Mula v NRMA
[2022] NSWPICMR 9
•11 February 2022
| CERTIFICATE OF DETERMINATION OF MERIT REVIEWER | |
| CITATION: | Mula v NRMA [2022] NSWPICMR 9 |
| CLAIMANT: | Saikiran Reddy Mula |
| INSURER: | NRMA |
| MERIT REVIEWER: | Katherine Ruschen |
| DATE OF DECISION: | 11 February 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); meaning of pre-accident weekly earnings (PAWE); schedule 1, clause 4(1) of the MAI Act; PAWE; calculation of PAWE for sole trader or self-employment; 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 Motor Accident Injuries Act 2017 (MAI Act) and is therefore a merit review matter under Schedule 2(1)(a) of the MAI Act. 1. The reviewable decision is varied as follows: (a) the claimant’s pre-average weekly earnings figure is $566.65. |
BACKGROUND
There is a dispute between Saikiran Reddy Mula (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 30 June 2021.
The claimant made an application for personal injury benefits under the MAI Act on 12 July 2021.
On 12 November 2021 the insurer calculated the claimant’s pre-accident weekly earnings (PAWE) in the amount of $544.70.
The claimant requested an internal review of the 12 November 2021 PAWE decision.
On 18 November 2021 the insurer issued their internal review decision which affirmed the decision of 12 November 2021 that the claimant’s PAWE is $544.70.
The claimant seeks a merit review of the insurer’s internal review decision dated 18 November 2021.
SUBMISSIONSThe claimant submits he is not happy with the insurer’s decision stating that he considers the amount payable for weekly benefits is “too low”. The claimant has not outlined any alternative calculation. Nor has he provided any further documents to challenge the insurer’s decision.
The insurer submits they have correctly calculated the claimant’s PAWE based on the net earnings of the claimant’s sole trader business and that they have determined the claimant’s PAWE based on the scenario that is more favourable to the claimant by including wage subsidy payments by another insurer as part of the claimant’s net business earnings.
REASONS
At the time of the motor accident the claimant was a self-employed food delivery driver working for various companies, including Uber, Deliveroo, Menulog and Doordash. The claimant operated his sole trader business under an ABN.
In his claim form he asserted his weekly earnings were in the range of $1,000 to $1,500 per week.
There is no dispute that the claimant is an earner within the meaning of “earner” in clause 2, Schedule 1 of the MAI Act based on his self-employed/sole trader status at the time of the motor accident.
The dispute is over calculation of the claimant’s PAWE.
Pursuant to clause 4 of Schedule 1 of the MAI Act PAWE means:
(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.
…
(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.
There is no evidence to suggest any of the exceptions in subclause 2 of clause 4 applies to the claimant’s circumstances. There is no evidence to suggest subclause 3 of clause 4 applies to the claimant. The claimant’s PAWE is therefore to be calculated under clause 4(1) of Schedule 1 of the MAI Act. Accordingly, the claimant’s PAWE is to be calculated based on the weekly average of the gross earnings received by the claimant as an earner during the 12 months immediately before the day on which the motor accident occurred.
The motor accident occurred on 30 June 2021. Accordingly, under clause 4(1) of Schedule 1 the pre-accident period is 30 June 2020 to 29 June 2021.
In the circumstances of a sole trader, the gross 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 and therefore do not form part of his individual gross earnings.
The claimant’s PAWE, as a sole trader, must be based on his gross earnings and not the 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.
Accordingly, for the purpose of clause 4(1) of Schedule 1 of the MAI Act the claimant’s PAWE is the weekly average of the net earnings of his business that is, the gross earnings less business expenses.
For the purpose of calculating PAWE the claimant has provided tax returns, payment statements from the delivery companies he contracts to, bank statements and a summary of expenses of the business. The available financial evidence of the business was analysed by PKF forensic accountants who produced a report dated 7 October 2021.
In addition to income generated through his business the claimant was in receipt of wage subsidy payments for part of the relevant pre-accident period from Insurance Australia Limited in relation to a prior accident.
PKF calculated the claimant’s PAWE based on two scenarios: one which included the wage subsidy payments and one that did not. PKF noted that whilst the wage subsidy payments were made by reason of an injury preventing the claimant from working that the claimant’s business nonetheless generated a consistent income throughout the pre-accident period, including the period in which the wage subsidy was received. On this basis, PKF is of the view that inclusion of the wage subsidy artificially inflates the claimant’s PAWE. However, without further information about the prior accident and the basis of the wage subsidy calculation by Insurance Australia Limited, I do not think any such conclusion can be drawn from the available information. Notably, the claimant also received a wage subsidy in the previous 2019/2020 financial year and so it would be necessary to examine earnings prior to this (for example in the 2018/2019 financial year) to determine whether there is any such artificial inflation in 2020/2021. The subsidy may, for example, replace additional income the claimant was able to earn in 2018/2019 prior to the prior accident.
In any event, whether the wage subsidy forms part of the claimant’s PAWE for the purpose of the MAI Act is not a matter that I consider I need to deal with as the insurer has agreed to its inclusion in the claimant’s PAWE. Accordingly, this merit review proceeds on the basis that the wage subsidy forms part of the claimant’s PAWE.
I have analysed the financial documents and consider the most accurate method of calculating the claimant’s PAWE is to take the period 1 July 2020 to 30 June 2021, which closely aligns with the specific pre-accident period from 30 June 2020 to 29 June 2021 (it is only one day out). The documents are otherwise insufficient to calculate PAWE in the precise period from 30 June 2020 to 29 June 2021.
The financial records demonstrate the claimant’s business earned gross income of $52,326 in the period 1 July 2020 to 30 June 2021 and had total business expenses of $29,703 in that period. This produces a net business income and in turn the claimant’s gross earnings from the business in the sum of $22,623. The claimant received total wage subsidy payments in the same period in the sum of $6,843. This, combined with net business earnings brings the claimant’s gross personal income to $29,466 in the 12 months from 1 July 2020 to 30 June 2021.
I note the claimant’s net earnings of $29,466 in the 2020/2021 financial year are reasonably consistent with his net earnings in the previous 2019/2020 financial year, including wage subsidy payments received in the previous year. In the 2019/2020 financial year the claimant had a gross personal income of $30,200. Business expenses in the 2019/2020 financial year were $29,801, which is also on par with expenses in 2020/2021 of $29,703. I am therefore comfortably satisfied on the balance of probabilities that calculation of the claimant’s PAWE based on his 2020/2021 financial records is an accurate method of calculating the claimant’s PAWE under clause 4(1) of schedule 1 of the MAI Act.
Based on the above I agree with PKF’s calculation of the claimant’s PAWE inclusive of wage subsidy payments save for the figure adopted by PKF for depreciation in deducting business expenses. PKF has asserted their own opinion that the correct depreciation figure is $3,392 over the depreciation amount determined by the claimant’s accountant in the sum of $2,250 and declared in the claimant’s 2020/2021 tax return.
Other than a notation that PKF’s depreciation figure is “calculated based on advised purchase price/date of vehicle utilised and TR 2020/3” PKF do not provide any or adequate reasons in their report for their depreciation figure. There are several methods of depreciation, and it is unclear for example whether PKF had any regard for the fact the claimant included a higher depreciation sum of $5,470 in his previous 2019/2020 tax return. That earlier, higher depreciation may, for example, result in lower depreciation figures in the following tax returns.
Absent adequate reasoning from PKF I am not satisfied it is appropriate to make any adjustment to the claimant’s declared depreciation figure in his tax return. The claimant did not receive any tax benefit from the higher depreciation calculated by PKF and only received the tax benefit flowing from the lower figure of $2,250. For these reasons the depreciation amount declared in the tax return is to be preferred. Business expenses calculated using the declared depreciation figure instead of PKF’s figure are $29,703 as compared to PKF’s total expenses calculation of $30,845.
Accordingly, the claimant’s PAWE is to be calculated as follows:
(a) gross business income: $52,326;
(b) less business expenses of $29,703;
(c) net business income: $22,623 ($52,326 - $29,703);
(d) plus wage subsidy payments: $6,843, and
(e) total gross earnings of the claimant: $29,466 ($22,623 + $6,843).
Total gross earnings of $29,466 over a 12-month period produces a weekly average of $566,65 ($29,466 divided by 52 weeks).
Accordingly, the claimant’s PAWE amount is adjusted to $566.65.
To the extent the claimant’s submission that he considers payments of weekly benefits to be “too low” is also a reference to the payment amount calculated under sections 3.6 and/or 3.7 of the MAI Act the claimant’s attention is drawn to the fact that payments under sections 3.6 and 3.7 are calculated on the basis of a percentage of the difference between the claimant’s PAWE and his post-accident earning capacity, if any.
For the first entitlement period payments are based on 95% of the difference between the claimant’s PAWE and any post-accident earning capacity. For example, if the claimant has no post-accident earning capacity in the first entitlement period, he would be entitled to weekly payments in the first entitlement period in the sum of $538.32 being 95% of his PAWE of $566.65, as determined in this merit review. Of course, if the claimant has a post-accident earning capacity, then weekly payments would be less than this.
In the second entitlement period payments are based on 80% of PAWE, if the claimant has no earning capacity and 85%, if he has a partial earning capacity.
CONCLUSION
The reviewable decision is varied as follows:
(a) the claimant’s PAWE figure is $566.65.
Legislation and Guidelines
In making this decision, I have considered the following:
· the application, reply and supporting documentation;
· Motor Accident Injuries Act 2017 (NSW),
· Motor Accident Guidelines, and
· Motor Accident Injuries Regulation 2017.
Katherine Ruschen
Merit Reviewer
Personal Injury Commission
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