The damages judgment
7 In the damages judgment, close consideration was given to the terms of the Policy. The primary judge noted that the parties had relied on evidence adduced at the original trial before the first judge in relation to Mr Romero's past and future financial loss, including study costs associated with her retraining as a lawyer, and to Ms Romero's likelihood of continued employment. Before the primary judge, the parties also relied on additional evidence not adduced at the first trial. This included evidence both in support of the damages claim and evidence in support of Farstad's contention of affirmation of the contract after its breach. The latter included correspondence between Ms Romero and her solicitor with Farstad in July and August 2012 and February 2013 concerning Ms Romero's insistence that Farstad make payments relating to her employment. It also included a payment advice of September 2012, which included an allowance for industrial clothing. Ms Romero objected to Farstad's reliance on some of this material, which had not been before the first judge. The objection was disallowed. Ms Romero complains that the primary judge failed to deal with her objection to the leading of additional evidence on affirmation. We will address that below.
8 Ms Romero's claim for what has been described as training costs was a total of $115,759.71 made up as follows:
Study costs incurred in study for a Master's certificate prior to November 2011 - $20,000.
Income lost during the period during which Ms Romero was undertaking the study prior to November 2011 - $40,000.
Study costs for a law degree undertaken by Ms Romero between March 2013 and March 2016 - $35,759.71.
Estimated costs of completion of her law degree and undertaking pre-admission practical legal training - $20,000.
9 The primary judge noted that there was no claim for any award of damages for stress, disturbance and psychological disability because, as a result of consent orders made on 17 December 2015 in the Tribunal and pursuant to the Deed, Farstad was required to pay Ms Romero a substantial sum to compensate her for "an adjustment disorder and/or depressive anxiety condition and/or major depressive disorder" arising out of her employment by Farstad. Farstad agreed to make such payment without admission of liability. It was a condition of the Deed that Ms Romero release Farstad from any common law claim for damages in respect of these conditions.
10 After discussing the principles upon which damages may be awarded, the primary judge referred to Ms Romero's contention, which relied on the second limb of the statement of principle expressed in European Bank Limited v Evans (2010) 240 CLR 432 (at 438 [12]-[13]), that it must have been in the contemplation of the parties that, if the obligations imposed on Farstad by the Policy were not fulfilled, she would have wasted her costs incurred in studying for her Master's Certificate and would incur further costs in retraining for another career. The primary judge then referred to Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 where McHugh JA discussed the distinction between reasonable foreseeability and reasonable contemplation and the role the distinction between those concepts played in the important consideration of remoteness of damage. His Honour observed that while parties need not contemplate the degree or extent of the loss or damage suffered, or the precise details of the events giving rise to it, damage would not be too remote if it were of the kind of loss or damage suffered.
11 The primary judge accepted that Ms Romero would be entitled to claim for damage occasioned by her unwillingness to render further service to Farstad such that it would be necessary for her to obtain further employment. However, each of Ms Romero's heads of damage were predicated upon her losing confidence, not only in Farstad, but also in all maritime industry employers. His Honour said that foreseeability of this broader loss of confidence was not explained. Had Ms Romero changed employers, but remained in the maritime industry, her training towards a Master's Certificate would not have been thrown away. The loss of wages during that training would not have been in vain. It would have been unnecessary for her to study for a law degree or to undertake any pre-admission practical legal training. Each head of damage arose only because Ms Romero made a choice to embark on a completely different career.
12 Following an examination of the relevant evidence, the primary judge held that the nature and character of the financial losses of the kind claimed by Ms Romero would not have been regarded as a probable consequence of Farstad's breach of contract. His Honour examined the evidence in support of that conclusion, observing in particular that Ms Romero had not even sought to work with another maritime employer on or off-shore.
13 The primary judge concluded that Ms Romero was entitled to nominal damages only for the breaches of contract identified by the Full Court and assessed an award of $100 as being appropriate in the circumstances.
14 As a consequence of the terms of the remittal by the Full Court, it was then necessary for the primary judge to turn to Ms Romero's claim that Farstad had repudiated the contract by the breaches of the Policy. It was necessary to do so because of the terms of the remittal by the Full Court. The primary judge cited what the Full Court said (at 435-436; [111]-[118]) in Full Court (No 1) and observed that Ms Romero had contended that she had acquired a right to terminate the contract either on the basis that Farstad's conduct amounted to a repudiation or that the breach was sufficiently serious to justify termination by her. She did not suggest that the breaches found by the Full Court evinced an actual intention by Farstad not to be bound by the contract as whole, but rather, that the necessary repudiatory intention was to be found in the breaches of "fundamental obligations" which fell on Farstad. His Honour discussed the characterisation of the breached term (namely the contractual term that there would be compliance with the Policy). He noted that the possible characterisation of contractual terms were identified by the Full Court as being "warranty, condition or intermediate term … ". These categories were identified in the joint judgment of Gleeson CJ, Gummow, Heydon and Crennan JJ in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115. In dealing with the concepts of conditions and warranties (at 137-139 [47]-[52]), their Honours quoted with approval from the judgment of Jordan CJ in Tramways Advertising Pty Ltd v Luna Park (NSW) Limited (1938) 38 SR (NSW) 632 (at 641-642) where his Honour said that:
The question whether a term in a contract is a condition or a warranty, ie, an essential or non-essential promise, depends upon the intention of the parties as appearing in or from the contract. The test of essentiality is whether it appears from the general nature of the contract considered as a whole, or from some particular term or terms, that the promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or a substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor. If the innocent party would not have entered into the contract unless assured of a strict and literal performance of the promise, he may in general treat himself as discharged upon any breach of the promise, however slight. If he contracted in reliance upon a substantial performance of the promise, any substantial breach will ordinarily justify a discharge.
15 The primary judge noted that the "intermediate" category emerged from later case law. As the plurality explained in Koompahtoo (at 138-139 [48]-[50]):
48 What Jordan CJ said as to substantial performance, and substantial breach, is now to be read in the light of later developments in the law. What is of immediate significance is his reference to the question he was addressing as one of construction of the contract. It is the common intention of the parties, expressed in the language of their contract, understood in the context of the relationship established by that contract and (in a case such as the present) the commercial purpose it served, that determines whether a term is "essential", so that any breach will justify termination.
49 The second relevant circumstance is where there has been a sufficiently serious breach of a non-essential term. In Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd, the English Court of Appeal was concerned with a stipulation as to seaworthiness in a charterparty. Breaches of such a stipulation could vary widely in importance. They could be trivial or serious. The Court of Appeal held that to the accepted distinction between "conditions" and "warranties", that is, between stipulations that were in their nature essential and others, there must be added a distinction, operative within the class of non-essential obligations, between breaches that are significantly serious to justify termination and other breaches. This was a recognition that, although as a matter of construction of a contract it may not be the case that any breach of a given term will entitle the other party to terminate, some breaches of such a term may do so. Diplock LJ said that the question whether a breach by one party relieves the other of further performance of his obligations cannot always be answered by treating a contractual undertaking as either a "condition" or a "warranty". Of some stipulations "all that can be predicated is that some breaches will and others will not give rise to an event which will deprive the party not in default of substantially the whole benefit which it was intended that he should obtain from the contract; and the legal consequences of a breach of such an undertaking, unless provided for expressly in the contract, depend upon the nature of the event to which the breach gives rise".
50 In this way Diplock LJ set the policy of the law favouring certainty of outcome through the classification of terms as conditions against that which encourages contractual performance and favours restriction of the right to terminate to cases where breach occasions serious prejudice. As it is put in the eleventh edition of Treitel:
"[T]he policy of leaning in favour of classifying stipulations as intermediate terms can be said to promote the interests of justice by preventing the injured party from rescinding on grounds that are technical or unmeritorious."
Perhaps the adoption of other taxonomies for contractual stipulations might achieve similar outcomes. However, Hongkong Fir was decided in 1961 and has long since passed into the mainstream law of contract as understood and practised in Australia.
(Original italic emphasis; citations omitted, bold emphasis added.)
16 As noted by the primary judge, the terms of Ms Romero's contract which the Full Court found had been breached were all found in the Policy. The Policy was not specifically referred to in Ms Romero's letter of engagement. Whether the provisions of the Policy were incorporated in Ms Romero's contract was in dispute at both trial and on appeal. The first judge was not persuaded that they were so incorporated. The Full Court disagreed. The primary judge considered it was an issue on which different views were legitimately open: see the observations of Buchanan J in Westpac Banking Corporation v Wittenberg (2016) 242 FCR 505 (at 525-527 [102]-[112]), with whom McKerracher and White JJ relevantly agreed. The primary judge noted that:
the Policy did not appear to have been in the parties' contemplation at the time at which the contract was entered into and that, had they turned their minds to the issue at that time and sought advice, it is likely that they would have been told that some uncertainty attended the question as to whether the Policy was incorporated in the contract;
it is also to be borne in mind that it was not the Policy, as a whole, which was found to have been breached. Rather, Farstad was found to have failed to comply with a small number of procedural requirements contained in it;
Farstad's principal breach was its conduct of a formal inquiry when Ms Romero had not asked for one. Ms Romero had made serious allegations of bullying and harassment. Farstad treated them seriously. Although Ms Romero had not asked for a formal inquiry of the kind contemplated by the Policy she had certainly requested and expected that her complaints would be investigated. She advised Farstad, in her email on 7 December 2011, that she welcomed an investigation of her complaints and, on 29 January 2012, expressed dissatisfaction at the time it had taken for her to be advised about the outcome of that investigation. When told of the findings which had been made she did not complain that an investigation had taken place but rather that her expectation of a "proper and fair investigation" had not been satisfied; and
there was, therefore, on both sides, a view that an inquiry should have been instituted. What was disputed was the form of the inquiry established by Farstad. It should not have been a formal inquiry under the Policy. Farstad did not, however, refuse to do something which the Policy required it to do. Nor did it do something which the Policy expressly prohibited it from doing. It embarked on the formal inquiry on the mistaken assumption that Ms Romero had requested it to conduct such an inquiry.
17 The primary judge observed that Farstad's conduct of the investigation was found by the Full Court (at 436 [117]) to be "entirely inconsistent with the Policy" as the details of Ms Romero's complaints had not been put to Captain Martin, all relevant witnesses had not been interviewed and detailed records had not been kept. The investigation had also taken into account the allegations made against Ms Romero by Captain Martin. This admixture of issues had led Ms Romero to consider that Farstad was not taking her allegations seriously and was using Captain Martin's complaints to undermine her; it was, therefore, according to the Full Court on the limited evidence before it, possible that Farstad's shortcomings in investigating her complaints "engendered in Ms Romero an objectively justified view that Farstad had not complied, and would not thereafter comply, with its contract with her" (at 435). The primary judge also considered that it was notable that despite the mixing of issues, the investigation report made no adverse findings relating to Ms Romero's competency as a second officer.
18 However, the primary judge observed that notwithstanding Ms Romero's complaints against Captain Martin and his reflections on her professional competence, Farstad, on a number of occasions, made it plain to Ms Romero that it wished her employment with it to continue. Alternative postings were proposed. Although the investigation miscarried there was no allegation that the managers responsible for its conduct sought to use it as a vehicle to bring about the termination of Ms Romero's employment.
19 His Honour therefore concluded that there was nothing in Ms Romero's contract (including the terms of the Policy) or in the relevant terms themselves to support a conclusion that, had the terms not been incorporated, Ms Romero would not have entered into the contract. Compliance with the Policy was not an "essential" promise. Indeed, on the evidence, his Honour observed that it appeared from [2]-[3] of Ms Romero's affidavit of 24 January 2014 that her first encounter with the Policy was during her induction process aboard the Far Scandia, that is, after she had already commenced casual employment with Farstad. At the time Ms Romero entered into the casual contract, she had not even seen the Policy. His Honour considered that tended against compliance therewith being treated as essential. While the position was different when she entered into her permanent contract, his Honour considered there was little reason, in this particular case, for thinking that, whereas compliance with the Policy was a non-essential element of the casual contract, it became essential in the subsequent permanent contract.
20 The primary judge also observed that it is sometimes the case (as the Full Court noted (at 420-421 [59])) that employers have an ability to unilaterally vary workplace policies. In such a circumstance, it would be difficult to suggest that compliance with any particular term of the Policy was essential.
21 Whether the policies were amenable to variation or not, his Honour could not accept that the term requiring compliance with policies was, or the relevant terms of the Policy themselves were, sufficiently important that "any breach [would] justify termination" (Koompahtoo (at [48])).
22 His Honour then turned to the question of whether the breaches found by the Full Court were sufficiently serious as to provide justification for termination by Ms Romero of her contract on the basis that Farstad had repudiated it. On this topic his Honour noted that Ms Romero gave evidence that the manner in which Farstad conducted the investigation undermined her faith in Farstad to the point where she felt unable to continue working for it. Her perception was that Farstad's inquiry had called her competence into question and she had not been afforded an opportunity to respond to this slight. She also complained that she was given little chance of discussing in full the events which would have formed the basis of any formal complaint. She claimed to have been put through an "unexpected interrogation under the guise of an investigation of a complaint." She disputed the inclusion of certain recommendations in Farstad's report, which she perceived as being retribution for the complaints she made against Captain Martin.
23 Ultimately, the investigation report made no findings or assumptions as to Ms Romero's competence, skills or experience.
24 After citing Byrnes v Jokona Pty Ltd [2002] FCA 41 (per Allsop J, as his Honour then was) (at [78]-[79]), in regards to assessing the seriousness of the breach, the primary judge concluded there was no repudiation. The primary judge said (at [51]-[53]):
51 In assessing whether the breach is sufficiently serious to justify termination, the court will take into account "the nature of the contract and the relationship it creates, the nature of the term, the kind and degree of the breach, and the consequences of the breach for the other party" Koompahtoo at 140 (per Gleeson CJ, Gummow, Heydon and Crennan JJ). The majority also added that "the adequacy of damages as a remedy may be a material factor in deciding whether the breach goes to the root of the contract". A breach without any proved loss is less likely to be serious: Carter v The Dennis Family Corporation [2010] VSC 406 at [165].
52 I do not consider that the breaches of the Policy by Farstad even approached the required level of severity. As I have already observed, the allegations made by Ms Romero against Captain Martin were serious and warranted some form of investigation. The deficiencies in the investigation did not lead to any adverse findings against Ms Romero. The conduct of the inquiry and its outcome did not threaten in any way the continuity of her employment with Farstad.
53 Farstad's conduct did not give rise to a repudiation of the contract
25 Finally, the primary judge also found against Ms Romero on the topics of affirmation and election. (His Honour acknowledged that, given his findings in relation to repudiation, those issues did not arise.) Nonetheless, had it been necessary to do so, his Honour held that Ms Romero had failed promptly to accept any repudiation and terminate the contract in the manner discussed in Wittenberg (at 532-535). His Honour discussed the dicta in O'Connor v SP Bray, Limited (1936) 36 SR (NSW) 248 per Jordon CJ (at 261-262), Immer (No 145) Pty Limited v The Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26 per Brennan J (at 30) and finally in Sargent v ASL Developments Limited (1974) 131 CLR 634 where Mason J (as the Chief Justice then was) said (at 656):
A person confronted with a choice between the exercise of alternative and inconsistent rights is not bound to elect at once. He may keep the question open, so long as he does not affirm the contract or continuance of the estate and so long as the delay does not cause prejudice to the other side.
26 The primary judge noted that Ms Romero did not purport to elect to accept Farstad's alleged repudiation until 25 October 2013. In the meantime she commenced the present proceeding and did so on the basis that, at that time (December 2012), she remained an employee of the company. Her originating application included the statement, on p 8, that "[Ms Romero's] relationship to [Farstad] is employee at the time of this application". In March 2013, Ms Romero pleaded, in her statement of claim, that: "[Ms Romero] … has been a permanent employee of [Farstad] since on or about January 2011". The primary judge noted that Farstad had continued to pay her entitlements as an employee, including the full extent of her paid sick leave. In August 2012, she made claims on Farstad for payments relating to her attendance at a medical assessment to assess her fitness for duty. During this period Farstad continued its efforts to facilitate her return to work. The primary judge referred to the statement in Sargent (at 656) that a party is not required to make an election immediately. The exercise of contractual rights during a period of consideration does not necessarily constitute affirmation. The primary judge considered an example given in Champtaloup v Thomas [1976] 2 NSWLR 265 (per Mahoney JA, with whom Street CJ agreed (at 273-274) that if the lessee of a flat, on learning of the lessor's breach, communicated to the lessor that he or she desired to consider his or her position, and in the meantime continued to occupy the flat and ride up and down in the lift, the lessee may not be found to have affirmed the contract (at least until a reasonable time had passed) even though the right to occupy and ride arose only by virtue of the lease.
27 His Honour observed that what is required for affirmation is that the party act in a manner consistent only with having chosen to rely on one of two alternative rights: Khoury v Government Insurance Office of New South Wales (1984) 165 CLR 622 (at 633). That may be done, for example, by the exercise of contractual rights during a period of delay, so as to induce the other party to believe that performance of the contract was insisted upon: Champtaloup per Glass JA, with whom Street CJ agreed, (at 268). It may also be done by unequivocal conduct evincing an intention to affirm the wronged party's obligations to perform: Galafassi v Kelly (2014) 87 NSWLR 119 per Gleeson JA, with whom Bathurst CJ and Ward JA agreed (at [88]). His Honour concluded (at [62]-[63]):
62 Two points arise from this. The first is that, in my judgment, Ms Romero's conduct after the allegedly repudiatory conduct by Farstad constituted an unequivocal affirmation of her contract of employment. For Ms Romero to assert in documents, lodged in the Court well after the alleged repudiation, that she was in an employment relationship with Farstad can only be an affirmation of her contract of employment.
63 The second is that, even if Ms Romero's conduct could be characterised as mere acquiescence in a course of conduct by Farstad, which course of conduct was predicated on its apparent view that the contract remained on foot - that is, the payment of wages and sick leave, etc. - her delay would have "cause[d] prejudice to the other side". The delay was unreasonable. It constituted affirmation of the contract. A fortiori where, as here, there was no conduct by Ms Romero that would have indicated to Farstad that she was considering her rights in relation to affirmation or termination of the contract.