Editors --- "Compensation preclusion period: amount of lump sum; special circumstances" [2009] SocSecRpr 32; (2009) 11(3) Social Security Reporter, Article 10

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Compensation preclusion period: amount of lump sum; special circumstances

MADRICK and SECRETARY TO DFHCSIA

(2009/408)

Decided: 4th June 2009 by J.D. Campbell

Background

Madrick claimed workers compensation from CGU following an injury sustained in a traffic accident in June 2004 with ongoing liability declined and weekly payments ceasing in July 2005. Madrick also claimed Salary Continuance Insurance from BT Financial Group at a monthly rate of $2,152.77 gross at least until the period ending June 2005. He also lodged a third party claim. Madrick subsequently received a lump sum compensation amount of $25,500 from CGU Insurance in settlement of his workers compensation claim. About a month later, Madrick’s third party claim was also settled for an amount of $350,000 inclusive of legal costs. Included in the third party settlement were amounts to pay $25,500 to CGU Compensation for the lump sum paid to Madrick, a further amount of $35,663.51 (though there was some confusion about this figure) to repay CGU for the periodic compensation payments made to Madrick up until July 2005 and an amount of $47,969 designated as repayment to BT Financial in relation to Salary Continuance Insurance.

As a consequence of the settlement of his two claims, a preclusion period was imposed. On 8 January 2009, Madrick was advised by Centrelink that because of his compensation settlement he could no longer be paid disability support pension until after 8 September 2009. Madrick subsequently sought waiver of the preclusion period citing family circumstances, health problems, financial difficulties, gambling problems and his failure to receive sufficient information from his solicitor or Centrelink on issues pertaining to a preclusion period.

Issues

The two key issues for determination in this matter were:

a) T h e q u a n t u m o f l u m p s u m compensation paid to Madrick as a consequence of the injuries received from the traffic accident in July 2004; and

b) Whether there were any special

circumstances in the case.

Quantum of lump sum compensation paid to Madrick

Whilst the Tribunal noted that the total sum settled in the two settlements was $375,500, it found that the actual quantum should be determined at $350,000 because to do otherwise would involve a double counting of the $25,500 compensation amount. In respect of the salary continuance insurance repayment, the Tribunal concluded that there was insufficient detail on which to make any determination as to whether these payments could be considered periodic compensation payments. The Tribunal also noted that there was significant confusion in the documentation as to both the quantum and make up of monies repayable to the Workers Compensation insurance authority but ultimately relied on a document that clearly defined an amount of $35,663.51 as being the amount paid by way of periodic compensation payments to Madrick.

On the available evidence, the Tribunal found that Madrick had received a lump sum compensation payment of $350,000 less periodic payments of $35,663.51 namely $314,335. As a consequence the Tribunal determined a preclusion period of 226 weeks for the period 6 July 2005 to 3 November 2009.

Special circumstances

The Tribunal accepted that Madrick’s financial circumstances demonstrated current severe financial hardship in terms of available cash and necessary weekly expenditure against a very limited revenue base in the form of his housemate’s contributions. The evidence before the Tribunal was that Madrick was sharing accommodation with a person who was HIV positive, suffered significant difficulties and was in receipt of disability support pension. The Tribunal further found that Madrick’s expenditure on capital assets (an unencumbered house, furniture and car which totalled approximately $280,000) should be commended rather than criticized in light of his gambling addiction. It further noted that Madrick was not in a position to borrow against such capital assets, that the capital assets were used for the accommodation of two people with significant health problems and limited financial means and the car asset was used to assist in Madrick’s caring responsibilities to his flat mate, parents and grandmother. Further the Tribunal found special circumstances in the medical evidence before the Tribunal that Madrick’s mental condition was an intrinsic disability much aggravated by his current circumstances including his current financial situation, an acquired gambling habit, his health and his housemate’s familial circumstances.

The Tribunal did not consider Madrick’s contention regarding the insufficient information from his solicitor and Centrelink about the preclusion period amounted to special circumstances, concluding that the difficulty most likely arose from Madrick not seeking or absorbing the necessary information until he was already in financial difficulty.

However this did not prevent the Tribunal finding special circumstances. The Tribunal ultimately found that when considered together the circumstances could be described as special.

Formal decision

The Tribunal set aside the decision under review and determined that Mad-rick had received a lump sum compensation payment of $314,336. This meant that there was a preclusion period from 6 July 2005 to 3 November 2009. However the Tribunal decided to waive the preclusion period from 1 May 2009 due to the special circumstances of the case.

[G.B.]