El Etri v Insurance Australia Limited t/as Nrma Insurance
[2024] NSWPICMR 74
•16 December 2024
| CERTIFICATE OF DETERMINATION OF MERIT REVIEWER | |
CITATION: | El Etri v Insurance Australia Limited t/as NRMA Insurance [2024] NSWPICMR 74 |
CLAIMANT: | Mustapha El Etri |
INSURER: | NRMA |
MERIT REVIEWER: | Katherine Ruschen |
DATE OF DECISION: | 16 December 2024 |
CATCHWORDS: | MOTOR ACCIDENTS - Motor Accident Injuries Act 2017 (MAI Act); dispute about payment of weekly benefits under Division 3.3 of the MAI Act, meaning of PAWE; schedule 1, clause 4; schedule 1, clauses 4(2)(b) and 4(3); significant change in earning circumstances; commencement of self-employment; expected earnings; earnings received after the change occurred; earnings received after the day of the accident for work performed before the accident; business expenses; Held – the reviewable decision is set aside. |
DETERMINATIONS MADE: | CERTIFICATE Issued under s 7.13(4) of the Motor Accident Injuries Act2017 DETERMINATION The reviewable decision is about the amount of weekly payments of statutory benefits 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 set aside, and the following determination is made: (a) the claimant’s pre-accident weekly earnings (PAWE) amount is $2,798.12. |
STATEMENT OF REASONS
INTRODUCTION
There is a dispute between Mustapha El Etri (the claimant) and the insurer about the amount of the claimant’s pre-accident weekly earnings (PAWE) for the purpose of weekly benefits under Division 3.3 of the Motor Accident Injuries Act 2017 (MAI Act).
The claimant was involved in a motor accident on 3 November 2023.
On 29 November 2023 the claimant lodged an application for personal injury benefits.
On 28 February 2024 the insurer determined the claimant’s PAWE in the sum of $3,092.81.
On 10 April 2024, after provision of further information by the claimant, the insurer issued an amended PAWE decision in the sum of $2,752.92.
On 17 July 2024 the claimant requested an internal review of the insurer’s amended decision of 10 April 2024.
On 18 July 2024 the insurer declined the claimant’s request for an internal review.
The claimant has requested a merit review of the insurer’s amended PAWE decision dated 10 April 2024 (the Application).
INTERIM DIRECTIONS AND SUBMISSIONS
The claimant’s initial documents lodged with the Personal Injury Commission (Commission) did not include any submissions. The application for a merit review contained the following in answer to “what is the dispute/issue” in the application form:
“Nrma is not paying me the right weekly payment, they made a decision on April and no matter how many times I called and said it’s wrong they never changed it they kept on asking me to send more documents but nothing changed till July I asked for internal review but they rejected it because it was more than 28 days after the decision was made, their accountant saying that I have $7600 in expenses not showing where I spent it, but I’ve supplied a profit and loss showing everything about my tax, the more expenses I have the less they should pay me, so it’s better for them but no”
In interim directions issued on 21 October 2024, the parties’ attention was drawn to the potential incompleteness of the above submission. The claimant has legal representation. In the interim directions the claimant was provided with an opportunity to address any deficiency in his submissions and/or documents by lodging any further submissions or documents by 4 November 2024.
On 4 November 2024 the claimant provided a one-page submission with attachments comprising a screenshot of an electronic funds transfer payment for a trailer, a screenshot of a Service NSW tax invoice for payment of vehicle registration and two photographs of a vehicle. The one-page submission simply provides a brief and incomplete (for example no dates are given for the cash purchases) narrative about purchase of vehicle accessories for the business and does not address the substantive issues.
Accordingly, the claimant’s submission remains limited to that contained in the Application, as set out at paragraph 9 above.
The insurer submits the claimant’s PAWE assessment falls under cl 4(2)(b) on the basis there was a significant change in earning circumstances pursuant to cl 4(3) when the claimant ceased employment as a plumber’s assistant and commenced as a self-employed plumber on 22 May 2023. On this basis, the insurer has calculated PAWE pursuant to cl 4(2)(b) based on net profit of the business, after deducting GST on sales and business expenses for the 24 week period from 22 May 2023 to 2 November 2023.
The insurer has reconciled invoices issued by the claimant’s business with payments made to the claimant’s bank account. The invoices and bank accounts are reconcilable save for a minor discrepancy which appears to arise from an overpayment of $2 on one invoice, an underpayment of $110 on another and an additional $700 deposit that does not have a corresponding invoice. However, the insurer relies on gross business income (excluding GST) stated in the claimant’s profit and loss statements and 2023 income tax return rather than the bank statements. The insurer has deducted business expenses, as stated in the profit and loss statements and income tax return, to produce total gross earnings received by the claimant as an individual earner in the 24 weeks from 22 May 2023 to 2 November 2023.
An issue seems to have arisen between the parties about the expenses for vehicle accessories referred to above said by the claimant to total $7,600. The insurer notes expenses in a profit and loss statement for the 2023 financial year differ from business expenses in the claimant’s 2023 tax return in that the profit and loss statement records an amount for business expenses that is $7,600 less than the amount declared in the tax return. The claimant was asked to clarify this discrepancy. The insurer submits there are inconsistencies in the claimant’s assertions about these expenses.
ISSUES
Whilst the claimant’s submissions are not helpful regarding identification of the issues in dispute, a review of the correspondence between the parties indicates the following issues arise for determination in this merit review:
(a) whether anything arises from a variation in expenses stated in a profit and loss statement for 30 June 2023 and the 2023 tax return;
(b) whether the insurer has adopted the correct figures for gross income of the business (excluding GST) for the period 22 May 2023 to 30 June 2023 and 1 July 2023 to 2 November 2023;
(c) whether the claimant’s PAWE falls under cl 4(1) or cl 4(2)(b), and
(d) the amount of the claimant’s PAWE.
REASONS
Variation in business expenses
I have been provided with two versions of the profit and loss statement to
30 June 2023. It appears the profit and loss statement was amended to include additional business expenses. The first profit and loss statement records business expenses in the sum of $8,259 whereas the second records expenses of $15,859, which is the same amount recorded in the 2023 tax return. When the discrepancy between the first profit and loss statement and the tax return was pointed out by the insurer the claimant readily acknowledged there were additional expenses for purchase of vehicle accessories in the sum of $7,600. It appears he agreed the higher expense figure in the tax return is correct and it also appears he subsequently amended the profit and loss statement to include the additional expenses.In his application for a merit review the claimant also acknowledges the vehicle accessories expense of $7,600 forms part of business expenses to be deducted from gross business income (no submission has been made by the claimant to the contrary) as he states “…their accountant saying that I have $7,600 in expenses not showing where I spent it, but I’ve supplied a profit and loss showing everything about my tax, the more expenses I have the less they should pay me, so it’s better for them…”
The claimant did not keep sufficient records of the vehicle accessories expense. The failure to include them in the first profit and loss statement appears likely an oversight arising from inadequate record keeping. Additional expenses were declared in the tax return, which was also provided to the insurer and as the claimant points out, the greater the business expenses, the lower the amount is for his PAWE. In all the circumstances, I do not think anything turns on this issue. Any inconsistency from the claimant likely arises from poor record keeping and, in any event, he declared the expenses to the insurer.
Did the insurer adopt the correct net business income figures from the profit and loss statements?
On 14 June 2024 the claimant emailed the insurer about their total figure for net profit of the business as stated in the profit and loss statements. The insurer had adopted a total figure of $126,239 to 2 November 2023 based on net income of $8,678 from
22 May 2023 to 30 June 2023 and $57,392 from 1 July 2023 to 31 October 2023 (noting bank records show no income deposits after 31 October 2023, before the accident on 3 November 2023). The claimant, however, stated in this email that the total should be $82,194 based on net income of $16,278 to 30 June 2023 and $65,916 for “July – November” 2023.However, there is now an amended profit and loss statement to 30 June 2023, which includes additional expenses (as declared in the corresponding tax return), which in turn amends net profit to $8,678. It would appear that at the time of sending his
14 June 2024 email the claimant inadvertently referred to the first version of the profit and loss statement to 30 June 2023 which had net income of $16,278 which has since been amended in a subsequent profit and loss statement to $8,678. Given the amendment, which also reconciles with the 2023 tax return, the insurer has adopted the correct net income figure to 30 June 2023.In relation to whether the amount adopted by the insurer from 1 July 2023 is correct the net income of $57,392 is taken from a profit and loss statement from 1 July 2023 to
31 October 2023 in circumstances where bank records show no pre-accident income received after 31 October 2023.There is also a profit and loss statement from 1 July 2023 to 30 November 2023 which records net profit of $65,916 as asserted in the claimant’s email of 14 June 2024. However, it is clear that this further profit and loss statement includes income received by the claimant after the day of the accident, as evidenced by bank statements. Accordingly, if it is accepted that the correct methodology for calculating PAWE is to calculate income to the day before the accident that is, to 2 November 2023 then the insurer’s figure is correct, as follows:
(a) net business income to 30 June 2023, as stated in the amended profit and loss statement: $8,259;
(b) net business income stated in the profit and loss statement from
1 July 2023 to 31 October 2023: $57,392, and(c) total of above: $65,651.
Does the claimant’s PAWE fall under cl 4(1) or 4(2)(b)?
Pursuant to cl 4 in Schedule 1 of the MAI Act 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 the earner received as an earner, or could reasonably have been expected to receive, during the 12 months after the change of circumstance referred to in the subclause occurred,
(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.
…
(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 effect of cl 4 is that unless one of the exceptions in cl 4(2) apply the claimant’s PAWE is to be assessed under cl 4(1).
The insurer has determined that there was a significant change in earning circumstances triggering cl 4(3) when the claimant ceased employment as a plumber’s assistance and commenced operating as a sole trader plumber on 22 May 2023. The insurer determined that the claimant regularly earned more as a sole trader than he had been earning before this change and on this basis, calculated PAWE pursuant to cl 4(2)(b).
The claimant was employed as a plumber’s assistant from to 21 May 2023. Payslips have been provided which show that in this employment the claimant received gross earnings on average of $2,065 per week.
Given the amount I have calculated for PAWE under cl 4(2)(b) below, I agree with the insurer that the exception in cl 4(2)(b) applies.
What is the claimant’s PAWE under cl 4(2)(b)?
The claimant commenced employment as a sole trader on 22 May 2023. There does not seem to be any dispute that the claimant’s gross earnings from the business are the net profit of the business, exclusive of GST and after accounting for all business expenses, including the $7,600 for vehicle accessories. For the sake of completeness, however, I am of the view that this is correct. Business expenses are not earnings received by the claimant, as they are outgoings of the business required to generate profit and therefore do not make it into the hands of the claimant as his earnings received as an individual earner. Accordingly, business expenses in the relevant period for the purpose of cl 4(2)(b) are deducted from gross profit of the business to produce the claimant’s gross earnings as an individual earner.
In their first PAWE determination the insurer adopted a figure for business income based on bank statements. In their amended PAWE determination PAWE has been calculated based on the profit and loss statements.
The amended profit and loss statement for 30 June 2023 is verified by the 2023 tax return and source documents in the form of invoices issued to 30 June 2023 and deposits received into the claimant’s bank account to 30 June 2023. The source documents (invoices and bank statements) reconcile with the amended profit and loss statement and tax return. Accordingly, the amended 30 June 2023 profit and loss statement and/or tax return can be considered reliable.
The profit and loss statement from 1 July 2023 to 31 October 2023 largely reconciles with the total for invoices issued in this same period with only a minor discrepancy of approximately $700, which is to be expected in the context of a small business. However, I am unable to reconcile the profit and loss statement from 1 July 2023 to
30 November 2023 with the invoices issued and/or bank statements. According to the profit and loss statement from 1 July 2023 to 30 November 2023 gross income (exclusive of GST) was $114,102. However, there is no record of invoices issued after 31 October 2023 to 30 November 2023 and accordingly, invoices issued in this same period (exclusive of GST) total only $102,454. This is a difference of approximately $12,000 in comparison to the 30 November 2023 profit and loss statement. Bank statements also show no income received between 10 November 2023 and
30 November 2023, yet total income received in the bank statements (after excluding GST and including a $700 deposit with no corresponding invoice) is only $109,460. This also results in a not insignificant discrepancy of approximately $5,000 in the
30 November 2023 profit and loss statement.The additional amount in the 30 November 2023 profit and loss statement is unaccounted for in the invoices and bank statements and is not supported by any documents. Given there are no supporting documents for the additional income contended in the 30 November 2023 profit and loss statement and there is a history of a prior incorrect profit and loss statement being the 30 June 2023 statement which required amendment, I do not consider the 30 November 2023 profit and loss statement to be reliable. Accordingly, I consider that the most reliable means of calculating gross profit of the business is the bank statements, particularly given cl 4 concerns earnings “received” by the injured person in the relevant period, regardless as to when the work was carried out. Consistent with this, the bank statements are a record of income that was in fact “received” by the business.
Whilst cl 4(1) requires PAWE to be calculated on the basis of earnings received up to the day before the day of the accident, cl 4(2)(b) is in different terms and provides that PAWE is:
“…the weekly average of the gross earnings the earner received as an earner, or could reasonably have been expected to receive, during the 12 months after the change of circumstance referred to in the subclause occurred.”
Accordingly, the relevant period may not be a closed period up to the day before the day of the accident. Rather, the relevant period under cl 4(2)(b) is “the 12 months after the change of circumstances” occurred with no condition in the subclause that this period must close the day before the day of the accident, as is the case under cl 4(1). However, it follows that were the assessment includes earnings received after the accident the additional weeks after the accident when the earnings were received must be added to the number of weeks over which the weekly earnings are averaged.
In this case, we do not have a 12 month period after the change of circumstances on 22 May 2022 upon which to assess PAWE. However, there is a period from
22 May 2023 to 10 November 2023 over which the claimant received earnings after the change occurred. This is a period of 25 weeks.In this period the bank statements show business income totalling $147,399 (I have accepted the $700 deposit that does not correspond with an invoice as being business income), which equates to $133,999 excluding GST.
Business expenses to 30 June 2023, as recorded in the amended profit and loss statement and tax return are $15,859. As to expenses to 10 November 2023 the bank statements indicate the business did not receive any income nor pay any expenses after this date (the last business expense appears to be on 10 November 2023 for either materials, plant hire or subcontractors and is recorded as “business” for “4xtank” in the bank statement).
As Merit Reviewer I am required to determine the correct and preferable decision based on the material before me. The evidence as to business expenses is perhaps lacking but on the material before me I conclude on balance that the expenses stated in the profit and loss statement from 1 July 2023 to 30 November 2023 are likely the expenses of the business from 1 July 2023 to 10 November 2023, particularly given there were no invoices issued and no income received from 11 November 2023 to
30 November 2023 (that is, it appears the business did not trade in this period, presumably because of the accident). The expenses in the 30 November 2023 profit and loss statement are $48,187. Accordingly, I conclude on balance that total expenses from 22 May 2023 to 10 November 2023 are $64,046 ($15,859[1] plus $48,187[2]).[1] As recorded in the amended profit and loss statement to 30 June 2023 and the 2023 tax return.
[2] As recorded in the profit and loss statement from 1 July 2023 to 30 November 2023.
Accordingly, gross earnings received by the claimant as an earner in the period
22 May 2023 to 10 November 2023 are $69,953 ($133,999[3] less expenses of $64,046).[3] Bank deposits from 22 May 2023 to 10 November 2023 less GST.
The claimant’s PAWE under cl 4(2)(b) is therefore $2,798.12 ($69,953 divided by 25 weeks). This is largely consistent with the insurer’s calculation of $2,752.92 based on income received (and expenses) over a slightly shorter period of 24 weeks to
2 November 2024 (given there is only a minor discrepancy between the
31 October 2024 profit and loss statement and the bank statements I do not have any difficulty with the insurer adopting the income figure in the profit and loss statements to 31 October 2023 rather than in the bank statement).Given the following, I am comfortably satisfied on balance that the claimant’s PAWE is $2,798.12:
(a) my determination is similar to the PAWE amount determined by the insurer based on a methodology with which I would agree if cl 4(2)(b) required PAWE to be calculated over a period up to the day before the accident, and
(b) the analysis I have set out above.
The slight variation between my PAWE determination and that of the insurer simply reflects the fluctuating nature of sole trader income.
CONCLUSION
For the reasons set out above I conclude the claimant’s PAWE amount is $2,798.12.
LEGISLATION AND GUIDELINES
In making this decision, I have considered the following:
· the Application, Reply and supporting documentation;
· MAI Act;
· Motor Accident Guidelines, and
· Motor Accident Injuries Regulation 2017.OutcomeDocumentSignature
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