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Accident Compensation Cases

Gamet v Accident Rehabilitation and Compensation Insurance Corporation (DC, 24/08/96)

Judgment Text

Judge A W Middleton
The appellant has appealed against the decision of the respondent and the review officer in relation to the quantum of her relevant earnings. 
The appellant suffered an injury to her back as a result of an accident on 22 November 1989. She lodged a claim for cover with the respondent on 6 December 1989 which was accepted. At the time of her accident she was a shareholder employee in her company known as Bernlee Industries Limited. The company's financial year ended on 31 December in each year. At the time of her accident the appellant had filed a tax return with the Inland Revenue Department for the year ending 31 March 1988 which disclosed her income as $18,169.20. Her returns for the tax years ending 31 March 1989 and 31 March 1990 were filed after the accident. The respondent based its assessment of relevant earnings on the income returned for the year ended 31 March 1988. 
In April 1992 the appellant's accountants queried the assessment of earnings related compensation. This resulted in the respondent checking the company accounts for the years following 1988 and raised the question that the income returned by the appellant as a shareholder employee for the year ending 31 March 1989 was $13,000. Her accountants declared the figure to the respondent as being $14,850 in the 1990 year. Subsequently the appellant's accountants indicated that the figure of $13,000 shown in the 1989 IRD return was an error and should have been $30,000 which figure was subsequently accepted as being the income used for assessment for tax by the Inland Revenue Department. The appellant's accountants submitted that this figure should have been the figure used in the assessment of relevant earnings for the purposes of payment of earnings related compensation. The review officer rejected that argument and confirmed the appellant's primary decision. 
With the consent of Mr Barnett, the appellant submitted an affidavit as evidence. In that affidavit she indicated that the business in which she was involved had only been going for a short time and that for the tax year which resulted in her return to 31 March 1988 involved some losses incurred in an Australian venture. She also stated that there had been no change in accounting policy and confirmed that while the figure of $13,000 had been shown as her income from the company in her 1989 return, that figure was in fact found to be wrong and was rectified and accepted by the Inland Revenue Department. 
Mr Lawson referred me to the company accounts which showed that the appellant's salary credited in the company books for the years ended 1987, 1988 and 1989, were $25,000, $45,001 and $30,000 respectively. He submitted that the figure of $13,000 shown in the appellant's 1989 income tax return was clearly wrong and that this can be seen by cross reference to the company accounts. He submitted that in the exercise of its discretion under s 53 of the Accident Compensation Act 1982, the respondent should have accepted the figure of $30,000 representing the appellant's normal earnings at the time of the accident. 
Mr Barnett submitted that there appeared to be something sinister in the way the situation had arisen, particularly having regard to the return of $13,000 in the 1989 Inland Revenue Department return. He submitted that while it was open to the Department to accept a correction to the sum of $30,000, that did not mean that the figure should necessarily be accepted by the respondent as definitive of the appellant's remuneration for that year. Mr Barnett also submitted that while the appellant had been making drawings from the company, these should not be considered as wages until they have been so allocated in the company's accounts for the financial year in question. 
I have examined the company accounts for the years in question and I am surprised at the attitude adopted by the respondent. It is quite clear from page 5 of the “notes to the financial statements” in the company's accounts for the year ended 31 December 1987 that the appellant was credited with salary of $45,001. That figure was then transposed to the appellant's return to the Inland Revenue Department which was lodged with that Department on 1 June 1989. However, because of the losses incurred in the partnership in which the appellant was then involved in Australia her total income for that year was reduced to $18,169.20 on which the respondent based relevant earnings because at that time the return for the year in which the accident occurred had not been filed. 
In the company's accounts for the year ended 31 December 1988, while the amount allocated for directors' fees is shown as $15,000, page 6 of the financial statement shows that salary credited to the appellant for the year was $30,000 as opposed to the $45,000 in the previous year. It is interesting to note that the company's return which included that statement of accounts was lodged with the Inland Revenue Department on 28 November 1989 while her accident had occurred on 22 November 1989 and her claim for cover was not lodged until 6 December 1989. 
The explanation given for the figure of $13,000 shown in the appellant's return for the year ended 31 March 1989 seems to indicate that this was some mistake which was readily rectified with the Department and certainly conforms with the company's accounts as submitted to the Inland Revenue Department within a week of the accident occurring. While it was open to the respondent to adopt the figure of $18,169.20 initially as the figure for assessment of relevant earnings, I consider that once the true position had been established the figure of $30,000 should have been accepted as the appellant's earnings at the time of the accident. 
While Mr Barnett has submitted that the appellant's return of income was filed after the accident and that in such cases a doubt may arise where the figure is higher than for the previous year, I reject that argument in this particular case. The appellant's income had already been determined in the company accounts which were filed with the Department prior to the accident occurring. 
Accordingly the appeal is allowed and relevant earnings are fixed at $30,000. There will be costs of $750 to the appellant. 

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