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Claim Farming

What are the new laws?

The claim farming provisions in the Personal Injuries Proceedings and Other Legislation Amendment Act 2022 (PIPOLA) replicate the provisions contained in the Motor Accident Insurance Act 1994. The Legal Services Commission (LSC) is now the regulator for personal injuries claims under the Personal Injuries Proceedings Act 2002 (PIPA) and the Workers Compensation Regulator at the Office of Industrial Relations is now the regulator for claims made under the Workers Compensation and Rehabilitation Act 2003. The Motor Accident Insurance Commission remains the regulator for claims made under the compulsory third party insurance scheme.

In summary the new laws:

  • prohibit cold calling or personally approaching another person and soliciting or inducing them to make a claim;
  • make it an offence for any person to pay claim farmers for the details of potential claimants or to receive payment for a claim referral or potential claim referral;
  • impose obligations on supervising principal of a law practice who represent the injured claimants to certify during the claims process that neither they nor their associates have paid a claim farmer for the claim. These certificates are called Law Practice Certificates (LPC) and will be required at different stages of the claims process;
  • require law practices to refund, or not recover, fees and disbursements paid in connection with a claim that has been claim farmed;
  • provide the LSC with additional powers to oversee and enforce the new claim farming provisions; and
  • expand the Workers’ Compensation Regulator’s enforcement and investigation powers so it can effectively prosecute claim farming.

Importantly, there are new offences prohibiting claim farming practices including:

  • prohibiting a person from giving or receiving consideration for referring a claimant or potential claimant. This offence aims to prevent a person from paying a claim farmer for the details of potential claimants or receiving payment for a claim referral or potential claim referral.
  • prohibiting a person from personally approaching or contacting another person to solicit or induce them to make a claim. Personal approach or contact includes contact by mail, telephone, email or other forms of electronic communication. This offence aims to prohibit the act of cold calling or personally approaching another person without their consent to solicit or induce them to make a personal injury claim.

Where can I access the required documents?

Law Practice Certificate (LPC) (PDF, 251.9 KB) for use across all three schemes.

The Claimant Certificate (PDF, 200.1 KB) for PIPA claims.

Please ensure you download these certificates and open in Adobe to allow for electronic signatures to be included on the form.

The Claimant Certificate for MAIA claims can be accessed in the MAIA Notice of Accident Claim Form or on the MAIC website.

What are my obligations?

You must not contravene the offence provisions prohibiting you from giving or receiving consideration for claim referrals, and you must not approach or induce potential claimants to induce them to make a claim.

In addition, if you act for a claimant, you will have obligations to complete and provide law practice certificates (LPC) which certify that you have not contravened the above provisions. It is an offence to give a false or misleading LPC. LPCs are required at various stages of the claim process including when retained, at settlement or judgment and if the law practice is sold. The LPC must be signed by the supervising principal and verified by statutory declaration. The LPC must state:

That the supervising principal and each associate of the law practice:

  • have not given, agreed to give or allowed or caused someone to give consideration to another person for a claim referral or potential claim referral for the claim or received, agreed to receive or allowed or caused someone else to receive consideration from another person for a claim referral or potential claim referral for the claim, or if the supervising principal believes section 71 of the Personal Injuries Proceedings Act 2022 does not apply due to subsection (3), the reasons for the belief; and
  • have not personally approached or contacted the claimant and solicited or induced the claimant to make the claim or if the supervising principal believes section 71B PIPA does not apply due to subsection (3), the reasons for the belief; and
  • If the claim is a speculative personal injury claim, that the costs agreement relating to the claim complies with section 71E or the Legal Profession Act 2007, section 347.

Acting for insurer

If you are a lawyer acting for an insurer, you are required to report a reasonable belief of contravention of a LPC provision. You can make a complaint about discrepancies in LPCs and any suspicions of claim farming activity to:

Selling a law practice

If you are selling all or part of your law practice’s business, you must complete a LPC for each of the claim matters you are selling and provide the certificate to the new law practice and a copy to the claimant, pursuant to section 8F of PIPA.

Purchasing a law practice

If you are a purchasing all or part of a law practice, you must receive a law practice certificate as identified above. If you do not receive an LPC for the claim, you must complete a notice that states you have not received the certificate and provide it to the regulator as soon as practicable.

What happens with claims that fall under multiple schemes?

Hybrid Claims

Some claims that have the same facts and injury may fall under two or more claim schemes and involve multiple respondents – these are known as hybrid claims. This may occur where, for example, a person suffers an injury at a site due to faulty equipment where they are completing work as part of their role. Their claim may fall under both the PIPA and WCRA.

Hybrid claims will require LPC to be submitted under each scheme, possibly to a number of respondents. However, a single form has been developed for use across the three schemes, which supports electronic signatures, to minimise regulatory burden.

This is a summary of the provisions consistent across the three schemes:

 

MAIA 1994

PIPA 2002

WCRA 2003

Certificate requirements

Division 2A Law practice certificates generally and certificates before notice of claim

Ch 2, Part 1, Division 1AA Requirements for law practice certificates

Ch 6B

Law Practice retained

s 36A or 37AB

s 8C or 9C

s 325H or 325I

Settlement/judgment

s 41A

s 61

s 325L

Sale of law practice

s 36E

s 8F

s 325M

Purchase of law practice s36E S8F(3) s325M

Investigation of claim farming offences

Each relevant regulator is responsible for investigating breaches of the claim farming provisions that fall within their jurisdiction. However, a coordinated approach will be taken to hybrid claims that fall under multiple schemes.

Offences consistent across three schemes

MAIA 1994

PIPA 2002

WCRA 2003

Giving or receiving consideration for claim referrals

Maximum penalty—300 penalty units

s 74

s 71

s 325R

Approach or contact for the purpose of making a claim Maximum penalty—300 penalty units

s 75

s 71B

s 325T

False or misleading law practice certificate

Maximum penalty—300 penalty units

S 36D

S 8E

S 325P

The Legal Services Commissioner may investigate the conduct of an external entity where he/she suspects the entity has contravened the claim farming provisions.

A special investigator can be appointed to investigate potential claim farming offences, where the regulators reasonably suspect an entity may have contravened the offence provisions under their respective acts which prohibit giving or receiving consideration for referring a claimant or potential claimant, and personally approaching or contacting another person to solicit or induce them to make a claim.

The regulators will conduct investigations where discrepancies are identified in relation to LPCs, and where complaints, intelligence or other information received indicates that a matter has been claim farmed.

Enforcement

The offence provisions prohibiting conduct including:

  • giving or receiving consideration for referring a claimant or potential claimant; and
  • personally approaching or contacting another person to solicit or induce them to make a claim; and
  • giving a false or misleading LPC.

These provisions carry a maximum penalty of 300 penalty units. In addition, a failure to comply with the requirement to provide a LPC at the required stages also carries a maximum penalty of 300 penalty units.

Breaches of these provisions may result in prosecution. The regulators will consider the available evidence at the finalisation of an investigation to determine the appropriate regulatory response. Action taken will be impartial and proportionate to the seriousness of the breach/es identified.

Breaches of the legal practice certificate requirements, and the claim farming provisions may also give rise to conduct which is considered to be unsatisfactory professional conduct or professional misconduct and may be investigated by the Legal Services Commission.

Additional consequences - costs

Where a principal or an associate of a law practice is convicted of a claim farming offence (failure to complete LPC on settlement/judgment; giving or receiving consideration for referring a claimant or potential claimant; approaching or contacting another person to solicit or induce them to make a claim), the law practice is not entitled to recover any fees or costs, including disbursements, that relate to the provision of services for the claim and must repay any amount received relating to the services to the person from whom it was received.

In addition, where a supervising principal of a law practice fails to give a LPC to the claimant in the circumstances set out by the Act, the principal must refund all fees and costs, including disbursements paid by the claimant and cannot charge or recover from the claimant any further fees and costs in relation to the claim.

What are the law practice certificate requirements under PIPA?

For an overview for when law practice certificate is required under PIPA, refer to the Law Practice Certificate Requirements Flowchart (PDF, 176.9 KB).

Law practice certificate requirement means a requirement under the following sections.

Section

Requirement

Timeframe

section 8C

Provision of law practice certificate where a law practice is retained by claimant before notice of claim or urgent proceeding

Before notice of claim or urgent proceeding

section 8E

Offence related to provision of false or misleading law practice certificate

N/A

section 8F

Provision of law practice certificate where law practice refers claim through sale of business

Before referral occurs

section 9C

Provision of law practice certificate where a law practice is retained by claimant after notice of claim

Within one month after law practice is retained

section 13A (2) and (4)

Duty to give law practice certificate if waiver or presumption

(2) As soon as practicable

(4) within 1 month after the claimant is notified of the waiver or presumption takes effect

section 61

Provision of law practice certificate on settlement or judgement

Within 7 days after acceptance or judgment

What about claims already on foot after commencement?

This is dealt with by the transitional provisions set out in part 9 of PIPA and Chapter 37 of WCRA. Section 88 PIPA/section 747 WCRA apply where a law practice was retained by a claimant prior to commencement and the claim has not been settled, decided by a court or otherwise concluded on commencement.

A LPC for the claim must state the matters in section 8B(2), (3) and (4) PIPA/section 325F(2), (3) and (4) WCRA only in relation to conduct after the commencement. However section 8F PIPA/section 325M WCRA apply to a referral of a client to a new practice made after commencement, even if the agreement for the sale of the practice was entered into prior to commencement.

Am I required to report non-compliance?

It is important to remember that each of the schemes has different requirements in relation to reporting non-compliance, and in relation to LPCs.

For example, under PIPA, section 71G requires a supervising principal (where they reasonably believe a person is contravening a law practice certificate requirement) to give the commissioner the information the principal has in relation to the contravention. This must be one within 14 days after forming the belief, or a longer period agreed by the commissioner.

A supervising principal’s failure to comply with this section may constitute unsatisfactory professional conduct or professional misconduct under the Legal Profession Act 2007, chapter 4.

Pursuant to subsection (4) an insurer may give the commissioner the information the insurer has in relation to a contravention, where the insurer reasonably believes a person is contravening a law practice certificate requirement or section 71 or 71B.

Transitional Provisions

The transitional provisions are set out in part 9 of PIPA.

LPC won’t be required under s8C or s9C in claims where a law practice has already been retained as these provisions apply at the point a law practice is retained. It is therefore likely that the next point an LPC is required for claims on foot will be at settlement/judgment, unless there is a sale of business.

Section 88 PIPA applies where a law practice was retained by a claimant prior to commencement and the claim has not been settled, decided by a court or otherwise concluded on commencement. An LPC for the claim must state the matters in section 8B(2), (3) and (4) PIPA only in relation to conduct after the commencement.

Section 8F PIPA applies to a referral of a client to a new practice made after commencement, even if the agreement for the sale of the practice was entered into prior to commencement - so an LPC will also be required for sale of business if the referral of the client occurs after commencement.