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Merit review MA07/18

Issued under section 7.13(4) of the Motor Accident Injuries Act 2017

Merit Reviewer's Determination

This determination relates to a merit review matter, which is a reviewable decision under Schedule 2(1)(a) of the Motor Accident Injuries Act 2017 (the Act).

The merit review matter is about the amount of weekly payments of statutory benefits that is payable to the Claimant under Division 3.3 (weekly payments of statutory benefits to injured persons).

The determination of the Merit Review is as follows:

  • The reviewable decision is set aside and remitted to the Insurer for reconsideration with the following directions:

The Insurer is to obtain the following:

  • The Claimant’s 2017 and 2018 Income Tax Return (if available).
  • The Claimant’s 2017 and 2018 Notice of Assessment (if available).
  • Schedule from Claimant’s previous accountant showing each payment of director’s fee to the Claimant for the period 2 January 2017 to 1 January 2018.
  • A copy of the company constitution for each of the entities in which the Claimant was a director, for the period January 2017 to January 2018.
  • Effective Date: Until the Insurer reconsiders its pre-accident weekly earnings decision, the Insurer is to continue to pay the Claimant weekly payments of $1,846.15. Upon making its reconsideration decision, the Insurer is to pay the Claimant the difference between what they have been paid and what they were entitled to be paid (if there is a shortfall), taking effect from January 2018, the date of the Insurer’s original decision in relation to the Claimant’s pre- accident weekly earnings.

Reasons

Background

  1. The Claimant was injured in a motor accident in January 2018.
  2. In January 2018, the Insurer wrote to the Claimant and advised them that they were entitled to weekly payments of statutory benefits, which would be calculated on the basis that their pre-accident weekly earnings (PAWE) is equal to $1,846.15. That decision covered the weekly payments of statutory benefits payable by the Insurer to the Claimant from the date of accident.
  3. The Claimant applied for an internal review by the Insurer. In May 2018, the Insurer gave the Claimant written notice that its original decision should be affirmed.
  4. The Claimant disputes the Insurer’s decision and lodged an application for merit review with the Dispute Resolution Service in June 2018. The application was made within 28 days of the Claimant receiving the Insurer’s internal review decision in accordance with clause 7.194 of the Motor Accident Guidelines (the Guidelines).

Documents and information

  1. I have considered the documents provided in and submitted with the application and the reply.
  2. At the request of the Dispute Resolution Service, the parties provided the following additional information:

The Claimant

  • Bank statements from the bank of the Claimant and Claimant’s spouse covering relevant period January 2017 to January 2018.
  • Further submissions dated July 2018.
  • Undated spreadsheet compiled by the Claimant allocating deposits to income.

The Insurer

  • Further submissions in email to the Dispute Resolution Service dated August 2018.
  • Copy of email from the forensic accountant to Insurer dated July 2018.

Submissions

The claimant

  1. In the application for merit review, the Claimant, through their solicitor, submits that the Insurer’s calculation of their PAWE is incorrect.
  2. The Claimant states that the Insurer relied upon a letter from the Claimant’s previous accountant dated January 2018 which notes the Claimant’s position as director of a number of entities and who drew a minimum monthly director’s fee of $8,000.00 which equates to $96,000.00 gross per annum or $1,846.15 per week.
  3. The Claimant submits that this minimum amount is not an accurate reflection of their PAWE and should not be the basis upon which their weekly benefits are calculated.
  4. Instead, the Claimant seeks to rely on a further letter from their previous accountant dated January 2018 which notes that for the financial year ended 30 June 2017, the claimant received a total of $162,500.00 in director’s fees which equates to $3,125.00 per week. This amount is inclusive of all income derived from the claimant’s entities.
  5. In further submissions dated July 2018, the Claimant states that PAWE should be calculated in accordance with their gross earnings during the 12 months before the date of the motor accident. It is submitted the gross earnings were from “wage payments, consulting fees, dividends and director’s fees” which were paid to the Claimant “on an irregular basis in varying amounts”. The Claimant relies on bank statements for the period January 2017 to January 2018 with an attached spreadsheet that itemises the entries that comprise of their income by way of wages, director’s fees and/or consulting fees.
  6. The Claimant claims that their actual earnings for the period January 2017 to January 2018 amount to $312,131.34 gross which equates to $6,002.52 gross per week

The insurer

  1. In reply, the Insurer states that it has not been provided with the letter from the Claimant’s previous accountant dated January 2018. The Insurer indicated that “once we have determined the pre-accident weekly earning based on the information provided, if there is a requirement to vary our original decision the Insurer will commence the process accordingly”.
  2. In further submissions dated August 2018, the Insurer acknowledges the Claimant’s bank statements however states that no income tax returns for the period have been provided to substantiate their claim.
  3. The Insurer relies on its internal review decision which calculated the Claimant’s PAWE as $1,846.15 per week on the basis that they had a director’s fee income of $96,000 for the 2017 financial year as per the letter from the Claimant’s previous accountants dated January 2018.
  4. The Insurer noted the subsequent letter from the Claimant’s previous accountant dated January 2018 that says the Claimant received a total of $162,500 in director’s fees. The Insurer rejects this amount on the basis that the amount was for the 2017 financial year while the relevant period for PAWE is January 2017 to January 2018.
  5. The Insurer says it requires the following additional information in order to make a correct and accurate calculation of the claimant’s PAWE:
  • Claimant’s 2017 income tax return
  • Claimant’s 2017 Notice of Assessment
  • Claimant’s 2018 income tax return
  • Claimant’s 2018 Notice of Assessment
  • Schedule from the Claimant’s previous accountants showing each payment of directors’ fee to the claimant for the period July 2016 to  June 2018.
  1. The insurer submits that “as per the assessment completed… there is insufficient evidence to make a correct and accurate calculation of the claimant’s pre-accident weekly earning(s).”

Legislation

  1. In conducting my review, I have considered the following legislation and guidelines:
    • Motor Accident Injuries Act 2017 (NSW) (the Act)
    • Motor Accident Guidelines effective 30 April 2018 (the Guidelines)
    • Motor Accident Injuries Regulation 2017 (NSW) (the Regulation)

Pre-accident weekly earnings

  1. As detailed in their submissions, the Claimant stated that their PAWE be calculated by reference to the director’s fees they received for the financial year ended 30 June 2017. This would, in my view, cover a period from 1 July 2016 to 30 June 2017.
  2. Clause 4(1) of Schedule 1 of the Act defines “PAWE” as:

    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.
  3. The period 12 months immediately before the day on which the motor accident occurred is, by my calculations, January 2017 to January 2018. The Dispute Resolution Service therefore requested that the Claimant provide further information that clearly show their gross earnings for this period.
  4. As detailed above in paragraph 6, there was a substantial amount of additional information received since the lodgement of the application for merit review. The request was initially made by the Dispute Resolution Service on the Claimant who, upon providing the information, the Insurer lodged submissions and additional information they wished to rely upon.
  5. I have read the additional information and submissions.

Letters from Claimant's previous accountant dated 01/2018 and 01/2018

  1. I agree with the Claimant’s submission insofar as the calculation of PAWE should not be solely based on the letter from the Claimant’s previous accountant dated January 2018. The definition of PAWE, as reproduced above, requires “the weekly average of the gross earnings” received by the Claimant in the 12 months before the motor accident. This, in my view, requires at the very least, some reliable information which substantiates the Claimant’s earnings, preferably on a week-to-week basis.
  2. There is very little information contained in the letter dated January 2018 from the Claimant’s previous accountant and, in my view, the letter falls short of any meaningful attempt at fulfilling the legislative requirement for the calculation of PAWE. For example, the letter states that $8,000 per month as being the “minimum” the Claimant draws per month. The word “minimum” indicates that it is likely the Claimant drew more than $8,000 each month. If they did, I do not have information that verifies which of the “companies” they drew from and how much was drawn.
  3. In a similar vein, the letter dated January 2018 cannot be used for the calculation of the Claimant’s PAWE as it specifies the $162,500 earned in director’s fees for the financial year ended 30 June 2017 and not for the period 12 months before the motor accident.
  4. I am therefore unable to make any reliable decision in relation to the Claimant’s PAWE using the information from the Claimant’s previous accountant.

Bank account statements and spreadsheets

  1. I have a copy of the bank account statement for account holders Claimant and Claimant’s spouse for the period 12 months before the motor accident. The Claimant has provided a spreadsheet with reference to various entries in the bank account statement which they say are evidence of their actual earnings. These total $312,131.24.
  2. I note that the spreadsheet identifies not only director’s fees as earnings but also wages and consulting fees. Wages have the description of “Internet Deposit” from various account numbers while consulting fees are “Expenses” or “Client expenses”.
  3. The Claimant has not advanced any submissions that their role in the various companies is anything other than as a director. Certainly, the information from their previous accountant only states that the Claimant holds the role of director and they are remunerated through director’s fees.
  4. The Claimant’s spreadsheet and bank account appear to indicate various other payment streams which the Claimant attributes as their actual earnings. There are a number of difficulties I have in accepting these payment streams as evidence of the Claimant’s PAWE.
  5. Firstly, I do not have any information from the Claimant’s previous accountant or from each of the companies that the Claimant is a director that indicates the Claimant is paid wages/consulting fees in addition to director fees.
  6. Secondly, the amounts are via internet deposits from various account numbers or sources that are not substantiated by invoices issued, receipts or company payslips.
  7. I cannot therefore make any reliable decision in relation to the Claimant’s PAWE using the information contained in their bank account statements and spreadsheet.

Other

  1. The various quarterly business activity statements from one of the Claimant’s companies “Pre-accident Company” do not assist in the calculation of the Claimant’s PAWE as they do not indicate what the Claimant’s personal earnings were.
  2. I do have an Income Tax Account for the statement period 1 June 2017 to 3 July 2017 however this shows an overdue income tax liability totalling $138,106.52. I do not have a copy of relevant income tax returns or notice of assessment.

Findings

  1. Although the Insurer maintains its original PAWE decision of $1,846.15 per week, I agree with the Claimant’s submissions that the information upon which this figure was calculated (i.e. letter from previous accountant dated 01/2018) is unreliable and potentially inaccurate.
  2. However, I am not persuaded from the information the Claimant has provided, namely bank account statement, spreadsheet and submissions are an accurate reflection of their earnings as a director of various companies.
  3. The Insurer has commissioned a forensic accountant who in their email to the Insurer dated July 2018, recommended that additional information be provided in order to properly calculate the Claimant’s PAWE.
  4. This information includes the Claimant’s income tax return and notice of assessment for 2017 and 2018 which cover the period of 12 months before the motor accident. The forensic accountant has also requested from the claimant’s previous accountant a schedule showing each director fee payment made to the Claimant.
  5. In my view, the information requested by the forensic accountant would assist in the proper calculation of the Claimant’s PAWE. The income tax return and notice of assessment for the financial years 2017/2018, if available, would provide a clearer indication of the Claimant’s actual gross earnings.
  6. In addition, a schedule of each director fee payment compiled by the Claimant’s accountant wouldprovide some clarity as to how much the Claimant was paid and at what time.
  7. I would also add that obtaining a copy of the company constitution for each of the companies the Claimant was a director to would assist in substantiating their claim that they are entitled to wages, consulting fees as well as director fees. It may also set out the basis upon how the Claimant was remunerated by way of director fees.
  8. I am aware that obtaining the above information will take some time, particularly if the Insurer is to obtain a further report from the forensic accountant after receiving a schedule of director fee payments from the Claimant’s previous accountant and a copy of the various company constitutions.
  9. The objects of the Dispute Resolution Service include the provision of a timely, independent, fair and cost-effective system for the resolution of disputes. This matter has been with the DRS for some time, since June 2018, when the Claimant submitted their request for merit review.
  10. In the circumstances, the most expeditious and fair outcome in my view is to allow the Insurer to obtain the additional information and to reconsider its decision in relation to the calculation of the Claimant’s PAWE.

Determination

My determination of the Merit Review is as follows:

  • The reviewable decision is set aside and remitted to the Insurer for reconsideration with the following directions:

The Insurer is to obtain the following:

  • The Claimant’s 2017 and 2018 Income Tax Return (if available).
  • The Claimant’s 2017 and 2018 Notice of Assessment (if available).
  • Schedule from the Claimant’s previous accountant showing each payment of director’s fee to the Claimant for the period January 2017 to January 2018.
  • A copy of the company constitution for each of the entities in which the Claimant was a director, for the period January 2017 to January 2018.
  • Effective Date: Until the Insurer reconsiders the pre-accident weekly earnings decision, the Insurer is to continue to pay the Claimant weekly payments of $1,846.15. Upon making its reconsideration decision, the Insurer is to pay the Claimant the difference between what they have been paid and what they were entitled to be paid (if there is a shortfall), taking effect from January 2018, the date of the Insurer’s original pre-accident weekly earnings decision.

Dispute Resolution Service Merit Reviewer