Hallam v Tancred

THE TRUSTEE OF THE SW HALLAM DISCRETIONARY TRUST Second Appellant

AND: MATTHEW TANCRED First Respondent

order made by: LOGAN J DATE OF ORDER: 31 JULY 2024

1. The appeal be allowed.
2. The orders made by the Federal Circuit and Family Court of Australia (Division 2) on 23 August 2023 and 12 October 2023 in proceeding SYG 1494 of 2018 be set aside.
3. In lieu thereof, it be ordered that proceeding SYG 1494 of 2018 be dismissed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

LOGAN J: 1 This appeal from the Federal Circuit and Family Court of Australia (Division 2) (Circuit Court) offers a small business life example of the accuracy of the aphorism, "The road to Hell is paved with good intentions." 2 In early January 2016, the first respondent, Mr Matthew Tancred embarked on a business arrangement with the second appellant, Mr Stuart Hallam and a company controlled by Mr Hallam, Shallam Pty Ltd (Shallam) in its capacity as trustee of the SW Hallam Discretionary Trust, the first appellant. There is no doubt on the evidence that this business arrangement commenced on an optimistic note as to an acquisition of an interest by Mr Tancred in the franchise business operated by Shallam and a related sharing of profits. These were the good intentions. 3 At that time, and in its trustee capacity, Shallam separately conducted, in partnership with another, a mortgage finance business known as "Swell Finance". The time which Mr Hallam needed to devote to this other business lent an imperative quality to a need for assistance in the operation of Shallam's franchise business. 4 In mid-2016, Mr Tancred's life partner, Ms Kellie Nagel, the second respondent, came to undertake some tasks in the operation of that business. In September 2017, H2YO! Pty Ltd (H2YO!), another company controlled by Mr Hallam, succeeded Shallam as the franchisee. 5 On 22 October 2017, the business arrangement between Mr Tancred and Mr Hallam came to an end. That also saw the end of the arrangement under which Ms Nagel undertook some tasks in the business. 6 Thereafter at least, Mr Tancred and Ms Nagel conceived that their business arrangement had, all along, been that of being employees of Shallam (although apparently not and oddly of H2YO!, judging by the parties to the proceeding). 7 On 25 May 2018, Mr Tancred and Ms Nagel instituted proceedings in the Circuit Court alleging contraventions of the Fair Work Act 2009 (Cth) (FW Act) by Shallam, to which Mr Hallam was said to be an accessory. They claimed orders pursuant to s 546 of the FW Act that Shallam and Mr Hallam pay pecuniary penalties in respect of alleged contraventions of ss 44, 45 and 357 of the FW Act and that any penalties levied be paid to them, compensation pursuant to s 545(2)(b) of that Act, to be paid by Shallam in relation to these alleged contraventions and interest pursuant to s 547 of the FW Act in relation to any such compensation ordered against Shallam and Mr Hallam in relation to any such compensation. 8 Almost two years later, in February 2020, after a leisurely progression through interlocutory steps and a failed mediation, directions were made to the end of a trial of the proceeding occurring for 5 days, commencing on 23 March 2020 at Lismore in New South Wales. On 16 March 2020, under the impact of public health responses to the initial stages of the COVID-19 pandemic, this trial was vacated to a date to be fixed. In April 2020, the proceeding was re-listed for a five-day trial at Lismore, commencing on 16 November 2020. The trial commenced then but was not completed over this period. Oral submissions in supplementation of earlier filed written submissions were heard on 19 February 2021. The trial judge made provision for supplementary written submissions. The last of these was filed almost 18 months later, on 27 July 2022. Some 13 months later, on 23 August 2023, a judgment in respect of liability was delivered: Tancred v Shallam Pty Ltd [2023] FedCFamC2G 777. On that day, the Circuit Court declared: (a) Mr Tancred to be an employee of Shallam from 4 January 2016 up to and including 23 October 2017; and (b) Ms Nagel, to be an employee of Shallam working on a on a part time basis undertaking: (i) cleaning work at the Premises in the period 7 February 2016 to 14 February 2017 for an hour once a week, and in the period from 14 February 2017 to 23 October 2017 for an hour once every 4 weeks, and (ii) administrative and financial work for 9 hours each week from 14 July 2016 to 14 February 2017. 9 Thereafter, the learned trial judge accepted a submission made by the parties that the reasons for judgment as delivered that day contained a transcription error. Accordingly, her Honour published a Corrigendum on 24 October 2023. 10 In the meantime, what at least purported to be an appeal against the orders made on 24 August 2023 was instituted by the filing of a notice of appeal in this Court on 28 September 2023. A month later, on 23 October 2023, that purported appeal was allocated to the docket of another judge. On 14 February 2024, the proceeding came to be listed for hearing on 3 May 2024. Late in April 2024, the proceeding was re-docketed to me to hear the appeal. The appeal was heard on 3 May 2024 with judgment reserved. 11 Also in the meantime, the parties jointly promoted to the Circuit Court detailed orders to carry into effect the consequence of the declaration made on 23 August 2023. Consequently, on 12 October 2023, the Circuit Court made these orders: 1. The First Respondent [Shallam] contravened s 45 of the Fair Work Act 2009 (Cth) (FW Act) by failing to notify the First Applicant [Mr Tancred] of his employment status and classification when he was engaged by the First Respondent, in accordance with the General Retail Industry Award 2010 (Award). 2. The First Respondent contravened s 45 of the FW Act by failing to pay the First Applicant the minimum rates set out in the Award for all hours of ordinary work he performed. 3. The First Respondent contravened s 45 of the FW Act by failing to pay the First Applicant wages on a weekly or fortnightly basis according to the actual hours he worked each week or fortnight in accordance with the Award. 4. The First Respondent contravened s 45 of the FW Act by failing to pay the First Applicant overtime rates for all hours of overtime worked in accordance with the Award. 5. The First Respondent contravened s 45 of the FW Act by failing to pay the First Applicant rates applicable for Saturday work under the Award. 6. The First Respondent contravened s 45 of the FW Act by failing to pay the First Applicant at double time and a half his ordinary hourly rate for all time he worked on public holidays. 7. The First Respondent contravened s 45 of the FW Act by failing to make contributions to a superannuation fund for the benefit of the First Applicant in accordance with the Award. 8. The First Respondent contravened s 45 of the FW Act by failing to pay the First Applicant meal allowances when he worked overtime in accordance with the Award. 9. The First Respondent contravened s 45 of the FW Act by failing to afford the First Applicant rest and meal breaks in accordance with the Award. 10. The First Respondent contravened s 44 of the FW Act by failing to pay the First Applicant accrued but untaken annual leave on the termination of his employment. 11. The First Respondent contravened s 45 of the FW Act by failing to pay the First Applicant annual leave loading on accrued but untaken annual leave. 12. The First Respondent contravened s 44 of the FW Act by failing to provide the First Applicant 2 weeks' notice in writing of termination of his employment. 13. The First Respondent contravened s 536 of the FW Act by failing to provide the First Applicant a payslip within one working day of paying an amount to the First Applicant in relation to the performance of work. 14. The First Respondent contravened s 535 of the FW Act by failing to keep records in relation to the First Applicant in accordance with the FW Regulations. 15. The First Respondent contravened s 357 of the FW Act by the representations made in the letter sent to the First Applicant dated 23 June 2017. 16. The First Respondent contravened s 45 of the FW Act by failing to notify the Second Applicant [Ms Nagel] of her employment status and classification at the time she was engaged in accordance with the Award. 17. The First Respondent contravened s 45 of the FW Act by failing to pay the Second Applicant the minimum rates set out in the Award for all hours of ordinary work she performed. 18. The First Respondent contravened s 45 of the FW Act by failing to pay the Second Applicant wages according to the actual hours she worked each week or fortnight in accordance with the Award. 19. The First Respondent contravened s 45 of the FW Act by failing to pay the Second Applicant overtime rates for all hours she worked on Sundays in accordance with the Award. 20. The First Respondent contravened s 45 of the FW Act by failing to make superannuation contributions to a superannuation fund for the benefit of the Second Applicant. 21. The First Respondent contravened s 536 of the FW Act by failing to provide the Second Applicant a payslip within one working day of paying an amount to the Second Applicant in relation to the performance of work. 22. The First Respondent contravened s 535 of the FW Act by failing to keep records in relation to the Second Applicant in accordance with the FW Regulations. 23. The First Respondent contravened s 45 of the Award by failing to ensure that copies of the Award and National Employment Standard were easily available to all employees to whom they applied at the workplace in compliance with the Award. 24. The Second Respondent [Mr Hallam] is a person involved in each of the First Respondent's declared contraventions of the FW Act within the meaning of s 55(2) of the FW Act, and by reason of s 550(1) of the FW Act, has contravened ss 44, 45, 357, 535 and 536 of the FW Act in respect of each of the First Respondent's declared contraventions of the FW Act. 25. Pursuant to sections 545 and 547 of the FW Act the Respondents are to pay the First Applicant compensation in the sum of $136,619.50 together with pre-judgment interest in the sum of $42,114, within 28 days. 26. Pursuant to section 545 and 547 of the FW Act the Respondents are to pay the Second Applicant compensation in the sum of $8,463.17, together with pre-judgment interest in the sum of $2,596, within 28 days. 12 Still pending in the Circuit Court, awaiting the fate of this purported appeal, are the penalty orders to be made in respect of the various contraventions of the FW Act, as declared on 12 October 2023. 13 So it is that, the better part of 7 years after a parting of the ways between Mr Hallam and related entities on the one hand and Mr Tancred and Ms Nagel on the other, and over 6 years since Commonwealth judicial power was first invoked, none of the parties as yet has closure and, depending on the fate of this purported appeal, may yet not have closure. Irrespective of the fate of this appeal, that, surely, is a form of Hell for each of the parties.

Leave to appeal needed? 14 An appeal as of right to this Court from a judgment of the Circuit Court exercising jurisdiction under the FW Act lies only in respect of a final judgment of that court: s 24(1)(d), as read subject to s 24(1A) of the Federal Court of Australia Act 1976 (Cth) (FCA Act). The term "judgment" is defined by s 4 of the FCA Act thus: "judgment" means: (a) a judgment, decree or order, whether final or interlocutory; or (b) a sentence; and includes a conviction. Save for the inclusory reference to a conviction, this definition replicates language found in s 73 of the Constitution in respect of the appellate jurisdiction of the High Court of Australia. 15 The order made by the Circuit Court on 24 August 2023 was, undoubtedly, a "judgment" as defined by s 4 of the FCA Act. On the hearing of the proceeding, the parties each proceeded on the basis that the judgment was final such that leave to appeal was not necessary. I did not suggest to the contrary at the hearing. It was only when preparing these reasons for judgment that a thought occurred about whether the judgment delivered on 23 August 2023 was interlocutory such that a grant of leave was necessary for the appeal to be competent. It is that thought which has occasioned thus far the adjectival qualification "purported". 16 Ordinarily, the occurrence of such a thought would, for procedural fairness reasons, dictate the affording of an opportunity to each party to make supplementary submissions. However, I have not offered such an opportunity for these reasons. 17 At the conclusion of her reasons for judgment, the learned trial judge summarised the position reached in the proceedings by starting, at [389], that she "found that the applicants' claims largely succeed". Her Honour continued, "Each of Shallam and Mr Hallam has contravened the FW Act. The applicants are entitled to most of the relief sought in the Claim". Her Honour stated, at [390], that it followed that, "compensation pursuant to s 545(2) of the FW Act must be paid by Shallam and Mr Hallam in relation to their contraventions of ss 44, 45 and 357 of the FW Act substantially in the nature and sums foreshadowed in the Claim at [157] and the Quantum Schedules, to the extent I have found established". Her Honour then stated, at [391], that she would "make declarations today that each of the applicants were employees of Shallam". The formal order of the Circuit Court of 23 August 2023, already quoted, carried into effect that intent. In the balance of the concluding part of her reasons for judgment, her Honour charted out future steps, which contemplated the bringing in of orders giving formal effect to conclusions reached as to compensation and related interest, ideally consensually, and the determination of penalty. The further orders of 12 October 2023 carried this partially into effect. The further progression of those steps was interrupted by the filing of the notice of appeal. 18 Thus, the position is that, although the judgment of 24 August 2023 did not by order determine fully the relief granted by the Circuit Court in respect of Mr Tancred's and Ms Nagel's claim, it did by order resolve a foundational issue of fact and law at issue between the parties namely, whether Mr Tancred and Ms Nagel were employees. In those circumstances, I consider that the better view is the order of 23 August 2023 was not interlocutory: Arrowcrest Group Pty Ltd v Gill (1993) 46 FCR 90 (Arrowcrest), at 100 to 101; Damorgold Pty Ltd v J.A.I. Products Pty Ltd [2014] FCA 448; see also B Cairns, Australian Civil Procedure, 12th Edition, p 850. As in Arrowcrest, although the court exercising original jurisdiction did not formally order the separate trial of a preliminary issue, that in substance is what occurred. And the outcome in respect of that separately determined issue was translated into an order which finally determined that issue between the parties. 19 I therefore conclude that the appeal is competent, requiring no grant of leave. That being so, there is no need to call for supplementary submissions. 20 Were that conclusion in error, I would unhesitatingly grant leave to appeal nunc pro tunc. The issue is of basal importance to the fate of the proceeding. Its merits have been fully addressed in submissions. If nothing else, the appellants' submissions demonstrate that the challenge they make to the status declared by the Circuit Court by the order of 23 August 2023 is at least reasonably arguable. No point was taken about the competency of the appeal by the respondents. It would be unjust to put the parties to the delay and further expense associated with requiring supplementary submissions.

If employed, by whom? 21 Assuming, for the moment, that Mr Tancred and Ms Nagel were correctly characterised as employees, one may doubt, with respect, whether either could have been, as declared, an employee of Shallam for a period up to and including 23 October 2017. 22 The uncontroversial evidence before the learned primary judge was that, as of December 2015, Shallam operated a business under the trading name "Poolwerx Ballina Byron", but generally identified as "Poolwerx Northern Rivers" (the Poolwerx business). It did so as a franchisee in its allocated areas of Ballina, Byron, Lennox Head and Lismore in New South Wales. That franchise agreement commenced on 17 September 2012 for an initial term of 5 years. The nature of the Poolwerx business was the sale of pools and spas and related products, together with the provision of pool and spa maintenance services. It was based in leased premises at Byron Street, Lennox Head. Mr Hallam was then the sole director and sole shareholder of Shallam. 23 On 17 September 2017, further to a franchise agreement dated 24 August 2017, H2YO! became the franchisee, thereafter operating the Poolwerx business, with Shallam and Mr Hallam as guarantors under that franchise agreement. H2YO! is another company controlled by Mr Hallam. 24 One might have thought that this change in the operator of the business would carry with it, if they were indeed employees, at least an interrogative note as to who was Mr Tancred's and Ms Nagel's employer on and from 17 September 2017? That thought does not seem to have occurred to them or to those advising them. H2YO! has never been a party to the proceeding. Equally, neither Shallam nor Mr Hallam put this question at issue in the proceeding. It was not raised by the learned primary judge of her own motion for the parties to consider. Accordingly, the ramifications of the change of ownership in terms of who was employer as at the termination date of 23 October 2017 were never addressed in the original jurisdiction. It is not an issue in this appeal. Instead, what is controversial in this appeal is just whether Mr Tancred and Ms Nagel were ever employees. Thus, although I record the interrogative note mentioned, I shall decide the appeal just on the issue which has been made controversial.

A business arrangement begins 25 The following is uncontroversial. 26 Mr Tancred became acquainted with Mr Hallam in 2006. They remained in touch over ensuing years. In May 2015, Mr Hallam caused Shallam to attempt to sell the Poolwerx business. Although nothing otherwise came of this attempt then, in May and June 2015, Mr Hallam and Mr Tancred did have discussions about a sale of the business to Mr Tancred for $100,000. This included the provision by Mr Hallam of financial information about the business to Mr Tancred and, seemingly also, Ms Nagel. Having discussed the subject with Ms Nagel, Mr Tancred decided at that stage not to proceed with an acquisition of the business. 27 In December 2015, Mr Hallam and Mr Tancred had further discussions, on this occasion concerning an acquisition of a half interest in the business by Mr Tancred for $50,000. By that stage, Mr Hallam urgently needed assistance in the operation of the business. Mr Tancred voluntarily undertook some work in the business late that month to help Mr Hallam. 28 On 4 January 2016, Mr Tancred commenced undertaking duties in the operation of the Poolwerx business pursuant to an arrangement he made with Mr Hallam. The terms of that arrangement are controversial. It was never reduced to writing. The learned primary judge, who had the benefit of observing them to the extent they gave oral evidence, preferred the version given by Mr Tancred to that of Mr Hallam. 29 There is substance in the appellants' submission that, in their essentials, the two accounts given by these gentlemen about the arrangement struck between them do not differ. In any event, the appellants' submission was that, even accepting Mr Tancred's account, it was not an employer/employee relationship which was formed as a result of the arrangement. In those circumstances, as did the primary judge, I shall approach that subject based on Mr Tancred's account of the arrangement (related at [110] to [112] by the primary judge).

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.

Ms Nagel 63 Once again, no written agreement was ever made between Shallam and Ms Nagel with respect to the performance by her of tasks in the Poolwerx business. In January 2016, while Ms Nagel was helping Mr Tancred undertake cleaning tasks at the Lennox Head business premises, Ms Nagel observed to Mr Hallam that the Lennox Head business premises really required someone to clean on a regular basis (at [365]). Mr Hallam then asked her if she could do this. The primary judge accepted that a conversation to this effect then ensued between them: Ms Nagel: Yes, but I'll have to fit it around my business and my family. That would most probably be on the weekend sometime. Mr Hallam: That would be great. I'll show you where I keep all the cleaning products. If you require anything further, but it from Jim [the hardware store] next door. [sic] 64 As found by the primary judge (at [261]), from February 2016 to February 2017, Ms Nagel helped clean the Lennox Head business premises for about one hour per week. From February 2017 to 23 October that year, she spent about one hour every 3 to 4 weeks helping clean those premises ([262]). The primary judge found (at [264]) that there was never any discussion between her and Mr Hallam about her being paid for cleaning tasks, and she never was paid. Nonetheless, her Honour found that there was an "arrangement" as between Shallam and her an implied term of which was that she would be paid for the performance of these tasks. 65 Between about June 2016 and February 2017, Ms Nagel also undertook some administrative tasks - data entry, invoicing, filing and the like - for the Poolwerx business. She spent about 9 hours per week on average on these tasks ([298]). 66 There were discussions about the possibility of Ms Nagel's being paid for this type of work. The primary judge accepted (at [290]) an account given by Ms Nagel (set out at [282] to [283]) of two conversations which occurred in October 2016. The first was a three-way conversation to which Mr Tancred, Mr Hallam and Ms Nagel were parties while Mr Hallam was sitting at his computer in the Lennox Head premises providing feedback to Ms Nagel about an invoicing matter: Mr Tancred: How about Kell's wages do you want her to email her hours to you again? Mr Hallam: There's no money in the account! 67 The primary judge accepted Ms Nagel's account that, when Mr Hallam exclaimed this, remained seated staring at his computer, hitting the desk with both his hands. 68 The second conversation in October 2016 also occurred at the Lennox Head premises but was just between Ms Nagel and Mr Hallam: Mr Hallam: Hopefully we will be able to start paying you for all the hours you have done soon. Ms Nagel: It's fine I understand how business works. I know you will pay me once the money starts to flow into the business and then you will look after me. Mr Hallam: Yes I will … maybe we will pay you with a spa! 69 There was never any written agreement between Shallam and Ms Nagel in relation to her performance of any of this work. The authorities already discussed above in relation to implication of a contract in circumstances of informality of dealing are therefore applicable. However, in contradistinction to the position with Mr Tancred, to these must, on the appellants' case, be added a more fundamental consideration namely, whether there was ever in the first place any intention to create contractual relations in that informal dealing? 70 As to the latter, the leading authority is, as the appellants submitted, Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 (Ermogenous). The relevant principle was stated by Gaudron, McHugh, Hayne and Callinan JJ in that case, at [24]: "It is of the essence of contract, regarded as a class of obligations, that there is a voluntary assumption of a legally enforceable duty". To be a legally enforceable duty there must, of course, be identifiable parties to the arrangement, the terms of the arrangement must be certain, and, unless recorded as a deed, there must generally be real consideration for the agreement. Yet "[t]he circumstances may show that [the parties] did not intend, or cannot be regarded as having intended, to subject their agreement to the adjudication of the courts". [Footnote references omitted] 71 Flowing from an observation made by Windeyer J in South Australia v The Commonwealth (1962) 108 CLR 130, at 154, cited with approval at [25] in Ermogenous, whether there was ever an intention to create contractual relations requires an objective assessment of the status of the alleged parties, their relationship one to the other and the circumstances surrounding the alleged formation of the contractual relationship. The existence or otherwise of such an intention becomes a matter of inference from that assessment: Allen v Carbone (1975) 132 CLR 528, at 532 per Stephen, Mason and Murphy JJ. 72 It is apparent from the discussion of the primary judge (at [365] and following) about whether Ms Nagel was an employee that, although the question as to an intention to create contractual relations was at large at trial, her Honour never undertook any such objective assessment. Had that been undertaken, that might have avoided what the appellants correctly submit to be a conflation (at [366]) between whether, in the informal circumstances at all times prevailing, there was ever an intention to create contractual relations and, if there were, what were the terms of the contract made between Shallam and Ms Nagel. As McHugh JA (as his Honour then was) observed in Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309, at 337, "the intention to be bound is a jural act separate and distinct from the terms of their bargain" (emphasis by McHugh JA). 73 Had the primary judge given attention to the subject, an uncontroversial, threshold circumstance forming part of the overall factual matrix falling for objective assessment was that Ms Nagel commenced undertaking clean-up tasks at the Poolwerx business office as a volunteer helping her de facto husband Mr Tancred in January 2016. Also part of that factual matrix was that Mr Tancred's presence there was an immediate sequel to an agreement he had made, with Ms Nagel's approval, to take up a 50/50 interest in that business for $50,000. Inferentially and hardly surprisingly, Ms Nagel had an interest in her de facto husband's "making a go" of that interest, as manifested by her voluntary help at the outset. If the business prospered, so would she and her life partner. Against that background, it was, objectively, unremarkable that there was never any discussion in respect of her being paid for undertaking such tasks. That was because, objectively, there was never any intention at any stage from January 2016 onwards to create contractual relations in relation to the performance of casual cleaning tasks by Ms Nagel. 74 Objectively, the same conclusion follows in relation to Ms Nagel's undertaking of some casual financial and administrative support tasks. There was evidence that, after Mr Tancred took up his "50/50" interest in the Poolwerx business, Ms Nagel discovered that invoicing for services was some 12 months in arrears (at [268]). Once again objectively, it was in her life partner's interest, as the holder of a "50/50" interest in that business to bring invoicing up to date. With greater prosperity would come any reward personally for her and, derivatively, via a greater worth of her life partner's interest. Once again, this was, to Ms Nagel's knowledge, a business in which a half interest was, as at January 2016, not worth the payment of more than $50,000 for a half interest. Objectively, it is an unlikely conclusion that there was ever any intention to increase on-costs by creating a contractual relationship under which, as a matter of entitlement as an employee, she had a right to be paid award entitlements for financial administrative tasks. 75 Overarchingly part of the factual matrix in relation to the performance for reward of any tasks by Ms Nagel is that the Poolwerx business was as at January 2016 a small business desperately in need of support to deliver its services. Obtaining that support required an investment of time by a person incentivised by an ownership interest in that business. That was Mr Tancred. In small business, it is hardly unusual for that incentive to translate into a life partner voluntarily helping in the hope of reward in the indefinite future. Objectively, that is not consistent with any intention to create contractual relations in relation to the provision of such help. 76 In the absence of any intention to create contractual relations, it would follow, in the circumstances of this case, that there was never any employer/employee relationship between Shallam and Ms Nagel.

Outcome 77 The existence of an employer relationship as between Shallam and Mr Tancred or, as the case may be, Ms Nagel was foundational. For the reasons given above, the primary judge was in error in concluding that there was any such a relationship. 78 What follows is that the appeal must be allowed, the declaratory orders of 23 August and 12 October 2023 set aside and, in lieu thereof, it must be ordered that the application to the Circuit Court be dismissed. A necessary corollary of that order of dismissal is that the pending penalty hearing stands dismissed. I certify that the preceding seventy-eight (78) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Logan.