The first time many people heard the term “claim farming” was last week when New South Wales police announced that seven arrests had been made and an allegedly fraudulent claims farming syndicate had been uncovered.
Police alleged that “claims farmers” at the heart of the scheme coached former young offenders, inmates and public school students on how to file false compensation claims for child sexual abuse while in care, then sold those referrals on to law firms in Sydney.
Claim farming, a practice that these arrests have shone a light on, is legal in most states including NSW, where intermediaries are allowed to sell on the details of victims to law firms, who then make claims on their behalf. Last week’s arrests were not due to claim farming per se but allegations that the claims being farmed were fraudulent.
Police will allege in court that in relation to the matters they had charged so far, the seven accused stood to make $3.75m. But Det Supt Gordon Arbinja said police would allege in court that at the time of arrest the group held 100 more applications and the intervention of police last week prevented a further $30m in compensation being paid out.
In his press conference announcing the arrests of the allegedly fraudulent claim farming syndicate, Arbinja said those charged had allegedly targeted three compensation programs, including the national redress scheme. The scheme was established after the royal commission into institutional responses to child sexual abuse as a means of providing financial redress to victims. The claims are capped at $150,000 but have a lower threshold for proof than civil claims and are far more accessible.
What is claim farming?
Claim farming is not illegal in most of the country – though Queensland and South Australia have introduced legislation to prohibit it and the NSW government has a draft exposure bill seeking to outlaw the practice.
Groups who engage in claim farming argue they act as trusted intermediaries between victims and a complex, overwhelming legal system and enable more people to access compensation by facilitating introductions between victim-survivors and trusted law firms.
But many lawyers and advocates argue that claims farming itself is too easy to exploit, and makes it harder for genuine survivors to be believed and get justice.
Someone who is familiar with claim farming is Adair Donaldson, a Queensland lawyer who has worked to get compensation for victims – including victims of childhood sexual abuse – for more than two decades. Donaldson has been approached many times by “claims farmers” trying to sell him the details of potential clients.
He says over the years he regularly received calls, often from members of survivor advocacy groups, offering to refer potential clients to him for a fee.
“This wasn’t limited to one or two people,” he says. “There were a number of organisations that I could think of that were doing this practice.
“What they would then do is that they often targeted lower socioeconomic areas or people … [or] our prison systems, and they would then contact these people and then engage with lawyers offering to sell their claims to the lawyers.”
Law firms are then able to make civil claims on behalf of the clients – suing institutions or government departments for compensation for historic sexual abuse, for example – and then take their legal fees from the eventual payout.
John Rule, a principal lawyer at Maurice Blackburn, has also experienced these offers – and, like Donaldson, he does not accept referrals from claims farmers.
“Someone who’s sort of self-styled as an advocate, they go and collect up a whole lot of claims from a particular institution, say, a particular private school or whatever it is, and then they approach us and try to sell to us in bulk,” he says. “We’ve been very conscious about that from the start, of not engaging with those sorts of people.”
Donaldson has heard of claims farmers charging law firms fees of between $4,500 and $6,500 for each client referral. Guardian Australia has seen documents from one survivor advocacy group citing fees of up to $14,000.
Several lawyers told Guardian Australia they have heard from people who have been “claim farmed” that the referral fee paid by the law firm to the claim farmer was then added to the individual’s legal bill as a “disbursement”, meaning claim farmers are not only profiting from referring victims, but the victims are also effectively paying to be claim farmed.
What are the issues with legal claims farming?
A key issue, says Rule, is that claims farming could become an “incentive to turn a blind eye” to suspect claims.
“[Claims farmers can] undermine legitimate claims by survivors of abuse, and those survivors of abuse are, by definition, incredibly vulnerable and already distrustful of the system and the abuse survivors really need a system they can trust,” Rule says.
“An unfortunate reality is that at some of these boys’ homes and juvenile detention centres, they had disproportionately higher levels of sexual and physical abuse. So there are a lot of legitimate claims from there, and those ones, I think, are going to be treated especially harshly by defendants and insurers and possibly courts.
“So it has very real-world consequences in the way that it will make the process much harder on legitimate survivors.”
One lawyer who works at Knowmore, the not-for-profit organisation that assists survivors in accessing the national redress scheme, has spoken on condition of anonymity about clients who have come to her seeking help after having been claim-farmed.
She says these clients didn’t always have a clear sense of who was representing them and how the fees work, and sometimes did not realise the claims farmer was being paid for their involvement in their case.
“[Sometimes] the survivor doesn’t even know that the person that seems to be wanting to help them was actually taking a cut,” she says. “And I think when the survivor does find that out, they feel like they’ve been taken advantage of, and that those people were out to make money from their pain.”
The lawyer says she has heard of survivors being “cold-called” by claim farmers asking them about their childhood sexual abuse, which they may not have disclosed to anyone before, in a process she described as being “not at all trauma-informed”, before offering to sign them up to a law firm.
“So the process can be incredibly re-traumatising for them, and then to find that the person that they were trusting had taken advantage of them and used them to make money, clients have told us how devastating that is.”
What is the impact of claim farming?
Jackie Mead, the chief executive of Knowmore, is aware of cases in which survivors have signed up with claims farmers and been told they will win a huge sum in civil litigation, only for the lawyer to realise that such a claim wasn’t likely to be successful because of the higher threshold of proof for civil claims.
“The fallback is that they then say, well, we can get you $85,000 through the redress scheme,” she says. “But by then, if they’ve racked up $40,000 worth of legal fees, when they could have had the same service for free in terms of getting their redress payment, that’s a massive issue.”
Mead says she knows of cases where half of people’s redress payments went on legal fees, something she says is “abhorrent”, especially given that protections are in place to try to ensure the redress payment goes entirely to the survivor of abuse. For example, redress payments cannot be garnished by Centrelink, even if the person had a debt to Centrelink.
The allegedly fraudulent claims exposed by police last week will have a huge impact on trust in the system, Mead says – for decision-makers of claims, survivors who might fear they won’t be believed, and for public perception of people accessing compensation and redress.
“We have to remember, for so long, these people weren’t believed, and so for it now to be a situation where anybody has to scratch their head and think, ‘Is this a real claim or is it a fraudulent claim?’ It’s terrible.”
• In Australia, children, young adults, parents and teachers can contact the Kids Helpline on 1800 55 1800; adult survivors can seek help at Blue Knot Foundation on 1300 657 380. Other sources of help can be found at Child Helplines International
