Patton v Allianz Australia Insurance Limited

CERTIFICATE OF DETERMINATION OF MERIT REVIEWER
CITATION:	Patton v Allianz Australia Insurance Limited [2022] NSWPICMR 74
CLAIMANT:	Jason Patton
INSURER:	Allianz Australia Insurance Limited
MERIT REVIEWER:	Katherine Ruschen
DATE OF DECISION:	21 December 2022
CATCHWORDS:	MOTOR ACCIDENTS- Merit review; dispute about payment of weekly benefits under Division 3.3 of the Motor Accident Injuries Act 2017 (2017 Act); section 6.24 of the 2017 Act duty to co-operate; section 6.3 of the 2017 Act duty to act honestly and not to mislead; duty to disclose all relevant information in a timely manner; meaning of pre-accident weekly earnings (PAWE) schedule 1, clause 4(1); clause 4(2)(a1) of the 2017 Act; whether earner received earnings as an earner in the 12 months immediately before the motor accident; whether superannuation contributions are earnings received as an earner; whether the monetary amount of leave entitlements are earnings received as an earner; Held – the reviewable decision is set aside.
DETERMINATIONS MADE:	Issued under s 7.13(4) of the Motor Accident Injuries Act2017 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 set aside. 2. The claimant’s pre-accident weekly earnings (PAWE) amount is $1,080.62.

STATEMENT OF REASONS

BACKGROUND

Jason Patton (the claimant) was involved in a motor accident on 11 December 2020.
The claimant made an application for personal injury benefits under the MAI Act.
A previous dispute arose between 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. In relation to that dispute, I issued a determination in related matter M10509282/22 dated 26 July 2022 pursuant to which:
(a) the claimant was directed to provide further information, and
(b) the insurer was required to re-determine PAWE upon receipt of that information, including that the claimant’s PAWE is to be calculated based on earnings received by the claimant as an individual earner, distinct from income of his company that is, based on wages or other earnings paid to the claimant by the company and any other employer during the relevant pre-accident period.
On 30 August 2022 the insurer re-determined the claimant’s PAWE as nil.
The claimant requested an internal review of the insurer’s decision dated 30 August 2022.
On 16 September 2022 the insurer issued their internal review decision in which PAWE was adjusted to $391 with indexation.
The claimant seeks a merit review of the insurer’s 16 September 2022 internal review decision.

SUBMISSIONS

The claimant’s submissions are convoluted. It is apparent, however, that at the crux of the claimant’s submissions is that the claimant now says his PAWE should be calculated pursuant to Schedule 1, cl 4(2)(a1) and not cl 4(1) or 4(2)(b), as previously contended. Contrary to the claimant’s previous representations the claimant now says he did not obtain any earnings during the 12 month period immediately before the accident but received earnings for at least 26 weeks in the year before this that is, in the first 12 months of the two year pre-accident period. The claimant says PAWE therefore falls under cl 4(2)(a1).
In addition, the claimant submits that superannuation contributions made on his behalf by employers together with the monetary amount of leave entitlements paid in the relevant period should be included as his earnings received as an earner for the purpose of calculating PAWE.
The insurer submits the evidence establishes the claimant received earnings, namely from the employer Grow Super Ops Pty Limited (Grow Super) during the 12 month period before the day of the motor accident and therefore cl 4(2)(a1) does not apply. The insurer submits that as no other exception under cl 4(2) applies the claimant’s PAWE is calculated under
cl 4(1) by taking total earnings received in the period 11 December 2019 to
10 December 2020 and dividing it by 52 weeks.
The insurer submits superannuation and leave entitlements are excluded from earnings for the purpose of PAWE, as they do not fall within the meaning of “income from personal exertion” in the MAI Act.

REASONS

Presentation of the case by the claimant

When the claimant first presented his case for the purpose of calculating PAWE, including in his previous merit review application in M10509282/22, he contended he earned income by way of operating a business through a company, “BluJay Nominees Pty Ltd atf BluJay Investment Trust”.
The claimant contended earnings from this company in the 12 month period before the day of the motor accident in an amount that far exceeded the profits of the company. In fact, the claimant contended that earnings through the company triggered Schedule 1, cl 4(3) for the purpose of assessing PAWE. It is only after pointed out in the determination in M10509282/22 that the company did not enjoy sufficient profits to be able to pay the amount contended by the claimant as earnings received by him that the claimant now contends he did not receive any earnings through the company in the 12 month period before the accident. The claimant therefore now contends his PAWE falls under cl 4(2)(a1) based on earnings received in the first 12 months of the two year pre-accident period.
Whilst the claimant has provided further information in response to the directions in M10509282/22, it is apparent the claimant has “cherry picked” the evidence he relies on and has sought to manipulate that evidence and/or draw inferences from that evidence in a manner deliberately designed to maximise his entitlement to statutory benefits under the MAI Act. However, for the reasons discussed further below, this approach is not permitted by the MAI Act, and I do consider the inferences drawn by the claimant are available on the evidence.
The claimant is reminded that the MAI Act imposes mandatory obligations on him, including those under ss 6.24 and 6.3.
Section 6.24 relevantly provides:
“Duty of claimant to co-operate with other party
(1)     A claimant must co-operate fully in respect of the claim with the other party to the claim (being the insurer on the claim or, if there is no insurer, the person against whom the claim is made) for the purpose of giving the other party sufficient information-
(a) to be satisfied as to the validity of the claim and, in particular, to assess whether the claim or any part of the claim, may be fraudulent, and
…
(2)     In particular, the claimant must comply with any reasonable request by the other party--
(a) to furnish specified information (in addition to the information furnished in the claim) or to produce specified documents or records, or
(b) to provide a photograph of and evidence as to the identity of the claimant.
(3)           ...,”
     (emphasis added)
The claimant also has a duty under s 6.3(2) of the MAI Act to “act honestly, not to mislead and to disclose all relevant information in a timely manner” (emphasis added).
The application for personal injury benefits also makes clear that the claimant must declare that all information he has provided in the claim form is true and correct in every respect. Under s 307C of the Crimes Act 1900, the claimant can be issued with a fine up to $22,000 or imprisoned for two years, or both for knowingly providing false or misleading information in the claim form.
The claimant’s initial contentions that he received substantial earnings from his company in the 12 month pre-accident period and his current contention, which can be described as a complete “backflip”, that he received no earnings from the company in that period raises questions about the claimant’s compliance with s 6.3. This in turn, raises questions about the veracity of the claimant’s evidence, as both of his contentions cannot be true.

Evidence of earning circumstances

The evidence now available establishes on balance the facts set out below regarding the claimant’s pre-accident earning circumstances.
The claimant was an employee of Grow Super and received his final earnings from Grow Super on 12 December 2019 following termination of or resignation from that employment.
The claimant also operated as a sole trader under the Australian Business Number (ABN) 75 407 182 593[1] registered to the claimant and active since 1 July 2009. The claimant is also the registered proprietor of the business name Blujay Property, which has been registered under his name and ABN since 19 January 2021.
[1] An ABN lookup shows this ABN registered to the claimant since 1 July 2009. The claimant is also the registered proprietor of the business name Blujay Property, which has been registered under his name and ABN since 19 January 2021.
In the financial years ending 30 June 2020 and 30 June 2021 the claimant’s sole trader business made a loss[2].
[2] The claimant declared in his 2020 tax return that his sole trader business suffered a net loss of $9,877 and declared in his 2021 tax return that his sole trader business suffered a net loss of $4623.
As part of his sole trader business the claimant invoiced his spouse, Louise Baker, via her business name Bean Banq[3] for services allegedly provided to Ms Baker’s business.
[3] An ABN lookup confirms the claimant’s spouse is the registered proprietor of Bean Banq.
For reasons that are unclear the claimant appears to have declared income from Bean Banq as separate income from personal services to the income otherwise declared from his sole trader business in his tax returns.
The invoices to Bean Banq are obviously incomplete, as they record a total of $1,710 payable by Bean Banq to the claimant, but the claimant has declared an additional $900 payable by Bean Banq in his 2020 tax return (there are also errors in the invoices provided, including invoice dates which are inconsistent with the dates on which the services are said to have been rendered).
Despite clear evidence of a sole trader business separate to the business of the discretionary trading trust (a separate ABN registered to the claimant, invoices issued to Bean Banq under the claimant’s ABN not that of the discretionary trading trust and the declaration of sole trader income in tax returns), the claimant contends in his submissions that the income from Bean Banq is income of the trust company. One can only assume this contention is a deliberate attempt at mischaracterising the evidence to avoid a conclusion that earnings were received by the claimant from a source other than the trust company in the 12 month pre-accident period and in turn to support his contention PAWE falls under cl 4(2)(a1) and not cl 4(1).
The claimant was not paid by Bean Banq (at least not during the 12 month pre-accident period), as the invoices request payment into the claimant’s separate individual Macquarie bank account; but the statements for that account do not show a record of payment in this period.
Had the claimant been paid by Bean Banq he would have received net earnings (before tax) after deducting business expenses of $697, as evidenced in the 2020 tax return.
In early 2020 the claimant commenced doing business via a discretionary trading trust known as The Trustee for Blujay Investment Trust (the trust company), which held the ABN 29 417 440 335 since 1 January 2020 and has been the holder of the business name “Blujay Services” since 2 February 2022. The trust company is a registered discretionary trading trust, meaning its main source of income is from trading activities[4].
[4] Details available via an ABN lookup.
In the financial years ending 30 June 2020 and 30 June 2021 the trust company made a net profit, after accounting for all expenses of the business.
By the end of each financial year the trust company distributed the whole of the net profit of the trust company to the various beneficiaries, including the claimant (the beneficiaries are the claimant, his two children and his spouse).
Bank records of the trust company demonstrate that the profit distribution was made by way of several instalment payments to the various beneficiaries (in addition to several instalments paid to the claimant’s two children in the form of wages, as part of the business expenses that had been deducted to arrive at the net profit).
The claimant declared the profit distribution he had received from the trust company in his 2020 and 2021 tax returns as part of his requirement to declare earnings he had received in those years to the Australian Taxation Office (ATO). The claimant also made a director’s declaration that the financial statements of the trust company, including that part of the statements showing the net profit distribution, present fairly the trust company’s financial position at the end of each financial year.
The claimant now says he did not receive any earnings from the trust company in the 12 month period prior to the accident.
When I issued the determination in M10509282/22 the claimant’s 2020 and 2021 tax returns and bank records of the trust company and the claimant were not available. These documents are now to hand and the claimant’s current contention he did not receive any earnings from the company in the 12 month pre-accident period flies in the face of this documentary evidence.
The tax returns and bank records of the trust company clearly demonstrate the claimant received earnings from the company during the period 11 December 2019 to
10 December 2020. The claimant’s bank records confirm receipt of payments from the company in this period.
Regarding that part of the 12 month pre-accident period from 11 December 2019 to
30 June 2020, the documents evidence the following earnings received by the claimant:
(a)   The trust company made a net profit of $29,809 in the financial year ending
30 June 2020, which was distributed as follows:
(i)      ABBP (the claimant’s son, Armon Baker-Patton): $410;
(ii)     EEBP (the claimant’s son, Eramus Baker-Patton): $410;
(iii)     JHBP (the claimant): $6,000, and
(iv)     LEB (the claimant’s spouse, Louise Baker): $22,989.
(b)   The trust company distributed the claimant’s and his spouse’s share of the net profit by instalments paid into their joint bank account, as follows:
(i)      3 June 2020: $10,000;
(ii)     22 June 2020: 2 x $10,000 (total $20,000);
(iii)     23 June 2020: $5,000, and
(iv)     27 June 2020 $5,000.
(c)   Accordingly, payments made to the claimant and his spouse in the period
11 December 2019 to 30 June 2020 totalled $40,000.
Whilst the amount received into the joint account of the claimant and his spouse from the trust company from 11 December 2019 to 30 June 2020, being $40,000, exceeds their combined profit distribution for the financial year ending 30 June 2020 of $28,989, the financial statements of the trust company make clear that of these payments only the sum of $28,989 represents net profit of the company. The balance of the gross income earned by the company went to business expenses and the balance of the net profit was paid to the claimant’s children. It is unclear what the additional payments into the joint account are for but there are transactions coming into the trust company’s account from the claimant’s joint account. Accordingly, it can be inferred that any additional payments likely represent repayments of loans made to the trust company and/or overpayment or loans from the company to the claimant or his spouse, which would need to be re-paid to cover the trust company’s expenses as part of the profit and loss reconciliation.
As noted, the claimant has declared the financial statements of the trust company, including the profit distribution as representing the trust company’s financial position. Having regard to the claimant’s director obligations in relation to such declarations (and his obligations in declaring the information in his tax returns, which is consistent with the financial records of the trust company) the financial statements are accepted as true and correct. Accordingly, of the total payments made by the trust company into the joint account of the claimant and his spouse in the period 11 December 2019 to 30 June 2020 only $6,000 can represent profit distribution to the claimant and in turn, the earnings received by the claimant as an earner as a result of running a business through the trust company in this period.
The balance of the payments received into the joint account can only be profit distribution paid to the claimant’s spouse in the financial year ending 30 June 2020, as per the financial statements of the trust company and/or repayment of loans or a loan of trust company funds to the claimant and or his spouse and not earnings received by the claimant as an earner from the trust company.
As the evidence demonstrates the trust company did not commence trading until after commencement of the 12 month pre-accident period that is, after 11 December 2019
I accept the whole of the claimant’s profit distribution of $6,000 for the financial year ending
30 June 2020 was received by the claimant in the 12 month pre-accident period.
Regarding the balance of the pre-accident period from 1 July 2020 to 10 December 2020, the evidence establishes earnings received by the claimant from the trust company as follows:
(a)   The trust company made a net profit of $59,987 in the financial year ending
30 June 2021, which was distributed to the beneficiaries as follows:
(i)the claimant’s son, Armon: $310;
(ii)the claimant’s son, Eramus: $310;
(iii)the claimant: $59,367, and
(iv)the claimant’s spouse, Louise Baker: nil.
(b)   The bank records of the trust company show the claimant received his profit distribution for the financial year ending 30 June 2021 by the following instalment payments made into his joint account during the remainder of the 12 month pre-accident period from 1 July 2020 to 10 December 2020 (the balance of his profit distribution was paid after the end of the 12 month pre-accident period):
(i)28 July 2020: $10,000;
(ii)9 September 2020: $10,000, and
(iii)4 October 2020: $10,000[5].
(c)   Accordingly, the claimant received total earnings via profit distribution from the trust company in the period 1 July 2020 to 10 December 2020 of $30,000, with the balance paid after the date of the accident.
[5][5] The next instalment was paid on 29 December 2020, after the date of the motor accident.
The financial statements of the trust company declare that the claimant’s spouse did not receive any profit distribution in the financial year ending 30 June 2021. Accordingly, on balance I accept that all payments by the trust company into the claimant’s joint account (a total of $30,000) in the period 1 July 2020 to 10 December 2022 are payment of the claimant’s profit distribution from the trust company.

Does clause 4(2)(a1) apply?

Clause 4(2)(a1) provides:
“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 - [then PAWE is] the average weekly gross earnings received by the earner as an earner during the first year of the pre-accident period”
Accordingly, cl 4(2)(a1) only applies if the claimant did not obtain any earnings in the 12 months immediately before the day of the accident that is, in the period 11 December 2019 to 10 December 2020.
As set out above, the claimant clearly obtained earnings from the trust company by way of distribution of part of the net profits of the trust company to him in the 12 month pre-accident period. Accordingly, cl 4(2)(a1) does not apply. This conclusion is supported by the financial statements of the trust company, the claimant’s tax returns and the bank records of the trust company of the claimant, all of which are consistent with each other regarding earnings received by the claimant from the trust company.

Given the claimant obtained earnings from the trust company in the 12 month pre-accident period it is not necessary for me to determine whether there is a distinction between the words “obtain” and “receive” in cl 4(2)(a1) for the purpose of determining whether the pay received from Grow Super on 12 December 2019 should be considered as earnings “obtained” in the 12 month pre-accident period.

Superannuation and leave entitlements

The claimant seeks to have employer superannuation contributions and payments representing annual leave entitlements included in PAWE. The amount in issue in this regard is $1,918.27 in superannuation contributions and $9,630.24 in respect of leave entitlements paid by Grow Super on 12 December 2022 (all other superannuation and/or leave payments were made prior to the 12 month pre-accident period under cl 4(1)).
There is no definition of “earnings”, or “gross earnings” separate to the meaning of “loss of earnings” in the MAI Act. “Loss of earnings” is relevant to payment of weekly benefits under Division 3.3 of the MAI Act but is not a phrase that appears in cl 4(1). However, it is widely understood that superannuation contributions are not earnings received by an earner as an earner. Employer superannuation contributions are contributions made by the employer into a nominated superannuation fund. They are not “received” by the claimant at the time of payment by the employer and are not capable of being received by the claimant until they are converted into superannuation pension payments received by the claimant as the fund holder, at a future point in time. Employer superannuation contributions are not taxable income and are not declared in a tax return. For these reasons I am of the view superannuation contributions are not “earnings received as an earner” for the purpose of
cl 4(1) and are therefore excluded from PAWE.
Whilst the phrase “loss of earnings” is not a phrase that appears in cl 4(1) guidance as to the intended meaning can be taken from the meaning of “loss of earnings” in Schedule 1, cl 3, as follows:
(a) pursuant to Schedule 1, cl 3(1) “loss of earnings” means a loss incurred or likely to be incurred in a person’s “income from personal exertion”. It can be taken from this that “earnings” in the phrase “loss of earnings” means “income from personal exertion”, and
(b) pursuant to Schedule 1, cl 3(3) income from personal exertion does not include any employer superannuation contributions or the monetary amount of annual, sick or other leave entitlement.
The intention of the MAI Act from the above can only be that “earnings”, whether for the purpose of calculating “loss” of earnings or earnings “received”, are income from personal exertion and do not include, among other things, superannuation contributions or the monetary amount of any annual, sick or other leave entitlement. If any other conclusion were reached that is, that “earnings” for the purpose of cl 4(1) means something different to income from personal exertion simply because the complete phrase “loss of earnings” does not appear in the clause there would be a tension between Schedule 1, cl 4 and calculation of the amount payable under s 3.6 or 3.7 of the MAI Act. Sections 3.6 and 3.7 require an assessment of a person’s loss of “earnings” based on whether there is any difference between the weekly average of the pre-accident “earnings” received by them (that is, PAWE) and their post-accident earning capacity. Accordingly, “earnings” should be considered to have a consistent meaning for the purpose of the MAI Act and one that is consistent with the meaning given to “earnings” for the purpose of the phrase “loss of earnings” that earnings in the context of the MAI Act means “income from personal exertion” and therefore excludes superannuation and the monetary amount of annual leave.
The Grow Super payslip records that the claimant received the monetary amount of his “remaining balance” of annual leave as part of his final pay following termination or resignation from his employment with Grow Super. In my view, this falls squarely within the exclusion that “the monetary amount of annual … leave entitlement” is not income from personal exertion and therefore not earnings.
As a result of the above analysis, superannuation contributions and the monetary amount of leave entitlements in the Grow Super payment received by the claimant on
12 December 2019 are excluded from PAWE.

What is the claimant’s PAWE?

None of the other exceptions to cl 4(1) under cl 4(2) arise on the evidence. Accordingly, the claimant’s PAWE falls under cl 4(1). Under cl 4(1) PAWE means “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” (emphasis added). The 12 months immediately before the day on which the motor accident occurred is the period from
11 December 2019 to 10 December 2020. It is clear from the wording of cl 4(1) in particular, the use of the word “received”, that only earnings that have in fact been received by the claimant in this period are included in PAWE.
In addition to earnings of the company the claimant received earnings from Grow Super in the 12 month pre-accident period, on 12 December 2019.
There is also evidence in the tax returns of possible net (after expenses but before tax) business income as a sole trader from Bean Banq in the sum of $697[6]. However, cl 4(1) requires the claimant to have “received” the earnings in the 12 month pre-accident period. There is no evidence that the earnings from Bean Banq were received by the claimant in the 12 month pre-accident period, or at all. Bean Banq is a business name registered to the claimant’s spouse, Louise Baker. The claimant’s invoices required her to make payment to the claimant into the claimant’s separate Macquarie bank account. The relevant bank statements suggest no payments were received by the claimant. The claimant bears the onus of proof regarding the earnings he received in the relevant period and as there is no evidence of proof of payment by Bean Banq or proof of receipt of payment by the claimant, I am not comfortably satisfied on balance that the claimant received any earnings from Bean Banq in the 12 month pre-accident period.
[6]The claimant’s 2020 tax return declares net income from the provision of personal services to Bean Banq of $697 after deducting the claimant’s business expenses.
As to other income received by the claimant as a sole trader under his own ABN 75 407 182 593, business expenses are to be deducted from gross profit of the business in the circumstances of a sole trader to produce the net profit of the business, which in turn represents the claimant’s gross earnings (that is, before tax) as an individual earner. The evidence demonstrates that after accounting for business expenses the claimant’s sole trader business made a loss in the 2020 and 2021 financial years. Accordingly, the claimant did not receive any earnings from his sole trader business in the 12 month pre-accident period.
In summary, I am satisfied on balance that the claimant received the following earnings in the period 11 December 2019 to 10 December 2020:

Payment date/period Source Amount

12 December 2019 Grow Super wages $20,192.31

11 December 2019 to 30 June 2020 Profit distribution from the trust company $6,000

1 July 2020 to 10 December 2020 Profit distribution from the trust company[7] $30,000

11 December 2019 to
10 December 2020 Total received in this 12 month period $56,192.31
[7] The balance of the claimant’s profit distribution for the financial year ending 30 June 2021 was paid after 10 December 2020 and is therefore excluded from PAWE.

Clause 4(1) requires PAWE to be calculated by averaging gross earnings received by the claimant over the number of weeks (52 weeks) in the period 11 December 2019 to
10 December 2020. Accordingly, the claimant’s PAWE is $1,080.62 ($56,192.31 divided by 52).

CONCLUSION

For the reasons set out above I am satisfied:
(a)   the claimant’s PAWE falls under Schedule 1, cl 4(1) and not any of the exceptions under cl 4(2);
(b)   the relevant pre-accident period under cl 4(1) is 11 December 2019 to
10 December 2020;
(c)   superannuation contributions and the monetary amount of leave entitlements is excluded from PAWE;
(d)   in the period 11 December 2019 to 10 December 2020 the claimant received gross earnings as an earner totalling $56,192.31, and
(e)   the claimant’s PAWE is therefore $1,080.62 ($56,102.31 divided by 52 weeks).
Accordingly:
(a) the reviewable decision is set aside, and
(b) the claimant’s PAWE is $1,080.62.

LEGISLATION AND GUIDELINES

In making this decision, I have considered the following:
· the Application, Reply and supporting documentation;
· MAI Act;

· Motor Accident Guidelines, and
· Motor Accident Injuries Regulation 2017.

Payment date/period	Source	Amount
12 December 2019	Grow Super wages	$20,192.31
11 December 2019 to 30 June 2020	Profit distribution from the trust company	$6,000
1 July 2020 to 10 December 2020	Profit distribution from the trust company[7]	$30,000
11 December 2019 to 10 December 2020	Total received in this 12 month period	$56,192.31

[2022] NSWPICMR 74

21 December 2022