Pourreza v GIO
[2021] NSWPICMR 47
•29 October 2021
| CERTIFICATE OF DETERMINATION OF MERIT REVIEWER | |
| CITATION: | Pourreza v GIO [2021] NSWPICMR 47 |
| CLAIMANT: | Davood Pourreza |
| INSURER: | GIO |
| MERIT REVIEWER: | Katherine Ruschen |
| DATE OF DECISION: | 29 October 2021 |
| CATCHWORDS: | MOTOR ACCIDENTS- Merit review; dispute about the amount of weekly payments under Division 3.3 of the Motor Accident Injuries Act 2017; pre-accident weekly earnings (PAWE); sole trader; whether future projected increase in profits relevant; whether adjustments can be made for fluctuation in business expenses or unusually high business expenses in the relevant pre-accident period; application of Schedule 1, clause 4(1) of the MAI Act; PAWE correctly calculated; Held – the reviewable decision is affirmed. |
| DETERMINATIONS MADE: | The reviewable decision is about the amount of weekly payments of statutory benefits that are payable under Division 3.3 of the Motor Accident Injuries Act 2017 (MAI Act), and is therefore a merit review matter under Schedule 2(1)(a) of the MAI Act. 1. The reviewable decision is: |
Background
There is a dispute between Davood Pourreza (the Claimant) and the insurer about the amount of weekly payments of statutory benefits that are payable under Division 3.3 of the MAI Act.
The Claimant was involved in a motor accident on 14 May 2021. He made a claim for weekly payments of statutory benefits under the MAI Act.
Prior to the accident the Claimant worked as a self-employed painter, having started his business approximately two to three years prior.
Pursuant to their internal review decision dated 10 August 2021 the insurer calculated the Claimant’s pre-accident weekly earnings (PAWE) to be $518.04.
The Claimant has applied for a merit review of the insurer’s internal review decision of 10 August 2021.
Submissions
The Claimant submits the insurer’s calculation of his PAWE fails to consider:
(a) that his business was relatively new and as it became more established future profits were expected to increase, and
(b) that his expenses in the year prior to the accident were particularly high.
The Claimant submits that in these circumstances his PAWE should be calculated on the basis of his gross business income before deducting business expenses rather than the net profit after expenses.
The insurer submits that in the circumstances of a sole trader such as the Claimant PAWE is to be calculated on the basis of the net business income, after expenses are deducted but before tax.
Reasons
Meaning of PAWE
There is no dispute that the Claimant is an earner under Schedule 1, clause 2(a) of the MAI Act on the basis he was self-employed during the eight weeks preceding the date of the motor accident (clause 2(a)(i)).
The question is whether, for the purpose of calculating PAWE, the Claimant’s income from the proceeds of his business is the gross income of the business, before business expenses are deducted or the net income of the business, after deducting expenses but before tax.
Pursuant to Schedule 1, clause 4 of the MAI Act PAWE means:
“4 Meaning of "pre-accident weekly earnings"--general
(1)"Pre-accident weekly earnings", in relation to an earner who is injured as a result of a motor accident, means the weekly average of the gross earnings received by the earner as an earner during the 12 months immediately before the day on which the motor accident occurred, unless subclause (2) applies.
(2) In the following cases, "pre-accident weekly earnings" , in relation to an earner who is injured as a result of a motor accident, means--
(a)if, on the day of the motor accident, the earner was earning continuously, but had not been earning continuously for at least 12 months--the weekly average of the gross earnings received by the earner as an earner during the period from when the earner started to earn continuously to immediately before the day of the motor accident,
(a1) if the earner was employed or self-employed during a period or periods equal to at least 26 weeks during the first year of the pre-accident period, but was not obtaining earnings from any source at any other time during the pre-accident period--the average weekly gross earnings received by the earner as an earner during the first year of the pre-accident period,
(b) if subclause (3) applies--the weekly average of the gross earnings received by the earner as an earner during the period from when the change of circumstance referred to in that subclause occurred to immediately before the day of the motor accident,
(c) if the earner is an earner by reason of having entered into an arrangement with an employer or other person to undertake employment or to commence business as a self-employed person--the average weekly gross earnings that the earner could reasonably have been expected to earn, but for the injury, in employment under that arrangement.
(2A) The "pre-accident period" , in relation to a motor accident, is the period of 2 years immediately preceding the motor accident.
(3) This subclause applies if, during the 12 months immediately before the day of the motor accident, there was, as a result of any action taken by the earner, a significant change in his or her earnings circumstances that resulted in the earner regularly earning, or becoming entitled to earn, more on a weekly basis than he or she was earning before the change occurred.
...
(4) For the purposes of this clause, an earner earns continuously if he or she obtains earnings from permanent employment or from a source that, on the day of the motor accident, was likely to continue for a period of at least 6 months to provide earnings to the earner on the same, or a similar, basis to the basis on which the earnings were being provided as at that day.” (emphasis added)
None of the subclauses in clause 4(2) apply to the Claimant’s circumstances. Accordingly, the Claimant’s PAWE falls for assessment under clause 4(1).
Under clause 4(1) PAWE is calculate on the basis of “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).
This makes clear that what is relevant is:
(a) the earnings received by the Claimant as an individual earner, and
(b) only those earnings received during the 12 months before the date of the motor accident.
In this case, the 12-month pre-accident period is 14 May 2020 to 13 May 2021 (the motor accident having occurred the following day, 14 May 2021).
Individual earnings
In the circumstances of a sole trader the earnings of the Claimant as an individual, distinct from the business, are the profits of the business after the expenses of the business are paid. In other words, the “proceeds” of the business the Claimant receives as an earner is the net profit of the business after accounting for all business expenses incurred to run the business, but before tax. Business expenses are not “proceeds” of the business that make it into the Claimant’s hands as his individual gross earnings.
The Claimant’s PAWE must be based on the Claimant’s gross earnings because it is his personal status as an “earner” that provides him with benefits under the MAI Act. The Claimant’s gross earnings as an “earner” cannot be anything other than the net income of the business, after deducting business expenses. Business expenses are clearly outgoings and do not form part of the gross earnings of the “earner” who ultimately receives the net income of their business as their individual earnings.
Adopting the business income, after expenses, as the Claimant’s gross earnings is consistent with the presentation of income by the Claimant to the Australian Taxation Office in his individual tax return, which records the Claimant’s gross earnings as an individual as being the net profits of the business (that is, after expenses). It is also consistent with the treatment and assessment of such income by the Australian Taxation Office and is consistent with the method of calculation in previous merit review decisions including MA 01/18 and MA 06/18.
Can there be any adjustment for higher expenses or expected future business growth?
The Claimant contends that:
(a) his business expenses in the year preceding the accident were unusually high, and
(b) his business was in the early years and he had expected profits to increase over the following years, as he became more established.
However, Schedule 1, clause 4(1) of the MAI Act does not permit any adjustment in the relevant pre-accident period for either of these circumstances.
In relation to unusually high business expenses the period under clause 4(1) is a fixed period and is fixed as the “12 months immediately before the day on which the motor accident occurred”. Accordingly, it can only be the net business earnings in that period that can be considered for calculation of the Claimant’s PAWE. It necessarily follows that all of the business expenses in that same period must be deducted in order to produce the net business earnings which in turn are the Claimant’s gross earnings. The fluctuation of business expenses from one year to another is not a relevant consideration under clause 4(1) given the period is fixed.
Clause 4(1) also does not permit consideration of any expected increase in business profits in the years following the date of the motor accident. As noted, the relevant period is fixed as the 12 months “immediately before” the date of the motor accident. This means that calculation of PAWE under clause 4(1) is a retrospective exercise. That is, it looks back on past circumstances, “before the day on which the motor accident occurred”.
There is nothing in the language of clause 4(1) that accommodates a prospective look at what might come about in the future. It deals only with past circumstances occurring “before” the accident. Future income, whether speculated or projected to be an increase or a decrease, falls outside the wording of clause 4(1) and is therefore not a matter that can be considered for the purpose of calculating PAWE.
Conclusion
The Claimant is an earner within the meaning in Schedule 1, clause 2(a).
The Claimant’s PAWE falls under Schedule 1, clause 4(1).
Under Schedule 1, clause 4(1) the Claimant’s earnings are to be calculated on the basis of the individual earnings he received from the business, after deducting business expenses but before tax, in the period 14 May 2020 to 13 May 2021, being the 12 months immediately before the date of the accident.
For the reasons set out above clause 4(1) does not permit adjustment to this calculation to account for a fluctuation in business expenses or speculation or projection of a future increase in income.
Accordingly, I am of the view the insurer has correctly calculated the Claimant’s PAWE in the sum of $518.04 on the basis the Claimant’s tax return for the period 1 July 2020 to 30 June 2021 evidences the net profit of the business was $23,462 after deducting business expenses of $41,658. The insurer is prepared to accept all of this income was generated in the period 1 July 2020 to 13 May 2021 given from 14 May 2021 to 30 June 2021 the Claimant was unable to work as a result of the motor accident on 14 May 2021. The period 1 July 2020 to 13 May 2021 is 45.285 weeks. $23,462 divided by 45.29 weeks is $518.04.
Accordingly, the reviewable decision is:
(a) affirmed.
Legislation and Guidelines
In making this decision, I have considered the following:
· the application, reply and supporting documentation;
· the MAI Act;
· Motor Accident Guidelines, and
· Motor Accident Injuries Regulation 2017.
Katherine Ruschen
Merit Reviewer
Personal Injury Commission
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