Marshall v Allianz
[2022] NSWPICMR 1
•5 January 2022
| CERTIFICATE OF DETERMINATION OF MERIT REVIEWER | |
| CITATION: | Marshall v Allianz [2022] NSWPICMR 1 |
| CLAIMANT: | Mark William Marshall |
| INSURER: | Allianz |
| MERIT REVIEWER: | Katherine Ruschen |
| DATE OF DECISION: | 5 January 2022 |
| CATCHWORDS: | MOTOR ACCIDENTS- Merit review; dispute about payment of weekly benefits under Division 3.3 of the Motor Accident Injuries Act 2017 (MAI Act); pre-accident weekly earnings; clause 4(1) of the MAI Act; self-employed earner; sole trader; business expenses; inconsistent evidence; onus of proof; balance of probabilities; lack of evidence; Held – the reviewable decision is varied. |
| DETERMINATIONS MADE: | The reviewable decision is about the amount of weekly payments of statutory benefits that are payable under Division 3.3 of the Act, and is therefore a merit review matter under Schedule 2(1)(a) of the Motor Accident Injuries Act 2017 (the MAI Act). 1. The reviewable decision is: a. Varied. b. The amount of the Claimant’s pre-accident weekly earnings (PAWE) is $424.54. |
Certificate
Issued under section 7.13(4) of the Motor Accident Injuries Act 2017
Background
There is a dispute between Mark William Marshall (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 18 December 2019.
Prior to the accident the Claimant worked as a self-employed pest control technician.
In relation to pre-accident income the Claimant has not provided any financial documents evidencing income and expenses of his business over the relevant pre-accident period such as profit and loss statements, business activity statements (BAS), tax invoices or receipts. He relies only on his 2019 and 2020 individual tax returns and incomplete bank statements together with contentions he makes as to their contents for the period 12 June 2018 to 30 June 2020.
The Claimant made an application for statutory benefits including weekly payments under Division 3.3 of the MAI Act.
On 3 August 2021, the insurer calculated the Claimant’s PAWE in the sum of $421.65.
The Claimant requested an internal review of the 3 August 2021 PAWE decision.
On 23 August 2021, the insurer issued their internal review decision which affirmed the initial decision that the Claimant’s PAWE is $421.65.
The Claimant has applied for a merit review of the insurer’s internal review decision dated 26 May 2021
Submissions
10. The Claimant submits he earned approximately $1,500 per week from his pest control business prior to the motor accident. The Claimant submits the insurer’s calculation of his PAWE fails to consider his self-employment status. Specifically, the Claimant submits he is “a director and employee within his company and is in effect self-employed as he has ultimate control over the company. The amount of $1,500.00 gross/per week is based on individual earnings being income the Claimant receives from his personal capacity as an employee as well as profits from his company”.
11. The insurer submits the Claimant has not provided sufficient and/or reliable evidence of his earnings in the relevant pre-accident period and in these circumstances, it is appropriate to rely on the Claimant’s income declared in his tax return for the nearest, complete financial year. On this basis, the insurer calculated the Claimant’s PAWE as the weekly average of his gross earnings declared in his 2018/2019 tax return.
Reasons
12. There is no dispute that the Claimant is an earner pursuant to schedule 1, clause 2 of the MAI Act.
13. The dispute is over the amount of the Claimant’s PAWE under clause 4 of schedule 1.
14. Pursuant to clause 4 of schedule 1 of the MAI Act PAWE means:
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) 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 received by the earner as an earner during the period from when the change of circumstance referred to in that subclause occurred to immediately before the day of the motor accident,
(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.
15. There is no evidence to suggest any of the exceptions in clause 4(2) apply to the Claimant’s circumstances. There is also no evidence that might trigger clause 4(3). Accordingly, the Claimant’s PAWE falls for assessment under clause 4(1). Clause 4(1) requires the Claimant’s PAWE to be calculated on the basis of the weekly average of the gross earnings received by him as an earner during the 12 months immediately before the day on which the motor accident occurred. The motor accident occurred on 18 December 2019. Accordingly, the pre-accident period for the purpose of clause 4(1) is 18 December 2018 to 17 December 2019.
16. Unfortunately, the Claimant has provided incomplete records in relation to his income in the period 18 December 2018 to 17 December 2019. The Claimant indicates he “chose to” only provide bank statements as evidence of his pre-accident income. However, the bank statements are insufficient to determine pre-accident income in the period 18 December 2018 to 17 December 2019 for the following reasons:
a) The bank statements are incomplete. Pages 3 and 5 of the transaction history, which appear to cover part of the relevant pre-accident period are missing.
b) The extent to which deposits are income of the pest control business or are from other sources is unclear.
c) The extent of business expenses of the pest control business is also unclear from the bank statements.
17. The onus is on the Claimant to prove, on the balance of probabilities, the amount of his pre-accident income in the period 18 December 2018 to 17 December 2019. It is therefore a matter for the Claimant, who is legally represented and assisted by an accountant, to provide sufficient documentary evidence rather than cherry pick documents he prefers to rely upon. By choosing to provide limited documents regarding pre-accident income the Claimant has failed to discharge his burden of proof. There is insufficient evidence upon which I can be satisfied, on the balance of probabilities, of the amount the Claimant earned between 18 December 2018 and 17 December 2019. The amount of earnings in this period is unclear.
18. The submissions made by the Claimant’s solicitor on behalf of the Claimant are broad brushed and are not reconcilable with the documents. The contentions in the submissions are not supported by any evidence. For example, the Claimant’s solicitor states in submissions that the Claimant’s business is run by a company of which the Claimant is a director, and that the Claimant’s income comprises both wages and dividends (profit) paid to him by the company. However, there is no evidence that the Claimant’s business operated through a company. There is no evidence that the Claimant received wages and/or dividends from a company of which he is the director. Contrary to this submission the tax returns demonstrate the Claimant operates his business as a sole trader and not through a company. An ABN lookup confirms the ABN for the Claimant’s business in the tax returns is owned by the Claimant as a sole trader and is not owned by a company. The submission that the Claimant is the director of a company is factually incorrect on the documents before me.
19. The Claimant’s solicitor submits the Claimant earned $1,500 (approximately) per week before the motor accident. However, the Claimant’s solicitor does not point to any specific evidence in support of this. Nor do they set out how they say this sum has been calculated.
20. Neither the tax returns nor the bank statements support the Claimant’s contention that he earned $1,500 per week before the accident.
21. Whilst the bank statements are incomplete, they suggest the sum of $1,500 per week alleged as pre-accident earnings is fanciful. Bank statements are available for the following periods within the 12-month pre-accident period and show total deposits in the available periods as follows:
| Period | No. of weeks in period | Total deposits |
| 18 December 2018 to 10 January 2019 | 3.43 | $700 |
| 2 March 2019 to 1 May 2019 | 8.71 | $1,910 |
| 1 November 2019 to 17 December 2019 | 6.71 | $500 |
| Total | 18.85 | $3,110 |
22. The weekly average of the above is only $164.98 before deducting expenses of the business, if one were to accept all deposits are income of the business. The Claimant has indicated the $500 payment on 11 December 2019 is not income of the business in which case the total gross business earnings, before expenses in the 18.85 weeks of the pre-accident period covered by the bank statements is only $2,610 or $138.46 per week. This falls far short of the Claimant’s contention he earned around $1,500 per week. If the Claimant’s contention he earned a weekly average of $1,500 were true one would expect the weekly average of the available 18.85 weeks in the bank statement to be at or around $1,500. It is nowhere near this sum.
23. The Claimant’s contention as to his pre-accident weekly income is also inconsistent with his tax returns. If the Claimant earned $1,500 per week one would expect the tax returns to reflect this in the circumstances of a sole trader. The 2020 tax return covers that part of the pre-accident period from 1 July 2019 to 17 December 2019 which is a period of 24.28 weeks. If the Claimant earned $1,500 per week before the accident, including in the 24.28 weeks immediately preceding the day of the accident he would have earned over $36,000 plus any income earned between 18 December 2019 and 30 June 2020. However, the net income of the business, after expenses (before tax) is only $19,234 in the 2020 tax return (gross business income of $33,540 less business expenses of $14,306). It can be assumed none of the business expenses declared in the supplementary section of the tax return are wages paid to the Claimant given the Claimant does not separately record any wages paid to him by his own business in the relevant section of his tax return.
24. The Claimant may be confused as to whether his gross earnings for the purpose of clause 4(1) are the gross earnings of his business or the net earnings of the business that is, after deducting business expenses but before tax. However, In the circumstances of a sole trader the earnings of the Claimant as an individual, distinct from the business, are the profits of the business after paying the expenses of the business. 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.
25. The Claimant’s PAWE must be based on the Claimant’s gross earnings and not gross earnings of the business because it is his personal status as an “earner” that provides him with benefits under the MAI 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 outgoings and do not form part of the gross earnings of the “earner” who ultimately receives the net income of their business as their individual gross earnings.
26. The ABN lookup also reveals the Claimant has not been registered for GST since 2017. If the Claimant earned $1,500 per week ($78,000 gross per year) his gross business income, before expenses would exceed $75,000 per year. In that case, the Claimant would need to be registered for GST (the Claimant must be registered for GST if his business has or is expected to have a gross turnover of more than $75,000 per annum). The fact the Claimant is not registered for GST is consistent with my conclusion that it is likely his business earned significantly less than $1,500 per week even on a gross turnover basis.
27. The bank records indicate the Claimant has continued to receive income from his pest control business after the date of the motor accident. For example, there is a deposit on 28 April 2020 for $330 for “Pest attack pest control P contractor work” and payments on 17 January 2020 ($1,180) and 24 June 2020 ($400) from owners of strata plans which appear to be for pest control services provided to strata buildings. It is unclear the extent to which other deposits post-accident are income or the extent to which there is additional post accident income not evidenced by the bank statements. The Claimant’s contentions that some post-accident deposits are not income should be treated with caution given his contention that he earned $1,500 per week pre-accident is not borne out by any documents. The documents put in question the veracity of the Claimant’s contentions both in relation to pre and post-accident earnings. For the purpose of calculating payments under Division 3.3 of the MAI Act the insurer may wish to seek clarification/verification from the Claimant’s accountant regarding any post-accident/ongoing income received by the Claimant through his business or otherwise.
28. As the extent to which the income declared in the 2020 tax return is pre-accident income or post-accident income is unclear, I cannot be satisfied the 2020 tax return is a reliable basis upon which to calculate the Claimant’s PAWE. Even if one were to accept the entire income declared in the 2020 tax return was earned before the accident (clearly this is not the case given the post-accident deposits recorded in the bank statements) it demonstrates a weekly average that falls far short of the alleged $1,500 per week.
29. This leaves the 2018/2019 tax return for consideration. Whilst it does not cover all the pre-accident period it covers a full 12 month earning period and shows:
a) That for part of the 2018/2019 financial year the Claimant was employed by another pest control company then known as Masters Pest Control Sydney Pty Limited now known as Clear View Investment Group Pty Limited earning a total of $10,421 gross. There is no evidence that the Claimant was anything other than an employee of that company for a period prior to 30 June 2019.
b) The Claimant’s own business earned only $11,655 after expenses in the financial year ending 30 June 2019 (gross business income of $57,713 less business expenses of $46,058).
c) The Claimant’s total gross income in the financial year ending 30 June 2019 from employment and his own business was $22,076 or $424.54 per week.
30. The Claimant’s solicitor submits the Claimant relies on the DRS decision of AHE v NRMA [2019] NSWDRS MR 190 in which the Claimant submits similar circumstances applied where it was held that “in the context of calculating the PAWE for weekly payments of statutory benefits under the Act, this may well work to the disadvantage of such claimants [director of a company] because not all of their income by way of personal exertion in the preceding 12 months to the motor accident might have been declared for taxation purposes”. However, the Claimant is not a director of a company. He is a sole trader. In the circumstances of a sole trader as distinct from a company (where dividends may be lawfully franked or paid into trust or to other shareholders or paid as director loans) there is no logical or lawful explanation as to why all income of the business would not be declared to the ATO. As a sole trader, the Claimant has a legal obligation to disclose all income of his business in the supplementary section of his tax return.
31. More importantly, however, the Claimant has not pointed to any evidence of additional income derived from his business not declared for taxation purposes. The submissions infer that in this regard, one can turn to the bank statements. However, as noted above the bank statements do not reveal any additional income not declared for tax purposes. In fact, if the bank statements were to be relied on in isolation, they suggest earnings far less than the earnings declared in the tax returns. There is no evidence of undeclared income for inclusion in calculation of PAWE.
32. Having regard to all the above I agree with the insurer that in the circumstances of this matter neither the bank statements nor the 2020 tax return form a reliable basis upon which to calculate PAWE and that the most reliable document is the 2019 tax return.
33. The insurer has taken the weekly average of the taxable income from the 2019 tax return, after deducting the Claimant’s personal work-related expenses. However, that is not the correct approach. The correct approach is to take the Claimant’s gross income being the net business income before personal deductions. That figure is slightly higher than the figure adopted by the insurer and is $22,076 which produces a PAWE of $424.54 ($22,076 divided by 52 weeks). Accordingly, the Claimant’s PAWE is varied to $424.54.
34. Should the Claimant provide further evidence verified by his accountant of the net income (that is, after business expenses) of his business in the actual pre-accident period of 18 December 2018 to 17 December 2019 for example in the form of quarterly BAS, profit and loss statements recording business income and expenses prepared and verified by his accountant for the relevant period and bank statements covering the complete pre-accident period (for example missing pages 3 and 5 of the 10 page transaction history provided) the insurer is to review the amount of the Claimant’s PAWE taking into account any such further information provided by the Claimant and/or his accountant. In the meantime, based on the material before me I conclude that the Claimant’s PAWE is $424.54.
Conclusion
35. The reviewable decision is:
a)Varied.
b)The amount of the Claimant’s PAWE is $424.54.
Legislation and Guidelines
36. In making this decision, I have considered the following:
· The application, reply and supporting documentation
· Motor Accident Injuries Act 2017 (NSW)
· Motor Accident Guidelines
· Motor Accident Injuries Regulation 2017
Katherine Ruschen
Merit Reviewer
Personal Injury Commission
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