Pobke v Ninth Rischell Pty Ltd
[2015] VMC 23
•25 May 2015
| IN THE MAGISTRATES COURT OF VICTORIA |
AT MELBOURNE
D12738779
| CHRISTIAN POBKE | Plaintiff |
| V | |
| NINTH RISCHELL PTY LTD | Defendant |
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MAGISTRATE: | Magistrate B.R. Wright |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 23 – 26, 31 March and 1 May 2015 |
DATE OF DECISION: | 25 May 2015 |
CASE MAY BE CITED AS: | Pobke v Ninth Rischell Pty Ltd |
REASONS FOR DECISION
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Catchwords:
Workers Compensation – Continuation of Weekly Payments After Second Entitlement Period – Family Trust – Termination of Payments and Claim for Reimbursement - Calculation of Pre-Injury Average Weekly Earnings and Current Weekly Earnings – Accident Compensation Act ss 5A, 93CD
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr E Makowski | McDonald Murholme |
| For the Defendant | Mr B McKenzie | Russell Kennedy |
DRAFT
HIS HONOUR:
1 These proceedings raise the vexed issue of the calculation of pre-injury average weekly earnings (“PIAWE”) and current weekly earnings (“CWE”) where there is a unit trust and family trust structure involving a worker suffering a work-related injury when employed by his own business. Of course that business is a separate legal entity, otherwise he would not be able to claim benefits under the Accident Compensation Act 1985 (“the Act”).
2 Mr Pobke is a qualified motor mechanic who at all material times worked at a “Tyreplus” store in Croydon, now known as “Tyres & More”. When he was first employed there on a normal wages basis in 1997 as a full time mechanic it provided tyre replacements and alignments. The business expanded to offer additional services such as providing various vehicle mechanical services.
3 In about May 2001 he said he bought a half share of the business from the sole owner Howard Eland for $75,000, according to his accountant Mr Alan Brown. He said at that stage Mr Eland had no mechanical skills and looked after the tyre aspects of the business. Mr Pobke did mechanical work and some tyre work. As Mr Eland had a family trust set-up in relation to the business, Mr Pobke decided to do the same. I will go into the family trust corporate structure in due course.
4
Mr Eland developed cancer and eventually withdrew from the business, selling his remaining half share to a Mr Phil Sykes. Sometime prior to 2007 Mr Pobke became sole owner of the business when he purchased
Mr Sykes' half share. The only other employee at the time was Mr Rene Vedder who was another full-time mechanic.
5 Mr Pobke said that then he worked an average 60 hours per week at the time in the business. Mr Vedder was being paid about $40,000 to $50,000 per annum. Mr Pobke believed an appropriate rate for a mechanic now was about $18 to $19 per hour.
6 On about 16 February 2007, Mr Pobke noticed elbow pain in his dominant right arm while doing some tyre fitting. He filled in a workers compensation claim form on 29 March 2007. In his capacity as a director of the Defendant, he set out his hourly rate at $11 per hour for 60 hours, giving a total of $660 per week. He said a $662 figure was the figure set out in his tax assessment for the year ending June 2006. QBE, the authorised agent of the VWA, "told him to put in that figure." He said that this wage was artificially low for a mechanic. Liability was accepted and he was paid weekly payments based on that PIAWE figure.
7 Effectively, QBE conducts this case on behalf of the defendant.
8 . I will briefly summarise the medical aspects now. He appears to have ceased work shortly after 16 February 2007. He had an ulnar nerve transposition in May 2007. He later had some pain management and a series of nerve blocks. Later again he was diagnosed as having chronic regional pain syndrome and/or dystonia. He had some stellate ganglion blocks and a spinal stimulator inserted.
9 He told Mr Owen Deacon, an independent medical examiner/orthopaedic surgeon, on 13 February 2009, he was doing supervisory administrative work only in his business at that time, but did not state the number of hours he was then working. Mr Deacon did not feel he was capable of returning to work as a mechanic then or into the future.
10 Mr Pobke was later served with a 130-week Notice of Termination effective as at 15 August 2009. At about that time he took up an invitation to apply for s.93CD weekly payments despite the 130-week notice.
11 On 15 December 2009, his application was accepted on the basis that he had returned to work for a minimum of 15 hours per week and was in receipt of CWE of at least $151 per week. Benefits were backdated to 15 August 2009 "at 15 hours per week." He had put in 15 hours at $155 per week in his application for those weekly payments as this was close to the $11 per hour figure he had put in the original claim form.
12 Those payments continued throughout most of 2010. When he forwarded a copy of his year ending June 2010 individual tax return and assessment to QBE, further information was requested. QBE was concerned at the amount of $155 p.w. (the then indexed rate) for the $15 per hour (a total of $8,060 p.a.) being CWE was not being reflected specifically, or even generally in his tax details. There was some correspondence between Mr Pobke's accountant, Mr Brown, and QBE on this issue.
13 Eventually by way of Notice dated 11 January 2011, his s.93CD payments were terminated as at 11 February 2011. QBE used his year ending June 2010 tax return as the basis for the termination. They deducted the amount of the compensation paid by them from the total income in the tax documents and came up with an estimate of $102 per week that he had "earned" in that period. As that amount was less than the $155 per week threshold, it was said that he had no entitlement to s93CD benefits.
14 For good measure, on 28 February 2011 QBE issued a Notice of Recovery seeking repayment of all s.93CD payments paid for the whole period on the same basis. This Notice has been incorporated as a Counterclaim in the present proceedings. Mr Pobke also disputes the original calculation of his PIAWE.
15
I will now try to summarise the legal, financial and employment structure of the defendant as it is relevant to these proceedings as related by
Mr Brown.
16 Mr Brown had been involved with the defendant initially as an employee of an accountancy firm and later in his own business. When Mr Pobke commenced as an employee only, the Tyres Plus Unit Trust operated the business. One hundred per cent of the units in that trust were owned by the Howard Eland Family Trust. The beneficiaries of that trust were Mr Eland, his wife and family.
17
When Mr Eland wanted to sell a half share of the business to Mr Pobke, half of the units in the Tyres Plus Unit Trust were sold by Mr Eland's family trust to Mr Pobke's family trust for the $75,000 figure. As
Mr Pobke was effectively a 50 per cent owner he began to take drawings as well as a weekly wage from the defendant. The defendant, Ninth Rischell Pty Ltd is, and always was, the trustee of the Tyres Plus Unit Trust. Twelfth Rischell Pty Ltd was the trustee of the Eland Family Trust. C&N Pobke Pty Ltd is the corporate trustee of the Pobke Family Trust, whose beneficiaries are Mr Pobke, his wife, children and stepchildren.
18 Prior to the changeover when Mr Pobke was a full time employee only, he worked full time and was paid what Mr Brown believed to be a "commercially realistic wage." After the changeover, Mr Pobke was paid the same as Mr Eland. They each took $500 per week net wage, had an allocation of $130 per week tax contribution and took a further $400 per week as drawings. Thus, they both received $900 per week net in total.
19 The balance of any profit was allocated in equal proportions to their respective family trusts and distributed to the beneficiaries as determined by their respective trustees. No evidence as to any superannuation deduction or payments at that time was presented to the court.
20 Apparently, Mr Eland ceased involvement with Tyreplus business in May 2001 and Mr Sykes became involved. However, he left in about June 2005, leaving Mr Pobke as effectively the only owner by way of his family trust structure.
21 Mr Vedder had initially worked at the Tyreplus business as an apprentice mechanic. Apparently, he did not get on well with Mr Sykes and left the business. When Mr Sykes left, Mr Vedder returned and worked as an employee mechanic.
22 As stated, Mr Pobke had a work injury in February 2007 and said he ceased work for over two years. Mr Vedder had to carry the load as it was apparently difficult to get assistance. Mr Brown said Mr Pobke wanted to "reward Mr Vedder's loyalty and sell him half the business."
23 This took effect as at 1 April 2009. Mr Pobke took out a loan of $125,000 to advance Mr Vedder the money to purchase half the business. Mr Vedder was charged the same interest rate that Mr Pobke was paying on the loan and had to repay a total of about $550 per week for about five years.
24 For some years prior to his injury Mr Pobke had been taking the $900 per week net from the business as to which I have already referred. This was made up of the gross rate of $663 less tax of $133 (that is $500 net) and drawings of $400 per week.
25 In addition, $400 per calendar month was noted as superannuation and paid into a mixture of three separate superannuation funds. Mr Pobke said he had never filled in any post-tax voluntary contribution forms for any of the superannuation payments. Nor had there been any differentiation between compulsory and voluntary superannuation payments in the records or otherwise.
26 It is important to note that while he was off work, Mr Pobke continued to regularly take out the same amount of money from the business despite the fact he was not working. His workers compensation weekly payments were apparently being paid into the business. The $900 net per week figure was in fact the amount that Mr Eland had been taking from the business prior to the time Mr Pobke had bought into it. Thus, the weekly figure had no basis in reality as to actual hours worked or actual expenses. The remaining profits at the end of the financial year were distributed to the two family trusts.
27 When Mr Pobke took over as owner of the business through his family trust, his weekly remuneration by way of wages, drawings and superannuation remained the same again until 1 April 2009, that is when Mr Vedder bought in to the business.
28 It was agreed that on the changeover to the 50/50 ownership as at 1 April 2009, Mr Vedder and Mr Pobke would take out equal remuneration with adjustment for the need for Mr Vedder to repay Mr Pobke for the above loan. In an email to QBE of 21 January 2011, Mr Brown explained that this was done by using Mr Vedder’s weekly drawings of $555 to pay Mr Pobke for the loan he had taken out.
29 Mr Pobke's gross wages was reduced by $153 per week and his drawings increased by $155 per week. Mr Vedder's gross wages was reduced by $150 per week. I did not really understand on the evidence how the loan and repayment was taken into account on the basis of what Mr Brown said in evidence. However, neither Counsel disputed or followed this up in evidence.
30 Thus, Mr Pobke was taking $480 per week gross wage with tax of $130 taken out (that is $350 net per week) together with drawings of $555 per week and superannuation remaining at $400 per calendar month.
31 From June 2007 to June 2009 he was given "unfit for all duties" medical certificates by his doctors. For the month of July 2009 he was given medical certificates as fit for modified duties for 15 hours per week, supervisory and administrative duties only with no manual handling, unable to drive and travel on public transport during peak hours.
32 From that date onwards he was given modified or alternate duties medical certificates with no hourly limit, but with a mixture of some or all of the above restrictions. There were no medical certificates tendered covering the period from November 2010 to March 2015 at all. He is currently certified fit for modified duties with similar restrictions, but without any public transport restriction.
33
Mr Pobke continued to work he said "an average of 15 hours per week" over the period he was in receipt of s.93CD payments, and probably back to at least February 2009 as noted in the history in
Mr Deacon's report. He said that when he started back he was spending half his time diagnosing mechanical problems and the other half answering the phone and helping customers.
34 In fact, at another point in his examination in chief Mr Pobke said that "he would have answered the phone" and done some administration work at home with his wife prior to the 130-week termination. Later again in cross-examination he appeared to contradict himself again by saying that he had not attended the workplace to do any work at all prior to 20 May 2009. He maintained written records of his remuneration and hours only until 30 June 2011, that is some four months after termination of his s.93CD payments.
35 As at 30 June 2011 the handwritten records show him taking on a weekly basis $480 gross and $130 tax (equalling $350 net) with drawings of $574.58 and super at $400 per calendar month. The records show "15 hours equals $155" reflecting the time worked and stated remuneration for those hours. The increase in drawings was a reflection of the higher interest rate at that stage of the loan for Mr Vedder set out before in this decision.
36 He said the 15 hours per week and $155 per week figures were discussed with his previous solicitors and they both "came up with that figure." After 30 June 2011 he said he stopped keeping record of the number of hours he actually worked and the remuneration received for that work.
37 He said he had worked 15 hours per week in the period to 28 June 2012. He said he now works about 25 hours per week during which he “greets customers, ‘picks up a spanner’, and does some adjustments and diagnostic work on cars." He may also check stock and give quotes. He says some days he does not do anything at all and other days he might work for six hours. The 15 hours per week figure in June 2012 "increased slowly" to 25 hours per week now. He has not kept any record of those hours.
38 I will go through the financial aspects of the defendant in due course. However, the defendant’s business has continued to sell and fit tyres, align wheels and carry out mechanical repairs. Mr Pobke said that about one-quarter of the business came from mechanical repairs and three-quarters from the sale and fitting of tyres. He said there was little profit from tyre sales and mechanical work was much more lucrative.
39 Over the years since Mr Vedder became an effective half owner in the business, there had been a number of other employees. His wife Vanessa had also done some bookwork and had even cleaned the reception area at some stage. She was doing the bookwork one hour per week for four hours on an unpaid basis until about two years ago. Of the rest of the family, only one son had been involved for about three months two to three years ago when he began, and then left, an apprenticeship as a mechanic.
40 The profit and loss accounts of the defendant show a number of other employees over the years. In June 2008 reference is made to a Mr Tzortzartos and a Mr Zanatta. Mr Zanatta continues to be mentioned in the June 2009 profit and loss statement with a Mr Cerna as well. A Mr Cameron and a Mr Robinson are included in the June 2010 profit and loss statement. Despite some of the names continuing over different financial years, Mr Pobke said the employees Cerna, Zanatta and Robinson were only employed “one at a time for a short period". This is difficult to see based on the profit and loss statements.
41 There are no names of any employees in the June 2011 profit and loss statement. Apart from Mr Pobke and Mr Vedder, Mr Cameron is the only person referred to as drawing wages in the June 2012 and June 2013 profit and loss statements. He continues to be named in the June 2014 profit and loss statements, with a Mr Woolcock. Now, he said, the physical work of tyre replacement and mechanical work is done by Mr Vedder, with Mr Cameron doing some tyre replacements.
42 Before discussing the financial figures in this case I would like to point out a few aspects of these records that caused me some concern. I have already pointed out that Mr Pobke has effectively taken out the same amount by way of wages, drawings and superannuation all the way through, save for one adjustment to the loan repayments in April 2009, This has continued from May 2001 to June 2012 at least and probably to date. The basic amounts have been the same despite Mr Pobke being an effective half owner, then a full owner, then a half owner again.
43 Also in that time, he has purchased and then later sold half shares in the business, worked 60 hours per week, then not worked at all for at least two years and then between 15 hours and 25 hours per week now. At all times his respective equal partners have drawn the same remuneration, save for an adjustment for Mr Vedder to repay a loan for his purchase of his interest in the business.
44 Mr Pobke has obviously invested considerable capital into the business purchasing an initial half share and a later half share and then later again taking out a loan for Mr Vedder to purchase his own half share. The defendant's business sells goods and also provides services as I have outlined already. Over the years, the number of work hours, and types of duties, undertaken by the respective partners have varied considerably. In addition, there have been various different employees over the years with probably some overlapping periods of employment.
45 Mr Brown gave evidence as to the financial and legal set up of the unit trust and Mr Pobke's family trust. He agreed that there were some discrepancies as to shareholders in the family trust, which is of no real consequence to this case. He took the attitude that drawings were a reflection of moneys earned by Mr Pobke over the period. The drawings were used by Mr Pobke to pay his personal household expenses. He said the drawings were an advance on profit, rather than an expectation of profit. He said the drawings had nothing to do with personal exertion. Mr Vedder had much more input into the profit the business made, certainly at least while Mr Pobke was off work. He said that it was difficult to make a distinction between personal exertion, input and a return on capital.
46 The Pobke Family Trust does not, and never did, have any bank account of its own. He said that a mechanic may earn about $30 to $35 per hour now being about $50,000 per annum. However, his mathematics did not make sense as those hourly rates would equate to about $60,000 to $70,000 per year.
47 A lot of time in this case was spent on the financial and taxation records of the defendant, Mr Pobke and his family trust. I will not detail that evidence at this stage.
48 There was a considerable variation in this case as to what Mr Pobke was claiming in his amended Statement of Claim compared to what was actually adduced in these proceedings. His Counsel’s final submissions varied again. Certainly, the amended Statement of Claim, though detailed, contained several glaring errors and misunderstandings of the provisions of the Act.
49 The amended Statement of Claim pleads the post Act 80 of 2010 provisions as to PIAWE and CWE are relevant (see, para. 43 of the amended Statement of Claim. However, this is not correct (see, the transitional provision s.366 of Act 80 of 2010).
50 It also pleads the PIAWE should be increased by an amount referable to salary sacrifice by way of superannuation, as opposed to any superannuation guarantee contribution. Further, PIAWE should also be increased by the $400 per week amount of drawings as being paid to him in expectation of profit.
51 It also pleads that the CWE was at least $155 per week taking into account:
(1) the amount payable by way of salary sacrifice to superannuation,
(2) the increase in earnings by way of indexation of weekly payments of the increase from 75 per cent to 80 per cent after 1 April 2010,
(3) distribution of profits by the family trust to Mr Pobke,
(4) the book entry alteration of $150 per week wages to drawings as at 1 April 2009, and
(5) the inclusion of four weeks annual leave payment in October 2009.
Finally, it pleads the CWE should be increased to an amount reflecting gross wages, salary sacrifice for super and what is referred to as his “profit share”.
52 Many of the above points were not addressed by Mr Pobke’s Counsel in his final submissions. In the case of the annual leave claim, this is nonsensical anyway. Annual leave is wages paid in respect of a normal week in which a worker is not required to attend work. It is not an extra payment to a worker.
53 In addition, although some evidence was called as to payments into various superannuation funds, this aspect was not included in final submissions. The evidence was that a fixed $400 per month was distributed over three separate superannuation funds with no differentiation between salary sacrifice, voluntary payments or guaranteed contributions in the defendant's records. Nor was any evidence tendered by way of forms, nominated payments or other details apart from some payment amounts.
54 In view of the uncertainty as to what amount was paid by way of the 9% or other guaranteed contribution or the relevant base figure, it is impossible to state what salary sacrifice or voluntary amount, if any, was paid, if that be a relevant issue in this case anyway. Of course, the employer’s compulsory superannuation contributions are excluded from consideration pursuant to s.5A(1A) of the Act.
55 Despite the issues raised in the amended Statement of Claim, Mr Pobke’s Counsel in his final submissions put his client's case on the following bases.
56 (1) He points out that Mr Pobke claimed, and QBE accepted, in error that Mr Pobke's PIAWE figure was 60 hours per week at $11 per hour based on acceptance of Mr Pobke's July 2006 tax assessment, which included a trust distribution made to him.
57 (2) QBE wrongfully terminated the s.93CD payments because the extra $155 per week did not appear specifically, or even generally, in the July 2010 profit and loss of the “business trust”, presumably meaning the Tyres Plus Unit Trust.
58 (3) He submits that QBE wrongfully ignored Mr Pobke's amended June 2010 tax return which removed a tax distribution of $1,948 and increased his wage to $28,424. He said this then showed the receipt of $155 per week for s.93C purposes, by way of a paper entry.
59 (4) He submits that even if the above submissions are ill founded, then this court must apply the relevant definition of CWE under s.93CD to the Act which should be "the workers actual earnings during the week" (see, s.5B(1) of the then Act at that time).
60 (5) He says the QBE wrongfully seized upon various “labels” in the profit and loss statements equating “wages plus” as earnings for s.93CD purposes. QBE did not take into account "the whole circumstances of the case."
61 (6) He then makes a frank submission that "on the facts of this case it is submitted that the accounting records do not properly assist in assessing CWE", as to which I agree.
62 (7) He submits that PIAWE of $662 is "below the minimum wage hourly" rate and CWE was $6 to $8 per hour. However, he does not expand upon what the minimum hourly wage was as at that date in his submissions.
63 (8) He submits the work undertaken by Mr Pobke as at the date of the s93CD termination was "of real value to the business" and was at least quantifiable as at $165 per week. Again, he gives no basis for that in his submissions.
64 (9) He submits the “real value” would be at least $10.33 per hour, being $155 divided by 15. In addition, it would probably cost substantially more than this to employ a "substitute worker" to perform that work.
65 (10) He then returns to PIAWE and submits this should be assessed differently. He submits that Mr Pobke did not have a fixed time rate of pay and thus the ordinary time rate of pay should be the average weekly rate earned by him in accordance with s.5A(6B).
66 (11) Following upon the decisions in Cage Developments v Schubert (1983) 151 CLR 554 and Martino v Blakistons Pty Ltd (County Court, Judge Higgins, del 26 March 1998), he submits it may not be appropriate to look at drawings, and presumably profits, to ascertain PIAWE.
67 (12) He submits that an appropriate way to assess PIAWE is to look at Mr Vedder’s wage as an employee before he became a part-owner. The material before me shows that in June 2006 Mr Vedder’s gross wage was $49,304, which is about $948 per week. However, there is no breakdown of that figure.
68 (13) He then refers to Azzopardi Haulage v. Azzopardi (2008) 21 VR 211 and returns to a submission that drawings represent wages in this case. He submits that case is authority for submitting that earnings can be made up of specific wages and a trust distribution amount in a case involving a family trust.
69 (14) He then submits that on this basis I should accept the $400 per week amount of “drawings” should actually represent wages, in addition to the $662 figure. He submits that the $662 per week figure was $4 per hour less than the minimum wage for a fully qualified mechanic. There is no reference to any evidence justifying that figure.
70 (15) He submits that it would have cost substantially more than $633 for the business to hire someone to do his job prior to his injury. He submits that the PIAWE should be $1,033 per week gross on that basis. At the very least, he submits the Notice of Termination and the s.114F Recovery Notice should be set aside.
71 Counsel for QBE substantially bases his submissions on Mr Pobke having the burden of proof. He refers to Green v VWA [1997] I VR 364 at 372 to the effect that if the claim depends on disputed questions of fact, the onus lies on the claimant to prove such facts as will establish the entitlement. In that case Tadgell J stated that it is unsound in theory and illogical in practice to require the opponent of the claim to marshal, muster and present facts which would disprove the claimant's case.
72 He submits that in this case Mr Pobke's seeks to attack the assessment of PIAWE which he accepted some five and a half years ago. As to CWE, he makes the same submission, pointing out that Mr Pobke had not been in receipt of s93CD weekly payments for long. Mr Pobke’s submissions were based on the family trust figures despite the fact that QBE used the same figures to terminate the payments. He submits the situation is different to that in my decision in Exton v King Lake Produce (del 22 November 2011).
73 He submits, and I agree, that the appropriate legislation is that in effect prior to Act 80 of 2010. He submits that insofar as s.93CD is concerned, the pre-Act 9 of 2010 provision applies (see, the transitional provision s.313).
74 As to PIAWE he submits that as "the plaintiff was self employed before and after the subject injury in the same business, he is not in the standard situation contemplated by s.5A which relies upon an ordinary time rate of pay and normal number of hours per week."
75 However, this ignores the admissions of employment and work-related injury in paras 1 and 3 of the Defence. He says that Mr Pobke was the "proprietor of his own business" operating through a corporate trust structure and thus his earnings should be considered through that prism.
76 I agree that the business was effectively his own business, wholly or in part, at all relevant times if we look at the situation informally. However, legally, and for accepted tax purposes, the business was operated by the Tyres Plus Unit Trust as to which the defendant, Ninth Rischell Pty Ltd, was the trustee. The reality is that Mr Pobke was not self-employed in the strict sense of the word. He would not have been entitled to workers compensation benefits if he had been so self-employed. The employer in this case, Ninth Rischell Pty Ltd, is a separate legal entity.
77 He also submits that the profits of a business are not earnings, referring to J. & H. Timbers v Nelson (1972) 126 CLR 625, Cage Developments v Schubert (supra), ACC v Alger (1993) 1 VR 379, and also Martino (supra).
78 He submits that the only possible case in which profits may represent actual or potential earnings is in a one-person business providing services only without any significant investment of capital (see, Cage Developments v Schubert (supra, at p.587). He submits, and I agree, that this was not Mr Pobke's situation, as I have pointed out above.
79 He also submits that his drawings could be regarded as representing the measure of his earnings as well (see, Martino (supra, at p.6). It was uncertain to what extent drawings were used towards debts or liabilities of the Pobke Family Trust or to his personal use. Thus, drawings and expectation of profits could not be regarded as equivalent terms or concepts in this case.
80 In relation to the submission as to self-employment, I also note the defendant is named as the employer in Mr Pobke’s tax returns. He is also nominated as a “mechanic” by occupation employed by the defendant in those returns.
81
Defendant's Counsel also submits, as I have pointed out, that according to the records and Mr Brown's evidence, throughout the last few years
Mr Pobke had received wages and drawings distributions at about the same level anyway. Further, he submits that over the years between 2006 and 2014 the business has continued to generate significant, and generally increasing, sales by way of tyres, tyre fittings and mechanical repairs with no apparent reflection of Mr Pobke's full-time, part-time or lack of contribution in terms of hours worked in the business.
82 He refers to the evidence of Mr Wilkinson, a forensic accountant called on behalf of the defendant. Mr Wilkinson stated that in order to ascertain the value of Mr Pobke's pre- and post-injury contribution to the business, the court would need to know (1) the hours worked by Mr Pobke and others, (2) the nature of the work performed by Mr Pobke and the others, and (3) the dollar rate per hour of Mr Pobke and the others.
83 As to trust distribution, Counsel referred to Azzopardi (supra) in which the distribution of profits earned by a company as trustee from the family trust was held to be capable of being “earnings” and “money earned by personal exertion”. However, he submits that the present situation is very different to that set out in Azzopardi.
84 In this case there were distributions to two separate family trusts and there was at least one and probably more employees at all relevant times, as well as Mr Vedder, working for the business. Counsel points out that the evidence was Mr Pobke's wife did little, if any, work of consequence for the business, yet received a higher trust distribution than Mr Pobke over the years between 2006 and 2012.
85 He also refers to the fact that the same or similar amounts were paid to Mr Pobke prior to, and after, the injury. Mr Brown had also altered figures in the two separate June 2010 tax returns when queried by QBE without any change to the underlying documents.
86 In reply, Counsel for Mr Pobke really does not take matters any further.
87 Before I hand down my findings, I should refer to Mr Wilkinson’s evidence. Mr Wilkinson had been asked to report on "the issue of drawings in the defendant's profit and loss statements for the years for 2006 to 2010, including whether they could be seen as expectation of profit."
88 He regarded the drawings as merely draw-downs against the beneficiaries' loan accounts and not assessable income. He also made a number of other comments referred to in Counsel for the Defendant's submissions. I do not propose to go through his report in any detail.
89 For reasons I will go into, I have disregarded the profit and loss accounts and drawings figures as being appropriate for the calculation of PIAWE and CWE in this case anyway without the need to consider his report in detail.
90 I do not see that this case really needs to be decided on who has the burden of proof. As for the burden of proof, I rule anyway that Mr Pobke carries the onus as to the issue of recalculation of PIAWE having regard to the fact that he seeks to alter the situation as it was determined initially on the basis of information supplied by him when he lodged his claim form in March 2007. In fact, he did not even take that determination on his PIAWE to conciliation until January 2013, about six years later.
91 I refer to my decision of Exton (supra, at paras 23-26) setting out some of the principles in this regard. I also refer to the principles set out in Jackson v Caulfield City Council (County Court, Judge Higgins, del 28 June 1996).
92 As for CWE, I believe that the VWA/QBE bears the burden of proof in that regard for the reasons set out in Exton and Jackson as well. It was the VWA/QBE who sought submissions and inspected records from Mr Pobke prior to issuing the Notice terminating his s.93CD weekly payments.
93 To some extent, I believe that both the Statement of Claim and Counterclaim in these proceedings have been misconceived. An inordinate and unwarranted amount of time was spent in this case examining financial records, including profit and loss statements and tax returns, in a great amount of detail without any great benefit to the issues raised in the Statement of Claim or in the Counterclaim.
94 It should not be forgotten in this case that Mr Pobke worked on a full time wage basis at the “Tyreplus” store as a mechanic for about four years prior to his purchase of a half-share in the business in May 2001. He was then employed by Ninth Rischell Pty Ltd which is shown as his employer in the tax return for the year ending June 2002. The ASIC search record shows Mr and Mrs Eland as directors from 1996 to 2003 and to May 2001 respectively.
95 There was nothing to suggest in the material before me that his duties changed in any way at all after his family trust became involved, apart from maybe working extra hours. He still worked full time as a mechanic. The prima facie basis for calculating PIAWE in s.5A(1) is the "worker's ordinary time rate of pay for the worker's normal number of hours per week."
96 Both these aspects are determined with reference to any applicable award, EBA or other agreement relevant to the worker (see, such decisions as Robertson v ACC [1991] 2 VR 333 and Catlow v ACC (1989) 167 CLR 543).
97 Presumably, there was an award, EBA or other agreement as to his employment prior to the ownership change to include his family trust in May 2001. Neither Counsel submitted evidence, or properly addressed me, on this point. Nor did I have any information or submission as to whether any award, EBA or agreement continued to be applicable to his employment after he set up his own family trust. The nature of his work did not appear to change, just the method of how he was paid for that work as well as any profits from the business.
98 Thus, uncertain as to the relevance of the prima facie determinant of PIAWE in s.5A(1) in this case. There is nothing to say that he did not have any fixed ordinary time rate of pay despite his Counsel’s submissions to the contrary.
99 Both parties spent much time in this case going over drawings, profits and trust distributions, from the point of view of both PIAWE and CWE in considering his earnings.
100 In this particular case, I find that his drawings, profits and trust distribution do not reflect or quantify his earnings from personal exertion. Although the weekly payments may reflect earnings in certain cases, this was not the situation in the present case.
101 He drew a fixed amount of $400 per week by way of drawings over a considerable period of time and only varied it to reflect the fact that he had taken out a loan to help Mr Vedder buy into the business. There was no variation or otherwise to reflect his working situation, that is whether he worked full-time, part-time or not at all. Nor were the constant drawings figures a reflection as to the varied profitability of the business (see, Martino at p.6).
102 Further, there was no evidence as to what the drawings were applied, for example loan repayments, living expenses or otherwise. To adopt Judge Higgins' words in Martino at p. 12 "the level of drawings cannot be regarded as in any way representing an appropriate method of calculating current weekly earnings."
103 Similar comments could be made in relation to the trust distribution and profits. I agree with Mr Pobke’s Counsel that pursuant to Azzopardi, trust distribution amounts can be seen as earnings in appropriate cases. However, unlike the circumstances of that case, there are a number of other contrary indications. The Tyreplus business at all relevant times sold goods such as tyres and related equipment and provided services. Its profits came from both aspects of the business.
104 Further, at various times since Mr Pobke was initially injured, trust distributions and profits were distributed to his family trust alone and later to Mr Vedder’s family trust as well. Mr Pobke invested capital into the business, purchasing his own and Mr Sykes' interest in the business and even taking out a loan to assist Mr Vedder's purchase of his share of the business.
105 Profits in this case were both a return on capital and labour, both his labour and others. The profits were also earned by several employees over the whole of the relevant period with some of their periods of employment overlapping. In addition, his wife provided some services at various times by way of bookkeeping and cleaning. Although Mr Pobke says she was not paid for this, there is no doubt that she received considerable payment by way of trust distributions from his family trust over the years. I agree with Counsel for the defendant's submissions in relation to J. & H Timbers v Nelson (supra) and Cage Developments v Schubert (supra) in this regard.
106 Mr Pobke's half share of profits distributed to his family trust in no way reflected his work by way of personal exertion.
107 In his written submission, Mr Pobke's Counsel spent considerable time in dealing with the issue of PIAWE and CWE if I was not to accept his submissions on drawings, trust distributions and profits. I note my comments earlier as to the prima facie situation in s.5A(1).
108 His alternative submission on behalf of Mr Pobke is that I should assess his PIAWE at the date of injury in February 2007 on the basis of Mr Vedder's gross income of $49,304. However, the only document tendered in that regard was Mr Vedder's PAYG summary for the year ending June 2009. Even if I was to consider that $49.304 figure, I do not know to what extent that was truly reflective of Mr Pobke's own situation. There is nothing to indicate Mr Vedder’s actual duties, hours worked, overtime, or whether he was doing more or less work than Mr Vedder.
109 Similarly Mr Brown and Mr Pobke gave vague what I would call “guesstimates” as to mechanics' wages at various times which seem to have no real validity. They appeared to be simply pulling figures out of the air. I would need to have more substantial and valid evidence in this regard. I do not see that Mr Vedder’s gross wage ought to be used for comparison purposes either, for the reasons that I have set out.
110 However, the situation is different when it comes to CWE. It was Mr Pobke's uncontested evidence that he was working at least 15 hours per week at the time of termination of his s93CD payments, and for a period thereafter, until progressing to 25 hours per week now. In fact, the defendant declined an opportunity to apply to adjourn these proceedings to investigate that issue.
111 Also, Counsel for the defendant did not dispute the type of work that Mr Pobke has been performing including answering the phone, greeting customers, giving quotes, helping to diagnose repairs, undertaking sales, advising mechanics and even picking up a spanner at times. I accept that such work has been wide-ranging, constant over the relevant period and of assistance to the defendant. It was work of some value to the defendant and was suitable for appropriate remuneration. Having regard to the nature of the duties and their variability, it would be difficult to put a fixed value on such work or consider an appropriate award.
112 However, Mr Pobke's Counsel tendered a copy of the National Minimum Wage Order of 2010 (“the Wage Order”) which came into effect as at 1 July 2010 setting a $15 per hour rate on the basis of 38 ordinary hours. The Wage Order itself provides a base rate for workers who are not otherwise covered by an award or EBA. It simply sets out an enforceable minimum wage for the purposes of payment to a worker.
113 I do not believe the casual loading figure in the Wage Order is appropriate in the circumstances of this case. He did, and does, not work on a true casual basis. He works the hours that he wishes to work.
114 The Wage Order is made in accordance with the Fair Work Act minimum wage provisions. I find that such a minimum wage rate to be appropriate in Mr Pobke's case, having regard to the nature and duties he has performed and is performing. The Wage Order sets out an appropriate minimum wage that would be applicable in this case.
115 Although he may in fact be entitled to a higher rate than this, I could not be satisfied as to any higher figure on the evidence before me. As I have previously stated, I have no other appropriate figures anyway.
116 Therefore, I rule that he was earning, or deemed to be earning, at least $15 per hour for 15 hours per week, that is a rate of $225 per week as at the date of termination of his s.93CD payments as at 11 February 2011. I make no further ruling in regard to his hours worked after that date as it is not required in these circumstances and in view of the limited evidence before me.
117 As for the Counterclaim, I believe that this was misconceived and inappropriate, even if disregard my specific ruling as to the hourly rates. It seems to be naive at least on behalf of QBE that his s.93CD weekly payments should have been terminated on the basis that his tax assessment could not specifically, or even generally, verify the wages earned for his 15 hours per week worked for s.93CD payments purposes.
118 The Counterclaim ignores the fact that there was a family trust in place. This is a legal and appropriate vehicle for distribution of moneys received by way of income by one person to various beneficiaries within a family structure or otherwise.
119 Although the trust distribution may have included profits, etc. from the business, this is not the point. The point is whether he had earnings from his personal exertion for the business, not whether such sum could be seen specifically, or generally, in his tax returns after the trust distribution. QBE did not dispute the fact that he worked at least 15 hours per week actually performing work of value for the business. The Counterclaim will be dismissed.
120 It seems to me that I should make orders setting aside the Notice of Termination of his s.93CD weekly payments and fix the rate at $15 per hour as at that date.. As stated, apart from the burden of proof issue, I have no proper evidence before me that the original PIAWE figure should be varied in any and if so what way. There is simply no adequate evidence in that regard.
121 That completes my Decision and I seek Counsels' assistance as to appropriate orders.
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