Statutes Amendment (Claim Farming) Bill

Introduction and First Reading

The Hon. K.J. MAHER (Minister for Aboriginal Affairs, Attorney-General, Minister for Industrial Relations and Public Sector) (11:12): Obtained leave and introduced a bill for an act to amend the Legal Practitioners Act 1981 and the Summary Offences Act 1953. Read a first time.

Second Reading

The Hon. K.J. MAHER (Minister for Aboriginal Affairs, Attorney-General, Minister for Industrial Relations and Public Sector) (11:13): I move:

That this bill be now read a second time.

I am pleased to introduce the Statutes Amendment (Claim Farming) Bill 2024. This bill will prohibit claim farming in relation to personal injury claims.

Claim farming is a process of collecting and selling the personal information of a person who has suffered an injury. The information is often collected in inappropriate or exploitative ways, such as cold calling or unsolicited approaches. High-pressure sales tactics are often used and deceptive promises of quick and easy compensation might be made. The injured person's details are then referred to a law firm or claims management provider who pays for the referral and makes a profit providing the service to the injured person.

Whilst all persons with an injury are vulnerable to some degree, claim farmers often target people with vulnerabilities additional to the injury, including prisoners or residents of remote Aboriginal communities. Most alarming are reports from multiple sources that claim farmers are targeting victims of child sexual abuse in the wake of reforms to establish the National Redress Scheme and to remove time limits for personal injury claims in relation to child abuse. This bill will outlaw such practices entirely.

Claim farming is inappropriate and exploitative. Cold approaches by claim farmers to injured persons disregards their autonomy and wellbeing, and they may not be ready to speak about the events leading to their injury. The sale of claims by claim farmers to legal firms disrespects the best interests of the injured persons and may be motivated by which firm will pay the highest fee rather than which firm is the most appropriate to represent the injured person in all the circumstances.

The bill is intended to proactively prevent widespread claim farming practices within South Australia. While it does occur, it is, thankfully, relatively infrequent; however, we do not want South Australia to become a destination of choice for claim farmers, particularly as other jurisdictions begin to take action against it. We have the opportunity to stop it at an early stage.

This bill will create two new offences in the Summary Offences Act 1953 to prohibit claim farming practices in relation to personal injury claims. A personal injury claim is a claim for compensation for physical or mental harm or death; therefore, the ban will cover claim farming practices against relatives of a deceased person who may have a wrongful death claim.

The first offence will cover the actual sale of claim referrals. It will be an offence to give or receive evidence or to allow another person to give or receive a benefit in exchange for a claim referral. A benefit includes money, goods or services; however, it does not include gifts not exceeding a prescribed value. This will ensure that a gift or a favour to thank someone for referring clients, such as taking a professional contact out to lunch, will not be considered illegal claim farming.

There will also be some limited exceptions for claims referred from one law firm to another as part of the sale of the law firm or because the referring firm has a conflict of interest or insufficient expertise in the subject matter. In these circumstances, paid referrals will be permitted, although legal practitioners will still be required to disclose the payment to their client under the South Australian Legal Practitioners' Conduct Rules.

The second offence will cover one of the main tactics used to collect personal information of injured persons by outlawing unsolicited approaches towards potential claimants. It will be an offence to personally approach or contact a person to induce them to make a personal injury claim or to cause or allow someone else to make such contact. Contact is prohibited regardless of whether a person contacted would actually have been entitled to make a claim; for example, it would prohibit the practice of claim farming businesses cold calling large numbers of persons to ask if they or someone they know has recently been in a motor vehicle accident.

There are several circumstances in which unsolicited approach offences will not apply. It will, of course, be legal to contact someone at that person's request. If an injured person is interested in making a claim and requests contact, for example, by placing an inquiry with a law firm or a claim management service they can, of course, be contacted to talk about the potential claim.

Additionally, altruistic approaches when a person making the approach does not expect or intend to receive, and does not receive, a benefit as a result of the approach, are permitted. It will certainly not be unlawful to approach an injured friend or family member and encourage them to consider seeking compensation where the intent of the approach is not ultimately profit from the referral of the claim.

Law firms may also approach their existing or former clients unsolicited to talk about a personal injury claim as they have a pre-existing relationship with that person; however, the lawyer must reasonably believe that the client would not object to the contact. Law firms may also approach persons at the request of a community legal centre or industrial organisation and may also approach persons that they believe may be eligible to participate in a class action for which the firm is responsible.

As well as creating these new criminal offences, the bill also amends the Legal Practitioners Act 1981 to provide that the conduct covered by the offences is capable of constituting unsatisfactory legal professional conduct or professional misconduct when engaged in by legal practitioners. If a lawyer pays for a claim referral or if they make an unsolicited approach to a person to try to convince them to make a claim, this can be reported to the Legal Professional Conduct Commissioner.

The commissioner can investigate the alleged misconduct, and this could lead to disciplinary action against the legal practitioner, including a reprimand, fine or restriction or suspension on entitlement to practise law. For the purposes of disciplinary proceedings under the Legal Practitioners Act, allegations of claim farming made against the legal practitioner need only be proved to the civil standard of proof on the balance of probabilities. The same exceptions will apply as are available in relation to the new criminal offences.

Disciplinary action may be commenced against lawyers regardless of whether criminal charges for claim farming are laid against the claim farmer or the legal practitioner. The bill creates additional financial consequences for lawyers who engage in claim farming. If an associate of a law practice is convicted of a claim farming offence, the law practice is not entitled to any fees in relation to the farmed claim. They may not collect any outstanding fees and must repay fees already received.

I commend the bill to members and seek leave to insert the explanation of clauses in Hansard without my reading it.

Leave granted.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Commencement

These clauses are formal.

Part 2—Amendment of Legal Practitioners Act 1981

3—Amendment of section 70—Conduct capable of constituting unsatisfactory professional conduct or professional misconduct

This clause amends section 70 of the principal Act to provide that a contravention of the claim farming offences proposed to be inserted into the Summary Offences Act 1953 by this measure is conduct capable of constituting unsatisfactory professional conduct or professional misconduct. The clause also provides that, for the purposes of determining whether a legal practitioner has engaged in unsatisfactory professional conduct or professional misconduct, the question of whether a person has contravened the Act, the regulations, or a claim farming offence is to be determined on the balance of probabilities.

4—Amendment of Schedule 4—Investigatory powers

This clause amends clause 5 of Schedule 4 of the principal Act to extend the protection against self incrimination in the Act to the proposed claim farming offences. It also amends clause 19 of that Schedule to allow information relating to an investigation into the conduct of a legal practitioner which relates to an offence against the proposed claim farming offences to be shared with a body prescribed by the regulations.

Part 3—Amendment of Summary Offences Act 1953

5—Insertion of Part 8A

This clause inserts a new Part into the principal Act.

Part 8A—Personal injury claim farming

42—Interpretation

Proposed section 42 provides definitions for terms used in proposed Part 8A.

42A—Giving or receiving a benefit in exchange for claim referral

Proposed section 42A creates an offence of giving or receiving a benefit, or allowing another person to give or receive a benefit, in exchange for the referral of a personal injury claimant. The section creates exceptions for situations where the referral occurs as part of the sale of a legal practice, or occurs because the referring practice has a conflict of interest or insufficient experience or expertise in the matter.

42B—Approaching or contacting person to solicit or induce a claim

Proposed section 42B creates an offence of making an unsolicited approach or contact to a person to solicit or induce them to make a personal injury claim. Exceptions are provided where the approach or contact is at the request of the contacted person, if the person making the approach or contact does not expect to receive a benefit, if the person making the approach or contact has previously provided legal services for the person approached or contacted, and in relation to community legal centres, industrial organisations and class actions.

42C—Imputation of state of mind of officer etc

Proposed section 42C provides that the conduct or state of mind of an officer, employee or agent of a person acting within the scope of their authority will be imputed to that person.

42D—Additional consequences for law practice

Proposed section 42D provides that if an associate of a law practice is convicted of a claim farming offence the law practice is not entitled to recover any fees or costs in relation to the provision of the services to which the offence related.

42E—Extraterritorial application of Part

Proposed section 42E provides for the extraterritorial application of proposed Part 8A.

Debate adjourned on motion of Hon. B.R. Hood.