Ekera Dental Pty Ltd v Creative Smiles Pty Ltd [2025] VSCA 149

Ekera Dental Pty Ltd v Creative Smiles Pty Ltd [2025] VSCA 149 | Case summary | Zoe

[22]

The following facts were either agreed or uncontroversial.
Ekera purchases and operates dentistry practices. It also provides administrative and accounting services to those practices. These practices are normally staffed by support staff employed by Ekera, and dentists who are independent contractors.
Creative Smiles owned a cosmetic dentistry practice located in High Street, Armadale.[7] Prior to 2016, the practice was controlled and owned by Dr Goodman, the sole director and shareholder of Creative Smiles. On 30 June 2016, Ekera entered into an acquisition agreement with Creative Smiles and Dr Goodman, pursuant to which it agreed to purchase the dentistry practice (the 'Acquisition Agreement').
Broadly speaking, the Acquisition Agreement provided that Ekera was to pay Creative Smiles $3.5 million on settlement; and two further tranches of $770,895 to be paid over the next two years (2017 and 2018) provided the practice met an EBITDA[8] target of $926,000 by 30 June in each of those years. The parties referred to these two years, ending 30 June 2018, as the 'Earn Out Period' and the two further tranches of payment together as the 'Earn Out'.
Further, pursuant to a services agreement also dated 30 June 2016, Dr Goodman agreed with Ekera that he would act as the Practice Principal of the practice during the Earn Out Period, and that he would work in the practice as a dentist from time to time (the 'Services Agreement'). Also under the Services Agreement, Dr Goodman and Ekera agreed that Ekera would provide 'Support Services' (that is, specified administrative services) to Dr Goodman.
The Acquisition Agreement and the Services Agreement were each contingent on the other being executed. Both agreements had a termination date of 30 April 2018.
The first EBITDA target of $926,000 was met by the due date (30 June 2017), but a problem arose with respect to the second EBITDA target in 2018. Ekera calculated the 2018 EBITDA as being below the $926,000 target. As a consequence, Ekera did not pay Creative Smiles the second payment of $770,895, but a lesser amount of $532,992. In calculating the 2018 EBITDA, Ekera deducted various items, including an expense in the amount of $132,908.84. This was an amount that Creative Smiles had recorded as money that had been received in fees paid by patients at the practice, but which had not been banked. It was referred to by the parties as the 'Missing Monies'.
On 20 February 2018, Ekera 'releas[ed]' Dr Goodman 'from his obligations under the Services Agreement and required him to stay away from the practice'. Ekera said that it would manage the practice itself for the remainder of the Earn Out Period. Ekera later blocked Dr Goodman's access to the practice's bank accounts, email and computer systems, and changed the locks at the premises. By letter dated 23 February 2018, Dr Goodman denied any wrongdoing.
On 22 October 2019, Creative Smiles and Dr Goodman commenced separate proceedings against Ekera in the County Court.
Creative Smiles sought damages for alleged breaches of the Acquisition Agreement and the Services Agreement, and for what was subsequently pleaded as misleading and deceptive conduct under s 18 of the Australian Consumer Law.[9] The alleged breaches of the Acquisition Agreement included Ekera's failure to pay the final tranche of the Earn Out in full.
Dr Goodman sought declarations that Ekera, as his employer, had contravened various provisions of the FWA by failing to pay him wages and other entitlements, and to make superannuation contributions on his behalf. Dr Goodman also sought an order under s 545(1) of the FWA requiring Ekera to pay a pecuniary penalty in relation to each of the alleged contraventions.
The two proceedings were formally consolidated in February 2020, with the pleadings in one proceeding to stand as pleadings in the other proceeding. On 3 June 2021, Dr Goodman was joined as a second plaintiff in the proceeding instituted by Creative Smiles, and Creative Smiles was granted leave to file and serve a Further Amended Statement of Claim incorporating the pleadings and parties in both proceedings. The Further Amended Statement of Claim bore the proceeding number CI-19-04997.
There was a lengthy trial, and the trial judge delivered the First Reasons on 16 December 2022. Ten of the 14 issues that the trial judge had identified for determination were determined in Ekera's favour. Relevantly, of the remaining issues, the judge found that Dr Goodman was an employee of Ekera when working as the Practice Principal, and that Ekera had contravened the FWA by failing to pay him wages and other entitlements, and to make superannuation contributions on his behalf. The judge also found that in calculating the 2018 EBITDA for the purpose of determining the second tranche of the Earn Out, Ekera should not have treated the Missing Monies as an expense. This was because the Missing Monies had not arisen in the ordinary course of business and therefore should have been excluded from the EBITDA calculation pursuant to clause 4.5(b)(ii)(A)(II) of the Acquisition Agreement. Ekera was therefore liable to pay damages.
On 27 and 28 February 2023, the trial judge conducted a hearing to determine what orders that should be made in light of his findings that Ekera had contravened the FWA. In the Penalty Reasons, delivered on 12 May 2023, the trial judge refused to make an order that Ekera pay a pecuniary penalty under the FWA.
In the Costs Reasons, delivered on 28 June 2023, the trial judge determined to make no order as to costs.
On 17 July 2023, his Honour made the following declarations and orders:

[23]

THE COURT DECLARES THAT:

The first defendant [Ekera] breached section 45 of the Fair Work Act 2009 (Cth) by contravening the Health Professionals and Support Services Award 2020 ('the Modern Award') in failing to:

pay wages to the second plaintiff [Dr Goodman] in the amount of $44,175.86 for the period from July 2016 to February 2018 at the prescribed rate pursuant to clause 14.3 of the Modern Award;

make superannuation contributions on behalf of the second plaintiff [Dr Goodman] as prescribed by clause 22.2 of the Modern Award in the amount of $4,907.84.

The first defendant [Ekera] breached section 44 of the Fair Work Act 2009 (Cth) in:

failing to pay public holiday pay in the amount of $3,454.43 as required by section 116 of the Fair Work Act 2009 (Cth) and the Modern Award; and

failing to pay the second plaintiff [Dr Goodman] annual leave and loading in the amount of $4,031.17 pursuant to section 90(2) of the Fair Work Act 2009 (Cth) and clause 31.2 of the Modern Award.

THE COURT ORDERS THAT:

The first defendant [Ekera] pay the first plaintiff [Creative Smiles] the sum of $136,687.84 within 30 days.

The first defendant [Ekera] pay the first plaintiff [Creative Smiles] interest on the sum of $136,687.84 from the date of issuing the writ to the date of this judgment at the rate prescribed under the Penalty Interest Rates Act 1983 (Vic), such interest totalling $51,080.06.

The first defendant [Ekera] pay to the second plaintiff [Dr Goodman] the sum of $44,175.86 together with interest to the date of this judgment of $27,582.68.

The first defendant [Ekera] pay to the second plaintiff [Dr Goodman] the sum of $3,454.43 together with interest to the date of this judgment of $2,156.89.

The first defendant [Ekera] pay to the second plaintiff [Dr Goodman] the sum of $4,031.17 together with interest to the date of this judgment of $2,517.00.

The first defendant [Ekera] pay to the superannuation fund nominated by the second plaintiff [Dr Goodman] the sum of $4,907.84 together with interest to the date of this judgment of $2,784.34.

The plaintiffs' [Creative Smiles' and Dr Goodman's] claims against the second defendant [Anthony Coulepis] be dismissed.

[40]

Having considered the whole of the agreement I determined the better view was that Goodman was an employee when performing his usual administration and management work for Ekera. Influential terms in the Services Agreement included those addressing topics such as the obligation to work, the hours of work, the provision of holidays, delegation of work, the provision and maintenance of equipment, where the right to exercise direction and control lay, and restraints of trade.

It was apparent from the Services Agreement that:

• Goodman would not work full time as a dentist but he would continue to manage the dental practice (recital B and C).

• an employee was defined in clause 1.1 to mean a person employed by Ekera who was engaged in the provision of Support Services at the practice. Goodman was engaged in providing Support Services at the practice.

• Ekera directed Goodman to manage the roster generally and to provide non-clinical services for at least 44 weeks per annum (clause 3.3).

• Clauses 4.1 and 4.2 imposed specific obligations upon Goodman by which Ekera exercised a level of control over him. These were important provisions because Ekera could terminate the Services Agreement under clause 4.2(e) if Goodman refused or failed without reasonable excuse to conduct the practice as required. Further, clause 4.2(a) was written to protect the goodwill of the practice which Ekera now owned.

• Clause 6.3 also required Goodman to do everything reasonably required by Ekera to enable Ekera to take out and maintain keyman insurance over Goodman to protect Ekera's goodwill in the practice and the value of its management rights.

• The restraints over Goodman in clause 18 were different from the restraints imposed on the contractor dentists working at Creative Smiles. The terms of the restraint on Goodman were broader and more extensive including as to duration and area.

• Unlike the contractor dentists, Goodman did not have the right to employ or engage another dentist to conduct or assist in conducting the practice at Creative Smiles.

• Goodman was obliged to abide by the Ekera Code of Conduct which was in the Ekera employee handbook whereas the contractor dentists were to comply only with the code of conduct in the schedule to their agreements. This was limited to three obligations and was significantly less onerous than the obligations imposed on Goodman.[25]

[43]

In written submissions filed before the hearing, Ekera pointed to CFMMEU v Personnel Contracting and Jamsek as containing the approach for determining whether the character of a relationship between parties is one of employment. In accordance with these authorities, Ekera submitted that where the terms of the relationship are comprehensively committed to a written contract (which is not said to be a sham or to otherwise have been varied, waived or the subject of an estoppel), the character of the relationship is to be determined solely pursuant to principles of contractual construction.
Here, Ekera said there was no suggestion that the Services Agreement was a sham, or that its terms had been varied, waived or were the subject of an estoppel. The trial judge was therefore bound to determine the question of employment solely by reference to the terms of the Services Agreement. He was wrong to have taken into account his finding that Ekera had exaggerated its position and mischaracterised the evidence about its relationship with Dr Goodman. He was also wrong to take into account any directions that Ekera's staff had given Dr Goodman. And to the extent that he had relied on the knowledge of the parties,[27] in the absence of any allegation of ambiguity, this was relevant only for the purpose of the reasonable business person test[28] of construction in respect of particular terms.
Ekera submitted that the trial judge's reasons did not address its detailed submissions about the terms of the Services Agreement concerning Dr Goodman's management of the practice, and the context of those terms 'in the framework of the Acquisition and Services Agreement[s]'. Instead, the trial judge had made findings of a general nature regarding the ambit of the subject matter of the Services Agreement without reference to its terms. He had, Ekera submitted, also attributed weight to evidence of Dr Goodman's inability to work as a dentist in determining whether he was an employee, which meant that Dr Goodman could unilaterally determine whether he was an employee by choosing how much he worked as a dentist.
Ekera submitted that the trial judge's findings resulted in a conceptually irreconcilable tension in the parties' relationship. The parties accepted that Dr Goodman was an independent contractor when performing dental work, but the judge's findings meant that he was an employee when working as Practice Principal.
As to the trial judge's finding that Ekera had paid insufficient attention to the status of Creative Smiles and Dr Goodman as separate legal entities, Ekera submitted that the judge had failed to consider its submissions explaining why the context and terms of the Services Agreement overcame this issue. The Services Agreement and the Acquisition Agreement incorporated each other by reference. Dr Goodman was a party to both agreements and the Acquisition Agreement was conditional upon Dr Goodman executing the Services Agreement. The nature of the Earn Out component of the Acquisition Agreement required Dr Goodman to continue to manage aspects of the practice to enable Creative Smiles to obtain the benefit of the Earn Out, and to the extent the Services Agreement contained terms relating to his management of the practice, that was work Dr Goodman did on behalf of Creative Smiles.
Ekera submitted that various terms in the Services Agreement should properly be seen as protecting both parties against risk. The Services Agreement allowed Dr Goodman to work to ensure Creative Smiles obtained the benefit of the Earn Out. At the same time, it protected Ekera against the risk that Dr Goodman would walk away with the upfront payment and leave Ekera unable to sustain the practice's level of profitability, including by requiring him to protect the goodwill in the practice.
Ekera identified a number of ways in which it said the terms of the Services Agreement did not replicate the terms one might expect to find in an employment contract. These included that the terms: did not require Dr Goodman to apply for leave, but merely to give notice before taking leave; gave Dr Goodman discretion as to how he managed the practice and the extent to which he attended the practice; did not require Dr Goodman to report to anyone at Ekera's head office; and gave Dr Goodman discretion and control over the fees charged by the dentists working at the practice.
At the hearing, senior counsel for Ekera, Mr Bourke KC, emphasised that the Court should have regard to the commercial context in which the Services Agreement was made in order to decide whether it created an employment relationship between Ekera and Dr Goodman. He submitted that the Services Agreement and the Acquisition Agreement were 'intertwined'[29] and that the judge had erred by failing to analyse this commercial setting when determining the nature of the relationship.
Mr Bourke KC noted that Dr Goodman had conceded below, and the judge had found, that when he was working as a dentist, he was an independent contractor. It was his status when working in his managerial role that was in dispute. In the context of a commercial arrangement, it was highly improbable that Dr Goodman would be a contractor when engaged in dental work and an employee when managing the practice. Dr Goodman would be required to 'shift hats, which could be in the course of the day', which would be almost impossible to regulate and manage.
The essence of the arrangement was, Mr Bourke KC submitted, that Ekera would provide support for Dr Goodman in running the practice, in circumstances where if he ran it effectively, he would maximise the payments during the Earn Out Period. The commercial purpose of the Services Agreement was to protect the goodwill of the practice, an objective with benefits for all parties. It was a commercial agreement in which each party was protecting its own interests.
Mr Bourke KC addressed various terms of the Services Agreement in some detail, commencing with the Recitals to the Services Agreement, which expressly referred to the Acquisition Agreement in Recital A, and stated in Recital D that Dr Goodman wished to engage Ekera to provide 'Support Services' to him.[30]
The provision of 'Support Services' was addressed in clause 3.1, which provided that Dr Goodman, as Practice Principal, engaged Ekera to provide 'Support Services'. The definition of 'Support Services' in clause 1.1 covered various types of services, including 'arranging payment of creditors incurred through the operations of the Practice' and 'providing day to day ongoing management, accounting and administrative services to the Dental Centre'. This, Mr Bourke KC submitted, indicated that such 'Support Services' were provided to Dr Goodman in connection with both his dental work and his work as Practice Principal.
Where there was no allegation that the Services Agreement was a sham and no claim for rectification, Ekera submitted that principles of contractual construction required clause 3.1 to be given the meaning a reasonable business person would have understood it to mean; that is, Dr Goodman was retaining Ekera to provide him with various services in connection with both his dental work and his work as Practice Principal. Mr Bourke KC also referred to clause 3.2, which imposed a 'service standard' on Ekera in the provision of the Support Services, as indicative of a subcontractor arrangement, because it put 'Dr Goodman in the driver's seat'. It gave 'control' to Dr Goodman, not Ekera.
Relatedly, Mr Bourke KC pointed to the definition of 'employee' in clause 1.1 of the Services Agreement. An 'employee' was defined as 'a person employed by Ekera who is engaged in the provision of the Support Services at the Dental Centre'. Mr Bourke KC contended that Dr Goodman could not fall within the definition of 'employee' because he was not providing 'Support Services' as defined; rather, Ekera was supplying such services to him.
Mr Bourke KC acknowledged that clause 3.3, by which Ekera directed Dr Goodman to manage the roster and provide 'non-clinical Services' for at least 44 weeks a year, was consistent with Ekera having a level of control over Dr Goodman. However, he submitted that 'non-clinical Services' essentially meant 'managing the practice', so clause 3.3 needed to be seen in the context of Ekera seeking to maintain the profitability of the practice, where it was Dr Goodman who determined how 'to manage the business', including the roster. Mr Bourke KC submitted that 'there's still a lot of power in relation to Dr Goodman, as to how he will conduct himself at the practice, and including, for example, where he's going to be located during that period'.
Next, Mr Bourke KC referred to the acknowledgment in clause 3.4 that Dr Goodman conducted the practice 'on his own behalf and at his own risk' as creating a level of 'exposure you will not expect to see placed at the feet of an employee'. Clause 3.5, by which Ekera assumed various obligations in relation to the performance of the practice, was, in Mr Bourke's submission, another example of Ekera's assumption of 'extensive obligations' that were 'entirely contrary' to the suggested employment relationship.
Mr Bourke KC described clause 4 of the Services Agreement, which required Dr Goodman to conduct the practice in particular ways, as a clause that was directed to 'maintaining [the] status quo' in a commercial setting in which Ekera wanted to ensure that the practice maintained its value. For example, Dr Goodman was required to continue to perform dental work and to manage the practice for the 8-20 hours per week stipulated in clauses 4.1(b) and (c). However, he was not required to 'report to anyone at Ekera's head office'. And as for his leave arrangements, clause 4.2 protected the goodwill of the Dental Centre, which was the fundamental commercial purpose of the Services Agreement. Clause 4.2(g), for example, required Dr Goodman, at the time of giving notice of his leave, to submit a plan for the management of the leave period that took all measures possible to keep the EBITDA of the practice at the same level. This was said to demonstrate that the purpose of the notice requirement was to ensure that the EBITDA could be managed and maintained while Dr Goodman was away.
In substance, so Mr Bourke KC submitted, save for perhaps clause 4.4(e), which required Dr Goodman to comply with the 'Ekera Dental Code of Conduct', there were no broad powers of direction that were typical of an employment situation. He contended that clause 4.4(e) was an insufficient indication of an employment relationship. He added that clause 5.1, which provided that Dr Goodman was to set the applicable fees for dental work at the practice, was inconsistent with such a relationship.[31]
Mr Bourke KC drew attention to clause 9.1 of the Services Agreement, which required Dr Goodman to pay Ekera a services fee for the provision of the Support Services, calculated at 60 per cent of the fortnightly net receipts of the practice. In the event that the EBITDA exceeded the annual $926,000 target, clause 9.1(c) allowed a 'Management Deduction' to be made from the services fee. That is, in the event the EBITDA was exceeded, Dr Goodman would be remunerated 'by way of a 40 per cent uplift, plus, in terms of his company [Creative Smiles], he gets the maximum instalment under the Acquisition Agreement'. Such a payment arrangement was said to be in stark contrast to the payment of wages or salary for an employee's time. There was no provision for any payment to Dr Goodman akin to wages or salary for his work as Practice Principal. A 'wage service bargain' - 'a classic touchstone of employment' - was missing.
Referring to clause 11 of the Services Agreement, pursuant to which Dr Goodman agreed to indemnify Ekera against any liability directly arising from, amongst other things, his conduct as Practice Principal, Mr Bourke KC submitted that 'the idea that ... an employee ... will indemnify their boss' was 'improbable'. Further, in his submission, clause 12 of the Services Agreement, which dealt with termination, provided Ekera with very limited rights to terminate Dr Goodman, which tended against an employment relationship, given that 'in common law, one fundamental right is to terminate your employees for serious misconduct'.[32] Similarly, he submitted that the provisions for termination of the agreement by Dr Goodman did not conform to the typical employment relationship.[33]
As to the statement of the relationship between the parties in clause 13, which we have set out at [31] above, Mr Bourke KC conceded that such a statement was not determinative, but submitted that it could be relied on where there was ambiguity.
As to the fact that clause 18 of the Services Agreement contained certain restraints on Dr Goodman's ability to engage in competition with the practice, which might be seen to be consistent with an employment relationship, Mr Bourke KC submitted that it was common to place the key player in a business under such restraints when acquiring a business.[34] He further submitted that Dr Goodman's entitlement to assign the agreement with Ekera's consent under clause 19.1 was unlike any type of employment agreement. So too was Ekera's right to assign the agreement under clause 19.2, because an employer cannot assign an employment agreement, being a private arrangement.
In summary, Mr Bourke KC submitted that, in construing the Services Agreement, the Court must make an objective assessment of its text, context and purpose. While there were some aspects of the Services Agreement that gave Ekera a measure of control over Dr Goodman, 'everything else points against an employment relationship'. Further, where Ekera exercised control over Dr Goodman, that control was consistent with its commercial purpose (namely, to ensure that Dr Goodman continued to manage the business so that it remained profitable in the ensuing two years). When the commercial purpose of the Services Agreement was taken into account, it was evident that it did not create an employment arrangement.

[47]

Whilst acknowledging that clause 13.1 of the Services Agreement characterised the relationship between Ekera and Dr Goodman as that of principal and contractor in relation to Dr Goodman's provision of dental work, Creative Smiles and Dr Goodman submitted that this clause did not apply to the services he provided to Ekera as 'Practice Principal and administrative manager of the Dental clinic'. In any event, clauses of this kind had long been seen as having no determinative effect on the proper characterisation of the parties' relationship.[36]
Creative Smiles and Dr Goodman submitted that the principles governing the interpretation of a contract of employment were no different from those that govern the interpretation of contracts generally.[37] The Court was required to ascertain 'the meaning that a document would convey to a reasonable person having all the background knowledge that would be reasonably available to the contracting parties at the time of the contract'.[38] Here, that included the knowledge of all parties that Dr Goodman could only perform a small amount of 'hands on work' each year due to his health.
Neither CFMMEU v Personnel Contracting nor Jamsek could justify construing the Services Agreement 'against a hypothetical normative' employment contract, as Ekera sought to do. Creative Smiles and Dr Goodman submitted that construed in its totality, the Services Agreement 'contains terms that relate to two distinct relationships': the provision of services to Dr Goodman by Ekera for his dental practice, where Ekera was described as a contractor and Dr Goodman the Principal;[39] and the provision of services by Dr Goodman to Ekera as Practice Principal, being Dr Goodman's major role at the practice, which created an employment relationship.
At the hearing, Mr Rivette, counsel for Creative Smiles and Dr Goodman, did not dispute that the Services Agreement and the Acquisition Agreement were interrelated. However, he emphasised that the Acquisition Agreement concerned the sale of a major dental practice by a corporate entity, Creative Smiles, which was not a party to the Services Agreement. It would, he submitted, be an error to consider the two contracts as one.
Mr Rivette submitted that there were two separate aspects to the Services Agreement. First, Ekera wanted to ensure that the dentist who worked in the practice they were buying remained working in the practice as a dentist. There was therefore a component of the Services Agreement that dealt with the dentist 'as a dentist'. In that capacity, the dentist was a contractor, and Ekera supplied them with support services, which included the provision of a room to conduct dental surgery. The second aspect of the Services Agreement reflected that Ekera also 'need[ed] that dentist ... to actually do the management of the practice ... in accordance with the way it's been done before'. It was therefore necessary for certain areas created by the Services Agreement to fall under the control of Ekera. This indicated that Dr Goodman was an employee when conducting his management role.
Mr Rivette submitted that Ekera had acknowledged in the consolidated summary prepared for this Court that the Services Agreement dealt with two distinct areas. He referred to the following statement from the consolidated summary:

[51]

Unsurprisingly, Mr Rivette relied almost entirely on the First Reasons. He submitted that the trial judge had correctly applied the principles from CFMMEU v Personnel Contracting and Jamsek. He noted that both the trial judge and Ekera had accepted that there was 'no ambiguity' in the Services Agreement, which meant there was no need to go to the 'reasonable business person' test. That said, Mr Rivette's basic submission was that the Services Agreement was not a 'commercial contract'; rather, 'it's a contract insofar as it relates to the personal services between an employer and [Dr Goodman]', and the Acquisition Agreement 'is something different between two corporate entities'. He submitted that the Court was obliged to examine the operative terms of the Services Agreement that governed 'the relationship between Dr Goodman and Ekera as Practice Principal, not the dentist terms'. In this context, he referred to and relied on paragraphs 513 to 514 of the First Reasons.[41] Furthermore, Mr Rivette relied on the trial judge's discussion in the First Reasons of the relevant clauses of the Services Agreement which, in his submission, led to the conclusion that Dr Goodman was properly characterised as an employee as regards his Practice Principal obligations.
Mr Rivette did not dispute that Dr Goodman was working to ensure the EBITDA was reached, but submitted that the benefit of those endeavours flowed to Creative Smiles, a separate legal entity.[42] He submitted that this arrangement was designed to provide an incentive for a dentist to stay in the Dental Centre for the two years after its acquisition by Ekera. He also relied on clauses 18.2(a)-(d) of the Services Agreement as denying Dr Goodman the capacity to assign his rights under the Services Agreement, adding that 'as Practice Principal ... he was subject to various restraints about future business activities. He was not to engage in any business which was the same as, or similar to, the practice'.
Finally, Mr Rivette noted that the trial judge was careful to distinguish between those contractual terms that related to Dr Goodman's work as a dentist and those that related to his work as Practice Principal.[43] He submitted that multiple clauses of the Services Agreement gave Ekera control over Dr Goodman's work as Practice Principal. He drew a comparison with CFMMEU v Personnel Contracting, where a single clause that required a construction worker to 'co-operate in all respects' with a labour hire company and a builder in the supply of labour was found to be a sufficient indicator that the construction worker was an employee of the labour hire company. He submitted that if the 'control' clause in that case were compared to the control clauses in the Services Agreement, then, 'the control that Ekera had over Dr Goodman [exceeded] that threshold'.

[60]

Before addressing the terms of the Services Agreement, it is convenient to refer to certain key provisions of the Acquisition Agreement, because they are relevant to the nature of the parties' relationship.
Broadly speaking, under clause 4.1 of the Acquisition Agreement, Ekera agreed to pay $5,139,300 for the Creative Smiles dental practice. Relevantly, for present purposes, the Acquisition Agreement did not provide that the whole of the purchase price was to be paid on the one date; rather, provision was made for the price to be paid over time.
Clause 4.3 of the Acquisition Agreement addressed the circumstances in which Ekera was to pay particular components of the purchase price. Under this provision, in addition to the amount it was to pay on settlement, Ekera agreed to pay $770,895 by 31 August in each of 2017 and 2018, provided the dental practice achieved an EBITDA target of $926,000 by 30 June in each of those years.[60] This was the 'Earn Out Period' we referred to at [8] above.
Again broadly speaking, the Services Agreement ran during the Earn Out Period.[61] Considered objectively, it was plainly designed to protect the parties from certain commercial risks in the period subsequent to sale. Dr Goodman was not only retained to manage the practice, as Practice Principal, under the Services Agreement, but he was also obliged to run the practice as he had done previously, including 'in accordance with management principles applied prior to the acquisition of the Practice by Ekera'.[62] From Ekera's perspective, in retaining Dr Goodman in this way, Ekera protected itself from the risk that it would be unable to maintain the profitability of the practice after its acquisition. From Dr Goodman's perspective, in continuing to manage the practice for the Earn Out Period, Dr Goodman could seek to ensure that his company, Creative Smiles, reached its EBITDA targets under clause 4.3(d) of the Acquisition Agreement. This was essential for payment of the remainder of the purchase price. Indeed, a failure to meet these targets led to a dollar for dollar reduction in Ekera's payment for each year.[63] If, however, the EBITDA exceeded the $926,000 yearly target, then Dr Goodman had the benefit of a significant 'management' deduction from the amount he was required to pay Ekera for the Support Services.[64]
It may be inferred from the commercial arrangement established pursuant to the Acquisition Agreement and the Services Agreement that, under the Services Agreement, Ekera and Dr Goodman were each working in their own commercial self-interest, to maximise the benefit of the acquisition and sale of the practice. From Dr Goodman's perspective, his work at the practice as Practice Principal was designed to protect the interests of his company (and therefore him) by: seeking to ensure that the full purchase price for the practice was paid; enhancing its commercial position if possible; and seeking to ensure that it did not suffer any detriment because of poor financial performance.
The commercial objects of Ekera and Dr Goodman were not indicative of an employment relationship, a matter also evident in the Recitals to the Services Agreement. The Recitals acknowledged that Dr Goodman had 'engaged' Ekera to provide 'Support Services' to him as Practice Principal, and that Ekera had 'agreed' to supply these services.[65]
In conformity with CFMMEU v Personnel Contracting, it is necessary, however, to turn to the rights and duties established by the specific provisions of the contract under which Dr Goodman was retained as Practice Principal.
At the outset, we note that clause 13.1 of the Services Agreement records the agreement between the parties that the Services Agreement did not create a relationship of employment between them. We have set the terms of that clause out above, but it bears repeating:

[86]

Clauses 4.1 and 4.2, concerning Dr Goodman's work location and leave arrangements, were relied upon by both Ekera and Dr Goodman. They create rights and duties which, on one view, tended both for and against an employment relationship.
Pursuant to clause 4.1, Dr Goodman covenanted that he would be present at the Dental Centre for at least 8 hours per week performing dental work or otherwise managing the practice, and that he would spend another 12 hours per week managing the practice or attending to the business of the practice. Such a clause may be thought indicative of an employment relationship, in that it conferred on Ekera a measure of control over Dr Goodman's hours and location of work. The fact that Dr Goodman also retained considerable latitude about those matters may, however, be thought to tend against an employment relationship.
Clause 4.2 related to Dr Goodman's leave entitlements. Dr Goodman was not entitled to take leave in the first six months following the commencement of the Services Agreement (save for a four week break on four weeks' notice provided he remained contactable during his absence). After six months Dr Goodman was required to give Ekera two weeks' notice of intended annual leave and to submit a plan for the management of the practice designed to maintain the EBITDA during his absence. Further, he had to make arrangements to be contactable during his absence and his maximum leave entitlement was 8 weeks in any 12 month period. Again, this clause provides some support for an employment relationship, in that Ekera controlled various aspects of Dr Goodman's leave arrangements. On the other hand, it may also be thought to tend against an employment relationship, because the extent Dr Goodman's leave arrangements reflected a shared commercial objective of ensuring the maintenance of the practice's EBITDA during periods when Dr Goodman was absent.
Ultimately, considered objectively, these provisions were designed to further the parties' commercial objectives in connection with the sale of the practice, rather than to create an employment relationship. Viewed in the context of the parties' commercial objectives, clauses 4.1 and 4.2 reflected a shared commercial objective of ensuring the maintenance of the practice's EBITDA by ensuring Dr Goodman's continuing personal involvement in the practice as agreed and ensuring that appropriate arrangements were in place to prevent any decline in the practice EBITDA in his absence.

[87]

The Services Agreement established a relationship between Dr Goodman and Ekera pursuant to which Dr Goodman: was not remunerated for his work by way of salary or wages; worked 'on his own behalf and at his own risk'; was assisted, both in his dental role and his role as Practice Principal, by services provided to him by Ekera; could only have his services terminated in limited circumstances; and was required to indemnify Ekera from any liability as a result of his acts or omissions, including in his role as Practice Principal.
To the extent that provisions of the Services Agreement conferred on Ekera a power of direction or control over Dr Goodman in his role as Practical Principal, those provisions were not designed to erect an employment relationship, but were instead designed to further the parties' commercial objectives in connection with the sale of the practice.
Further, it is improbable that the Services Agreement established, as Creative Smiles and Dr Goodman contended, a bifurcated relationship between Dr Goodman and Ekera, pursuant to which Dr Goodman was acting as an employee when working as a Practice Principal and as a contractor when performing dental work. Such an outcome would have the unlikely result that Dr Goodman's status and its legal attributes while he worked at the practice could change from time to time during the course of a day.
When viewed through the prism of the commercial arrangements that the Services Agreement and the Acquisition Agreement were designed to secure, the better view is that the terms of the Services Agreement which we have considered, viewed both quantitatively and qualitatively, did not give rise to an employment relationship between Ekera and Dr Goodman. Rather, the relationship between Ekera and Dr Goodman was at all times that of practice owner and independent contractor. The interrelationship between the two agreements, which provided the relevant contractual framework for the parties' commercial arrangements, permits of no other conclusion than, as a practical matter, Ekera and Dr Goodman (along with his wholly-owned corporate entity, Creative Smiles) were each acting in their own independent commercial interests.

[96]

The trial judge referred to expert accounting and business evidence from Mr Ferrier and Mr Jones, which the parties had relied on in relation to whether the Missing Monies should have been deducted from the EBITDA calculation for the purpose of determining the Earn Out payments.[81] His Honour observed that the experts agreed that if this were a business valuation where EBITDA was relevant to the assessment of the future maintainable earnings of the business, the Missing Monies would not be taken account. On the other hand, the experts seemed to agree that if the purpose of determining the EBITDA was to determine how much Ekera was obliged to pay Creative Smiles under the Earn Out provision, the Missing Monies should be brought into account to reduce the earnings.[82]
While noting that the Court should pay some attention to the views of the experts, the trial judge stated that their views were not determinative of whether the Missing Monies formed part of the EBITDA calculation, because the Court needed to consider and construe the terms of the Acquisition Agreement.[83]
His Honour observed that clause 4.5(b)(ii)(A) set out nine items, in addition to interest and tax, which were to be excluded from the calculation of the EBITDA for the purpose of calculating the Earn Out payments.[84] These included various 'actual amounts paid, reimbursed or realised',[85] namely payments by or reimbursements to Ekera for fees related to or connected with the acquisition of the business or any later sale of the business;[86] changes in accounting policy or treatment from those applied in Creative Smiles' accounts;[87] and profits or losses arising from any acquisition or disposal of fixed or material assets.[88]
The trial judge described the remaining three items to be excluded from the calculation of the EBITDA under clause 4.5(b)(ii)(A) as 'different'.[89] The first was any aggregate administrative charges which exceeded the amount invoiced to the practice for the financial year ending 30 June 2015.[90] This item had the effect of 'imposing a cap on the administrative charges which could be taken into account even if the actual charges were greater than the sum used in performing the EBITDA calculations'.[91]
The second of the three remaining items for exclusion is the relevant item for the purpose of this proceeding, which was described by the trial judge as follows:

[99]

(a) First, after referring to the expert accounting and business evidence,[96] his Honour noted that the evidence before the Court 'did not disclose a history of missing cash'; the Missing Monies 'was an unusual occurrence' and 'not something which had occurred routinely, or apparently at all, in the ordinary course of the Creative Smiles business'. Thus, '[a]s a matter of construction ... the loss of the cash did not occur in the ordinary course of business'.[97]

(b) Second, the terms of the Acquisition Agreement were designed to focus attention on the earnings of the business, so as to align the interests of Ekera as the buyer and Dr Goodman as the person running the practice and wanting to obtain the maximum Earn Out payment. It was proper to 'include the cash in the earnings calculation because EBITDA is a measure of the financial performance of a business and the money was plainly earned'. The problem with the Missing Monies was the failure to properly bank and safeguard it so that Ekera derived the full financial benefit of work that had been done by the contracting dentists. That the money had been lost in unknown circumstances was not something which usually took place in the Creative Smiles business.[98]

(c) Third, his Honour rejected Mr Ferrier's reasoning that 'because the collection and banking of cash was something which occurred in the ordinary course of business, where cash was lost in that process, the loss occurred in the ordinary course of business'. Rather, his Honour found that '[l]osing or failing to bank cash' is 'exceptional and out of the ordinary' and 'not part of the normal and ordinary operation of the business'.[99]

(d) Fourth, his Honour found that the fact that the calculation of the EBITDA did not give an entirely accurate picture of the financial position of the business was consistent with the terms of the Acquisition Agreement. The Acquisition Agreement expressly contemplated that there could be a discrepancy between the calculation of the EBITDA and the actual financial position of the business. In these circumstances, it contemplated the possibility that Ekera might have to include the fees (being the fees received for the work of the contracting dentists) in the EBITDA calculation even through it did not physically receive the fees into its bank account.[100]

[101]

In written submissions, Ekera submitted that the trial judge did not give clause 4.5(b)(ii)(A)(II) the ordinary meaning that a reasonable business person would have given it. It submitted that the critical part of the clause was 'expenses not arising in the ordinary course of business' (emphasis added). The adjective 'ordinary' did not describe the expenses, but rather the circumstances in which the expenses must not occur. A reasonable business person, it submitted, would have understood the clause to require that the expense be incurred other than in the ordinary course of business. The trial judge's analysis, Ekera submitted, erroneously analysed whether the expense was ordinary, by considering whether expenses similar to the Missing Monies recurred from time to time.
Ekera also challenged the trial judge's statement that 'it is proper to include the cash in the earnings calculation because EBITDA is a measure of the financial performance of a business and the money was plainly earned'.[101] This reasoning was, so Ekera submitted, contrary to the opinion of both experts who opined that, where the purpose of the EBITDA calculation was to calculate the amount to be paid for the Earn Out, the Missing Monies should not be included in the EBITDA calculation. The reasoning was therefore without an evidentiary basis and erroneous.
At the hearing, Mr Bourke KC, for Ekera, conceded that whether clause 4.5(b)(ii)(A)(II) captured the Missing Monies was ultimately a matter of construction. As he put it, 'it's a matter of construing what it means in the context of the clause itself, and in the context of the agreement and the purpose of the agreement'. Mr Bourke KC contended that where a business receives payments from its customers by cash, as well as credit card, and money goes missing between the payment of the cash and the banking of the cash, 'the absence of that money is in the ordinary course of business'. He submitted that the trial judge had erred by requiring the expense to be a 'frequent' expense in order to be 'arising in the ordinary course of business'. There was, Mr Bourke KC submitted, no reason why a transaction could not be 'one-off' or infrequent, and still be 'in the ordinary course of business'. Mr Bourke KC pointed to the other categories of exclusions under clause 4.5(b)(ii)(A), which he submitted were 'one-off type arrangements' that 'have got nothing to do with the running of the business itself'.

[103]

As counsel for Creative Smiles and Dr Goodman, Mr Rivette, conceded, the experts did not agree as to whether, if the purpose of determining the EBITDA was to determine how much Ekera was obliged to pay Creative Smiles under the Earn Out provision, the EBITDA should be calculated in such a way that the Missing Monies would be brought into account to reduce the earnings.[102] Mr Rivette acknowledged that the judge's statement to the contrary[103] was in error. As Mr Rivette noted, however, the trial judge had correctly described the differing views of the experts elsewhere in his reasons.[104]
Creative Smiles and Dr Goodman noted, however, that the trial judge did not treat the expert opinions as determinative of the Missing Monies issue. Rather, his Honour correctly accepted that the determination of the issue depended on the proper construction of the Acquisition Agreement, and that this was for the Court to determine. In doing so, the trial judge considered the ordinary meaning of the text of clause 4.5(b)(ii)(A)(II), in the context in which it was found, having regard to its purpose, to conclude that the Missing Monies fell within the clause.[105] Creative Smiles and Dr Goodman submitted that the basis for this finding included the unchallenged findings that the loss of the Missing Monies was an unusual occurrence that created a special situation; that the money had been lost in unknown circumstances, which was not something that usually took place within the business; and that the loss of the Missing Monies was exceptional and out of the ordinary. Ekera's proposed interpretation of clause 4.5(b)(ii)(A)(II) was said to be artificial and strained when the clause was read as a whole and in context.
Creative Smiles and Dr Goodman submitted that the trial judge correctly took into consideration the whole of clause 4.5(b)(ii)(A) in determining the meaning of the phrase '[a]ny income or expenses not arising in the ordinary course of business of the relevant Practice', which demonstrated that other parts of the clause served the same purpose: to calculate a figure that need not represent the actual financial performance of the business.[106]
Finally, Creative Smiles and Dr Goodman noted that EBITDA was neither a legal concept, nor a concept relevant to revenue or tax law. They referred to the evidence of Mr Jones that there were no accounting standards in Australia which related to EBITDA, because EBITDA was neither a Statutory Reporting requirement, nor a part of the Generally Accepted Accounting Principles. They noted that Mr Jones and Mr Ferrier had agreed that, in the context of this case, EBITDA was governed by clause 4.5 of the Acquisition Agreement, with the principles to be adopted in its calculation being those set out in clause 4.5(b). There was no merit in Ekera's submission that the trial judge's conclusion was without an evidentiary basis, because his Honour was engaged in a process of construction.

[113]

The trial judge recorded that the parties accepted that s 570 of the FWA applied to the litigation.[112] At the hearing before us, Ekera accepted that this was an error, and that the applicability of s 570 had in fact been contested by Creative Smiles and Dr Goodman.
Despite wrongly recording the position of the parties, the trial judge nonetheless observed that after the cases were consolidated in February 2020, any issues arising from having two separate proceedings 'disappeared'.[113] In support of the proposition that 'there should have been no legal issue in any event', his Honour referred to Joseph v Parnell Corporate Services Pty Ltd, [114] and to Melbourne Stadiums Ltd v Sautner.[115] His Honour said that the Full Federal Court had found in these cases that the no cost jurisdiction created by s 570 'encompassed the whole of a proceeding even if that proceeding included not only claims under the FWA but also claims at common law'.[116]
The trial judge considered that from the time Dr Goodman made the claims against Ekera under the FWA, Dr Goodman (and Creative Smiles) knew, or should have known, that conducting those claims in conjunction with the commercial claims was likely to have major costs consequences for the parties to the litigation, in that there would be a presumption of no order for costs. Notwithstanding this potentially significant consequence, it was the solicitor for Dr Goodman and Creatives Smiles who wrote to the Court in February 2020 to request that the two proceedings be consolidated by consent. In his Honour's view, the consolidation of the proceedings in February 2020 'put beyond doubt the position that section 570 of the FWA would govern this court proceeding'.[117]
As to whether the exception in s 570(2)(b) applied, the trial judge found that it did not. His Honour stated that Ekera was justified in refusing, and did not unreasonably reject, an offer of compromise dated 26 June 2020 (the 'First Offer'), pursuant to which Creative Smiles and Dr Goodman offered to settle all claims by Ekera paying them $200,000 plus party/party costs and disbursements (which at the time were $41,763.34). Ekera was also justified in refusing, and did not unreasonably reject, a Calderbank offer made on 21 February 2021 (the 'Second Offer'), pursuant to which Creative Smiles and Dr Goodman offered to settle all claims for the equivalent of $150,000, as well as a subsequent offer of compromise made on 7 April 2021 (the 'Third Offer'), by which Creative Smiles and Dr Goodman offered to settle all claims for $130,000 inclusive of costs (which were then likely to total about $20,000).[118]
The trial judge accepted that the terms of each of the offers were clear and that the period to accept at least the First Offer was generous.[119] His Honour observed it was well established that a failure to accept a reasonable offer of compromise can constitute an unreasonable act for the purposes of s 570(2).[120] He acknowledged that the aggregate amount awarded to Creative Smiles and Dr Goodman was $269,430, which incorporated approximately $88,777 arising from the contraventions of the FWA.[121] The Second and Third Offers were therefore each 'more generous' to Ekera than the decision of the Court, and the First Offer 'probably was too', but was made earlier and had accrued substantial interest.[122] However, his Honour said that even where a party to a proceeding involving matters under the FWA has made a reasonable offer to compromise the litigation, it does not necessarily follow that the other party's failure to accept was unreasonable.[123]
In the circumstances of the case, the trial judge found that Ekera had 'good reasons not to accept the offers', which meant that it did not act unreasonably in rejecting them.[124] His Honour gave six reasons for this conclusion.

[114]

(a) First, there was a prominent claim under the FWA, such that the parties should have understood that s 570 of the FWA applied to the litigation. This meant that, subject to the exception s 570(2)(b), there would be no order for costs in the proceeding.[125]

(b) Second, Ekera had strong grounds for believing that it had good prospects of success in defending the claims brought against it. It was unlikely that it expected the Court to interpret the Acquisition Agreement differently from the expert witnesses or to adopt a position on Dr Goodman's employment status that was different to that expressed by its legal advisers and from 'Liquid HR', which had provided advice about the template agreements and other ongoing issues, as well as 'the terms of the agreement itself'. Until he had found against Ekera on the point, the experts 'each supported the outcome for which Ekera had always contended and upon which it had acted'.[126]

(c) Third, although there was no requirement that a Calderbank offer set out a rationale for why it was appropriate to accept the offer, the provision of an explanation strengthens a submission that a refusal to accept is unreasonable, particularly in complex litigation. No rationale had been provided.[127]

(d) Fourth, the offers dealt with Ekera and the then second defendant (Mr Coulepis) without distinction, and did the same for the commercial claims and the employment claims. The binding together of the offers made their refusal more reasonable.[128]

(e) Fifth, the extent of the offered compromise was not that substantial.[129]

(f) Sixth, Ekera displayed sound judgment in assessing major parts of the case. Creative Smiles and Dr Goodman had failed in their heavily contested claims for breach of contract, misleading and deceptive conduct, damages for loss of opportunity and damage to reputation. These issues had consumed considerably more of the Court's time and attention at trial than the issues of Dr Goodman's status and the Missing Monies.[130]

[116]

The essence of the submissions of Creative Smiles and Dr Goodman in support of the fourth cross-appeal ground was that s 570(1) did not apply to the commercial dispute between Creative Smiles and Ekera because it did not lose its distinct commercial character following the consolidation of the two lower court proceedings.
Creative Smiles and Dr Goodman accepted that, following the consolidation of the two proceedings, Creative Smiles was 'a "party to proceedings" below containing matters arising under the [FWA]'. However, they emphasised that the commercial claims were commenced by a separate and distinct legal entity (Creative Smiles) from the person who brought the claim under the FWA (Dr Goodman). Creative Smiles did not seek to enforce any right or duty that owed its existence to the FWA, and Ekera did not invoke the FWA in its defence or cross-claim. There was therefore a 'very different factual matrix' to that considered in Sautner. It followed that there was not, and never could be, any 'matter' between Creative Smiles and Ekera arising under the FWA.[132]
Creative Smiles and Dr Goodman suggested that the consolidation of the two proceedings 'appeared to be for efficiency only'. It contended that 'there is no reason in principle why there could not be a proceeding within a proceeding'.[133] The commercial claims should not lose their distinct character and should remain as a distinct (commercial) proceeding following consolidation. They were separate and distinct claims, made by separate legal persons, arising out of separate facts and distinct agreements: one for the sale of a significant asset, the other for the provision of personal services. And the Creative Smiles proceeding was not a proceeding 'in relation to a matter arising under the [FWA]'.
While Creative Smiles acknowledged that a plain reading of s 570 of the FWA would suggest that none of these things mattered, the context and purpose of the provision were important to its proper construction. The object of the FWA was 'to provide a balanced framework for cooperative and productive workplace relations'.[134] In the Fair Work (Commonwealth Powers) Act 2009 (Cth), which referred the power to regulate workplace relations in the State of Victoria to the Commonwealth for the purpose of s 51(xxxvii) of the Constitution, the referred subject matters said nothing of commercial disputes between corporate entities. Section 570 was a remedial provision that was focused on access to justice,[135] in an Act designed to regulate workplace relations. There was therefore no policy reason for imposing a protective purpose upon commercial disputes between commercial entities who have submitted the jurisdiction of their contract to the courts of Victoria.
At the hearing, Mr Rivette, counsel for Creative Smiles and Dr Goodman, relied on the decision of Tucker v Victoria, in which this Court distilled certain points from the case law on s 570(1).[136] Those points included that the provision will 'be engaged if a right or duty sought to be enforced owes its existence to the FWA' and that '[w]hat is required is a relevant relationship between the proceeding and a matter arising under the FWA, having regard to the scope of the FWA'.[137]
The fifth cross-appeal ground was based on Ekera's refusal of the Second and Third Offers, which were 'more generous' than the trial judge's decision.[138] Creative Smiles and Dr Goodman submitted that even if s 570(1) did apply, in determining that the exception in s 570(2)(b) did not apply, the trial judge had acted on the wrong principle and erred in the exercise of his discretion. He had proceeded on the basis of irrelevant considerations or mistaken facts, in that he referred to Ekera's state of mind and forensic decision-making, despite no evidence being tendered about those matters. The evidence before the trial judge was confined to the offers and to Ekera's lack of acknowledgement of, or response to, those offers. On a 'proper analysis' of that evidence, and in light of the ultimate outcome of the proceeding, the trial judge should have found that it was unreasonable for Ekera not to accept the offers, particularly where the offers were 'more generous' than what Creative Smiles and Dr Goodman ultimately achieved. There was, Creative Smiles and Dr Goodman submitted, no reason why the ordinary rule as to costs should not apply.
At the hearing, Mr Rivette submitted that the trial judge specifically fell into error:

[121]

Mr Bourke KC submitted that ultimately, the Court did not need to answer questions like 'is there a connection or a relationship?' and 'is there a common substratum?', because the commercial and employment claims were all pursued in 'the one proceeding, the one pleading'. But if he was wrong about that, Mr Bourke KC submitted that the common substratum and connection was clear because Creative Smiles and Dr Goodman had expressly pleaded that the Acquisition Agreement and the Services Agreement were interconnected.
In relation to the fifth cross-appeal ground, Ekera submitted that the Court 'should accept' the reasons the trial judge gave as to why it had not behaved unreasonably in not accepting the three settlement offers.[145]
At the hearing, Mr Bourke KC submitted that Creative Smiles and Dr Goodman were required to demonstrate House v The King[146] error, and emphasised that the latitude given to a trial judge's discretion was even higher in relation to assessments of costs.
Mr Bourke KC also emphasised that Ekera 'had a good case on an enormous amount of the issues'. Of the 14 issues that were agreed for determination, Creative Smiles and Dr Goodman won only three. The trial judge recognised how 'counterintuitive' it was to describe this commercial scenario as giving rise to an employment situation. Mr Bourke KC also submitted that, allowing for interest, the Third Offer effectively required Ekera to pay $150,000. Given that the total orders made, allowing for interest, were worth about $231,0000, this was not a significant compromise.
Mr Bourke KC also submitted that even if the trial judge was found to have erred on the issue of costs, this Court should nonetheless order that there be no order as to costs in respect of the proceeding below, given that Ekera 'effectively won the vast bulk of the case' and it was the commercial case run by Creative Smiles that took the majority of the hearing time. He further submitted that s 570 of the FWA applied to the applications in this Court, so that irrespective of the outcome of those applications, there should be no order as to costs in this Court.

[122]

Section 570 of the FWA operates as an express limitation on the otherwise broad discretion to award costs in certain proceedings.[147] The trial judge was correct to find that s 570 governed the costs of the proceeding below. Each of Ekera, Creative Smiles and Dr Goodman was, to use the language of s 570(1), 'a party to proceedings ... in a court ... in relation to a matter arising under [the FWA]'.
The proceeding to which each of Ekera, Creative Smiles and Dr Goodman was a party was the consolidated proceeding that originally comprised two separate proceedings brought against Ekera - one proceeding in which Creative Smiles made various commercial claims, and another proceeding in which Dr Goodman made various claims under the FWA. Following the consolidation of these two proceedings into a single proceeding, which came to proceed by way of a consolidated pleading and a single proceeding number, each of Ekera, Creative Smiles and Dr Goodman were parties to a single proceeding in the County Court. It matters not that the decision to consolidate the two proceedings into that single proceeding may have occurred for reasons of 'efficiency'.
In the consolidated proceeding, Dr Goodman sought relief under the FWA in respect of alleged contraventions of the FWA by Ekera. The duties of Ekera that Dr Goodman sought to enforce owed their existence to provisions of the FWA. The controversy between Dr Goodman and Ekera about whether Ekera had breached those duties, entitling him to relief under the FWA, was a 'matter arising under' the FWA.
As to whether the consolidated proceeding was 'in relation to' that matter, the phrase 'in relation to' has been described as one of 'wide and general import'.[148] It has been said that, 'subject to any contrary indication derived from its context or drafting history, it requires no more than a relationship, whether direct or indirect, between two subject matters'.[149] In Parnell, the Full Federal Court found that neither the context nor the drafting history suggested that the relationship between the 'proceeding' and the 'matter' that is required by s 570(1) should be a narrow one.[150] The Court emphasised that s 570 was remedial and beneficial in nature, and therefore should be interpreted beneficially.[151]
The consolidated proceeding was the vehicle in which Dr Goodman sought to have the controversy about whether Ekera had contravened provisions of the FWA (on the basis that he was an employee of Ekera), entitling him to relief under the FWA, resolved. It was the vehicle through which he sought orders from the County Court under the FWA. There was therefore a direct relationship between the matter arising under the FWA and the proceeding. The consolidated proceeding was a proceeding 'in relation to' that matter.
The attempt by Creative Smiles and Dr Goodman to characterise the claims made by Creative Smiles as a 'proceeding within the proceeding' in which Dr Goodman made his claims does not assist their cause. To the extent that the Full Federal Court decided in Parnell that a cross-claim made in the proceeding there under consideration was a 'separate proceeding',[152] that finding has no bearing on the circumstances of this case. There was no cross-claim in the consolidated proceeding. In any event, even if the commercial claims made by Creative Smiles could be treated as a separate proceeding within the proceeding in which Dr Goodman sought relief under the FWA, that separate proceeding would still be sufficiently connected to Dr Goodman's claims under the FWA to be a proceeding 'in relation to' a matter arising under the FWA. A common substratum of facts underpinned each set of claims.
For these reasons, the fourth cross-appeal ground must fail.
As to the fifth cross-appeal ground, we are not satisfied that Creative Smiles and Dr Goodman have demonstrated that the trial judge's decision that it was not unreasonable for Ekera to reject the Second and Third Offers was infected by an error of the kind identified in House v The King.[153] We are not persuaded that the trial judge acted on any wrong principle or proceeded on the basis of irrelevant considerations or mistaken facts. To the extent that the submissions of Creative Smiles and Dr Goodman can be interpreted as suggesting that the trial judge's decision was 'unreasonable or plainly unjust',[154] we reject that contention. In the circumstances of this case, where Ekera: had strong and reasonable grounds for believing that it would successfully defend the claims brought against them; had successfully defeated the majority of those claims; and was faced with settlement offers that did not reflect a substantial compromise on the part of Creative Smiles and Dr Goodman, we do not regard the trial judge's conclusion as 'unreasonable or plainly unjust'.
For these reasons, the fifth cross-appeal ground must also fail.

[124]

As noted at the outset of these reasons, in preparing its reasons for judgment in this matter, the Court noted s 565 of the FWA, which provides in effect that an appeal from the County Court exercising jurisdiction under that Act lies to the Federal Court, rather than this Court. This is a departure from the usual pathway for appeals from the County Court of Victoria.[155] In this way, the FWA gives effect to the special role of the Federal Court with respect to the FWA.
By the time the Court became aware of s 565, however, the Court had heard the application for leave to appeal, and the cross-application for leave to cross-appeal. It had reserved its judgment, and the preparation of its reasons for its decision was well advanced. In these circumstances, the Court sought the parties' submissions on whether, having regard to s 565 of the FWA, the Court had power to determine the parties' respective applications to this Court.
Ekera initially contended that the proceedings should be transferred to the Federal Court under s 5 of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Vic), whereas Creative Smiles and Dr Goodman contended that the Court should exercise the power conferred by s 6(3) of the Commonwealth Cross-vesting Act to determine the applications for leave to appeal itself.
The Court subsequently sought the parties' submissions on the meaning of 'matter' in the expression 'special federal matter' as used in s 6 of the Commonwealth Cross-vesting Act and requested they identify the 'matter' in this case. In its further submissions, Ekera accepted that these proceedings involve a 'special federal matter' and that it would be appropriate for the Court to determine the proceedings under s 6 of the Commonwealth Cross-vesting Act. After receiving those submissions, there was a brief hearing on 9 May 2025. At the conclusion of this hearing, the Court directed Ekera to serve a written notice on the Commonwealth and State Attorneys-General in conformity with s 6(4)(a) of the Commonwealth Cross-vesting Act by 12 May 2025.
It is helpful at this point to refer to the relevant provisions of the Commonwealth Cross-vesting Act. Section 6 concerns matters for determination in a pending proceeding in a Supreme Court that are 'special federal matters'. The term 'special federal matter' is relevantly defined in s 3(1) of that Act as 'a matter that is within the original jurisdiction of the Federal Court by virtue of s 39B of the Judiciary Act 1903 (Cth); being a matter in respect of which the Supreme Court of a State or Territory would not, apart from this Act, have jurisdiction'.
Section 6 of Commonwealth Cross-vesting Act relevantly provides as follows:

[128]

It suffices to observe that the relevant controversy before the Court is whether Ekera breached the FWA by failing to pay Dr Goodman wages, public holiday pay, annual leave and loading, and by failing to make superannuation contributions on his behalf. Such a controversy gives rise to a matter that is within the original jurisdiction of the Federal Court by virtue of s 39B(1A)(c) of the Judiciary Act (Cth); and therefore is a 'special federal matter' as defined in s 3(1) of the Commonwealth Cross-vesting Act.
Section 6(3) of the Commonwealth Cross-vesting Act is therefore engaged. After careful consideration, the Court has concluded that it should make an order under that provision.
Such an order was made in Huynh v Attorney-General (NSW).[159] In that case, s 9(1) of the Administrative Decisions (Judicial Review) Act 1977 (Cth) operated to deprive the Supreme Court of New South Wales of the jurisdiction it would otherwise have had under s 39(2) of the Judiciary Act, 'with the consequence that, in the language of s 3(1) of the [Commonwealth] Cross-vesting Act, the matter is one "in respect of which th[e] Court would not, apart from the [Commonwealth] Cross-vesting Act, have jurisdiction"'.[160] The matter was thus a 'special federal matter'. As Bell CJ observed, s 4 of the Commonwealth Cross-vesting Act 'had the effect of reinvesting the Supreme Court ... with (cross-vested) jurisdiction', subject to the 'special federal matter' regime in s 6.[161] His Honour considered what was intended by the expression 'special reasons' in s 6(3), holding that 'special reasons' were 'not synonymous with "exceptional circumstances"', and fell to be considered 'in the particular circumstances of the proceeding'.[162]
In this case, as we have seen, s 565 of the FWA operates to deprive this Court of jurisdiction to hear the parties' respective applications for leave to appeal and cross-appeal, with the consequence that, but for the Commonwealth Cross-vesting Act, the Court would not have jurisdiction.
The Court acknowledges the general rule that special federal matters should be heard by the Federal Court.[163] It has had regard to that rule in considering whether there are special reasons in the particular circumstances of these proceedings for it to make an order under s 6(3) that it determine the proceedings. In the particular circumstances of these proceedings, it is satisfied, however, that there are in fact special reasons for making an order that this Court determine the proceedings. Briefly, these special reasons are for the avoidance of significant additional public expense and the further engagement of court resources; and to promote the associated public interest.
Significant court time has already been spent at significant public expense in the listing and hearing of the proceedings, and in the preparation to date of the Court's reasons. The proceedings already have a lengthy history. Ekera filed its application for leave to appeal in this Court on 11 August 2023. Creative Smiles and Dr Goodman filed their application for leave to cross-appeal in this Court on 12 September 2023. Written cases were filed in July 2024. There was a hearing on 29 August 2024, which ran for the entirety of that day. Further time and effort has now been expended, at additional public expense, addressing the issue of the Court's jurisdiction.
Moreover, the Court is able to deliver its judgment and its reasons now. If this Court does not determine the proceeding, there will inevitably be more delay. There will also be a further commitment of court resources, including judicial resources, at significant additional public expense. Delay in the resolution of disputes and the waste of court and judicial resources is not in the public interest.[164]
Further, apart from these not insignificant considerations, there is also the fact that, apart from the special federal matter, the proceedings also involve contentions about whether a judge of the County Court properly construed the terms of a private contract, which would ordinarily be determined in this Court.
The Court notes that s 6(3) of the Commonwealth Cross-vesting Act indicates that the convenience of the parties is irrelevant in determining whether an order should be made under that provision. The convenience of the parties has not formed any part of the Court's assessment of whether an order should be made under s 6(3) and is not relevant to the Court's reasons for determining to make such an order.
Further, in conformity with s 6(4)(b) of the Commonwealth Cross-vesting Act, the Court has considered whether a reasonable time has elapsed since notice was given to the Attorneys-General pursuant s 6(4)(a) and its direction of 9 May 2025. The Court is satisfied that a reasonable time has elapsed since that notice was given for the Attorneys-General to consider whether submissions should be made to the Court in relation to this proceeding. In an affidavit of service sworn on 13 June 2025, Mr James Greentree, solicitor, deposed to the service of the reasons of the trial judge delivered on 16 December 2022, 12 May 2023 and 28 June 2023; the application and cross-application for leave to appeal filed in this Court, the parties' written cases and consolidated summary; and the transcript of the hearing on 29 August 2024. Mr Greentree also deposed to receiving an email on 4 June 2025 with a letter from the Director of the Federal Courts Branch of the Commonwealth Attorney-General's Department advising that the Commonwealth Attorney-General would not be making a submission in this matter. Mr Greentree further deposed to receiving an email on 12 June 2025 from the Victorian Government Solicitor's Office advising that the Attorney-General for Victoria did not propose to make submissions in the matter.
Accordingly, the Court is satisfied that there are special reasons in the particular circumstances of the proceedings for making an order pursuant to s 6(3) of the Commonwealth Cross-vesting Act that the two applications for leave to appeal be determined by this Court.

At a glance

Court

Decision date

Source

Judgment (234 paragraphs)

Ekera Dental Pty Ltd v Creative Smiles Pty Ltd [2025] VSCA 149 (27 June 2025)

Parties

Legislation Cited (9)

Cases Cited (26)