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AAG v NRMA Insurance Ltd [2018] NSWDRS MR 007

Overview

Jurisdiction: Merit reviews

Catchwords: Weekly benefits – Statutory benefits - pre-accident weekly earnings – self employed – operating expenses

Legislation cited:

  • Motor Accident Injuries Act 2017 (NSW) ss 7.13, Schedule 1 cl 4, Schedule 2
  • Motor Accident Guidelines effective from 30 April 2018
  • Motor Accident Injuries Regulation 2017 (NSW)
  • Interpretation Act 1986 s 36

Parties:

  • AAG – claimant
  • NRMA Insurance Ltd – insurer

Disclaimer: This decision has been edited to remove all Unique Personal Identification including the name of the Claimant and injured persons.

Merit Review Certificate

View the certificate

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

The Claim
Claimant AAG
Insurer NRMA Insurance Australia Limited
Claim Number: NWRTP180007701
The Reviewable Decision
Decision-maker: Saroja Sureshkumar
Date of decision: 24 January 2018
Nature of decision: The amount of pre-accident weekly earnings
The Merit Review
Our Reference: 10034039
Merit Reviewer: Jeremy Lum
Date of this Certificate: 8 August 2018

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 AAG 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:

○   AAG’s 2017 and 2018 Income Tax Return (if available).
○   AAG’s 2017 and 2018 Notice of Assessment (if available).
○   Schedule from Bacchus showing each payment of director’s fee to AAG for the period 2 January 2017 to 1 January 2018.
○   A copy of the company constitution for each of the entities in which AAG was a director, for the period 2 January 2017 to 1 January 2018.

●   Effective Date: Until the Insurer reconsiders its pre-accident weekly earnings decision, the Insurer is to continue to pay AAG weekly payments of $1,846.15. Upon making its reconsideration decision, the Insurer is to pay AAG the difference between what he has been paid and what he was entitled to be paid (if there is a shortfall), taking effect from24 January 2018, the date of the Insurer’s original decision in relation to AAG’s pre- accident weekly earnings.

Jeremy Lum
Dispute Resolution Service Merit Reviewer

Reasons

Background

1.   AAG was injured in a motor accident on 2 January 2018.

2.   On 24 January 2018, the Insurer wrote to AAG and advised him that he was entitled to weekly payments of statutory benefits, which would be calculated on the basis that his 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 AAG from the date of accident.

3.   AAG applied for an internal review by the Insurer.  On 11 May 2018, the Insurer gave AAG written notice that its original decision should be affirmed.

4.   AAG disputes the Insurer’s decision and lodged an application for merit review with the Dispute Resolution Service on 8 June 2018.  The application was made within 28 days of AAG receiving the Insurer’s internal review decision in accordance with clause 7.194 of the Motor Accident Guidelines (the Guidelines).

Documents and Information

5.   I have considered the documents provided in and submitted with the application and the reply.

6.   At the request of the Dispute Resolution Service, the parties provided the following additional information:

AAG
●   Bank statements from St George account of AAG and AAG’s partner covering relevant period 2 January 2017 to 1 January 2018.
●   Further submissions dated 30 July 2018.
●   Undated spreadsheet compiled by AAG allocating deposits to income.

The Insurer
●   Further submissions in email to the Dispute Resolution Service dated 2 August 2018.
●   Copy of email from Mr Mark Bland, forensic accountant, to Insurer dated 31 July 2018.

Submissions

AAG

7.   In the application for merit review, AAG, through his solicitor, submits that the Insurer’s
calculation of his PAWE is incorrect.

8.   AAG states that the Insurer relied upon a letter from AAG’s previous accountant Bacchus Associates Pty Ltd (Bacchus) dated 15 January 2018 which notes AAG’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.

9.   AAG submits that this minimum amount is not an accurate reflection of his PAWE and should not be the basis upon which his weekly benefits are calculated.

10.   Instead, AAG seeks to rely on a further letter from Bacchus dated 31 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.

11. In further submissions dated 30 July 2018, AAG states that PAWE should be calculated in accordance with his 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 AAG “on an irregular basis in varying amounts”.  AAG relies on bank statements for the period 3 January 2017 to 2 January 2018 with an attached spreadsheet that itemises the entries that comprise of his income by way of wages, director’s fees and/or consulting fees.

12. AAG claims that his actual earnings for the period 3 January 2017 to 2 January 2018 amount to $312,131.34 gross which equates to $6,002.52 gross per week.

The Insurer

13. In reply, the Insurer states that it has not been provided with the letter from Bacchus dated 31 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 NRMA will commence the process accordingly”.

14.   In further submissions dated 2 August 2018, the Insurer acknowledges AAG’s bank statements however states that no income tax returns for the period have been provided to substantiate his claim.

15.   The Insurer relies on its internal review decision which calculated AAG’s PAWE as $1,846.15 per week on the basis that he had a director’s fee income of $96,000 for the 2017 financial year as per the letter from his accountants Bacchus dated 15 January 2018.

16.   The Insurer noted the subsequent letter from Bacchus dated 31 January 2018 that says AAG 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 3 January 2017 to 2 January 2018.

17.   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 Bacchus showing each payment of directors’ fee to the claimant for the period 1 July 2016 to 30 June 2018.
  • 18.   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

    19. 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

    20.   As detailed in his submissions, AAG stated that his PAWE be calculated by reference to the director’s fees he 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.

    21.   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.

    22.   The period 12 months immediately before the day on which the motor accident occurred is, by my calculations, 2 January 2017 to 1 January 2018. The Dispute Resolution Service therefore requested that AAG provide further information that clearly show his gross earnings for this period.

    23.   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 AAG who, upon providing the information, the Insurer lodged submissions and additional information they wished to rely upon.

    24.   I have read the additional information and submissions.

    Letters from Bacchus dated 15/01/2018 and 31/01/2018

    25.   I agree with AAG’s submission insofar as the calculation of PAWE should not be solely based on the letter from Bacchus dated 15 January 2018. The definition of PAWE, as reproduced above, requires “the weekly average of the gross earnings” received by AAG in the 12 months before the motor accident. This, in my view, requires at the very least, some reliable information which substantiates AAG’s earnings, preferably on a week-to-week basis.

    26.   There is very little information contained in the letter dated 15 January 2018 from Bacchus 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” AAG draws per month. The word “minimum” indicates that it is likely AAG drew more than $8,000 each month. If he did, I do not have information that verifies which of the “companies” he drew from and how much was drawn.

    27.  In a similar vein, the letter dated 31 January 2018 cannot be used for the calculation of AAG’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.

    28. I am therefore unable to make any reliable decision in relation to AAG’s PAWE using the information from Bacchus.

    Bank account statements and spreadsheet

    29.   I have a copy of the bank account statement for account holders AAG and AAG’s partner for the period 12 months before the motor accident. AAG has provided a spreadsheet with reference to various entries in the bank account statement which he says are evidence of his actual earnings. These total $312,131.24.

    30.   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”.

    31.   AAG has not advanced any submissions that his role in the various companies is anything other than as a director. Certainly, the information from his accountant Bacchus only states that AAG holds the role of director and he is remunerated through director’s fees.

    32.   AAG’s spreadsheet and bank account appear to indicate various other payment streams which AAG attributes as his actual earnings. There are a number of difficulties I have in accepting these payment streams as evidence of AAG’s PAWE.

    33. Firstly, I do not have any information from Bacchus or from each of the companies that AAG is a director that indicates AAG is paid wages/consulting fees in addition to director fees.

    34. Secondly, the amounts are via internet deposits from various account numbers or sources that are not substantiated by invoices issued, receipts or company payslips.

    35.   I cannot therefore make any reliable decision in relation to AAG’s PAWE using the
    information contained in his bank account statements and spreadsheet.

    Other

    36.   The various quarterly business activity statements from one of AAG’s companies do not assist in the calculation of AAG’s PAWE as they do not indicate what AAG’s personal earnings were.

    37.   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

    38.   Although the Insurer maintains its original PAWE decision of $1,846.15 per week, I agree with AAG’s submissions that the information upon which this figure was calculated (i.e. letter from Bacchus dated 15/01/2018) is unreliable and potentially inaccurate.

    39.   However, I am not persuaded from the information AAG has provided, namely bank account statement, spreadsheet and submissions are an accurate reflection of his earnings as a director of various companies.

    40.   The Insurer has commissioned a forensic accountant, Mr Mark Bland, who in his email to the Insurer dated 31 July 2018, recommended that additional information be provided in order to properly calculate AAG’s PAWE.

    41. This information includes AAG’s income tax return and notice of assessment for 2017 and 2018 which cover the period of 12 months before the motor accident. Mr Bland has also requested from Bacchus a schedule showing each director fee payment made to AAG.

    42.   In my view, the information requested by Mr Bland would assist in the proper calculation of AAG’s PAWE. The income tax return and notice of assessment for the financial years 2017/2018, if available, would provide a clearer indication of AAG’s actual gross earnings.

    43.   In addition, a schedule of each director fee payment compiled by AAG’s accountant would provide some clarity as to how much AAG was paid and at what time.

    44.   I would also add that obtaining a copy of the company constitution for each of the companies AAG was a director to would assist in substantiating his claim that he is entitled to wages, consulting fees as well as director fees. It may also set out the basis upon how AAG was remunerated by way of director fees.

    45.   I am aware that obtaining the above information will take some time, particularly if the Insurer is to obtain a further report from Mr Bland after receiving a schedule of director fee payments from Bacchus and a copy of the various company constitutions.

    46.   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 8 June 2018, when AAG submitted his request for merit review.

    47.   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 AAG’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:
  • AAG’s 2017 and 2018 Income Tax Return (if available).
  • AAG’s 2017 and 2018 Notice of Assessment (if available).
  • Schedule from Bacchus showing each payment of director’s fee to AAG for the period 2 January 2017 to 1 January 2018.
  • A copy of the company constitution for each of the entities in which AAG was a director, for the period 2 January 2017 to 1 January 2018.

  • ●   Effective Date: Until the Insurer reconsiders the pre-accident weekly earnings decision, the Insurer is to continue to pay AAG weekly payments of $1,846.15. Upon making its reconsideration decision, the Insurer is to pay AAG the difference between what he has been paid and what he was entitled to be paid (if there is a shortfall), taking effect from 24 January 2018, the date of the Insurer’s original pre-accident weekly earnings decision.

    Jeremy Lum
    Dispute Resolution Service Merit Reviewer