Editors --- "Compensation preclusion period: special circumstances" [2008] SocSecRpr 51; (2008) 10(4) Social Security Reporter, Article 17

• PISCOPO and SECRETARY TO THE DEEWR
• Background
• Piscopo’s circumstances
• Decision

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Compensation preclusion period: special circumstances

PISCOPO and SECRETARY TO THE DEEWR

(2008/855)

Decided: 25th August 2008 by J.D. Campbell

Background

In September 2003Piscopo commenced working as a permanent part-time cleaner with Tempo Cleaning Services. He sustained a work related injury to the rotator cuff of his left shoulder on 15 June 2004 which was surgically repaired in early 2005. He returned to work in October 2005, with some physical restrictions relating to movements of the left shoulder.

In January 2006 Transfield Services acquired Tempo Cleaning Services and following a work site inspection by a Transfield representative, Piscopo was advised that he was unable to undertake his duties and that he was to remain off work with no pay until further advised. Piscopo’s services were terminated by Transfield in January 2008.

On 21 May 2007 his compensation case was settled by agreement for a gross sum of $300,000. He received from the gross sum an amount of $64,244.42, at a date shortly after 14 July 2007, with the remainder of the settlement being dispersed to costs of $112,000,reimbursement of periodic compensation payment of $82,064.33, payment to CMC Lawyers in the amount of $41,361, and payment to Medicare of $335.85.

His lawyers advised Centrelink of the settlement and his current address on 22 May 2007. Centrelink advised him in writing of the preclusion period which would apply to him on 30 May 2007 but sent it to an address at which he had not lived for 3 years rather than the address provided by his lawyers.

On 7 January 2008 he lodged a claim for newstart allowance. On 23 January 2008 Centrelink determined that he was not eligible for newstart allowance because he was subject to a preclusion period from 24 May 2007 to 3 November 2010.Centrelink’s first effective notification to him of the preclusion period was by letter of 10 January 2008.

The SSAT set aside the decision, and substituted a new decision that so much of the compensation payment received by him be treated as not having been made, so that the preclusion period ended on 29 January 2009.

Piscopo’s circumstances

Piscopo acknowledged that after the injury and prior to the settlement in May 2007, he became somewhat addicted to poker machines and, in doing so, not only wasted money, but also created debts by way of a mortgage over his property ($20,000), credit card debt ($10,000) and borrowings from his ex-wife and children ($5,000). After receiving the lump sum of $64,000(approximately) in July 2007, he stated that he paid out these debts of $35,000and purchased a car for $5,000. He also attended to bathroom and plumbing work at his home ($6,300). The Tribunal accepted the value of his residence was around $280,000 and that there was no money owing on the property. Piscopo stated that the remainder ($18,000) plus $8,000 drawn down from his superannuation fund (total amount) was all the money available to him to expend since settlement in May 2007 and that equated to approximately $370 per week. Mr Piscopo stated that he felt obligated to pay off his debts and his mortgage, and he did so in the belief that he would be returning to his permanent part-time employment as a cleaner. He was however terminated from that employment in January 2008.

The Tribunal accepted that he had since unsuccessfully tried to secure employment as a cleaner. Over the past month she had been attempting to establish a cleaning business and he had received three jobs in response to such activity. He had approached Centrelink for assistance to find a job and for funds to help start his business. Both requests were declined because he was not eligible for assistance. His financial situation was desperate. He had approached the banks for a loan against his unencumbered property, but all had refused as he had no capacity for repayment. He had considered selling his home, but that would take some months, with no certainty of outcome in the current market. He had sought the assistance of a Lifeline financial counsellor who referred him to various charities and he had received some financial assistance($80) for his telephone bill from St Vincent de Paul.

The Tribunal accepted that his financial situation was desperate. The Tribunal observed that the notification failure by Centrelink had not assisted him in appreciating the financial limitations that were before him when receiving his $64,000 around 14 July 2007.

The Tribunal also considered medical evidence and accepted that Piscopo suffered from a number of medical disabilities including residual restriction of movement of the left shoulder – a disability which was permanent and restricted him to modified duties with a current capacity for work assessed as being 22-29 hours per week.

He gave evidence that he was anxious and stressed by his financial circumstances and that he had been treated by his doctor for anxiety and depression. He had thoughts of self harm once or twice per week, and such thoughts were becoming more frequent.

A Medical Report confirmed Piscopo was suffering from anxiety and depression associated with his shoulder condition since May 2006, with some symptoms being present for some months prior to that date. His depression was associated with both a transport phobia (inability to use public transport) and a gambling problem. He self medicated with marijuana and the use of antidepressant medication. The assistance of a counsellor also provided him limited relief. Medical opinion observed that lack of income and the threat of losing his house were exacerbating the depression and if forced to sell his house, his depression would worsen.

The Tribunal examined the reasoning underlying the decision of the SSAT. Its decision to exclude the significant legal costs and disbursements ($154,000) and the repayment of periodic payments and other compensation sums ($82,000) was considered by the AAT to be both fair and reasonable when determining what compensation should be taken into consideration in determining the length of the preclusion period. However, the Tribunal considered it to be anomalous to include repayment of periodic payments, for those payments were made to provide an income pending settlement of a compensation claim, which may be a period of years in being finalised. To include such in the calculation of the preclusion period could only be justified if the preclusion period commenced with the commencement of such payments, rather than from the date of settlement. To do otherwise places an unfair and unjust outcome on a compensation payee for receiving monies to which he was entitled, and because they were included in a settlement agreement, the individual is penalised by way of being unable to be paid compensation affected payments in the future fora period which indeed reflects payments in part for a benefit properly received prior to the settlement.

The Tribunal also concluded that Piscopo’s financial circumstances were dire and not merely straightened. It was acknowledged that he owned an unencumbered house, but attempts to mortgage and/or sell were frustrated by his inability to make repayments and the time taken to realise on such an asset in uncertain market conditions. It was also acknowledged that Piscopo had in part been responsible for his financial predicament. On the other hand there was a failure by Centrelink to properly notify Piscopo of the facts of his preclusion period, together with the anxiety and depressive conditions associated with his work related injury, which were being made worse as a consequence of the stress arising from his financial situation.

It was suggested that Piscopo could consider either borrowing from family members or having a lodger, but the Tribunal found this was speculative and that revenue from a lodger could be of marginal financial impact, once costs and outlays are considered.

The Tribunal concluded that Piscopo’s circumstances when considered as a whole were special, and for reasons which extended beyond those found in the SSAT decision.

Decision

The Tribunal set aside the decision under review and determined that part of the amount of compensation payment should be treated as not having been made with the effect that the applicable compensation preclusion period ended on 11 September 2008, thereby shortening it by 20 weeks beyond that determined by the SSAT.

[I.T.]