Muzammil v QBE Insurance (Australia) Limited
[2022] NSWPICMR 25
•26 April 2022
| CERTIFICATE OF DETERMINATION OF MERIT REVIEWER | |
| CITATION: | Muzammil v QBE Insurance (Australia) Limited [2022] NSWPICMR 25 |
| CLAIMANT: | Mohammed Abdul Ahad Muzammil |
| INSURER: | QBE Insurance (Australia) Limited |
| MERIT REVIEWER: | Katherine Ruschen |
| DATE OF DECISION: | 26 April 2022 |
| CATCHWORDS: | MOTOR ACCIDENTS- Merit review; meaning of pre-accident weekly earnings, schedule 1(4)(2)(b) of the Motor Accident Injuries Act 2017 (MAI Act); schedule 1(4)(1) of the MAI Act; pre-accident weekly earnings; self-employment; whether 52 week period under schedule 1(4)(1) of the MAI Act can be reduced or adjusted; Held– the reviewable decision is set aside. |
| 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 (the MAI Act), and is therefore a merit review matter under Schedule 2(1)(a) of the MAI Act. 1. The reviewable decision is: (a) set aside; (b) the claimant’s pre-accident weekly earnings (PAWE) amount is $528.95; and (c) the claimant’s entitlement to costs is nil. |
Issued under section 7.13(4) of the Motor Accident Injuries Act2017
BACKGROUND
There is a dispute between Mohammed Abdul Ahad Muzammil (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 6 July 2021.
The claimant made an application for personal injury benefits under the MAI Act.
On 3 November 2021 the insurer determined the claimant’s pre-accident weekly earnings (PAWE) in the sum of $464.69 for the purpose of calculating whether the claimant is entitled to weekly payment of statutory benefits under sections 3.6 and 3.7 of the MAI Act.
The claimant requested an internal review of the insurer’s PAWE decision of 3 November 2022.
On 17 November 2021 the insurer issued their internal review decision in which the insurer affirmed their decision that the claimant’s PAWE amount is $464.69.
The claimant has requested a merit review of the internal review decision of 17 November 2022.
SUBMISSIONS
The claimant submits his PAWE should be averaged over the month of June 2021 only and not over the entire 12 month period before the accident.
During the year before the accident the claimant received income from multiple sources both in the capacity of employee and self-employment. The claimant submits payments to his sole trader business were “irregular” which led to “delays and complications in the calculation of his income and payment” and relies on his bank records showing payments in June 2021 into his account from various sources of employment.
The claimant sets out the hours he purportedly worked prior to the accident as employee and in his business and submits that the month of June 2021 best reflects his usual weekly earnings generated by these hours.
The claimant’s submissions do not reflect a proper application of the MAI Act. For example, the claimant’s submissions state “the insurer has accepted that the claimant incurred a wage loss in accordance with Schedule 1, Clause 4” of the MAI Act. However, clause 4 sets out the meaning of PAWE. Determining how PAWE is calculated is a separate question from the question of whether there has in fact been any wage loss. The claimant’s solicitor has also provided a schedule of “damages” claiming full wage loss together with loss of superannuation, with no regard to the operation of sections 3.6 and 3.7 of the MAI Act which reduce weekly payments by certain percentages even in the circumstances of total incapacity and do not allow for loss of superannuation.
Whilst the claimant may have an entitlement to claim damages, the present merit review application is in respect of payment of statutory benefits, not damages and the claimant’s damages schedule is inconsistent with the way in which statutory benefits are payable.
The insurer submits the claimant has failed to take into account total gross earnings over a 12 month period, as required by Schedule 1, clause 4(1) and has failed to calculate the claimant’s earnings from self-employment based on net business income, after accounting for all expenses of the business.
REASONS
Issues
The following issues arise for determination in this merit review:
(a) whether the claimant’s PAWE falls under clause 4(1) or one of the exceptions in clause 4(2), and
(b) calculation of the claimant’s PAWE.
Does clause 4(1) or one of the exceptions in clause 4(2) apply to the claimant?
Pursuant to Schedule 1, clause 4 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.
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.
The claimant meets the definition of earner in Schedule 1, clause 2 of the MAI Act on the basis he was injured as a result of a motor accident, is over 15 years of age, was employed or self-employed for at least 13 weeks of the 52 weeks of the year immediately preceding the accident and had not permanently retired at the date of the accident. In these circumstances, clause 4(1) prima facie applies to calculation of the claimant’s PAWE, unless one of the exceptions in clause 4(2) is satisfied.
The evidence establishes clause 4(2)(a) does not apply, as the claimant had been earning continuously for at least 12 months before the accident.
The evidence also establishes clause 4(2)(a1) does not apply. For this exception to apply the claimant must have received earnings for at least 26 weeks during the first year of the two year pre-accident period and must not have received any earnings after the first year of the two year pre-accident period. This means the claimant must receive all his earnings (and for at least 26 weeks) in the period 6 July 2019 to 5 July 2020 and no earnings in the period 6 July 2020 to 5 July 2021. However, the claimant was in receipt of earnings during the second year of the two year pre-accident period. Accordingly, clause 4(2)(a1) does not apply to the claimant’s circumstances.
Clause 4(2)(b) applies, if clause 4(3) is satisfied. Clause 4(3) is satisfied if, during the 12 months before the date of the motor accident, the claimant took action that resulted in a significant change in his earnings circumstances that resulted in him regularly earning more than he did before. The evidence establishes the following relevant earnings history:
(a) the claimant commenced employment with McDonalds prior to the 12 month period immediately before the day of the accident and continued in this employment throughout the 12 months before the accident[1]. Accordingly, there is no significant change arising from earnings from McDonalds during the 12 month period before the date of the accident;
(b) the claimant generated income as a self-employed delivery driver for Menulog prior to the 12 month period immediately before the day of the accident and continued to receive income on this basis throughout the 12 month period before the accident[2]. Accordingly, there is no significant change arising from earnings from Menulog during the 12 month period before the date of the accident;
(c) the claimant commenced receiving earnings from the Trustee for Charlies of Lane Cove Trust (Charlies) prior to the 12 month period immediately before the day of the accident and ceased receiving income from this source on 22 November 2020, before the end of the 12 month period immediately before the day of the accident[3]. The payment period in this employment from 1 July 2020 to 22 November 2020 is 20.7 weeks during which the claimant received gross earnings of $2763. This is a weekly average of $133.41;
(d) the claimant commenced receiving earnings from CC Frenchman during the 12 month period immediately before the day of the accident, on 17 August 2020 and ceased to be in receipt of these earnings on 8 November 2020, before the end of the pre-accident period. The payment period in this employment is 12 weeks during which the claimant received total gross earnings of $4,718, which gives a weekly average of $393.16;
(e) the claimant commenced earning as a sole trader through Smart Ware[4] on 9 November 2020 and continued to receive earnings from this source throughout the remainder of the 12 month period before the day of the accident. The period in which the business received earnings until the end of the 12 month period before the day of the accident on 5 July 2021 is 34 weeks. Gross profit of the business in this period is $23,155[5]. Business expenses were $15,500[6] which produces net income of the business and in turn, the claimant’s gross individual earnings from the business of $7,655. This is a weekly average of $225.15.
[1] Pay slip dated 15 June 2020 includes payments for the week ending 28 June 2020.
[2] Documents show income since at least 5 July 2020, being the day before the commencement of the 12 month period immediately before the day of the accident.
[3] Australian Taxation Office (ATO) income statement records payments made in the period 1 July 2020 to 22 November 2020.
[4] The claimant says his sole trader business name is “Inspiring & Living” and payments by Smart Ware are those shown in his bank records with the payer name “Kulsoom Sultana” and description “pay till [date]”.
[5] As declared in the 2020/2021 tax return. Whilst this is to 30 June 2021 the bank records confirm the claimant did not receive any additional earnings through this business in the remaining period 1 July 2021 to 5 July 2021.
[6][6] As declared by the claimant in his 2020/2021 tax return.
As demonstrated by the above, the only change in the claimant’s earnings circumstances during the 12 month period before the day of the accident was that in November 2020, he ceased receiving wages from Charlies and CC Frenchman and began to generate income in self-employment from Smart Ware. For clause 4(3) to be satisfied the change must be “significant” and must result in the claimant regularly earning more than he did before the change occurred.
The claimant’s combined average weekly income from the two jobs that ceased around the time the Smart Ware earnings commenced in November 2020 were $526.57. In its place, the claimant commenced receiving weekly average earnings from Smart Ware of $225.15, which is significantly lower than previous combined earnings from Charlies and CC Frenchman. Accordingly, whilst the reduction in income might be a significant change it is not a significant change that satisfies clause 4(3) as it did not result in the claimant regularly earning more than he did before the change occurred. It resulted in him earning less. Accordingly, clause 4(2)(b) does not apply.
There is no evidence that the exception under clause 4(2)(c) applies.
Therefore, the claimant’s PAWE assessment falls under clause 4(1), as none of the exceptions in clause 4(2) apply. Pursuant to clause 4(1) the claimant’s PAWE is calculated from 6 July 2020 to 5 July 2021, being the 12 month period immediately before the day of the motor accident.
Calculation of the claimant’s PAWE
In so far as I have adopted the net income of the claimant’s business at paragraph 19(e) above, in the circumstances of a sole trader business 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.
The claimant’s PAWE must be based on his individual gross earnings and not the gross earnings of the business because it is his personal, individual status as an “earner” that entitles him to weekly 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 incurred by the business. They do not form part of the gross earnings of the claimant as an individual earner, distinct from the business. As an individual earner, the claimant receives the net income of the business, after the business has accounted for all expenses.
Adopting the net business income as the claimant’s gross earnings for the purpose of the MAI Act is also consistent with the presentation by the claimant of his individual earnings to the ATO. In his individual tax return, the claimant declares his gross earnings as an individual to be the net profits of the business, after accounting for all business expenses. It is also consistent with the treatment and assessment of such income by the ATO and is consistent with the method of calculation in previous merit review decisions including ABQ v NRMA Insurance [2018] NSWDRS MR 043; ACK v QBE Insurance Australia Limited [2018] NSWDRS MR 063 and AGZ v NRMA Insurance Pty Ltd [2019] NSWDRS MR 184.
In so far as the claimant contends PAWE should be calculated only over the month of June 2021, there are no provisions under the MAI Act, Motor Accident Injuries Regulation 2017 (the Regulation) or the Motor Accident Guidelines that permit adjustment of the period specified in Schedule 1, clause 4(1).
Pursuant to the Supreme Court decision in Allianz Insurance Australia Limited v Shahmiri [2022] NSWSC 481 (Shahmiri) PAWE is to be calculated under clause 4(1) by taking earnings over the whole of the 12 month period and dividing it by 52, reflecting the number of weeks during the whole of the period even if the earner did not receive earnings for each and every week of the 12 month period.
Accordingly, the claimant’s PAWE cannot be calculated over the discreet period 1 June 2021 to 30 June 2021 and must be averaged over the number of weeks (52) in the whole of the 12 month period under clause 4(1). The 12 month period under clause 4(1) in relation to the claimant is 6 July 2020 to 5 July 2021.
Pursuant to clause 4(1) the claimant’s PAWE is the weekly average of the gross earnings received by him in the period 6 July 2020 to 5 July 2021. Therefore, any earnings received by the claimant into his bank account after 5 July 2021 are excluded.
The claimant’s financial records are deficient. The claimant has declared earnings through Inspiring & Living to the ATO on the basis of a sole trader. However, Inspiring & Living is a registered corporation, meaning it is a separate legal entity and is required to lodge its own tax return. As a separate legal entity payments by Smart Ware to Inspiring & Living are not payments to the claimant and the claimant only earns through the corporation to the extent the corporation makes payments to him for example, in the capacity of employee of the company or through dividend payments in the capacity of shareholder.
It is apparent from the 2021 tax return, however, that the claimant has dealt with the profit of Inspiring & Living as if it were a sole trader business. On this basis, it is reasonable to assume that had the claimant dealt with Inspiring & Living in a manner consistent with the Corporations Law that Inspiring & Living would have lodged a tax return consistent with the gross profit and business expense figures in the claimant’s tax return and that the net profit would have been paid to the claimant.
The claimant has income from Menulog of over $3,000 in the 2020/2021 tax year, which he failed to declare to the ATO despite being required to do so. There is no doubt that as a Menulog delivery driver working on a self-employed basis the claimant would have had business expenses in connection with these earnings namely, running costs for the motor vehicle used in this work. Had the claimant declared his Menulog earnings to the ATO I have no doubt that he would have also declared the business expenses relating to this income to reduce his tax liability.
The onus is on the claimant to provide sufficient evidence of his pre-accident earnings, including the expenses of any business. As a sole trader the claimant ought to be able to provide reliable records not only of the total sales of the business but for business expenses. He has a legal obligation to retain such records. However, the claimant has only provided records of the gross profits of the business in relation to Menulog.
In circumstances where the claimant has not provided records of business expenses, I agree with Procare that it is appropriate to notionally assess business expenses. However, I disagree with Procare’s decision to base motor vehicle expenses on the maximum kilometre allowance of 5,000km. This has no regard for the fact the claimant’s Menulog earnings were not significant or that the records show the claimant generated earnings from Menulog for only 32 weeks of the 52 week period. Given the nature of this service as a local delivery service and the limited income in any given week it is unlikely that the claimant drove an average of 156km per week (5,000km divided by 32 weeks) to generate this income. It is also unlikely motor vehicle expenses attributable to the business exceeded gross profits of this business, as suggested by Procare in their methodology. In the absence of records of expenses, I consider it more appropriate to notionally assess expenses using the ATO performance benchmarks for delivery services. The performance benchmark for delivery service motor vehicle expenses is 12% to 20% of gross income of the business, with the average being 16%.
I do not agree with Procare that there should be a further reduction for mobile phone expenses. Given the claimant did not derive a significant income from Menulog and only earned through Menulog for 32 weeks of the 12 month pre-accident period I doubt that 50% of phone expenses are attributable to Menulog. Most phone expenses are likely included in expenses declared for Inspiring & Living and/or were incurred from personal use. Given it is likely the claimant has a mobile phone plan with unlimited calls any portion of the phone bills attributable to Menulog earnings is likely to be inconsequential in the context of the claimant’s overall earning circumstances. Accordingly, I do not think it appropriate to deduct an amount from the Menulog earnings for mobile phone expenses.
The claimant is legally represented. Something should be said about the presentation of the claimant’s case in the context of his obligations to the insurer to ensure the information he provides is true and correct. In his application for personal injury benefits the claimant declared that his pre-accident average weekly income was $1,450 “net” per week and that he has been off work since the date of the accident. The claimant’s solicitors also contend pre-accident earnings of a similar amount and a total incapacity since the date of the accident.
In the claimant’s submissions his solicitors contend the claimant worked a full 5 to 5.5 day week in self-employment and in addition to this, typically worked 10 hours per week at McDonalds. They contend the payment cycle in relation to Smart Ware earnings is “irregular”, resulting in “delays and complications in calculation of his income”.
However, none of these statements are borne out by the evidence. Having regard to the evidence, the suggestion the claimant enjoyed average weekly earnings (whether gross or net) of around $1,450 pre-accident is fanciful.
In relation to McDonalds, the evidence does not establish the claimant typically worked 10 hours every week. True to the nature of casual employment the evidence establishes the claimant only worked 41 weeks out of 52 weeks from 1 July 2020 to 30 June 2021 and worked anywhere between 2.98 hours and 17.2 hours per week. During the 41 weeks worked the claimant worked a total of 346.14 hours, which gives a weekly average of 8.44 hours across the 41 weeks but more relevantly, a weekly average across the whole of the 52 week period of only 6.65 hours.
In so far as the claimant’s solicitors contend payments from Smart Ware were “irregular”, “delayed” or “complicate” calculation of earnings, irregularity, delay or complication is not borne out by the evidence. In fact, the documents show the opposite that is, that the pay cycle was regular at every 10 to 14 days, that Smart Ware made payments in a timely fashion and that total earnings can be readily calculated without complication. By way of example, the records show:
(a) purchase order dated 2 May 2021 for services up to this date: paid by Smart Ware into the claimant’s bank account within 4 days on 6 May 2021;
(b) next purchase order 11 days later on 13 May 2021 for services provided to 14 May 2021: paid by Smart Ware the same day on 13 May 2021;
(c) next purchase order 10 days later on 23 May 2021 for services up to 21 May 2021: paid by Smart Ware within 2 days on 25 May 2021;
(d) next purchase order 14 days later on 6 June 2021 for services up to 4 June 2021: paid by Smart Ware within 2 days on 8 June 2021;
(e) next purchase order 14 days later on 20 June 2021 for services to 18 June 2021: paid by Smart Ware within 3 days, on 23 June 2021, and
(f) next purchase order 12 days later on 2 July 2021 for services up to same date: paid by Smart Ware within 5 days on 7 July 2021.
The claimant’s solicitors also assert in a schedule of damages that since the accident on 6 July 2021 the claimant has suffered a total loss of earnings. However, clearly this is incorrect. Bank records are only available to 30 July 2021 but show the claimant continued to receive earnings post-accident, as follows:
(a) 6 July 2021: $113.39 from Menulog;
(b) 7 July 2021: $232.76 from McDonalds;
(c) 7 July 2021: $1,900 from Smart Ware;
(d) 14 July 2021: $212.23 from McDonalds, and
(e) 18 July 2021: $1,200 from Smart Ware.
Given the above sums were received after 5 July 2021 they must be used in calculating the difference between PAWE and post-accident earnings under sections 3.6 and 3.7 of the MAI Act for any corresponding period. Further, given the pay periods demonstrated by the McDonalds pay slips and Smart Ware purchase orders there is a probability some of this income was received from personal exertion by the claimant after the accident on 6 July 2021. This puts into question the claimant’s contention he has been totally incapacitated for work since 6 July 2021.
The discrepancies between the claimant’s submissions and the evidence are concerning. Accordingly, the insurer should request that the claimant provide ongoing bank records for the purpose of calculating whether there is any difference between PAWE and post-accident earnings for the purpose of payments under sections 3.6 and 3.7 of the MAI Act. It would also be prudent to request, in due course, the ATO generated income statement for McDonalds as of 30 June 2022 and it may be prudent to make a direct request to Menulog and Smart Pay regarding the claimant’s earnings from these sources after 5 July 2021 pursuant to the claimant’s authority in the application for personal injury benefits.
Returning to calculation of PAWE, as noted above pursuant to clause 4(1) only earnings “received” by the claimant in the period 6 July 2020 to 5 July 2021 are included in calculation of PAWE. The evidence establishes the claimant received the following gross earnings in this period:
(a) McDonalds: $10,335 less $214.16 received 1 July 2020 (before commencement of the relevant 52 week period) = $10,120.84;
(b) Charlies: $2,763 less $413.16 received 1 July 2020 (before commencement of the relevant pre-accident period) = $2,349.84;
(c) CC Frenchman: $4,718;
(d) Menulog $3,168.42 less $506.95 (16%) notional assessment of business expenses based on the average of the ATO performance benchmark for delivery driver motor vehicle expenses = $2661.47, and
(e) Inspiring & Living (Smart Ware[7]): $23,155 less business expenses of $15,500[8] = $7,655.
[7] Procare include payment 7 July 2021, which is outside the relevant 12 month period and therefore excluded.
[8] I do not agree with Procare’s notional increase of Inspiring & Living expenses. Whilst source documents for business expenses are not provided, there is evidence establishing on balance expenses were $15,500, being the 2020/2021 tax return and declaration in same. If there were other expenses, it would have been in the claimant’s interest to include them in the tax return. On the other hand, the claimant failed to declare his Menulog income and therefore had no interest in retaining records of Menulog expenses.
The totals above were received during that part of the pre-accident period from 6 July 2020 to 30 June 2021. Bank records establish the claimant did not receive any earnings during the balance of the pre-accident period from 1 July 2021 to 5 July 2021. He next received earnings on 6 July 2021 from Menulog, which is after the end of the relevant 52 week period on 5 July 2021. Accordingly, as there were no further earnings received 1 July 2021 to 5 July 2021 the claimant’s total gross earnings in the 52 week period under clause 4(1) from 6 July 2021 to 5 July 2021 are $27,505.15. The weekly average of this sum over the whole of the 52 week period (as required under the Shahmiri decision) is $528.94. Therefore, the claimant’s PAWE is $528.95.
COSTS
The claimant seeks regulated costs of this merit review.
Pursuant to section 8.10 of the MAI Act the claimant is only entitled to costs permitted by the Regulation.
This is a dispute about the amount of statutory benefits payable under Division 3.3 of the MAI Act and is a merit review matter under Schedule 2, clause 1(a) of the MAI Act.
Pursuant to Regulation 22 and Schedule 1, clause 1 of the Regulation a merit review under Schedule 2, clause 1(a) of the MAI Act about the amount of statutory benefits payable under Division 3.3 is not a regulated merit review matter. Accordingly, costs are not permitted by the Regulation for this dispute.
CONCLUSION
The reviewable decision is:
(a) set aside;
(b) the claimant’s PAWE amount is $528.95, and
(c) the claimant’s entitlement to costs is nil.
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
· the Regulation.
Katherine Ruschen
Merit Reviewer
Personal Injury Commission
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