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Following the NSW government’s recent introduction of laws to stamp out claim farming, three senior lawyers from a global law firm delve into the significance of the legislation and its potential impact on the legal profession.
In a significant move to protect vulnerable individuals and uphold the integrity of the legal system, the NSW government has recently enacted the Claim Farming Practices Prohibition Act 2025, introducing new laws that criminalise claim farming.
Introduced to Parliament as a bill in February this year, the legislation now makes it a criminal offence in NSW to solicit, purchase, or sell personal injury claims arising under section 11 of the Civil Liability Act 2002 (NSW).
The act covers claims relating to serious injury, medical negligence, public and product liability, and intentional torts.
The enactment of this legislation brings NSW into alignment with jurisdictions such as Queensland, which implemented similar restrictions on claim farming in 2022.
The state government’s crackdown on the controversial practice follows sustained advocacy from members of the legal profession, including Clyde & Co’s Luke O’Kane, Isabella He, and Charlotte Cossey.
“The act represents a meaningful reform for NSW, protecting claimants, upholding the integrity of the compensation process, and aligning the state’s approach with aspiring national standards,” O’Kane said.
The global law firm’s lawyers explained that claim farming refers to the practice where “ third parties actively seek out individuals who may have potential compensation claims – often through cold calling, online ads, or referral networks – and then sell this claim information to legal firms for a fee”.
They noted that such practices are “known to pressure or mislead individuals into initiating claims they didn’t fully understand their rights”.
NSW Attorney-General Michael Daley stated that the new law aims to “put a stop to the insidious practice of claim farming that exploits the trauma of vulnerable people”.
Beyond addressing exploitative conduct, the team from Clyde & Co explained that the legislation also “targets the reduction of fraudulent and opportunistic claims that burden the civil justice system and inflate costs for insurers”.
Under the claim farming legislation, legal practitioners and others found guilty of farming offences face criminal prosecution, including financial penalties of up to 500 penalty units – currently equivalent to $55,000.
The Clyde & Co lawyers also explained that offending lawyers could be “barred from charging or retaining any fees connected with farmed claims, with a requirement to refund amounts already collected”.
They added that such individuals may also be found to have engaged in unsatisfactory professional conduct or professional misconduct.
In severe cases, the trio noted that this conduct could amount to dishonestly obtaining a financial advantage by deception, which carries a penalty of up to 10 years imprisonment.
The act is not just about punishing wrongdoing – it also aims to deliver broad benefits to the legal and insurance sectors.
The lawyers shared that by reducing the number of fraudulent or exaggerated claims, this new law is expected to lower overall legal and investigation costs, expedite genuine claims processing, and potentially stabilise or reduce insurance premiums.
“Importantly, the act preserves access to justice for genuine claimants. Individuals remain free to seek legal advice or support from others when initiating a claim. The prohibition specifically targets the commercial trading of claims, not genuine legal assistance or advocacy,” they said.
