‘Car napping’ is the predatory practice of targeting the not-at-fault party following a car accident. 

In a typical car napping matter, a person’s car is damaged in an accident they don’t believe was their fault. The person then comes into contact with a business offering to arrange or provide services – such as towing, repairs and/or a hire car. The business (which is not connected with any insurer) leads the person to believe that, because they weren’t at fault, these services are available at no cost or risk to them.

People come into contact with these businesses in different ways. Some people report that they believed they were contacting their insurer. Others report that the business made unsolicited contact, and that they do not know how the business obtained their contact information.

The business then arranges for the person to sign certain documents. The person may be pressured to sign the documents quickly, be misled about the content of the documents, or have language barriers or other vulnerabilities that prevent them from reading and understanding what the documents say. Some consumers report having been pressured to sign a piece of paper (or sign via a digital device such as a tablet) without being told what they were signing. The setting in which these documents are provided may also mislead consumers about the document’s purpose: a repairer’s workshop is a very different environment to a law practice.

The documents often include an ‘Authority to Act’ or other similarly styled form, which claims to authorise a lawyer to act on the person’s behalf in seeking to recover from the at-fault party the cost of the services provided (e.g. towing, repair and/or hire car services). The form may also purport to:

• appoint a business (e.g. towing business, repairer or hire car provider) as the person’s agent 
• authorise a lawyer to take instructions from that business in relation to the person’s claim
• include terms and conditions that the person may be personally liable for the cost of the services in certain circumstances – (e.g. if they don’t agree to bring proceedings against the at-fault party).

The business then gives these documents to a lawyer, who starts ‘acting’ on the person’s behalf. We often see lawyers sending letters of demand to the alleged at-fault party or their insurer based solely on an ‘Authority to Act’ form – without having any direct contact with the person on whose behalf they are claiming to act.

Sometimes, further steps are taken without the person’s knowledge or instructions – such as settling the matter or starting proceedings. In other matters, after the initial demand is rejected by the at-fault party or their insurer, the person is told that they must now cooperate in bringing proceedings or pay for the services themselves. This puts the person in a difficult position, because their only options are to: 

• allow legal proceedings to be brought in their name, and risk being ordered to pay legal costs if the claim is unsuccessful
• refuse to do so and risk being sued themselves for the cost of the services.

In some complaints people have said they didn’t sign the ‘Authority to Act’ form or any other forms that may have been relied on when starting proceedings (e.g. an Overarching Obligations Certification), and that they don’t recognise the signature on those forms. 

Complaints we have investigated and prosecuted have involved lawyers:

• undertaking legal work for a person without their knowledge or instructions, such as starting court proceedings or settling the claim
• failing to advise the person about the risks of litigation (such as the possibility of an adverse costs order).

As with any area of law that you practise in, you need to understand how your professional and ethical obligations apply to your work. The following obligations under the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 (ASCR) are particularly relevant when acting in motor vehicle accident claims.

1. You must act in the best interests of your client (ASCR r 4.1.1)
To fulfil this fundamental duty, you need to understand who your client is. In a motor vehicle accident claim where you are acting to recover costs on behalf of a driver or owner of the vehicle, your client is the driver or owner of the vehicle – not the smash repairer, tow truck operator or hire car provider.

Acting in your client’s best interests requires you to directly provide information and advice to your client, so that they can make an informed decision about their claim. If you don’t communicate with your client directly and obtain their informed consent and instructions to a course of action you have proposed, you can’t reasonably claim to be acting in their best interests.

2. You must deliver legal services competently, diligently and promptly (ASCR r 4.1.3)
This includes providing clear and timely advice to your client so they understand their position and can make informed decisions about their claim. To do this competently and diligently, your advice must take into account your client’s specific circumstances, including:

• their capacity to give lawful, proper and competent instructions
• ownership of the motor vehicle
• the circumstances of the crash or accident
• the damage to the motor vehicle, and the client’s potential loss and damage
• any insurance held by them and the other party.

You must explain to your client their rights and obligations, including the options available to them and the benefits and risks of these different options. You should also advise your client on the benefits and risks of litigation, the nature and duration of any court proceedings, and the costs involved (including the possibility of an adverse costs order being made, requiring your client to pay the other party’s legal costs).

3. You must avoid conflicts of interest (ASCR r 12)
You must not act for a client where there is a conflict between their interests and your own. A conflict may arise where the prospective client has received services from a repairer, towing business or hire car provider that you, a family member or another representative of your law practice has an interest in.

4. You must not engage in conduct that is likely to bring the profession into disrepute (ASCR r 5) or conduct that is dishonest (ASCR r 4.1.2)
Car napping is a predatory and reprehensible practice. Lawyers who accept referrals from, or are affiliated with, service providers engaged in this practice risk bringing the profession into disrepute. Pressuring clients to start legal proceedings is also unacceptable, and behaviour that is likely to bring the profession into disrepute.

You must be honest in your communications with your client, the court and other parties. This includes not implying that you have discussed something with, or received instructions from, your client when you haven’t had direct contact with them or obtained instructions directly from them.

You should also be mindful of other important professional obligations, including under the Legal Profession Uniform Law (as set out in Schedule 1 to the Legal Profession Uniform Law Application Act 2014 (Vic)) (Uniform Law) and the Legal Profession Uniform General Rules 2015 (Uniform Rules):

1.      You must comply with your cost disclosure obligations (Uniform Law pt 4.3 div 3)

You are required to make appropriate costs disclosures in writing and as soon as possible to your client (and, where relevant, to a third-party payer). Cost disclosures must include the basis for calculating legal costs, and an estimate of the total legal costs. You must make sure your client understands how you plan to handle their matter and what their legal costs are likely to be.

If you don’t properly disclose your costs to your client, or if you fail to give them proper costs disclosures, your costs agreement (if any) will be void. You won’t be able to recover the costs until they are assessed, or we have determined them in a costs dispute. You may also face disciplinary action for breaching your professional obligations.

2.      Principals must supervise their law practice (Uniform Law s 34, ASCR r 37)

If you are a principal of a law practice, you must properly supervise and review work done by your employee solicitors, and prevent unethical and unlawful behaviour from happening at your practice.

We have seen a lack of adequate supervision result in employee solicitors engage in unethical behaviour in motor vehicle accident claims, including taking instructions from third parties, failing to verify client signatures or make further enquiries when observing suspicious matters, failing to review correspondence, and failing to consider alternative courses of action. Where this behaviour happened, the principal was held responsible for failures in supervision.

3.      You must deal with trust money according to client instructions (Uniform Law s 138, Uniform Rules r 42)

Where you receive and hold money in your trust account, you must only deal with that trust money as instructed by your client. You cannot disburse or withhold trust money based on instructions from third parties (e.g. repairers, hire car providers, or tow truck businesses) or in breach of assurances you made to your client or third-party payer.

4. Consumer law prohibitions against unconscionable conduct and misleading or deceptive conduct (schedule 2 of the Competition and Consumer Act 2010 (Cth))

The Australian Consumer Law contains both general and specific protections for consumers, and applies to the supply of legal services. It includes prohibitions against both unconscionable conduct and misleading or deceptive conduct. 

This section sets out our minimum expectations of all lawyers who provide legal services in relation to motor vehicle accident claims.

1. When you receive an Authority to Act, or referral form from a third party, contact the potential client directly (in person, by phone, or by audio/visual link) to:
a. confirm they understand the legal meaning and effect of the Authority to Act form, whether they want to engage your law practice, and how they want to proceed
b. explain your role and your potential client’s rights and options, and advise on the strengths of the case, the risks of going to court and any available alternatives 
c. obtain clear and informed instructions to act on their behalf
d. obtain (or confirm) their address and contact details.

2. Send the client an email or letter with:
a. a summary of the legal advice you provided to them, and their instructions
b. a written disclosure of the potential costs they could incur
c. copies of any documents addressed to them, or in their name (such as tax invoices or assessment reports)
d. copies of documents signed (or claimed to have been signed) by them.(/text-indent>

Make sure you contact the client and confirm they have received these documents, that they understand them, and that they have truly signed any documents needed to proceed.

3. At key stages, provide timely updates to your advice and seek informed instructions verbally or in writing, including:
a. when you receive an offer of settlement (e.g. from the at-fault driver or insurers)
b. before starting legal proceedings – clearly explain the nature and likely duration of the litigation process, possible risks and consequences of proceeding, and potential costs implications
c. at regular intervals – update your client on progress and provide them with opportunities to ask questions during the course of the matter.

4. Maintain and keep accurate, contemporaneous records, file notes and correspondence on the client’s file:
Document their instructions and the legal advice you give them. Also document any authority they may have given you to take instructions from another person on their behalf.

5. Provide clear, written cost disclosures to the client (and, where relevant, any third-party payer):
Make disclosures as soon as practicable and take reasonable steps to confirm the client has understood them and given informed consent to proceed.

6. Avoid ‘Authority to Act’ forms:
We recommend amending any templates you provide to third-party referrers, removing any terms providing authority to act and replacing them with terms consenting to the potential client's details being provided to a law practice.

The following practices can amount to unsatisfactory professional conduct or professional misconduct. We will investigate complaints involving this conduct and take disciplinary action, where appropriate.

1. Accepting an ‘Authority to Act’ or similar form as a standing authority to act, without taking any further steps:
This includes failing to directly contact the client, verify their identity and their intention to retain you, and failing to make enquires if there are signs of fraud or other red flags (e.g. missing information or mis-matched signatures in the ‘Authority to Act’ form).

2. Acting without communicating with your client or providing them with legal advice:
This includes taking important steps (such as issuing proceedings, starting negotiations or settling a claim) without first providing clear advice to your client about their rights and options (and the benefits and risks associated with those options), and obtaining their informed consent.

3. Putting your own interests, or that of a third party, ahead of your client’s:
You must not act for a client where there is a conflict between your interests and theirs (e.g.  where you have an interest in a business that is providing services to the client).

4. Failing to provide appropriate costs disclosures:
You must provide written disclosures to your client (and/or a third-party payer responsible for paying your bill) that sets out how you plan to handle the matter and what the legal costs are expected to be.

Case study

An example of where a lawyer engaged in these unacceptable practices is Victorian Legal Services Commissioner v Houston (Legal Practice) [2021] VCAT 34.

Mr Houston was a lawyer whose legal practice predominantly involved recovering damages for people who had been involved in motor vehicle accidents. His work was referred to him by two companies: Claims Made Easy Pty Ltd and CME Recoveries Pty Ltd.

In this case Mr Houston was found guilty of professional misconduct, reprimanded and prohibited from practising law for five years. Mr Houston also gave an undertaking that he would not apply for an Australian practising certificate.  The Victorian Civil and Administrative Tribunal observed that, if not for factors including the guilty pleas and the undertaking, his conduct may have warranted a referral to the Supreme Court for striking off.

The Victorian Legal Services Commissioner brought 24 charges against Mr Houston in relation to three different clients. Relevantly, those charges included:

• purporting to act for a person without instructions
• failing to provide costs disclosures, and maintain proper trust account records
• allowing his interests to conflict with the interests of a client
• disbursing a client’s settlement money without authorisation from the client.

A list of other cases involving unacceptable practices is provided below.

Relevant cases

The following cases are examples of disciplinary matters initiated before the Victorian Civil and Administrative Tribunal where lawyers have failed to meet their professional obligations when handling motor vehicle claims:      

• Victorian Legal Services Commissioner v Logan [2022] VSC 97 (28 February 2022)
• Victorian Legal Services Commissioner v Houston (Legal Practice) [2021] VCAT 32 (19 January 2021)
• Victorian Legal Services Commissioner v Nikolaidou (Legal Practice) [2020] VCAT 187 (18 February 2020)
• Victorian Legal Services Commissioner v Chelper (Legal Practice) [2018] VCAT 2041 (21 November 2018) (at [69])
• Victorian Legal Services Commissioner v Logan (Review and Regulation) [2017] VCAT 1330 (18 August 2017)
• Victorian Legal Services Commissioner v Logan (Legal Practice) [2017] VCAT 189 (21 February 2017)
• Victorian Legal Services Commissioner v Logan (Legal Practice) [2016] VCAT 544 (8 April 2016) (Decision)
• Victorian Legal Services Commissioner v Logan (Legal Practice) [2016] VCAT 1193 (18 July 2016) (Penalty)
• Victorian Legal Services Commissioner v Anderson (Legal Practice) [2015] VCAT 1157 (31 July 2015)
• Legal Services Commissioner v Brott (Legal Practice) [2011] VCAT 110 (7 February 2011)
• Victorian Lawyer’s RPA Ltd v Hession [2000] VLPT 12 (1 August 2000)
• Legal Ombudsman v Battley [1999] VLPT 6 (6 September 1999)