damages that she sought. In my judgment, that is not "success". It seems to me that the observation in Motium at [10] - that the nominal damages are of no real use to Ms Romero and, had she known that that was all that was available, she would not have brought proceedings - is apposite. 63 Of course it is true that Ms Romero sought to establish that her contract had been breached, and indeed repudiated, by Farstad, and a finding that breach had occurred was, in some measure, vindicatory of her position. However, in my view, her primary purpose was to obtain an award of substantial damages. 64 Ms Romero countered that the fact of her having made an offer to settle her claim for $100,000 plus costs if Farstad accepted liability for payment of benefits under the SRC Act demonstrated that she had not "vigorously and actively pursued substantial damages … by reference to the particulars of her claim". The fact of that offer does not appear to me to strengthen Ms Romero's submission. The letter of offer, attached to Ms Romero's submissions, provides that "[Ms Romero] is prepared to provide a deed of release which acknowledges Farstad's denial of her claims in the proceedings". That rather supports a finding that monetary considerations were Ms Romero's primary motivation, rather than any acknowledgement of wrongdoing by Farstad. 65 Ms Romero submitted, as I have recorded, that, after the Full Court's remittal of the proceeding, she effectively had no choice other than to prosecute the proceeding, partly because Farstad failed thereafter to make any other offers of settlement. Ms Romero could have made a settlement offer herself, for instance one that contemplated an award of nominal damages plus costs. There was no evidence of such an offer having been made. She could have applied for an order to the effect that, were she to discontinue, the parties were to bear their own costs (cf r 26.12(7) of the Rules). No such application was made. 66 In my judgment, at least since 18 December 2015 - i.e., after the Deed took effect - Farstad has been successful in its defence of Ms Romero's proceeding. It should have its costs on at least a party and party basis. It remains to consider whether it should have the additional benefit of a special costs order.

Offers to settle 67 I do not accept that Farstad is entitled to costs on an indemnity basis. Its reliance on the settlement offer dated 24 September 2013 overlooks the fact that, at that time, Ms Romero's claim for contractual damages arising out of her alleged "adjustment disorder and/or depressive anxiety condition and/or major depressive disorder" - what came in the Deed to be called the "common law claim" - was still in issue. Loss of that kind was claimed in Ms Romero's originating application (see [6]-[7] above), and in her statement of claim (see [8] above), and the Deed had not yet been entered into. 68 Ms Romero rejected an offer of $40,000 inclusive of costs to settle claims including the "common law claim". She received $580,000 as part of a settlement of claims including the common law claim. In those circumstances, I do not think Ms Romero can rightly be said to have obtained a judgment that is "less favourable than the terms of the offer". 69 By the time of the March 2014 offer, Ms Romero had made her claim under the SRC Act. The deed of settlement that Farstad proposed to Mr Romero contemplated that Farstad would pay to Ms Romero $10,000 and that Ms Romero would release Farstad in respect of all claims arising out of her employment, save that she would not release Farstad in respect of the claim under the SRC Act. It remained the case, at that time, that the "common law claim" was the subject of the proceeding in this Court (even if, by then, it overlapped with a claim made under the SRC Act). The same reasoning as I set out in the previous two paragraphs, in relation to the September 2013 offer, applies also in relation to the March 2014 offer. In light of the intervening settlement and Deed, I do not think it can rightly be said that Farstad bettered its March 2014 offer, so as to enliven the principles established in Calderbank v Calderbank [1975] 3 All ER 333. 70 That is sufficient to dispose of Farstad's application for indemnity costs. 71 In case I am wrong in so finding, and in deference to the parties' submissions, it is appropriate to consider Ms Romero's further submissions concerning the offers of settlement. In relation to the September 2013 offer, Ms Romero submitted that Farstad's offer was not a genuine offer of compromise and that it was not unreasonable for Ms Romero to have rejected it. In order for me to be wrong, it seems to me that it would need to be held that the parties' entry into the Deed is properly to be disregarded because, for example, the claims settled did not include one that was in issue in this proceeding. In considering this alternative possibility, I will, therefore, ignore the existence of the Deed and its contents. 72 In the alternative to her primary position that evidence of the March 2014 offer ought not to be received, Ms Romero said only that it did not provide her with an acknowledgement of liability, an apology, or to pay her taxed costs. The implication was either that the offer was not genuine or that it was reasonable for her to have rejected it. 73 Dealing first with the September 2013 offer: I accept that the purpose of Pt 25 of the Rules is to promote the settlement of proceedings by the making of offers of settlement involving genuine compromise and, therefore, that if an offer does not involve genuine compromise on the part of the offeror the Part is not enlivened: Anchorage Capital Partners Pty Limited v ACPA Pty Limited (No 4) [2016] FCA 218 at [11] (Perram J); see also Tickell v Trifleska Pty Ltd (1990) 25 NSWLR 353 at 355. It is not necessary to establish that Ms Romero acted unreasonably for r 25.14(1) to operate: Skyy Spirits LLC v Lodestar Anstalt (No 2) [2015] FCA 575 at [5] (Perram J); IFTC Broking Services Limited v Commissioner of Taxation [2010] FCAFC 31; 268 ALR 1 at [9], [12] (Stone, Edmonds and Jagot JJ)), although her acting in such a manner may be a relevant consideration. 74 Ms Romero submitted that the September 2013 offer did not "take into account and provide [her] with her requested acknowledgement or apology", and that neither breach of contract nor the entitlement to a declaration thereof was conceded. Ms Romero submitted that "[t]he offer did not concede an entitlement to even nominal damages and costs to be taxed." It was, she submitted, for an amount that was less than her costs at that time. 75 In my view, none of those submissions prevent the offer being one of genuine compromise. It remained possible that Ms Romero might fail to establish a breach of contract. Farstad may well have considered that it had good prospects of resisting such a claim. If that had turned out to be the result, then Ms Romero would have had no entitlement to damages, costs, a declaration of liability, or an apology. Rather, she would probably have been ordered to pay Farstad's costs. Ms Romero would have been aware of the risk of that outcome, even if she assessed its probability differently from Farstad. In that context, an offer by Farstad to (in effect) contribute $40,000 to Ms Romero's costs is far better than a worst-case outcome for Ms Romero. It was better than a "walk-away" offer. I do not consider that the offer was solely for the purpose of costs protection, even if that was one of its purposes. 76 Even if, and I accept this to be the case, the offer was far closer to Ms Romero's worst-case outcome than Farstad's, I consider it to have been genuinely made and to have constituted an offer of compromise, if not one that would have been especially attractive to Ms Romero. 77 The questions whether an offer is genuine and whether its rejection was reasonable are related, but an affirmative answer to the former does not require a negative answer to the latter. As to unreasonableness, Katzmann J set out the relevant considerations, albeit in the context of Calderbank offers, in Veda Advantage Limited v Malouf Group Enterprises Pty Limited (No 2) [2016] FCA 470 at [31]: "… [R]efusal to accept an offer not made in compliance with the rules (a Calderbank offer, see Calderbank v Calderbank [1975] 3 All ER 333) does not give rise to any presumption in favour of the offeror. The offeror needs to show that there was a genuine offer of compromise, and that it was unreasonable for the offeree not to accept it: Black v Lipovac at [217]-[218]. In deciding whether it is unreasonable for an offer to be rejected, the following matters should ordinarily be considered: • the stage of the proceeding when the offer was made; • the time afforded to the offeree to consider the offer; • the extent of compromise involved; • the offeree's prospects of success, assessed as at the date of the offer; • the clarity with which the terms of the offer were expressed; • whether the offer foreshadowed an application for indemnity costs in the event of refusal. See Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 at [25]." 78 It is important to keep in mind that, in this assessment of reasonableness, I am assuming that the claim that Ms Romero ultimately settled (with other claims) for $580,000 did not form part of this proceeding. 79 In my assessment, at the time that the offer was made, Ms Romero had fair prospects of establishing a breach of contract (as she ultimately did). The question upon which Marshall J's decision turned was complex and good arguments could be made for either position. The damages that Ms Romero stood to recover if successful ranged between nominal and very substantial, even without the claim ultimately settled by Deed. An offer to pay Ms Romero $40,000 inclusive of costs involved a pessimistic assessment of Ms Romero's chances. 80 Further, it must be taken into account that nearly a year had passed since the commencement of the proceeding, and Ms Romero had just filed a tranche of affidavits. Her costs would, by then, have been substantial. It is asserted in Ms Romero's submissions that her costs were, at that time, more than three times the amount of the offer. Farstad may or may not have known that, but objectively assessed the likelihood was that an offer of $40,000 made at that time was an offer really to contribute something to Ms Romero's costs rather than to leave her with an amount of money in her pocket. 81 Further, Ms Romero had not yet seen the evidence upon which Farstad ultimately relied. It appears from Marshall J's orders of 23 October 2013 that discovery would not be provided, or in any event completed, until a few months later. Ms Romero had not yet made her claim under the SRC Act. 82 I accept, of course, that it is in a party's interest to make an offer of settlement prior to incurring the costs of preparing evidence and providing discovery, and it is sound public policy that the making of such offers should be encouraged. On the other hand, it is important to remember the context in which the question of unreasonableness arises. As Hodgson JA said in Commonwealth of Australia v Gretton [2008] NSWCA 117 at [117]: "In my opinion, where the question is whether, by reason of refusal of a Calderbank offer, a party should have to pay costs on an indemnity basis rather than party and party basis, it is generally necessary that the party seeking assessment on an indemnity basis satisfy the court that the other party was acting unreasonably in refusing the offer. In Rosniak v Government Insurance Office (1997) 41 NSWLR 608, Mason P (Clarke AJA agreeing) at 616 notes the requirement of unreasonableness for indemnity costs in contradistinction to party-party costs: Later cases have emphasised that the discretion to depart from the usual "party and party" basis for costs is not confined to the situation of what Gummow J described as the "ethically or morally delinquent party" ... Nevertheless the court requires some evidence of unreasonable conduct, albeit that it need not rise as high as vexation. This is because party and party costs remain the norm, although it is common knowledge that they provide an inadequate indemnity." 83 If the offer under consideration were a Calderbank offer, the question would be whether there was evidence of unreasonable conduct, in light of the factors set out by Katzmann J in Veda, sufficient to warrant departure from the "norm" - party and party costs. 84 Were it necessary, and taking into account all of the considerations to which I have adverted in previous paragraphs (and in particular in [79]-[81]), I would have accepted that Ms Romero did not act unreasonably in rejecting the offer. On the contrary, given her fair prospects of success, her fair chance of obtaining substantial damages if she were successful, the fact that she had just incurred substantial costs in preparing her evidence, and the fact that she had not yet had an opportunity of assessing the strength of her opponent's case in light of its evidence and discovered documents, I consider that her rejection of the offer was reasonable. 85 Such a finding would not, however, have led me to conclude that there was a proper basis for departing from r 25.14(1). There does not seem to me to be anything unusual about the circumstances of this case. Ms Romero did not point to anything other than the factors which, she said, rendered the offer other than genuine (a contention which I have rejected) and that made her rejection of it reasonable (which I have accepted, but which is not enough to justify departure from the rule). 86 Accordingly, had I not found r 25.14(1) to be inapplicable, for the reasons given at [67]-[70] above, I would have held that it ought to have effect and that the consequences set out in sub-rules (a) and (b) should apply. 87 The need to consider the March 2014 offer, therefore, only arises in the second alternative, i.e., if I am wrong in holding that the intervening Deed precludes the enlivenment of both Pt 25 of the Rules and Calderbank principles, and also in saying (in the alternative) that the September 2013 offer was effective. In those circumstances, I do not consider it to be necessary for me to deal with that offer.

Additional matters 88 There are two other issues, both of which can be dealt with shortly. 89 The first relates to the SD Act claim. That claim, as already noted, had been unsuccessful before Marshall J and was not the subject of appeal. Ms Romero's primary submission on this point was that there ought not to be an apportionment of costs to take account of her failure to make good this claim, because her pursuit of it did not add greatly to the time required at, or preparation for, trial. That assumed that she would obtain an award of costs in respect of her contract claim. She has not done so. Farstad submitted that the SD Act claim extended the work involved in preparation for and conduct of the trial by 60 per cent. In reply, Ms Romero said that Farstad's assertion was unsubstantiated and she re-iterated her submission that the trial was not materially lengthened. 90 The distinction Farstad sought to draw between the SD Act claim and the contract claim was that the former, it said, "relied on alleged conduct occurring during [Ms Romero's] time aboard the Far Swan under the supervision of Captain Martin", whereas the latter "related to the process of Ms Romero's complaint … and [Farstad's] investigation and handling of it". These events are, nonetheless, closely related. Evidence as to the events leading up to the making of the complaint would doubtless have been led irrespective of whether a separate SD Act claim was made. Farstad's estimate of 60 per cent seems to me to be an overstatement. 91 I would be prepared to accept that the evidence that would, in any event, have been required for the contract claim required some supplementation or augmenting to take account of the SD Act claim, and of course that legal and factual submissions were required specifically in relation to the SD Act claim. Perhaps that would have added to the length of trial by somewhere in the order of 10 or 20 per cent. On the other hand Farstad raised a jurisdictional issue at trial on which it was unsuccessful. As a result Marshall J denied Farstad 15 per cent of its costs. 92 Doing the best that I can in the absence of detailed submissions or evidence on the costs relating to the various aspects of the proceeding, I think a just outcome is that there be no order as to the costs of the contract claim before Marshall J (as I have already held), and that any costs orders in respect of the SD Act claim and the preliminary jurisdiction point be treated as offsetting one another. There ought, therefore, to be no order as to the costs of the proceeding before Marshall J. 93 The second issue is that Farstad complained about Ms Romero's conduct of the trial. It did so in making its application for indemnity costs. The submission did not go further than the assertion that Ms Romero filed extensive medical evidence upon which she ultimately did not rely, and that she did rely, to some extent, upon previously-undiscovered material. That conduct may be suboptimal but, without much more detail than was given in Farstad's written submission, it is hardly a basis for awarding Farstad its costs on an indemnity basis. Likewise, I do not think that anything turns on Ms Romero's complaints in reply concerning Farstad's late discovery of certain notes.

Conclusion 94 Neither party should have her or its costs prior to 18 December 2015 (excepting, of course, the costs of the appeal, which have already been dealt with by the Full Court). 95 Farstad was the successful party on the remitted hearing. It should have its costs on a party and party basis from 18 December 2015. Farstad's application that those costs be on an indemnity basis must be refused: its offer under Pt 25 of the Rules was ineffective, in light of the parties' subsequent execution of the Deed. 96 Were I wrong concerning the import of the Deed, I would have held that, although Ms Romero acted reasonably in rejecting Farstad's offer, that did not provide a proper reason for displacing the effect of r 25.14(1). I would have awarded Farstad its costs on an indemnity basis from 11:00 am on the second business day after the offer was served, consistently with r 25.14(1)(b) of the Rules. I certify that the preceding ninety-six (96) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tracey.