Jiang v AAI Limited t/as GIO
[2023] NSWPICMR 59
•4 December 2023
| CERTIFICATE OF DETERMINATION OF MERIT REVIEWER | |
| CITATION: | Jiang v AAI Limited t/as GIO [2023] NSWPICMR 59 |
| CLAIMANT: | Chaohua Jiang |
| INSURER: | GIO |
| MERIT REVIEWER: | Katherine Ruschen |
| DATE OF DECISION: | 4 December 2023 |
| CATCHWORDS: | MOTOR ACCIDENTS - Motor Accident Injuries Act 2017; dispute about payment of weekly benefits under division 3.3; meaning of pre-accident weekly earnings; schedule 1, clause 4; whether there was a change in earning circumstances; whether the claimant began or became entitled to regularly earn more than the claimant had earned before the change occurred; schedule 1, clause 4(3), clause 4(2)(b); Held – the reviewable decision is set aside. |
| DETERMINATIONS MADE: | CERTIFICATE Issued under s 7.13(4) of the Motor Accident Injuries Act2017 DETERMINATION 1. The reviewable decision is set aside. 2. The claimant’s pre-accident weekly earnings is $538.73. |
STATEMENT OF REASONS
INTRODUCTION
There is a dispute between Chaohua Jiang (the claimant) and the insurer about the amount of weekly payments of statutory benefits payable under Division 3.3 of the Motor Accident Injuries Act 2017 (the MAI Act).
The claimant was involved in a motor accident on 17 June 2023.
On 3 July 2023, the claimant made an application for personal injury benefits under the MAI Act.
On 11 August 2023, the insurer determined the claimant’s pre-accident weekly earnings (PAWE) amount was $488.10.
On 21 August 2023, the claimant requested an internal review of the insurer’s PAWE decision of 11 August 2023.
On 5 September 2023, the insurer issued their internal review decision in which the insurer varied their PAWE decision to $543.63.
The claimant has made an application for a merit review of the insurer’s internal review decision dated 5 September 2023 (the Application).
SUBMISSIONS
The claimant submits her PAWE falls under Schedule 1, cl 4(2)(b) on the basis there was a change in earning circumstances when she commenced what she contends was an employment probation period on 17 April 2023 with M&S Business Solutions Pty Limited (M&S). The claimant contends the probation period was due to end on
17 July 2023, after the accident, at which time she would have transitioned to full-time permanent employment with M&S earning $90,000 per annum.
The claimant contends the change of circumstances arose from an oral offer of full-time employment at the end of a probation period by M&S and oral acceptance of that offer by the claimant on 4 April 2023. The claimant relies on minutes she prepared of a meeting she says took place with M&S on 4 April 2023 (Minutes) as evidence of an agreement made before the accident.
The insurer submits that whilst there may have been a change in earning circumstances by way of commencement of a three month probation period on or about 17 April 2023, that arrangement was on a self-employed basis and did not result in the claimant’s regularly earning, or becoming entitled to earn, more on a weekly basis than she was earning before the change occurred, as required by cl 4(2)(b). The insurer submits there is no reliable evidence from M&S in support of the claimant’s contention that she would have transitioned into full-time employment earning $90,000 per annum.
REASONS
Issues
The issue in dispute is whether the claimant’s PAWE falls under cl 4(1) or cl 4(2)(b).
Evidence and background facts
The claimant prepared the Minutes, which have not been endorsed by M&S. There is no evidence from M&S to support the contentions made by the claimant in the Minutes. To the extent the Minutes purport to record statements made by the M&S representative at the meeting it is hearsay.
The Minutes contain an extraordinary amount of detail such that it is unlikely they were prepared during the meeting, particularly as the meeting is said to have only been for one hour and the Minutes suggest a lot of ground was covered.
The Minutes include contentions that appear to be the claimant’s reflections as to what she was thinking at the time rather than what was actually said. For example, the Minutes state at 2.3.4 that it was the claimant’s “wish to commence employment with M&S”. The claimant goes on to reference a phone call on 3 April 2023 as evidence in support of her contended state of mind. A statement as to a person’s state of mind is not the kind of thing that would ordinarily be recorded in minutes of a business meeting. Nor would minutes typically provide references to other sources in support of statements said to have been made in the meeting by the person taking the minutes. References seem to be included in an effort to prove what was said in the meeting or, where the Minutes record the claimant’s state of mind, what the claimant was thinking. It can be inferred from this that the Minutes were written by the claimant after the motor accident for the purpose of proving her claim under the MAI Act and are not a contemporaneous record of the meeting.
The claimant is adamant in submissions that she had a “contract of employment” (albeit an oral contract), including a three month “probation period” with M&S before the motor accident. The Minutes also stress this point. The Minutes record that the proposal was one of employment, including the probation period. The Minutes do not refer at any time to the independent contractor arrangement which subsequently took place.
The position in the Minutes and the claimant’s submissions that the claimant was an employee of M&S, including during probation, is inconsistent with the contemporaneous evidence of self-employment. The contemporaneous evidence establishes on balance that the claimant was not at any time employed by M&S but instead, provided services to M&S as a self-employed contractor. The evidence of this includes:
(a) the claimant has held an Australian Business Number (ABN), which has been active since 23 November 2020;
(b) in her application for personal injury benefits the claimant declared her employment with M&S was on a “casual” basis, which suggests she provided services from time to time rather than pursuant to a permanent employment arrangement;
(c) the Minutes suggest the claimant would provide her own equipment including a laptop, desktop, iPad and pencil and unlimited NBN internet;
(d) the claimant issued invoices to M&S for her services under her ABN, in which the claimant recorded that she provided “Consultant Services” to M&S;
(e) M&S did not deduct pay as you go withholding tax or pay mandatory employer superannuation contributions on behalf of the claimant, and
(f) the claimant prepared her own tax returns and declared her M&S income as income from self-employment.
I doubt the claimant did not understand the terms on which she provided services to M&S that is, the distinction between employment and self-employment. The claimant is not a lay person in regard to such matters. The claimant is a qualified accountant. She has held an ABN for over three years and previously worked on a self-employed basis. The claimant had previously prepared her own tax returns in which she declared income from self-employment and claimed business expenses as a tax deduction.
The Minutes state on page 3 that the claimant’s work for M&S would include involvement in preparation of tax returns for individuals, super funds, self-managed super funds, trusts and companies and would include “review, analysis and finalisation of Business Activity Statements (BAS)”. The Minutes record that the claimant would also consult on “complicated” tax cases and “provide advice to assist clients in solving their business enquiries”. The Minutes record the claimant would work with minimum supervision”. The Minutes record on page 6 that the claimant “has the capacity to execute all relevant work” that is, to do the work proposed on page 3. The claimant recorded in her invoices to M&S that she was consulting to M&S.
The claimant must be taken to have known the difference between employment and self-employment given her qualifications and capacity to fulfil the proposed role which included working with sole trader clients of M&S in relation to their tax affairs. Accordingly, I am satisfied on balance that the claimant fully understands she was not employed by M&S but was contracting to M&S as a sole trader. However, the claimant continues to contend she was an employee of M&S and does not acknowledge the subcontract arrangement. This puts into question the veracity of the claimant’s evidence.
The inconsistency between the claimant’s self-employment and the language of an employment contract in the Minutes reinforces my conclusion that the minutes were likely prepared post-accident for the purpose of the claim under the MAI Act. The only other explanation given the claimant’s assumed knowledge regarding the distinction between employment and self-employment is that whilst an employment contract was contemplated during the meeting, the claimant and M&S subsequently did not agree an employment contract and instead, M&S agreed to use the claimant’s services as an independent contractor. This does not, however, explain why the claimant refuses to acknowledge she was a subcontractor and maintains that she was an employee.
Given the issues outlined above caution must be exercised regarding the evidentiary weight of the Minutes. The Minutes are not a business record of M&S. The Minutes were prepared by the claimant and therefore self-serving evidence. Any statement in the Minutes allegedly made by M&S is hearsay only. For these reasons, I consider that any statement in the Minutes not supported by corroborating evidence (such as independent documentary evidence), should be treated as a submission and not proof of the facts asserted in the Minutes.
Even if employment (as distinct from subcontracting) was discussed in the meeting, the Minutes do not confirm an employment agreement was entered into on an oral or any other basis in any event. In that respect, the Minutes are not necessarily inconsistent with what subsequently took place. Potential employment may have been discussed but, subsequent to the meeting, the parties agreed to a subcontract arrangement instead of an employment contract. In this regard:
(a) the Minutes state at 1.4 that the purpose of the meeting was to “consider [the claimant’s] application for employment with M&S”;
(b) the meeting on 4 April 2023 was purportedly the second meeting about the claimant’s “job application” but there are no minutes of the first meeting;[1]
(c) at 2.3.5 the Minutes record the claimant accepted the proposed job offer from M&S but that this remained “subject to [M&S’s] confirmation” (there is no evidence of any confirmation of employment by M&S whereas there is evidence of self-employment by way of invoices issued to and paid by M&S), and
(d) the Minutes further record at 4 that “no resolutions were passed at the meeting”.
[1] There is no evidence of either a job advertisement by M&S or a written employment application from the claimant.
Accordingly, the Minutes do not support a contention that M&S had agreed to any employment contract with the claimant before the motor accident. This remained “subject to [M&S’s] confirmation”. An employment contract was also not subsequently confirmed by M&S by the conduct of the claimant and M&S. The conduct of the claimant and M&S after the meeting amounted to an independent contract arrangement and not an employment contract.
I am therefore comfortably satisfied on balance that contrary to the claimant’s contention she was an employee, the claimant was not at any material time employed on any basis by M&S. Instead, the claimant was a sole trader who provided services to M&S as an independent contractor from on or about 17 April 2023.
I am also comfortably satisfied on balance that the claimant had not entered into any arrangement with M&S to commence employment with M&S on or about 17 July 2023 on the basis of an annual salary of $90,000 or on any other basis. It follows from the above analysis and conclusion that an employment contract was not entered into before the accident that there was also no employment arrangement agreed to commence at any time after the accident. As at the date of the accident, the prospect of a future employment contract remained speculative even according to the Minutes, as it was contingent on a successful trial period.
Was there a change in the claimant’s earning circumstances?
The claimant submits there was a change in her earning circumstances when she commenced working for M&S such that Schedule 1, cl 4(3) is satisfied and therefore PAWE falls under cl 4(2)(b).
Clause 4(2)(b) only applies to calculation of the claimant’s PAWE if cl 4(3) applies.
Clause 4(3);
“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” (emphasis added).
Accordingly, in order to satisfy cl 4(3):
(a) the change must have already occurred “before” the motor accident;
(b) the change must be the result of action taken by the earner, and
(c) the change must be a “significant’ change to earning circumstances resulting in the claimant “regularly” earning or becoming entitled to earn more than she was earning before the accident.
The “change” relied upon by the claimant is allegedly entering into an “employment contract” with M&S on or about 4 April 2023 to commence employment on
17 April 2023. The claimant contends the terms of employment included a three month probation period during which she would be paid “wages” of $3,500 per month. The claimant contends that on successful completion of the probation period on
17 July 2023 she was to transition to full time employment on an annual salary of $90,000.
However, I have concluded above that at no time before the accident did the claimant and M&S enter into an employment contract of any kind, whether to commence before or after the motor accident. Instead, the claimant began providing services as a sole trader to M&S from on or about 17 April 2023.
To the extent the claimant might contend that regardless of whether she was an employee or contractor, she would have transitioned into full-time permanent employment with M&S on an annual salary of $90,000 after a three month “probation” period this is not a change that occurred before the accident, as required by cl 4(3). Even if I accepted the Minutes as reliable evidence of the facts stated therein the Minutes do not support the claimant’s contention an oral agreement was made before the accident for the claimant to begin full-time employment on $90,000 per annum on 17 July 2023. The Minutes state an offer of such employment would be made after three months. The Minutes state any employment arrangement was “subject to…confirmation” by M&S and an employment contract would not be entered into until the claimant had successfully completed a three month trial period.
Clause 4(3) requires the change to have occurred “before” the motor accident and does not contemplate potential future changes to earning circumstances that might occur after the motor accident even if such circumstances were contemplated before the motor accident.
As the claimant had not commenced employment with M&S on an annual salary of $90,000 before the motor accident such change, being both prospective and contingent on other things happening (for example, successful completion of a three month trial period), does not satisfy cl 4(3).
Clause 4(3) also requires the change occurring before the accident is one pursuant to which the claimant became “entitled” to regularly earn more than she was earning before the change occurred. As the claimant had not entered into any employment contract with M&S before the accident for an annual salary of $90,000, she had no “entitlement” at the time of the accident to regularly earn that amount. For the claimant to become “entitled” to earn $90,000 per annum, the claimant must have entered into an employment contract before the motor accident entitling her to that salary for the purpose of cl 4(3). No such contract was agreed before the accident.
It could be argued that commencement of the subcontract arrangement with M&S is a change in earning circumstances for the purpose of cl 4(3). However, the change must be “significant” and result in the claimant regularly earning or becoming entitled to regularly earn more than she was earning before the change occurred.
The claimant carried out work for M&S on the basis she was a sole trader. This in itself is not a significant change in earning circumstances as the claimant has held an ABN since 2020 and previously worked as a self-employed contractor.
The claimant invoiced M&S and received payment from M&S on three occasions, two being before the accident and one after the accident. The payments were monthly for a fixed fee of $3,500 per month.
The claimant contends she commenced working for M&S on 17 April 2023. In the period 17 April 2023 to the day before the motor accident on 17 June 2023 (8.7 weeks) the claimant received gross payments from M&S of $7,000 which equates to $804 per week. Prior to this the claimant was providing services as a self-employed contractor to Richard Hogg earning $800 per week, as evidenced by invoices to Mr Hogg dated
26 March 2023, 2 April 2023, 9 April 2023 and 16 April 2023. As such, the claimant’s earnings from Mr Hogg and from M&S are similar. The difference between the two amounts is not significant and therefore I do not consider this to be a “significant” change in earning circumstances as the claimant was earning much the same with M&S as she was earning through services provided to Mr Hogg.
To the extent it might be argued the claimant began to earn more because she now had two sources of income (M&S and Mr Hogg) cl 4(3) requires that the change results in the claimant “regularly” earning more than she did before the change. There is overlap in earnings from Mr Hogg and M&S for a brief period. However, during this overlapping period earnings from Mr Hogg reduced to $300 per week and the claimant confirmed she ceased providing services to Mr Hogg to focus on her accounting career.
Accordingly, the requirement that the change must be one resulting in the claimant “regularly” earning more is not satisfied because ultimately, the M&S income replaced the income from Mr Hogg (and did not continue to be in addition to income from Mr Hogg), which was of a similar amount.
Even if it could be established that from 17 April 2023 the claimant began to earn more, I am not satisfied on balance that the claimant began to “regularly” earn more.
The claimant and M&S had not entered into a written contract in respect of the claimant’s services. There is no evidence of any agreed contract period or agreed amount of work that M&S would provide. The Minutes do not assist, even if accepted as reliable evidence. This is because the Minutes speak to a different proposal, one which contemplated that the claimant would be employed by M&S. However, the employment proposal never eventuated. Instead, the claimant and M&S agreed a different arrangement for the claimant to provide services as an independent contractor. As the employment proposal contended in the Minutes did not transpire the Minutes are effectively irrelevant as they contain no information as to the terms (or proposed terms) of the subcontract arrangement which commenced on 17 April 2023.
There is evidence that the claimant received monthly payments from M&S in May, June, and July 2023 on a subcontract basis. However, there is no evidence as to any other terms of the subcontract between the claimant and M&S.
Where a person provides services on a self-employed basis there is no guarantee of work unless there is a written subcontract agreement which sets out, for example, specific minimum terms about minimum payment and a minimum contract period. Absent a formal contract with such terms, whether the claimant would have continued to provide services to M&S is subject to demand by M&S. On any day, in any week or month M&S may have no need for the claimant’s services or may have a lesser need for those services. This would result in a reduction in income to the claimant.
There is no evidence to support the claimant’s contention she ceased providing services to M&S because of the accident. The evidence establishes that despite the accident the claimant continued to provide services to M&S for a month after the accident, receiving the same payment of $3,500 for that month as she had received before the accident. It may be that M&S agreed for the claimant to provide services on a short term contract basis of only three months and that is why the work ended after three months. An inability of M&S to guarantee ongoing work may also have been the reason why the employment arrangement contemplated in the Minutes did not eventuate and instead, the claimant and M&S entered into a subcontract arrangement.
As there is no evidence of any agreement for ongoing work or the availability of work from M&S beyond the three months during which the claimant provided services, the claimant did not “regularly” begin to or become entitled to earn more when she commenced contracting to M&S. Even if it were established the claimant was earning more than she was before 17 April 2023, cl 4(2)(b) requires that the claimant “regularly” began or became entitled to earn more. The requirement that the claimant earned or became entitled to earn more on a regular basis is not satisfied. Even according to the Minutes, the claimant only became entitled to earn, and began to earn, $3,500 per month for up to three months. The arrangement was a trial only. The Minutes state the availability of work beyond three months remained subject to confirmation by M&S. I do not consider earnings for a limited, closed period satisfies the requirement that the claimant began or became entitled to “regularly” earn more than she was earning before 17 April 2023.
In any event, the evidence establishes the claimant did not begin to earn more or become entitled to earn more as a result of the change on 17 April 2023 because average weekly earnings as a sole trader from M&S ($804 per week) amounted to about the same as previous weekly earnings as a sole trader from Mr Hogg ($800 per week), which the M&S earnings replaced. Whilst there was an overlapping period when the claimant received earnings from both sources that period was brief before the claimant ceased to receive earnings from Mr Hogg.
For the reasons set out above, cl 4(3) is not satisfied. Accordingly, as cl 4(2)(b) only applies if cl 4(3) is satisfied cl 4(2)(b) does not apply to assessment of the claimant’s PAWE.
What is the claimant’s PAWE?
Clause 4(1) applies to assessment of PAWE “unless subclause (2) applies”. I have concluded subclause 4(2)(b) does not apply.
Although not raised by the claimant, I have considered whether cl 2(b) and in turn,
cl 4(2)(c) applies. Clause 2(b) applies if the claimant is not an earner under cl 2(a) but, at the time of the accident had entered into an arrangement to commence employment or self-employment on a particular date in the future. Clause 4(2)(c) only applies if the claimant is an earner under cl 2(b).
The claimant was self-employed at the time of the accident and is therefore an earner pursuant to cl 2(a)(i). Clause 2(b) therefore does not arise. Even if it did, I have concluded above that the claimant had not, at the time of the accident, entered into an arrangement to commence employment with M&S or provide further services on a self-employed basis to M&S on any terms different to the terms on which she was presently providing services to M&S as of the date of the accident. Those terms were that the claimant would provide services as an independent contractor for up to three months for a fixed monthly fee of $3,500. The claimant had not, as at the date of the accident, entered into the alleged employment contract for $90,000 per annum commencing from 17 July 2023. The Minutes record that any such contract was not yet agreed by M&S. Accordingly, cl 2(b) and in turn, cl 4(2)(c) do not apply.
There is no evidence that any other subclause in cl 4(2) applies to the claimant’s circumstances. Accordingly, the claimant’s PAWE falls under cl 4(1).
Clause 4(1) provides that PAWE 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…”
The motor accident occurred on 17 June 2023. Accordingly, the 12 months immediately before the day of the motor accident for the purpose of the claimant’s PAWE under cl 4(1) is 17 June 2022 to 16 June 2023.
The evidence establishes the claimant received the following income during this period:
(a) earnings from employment with Solutions Personnel Pty Limited: $6,863.97;
(b) self-employed income from Mr Hogg: $15,200, and
(c) self-employed income from M&S: $700.
The insurer has a lower figure in their submissions for earnings from Solutions Personnel Pty Limited. However, it is clear the insurer’s total is taken from bank statements. Payslips make clear that before earnings are paid into the claimant’s bank account withholding income tax is deducted by the employer. Accordingly, the amounts shown in the bank statements are the claimant’s net earnings that is, after tax.
Clause 4(1) concerns gross earnings not net earnings from employment. The year to date gross earnings is recorded in the final payslip bearing a payment date of
23 November 2023. The figure I have adopted above is the gross year to date earnings, as recorded on the final payslip.
There is a slight variation between the year to date figure in the final payslip and the amount recorded in the claimant’s tax return and the end of year statement of income. However, as there is no amended payslip in support of this, I have accepted the contemporaneous payslips as being accurate given net payments recorded in the payslips correspond with the net amounts received into the claimant’s bank account.
In relation to Mr Hogg there is an invoice for $600 dated 12 June 2022. As this pre-dates the 12 month pre accident period commencing 17 June 2022 and there is no evidence payment was received on or after 17 June 2022 it is excluded from PAWE. Under cl 4(1) only earnings “received” by the claimant in the 12 month pre-accident period are included in PAWE.
Similarly, the third payment from M&S of $3,500 is excluded as the bank statements confirm this payment was received on 20 July 2023 which is after the 12 month period under cl 4(1) ceased on 16 June 2023. This payment is of course relevant to whether the claimant suffered a loss of earnings for the purpose of payment of weekly statutory benefits under s 3.6 of the MAI Act. As the claimant was paid the same amount for the month following the motor accident as she was receiving before the accident the claimant did not suffer any loss in the first month following the accident and therefore would not be entitled to payment of weekly statutory benefits under s 3.6 for the first month following the accident.
Earnings from Mr Hogg and M&S were obtained on a self-employed basis. Accordingly, business expenses must be deducted to determine the claimant’s gross earnings from her business as an individual earner. Expenses of the business are outgoings in order to generate the business income and are not profit that makes its way into the hands of the claimant as an individual earner. Where a person earns as a sole trader operating a business their gross earnings as an individual earner are the net profit of the business after deducting business expenses, but before tax.
The claimant’s 2023 tax return evidences business expenses of $1,050 in the 12 month period before the motor accident.
Accordingly, the gross earnings received by the claimant in the 12 month period before the accident from 17 June 2022 to 16 June 2023 are $28,013.97 calculated as follows:
(a) gross income from employment: $6,863.97, and
(b) gross income from self-employment: $21,150 ($15,200 plus $7,000 less expenses of $1,050).
The claimant’s PAWE is therefore $538.73 ($28,013.97 divided by 52 weeks).
CONCLUSION
For the reasons set out above:
(a) Schedule 1, cl 4(3) does not apply and therefore, cl 4(2)(b) also does not apply;
(b) the claimant’s PAWE falls under Schedule 1, cl 4(1) of the MAI Act;
(c)
clause 4(1) requires the claimant’s PAWE to be calculated based on the weekly average over the 52 week period from 17 June 2022 to
16 June 2023;
(d) in this period the claimant received gross earnings of $28,013.97, and
(e) the claimant’s PAWE is therefore $538.73 ($28,013.97 divided by 52 weeks).
Accordingly:
(a) the reviewable decision is set aside, and
(b) the claimant’s PAWE amount is $538.73.
LEGISLATION AND GUIDELINES
In making this decision, I have considered the following:
· The Application, Reply and supporting documentation;
· MAI Act;
· The Motor Accident Guidelines, and
· the Motor Accident Injuries Regulation 2017.
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