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Merit review MA08/18

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, about weekly payments of statutory benefits to injured persons.

My determination of the Merit Review is as follows:

  • The reviewable decision is set aside and the following decision is made in substitution for the reviewable decision:
  • The Claimant's pre-accident weekly earnings are $2,159.80.
  • Effective Date: This determination takes effect in January 2018
  • Legal Costs: The amount of the Claimant’s costs assessed in accordance with the Motor Accident Injuries Regulation 2017 is $0 inclusive of GST.

A brief statement of my reasons for this determination are attached to this certificate.

Background

  1. There is a dispute between the Claimant and Insurer as to the amount of the Claimant’s pre- accident weekly earnings (PAWE).
  2. The Claimant suffered injury as a result of a motor vehicle accident in January 2018 in Suburb.
  3. The Insurer has determined that the Claimant’s PAWE is $1,438.00.
  4. The Claimant says it was closer to $3,000.00.
  5. The dispute I must therefore determine is what the Claimant’s PAWE was.
  6. The Insurer submits that I am to apply sub clause (1) of the definition of PAWE at clause 4 of Schedule 1 of the Act.
  7. The Insurer’s reply indicates that attached to it is a Forensic Accountant’s Report dated 4 June 2018.
  8. I was unable to locate that document in the bundle of material provided by the Insurer in support of the reply.
  9. The Dispute Resolution Officer wrote to the parties on my behalf requesting that the Insurer supply that document together with any other material available to the claims consultant or internal reviewer.
  10. The Insurer responded indicating that everything had been supplied on a USB attached to the reply.
  11. I was provided with the USB but on checking was unable to locate a report dated June 2018.
  12. The Dispute Resolution Officer wrote again to the Insurer requesting the report of June 2018.
  13. The Insurer responded by email attaching an email dated April 2018 from the Forensic Accountant.
  14. The Insurer says all other available material was included on the USB. I do not have all other material requested and it was not included in the documents on the USB.
  15. The internal reviewer in their letter of June 2018 quotes from the Forensic Accountant’s advice of June 2018.
  16. Those quotes include reference to business activity statements provided by the Claimant’s accountant. I have not been provided with those.
  17. I also requested the Claimant provide additional information which I have received. The Claimant says they cannot provide quarterly business activity statements (BAS) for the 2018 tax years as they lodge an annual GST return.
  18. The Claimant did provide the profit and loss statements requested.
  19. The Insurer’s consultant wrote to the Claimant by letter dated April 2018 advising them that the Insurer had calculated their PAWE to be $1,438.
  20. The Claimant then sought an internal review.
  21. By letter dated June 2018 the internal reviewer wrote to the Claimant advising they confirmed the original decision.
  22. The letter lists a number of documents to which the internal reviewer had access including the Application for Internal Review and Forensic Accountant Advice dated June 2018.
  23. It does appear that much of the information contained in the Forensic Accountant Advice of June 2018 is set out in the Internal Reviewer’s letter.
  24. The Claimant’s position is that immediately prior to the accident their earnings were closer to $3,000 per week.
  25. They submit that the Insurer relies on its own conclusion based on an assumption about their costs rather than their own accountant’s calculations.
  26. If the Claimant’s calculations are accepted as correct that would mean a PAWE of $2,517.94.

Documents and information

  1. I have considered the documents provided in the application and the reply and any further information provided by the parties.
  2. As indicated I have not been provided with a Report from the Insurer’s Forensic Accountant dated June 2018 despite it being listed as an attachment to the reply and despite my request for it on two occasions.
  3. The Insurer did forward to SIRA an email dated August 2018 in which they state the Forensic Accountant’s Report was attached.
  4. The “report” attached to that email is an email from the Insurer’s forensic accountant to the Insurer’s claims consultant dated April 2018.
  5. In their letter of June 2018 the Insurer’s Internal Reviewer refers to an advice from the Forensic Accountant dated June 2018 and appears to quote from it.
  6. I had hoped to find within that report some explanation as to why the accountant, in their email of April 2018, did not take account those amounts shown in the expenses to 2018 that appear in brackets.
  7. I am not a Forensic Accountant but the profit and loss statement appears to allow those as credit against other expenses.
  8. There is no doubt some rational explanation for that but without the assistance and guidance of either party I am unable to satisfy myself that the Claimant is entitled to include those amounts as credits.

Submissions

  1. The Claimant has provided short submissions.
  2. The Claimant’s concern is that the Insurer has made assumptions about their costs and has refused to accept their accountant’s calculations.
  3. The application does not list any documents as being attached to it.
  4. The Claimant says that their income was as a sole trader running their own business known as Company and that in the 12 months immediately preceding this accident the net profit of that business were close to $3,000 per week.
  5. The net profit shown in Company’s profit and loss statement for the year to January 2018 is $130,933.
  6. The Insurer does not submit that Company’s gross profits for the year to   January 2018 should not be used in calculating the Claimant’s PAWE.
  7. The Insurer submits that the amount of expenses shown are unreliable and that therefore expenses equivalent to those incurred in the 2017 tax year should be deducted from gross profits.
  8. The Claimant had indicated to the Insurer that the lesser expenses in 2017 and then in the year to January 2018 were an indication that they had ceased to employ full time staff from around July 2016.
  9. The wages component is less in 2017 than in 2016 which is a reflection of the Claimant’s assertion.
  10. What the Insurer is suggesting is that the expenses listed for the 12 months to January 2018 are at such variance with what appears in the 2016 and 2017 tax years is that they cannot be correct.
  11. They base that on a report of their Forensic Accountant who states at page 2 of an email dated April 2018 that “The business’s non-salary and superannuation expenses in the year to January 2018 are significantly lower than those of the June 16 and June 17 years such that I cannot place reliance on them.”
  12. The accountant then goes on to calculate PAWE on Company’s gross profit to January 2018 less an amount equivalent to expenses for the year ended 30 June 2017.
  13. They arrive, by that method, at a figure of $1,438 per week.
  14. I do not accept that that can be correct.
  15. The definition provides that PAWE is to be based on the Claimant’s gross earnings during the 12 months immediately preceding the day of the accident.
  16. A calculation of those gross earnings must include expenses for the same 12 month  period.
  17. In my view they are the expenses shown in the profit and loss statement for the 12 months to January 2018 without those amounts shown in brackets. By my calculation the business losses were $23,325.

Legislation

  1. In conducting my review I have considered the following legislation and guidelines:
    1. Motor Accident Injuries Act 2017 (NSW) (“the Act”)
    2. Motor Accident Guidelines effective 13 July 2018 (“the Guidelines”)
    3. Motor Accident Injuries Regulation 2017 (NSW) (“the Regulation”)

Reasons

  1. The Claimant’s gross earnings are the equivalent of the net profits of the business known as Company. The Insurer appears to accept that as being the correct. PAWE is defined by clause 4 of Schedule 1 of the Act.  Sub-clauses 1 states:

    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. Neither party suggests that subclause (2) applies.
  3. The Insurer’s accountant in their email of April 2018 indicated that because Company’s expenses for the 12 months to January 2018 were significantly lower than they were in the tax years ended June 2016 and June 2017 they could not be relied upon.
  4. In this matter that statutory benefit is that payable under section 3.6 of the Motor Injuries Act 2017.
  5. The PAWE is the weekly average of gross earnings received by the earner in the 12 months immediately before the day of the accident.
  6. The Insurer’s Forensic Accountant calculated PAWE by deducting an amount equivalent to Sublime’s total expenses in 2017 from Company’s Gross Profit for the year to 31 January 2018.
  7. I base my calculation on the period of 12 months immediately preceding the accident.
  8. I adopt those figures set out in the profit and loss statement for the period February 2017 to January 2018 which I believe was prepared by the Claimant’s accountant.
  9. The list of Company’s expenses for the 12 months to January 2018 allow for a number of credits which reduces the expenses in that period from $23,325.00 to $4,702.00.
  10. In my view the “credits” shown amongst those losses are not allowable as earnings.
  11. By my calculation therefore the Claimant’s gross earnings for that year was $112,310.00.
  12. By dividing that by 52 the Claimant’s PAWE for the 12 months to January 2018 is calculated at $2,159.80.
  13. The equation is:
  14. $135,635.00 -  $23,325.00 = $112,310 ÷ 52 = $2,159.80

  1. The PAWE is therefore $2,159.80

Determination

My determination of the Merit Review is as follows:

  • The reviewable decision is set aside and the following decision is made in substitution for the reviewable decision:
    • The Claimant’s PAWE is $2,159.80.
  • Effective Date: This determination takes effect in January 2018.
  • Legal Costs: The amount of the Claimant’s costs assessed in accordance with the Motor Accident Injuries Regulation 2017 is $0. inclusive of GST.

Merit Reviewer
Dispute Resolution Service