Queensland Government Prohibits Claim Farming

Authors: Chris Mills, Ben Maxwell and Lydia Andrews

The Personal Injuries and Other Legislation Amendment Bill 2022 (‘the Bill’) introduces offences similar to the Motor Accident Insurance and Other Legislation Amendment Act 2019 (‘MAI Amendment Act’). The MAI Amendment Act introduced a prohibition on claim farming in relation to motor vehicle claims as the practice had become prevalent and needed to be addressed.

The Bill amends the Personal Injuries Proceedings Act 2002 (‘PIPA’). The specific changes to PIPA prohibit claim farming and undesirable billing practices for personal injury and worker’s compensation claims. Although the Bill is yet to become law, the implications will be significant.

What is ‘claim farming’?

In a media statement published last week, the Queensland Attorney-General, the Honourable Shannon Fentiman MP stated that “Claim farmers cold call or approach individuals to coerce them into making a personal injury or workers’ compensation claim and then charge a fee to ‘sell’ their claim to a legal practitioner or other claims management service providers…”

Though the practice of claim farming was outlawed for Motor Accident Claims in 2019, Ms Fentiman observed that “…due to the success of the reforms, the claim farming industry has pivoted to new types of personal injury claims with reports that claim farmers are targeting personal injury claims, including those involving institutionalised child sexual abuse…”

‘Claim farming’ for institutional child sexual abuse claims occurs when a claim farmer takes unsolicited steps to pressure survivors to make a personal injury claim against an institution and, for reward, sells or refers the claim to a law firm.  In its submission to the Legal Affairs and Safety Committee in response to the draft exposure Bill, knowmore (an organisation that provides free advocacy, legal advice and assistance to survivors of child sexual abuse) submitted “We consider these provisions are necessary and appropriate to protect survivors of institutional child abuse who are currently being targeted by such practices throughout Queensland.”

It also submitted that “Survivor advocacy businesses are known to regularly send unsolicited mail to survivors in prison. knowmore has seen letters sent to survivors in prison by three different businesses. These all follow a similar model of asking the survivor to provide some initial details to take up the business’s offer of assistance and start their claim. The tone of the letters is such that many of our clients have been confused about who the letters were from and what they should do with them. The documents sent by some of these businesses are particularly forceful…”

The submission by knowmore identifies compelling reasons for ending the practice of claim farming for institutional child sexual abuse claims. It is available here.

Claim Farming Offences

The Bill introduces various offences in relation to claim farming by individuals and law practices.

The first offence removes the financial incentive to engage in claim farming by prohibiting a person from giving or receiving consideration for referring a claimant or potential claimant. The Bill provides:

“(1) A person (a payer) must not give, agree to give or allow or cause someone else to give consideration to another person (a payee) for a claim referral or potential claim referral.

(2) A person (also a payee) must not receive, agree to receive or allow or cause someone else to receive consideration from another person (also a payer) for a claim referral or potential claim referral.”

There is a maximum penalty of 300 penalty units (currently $43,215) for a person found in contravention of the above offences. ‘Consideration’ includes a fee or other benefit; however, it does not include a gift or hospitality if the gift or hospitality is not money and has a value of $200 or less.

The second offence prohibits a person from personally approaching or contacting another person to solicit or induce them to make a claim. The offence attracts a maximum penalty of 300 penalty units (currently $43,215). This includes specifically contacting a person whether in person or by mail, telephone, email or another form of electronic communication.

There are certain exceptions for these offences, including if:

  1. The first person does not expect or intend to receive any consideration and does not ask for someone else to receive any consideration because of the approach or contact;
  2. The first person is a law practice that is supplying, or has supplied, the second person or a relative of the second person with legal services, and the law practice reasonably believes the person will not object to the approach; or
  3. The first person is a law practice that has been asked to contact the person on behalf of a community legal service or industrial organisation to approach the person, and they have been advised that the representative reasonably believes the second person will not object to the approach.

Law Practice Certificates & Billing Requirements

Additional obligations and offences apply to law practices, such as reporting non-compliance, and if a law practice is convicted of an offence of claim farming, the law practice is not entitled to recover any fees or costs, including disbursements.

To ensure compliance by law practices, legal practitioners will be required to give a law practice certificate when a claim is made and settled/finalised confirming that the supervising principal and each associate of the law practice has not paid a ‘claim farmer’ for the claim or approached, solicited or induced the claimant to make the claim. A breach of the obligation to provide a law practice certificate, or providing a false or misleading certificate, attracts a maximum penalty of 300 penalty units.

Related to the issue of claim farming is undesirable billing practices by law practices in speculative personal injury matters. The Bill aims to prevent law practices billing in a manner that may disguise claim farming arrangements. These practices ultimately prevent successful claimants from receiving a fair and equitable share of judgement or settlement funds, that they may have otherwise been entitled to.

Currently, the Legal Profession Act 2007 (Qld) (‘LPA’) places limitations on what legal costs can be charged in relation to speculative personal injury matters. The limitation in regards to these types of claims is 50 percent of legal costs after disbursements. This is what is commonly known as the 50/50 rule. Essentially, the 50/50 rule is an agreement that when a claim has been settled that the firm can claim a maximum of half of the total settlement amount and the remainder goes to the claimant.

Ms Fentiman MP explained that undesirable practices constituted the process of ‘…inflating disbursements, through the charging of ‘additional amounts’, thereby increasing the amount of legal costs that can be charged and in turn reducing the amount payable to the successful claimant.’ These additional amounts often take the shape of items such as interest and fees paid to an entity other than the law practice in obtaining instructions or preparing statements in relation to the claim.

The Bill amends the LPA such that interest and ‘additional amounts’ are effectively treated as legal costs rather than disbursements for the purpose of calculating the maximum payment a law practice may receive for a personal injury claim.

What does this mean in practice?

Claim Farming

These changes ensure the practice of ‘claim farming’ is now an offence under the Act. They remove financial incentives for claim farmers to procure or manipulate survivors into making personal injury claims.

Law firms will now be required, upon settlement of a claim, to provide a certificate declaring that the ‘claim farming’ provisions have not been breached. If a firm breaches these provisions, it will not be able to recover any fees or costs in relation to the claim and must repay any amount received.

The changes bring PIPA in line with the changes that the MAI Amendment Act. Given the success the MAI reforms have had in combating ‘claim farming’ for motor accident claims, these reforms are arguably well overdue.

Undesirable Billing Practices

The Bill introduces greater transparency around the billing practices of legal costs in relation to speculative personal injury claims. The expansion of the definition of legal costs to include additional amounts allows for the claimant to have access to a greater portion of their settlement as per the 50/50 rule. Given a measure of the costs payable to the law practice is usually borne by defendants upon settlement of claims, it may have consequences for the quantification and assessment of the cost’s payable by defendants.

What will these changes mean for historical abuse cases?

The amendments to the PIPA will help prevent unscrupulous operators from taking advantage of abuse survivors for profit and may help survivors make more informed choices about the options available to them. There are a number of less adversarial options than litigation available to survivors, including the National Redress Scheme and private Redress Schemes implemented by various institutions. These options do not require survivors to engage lawyers and do not result in costs liability for institutions. They often mean that all money paid as settlements by institutions is directed to the survivors rather than the payment of legal bills.

For those matters that continue to proceed as personal injury claims, there can be a higher degree of confidence that survivors have clarity about the nature and prospects of their claims and the process to be followed for the resolution of their claims. It is also significant that lawyers will not be able to recover fees if they are unable to certify that their claims have not been farmed.

If you would like more information, please contact Neumann & Turnour Lawyers on 07 3837 3600.