Schmahl v AAI Limited t/as GIO
[2023] NSWPICMR 44
•24 August 2023
| CERTIFICATE OF DETERMINATION OF MERIT REVIEWER | |
| Citation: | Schmahl v AAI Limited t/as GIO [2023] NSWPICMR 44 |
| ClaimanT: | Marlis Schmahl |
| Insurer: | AAI Limited t/as GIO |
| Merit Reviewer: | Katherine Ruschen |
| DATE OF DECISION: | 24 August 2023 |
| CATCHWORDS: | MOTOR ACCIDENTS - Motor Accident Injuries Act 2017; dispute about payment of weekly benefits under division 3.3; meaning of pre-accident weekly earnings; meaning of earnings; schedule 1, clause 4; self-employment; ongoing business expenses; COVID-19; Allianz Insurance Australia Limited v Shahmiri referred to; whether earnings as an earner are the gross profit or net income of the business; whether statutory benefits available for property damage to vehicle; Held – the reviewable decision is affirmed. |
| Determinations made: | CERTIFICATE Issued under s 7.13(4) of the Motor Accident Injuries Act2017 DETERMINATION 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 determination is as follows: (a) the reviewable decision is affirmed, and (b) the claimant may provide further documents to the insurer and if so, the insurer is to re-determine pre-accident weekly earnings taking into consideration the further documents. |
STATEMENT OF REASONS
INTRODUCTION
There is a dispute between Marlis Schmahl (the claimant) and the insurer about the amount of weekly payments of statutory benefits payable under Division 3.3 of the Motor Accident Injuries Act 2017 (MAI Act).
The claimant was involved in a motor accident on 17 March 2023.
On 6 April 2023 the claimant lodged an application for personal injury benefits.
On 2 June 2023 the insurer determined the claimant’s pre-accident weekly earnings (PAWE) in the amount of $314.69.
The claimant requested an internal review of the insurer’s 2 June 2023 decision.
On 28 June 2023 the insurer issued their internal review decision in which the insurer varied the claimant’s PAWE amount to $298.42.
The claimant has applied for a merit review of the insurer’s internal review decision dated 28 June 2023.
SUBMISSIONS
The claimant has not provided any submissions. The application for a merit review states the claimant applies for a merit review in respect of:
(a) the amount of weekly payments of statutory benefits that are payable;
(b) ceasing statutory benefits re damages claim;
(c) recoverable statutory benefits, and
(d) verification of expenses.
In respect of 8(a), (b) and (c) above the claimant states in her merit review application that the outcome she seeks is that there is “replacement of losses through accident injuries and loss of business vehicle”.
In respect of 8(d) the claimant states in the merit review application that the outcome she seeks is that “GIO pay the costs of surgery”.
In addition, under “other dispute details” in the application the claimant states that she seeks “payment loss of income to cover business expenses (operating and private expenses)”.
It also appears from correspondence in connection with the insurer’s internal review that the claimant raises the issue that her pre-accident income was adversely affected by COVID-19 and that in the period from in or about June 2022 to the date of the accident her business began to recover, and she began to earn more on average per week than she had prior to June 2022. It appears the claimant contends PAWE should be based on earnings received in the reduced period from June 2022 to 16 March 2023 because of this rather than based on the full 12 month pre-accident period.
The insurer submits further information is required to accurately determine PAWE and has requested that the claimant be directed to provide further documents namely, complete bank statements for the pre-accident period and a schedule of business income and expenses for the 12 month pre-accident period.
REASONS
Issues
There does not appear to be any dispute that the claimant is an earner or that Schedule 1, cl 4(1) applies in relation to calculation of the claimant’s PAWE.
It can be surmised from the documents that the following issues arise;
(a) what is the claimant’s PAWE, including:
(i)whether payment of weekly statutory benefits under Division 3.3 of the MAI Act should include an amount to cover ongoing business expenses; and
(ii)whether the pre-accident period under cl 4(1) can be adjusted to account for a downturn in business due to COVID-19 in the period prior to June 2022;
(b) whether payment of statutory benefits under the MAI Act include replacement of losses such as the alleged loss of the claimant’s motor vehicle used for business purposes.
To the extent the claimant has ticked boxes in her merit review application to say this is also a merit review about verification of expenses and/or ceasing statutory benefits in relation to a damages claim there is no evidence or other information before me to indicate these are matters in dispute. There is no evidence that the insurer ceased payment of weekly benefits in circumstances of a pending damages claim and no evidence the insurer has disputed the costs of surgery.
To the extent there may be a dispute about verification of expenses or cessation of weekly benefits where there is a pending damages claim not disclosed in the documents provided in this merit review, I have not been provided with any evidence of these issues being the subject of an internal review. I do not have jurisdiction to determine those issues unless and until they have first been the subject of an internal review by the insurer (or the insurer has refused or failed to conduct an internal review after being requested to do so). Accordingly, this merit review will determine only those issues that are listed at paragraph 15 above.
Relevant background
The claimant is a female who was 72 years of age as at the date of the motor accident on 17 March 2023.
Because of the claimant’s age, s 3.13 of the MAI Act applies to the claimant. Section 3.13(2) relevantly provides:
“If the motor accident that causes a person's injury happens on or after the person reaches the retiring age, a weekly payment of statutory benefits is not to be made under this Division in respect of any resulting period of loss of earnings or earning capacity occurring more than 12 months after the motor accident occurs.”
Pursuant to s 3.13(3) "retiring age" means the age at which a person would, subject to satisfying any other qualifying requirements, be eligible to receive an age pension under the Social Security Act 1991 of the Commonwealth.
Pursuant to ss 42 and 23(5D) of the Social Security Act 1991 the claimant’s retiring age for the purpose of s 3.13 of the MAI Act is 65 years. Accordingly, the claimant is only entitled to payment of weekly payments of statutory benefits under Division 3.3 of the MAI Act for a maximum period of 12 months after the motor accident occurred on
17 March 2023. The claimant’s entitlement to weekly payments ceases on
17 March 2024.The claimant contends she was the proprietor of a business named A Pass Driving School at the time of the motor accident. The evidence establishes the claimant had been operating that business during the 12 month period prior to the motor accident and that the claimant’s PAWE falls under Schedule 1, cl 4(1). There is no evidence that any of the exceptions to cl 4(1) under cl 4(2) apply to the claimant’s circumstances.
Under cl 4(1) the claimant’s PAWE is the weekly average of the gross earnings she received in the period 17 March 2022 to 16 March 2023.
The claimant has provided her tax return for the period 1 July 2021 to 30 June 2022, a document titled Profit and Loss Account for Year 2023 (this is assumed to be the business profit and loss statement for the financial year 1 July 2022 to 30 June 2023) and bank statements for the period 28 March 2022 to 27 June 2022 and 1 July 2022 to 26 March 2023. It is unclear why the claimant has not provided complete bank statements for the relevant pre-accident period from 17 March 2022 to 16 March 2023.
Legislation
Under cl 4(1) the claimant’s PAWE is calculated over the 52 week period immediately before the day of the motor accident. That period is 17 March 2022 to 16 March 2023.
Pursuant to cl 4(1) PAWE relevantly means “the weekly average of the gross earnings received by the earner as an earner…”.
“Gross earnings” is not defined in the MAI Act. “Earnings” is also not defined. However, “loss of earnings” is defined in Schedule 1, cl 3 of the MAI Act to mean “a loss incurred or likely to be incurred in a person's income from personal exertion”. It is clear from this definition that the word “earnings” in the phrase “loss of earnings” means “income from personal exertion”.
Relevantly, pursuant to cl 3(2)(b) “income from personal exertion” is “the proceeds of any business carried on by the person either alone or in partnership with any other person”.
The principles of statutory interpretation are set out by the High Court in Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355; 72 ALJR 841; 153 ALR 490 and relevantly require that:
(a) the words in the statute must be interpreted in a way that is consistent with the language used in that statute;
(b) words of a statutory provision are given the meaning that the legislature is taken to have intended them to have, and
(c) the same wording used throughout the statute carries the same meaning.
Whilst the word “earnings” does not have a specified definition in isolation to the definition of the phrase “loss of earnings” it is a word that is used throughout the MAI Act. Pursuant to principles of statutory interpretation it must be taken to have the same meaning throughout the MAI Act. Accordingly, “earnings” should be given the same meaning when used in phrases such as “gross earnings” and “earnings as an earner” as it is given by the definition of “loss of earnings” in Schedule 1, cl 3 of the MAI Act.
Under cl 3 “loss of earnings” means a loss of “income from personal exertion”. It follows from this is that the word “earnings” is intended to mean “income from personal exertion” wherever the word appears in the MAI Act. Relevant to the facts of this case is that “income from personal exertion” means “the proceeds” of the claimant’s driving school business pursuant to cl 3(b). Accordingly, the claimant’s “gross earnings” for the purpose of PAWE are the proceeds she receives from her driving school business.
What are the proceeds of the claimant’s business?
Schedule 1, cl 4(1) requires a determination of the claimant’s gross earnings received as an individual “earner” and not the gross earnings of the business itself. The “proceeds” enjoyed by the claimant as an “earner” are the net income of the business after accounting for 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 her “gross earnings”.
PAWE must be based on the claimant’s gross earnings, as it is her personal status as an “earner” that provides her with benefits under the 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.
All business expenses must be deducted in order to calculate the claimant’s individual earnings from the business. Whilst there may be ongoing administrative, maintenance or other “fixed” expenses despite no work being carried out, this is irrelevant as PAWE is calculated based on pre-accident earnings, when the business was an ongoing concern and all expenses had to be paid to run the business.
The net income of the business, after deducting fixed and variable costs, is synonymous with profit as it represents the final measure of profitability of a business. The net income represents the net amount of profit remaining after all expenses and costs are subtracted from revenue. It is the net income (proceeds of the business) that then becomes available to the owner of the business, as their individual gross earnings from the business.
The MAI Act is concerned with the earnings the claimant ultimately receives into her own hands as an individual. The earnings the claimant receives from the business is what is left over after accounting for all expenses of the business, including fixed costs. This is consistent with how the claimant presents her individual gross earnings to the Australian Tax Office that is, her earnings are the net income of the business and is consistent with accounting conventions.
The deduction of all business expenses is consistent with the method of calculation in previous merit review decisions with which I agree, including ABQ v NRMA (Merit Review) [2018] NSWSIRADRS 43 (17 October 2018), AJQ v NRMA (Merit Review) [2020] NSWSIRADRS 44 (8 April 2020), APD v AAI Limited trading as GIO (Merit Review) [2020] NSWSIRADRS 198 (24 August 2020), APL v GIO (Merit Review) [2020] NSWSIRADRS 207 (16 September 2020), Mula v NRMA [2022] NSWPICMR 9, Hayes v GIO [2022] NSWPICMR 17, Le v Insurance Australia Ltd t/as NRMA Insurance [2022] NSWPICMR 47 and Shqau v AAMI [2022] NSWPICMR 6.
Can there be an allowance for business expenses continuing post-accident?
The claimant may be continuing to incur certain business expenses on a maintenance or administrative basis in order to preserve the business ready for operation once she is fit to return to her pre-injury work. However, there is no provision within the legislation that allows ongoing expenses to be taken into account so as to increase PAWE. If this were the case and an injured person, for example, wound up their business following a motor accident meaning they no longer incur any business expenses, payment of weekly benefits calculated on PAWE that accommodates ongoing fixed costs of a business would amount to a windfall to that person and is inconsistent with the objects of the MAI Act set out in s 1.3.
Some business expenses may be one-off or occasional expenses. Others may be incurred weekly, monthly or on some other regular basis. This is part and parcel of running a business. Some people choose not to run their own business because they do not want to carry the risk of ongoing operating/fixed costs in case of, for example, a downturn in business or a non-operating period. It is a matter for the business owner whether they take steps to reduce, avoid or otherwise mitigate ongoing expenses in circumstances where the business is not active for example due to injury or a period of absence for any other reason such as an extended holiday or to care for a relative. Such steps may include winding up the business or arranging a locum or other employed staff to keep the business running.
There is also no evidence before me that the claimant continues to pay business expenses post-accident or that any such payment is mandatory.
In any event, there is nothing in the MAI Act that permits PAWE to be adjusted upwards to include an allowance for ongoing business expenses that a person such as the claimant in self-employment may continue to incur after the accident even though they may be unfit to resume full pre-injury employment.
Impact of COVID-19 on the claimant’s business
There is insufficient evidence upon which to determine whether the claimant’s business was impacted by COVID-19 in the first part of the 12 month pre-accident period from March 2022 to June 2022. In any event, the MAI Act does not permit any adjustment to PAWE by reason of COVID-19 or other events impacting the profitability of a business. Schedule 1, cl 4(1) is clear in its terms that the claimant’s PAWE must be taken as the weekly average over the 52 week pre-accident period.
There are no provisions under the MAI Act, Motor Accident Injuries Regulation (the Regulation) or the Motor Accident Guidelines (the Guidelines) that permit adjustment of PAWE to account for the impact of COVID-19 on a business. The reasons for this are set out by Harrison AsJ in the Supreme Court decision in Allianz Insurance Australia Limited v Shahmiri [2022] NSWSC (Shahmiri). In Shahmiri Harrison AsJ held that pursuant to Schedule 1, cl 4(1) PAWE is to be “calculated by taking … earnings over the whole of the 12-month period immediately before the day of the accident and dividing it by 52 reflecting the number of weeks during the whole 12-month period” and that the MAI does not allow any adjustment to this by reason of the COVID-19 pandemic or other break or reduction in employment or earnings.
Accordingly, the claimant’s PAWE cannot be adjusted under cl 4(1) to account for interruption or reduction in earnings due to COVID-19 restrictions.
What is the claimant’s PAWE
I agree with the insurer that the evidence provided by the claimant is insufficient to precisely determine the claimant’s PAWE over the correct pre-accident period from
17 March 2022 to 16 March 2023. The 2022 tax return does not cover this period. The 2023 profit and loss statement does not identify the amount of income and expenses of the business received or paid in the pre-accident period that is, on or before
16 March 2023 as distinct from the amount received or paid after this date. Further, the claimant has not provided any source documents to support the profit and loss statement.
To the extent bank statements are useful the documents indicate the bank statements provided by the claimant are incomplete as bank statements for the period
17 March 2022 to 27 March 2022 and 28 June 2022 to 30 June 2022 are missing (I have not been provided with the bank statements in order to verify this).
I agree with the insurer that the most reliable method of determining PAWE in the circumstances is based on the bank statements albeit they do not quite cover the pre-accident period (the onus is on the claimant to provide the missing statements if she relies on income received in any period in respect of which there is no bank statement). The claimant has not provided any other documents on which a different PAWE could be calculated on a reliable basis. Accordingly, the reviewable decision is affirmed.
The claimant may wish to provide further documents to the insurer for the purpose of PAWE. If so, this should include:
(a) complete bank statements for the period 17 March 2022 to 16 March 2023 which show the income received and the expenses paid by the business in this period;
(b) source documents such as invoices, receipts, bank statements upon which the 2023 profit and loss statement was prepared;
(c) the claimant’s 2023 tax return and notice of assessment if available;
(d) if the claimant has not yet lodged her 2023 tax return the claimant’s 2023 pre-filing statement downloaded from her MyGov account, and
(e) a schedule of income and expenses for the period from 17 March 2022 to 16 March 2023 with reference to the bank statements and/or other documents as evidence in support or in the alternative, an marked up version of the bank statements, identifying each transaction as ether an income or expense of the business.
If the claimant provides further documents the insurer is to re-determine PAWE taking into consideration the additional documents.
Does the MAI Act allow statutory benefits for property damage to the claimant’s motor vehicle?
Statutory benefits under the MAI Act include funeral expenses to cover those who die as a result of the motor accident, loss of income because of injury to a person as a result of a motor accident and costs of medical treatment and care to assist recovery for persons injured as a result of a motor accident.
The claimant appears to seek to recover the costs of damage to her motor vehicle used in her driving school business. Damage to a motor vehicle, whether for business or private use is property damage. Statutory benefits are not payable under the MAI Act for property damage. This would be a matter for the claimant to claim under her first party motor vehicle property insurance. Alternatively, if there is another driver at fault, she may be entitled to make a claim for damage to her vehicle against the other driver/the other driver’s motor vehicle property insurer. However, the claimant is not entitled to claim for damage to her vehicle under the MAI Act as no statutory benefits are payable for property damage.
CONCLUSION
For the reasons outlined above the reviewable decision is affirmed.
The claimant may provide further documents to the insurer, which should include the documents listed at paragraph 48 above. If so, the insurer is to conduct a further determination as to PAWE taking into consideration the further documents from the claimant.
LEGISLATION AND GUIDELINES
In making this decision, I have considered the following:
· the application, reply and supporting documentation;
· the MAI Act;
· the Guidelines, and
· the Regulation.
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