Patton v Allianz Australia Insurance Limited (No 2)

CERTIFICATE OF DETERMINATION OF MERIT REVIEWER
Citation:	Patton v Allianz Australia Insurance Limited (No 2) [2022] NSWPICMR 48
ClaimanT:	Jason Patton
Insurer:	Allianz Australia Insurance Limited
Merit Reviewer:	Katherine Ruschen
DATE OF DECISION:	10 August 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); meaning of pre-accident earning capacity under clause 7 of schedule 1 to the 2017 Act; meaning of post-accident earning capacity under clause 8 of schedule 1 to the 2017 Act; relevance of pre-accident weekly earnings to assessment of pre-accident earning capacity; Held — the reviewable decision is remitted back to the insurer.
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 remitted back to the insurer for re-determination.

STATEMENT OF REASONS

BACKGROUND

There is a dispute between Jason Patton (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 in a motor accident on 11 December 2020.
The claimant made an application for personal injury benefits under the Motor Accident Injuries Act 2017 (the MAI Act) on 29 October 2021.
On 13 April 2022 the insurer made a decision to cease payment of weekly benefits in relation to the period after the first 78 weeks after the accident, from 11 June 2022 on the basis the insurer determined the claimant did not suffer any post-accident earning capacity (the Earning Capacity Decision).
The claimant requested an internal review of the Earning Capacity Decision.
On 26 May 2022 the insurer issued their internal review decision in respect of the Earning Capacity Decision in which the initial Earning Capacity Decision was upheld.
The claimant seeks a merit review of the insurer’s internal review decision dated
26 May 2022 regarding earning capacity.

RELATED MATTER

On 4 March 2022 the insurer determined the claimant’s pre-accident weekly earnings (PAWE) in the sum of $3,721.67.
The claimant requested an internal review of the insurer’s 4 March 2022 decision.
On 12 April 2022 the insurer issued their internal review decision in which the claimant’s PAWE amount was determined to be $3,755.
The claimant requested a merit review of the insurer’s internal review decision dated
12 April 2022. That merit review came before me. On 26 July 2022 in M10509282/22 I issued a merit review certificate and reasons in which I determined that the dispute regarding the claimant’s PAWE is remitted back to the insurer for re-determination following provision of further information by the claimant.
It is understood that re-determination of the claimant’s PAWE in accordance with the decision in M10509282/22 is not yet complete.

SUBMISSIONS

The claimant submits he has a loss of earning capacity by reason of psychological injury (post-traumatic stress disorder) and that the insurer’s decision to cease weekly payments is incorrect.
The insurer submits that any assessment of earning capacity should be deferred until the outcome of the insurer’s re-determination of PAWE pursuant to the directions made in related matter M10509282/22.

REASONS

The claimant operates a business through a company, BluJay Nominees Pty Ltd atf BluJay Investment Trust.
In M10509282/22 I determined that the parties had incorrectly considered income of the company as the claimant’s income. The reasons are set out in the merit review decision in M10509282/22.
Even if the company paid 100% of the net profits to the claimant as income payments to the claimant the suggestion that the claimant’s PAWE is $3,755 (or higher on the claimant’s contention) is implausible given the limited net profit of the company in the financial years ending 30 June 2020 and 30 June 2021.
The insurer’s PAWE calculation was based on purported net profit of the business in the 12 month period from 11 December 2019 to 10 December 2020 in the sum of $204,327. It is unclear how this figure was reached, but it is not consistent with the profit and loss statements of the company.
The 12 month period from 11 December 2019 to 10 December 2020 over which it was said net earnings of the company were $204,327 falls partially within the financial year ending 30 June 2020 and partially within the financial year ending 30 June 2021. However, the combined net profit of the company for 2020 and 2021, which is a 24 month period, is only $89,791 ($29,809 in 2020 and $59,982 in 2021), which is well short of $204,327 and produces a weekly average of $863.37. Put simply, even if the company paid out all of its net profit to the claimant as income to the claimant the company did not have sufficient funds to pay out $204,327 to the claimant in the relevant period.
I consider the company profit and loss statements are more reliable and are the preferred evidence of the company’s earnings over other evidence such as invoices said to have been issued because:
(a) they are contained in an annual report of the company prepared by a professional third party accountant, LJR Bantacs Accountants;
(b) the directors of the trust have declared that the financial statements, including the profit and loss statements in the annual report present fairly the company’s financial situation, and
(c) whilst the company’s tax returns have not been provided, the profit and loss statement, which records income and expenditure of the company, presumably mirrors the presentation of the company’s income and expenses to the Australian Taxation Office (ATO) given the declaration of the directors in the annual report. A claimant cannot have it both ways that is, present (and declare) income and expenses to the ATO in a way that maximises tax benefits and then manipulate the income and/or expenses in another way for the purpose of maximising benefits under the MAI Act.
In any event, any distinction between which type of expenses should be deducted to produce the claimant’s gross earnings is academic in the circumstances of a company. For the reasons set out in the decision in M10509282/22, other than any wages paid by the company to the claimant as an employee it is only the net profit of the company (after deducting all expenses of the company regardless of their classification) that can be available as potential income to be paid to the claimant, as the claimant and the company have separate legal personalities.
The current merit review is in relation to earning capacity, not PAWE, for the purpose of section 3.8 of the MAI Act.
Relevantly, pursuant to section 3.8 a person who is injured as a result of a motor accident and suffers a total or partial loss of earning capacity as a result of the injury is entitled to weekly payments at the rate of:
“(a) in the case of total loss of earning capacity--80%, or
(b) in the case of partial loss of earning capacity--85%, of the difference between the person's pre-accident earning capacity and the person's post-accident earning capacity (if any) after the second entitlement period.”
(emphasis added)
Accordingly, under section 3.8 it is necessary to make an assessment of pre-accident earning capacity and an assessment of post-accident earning capacity.
Pursuant to Schedule 1, cl 7 of the MAI Act “pre-accident earning capacity” relevantly means:
"(1) Pre-accident earning capacity" of an injured person means the weekly amount a person had the capacity to earn before the motor accident concerned in employment reasonably available to the person in view of the person's training, skills and experience.
(2) If the amount of an injured person's pre-accident earning capacity cannot be determined, the amount is deemed to be the amount that is equal to 80% of the average weekly total earnings of adults in full-time employment in New South Wales last published by the Australian Statistician.” (emphasis added)
Pursuant to Schedule 1, cl 8 of the MAI Act “post-accident earning capacity” relevantly means “the weekly amount the person has the capacity to earn in any employment reasonably available to the person, determined on the basis of the person's fitness for work in any such employment”.
For the purpose of section 3.8, under Schedule 1, cl 8 a person's fitness for work is to be determined having regard to the following:
(a)    the nature of the injury and the likely process of recovery;
(b)    treatment provided and rehabilitation undertaken and the potential for further treatment and rehabilitation;
(c)    the person's training, skills and experience;
(d)    the age of the person, and
(e)    any medical certificate provided by the injured person as to the person's fitness for work.
Whilst section 3.8 concerns pre-accident earning capacity, not PAWE, cl 7 of Schedule 1 requires consideration of a person’s “capacity to earn before the motor accident concerned in employment reasonably available to the person …”. Evidence of a person’s PAWE from the employment they engaged in pre-accident is at least in part evidence of employment reasonably available to the person. If a person was engaged in particular employment, then it can be reasonably inferred that employment of that type is employment of a kind reasonably available to the person pre-accident. It is also probable that the value of such employment, measured in earnings received, represents in turn the value of a person’s pre-accident earning capacity subject to any other factors that require consideration. That is to say, a person’s PAWE is a relevant consideration when determining pre-accident earning capacity under Schedule 1, cl 7 by reference to employment “reasonably available” to the person before the accident. Accordingly, whilst a person’s PAWE is not the determinative factor in assessing pre-accident earning capacity under Schedule1, cl 7, it is a relevant consideration.
In circumstances where re-determination of the claimant’s PAWE pursuant to directions made in M10509282/22 is not yet complete, it is premature to make a determination by way of a merit review regarding earning capacity. The re-determination of PAWE by the insurer may have some bearing on assessment of earning capacity.
As the internal review decision of 26 May 2022 regarding earning capacity takes into consideration the insurer’s initial PAWE determination rather than the re-determination, it follows that the insurer should be given an opportunity to also re-determine earning capacity and in turn, whether weekly benefits are payable under section 3.8 taking into consideration the outcome of the insurer’s redetermination of the claimant’s PAWE. The matter is therefore remitted back to the insurer for re-determination.
It is noted that the documents in this matter are incomplete. There is insufficient information upon which to determine earning capacity. In particular, the parties have not provided all documents considered in the internal review decision of 26 May 2022 regarding earning capacity. There is a list of documents in the internal review decision of 26 May 2022, most of which have not been provided in this merit review. In particular, there does not appear to be any medical certificates or other medical evidence provided, which would be expected in an application for a merit review regarding earning capacity.
Accordingly, if there is a further dispute regarding earning capacity, following redetermination by the insurer such that the claimant lodges a fresh merit review application, the insurer should ensure that they lodge by way of one PDF document binder with page numbering, a complete copy of all documents considered in connection with both the decision of 26 May 2022 and the redetermination on this matter being remitted back to the insurer, together with any other documents relied on by the insurer. The claimant should then lodge by way of a single PDF document binder with page numbering, any further documents relied on by the claimant not contained in the insurer’s bundle. Care should be taken not to duplicate documents that already appear in the insurer’s bundle.

CONCLUSION

Given the potential relevance of the insurer’s re-determination of the claimant’s PAWE, which is incomplete, it is appropriate that this matter be remitted back to the insurer for redetermination following redetermination of PAWE.
The reviewable decision is remitted back to the insurer.

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.

[2022] NSWPICMR 48

10 August 2022