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ADP v CIC Allianz [2019] NSWDRS MR 093

Overview

Jurisdiction:  Merit Review

Catchwords:  Pre-accident weekly earnings - PAWE – earner - self-employed - PAYG- legal costs
Legislation cited:

  • Motor Accident Injuries Act 2017: Section 3.6; Section 8.10
  • Schedule 1 Clause 4; Schedule 2(1)(a)
  • Motor Accident Injuries Guidelines- Clause 7.192

Cases cited:  N/A

Text cited:  N/A

Parties:

  • ADP – Claimant
  • CIC Allianz Insurance Limited - Insurer

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

Merit review certificate

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

Claimant

ADP

Insurer

CIC Allianz Insurance Limited

Claim Number

37C000454

Decision-maker

Nahao (Margaret) Yan

Date of decision

21 November 2018

Nature of decision

The amount of Pre-Accident Weekly Earnings

Our Reference

10074005

Merit Reviewer

Tajan Baba

Date of this Certificate

1 March 2019

Determination

This determination relates to a merit review matter about weekly payments of statutory benefits to injured persons. This is a reviewable decision under Schedule 2(1)(a) of the Motor Accident Injuries Act 2017.

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 amount of ADP’s Pre-Accident Weekly Earnings is $517.05.
  • Effective Date: 21 November 2018

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

Tajan Baba

Merit Reviewer, Dispute Resolution Service

Reasons

Background

1. ADP was injured in a motor vehicle accident on 1 July 2018. He was self-employed at the time of the accident and was working as a sub-contractor with the A Company.

2. The Insurer accepted ADP’s claim under the Motor Accidents Injuries Act 2017 (“the Act”). On 21 November 2018, it made a decision that the amount of ADP’s Pre-Accident Weekly Earnings (“PAWE”) was $207.69.

3. ADP sought an internal review of the Insurer’s decision about the amount of his PAWE. The Insurer conducted an internal review on 5 December 2018 and affirmed its decision.

4. ADP did not agree with the Insurer’s decision on internal review and lodged an application for merit review with the Dispute Resolution Service (“DRS”) on 20 December 2018. The application was accepted by DRS.

5. The Insurer’s decision about PAWE affects the amount of weekly payments of statutory benefits payable to ADP. It is a reviewable decision under Schedule 2(1)(a) of the Act.

Documents and information

6. I have considered the documents provided in the application and the reply and any further information provided and exchanged between the parties.

Submissions

7. ADP’s legal representatives, One Group Legal Pty Ltd, make the following submissions on his behalf:

a. ADP is a self-employed contractor that entered into an arrangement with another person to commence business as a self-employed person. Consequently, the average of the gross earnings over 12 months formula is not applicable.

b. The relevant provision of the Act applicable to ADP is Schedule 1, Clause 4(2)(c), which provides:

(c) if the earner is an earner by reason of having entered into an arrangement with an employer or other person to undertake employment or to commence business as a selfemployed person – the average        weekly gross earnings that the earner could reasonable have been expected to earn, but for the injury, in employment under the arrangement.

c. It is requested that DRS review the matter in accordance with the correct provision under the Act.

8. In its reply to ADP’s application, the Insurer provides a background to the dispute, a summary of the evidence and relevant legislation and makes the following submissions:

a. ADP was a self-employed person at the time of the motor accident for the purposes of the Act. The average gross earnings over 12 months formula is therefore applicable.

b. As outlined above, ADP has alleged his business has generated income of $10,800.00 between 11 February 2018 to 30 June 2018 as confirmed by his representative.

c. Clause 4(2)(c) referred to by ADP’s representative refers to an earner whom has entered into an arrangement with an employer or other person to undertake employment or to commence business as a self-employed person.

d. However, as confirmed by ADP’s representative, ADP was generating income as a self-employed earner, months prior to the accident. There are also bank statements from 16 June 2017 to 22 May 2017 demonstrating income has been received. Whilst these dates are not in the relevant period, they indicate ADP was receiving income.

e. It is therefore submitted that clause 2 is not applicable given ADP was a self-employed person when the motor accident occurred. The business agreement with the A  Company was already in operation and he had provided services for 5 months as a selfemployed individual.

f. It is submitted that ADP has not provided the Insurer with the business agreement he has relied upon. His assertion that he would earn $70,000.00 is irrelevant given ADP was a self-employed earner at the time of the accident and his PAWE would be based on the average earnings from his total earnings over the 12 months prior to the accident.

g. It is also submitted that ADP has failed to submit his business expenses which are to be deducted from his gross profits (prior to taxation) when determining his PAWE. The relevant profit and loss statement should therefore be provided by ADP.

h. The Insurer provides a list of further documents that ADP has failed to provide.

i. It is therefore submitted that ADP was self-employed at the time of the motor accident and his PAWE is $207.69.

j. Clause 4, Schedule 1 of the Act is construed such that earnings from self-employment do not attract the exceptions listed in subclause 2 and 3, as relied upon by ADP.

9. On 11 February 2019, ADP’s representatives provided further information in response to a request from the Authority. The information included a Profit and Loss statement for the year ended 30 June 2018, Individual Tax Return for 2018, bank statements and invoices issued to the A  Company.

10. On 15 February 2019, the Insurer made the following further submissions in response to the information provided by ADP:

  1. The Individual Tax Return and Profit and Loss statement for year ended 30 June 2018 confirms the following:
    1. ADP received a gross income of $38,800.00
    2. Total expenses amounted to $11,913.58
    3. Net profit from ordinary activities before income tax therefore equals $26,886.42
  2. The Insurer’s position regarding the nature of ADP’s employment remains unchanged.
  3. It is therefore submitted that ADP’s PAWE would equal $517.05 ($26,886.42 divided by 52 weeks) based on the new information provided on 11 February 2019.
  4. The Insurer maintains the position that ADP has failed to prove the assertion that he would have earned $70,000.00 a year but for the motor accident. ADP has not provided the Insurer with the business agreement he has relied upon.
  5. The amount of $70,000.00 alleged seems highly dubious on the basis that he has only generated $10,800.00 of the alleged $70,000.00 per annum following 5 months of work (prior to the motor accident).
  6. The Insurer submits that a dispute no longer exists should the ADP accept his revised PAWE of $517.05.
  7. On 21 February 2019, ADP’s legal representatives made the following submissions:
  8. ADP’s income from work unrelated to The A Company and prior to the accident was $26,886.42.
  9. In the months prior to the accident ADP performed work for the A Company to the value of $10,800 (February 2018 - 30 June 2018 averaging $540 per week).
  10. The A Company has advised that had ADP continued to perform work for the A  Company then he would have obtained further contract work from the A Company of up to the value of about $15,000.00 for the period of 1 July 2018 - 19 December 2018 (averaging $681 per week from this client alone).
  11. ADP is prepared to accept $850.00 per week, this being a more realistic reflection of the income he was likely to earn if he had not been injured.
  12. On 21 February 2019, the Insurer made the following submissions:
  13. The Insurer does not accept that ADP's PAWE is $850.00.
  14. The Insurer submits the revised amount of $517.05 is the best reflection of ADP's PAWE as it is based on financial evidence he has recently provided.
  15. As such, the dispute before the DRS Assessor is therefore whether ADP's calculated PAWE of $517.05 is correct.
  16. The Insurer also submits the maximum costs allowed should not be payable should the Assessor make a finding that the ADP's PAWE is $517.05 or below this amount.

Legislation

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

  • Motor Accident Injuries Act 2017 (NSW) (“the Act”)
  • Motor Accident Guidelines effective from 30 April 2018 (“the Guidelines”)
  • Motor Accident Injuries Regulation 2017 (NSW) (“the Regulation”).

Pre-accident weekly earnings

  1. The fundamental issue in dispute between the parties is the provision of the Act that ADP’s PAWE should be determined under. PAWE is defined under clause 4 of Schedule 1 of the Act.
  2. Subclause (1) of clause 4 provides:

"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.

  1. Subclause (2) of clause 4 provides:

    In the following cases, "pre-accident weekly earnings" , in relation to an earner who is injured as a result of a motor accident, means:

    (c) if the earner is an earner by reason of having entered into an arrangement with an employer or other person to undertake employment or to commence business as a self-employed person--the average weekly gross earnings that the earner could reasonably have been expected to earn, but for the injury, in employment under that arrangement.

  2. As can be seen above, subclause (1) provides the general definition for how PAWE is to be determined. The Insurer determined ADP’s PAWE under subclause (1) by dividing the total of ADP’s earnings in the 12 months before the motor accident by 52 weeks.
  3. Subclause (2) above, provides some exceptions for earners in certain employment/work circumstances, providing different methods for determining PAWE. Of these circumstances, subclause (2)(c) relates to an earner who “is an earner by reason of having entered into an arrangement with an employer or other person to undertake employment or to commence business as a self-employed person”. In this instance, PAWE is to be determined by considering what the “earner could reasonably have been expected to earn, but for the injury, in employment under that arrangement”. ADP submits that his PAWE should be determined under this provision by looking at what he was likely to have earned but for the injury as opposed to the general method under subclause (1).
  4. The Insurer accepts that ADP is an “earner”. Clause (2) of Schedule 1 of the Act defines an “earner” as follows:

(2) A person who is injured as a result of a motor accident is an "earner" if the person is at least 15 years of age and who:

(a)  was employed or self-employed (whether or not full-time):

(i)  at any time during the 8 weeks immediately preceding the motor accident, or

(b) before the motor accident, had entered into an arrangement (whether or not an enforceable contract):

(i)  with an employer or other person to undertake employment, or

(ii) to commence business as a self-employed person, at a particular time and place,

(c)  was, immediately before the motor accident, receiving a weekly payment or other payment in respect of loss of earnings under this Act or the Workers Compensation Act 1987 .

20. Based on the definition above, an injured person can be an “earner” if he/she is employed or self-employed as provided by subclause (a) at the time of the accident, or if subclause (b) or (c) applies to them.

21. The motor accident ADP was injured in occurred on 1 July 2018.

22. To assist in the determination of PAWE, ADP submitted information to the Insurer in the form of bank statements and a letter from a director of The A Company dated 19 December 2018 stating that he had joined The A  Company as a sub-contractor in February 2018 and was paid a total of $10,800.00 from this time until the end of June 2018 for work he completed. This is supported by bank statements showing payments from the A Company commencing from 7 February 2018. More recently, ADP has submitted to the Authority further financial information for the year ending 30 June 2018 showing further earnings in that financial year that he has submitted is for “work unrelated to The A Company”.

23. This information supports, and it is accepted by the parties, that ADP was self-employed at the time of the motor accident and had been in receipt of earnings in the 12 months immediately before the accident. ADP is therefore an “earner” of a type under clause (2)(a) of Schedule 1 of the Act, being a self-employed earner.

24. For the exception at clause 4, subclause (2)(c) of the Act to apply to ADP and for his PAWE to be determined under this subclause as opposed to the general method under subclause (1), as ADP submits it should, subclause (2)(c) provides that ADP needs to be an earner who “is an earner by reason of having entered into an arrangement with an employer or other person to undertake employment or to commence business as a self-employed person”. That is, ADP needs to be an earner of a type under clause 2, subclause (2)(b) which defines this type of “earner” and includes the further addition of “at a particular time and place”.

25. It is clear from the above definitions that ADP is not an earner of a type under clause 2, subclause (2)(b) and the exception at clause 4, subclause (2)(c) of the Act does not apply to him as he was self-employed at the time of the accident, was working and had been in receipt of earnings in the preceding 12 months. He was not an earner of a type who had entered into an arrangement to commence work, or commence any further work under a different arrangement, at a particular time and place.

26. Neither of the other exceptions under clause 4, subclause (2) apply to ADP.

27. Accordingly, ADP’s PAWE is to be determined under clause 4, subclause (1) of the Act.

Calculation of PAWE

28. In order to determine ADP’s PAWE under clause 4, subclause (1) of the Act, (outlined above at paragraph 15) I am required to determine the weekly average of the gross earnings received by ADP as an earner during the 12 months immediately before the day on which the motor accident occurred.

29. In respect to the submissions made by ADP regarding what his earnings could have been or was likely to be had he not been injured and the proposed amount of $850.00 per week which is submitted to be a more realistic reflection of the income he was likely to have earned if he had not been injured, I note that the definition of PAWE under clause 4, subclause (1) of the Act does not have regard to what ADP was likely to earn had he not been injured.

30. The definition of PAWE under clause 4, subclause (1) of the Act requires me to come to the most correct and preferable decision about the amount of ADP’s PAWE based on the information before me about his actual gross earnings in the 12 months before the injury.

31. In relation to self-employed workers, the term ‘gross earnings’ in the definition at clause 4, subclause (1) refers, in my view, to the net profit or the personal proceeds received by the selfemployed earner after deducting business expenses and before taxation.

32. ADP has submitted a Profit and Loss statement for the year ended 30 June 2018 and an Individual Tax Return for that year. Given that the motor accident occurred on 1 July 2018, these financial documents accurately cover the earnings ADP received in the 12 months immediately before the accident (“the assessable period”).

33. The Profit and Loss statement for the year ended 30 June 2018 shows that ADP received a gross income of $38,800.00, incurred total expenses in the amount of $11,913.58 and received $26,886.42 in net profit from ordinary activities before income tax.

34. ADP therefore received a total of $26,886.42 in gross earnings in the assessable period.

35. ADP’s Individual Tax Return for 2018 supports the information contained in the Profit and Loss statement. ADP has also submitted copies of invoices issued in his name to The A Company in the assessable period totalling $10,800.00, as well as a letter from a director of The A Company and bank statements confirming he received these amounts. ADP has submitted that the remaining amount ($16,086.42.00) is from work unrelated to The A Company.

36. The amount of $26,886.42 divided by 52 weeks is $517.05.

37. I am satisfied that $517.05 is the correct and preferable decision in respect to the weekly average of the gross earnings received by ADP during the 12 months immediately before the day on which the motor accident occurred.

38. I find that ADP’s PAWE is $517.05.

Legal costs

39. The Insurer has made submissions that the maximum costs allowed should not be payable.

40. I note that the Act provides at section 8.10(3) that necessary and reasonable costs are recoverable in respect to disputes in connection with statutory benefits only if it is permitted by the Regulations or DRS. Subsection (4) of 8.10 provides that DRS can permit legal costs if the claimant is under a legal disability or there are exceptional circumstances to justify payment of legal costs.

41. The Regulations currently do not permit costs for disputes related to the amount of PAWE. And, given that ADP is not under a legal disability and I am not satisfied there are exceptional circumstances to justify payment of legal costs on the information before me, I do not consider legal costs are recoverable in this matter.

42. I find that legal costs are not recoverable in accordance with section 8.10(3) of the Act.

Determination

43. The reviewable decision is set aside. The amount of ADP’s Pre-Accident Weekly Earnings is $517.05. This is the decision in substitution of the reviewable decision.

44. The reviewable decision referred for merit review by ADP is about the amount of PAWE determined in the Insurer’s decision dated 21 November 2018. It is the function of the DRS on merit review to arrive at the correct and preferable outcome in respect of the weeks covered by the reviewable decision that is referred for review. Accordingly, this determination has effect from 21 November 2018. The Insurer is to determine ADP’s entitlement to weekly payments of statutory benefits in accordance with the decision above from 21 November 2018.

Tajan Baba

Merit Reviewer, Dispute Resolution Service