Babaee v QBE Insurance (Australia) Limited
[2023] NSWPICMR 3
•12 January 2023
| CERTIFICATE OF DETERMINATION OF MERIT REVIEWER | |
| Citation: | Babaee v QBE Insurance (Australia) Limited [2023] NSWPICMR 3 |
| ClaimanT: | Hamid Babaee |
| Insurer: | QBE Insurance (Australia) Limited |
| Merit Reviewer: | Maurice Castagnet |
| DATE OF DECISION: | 12 January 2023 |
CATCHWORDS: | MOTOR ACCIDENTS - Merit review; dispute about the amount of weekly payments of statutory benefits under Division 3.3 of the Motor Accident Injuries Act 2017 (2017 Act); calculation of pre-accident weekly earnings (PAWE) under Schedule 1 clause 4(1); where the claimant received gross earnings as a self-employed cement renderer paid in cash and by way of bank transfer deposits; Held – the reviewable decision is set aside. |
| Determinations made: | CERTIFICATE OF DETERMINATION The reviewable decision concerns the amount of weekly payments of statutory benefits that is payable under Division 3.3 of the MAI Act, and is therefore a merit review matter under Schedule 2, cl (1)(a) of the MAI Act. 1. The reviewable decision is set aside. 2. The claimant’s pre-accident weekly earnings (PAWE) are determined to be $2,104.33. 3. The insurer is to apply PAWE of $2,104.33 when determining the claimant’s entitlements under Division 3.3 of the MAI Act. 4. The effective date of this decision is 13 July 2022. |
STATEMENT OF REASONS
INTRODUCTION
There is a dispute between the claimant, Hamid Babaee and the insurer concerning the amount of weekly payments of statutory benefits that is payable to the claimant under Division 3.3 of the Motor Accident Injuries Act 2017 (the MAI Act).
BACKGROUND
The claimant is a 39-year-old man who was injured in a motor accident on
13 July 2022.At the time of the accident, the claimant was a self-employed cement renderer.
On 28 July 2022, the claimant made a claim to the insurer for statutory benefits. The claim included an application for weekly payments for loss of earnings. In his claim form, the claimant stated that at the time of the accident, he was earning $2,800 per week.
On 12 August 2022, the insurer notified the claimant that it accepted liability to make weekly payments for the first 26 weeks. The insurer also notified the claimant that such payments would be made in the interim amount of $550.37 per week for at least 13 weeks, pending the receipt of further information from the claimant to calculate his pre-accident weekly earnings (PAWE).
The actual amount of the claimant’s weekly payments is based on his PAWE, subject to the usual reductions imposed by the Division 3.3 of the MAI Act.
On 30 August 2022, following receipt of further information, the insurer notified the claimant that his PAWE has been calculated in the amount of $352.38.
The claimant disagreed with the insurer’s decision. On 13 September 2022, he sought an internal review of the decision, submitting that his PAWE should be $2,322.82.
On 4 October 2022, the insurer issued a review decision setting aside its original decision and determined that the claimant’s PAWE should be in the amount of $1,584.83. The claimant disagreed with the review decision.
On 15 November 2022, the claimant made an application to the Personal Injury Commission (the Commission) seeking a Merit Review of the insurer’s review decision.
The application was accepted by the Commission. The insurer lodged a reply with the Commission on 25 November 2022.
The application is now before me for determination.
DOCUMENTS CONSIDERED
In making my decision, I considered the documents and submissions provided to the Commission by the claimant in his application and by the insurer in its reply.
LEGISLATION
In making my decision, I have considered the following:
· the MAI Act;
· Motor Accident Guidelines 2017 (Version 8.2) (the Guidelines), and
· Motor Accident Injuries Regulation 2017 (the Regulation).
THE DISPUTE
There is no dispute between the parties on the following issues:
(a) the claimant is an earner within the meaning of cl 2(a) of Schedule 1 of the MAI Act and therefore entitled to weekly payments of statutory benefits under Division 3.3 of the MAI Act;
(b) in calculating the claimant’s PAWE, cl 4(1) of Schedule 1 of the MAI Act is to be applied. Clause 4 (1) provides that the claimant’s PAWE as 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 (the relevant period);
(c) the relevant period is from 13 July 2021 to 12 July 2022, and
(d) the insurer has submitted that the Covid hardship payments received by the claimant from Services Australia during the relevant period are not earnings derived from personal exertion, and therefore excluded from the total amount used to calculate the claimant’s PAWE. The claimant has elected not to pursue the inclusion of these payments as earnings for the purpose of the calculation of his PAWE.
The sole issue in dispute between the parties is the amount of the claimant’s PAWE and how the information provided by the claimant to the insurer has been applied to calculate it.
THE INSURER’S POSITION
In determining the claimant’s PAWE for the purposes of cl 4(1), the insurer relied upon two forensic accountant reports of Matthew Gwynne of PKF dated 25 August 2022 and 26 September 2022.
The insurer submits that the claimant’s asserted income (of $138,123) cannot be verified with reference to the objective evidence. The claimant has been paid by both cash and bank transfer. As identified by Mr Gwynne in his report of
26 September 2022, a number of the claimant’s alleged cash payments cannot be verified with reference to the claimant’s bank transactions or other financial records. PKF has conducted a review of the claimant’s bank statements and various financial records which demonstrates that a gross total of $109,048 can be verified. Accordingly, the insurer says that it has appropriately adopted this sum in calculating PAWE.The insurer says that in calculating PAWE, an appropriate deduction of $26,637 for work expenses (based on the claimant’s 2022 Individual tax return) has been made from the claimant’s total income.
Accordingly, the insurer submits that the available documentary evidence supports the insurer’s determination of PAWE being $1,584.83 per week ($109,048 - $26,637 = $82,411 divided by 52 weeks).
The insurer notes that the claimant’s ABN is not registered for GST, despite his stated income exceeding $75,000.
THE CLAIMANT’S POSITION
The claimant contends that his PAWE should be calculated in the amount of $2,143.97.
In support of that contention, the claimant refers to his internal review submissions of 13 September 2022, the PKF report of 26 September 2022 (specifically the Table at paragraph 4.3) and the insurer’s review decision dated 4 October 2022.
In calculating the claimant’s PAWE in the amount of $1,584.83, the insurer has adopted the total earnings of $109.048 found in Column 2 of the Table in paragraph 4.3 of the PKF report.
The claimant says that Column 2 does not take into account money received into the claimant’s bank accounts described in the claimant’s internal review application as earnings received for rendering work. In his submissions to the Commission, the claimant identified those earnings to a total of $25,575 and highlighted the transactions in his bank statements.
The claimant refutes the insurer’s assertion that these payments are not earnings for rendering work completed. The claimant submits that Column 1 of the Table in paragraph 4.3 of the PKF report reflects those earnings and should be included in the total earnings used to calculate his PAWE.
The claimant submits that a further $3,500 was unaccounted for in the PKF report but accounted for in the signed letter of Mr Ruwan Rankothge, dated 5 September 2022. Those earnings should also be included in the total earnings used to calculate his PAWE.
Excluding the money the claimant received from Services Australia during the Covid shutdown, the claimant submits that his total earnings were $138,123 for work completed. These earnings are the combined total of money paid into the claimant’s bank accounts, money accounted for in the signed letters from his clients and money paid by Vogue Rendering for subcontracting work.
The claimant accepts that it is appropriate to deduct the amount of $26,637 (declared as work expenses in his 2022 Individual tax return) to arrive at the gross earnings used to calculate his PAWE.
Accordingly, the claimant submits that his PAWE should be calculated as follows:
$138,123- $26,637.00 = $111,486.45
$111,486.45/52 = $2,143.97
DISCUSSION
In revising the claimant’s PAWE in its review decision, the insurer submitted that it relied on the accounting report of Mr Gwynne of PKF dated 26 September 2022.
In that report, Mr Gwynne presented the insurer with two alternative scenarios for an amended assessment of the claimant’s PAWE.[1]
[1] Page 83 of the insurer’s bundle.
In Scenario 1, Mr Gwynne provided the insurer with a summary of the claimant’s earnings to a total of $134,623. This is reflected in the first column in the table at paragraph 4.3 of his report (Table 4.3).[2] They are earnings received from clients and a subcontractor, Vogue Rendering. They include earnings received by way of bank deposits as well as cash payments.[3]
[2] Page 76 of the insurer’s bundle.
[3] See the fifth column in Table 4.3 at page 76 of the insurer’s bundle.
Under this scenario and applying work expenses of $26,637, Mr Gwynne calculated the claimant’s gross earnings from self-employment to be $107,986 which yielded PAWE of $2,076.66.[4]
[4] Pages 78 and 83 of the insurer’s bundle.
Under the third and fourth columns in Table 4.3, Mr Gwynne then identified payments summarised in that scenario that were supported by signed letters from the claimant’s clients. From those letters, Mr Gwynne also extracted the dates that the work was completed. The total of that summary of earnings was $109,048 and included cash payments as well as bank transfer deposits.[5]
[5] See the sixth column in Table 4.3 at Page 76 of the insurer’s bundle.
Under the fourth and sixth columns in Table 4.3, Mr Gwynne then identified payments summarised in that scenario that were not supported by signed letters from the claimant’s clients, but the amounts paid by these clients were identified by him in the bank deposits. The only bank deposit that he could not identify was from the client,
Mr Nazmul Huda in the amount of $3,000.In Scenario 2, Mr Gwynne provided a summary of earnings based on earnings that he identified in bank transfer deposits only. The total of that summary of earnings was $58,913. Applying a deduction of $26,637 for work expenses, Mr Gwynne calculated the claimant’s gross earnings from self-employment as $32,276 which yielded PAWE of $620.70.[6]
[6] Pages 78, 79 and 83 of the insurer’s bundle.
In determining the claimant’s PAWE in the amount of $1,584.83 in its review decision, the insurer did not adopt either Scenario 1 or Scenario 2 as presented by Mr Gwynne. Instead, the insurer based its calculation on gross earnings of $109,048. As discussed earlier, these earnings were summarised by Mr Gwynne on the basis of signed letters having been provided by the claimant’s clients.
In its submission to the Commission, the insurer said that PKF has conducted a review of the claimant’s bank statements and various financial records which demonstrates that a gross total of $109,048 can be verified. Mr Gwynne has identified a number of the claimant’s alleged cash payments that could not be verified with reference to the claimant’s bank transactions or other financial records. Accordingly, the insurer has adopted the sum $109,048 in calculating PAWE.
Noting the observations that I made earlier, the insurer’s submissions are clearly inconsistent with Mr Gwynne’s report upon which it relied in determining the claimant’s PAWE and must therefore be rejected.
The sum upon which the insurer relied to make its calculation of PAWE include all cash payments received by the claimant and identified by Mr Gwynne as gross earnings. This is apparent from a reading of the third and fifth columns of Table 4.3 of his September report.
The claimant submitted that the balance of the earnings from the first column of Table 4.3 to the total of $25,575 may be identified as deposits in the bank statements provided to the insurer. I agree.
Looking at the insurer’s own evidence, Mr Gwynne has also identified bank deposits for all of these earnings except $3,000 received from Mr Huda. This is apparent upon a reading of the bottom of the sixth column of Table 4.3. The only other difference is that he was only able to identify total earnings received from Mr Tawil in the sum of $7,625. On my review of the bank statements, I identified total deposits of $8,325 from Mr Tawil and $3,000 from Mr Nasmul Huda and Mr Mohammad Huda.
Having reviewed the claimant’s bank statements and the explanation provided in the claimant’s submissions, I am satisfied that these amounts totalling $25,575 were received by the claimant as income from personal exertion as a cement renderer.
In my view, there is no reason why earnings verified by way of bank deposits from clients cannot be considered to be earnings earned by the claimant as an earner during the relevant period.
The claimant also submitted that a further amount of $3,500 received in cash for work carried out on behalf of a client, Mr Rwan Rankothge is verified by a signed letter from the customer dated 5 September 2022.[7]
[7] Page 42 of the claimant’s bundle.
Having reviewed the signed letter, I accept this submission.
Adding the amounts of $25,575 and $ 3,500 to the amount of $109,048, I am satisfied that on the available evidence, the claimant has received earnings to a total of $138,123. Significantly, those earnings were declared as income from personal exertion as a cement renderer in his 2022 Individual tax return.
I make the following further observations.
First, I consider that some of those earnings were received before the relevant period. Specifically, two payments made by way of bank deposits by the client Mr Tawil were received prior to the relevant period. An amount of $1,600 was received on
5 July 2021[8] and an amount of $500 was received on 8 July 2021.[9] On that basis, earnings of $2,100 cannot be included in the calculation of the claimant’s PAWE.[8] Page 123 of the claimant’s bundle.
[9] Page 122 of the claimant’s bundle.
Secondly, I note that in calculating the claimant’s PAWE, both parties have accepted that the appropriate deduction of the claimant’s work expenses is the amount of $26,637 which he declared in his 2022 Individual tax return.
I accept that in the circumstances, this is the most practical way to calculate the claimant’s work expenses but, in my view, it is also appropriate to reduce the amount of $26,637 by 1.5% (or $40) to take into account the deduction of earnings of $2,100 (declared as earnings in the claimant’s 2022 Individual tax return) but received prior to the relevant period. That comes to a figure of $26,598.
Lastly, I refer to the insurer’s submission that the claimant’s ABN was not registered for GST despite his stated income exceeding $75,000. The insurer has not developed the submission or explained how this circumstance impacts the determination of the claimant’s PAWE. I put the submission to one side.
In summary, I find that the claimant’s total average gross earnings during the relevant period is $136,023.[10] After deduction of work expenses of $26,598, that comes to the sum of $109,425. That sum divided by 52 weeks yields PAWE of $2,104.33.
[10] $138,123 - $2,100 = $136,023.
I therefore find that the amount of the claimant’s PAWE for the purposes of weekly payments of statutory benefits under Division 3.3 of the MAI Act is $2,104.33.
In conformity with s 7.13(1) of the MAI Act, my role is to decide what the correct and preferable decision is, having regard to the material before me and any applicable written or unwritten law. I have made my determination based on the material before me and having considered the facts and circumstances of the matter.
CONCLUSION
The reviewable decision is set aside.
The claimant’s PAWE is determined to be $2,104.33.
The insurer is to apply PAWE of $2,104.33 when determining the claimant’s entitlements under Division 3.3 of the MAI Act.
The effective date of this decision is 13 July 2022.
The claimant was legally represented. Schedule 1 of the Regulation makes no provision for legal costs for this type of merit review matter. I grant leave to the claimant to make an application for costs to the Commission on any other basis under Part 8 of the MAI Act within 14 days should he so wish.
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