Warning: This article contains details about sexual assault and abuse which may be upsetting for some readers. Reader discretion is advised.
On 9 April 2025, the Claim Farming Practices Prohibition Act 2025 (NSW) (the Act) came into force, prohibiting the solicitation, buying, or selling of personal injury claims. This new legislation aims to curb unethical practices, reduce fraudulent claims, and alleviate the burden on insurers, the NSW government and the legal system.
Pursuant to the Act, anyone who solicits, buys or sells a claim faces a financial penalty of up to 500 penalty units (or $55,000).
The Act applies to personal injury claims as defined in section 11 of the Civil Liability Act 2002 (NSW), as well as intentional torts, including most common law personal injury claims, such as those related to child abuse, assault, medical negligence, and public and product liability. It does not apply to personal injury claims such as dust disease, motor accident or workers compensation claims.
A corresponding amendment to section 165B of the Legal Profession Uniform Law Application Act 2014 (NSW) means that a legal practitioner who contravenes the Act may be found to have engaged in unsatisfactory professional conduct or professional misconduct. Furthermore, law practices found to have breached the Act will be unable to recover legal costs and must refund any legal costs collected.
What is claim farming?
Claim farming typically involves third-party conduits (commonly known as claim farmers) acting between potential claimants and law firms. In some cases, claim farmers may be legal practitioners with no third party involved.
Claim farmers contact potential claimants, including by cold-calling, to persuade or pressure them into making compensation claims. They may use heavy handed and manipulative tactics, coaching victims on what allegations to make and promising outcomes that cannot be delivered. The information collected from potential claimants, which may also consist of preparing witness statements and the like, is then passed onto law firms for a fee.
In essence, claim farmers commodify vulnerable individuals and potential claimants, while certain law practices facilitate and buoy that market by buying the claims. It is a dubious ethical practice and one that is now illegal.
Circumstances giving rise to the Act
Queensland implemented similar laws in 2022 after an inquiry into claim farming practices revealed a rising trend in third parties and law firms making unsolicited approaches to vulnerable individuals. This led to a surge in claims, many of which were found to lack merit.
While similar legislation was adopted in Queensland, the lack of regulation in NSW allowed the claim farming industry to flourish, including a large amount of claims relating to incidents that occurred in Queensland, but were litigated in NSW. Concerns grew that vulnerable victims of child sexual abuse were being exploited by those seeking to create a lucrative business model by capitalising on the removal of legislative barriers following the Royal Commission into Institutional Responses to Child Sexual Abuse, which made it easier for victims to bring claims and seek redress.
The Law Society of NSW had warned of the increasing prevalence of claim farming, which it said 'poses serious questions for governments, insurers and legal practitioners'.
In his second reading speech introducing the Claim Farming Practices Prohibition Bill, the NSW Attorney General explained that:
- anecdotal reports from stakeholders indicated that claim farmers were selling potential claims to law practices for between $800 and $10,000
- the claims were sometimes sold to lawyers 'without the claimant's knowledge', and
- lawyers would later pass on these costs to claimants through disbursement fees upon settlement of a claim – a practice which may not be properly explained or understood by claimants.
Claim farming increases the risk of fraudulent claims
There has been an exponential increase in historical child abuse civil claims in recent years, particularly since 2022.
NSW Police have indicated that one-third of the inmates at one NSW correctional centre had brought child sexual abuse claims alone.
In February 2025, seven people were charged by NSW Police for allegedly bringing fraudulent child sexual abuse claims, with police describing those charges as the 'tip of the iceberg'. One of the accused faces multiple charges, including allegedly bringing his own fraudulent claim and inciting others to make fraudulent claims, through various Sydney law firms. The role played by law firms in progressing such claims was also said to be under investigation by Strikeforce Veritas.
The number of claims that may have been farmed and/or fraudulently brought is unknown. However, dubious claims have undoubtedly placed an enormous strain on insurers, government bodies, not-for-profit organisations, and the legal system, hindering the efficiency of advancing legitimate claims through the system and devastating those who have been falsely accused.
Implications for you
The immediate impact of the Act is likely to be a decline in claims previously brought by law firms engaging in buying farmed claims, as the risks of engaging in this now illegal practice are significant.
The flow-on effect is expected to reduce the significant costs and resources associated with defending such claims for insurers, the government, and other bodies against whom institutional abuse claims have been brought.
The Act, together with the investigations of NSW Police into claim farming and fraudulent claims, is expected to reduce the overall number of claims, including fraudulent ones, which will likely lower premiums and reduce the burden on taxpayers.
Importantly, insurers that were previously forced to withdraw from the market covering sexual abuse claims due to the sheer volume and cost may be able to return. This could help address the significant gap in coverage, particularly for non-government organisations, which has required the State of NSW to temporarily step in with a taxpayer-funded indemnity to fill the insurance gap.
Additionally, the flow-on effects within the civil claims system may include easier access to expert psychiatrist assessments, a reduction in the overwhelming number of subpoenas to bodies such as Medicare and NSW Police, and a shift in focus for courts towards legitimate claims that are likely to progress more efficiently.
As a result of the Act, those that exploit, facilitate, or enable the exploitation of a system designed to assist victims of child abuse are effectively out of business.
Claim Farming Practices Prohibition Act 2025 (NSW)
Claim Farming Practices Prohibition Bill 2025
Civil Liability Act 2002 (NSW)
Legal Profession Uniform Law Application Act 2014 (NSW)
