Gorrie v Allianz Australia Insurance Limited
[2023] NSWPICMR 18
•24 March 2023
| CERTIFICATE OF DETERMINATION OF MERIT REVIEWER | |
| Citation: | Gorrie v Allianz Australia Insurance Limited [2023] NSWPICMR 18 |
| ClaimanT: | Hugh Gorrie |
| Insurer: | Allianz Australia Insurance Limited |
| Merit Reviewer: | Maurice Castagnet |
| DATE OF DECISION: | 24 March 2023 |
CATCHWORDS: | MOTOR ACCIDENTS - Motor Accident Injuries Act 2017; merit review; dispute about the amount of weekly payments of statutory benefits under Division 3.3; where the claimant received gross earnings as an employee of a registered proprietary company under the Corporations Act 2001; where the claimant was also the sole director, sole shareholder and sole employee of the company; whether the company’s net profit or gross earnings should be included in the claimant’s gross earnings for the purpose of calculating the claimant’s pre-accident weekly earnings under Schedule 1 clause 4(1); Held – the reviewable decision is affirmed. |
| Determinations made: | CERTIFICATE OF DETERMINATION Issued under s 7.13(4) of the Motor Accident Injuries Act 2017 (the MAI Act) The reviewable decision concerns the amount of weekly payments of statutory benefits that are 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 affirmed. |
STATEMENT OF REASONS
INTRODUCTION
This matter concerns a dispute between the claimant, Hugh Gorrie, and the insurer about the amount of weekly payments of statutory benefits payable to the claimant under division 3.3 of the Motor Accident Injuries Act 2017 (the MAI Act).
BACKGROUND
The claimant is a 54-year-old man who was injured in a motor accident on
6 August 2022.On 9 August 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 employed full-time in the field of electrical and hydraulic repairs by “Atlas Collision Repair Equipment”. As will become apparent later in these reasons, this is a reference to a company called Atlas Collision Repair Equipment Pty Ltd. He also stated that at the time of the accident, he was earning $87,000 annually.
On 7 September 2022, the insurer notified the claimant that it accepted liability to make weekly payments for the first 26 weeks and that the claimant would receive interim payments of $550.38 per week for at least 13 weeks, pending the receipt of financial information from the claimant to calculate his pre-accident weekly earnings (PAWE).
The actual amount of weekly payments that the claimant is entitled to receive is based on his PAWE, subject to the usual reductions imposed by division 3.3 of the MAI Act.
On 21 October 2022, following receipt of the claimant’s financial information, the insurer notified the claimant that it had determined the claimant’s PAWE to be $672.05.
The claimant disagreed with the insurer’s decision. On 7 November 2022, he sought an internal review of the decision, submitting that his PAWE should be $1,891.33.
On 21 November 2022, the insurer issued a review decision affirming its original decision.
On 2 December 2022, the claimant made an application to the Personal Injury Commission (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 20 December 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. I also considered further submissions made by the claimant on 12 January 2023 and further documents that were provided by the parties in February 2023 at my request.
I am satisfied that I have enough information to proceed with a determination of the dispute, on the papers.
LEGISLATION
In making my decision, I have considered the following:
· the MAI Act;
· Motor Accident Guidelines 2017 (Version 9) (Guidelines), and
· Motor Accident Injuries Regulation 2017 (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 ss 3.6 and 3.7 of division 3.3 of the MAI Act, and
(b) in calculating the claimant’s PAWE, cl 4(1) of Schedule 1 of the MAI Act is to be applied.
The central issue in the dispute between the parties is the determination of 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 CLAIMANT’S POSITION
The claimant’s position may be summarised as follows:
(a) He is the owner, sole employee and sole shareholder of the company, Atlas Collision Repair Equipment Pty Limited (Atlas). On that basis, his PAWE should be calculated with reference to the income of Atlas, and not only on his taxable income.
(b) The insurer’s determination of his PAWE in the amount of $672.05 does not take into account profits retained by Atlas for whom the claimant worked during the relevant period. Accordingly, for the purposes of determining PAWE pursuant to cl 4 of Schedule 1, his income as an earner includes the proceeds of the business carried on by him. Atlas is simply the vehicle through which that business is conducted.
(c) In Patton v Allianz Australia Insurance Limited (No.1) [2022] NSWPICMR 45 (Patton (No.1)) at paragraphs 21 – 26, the merit reviewer has taken a narrow interpretation of business carried on by the person, by observing that whilst the claimant ultimately derives income from the company’s business, “the business” is operated by the company, a registered corporation and separate legal entity and not operated, or carried on, by the claimant. The claimant accepts that Atlas is a separate legal entity, but to say that the business is not carried on by the claimant is incorrect. The claimant poses the question: if the business is not carried on by the claimant, by whom is the business carried on? To argue, as the merit reviewer does in Patton (No.1), that the business is carried on by the company, ignores the fact that although the company is a legal structure, it is incapable of any action at all without the active involvement of the claimant who, in this case, is its sole director, sole shareholder and sole employee.
(d) Sub-clause 3(2)(b) of Schedule 1 should be construed with regard to the provisions of sub-cl 3(2)(a) which casts a very wide net in terms of what should be considered income from personal exertion. The interpretation of the phrase “proceeds of any business” in Patton (No.1) is erroneous and should not be followed in this merit review.
(e) In Patton (No.1), the merit reviewer did not refer to Husher v Husher [1999] HCA 47. In that case, the High Court was dealing with the assessment of the income of a self-employed block layer through a partnership with his wife. Whilst the entity considered in Husher was a partnership rather than a company, the process of construction is the same. The approach taken by the High Court is that the plaintiff in that case was entitled to the proceeds of the particular entity that he controlled, rather than his “paper earnings” or tax returns. This approach is a far more reasonable and realistic way of assessing the claimant’s PAWE than the approach taken by the merit reviewer in Patton (No.1).
(f) The claimant relies on the report of forensic accountant, Lance Kahler of Vincents, dated 18 October 2022 provided to the Commission by the insurer. That report provides two potential calculations of PAWE based on the claimant’s earnings from Atlas; $1,891.33 per week or $1,343.25 per week. The difference between the two is that the higher calculation takes into account Service NSW COVID-19 Support payments received by Atlas during the financial year ending 30 June 2022.
(g) The COVID-19 pandemic adversely affected the incomes of many businesses. Sub-clause 3(2)(c) of Schedule 1 provides that income from personal exertion includes “any amount received as a bounty or subsidy in carrying on a business”. The claimant submits that the COVID-19 payments received by the business is a subsidy received in carrying on the business and should be included in the calculation of the PAWE.
(h) Based on the matters raised above, the claimant submits that his PAWE should be $1,891.33.
THE INSURER’S POSITION
The insurer maintains that the claimant's PAWE should be $672.05 as determined in its review decision.
The insurer says that it has calculated the claimant's PAWE using the method set out in cl 4(1) of Schedule 1 of the MAI Act based on the earnings received by the claimant as wages from Atlas. The insurer accepts that the claimant is the sole director and shareholder of Atlas. However, in view of the corporate structure, the insurer says that Atlas is its own legal entity and distinct from the claimant.
The insurer relies on the reasons given by Merit Reviewer Katherine Ruschen in Patton (No.1) and says that what is relevant in the assessment of the claimant's PAWE are the earnings that he received as wages from Atlas, and not Atlas' income.
Based on those wages, the insurer says that the claimant's PAWE are $672.05.
RELEVANT LEGISLATION
According to ss 3.6 and 3.7 of the MAI Act, an earner such as the claimant is eligible to receive weekly payments of statutory benefits in respect of loss of earnings for a total period of 78 weeks after the accident. The first period is the first 13 weeks after the accident. The second period is from weeks 14 to 78.
The issue in dispute in this matter is about the calculation of the amount of any weekly payments of statutory benefits the claimant might be entitled to receive during those periods.
Section 3.6 relevantly makes provision for the first period 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.
…
(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.
…”
(Emphasis added)Section 3.7 relevantly makes provision for the second period in the following terms:
“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 … 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.
…
(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% …
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.…”
(Emphasis added)“Loss of earnings” is defined in cl 3 of Schedule 1 of the MAI Act in the following terms:
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.
Clause 4 of Schedule 1 of the MAI Act provides:
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) …
(2A) …
(3) …
(4) …”
CONSIDERATION
The relevant period of the claimant’s gross earnings to calculate PAWE
As previously noted, the parties accept that cl 4(1) of Schedule 1 should be applied to calculate the claimant’s PAWE.
Clause 4(1) provides that the claimant’s PAWE means the weekly average of the gross earnings received by him as an earner during the 12 months immediately before the day of the motor accident.
The motor accident occurred on 6 August 2022. A strict application of cl 4(1) would therefore require that the claimant’s PAWE be calculated on the basis of his gross earnings during the period from 6 August 2021 to 5 August 2022 (the relevant period).
In this matter, the parties accept that the claimant’s gross earnings during the financial year ending 30 June 2022 should be applied as the relevant period of gross earnings to calculate the claimant’s PAWE. On that basis, I consider that there is no utility in disturbing the parties’ consensus in that regard, particularly in circumstances where they also agree that the claimant is an “earner” for the purpose of cl 2(a) of Schedule 1, and that he is eligible to receive weekly payments of statutory benefits.
The claimant’s gross earnings during the relevant period
The claimant says that his gross earnings as an earner during the relevant period were $98,349. Dividing that amount by 52 weeks results in PAWE of $1,891.33.
According to the material before me, the amount of $98,349 is made up of the following:
a)gross wages of $34,947 paid to the claimant by Atlas;
b)employer superannuation contributions of $3,495 made by Atlas on the claimant’s behalf, and
c)Atlas’ reported net profit or gross earnings of $59,908.
Discussion
The claimant has made a claim for weekly payments of statutory benefits with respect to his loss of earnings. The term “earnings” is not specifically defined in the MAI Act. Clause 3 of Schedule 1 provides a definition for the term “loss of earnings” by stipulating the types of income that may constitute loss of earnings. In my view, it follows that the same types of income are to be included to arrive at gross earnings for the purpose of calculating PAWE under cl 4 of Schedule 1.
First, there is no dispute that the wages of $34,947 the claimant received from Atlas should be included in the gross earnings to calculate his PAWE. This is because sub-cl 3(2)(a) of Schedule 1 is satisfied. The claimant received those wages as the employee of Atlas.
Secondly, the claimant contends that the employer superannuation contributions of $3,495 made by Atlas on his behalf should be included in the gross earnings to calculate his PAWE. This contention must be rejected because sub-cl 3(3)(c) of Schedule 1 excludes any employer superannuation contributions from the calculation of loss of earnings.
Lastly, the claimant contends that the net profit or gross earnings of Atlas should be included in the claimant’s gross earnings to calculate his PAWE. The claimant says this is because all of the work carried by him for Atlas was in his capacity as employee, director and sole director of Atlas. As such, the business carried on by Atlas was carried on by him alone.
I have considered the claimant’s substantial submissions on this issue. For the reasons that follow, they must be rejected.
Sub-clause 3(2)(a) of Schedule 1 provides that the proceeds of any business carried on by the claimant either alone or in partnership with any other person may be taken into account for calculating his loss of earnings.
In this case, it cannot be said that the claimant was carrying on the business alone. The proceeds of the business or the gross earnings of $59,908 was not received by the claimant as an individual earner but by Atlas as a separate corporate entity. The evidence reveals that Atlas is a registered proprietary company under the Corporations Act 2001.
The only gross earnings received by the claimant from Atlas during the relevant period were wages of $39,947.
The “Financial Statements for the period ended 30 June 2022” of Atlas, reveals that the company reported retained earnings of $166,778.04 for that financial year. If part or all of those retained earnings were received by the claimant as declared director’s fees or dividend income in the relevant period, those earnings may be included in his gross earnings pursuant to cl 3(2)(a) as “fees” or “bonuses”. However, there is no evidence before me that this occurred.
On that basis, the only earnings received by the claimant as an earner that may be included in the calculation of his gross earnings during the relevant period are the wages of $39,947.
It follows that the review decision must be affirmed.
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 affirmed.
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