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Wannous v QBE Insurance (Australia) Limited [2023] NSWPICMR 11 (28 February 2023)

Last Updated: 8 March 2023

CERTIFICATE OF DETERMINATION OF MERIT REVIEWER


CITATION:
Wannous v QBE Insurance (Australia) Limited [2023] NSWPICMR 11




CLAIMANT:
Jalal Wannous




INSURER:
QBE Insurance (Australia) Limited




MERIT REVIEWER:
Katherine Ruschen




DATE OF DECISION:
28 February 2023




CATCHWORDS:
MOTOR ACCIDENTS - Motor Accident Injuries Act 2017; merit review; dispute about payment of weekly benefits under Division 3.3; meaning of pre-accident weekly earnings; PAWE; schedule 1, clause 4; whether change in earning circumstances, when change occurred; cl 4(3); cl 4(2)(b); when earner began earning continuously; cl 4(2)(a); sole trader; business expenses; GST; earnings received as an earner; COVID-19 lockdown; Held the reviewable decision is set aside.




DETERMINATIONS MADE:
CERTIFICATE OF DETERMINATION

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

The reviewable decision is about the amount of weekly payments of statutory benefits that are payable under Division 3.3 of the Motor Accident Injuries Act 2017 (the MAI Act), and is therefore a merit review matter under Schedule 2(1)(a) of the MAI Act.
  1. The reviewable decision is:
    (a) set aside, and

    (b) the claimant’s pre-accident weekly earnings are $935.30

STATEMENT OF REASONS

INTRODUCTION

  1. There is a dispute between Jalal Wannous (the claimant) and the insurer about the amount of weekly payments of statutory benefits payable under Division 3.3 of the MAI Act.
  2. The claimant was involved in a motor accident on 29 June 2022.
  3. The claimant made an application for personal injury benefits under the Motor Accident Injuries Act 2017 (the MAI Act).
  4. On 20 October 2022 the insurer determined the claimant’s (PAWE) in the sum of $554 for the purpose of calculating whether the claimant is entitled to weekly payment of statutory benefits under ss 3.6 and 3.7 of the MAI Act.
  5. The claimant requested an internal review of the insurer’s PAWE decision of

    20 October 2022.
  6. On 2 November 2022 the insurer issued their internal review decision in which the insurer affirmed their earlier determination that the claimant’s PAWE is $554.
  7. The claimant has requested a merit review of the internal review decision dated

    2 November 2022.

SUBMISSIONS

  1. The claimant works in the building industry on a self-employed basis as a site supervisor.
  2. The claimant did not earn in the period 1 July 2021 to 1 December 2021 said to be because of COVID-19 lockdowns. The claimant submits his PAWE falls under Schedule 1, cl 4(2)(a) on the basis that because of the break in earnings from July to December 2021 he was not earning continuously in the 12 month period before the accident. In the alternative, the claimant submits in the alternative that his PAWE falls under cls 4(3) and 4(2)(b) of the MAI Act on the basis that recommencement of employment in December 2021 amounts to a change in his earning circumstances because of action taken by the claimant, which resulted in him earning, or being entitled to earn, more than he had before the change occurred.
  3. The claimant submits, however, that because he only earned briefly when returning to work in December 2021, he did not begin to earn continuously for the purpose of

    cl 4(2)(a) until January 2022. In the alternative, the claimant submits that because he only earned briefly when returning to work in December 2021 the change did not occur until January 2022 for the purpose of cl 4(3) and in turn, cl 4(2)(b).
  4. The insurer assessed PAWE in their internal review decision under Schedule 1, cl 4(1) of the MAI Act by calculating the weekly average of the gross earnings received by the claimant in the 52 week period before the day of the accident. For the purpose of this merit review, however, the insurer accepts the claimant’s PAWE likely falls under

    cl 4(2)(a) and submits the relevant date from when the claimant began to earn continuously is 2 December 2021.

REASONS

Issues

  1. There is an issue as to whether the claimant’s PAWE falls under Schedule 2, cl 4(2)(a) or 4(2)(b) of the MAI Act and if so, whether the pre-accident period commences from

    2 December 2021 or from 1 January 2022.

Is cl 4(3) triggered?

  1. Clause 4(3) provides that cl 4(2)(b) applies:

“if, during the 12 months immediately before the day of the motor accident, there was, as a result of any action taken by the earner, a significant change in his or her earnings circumstances that resulted in the earner regularly earning, or becoming entitled to earn, more on a weekly basis than he or she was earning before the change occurred.” (emphasis added)

  1. If cl 4(3) is triggered, then under cl 4(2)(b) PAWE is:

“the weekly average of the gross earnings the earner received as an earner, or could reasonably have been expected to receive, during the 12 months after the change of circumstance referred to in the subclause occurred.”

  1. The claimant contends the reason he did not earn from 1 July 2021 to 1 December 2021 was because of COVID-19 lockdowns.
  2. The claimant contends that returning to work on 2 December 2021 is an action taken by him resulting in change in earning circumstances for the purpose of cl 4(3).
  3. For the reasons set out in the decision of Mackery v Allianz Australia Insurance Limited [2022] NSWPICMR 35 (Mackery) I do not accept that returning to work after COVID-19 lockdowns is an “action taken by” the claimant that resulted in him regularly earning, or becoming entitled to earn more than he was earning before the return to work. Whilst the facts may be different, I consider the reasons in Mackery equally applicable to the claimant’s circumstances.
  4. The claimant was earning regularly prior to 1 July 2021. He did not earn during the period 1 July 2021 to 1 December 2021 by reason of action of the government in response to the COVID-19 pandemic. The claimant was able to return to work on

    2 December 2021 by reason of the same government action and not because he decided to recommence work. In other words, the claimant was put off work by action of the government and/or because of the COVID-19 pandemic and was then able to return to work because of action of the government in relation to the pandemic, including lifting of government restrictions.
  5. Examples of a change of circumstances for the purpose of cl 4(3) “include a change of job, a promotion, a move from part-time to full-time employment, or a pay increase arising from the achievement of performance standards”. Whilst this list is not stated to be exhaustive it provides useful context when considering whether the change in earning circumstances is the result of action taken by the earner. All of these examples arise from positive action of an earner such has a decision to change jobs, accepting a promotion or deciding to move from part-time to full-time work. They are decisions that are in the control of the earner and are the proximate cause of the change in earning circumstances.
  6. The claimant, on the other hand, was not in control of his earning circumstances when lockdowns were imposed and subsequently lifted. To the extent the recommencement of work on 2 December 2021 might be considered a change in earning circumstances it is not a change brought about by action of the claimant. It was brought about by action of the government in lifting COVID-19 restrictions.
  7. The claimant submits that regardless of action of the government impacting his earning circumstances he had to “choose” or “elect” to return to work once restrictions were lifted and was not “forced” or “compelled” to do so. However, it is implausible to suggest that a person such as the claimant who was running their own business and then unable to generate income for a temporary period by reason of government action, would have made a different decision that is, not to return to work once restrictions were lifted. Like many others, the claimant was no doubt “waiting it out” so he could return to work once restrictions were lifted.
  8. The change that occurred on 2 December 2021 is intrinsically connected with government action that occurred on or before 1 July 2022 (adopting the claimant’s timeline that he was forced off work by reason of COVID-19 restrictions on or before

    1 July 2021). In this sense, the return to work cannot be considered an autonomous action taken by the claimant even if he had considered not returning but then decided to do so. Even if the claimant engaged in a decision making exercise as to whether to return to work such “action” cannot be said to be the proximate cause for the claimant beginning to earn again from 2 December 2022. The wording of cl 4(3) is such that one must identify the proximate cause for the claimant beginning to earn again on

    2 December 2022. In the circumstances of this case the proximate cause of any change in earning circumstances on or after 2 December 2021 is clearly the action of the government lifting restrictions, which allowed the claimant to return to work should he wish to do so.
  9. For these reasons I conclude cl 4(3) is not triggered and therefore cl 4(2)(b) does not apply.
  10. If cl 4(3) were triggered, I am satisfied that the relevant date on which the change occurred for the purpose of cl 4(3) is 2 December 2021. Whilst the claimant received earnings on this date and then did not receive any further earnings until January 2022 the wording of cl 4(3) is that the change results in the claimant earning, “or becoming entitled to earn” more than before the change occurred. Accordingly, it is not necessary for the change to result in an immediate regular receipt of earnings. It is sufficient that the change results in the earner “becoming entitled to earn” more.
  11. If I were to accept that returning to work after COVID-19 lockdowns is an “action taken by the claimant” which amounts to a change in earning circumstances for the purpose of cl 4(3) it follows that the change in circumstances occurred on 2 December 2021. This is because once the claimant took the action of returning to work he became “entitled to earn more” than he was earning before taking this action. It follows that upon recommencing the same work the claimant had been performing prior to 1 July 2021 that the claimant became entitled to earn similar earnings to the earnings he contends he earned prior to the COVID-19 lockdowns that is, $1,800 per week, even if the claimant did not actually receive such earnings each and every week after the change occurred on 2 December 2021.
  12. Clause 4(2)(a) requires PAWE to be calculated from the date of the change under

    cl 4(3) until the day before the motor accident. For the reasons set out above, if I were to accept cl 4(3) is triggered then the period is 2 December 2021 to 28 June 2022. This is a period of 30 weeks.
  13. The financial records provided by the claimant show the claimant’s business earned $43,445 in gross profit in this period. After business expenses of $15,386 the net profit of the business is $28,059. The net profit of the business is, in turn, the claimant’s individual gross earnings as an earner and equates to PAWE in the sum of $935.30 ($28,059 divided by 30 weeks) under cl 4(2)(b).
  14. However, I have concluded cl 4(2)(b) does not apply.

Does cl 4(2)(a) apply?

  1. There is a question as to whether cl 4(2)(a) applies or whether the claimant’s PAWE falls under cl 4(1) in circumstances where none of the other exceptions under cl 4(2) apply.
  2. However, the insurer agrees with the claimant in their submissions that cl 4(2)(a) likely applies. Accordingly, I do not need to determine this issue and will proceed on the basis cl 4(2)(a) applies given the insurer’s concession.

What is the claimant’s PAWE under cl 4(2)(a)?

  1. The claimant submits that because earnings received in December 2021 were limited to $990 he did not begin to earn continuously until January 2022. The claimant says he did not work for the balance of December 2021 because of a combination of Christmas and New Year shutdowns, COVID-19 lockdowns and supplier shutdowns. No evidence has been provided to support a contention that the claimant was forced off work again after 2 December 2021 because of a COVID-19 lockdown imposed after restrictions were lifted in October 2021. It seems more likely that, as is traditional in the building and construction industry regardless of COVID-19 that there were site and supplier shutdowns over the Christmas and New Year period. This occurs in the building and construction industry every year.
  2. The claimant relies on gross sales of the business in the quarters ending

    31 March 2022 and 30 June 2022, inclusive of GST which total $46,800 and says this produces PAWE of $1,800. On this basis it is understood the claimant contends the period under cl 4(2)(a) is 1 January 2022 to 28 June 2022, as gross profit of $46,800 divided by 26 weeks (the number of weeks in this period) equals a weekly average of $1,800.
  3. However, the claimant has included GST. The GST received by the business is not earnings and is remitted to the government pursuant to the quarterly business activity statements. The gross profit of the business, excluding GST is $43,445, as declared in the claimant’s 2022 tax return. The difference between the profit declared in the tax return and the amount in the business activity statements (including the quarter ending 31 December 2021) is clearly the GST component.
  4. A selection of invoices purportedly issued by the claimant to suggest receipt of regular income each week for around the contended $1,800 have been provided. However, the invoices do not reconcile with the business activity statements or the tax returns in relation to the total amount of the invoices. They also do not reconcile with the bank statements in relation to the amounts paid and the dates of payment. Bank statements show inconsistent payment amounts, including much larger sums than shown on any one invoice. This is indicative of payment for multiple weeks’ work in one lump sum rather than a consistent weekly payment. As such, it appears likely the claimant was working in December 2021 and/or January 2022, after 2 December 2021, but was not paid for this work until February 2022, as is often the nature of running a sole trader business.
  5. It is understood the claimant contends he did not return to work after 2 December 2021, until February 2022 even though he concedes in his PAWE calculation that the period (on the claimant’s case) under cl 4(2)(a) commences from 1 January 2022. The claimant’s business received a payment of income in the sum of $6,500 on 1 February 2022. This could only be payment for work carried out in December 2021 and/or January 2022 given the payment date and the amount, which is inconsistent with the claimant’s contentions.
  6. Given the invoices cannot be reconciled with the balance of the financial records I consider the invoices to be unreliable.
  7. Accordingly, the starting point is that the claimant’s business earned $43,445 (being the GST free figure) in gross profit in the financial year ending 30 June 2022 as declared in the tax returns and in the business activity statements, excluding GST.
  8. The claimant has ignored the expenses incurred by the business to generate this profit. Business expenses for the same period total $15,386, which results in a net profit of the business (before tax) of $28,059.
  9. Schedule 1, cl 4(2)(a) requires a determination of the claimant’s gross earnings received as an individual “earner” and not the gross earnings of the business itself. In so far as the claimant earns from the proceeds of the business, the “proceeds” received by the claimant as an “earner” are the net income of the business after accounting for all business expenses incurred to run the business, but before tax. Business expenses are not “proceeds” of the business that make it into the claimant’s hands as his “gross earnings”.
  10. The claimant’s submissions are silent on the question of business expenses and accordingly, it is not clear whether this is in issue or whether the business expenses were inadvertently ignored along with GST when the claimant submitted his PAWE is $1,800 based on gross business profit of $46,800 inclusive of GST.
  11. For the avoidance of doubt, however:
    (a) the approach I have taken in concluding the claimant’s gross earnings from the business are the net profit of the business after deducting business expenses is consistent with the method of calculation in previous merit review decisions including ABQ v NRMA (Merit Review) [2018] NSWSIRADRS 43 (17 October 2018), ACL v CIC Allianz Insurance Limited [2018] NSWDRS MR 064; AJQ v NRMA (Merit Review) [2020] NSWSIRADRS 44 (8 April 2020), APD v AAI Limited trading as GIO (Merit Review) [2020] NSWSIRADRS 198 (24 August 2020), APL v GIO (Merit Review) [2020] NSWSIRADRS 207 (16 September 2020), Mula v NRMA [2022] NSWPICMR 9, Hayes v GIO [2022] NSWPICMR 17, Le v Insurance Australia Ltd t/as NRMA Insurance [2022] NSWPICMR 47 and Shqau v AAMI [2022] NSWPICMR 6 and a number of other recent decisions of the Commission, and

    (b) the reasons set out in the above mentioned decisions should be read as being the reasons for reaching the conclusion in this matter that business expenses must be deducted.

  12. Accordingly, if the period under cl 4(2)(a) is from 2 December 2021 to 28 June 2022 as contended by the insurer then the claimant’s gross earnings received as an earner are $28,059. If the period is from 1 January 2022 to 28 June 2022, as contended by the claimant the claimant’s gross earnings received as an earner are $27,159 being $28,059 less $900 (exclusive of GST) received by the claimant in December 2021.
  13. The question is therefore whether the period under cl 4(2)(a) commences from

    2 December 2021 or from 1 January 2022.
  14. Clause 4(2)(a) provides that:

“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.”

  1. Regard must be had to the definition of earning “continuously” set out in cl 4(4) which provides:

“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.” (emphasis added)

  1. There needs to therefore be an assessment of whether, upon returning to work on

    2 December 2021, the claimant was likely to continue to obtain earnings from his business on the same, or a similar, basis.
  2. As a self-employed earner the claimant’s earnings are likely to fluctuate for a variety of reasons. This might include, among other things, a downturn in work, or because of inclement weather, or because the claimant takes annual or other leave. This is the nature of being self-employed.
  3. As noted, there is no evidence of any applicable COVID-19 lockdown in December 2021. Regardless of whether the claimant had not had a break in earnings from 1 July 2021 to 2 December 2021 it is likely that the claimant’s business would not have been in receipt of income for part of December 2021 and January 2022 by reason of the traditional Christmas shutdown period in the building and construction industry. Once the claimant returned to work on 2 December 2021, he began to obtain earnings from his business on the same, or a similar basis from that date onwards that basis being:
    (a) that by the very nature of self-employment the earnings would likely fluctuate from week to week;

    (b) that no earnings would be obtained during site closures, including during holiday shutdown periods, on public holidays, on standdown days or during site shutdowns for inclement weather or other reasons, and

    (c) that no earnings would be obtained during periods of annual leave, sick leave or other leave taken by the claimant, all of which would be unpaid for the claimant as a sole trader.

  4. Accordingly, I conclude that as from at least 2 December 2021 the claimant began earning continuously for the purpose of cl 4(2)(a) because from this date he began to obtain earnings from a source (his sole trader business) on “the same, or a similar basis” up to the date of the motor accident.
  5. If periods of no income from a sole trader business such as during the traditional building and construction industry shut down period in December/January each year were quarantined from PAWE it would distort the likely true average weekly earnings and likely result in enrichment.
  6. Having concluded that the claimant began to earn continuously from 2 December 2021 for the purpose of cl 4(2)(a) the claimant’s PAWE is $935.30 being gross earnings of $28,059 received by the claimant in the period 2 December 2021 to 28 June 2022 divided by 30 weeks.

CONCLUSION

  1. For the reasons set out above:
    (a) I conclude cl 4(3) is not triggered;

    (b) I have assessed the claimant’s PAWE under cl 4(2)(a);

    (c) the gross earnings received by the claimant as an earner do not include GST received by the business;

    (d) business expenses must be deducted from the gross profit of the business to produce the gross earnings of the claimant;

    (e) the relevant period under cl 4(2)(a) is 2 December 2021 to 28 June 2022, which is 30 weeks;

    (f) the claimant’s gross earnings received in this period total $28,059, and

    (g) the claimant’s PAWE is therefore $935.30 ($28,059 divided by 30 weeks).

  2. Accordingly:
    (a) the reviewable decision is set aside, and

    (b) the claimant’s PAWE is $935.30.

LEGISLATION AND GUIDELINES

  1. In making this decision, I have considered the following: