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AFY v NRMA [2019] NSWDRS MR 153

NSW DISPUTE RESOLUTION SERVICE (NSWDRS)
JurisdictionMerit Review
CatchwordsPAWE – pre-accident weekly earnings – individual tax return – courier driver – sole trader – forensic accountant report – pre-accident period – earning continuously – exceptional circumstances – reasonable and necessary legal costs
Legislation citedMotor Accidents Injury Act (NSW) ss 7.13(4), 8.10, 8.10(3), 8.10(4), div 3.3, div 7.4, Schedule 1 clause 4(1),(2A),(2)(a) & (2)(a1), Schedule 2 clause 1(a)
Motor Accident Injuries Regulation 2017 Schedule 1 Part 1 Clause 1, Schedule 3
Motor Accident Guidelines effective 13 July 2018 cl 7.190
Cases cited

Yacoub v Pilkington (Australia) Ltd [2007] NSWCA 290

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

Merit Review Certificate

Merit Reviewer's Reasons for Determination

Background

1.  The Claimant was injured in a motor accident on 17 March 2019 (the subject accident).

2.  At the time of the subject accident the Claimant was a courier driver, working as a sole trader.  He was providing courier driving services to a company named ‘XXX’ and he indicated, in his Application for Personal Injury Benefits, that he was earning $1,700 per week. The Claimant did not issue tax invoices to XXX for the work he performed but rather, XXX issued the Claimant with ‘Recipient Created Tax Invoices’, reflecting the  amounts paid to the Claimant by XXX for the work he had performed.

3.  Between early July 2018 and mid September 2018, the Claimant was overseas and was not working. He was therefore not earning income for the full 12 month period immediately prior to the subject accident. His earnings from mid September 2018 up until the date of the subject accident (a period of approximately 6 months) were from the courier services he had provided to XXX.

4.  The Claimant lodged an Application for Personal Injury Benefits and on 4 June 2019, the Insurer advised the Claimant that he was entitled to weekly payments of statutory benefits, which would be calculated on the basis that his pre-accident weekly earnings (PAWE) was equal to $724.06. That decision covered the weekly payments of statutory benefits payable by the Insurer to the Claimant from the date of the subject accident.

5.  The Claimant applied for an internal review by the insurer. On 23 July 2019, the insurer gave the Claimant written notice that its original decision was affirmed and maintained the PAWE rate of $724.06.

6.  The Claimant disputes the insurer’s decision and lodged an Application for merit review with the Dispute Resolution Service on 19 August 2019. The application was made within 28 days of the Claimant receiving the insurer’s internal review decision in accordance with clause 7.190 of the Motor Accident Guidelines (the Guidelines).

Documents and Information

7.  I have considered the documents provided in the application and the reply and the further information provided by the Claimant, namely bank statements for the period 26 October 2018 to 3 April 2019.

8.  At my request, on 17 September 2019 I was supplied with additional submissions from the parties on the issue of costs and I have considered those submissions. I thank the parties for providing their submissions on costs at short notice.

9.  The Claimant notes that the insurer’s calculation was based upon a forensic accountant report prepared by Mr Matthew Gwynne of PKF accountants dated 23 May 2019, and says that Mr Gwynne did not reveal how he arrived at the figure of $724.06.

10.  Further, the Claimant says that as he was overseas between early July 2018 and mid September 2018, Clause 4(1) of Schedule 1 does not apply because he did not earn an income for the 12 month period immediately prior to the subject accident.

11.  The Claimant submits that either subclause 2(a) or 2(a1) of Clause 4 in Schedule 1 may be used to calculate the Claimant’s PAWE, and that regard should be had to his relevant bank statements or alternatively, to his individual tax return lodged for the 2018 financial year. He says that the test in Clause 4(2)(a1) requires that there be a determination of the average weekly gross earnings received by the earner during the first year of the “pre-accident period”, which the Claimant says would be 18 March 2017 to 18 March 2018.

12.  In the Claimant’s 2018 tax return, the Claimant declared a taxable income of $54,884, which the Claimant submits would result in a considerably higher PAWE than that calculated by the insurer.

13.  The insurer agrees that because the Claimant was overseas during the 12 month period immediately prior to the subject accident, Clause 4(2)(a1) of Schedule 1 can apply. The insurer says that the first year of the pre-accident period is 18 March 2018 to 18 March 2019 and relies upon the calculations made by its forensic accountant, Mr Gwynne, which were based  on an assessment of the Claimant’s earnings between March 2018 and March 2019 (and included an estimation of the Claimant’s likely expenses, based on the Claimant’s reported expenses during the 2018 financial year).

14.  The insurer submits that when formulating his calculations, Mr Gwynne had regard to the fact the Claimant was away between early July 2018 and mid September 2018, and that he took into account the fact that a hire purchase agreement ended in November 2018. As such, the insurer maintains that Mr Gwynn’s calculations are reliable.

Legislation

15.  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 15 January 2019 (“the Guidelines”)

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

Reasons

Pre Accident Weekly Earnings

16.   The Claimant falls within the definition of an “earner” in accordance with Clause 2(a)(i) of Schedule 1 of the Act.

17.   Clause 4(1) of Schedule 1 defines "Pre-accident weekly earnings" (PAWE), in relation to an earner who is injured as a result of a motor accident, “as 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” (my emphasis).

18.   Clause 4(2) of Schedule 1 confirms that in the following cases, "pre-accident weekly earnings", in relation to an earner who is injured as a result of a motor accident, means:

(a) if, on the day of the motor accident, the earner was earning  continuously, but had  not  been earning continuously for at least 12 months--the weekly average of the gross earnings received by the earner as an earner during the period from when the earner started to earn continuously to immediately before the day of the motor accident,

(a1) if the earner was employed or self-employed during a period or periods equal to at least 26 weeks during the first year of the pre-accident period, but was not obtaining earnings from any source at any other time during the pre-accident period--the average weekly gross earnings received by the earner as an earner during the first year of the pre-accident period.

19.   I note that Clause 4(2A) of Schedule 1 defines the "pre-accident period", in relation to a motor accident, as the period of 2 years immediately preceding the motor accident.

20.   Given Clause 4(2A) of Schedule 1 defines the “pre accident period” as the period of 2 years immediately preceding the motor accident, and noting the subject accident occurred on 17 March 2019, the first year of the “pre-accident period” is 17 March 2017 to 17 March 2018. I find that the insurer has proceeded on an incorrect assumption that the first year of the “pre- accident period” is March 2018 to March 2019, which is in fact the second year of the pre- accident period. Therefore, Mr Gwynne’s calculations, which relate to the second year of the pre-accident period and not the first year of the pre-accident period, cannot be relied upon for the purposes of assessing the Claimant’s PAWE.

21.   A question remains, however, as to whether the Claimant’s PAWE should be determined in accordance with Clause 4(2)(a) or Clause 4(2)(a1) of Schedule 1. The Claimant says that either Clause 4(2)(a) or Clause 4(2)(a1) could apply. The insurer says that Clause 4(2)(a1) applies, but is silent on whether Clause 4(2)(a) could apply.

Does Clause 4(2)(a) apply?

22.   On my reading, Clause 4(2)(a) provides for the situation where a claimant, as at the date of their motor accident, has been earning a “continuous” income but for a period of less than 12 months.

23.   I note Clause 4(4) states: “For the purposes of this clause, an earner earns continuously if he or she obtains earnings from permanent employment or from a source that, on the day of the motor accident, was likely to continue for a period of at least 6 months to provide earnings to the earner on the same, or a similar, basis to the basis on which the earnings were being provided as at that day” (my emphasis).

24.   The bank accounts provided show deposits made into the Claimant’s bank account by XXX (for whom the Claimant was providing courier driving services) from 5 November 2018 to 21 March 2019. The payments are made on a fortnightly basis, and so it appears that the first deposit on 5 November 2018 represents payment for work performed by the Claimant from around mid October 2018.

25.   The ‘recipient created tax invoices’ annexed to the Claimant’s Application evidence work performed by the Claimant for XXX between March 2018 and 30 June 2018, and  then between 10 September 2018 to March 2019 (a period of just over 6 months).

26.   While it is clear that the Claimant was earning income from the work he performed for XXX at the time of the subject accident and that he had done so for over 6 months, I have not been provided with any information that would assist me to determine whether the Claimant’s earnings from such work were likely to continue for a period of at least 6 months post accident, or at a level similar to the level derived as at the date of the subject accident. If the Claimant is able to provide such information, then I consider Clause 4(2)(a) of Schedule 1 applies.

Does Clause 4(2)(a1) apply?

27.   I do not accept that Clause 4(2)(a1) is the correct basis for determining the Claimant’s PAWE.  As  I have noted above, the term “pre-accident period” is defined as the period of 2 years immediately preceding the motor accident. In my view, Clause 4(2)(a1) provides for the situation where a claimant was earning an income for at least 26 weeks during the first 12 months of the pre-accident period, but not thereafter (and therefore not at the time of their accident). This is confirmed by the inclusion of the words “but was not obtaining earnings from any source at any other time during the pre-accident period”.

28.   The Claimant was earning an income at the time of the subject accident, and he appears to have been earning an income for at least 26 weeks during the first year of the pre-accident period, given his 2018 tax return related to earnings derived between 1 July 2017 and 30 June 2018. Given my interpretation of Clause 4(2)(a1), I do not consider Clause 4(2)(a1) is the proper basis for determining the Claimant’s PAWE.

Findings

29.   In my view, the correct approach to calculating the Claimant’s PAWE is in accordance with Clause 4(2)(a) of Schedule 1, subject to the Claimant providing evidence that his earnings from XXX were likely to continue and at a similar level for a period of at least 6 months post accident.

30.   Although the insurer maintains its original PAWE decision of $724.06 per week, this was based upon an assessment of the Claimant’s estimated earnings between 18 March 2018 and 18 March 2019 (which I consider to be incorrect for the reasons outlined above), on the basis Clause 4(2)(a1) is the correct method of calculating PAWE (which is also, in my view, incorrect).

31.   However, further information is required before the insurer can be satisfied that the Claimant was likely to continue earning income from XXX at a similar level to that which he derived in the 6 months immediately prior to the subject accident. Such information would support an assessment of the Claimant’s PAWE in accordance with Clause 4(2)(a) of Schedule 1.

32.   Further, an assessment of the Claimant’s PAWE in accordance with Clause 4(2)(a) will require an assessment of the Claimant’s actual earnings between 10 September 2018 and 17 March 2019, less all expenses incurred. Details of the Claimant’s expenses incurred between 10 September 2018 and 17 March 2019 is required in order for this to occur, as an “estimate” based on the expenses disclosed during the 2018 financial year could be inaccurate (noting, for example, that the Claimant’s hire purchase agreement ceased in November 2018).

33.   I am aware that obtaining the above information may take some time, particularly if the Claimant is to obtain information from XXX and the insurer decides to obtain a further report from the forensic accountant after receiving such information, in order to determine the PAWE based on the Claimant’s earnings and expenses incurred between September 2018 and March 2019.

34.   The objects of the Dispute Resolution Service include the provision of a timely, independent, fair and cost-effective system for the resolution of disputes.

35.   In the circumstances, the most expeditious and fair outcome in my view is to allow the Claimant to obtain the additional information and for the insurer to reconsider its decision in relation to the calculation of the Claimant’s PAWE upon receipt of that information.

Legal Costs

36.  I note I may determine whether the Claimant is entitled to his legal costs associated with his claim for Statutory Benefits in accordance with Section 8.10 of the Act. Section 8.10 of the Act states:

(1)   A claimant for statutory benefits is (subject to this section) entitled to recover from the insurer against whom the claim is made the reasonable and necessary legal costs, and other costs and expenses, incurred by the claimant in connection with the claim. Other costs and expenses include the cost of medical and other tests and reports.

(2)   The regulations may make provision for or with respect to fixing the maximum costs and expenses recoverable by a claimant under this section (including any matters for which no costs and expenses are recoverable from the insurer).

(3)   A claimant for statutory benefits is only entitled to recover from the insurer against whom the claim is made reasonable and necessary legal costs incurred by the claimant if payment of those costs is permitted by the regulations or the Dispute Resolution Service.

(4)   The Dispute Resolution Service can permit payment of legal costs incurred by a claimant but only if satisfied that:

(a)  the claimant is under a legal disability, or

(b)   exceptional circumstances exist that justify payment of legal costs incurred by the claimant.

(5)   An insurer is not entitled to recover from a claimant for statutory benefits any legal costs, or other costs and expenses, of the insurer in relation to the claim.

(my emphasis)

37.  Schedule 1, Part 1, Clause 1 of the Regulations provides that the maximum costs for legal services provided to a claimant or an insurer in connection with a merit review under Division 7.4 of the Act involving a dispute about a regulated merit review matter are 16 monetary units.

38.  In accordance with Schedule 3 of the Regulations, the current monetary unit amount is $102.06.

39.  On 17 September 2019, I received submissions from both parties addressing me on the  issue of costs. The insurer submits that this particular dispute is not a “regulated merit review matter” and that, in accordance with Section 8.10(4) of the Act, I am only able to permit payment of legal costs incurred by the Claimant if I am satisfied that “exceptional circumstances” exist that justify payment of legal costs incurred by the Claimant. The insurer says that no such “exceptional circumstances” exist and has drawn my attention to the Court of Appeal’s decision in Yacoub v Pilkington (Australia) Ltd [2007] NSWCA 290, where it was noted that “exceptional circumstances” need not be unique, or unprecedented, or very rare, but simply that the circumstances are not routine or are unusual.

40.  The Claimant submits that the Act and the Regulations permit the payment of reasonable and necessary legal costs in connection with a merit review matter and says that the Claimant does not bear the onus of establishing that exceptional circumstances exist to allow costs. This is because, in the Claimant’s submission, the Regulations permit the recovery of reasonable and necessary costs of a merit review matter under Schedule 1, Part 1, Clause 1. Further, in providing a maximum amount recoverable, this specifically permits the payment of reasonable and necessary costs incurred in connection with a merit review matter.

41.  In addition, the Claimant says that costs ought to be allowed in circumstances where he came to be injured as a result of the negligence of the insurer’s driver. I do not accept that submission; the Act does not permit me to allow the Claimant’s costs of this merit review on that basis.

42.  Sections 8.10(3) and 8.10(4) of the Act, when read together, confirm that a Claimant is entitled to payment of costs if permitted by the Regulations or by the Dispute Resolutions Service, however, if payment of costs is not permitted by the Regulations, the Dispute Resolution Service can only allow costs if exceptional circumstances exist.

43.  I agree with the insurer that the Regulations permit maximum costs in relation to “regulated merit review matters” and that this dispute does not fall within the category of “regulated merit review matters” listed at Part 1, Clause 1(2) of Schedule 1 of the Regulations.

44.   As such, I need to consider whether “exceptional circumstances” exist to justify payment of legal costs to the Claimant. Having regard to the circumstances of this case, and noting that “exceptional circumstances” need not be unique, or unprecedented, or very rare, but simply that the circumstances are not routine or are unusual, I consider that exceptional circumstances do exist in this matter, which justify payment of legal costs to the Claimant. This is because of the following:

a.  The fact the Claimant’s pre accident weekly earnings are not easily ascertainable based on the routine taxation records normally supplied, and thus required the insurer to obtain a report from a forensic accountant;

b.   The complexities in determining the Claimant’s pre accident weekly earnings in accordance with the relevant provisions, such that the Claimant would not likely have been able to navigate such provisions without legal advice;

c.  The fact that I have determined further information is required in order that a proper assessment of the Claimant’s pre-accident weekly earnings can take place.

45.   Given the unusual circumstances and complexities I have outlined above, I consider it appropriate to allow the maximum costs that would otherwise be permitted if this was a regulated merit review matter, in the sum of 16 monetary units, plus GST (which is $1,796.25 inclusive of GST).

Determination

My determination of the Merit Review is as follows:

  • The reviewable decision is set aside and the decision is remitted to the Insurer for reconsideration in accordance with these directions:
o   The Claimant is to provide the insurer with information to evidence that his earnings from XXX were likely to continue for a period of at least 6 months on the same, or a similar, basis to the basis on which the earnings were being provided as at the day of the subject accident.

o   The Claimant is to provide to the insurer a copy of his individual tax return for the financial year ending 30 June 2019, if it is available.

o   The Claimant is to provide the insurer with a copy of all relevant documents in support of the work-related expenses incurred by the Claimant between September 2018 and 17 March 2019.

  • Effective Date: Until the Insurer reconsiders its pre-accident weekly earnings decision, the Insurer is to continue to pay the Claimant weekly payments of $724.06 during the relevant period of entitlement. Upon making its reconsideration decision, the Insurer is to pay the Claimant the difference between what they have been paid and what they were entitled to be paid (if there is a shortfall), taking effect from 4 June 2019, being the date of the Insurer’s original decision in relation to the Claimant’s pre- accident weekly earnings.
  • Legal Costs: The amount of the Claimant’s costs assessed in accordance with the Motor Accident Injuries Regulation 2017 is $1,796.25 inclusive of GST.

Chandrika Darroch
Merit Reviewer, Dispute Resolution Service