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ABQ v NRMA Insurance [2018] NSWDRS MR 043

NSW DISPUTE RESOLUTION SERVICE (NSWDRS)
JurisdictionMerit Review
CatchwordsPre-accident weekly earnings – PAWE – self-employed – sole trader – earner – gross earnings – net profits – earner – business expenses – hairdresser
Legislation cited                    Motor Accidents Injury Act (NSW) ss 6.3(2), 7.13(4), Schedule 1 (4)(1), Schedule 2(1)(a)
Motor Accident Guidelines effective 13 July 2018
Motor Accident Injuries Regulation 2017
Cases cited

N/A

Text citedN/A
Parties ABQ - Claimant
NRMA Insurance - Insurer
DisclaimerThis decision has been edited to remove all Unique Personal Identification including the name of the Claimant.

Merit Review Certificate

View the certificate

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

The Claim
Claimant ABQ
InsurerNRMA Insurance
Claim Number NWRND180001801
The Reviewable Decision
Reviewable decision-makerMr Rhys Wilson
Date of Reviewable decision                                         5 September 2018
Nature of Reviewable decision Internal Review
The Merit Review
Our Reference 10048814
Merit Reviewer Katherine Ruschen
Date of Merit Review Certificate 17 October 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, about weekly payments of statutory benefits to injured persons.

My determination of the Merit Review is as follows:

  • The reviewable decision is affirmed.
  • Effective Date: This determination takes effect on 17 October 2018.

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

Katherine Ruschen
Merit Reviewer, Dispute Resolution Service

Merit Reviewer's

Background

1.  There is a dispute between the Claimant and the Insurer as to the amount of the Claimant’s pre- accident weekly earnings (PAWE) under the Motor Accidents Injuries Act 2017 (“the Act”).

2.  The Claimant is a self-employed hairdresser operating as a sole trader. She rents a chair in a salon where she works two days per week.

3.  The Claimant was injured in a motor vehicle accident on 17 January 2018.

4.  On 24 August 2018 the Insurer wrote to the Claimant advising her that they had calculated her PAWE to be $226.35. The Claimant applied for an internal review of that decision.

5.  On 5 September 2018 the Insurer issued their internal review certificate of determination with a letter to the Claimant outlining the reasons for this determination. The internal review certificate adjusted the PAWE calculation to $228.10 on the basis the incorrect period had previously been used to calculate the Claimant’s PAWE.

6.  The Claimant’s PAWE has been calculated on the basis of profit and loss statements furnished by the Claimant, which record the gross takings of her business and the net profit, after deducting $220 per week as an expense for renting the chair at the salon (“chair rent”).

7.  There is some evidence of other business expenses in addition to chair rent (e.g. purchase of supplies), but this evidence would appear to be insufficient to enable a proper calculation of such expenses over the relevant 52 week period. In any event, the Insurer is content to exclude expenses other than chair rent from an assessment of the Claimant’s PAWE.

8.  The Claimant disputes that her PAWE is to be calculated on the basis of the net profit of her business and says it should be calculated on the basis of the gross takings of her business, before any deduction for chair rent or other business expenses. The Claimant seeks a merit review of the Insurer’s internal review determination dated 5 September 2018 on this basis.

Documents and information

9.  I have considered the documents provided in the application and the reply.

Submissions

10.  The Claimant submits that as a sole trader, she is personally responsible for all business expenditure and therefore, the gross takings of her business should be used to calculate her PAWE, rather than the net profit. The Claimant says she is still required to pay chair rent.

11.  The Insurer submits that assessment of the Claimant’s PAWE requires an assessment of the Claimant’s gross earnings, being the net business income (i.e. the net profit of the Claimant’s business after accounting for business expenses, but before tax).

12.  The Insurer asserts the Claimant has provided insufficient information to enable a proper assessment of her PAWE. The Insurer says in this regard, the Claimant has not complied with her duty under section 6.3(2) of the Act by failing to provide all relevant information to assist with an assessment of her PAWE.

13.  Nonetheless, the Insurer decided to accept the Claimant’s profit and loss statements and to calculate her PAWE on the basis of same. Whilst there was some evidence of expenses in addition to chair rent, the Insurer submits that by accepting the Claimant’s profit and loss statements at face value, which disclose chair rent as the only expense, it has approached assessment of the Claimant’s PAWE in a manner beneficial to the Claimant.

Legislation

14.          In conducting my review I have considered the following legislation and guidelines:

a.  Motor Accident Injuries Act 2017 (NSW) (“the Act”)

b.  Motor Accident Guidelines effective 13 July 2018 (“the Guidelines”)

c.  Motor Accident Injuries Regulation 2017 (NSW) (“the Regulation”)

Reasons

Pre-accident weekly earnings

15.  PAWE is defined by clause 4 of Schedule 1 of the Act. Sub-clause 1 states:

(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.

16.  I am satisfied subclause (2) does not apply.

17.  There is no dispute that the Claimant is "an earner who is injured as a result of a motor accident". There is also no dispute that the relevant 52 week period is 17 January 2017 to 16 January 2018 on the basis the Claimant’s motor vehicle accident occurred on 17 January 2018.

18.  The question is whether the weekly average over that 52 week period should be calculated on the basis of the gross takings of the business, before accounting for business expenses or whether it should be calculated on the basis of the net profit, after deducting business expenses but before tax.

Financial records

19.  The Insurer requested various financial records from the Claimant to support her claim. Limited information has been provided in response. The Insurer raises a lack of supporting evidence provided by the Claimant to enable verification of her claim in their submissions. However, the Insurer is content to accept the Claimant’s profit and loss statements on the basis her PAWE is calculated on the net profit of the business, as evidenced by those profit and loss statements.

20.  I am satisfied in these circumstances that of the documents provided by the Claimant the most useful documents upon which to assess her PAWE are the profit and loss statements furnished by the Claimant for the periods 1 January 2017 to 31 December 2017 and 1 January 2018 to 19 January 2018.

Basis of calculation

21.  I am also satisfied that the calculation of the Claimant’s PAWE set out by the Insurer in their letter of 5 September 2018 accompanying their internal review certificate of determination is correct in that the Claimant’s PAWE is $228.10 based on the net profit of the business disclosed over the relevant 52 week period by the profit and loss statements.

22.  I do not accept the Claimant’s submission that her PAWE should be assessed on the basis of the gross takings of her business, before deducting expenses. The Claimant’s gross earnings received as an “earner” are derived from the income of her business, after accounting for business expenses including chair rent. That is, the Claimant’s earnings are the income she derives from the business, after all expenses of the business are accounted for, but before tax.

23.  An individual’s earnings from self employment do not include the expenses of the business required in order to generate those earnings. It seems clear that PKF (NS) Forensic  Accountants required evidence of expenses to be able to calculate the Claimant’s personal earnings for the purpose of assessing her PAWE. This is because business expenses must first be deducted in any calculation of the Claimant’s personal earnings derived from her  sole trader business. This approach is consistent with basic accounting principles. I note it is also consistent with the method of calculation in previous Merit Review decisions MA01/18 and MA06/18.

24.  The Insurer has properly calculated the Claimant’s earnings by deducting chair rent expenses from the gross takings of her business. I consider it likely that other expenses could be deducted, but note that in the absence of sufficient evidence of other expenses the Insurer has agreed that chair rent is the only business expense to be deducted for the purpose of assessing the Claimant’s PAWE.

25.  It is unfortunate that the Claimant continues to pay chair rent, although the reasons for this are unknown. There also does not appear to be any documentary evidence of continuing chair rent payments. In any event, there is no provision within the legislation that allows these expenses to be included as part of the Claimant’s PAWE.

Determination

My determination of the Merit Review is as follows:

  • The reviewable decision is affirmed
  • Effective Date: This determination takes effect on 17 October 2018.

Katherine Ruschen
Merit Reviewer, Dispute Resolution Service