Pal v Insurance Australia Limited t/as NRMA Insurance
[2023] NSWPICMR 57
•7 November 2023
| CERTIFICATE OF DETERMINATION OF MERIT REVIEWER | |
| CITATION: | Pal v Insurance Australia Limited t/as NRMA Insurance [2023] NSWPICMR 57 |
| CLAIMANT: | Surinder Pal |
| INSURER: | Insurance Australia Limited t/as NRMA Insurance |
| MERIT REVIEWER: | Katherine Ruschen |
| DATE OF DECISION: | 7 November 2023 |
| CATCHWORDS: | MOTOR ACCIDENTS - Motor Accident Injuries Act 2017; dispute about weekly payment of statutory benefits under division 3.3; dispute about pre-accident weekly earnings; schedule 1, clause 4(1); business conducted by a corporation; corporation as a separate legal-entity; earnings received from the corporation; compliance with directions; sections 42 and 54 of the Personal Injury Commission Act 2020; rule 77 of the Personal Injury Commission Rules 2021; power to dismiss proceedings; Held – the application for a merit review 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 amount is $370.96. |
STATEMENT OF REASONS
INTRODUCTION
There is a dispute between Surinder Pal (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 19 November 2022.
On 13 December 2022 the claimant made an application for personal injury benefits.
On 27 April 2023 the insurer determined the claimant’s pre-accident weekly earnings (PAWE) in the sum of $443.77.
On 23 May 2023 the claimant applied for an internal review of the insurer’s decision dated 27 April 2023.
On 1 June 2023 the insurer issued their internal review decision in which the insurer varied the claimant’s PAWE to nil.
The claimant has requested a merit review of the insurer’s internal review decision dated 1 June 2023 (the Application).
SUBMISSIONS
The claimant is a director of a company, Abohar Pty Limited (the Company). The claimant contends as also an employee of the Company he is paid wages by the Company. The claimant contends these wages were declared to the Australian Taxation Office (ATO) through Single Touch Payroll (STP) Reporting and is reflected in the Financials of the Company in the relevant profit and loss statement as wages. The claimant contends he received annual gross wages of $80,000.
The claimant submits his PAWE is to be calculated based on his individual gross earnings and not the gross earnings of the Company because it is his personal, individual status as an “earner” that provides him with benefits under the MAI Act. The claimant contends he “clearly withdrew monies at various times of varying amounts throughout the relevant financial year to cover his living expenses which, at the end of the financial year, his accountant reconciled as wages/director’s fees for the purpose of the claimant’s individual tax return”. In response to directions issued to the parties the claimant further contended the Company did not pay his wages into a bank account.
The insurer submits that as the claimant is self-employed, the claimant’s gross earnings are the net profit of the business, before tax but after accounting for business expenses.
The insurer relies on reports of PKF Forensic Accountants dated 19 April 2023 and
26 May 2023. In their first report of 19 April 2023 PKF determined the claimant’s PAWE in the sum of $443.77 based on net profit of the Company, after accounting for business expenses.Further information was provided by the claimant and as a result, in their report of
26 May 2023 PKF determined the Company had in fact made a loss in the relevant period and accordingly, the claimant’s PAWE is nil.
REASONS
Self-employment v company
The insurer’s submissions are misconceived in so far as they are based on self-employment. In circumstances of self-employment that is, a person operating a business as a sole trader, the insurer is correct that the net profit of the business, after accounting for all business expenses, is the person’s individual earnings received as an earner for the purpose of the MAI Act. However, the claimant is not a sole trader. The business the claimant works in is conducted by the Company.
Pursuant to s 1.5.1 of the Corporations Act 2001 (Cth):
“As far as the law is concerned, a company has a separate legal existence that is distinct from that of its owners, managers, operators, employees and agents. A company has its own property, its own rights and its own obligations. A company's money and other assets belong to the company and must be used for the company's purposes. A company has the powers of an individual, including the powers to: * own and dispose of property and other assets * enter into contracts * sue and be sued. Once a company is registered, its separate legal status, property, rights and liabilities continue until ASIC (Australian Securities and Investments Commission) deregisters the company."
Accordingly, as the Company is a separate legal entity the claimant is correct that his PAWE is based on earnings he received from the Company in the relevant period and not the net profit or loss of the Company. The issue, however, is what amount did the Company pay to the claimant in earnings during the relevant pre-accident period that is, what amount did the claimant, as an individual earner, receive from the Company.
The evidence contradicts the claimant’s contentions in this regard. For example, the claimant has stated that the Company did not pay his wages into a bank account. However, bank records of the claimant and the Company clearly show transfers from the Company’s account to the claimant’s account, which are described in the bank statements as “director pay” or similar.
Further, in submissions the claimant contended he regularly withdrew amounts from the Company bank account, used this money to pay personal expenses and his accountant reconciled these withdrawals at the end of each financial year as wages. However, there do not appear to be cash withdrawals from the Company’s account. The majority, if not all withdrawals have transaction descriptions indicating they are business expenses. I have also been unable to reconcile withdrawals that might possibly be personal expenses with a contention that each year the claimant received a gross salary of $80,000 in this manner. In fact, it would be surprising if the claimant’s accountant reconciled random withdrawals of varying amounts (which is how the claimant says he was paid) as equating to precisely $80,000 each financial year. That would be an extraordinary coincidence in the circumstances of ad hoc withdrawals described by the claimant in his submissions.
Lastly, the documents relied on by the claimant in support of his contention he received $80,000 in gross earnings from the Company in the 12 month pre-accident period appear to have been prepared after the claimant made an application for personal injury benefits, and in the context of the claim. This includes the STP, and tax return relied on by the claimant. It would also appear to include the payslips. These documents are therefore not contemporaneous records and as such, should be scrutinised.
The STP document said to show pay as you go (PAYG) withholding tax paid to the ATO is not signed or dated and has a redacted tax file number. The claimant was directed to provide statements of income and his 2023 pre-filing statement (noting the claimant says he has not yet lodged his 2023 tax return), which ought to be available for download via his MyGov account. If PAYG tax has been paid to the ATO as contended, this would be confirmed in the corresponding statement of income and pre-filing statement. However, the claimant has failed to provide these documents and has not provided any explanation as to why he has been unable to provide them.
Given the STP document is unsigned and undated it therefore appears to be a draft in addition to being a document that appears to have been prepared after the claimant lodged his claim for personal injury benefits. I therefore consider it to be unreliable in circumstances where its contents are not verified by ATO generated statements of income. In any event, the STP document does not reconcile with the 12 month period before the accident. The STP document covers the period 1 July 2021 to 30 June 2022 whereas the 12 month pre-accident period is 19 November 2021 to
18 November 2022. Accordingly, even if reliable, it is not possible to calculate PAWE based on the STP document or the corresponding tax return.The claimant has provided payslips purportedly issued by the Company for payment of monthly gross wages of $6,666.67 (which would equate to an annual salary of $80,000). However, each payslip appears to have the same document number/identifier in the footer suggesting they may have been prepared retrospectively, at the same time. There is no year to date earnings recorded and the payslips are inconsistent with the contention of the claimant that he sporadically withdrew varying amounts from the Company account to use for personal expenses and did not receive consistent payments from the company for consistent amounts at consistent intervals such as monthly.
As a result of the difficulties with the claimant’s contentions and evidence directions were issued to the parties as set out below.
Procedural history
On 11 August 2023 I issued directions to the parties as follows:
“1. The insurer is, by 26 August 2023 to upload to the portal the following documents which were provided to PKF:
(a) a copy of the claimant’s bank statements from 1 July 2021 to
31 December 2022;(b) a copy of the company’s bank statements from 1 October 2021 to
31 December 2022, and(c) the payslips issued by the company to the claimant for the period
1 July 2021 to 4 December 2022.2. The claimant is, by 9 September 2023 to upload to the portal:
(a) a document which identifies the transactions in his bank statements that represent payment of wages by the company to the claimant by identifying for each payment:
(i) the transaction date;
(ii) the transaction description;
(iii) the amount deposited; and
(iv) the payslip pursuant to which the deposit is made.
(b) a copy of his individual 2023 final tax return and notice of assessment, if lodged and received;
(c) if the claimant has not yet lodged his individual 2023 tax return, a copy of his 2023 pre-filing statement;
(d) any further documents and/or submissions on which the claimant relies.
3. The insurer is, by 23 September 2023 to upload to the portal:
(a) any further documents and/or submissions on which the insurer relies.”
The claimant did not comply with direction 2, which expired on 9 September 2023.
On 20 September 2023 the claimant belatedly requested further time by asking for the matter to be “placed on hold” pending provision of an accountant’s report which the claimant expected to receive “shortly”. No explanation was provided as to why, in the meantime, the claimant could not provide the documents required by directions 2(a) to 2(c).
On 22 September 2023 further directions were issued to the parties, which relevantly provided:
“1. …
2. Directions were issued to the parties on 11 August 2023 which required, among other things, the claimant to provide certain documents under direction 2 by 9 September 2023. The claimant failed to comply with that direction and did not request an extension of time before the direction expired.
3. On 20 September 2023, 11 days after the relevant direction expired, the claimant’s solicitor belatedly wrote to the commission. Whilst an extension of time is not expressly requested, I will assume that is the intention of the message.
4. No explanation is provided by the claimant’s solicitor for the failure to comply with direction 2 of 11 August 2023.
5. The claimant has notified of an intention to provide an accountant’s report. However, this would not explain why the claimant has been unable to comply with direction 2(a) to (c) to date. The documents requested under direction 2(a) to (c) ought to be readily available to the claimant and the claimant ought to be able to readily mark up the bank statements, as required by the direction. The direction is not onerous.
6. The claimant and their solicitors are reminded that compliance with the Commission’s directions is mandatory.
7. In the circumstances, I make the following further directions:
(a)The claimant is to comply with direction 2 of 11 August 2023 by providing the documents required under directions 2(a) to 2(c) by no later than 29 September 2023.
(b)Time for compliance by the claimant with direction 2(d) of 11 August 2023 is extended such that the claimant is to provide any further documents and submissions, including the foreshadowed accountant’s report by on or before 7 October 2023.
(c)Time for compliance by the insurer with direction 3 of 11 August 2023 is extended to 21 October 2023.
(d)Any further request for an extension of time to comply with the directions made on 11 August 2023 must be made by the party requiring an extension in writing before the relevant direction or directions expire. The request must provide an explanation for the failure to comply with the direction(s) and attach evidence in support of the explanation given.”
As pointed out in the further directions, an outstanding accountant’s report does not explain why the claimant is unable to provide documents under directions 2(a) to 2(c), which ought to be readily available to him. The further directions of 22 September 2023 required the claimant to provide the outstanding documents by 29 September 2023. Time for the claimant to provide any other documents, including the outstanding accountant’s report was extended to 7 October 2023.
On 29 September 2023 the claimant advised that documents under direction 2(a), namely the claimant’s bank statements marked up to show payment of income by the Company to the claimant were not readily available because the claimant was not paid wages by the Company “into a bank account”. The claimant stated a further meeting with the accountant was scheduled for the following week and the accountant’s report would address directions 2(a) to (c). However, no explanation was provided as to why directions 2(b) and (c) could not be complied with by the claimant in the meantime. Further, payment to the claimant by the Company other than into the claimant’s bank account does not explain why the claimant could not mark up the Company’s bank statements by highlighting the transactions said to be the withdrawals he made from time to time to pay personal expenses. If the claimant’s accountant reconciled such withdrawals at the end of each financial year as wages (as contended), then presumably this exercise has already been done by the claimant’s accountant and the claimant ought to be able to immediately provide the accountant’s reconciliation showing Company withdrawals reconciled as wages.
The claimant requested a further “short” extension to provide the accountant’s report.
On 29 September 2023 I advised the parties that the directions were varied and time for compliance was further extended relevantly as follows:
“The directions of 22 September 2023 are amended as follows:
1. In lieu of direction 2(a) of 11 August 2023 the claimant is to provide immediately and by no later than 6 October 2023 the company bank statements marked up (or other such independent source documents marked up) which identify the transactions in the COMPANY bank statements that represent payment of wages by the company (i.e. withdrawals from the company account) to the claimant by identifying for each payment:
(i) the transaction date;
(ii) the transaction description;
(iii) the amount withdrawn from the company account;
(iv) the corresponding payslip by payslip number/date/other identifying feature.
There would seem to be no reason why this exercise could not be readily attended to based on company bank statements, particularly given the claimant has already provided documents which he contends are payslips for payments by the company to him as wages. Presumably he had some record before him of payments in order to prepare those payslips.
2. The claimant is to immediately and by no later than 6 October 2023 provide his ATO pre-filing statement. This ought to be readily available to the claimant to download in his MyGov account given payslips suggest the withholding of PAYG tax by the company. There is no basis upon which this should be further delayed.
3. Time for compliance by the claimant with direction 2(d) of 11 August 2023 is further extended such that the claimant is to provide any further documents and submissions, including the foreshadowed accountant’s report by on or before 14 October 2023.
4. ...
5. Any further request for an extension of time to comply with the directions made on 11 August 2023 must be made by the party requiring an extension in writing before the relevant direction or directions expire. The request must provide an explanation for the failure to comply with the direction(s) and attach evidence in support of the explanation given.
I note in requesting the current extension the claimant has not complied with 5 above (direction 7(d) of 22 Sept 23) as a proper explanation for the failure to comply has not been provided and further, there is no supporting evidence provided to establish the claimant has to date been unable to comply. Proper compliance with 5 above will be required for any request for a further extension of time.”
To date, the claimant has failed to comply with the directions. The foreshadowed accountant’s report has not been provided. Documents required by the directions have not been provided and no further documents have been provided by the claimant. Despite the clear terms of direction 7(d) of 22 September 2023 and direction 5 of
29 September 2023 there has been no request for a further extension of time and no explanation given for the failure to comply with the directions to date (awaiting an accountant’s report does not explain the non-compliance with directions requiring the claimant to provide specified documents).
Consideration
Compliance by the claimant with the directions issued in this matter is mandatory. By failing to comply with the directions the claimant and their solicitor are both in breach of their obligations under s 42 of the Personal Injury Commission Act 2020 (PIC Act).
The directions for the claimant to provide further documents ought not be onerous. The claimant has legal representation and an accountant. The documents requested in the directions ought to be readily available to the claimant, including through their MyGov online account. The claimant says his accountant reconciles withdrawals from the Company account for use as personal expenses as wages at the end of each financial year. If this is correct, a document ought to already be available which identifies the withdrawals said to be for personal use by the claimant. There is no reasonable explanation as to why the documents have not been or cannot be provided.
The claimant has resisted compliance with the directions on the basis the claimant has commissioned a report from his accountant. However, despite this representation and several extensions of time such report has not materialised. Whilst the claimant is entitled to provide expert evidence such as a report from his accountant, which would presumably speak to the source documents, the claimant is obliged to comply with the directions regardless. This was pointed out to the claimant in further directions. However, the claimant remains in breach of the directions despite being granted extensions of time to provide the documents specified in the directions and his accountant’s report.
The claimant is also required to prosecute the Application with due despatch. The claimant has had at least since 1 June 2023 when the internal review decision was issued by the insurer to obtain an accountant’s report and since 29 June 2023 when the application was lodged. It has been over five months since the dispute giving rise to this merit review arose on 1 June 2023 and over four months since the application for a merit review was lodged on 29 June 2023. The claimant has not provided any evidence as to what steps have been taken in this time to procure the accountant’s report and why it is not yet available.
Pursuant to s 54 of the PIC Act the Personal Injury Commission (Commission) may at any stage dismiss proceedings:
(a) if it is satisfied that the proceedings have been abandoned, or
(b) if it is satisfied that the proceedings are frivolous or vexatious or otherwise misconceived or lacking in substance, or
(c) for any other ground of dismissal specified in the Commission rules.
The grounds specified under Rule 77 of the Personal Injury Commission Rules 2021 (the PIC Rules) for the purpose of s 54(c) of the PIC Act include:
(a) the applicant has failed, without reasonable excuse, to comply with a direction given by the Commission or the President; or
(b) the applicant has failed to prosecute the proceedings with due despatch.
Pursuant to PIC Rule 114(1)(d) s 54 applies to merit review proceedings.
Pursuant to PIC Rule 114(2) “a function given to the Commission in section 42 … of the PIC Act is to be read as being given to the merit reviewer conducting the merit review proceedings”.
Pursuant to PIC Rule 114(3) “a function given to the Commission in section … 54 of the PIC Act is to be read as being given to the President”.
Pursuant to PIC Rule 9:
“A non-presidential member or merit reviewer to whom applicable proceedings are referred may make any order relating to the procedure to be followed in the proceedings, including an order striking out the proceedings or any step in the proceedings, that could be made by the President.”
Pursuant to Rule 5(2)(d) applicable proceedings for the purpose of PIC Rule 9 include merit review proceedings.
Pursuant to PIC Rule 5 “merit review proceedings” are “proceedings before a merit reviewer under enabling legislation”. Accordingly, these proceedings are merit review proceedings for the purpose of s 54 of the MAI Act and PIC Rule 114.
Accordingly:
(a) pursuant to PIC Rule 114 as Merit Reviewer I have power to issue directions to the parties and for compliance with the directions by the parties to be compulsory under s 42 of the PIC Act, and
(b) pursuant to PIC Rules 114 and 9 I have power to strike out the proceedings or to take any step in the proceedings that could be made by the President. This includes the power to dismiss the proceedings under s 54(c) of the PIC Act and PIC Rule 77.
On one view, as the claimant has failed to comply with the directions without reasonable excuse (and therefore failed to prosecute the proceedings with due despatch) these proceedings ought to be dismissed pursuant to s 54(c) of the PIC Act and PIC Rule 77(b)(ii) and/or (iii). However, I consider there is sufficient information before me on which to determine the claimant’s PAWE and that having regard to my role to determine the correct and preferable decision, I should do so.
The onus is on the claimant to provide sufficient reliable and cogent evidence of his pre-accident earnings. The only reliable evidence is the bank statements showing payment of “director pay” by the Company to the claimant. In any event, there is no other evidence of the claimant actually “receiving” any other earnings from the Company other than the payments from the Company bank account into the claimant’s bank account. The STP document and tax return does not evidence actual “receipt” by the claimant of the earnings stated in those documents. The claimant’s failure to comply with directions and provide reliable evidence of receipt of earnings other than earnings demonstrated by the bank statements is to his own determent.
What is the claimant’s PAWE?
There is no evidence to suggest any of the exceptions to Schedule 1, cl 4(1) set out in cl 4(2) apply to the claimant’s circumstances. Accordingly, the claimant’s PAWE falls for assessment under cl 4(1) which relevantly provides:
“‘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…” (emphasis added)
As emphasised above, cl 4(1) is concerned only with earnings “received” by the claimant in the 12 month period before the day of the motor accident. The claimant might have received an annual salary of $80,000 but if the claimant did not actually receive payment of this amount as suggested by the payslips in the relevant period (instead allegedly receiving earnings by way of withdrawals from the Company bank account at various times for varied amounts) the amounts not received are excluded from PAWE, even if shown in payslips. Bank statements, for example, show no wages paid to the claimant in the period 19 November 2021 to 3 March 2022 despite monthly payslips suggesting wages were paid in this period. Earnings for this period may have been made up at a later date (after the end of the 12 month pre-accident period) as a form of makeup pay. However, only earnings received in the 12 months before the accident are included as PAWE. Any make-up pay received after the end of the pre-accident period is excluded under cl 4(1) even if such pay represents work performed or payslips purportedly issued during or in respect of the 12 months before the accident.
The claimant was directed to mark up the bank statements to identify payments by the Company to him but did not comply with this direction. I have now attended to this exercise and have identified the following payments from the Company bank account to the claimant’s bank account, which appear on balance to be payment of wages:
Date received into claimant’s bank account Amount received 19 November 2021 to 3 March 2022 Nil 4 March 2022 $2,400* 2 June 2022 $2,300 2 September 2022 $1,920 7 September 2022 $1,000 16 September 2022 $600 24 September 2022 $500 27 September 2022 $1,000 4 October 2022 $2,350* 5 October 2022 $1,000 8 October 2022 $500* 12 October 2022 $1,000 25 October 2022 $500 30 October 2022 $20* 3 November 2022 $3,000 9 November 2022 $700 14 November 2022 $500 15 November 2022 to 18 November 2022 Nil Total $19,290
All payments above other than the four payments marked with an asterisk are described as “director pay” and I therefore accept on balance that these payments are earnings received by the claimant. The payments marked with an asterisk either have no description or state for “house mortgage”. As the payments with no description are to the claimant’s bank account and not identifiable as business expenses, I accept on balance that these are also earnings. The house mortgage transfer is identifiable as a transfer for payment of a non-business expense, and I therefore accept on balance this amount represents earnings received by the claimant from the Company.
As set out in the above table total earnings received by the claimant from the Company in the 12 month pre-accident period from 19 November 2021 to 18 November 2022 were $19,290. Under cl 4(1) this is to be divided by 52 weeks to produce average weekly earnings that is, PAWE. Gross earnings of $19,290 divided by 52 weeks is $370.96. The claimant’s PAWE is therefore $370.96.
Other issues – whether there is a loss of income post-accident
The extent to which the claimant has declared post-accident earnings received from the Company to the insurer is not known. This disclosure is relevant to whether weekly benefits are payable under Division 3.3 of the MAI Act and if so, the amount payable.
Whilst not the subject of this merit review, the evidence before me indicates that for the post-accident period 19 November 2022 to at least 31 December 2022 the claimant did not suffer a loss of earnings. This is because the bank records show the following payments by the Company to the claimant as “director pay” in this period:
Date received into claimant’s bank account Amount received 19 November 2022 $500 23 November 2022 $500 30 November 2022 $1,400 5 December 2022 $1,500 6 December 2022 $500 9 December 2022 $2,140.09 9 December 2022 $2,502.10 16 December 2022 $500 23 December 2022 $3,000 Total $12,542.19
These payments exceed the claimant’s PAWE amount and accordingly, the claimant would not be entitled to weekly benefits in the above period.
For the purpose of calculating payments beyond 31 December 2023 the insurer should require the claimant to provide ongoing bank statements for both the Company and the claimant’s account. If the Company statements evidence the Company continues to receive income but earnings are not paid to the claimant, it may be that any loss of income suffered by the claimant is not a result of the motor accident but because the Company has determined not to make payments to the claimant. All of this should be explored by the insurer as part of their due diligence before making payment of weekly benefits to the claimant given the evidence the claimant continued to earn from the Company at least up until 31 December 2022.
CONCLUSION
For the reasons set out above I am satisfied on the balance of probabilities that:
(a) the claimant’s PAWE is to be calculated under Schedule 1, cl 4(1) of the MAI Act by taking the weekly average of gross earnings received from
19 November 2021 to 18 November 2022;(b) there is no evidence of actual receipt by the claimant of any other monies from the Company that might be considered earnings received as an earner in the 12 months before the accident other than the bank account transfers identified above;
(c) gross earnings received by the claimant in the 12 month period from 19 November 2021 to 18 November 2022 were $19,290; and
(d) the claimant’s PAWE is therefore $370.96.
Accordingly:
(a) the reviewable decision is set aside, and
(b) the claimant’s PAWE is $370.96.
LEGISLATION AND GUIDELINES
In making this decision, I have considered the following:
· The Application, Reply and supporting documentation;
· MAI Act;
· Motor Accident Guidelines;
· Motor Accident Injuries Regulation 2017;
· the PIC Act, and
· the PIC Rules.
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