ACJ v Insurance Australia Limited t/as NRMA
[2021] NSWPICMRP 3
•29 July 2021
| DETERMINATION OF MERIT REVIEW PANEL | |
| CITATION: | ACJ v Insurance Australia Limited t/as NRMA [2021] NSWPICMRP 3 |
| CLAIMANT: | ACJ |
| INSURER: | Insurance Australia Limited t/as NRMA |
| MERIT REVIEW PANEL MEMBERS: | Brett Williams (Chair) Terence O’Riain Michael Sofoulis |
| DATE OF DECISION: | 29 July 2021 |
| CATCHWORDS: | MOTOR ACCIDENTS- Merit Review Panel; quantification of the Claimant’s weekly benefits; pre-accident earning capacity (PAWE) and his post-accident earning capacity (PAEC); Claimant is a director and equal shareholder of company operating a motel; whether Claimant’s PAWE should be determined by reference to director’s fees alone; whether PAWE should be determined by attributing 50% of company’s adjusted profit; whether exceptional circumstances exist in accordance with section 8.10(4)(b) of the Motor Accident Injuries Act 2017 (MAI Act) to permit Commission to permit payment of costs in excess of regulated costs; Held - the Motel is a business carried on by the company, a legal entity in its own right, and not the Claimant; neither the Motel nor the company are businesses carried on by the Claimant in partnership; the Claimant’s only income from personal exertion received by him as an earner during the 12 months immediately before the accident were the director’s fees from the company; the management fees paid to the Claimant reflect his capacity to earn in the employment in which he was engaged immediately before the motor accident, determined on the basis of his fitness for work in that employment during that period; having regard to the nature and complexity of the dispute, together with the work performed by the Claimant’s lawyers, exceptional circumstances exist that justify the Commission permitting payment of the Claimant’s reasonable and necessary legal costs in connection with the Panel review in accordance with section 8.10(4)(b) of the MAI Act; the merit review decision of 4 September 2020 is set aside; decision made in substitution. |
| DETERMINATIONS MADE: | 1. The merit review decision of Merit Reviewer Medland dated 4 September 2020 is set aside. 2. In substitution the Merit Review Panel finds: (a) the Claimant’s pre-accident weekly earnings (PAWE) are $1,608.35; (b) for the period during which the Claimant suffered a total loss of earnings, 15 December 2018 – 9 January 2019, the Insurer is to pay the Claimant weekly payments in accordance with s 3.6 on the basis that his PAWE are $1,608.35; (c) for the period 10 January 2019 – 15 December 2019, during which the Claimant suffered a partial loss of earning capacity, the Insurer is to determine the Claimant’s post-accident earning capacity on the basis that it is the weekly average of the gross director’s fees received by the Claimant for the period 10 January 2019 to 15 December 2019, and (d) the Claimant’s entitlement to weekly payments of statutory benefits under ss 3.6 and 3.7 are to be determined accordingly. 3. The amount of the Claimant’s costs assessed in accordance with the Motor Accident Injuries Act 2017 (the MAI Act) is $6,600 inclusive of GST. |
Background
The decision of Merit Reviewer Medland dated 4 September 2020 has been referred to the Merit Review Panel (the Panel) for review.
All Panel members confirmed that they had no previous involvement with this matter. All Panel members also confirmed that there was no conflict or any other reason that they would be unable to approach this review with an open mind.
The Claim
The Claimant was involved in a single vehicle motor accident on 15 December 2018. He submitted a claim for benefits dated 10 January 2019. The claim was received by the Insurer on 14 January 2019. Liability to pay benefits for the first 26 weeks was accepted by the Insurer by letter dated 22 January 2019. A dispute in relation to whether the Claimant was mostly at fault for the accident was resolved in his favour[1]. As a result, the Claimant was entitled to benefits after the first 26 weeks.
[1] Insurer’s submissions 24 July 2020 at [13] and Claimant’s statement dated 13 July 2020 at [26].
At the time of the accident the Claimant and his wife were directors and equal shareholders of ACJ Holdings Pty Limited (ACJ HP)[2]. ACJHP operated the XX Motel in Mudgee (the Motel).
[2] Claimant’s statement dated 13 July 2020 at [3].
The Claimant was born on XX June 1939. He was 79 years of age when the accident occurred. Having reached retiring age at the time of the accident the Claimant’s entitlement to receive weekly benefits is limited to 12 months.[3] As a corollary, the Claimant was limited to recovering weekly benefits for the first entitlement period[4] and for 39 weeks during the second entitlement period.[5]
[3] s 3.13(2) MAI Act.
[4] s 3.6 MAI Act.
[5] s 3.7 MAI Act.
The matters in dispute relate to the Claimant’s entitlements to weekly payments of statutory benefits in accordance with Division 3.3. There is a dispute about the quantification of the Claimant’s weekly benefits, specifically with respect to his pre- accident earning capacity (PAWE) and his post-accident earning capacity (PAEC).
The Insurer paid the Claimant weekly benefits on the basis that his PAWE are
$2,178.27.[6] His post-accident weekly earnings (as opposed to PAEC) were determined by the Insurer to be $2,124.57. On 14 May 2020 the Insurer informed the Claimant that his loss of earnings had been calculated to be $53.70 per week.[7] This amount represents the difference between $2,178.27 and $2,124.57.
[6] Letter from the Insurer to the Claimant dated 2 May 2019.
[7] Insurer’s submissions 24 July 2020 at [16].
The Claimant asked the Insurer to conduct an internal review in relation to the decision about his weekly payment entitlements. The internal reviewer affirmed the Insurer’s original decision on 16 June 2020.[8]
[8] Insurer submissions 24 July 2020 at [17 – 18].
The Claimant subsequently made an application for a merit review of the Insurer’s internal review decision.
The decision under review
The merit review was determined by the merit reviewer on 4 September 2020 (the merit decision). The merit reviewer considered ss 3.6 and 3.7, together with relevant provisions in Schedule 1. The merit reviewer affirmed the Insurer’s internal review decision.
The merit reviewer was not satisfied that the net profit of ACJ HP, as set out in the profit and loss statements, constituted “dividends”.
On the basis that the net profit of ACJ HP was not distributed to the shareholders as dividends the merit reviewer found that Schedule 1 clause 3(3)(b) did not apply. She found that the net profit of ACJ HP constituted retained earnings of ACJ HP and represented proceeds of a business carried on by the Claimant. It followed that clause 3(2)(b) applied and that the undistributed net profit of ACJ HP was to be included in the calculation of the Claimant’s “income from personal exertion”.
The reasoning in the reports from PKF(NS) Accountants Pty Limited (PKF) was found by the merit reviewer to be correct as was the Insurer’s calculation of the Claimant’s PAWE and his post-accident earning capacity. The merit reviewer was not satisfied that management fees for the 2019 financial year were apportioned between pre and post- accident.
The Claimant subsequently applied to the Dispute Resolution Service (DRS) for a review of the merit decision (the application). On 2 March 2021, having found that there was reasonable cause to suspect that the merit decision was incorrect in a material respect, the President’s delegate accepted the application and referred it to this merit review panel to review the merit decision in accordance with s 7.15 of the MAI Act.
Transitional matters
The Personal Injury Commission (the PIC) was established on 1 March 2021. The application was lodged on 12 October 2020, before the PIC was established. In accordance with Sch 1 Part 2 cl 14A and cl 14B of the Personal Injury Commission Act 2020 (the PIC Act), the application constitutes pending proceedings and pre- establishment proceedings that we are empowered to determine.
Conduct of the review
The Panel is required to decide what the correct and preferable decision is, is not bound by the rules of evidence and may inquire into any matter relevant to the issues in dispute in such manner as the Panel sees fit. The Panel may confirm the decision of the single merit reviewer or set aside the decision and make a decision in substitution for the decision the review panel sets aside.[9]
[9] s 7.15(4) MAI Act.
The Panel met by teleconference on 11 May 2021. Merit Reviewer Williams acted as chairperson of the Panel. The Panel determined that it would be assisted by further submissions from the parties. Directions were made in that regard on 13 May 2021.
Submissions were subsequently provided by the parties. The Claimant sought an oral hearing. Having regard to the issues in dispute the Panel agreed that an oral hearing was appropriate.
Hearing
A hearing took place by teleconference on 2 July 2021. At the commencement of the hearing the Panel confirmed with the parties that all evidence upon which they relied in the review was attached to the Claimant’s submissions dated 1 June 2021. The evidence is listed in the index provided with those submissions. Although it is not referred to in the index, the PKF report dated 7 May 2020 is included in the evidence attached to the Claimant’s submissions and is relied on, together with two other PKF reports, by the Insurer.
In addition to oral submissions made at the hearing, the Claimant relies on written submissions dated 12 October 2020 and 1 June 2021, primarily the latter. The Insurer relies on written submissions dated 24 July 2020, 21 October 2020 and 16 June 2021.
As a consequence of the constructive approach taken by the parties, the issues in dispute were narrowed significantly at the hearing.
The following matters were agreed by the parties:
(a)for the purposes of s 3.6 the Claimant is an ‘earner’ as defined in Schedule 1 cl. 2 of the MAI Act;
(b)for the purposes of s 3.6 the Claimant suffered a total or partial loss of earnings as a result of injury sustained in the accident;
(c)the Claimant is entitled to weekly payments of statutory benefits in accordance with s 3.6 during the first entitlement period;
(d)for the purposes of s 3.7 the Claimant is an ‘earner’ as defined in Schedule 1 cl. 2 of the MAI Act;
(e)for the purposes of s 3.7 the Claimant suffered a partial loss of earnings as a result of injury sustained in the accident;
(f)the Claimant is entitled to weekly payments of statutory benefits in accordance with s 3.7 during the period 17 March 2019 – 15 December 2019;
(g)during the first entitlement period (s 3.6):
(i)the Claimant was totally unfit for work from 15 December 2018
– 9 January 2019;
(ii)the Claimant was partially fit for some work from 10 January 2019 – 31 January 2019 for 15 hours per week, and
(iii)the Claimant was partially fit for some work from 1 February 2019 – 16 March 2019 for six hours per week.
(h)during the second entitlement period (s.3.7):
(i)the Claimant was partially fit for work from 17 March 2019 – 9 April 2019 for six hours per week, and
(ii)The Claimant was partially fit for work from 10 April 2019 – 15 December 2019 for nine hours per week.
(i)the Claimant and his wife were Directors and equal shareholders of ACJ HP at all relevant times;
(j)ACJ HP operated the X Motel in Mudgee NSW, and
(k)in the 12 months immediately before the subject accident the Clamant received from ACJ HP directors fees in the gross sum of $83,634.61, which equates to $1,608.35 gross per week during that 12-month period.
The parties agreed that the matters in dispute are:
(a)the Claimant’s pre-accident weekly earnings (PAWE) for the purposes of sections 3.6 and 3.7;
(b)the Claimant’s post-accident earning capacity for the purposes of sections
3.6 and 3.7, and
(c)the quantification of the Claimant’s weekly benefits in accordance with sections 3.6 and 3.7.
In summary, the Claimant’s submissions at the hearing were as follows:
(a)he is an ‘earner’ within the meaning of Schedule 1 cl. 2(a) because he was employed by ACJ HP at the time of the accident. This submission was made for the first time at the hearing; the Claimant’s written submissions arguing that he was self-employed;
(b)his PAWE should be calculated on the basis of the director’s fees he received from ACJ HP in the 12 months immediately before the accident.
Accordingly, his PAWE are $1,608.35, and
(c)his post-accident earning capacity should be quantified in monetary terms on the basis of his actual earnings by way of director’s fees received from ACJ HP post-accident and his entitlements under ss 3.6 and 3.7 determined accordingly.
Ms Zogopoulos confirmed that the Insurer relied on the reports of PKF to determine the Claimant’s entitlement to weekly benefits.
It was noted by the Panel that PKF did not consider post-accident earning capacity. This is a matter that is considered later in these reasons.
The Claimant sought an order for costs from the Commission on the basis that exceptional circumstances exist in accordance with s 8.10(4)(b) of the MAI Act. The Insurer did not oppose the Commission making a costs order on that basis.
At the conclusion of the hearing the parties sought and were given additional time to explore whether resolution of the dispute can be achieved. Resolution of the claim was not achieved. Accordingly, the Panel has proceeded to determine the dispute.
Relevant Statutory Provisions
The Claimant’s entitlement to statutory benefits is governed by Part 3 of the MAI Act. Entitlements to weekly payments of statutory benefits are determined in accordance with Division 3.3. Of particular relevance to these proceedings are sections 3.6 and 3.7, together with Schedule 1 of the MAI Act which contains provisions relevant to the application of ss 3.6 and 3.7.
Sections 3.6 and 3.7 are in the following terms:
“3.6 Weekly payments during first entitlement period (first 13 weeks after motor accident)
(1) An earner who is injured as a result of a motor accident and suffers a total or partial loss of earnings as a result of the injury is entitled to weekly payments of statutory benefits under this section during the first entitlement period.
Note— Only a person who was an earner when injured is entitled to statutory benefits under this section—see Schedule 1.
(2) A weekly payment of statutory benefits under this section is to be at the rate of 95% of the difference between the person’s pre-accident weekly earnings and the person’s post-accident earning capacity (if any) for the first entitlement period.
(3) A weekly payment of statutory benefits to a person under this section is not to exceed the maximum weekly statutory benefits amount less the person’s post-accident earning capacity (if any) for the first entitlement period.
(4) A weekly payment of statutory benefits to a person under this section is not to be less than the minimum weekly statutory benefits amount or the person’s pre-accident weekly earnings, whichever is the lesser.
(5) If a weekly payment of statutory benefits is payable under this section, but further information is required to determine the amount of the payment, interim payments are to be made in accordance with the Motor Accident Guidelines until the correct amount of the payment can be determined and paid.”
3.7 Weekly payments during second entitlement period (weeks 14–78 after motor accident)
“(1)An earner who is injured as a result of a motor accident and suffers a total or partial loss of earnings as a result of the injury is entitled to weekly payments of statutory benefits under this section during the second entitlement period.
Note— Only a person who was an earner when injured is entitled to statutory benefits under this section—see Schedule 1.
(2)A weekly payment of statutory benefits under this section is to be at the rate of—
(a)in the case of total loss of earning capacity—80%, or
(b)in the case of partial loss of earning capacity—85%,
of the difference between the person’s pre-accident weekly earnings and the person’s post-accident earning capacity (if any) after the first entitlement period.
(3)A weekly payment of statutory benefits to a person under this section is not to exceed the maximum weekly statutory benefits amount less the person’s post-accident earning capacity (if any) after the first entitlement period.
(4)A weekly payment of statutory benefits to a person under this section is not to be less than the minimum weekly statutory benefits amount or the person’s pre-accident weekly earnings, whichever is the lesser.”
Definitions relating to earnings for the purposes of weekly payments of statutory benefits under Division 3.3 are found in Schedule 1 of the MAI Act. The definitions are, relevantly, in the following terms:
“2 Meaning of “earner”
A person who is injured as a result of a motor accident is an earner if the person is at least 15 years of age and who—
(a) was employed or self-employed (whether or not full-time)—
(i)at any time during the 8 weeks immediately preceding the motor accident, or
(ii)during a period or periods equal to at least 13 weeks during the year immediately preceding the motor accident, or
(iii)during a period or periods equal to at least 26 weeks during the 2 years immediately preceding the motor accident,
and, at the date of the motor accident, had not retired permanently from all employment, or
(b)…
(c)…
3 Meaning of “loss of earnings”
(1)Loss of earnings means a loss incurred or likely to be incurred in a person’s income from personal exertion.
(2)A person’s income from personal exertion is—
(a) the amount that is the income of the person consisting of earnings, salaries, wages, commissions, fees, bonuses, pensions, retiring allowances and retiring gratuities, allowances and gratuities received in the capacity of employee or in relation to any services rendered, and
(b) the proceeds of any business carried on by the person either alone or in partnership with any other person, and
(c) any amount received as bounty or subsidy in carrying on a business.
(3)A person’s income from personal exertion does not include—
(a) interest, unless the person’s principal business consists of the lending of money, or unless the interest is received in respect of a debt due to the person for goods supplied or services rendered by the person in the course of the person’s business, or
(b) rents or dividends, or
(c) any employer superannuation contributions, or
(d) the monetary amount of any annual, sick or other leave entitlement.
4 Meaning of “pre-accident weekly earnings”—general
(1)Pre-accident weekly earnings, in relation to an earner who is injured as a result of a motor accident, means the weekly average of the gross earnings received by the earner as an earner during the 12 months immediately before the day on which the motor accident occurred, unless subclause (2) applies.
…
8 Meaning of “post-accident earning capacity”
(1)Post-accident earning capacity of an injured person means—
(a) for the first and second entitlement periods—the weekly amount that the person has the capacity to earn in the employment in which the person was engaged immediately before the motor accident, determined on the basis of the person’s fitness for work in that employment, or
(b) …
(2)A person’s fitness for work during the first and second entitlement periods is to be determined having regard to the following—
(a)the nature of the injury and the likely process of recovery,
(b)treatment and rehabilitation needs, including the likelihood that treatment or rehabilitation will enhance earning capacity and any temporary incapacity that may result from treatment,
(c)any earnings of the person in any employment engaged in by the person after the motor accident,
(d)any medical certificate provided by the injured person as to the person’s fitness for work.
(3) …
(4) …”
Evidence
We will make reference to relevant aspects of the evidence as we address the matters in dispute.
It is convenient at this point to address the three reports from PKF, dated 3 April 2019, 23 December 2019 and 7 May 2020, which are relied on by the Insurer. These reports informed the Insurer’s decisions in relation to the Claimant’s entitlements under Div.
3.3 and are relied on by the Insurer in these proceedings. The following is a summary of the opinions expressed in the PKF reports:
3 April 2019 report
· The Claimant’s PAWE was determined on the basis of ACJ HP ’s 2018 profit and loss (P&L) statements and the P&L statement for the period 1 July 2018 – 31 December 2018.
· The 2018 P&L statement was pro-rated to calculate the profit and loss for the period 15 December 2017 – 30 June 2018 as was the P&L for the period to 31 December 2018 to calculate the profit and loss for the period 1 July 2018 – 15 December 2018 (the 52 weeks prior to the accident).
· It was noted that the Claimant received management fees from ACJ HP which are confirmed in his personal tax return. To determine the Claimant’s PAWE, PKF added back the management fees and attributed 50% of ACJ HP ’s adjusted profit to the Claimant.
· The Claimant’s PAWE was assessed to be $2,178.27. Relevant calculations are contained in annexure 1 to the report.
23 December 2019 report
· The P&L for ACJ HP to 30 June 2019 was considered. These records were not available when the April 2019 report was prepared.
· To determine the Claimant’s post-accident weekly earnings ACJ HP ’s P&L statements for the periods 1 July 2018 to 31 December 2018 and 1 January 2019 – 30 June 2019 were relied on. The December 2018 P&L was pro-rated to calculate P&L for the period 16 December 2018 – 31 December 2018.
· On the basis that management fees received by the Claimant from ACJ HP are discretionary it was assumed that the net income of ACJ HP represented earnings at the control of shareholders (the Claimant and his wife). The management fees received by the Claimant were added back to the ACJ HP ’s P&L and 50% of ACJ HP ’s adjusted profit was attributed to the Claimant.
· The Claimant’s post-accident weekly earnings were determined to be
$1,945.64. Relevant calculations are contained in annexure 1 to the report.[10]_bookmark9
[10] It is apparent that reference to PAWE in this report is used as an acronym for post-accident weekly earnings not pre-accident weekly earnings. This is confirmed in Annexure 1, which refers to “Weeks in Post AWE Period” and calculates earnings by reference to income and expenses between 16 December 2018 – 30 June 2019.
7 May 2020 report
· The report was provided in response to a request that post-accident weekly earnings be assessed for the period 16 December 2018 – 16 December 2019, following review of ACJ HP ’s 2019 tax return and P&L for the periods 1 July 2018 – 31 December 2018, 1 January 2019 – 30 June 2019 and 1 July 2019 – 31 December 2019.
· The December 2018 and 2019 P&L statements were pro-rated to determine the profit and loss for the period 16 December 2018 – 31 December 2018, and 1 July 2019 – 16 December 2019.
· Noting that management fees are discretionary, it was assumed that the net income of ACJ HP represents the net income of the company represents earnings at the control of the shareholders. The Claimant’s management fees were added back and 50% of ACJ HP ’s profit attributed to the Claimant.
· The Claimant’s post-accident weekly earnings (again referred to as “PAWE”) were determined to be $2,124.57.
The Insurer’s submissions
In addition to submissions made at the hearing, the Insurer relies on written submissions dated 24 July 2020, 21 October 2020 and 16 June 2021.
In summary, the Insurer’s submissions of 24 July 2020, which were prepared in response to the Claimant’s application for merit review, argue that:
(a)the Claimant’s PAWE is $2,178.27 and his post-accident weekly earnings are $2,124.57;
(b)PKF’s methodology was correct in determining PAWE and post-accident weekly earnings, and
(c)based on PAWE of $2,178.27 and post-accident weekly earnings of
$2,124.57, the Claimant’s loss of earnings was $53.70 per week, or
$2,792.40 from 16 December 2018 to 15 December 2019.
The 21 October 2020 submissions address s 7.15(2) of the MAI Act. The Insurer argues that the Claimant’s review application should be dismissed as there is no material error disclosed in the merit decision. It is also argued that there is an absence of exceptional circumstances to warrant a costs order.
In its 16 June 2021 submissions, the Insurer states that it relies on its 21 October 2020 submissions. The Insurer confirms that it does not dispute the entitlement to statutory benefits for the first and second entitlement periods. The Insurer argues that exceptional circumstances do not exist so as to justify a costs order in accordance with 8.10(4)(b). We note, however, that at the hearing the Insurer did not oppose the Commission making a costs order in accordance with s 8.10(4)(b).
Determination of PAWE
PAWE is to be determined in accordance with Sch 1 cl. 4. As none of the exceptions found in cl. 4(2) apply, PAWE is determined in accordance with cl. 4(1). Thus, for the purpose of these proceedings, PAWE means the weekly average of the gross earnings received by the Claimant as an earner during the 12 months immediately before the day on which the motor accident occurred.
The Claimant argues that the only earnings he received as an earner in the 12 months immediately before the accident were the director’s fees from ACJ HP. At the hearing the parties agreed that in the 12 months immediately before the accident the Clamant received from ACJ HP directors fees in the sum of $83,634.61, which equates to
$1,608.35 gross per week during that 12-month period. On this basis, the Claimant argues that his PAWE are $1,608.35.
The Insurer argues that the Claimant’s PAWE should be calculated in accordance with the methodology applied by PKF in their report of April 2019. The approach adopted by PKF was to determine PAWE by attributing 50% of ACJ HP ’s adjusted profit to the Claimant, after adding back the management fees paid to him. This results in PAWE of $2,178.27.
The Claimant argues that ACJ HP is a separate and distinct legal entity. Accordingly, the Claimant says ACJ HP ’s profit is not relevant to determining his PAWE.
Schedule 1 contains no definition of ‘earnings’ for the purposes of Division 3.3. However, “loss of earnings” is defined in Sch.1 cl.3. Although cl. 3 defines “loss of earnings” and not ‘earnings’, so as to construe Division 3.3 and Schedule 1 in a cohesive way, it is appropriate to proceed on the basis that, as “loss of earnings” means “a loss incurred or likely to be incurred in a person’s income from personal exertion”, ‘earnings’ should be taken to mean “a person’s income from personal exertion”. “A person’s income from personal exertion” is income of the type referred to in Sch 1 sub-cl. 3(2) and excludes income of the type referred to in Sch 1 sub-cl. 3(3).
The accident occurred on 15 December 2018. The relevant 12 month period for the purposes of cl.4(1) cuts across the tax years ending 30 June 2017 and 30 June 2018. The tax returns lodged by the Claimant in each of those years reflect that the Claimant’s sole source of income, other than interest, was from ACJ HP.
On the evidence available to us, we find that the Claimant’s income from personal exertion in the 12 months before the accident, that falls within sub-cl. 3(2)(a), is the income he received from ACJ HP by way of director’s fees. The parties agree that this income amounts to $83,634.61 gross, which equates to $1,608.35 gross per week for that 12-month period.
In accordance with sub-cl 3(2)(b) a person’s income from personal exertion includes the proceeds of any business carried on by the person either alone or in partnership with any other person.
On the evidence available to us the only business that is relevant for the purposes of sub-cl 3(2)(b) is the Motel. In his statement dated 13 July 2020 the Claimant gives evidence that ACJ HP owns the Motel.[11] His wife gives consistent evidence in her statement of the same date.[12]
[11] At [3].
On the basis of this evidence, we are satisfied that the Motel is a business carried on by ACJ HP, a legal entity in its’ own right, and not the Claimant.
If we are wrong about this, and the Claimant is considered to have been carrying on the Motel business, it cannot be said that this was a business carried on by him alone. If he was carrying on the Motel business, so was his wife.
Neither the Motel or ACJ HP are businesses carried on by the Claimant in partnership. The term ‘partnership’ is a business arrangement recognised by law. The term is defined in s 1 of the Partnership Act 1892 (NSW) as follows:
“1 Definition of partnership
(1) Partnership is the relation which exists between persons carrying on a business in common with a view of profit and includes an incorporated limited partnership.
(2)But the relation between members of any company or association which is:
(a) incorporated under the Corporations Act 2001 of the Commonwealth, or
(b) Formed or incorporated by or in pursuance of any other Act of Parliament or Letters Patent or Royal Charter,
is not a Partnership within the meaning of this Act.”
There is no evidence that ACJ HP is an incorporated limited partnership. As ACJ HP is incorporated under the Corporations Act it is expressly excluded from the definition of ‘partnership’.
There is no evidence that the Claimant received any amount as bounty or subsidy in carrying on a business for the purposes of sub-cl. 3(2)(c).
In these circumstances, we find that the Claimant’s only income from personal exertion received by him as an earner during the 12 months immediately before the accident were the director’s fees from ACJ HP. These fees are agreed in the gross sum of
$83,634.61. We find that this sum represents the gross earnings received by the Claimant as an earner during the 12 months immediately before the accident. The weekly average of this amount, calculated over 52 weeks, is $1,608.35. Accordingly, we find that the Claimant’s PAWE are $1,608.35.
Determination of post-accident earning capacity
The Insurer appears to have determined the Claimant’s entitlements under ss 3.6 and
3.7 by reference to his post-accident earnings, as opposed to his post-accident earning capacity.
Both s 3.6 and 3.7 require weekly payments to be determined by reference to “…the difference between the person’s pre-accident weekly earnings and the person’s post- accident earning capacity (if any) …”.[13] To the extent that the Insurer has determined the Claimant’s entitlements under ss 3.6 and 3.7 on the basis of his post-accident earnings as opposed to the post-accident earning capacity, the Insurer has applied the wrong test.
[13] Ref s 3.6(2) and s 3.7(2).
The parties agree that:
(a)during the first entitlement period (s 3.6):
(i)the Claimant was totally unfit for work from 15 December 2018
– 9 January 2019;
(ii)the Claimant was partially fit for some work from 10 January 2019 – 31 January 2019 for 15 hours per week, and
(iii)the Claimant was partially fit for some work from 1 February 2019 – 16 March 2019 for 6 hours per week.
(b)during the second entitlement period (s.3.7):
(i)the Claimant was partially fit for work from 17 March 2019 – 9 April 2019 for six hours per week, and
(ii)the Claimant was partially fit for work from 10 April 2019 – 15 December 2019 for nine hours per week.
With respect to the balance of the period during which the Claimant is entitled to weekly benefits the critical issue that remains for determination, given the matters that are agreed by the parties, is the quantification of the Claimant’s PAEC.
The evidence discloses that as a consequence of the accident the Claimant suffered a burst fracture of the fourth lumbar vertebra, a fracture of his left seventh rib and soft tissue injuries[14].
[14] Reports of Dr Peter Leal dated 10 May 2019 and 12 March 2020.
In his statement the Claimant says that he was working ‘about 73 hours per week’ prior to the accident. [15]Pre-accident, the tasks he performed at the Motel included: managerial duties, showing guests to their rooms, delivering breakfast trays to guests, attending the reception desk and dealing with bookings, check-ins and check-outs, attending to guest enquiries and requests, recruiting and supervising employees and contractors, painting motel units and the motel exterior, performing simple repairs, maintenance and gardening, attending to deliveries and supplies, banking, arranging advertising, promotions and the motel website.[16] He states that he was able to carry out these tasks without restriction prior to the accident.[17]
[15] At [11].
[16] At [12].
[17] At [15].
The Claimant states that when he was able to return to some form of work post- accident all he could do was take telephone calls and process telephone bookings. He says he could not have performed the tasks he was undertaking pre-accident.[18]
[18] At [17].
The Claimant’s wife states that pre-accident he would perform most of the physical tasks around the Motel without restriction.[19] Post-accident, she says the Claimant was greatly restricted in his ability to carry out many tasks around the Motel[20] and that she has been required to carry out many of the tasks previously performed by the Claimant.[21] Other staff and handymen have been required to undertake some of the tasks previously performed by the Claimant.[22]
[19] At [7] and [8].
[20] At [9].
[21] At [11].
[22] At [11].
Post-accident earning capacity is defined in Sch 1 cl.8, relevant terms of which are set out earlier in these reasons. The Claimant’s PAEC for the periods in question is the weekly amount that he had the capacity to earn in the employment in which he was engaged immediately before the motor accident, determined on the basis of his fitness for work in that employment.[23]
[23] Sch 1 cl. 8(1)(a).
We are comfortably satisfied, by reference to the nature of the Claimant’s injuries, his process of recovery, his treatment needs[24], and the certificates of fitness provided by
Dr Leal [25]that while the Claimant had some capacity to earn from 10 January 2019 to 15 December 2019, his fitness to undertake work of the nature he performed pre- accident was very limited.
[24] See reports of Dr Leal 10 May 2019 and 12 March 2020.
[25] Certificates dated 10.1.2019, 18.4.2019, 9.5.2019, 30.5.2019, 22.11.2019 (x2), 24.1.2020.
Quantification of weekly payments
For the period during which it is agreed that the Claimant suffered a total loss of earnings as a result of injuries caused by the accident, 15 December 2018 – 9 January 2019, the Insurer is to pay the Claimant benefits in accordance with s 3.6 on the basis that his PAWE are $1,608.35.
It is agreed by the parties that the Claimant suffered a partial loss of earnings for the period 10 January 2019 – 15 December 2019.
Prior to the accident the Claimant and his wife received management fees from ACJ HP in equal amounts, reflecting their contribution to the running of the Motel.[26] Following the accident, the management fees paid to the Claimant were less than those he received pre-accident.
[26] Claimant’s statement at [14].
In all the circumstances, we find that the management fees paid to the Claimant for the period 10 January 2019 to 15 December 2019 best reflect his capacity to earn in the employment in which he was engaged immediately before the motor accident, determined on the basis of his fitness for work in that employment during that period.
The Insurer is to determine the Claimant’s post-accident earning capacity on the basis that it is the weekly average of the gross director’s fees received by the Claimant for the period 10 January 2019 to 15 December 2019.
The Claimant’s entitlements under ss 3.6 and 3.7 should be determined accordingly.
Costs
The Claimant submits that the Commission should permit the payment of legal costs incurred by him on the basis that exceptional circumstances exist that justify payment of those costs.
On the basis of the information available to the Panel it is apparent that the Claimant’s lawyers performed legal work that included the following:
(a)obtaining instructions;
(b)preparing the application for review;
(c)drafting written submissions dated 12 October 2020 and 1 June 2021;
(d)reading and advising on the Insurer’s written submissions, and
(e)advocacy at the hearing conducted by teleconference on 2 July 2021.
Costs in statutory benefit matters are regulated under s 8.10 of the MAI Act and Schedule 1, Part 1, clause 1 of the Motor Accident Injuries Regulation 2017 (the Regulation).
The maximum costs for legal services provided in connection with a review of a decision about any merit review matter by a review panel are regulated by sub-cl. (3) of Schedule 1, Part 1, clause 1 of the Regulation and are capped at 16 monetary units.
The Claimant’s solicitor has performed considerable work in connection with the Panel Review.
In the Insurer’s submissions dated 21 October 2020 it argues that there was an absence of exceptional circumstances to warrant a costs order in accordance with s 8.10(4)(b). Those arguments were repeated in the subsequent written submissions.
However, at the hearing on 2 July 2021, the Insurer’s representative did not dispute that this case had raised complex issues.
In the Claimant’s submissions dated 1 June 2021 the Claimant relies on AAI Ltd trading as GIO v Moon [2020] NSWSC 714 (Moon) in support of the order for costs sought under s 8.10(4)(b). As a guideline on costs the Claimant’s solicitor referred the panel to his costs agreement with the Claimant and says that he performed 20 hours work valued at $550 per hour.
The Panel finds that, having regard to the nature and complexity of the dispute, together with the work performed by the Claimant’s lawyers, exceptional circumstances exist that justify the Commission permitting payment of the Claimant’s reasonable and necessary legal costs in connection with the Panel review in accordance with section 8.10(4)(b) of the MAI Act.
We find that the sum of $6,600 inclusive of GST reflects those reasonable and necessary costs.
Conclusion
The merit review decision of Merit Reviewer Medland dated 4 September 2020 is set aside. In substitution the Merit Review Panel finds:
(a)the Claimant’s pre-accident weekly earnings (PAWE) are $1,608.35;
(b)for the period during which the Claimant suffered a total loss of earnings, 15 December 2018 – 9 January 2019, the Insurer is to pay the Claimant weekly payments in accordance with s 3.6 on the basis that his PAWE are $1,608.35;
(c)for the period 10 January 2019 – 15 December 2019, during which the Claimant suffered a partial loss of earning capacity, the Insurer is to determine the Claimant’s post-accident earning capacity on the basis that it is the weekly average of the gross director’s fees received by the Claimant for the period 10 January 2019 to 15 December 2019, and
(d)the Claimant’s entitlement to weekly payments of statutory benefits under ss 3.6 and 3.7 are to be determined accordingly.
The amount of the Claimant’s costs assessed in accordance with the MAI Act is
$6,600 inclusive of GST.
Brett Williams
Terence O’Riain
Michael Sofoulis
Merit Review Panel
Personal Injury Commission
[12] At [3].
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