What was the arrangement?
30 The appellants offered an accurate summary in submissions of the key features of Mr Tancred's account as to the arrangement made during his conversations with Mr Hallam in December 2015:
a. Mr Hallam offered half the business to Mr Tancred for $50,000 on the basis that Mr Tancred would "come on board" now but could pay the money later.
b. Mr Tancred went away and discussed the offer with Ms Nagel.
c. When Mr Tancred and Mr Hallam met again a few days later, they agreed to a 50/50 split of the business with payment to occur at a later date, but with Mr Tancred to start work first thing in the New Year.
d. When payment occurred, the parties would formalise a joint ownership structure.
31 As the primary judge correctly apprehended, so far as presently material the FW Act uses employee and employer according to the common law meaning of those terms. The provisions of the FW Act recited by the Circuit Court in the consequential orders made on 12 October 2023 each depended for their application upon Mr Tancred and Ms Nagel being employees of Shallam.
32 Much time, treasure and, for the natural person parties, angst would have been avoided had there been a formal, written agreement made as a sequel to the discussions which occurred between Mr Tancred and Mr Hallam in December 2015. There was no such written agreement. That is hardly unusual in small business.
33 Thus, unlike in two recent cases in the High Court which concerned whether or an individual had the status of an employee, Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2022) 275 CLR 165 (CFMMEU v Personnel Contracting) and ZG Operations Australia Pty Ltd v Jamsek (2022) 275 CLR 254 (ZG Operations v Jamesk), the present is not the case where the parties have committed the totality of their relationship to a written agreement or even one which is partly written and partly oral. The arrangements under which Mr Tancred and, in time, Ms Nagel undertook duties were wholly oral.
34 The later difficulties that can be encountered by informality of dealing are not confined to the industrial jurisdiction in a case such as the present. They may also, for example, be encountered in taxation cases when it becomes material to characterise whether a deduction is allowable in respect of a service fee under what is said to be a management agreement, albeit one made informally: see, for example, Anglo American Investments Pty Ltd (Trustee) v Commissioner of Taxation [2022] FCA 971, at [52] to [54].
35 In this instance, the urgent need for assistance in the operation of the Poolwerx business offered an additional reason why nothing in writing preceded 4 January 2016. Thereafter, each of Mr Tancred and Mr Hallam was just content to get on with the operation of the Poolwerx business. When all is, and remains, well between parties, and there must be a myriad of examples of this in business, especially in small business, there is no vice in informality of dealing. Indeed, mutual trust, honour and understanding are virtues which are beyond the price of detailed written prescription. The vice in it often only becomes evident in hindsight and against the background of a business relationship which has ended in acrimony.
36 In law, a valid contract may be formed, or its existence and terms inferred, by conduct attended with considerable informality. In Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 (Branir), at [369] Allsop J (as his Honour then was), with the agreement of Drummond and Mansfield JJ, stated the position:
… [A] number of authorities discuss the need not to constrict one's thinking in the formation of contract to mechanical notions of offer and acceptance. Contracts often, and perhaps generally do, arise in that way. They can also arise when business people speak and act and order their affairs in a way without necessarily stopping for the formalities of dotting i's and crossing t's or where they think they have done so. Here, the i's were not dotted and the t's were not crossed because of Mr Graham's conduct. Sometimes this failure occurs because, having discussed the commercial essentials and having put in place necessary structural matters, the parties go about their commercial business on the clear basis of some manifested mutual assent, without ensuring the exhaustive completeness of documentation. In such circumstances, even in the absence of clear offer and acceptance, and even without being able (as one can here) to identify precisely when a contract arose, if it can be stated with confidence that by a certain point the parties mutually assented to a sufficiently clear regime which must, in the circumstances, have been intended to be binding, the court will recognise the existence of a contract. Sometimes this is said to be a process of inference or implication. For my part, I would see it as the inferring of a real intention expressed through, or to be found in, a body of conduct, including, sometimes, communications, even if it be the case that the parties did not consciously advert to, or discuss, some aspect of the relationship and say: ''and we hereby agree to be bound'' in this or that respect. The essential question in such cases is whether the parties' conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract. The authority for the above can be found in, at least, the following: Meates v Attorney-General [1983] NZLR 308 at 377 per Cooke J (as his Lordship then was); Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117-11,118 per McHugh JA (Hope and Mahoney JJA concurring); Vroon BV v Foster's Brewing Group [1994] 2 VR 32 at 81-83 per Ormiston J (as his Honour then was); Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 555 per McHugh JA (with whom Samuels JA concurred); Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601 at 611 per Bingham J (as his Lordship then was) affirmed on appeal at 615; Pobjie Agencies v Vinidex Tubemakers [2000] NSWCA 105 at [22]-[24] per Mason P (with whom Meagher and Handley JJA concurred); Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61 at [74] - [80] per Heydon JA; though see Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 at 178 per Tadgell J (as his Honour then was); and in this context see also Electrical Enterprises Retail Pty Ltd v Rodgers (1988) 15 NSWLR 473 at 489 per Kearney J and Manzi v Smith (1975) 132 CLR 671 at 674.
37 Where parties have dealt one with the other with great informality, their subsequent conduct can be of particular assistance in determining exactly what was the agreement into which they entered and what were the terms of that agreement. That use is to be distinguished from endeavouring to use subsequent conduct to construe a term of an agreement, which is not permissible. This was the point made by Spigelman CJ in County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 (County Securities v Challenger Group), at [20], an authority relied upon by the appellants, in holding that evidence of post contractual conduct is admissible "where what is in issue is the identification of the subject matter of the contract, or the identification of necessary terms which were not the subject of express provision in a contract not reduced to writing".
38 No separate principle attends referring to subsequent conduct to determine whether it was a contract of employment which was formed between the parties and, if so, what were its terms. This is exemplified by a case to which Spigelman CJ referred in County Securities v Challenger Group namely, Carmichael v National Power Plc [1999] 1 WLR 2042. In that case, the House of Lords had to determine whether a person performed work under a contract of employment, within the meaning of a statute. The performance of that work was a sequel to an exchange of letters and conversations between the parties. Objection, successful in the Court of Appeal, had been taken to resort to post contractual conduct for the purpose of determining the relationship between the parties because that was said to be inconsistent with the objective approach to identifying and interpreting a contract and that the subjective belief of the parties was irrelevant. The House of Lords reversed the Court of Appeal, with Lord Hoffman stating, at 2050:
This austere rule would be orthodox doctrine in a case in which the terms of the contract had been reduced to writing. But I do not think that it applies to a case like the present. In a case in which the terms of the contract are based upon conduct and conversations as well as letters, most people would find it very hard to understand why the tribunal should have to disregard the fact that Mr Lovatt and Mrs. Carmichael both agreed that the CEGB were under no obligation to provide work and the applicants under no obligation to perform it. It is, I think, pedantic to describe such evidence as mere subjective belief. In the case of a contract which is based partly upon oral exchanges and conduct, a party may have a clear understanding of what was agreed without necessarily being able to remember the precise conversation or action which gave rise to that belief … But the terms of the engagement must have been discussed and these conversations must have played a part in forming the views of the parties about what their respective obligations were.
The evidence of a party as to what terms he understood to have been agreed is some evidence tending to show that those terms, in an objective sense, were agreed. Of course the tribunal may reject such evidence and conclude that the party misunderstood the effect of what was being said and done. But when both parties are agreed about what they understood their mutual obligations (or lack of them) to be, it is a strong thing to exclude their evidence from consideration. Evidence of subsequent conduct, which would be inadmissible to construe a purely written contract (see Whitworth Street Estates (Manchester) Ltd v James Miller and Partners Ltd [1970] AC 583) may be relevant on similar grounds, namely that it shows what the parties thought they had agreed.
[Emphasis added]
39 To like effect as to the relevance of the conduct of the parties in determining whether an employer/employee relationship exists is this statement by King CJ in Lenzoot Haulage Pty Ltd v Sinclair (1986) 42 SASR 506, at 511:
Whether the relationship of the parties is that of employer and employee, … is to be determined by reference to indicia found in the terms of the agreement constituting the relationship. The terms of that agreement may be written, oral, or implied from the conduct of course of dealing of the parties and may be found partly in one source and partly in another.
[Emphasis added]
40 Even more apt, in relation to the relevance of conduct in relation to deciding the character of a relationship formed in circumstances of great informality is this stated by Gleeson CJ in Connelly v Wells (1994) 55 IR 73 (Connelly v Wells), at 74:
Where the relationship between two persons is founded in contract, the character of the relationship depends upon the meaning and effect of the contract. In the absence of a suggestion that a contract was varied after it was originally made, its meaning and effect must be determined as at the time it was entered into. If the contract is in writing, then the court which is considering the nature of the relationship between the parties is directed to an examination of the terms of the written agreement in the light of the circumstances surrounding its making. (Narich Pty Ltd v Commissioner of Pay-Roll Tax [1983] 2 NSWLR 597 at 601.)
In some cases, of which the present is an example, the contract may have been entered into without writing, and in circumstances of considerable informality. This may mean that it is more difficult to reach a conclusion as to when the contract was entered into, and as to the terms of the agreement which the parties made. The conduct of the parties may need to be examined for the purpose of reaching a conclusion as to their common intention as to the terms and conditions on which they were contracting with one another. However, the basic principles remain the same.
[Emphasis added]
41 The recent emphasis by the High Court in CFMMEU v Personnel Contracting and ZG Operations v Jamesk on the importance of contractual prescription in determining whether a relationship is to be characterised as that of employer and employee lends particular relevance to the observations made by Gleeson CJ in the second paragraph of the passage quoted. Notwithstanding the considerable informality of dealing, it is singularly important to identify whether and when a contract was made and what were its terms. If it is determined that a contract on particular terms was concluded, and this would necessarily exclude a conclusion that a purported contract was a sham, then, in the absence of variation, that will dictate the character of the relationship formed.
42 The evidence was that Mr Tancred never did pay the $50,000 to which reference was made in the December 2015 conversations. However, there was a considerable body of evidence that, repeatedly thereafter, both in conversation and in writing, Mr Tancred referred to what he was receiving out of the business as "drawings". He also at various times described himself as an "owner" of the Poolwerx business.
43 The evidence concerned and what the primary judge made of the witnesses who gave that evidence is thoroughly recorded in her Honour's reasons for judgment. Though lengthy, it is necessary to set out the passage concerned (at [95] to [103]) in full, both to do justice to the submissions of the parties on the appeal, as well as to her Honour's findings about that evidence:
95 Mr Craig Douglas McDonald was a former owner of two Poolwerx franchises for the period 2004 and 2013, and since late 2013, an accounts manager employed by Aquatic Elements, a wholesaler of pool chemicals, including to Poolwerx franchisees until 2018. Mr McDonald has known Mr Hallam since 2007, and helped him with his business, including visiting councils, and obtaining commercial contracts.
96 Mr McDonald gave evidence that Mr Hallam introduced Mr Tancred to him at Quattro restaurant in early 2016, by saying "Matt and I are in the process of going into partnership with one another in the Poolwerx Lennox Head Franchise. Matt will be a half owner", and of dealing with Mr Tancred in relation to the Poolwerx Lennox Head account, as well as Mr Hallam. Mr McDonald asserted that at a golf round in Fiji at the Poolwerx annual franchisee conference in August 2017 Mr Tancred introduced himself as "an owner in the business". In cross-examination Mr McDonald conceded that he did the introductions, saying "This is Matt from Lennox, he works with Stu".
97 Ms Jessica Tahnee-Leigh Pye is an administration and sales assistant employed in the Poolwerx business who commenced employment in mid-October 2017, just before Mr Tancred ceased working there. Ms Pye gave brief evidence of being interviewed by Mr Tancred in September 2017, and him saying he was an owner of Poolwerx.
98 Mr Joshua Michael Saad has been an employee of the Poolwerx business since early July 2016, when he commenced as a fulltime technician. He became store manager at the Poolwerx Lismore store in September 2017. At the time of his affidavit he was employed as a senior pool technician. Mr Saad was employed by Mr Tancred, and gave evidence that Mr Tancred described himself and Mr Hallam as business partners. In cross-examination Mr Saad exhibited a lack of recollection and was vague in his answers. Accordingly, I give little weight to Mr Saad's evidence.
99 Mr Damian Shanahan has been a Lennox Head resident since 1990, and a customer of the Poolwerx business since shortly after it opened. Mr Shanahan gave brief evidence of a conversation with Mr Tancred at the Premises in early May 2017, in which he recalled the latter described himself as "one of the owners" of the business.
100 Mr John Casey was accountant for Mr Tancred during the Period, and it transpired during the hearing also for Mr Hallam, with whom he was friendly. When pressed in cross-examination he disclosed that he and Mr Hallam had been on an overseas holiday together, adding that there were other people also on the trip. Mr Casey gave evidence of an informal 'kerbside' conversation he had with Mr Tancred in 2016, in which Mr Tancred advised he was buying into the business, but as he did not have the capital to pay yet it would be finalised when he got money from the Iluka development, and described the monthly amounts to be paid to him as "drawings".
101 Mr Casey exhibited to his affidavit email correspondence with Mr Tancred in 2019 in which the two expressed different recollections, and also the applicants' taxation returns for 2016, which documents he had produced under subpoena. In the 2016 taxation return, Mr Casey described Mr Tancred's income as "casual earnings". In cross-examination, Mr Casey sought to explain the inconsistency between the income statement in the 2016 taxation return, and the earlier conversation he claimed to have had with Mr Tancred, as a lapse of memory. In response to cross-examination, Mr Casey disclosed that he had some 400 clients, and had between 1 and 10 conversations a day with clients at the time of his claimed conversation.
102 Mr Tancred denied having the conversation as described by Mr Casey, and denied describing his monthly payments as drawings. There is considerable force in Ms Blattman's submission in closing that Mr Tancred's recollection, as a matter personally concerning him, is to be preferred to Mr Casey's recollection of an informal conversation with one of his many clients, over 3 years' prior to giving evidence.
103 In the circumstances, and observing that the label parties place on their relationship is seldom determinative, I place greater weight on the evidence of the 2016 taxation return, than on recollections several years later of a conversation in 2016 between Mr Casey and Mr Tancred.
[Emphasis by primary judge]
44 It is also desirable for these same purposes to set out, as reproduced at [153] in the reasons for judgment of the primary judge, the terms of an email exchange which occurred in June 2017 between Mr Hallam and Mr Tancred:
The email chain is as follows (without alteration, save emphasis added):
[Email Wednesday, 28 June 2017, sent at 7:41pm from Mr Hallam using his Poolwerx email address to Mr Tancred at his Poolwerx email address as follows]
Hey mate,
Good pow-wow today.
Coming back to you with a summary of what was agreed on and what is to do:
• Terms of purchase by MT to remain in line with letter issued earlier this month. Most likely outcome is to be 1 x full settlement in the first half of 2018 financial year.
• Work to be done on roles moving forward to address several parts of the business and risks identified. MT to come back with ideas by end of holidays, circa 24/7/17.
• Cash position is in good state to enter the new financial year which is reflective of the work been put in by team on the back end.
• MT has requested not to go onto PAYG pending partnership but instead we will increase draws for SH and contract amount for MT to be $3.5k each per month for this financial year.
I have also considered the overall position and can raise the following proposal for your consideration:
• Based on above cash position, we have up to $10k which could be taken by us as a year end additional salary/contractor payment if you would like this to be paid. NOTE - this would be split 50/50, so up to $5k each. I am easy either way. Payment would be processed Friday 30/6/2017.
Please confirm your thoughts on the above proposal. No response will result in no payment to be made.
Thanks Stu
[Mr Hallam's Poolwerx email signoff follows]
[Email reply dated Thursday, 29 June 2017, at 8:53am sent from Mr Tancred from his Poolwerx email address to Mr Hallam at the Poolwerx email address he used follows below the above]
Hey Mate
Agreed I think catch up was timely and very productive. Points raised are acknowledged and as suggested I will be back to you with thoughts ideas at the end of Holidays.
The 5k each payment I think is a good idea to finish the financial year, also the increase in our drawings moving forward for 3500K per month would be great. I think that both these steps represent not only the effort we have put in to date but also a change in what is ahead.
I look forward to re-energising a bit over the holidays and returning to knock a hole in our July/August Job List.
I would also like to close by saying I understand the pressures and the stress to this point and the toll it has taken, your efforts and industry knowledge over the past 18mths have been instrumental in this business journey and evolution. I think it is your industry knowledge that is crucial for the future, we have to install some of it into the staff on a consistent basis to overtime alleviate the requirement to call on you.
Looking forward to a beer and a fishing trip.
Thanks Matt
[Poolwerx logo and sponsorship block, and Mr Tancred's email signoff follow]
[Emphasis added by primary judge]
45 The primary judge observed, at [154], of this email exchange:
It is apparent from the above exchange that Mr Tancred agreed with the payments proposed, and otherwise acknowledged, but did not respond to, Mr Hallam's proposals - whether as set out in the email, or in the June 2017 letters. Mr Tancred was not cross-examined about his use of the term "drawings". The applicants submit that in the absence of that subject being explored in cross-examination, no weight can be put on his use of the term - and that it is not inconsistent with Mr Tancred then considering he was an employee, or indeed, not knowing what his status was. I accept that little weight can be put on Mr Tancred's use of the term, and that it is consistent with Mr Tancred not knowing what his status was.
[emphasis in original]
46 The statement made by Spigelman CJ in County Securities v Challenger Group as to the permissible use which may be made of conduct for identifying the subject matter of a contract was not, as the authorities his Honour cites, at [18], of his judgment bear out, idiosyncratic. It may be contrasted with the primary judge's observation, at [103], that, "the label parties place on their relationship is seldom determinative".
47 With respect, that observation is not consistent with the statement of principle by Spigelman CJ in County Securities v Challenger Group. Further, as CFMMEU v Personnel Contracting and ZG Operations v Jamesk demonstrate in relation to employment agreements in writing, and in the absence of a sham, a "label" given to the relationship thereby created by the parties may very well be determinative. Likewise, where, as here, circumstances of considerable informality attend the formation of a business relationship, the "label" which the parties mutually place on that relationship in a contract found to exist by inference or implication may very well be determinative. As Gleeson CJ observed in Connelly v Wells in the passage quoted above, "the principles remain the same" as they do in respect of a "label" given in an agreement in writing.
48 In December 2015, these parties, Mr Tancred in his own right and Mr Hallam on behalf of Shallam, agreed to a "50/50 split". As the email exchange of June 2017 confirms, 18 months later, the mutual understanding of Mr Hallam ("draw") and Mr Tancred ("drawings") was that this is what each had been receiving from the business over that period and that the amount thereof should increase. That email exchange also shows that, over that period and in relation to Mr Tancred and without any demur by him, no pay as you go withholdings had been made from those "drawings". More particularly, it shows, as Mr Tancred confirmed by his acknowledgement, that he had "requested not to go onto PAYG pending partnership but instead we will increase draws for SH [Mr Hallam] and contract amount for MT [Mr Tancred] to be $3.5k each per month for this financial year". That is how the parties conducted themselves on and from their conversations in December 2015.
49 The reasoning of the primary judge as to why an employee/employer relationship existed as between Mr Tancred and Shallam is revealed, at [325] to [326], of her Honour's judgment:
325. In sum, on the evidence I find that the employment relationship between Shallam and Mr Tancred was established by the matters agreed in December 2015, and by conduct, including the following:
(a) Mr Tancred was employed to undertake, and assisted in the operational side of the business under Mr Hallam's overall direction, and implementing Mr Hallam's decisions. Thus, whilst Mr Hallam continued to issue the technician's weekly job schedules, Mr Tancred handled the daily administration and organisation of the technicians, their jobs and their supplies, and the office staff, and customer facing matters, reporting to Mr Hallam daily or near-daily;
(b) Mr Tancred worked exclusively in the business save that as agreed in their December 2015 conversations, Mr Tancred could continue on an ad hoc basis with his father managing the Iluka development to completion;
(c) Mr Tancred would do and did what Mr Hallam asked him to do in the Poolwerx business, and would and did report to Mr Hallam on what he had done and how the business was going;
(d) Mr Hallam alone decided what staff would be told about Mr Tancred's position in the Poolwerx business when he commenced working in the business, and what Poolwerx Corporation was to be told, and directed Mr Tancred accordingly, and reiterated his direction;
(e) Mr Hallam retained and exercised control over what staff were hired and fired, and directed the terms on persons were employed and were terminated, and that Mr Tancred give effect to Mr Hallam's decisions;
(f) Mr Hallam retained and exercised sole control over the finances of the Poolwerx business and over its bank accounts, and determined the payments Shallam and subsequently H2YO! made to Mr Tancred, directed when they would be made and were made, and how they were described; he alone decided the transactions made through the Poolwerx bank accounts (including the holding account) and what the profit of the Poolwerx business would be. There was no transparency as to these matters, and Mr Hallam alone determined when and what Mr Tancred would be told of the financial position of the Poolwerx business;
(g) further to the above, the monthly amounts paid to Mr Tancred were fixed, there is no evidence that they bore any relationship to the profits of the Poolwerx business. Descriptions given by Mr Hallam to those payments as 'drawings', 'equal draws', 'contractor income', and 'salary/contractor income' at various times, including in his affidavit evidence, and explanations at hearing, are unreliable;
(h) all franchisor / franchisee interactions between Poolwerx Corporation and Shallam (and subsequently H2YO!) were initiated, controlled and responded to on the part of the franchisee by Mr Hallam or as he directed (viz, the organisation of employee email addresses, and conference attendances, and awards nomination and acceptances, renewal of franchise and nomination of franchise manager and guarantors);
(i) whilst Mr Hallam involved Mr Tancred in working out the layout of the redeveloped Premises with assistance from Poolwerx Corporation, and sought his input regarding the proposed lease, Mr Hallam at all times was and remained the decision maker for the Poolwerx business in that matter, and controlled all aspects of the proposed lease, who would be the lessee, guarantor, and manager and the contractual, financial and practical negotiations and agreement. Mr Hallam determined who dealt with the landlord, Poolwerx Corporation and the franchisee service providers, and the matters on which he sought Mr Tancred's input.
326 Further, I am satisfied that Mr Hallam alone decided to pursue the purchase from Mr Savvas of some interest in Lismore Profile Pools, and undertook all the steps to effect the purchase, and pressed Mr Tancred to increase the amount of his proposed buy-in. Whilst Mr Hallam informed Mr Tancred of his proposal to purchase an interest, and the amount he proposed to pay, it was not made clear on the evidence what that interest was. I was not persuaded by Mr Hallam that the decision was in anyway a joint decision. I find it was not. Mr Hallam's interest as expressed was in ensuring that Mr Tancred would increase his proposed buy-in, not his approval for the purchase. The lease of the Lismore shop was procured by Mr Hallam and entered into by his company, H2YO!. Mr Tancred did not participate in those arrangements.
50 Obviously enough, the above excerpt from the primary judge's account of evidence given by various witnesses as to statements made by Mr Tancred entailed an assessment as to credit made with the benefit of observing the witness concerned when giving oral evidence. Given this, there was quite some debate in submissions as to the extent to which this Court, on appeal, was bound by such credibility findings. The respondents embraced the reasoning of the primary judge, at [325] to [326], and emphasised that this was based in part on credibility findings which should not be disturbed on appeal.
51 Ever since Branir (see especially at [20]), it has been clear that an appeal to this Court is by way of rehearing. That means that the Court must make its own mind up on questions of fact, giving full weight in relation to credibility to the advantages enjoyed by a trial judge. To interfere in the exercise of appellate jurisdiction with findings of fact, the Court must be persuaded that those of the trial judge were wrong. As Allsop J (with whom Drummond and Mansfield JJ agreed) stated in Branir, at [30], after a thorough consideration of the then state of the authorities:
The proper approach is not to ask the court to survey all the evidence, directed by the otherwise unassailable findings on credit, and to ask it to arrive at its own conclusions, without "essaying the necessary task of positively demonstrating that the trial judge was wrong": Williams v The Minister, supra at [61] per Heydon JA. It is not appropriate to treat the appeal as though it were a new trial on the evidence and constrained merely by the unassailable factual findings. Error must be demonstrated. See also Biogen Inc v Medeva Pty Ltd, supra at 45 and Williams, supra at [136] and [137] citing Zuvela, supra and Biogen, supra. The views and conclusions of the trial judge ultimately have to be shown to be wrong. They should not be laid to one side and a simple re-argument of the case take place.
52 More recently, in the High Court, in Lee v Lee (2019) 266 CLR 129, at [55], Bell, Gageler, Nettle and Edelman JJ stated:
A court of appeal is bound to conduct a "real review" of the evidence given at first instance and of the judge's reasons for judgment to determine whether the trial judge has erred in fact or law. Appellate restraint with respect to interference with a trial judge's findings unless they are "glaringly improbable" or "contrary to compelling inferences" is as to factual findings which are likely to have been affected by impressions about the credibility and reliability of witnesses formed by the trial judge as a result of seeing and hearing them give their evidence. It includes findings of secondary facts which are based on a combination of these impressions and other inferences from primary facts. Thereafter, "in general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge".
[Footnotes omitted]
53 I have already highlighted the error in understanding by the primary judge as to the determinative role which a contractual "label" may have in determining whether or not an employer/employee relationship exists. The reasoning of the primary judge, at [325] to [326], is noteworthy for an absence of appreciation that the reference to "drawings" was not just that of Mr Hallam. It was a term also used by Mr Tancred, as the June 2017 email exchange confirms. The term "wage" was never used by either of them. Of all of the evidence led in the case, this email exchange was the sole, written, contemporaneous evidence of a mutual understanding. Further, it was accompanied in that email exchange by a mutuality of understanding, consistent with 18 months of conduct, that no PAYG withholdings would be made from such "drawings". Of course, the primary judge, considering their evidence individually, made particular credibility observations concerning the witnesses whose evidence is summarised at [95] to [100] of her reasons for judgment. However, what is striking about their evidence, considered collectively, is the consistent presence of the word "drawings" or "owner" in that evidence and how similar it is with the description used by Mr Tancred and Mr Hallam in their June 2017 email exchange.
54 The trial judge's list in paragraph [325] of facts considered is noteworthy for its omission of reference to the statement made in early 2016 by Mr Hallam to Mr McDonald in Mr Tancred's presence - "going into partnership" and "Matt will be half owner". That statement was not found by her Honour to lack credibility. It is entirely consistent with the evidence of Mr Tancred, which her Honour accepted, as to what was agreed in December 2015. Further, even with the explanation given in cross-examination, the introduction of Mr Tancred was of a person who worked "with", not "for", Mr Hallam.
55 The appellants made four points, each of them sound in my view, in relation to the reasoning of the primary judge found in [325]:
(a) It was erroneous for the primary judge to characterise the parties' relationship or the agreement between them "by reference to indicia prevailing when the agreement was still partly executory and not fully completed". As the appellants submitted, the absence of Mr Tancred as a party to the lease of the Poolwerx business office at Lennox Head, to the franchise or being joined in other legal titles or authorities was explicable on the basis he had not yet paid any part of the $50,000 he had agreed to pay. If, truly, the agreement made in December 2015 was to acquire a half share in the Poolwerx business, the appellants' submission that this agreement did not, even in the interim period, make him an employee of Shallam is correct. Acceptance that there was such an agreement is not dependent upon preferment of Mr Tancred's evidence to that of Mr Hallam.
(b) Accepting Mr Tancred's account as to what was agreed in December 2015, what was agreed was for the sale of half of the Poolwerx business, not half of Shallam. Given that Shallam acted as a corporate trustee and also carried on another, unrelated business, Shallam was never going to be the vehicle by which the Poolwerx business would, upon completion of the agreement, be carried on. Accepting Mr Tancred's account, the necessary implication of the December 2015 conversations was that some new business vehicle would be formed to carry on that business once the agreed price was paid. Once this is understood, and, with respect, it was not by the primary judge, it is unremarkable that, before then, Mr Tancred did not have control of Shallam, or its bank accounts. Especially that is so as Shallam was involved in two businesses with one of which Mr Tancred was completely unconcerned.
(c) Again accepting Mr Tancred's account of the December 2015 conversations, what was agreed was "50/50" sale of the Poolwerx business with co-ownership, not sole ownership by Mr Tancred. Nothing in that carried with it an inability thereafter for Mr Hallam to make decisions about that business, or a requirement that only Mr Tancred could make such decisions.
(d) Related to the last preceding point, for several years before December 2015, decisions about the Poolwerx business and the knowledge of the operation of that business had been for Mr Hallam alone, as the directing mind and will of Shallam. It was unremarkable that, as the appellants put it, "he would take the lead on decision making and Mr Tancred would defer to him for some significant period of time", especially in an interim period pending completion.
56 To these points might be added that, earlier in 2015, Mr Tancred had seen the financial data for the Poolwerx business and declined to purchase it outright for $100,000. The financial data for the 2015 to 2017 financial years for the trust of which Shallam was trustee was in evidence. Mr Tancred could, in December 2015, only have seen the 2015-year figures. However, even looking at these, the notion that he and Mr Hallam set out in December 2015 to create a relationship whereby Mr Tancred would become an employee with a related award wages oncost for the business is, with all respect to the primary judge, the stuff of fantasy. It gives no credence to what must by necessary inference have been a mutual understanding of Mr Tancred and Mr Hallam (on behalf of Shallam) that a half share in the Poolwerx business was in December 2015 worth no more than $50,000 and that a monthly drawing of $2,500 each, not a wage, was a cost which that business could then afford.
57 The primary judge rejected a submission made by Mr Hallam and Shallam that, as at December 2015, there was a binding agreement, the consideration for which remained executory, which was partly performed by their joint work in the business, and the payments to Mr Tancred. Yet, necessarily and unremarkably, the imminence of a need for Mr Tancred's presence in the Poolwerx business made the payment of the agreed price executory. The only basis upon which Mr Tancred undertook any work on and from January 2016 was the "50/50" agreement he had struck with Mr Hallam in December 2015.
58 All of the elements of the partnership for which the appellants contended were then present, even if one looks just to Mr Tancred's account of the December 2015. He and Mr Hallam agreed to the purchase of half ("50/50") the Poolwerx business by Mr Tancred for a specified price ($50,000, with payment deferred), and to share profits equally. In New South Wales, where their conversation occurred, "the receipt by a person of a share of the profits of a business is prima facie evidence that the person is a partner in the business, but the receipt of such a share, or of a payment contingent on, or varying with the profits of a business does not of itself make the person a partner in the business": s 2(1)(3), Partnership Act 1892 (NSW) (Partnership Act). The appellants' submission that "a partnership arose at law on the day that Mr Tancred commenced working in the business with a view to generating profits" is consistent with this statutory provision. The countervailing proposition, also flowing from the Partnership Act, via s 2(1)(3)(b), was that, "A contract for the remuneration of a servant or agent of a person engaged in a business by a share of the profits of the business does not of itself make the servant or agent a partner in the business or liable as such." This alternative is inconsistent with the mutuality of understanding that each would draw a like share, an understanding which was unchanged over 18 months, as the June 2017 email exchange attests. Mr Tancred was to be, and was, remunerated by drawings generated by the operation of the business, from the deployment of all its assets, not at all by reference to his labour. That was an inherent feature from the outset of the agreement he made with Mr Hallam in December 2015.
59 The learned primary judge saw (at [102]) some support for her conclusion that Mr Tancred was an employee from Mr Tancred's self-description of his remuneration "casual earnings" in his 2016 taxation return as prepared by the accountant, Mr Carey. Mr Hallam was not privy to this description. It was, at best, misleading. In any event, as the Judicial Committee of the Privy Council did not in Australian Mutual Provident Society v Chaplin (1978) 52 ALJR 407, at 411, the primary judge placed no importance on this description.
60 I therefore respectfully disagree with the conclusion reached by the primary judge as to the absence of a partnership as pleaded. There was such a partnership on and from January 2016. Mr Tancred was providing his services for the benefit of that partnership. On and from that time, Mr Tancred and Shallam had a beneficial interest in that partnership and in all of its assets: Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321; Federal Commissioner of Taxation v Everett (1980) 143 CLR 440. Consequentially, Shallam from then held the assets of the Poolwerx business on trust for that partnership. It is not possible to be both the holder of a beneficial interest in a partnership and an employee: Cowell v Quilter Goodison Company Limited, Q.G. Management Services Limited [1989] IRLR 392 (Court of Appeal).
61 Alternatively, and as the appellants also submitted, even if a partnership were not, as alleged, formed in January 2016, there nonetheless then existed, and continued to exist, a fiduciary relationship between Mr Tancred and Shallam. The relevant authority is indeed that cited by the appellants, United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 in which, at 12, Mason, Brennan and Deane JJ stated:
A fiduciary relationship can arise and fiduciary duties can exist between parties who have not reached, and who may never reach, agreement upon the consensual terms which are to govern the arrangement between them. In particular, a fiduciary relationship with attendant fiduciary obligations may, and ordinarily will, exist between prospective partners who have embarked upon the conduct of the partnership business or venture before the precise terms of any partnership agreement have been settled.
If, as I accept could alternatively be the case, this is the true description of the relationship what is described is not a relationship of employer and employee.
62 On either view, the conclusion reached by the primary judge that Mr Tancred was on and from January 2016 an employee of Shallam, was wrong in law.