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ADS v NRMA Insurance Ltd [2019] NSWDRS MR 096

Overview

Jurisdiction:  Merit Review

Catchwords:  PAWE – weekly payments of statutory benefits – pre-accident weekly earnings – sole proprietor – income tax return – business activity statements – forensic accountant – interim payment – gross earnings

Legislation cited:  Motor Accident Injuries Act 2017 (NSW) ss 3.6, 7.13, chedule 2

  • Motor Accident Injuries Regulation 2017
  • Motor Accident Guidelines effective 13 July 2018 cl 4.45, 7.190

Cases cited:  N/A

Text cited:  N/A

  • Parties  ADS – Claimant
  • NRMA Insurance– 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 ADS
InsurerNRMA Insurance
Claim numberNWRND1800192
Date of accident26 October 2018
Date of decision3 December 2018
Nature of decisionThe amount of pre-accident weekly earnings
Our Reference10074862
Merit ReviewerJeremy Lum
Date of this certificate11 February 2019

Determination

The reviewable decision is the decision of the Insurer about ADS’s pre-accident weekly earnings

(PAWE). This is a decision that affects the amount of weekly payments of statutory benefits and is therefore a merit review matter under Schedule 2(1)(a) of the Motor Accident Injuries Act 2017.

  • The reviewable decision is set aside and the following decision is made in substitution:
    • From 25 October 2018 to 25 January 2019, ADS is entitled to weekly payments of statutory benefits in the amount of $504.88 per week (interim amount). ADS is open to nominate a lower amount.
  • The reviewable decision is set aside and remitted to the Insurer for reconsideration in accordance with the following directions:
    • The Insurer is to re-calculate ADS’s PAWE within 28 days after receipt of the following:
      • 2018 financial accounts of ADS Jewellery Pty Ltd
      • 2018 income tax return of ADS Jewellery Pty Ltd
      • 2018 personal income tax return of ADS
  • Following the re-calculation of ADS’s PAWE, the Insurer is to pay ADS any amounts owed to him. This is to apply from 26 January 2019.

A brief statement is attached setting out my reasons for the determination.

Jeremy Lunn

Merit Review

Dispute Resolution Services

Reasons

Background

  1. ADS was injured in a motor accident on 26 October 2018.
  2. On 3 December 2018, the Insurer made a decision on ADS’s PAWE. This decision relied on the opinion of forensic accountant Mr Mark Bland who conducted an analysis of ADS’s Business Activity Statements for the period 1 October 2017 to 30 September 2018 and determined his PAWE as $14,053 per year or $270.25 per week.
  3. ADS sought a review of this decision.
  4. On 20 December 2018, the Insurer conducted an internal review which affirmed its original decision that ADS’s PAWE was $270.25 per week.
  5. ADS disputes the Insurer’s decision and lodged an application for merit review with the Dispute Resolution Service on 16 January 2019. I am satisfied the application was made within 28 days of ADS receiving the Insurer’s internal review decision in accordance with clause 7.190 of the Motor Accident Guidelines.

Documents and information

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

    Submissions

  2. ADS’s submissions may be summarised as follows:
    • The forensic accountant, Mr Bland, adopted an incorrect approach when he calculated PAWE based on nett profit and has deducted such payments as motor vehicle expenses, interest, superannuation and salaries.
    • The correct approach is set out in the statement of profit and loss of ADS Jewellery Pty Ltd from 1 October 2017 to 30 September 2018. This document states the gross profit of

    the business as $127,637.03. 95% of this results in a calculation of $2,318.82 per week net and this should be the amount paid to Mr Bland.

  3. The Insurer’s submissions may be summarised as follows:
    • The determination of PAWE requires an assessment of Mr Bland’s “gross earnings” or “net business income”.
    • “Gross earnings” or “net business income” refers to the “net profit” earned by a self- employed claimant after accounting for business expenses but before tax.
    • ADS relies on a gross profit figure of $127,637.03 which comprises total income minus the cost of sales. However, this is not an accurate figure as the cost of operating expenses have not been deducted.
    • The Insurer refers to the statement of profit and loss for the period from 1 October 2017 to 30 September 2018 which shows ADS’s net profit to be $15,112. This figure was derived after both the cost of sales and operating expenses were deducted.
    • The Insurer submits the figures of $15,112 per annum or $290.62 per week are figures comparable to those assessed by Mr Bland.

    Legislation

  4. 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 2016 (NSW) (the Regulation)

    Pre-accident weekly earnings

  5. Clause 4(1) of Schedule 1 of the Act applies to ADS and defines pre-accident weekly earnings 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.

  6. ADS is a self-employed Jeweller and is the sole proprietor of the business, ADS Jewellery.
  7. There is no issue that ADS was an earner at the time of the motor accident.
  8. The Profit & Loss Statement shows figures of total income ($277,872), total cost of sales ($176,362), gross profit ($101,511) and net profit ($15,112) for the period 1 October 2017 to 30 September 2018.
  9. The Business Activity Statements (BAS) indicates total sales ($330,402), total expenses ($316,349) and net profit ($14,053) for the period 1 October 2017 to 30 September 2018.
  10. The Insurer’s position is that gross earnings refers to net profit earned by a self-employed claimant after accounting for business expenses but before tax. ADS’s position is that gross earnings of the business is the amount that should be used in the calculation of his PAWE.
  11. “Gross earnings” is not defined in the Act. However, it clear in the definition of PAWE that the term refers to the gross earnings received by an earner as an earner. The issue for determination is therefore the amount of gross earnings received by ADS in self-employment in the 12 months before the motor accident, expressed as a weekly average.
  12. In my view, there is insufficient information to make that determination. The information contained in the Profit & Loss Statement and the various BAS relate only to the financial affairs of ADS Jewellery and not to the gross earnings ADS received as an earner. For instance, I do not know whether ADS paid himself a salary, how often he drew from the business revenue/profits or whether he retained any profits for business growth.
  13. It is likely this information will be revealed in the 2018 financial accounts and 2018 income tax return of ADS Jewellery Pty Ltd and ADS’s 2018 personal income tax return. It is not possible for me to obtain this information as ADS has indicated he is not required to lodge taxation returns until March 2019.
  14. It is therefore my view that while ADS is entitled to statutory benefits, further information is required to determine his PAWE and the amount of weekly payments.
  15. I find that ADS is entitled to interim payments as follows:

3.6            Weekly payments during first entitlement period (first 13 weeks after motor accident)

(5) If a weekly payment of statutory  benefits is payable  under this section,  but further information is required to determine the amount of the payment, interim payments are to be made in accordance with the Motor Accident Guidelines until the correct amount of the payment can be determined and paid.

  1. Clause 4.45 of the Guidelines states that “the interim payment amount is 12.5% of the maximum weekly statutory benefits amount under the Act. The claimant can nominate a lower amount”.
  2. The statutory maximum for weekly benefits is $4,039 (as at 1 October 2018).  12.5% of $4,039 is

$504.88.

  1. I therefore find that ADS is entitled to $504.88 per week from 25 October 2018 to 25 January 2019 (first 13 weeks). ADS is open to nominate a lower amount.
  2. After 13 weeks, the interim rate ceases to apply and ADS should forward to the Insurer the necessary information (see below) to re-calculate his PAWE.

Determination

My determination of the Merit Review is as follows:

  • The reviewable decision is set aside and the following decision is made in substitution:
    • From 25 October 2018 to 25 January 2019, ADS is entitled to weekly payments of statutory benefits in the amount of $504.88 per week (interim amount). ADS is open to nominate a lower amount.
  • The reviewable decision is set aside and remitted to the Insurer for reconsideration in accordance with the following directions:
    • The Insurer is to re-calculate ADS’s PAWE within 28 days after receipt of the following:
      • 2018 financial accounts of ADS Jewellery Pty Ltd
      • 2018 income tax return of ADS Jewellery Pty Ltd
      • 2018 personal income tax return of ADS
  • Following the re-calculation of ADS’s PAWE, the Insurer is to pay ADS any amounts owed to him. This is to apply from 26 January 2019.

Jeremy Lum

Merit Reviewer

Dispute Resolution Service