Brewer v Insurance Australia t/as NRMA
[2021] NSWPICMR 14
•28 May 2021
| CERTIFICATE OF DETERMINATION OF MERIT REVIEWER | |
| CITATION: | Brewer v Insurance Australia t/as NRMA [2021] NSWPICMR 14 |
| APPLICANT: | Alexander Brewer |
| RESPONDENT: | Insurance Australia t/as NRMA |
| MERIT REVIEWER: | Brett Williams |
| DATE OF DECISION: | 28 May 2021 |
| CATCHWORDS: | MOTOR ACCIDENTS- weekly payment of statutory benefits under Division 3.3 of the Motor Accident Injuries Act 2017; workers compensation benefits ceased; PAWE was $608.37; earner; both employment and self-employment; self-employed martial arts trainer; employment with Sydney Fire Bricks (SFB); thumb injury; self-employed sole trader; Held- not satisfied that the Claimant had entered into an arrangement with SFB before the accident; martial arts business income of $850; reduced to account for the expenses; adopt a figure of 5%; PAWE is $807.50; decision is set aside. |
| DETERMINATIONS MADE: | 1. The reviewable decision is set aside. 2. The Claimant’s PAWE is determined to be $807.50. 3. The Insurer is to apply PAWE of $807.50 when determining the Claimant’s entitlements under Division 3.3 of Act. |
Background
The Claimant suffered injury in a motor accident on 7 December 2020. He submitted a claim for statutory benefits to the Insurer.
On 19 January 2021 the Insurer accepted liability to pay benefits for the first 26 weeks after the accident. On 1 April 2021 the Insurer accepted liability for the payment of statutory benefits after 26 weeks.
At the time of the accident GIO was paying the Claimant weekly payments under the Workers Compensation Act 1987 (the 1987 Act). Payment of workers compensation benefits ceased on 10 February 2021.
In quantifying the amount of the Claimant’s entitlements to weekly payments under Part 3 Division 3.3 of the Motor Accident Injuries Act 2017 (the Act) the Insurer determined that the Claimant’s pre-accident weekly earnings (PAWE) were $608.37.
The Insurer informed the Claimant of its decision in relation to his PAWE by letter dated 15 March 2021.The Insurer assessed the Claimant’s PAWE on the basis of the weekly payments he received from GIO in accordance with the 1987 Act during the period 7 December 2019 to 4 December 2020.
The Claimant disagreed with the Insurer’s determination in relation to his PAWE. The corollary of this is that the Claimant asserted he had not received the full measure of his entitlements to weekly payments. In these circumstances he sought an internal review on 23 March 2021 (R15).
On 19 April 2021 the Insurer issued an internal review decision affirming the PAWE decision made on 15 March 2021 (A2). The Claimant seeks a review of this decision by way of a merit review.
The Dispute
The Insurer accepts that the Claimant is entitled to statutory benefits under Part 3 Division 3.3 of the Act.
There is no dispute that the Claimant was an ‘earner’ for the purposes of Division 3.3 of the Act (R1 at 20).
The ground has shifted over time in relation to the basis upon which the Insurer asserted the Claimant satisfied the definition of ‘earner’. Initially the Insurer maintained that the Claimant was an ‘earner’ because he satisfied Sch. 1 cl. 2(c), having been in receipt of benefits under the 1987 Act immediately before the accident. The insurer now submits that the Claimant satisfies Sch1. cl. 2(b)(ii).
The Claimant says he is an ‘earner’ because he satisfied both limbs of Sch. 1 cl. 2(b), having entered into arrangements before the motor accident with respect to both employment and self-employment. He argues that his PAWE should be determined by reference to Sch. 1 cl. 4(2)(c).
In my view, it is possible for the Claimant to satisfy multiple limbs of the definition of ‘earner’. If it were found that multiple limbs were satisfied, an assessment of the average weekly gross earnings that he could reasonably have been expected to earn, for the purposes of Sch. 1 cl. 4(2)(c), would reflect that finding.
Although it previously assessed PAWE at $608.37 (A2) the Insurer now argues that the Claimant’s PAWE should be $765 (R1 at 19). Having initially assessed PAWE under Sch. 1 cl. 4(2)(a), the Insurer now submits that PAWE should be determined in accordance with Sch. 1 cl. 4(2)(c) (R1 at 21).
In short, the Insurer no longer says that PAWE should be determined on the basis of the workers compensation benefits received by the Claimant at the time of the accident. The Insurer submits that PAWE should be based on the Claimant’s pre-accident arrangements to commence business as a self-employed martial arts trainer.
The Insurer’s change in position followed receipt of a report from Mathew Gwynne of PKF(NS) Forensic Accountants (R20).
In any event, the parties now agree that PAWE is to be determined in accordance with Sch. 1 cl. 4(2)(c).
The matter comes before me to determine the correct PAWE to be applied when assessing the Claimant’s entitlements to weekly benefits under Division 3.3.
The dispute constitutes a merit review matter for the purposes of Part 7 of the Act (see Sch. 2 cl.1(a)) and is to be determined in accordance with s 7.13.
Relevant provisions of the Act
The definitions of “earner’ and “pre-accident weekly earnings” for the purposes of Division 3.3 of the Act are found in Schedule 1, Clauses 2 and 4 respectively. Those provisions are 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) before the motor accident, had entered into an arrangement (whether or not an enforceable contract)--
(i) with an employer or other person to undertake employment, or
(ii) to commence business as a self-employed person,
at a particular time and place, or
(c) was, immediately before the motor accident, receiving a weekly payment or other payment in respect of loss of earnings under this Act or the Workers Compensation Act 1987.
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.
(2) In the following cases, "pre-accident weekly earnings" , in relation to an earner who is injured as a result of a motor accident, means--
(a) if, on the day of the motor accident, the earner was earning continuously, but had not been earning continuously for at least 12 months--the weekly average of the gross earnings received by the earner as an earner during the period from when the earner started to earn continuously to immediately before the day of the motor accident,
(a1) if the earner was employed or self-employed during a period or periods equal to at least 26 weeks during the first year of the pre-accident period, but was not obtaining earnings from any source at any other time during the pre-accident period--the average weekly gross earnings received by the earner as an earner during the first year of the pre-accident period,
(b) if subclause (3) applies--the weekly average of the gross earnings received by the earner as an earner during the period from when the change of circumstance referred to in that subclause occurred to immediately before the day of the motor accident,
(c) if the earner is an earner by reason of having entered into an arrangement with an employer or other person to undertake employment or to commence business as a self-employed person--the average weekly gross earnings that the earner could reasonably have been expected to earn, but for the injury, in employment under that arrangement.
(2A)…
(3)…
(4)…”
Evidence relevant to ‘earner’ and PAWE
The Claimant says that prior to the accident he had entered into two arrangements that are relevant to determining his PAWE in accordance with Sch. 1 cl. 4(2)(c), namely:
(a) To commence business as a self-employed martial arts trainer; and
(b) To undertake employment with Sydney Fire Bricks (SFB).
With respect to the martial arts business, the Claimant relies on evidence from six people (A3 – A8) with whom he says he had reached agreement to provide martial arts training. He says that this evidence establishes that he had entered into an arrangement pre-accident to commence a martial arts business.
The Claimant submits that the evidence establishes he was to provide martial arts training, and receive payment for that training, as follows:
(a) BB – two sessions a week at $80 a session ($160);
(b) AR – two sessions a week at $80 a session ($160);
(c) S – one session a week at $50 a session;
(d) JF – two sessions a week at $80 as session ($160);
(e) CH + sibling – two sessions a week at $80 per session per person ($320);
(f) SP – two session a week at $80 a session ($160).
The Claimant also alleges that he started working at SFB in mid-January 2021, having entered into an arrangement to take up this position in mid-November 2020. The Claimant submits that he was earning $650-$700 per week in this employment, an average of $675 per week.
The evidence relied on by the Claimant in relation to his employment at SFB includes timesheets for the weeks ending 21 January 2021, 28 January 2021, 3 February 2021 and 10 February 2021.
There is an email from GL of SFB to the Claimant’s solicitor sent at 7:50:25 am on 26 February 2021 (R7). In that email GL stated as follows:
“To whom it may concern I employed Mr Alexander G Brewer from mid January to mid February. He alerted me he was suffering from a thumb injury due to a car crash on the 7 of December my manger had offer Alex a position in our team .He alerted me he had suffered a thumb injury .Due to this he unfortunately had to stop working and focus on his injury. His weekly wage was roughly $650 -700$.”
An email from the Claimant’s solicitor to the Insurer, sent at 1:15 am on 26 February 2021, states that, in relation to his work at SFB, ‘There is no other written offer of employment or employment contract.’ (R7)
The Insurer relies on a report from Matthew Gwynne of PKF(NS) Forensic Accountants. PKF provided an assessment of the Claimant’s PAWE under three scenarios that can be summarised as follows:
(a) Scenario 1 was based on the income received by the Claimant from GIO by way of workers compensation payments in the 52 weeks prior to the accident. This scenario resulted in his PAWE being $608.37.
(b) Scenario 2 assessed PAWE at $430 on the basis of the income the Claimant would have received from the three prospective clients from whom statements were obtained by Huxley Hill (CH, JF and AR), less $50 a week representing the likely costs associated with running the martial arts business.
(c) Scenario 3 assessed PAWE at $765. This sum assumed income from all six individuals who provided evidence that they intended to take up training with the Claimant, less 10% reflecting business expenses ($850 - $85 = $765).
Huxley Hill Group reported to the Insurer on 19 April 2021 (R18). Huxley was instructed by the Insurer to obtain evidence from witnesses in relation to the Claimant’s assertions in relation to his martial arts training business and his employment with SFB.
Statements were obtained from CH, JF and AR. Each of these witnesses confirmed that they had made arrangements to commence martial arts training with the Claimant prior to the accident.
Huxley was unable to obtain statements from SP, BB or S.
GL was not prepared to provide a statement or employee records in relation to the Claimant’s employment at SFB.
The Claimant’s Submissions
The Claimant’s submissions are contained in A1 to the Application. In summary, the Claimant submits that:
(a) The Insurer has not correctly calculated PAWE;
(b) The Insurer’s application of weekly workers compensation payments to the determination of PAWE was incorrect;
(c) The entire premise upon which the Insurer has calculated the PAWE is unfounded and represents an incorrect application of the Act;
(d) The insurer should have calculated PAWE in accordance with Schedule 1, clause 4(2)(c);
(e) The Insurer should have assessed PAWE on the basis of arrangements he had made to commence a martial arts training business. Those arrangements would have resulted in earnings of $1010 gross per week;
(f) The Insurer should have included in its’ assessment of PAWE the sum of $675, representing income the Claimant would have received from SFB;
(g) Had the accident not occurred the Claimant would have been earning $1,685 gross per week ($160 + $160 + $50 + $160 + $320 + 160 + $675 = $1685);
(h) Had the Insurer correctly interpreted and applied the Act PAWE would have been determined to be $1,685 gross per week.
The Insurer’s Submissions
The Insurer’s submissions are contained in R2 to the Reply. In summary, the Insurer submits that:
(a) The correct PAWE is $765 per week before tax (gross);
(b) While the term “gross earnings” is not defined in the Act it has been interpreted to mean the net profit/income earned by a self-employed claimant after accounting for all business expenses incurred to run a business, but before tax;
(c) In relation to the Claimant’s purported arrangement with his prospective martial arts clients:
(i)An ABN search records that ‘Alexander Gareth Brewer (ABN 90 858 026 825) is not registered for GST, that his ABN was cancelled for the period 21 March 2019 to 1 December 2020 and reactivated from 1 December 2020 (R21). Accordingly, the Claimant was carrying out business as a self-employed sole trader;
(ii)Huxley were able to obtain statements from only 3 of the Claimant’s prospective martial arts clients (AR, JF and CH) verifying the agreement they had reached with him prior to the subject accident. The other 3 prospective clients, S, SP and BB, did not participate and/or provide statements;
(iii)The Claimant has not provided a summary of estimated expenses incurred by him to derive income as a sole trader;
(iv)The Claimant has not provided a business plan or similar which would demonstrate how he was going to support the requirements of his sole trader business.
(d) In relation to the Claimant’s proposed employment with SFB:
(i)Huxley advised that GL of SFB did not want to participate and/or provide a statement;
(ii)The Claimant provided copies of handwritten weekly timesheets allegedly from SFB for the weeks ending 21 January 2021, 28 January 2021, 3 February 2021 and 10 February 2021; however, the timesheets do not record the name of the employer;
(iii)The Claimant did not provided evidence to verify income derived and/or earnings from SFB such as:
1.A copy of payslips for the period January 2020 to February 2021;
2.A copy of his bank statements for all bank accounts for the period December 2019 to February 2021;
3.A copy of his 2021 ATO income statement from SFB; and
4.A copy of the employment contract confirming details of the purported arrangement with SFB.
(e) The Insurer based its revised assessment of the Claimant’s PAWE on the potential income he would have derived as a martial arts instructor according to the statements provided by his six prospective clients.
(f) PAWE should be determined in accordance with Sch.1 cl. 4(2)(c).
(g) The Claimant’s average weekly gross earnings that he could reasonably have been expected to earn is $850, based on his potential business income from work as a martial arts instructor. The potential / approximate expenses likely to have been incurred operating this business total $85, representing 10% of his revenue. This deduction was below the ATO benchmarks which form Annexure 2.2 of the PKF report.
(h) Once all relevant business expenses are deducted, the business would operate at a potential net profit of $765.
(i) The Claimant’s potential average weekly gross earnings that he could reasonably have been expected to earn, but for the subject accident, in employment under the arrangement entered to commence business as a self-employed person, is $765.
(j) The conclusions reached by Mr Gwynne of PKF should be accepted as the reasoning provided is logical, reasonable, and persuasive; and based on accounting principles.
Determination
The Insurer does not submit that the evidence from the six witnesses relied on by the Claimant to establish the arrangements he had entered into before the accident to commence business as a martial arts trainer should not be accepted. The Insurer was able to verify the evidence of three of the witnesses. In its submissions the Insurer bases its revised assessment of the Claimant’s PAWE on the evidence of all six witnesses (R1 para 28).
I accept the evidence of BB, AR, S, JF, CH and SP in relation to the arrangements they had entered into with the Claimant pre-accident with respect to martial arts training. Huxley’s inability to verify the Claimant’s arrangements with SP, BB and S does not mean I cannot accept their evidence. I do not understand the Insurer to submit to the contrary.
The Claimant asserts that he agreed to provide two training sessions each week to CH and his sibling at a cost of $80 each, a total of $320 a week.
In an email dated 11 February 2021 [A7] CH stated relevantly as follows:
“I am writing on behalf of Alex G Brewer whom I have trained on and off with since 2015 Last year Alex and I had arranged to begin training again in the new year starting in January…Our scheduled training sessions were for twice a week at the cost of $80”
CH provided a statement to Huxley on 8 April 2021 in which he confirmed the arrangement referred to in his email of 11 February 2021.
Neither the email nor the statement refers to a sibling. Further, the arrangements confirmed in the email and the statement refer to two training sessions a week at a cost of $80 per session, a total of $160 not $320 as referred to in the Claimant’s submissions.
The only reference to the provision of training to siblings in the evidence relied upon by the Claimant is the email from SP dated 12 February 2021 (A8). The email states as follows:
“My brother and I are writing on behalf of Alex G Brewer who we wanted to get trained by. He has shown nothing but care and support and is very trustworthy which is why we wanted to be trained by him.
Last year planned to begin training in the new year starting in January but due to his thumb injury he received and other problems he had been experiencing, unfortunately we had to put our training plans on hold until his injury has healed. Our scheduled training sessions were for twice a week at the cost of $80 per sessions.”
Huxley attempted to contact SP to confirm the arrangements with the Claimant but were unsuccessful (see p5 of Huxley report).
I do not accept the Claimant’s submission that he had entered into arrangements to provide two training sessions each week to CH and his sibling at a cost of $80 per person, per session, a total of $320 a week. The submission is not supported by the evidence.
To the extent that the reference to CH is erroneous, and it is the arrangements with SP to which the Claimant intended to refer, I do not accept that the email from SP supports a finding that he and his sibling were to pay the Claimant $80 per person twice a week. On a plain reading that is not what the email from SP says.
I find that at the time of the accident the Claimant had entered into arrangements to provide martial arts training as follows:
(a) BB – two sessions a week at $80 a session ($160);
(b) AR – two sessions a week at $80 a session ($160);
(c) S – one session a week at $50 a session;
(d) JF – two sessions a week at $80 a session ($160);
(e) CH – two sessions a week at $80 a session ($160);
(f) SP – two session a week at $80 a session ($160);
(g) Total = $850.
I am not satisfied that the Claimant had entered into an arrangement with SFB before the accident to undertake employment with them. There is no evidence before me that establishes when the Claimant entered into an arrangement with SFB to undertake employment. The email from GL dated 26 February 2021 makes no reference to when the Claimant entered into an arrangement with SFB to undertake employment. I am not satisfied that the handwritten timesheets for the period 21 January - 10 February 2021 establish when the arrangement was entered into.
I find that the Claimant was an earner as defined in Sch 1. cl. 2(b)(ii) of the Act, as he had entered into an arrangement to commence business as a self-employed person, namely a martial arts trainer, before the motor accident.
I find that the martial arts business would have received income of $850 per week from the arrangements referred to in paragraph 44.
Schedule 1 cl. 4(2)(c) requires me to determine the average weekly gross earnings that the Claimant could reasonably have been expected to earn, but for the injury, under the arrangements he had made to commence business as a self-employed person.
The question arises as to whether the business income of $850 should be reduced to reflect the likely expenses associated with running the business.
In the context of his martial arts business, I find that business expenses would have been incurred. Those expenses would have included, for example, mobile phone and internet costs and the cost of appropriate kit.
In my view, when determining the average weekly gross earnings that the Claimant could reasonably have expected to earn, but for the injury, in his self-employment as a martial arts trainer for the purposes of cl. 4 (2)(c) the likely income received by that business should be reduced to account for the expenses that would have been incurred running the business.
I do not think that the Claimant could reasonably have expected to earn income from the business that did not reflect a deduction to account for those expenses.
I have determined that the sum of $850, less a sum to reflect business expenses, represents the average weekly gross earnings that the Claimant could reasonably have been expected to earn, but for the injury, as a self-employed martial arts trainer.
The evidence in relation to the business expenses associated with the Claimant’s martial arts business is limited to the opinion expressed in the PKF report, including the ATO Benchmarks for Sports and Physical Recreation Instruction.
Absent information in relation to likely expenses associated with running the martial arts business, PKF assumed expenses equal to 10% of the revenue from the business.
I am not persuaded that the business expenses would have been that high. The martial arts business was a one-man operation. It was not a commercial undertaking that was likely to involve significant overheads or running costs. In the circumstances I propose to adopt a figure of 5% to account for business expenses.
Accordingly, I find that, for the purposes of Sch.1 cl. 4(2)(c), the average weekly gross earnings that the Claimant could reasonably have been expected to earn from his martial arts business is $807.50 ($850 less $42.50).
I find that the Claimant’s PAWE is $807.50. The Insurer is to apply this finding when determining the Claimant’s entitlements under Div. 3.3 of the Act.
Costs
The Claimant seeks the maximum costs payable in relation to the proceedings.
The Insurer has made no submissions in relation to costs.
Subject to s 8.10(1) a claimant for statutory benefits is entitled to recover from the insurer against whom the claim is made the reasonable and necessary legal costs, and other costs and expenses, incurred by the claimant in connection with the claim.
A claimant for statutory benefits is only entitled to recover those costs permitted by the regulations or the Commission (s 8.10(3)).
The Regulations do not permit costs in relation to a dispute about the amount of statutory benefits that is payable under Division 3.3. This is such a dispute.
The Commission can permit payment of legal costs incurred by a claimant but only if satisfied that exceptional circumstances exist to justify the payment of legal costs incurred by the claimant.
The Claimant has not provided any evidence in relation to the legal costs, or other expenses, he has incurred in connection with the claim. Nor have submissions been provided by the Claimant with respect to the exceptional circumstances that would justify an order for the payment of his legal costs.
In the circumstances I am not in a position to determine whether the Claimant’s legal costs should be allowed on the basis that exceptional circumstances exist to justify the payment of those costs.
Brett Williams
Member – Motor Accident Division | Merit Reviewer
Personal Injury Commission
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