Khalid v Insurance Australia Limited t/as NRMA Insurance
[2024] NSWPICMR 71
•21 October 2024
| CERTIFICATE OF DETERMINATION OF MERIT REVIEWER | |
CITATION: | Khalid v Insurance Australia Limited t/as NRMA Insurance [2024] NSWPICMR 71 |
CLAIMANT: | Ahmed Hassan Khalid |
INSURER: | NRMA |
MERIT REVIEWER: | Elizabeth Medland |
DATE OF DECISION: | 21 October 2024 |
CATCHWORDS: | MOTOR ACCIDENTS - Motor Accident Injuries Act 2017; merit review dispute as to the amount of weekly payments of statutory benefit; calculation of pre accident weekly earnings (PAWE); claimant self-employed taxi/uber/DiDi driver; dispute as to whether statutory benefit payments in respect of earlier unrelated accident should be taken into account; whether the claimant’s business expenses should be deducted from the business earnings for the purposes of calculation of PAWE; whether a vehicle purchase should be taken into account as a business expense; Held – statutory benefits received in respect of earlier motor accident are not to be included in earnings; found that business expenses are to be deducted from gross business earnings for the purposes of the calculation of PAWE; the purchase of the vehicle to be included in the business deductions noting it was claimed as a business expense with the Australian Taxation Office; the reviewable decision set aside and remitted back to the insurer for reconsideration with a number of directions including a direction that the calculation is to be made pursuant to Schedule 1, clause 4(2)(a) rather than clause 4(1). |
DETERMINATIONS MADE: | CERTIFICATE 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 (MAI Act), and is therefore a merti review matter under Schedule 2(1)(a) of the MAI Act. Pursuant to s 7.13(3) of the MAI Act: 1. The reviewable decision is set aside and remitted back to the insurer for reconsideration of the following: (a) the calculation is not to include payments of statututory benefits; (b) business expenses are to be deducted from the business earnings for the purposes of the calculation of the claimant’s pre accident weekly earnings; (c) the calculation is to be made pursuant to cl 4(2)(a) of Schedule 1 of the MAI Act (30 May 2023 to 6 May 2024); (d) the calculation is to be made on the assumption that the claimant purchased a motor vehicle for business purposes in February 2024, and (e) deposits by “Driven by Limo Pty Ltd” are to be included as business earnings in the calculation of PAWE. |
STATEMENT OF REASONS
INTRODUCTION
Mr Ahmed Hassan Khalid was involved in a motor accident on 7 May 2024.
He subsequently lodged a claim for statutory benefits with the compulsory third party insurer of the vehicle considered at fault – Insurance Australia Limited t/as NRMA Insurance (the insurer).
Liability for statutory benefits was accepted by the insurer. By way of notice dated
4 July 2024, the insurer advised that the claimant’s pre-accident weekly earnings (PAWE) had been calculated as being $501.69.
The claimant disputes the PAWE calculation and such dispute is the subject of these proceedings.
An internal review was carried out and by way of notice dated 25 July 2024, a substituted decision was made. In this regard, the PAWE was recalculated to be $434.86.
The claimant subsequently lodged an application with the Personal Injury Commission (Commission) and the matter has been allocated to me as Merit Reviewer.
I held two teleconferences with the parties. It was agreed that the matter should be determined on the papers.
LEGISLATIVE FRAMEWORK
The dispute is deemed a merit review matter pursuant to Schedule 2, cl 1(a) of the Motor Accident Injuries Act 2017 (MAI Act) – “the amount of statutory benefits that is payable…under Division 3.3 (Weekly payments of statutory benefits to injured persons)”.
Section 3.6(1) of the MAI Act provides that an injured person who is an earner 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”.
For the first entitlement period the injured person is entitled to 95% of the difference between the person’s pre-accident weekly earnings and the person’s post-accident earning capacity (if any) or post accident earnings, whichever is the greater (s3.6(2)).
Payments of weekly statutory benefits after the first entitlement period are calculated in a different way (see ss 3.7 and 3.8) yet are made with reference to the person’s PAWE.
PAWE is defined by cl 4, schedule 1 of the MAI Act, which provides as follows:
“(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.
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.”
SUBMISSIONS
In his Commission application form the claimant submits that the insurer has not counted his “proper wages’ and that his income is around $74,980 in accordance with his taxation records.
He notes that he has three sources of income being from taxis, Uber and DiDi.
The first teleconference, I had difficulty understanding the claimant’s statements regarding his claim. The audio was poor and he often talked over others speaking. As such, I asked that he set out in writing all the issues that he wished for me to take into account when making my determination.
The claimant has provided an email, via the insurer, dated 29 August 2024.
The email states that the vehicle that he purchased, which PKF has accounted for as a business expense, was bought from his savings for personal use and as well as for future some work purposes. He submits that he did not use the car for any business purpose because of the motor accident.
The claimant contends that he was not working between February 2023 and
October 2023 due to injuries sustained in an earlier unrelated motor accident. So therefore, for the 12 month period prior to the motor accident he was only working from November 2023 until the date of the motor accident on 7 May 2024.
I note that during the teleconferences, the claimant confirmed that he had not commenced working again, after the earlier motor accident, until 7 November 2023.
I confirmed with the claimant that he purchased the vehicle in question in February 2024, and he again stated that he did not use it for work purposes. That he paid for the vehicle using savings. I raised with him that I understood that he declared the purchase of the vehicle as a business expense with the Australian Taxation Office (ATO). The claimant eventually conceded that his taxation material reflected this fact.
Insurer’s written submission dated 7 August 2024
The insurer relies upon a PAWE calculation set out by PKF Accountants. PKF have provided two reports. The second dated 23 July 2024 took into account further material and recalculated the PAWE to be $434.86.
The insurer submits the relevant pre-injury period for the purposes of calculation of PAWE is 7 May 2023 to 6 May 2024.
PKF, in annexure 1.1 calculated the claimant’s income from Uber and DiDi to be $16,651 gross, all other driving income to be $220 based on invoices and bank deposits and calculated GM Cabs income to be $35,623 gross. This totals income from self employment over the relevant period to be $52,494.
The insurer submits that as the claimant is self-employed, the gross earnings refer to the net profit after accounting for business expenses but not before tax. The insurer refers to previous Merit Review decisions in this regard, such as: ACL v CIC Allianz Insurance Limited [2018] NSWDRS MR -64; ABQ v NRMA Insurance [2018] NSWDRS MR 043; Brewer v Insurance Australia t/as NRMA [2021] NSWPICMR 14; Glover v GIO [2022] NSWPICMR 7.
PKF calculated total expenses from self-employment to be $44,441, and therefore, the net profit before adjustment is $8,953 gross.
The claimant was in receipt of statutory benefits during the relevant period that arose from an unrelated motor accident. The insurer submits that such payments are not to be included in the calculation of PAWE. In this regard, the insurer refers to the case of Prendergast v QBE Insurance (Australia) Limited [2024] NSWPICMR 15 (Prendergast) where the Member found that prior statutory PAWE payments are to be excluded from a PAWE calculation. This is due to it not being income derived from personal exertion (cl 3(1) of Schedule 1 of the MAI Act).
The insurer submits that accordingly, the total earnings from self employment is $22,613 gross and averaged over the relevant period, being 52 weeks, is $434.86.
DOCUMENTATION
I have considered all material submitted by the parties in support of the application and reply.
The claimant’s application for personal injury benefits (claim form) dated 14 May 2024 identifies his employment as a full time taxi driver for GM cabs. He states that his income is “almost 4000” weekly.
PKF reports
As noted above, the insurer has obtained two reports from PKF accountants who calculated the claimants’ PAWE based upon primary source material. The reports are dated 19 June 2024 and 23 July 2024.
In the report of 23 July 2024 PKF note the claimant’s suggestion that he was not working between May 2023 and November 2023. However, it is noted that the claimant’s bank statements record deposits from Uber in the period 30 May 2023 to October 2023 (and continuing).
The accountants also note the claimant stating that he received income from Doordash during the relevant period, however, there were no deposits identified to substantiate this.
PKF also identified further deposits in the bank statements that may reflect income as they include descriptions such as “inv”, “job” or “tour guide” and were deposited by a company apparently in the transportation industry (ie. Driven by Limo Pty Limited). PKF did not include these amounts in their assessment of PAWE.
It is confirmed that the PAWE has been calculated with reference to cl 4(1) of Schedule 1 of the MAI Act which essentially provides the calculation to be done as the average of gross earnings during the 12 months immediately before the motor accident, unless subclause (2) applies.
PKF conclude on the evidence that none of the subclauses apply.
In calculating PAWE PKF have included all DiDi deposits, rather than DiDi statements as the deposits exceed the statements, and it is noted there are missing statements.
Amounts received from Lok International Pty Limited are identified as income and included.
PKF found discrepancies between the GM Cabs Turnover Reports as driver pay, as compared to cash deposits related to GM Cabs. Nonetheless PKF have utilised the Turnover Reports for the purposes of assessing PAWE.
In respect of expenses, PKF have largely had reference to the claimant’s 2024 taxation return. It is noted that “fuel & oil” is a variable expenses and has been calculated on the basis on a ratio of these to revenue per the 2024 taxation return.
The depreciation expense set out in the 2024 taxation return is assumed to be an accurate reflection of the expense incurred in the assessment period, and is in addition to the depreciation on the new vehicle purchased by the claimant.
All other expenses are assumed to be fixed expenses and have been estimated based on the 2024 taxation return.
Absent a profit and loss statement (which was requested from the claimant but not received) PKF have assumed an estimate of expenses per the claimant’s 2024 taxation return is reasonable. Expenses, with reference to the taxation material is calculated as $44,441 with a net business profit is $8,053, however, with adjusted depreciation in respect of the vehicle purchase (see below) earnings from self employment is calculated at $22,613.
The purchase of the new vehicle is a particular point of contention. For this reason, I consider it useful to transcribe PKF’s reasoning when dealing with this purchase. They state at paragraph 4.11 as follows:
“On review of the Claimant’s 2024 ITR and in line with advice provided at paragraph 3.1.6(i), we have identified that the claimant has depreciated his vehicle at 100% in line with the Temporary Full Expensing rules which enables eligible businesses to claim an immediate tax deduction for he business portion of a business asset. Depreciation represents and expense of the business, being an allocation of the decline in value of an asset of the business over its useful life. At some point the asset will need to be replaced. In our opinion, the immediate write-off of an asset is an Income Tax Incentive and may not reflect a decline in value of the asset in the period it was written off. Therefore, when assessing a claimant’s earnings, this may disadvantage the claimant because it will overstate the expense in the year of purchase. We have assumed the vehicle was purchased on 1 July 2023 and have adjusted this expense to reflect an assume useful life of the vehicle of 8 years (i.e. a depreciation rate of 25% on a diminishing value basis) in line with Taxation Ruling TR 2022/1. We consider this to be a better reflection of the expenses incurred by the claimant to derive his income…”
FINDINGS
Should unrelated statutory benefits be included in the PAWE calculation?
I agree with the insurer’s submissions that statutory benefit weekly payments in respect of the earlier unrelated motor accident should not be included as earnings in the PAWE calculation. These payments are not as a result of personal exertion (see: Prendegast).
PKF in their latest report have included those payments in their calculation of PAWE. With the payments included the PAWE is calculated as $767.36.
However, I do not consider this to be the correct calculation method. Without the payments of statutory benefits included, PAWE is calculated as $434.86 – which is what the insurer submits is the correct amount.
Should the vehicle purchase be included as a business expense
The claimant submits that he bought the vehicle for personal use, and for work purposes in the future. I do not accept this to be the case on the evidence. It is entirely inconsistent to allege that the vehicle was purchased for personal use, yet claimed 100% of the purchase as a business expense with the ATO and receive taxation benefit as a result.
Noting the claimant’s business activity is substantially related to Uber/DiDi I find that it is more likely than not that the vehicle was purchased as a business expense.
Should business expenses be deducted from the calculated gross business earnings prior to calculation of PAWE
In my opinion, business expenses should be deducted from the business income for the purposes of a PAWE calculation. In this regard, I follow the reasoning of Member Ruschen in the matter of Hayes v GIO [2022] NSWPICMR 17 (25 March 2022) where at [18] she states:
“…the earnings of the claimant as an individual as distinct from the business, are the profits of the business after expenses of the business are paid. In other words, the ‘proceeds’ of the business the claimant receives as an earner is the net profit 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 individual gross earnings.”
Member Ruschen found the words “earnings received by the [claimant]” meant earnings that made it to the claimant as an individual, and not the earnings of a business. I agree with this reasoning.
What is the correct calculation of PAWE
Whilst in general, I consider the calculation methods of PKF (when excluding statutory benefit payments) to be correct. However, I am of the opinion that the calculations need adjusting on three grounds.
Firstly, the insurer has utilised cl 4(1) of Schedule 1 of the MAI Act in calculating the PAWE. However, the material does not establish that the claimant was earning continuously for the 12 months prior to the motor accident.
The claimant stated to me that he did not commence back at work before the subject accident until November 2024. Whilst the documentation from GM Cabs does not show earnings prior to 6 November 2024, the claimant’s bank statements reveal that he was receiving payments from Uber since 30 May 2024. I therefore consider the claimant’s evidence to be unreliable in this regard, on the evidence.
I therefore find that the claimant commenced earning from 30 May 2024. However, this is not 52 weeks prior to the accident and is around three weeks shy of such number of weeks.
Accordingly, I consider the PAWE ought be calculated with reference to cl 4(2)(a) of Schedule 1 of the MAI Act.
Secondly, the calculations have been made on the assumption that the claimant purchased the vehicle on 1 July 2023. I accept the claimant’s evidence that the vehicle was in fact purchased in February 2024. Whilst it would have minimal impact on the amount, I consider it correct and preferable that the calculation take into account a depreciation calculation on the basis of the vehicle being purchased in February 2024.
Lastly, on the balance of probabilities I consider the deposits identified by PKF from “Driven by Limo Pty Ltd” represent business earnings and therefore should be included in the calculation of PAWE.
CONCLUSION
On the basis of the above, I set aside and remit back to the insurer for reconsideration of the PAWE calculation with the following directions: the calculation is not to include payments of statututory benefits;
(a) business expenses are to be deducted from the business earnings for the purposes of the calculation of the claimant’s pre accident weekly earnings;
(b) the calculation is to be made pursuant to cl4(2)(a) of Schedule 1 of the MAI Act (30 May 2023 to 6 May 2024);
(c) the calculation is to be made on the assumption that the claimant purchased a motor vehicle for business purposes in February 2024, and
(d) deposits by “Driven by Limo Pty Ltd” are to be included as business earnings in the calculation of PAWE.
0
4
0