Statutes Amendment (Claim Farming) Bill

Second Reading

Adjourned debate on second reading.

(Continued from 12 September 2024.)

The Hon. J.M.A. LENSINK (17:00): I rise today to indicate the opposition's support of the Statutes Amendment (Claim Farming) Bill 2024. This bill is an important legislative step to protect South Australians from the unethical and exploitative practice of claim farming. Claim farming is an industry where personal injury claims are treated as commodities, with individuals' private information being collected and sold to law firms for financial gain. This practice often involves aggressive and misleading tactics, such as unsolicited calls, deceptive promises of easy compensation and targeting of vulnerable groups, including prisoners, Aboriginal communities and survivors of child sexual abuse. Such actions undermine the integrity of our legal system.

This bill will directly tackle claim farming by creating two key offences within the Summary Offences Act. The first offence makes it illegal to give or receive a benefit in exchange for a claim referral. This means claim farmers and law firms will no longer be able to profit from the sale of personal information obtained through unethical means. The second offence prohibits unsolicited approaches to potential claimants. This prevents cold-calling operations that pressure individuals into pursuing claims they may not have otherwise considered.

Additionally, the bill introduces amendments to the Legal Practitioners Act 1981. It classifies claim farming practices as conduct capable of constituting unsatisfactory professional conduct or professional misconduct, ensuring that legal practitioners who engage in such activities face disciplinary consequences. The legislation provides limited exemptions for appropriate claim referrals, such as when one law firm acquires another, or when a lawyer refers a client elsewhere due to a conflict of interest. It also permits lawyers to reach out to former clients or individuals eligible for class actions under specific conditions, ensuring that claimants still have access to necessary legal assistance.

The bill holds law firms accountable for their employees' conduct. If a law firm associate is convicted of claim farming, the firm must forfeit all fees associated with that claim. However, a defence is available if the firm can demonstrate it took reasonable steps to prevent such behaviour. This measure ensures that South Australia does not become a target for claim farmers, particularly as other jurisdictions are also cracking down on the practice. By acting now, we are preventing exploitation and protecting the rights of those who have suffered injuries.

There are amendments standing in my name which I will speak to in committee and which seek to address concerns raised by the Law Society, so I will move those at the appropriate juncture and I look forward to further debate on this bill.

The Hon. S.L. GAME (17:03): I rise to speak on the government's Statutes Amendment (Claim Farming) Bill 2024. The aim of this bill is to prohibit claim farming, the predatory practice of collecting and selling personal injury data and pressuring vulnerable individuals into lodging compensation claims. The practice has already been banned in Queensland and it is right for our state government to be concerned that these unscrupulous operators will move into our jurisdiction. Consequently, this is a timely proposal that will prevent the establishment of such predatory operations in this state and will protect vulnerable people in our community from being exploited by having their personal information sold or facing unsolicited cold calls from pushy salespeople who want to pressure them to make a compensation claim.

Under the proposal, any person who approaches or contacts someone to solicit or induce a claim will face a maximum penalty of $50,000. Additionally, any person giving or receiving a benefit from exchanging or referring a claim could face a maximum penalty of up to $50,000. The types of claims covered by the proposed amendments will be personal injury claims for compensation for physical or mental harm or death.

While it is unclear how these offences will be detected and enforced, the bill remains a useful preventative measure against a lucrative industry that seeks to profit from the suffering of victims. The proposal also seeks to amend the Legal Practitioners Act 1981 to provide that 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 conduct can be reported to the Legal Profession Conduct Commissioner, which could lead to disciplinary proceedings.

Once again, it is unclear how such conduct will be detected and enforced, but at least it puts practitioners on notice that such exploitation of people's suffering could lead to disciplinary action, up to suspension on entitlement to practise.

The Hon. J.S. LEE (17:05): I rise to speak in support of the Statutes Amendment (Claim Farming) Bill 2024. This bill will prohibit the act of claim farming in relation to personal injury claims in South Australia. It would be reasonable to assume that most people may not be aware of the practice of claim farming. It is quite alarming to learn that there are unscrupulous firms out there that attempt to profit from the trauma and injury of individuals in this way.

Claim farming is a process of collecting the personal information of a person who has suffered an injury, usually through inappropriate or exploitative ways, such as cold-calling or unsolicited approaches. That information is then sold to a law firm or a claims management provider who pays for the referral and makes a profit from providing a service to the injured person. It is particularly concerning that claim farmers often target people with vulnerabilities, such as prisoners or residents of remote Aboriginal communities, and often use high-pressure sales tactics and deceptive promises of quick and easy compensation to secure the sale.

Selling information for personal injury claim referrals disrespects the best interests of the injured person and can be motivated by greed rather than by which law firm is the most appropriate to represent the case. I understand that it is difficult to quantify how widespread claim farming practices may be in South Australia, as it is largely done under the table. However, it is concerning to learn that there are reports of claim farmers targeting victims of child sexual abuse, following the establishment of the National Redress Scheme. This bill seeks to outlaw claim farming practices and to prevent them from becoming rampant in South Australia.

The bill will prohibit the sale or receipt of claim referrals for a benefit and will cover claim farming in relation to personal injury claims, including wrongful death claims. There will be exceptions for claims referred between law firms as part of the sale of a law firm or due to a genuine lack of expertise or a conflict of interest.

The bill will also introduce an offence for personally approaching or contacting a person to induce them to make a personal injury claim. It is important to note that there are several exceptions to this that would allow a person to be contacted if they had requested the contact or to allow friends or family to encourage an injured person to consider seeking compensation where there is no profit gain from the claim referral.

It will also be legal for law firms to approach existing or former clients about a personal injury claim in cases where the lawyer reasonably believes that the client would not object to the contact. For example, where a law firm may have provided legal advice or representation to a person for a family law case and it comes up that there is a history of childhood sexual abuse, the law firm could suggest that the person may have recourse to a personal injury claim. A law firm would also be able to approach a person at the request of a reputable support service, such as a community legal centre or industrial organisations, or approach people who they believe may be eligible to participate in a class action that the law firm is representing.

There are also provisions for investigation and disciplinary action to be undertaken by the Legal Profession Conduct Commissioner in relation to law firms that pay for claim referrals or make an unsolicited approach. I understand that the Law Society of South Australia has been consulted on this bill and has provided detailed submissions to the government, particularly regarding the carve-outs for law firms to make appropriate approaches to clients and when requested by community legal centres and industrial organisations. I am advised that the government will introduce several amendments in response to the Law Society's submission to further clarify such carve-outs and add several definitions to the bill.

While claim farming is not yet rampant in South Australia, I am encouraged to see the state government is following Queensland's example and taking a proactive approach to outlaw this shady and exploitative practice. It is important that the privacy and wellbeing of injured persons, victim survivors and their families are protected. I am particularly alarmed at the prospect of victim survivors of childhood sexual abuse being targeted by these unscrupulous claim farmers. I will be supporting this bill to help protect and serve the best interests of vulnerable members of our community. I commend the bill.

The Hon. R.P. WORTLEY (17:10): I rise to speak in support of the Statutes Amendment (Claim Farming) Bill 2024. Claim farming refers to a practice of collecting the details of a person or persons with potential legal claims and selling them to a law firm who subsequently offers services to the claimant. The referral may be made with or without the consent of the claimant. Usually claim farming is undertaken in relation to personal injury claims.

Businesses that engage in claim farming obtain potential claimants' details in a variety of ways, including: advertisements offering assistance to persons with a particular injury, for example, offering hearing assessments to persons with potential work-induced hearing loss; cold-calling people to ask if they have a relevant injury, either at random or with numbers obtained from relevant contacts, such as an automotive repairer providing numbers of persons who have been in car accidents; online data collection, for example, a website that allows people to book appointments with doctors that collects details of patients with a work-related injury; and direct approaches in relevant communities.

The claim farming business will provide the claimant's details to a law firm with whom they have pre-existing arrangements. The law firm will provide a referral fee or other benefit. Claim farming has long been a concern in relation to claims under compulsory third-party personal injury insurance for motor vehicle accidents. It has also been identified or suspected in relation to a range of other types of injuries, including workplace injuries and compensation for physical and psychological injuries sustained due to child sexual abuse. This practice typically targets particularly vulnerable people, such as those in prison.

Injured persons are in a vulnerable situation, and claim farming exploits that vulnerability. The potential for profit motivates claim farmers to approach injured persons or the families of deceased victims in harassing or predatory ways and to inappropriately deal with their private information. The bill would make claim farming a criminal offence within the Summary Offences Act 1953, punishable by a fine of up to $50,000. It would also be an offence to make unsolicited personal contact with any person to solicit or induce them to make a personal injury claim in the expectation that the first person will receive a benefit.

It would be an offence to give or receive a benefit in exchange for the personal details of a person who has or may have a personal injury claim. 'Benefit' will be defined broadly to include goods, services, cash payments or other benefits. However, it will not include gifts or hospitality not exceeding a certain value, e.g., a lawyer can still give a professional acquaintance a small thankyou gift for referring a client. As well as being a criminal offence, these practices would constitute unsatisfactory professional conduct or professional misconduct for the purposes of the Legal Practitioners Act 1981. This will allow such conduct by lawyers to be investigated and disciplined regardless of whether there has been a conviction for such conduct.

The bill includes a series of carve-outs for practices that will not be considered claim farming for the purpose of the offence, such as referral fees paid when lawyers may have legitimate reasons to refer a claimant to another law firm, such as for a lack of expertise or a conflict of interest, so long as the payment does not exceed the amount prescribed by the regulations.

The bill allows lawyers to make unsolicited approaches to their existing or former clients if the lawyer reasonably believes that the client would not object, as the lawyer and client have a pre-existing relationship. It will not be unlawful for a law firm to approach or contact a person who may be eligible to participate in a class action for which the law practice is responsible. This acknowledges that in some cases law practices may be required to contact potential class action claimants.

As with any crime, police will be able to investigate reports of claim farming offences. Reports to police could be made by members of the public, support services assisting injured persons or agencies who hear of claim farming during the normal course of their work, such as the CTP Insurance Regulator, who may become aware of claim farming of CTP insurance claims.

In addition, as claim farming practices by a legal practitioner will be considered professional misconduct, the Legal Profession Conduct Commissioner will be able to use their existing investigation powers to investigate suspected claim farming by legal practitioners. The powers of the LPCC include the ability to require investigated legal practitioners to produce documents or written information. To preserve the privilege against self-incrimination, the purposes for which these documents can be used are limited. The LPCC can also search premises with the consent of the occupier or under a warrant issued by a magistrate.

Approaching a person at the person's request, such as a law firm receiving an inquiry through their website or someone asking to be contacted in relation to a personal injury, is not prohibited. General advertising of a law practice's services, including on social media, is also not prohibited.

Amendment No. 1, definition of 'claim' under the bill: a 'claim' means a claim for compensation for personal injury. This amendment will put beyond doubt that claims under the National Redress Scheme are also considered claims for personal injury and are covered by the prohibitions on claim farming.

Amendment No. 2, definition of 'industrial organisation': the bill provides some exceptions to the offence of approaching a person to solicit or induce them to make a personal injury claim. One exception provides that a law firm may contact a potential claimant if requested to do so by a community legal centre or industrial organisation. This amendment will insert a definition of 'industrial organisation' for the purposes of this exception to ensure consistency with the Fair Work Act 1994.

Amendment No. 3, definition of 'legal services': another exception to the unsolicited approach offence provides that law firms may contact potential claimants to whom the law firm has previously supplied legal services. This amendment will insert a definition of 'legal services' to match the Legal Practitioners Act 1981, which will ensure consistency between the two acts.

Amendment No. 4, referrals from other not-for-profit organisations: the Law Society suggests that law firms should be allowed to contact potential claimants at the request of other not-for-profit organisations, such as the Returned and Services League (RSL), in addition to CLCs and industrial organisations. This amendment will allow other kinds of organisations to be added to the relevant exception by regulation. With that, I seek the support of the council for this bill.

The Hon. C. BONAROS (17:18): I rise to speak in support of this bill. I think all the honourable members have now described what claim farming is. I am going to say it because sometimes you just have to: when this bill first came up, I think it was a pretty chaotic week. I was trying to figure out what on earth this had to do with farming and claims. Every time I look at the bill, I am reminded of that day when, indeed, Jody and I both sat in our office saying, 'What are we doing about farming?'

It turns out that there is a much more sinister side to this bill, a very troubling one indeed, particularly as it relates to historic child abuse cases where we know that individuals can be not just financially exploited but, perhaps worse still, retraumatised through the practice of claim farming, otherwise known as claim harvesting. If there is one thing I think we know—and other commentators have said this—victims in particular and those vulnerable members of our community need a system they can trust.

What we saw in New South Wales was a terrible case which resulted in this legislation. Even though it was not claim farming per se, in effect what happened in that jurisdiction was that there were a number of arrests made—seven I think in total—after an allegedly fraudulent claims farm syndicate had been uncovered. It was alleged in that case that at the heart of that scheme claim farmers coached former young offenders, inmates and public school students on how to file false compensation claims for child sex abuse while in care, and then sold those referrals to law firms in Sydney.

That is unconscionable, to say the least, and really detracts from the severity of the sorts of historic child sex abuses that we deal with in this area. It was that particular case that, as was reported, shone a light on what is otherwise—and has until this point in time—been legal, and now we have seen New South Wales and Queensland and us moving towards stopping this sort of predatory practice from being able to continue any further.

I note of course that the Knowmore Legal Service has, for obvious reasons, spoken in support of this legislation, as has the Australian Lawyers Alliance. Their strong opposition to what they call an insidious practice of claim farming has been provided loudly to all of us. There is no place for those who make fraudulent claims in the justice system. As the Hon. Michelle Lensink said, it just serves to undermine the integrity of that system, but also the faith that people have in that system.

I note also that—and we might canvass some of this when we get to the committee stage debate—there have been some questions raised with me around why we are dealing with this in the Summary Offences Act. I will foreshadow those now and we can get to them when we deal with the committee stage debate. In all, I guess what we are really trying to do by legislating against claim farming is to prevent the undermining of those legitimate claims by survivors, particularly by survivors of abuse and those survivors who already lack faith in the system because of the abuse that they have sustained.

As has been said publicly, they, more than anybody else, who are amongst our most vulnerable, need a system that they can trust, and this sort of measure is aimed directly at providing that sort of faith in the system they are dealing with. I note also commentary that was made in relation to the fact that boys' homes and juvenile detention centres, for instance, had, as we know, disproportionately high levels of sexual and physical abuse.

There are many legitimate claims and to have those undermined by the sorts of claims that gave rise to this legislation in the first place—where you have these individuals who think it is appropriate to go to people who are young offenders and inmates in incarceration and convince them to make false claims, only to sell those on for profit to law firms—beggars belief in many respects, that people would stoop to that sort of level and undermine our justice system as much as they do.

I think overall this is a positive step forward, one that certainly has the support of those alliances and groups working in this space, but also who have been advocating for these changes. I think it is important also to note, and this was canvassed during the briefing, that there are carve-outs in the bill, that there are, I suppose, unique elements of this bill that differ from other models, and make it unique to South Australian circumstances.

But, specifically, what we would not want to do is anything to affect the ability to have, for instance, class actions. There are carve-outs for unions, there are carve-outs for class actions and other like associations who we know often go down the path of bringing together claimants for whatever purpose it is, not necessarily child abuse; it could be anything. The one that springs to mind is the underpayment of wages. You would expect that those sorts of things would be carved out.

By the same token, though, this idea of having what claim farmers would call legitimate people working as intermediaries trying to link claimants together for the purposes of making one of these claims only to onsell that to somebody else is, as the Lawyers Alliance said, an insidious practise that needs to be stamped out, and I am glad that we are one step closer to doing that.

The Hon. K.J. MAHER (Minister for Aboriginal Affairs, Attorney-General, Minister for Industrial Relations and Public Sector, Special Minister of State) (17:26): I thank members for their contributions on this bill and their indications of support. I must say there are a number of staff in my office who have been most pleased that some have thought this might have been about clam farming. They thought we were secretly implementing their vegan agenda by stealth as a matter of course through this bill. But, alas, no, it is not a secret vegan agenda to outlaw the eating of certain types of seafood.

It is a very serious issue, as members have spoken about. It can be an insidious practice. At its heart, this is about doing less harm to people who have suffered great trauma. The very fact of being approached unsolicited about a possibility of harm, it is reported, can cause great harm and distress for someone who does not wish to engage in that. These are the sorts of practices that we are looking to address here.

I look forward to having some further discussions about how this works, particularly the government amendments and other amendments and views that are being put forward by the Law Society. Certainly, we have aimed to take into account much of what the consultation, particularly with groups who represent lawyers like the Law Society, have said in relation to what this bill does and look forward on the next sitting day when we progress to the committee stage, having those discussions.

Bill read a second time.

At 17:29 the council adjourned until Tuesday 1 April 2025 at 14:15.