Sparke Helmore's MAD (Motor Accidents Division) Weekly - Issue 96

Welcome to the 96th edition of Sparke Helmore’s MAD Weekly.

The Personal Injury Commission (Commission) commenced on 1 March 2021 and, with it, the publication of the majority of decisions issued by the Commission.

To help you navigate the recent decisions of the Motor Accidents Division (MAD) of the Commission, we are publishing weekly the relevant headnotes of published decisions with a link to the decisions on the Australasian Legal Information Institute (AustLII) website. Please see this week’s edition below.

All references to legislation are to the Motor Accident Injuries Act 2017 (NSW) unless otherwise noted.

Commentary and analysis of trends will be provided on more substantive decisions by our CTP team and will be separately published when necessary.

Claims Assessment – Settlement Approval

Allianz Australia Insurance Limited v Godfrey [2023] NSWPIC 386

Member Shana Radnan

Settlement approval – claimant is self-represented – claim economic loss only – physical injuries only.

On 2 March 2021, the claimant was injured riding his motorcycle when the insured’s vehicle collided with him while he was attempting to make a left turn from the middle traffic lane. Police and ambulance services attended the scene of the accident and the claimant was conveyed to Royal North Shore Hospital.

As a result of the accident, the claimant sustained injuries to the following areas of his body:

• right ankle fracture – minimally displaced transverse fracture of medial malleolus
• right shin wound
• right shoulder pain, and
• right knee pain.

At the time of the accident, the 34-year-old claimant was employed full time as a bus driver with the State Transit Authority and was subsequently non-weight-bearing for a period of six weeks. On 19 April 2021 the claimant was certified fit to return to his pre-injury hours of eight hours, five days per week, and returned to work the next day. The parties agreed that economic loss damages only would be awarded, as the claimant did not dispute that his injuries did not exceed 10% whole person impairment (WPI), as is required under s 4.11 of the Act for an award of non-economic loss damages.

The claimant was not represented by a solicitor and the proposed settlement required approval pursuant to s 6.23 of the Act, ensuring that the settlement was ‘just, fair and reasonable’ per cl 7.37 of the Motor Accident Guidelines (the Guidelines).

At a Preliminary Conference, the parties agreed on a settlement of $12,000 for past economic loss only, but later amended the terms of settlement to include a buffer of $5,000 for future economic loss.

Findings: The Member accepted that a damages award of $17,000 for economic loss was just, fair and reasonable and within the range of damages likely to be awarded if the matter progressed to hearing.

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Review Panel Determination

QBE Insurance (Australia) Limited v Saltan [2023] NSWPICMP 340

Panel: Principal Member John Harris, Dr Margaret Gibson, and Dr John Garvey

Medical assessment of threshold injury – causation of left shoulder injury – whether absence of complaints determinative of no causation.

On 14 December 2021, the claimant sustained injuries when the insured vehicle came from a side street, colliding with another vehicle’s side panel and the corner of the claimant’s vehicle. A medical dispute arose as to whether the claimant’s injuries were threshold injuries per s 1.6 of the Act. Injuries to the following areas were referred for assessment:

• cervical spine
• lumbar spine
• right and left shoulders, and
• abdomen – aggravation of a hiatus hernia.

At first instance, Medical Assessor Berry determined the claimant’s injuries to the cervical and lumbar spine, right shoulder and abdomen were threshold injuries (known at the time as ‘minor injuries’), and the left shoulder injury was a non-threshold injury (known at the time as a ‘non-minor injury’).

The claimant lodged an Application for Review, and the Review Panel stated that a re-examination of the claimant was required as part of the Review, performed by Medical Assessor Gibson and Principal Member Harris.

In the initial WPI dispute, the insurer referred to the claimant’s pre-accident treating evidence, which demonstrated a protracted history of back pain, right shoulder pain, hernia and back pain. Similarly, the insurer submitted that subsequent x-rays to the cervical spine and lumbar spine merely showed degenerative changes with no specific pathology being caused by the subject accident. The insurer also referred to further MRI scans, arguing these only showed degenerative changes.

In the Application for Review, the insurer disputed the causation of the claimant’s injuries. In addition, the insurer noted the absence of left shoulder complaints in a variety of the claimant’s treating records following the accident.

Notably, the claimant did not file submissions in support of the Review Application, instead filing a series of documents in support. These included the expert report of Dr David Crocker, who opined that the accident had caused an aggravation of multi-level degenerative changes in the spine, as well as the aggravation of pre-existing tendonitis. Dr Crocker further posited that the accident caused a partial tear of the rotator cuff.

On re-examination, Medical Assessor Gibson and Principal Member Harris confirmed the claimant’s previous right shoulder condition in 2014. As evidence of his left shoulder pain, the claimant reported that his seatbelt went over both shoulders, despite having previously agreed that the seatbelt went over his right shoulder only.

The Review Panel noted the importance of forming a new opinion instead of choosing between competing opinions, applying Insurance Australia Group Ltd v Keen [2021] NSWCA 287 and Insurance Australia Ltd v Marsh [2022] NSWCA 31. In that same vein, the Review Panel held that the claimant’s neck and back injuries were soft tissue injuries, identifying no signs of radiculopathy under cl 5.8 of the Guidelines. The Review Panel noted the likelihood of the claimant suffering a ‘transient’ soft tissue injury to the right shoulder, given the lack of any ongoing complaints. Similarly, the Review Panel causally linked the claimant’s hiatus hernia to his medical intake and his subsequent chronic inflammation of the gastric antrum. This was held to be a soft tissue injury, and therefore a threshold injury for the purposes of the Act.

Similarly, the Review Panel accepted that the claimant sustained a whiplash injury in the subject accident, which was supported by the contemporaneous complaints of neck and back pain; however, given the lack of radiculopathy, this too was held to be a soft tissue injury under the Act.

Conversely, the Review Panel rejected the claimant’s assertion of a left shoulder injury, largely because there were no records of this injury until November 2021 – almost two years after the accident. Nevertheless, the Review Panel noted the absence of records being ‘relevant but not determinative of the question of causation’, per AAI Ltd v McGiffen [2016] NSWCA 229. The Review Panel also was not satisfied of the medical plausibility of the accident causing an injury to the left shoulder, noting the claimant’s inconsistent description of his seatbelt as ‘unconvincing and simply inconsistent with common knowledge’.

Findings: The Review Panel revoked the certificate of Medical Assessor Berry, instead finding that all of the claimant’s injuries were threshold injuries.

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Merit Review

Singh v Insurance Australia Limited t/as NRMA Insurance [2023] NSWPICMR 39

Merit Reviewer: Katherine Ruschen

Merit review – dispute about payment of weekly benefits – whether trust income earnings – separate legal personhood of company and claimant – whether rental income earnings.

The claimant made a claim for statutory benefits in relation to an accident, which occurred on 31 October 2022. The matter was brought before the Commission with regard to a dispute between the parties about the payment of the claimant’s pre-accident weekly earnings (PAWE).

The insurer determined the claimant’s PAWE and the claimant sought an internal review of that decision. On 29 March 2023, an internal reviewer determined that the claimant’s PAWE was $280.07. The insurer made this decision as if the claimant were a sole trader. In actuality, the claimant was the sole director and shareholder of a company, with the company being the trustee for a discretionary family trust. All income generated by the claimant’s company was held on trust for the beneficiaries in the trust deed. The beneficiaries included the claimant and two other named persons, in addition to various other categories of beneficiaries.

The claimant lodged an application with the Commission disputing the insurer’s decision.

The parties agreed that there was no dispute that the claimant was an earner for the purposes of the Act; the crux of the dispute was the amount of gross earnings received by the claimant in the 12-month pre-accident period.

The claimant submitted two issues with the insurer’s internal review decision:

• The internal reviewer apportioned two thirds of the trust income to the two other named beneficiaries, in circumstances where the claimant’s company would not have paid trust monies to either person.
• Rental income of the trust was incorrectly calculated by the internal reviewer at $204,972, whereas it was $96,000 per annum and should have been included as earnings of the trust in the pre-accident period.

In reply the insurer relied on an expert forensic accountant’s report, which treated the claimant as a sole trader, submitting that the claimant’s gross earnings were the net income of the trust available for distribution to the claimant. Moreover, the insurer submitted that as there were two other named beneficiaries in the trust deed, only one third of the net trust income was available for distribution to the claimant.

The Merit Reviewer identified that there was no evidence to suggest that any of the exceptions in sch 1 cl 4(2) of the Act applied to the claimant, who said that she had been earning via the trust in the 12-month pre-accident period.

Contrary to both parties’ positions, the Merit Reviewer found that the claimant’s PAWE should not have been calculated on the basis of her being a sole trader. Instead, the Merit Reviewer found that the calculations should have accounted for the trust relationship between the claimant, her business as trustee, and the beneficiaries. Importantly, the Merit Reviewer acknowledged that the claimant’s company controlled the trust, not the claimant herself. The Merit Reviewer distinguished the claimant from her company as separate legal persons, despite the claimant ultimately having full control of her company. Vitally, sch 1 cl 4(1) of the Act was concerned purely with monies received ‘by the claimant’, and, given that the claimant and her company were wholly separate legal persons, monies received by her company were not monies received by the claimant, ‘unless and until [her] company ma[de] a trust distribution to the claimant as a beneficiary’.

Furthermore, the Merit Reviewer noted that the family trust, being a discretionary trust, gave the claimant’s company complete discretion to determine the distribution of trust assets. In turn, the Merit Reviewer noted that the claimant, as sole director of her company, effectively could have distributed all available trust monies to herself. However, because the claimant did not directly control the trust, any other beneficiaries (including the claimant) were not technically beneficiaries of the trust until such time that the trust was administered. Until that time, the claimant was merely an object of the trust, being a potential beneficiary until the trust was administered in her favour. Therefore, as the Act purely concerned earnings ‘received’ by the earner, any trust income could not be classified as earnings received by the claimant until she had received income following administration of the trust. Accordingly, the Merit Reviewer identified the total gross wages paid to the claimant in the 12-month pre-accident period as $1,220.

As to other taxable income received by the claimant, the Merit Reviewer found the $9,869 in parental leave payments received from Centrelink were excluded from earnings received by the claimant as an earner.

Specifically, the Merit Reviewer found the rental income of the claimant’s trust not to be earnings received by the claimant for the same reasons as above; these could not have been earnings until the claimant’s company administered the trust. Conversely, the Merit Reviewer excluded rental earnings as a general category from ‘earnings’ and therefore PAWE. Given that ‘earnings’ is not a term defined in the Act, the Merit Reviewer applied the principles of statutory interpretation, requiring ‘earnings’ to be defined consistently with the other language used in the Act. Accordingly, the Merit Reviewer interpreted earnings in line with ‘gross earnings’, ‘earnings as an earner’, and ‘loss of earnings’. Accordingly, the Merit Reviewer found that ‘earnings’ was intended to mean ‘income from personal exertion’, with the two terms able to be used interchangeably. Accordingly, given that ‘income from personal exertion’ specifically excludes rental income under sch 1 cl 3(3)(b), the Merit Reviewer found that rental income in any case including the claimant’s, could not be counted as ‘earnings’ for the purposes of the Act.

Accordingly, the Merit Reviewer calculated the claimant’s PAWE as follows:

• total gross wages from the claimant’s company in the sum of $1,220, and
• nil trust income distributed nor received.

Findings: The Merit Reviewer determined that the reviewable decision was set aside, and the claimant’s PAWE amounted to $23.46.

View decision

Merit Review

Walker v QBE Insurance (Australia) Limited [2023] NSWPICMR 40

Merit Reviewer: Katherine Ruschen

Merit review – dispute about payment of weekly benefits – whether PAWE formula can be adjusted – whether fixed business expenses excluded from PAWE – whether natural disasters or COVID-19 restrictions considered.

The claimant made a claim for statutory benefits in relation to an accident that occurred on 22 December 2022. The matter was brought before the Commission with regards to a dispute between the parties about the payment of the claimant’s PAWE.

The insurer determined the claimant’s PAWE and the claimant sought an internal review of that decision. On 2 May 2023, an internal reviewer determined that the claimant’s PAWE was $613.72. The insurer made this decision on the basis of the claimant being a self-employed carpenter.

The claimant subsequently lodged an application with the Commission disputing the insurer’s decision.

The parties agreed that there was no dispute that the claimant was an earner for the purposes of the Act; the issues in dispute were the following:

• the gross earnings received by the claimant in the 12-month pre-accident period
• whether a greater allowance could be made for earnings in the three-month period prior to the accident in comparison to earnings received in the balance of the 2-moth pre-accident period, and/or
• whether any adjustment could be made to PAWE to account for business downturns resulting from flooding, poor weather, and/or COVID-19 restrictions.

The claimant submitted that the insurer failed to adequately consider his earnings received in the three-month period prior to the subject accident, contending that he received ‘a considerable amount of earnings’ in that period, being a ‘true reflection’ of his PAWE. The claimant further highlighted that prior to the three-month period, his earnings had been impacted by flooding, poor weather, and COVID-19 restrictions. Furthermore, the claimant submitted that only variable business expenses should be deducted from the gross profits of the claimant’s business for the purposes of PAWE, positing Aktop v Allianz Insurance [2021] NSWPICMR 33 (Aktop) as authority. Accordingly, the claimant contended that his PAWE should have been calculated in the sum of $1,899.52.

Conversely, the insurer submitted that all business expenses should be deducted from the gross profits of the claimant’s business to calculate PAWE. Additionally, the insurer submitted only bank deposits ‘readily identifiable’ as business income should have been included in the claimant’s gross earnings, and that there was no evidence that the claimant made significant earnings in the three-month pre-accident period.

Given that the claimant was self-employed, the Merit Reviewer held that business expenses should have been deducted from the gross income of the business, thereby producing the net profit of the business. The net profits of the business would, thereafter, comprise the claimant’s gross earnings as an individual earner from the business; PAWE purely concerns earnings received by the claimant as an individual earner.

The Merit Reviewer also disagreed with the findings in Aktop that only variable business expenses should be deducted for the purposes of calculated PAWE. Instead, the Merit Reviewer held that irrespective of the nature of the claimant’s business expenses, every business expense must be deducted in order to calculate the claimant’s individual earnings from the business. The Merit Reviewer concluded that ‘all business expenses, fixed and variable, are to be deducted from the gross income of the business for the purpose of calculating PAWE in the circumstances of self-employment. In support, the Merit Reviewer found this to be consistent with other authoritative decisions.

Even if the position in Aktop were correct, the Merit Reviewer criticised the claimant’s suggestion that only a motor vehicle expense is a variable expense as ‘clearly incorrect’. The Merit Reviewer noted a number of other variable business expenses for a carpenter, including the costs of purchasing materials and the costs of subcontracted labour and other trades, vary according to demand.

Furthermore, the Merit Reviewer acknowledged that the claimant may continue to incur certain business expenses on a maintenance or administrative basis to preserve the business in preparation for his return to pre-injury work; however, there was no legislative provision to allow these ongoing expenses to be accounted for, so as to increase PAWE. Applying Allianz Insurance Australia Limited v Shahmiri [2022] NSWSC 481, the Merit Reviewer determined that ‘one cannot construe an Act to accommodate a particular circumstance, no matter how unfair that circumstance may be’. The Merit Reviewer found that quarantining fixed costs from other business expenses to calculate PAWE for self-employed claimants would yield an unjust result, likely giving rise to enrichment, thereby being inconsistent with the objects of the Act. Ultimately, the Merit Reviewer found that the claimant’s gross earnings as an earner for the purpose of calculating PAWE should comprise the net income of the business after deducting all business expenses, both fixed and variable.

Moreover, the Merit Reviewer criticised the insurer’s forensic accountant report, stating aspects of its methodology were flawed, citing that the report should not have:

• excluded some transactions in the claimant’s bank statements when they can be reconciled with the sales transaction summary
• potentially excluded transactions that were sales merely on the basis that the payer did not properly describe the transaction, and
• ignored the claimant’s business activity statement.

Similarly, the Merit Review disagreed with the claimant’s contention that the three-month pre-accident period demonstrated the claimant’s true earnings, finding it to be unsubstantiated by the evidence. In fact, the Merit Reviewer found that whilst sales were up from 1 October to 31 December 2022 as compared to July and September, earnings in previous quarters were greater. The Merit Reviewer found these fluctuations to be consistent with the nature of a sole trader business, further noting that the Act was clear in requiring a calculation of the claimant’s PAWE as a weekly average of the 52-week pre-accident period.

Similarly, the Merit Reviewer found that the claimant’s PAWE could not be adjusted by virtue of overriding factors including flooding, bad weather or COVID-19 restrictions, noting that there were no provisions in the Act, the Guidelines, or the Motor Accident Injures Regulation 2017 (NSW) to permit such an adjustment. Applying Allianz Insurance Australia Limited v Shahmiri [2022] NSWSC 481, the Merit Reviewer held that PAWE could only be calculated by dividing earnings over the 12-month pre-accident period by 52 weeks, and that the Act did not permit any adjustment by reason of external factors.

Therefore, the Merit Reviewer calculated the claimant’s PAWE on the following bases:

• the gross profits of the claimant’s business in the 12-month pre-accident period was $52,434.64
• business expenses incurred in the 12-month pre-accident period in the sum of $14,278.69 were to be deducted
• gross earnings, therefore, received by the claimant as an earner for the 12-month pre-accident period were $38,155.95, and
• there could be no adjustment to the PAWE formula account for flooding, poor weather or COVID-19 restrictions.

Findings: The Merit Reviewer determined that the reviewable decision was set aside, and the claimant’s PAWE amounted to $733.77.

View decision

Review Panel Determination

QBE Insurance (Australia) Limited v Dang [2023] NSWPICMP 356

Panel: Member Susan McTegg, Dr Mohammed Assem, and Dr Margaret Gibson

Medical assessment of threshold injury – causation of injury to left shoulder – whether causation assessed on balance of probabilities – whether scientific certainty considered for causation.

On 11 May 2021, the claimant sustained injuries when his vehicle was side swiped by a semi-trailer while he was changing lanes. A medical dispute arose as to whether the claimant sustained a non-threshold injury. Injuries to the following areas were referred for assessment:

• cervical spine
• left shoulder
• lumbar spine
• right leg, and
• thoracic spine.

At first instance, Medical Assessor Woo determined that all of the claimant’s injuries were threshold injuries with the exception of the claimant’s left shoulder injury, which was a non-threshold injury.

The insurer lodged an application for review, disputing that the claimant’s left shoulder injury was a non-threshold injury, referencing an Allied Health Recovery Request, which only provided a diagnosis of ‘acute whiplash injury to the cervical and lumbar spine’. Moreover, the insurer submitted that Medical Assessor Woo had failed to provide adequate reasoning for his finding of non-threshold injury, as is required by cl 5.6 of the Guidelines.

In reply, the claimant provided short submissions and argued that Medical Assessor Woo had adequately satisfied cl 5.6 of the Guidelines and had provided ample reasoning for his conclusions.

The Review Panel stated that a re-examination of the claimant was required as part of the Review, performed by Medical Assessor Assem.

The Review Panel noted the claimant’s pre-accident history of neck and back problems, as well as an absence of previous shoulder complaints. In particularly, the Review Panel noted the claimant’s involvement in a prior motor vehicle accident, where he sustained an injury to his neck, back and both shoulders. The claimant reported that he had made a full recovery from those injuries, with no significant shoulder problems identified at the time. Notably, the Review Panel noted photographs of the claimant’s vehicle following the accident, which showed only minor damage to the vehicle.

Moreover, the Review Panel highlighted that the claimant reported feeling ‘no immediate discomfort’ following the accident. Remarkably, during the re-examination the claimant was unable to identify a specific event that could have resulted in the alleged left shoulder injury. Relatedly, the claimant’s physiotherapy records did not reference shoulder pain of any sort seven months following the accident. When confronted with the lack of evidence to support his left shoulder injury, the claimant asserted that he had no issues with his left shoulder prior to the accident. Similarly, on clinical examination, the claimant reported tenderness over his right shoulder, but not his left.

In their discussion of the applicable principles of causation, the Review Panel applied Briggs v IAG Limited t/as NRMA Insurance [2022] NSWSC 372, which highlighted that the relevant legal test for causation did not require scientific certainty; instead, it must be examined on the balance of probabilities whether the accident was a material cause of the claimant’s injury. The Review Panel determined that causation may be decided without medical evidence in support, or when expert evidence merely suggests a possibility of causation. The Review Panel concluded, on review of expert biomechanical evidence, that it was factually improbable for the claimant to have sustained an injury to his left shoulder in the subject accident.

The Review Panel found the claimant’s vague recollection of the 2016 accident ‘surprising’ considering that he had instructed a solicitor and pursued a claim for damages. Furthermore, the claimant was examined by Dr Uthum Dias and Dr Horace Ting for that claim, leading the Review Panel to conclude the claimant had been ‘less than forthright about the impact of the 2016 accident and that he had ongoing symptoms at least until May 2019’. Instead of attributing the claimant’s left shoulder injury to the subject accident, the Review Panel found it more likely that his injury was akin to a chronic, degenerative condition. Noting the requirement to assess causation on the balance of probabilities rather than scientific certainty, the Review Panel ultimately found no direct causal relationship between the claimant’s left shoulder injury and the subject accident. Therefore, the claimant had not sustained a non-threshold injury in the accident.

Findings: The Review Panel confirmed the agreement between the parties as to the threshold injuries to the cervical spine, thoracic spine, lumbar spine, and right leg, but found that the claimant did not sustain any injury to the left shoulder in the accident.

View decision