Hallak v Allianz Australia Insurance Limited
[2023] NSWPICMR 10
•20 February 2023
| CERTIFICATE OF DETERMINATION OF MERIT REVIEWER | |
| Citation: | Hallak v Allianz Australia Insurance Limited [2023] NSWPICMR 10 |
| ClaimanT: | Hadi Hallak |
| Insurer: | Allianz Australia Insurance Limited |
| Merit Reviewer: | Katherine Ruschen |
| DATE OF DECISION: | 20 February 2023 |
CATCHWORDS: | MOTOR ACCIDENTS- Motor Accident Injuries Act 2017; merit review; dispute about payment of weekly benefits under Division 3.3; meaning of pre-accident weekly earnings; PAWE; meaning of earnings; Schedule 1, clause 4; self-employment; business expenses; proceeds of the business; clause 3(2)(b); whether earnings as an earner are the gross profit or net income of the business; COVID-19 disaster allowance; Held – the reviewable decision is affirmed. |
| Determinations made: | CERTIFICATE OF DETERMINATION Issued under s 7.13(4) of the Motor Accident Injuries Act2017 DETERMINATION 1. The reviewable decision is affirmed. |
STATEMENT OF REASONS
INTRODUCTION
There is a dispute between Hadi Hallak (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 19 July 2022.
The claimant made an application for personal injury benefits under the MAI Act.
On 7 December 2022 the insurer determined the claimant’s pre-accident weekly earnings (PAWE) in the sum of $959.15.
On 10 January 2023 the claimant requested an internal review of the insurer’s PAWE decision dated 7 December 2022.
On 23 December 2022 the insurer issued their internal review decision, which affirmed the original decision that PAWE is $959.15.
The claimant has requested a merit review of the insurer’s internal review decision dated 23 December 2022.
SUBMISSIONS
The claimant was a self-employed renderer at the time of the motor accident.
The claimant submits the definition of income from personal exertion is in Schedule 1, cl 3(2)(a) of the MAI Act. The claimant submits pursuant to that definition his PAWE is the weekly average of “total sales” of the business that is, the gross profit of the business before taking into account business expenses.
The claimant is legally represented. The claimant’s submissions are less than half a page. The submissions do not set out the claimant’s interpretation of cl 3(2)(a) nor the basis on which the claimant challenges the insurer’s application of other decisions of the Personal Injury Commission (the Commission) dealing with question of a person’s gross earnings as an earner from self-employment. The submissions also ignore Schedule 1, cl 3(2)(b) of the MAI Act despite its obvious relevance, The submissions are not particularly helpful.
The insurer submits that in line with other decisions the claimant’s gross earnings received as an earner are the net income of the business, after accounting for all business expenses.
REASONS
The issue
There is no dispute that the claimant is an earner for the purpose of the MAI Act.
There also does not appear to be any dispute that the claimant’s PAWE falls under Schedule 1, cl 4(1) of the MAI Act[1].
[1] A previous contention by the claimant that he did not start earning continuously until October 2021 and therefore PAWE falls under cl 4(2)(a) has been abandoned by the claimant in his submissions for this merit review.
Under cl 4(1) the claimant’s PAWE is calculated over the 52 week period immediately before the day of the motor accident. That period is 19 July 2021 to 18 July 2022. However, the parties agree the claimant’s PAWE should be based on gross earnings in the nearest 52 week period in respect of which complete records of the business earnings are available, being 1 July 2021 to 30 June 2022.
Given the period 1 July 2021 to 30 June 2022 is closely aligned with the pre-accident period being only 18 days out and the absence of records that would enable PAWE to be calculated over the precise pre-accident period under cl 4(1) I agree the approach taken by the parties is the correct and preferable approach.
The legislation
Pursuant to cl 4(1) PAWE relevantly means “the weekly average of the gross earnings received by the earner as an earner…”.
“Gross earnings” is not defined in the MAI Act. “Earnings” is also not defined. However, “loss of earnings” is defined in Schedule 1, cl 3(1) of the MAI Act to mean “a loss incurred or likely to be incurred in a person's income from personal exertion”. It is clear from this definition that the word “earnings” is intended to mean “income from personal exertion”.
The meaning of “income from personal exertion” is contained in cl 3(2) as follows:
|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.”
The claimant relies on cl 3(2)(a). However, this completely ignores cl 3(2)(b) which is obviously applicable to the claimant’s circumstances of self-employment as a sole trader.
Clause 3(2)(b) expressly deals with circumstances of self-employment and as such, renders cl 3(2)(a) redundant in so far as a person is earning through a business either in partnership or as a sole trader. The claimant was a sole trader.
Relevantly, pursuant to cl 3(2)(b) the claimant’s sole trader “income from personal exertion" is “the proceeds of [his] business” which he carried on alone.
The principles of statutory interpretation are set out by the High Court in Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355; 72 ALJR 841; 153 ALR 490 and relevantly require that:
(a) the words in the statute must be interpreted in a way that is consistent with the language used in that statute;
(b) words of a statutory provision are given the meaning that the legislature is taken to have intended them to have, and
(c) the same wording used throughout the statute carries the same meaning.
Whilst the word “earnings” does not have a specified definition in isolation to the definition of the phrase “loss of earnings” it is a word that is used throughout the MAI Act. Pursuant to principles of statutory interpretation it must be taken to have the same meaning throughout the MAI Act. Accordingly, “earnings” should be given the same meaning when used in phrases such as “gross earnings” and “earnings as an earner” as it is given by the definition of “loss of earnings” in Schedule 1, cl 3 of the MAI Act.
Under cl 3 “loss of earnings” means a loss of “income from personal exertion”. It follows from this is that the word “earnings” is intended to mean “income from personal exertion” wherever the word appears in the MAI Act.
Where circumstances of a sole trader business are expressly accommodated in cl 3(2)(b) it cannot be intended by the legislature that cl 3(2)(a) applies in addition, or in the alternative, to cl 3(2)(b). The only logical conclusion is that in the circumstances of a sole trader “income from personal exertion” means “the proceeds” of the claimant’s business pursuant to cl 3(2)(b). Accordingly, the claimant’s “gross earnings” for the purpose of PAWE are the “proceeds” he receives from his rendering business.
What are the proceeds of the claimant’s business?
Schedule 1, cl 4(1) requires a determination of the claimant’s gross earnings received as an individual “earner” and not the gross earnings of the business itself. In so far as the claimant earns from “the proceeds of [his] business”, the “proceeds” enjoyed by the claimant as an “earner” are the net income of the business after accounting for all business expenses incurred to run the business, but before tax. Business expenses are not “proceeds” of the business that make it into the claimant’s hands as his “gross earnings”.
PAWE can only be based on the claimant’s gross earnings and not the gross profit of the business before expenses, as it is his personal status as an “earner” that provides him with benefits under the Act. The claimant’s gross earnings as an “earner” cannot be anything other than the net income of the business, after deducting business expenses. Business expenses are clearly outgoings that do not form part of the gross earnings of the “earner” who ultimately receives the net income of their business as their individual earnings.
Net income of the business, after deducting business expenses, is synonymous with profit as it represents the final measure of profitability of a business. The net income represents the net amount of profit remaining after all expenses are subtracted from revenue and it is the net income (proceeds of the business) that then becomes available to the owner of the business, as their individual gross earnings from the business.
As noted above, the MAI Act is concerned with the earnings the claimant ultimately receives into his own hands as an individual. Ultimately, the earnings the claimant receives from the business is what is left over after accounting for all expenses of the business. This is consistent with how the claimant presented his individual gross earnings to the Australian Taxation Office (ATO) that is, his earnings are the net income of the business and is therefore consistent with accounting conventions.
This method is also consistent with the method of calculation in previous merit review decisions including ABQ v NRMA (Merit Review) [2018] NSWSIRADRS 43 (17 October 2018), ACL v CIC Allianz Insurance Limited [2018] NSWDRS MR 064; AJQ v NRMA (Merit Review) [2020] NSWSIRADRS 44 (8 April 2020), APD v AAI Limited trading as GIO (Merit Review) [2020] NSWSIRADRS 198 (24 August 2020), APL v GIO (Merit Review) [2020] NSWSIRADRS 207 (16 September 2020), Mula v NRMA [2022] NSWPICMR 9, Hayes v GIO [2022] NSWPICMR 17, Le v Insurance Australia Ltd t/as NRMA Insurance [2022] NSWPICMR 47 and Shqau v AAMI [2022] NSWPICMR 6 and a number of other recent decisions of the Commission.
If a person such as the claimant had PAWE calculated based on gross profit of the business, before expenses, I am of the view it would likely produce a position of unjust enrichment which is not in keeping with the objects of the MAI act. Section 1.3 sets out the objects of the MAI Act, which relevantly include:
(a) benefiting all members of the motoring public by keeping the overall costs of the scheme within reasonable bounds so as to keep premiums affordable, and
(b) promoting the recovery and return to work or other activities of those injured in motor accidents.
Section 1.3(4) requires a construction of the MAI Act that would promote the objects of the MAI Act to be preferred to a construction that would not promote those objects. The second reading speech for the Motor Accident Injury Bill noted the reasons for insurers being able to regularly assess a person’s earning capacity under the MAI Act as being “to ensure that injured people who have the capacity to return to employment stay off work only as long as is necessary to support their recovery”. Calculation of PAWE based on gross profit of the business, without accounting for expenses incurred to generate that profit, is likely to give rise to enrichment. It is therefore inconsistent with the objects of the MAI Act. It would not assist in keeping the overall costs of the scheme within reasonable bounds and likely would provide little to no incentive for a sole business owner to engage in recovery and a return to work, as they are potentially better off on weekly benefits.
Calculation of the claimant’s PAWE
The claimant contends gross profit of the business for the period 1 July 2021 to 30 June 2022 is $79,432. The claimant does not state how this figure is calculated and does not reference any evidence in support of this calculation. It is inconsistent with the gross profit of the business declared to be true and correct by the claimant in his tax return for the same year (even if COVID disaster payments were included). I am therefore not persuaded this figure is correct.
I consider it more likely that the business income is as declared in the tax return. The claimant’s tax return for the period 1 July 2021 to 30 June 2022 shows gross income of the claimant as follows:
(a) COVID-19 disaster recovery allowance: $4,153, and
(b) business net income: [$72,211 less expenses of $22,335]: $49,876.
I am of the view the COVID-19 disaster payments 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, cl 2. Pursuant to cl 4(1) only earnings received by the claimant “as an earner” can be included in calculation of PAWE.
The claimant did not receive government COVID-19 disaster payments “as an earner”. He did not perform any work for those payments. The claimant is not in a relationship of employee and employer with the government and did not render services to the government. Accordingly, the claimant did not receive the payments in the capacity of employee or for any services rendered.
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]”.
Accordingly, the net income of the business after accounting for all business expenses, which is in turn the proceeds of the business the claimant receives pursuant to cl 3(2)(b), is $49,876. This equates to a weekly average of $959.15, as calculated by the insurer.
CONCLUSION
For the reasons set out above:
(a) under Schedule 1, cl 4(1) the claimant’s earnings are the individual earnings he received from the business, after deducting all business expenses in the period 1 July 2021 to 30 June 2022;
(b) COVID-19 disaster payments are not earnings received by the claimant as an earner and therefore excluded from PAWE, and
(c) I am of the view the insurer has correctly calculated PAWE in the sum of $959.15 on the basis gross earnings received by the claimant as an earner for the purpose of cl 4(1) are the net income of the business in the sum of $49,876.
Accordingly, the reviewable decision is affirmed.
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.
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