NSW bans claim farming: update for personal injury practitioners

What is claim farming and why has it been banned?

Claim farming (also known as “claims harvesting”) is a practice where a third party (the “claim farmer”) refers individuals who may have legal claims to a law practice for financial reward. In recent years, there has been increased scrutiny on the unethical aspects of claim farming, particularly its impacts on vulnerable people, including people with a history of trauma and those who have survived any kind of historical abuse.

Advocacy groups such as Knowmore, an independent legal service, have campaigned to ban claim farming across all Australian state and territory jurisdictions. They have documented a pattern of conduct in which claim farmers cold call survivors of abuse, without their knowledge or permission, to encourage them to make compensation claims. The tactics used by the claim farmers have been described as harassing, intimidating and, in many cases, misleading.

In cases of institutional child sexual abuse, survivors have often not been made aware about options other than civil litigation available to them, such as the National Redress Scheme, as well as free legal services such as Knowmore that can assist them with their claims.

Aside from the serious ethical implications of claim farmers and lawyers working together to target vulnerable people, claim farming also raises other concerns, including the privacy of persons targeted by claim farmers. Where lawyers engage in the profit-driven practice of claim farming, questions may also arise about their conduct from a professional standards perspective, including whether lawyers are fulfilling their fundamental duties to the court and their clients.

What types of claims are caught by the Claim Farming Practices Prohibition Act 2025 (NSW) (Act)?

The Act prohibits a person from contacting someone to solicit a claim and buying or selling claims.

The prohibition applies to personal injury claims as defined in s 11 of the Civil Liability Act 2002 (NSW) (CLA), other than certain categories of excluded claims: see s 3B(1)(b)-(h) of the CLA.

Examples of the types of matters that are covered by the ban on claim farming include CLA claims in respect of serious injury, medical negligence, public liability and product liability. Practitioners should also note that intentional torts (i.e., intentional acts done with intent to cause injury or death, or that are sexual assault or other sexual misconduct) are also captured by the new claim farming ban.

What conduct is prohibited under the Act? 

Unsolicited contact with claimants

Section 5 of the Act prohibits a person from contacting another person to solicit them to make a claim or to refer them to another person to provide a service in relation to a claim, if the person making the contact receives, agrees or expects to receive consideration because of the contact. The clause also makes it an offence to arrange for prohibited contact using a third party. Exceptions to the prohibited contact offence include where there is:

• Notice given to group members in relation to representative proceedings.
• Contact with a potential claimant to whom a legal practice has provided services, where the practice reasonably believes the potential claimant will not object to the contact.
• Contact made by a legal practice after receiving a request to do so by a representative community legal service or industrial organisation, having confirmed that the representative reasonably believes the potential claimant will not object to the contact.

Referral fees

Section 6 prohibits a person from providing or receiving consideration for the referral of a claim in civil proceedings, or from entering into agreements or arrangements relating to referrals of claims for consideration. Notable exceptions to the referral offences include where:

• A law practice, in the course of acting for a claimant, refers a matter relating to a claim to another person to provide a relevant service e.g., to a medical practitioner to prepare a medico-legal report.
• In circumstances of the sale of a law practice, where the claimant approves the referral and the sale value is not more than the claimant’s unbilled legal costs at the time of the sale.

How does the new prohibition fit with Rule 12 of the Australian Solicitors Conduct Rules?

Rule 12 deals with conflicts associated with a solicitor’s own interests. Generally, Rule 12 will not be breached if a solicitor receives a financial benefit from a third party for referring the client, provided the solicitor has first disclosed the payment or financial benefit to the client.

However, given the introduction of the Act, if a solicitor is acting for a client in relation to a relevant claim under the CLA, they would be prevented from receiving a referral fee i.e., there is now a class of personal injury matters for whom a different standard applies.

Practitioners should be aware that contravention of the claim farming provisions is also capable of representing unsatisfactory professional conduct or professional misconduct, whether or not the practitioner has been convicted of an offence in relation to the contravention: see s 165B(1) of the Legal Profession Uniform Law Application Act 2014 (NSW).

What are the penalties in place for claim farming?

The Act provides for financial penalties of up to 500 penalty units ($55,000) for contravention of the claim farming offences.

If fraud is involved, existing offences such as dishonestly obtaining financial advantage by deception, will continue to apply in addition to the claim farming offences. Such fraud offences can carry a maximum penalty of 10 years’ imprisonment.

Section 61A of the Legal Profession Uniform Law Application Act 2014 (NSW) has also been amended to prevent a law practice or associate from charging or recovering legal costs in relation to the claim, where a conviction has been made for an offence under the Act.

Sophie Bathurst is a Senior Policy Lawyer at the Law Society of NSW.