CASE NO/S: ET-23-02793, ET-23-02794 & ET-23-04562

HEARING DATES: 3 & 4 February 2025, 2 April 2025 and 30 May 2025

JUDGMENT OF: The Honourable President Justice Dolphin

Whether the applicant was engaged under a contract of service or a contract for services - Applicant claims to be an employee - Determination of the "whether employee" is a crucial factor in both the money claim proceedings (underpayment of wages) under the Fair Work Act 2009 (Cth) and the workers compensation proceedings under the Return to Work Act 2014 - Applicant alleged that he was employed by CUMKEL Pty Ltd - CUMKEL denied that arguing that he and his business partner were engaged through a business to business contract to perform management and administration services at the Elizabeth Motor Inn through their corporate entity LOFLAXOZ Pty Ltd - Applicant alleges that CUMKEL's dealings and arrangements with LOFLAXOZ were a "sham" and as such the total circumstances of the relationship should be considered - Relevant authorities considered - Indicia of employment considered. Held: Applicant's evidence not believed - CUMKEL's contractual relations with LOFLAXOZ were not a sham - The totality of the relationship between the applicant and CUMKEL demonstrate that they were not engaged in an employment relationship, he was not an "employee" - No contractual relationship at all between the applicant as an individual and CUMKEL. Applicant is unsuccessful in both his FW Act (Cth) proceedings and his RTW Act proceedings.

Legal Profession Conduct Commissioner v Fitzpatrick [2025] SASCFC 1

Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1

ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2

Cam and Sons Pty Ltd v Sargent (1940) 14 ALJ 162

Raftland Pty Ltd as trustee of the Raftland Trust v Commissioner of Taxation [2008] HCA 21; (2008) 238 CLR 516

Millar v Commissioner of Taxation [2016] FCAFC 94

Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471

Mandalios v Return to Work Corporation of South Australia [2025] SAET 132

On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) [2011] FCA 366

1. If a contract is used as a cloak to conceal the real legal relationship it may be a declared to be a "sham". That being, when the particular contract was brought into existence as a mere piece of machinery to serve some other purpose, than constituting the whole of the relationship.
2. John Schafer says that the contract between LOFLAXOZ Pty Ltd - of which he was a director - and CUMKEL Pty Ltd was a sham, and that the creation of the former was mere machinery to conceal his real relationship as an employee of the latter.
3. Mr Schafer's artfully crafted legal arguments cannot be sustained on the facts; as such they are ultimately unpersuasive and are dismissed. It will be explained in the reasons that follow, why Mr Schafer's relationship with CUMKEL was not a "contract of service" within the meaning of the Return to Work Act 2014. With such a relationship not established, Mr Schafer is not entitled to compensation, under the RTW Act, for the psychological injuries he claims to have sustained: ET-23-04562.
4. Further, Mr Schafer also claimed to be owed wages by CUMKEL. As he is not an "employee" of CUMKEL he is not able to recover such monies under the Fair Work Act 2009 (Cth): ET-23-02793.

1. First is the question as to whether there was any contractual relationship directly between Mr Schafer and CUMKEL. If the answer to that is yes, the second question is whether that contractual relationship was one of employment (as an employee) and/or was a contract of service (as an employee).
2. As these reasons will reveal, there was no contractual relationship at all between Mr Schafer and CUMKEL. The contractual relationship was between CUMKEL and LOFLAXOZ. That relationship was between one corporate entity to another; it was exactly what the written contract entered into by those parties envisioned; it is not a sham.
3. In these proceedings Mr Schafer did not submit that his relationship with his company LOFLAXOZ was in the nature of employment. He said very little as to his relationship with that entity at all, and what he did say he was unsure of.

1. It is convenient to explain the various corporate and other entities involved in this case.
2. The business in question in these proceedings is the Elizabeth Motor Inn. All of the relevant facts of Mr Schafer's case are centred on and associated with that location in Elizabeth, South Australia. That motel business is owned by a family superannuation fund: TMS Superannuation Fund. The members of that fund are Jane Cummings and her mother.[1]
3. A trustee of TMS Superannuation Fund is CUMKEL Pty Ltd. The day-to-day operations of the Elizabeth Motor Inn business are conducted by CUMKEL. Jane Cummings is the managing director of CUMKEL.[2]
4. Ms Cummings is also the managing director of another corporate entity called Elizabeth Motor Inn Pty Ltd (EMI Pty Ltd). Initially only a shelf company, EMI Pty Ltd did not engage in any business activities until November 2022. EMI Pty Ltd owns a registered business name, TEAMCLEAN which engages in the work of the cleaning and the housekeeping of the Elizabeth Motor Inn. At the relevant times, EMI Pty Ltd / TEAMCLEAN had employees. For ease of understand that entity will be referred to as simply TEAMCLEAN.
5. On 30 November 2022, the corporation LOFLAXOZ Pty Ltd was registered with the Australian Securities & Investment Commission.[3] The two directors of that company were then Mr Schafer and Linda Jones.[4] At that point in time Mr Schafer and Ms Jones were domestic as well as business partners.
6. In addition to, and as a vehicle for LOFLAXOZ Pty Ltd, a trust was established called the LOFLAXOZ Family Trust. The trustee of the trust was LOFLAXOZ Pty Ltd. The named beneficiaries of the trust were Mr Schafer and Ms Jones. The appointor of the trust was Ms Jones. And the settlor of the trust was Ms Cummings.

The reliability and credibility of the witnesses

1. It is necessary to address upfront the credibility and reliability of the witnesses, lest the reader get confused with the twists and turns of the factual matrix to be described. The judgment on same is critical to the outcome of these proceedings, notwithstanding the various legal arguments made.
2. John Schafer was a poor witness. His affidavit evidence was sub-standard and lacking. His oral evidence was sheepish and unconvincing. His counsel accepted that he had an unsophisticated understanding of his relationship with CUMKEL, and that had appeared to have coloured a lot of his evidence. Further, that he clearly had gaps in his memory regarding the relevant events. His opposition described him as being 'all at sea' and of 'not having his eyes open.' In my opinion, those were generous descriptions. A more critical opposition would have said that he was wilfully blind, or that he allowed his case to be prosecuted knowing that the facts would not support the conclusions sought. It is not necessary to ultimately resolve such motivational issues. Suffice it to say, I do not accept Mr Schafer's evidence as being reliable over the contested facts, in that regard for the most part I find his evidence implausible.
3. Mr Schafer's partner Linda Jones was not called as a witness by any of the three parties.
4. CUMKEL's managing director, Jane Cummings, was a calm, thoughtful and impressive witness. Her evidence was straightforward; it made logical sense; it was consistent and was little troubled by cross-examination. I accept her evidence as being credible and reliable.
5. John Fitzpatrick is an erstwhile lawyer and adviser to CUMKEL. He was involved in the engagement of Mr Schafer and Ms Jones. He assisted in the incorporation of LOFLAXOZ. CUMKEL's counsel described him - their own witness - as being volatile: the respondent agreed with that. Mr Schafer's position was that he was argumentative, combustible and insulting. He was all of those things. His vituperation with opposing counsel was undignified. He obfuscated regularly and often descended into loquacious ramblings. However, the quality of his presentation often improved after rebukes from the bench.
6. Mr Schafer's submissions argued that Mr Fitzpatrick's evidence was unreliable and was motivated by dishonesty, poor memory and an overriding desire to prosecute the false narrative that the contract between CUMKEL and LOFLAXOZ was valid and represented the true relationship. Those submissions are a misreading of his evidence and are rejected. Despite all the difficulties associated with his performance in the witness box, his evidence remained consistent and credible on the contested points.
7. Also, as part of Mr Schafer's case, it was suggested that I should have regard to a decision of the Full Court of the Supreme Court, where Mr Fitzpatrick's name was removed from the roll of legal practitioners. In that judgment it was noted that the Legal Practitioner Disciplinary Tribunal had made various adverse findings against Mr Fitzpatrick for his professional conduct from at least 2014 onwards, which included: repeated failures to respond in an adequate and timely manner to requests from the Legal Profession Conduct Commissioner; failing to honour an undertaking to the Law Society of South Australia; failing to respond to requests for documents; breaching orders of the Supreme Court of South Australia; failing to act in the best interests of clients and failing to deliver services competently, diligently and promptly; failing to provide clear and timely advice to a client; acting without instructions; making dishonest statements to other solicitors; failing to comply with mandatory continuing Professional Development requirements; and, failing to return original document to a former client, inter alia.[5]
8. In the proceedings before the LPDT Mr Fitzpatrick raised his difficulties with his mental health, which he argued were a contributing factor to his conduct. It was accepted by the LPDT that he had suffered from a recognised psychiatric illness for a relevant period. However, it was noted that mental illness, no matter how debilitating, cannot provide a defence to liability for professional misconduct.[6]
9. Although the judgment of the Full Court was not put to him in cross-examination - it hadn't been delivered by then - the LPDT proceedings and relevant issues were. Mr Fitzpatrick repeatedly raised his then mental health problems as the reasons for his then professional misconduct. He also stressed that he had "retired" as a legal practitioner and that he had asked for his name to be removed from the roll voluntarily, although he was told that could not be done. Further, that the findings made by the LPDT were uncontested as he didn't give evidence there, presumably due to his then mental illness.[7]
10. I have considered what has been reported regarding Mr Fitzpatrick's professional misconduct and unsatisfactory professional conduct. I have also considered what he said to me from the witness box regarding that, and how he said it. I have weighed those issues with what he actually said about the essential facts of this case. Looking beyond his theatrics in cross-examination, and his previous professional difficulties, I accept that his evidence as it relates to the essential facts of this case is credible and reliable. He was consistent throughout; his evidence made more logical sense than the evidence given by Mr Schafer on contested issues.
11. Susan Ansell is a Chartered Accountant that had a working relationship with Jane Cummings and CUMKEL, and assisted Mr Schafer and Ms Jones to set up the LOFLAXOZ family trust. Her evidence was largely uncontroversial. She did her best to assist in establishing the necessary facts of the case. Her evidence was credible and reliable.

The background to Mr Schafer's dealings with the Elizabeth Motor Inn

1. Mr Schafer was 49 years of age when his dealings with the Elizabeth Motor Inn began. He said that prior to commencing that engagement, he had been working for a temporary labour hire agency. Very little other information was provided by him about his work history. He said that he had had 'numerous jobs.' He volunteered that after leaving school he had worked in the poultry industry and had done so for 13 years. The lack of detail provided by him about his work history was unsatisfactory considering how his case was argued.
2. When cross-examined he agreed that when he worked in the poultry industry that: he would receive a pay slip for the work that he had done; the employer deducted taxation; the employer contributed to his superannuation; sick leave entitlements were available; as were annual leave entitlements.[8] That is, he was working as an employee (to whom, where, when, for how long, doing what exactly, etc?).
3. The paucity of evidence from Mr Schafer about his working life left me suspicious. If your case is, 'I have no management experience and I am not business savvy' - which his case was - why not be forthright in explaining a work history that demonstrates that? Whilst he said that he worked in the poultry industry when he first left school, that was a long time ago, why didn't he provide a full and complete work history? Mr Schafer's lack of candour in that regard diminished his credibility in my eyes.

1. Mr Schafer and Ms Jones commenced a romantic relationship at or about Easter 2020. At the time he was working for the temporary labour hire agency, and she was working in counselling. Mr Schafer said that 'we both decided to get into hotel management together.'[9] As with his evidence of his work history, he volunteered little other else as to how, why and when he made his decision to get into hotel management. Given that his case was that he was entirely new to the work of motel management [at the Elizabeth Motor Inn], and indeed perhaps management of any sort, it could have been expected that he would have extrapolated as to why he decided on such a dramatic a career change. He did add that in future he and Ms Jones were planning to move on to manage caravan parks.[10]
2. Before addressing the relevant chronological events, it will assist the reader to know that Mr Schafer and Ms Jones were live-in managers of the Elizabeth Motor Inn from the end of November 2022 to May 2023. During that latter month there was an acrimonious ending to their romantic relationship, which resulted in Mr Schafer leaving the premises. Thereafter, their business relationship evaporated, and he did not provide any further services to the Elizabeth Motor Inn. Accordingly, the relevant period of time to be examined is six months or so.

1. In or about November 2022, an advertisement was placed on the Seek website with regards to the Elizabeth Motor Inn. That advertisement was headed Motel management - ideally suit couple - modern accommodation provided and included a reference to Contract/Temp.[11] The body of the advertisement read:

Opportunity for motel management with comfortable onsite accommodation in northern metropolitan Adelaide - ideally suiting a couple.

We are an iconic Adelaide motel, well known for over 50 years as a provider of comfortable accommodation and friendly hospitality, in a prime location close to the Elizabeth Shopping Centre, Lyell McEwin Hospital and local community, sporting and recreational facilities.

We're looking for people - and this could be a couple, partners or a team - who will look forward in continuing our tradition, and enjoy delivering happy accommodation experiences for our valued guests.

This is an exciting and rewarding opportunity to deliver high quality hospitality services at a prominent highly respected motel in the northern suburbs of Adelaide.

You will provide the day-to-day management, greeting our valued guests, taking bookings and overseeing administration.

Please note that we have an existing cleaning team, who are dedicated to that aspect of the business.

This opportunity is ideal for someone who has previous experience in accommodation management, whether it is a motel, accommodation hotel or a caravan park

On the other hand, this may be the "sea change" opportunity you have been looking for, or a good way of returning or relocating to Adelaide.

We will be offering an attractive contractual package, which included high quality recently renovated comfortable manager accommodation.

We welcome applications from all persons - we have an equal opportunity policy.[12]

1. In amongst all that verbiage, it is evident that the opportunity offered was for the day-to-day management and administration of the Elizabeth Motor Inn for which in return a contractual package would be provided that included accommodation. As can also be seen the advertisement does not make any reference to "employment" or "employee". Equally, the concepts of a "corporation" or a "corporate entity" are similarly absent.
2. There is no dispute that where the advertisement mentions 'an existing cleaning team' that that means the business name TEAMCLEAN as owned by EMI Pty Ltd.
3. In his affidavit evidence, Mr Schafer said that Ms Jones had seen the advertisement. When cross-examined, he denied seeing the advertisement at all, saying, 'To be honest, I don't even remember seeing this document'. And then later admitted that the advertisement did not contain the word "employment" at all.[13]
4. As with other topics that will be explained, Mr Schafer's evidence about seeing the advertisement was less than satisfactory. He was unable to provide a complete coherent picture as to whether he in fact saw the advertisement and what his thoughts where about that.
5. It was submitted on Mr Schafer's behalf that the advertisement demonstrated that CUMKEL was looking for two individuals to make use of their personal service and personal labour; that it was always envisaged that the personal labour would be engaged. Further, that the information contained in the advertisement was not indicative of any solicitation of a corporate entity.[14]
6. Those submissions press the point too far. The advertisement cannot be relied upon either way to assist in the interpretation of the contractual relationship - whether Mr Schafer was an employee of CUMKEL. In that regard it must be viewed as merely an invitation to treat.

1. There is no dispute that following their reading and considering of the Seek advertisement, Ms Jones and Mr Schafer responded to it. The details of how that was done are not important, suffice it to say, an interview with them was arranged.
2. In his first affidavit Mr Schafer said a meeting took place on 15 November 2022 with Ms Cummings, Ms Jones and himself. In his second affidavit Mr Schafer said that Mr Fitzpatrick was also there. Mr Fitzpatrick denies that. Ms Cummings couldn't remember whether Mr Fitzpatrick was there, but thought he probably was because that was her usual practice.
3. Nevertheless, this interview was an opportunity for Ms Cummings to explain what the role entailed, for Mr Schafer and Ms Jones to consider whether they would be interested and then for Ms Cummings to decide as to whether they would be suitable for the role. If Mr Schafer and Ms Jones decided that the role was not for them, then that would have been the end of it. Whereas, if they expressed their interest, then Ms Cummings would assess their suitability for the role and if satisfied make an offer to them.

1. Explaining some of the history of the management of the Elizabeth Motor Inn, Ms Cummings said that up until 2015, her mother was the manager. After that a business decision was taken to only engage with companies (corporate entities) to manage the motel. Since then, CUMKEL had only contracted with corporate entities to manage to motel. A list of such proprietary limited companies was referred to.[15] Her evidence in that regard was not challenged.
2. On the issue of how they would be engaged by CUMKEL, to manage the Elizabeth Motor Inn, in his first affidavit Mr Schafer said, 'Jane Cummings told us that we needed to have a business to contract with the Inn, she didn't explain why.'[16] Asked to confirm when she spoke those words, in his examination-in-chief, Mr Schafer said, '...that would have been at the first meeting.'[17] However, in his second affidavit, Mr Schafer said something different about what was discussed at the interview:

There was no mention of needing a business or being contractors to perform the job. I had assumed we were going to be employees.[18]

1. When cross-examined, it was put to Mr Schafer directly that, 'it was made very clear at the outset that it was envisaged that there would be a contract between Elizabeth Motor Inn and you and Ms Jones having formed a company.' To that he said, 'not that I'm aware.'[19]
2. If that answer was given to bolster his changed position from his first to his second affidavit, its effect was only to reinforce the confusion that was evident in Mr Schafer's story.
3. During further cross-examination, Mr Schafer introduced that in addition to the interview, there was a second meeting with Ms Cummings. That being, when his very recently given oral evidence was put to him - that it was at the first meeting that Ms Cummings said that they needed to have a business to contract with the CUMKEL - he then disagreed with that proposition saying that conversation was at a second meeting. Asked when that meeting was, he said 'I honestly couldn't tell you. Could have been a week after our first meeting.'[20] That evidence had a made-up on-the-spot feel to it.
4. Mr Schafer's very uncertain evidence on the critical topic of the discussions regarding the contractual basis of the potential relationship, led to this exchange with him:

Q: In the case of all interviews and offers, it is made clear that the offer is on the basis of a contract between the motel operator and a corporate entity. So I suggest again to you that certainly by the end of the second meeting that was what was front and centre before you. That there was to be a contract between Elizabeth Motor Inn and a company that you and Ms Jones had set up.

A: That was what we - they talked about, yes. On the second meeting.

Q: So you understood that as the basis on which you would start to perform activities at the Elizabeth Motor Inn.

A: I - yes. I didn't understand why, because they never explained why we need to do that. They just said on the second meeting that was what we needed to do to go ahead. So it was just - yeah. It wasn't black and white.[21] (emphasis added)

1. Far from not being black and white, by the above evidence Mr Schafer was accepting that, by the end of the discussions with Ms Cummings (and perhaps Mr Fitzpatrick) whether that be at the end of the interview, or after another meeting, that he understood the basis of the contractual relationship to be entered into was company to company - between the motel owner (CUMKEL) and a corporate entity (the soon to be created LOFLAXOZ). He accepted that the thing he didn't understand was why Ms Cummings wanted that arrangement. He said they 'never explained why we (him and Ms Jones) needed to do that.
2. As would be evident from the above paragraphs, on the key issue of the relevant contractual relationship, Mr Schafer just couldn't quite get his story straight. His evidence on that topic through three affidavits, examination-in-chief and in cross-examination was unconvincing.
3. In her evidence, Ms Cummings said that since 2015 only companies had been engaged to manage the Elizabeth Motor Inn. She also said that since Mr Schafer had left the Elizabeth Motor Inn that the engaging of companies only had continued.[22] Ms Cumming was resolute in her evidence. That being, at the end of the discussions with Mr Schafer and Ms Jones together - and before any written contract was entered into - CUMKEL would only contract with a corporate entity for the management of the Elizabeth Motor Inn.
4. Ms Cummings evidence on this topic was consistent, logical, reliable and credible, I accept her evidence over that of Mr Schafer in that regard.

1. In his first affidavit, Mr Schafer said Ms Cumming told them that 'the job was for a management couple and that it would not work without both of us working there. She was explicit that the arrangement would be that Linda, and I provide the services.' He added that, 'there was no discussion about us delegating the work to another party.' In his second affidavit he said that Ms Cummings [and Mr Fitzpatrick] were looking for a "Management Team", and that there was no discussion about subcontracting or delegating work to others.[23]
2. Ms Cummings agreed that when considering applicants for the role at the Elizabeth Motor Inn, a highly desirable attribute would be whether the individuals had previously engaged in management roles at a caravan park or other accommodation. Also, that the applicants would need to be physically able to do the work at the Elizabeth Motor Inn. Asked about the advertisement and its comment that the role would be 'ideal for a couple', Ms Cummings confirmed, 'yes, always, I want a couple', meaning two people. She said that was because they had to live in the accommodation at the Elizabeth Motor Inn that is provided. Also, that she had never thought of not having a couple.[24]
3. There is nothing controversial about this portion of the case. I am able to accept the evidence of Ms Cummings in that regard.

1. In his second affidavit, Mr Schafer provided more detail than in his first affidavit about what was discussed at the interview. He said that Ms Cummings explained that she was the owner of the Elizabeth Motor Inn. He also said that Mr Fitzpatrick did most of the talking, he was 'quite chatty'. It was explained to Mr Schafer and Ms Jones that the motel would be open seven days per week and that they would be working 12 hours per day, six days per week. Also, that they would need to be on-call for overnight emergencies.[25]
2. In her evidence, Ms Cummings agreed that the Elizabeth Motor Inn was to be open seven days per week, but that the successful applicants would only be required to perform management function on six days per week. She also agreed that 12 hours engagement was required on those six days.[26]
3. On the issue of on-call work, Ms Cummings couldn't recall discussing that with Mr Schafer and Ms Jones at the interview. It was suggested to her that she had said they would need to be available on-call over night for emergencies. She disagreed, saying that the hours of the Elizabeth Motor Inn were 9.00am to 7.00pm [meaning those where the hours discussed]. She said that as far as she was concerned there would be no obligation for Mr Schafer and Ms Jones to work outside of the 12 hours engagement, six days per week.[27]
4. As for the duties that they would be required to perform, Mr Schafer said that it was discussed that he and Mr Jones:

... were to look after the entire motel by ourselves. We would handle reception and administrative duties as well as maintaining the lawns, gardens and general maintenance. We were told that the motel provided services for organisations like Anglicare by providing housing to vulnerable people.[28]

1. Ms Cummings agreed that the above issues were discussed at the interview.[29]
2. Mr Schafer said that at the interview, there was no discussion about any other employees that would do the work, except the cleaners. In that regard he said:

The only exception was cleaning. We were both told that the Motel employed cleaners, but that there was some dispute between the Motel and the long term cleaners.[30]

1. With regards to the cleaning of the Motel, Ms Cummings explained that TEAMCLEAN is a registered business name owned by EMI Pty Ltd, and that the cleaners engaged by that entity were employees. She said that in the past the cleaning work had been performed by contractors, but as that arrangement didn't work out, in late 2022 a decision was taken to employ cleaners directly. She explained that those employees: cleaned the Elizabeth Motor Inn only and did not clean elsewhere; time and wages records were kept for them; were paid pursuant to an industrial award and payslips were generated; and that superannuation, payroll tax and workers compensation premiums were paid for them.[31]
2. When it was put to her directly that the reason why she insisted on Mr Schafer and Ms Jones providing their services to the Elizabeth Motor Inn through a corporate entity, was so that she could avoid paying to them those emoluments of employment, she emphatically denied that. She stressed - convincingly so - that engaging management through a corporate entity was what she had always done; she did not take that approach based on Mr Fitzpatrick's advice; nor did she do that to avoid confusion as to whether such people would be employees.[32]

1. As for remuneration, Mr Schafer said that there was no discussion about how they would be paid, only that they would be paid 'about $95,000.00 for both of us per year.' He said there was no discussion about them making a "profit" or anything similar.[33] In her evidence, Ms Cummings agreed that it was discussed at the interview that 'the fee would be $95,000.00 cumulatively per year.'[34]
2. With regards to them working elsewhere - whilst being engaged at the Elizabeth Motor Inn - Mr Schafer said there was no discussion about that at the interview. Similarly, that there was no discussion about supplying plant, supplies, tools, or about a uniform.[35]

1. As explained above, in his oral evidence Mr Schafer introduced the possibility that there was a second meeting with Ms Cummings before contractual relations were entered into. In his three affidavits sworn well before the hearing, Mr Schafer did not mention a second meeting with Ms Cummings.[36]
2. Nothing much turns on whether there was a second meeting with Ms Cummings; she didn't say so in her evidence and she wasn't cross-examined on that topic. Given Mr Schafer's general uncertainness about his own evidence and his poor recollections about relevant events, I conclude it was more likely that, as he said in his first affidavit, it was at the interview of 15 November 2022, that Ms Cumming told him and Ms Jones that in order to fulfil the management role at the Elizabeth Motor Inn, that they would need to have a business / a corporate entity to which the motel would contract. I find as such.

1. It was Mr Schafer's case that he and Ms Jones left the interview without agreeing to anything, saying that they would think about it. He said 'on the way home we both decided to give it a go.'[37] Ms Cummings' evidence was that that proposition was incorrect and that at the interview they had agreed to be engaged.[38] Again, nothing much turns on that difference, however, insofar as it is necessary, I would prefer Ms Cummings evidence as being more credible and reliable. The critical factor being that after the discussions about the role of managing and administering the Elizabeth Motor Inn, Mr Schafer and Ms Jones agreed to proceed.

1. At the interview, I find that Ms Cumming discussed and explained the following with Mr Schafer:
   • 66.1. The duties of the role/s of the day-to-day management and administering of the Elizabeth Motor Inn, which would ideally be undertaken by a couple or a team.
   • 66.2. The managers of the Elizabeth Motor Inn would be required to live on-site in the accommodation provided.
   • 66.3. The relationships that the Elizabeth Motor Inn had with other parties such as Anglicare.
   • 66.4. The Elizabeth Motor Inn would be open seven days per week, but that Mr Schafer and Ms Jones would only be required to work on six of those days. They would also be required to be on-call after those hours for emergencies.
   • 66.5. That cleaning work at the Elizabeth Motor Inn would not be part of their role/s as another entity (TEAMCLEAN) would do that.
   • 66.6. That CUMKEL, as the trustee / owner of the Elizabeth Motor Inn, would only contract with corporate entity, to be created by Mr Schafer and Ms Jones.
   • 66.7. That the corporate entity would be paid $95,000.00 per annum to manage the Elizabeth Motor Inn.
2. At the conclusion of the interview, or soon thereafter, I find that the following occurred:
   • 67.1. On behalf of CUMKEL, Ms Cummings decided that Mr Schafer and Ms Jones as a couple were suitable to undertake the role of managers of the Elizabeth Motor Inn.
   • 67.2. That decision was communicated to Mr Schafer and Ms Jones, where she explained that in order to proceed with the necessary arrangements, they would need to have their own corporate entity.
   • 67.3. Whether at the interview, or sometime soon after, Mr Schafer and Ms Jones replied positively to Ms Cummings decision, agreeing to proceed with the necessary arrangements.
3. Further, and just to underline the point, I find that before any contractual documents were seen and considered by Mr Schafer that he, as part of a couple with Ms Jones, had been told by Ms Cummings that in order to fulfil the management role at the Elizabeth Motor Inn that a corporate entity was required.

1. Although everybody's accounts differ slight as to exactly what happened next, it is clear that Mr Fitzpatrick provided assistance to Mr Schafer and Ms Jones in the creation of their business entities.
2. Mr Fitzpatrick described himself as a consultant to Ms Cummings, he said he had worked closely with her and assisted with the running of the business of the Elizabeth Motor Inn.[39] Ms Cummings said that description wasn't quite right; whilst he was a consultant, he did not assist in running the business; he had a limited role to assist her to engage contractors.[40]
3. Whilst Mr Fitzpatrick's recollection was not entirely clear, it is apparent that he was given instructions by Ms Cummings to progress the arrangements with Mr Schafer and Ms Jones. He couldn't remember, but he conceded that there may have been a meeting with them [and with Ms Cummings] prior to the execution of any contractual documents. What he said about that was:

All I can remember is that - the generic thing, that you go from Jane Cummings tell[ing] you she wants to engage these people to the time when they engaged, there'd be communication about various things to do with finalising the deal. Because of them being fairly basic things, I couldn't remember what they were. You know, it just is one of those things where you sort of - well, to be frank about it, you're a bit on autopilot, because it's a fairly standard way of dealing with things.[41]

1. Whatever discussions did take place between him and Mr Schafer and Ms Jones, Mr Fitzpatrick agreed that the particulars of the role at the Elizabeth Motor Inn were discussed with them, such as hours of work. As for drawing up the contract, Mr Fitzpatrick said it was axiomatic that he would do that. He said it was a standard thing for him to have said to them that they should go and see your accountant. And that if they didn't have an accountant, he could supply a list of names. Also, he said that whilst he couldn't recall any conversation about them getting an ABN, if there was one, he would have told them how to do that.[42]
2. When it was suggested to him that he in fact had told Mr Schafer and Ms Jones that he 'would organise them and set it all up for them', he answered:

Well, I might have done that if we had a contractor. And some contractors had who came to us they had ABNs, but it was our standard rule not to engage contractors unless they had a corporate entity in order to ensure that there was no misunderstanding about the basis of the engagement. And I think on a couple of occasions there were contractors who actually had an existing ABN, and they had something like a family trust where they were personally the trustees. And so we said, "No, that's no good you've got to establish a company to do that."

And there might've been times like, can't recollect with the - with these folk. But it could well be the case that if they didn't have a company rather than going and paying one of those dial a shelf company people X dollars to set up their company, I think Jane said, "I'll do it for you for free. I don't know what the ASIC fee is. But if you tell us what the name of your company want, who the shareholders are, who the directors are, we'll go away and we'll set it up for you, what your instructions.[43]

1. Given that answer he was cross-examined on the topic of confusion/misunderstanding regarding independent contractor and employee, it was suggested to him that what he was then attempting to do was to avoid the situation in which the engagement of Mr Schafer and Ms Jones could later be held out to be a relationship of employment.[44]
2. In answering that proposition, Mr Fitzpatrick disagreed saying that wasn't quite right, 'I think it was to make sure that we have a clear understanding of the base of the engagement. And that was on the basis that they were contractors providing a service ... .' Pressed further, that the purpose of requiring the engagement of contractors was to ensure that the persons so engaged wouldn't be characterised as employees, Mr Fitzpatrick emphatically answered that 'it was to make sure that it was made clear about being an engagement of [a] corporate entity.'[45]
3. Whatever the nature and extent of pre-contract discussions held with Mr Fitzpatrick, the next relevant event was an email from him to Mr Schafer and Ms Jones.

1. Mr Fitzpatrick sent an email to both Mr Schafer and Ms Jones at their separate email addresses on 25 November 2022 at 7.46am. I feel it is important to set that email out in full (with its uncorrected typing errors):

First of all, Jane and I look forward to welcoming you both to the Motel, as well as having a long and successful association with you.

Further to my recent conversations with each of you, I confirm as follows:

1. We look forward to you starting on Wednesday 30 November {a day later than previously contemplated).

2. The office hours are now 9am-7pm each day, rather than 8am-8gm.

1. You are welcome to visit the Motel as from next Monday and commence moving into the management accommodations. On Monday, Wendy and/ or Denise will be at the Motel, and they will be happy to greet you. Jane will be at the Motel on Tuesday.
2. Also, Jane will be with you to support you with your induction into the Motel, as well as answering any questions.
3. As discussed yesterday, we are having some issues with our cleaning contractor - which has been our service provider since 2013. We are in the course of resolving those issues, and we are focused on not allowing those to interfere with your successful and happy "moving in".

It is a matter of regret that we have the issue with that contractor; Jane will be able to brief you further on the subject when you all get together.

a. As discussed, the management contract is on the bais that it is with your company. We are happy to assist you with establishing your company, and we will pay the ASIC fee for incorporation and registration.

Also, we will assist you with your ABN and GST registration.

b. We need you to give us the following details to allow us to attend to the registration on your behalf:

i. Your full names, residential address (presumably c/o the Motel), date and place of birth; and

c. I will send you the draft contract by separate e-mail shortly. It will cover all the terms. Obviously we will need to add in the name of the company once it is established.

I would be grateful if in the meantime you would cast your eyes over the terms, and let me know if there is any issue or query.

d. As previously discussed, I confirm the following key terms:

ii. There is an initial three month contract, then either side may give one month's notice;

iii. The contract rate is $95,000 per annum (plus applicable GST), for the provision of management services for a 50 week period in each period of 52 weeks. At the end of twelve months, there is a bonus of $10,000 (plus applicable GST) for continuing with the contract; and

Note that we pay you on the basis of the gross contract amount, plus applicable GST.

1. Appointing an accountant: I am happy to discuss this with you once you are in the Motel. As we discussed, having a good accountant is a prudent business decision.

Also, once you establish your company, you can give consideration to tax planning, wealth management (eg superannuation) and company tax expense deductions.

I will forward the contract to you shortly - if you have any questions, please do not hesitate to ask.

EXECUTIVE CONSULTANT ELIZABETH MOTOR INN[46]

1. As the emphasised words in the email show, Mr Fitzpatrick advised that the "management contract" would be with Mr Schafer and Ms Jones' "company". Further that assistance could be provided to them to establish that company and with ABN and GST registration.
2. When those words were put to Mr Schafer in cross-examination, he was asked to agree that 'those things [company, ABN, GST] happened?' he agreed that was correct. Asked then to agree that he had never previously had to do any of 'those things [company, ABN, GST] in any of your work activities before going to the Elizabeth Motor Inn, he said 'No' meaning that he hadn't.[47]
3. Given Mr Schafer's stated lack of experience in the business arrangements of establishing a company and given Mr Fitzpatrick expertise and offer to provide assistance with that, it is entirely consistent within his consultant role to the Elizabeth Motor Inn, that as events would transpire, that the assistance would be provided. Far from a sham, at this juncture it is evident that the proposed basis of the contractual relationship between CUMKEL and Mr Schafer (and Ms Jones) was to be company to company and not employer and employee.
4. After receiving the email of 22 November 2022 at 7.46am, it ought to have been apparent to Mr Schafer, that if arrangements were to be made with CUMKEL, that such arrangements would be through a company established by him and Ms Jones. That is, at the very least if he didn't comprehend that concept, that the arrangement was not a normal employment relationship that he had engaged in previously.
5. Mr Schafer sought to take comfort in the fact that the email was sent from an email address regarding 'information and applications' and was not sent from Mr Fitzpatrick's personal email address. Mr Fitzpatrick's explanation that it was just a generic email address which was made up for that purpose (information and applications) and it was also an address which could be used to 'communicate with perspective management persons' was an acceptable answer and did not evince any dubious conduct.[48]

1. A quarter of an hour later that day, at 8.00am, Mr Fitzpatrick sent a further email saying, 'Good morning again Linda and John. Here is the draft contract, as promised. Let me know if you have any queries. Kind regards.'[49] As advised, that email contained the draft contract document.
2. That second email was this time sent from his personal email address and Bcc'ed to the 'information and applications'. Also, it appears that the email was only sent to Ms Jones, Mr Schafer said that he had 'never seen the email.'[50]
3. The contract referred to by Mr Fitzpatrick, and as sent to Ms Jones, will be addressed further on under the heading "Management and Administration Services Agreement". There is no factual dispute that as a couple, Ms Jones and Mr Schafer had access to that document before they established their company.

1. Mr Fitzpatrick assisted Mr Schafer and Ms Jones to establish LOFLAXOZ. He said that with him knowing how to incorporate a proprietary limited company, that he was the functionary of Mr Schafer and Ms Jones in that regard.
2. The LOFLAXOZ application for incorporation was lodged on 29 November 2022 and processed on 30 November 2022. The Australian Securities & Investments Commission, current & historical company extract document evinces that Mr Schafer and Ms Jones are the directors of the company. They are also both listed as the company secretary. The address record for the company, Mr Schafer and Ms Jones are all the same, presumably being their residential address prior to moving into the Elizabeth Motor Inn.[51]
3. Ms Cummings was asked about the creation of LOFLAXOZ. It was repeatedly put to her that she had instructed Mr Fitzpatrick to create that entity, which she denied. She said 'we told them that if they wanted to take on the position they had to have a company. Because it was a contractual arrangement.' She then gave contradictory answers about whether she knew Mr Fitzpatrick had assisted Mr Schafer and Ms Jones to create LOFLAXOZ, before confirming that she was aware of that, and had paid for it. That is, the incorporation fee. When it was put to her that her contradictory evidence was demonstrative of an untruth, she denied that, saying that she hadn't been thinking clearly.[52] There was nothing suspicious about that segment of Ms Cummings evidence; she got momentarily confused; she was consistent throughout however, that she had not "instructed" Mr Fitzpatrick to create LOFLAXOZ for Mr Schafer and Ms Jones. Accordingly, I find that there was no such instruction.
4. Despite the criticism from Mr Schafer - to the effect that Mr Fitzpatrick creating LOFLAXOZ was an element in the sham; that he orchestrated everything - I find there to be nothing unusual by him providing the assistance he did. First of all, he had promised to do that in the email of 25 November 2022 at 7.46am, 'We are happy to assist you with establishing your company, and we will pay the ASIC fee for incorporation and registration.' Second, he had the experience and expertise that Mr Schafer and Ms Jones didn't have in incorporating companies.

1. Whilst the exact date seems to be elusive, there is no dispute that the contract between LOFLAXOZ and CUMKEL was executed in November 2022. As LOFLAXOZ was incorporated on 30 November 2022, and as that is the last day of that month, the date of signing must have been 30 November 2022. There are three separate handwritten names on that document, and three separate signatures: for and on behalf of the contractor [LOFLAXOZ] John Schafer and Linda Jones, and for and on behalf of the principal [CUMKEL] Jane Cummings.[53]

Contract: Management and Administration Services Agreement

1. The contract was headed Management and Administration Services Agreement and has the preamble 'this document is the agreement between you, the Contractor specified below, and CUMKEL Pty Ltd ABN 64 008 196 432 ("the Principal") ("the Agreement"). The document details the name of the Contractor as LOFLAXOZ PTY LTD and the residential address of Mr Schafer and Ms Jones. The address of the Principal is given as Mr Fitzpatrick's business address.
2. On page 2 of its eight pages, the contract sets out the heading: SET OUT BELOW ARE THE TERMS OF THE AGREEMENT. Thereafter, the contract has seven sub-headings followed by a schedule. The seven sub-headings are: What is the Agreement? Defined Terms in the Agreement; What is the Term? The Services; What are the payment terms for the provision of the Services; What if the parties disagree?; and, Miscellaneous matters. Leaving aside sub-paragraphs, the contract has 29 separate paragraphs.
3. The schedule in the contract is headed: SCHEDULE - THE SERVICES. There are five headings, the first three being: What are the Services to be provided?; General Services compromise; and, Out of hours services compromise. The next heading is: Manner of the Services, which contains four sub-headings: General principles; Special conditions imposed by customers; Security, safety, confidentiality and assurance: And, Plant and equipment. The fifth and final heading is: When are Services to be provided, which contains four subheadings: General Services; Out of Hours Services; Variation of timing of provision of Services; And, Special condition re provision of Services. Leaving aside dot-pointed paragraphs, the schedule to the contract contains 23 separate paragraphs.
4. In total therefore, without listing sub-paragraphs and dot-pointed paragraphs, the contract contains well over 50 separate paragraphs. I make these observations as it would be obvious to the average person that given its length, complexity, comprehensiveness, context and text that the contract was not an employment contract. It is evidently a contract as between businesses - LOFLAXOZ and CUMKEL.
5. To highlight the evident nature of that, I set out below some selected quotes from the contract:

• The Agreement between the parties is for the Contractor to provide to the Principal Management and Administration services ("the Services") specified in this Agreement during the Term in respect to the accommodation and hospitality business the Contractor conducts at its premises situated at 582 Main North Road Elizabeth Park SA 5113 ("the Motel"), as well as any other services as the parties may agree in writing from time to time during the Term.
• The parties agree that this Agreement and all of its terms represent a serious agreement which is legally binding on both parties.
• The Contractor shall ensure that all of its personnel which it deploys in respect of the provision of the Services shall at all times hold the Relevant Consents, as defined in this Agreement. The Relevant consents are:
  • Federal Police Clearance, and
  • SA Government "working with children" clearance.
• The Term: this is the period commencing on the Commencement Date and concluding at the end of the Preliminary Period;
• If the parties agree in writing to continue the Agreement after the conclusion of the Preliminary Period, then the Term shall continue indefinitely on the basis that either party may give one month's notice in writing to end the Term, in which case the Term shall conclude upon the expiry of such written notice.
• If a party is not in compliance with all of the terms of the Agreement, then the other party may give notice in writing to the other party to require rectification of the non-compliance ...
• The commencement date of the provision of the Services, is 30 November 2022 ...
• The preliminary period commences on the commencement date and continues for a period of three (3) months.
• The Services to be provided are set out in the Schedule attached to and forming part of this Agreement.
• The Principal shall pay the Contractor for the provision of the Services at the rate equivalent to an annual rate of NINETY [FIVE] THOUSAND DOLLARS ($95,000) plus applicable GST calculated on a pro rata daily basis during the term payable weekly within 7 days of the receipt of a Tax Invoice in respect to the provision of Services during the previous week.
• The parties agree that the Contractor is an independent contractor to the Principal, and accordingly the Contractor is responsible for:
  • Payment of all applicable taxes and liabilities it incurs; and
  • Engagement and employment of all persons it deploys comply with the terms of this Agreement and applicable laws.
• The parties agree that if the Contractor continues to provide the services for a period of 12 months ... then the Principal shall pay to the Contractor a "Retention and Continuation Bonus" in the amount of TEN THOUSAND DOLLARS ($10,000) (plus applicable GST).
• [Regarding disagreement] If an issue cannot be resolved by agreement, the parties may agree to seek the assistance of an independent conciliator or mediator ...
• The Contractor may not assign this Agreement or engage in any sub-contracting without the consent of the Principal which shall not be withheld unreasonably.
• The Contractor warrants as a fundamental condition of this Agreement:
  • It is a company duly incorporated under Australian law;
  • It has all the requisite power and authority to make execute and perform this Agreement; and
  • The execution of this Agreement by the Contractor has been duly and validly authorised bay all necessary action on the part of the Contractor.

• Provision of services relating to the operation, management, administration, maintenance and repair of the Motel, including, but not limited to:
  • Conduct of the operation of the Motel, including:
    • provision of customer and guest service.
    • maintenance of records in relation to the conduct of the Motel business.
    • banking of monies received and maintaining daily records of all receipts.
    • ensuring adequate security in respect to the Motel, including loss prevention, inhibiting unruly or inappropriate behaviour, and preventing unauthorised persons from entering the Motel.
    • securing the Motel's assets and infrastructure.
    • cleaning of carpets, air conditioning filters and exhaust fan ventilators as required.
    • laundering of towels and bedspreads.
    • tending garden areas.
    • performing maintenance and repair tasks.
    • ensuring that all persons engaged in providing services are legally able to do so, including holding all relevant permits and approvals.
    • such further or other services as in respect to the operation of the Motel as the Principal may notify to the Contractor in writing from time to time.

• Services applicable to the "out of hours" period during each day when Services are to be ed during the Term.
• These Services comprise providing a person who shall be deployed at the Motel in a nightly overnight role with a view to monitoring and ensuring the guests' quiet enjoyment of the accommodations provided, monitoring for security and loss prevention issues, and assisting guests in the case of an emergency.
• For the purpose of providing these Services, the Contractor shall provide sleeping and amenities quarters for use by the Contractor's personnel which may be occupied during the Term.
• The parties agree that such facilities represent an incidental resource for use by the Contractor in providing Services and no tenancy is implied.
• The Contractor shall be responsible for the cleaning and tidiness of the sleeping and amenities quarters.

• The Contractor further agrees that it shall not engage any person in the provision of the Services without the prior approval of the Principal, which will not be withheld unreasonably and the parties agree that this requirement is reasonably necessary due obligations of the Principal under its arrangements with third party customers who use the Motel for the provision of emergency accommodation.

Security, safety, confidentiality, and assurance

• The Contractor acknowledges and agrees that the performance of the Services includes consideration of security and safety issues associated with such matters as guests who are vulnerable and potentially at risk and therefore the Contractor shall undertake such security clearances in respect to its employees, contractors and gents as the Principal considers reasonably necessary from time to time and furthermore the Contractor shall:
  • Refrain from engaging or employing any person or cease engaging or employing any person who has been convicted of any serious offence involving dishonesty, violence or abuse or except with the prior approval of the Principal; and
  • Maintain the confidentiality of all confidential information and in particular not revealing details of guests and customers without authority from the Principal.

• These Services are to be provided during six consecutive days in each period of seven consecutive days during the Term, for a period of 10 consecutive hours in each day.
• Initially, these Services shall be provided commencing on 9am and concluding at 7pm each day.

• These Services are to be provided during six consecutive days in each period of seven consecutive days during the Term, for a period of 14 consecutive hours in each day.
• Initially, these Services shall be provided commencing at 7pm and concluding at 9am the following day.

• The parties agree that the Contractor shall provide the Services on the basis and at the times specified in this Agreement, subject to the special conditions set out below.
• The Contractor is obligated to provide the Services during the term on the basis of providing he Services during an equivalent of a period of 50 weeks in each period of 52 consecutive weeks, or the pro rata equivalent in respect to a part year.
• The specific times when the Contractor is not obligated to provide Services during the Term shall be by mutual agreement and in the ordinary course of business would be on the basis of two periods of seven consecutive days during each period of 52 consecutive weeks during the Term.
• For the avoidance of doubt, the amount payable in respect to the Services shall be calculated at an annual rate which contemplates the provision of the Services during 50 weeks in each period of 52 consecutive weeks.

1. There is no dispute, and I find, that:
   • 96.1. The contract was signed on its first page, by Mr Schafer and Ms Jones on behalf of LOFLAXOZ and by Ms Cummings on behalf of CUMKEL.
   • 96.2. Mr Schafer and Ms Jones moved into the Elizabeth Motor Inn and commenced providing the management and administrative services as set out in the contract.
   • 96.3. That CUMKEL made payments to LOFLAXOZ pursuant to the contract.
   • 96.4. LOFLAXOZ was responsible for the payment of its own taxes.
   • 96.5. LOFLAXOZ satisfactorily completed its Preliminary Period and as such the Term of the Contract continued indefinitely.

1. With the contract explained and with the context established, during his cross-examination Mr Schafer was asked when did he read the contract? He answered, 'I honestly couldn't tell you. To be honest.' Asked whether he had read it at all? He answered, 'I would have read it at the time, but honestly can't say when. It was very full on, like, yeah. It wasn't as easy as just reading this.' He then accepted that the issue was reading and understanding the contract.[54]
2. To be fair to Mr Schafer, Mr Fitzpatrick said that Mr Jones was the 'prime mover' in the business dealings regarding the establishing of the contract with CUMKEL.
3. When cross-examined about subcontractors - and that if they were engaged that their costs would come out of LOFLAXOZ's $95,000.00 - Mr Schafer said that topic was never discussed. He stressed, 'We were never a business. We come out of just normal workers, so a lot of this - yeah - I'm ...'. He then agreed that this [LOFLAXOZ/CUMKEL contact] was 'the first time that he had performed any activity for payment that was pursuant to a signed agreement.[55]
4. What I understood Mr Schafer to be saying there was that he had not previously been engaged in a corporate contract situation before - he had been just a normal worker [for wages]. As said above, that proposition was not able to be satisfactorily tested given the lack of evidence about his working life.
5. When his signature on the contract was referred to, Mr Schafer was asked:

Q: But there no mention of the word "employment" in the contract.

A: All I've got to say, we didn't come from a business background. So, we were under the - taking - and the way that I explained it, that this was an important contract. It wasn't until the next meeting that that come about.

Q: But you didn't seek any advice from any exterior source about the document?

A: No, because like I just said, we were not business people, we just - yeah - we took it for granted that they were working on our best half, and yeah, so ‑ ‑ ‑.[56]

1. Asked then about holidays - in his affidavit evidence Mr Schafer said that the contract provided for two weeks - Mr Schafer agreed that it didn't strike him as odd that the contract only provided two weeks, whereas the Australian legal standard for employees was four weeks.[57]
2. Mr Schafer was cross-examined about why he consistently referred to his work at the Elizabeth Motor Inn as "employment" in his affidavit evidence. It was suggested to him that he was aware that he and Ms Jones were contractors. To that Mr Schafer said, 'no, I can't say I was, no.' thereafter, the following exchange occurred:

Q: Then what did you think you were doing when you signed the contract?

A: Well. A lot of it got pushed through, very quickly and very fast. So to be honest with you, I thought we were coming into a business. I had no idea that it was an actual contract, as in a business contract.

Q: The Management and Administration Services Agreement, you can see on the face of it who the agreement is between. It's between LOFLAXOZ and CUMKEL. So again, what did you think you were doing when you signed the agreement?

Q: But there's no mention of employment in the document

A: Yeah, I - like I said, that's - that was my understanding.

1. Asked about the employment concepts of notice and payment in lieu [thereof] and that such concepts do not appear in the contract, Mr Schafer said, 'to be honest, I'm not sure.' Asked again whether he had read the contract before signing it he said, 'to be honest, I can't really remember, to be honest with you.' When it was suggested that reading the contract would have been a prudent thing to do, he said:

It would have been if we were business savvy. We took it upon John Fitzpatrick had all our best interests. He said he would sort it out, he wouldn't do this and blah, blah blah. And that's why we sort of, I guess, took his word for it, which was a bit naïve on our behalf.[59]

1. The above portions of Mr Schafer's oral evidence have been set out to not only record what he said, in order to comprehend his alleged understanding at the time, but also to demonstrate the weakness and unsatisfactory nature of that evidence. After establishing a corporate entity, he signs an eight page, 50 odd paragraph contract - without taking any independent advice - where his newly established company is described as "the Contractor" and which provided for only half of the required leave employees in Australia can expect; but he thought it was an employment contract? He took it that John Fitzpatrick was acting for him?
2. Whilst Mr Schafer said that he was not from a business background and that this was the first time he had entered into an arrangement like this, and that corporate arrangements were new to him, he ought to have understood, at the time he signed the contract, that the engagement was not that of a "normal worker". The fact that he says he did not comprehend that, does not of itself establish that the arrangements with CUMKEL were a sham, but reinforces the alternative theory that he was all at sea and out of his depth.
3. Despite his understanding that the contract was for his employment, nobody else involved in the events at the time understood the contract that way. Ms Cummings didn't. Mr Fitzpatrick didn't and, whilst she did not give evidence, it can be inferred that Ms Jones didn't either. That being as she said the below in an email from an Elizabeth Motor Inn email address to Mr Schafer on 5 June 2023 at 6.12pm:

As you are aware, we got taken on as a business. Jane didn't have to provide payslips as we were contracted for our services. We needed to generate payslips from our own company. As you had no identification to open a business account we couldn't do this. Hence, why John Fitzpatrick enabled us to have a trust fund instead. We were also unable open up a trust fund account also due to you not having any identification

Have you told fair work that? Also I suggest you have fair work contact Jane as they wouldn't ask you to do this yourself, as well, they don't know the full story.

"You weren't employed by Jane". You are your own employer.[60]

1. My overall impression of Mr Schafer's evidence surrounding the contract was that he was committed to sticking to the script, so-to-speak, that he understood it to be a contract for "employment". That being despite in doing so that he was straining credulity. His very frequent figure of speech, 'to be honest with you' and similar, did not come across that way.
2. Further, despite Mr Schafer's misguided insistence that the contract was an employment contract, his case wasn't presented that way. What was argued was that the contract was a piece of machinery to conceal the true relationship between him and CUMKEL. That is, whilst the contract is a business to business arrangement, that it ought to be disregarded because the correct analysis is that he was employed by CUMKEL.
3. Therefore, the suggestion that the contract was an employment contract can be dismissed out of hand, none of the parties to this case argued that and the facts don't support that. The argument that the contract should be disregarded because it was part of the sham must also be dismissed. I accept the evidence of Ms Cummings and Mr Fitzpatrick that the contract was entered into with the express approval of Mr Schafer and Mr Jones on behalf of LOFLAXOZ. That is, I find that the contract is a valid representation of what was agreed as between CUMKEL and LOFLAXOZ: it was the entire agreement as between those two entities.

1. In his third affidavit - responding to what Ms Cummings had said in her affidavit - Mr Schafer said that he and Ms Jones 'were directed' by Ms Cummings to 'contact an accountant.' He said that they had initially suggested an accountant that 'was close to us' but Ms Cummings insisted on them seeing Susan Ansell. He did not know her prior to that.[61]
2. Asked about accountants, Ms Cummings confirmed that MGK & Co Accountants Pty Ltd were her accountants and had been for a number of years; they were her accountants in 2022. She confirmed that Susan Ansell - at that firm - was her accountant.[62]
3. Asked whether Ms Jones had an accountant at the time, Ms Cummings said that she didn't, and she had asked her, 'who would you recommend?' She replied, 'you can go to any accountant'. Ms Jones then said that she didn't know any and so she went to see Ms Cummings accountant - MGK & Co. She understood that Ms Jones - and Mr Schafer - had consulted with MGK & Co. Put to her squarely that she had 'instructed Ms Jones to use MGK & Co', Ms Cummings denied that.[63]
4. Mr Schafer was questioned about the services provided by the accountant, the following was asked and answered:

Q: As discussed, the management contract is on the basis that it is with your company. We're happy to assist you with establishing your company. We will pay the ASIC fee for incorporation and registration. Also, we will assist you with the ABN and GST registration. Now those things happened, didn't they?

1. Susan Ansell gave evidence via affidavit and orally. She is a Chartered Accountant working at MGK & Co. She said she has been Ms Cummings accountant for a number of years. She said that she had had dealings with Ms Jones which included setting up a family trust, registering and then cancelling that entity for GST, preparing Business Activity Statements and preparing tax returns. She recalled that there was an issue with Ms Jones not being able to set up a bank account because Mr Schafer did not have identity documents. She said her only dealing with Mr Schafer was on 6 June 2023 - after he and Ms Jones had split up - she had returned his phone call. He had asked for a copy of the contract with Jane (Ms Cummings - CUMKEL). She said she didn't have that document and directed him to Mr Fitzpatrick.[65]
2. In her oral evidence she clarified that when she said registering and cancelling GST registration, she had meant LOFLAXOZ Pty Ltd, not the family trust.[66] After being asked many questions in cross-examination it was clear that in the events surrounding the creation of LOFLAXOZ, its related entities and its business dealings, Ms Ansell dealt with Ms Jones and not Mr Schafer. It was similarly clear that she was not being directed - in those dealings with Ms Jones - by Ms Cummings and/or Mr Fitzpatrick.
3. There was no challenge to the credibility or reliability of Ms Ansell's evidence. Her evidence was cogent and logical, and I accept it.
4. In line with the evidence of Ms Cummings and Ms Ansell, I find that the former suggested the services of the latter to Ms Jones. Ms Jones then engaged the services of MGK & Co/Ms Ansell. There was no direction given; Ms Jones asked for advice; that advice was given and acted upon. I find that the fact that both Ms Cummings and her corporate entity CUMKEL, and Ms Jones (and Mr Schafer) and their corporate entity LOFLAXOZ, had the same accountant to be of no moment. I do not accept the characterisation of that fact by Mr Schafer as being a reason why the arrangements between him and CUMKEL were a sham.

1. In neither of his first two affidavits, nor his evidence-in-chief did Mr Schafer say that the LOFLAXOZ Family Trust had been established and that he, along with Ms Jones, was one of the two named beneficiaries of that discretionary trust. In his third affidavit - responding to what Ms Cummings had said in her affidavit - Mr Schafer said that he and Ms Jones 'were directed' by Ms Cummings to contact an accountant to 'establish the trust.'[67]
2. Mr Fitzpatrick gave evidence that he assisted Ms Schafer and Ms Jones to establish that family trust. He insisted that they wished to set-up the trust based on accountancy advice. He suggested that he spoke to that accountant and that it was decided that one of 'those dial-a-trust type things' would be used. He said he used such a facility and paid the fee and, 'it came out looking very professional.' He said that one day he drove to the Elizabeth Motor Inn and gave the document to Ms Jones. He was insistent throughout that he did this to assist Mr Schafer and Ms Jones in their business affairs. They being inexperienced in that regard, him having the necessary experience.[68] The cross-examination of him on the topic of the family trust was extensive.
3. The trust deed that was admitted into evidence was unexecuted. It listed Ms Jones as the appointor and Ms Cummings as the settlor. The date of the deed was listed as 23 March 2023.
4. Mr Fitzpatrick was cross-examined on why the document had his corporate entity listed on the first page, with his addresses, but also had the name of a law firm on the same page. Mr Fitzpatrick said that he could not recall having any dealings with that law firm and that his only dealing with another entity regarding the family trust was with the 'dial-a-trust - dial-a-family trust, dial-a-shelf company people.'[69]
5. Pressed heavily about his role in the establishment of the family trust, Mr Fitzpatrick would not be shaken: it was all quite simple; the LOFLAXOZ accountant had asked him to set up the trust; he used the dial-a-shelf company type of people to do that; paid the fee (bill); and it was done. He said:

Once you establish your company, give consideration to tax planning, which is what I premised they did, they got that advice. My sole role was effectuating what they wanted done.[70]

1. Put to him that it was in fact Ms Cummings who had suggested that the family trust be established, Mr Fitzpatrick was emphatic: no, it was the accountant. Asked if Ms Cummings had any role in setting up the family trust, he said she had paid the bill; she had no other role at all, it was instigated by the LOFLAXOZ accountants.[71]
2. When she was asked about the family trust, Ms Cummings denied that she had either recommended or 'insisted' that Ms Jones and Mr Schafer set one up; she had insisted on them having a company [LOFLAXOZ] and that was it. As for paying for the family trust to be set up, she said that she didn't think CUMKEL had paid for that.[72]
3. Further, she initially denied having any role in relation to the family trust but accepted that she was the "settlor" of the LOFLAXOZ Family Trust. She said she didn't know what the role of a settlor was and that she had agreed to do that because Ms Jones [or perhaps Mr Fitzpatrick] had asked her to. She recognised her signature on that document and accepted that it appeared above the signature of Mr Fitzpatrick. She denied instructing him to set up the trust.[73] Despite her slight inconsistences about what her role was in the formation of the family trust, I accept Ms Cummings evidence that she had got involved because she was asked to.
4. In her evidence, the accountant Ms Ansell said she had assisted Ms Jones in setting up the family trust. She agreed that that when somebody was setting up a business that it was not unusual - it was common practice - for a family trust also to be set up. She explained that the LOFLAXOZ Family Trust had not been set up by her, but by a partner of MGK & Co. In cross-examination she denied any involvement in setting up the trust or in drawing up the necessary document. However, she believed the MGK & Co partner, or perhaps herself, had got in touch with Mr Fitzpatrick in that regard. Also, she had no discussions with Ms Cummings about the trust and didn't know what her involvement in that regard was.[74]
5. The suggestion within Mr Schafer's case was that there was something nefarious about the setting up of the LOFLAXOZ Family Trust; it was controlled and directed by Ms Cummings and/or Mr Fitzpatrick on her behalf. The evidence given does not support any such conclusions.
6. Mr Schafer's evidence that he and Ms Jones were directed to set up the LOFLAXOZ Family Trust by Ms Cummings must be rejected. He only made that claim after she had raised the issue of the trust in her affidavit. He did not elaborate how they were so directed in either his affidavit evidence or from the witness box. Ms Cummings strenuously and credibly denied she had made such a direction. As part of his case, it was also tilted at that perhaps Mr Fitzpatrick was the Machiavelli behind the establishment of the trust. His evidence did not bear that out. The evidence of Ms Ansell confirms that the motivating force was her accountancy firm - to be assumed on instructions from Ms Jones - and that they had contacted Mr Fitzpatrick. What is abundantly clear is that Mr Schafer did not have any direct dealings in the relevant events, Ms Jones was the leader in that regard.
7. I find that the situation with the LOFLAXOZ Family Trust was essentially as described by Mr Fitzpatrick, Ms Cummings and Ms Ansell. Mr Schafer and Ms Jones were apparent novices in the ways of business. Advice was provided to them to seek professional help. That was done and as a result their family trust was established. There was nothing untoward or unusual about this. These findings strongly militate against Mr Schafer's argument that the family trust arrangements were a factor to demonstrate that his arrangements with CUMKEL were a sham.

1. With regards to the Federal Police Clearance, and SA Government working with children clearance requirements contained in the contract, Mr Schafer said in his affidavit evidence, such clearances were required because of the Elizabeth Motor Inn's dealings with Anglicare. He also said, 'I never attained the Working with Children Check'.[75] He did not explain why not. During the course of the hearing, it became evident that the reason he didn't get those clearances was due to his difficulties proving his identity; 'Because I didn't have the ID.'[76]
2. In his third affidavit, Mr Schafer explained that he was born interstate and that he did not have a birth certificate.[77]

1. There was general agreement that there was no bank account for LOFLAXOZ. The bank account used for that entity was Ms Jones' account. Ms Cummings said that Ms Jones told her that a joint bank account could not be opened because Mr Schafer had difficulty in providing proof of his identity to open up a new account.[78]
2. Mr Fitzpatrick said in his affidavit that he believed Mr Schafer and Ms Jones could not open a bank account in the name of LOFLAXOZ because they were unable to locate documents that the bank required to open such an account. As such, with a view to alleviate that problem in the short term, the payment of contractual amounts due to LOFLAXOZ, were paid to Ms Jones' bank account.[79]
3. In neither of his first or second affidavits did Mr Schafer properly explain the situation regarding LOFLAXOZ's banking issues. In his third affidavit - responding to Ms Cummings' affidavit - he said that they [he and Ms Jones] were unable to open a business account [for LOFLAXOZ] because he did not have a driver's license nor a birth certificate. He did also say that he had his own bank account at all times he was engaged by CUMKEL.[80]
4. When asked about his identity documents in cross-examination, and after a brief confusing exchange, Mr Schafer was asked:

And that's why all the payments to LOFLAXOZ were made to Ms Jones' personal account?

I don't know, to be honest. I'm not sure why that happened. There was no discussion.[81]

1. This was another piece of very poor evidence by Mr Schafer. Arguably the most important part of a working relationship is the receipt of remuneration for the services rendered. I find it beyond credible that Mr Schafer would not 'know, to be honest' where the remuneration for his work was going. I find unbelievable that he 'wasn't sure what was happening' in that regard. And I find it implausible that there 'was no discussion' about remuneration being paid by CUMKEL to Ms Jones personal bank account.
2. Later in his oral evidence, Mr Schafer was asked to confirm that the regular payments owed by CUMKEL to LOFLAXOZ (to him and Ms Jones) was paid in to Ms Jones bank account, and that then she would pay him from time to time. To that Mr Schafer suggested:

That's what Jane (Cummings) and Linda (Jones), obviously sorted out.

I've had a bank account for 52 years. So there's no reason why that shouldn't have happened. I did approach Jane once about that, and she pretty much blew it off. Because as far as I'm aware, we're two separate people, it was too - yes.[82]

1. What I understood Mr Schafer to be trying to express there, however unsatisfactorily, was that he had approached Ms Cummings as to why money wasn't being paid directly into his individual bank account, and she didn't respond favourably. Curiously, Mr Schafer did not mention that alleged exchange in any of his three sworn affidavits, nor in his evidence-in-chief. Mr Schafer's evidence about alleged conversations about payments into his bank account with Ms Cummings very much had a 'making it up as you go' feel.
2. On the 'we're two separate people comment', Mr Schafer was cross examined, as below:

Q: ‑ ‑ ‑ but you're one company, and it's that one company is contracted, and so it's that one company that would be paid; you understand that?

A: I understand what you're saying, yes.[83]

1. The above concession by Mr Schafer demonstrates that it was dawning on him - or that he now accepted it was an inescapable conclusion - that the contracting parties were CUMKEL and LOFLAXOZ, and not CUMKEL and himself.
2. Whatever the status of Mr Schafer's identity documents as at the relevant time, it is an accepted fact between the parties that there was no LOFLAXOZ bank account to which Ms Schafer was signatory/joint account holder. Mr Schafer's evidence, or lack thereof, regarding the LOFLAXOZ banking situation was unsatisfactory. There was a distinct lack of candour in his affidavit evidence, and his oral evidence was insufficient and confused.

1. In his first affidavit Mr Schafer described what he did when he and Ms Jones were administering and managing the Elizabeth Motor Inn pursuant to the contract. As previously said, he and Ms Jones lived on the premises, he said in a two bedroom unit attached to the reception. He said they worked from around 9.00am to 7.00pm, six days per week, with Tuesdays off. He said that outside of those hours they were on-call and would regularly get calls from motel guests in the middle of the night.
2. With regards to Tuesdays, he said that Ms Cummings and a friend would come in and work on those days. He also said that, other than Tuesdays, Ms Cummings would come by once or twice per week to drop off supplies such as snacks and toilet rolls. When she did so, he said she 'would tell us we were doing a good job.'
3. As to what duties he did, he said: maintenance; gardening; reception duties; checking guests in and out; scheduling; security and loss prevention; keeping the assets and infrastructure of the motel secure; cleaning carpets, air conditioning filters and exhaust ventilators; and laundering of towels and bedspreads. He said he spent most of his time doing yard work and laundry which were everyday jobs. Further, that as he and Ms Jones were the only people working at the motel for the majority of the time, they were required to do whatever was required on a day-to-day basis to keep the place running.
4. With regards to tools, equipment and the like, he said that was supplied by the Elizabeth Motor Inn, he hadn't supplied any. For more substantial maintenance work, such as plumbing, Ms Cummings would be informed, and outside professionals would be brought in.
5. Other that the cleaning work performed by TEAMCLEAN, he said that he and Ms Jones were entirely in-charge of the motel. He said that some of the guests at the motel were 'unsavoury'. There were instances of domestic violence, destruction of property, physical abuse, threats, fights, drug use, weapons and police raids.
6. Also, due to the Elizabeth Motor Inn's relationship with Anglicare, that he and Ms Jones needed to obtain a working with children check. He said this was raised after they had been in the motel for three to four months, however that he never obtained that check.
7. The impression he gave in his first affidavit was that he and Ms Jones were almost fully responsible for the administration of the Elizabeth Motor Inn on all days except Tuesdays.
8. In his second affidavit, Mr Schafer gave more evidence on what he did at the Elizabeth Motor Inn. This time around - almost twelve months later - he sought to emphasise that he and Ms Jones were in frequent contact with Ms Cummings about how she wanted the motel to be run. He said:

We would talk to her daily on the phone and she would direct us what to do.[84]

1. Mr Schafer said that Ms Cummings would direct them to do certain paperwork and approve it so that guests could stay at the motel. With regards to bringing in tradespeople, Mr Schafer said that Ms Cummings' approval would be need before such people could be engaged. He also said that he and Ms Jones were involved in the hiring and firing of cleaners for the motel, which Ms Cummings would then approve. As for hiring, he and Ms Jones would review resumes, conduct interviews and select the candidate. As for firing, he said he and Ms Jones would sit down with them and fire them. On one occasion a cleaner was caught drinking on the job, he said Ms Cummings left it up to them to make the decision to dismiss that person.
2. With regards to his earlier suggestion, that other than Tuesdays, Ms Cummings would attend the motel once or twice per week where she would do a sweep of the motel and check on things. He said, she would then tell him and Ms Jones what needed doing such as a carpet cleaned, or a cupboard fixed etc.
3. As to whether he was working anywhere else, during his time at the Elizabeth Motor Inn, Mr Schafer said he did not as there was no time to do so given his six day working week and the on-call commitments.
4. When cross-examined on the affidavit evidence that there would be daily telephone calls with Ms Cummings where she would provide directions, Mr Schafer backtracked. He said there were times where the calls were daily - Ms Jones would speak to her daily regarding forms, documents, plumbers, electricians etc. When it was put to him that "daily" meant it happened every day, Mr Schafer said:

Well, I remember a lot of conversations between them, yes. Absolutely. And Jane will also contact us if something needed to be done, so ‑ ‑ ‑. [85]

1. Disagreeing with Mr Schafer's recollection that there was daily telephone contact, Ms Cummings initially said that was not the case, she wouldn't do that with managers, that's why they were managing the motel [not her]. She said when there needed to be contact with either Mr Schafer or Ms Jones, the contact would usually be with the latter. She reiterated that when cross-examined, saying that it was rarely the case she would speak to Mr Schafer, but more regularly with Ms Jones. She said such calls were not regular, but ad hoc; there was no particular frequency; sometimes she wouldn't speak with them for three or four days; sometimes there might be contact two days in a row. Asked that if there was anything from her perspective that needed to be attended to at the motel, that she would advise Mr Schafer or Ms Jones to attend to it, she disagreed saying they would always contact her - 'I wasn't breathing down their necks'. If there were irregular occurrences of damage at the motel, she would attend occasionally. On the issue of engaging tradespeople, she agreed that her approval was sought.[86]
2. Like with much else with his case, Mr Schafer over egged the pudding with his allegation that Ms Cummings would direct him and Ms Jones what to do each day by a daily telephone call to them. His evidence on this topic appeared designed to demonstrate that Ms Cummings had more control over his activities than was actually the case. I find Ms Cummings' evidence much more reliable and probable than his evidence on this topic. She spoke on the phone, mostly with Ms Jones and rarely with Mr Schafer, about issues that came up from time to time. Sometimes that was more frequent than other times. She wasn't breathing down their necks in that regard. Given Ms Cummings' evidence, which I accept, and the picture painted by Mr Schafer in his first affidavit, I find that he and Ms Jones were almost fully responsible for the administration of the Elizabeth Motor Inn on all days except Tuesdays. The occasional telephone call with Ms Cummings - essentially to seek her approval on various things - does not materiality change that characterisation.
3. In that regard, to the extent that it is necessary I find that on all days expect Tuesdays there was little if not no control over Mr Schafer by Ms Cummings for the duties he undertook at the Elizabeth Motor Inn. What control there was, was in the nature of her being informed of certain events, so that her approval to engage others was received. Also, when there was damage, or other such like incidents, Ms Cummings would attend the motel and would then provide directions as to what would happen next. That is, a property owner providing instructions to the property management about what should be done with the property. I find that the nature of any directions that might have been given to Mr Schafer by Ms Cummings were within that context and were not of the nature of an employer providing lawful directions to an employee about what, when, where and how work duties would be undertaken.
4. On the issue of Mr Schafer and Ms Jones allegedly hiring and firing cleaners, it was put to him that such activity was akin to behaviour that a company would do; that is, to attend to the daily business of the Elizabeth Motor Inn. Mr Schafer said he didn't know about that, and when he was asked if he disputed that proposition, he said:

I'm not sure, to be honest. I'm not a business person, so I'm really not sure. That was just something we got told by Jane. If we liked them, we keep them; if we don't, we get rid of them. It was in those words.[87]

1. Ms Cummings was not asked about Mr Schafer and Ms Jones hiring and firing cleaners.
2. Aside from demonstrating that Ms Cummings was controlling the hiring and firing of cleaners, Mr Schafer's above evidence suggests that the autonomy was his and Ms Jones'. In the context of all the other evidence of this case I am sceptical about what Mr Schafer contends. The impression given by Ms Cummings was that she was in charge of the cleaners as employees for TEAMCLEAN, she attended to all of the necessary employment entitlements and conditions. It would have been helpful if Mr Schafer's proposition, that he and Ms Jones had hired and fired cleaners, was put to her so that her answer could be heard. As it wasn't, and as I have grave doubts about the reliability and credibility of Mr Schafer generally, I make no findings on this topic.

1. As per the contract, in order for Mr Schafer and Ms Jones to be paid for the services they had undertaken at the Elizabeth Motor Inn, they were required to provide a tax invoice to CUMKEL. That tax invoice would relate to services rendered during the previous week. Payment would be made by CUMKEL within 7 days of the receipt of the tax invoice.
2. Mr Schafer's evidence was that Ms Jones 'controlled the financials entirely' and that he did not know if she provided tax invoices to CUMKEL because he never saw one.[88] In his second affidavit he was more definitive, 'we never once provided an invoice for our services, and we were never asked to.'[89]
3. Ms Cummings didn't mention tax invoices in her affidavit. However, she was extensively cross-examined on that topic. After saying that she had received tax invoices from LOFLAXOZ, she was questioned that in fact that wasn't true, and no such invoices were sent to her. She disagreed; she had received them. Asked why copies of such invoices hadn't been disclosed, she said she didn't keep any of them, she would have thrown they away. Her practice was to receive the tax invoice; pay it then throw it out. She didn't keep the invoices for tax purposes, and she didn't give them to her accountant. Challenged that her evidence about tax invoices from LOFLAXOZ was 'an out-and-out lie', Ms Cummings authoritatively said, 'No'. Challenged further that she never received a tax invoice of any kind from LOFLAXOZ, she confidently confirmed that she did.[90]
4. When the accountant, Ms Ansell, was asked whether she had ever seen tax invoices issued by LOFLAXOZ to CUMKEL, she said, 'no, why would I see their invoices?'[91]
5. The basis of the confrontation to Ms Cummings credibility over the tax invoice issue was never revealed. Mr Schafer did not know if LOFLAXOZ tax invoices were ever sent to CUMKEL and Ms Jones was not called to give evidence. I find Ms Cummings evidence on this topic to be more likely the case than the arguments advanced by Mr Schafer. Her evidence accords with the arrangements as set out in the contract. Her evidence accords with the fact that payments were made to LOFLAXOZ via Ms Jones' bank account. Accordingly, I accept her evidence that she received tax invoices from LOFLAXOZ, paid the required amount and then threw out those documents.
6. These findings do not support Mr Schafer's position that because he never saw any tax invoices from LOFLAXOZ to CUMKEL that somehow his arrangements with CUMKEL were a sham.

1. It is common ground between the parties that there were never any pay slips provided, as would be expected in an employment relationship, to Mr Schafer by CUMKEL.
2. In his first affidavit, Mr Schafer painted a picture that Ms Jones was entirely in control of his "pay". He said that Ms Jones would receive the "funds" (money from CUMKEL) and that then money was paid to him by bank transfer to his bank account from Ms Jones' bank account. He said that Ms Jones would pay him far less 'than what was indicated that I was earning' which would be only 'fifty to a couple of hundred dollars from week to week'. Further, that Ms Jones 'controlled the financials entirely.' And that:

Any time I brought up my pay there would be an argument. She told me she was paying me what I was worth. We often fought about money.[92]

1. In his second affidavit, Mr Schafer confirmed: 'What money I did receive I received from Ms Jones.'[93] No additional mentions were made of payments to him from Ms Jones or anybody else in his third affidavit.
2. In his evidence-in-chief Mr Schafer did not explain his pay situation any further.
3. Additional details about his "pay" only came out in cross-examination.
4. Asked about only receiving fifty or a couple of hundred dollars from Ms Jones, Mr Schafer agreed that he received sporadic amounts from her, but on a weekly basis. Asked about the arguments that he had with Ms Jones, the following exchange occurred:

Q: And did you raise with her that you should be getting half of what she was getting?

Q: And she said that you were being paid what you were worth, and that was her judgment about what you were worth?

Q: How long into your providing services at Elizabeth Motor Inn do you think the relationship with Ms Jones began to become difficult?

A: Probably in the 3-month period I started noticing things, yes.[94]

1. With regards to the money being paid by CUMKEL to Ms Jones' bank account, Mr Schafer agreed that he was aware that such payments had been made at relevant times. On the topic of tax on those payments, the following exchange occurred:

A: Well, I just - obviously, it's got to be done in the BAS statements. That's what a BAS statement is for.

A: And that - this was my understanding of what I've been told by Ms Jones.

Q: Is it more properly said to be the case that you didn't turn your mind through this period as to who was paying any tax?

1. At the end of his re-examination, I felt compelled to ask Mr Schafer additional questions so as to completely understand his evidence about how he was paid, and how he understood he should have been paid. He confirmed that he believed that he should have received half of the money paid by CUMKEL; '...half would be yours (Ms Jones), half would be mine.' I then took him to a bundle of bank records from Ms Jones' bank account. I identified a payment to him from Ms Jones on 22 May 2022 in the amount of $1,000.00. I took him to the entry immediately above that, which showed on the same day that account was credited $2,326.00 from the "Elizabeth Motor Inn Managers". The following exchange then occurred:

Q: So what your evidence to me is - that you think that you were underpaid there because you should have received half of 2326.

Q: Sure. And was that the case no matter how many hours you worked in any particular week?

A: Yes, that's right. It was the same - it was like a salary, I would have taken it as, sort of a thing.

Q: So you understood that you were on a salary that would be the same every [week].

1. In her affidavit, Ms Cummings said that all payments made by CUMKEL were made to or on behalf of LOFLAXOZ. She said that initially such payments were made directly to Ms Jones on behalf of LOFLAXOZ, as she told her that there were difficulties opening a bank account because Mr Schafer had problems providing a proof of identity.[97]
2. When cross-examined, Ms Cummings agreed that she [on behalf of CUMKEL] paid money [under the contract] to Ms Jones. Indeed, that all payments were made to her bank account, because LOFLAXOZ didn't have one due to Mr Schafer's identity issues. Such payments continued until Ms Jones left the Elizabeth Motor Inn in August 2023. Asked at agree that at no point were any payments made to Mr Schafer's bank account, Ms Cummings said, 'well, I was never given one' meaning the details of such an account were never provided to her. She also confirmed that the only payment made directly to Ms Schafer was the cash payment she made to him when she asked him to leave the motel in May 2023.[98]

1. Pausing here just to give context to that answer. As briefly advised of above, there was an acrimonious ending to the personnel relationship between Mr Schafer and Ms Jones. All of the unfortunate details do not need to be repeated. It is sufficient to record that on 26 May 2023, due to an alleged infidelity, an angry confrontation took place between them. Thereafter, there was an alleged assault and a report to police. At about that point Ms Cummings arrived at the Elizabeth Motor Inn. Mr Schafer said that he tried to explain to her what had just happened. However, she allegedly said that because the two of them weren't getting along, he had to leave. She allegedly said that Ms Jones was more valuable, so he had to go. She ordered him off the premises. Being told that, he left the motel and has never returned since.[99]
2. In his first affidavit, Mr Schafer did not mention receiving any cash payment from Ms Cummings. Moreover, he said that he never received any payment in-lieu of notice and importantly that he, never received any payment for the work that he did at the Elizabeth Motor Inn, except the money he had received from Ms Jones. That is, that he never received any money from Ms Cummings and/or CUMKEL directly.[100]
3. On the topic of payments, in his second affidavit Mr Schafer said, 'what money I did receive I received from [Ms Jones].' He did not mention any cash payment made to him by Ms Cummings upon leaving the motel.[101]
4. Similarly, in his third affidavit, Mr Schafer did not mention any cash payment made to him by Ms Cummings.
5. Notwithstanding those three opportunities for Mr Schafer to fully explain his case, the fact of a cash payment made by Ms Cummings to him, only came up when he was cross-examined. In that regard, when questioned about the content of his first affidavit and payments he received, the following lengthy exchange took place:

Q: Now, without going into the circumstances of the last day you worked at the Elizabeth Motor Inn, if I could take your attention to page 29 [of exhibit A1]. You say in paragraph 90 [of his first affidavit] the police had arrived. You'd asked Jane if you could stay in one of the rooms, but she refused that. You packed your things, and after that incident you never returned. This is on a Friday. Isn't it the case that you returned on the Monday, and Ms Cummings paid you some money in cash?

Q: That's information I saw from one of the medical reports I referred to at the beginning of our discussion.

Q: And Jane paid you some money in cash on the following Monday?

Q: Well, in what circumstances did she provide you with money physically? What words accompanied it?

A: She didn't actually say too much at all. I came in - she told me to come in on the Monday - I came in, and she paid me some money; it was a couple of thousand dollars. And that was it, and there was no discussion of anything.

Q: That would have been the most you received out of a LOFLAXOZ payment in all the preceding six months, wouldn't it?

Q: Yes. You say in paragraph 95 [of his first affidavit] - and I'm looking at page 30 [of exhibit A1] now, Mr Schafer - you said:

Now, payment in lieu is obviously something that we associate with an employment contract, and payment in lieu is not a concept dealt with in any way in the Management and Services Agreement [the contract] is it?

A: To be honest, I'm not sure. That's why I would have said that, because I thought you would.

Q: When you say you had read the Management and Services Agreement [the contract], was that before you signed it?

A: To be honest, I can't really remember, to be honest with you.

Q: It would have been a prudent thing to do, wouldn't it?

A: It would have been if we were business-savvy. We took it upon - John Fitzpatrick had all our best interests. He said he'd sort it out, he wouldn't do this and blah, blah, blah. And that's why we sort of, I guess, took his word for it, which was a bit naive on our behalf.

Q: And as far as you're aware, after you left of 26 May 2023 - - -

Q: When you left the premises - let me put that - - -

Q: neutral expression - LOFLAXOZ continued to provide management services to Elizabeth Motor Inn for about another four months, didn't they?

A: I don't know. I wasn't there. I didn't have any contact with anyone, so I don't know.

Q: Now, part of the lead-up to this trial - each of the parties make what's called discovery or disclosure, and they deliver up all the documents of a relevant kind that are in their possession; you are familiar with that?

Q: One of the documents you discovered was your 2022/23 tax return. Now, it's the case, isn't it, that, in that return, you did report some income from work as a warehouse assistant, didn't you?

Q: And would that have been before the Elizabeth Motor Inn - - -

Q: - - - that financial year? But there's no record in that tax return, is there, of you having received any payments through LOFLAXOZ?

A: Absolutely not, no. And that was one of the things I was asking for, is some documentation showing what - tax and stuff like that.

A: I spoke to the accountant after I was told to leave, and she never got back to me - Susan - and that's why I also sent the document to Jane from Fair Work, because they told me to send that to her and get her to fill it out, which she refused to do - or which, actually, Ms Jones answered.

Q: Did you ever say to Ms Jones, or indeed to Ms Cummings, or indeed to Mr Fitzpatrick, that you perceived that you were an employee?

Q: All right. So you don't recall whether you did or you didn't?

A: No, not face-to-face in words. No, I can't really recall that.[102]

1. As would be evident, this was another very poor segment of evidence from Mr Schafer. In providing his evidence in this way - that is, withholding details about payments made to him until he was asked about it in cross-examination - not only demonstrates his lack of candour, but raises the prospect that his version of events must be viewed as suspect. Why did he seek to conceal this information? Was it to make good his claim that he never received any notice or payment in-lieu thereof? Why did he not reveal it anyway, as it could be argued that such a direct payment to him, was "wages" for his work done? I do not need to resolve those questions. Suffice it to say, this is a further example of Mr Schafer's questionable evidence which does damage to his credibility and reliability.

A cash payment to Mr Schafer - Ms Cummings' evidence

1. It is to be noted as well however, that Ms Cummings similarly neglected to mention the cash payment to Mr Schafer in her affidavit. When she was asked about that in her oral evidence, she said he returned to the Elizabeth Motor Inn on the Monday, after she had told him to leave the preceding Friday and that she then gave him half of the amount of the payment that would be made to LOFLAXOZ. She said that payment was for "notice" and was in cash because he didn't have a bank account'.[103]
2. When cross-examined on that topic, Ms Cummings agreed that the cash payment after Mr Schafer had left the Elizabeth Motor Inn was the only payment she ever made directly to him. Asked what the purpose of the payment was, she said because she had to give him a month's notice, which was required as per the contract.[104] After a series of questions about that, Ms Cummings was asked to agree that it was her understanding that the contract that was being discussed was a contract with Mr Schafer? To that she said, yes.[105] It was obvious at the time however, and was clarified later, that in answering positively, she thought she was agreeing with the proposition that the contract was between herself as CUMKEL and Ms Schafer and Ms Jones as LOFLAXOZ.[106]
3. It is curious why Ms Cummings did not mention the cash payment to Mr Schafer in her affidavit evidence. Nevertheless, I accept her evidence that she made such a cash payment to Mr Schafer, because she believed was required pursuant to the contract.
4. Returning to the topic of payments generally, I make the following findings. Other than the cash payment as discussed above, all other payments made by CUMKEL pursuant to the contract were to LOFLAXOZ and not to Mr Schafer. Those payments were made to Ms Jones' bank account because LOFLAXOZ did not have its own bank account. Mr Schafer's bank account details were never provided to Ms Cummings. There were no payments made from CUMKEL to Mr Schafer's bank account. All payments received by Mr Schafer, for his work at the Elizabeth Motor Inn were received by him from Ms Jones.
5. It is evident from the above findings that - other that the cash payment upon Mr Schafer leaving the Elizabeth Motor Inn - there was no financial relationship between himself as an individual and CUMKEL: the financial relationship was between his company LOFLAXOZ and CUMKEL.

High Court authorities - Personnel Contracting and Jamsek.

1. Helpfully, the High Court of Australia has recently commented on the employee / contractor dichotomy in two cases from 2022: Personnel Contracting and Jamsek. The High Court heard those appeals together and delivered judgment in both cases on the same day, 9 February 2022.

Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 - 9 February 2022

1. In Personnel Contracting the question was whether Mr McCourt, who was engaged by the labour hire firm Construct, was an employee or an independent contractor. Mr McCourt and Construct had entered into an Administrative Services Agreement (ASA) which described him as an "self-employed contractor". Construct assigned Mr McCourt to work on two construction sites run by their client, Hanssen. On those sites he performed basic labouring tasks under the supervision and direction of Hanssen employees. The relationship between Construct and Hanssen was governed by a Labour Hire Agreement. There was no contractual relationship between Mr McCourt and Hanssen.[107]
2. Mr McCourt pursued Construct for compensation and penalties under the Fair Work Act 2009 (Cth), arguing that he was an "employee" under that Act. At first instance, and on appeal, Mr McCourt was unsuccessful in establishing that his relationship with Construct was that of employer and employee. However, the High Court thought differently with the majority holding that he was an employee.[108]
3. In setting the necessary legal framework, the plurality and part of the majority, Keifel CJ, Keane and Edelman JJ, conclusively stated:

While there may be cases where the rights and duties of the parties are not found exclusively within a written contract, this was not such a case. In cases such as the present, where the terms of the parties' relationship are comprehensively committed to a written contract, the validity of which is not challenged as a sham nor the terms of which otherwise varied, waived or the subject of an estoppel, there is no reason why the legal rights and obligations so established should not be decisive of the character of the relationship.

Where the parties have comprehensively committed the terms of their relationship to a written contract the validity of which is not in dispute, the characterisation of their relationship as one of employment or otherwise proceeds by reference to the rights and obligations of the parties under that contract. Where no party seeks to challenge the efficacy of the contract as the charter of the parties' rights and duties, on the basis that it is either a sham or otherwise ineffective under the general law or statute, there is no occasion to seek to determine the character of the parties' relationship by a wide‑ranging review of the entire history of the parties' dealings. Such a review is neither necessary nor appropriate because the task of the court is to enforce the parties' rights and obligations, not to form a view as to what a fair adjustment of the parties' rights might require.

In this respect, the principles governing the interpretation of a contract of employment are no different from those that govern the interpretation of contracts generally. ... .

The foregoing should not be taken to suggest that it is not appropriate, in the characterisation of a relationship as one of employment or of principal and independent contractor, to consider "the totality of the relationship between the parties" by reference to the various indicia of employment that have been identified in the authorities. What must be appreciated, however, is that in a case such as the present, for a matter to bear upon the ultimate characterisation of a relationship, it must be concerned with the rights and duties established by the parties' contract, and not simply an aspect of how the parties' relationship has come to play out in practice but bearing no necessary connection to the contractual obligations of the parties. [109] (footnotes omitted) (emphasis added)

1. I highlighted the phrase "a sham" as in this matter Mr Schafer squarely puts it that the contractual relationship as between LOFLAXOZ and CUMKEL was a sham. In short, the validity of the contract is in dispute, his case was that LOFLAXOZ was "an artifice" created by Ms Cummings and Mr Fitzpatrick to conceal the true arrangements from him, and that the reality of the situation was that he was in a legal sense an employee of CUMKEL.[110]
2. In her separate judgment, but also as part of the majority, Gordon J also made apposite comments about how to understand a contract. Warning against using subsequent conduct in construing a contract wholly in writing, her Honour set out five relevant concepts. Relevantly, the fourth such concept being that of "sham". Explaining that, her honour said: sham - to show that the contract was a "sham" in that it was brought into existence as "a mere piece of machinery" to serve some purpose other than that of constituting the whole of the arrangement.
3. The footnote provided for that statement was to the High Court cases of Cam and Sons Pty Ltd v Sargent and Raftland Pty Ltd v Federal Commissioner of Taxation. The facts of those cases are complex and do not need to be repeated here. In the 1940 unreported case of Cam, Dixon J said that a court 'should look at the substance of the transaction and not treat a written agreement, which was designed to disguise its real nature, as succeeding in doing so if it amounted to merely a cloud of words.'[111]
4. In his judgment, Evatt J pithily said, 'in so far as the agreement represented the respondent as an independent contractor it was a sham. It was only a cloak for concealing the real relationship.'[112]
5. In the 2008 case of Raftland, Gleeson CJ, Gummow and Crennan JJ explained that one such instance where a court may consider evidence beyond the parol evidence rule, was 'where other evidence of the intentions of the relevant actors shows that the document was brought into existence "as a mere piece of machinery" for serving some purpose other than that of constituting the whole of the arrangement.'[113]
6. Describing such a situation as a "sham", their Honour's emphasised that although that term was ambiguous and uncertainty surrounded its meaning and application, citing authorities, it could be understood as 'where an agreement may be taken otherwise than at its face value.' Also, that the term "sham" is correctly employed when there is 'an objective of deliberate deception of third parties.'[114]
7. Raftland was cited as clear authority by the Full Court of the Federal Court, Logan, Pagone and Davies JJ, in the 2016 case of Millar v Commissioner of Taxation. There Davies J said:

... that where sham is in issue, the Court is not confined to examining the documentation alone in determining the parties' intentions. The Court may examine and draw inferences from other evidence, including the parties' explanations as to their dealings and their subsequent conduct. Their subsequent conduct is relevant as evidence of their intentions, either because such conduct is consistent with the transactional documents or because such conduct is not consistent.[115]

1. Another High Court case may also be relied upon. In Equuscorp Pty Ltd v Glengallan Investments Pty Ltd the majority of Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ determined that:

"Sham" is an expression which has a well‑understood legal meaning. It refers to steps which take the form of a legally effective transaction but which the parties intend should not have the apparent, or any, legal consequences.[116]

1. Turning back to Personnel Contracting, the plurality of Keifel CJ, Keane and Edelman JJ discussed the "whether an employee?" issue as below:

While the "central question" is always whether or not a person is an employee, and while the "own business/employer's business" dichotomy may not be perfect so as to be of universal application for the reason that not all contractors are entrepreneurs, the dichotomy usefully focusses attention upon those aspects of the relationship generally defined by the contract which bear more directly upon whether the putative employee's work was so subordinate to the employer's business that it can be seen to have been performed as an employee of that business rather than as part of an independent enterprise. In this way, one may discern a more cogent and coherent basis for the time‑honoured distinction between a contract of service and a contract for service than merely forming an impressionistic and subjective judgment or engaging in the mechanistic counting of ticks on a multifactorial checklist.[117] (footnotes omitted) (emphasis added)

1. The question of whether a person's work was so subordinate to the other party's business, is often discussed in the terms of "the right to control" that person. On the facts of Personnel Contracting, the plurality held that Mr McCourt was subject to the "control" of Construct. Explaining the significance of the concept of control, they said:

... the existence of a right of control by a putative employer over the activities of the putative employee serves to sensitise one to the subservient and dependent nature of the work of the employee, so as to assist in an assessment of whether a relationship is properly to be regarded as a contract of service rather than a contract for services.

... it is the right of a person to control the work of the other, rather than the detail of the actual exercise of control, which serves to indicate that a relationship is one of employer and employee.[118] (footnotes omitted) (emphasis added)

1. Applying that rationale to the facts, the plurality emphasised that:
   • Construct was entitled to determine for whom Mr McCourt would work.
   • Once assigned to a client (like Hanssen) Mr McCourt was obliged to co-operate in all respects with Construct and the Builder in the supply of labour to the Builder.
   • There was no suggestion that the work Mr McCourt agreed to do would involve the exercise of any discretion on his part, either as to what he would do or as to how he would do it.
   • Mr McCourt's obligation to "supply ... labour" in cooperation with Hanssen necessarily meant that he agreed, for the duration of the assignment, to work in accordance with Hanssen's directions. He was simply not permitted to do otherwise.
   • Had Mr McCourt breached those obligations, Construct (not Hanssen) would have been entitled to terminate the ASA.[119]
2. Concluding on the control question, the plurality held that:

Mr McCourt's performance of that obligation was unambiguously central to Construct's business of supplying labour to builders. In referring Mr McCourt to Hanssen, Construct was exercising, and commercialising, its right to control the work that Mr McCourt would do and how he would do it. The marketability of Construct's services as a labour‑hire agency turned on its ability to supply compliant labour; without that subservience, that labour would be of no use to Construct's clients. That right of control was therefore the key asset of Construct's business. Its significance was not diminished by the circumstance that the minutiae of Mr McCourt's performance of daily tasks were at the direction of Hanssen. Indeed, the right of control held by Construct over Mr McCourt explains why there was no need for any contractual relationship between Mr McCourt and Hanssen in order to support Hanssen's ability to issue day‑to‑day directions to Mr McCourt.

Mr McCourt had no right to exercise any control over what work he was to do and how that work was to be carried out. That state of affairs was attributable to the ASA, by which Mr McCourt's work was subordinated to Construct's right of control.[120] (emphasis added)

1. Finally, in deciding the appeal the plurality held:

Under the ASA, Mr McCourt promised Construct to work as directed by Construct and by Construct's customer, Hanssen. Mr McCourt was entitled to be paid by Construct in return for the work he performed pursuant to that promise. That promise to work for Construct's customer, and his entitlement to be paid for that work, were at the core of Construct's business of providing labour to its customers. The right to control the provision of Mr McCourt's labour was an essential asset of that business. Mr McCourt's performance of work for, and at the direction of, Hanssen was a direct result of the deployment by Construct of this asset in the course of its ongoing relationship with its customer.

In these circumstances, it is impossible to conclude other than that Mr McCourt's work was dependent upon, and subservient to, Construct's business. That being so, Mr McCourt's relationship with Construct is rightly characterised as a contract of service rather than a contract for services. Mr McCourt was Construct's employee.[121] (emphasis added)

1. My take on the facts and conclusions from Personnel Contracting is that Mr McCourt was engaged and paid by Construct for the supply of his labour only, but he was effectively loaned out to other entities to perform that labour. Construct's business model, so-to-speak, was to be the engaging entity, with the rights and liabilities that entailed. It would then direct were its labour resources would be provided - to which client. The client would then assume the day-to-day directions as to where and to which specific task the labour would be applied. Clear in the rationale of Personnel Contracting was that Construct marketed itself as a provider of compliant and subservient labour.

Jamsek v ZG Operations Pty Ltd [2022] HCA 2 - 9 February 2022

1. As in Personnel Contracting, there was no suggestion in Jamsek that the contract between the parties was a sham.[122]
2. In that case, Mr Jamsek and Mr Whitby (the respondents) had worked as truck drivers from 1977 to 2017. They had been engaged by a company which had over those years been through various changes of ownership and of names. In 2015 there was a corporate restructure which produced two companies, ZG Operations Pty Ltd and ZG Lighting Pty Ltd. The respondents' contractual dealings were with the latter. For the sake of the reader, given the various changed ownerships and names over the years, for ease of understanding all will be referred to as simply "the company".
3. Whilst the respondents were initial employees of the company, and drove trucks owned by the company, that all changed in either late 1985 or early 1986. Then, the company insisted that it would no longer employ the respondents and would only continue to use their services as truck drivers if they purchased their trucks and entered into contracts to carry goods for the company. That is, that they would cease to be "employees" of the company, but henceforth would be "contractors" to the company.
4. The respondents agreed to the new contractual arrangement with the company. They both set up partnerships with their respective spouses. Those partnerships each purchased trucks from the company. Those partnerships each entered into a written contract with the company for the provision of delivery services. As a result, the respondents made deliveries as requested by the company and each partnership separately invoiced the company for those services as provided. The company paid those invoices. The gross revenue received by the partnerships was used to meet the operating costs of the delivery services. The net revenue earned was then declared in the respective partnership's income and was split between each's respective spouse for the purpose of income tax.
5. In 2012 the Whitby partnership was dissolved after the ending of Mr Whitby's marriage. Other than that change, he continued to provide services to the company in the same way and invoiced it as a sole trader using his own ABN. These arrangements continued until the contracts between the respondents and the company were terminated in 2017.
6. Following that termination, the respondents then commenced proceedings in the Federal Court seeking statutory entitlements allegedly owed to them, by the company, under the Fair Work Act 2009 (Cth) and under New South Wales state superannuation and long service leave laws. They argued that they were either "employees" of the company or were "workers" for the purposes of those enactments.
7. As in the present proceedings, there was no suggestion that there was any material difference between the meaning of "employee" and "worker".[123]
8. At first instance, the respondents were unsuccessful. On appeal, that judgment was overturned by the Full Court of the Federal Court who found that the respondents were employees of the company. On appeal again, that judgment was overturned by the High Court who held unanimously that the respondents were not employees of the company. Keifel CJ, Keane and Edelman JJ said:

The reasons of the Full Court suffered from two errors of approach. The first was the significant attention devoted by that Court (and indeed the primary judge) to the manner in which the parties actually conducted themselves over the decades of their relationship. That was thought to be necessary because those courts took the view that a proper characterisation of the totality of the relationship required a consideration of how the parties' contract played out in practice. The second was the Full Court's reasoning that the disparity in bargaining power between the parties affected the contract pursuant to which the partnerships were engaged, so that the "reality" of the relationship between the company and each respondent was one of employment.

The reasoning of the Full Court cannot be sustained. The respondents were not employed by the company. They were members of partnerships which carried on the business of providing delivery services to the company. The appeal to this Court must be allowed.[124]

1. After detailing those errors of approach by the Full Court, Keifel CJ, Keane and Edelman JJ, emphasised when interpreting contracts, the orthodox approach required that there be regard given to the circumstances surrounding the making of the contract. Their Honours confirmed that the 1986 contracts - between the company and the Jamsek and the Whitby partnerships - came to be made because of the company's insistence that the only ongoing relationships would be as contractors, not employees. In that regard, their Honours said:

Given that the genesis of the contract was the company's refusal to continue to employ the respondents as drivers, and the respondents' evident acceptance of that refusal, it is difficult to see how there could be any doubt that the respondents were thereafter no longer employees of the company.[125]

1. To explain that point, their Honours acknowledged that the state of affairs of the 1986 contracts was brought about by the exercise of superior bargaining power of the company. But they confirmed that circumstance had 'no bearing on the meaning and effect of the bargains that were struck between the partnerships and the company.' In weighing that factor heavily, the Full Court had erred. Although, in saying that it was noted that some disparages in bargaining power may give rise to a legal remedy, for example in that case of a "sham" contract.[126]
2. Referencing the earlier authority of WorkPac Pty Ltd v Rossato, their Honours confirmed that:

In Australia, claims of sham cannot be made by stealth under the obscurantist guise of a search for the "reality" of the situation.[127]

1. Speaking further regarding the prospect of a sham, their Honours said:

Even if this disguised submission of sham were to be countenanced, the reality of the situation is that the partnerships, and not the respondents individually, owned and operated the trucks. The partnerships contracted with the company and invoiced the company for delivery services provided by the operation of the trucks. The partnerships earned income from the company, incurred expenses associated with the ownership and operation of the trucks, and took advantage of tax benefits of the structure. It is not possible to square the contention that the respondents were not conducting a business of their own as partners with the circumstance that, for many years, they enjoyed the advantages of splitting the income generated by the business conducted by the partnerships with their fellow partners.[128]

Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 (Cth)

1. The Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 (Cth) amended the Fair Work Act 2009 (Cth) to include a new section - s 15AA - to determine the ordinary meanings of "employee" and "employer". Those amendments were enacted in a response to the judgments of the High Court in Personnel Contracting and Jamsek, as explained above. The object of the amendments was to return to the 'muti-factorial assessment' which was a broader definitional basis for the determination of employee and employer than was established in Personnel Contracting and Jamsek.
2. The new s 15AA came into effect on 26 August 2024 and was not retrospective.

1. Here, the contractional relationship between CUMKEL and LOFLAXOZ commenced in November 2022, being after the delivery of the judgments in Personnel Contracting and Jamsek. And, those contractual relations ended in May 2023, being before the amendments to the FW Act (Cth). Accordingly, as the events of this present case predate the operation of s 15AA of the FW Act (Cth), the law as it was at the time will apply. That is explicitly the case for Mr Schafer's proceedings under the FW Act (Cth) to recover wages from CUMKEL: ET-23-02793. Accordingly, the law as defined by Personnel Contracting and Jamsek applies.

1. With regard to his RTW Act proceedings: ET-23-04562, the question is whether Mr Schafer is a worker under that Act. Section 4 of that Act defines "worker" as a person by whom work is done under a contract of service (whether or not as an employee); or a person who is a worker by virtue of Schedule 1; or a self-employed worker. The latter two categories do not apply in this case. The test to be applied is whether Mr Schafer was working for CUMKEL under a "contract of service". Section 4 defines that concept as:

(a) a contract under which 1 person (the worker) is employed by another (the employer); or

(b) a contract, arrangement or understanding under which 1 person (the worker) works for another in prescribed work or work of a prescribed class; or

(d) a contract, arrangement or understanding under which a person (the worker) -

(i) receives on-the-job training in a trade or vocation from another (the employer); and

(ii) is during the period of that training remunerated by the employer;

1. Placita (a) is applicable here.
2. Importantly, unlike with the FW Act (Cth), there has been no displacement of the common law of Australia, as defined by Personnel Contracting and Jamsek, under the RTW Act_._ No equivalent of s 15AA has been enacted.
3. Recently, in Mandalios v Return to Work Corporation of South Australia,[129] my colleague Deputy President Judge Gilchrist followed the law as defined by Personnel Contracting and Jamsek to find that Mr Mandalios was not a worker under the RTW Act. In doing so he said:

Following the decisions in Personnel Contracting and Jamsek, in determining how a contract of the type under consideration here is to be characterised, primacy must be given to objective findings as to what the agreed terms were at the time of the contract's formation. The fact that the parties might be in an uneven bargaining position when the contract was formed is not especially relevant. And the fact that in practice, the parties might have conducted themselves in a way that is inconsistent with the terms of the contract or points to the character of the contract being different to that which have been thought to be the case when the contract was formed, will generally not provide a basis to conclude that the contract is other than what appears on its face.[130]

1. Like my colleague, I conclude that the judgments of the High Court of Australia in Personnel Contracting and Jamsek, established the correct test to determine whether Mr Schafer was engaged pursuant to a contract of service. In that regard, those decisions can be relied upon to answer the question whether Mr Schafer was a worker under the RTW Act.

1. As I outlined in the opening, the first question for consideration is whether there was any contract at all between Mr Schafer and CUMKEL. If that question is answered in the affirmative, the next question is whether that contract is an employment contract/a contract for services.
2. Mr Schafer's case was that he was an employee of CUMKEL and that the interpolation of the contract between CUMKEL and LOFLAXOZ was an artifice to disguise or obscure the nature of the relationship.[131] That is, that the contract was a sham. There was an acceptance by his case that if the fact of the contract being a sham could not be found, that it was the end of the line for him to find success.[132] By that concession I understood that Mr Schafer was "all-in" with the sham argument; he was not arguing the contract document itself should be construed as an employment contract; that contract should be disregarded entirely.
3. Further, that in these proceedings, Mr Schafer was not contending that he was an employee/worker of LOFLAXOZ for one or both of his actions under the FW Act (Cth) and the RTW Act.[133]

1. I will start with the characterisation of the CUMKEL business model. It owned and operated a motel - the Elizabeth Motor Inn. It was in the motel business. By contrast to say the facts of the Personnel Contracting case, the business model of CUMKEL was not to loan out compliant labour. It was to run a motel, with all of the rights and responsibilities that entailed.
2. Leaving the question of Mr Schafer aside, CUMKEL did not have any employees. Ms Cummings' evidence about that was clear and consistent Up to 2015 her mother was the manager; thereafter she had only ever engaged corporate entities to manage the motel. That is, like in the Jamsek case, a business decision was made to not engage employees; to only engage with a contractor; with a corporate entity only.
3. Parsing that business decision further, with the rights and responsibilities of running a motel in mind, is evident that the choice was to be either "hands-on" so-to-speak, meaning the attendant supervision and direction of employees, or to be "hands-off" meaning transferring the day-to-day responsibilities of the running of the motel to another corporate entity. Put simply, to outsource the management and administration of the motel.
4. The point there being that it was the motel management and administration aspect to the CUMKEL business model that was outsourced.
5. A component within the CUMKEL business model was the associated entity, the EMI Pty Ltd, and the registered business name it owned, TEAMCLEAN. TEAMCLEAN's role was to clean the Elizabeth Motor Inn premises. It did so through the cleaners it engaged as employees. There has been no suggestion that Mr Schafer was one of those employees; he specifically said he wasn't.
6. Whilst previously the cleaning of the Elizabeth Motor Inn had been done through a corporate entity contracted to CUMKEL, as Ms Cummings found those arrangements unsatisfactory, a business decision was taken to refuse to outsource the cleaning services further, and to engage the cleaners as employees.
7. Relying on her evidence I find that, the business decisions taken by Ms Cummings, before she had any dealings with Mr Schafer, were:
   • 236.1. To not manage and administer the Elizabeth Motor Inn herself, unlike perhaps as her mother had done.
   • 236.2. To only engage with corporate entities to manage and administer the Elizabeth Motor Inn, to not employ a manager(s) to complete those functions.
   • 236.3. To change from engaging a corporate entity to undertake the cleaning of the Elizabeth Motor Inn, to employing cleaners with TEAMCLEAN.
8. Essentially that she decided to: not manage and administer the motel herself; not clean the motel herself; engage a corporate entity to be the manager of the motel; and employ cleaners to clean the motel. To facilitate those decisions a business structure was created which had various entities but relevantly included CUMKEL.
9. With that analysis explained and the findings made, the fallacy at the heart of Mr Schafer's case - that the business decisions made by Ms Cummings were motivated and designed to avoid the liabilities of employment - is exposed. The employing of cleaners by TEAMCLEAN demonstrates that Ms Cummings understood the rights and responsibilities of doing such and was not averse to that type of business arrangement. To put that another way, having employees perform certain functions in and about the motel was part of the CUMKEL business model.
10. Fundamentally for that business model though, was the responsible and accountable function of managing and administering the Elizabeth Motor Inn. That function was to be undertaken by a corporate entity.

1. The findings I have already made throughout this judgment are to the effect that with the events leading up to and including the entering into the contract between CUMKEL and LOFLAXOZ, the facts as described by Ms Cummings and Mr Fitzpatrick are preferred over the facts as described by Mr Schafer. For the reasons already given, I have not believed Mr Schafer's evidence over the contested facts.
2. Relying on and following the evidence of Ms Cummings and Mr Fitzpatrick, I find that:
   • 241.1. At all material times before the entering into of the contract CUMKEL, its officers and consultant, represented to Mr Schafer that the only contract that was available to him (as a couple with Ms Jones) to manage and administer the Elizabeth Motor Inn was a contract with a corporate entity as a party with CUMKEL.
   • 241.2. Mr Schafer and Ms Jones as couple agreed to proceed, and to establish their own corporate entity which would be LOFLAXOZ.
   • 241.3. Mr Fitzpatrick prepared the contract which would see one corporate entity, CUMKEL (the Principal) enter into business relations with another corporate entity, LOFLAXOZ (the Contractor) for the management and administration of the Elizabeth Motor Inn.
   • 241.4. Mr Schafer and Ms Jones as a couple agreed to proceed, and LOFLAXOZ was created, of which both were directors and secretaries of.
   • 241.5. The contract between CUMKEL and LOFLAXOZ, headed the Management and Administration Agreement, was entered into. Ms Cummings signed that document on behalf of CUMKEL; Mr Schafer and Ms Jones signed that document on behalf of LOFLAXOZ.
   • 241.6. The contract is explicitly and unquestionably an agreement between two corporate entities, CUMKEL and LOFLAXOZ.
   • 241.7. The contract is explicitly and unquestionably not a contract of employment between CUMKEL and Mr Schafer.
3. Accordingly, at this stage of the analysis, the evidence does not demonstrate that the contract between CUMKEL and LOFLAXOZ was a sham arrangement. Indeed, the opposite is true; the salient facts evince a contract between two corporate entities regarding the provision of services to manage and administer the Elizabeth Motor Inn. And so I find.

1. Mr Schafer's submissions urged for an examination of the way the parties behaved during Mr Schafer's time at the Elizabeth Motor Inn. The argument being that once such facts were exposed, the true nature of the relationship between him and CUMKEL would be revealed: an employment relationship. The well understood indicia of employment were referred to in that regard, as was the 2011 Federal Court case of On Call Interpreters.[134]
2. Relying on that case, the following indicia were highlighted: the right of the business to control the person; whether the person was held out as a representative of the business; the ability to generate goodwill or other saleable assets; whether the person is engaged for an outcome or result; whether the person had a right to delegate the work; the economic dependency of the person on the business; the extent of integration of the person within the business; exclusivity of work; whether there was an opportunity for profit; the extent of the person's risk of loss; the proper characterisation of the economic activity involved; the withholding of tax; leave arrangements; the supply of equipment.[135]
3. Of those indicia, and leaving aside control for the moment, Mr Schafer accepted, as a result of Personnel Contracting and Jamsek, that the question was not necessarily whether he in fact delegated his work, or in fact supplied equipment, but whether he had a legal right under the contract to delegate his work or to supply equipment inter alia.[136]
4. Given Mr Schafer's argument that the contract was a sham, some of the indicia of employment were emphasised by him in an attempt to demonstrate that his true relationship with CUMKEL was one of employment. It was stressed that he neither did, nor was he obliged to supply any equipment tools or capital. He had no opportunity to generate any goodwill or to create a saleable asset. He wasn't paid by outcome, result or upon the completion of a task. He was not engaged to provide services for a defined period. He had no opportunity for profit or loss. His remuneration wasn't influenced by the quality or quantity of the work he performed. None of his personal capital was at risk. And he had nothing to gain from the relationship except regular remuneration, which was synonymous with a salary. Essentially, that Mr Schafer had nothing to sell but his labour.[137]
5. Even his right and responsibility of accommodation at the Elizabeth Motor Inn under the contract was cast as being consistent with Mr Schafer being an employee of Cumkel.[138]
6. Specifically addressing the lack of a deduction of taxation from monies paid by CUMKEL, Mr Schafer's case was that such a factor was unimportant. Similarly, the "label' given to him as a "contractor" was to be given 'precisely nil' weight.[139]
7. Returning to the indicia of control, Mr Schafer argued that from the earliest time it was clear that he was under the control and direction of Ms Cummings. Accepting that he was in a managerial role, Mr Schafer stressed that he was accountable to Ms Cummings and was subject to her direction in the performance of his duties. The concept of control he argued was 'an important indicia' of employment, which the High Court had described, in Personnel Contracting as central to the characterisation of the true relationship.[140]
8. The fact of Mr Schafer being engaged with Ms Jones as a couple to be the live-in mangers of the Elizabeth Motor Inn is the correct context to view the indicia of employment. In such an arrangement it would be hardly surprising that such a person would not be paid by outcome, result or completion of a task. Or that remuneration received was regular and not influenced by the quality or quantity of the work. Therefore, some of the indicia will be less relevant than others given the context of the arrangements. In that regard, at one level some of the indicia will lean Mr Schafer's way, some indicia will lean the other way. That itself is hardly surprising as the task is to analysis and then weigh the indicia. As the High Court said in Personnel Contracting, what should be considered is the totality of the relationship between the parties by reference to the various indicia of employment.[141]
9. Leaving aside the indicia of control, which will be addressed presently, weighing the indicia in the context of the circumstances of Mr Schafer at the Elizabeth Motor Inn, the factors that lean towards him not being characterised as an employee are: other than the one-off cash payment, no other payments were made to him by CUMKEL; no deduction of taxation; two weeks leave instead of four weeks leave as per the National standard; no other leave entitlements, sick leave or long service leave for example; no payment of superannuation; no payments of various employee taxes such as payroll tax.
10. In the other column, the factors that might lean towards him being characterised as an employee could be: he didn't supply his own tools or equipment; none of his personnel capital was at stake; and he had no opportunity for profit or loss.
11. Some of the other factors are more equivocal. In context, the facts that he wasn't engaged or paid to complete a specific task and that his pay was not affected by the quality or quantity of the work are difficult to assess with managerial work.
12. The issue of goodwill and saleable assets are also more vexed. It should be understood, as said in Jamsek, that many businesses - such as manufacturers of products for a single business - do not generate goodwill. That is the context of the niche in the market occupied by those businesses; it will be not a circumstance which militates against the independence of that business.[142] Another aspect to consider is that not all contractors will be entrepreneurs. [143]
13. In his uncontested evidence, Mr Schafer did say that he (along with Ms Jones) wished to go on and manage caravan parks in the future. Concluding a successful period of managing a motel might be seen as generating some form of goodwill in that regard. On the issue of a saleable asset, Mr Schafer was a director in a corporate entity, was there an opportunity to sell his interests? Such issues were not explored in the evidence in this case.
14. With all that understood, the centrality of the indicia of control is now considered in light of the facts. Whilst Mr Schafer contends that from the onset he was accountable to and under the control and direction of Ms Cummings, only the first of those concepts holds any water. Yes, he was accountable to her, but only in the way that a manager would be accountable to an owner of the property where the business was being carried out. She needed to be informed about damage and other serious events. But essentially otherwise, he and Ms Jones were managing the property and business. I have not accepted Mr Schafer's evidence insofar as it relates to the control of him allegedly by Ms Cummings. I have accepted her evidence that she was not controlling nor directing them what to do in their day-to-day activities in and about the Elizabeth Motor Inn. I accept what submitted by CUMKEL that the correct characterisation of the extent of control by Ms Cummings over the activities of Mr Schafer (and Ms Jones) was effectively: 'You two get the job done. You do it in your time. You do it in your way. You distribute the job[s] to be done between each other.'[144]
15. Suffice it to say if the time Mr Schafer spent at the Elizabeth Motor Inn is analysed, the indicia of employment go both ways. However, weighing such indicia in the context of his live-in managerial role, and considering the centrality and importance of the indicia of control, I find that he was not an employee of CUMKEL.

1. The findings that have been made above, regarding Mr Schafer's dealings with CUMKEL, up to the point of commencing his duties at the Elizabeth Motor Inn, conclusively determine that the contract between CUMKEL and LOFLAXOZ was not a sham. Key to that conclusion is that Mr Schafer's evidence has not been accepted over any of the contested facts. He has not proven his case in that regard.
2. Considering the analysis of what the parties actually did while Mr Schafer was at the Elizabeth Motor Inn, an identical conclusion is reached. Nothing that happened during that time lends weight to his contention that the contract between CUMKEL and LOFLAXOZ was a sham. Indeed, the parties behaved like the contract stipulated. Importantly, Mr Schafer and Ms Jones lived on the premises and undertook the identified services. LOFLAXOZ regularly provided invoices for those services and CUMKEL regularly paid LOFLAXOZ for those services. Other than the one-off cash payment, money received by Mr Schafer was not from CUMKEL, but from LOFLAXOZ. Such payments did not have the characteristic of a regular wage for hours or weeks worked but were more akin to a director's drawings from his corporate entity.
3. Accordingly, I make the ultimate finding that the contract between CUMKEL and LOFLAXOZ, for the provision of management and administrative services at the Elizabeth Motor Inn was not a sham.
4. Following the authorities of Personnel Contracting and Jamsek, and given Mr Schafer's submissions, that finding is essentially the end of the matter for Mr Schafer, however, I go on to make further findings.

The true nature of the relationship between Mr Schafer and CUMKEL

1. As said by the plurality in Personnel Contracting, whilst the central question will always be whether the person is or is not an "employee", a consideration of the dichotomy of "own business or employer's business" will also be useful. That being as it focuses attention on those aspects of the relationship which bear directly upon whether the putative employee's work was so subordinate to the employer's business that it can be seen to have been performed by an employee of that business, rather than as part of an independent enterprise.[145]
2. In assessing such aspects of the relationship, the right to control the putative employee - the subservient and dependant nature of the work of that person - will be important. Further it is that right of a person to control the work of another, rather than what actually took place in practice, that will indicate that a relationship is ones of employer and employee.[146]
3. Looking at the contract, and the schedule within it, there are no express provisions that stipulate Mr Schafer was to be under the control of CUMKEL, that he was subject to orders and direction from Ms Cummings. Unlike Mr McCourt in Personnel Contracting, there was no promise by Mr Schafer to work as directed by the Contractor.
4. What was said, or indeed not said, in that contract is borne out when the facts of what Mr Schafer did whilst at the Elizabeth Motor Inn are analysed, as I have done above. Ms Cummings did not direct him in the day-to-day activities of the motel; that was left up to him and Ms Jones to organise. He had agency in that regard, he would share the necessary tasks with his business partner, Ms Jones. Ms Cummings would only direct specific tasks in specific instances; she was not breathing down their necks, and they were managing the motel, not her. They were paid to do that.
5. Accordingly, the true relationship between Mr Schafer and CUMKEL was not one of employment.
6. I have answered that question in the negative, because there was in fact no contractual relationship at all between Mr Schafer as an individual and CUMKEL. The relevant relationship was between CUMKEL and LOFLAXOZ for the provision of management and administrative services at the Elizabeth Motor Inn. Mr Schafer had a relationship with LOFLAXOZ; he was one of its directors; he was one of its secretaries; he undertook activities for it with his business partner Ms Jones; and he received remuneration from it.

1. For the above reasons, orders will be made that confirm the decision to reject Mr Schafer workers compensation claim under the RTW Act. Also, separate orders will be made dismissing his monetary claim application under the FW Act (Cth).
2. Should the parties wish to be heard on the issue of costs, the appropriate application should be made with 14 days.

[1] Exhibit A1 p 184-188 Affidavit of Jane Cummings 9 December 2024 [1]-[2].

[3] A1 p 32-34; Australian Securities & Investment Commission Current & Historical Company Extract

[4] As she did not give evidence I have given her a pseudonym.

[5] Legal Profession Conduct Commissioner v Fitzpatrick [2025] SASCFC 1.

[9] A1 pp 25-31 First Affidavit of John Schafer 16 November 2023 [2]-[4].

[13] Schafer Aff 1 [5]; Tr 13.29-14.08.

[18] A1 p 104-107, Second Affidavit of John Schafer 25 October 2024 [18].

[23] Schafer Aff 1 [10]; Schafer Aff 2 [14].

[36] The affidavits are dated 16 November 2023, 25 October 2024 and 6 January 2025.

[38] Ibid [19], A1 p 105; Tr 127.36-40.

[39] Exhibit A1 p 114-183 Affidavit of John Fitzpatrick 5 December 2024 [1].

[51] Schafer Aff1 [11]-[13] & Annexure JS-01.

[60] Exhibit OP2 Jones email 5 June 2023 at 6.12pm.

[61] A1 p 221-223 Third Affidavit of John Schafer [14]-[15] & [20]-[21].

[65] A1 pp 200-201, Affidavit of Susan Margaret Ansell 11 December 2024.

[73] Tr 132.36-133.15; 134.09-37; 135.03-11.

[74] Tr 209.30-43; 212.22-213.17; 214.37-42.

[107] Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 (Personnel Contracting) Judgment Summary 9 February 2022.

[111] Cam and Sons Pty Ltd v Sargent (1940) 14 ALJ 162 at 163.

[113] Raftland Pty Ltd v Federal Commissioner of Taxation [2008] HCA 21 [34].

[115] Millar v Commissioner of Taxation [2016] FCAFC 94 [82].

[116] Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471 [46].

[118] Personnel Contracting [73]-[74].

[122] Jamsek v ZG Operations Pty Ltd [2022] HCA 2 [8].

[127] Ibid [62]. Obscurant - someone who strives to prevent inquiry and enlightenment. Someone who obscures. Macquarie English Dictionary 7th edition p 1037.

[129] Mandalios v Return to Work Corporation of South Australia [2025] SAET 132 - 5 December 2025.

[134] On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) [2011] FCA 366.