Conde v Insurance Australia Limited t/as NRMA Insurance
[2022] NSWPICMR 28
•26 April 2022
| CERTIFICATE OF DETERMINATION OF MERIT REVIEWER | |
| CITATION: | Conde v Insurance Australia Limited t/as NRMA Insurance [2022] NSWPICMR 28 |
| CLAIMANT: | Vanesa Conde |
| INSURER: | Insurance Australia Limited t/as NRMA Insurance |
| MERIT REVIEWER: | Katherine Ruschen |
| DATE OF DECISION: | 26 April 2022 |
| CATCHWORDS: | MOTOR ACCIDENTS- Merit review; meaning of pre-accident weekly earnings, schedule 1(4)(2)(b) of the Motor Accident Injuries Act 2017; pre-accident weekly earnings (PAWE); change of earnings circumstance; whether PAWE can be adjusted by reason of the COVID-19 pandemic lockdown in the pre-accident period; disaster payments; earnings as an earner; Held– the reviewable decision is set aside. |
| DETERMINATIONS MADE: | The reviewable decision is about the amount of weekly payments of statutory benefits that are payable under Division 3.3 of the Motor Accident Injuries Act 2017 (the MAI Act), and is therefore a merit review matter under Schedule 2(1)(a) of the MAI Act. 1. The reviewable decision is: (a) set aside; (b) the claimant’s PAWE amount is $52.30, and (c) pursuant to sections 3.6(4) and 3.7(4) of the MAI Act a minimum payment under section 3.6 or 3.7 is not to be less than $52.30. |
BACKGROUND
There is a dispute between Vanesa Conde (the claimant) and the insurer about the amount of weekly payments of statutory benefits that are payable under Division 3.3 of the MAI Act.
The claimant was involved in a motor accident on 21 November 2021.
The claimant made an application for personal injury benefits under the MAI Act.
On 1 February 2022 the insurer determined the claimant’s pre-accident weekly earnings (PAWE) in the sum of $246.94 for the purpose of calculating whether the claimant is entitled to weekly payment of statutory benefits under sections 3.6 and 3.7 of the MAI Act.
The claimant requested an internal review of the insurer’s PAWE decision of 1 February 2022.
On 28 February 2022 the insurer issued their internal review decision in which the insurer revised the claimant’s PAWE to $37.21 and found in this circumstance that the minimum weekly statutory benefit amount of $110.10 applies in respect of payments under sections 3.6 and 3.7 of the MAI Act.
The claimant has requested a merit review of the internal review decision dated 28 February 2022.
SUBMISSIONS
The claimant is a self-employed hairdresser and submits her PAWE should be averaged over a one month period, being the one month immediately before the COVID-19 related Sydney Lockdown in June 2021 on the basis she did not receive any earnings during the lockdown.
The insurer has not made direct submissions in the merit review, but it is apparent from their internal review decision that they consider the claimant’s PAWE assessment falls under Schedule 1, clause 4(1) of the MAI Act and that there is to be no adjustment to the 52 week period under clause 4(1).
REASONS
Issues
The following issues arise for determination in this merit review:
(a) whether the claimant’s PAWE falls under clause 4(1) or one of the exceptions in clause 4(2)(b);
(b) whether the claimant’s PAWE can be adjusted under the applicable sub-clause under clause 4 to account for the impact of the COVID-19 pandemic on earnings in the pre-accident period, and
(c) calculation of the claimant’s PAWE.
Does clause 4(1) or one of the exceptions in clause 4(2) apply to the claimant?
Pursuant to Schedule 1, clause 4 “PAWE” means:
(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) The "pre-accident period", in relation to a motor accident, is the period of 2 years immediately preceding the motor accident.
(3) This subclause applies if, during the 12 months immediately before the day of the motor accident, there was, as a result of any action taken by the earner, a significant change in his or her earnings circumstances that resulted in the earner regularly earning, or becoming entitled to earn, more on a weekly basis than he or she was earning before the change occurred.
Note : Examples of a change of circumstances to which this subclause would apply include a change of job, a promotion, a move from part-time to full-time employment, or a pay increase arising from the achievement of performance standards.
(4) For the purposes of this clause, an earner earns continuously if he or she obtains earnings from permanent employment or from a source that, on the day of the motor accident, was likely to continue for a period of at least 6 months to provide earnings to the earner on the same, or a similar, basis to the basis on which the earnings were being provided as at that day.
The claimant is a self-employed hairdresser. The 12-month pre-accident period is 21 November 2020 to 20 November 2021. The evidence establishes that the claimant was in receipt of earnings through her business during this pre-accident period from 6 March 2021 to 15 June 2021. This is a period of 14.57 weeks. Accordingly, the claimant is an “earner” within the meaning in the MAI Act on the basis she falls within the ambit of Schedule 1, clause 2(a) as she was injured as a result of a motor accident, is over 15 years of age, was employed or self-employed for at least 13 weeks of the 52 weeks of the year immediately preceding the accident and had not permanently retired at the date of the accident.
Prima facie, clause 4(1) applies to calculation of the claimant’s PAWE, unless one of the exceptions in clause 4(2) applies to the claimant’s circumstances.
The evidence establishes that the exception at clause 4(2)(a1) does not apply. For this exception to apply the claimant must have received earnings for at least 26 weeks during the first year of the two year pre-accident period and must not have received any earnings after the first year of the two year pre-accident period. In the claimant’s case, this means the claimant must receive all of her earnings (and for at least 26 weeks) in the period 21 November 2019 to 20 November 2020 and no earnings in the period 21 November 2020 to 20 November 2021. However, it is apparent from the documents that the claimant was in receipt of earnings during the second year of the two year pre-accident period that is, after 20 November 2020. Accordingly, the exception under clause 4(2)(a1) does not apply to the claimant’s circumstances.
There is no evidence to suggest the exception under clause 4(2)(c) might apply.
The claimant arrived in Australia in March 2020 and began to derive income as a self-employed hairdresser from March 2021. This is consistent with the bank statements which show no earnings in the 12 months before the date of the accident, prior to 6 March 2021. On this basis, the exception at clause 4(2)(a) arises for consideration. However, clause 4(2)(a) requires the claimant to have been earning continuously on the day of the motor accident that is, as at 21 November 2021. The evidence establishes the claimant had not derived any income from her business since 15 June 2021, more than five months prior to the accident. Accordingly, the claimant was not earning continuously as at the date of the motor accident. Therefore clause 4(2)(a) does not apply to the claimant’s circumstances.
On the basis the claimant began to earn through her business from 6 March 2021 clause 4(2)(b) arises for consideration. Clause 4(2)(b) applies, if clause 4(3) is satisfied. Clause 4(3) is satisfied if, during the 12 months before the date of the motor accident, the claimant took action that resulted in a significant change in her earnings circumstances that resulted in her regularly earning more. The evidence establishes the claimant did not have any earnings in the period from March 2020 when she arrived in Australia until March 2021 when she commenced her hairdressing business. In the 14.57 weeks she traded before the June 2021 lockdown the business earned a weekly average of $301.78 in gross takings. As a result of commencing her business the claimant’s earnings circumstances changed from having no earnings to regularly earing through her business. For the first 14.57 weeks of the business the claimant clearly regularly earned more than she had before, as her earnings went from nil to earning a weekly average of $132.80 (based on the net profit of the business – see further below). Having set up her business prior to the June 2021 lockdown it can be reasonably expected that the claimant would have continued her hairdressing business and therefore, but for the lockdown had become entitled to earn more on a weekly basis than she was earning before she started her business.
I am therefore satisfied that on 6 March 2021, when the claimant commenced earning from her business, there was a significant change in the claimant’s earnings circumstances that resulted in her regularly earning, or becoming entitled to earn, more on a weekly basis than she was earning before this change occurred. Accordingly, clause 4(3) is satisfied and the claimant’s PAWE is therefore to be assessed under clause 4(2)(b) rather than clause 4(1).
Can the claimant’s PAWE be adjusted by reason of the COVID-19 pandemic?
There are no provisions under the MAI Act, Motor Accident Injuries Regulation or the Motor Accident Guidelines that permit adjustment of PAWE to account for impact of the COVID-19 pandemic on a person’s ability to earn during the pre-accident period. My reasons for reaching this conclusion are set out in detail in my dissenting reasons in the merit review panel determination of Shahmiri v Allianz Australia Insurance Limited [2021] NSWPICMRP 2 (9 August 2021) (Shahmiri).
In Shahmiri I concluded that there is no basis upon which the MAI Act permits an adjustment under Schedule 1, clause 4 to calculation of an earner’s PAWE by reason of the COVID-19 pandemic, including a government imposed lockdown, or any other interruption to earnings such as illness, maternity leave or leave of absence for other reasons. Whilst the majority in Shahmiri found an adjustment can be made, I disagree.
The review panel’s decision in Shahmiri was the subject of an appeal to the Supreme Court. Judgement was handed down by the Supreme Court in the appeal in Allianz Insurance Australia Limited v Shahmiri [2022] NSWSC 481 on 22 April 2022 (the Shahmiri appeal). In the Shahmiri appeal Harrison AsJ overturned the majority review panel decision and agreed with my dissenting reasons. Harrison AsJ held that pursuant to Schedule 1, clause 4(1) PAWE is to be “calculated by taking … earnings over the whole of the 12-month period immediately before the day of the accident and dividing it by 52 reflecting the number of weeks during the whole 12-month period” and that the MAI does not allow any adjustment to this by reason of the COVID-19 pandemic or other break or reduction in employment or earnings.
Whilst Mr Shahmiri’s PAWE calculation fell under clause 4(1) and I have concluded the claimant’s falls under clause 4(2)(b), the language of clauses 4(1) and 4(2)(b) in so far as is relevant in the Shahmiri appeal is the same. The findings of Harrison AsJ turn on the wording in clause 4(1) that PAWE is to be calculated based on the “weekly average of the gross earnings received by the earner as an earner during” the relevant period, which is the same wording in clause 4(2)(b). The only point of difference between clause 4(1) and 4(2)(b) is the period that is, the period “during” which the earner received earnings as an earner. In the case of clause 4(1) the relevant period is the 52 week period immediately before the date of the motor accident. In the case of clause 4(2)(b) the relevant period is the period from the date of the change in circumstance to the day immediately before the day of the accident, which in the claimant’s case is 37 weeks (6 March 2021 to 20 November 2021).
It follows from the use of the language, “gross earnings received by the earner as an earner during …” in both clause 4(1) and 4(2)(b) and the reasons in the Shahmiri appeal that the decision of Harrison AsJ also applies to clause 4(2)(b).
Accordingly, the claimant’s PAWE cannot be adjusted under clause 4(2)(b) to account for interruption or reduction in earnings during the pre-accident period by reason of the COVID-19 lockdown.
Calculation of the claimant’s PAWE
Pursuant to clause 4(2)(b) the claimant’s PAWE is the weekly average of the gross earnings received by the earner as an earner during the period from when the change of circumstance occurred to immediately before the day of the motor accident. The period over which PAWE is to be calculated is therefore 6 March 2021, when the business commenced receiving an income, until 20 November 2021, being the day before the accident. This is 37 weeks.
Pursuant to the decision of Harrison AsJ in the Shahmiri appeal, the claimant’s earnings received in this period are to be averaged over the whole of the period from 6 March 2021 to 20 November 2021 and dividing it by 37 reflecting the number of weeks during the whole of this period. Pursuant to the decision in the Shahmiri appeal, the number of weeks over which PAWE is averaged cannot be reduced, regardless of any break or reduction in earnings because of the pandemic, including any lockdown.
The claimant’s financial records of her business are seriously deficient. The onus is on the claimant to provide sufficient evidence of her pre-accident earnings. As a sole trader the claimant ought to be able to provide reliable records of total sales of the business and total business expenses. However, the claimant has only provided records relevant to gross sales of the business. Those records show a total of gross sales of $4,397 received during the 37 week pre-accident period under clause 4(2)(b) from 6 March 2021 to 20 November 2021.
In so far as the claimant received COVID-19 disaster payments during the 37 week pre-accident period they are excluded from PAWE. This is because the claimant achieves earner status for the purpose of the MAI Act by reason of being in receipt of earnings from employment or self-employment as per the definition of earner in Schedule 1, clause 2. Pursuant to clauses 4(3) and 4(2)(b) only earnings received by the claimant “as an earner” can be included in calculation of PAWE.
The claimant did not receive Centrelink COVID-19 disaster payments “as an earner”. She did not perform any work for those payments. The claimant is not in a relationship of employee and employer with Centrelink and did not render services to Centrelink. Accordingly, the claimant did not receive the payments in the capacity of employee or for any services rendered.
Accordingly, COVID-19 disaster payments are not earnings received by the claimant as an earner and are therefore excluded from PAWE. This conclusion is consistent with the article “COVID-19 hub for injured workers and road users” published by the State Insurance Regulatory Authority which states “COVID-19 Disaster Payments are not considered earnings for the purpose of [PAWE]”.
As a self-employed earner the gross earnings the claimant receives as an individual earner for the purpose of the MAI Act are the net profit of her business (before tax), after accounting for all expenses incurred by the business. The claimant has failed to provide evidence of her business expenses. It is apparent, however, including from the photographs provided by the claimant showing her salon and the transaction descriptions in the claimant’s sales “summary report” that the business incurs expenses. For example, some of the sales are for the purchase of “haircare products”, which the business would have had to purchase in order to then sell them on to customers. Other services are described as “highlights”, “Keratine treatment” and “haircolour”. The business would have had to purchase products for use on the customer’s hair. There would likely also be other business expenses such as rent, electricity, telephone and internet, costs of purchase of equipment and so on.
In circumstances where the claimant has not provided records of the business expenses I agree with the insurer and PFK forensic accounts that it is appropriate to assess expenses pursuant to the ATO benchmarks for hairdressers at an average rate of 56% of revenue derived. This produces a figure of $2,462 (56% of gross profit of $4,397) for business expenses and in turn, a net profit of the business (before tax) of $1,935 (gross profit of $4,397 less expenses of $2,462).
Accordingly, the claimant’s total gross earnings as an earner in the clause 4(2)(b) pre-accident period are $1,935. Applying the decision in the Shahmiri appeal the claimant’s PAWE is therefore $52.30, being gross earnings of $1,925 divided by 37 weeks.
Under section 3.6 of the MAI Act a weekly payment of statutory benefits “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)…”
Under section 3.7 a weekly payment of statutory benefits 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).
However, under sections 3.6 and 3.7 a weekly payment of statutory benefits is “not to be less than the minimum weekly statutory benefits amount or the person's [PAWE], whichever is the lesser” (emphasis added).
The insurer concluded that as the claimant’s PAWE is less than the minimum weekly statutory benefits amount payments under sections 3.6 and 3.7 are to be at the minimum of $110.10, which is greater than the claimant’s PAWE. However, sections 3.6 and 3.7 clearly state the claimant is entitled to the minimum weekly statutory benefits amount or PAWE, whichever is the lesser. In this case the claimant’s PAWE is the lesser of the two and accordingly, if the claimant establishes an entitlement to a weekly payment based on the difference between her PAWE and post-accident earning capacity (if any) then she will be entitled to payment in amount not less than her PAWE of $52.30.
In summary, for the reasons set out above I conclude that:
(a) the claimant’s PAWE is to be assessed under Schedule 1, clause 4(2)(b) of the MAI Act;
(b) the period over which the claimant’s weekly earnings are to be averaged under clause 4(2)(b) is 6 March 2021 to 20 November 2021, which is 37 weeks;
(c) the claimant’s gross earnings from her business (that is, the net earnings of the business but before tax) in the relevant 37 week period are $1,935;
(d) the claimant’s PAWE is therefore $52.30 ($1,935 divided by 37 weeks), and
(e) if the claimant is entitled to payment under section 3.6 or 3.7 of the MAI Act then she is entitled to a minimum payment of $52.30, being the lessor of the claimant’s PAWE and the minimum weekly statutory benefits amount.
CONCLUSION
The reviewable decision is:
(a) set aside;
(b) the claimant’s PAWE amount is $52.30, and
(c) pursuant to sections 3.6(4) and 3.7(5) of the MAI Act a minimum payment under section 3.6 or 3.7 is not to be less than $52.30.
LEGISLATION AND GUIDELINES
In making this decision, I have considered the following:
· The application, reply and supporting documentation;
· The MAI Act;
· Motor Accident Guidelines, and
· Motor Accident Injuries Regulation 2017.
Katherine Ruschen
Merit Reviewer
Personal Injury Commission
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