- Rights of clients are upheld by lawyers as part of their legal and ethical obligations. The incorporation of the law firm does not displace this reality. In fact, it accentuates the obligation of the principals of the law firm to ensure mechanisms are in place to protect clients’ interest.
- Further, Uniform Law receivers may be appointed to safeguard trust funds of clients.
- The key concern that remains is the way clients’ matters will be closed or transferred to other law firms when an organisation goes into external administration.
Slater & Gordon Ltd (S&G) lost close to $1 billion in the first half of the 2016 financial year, which wiped out all of its profits since listing. The loss is attributable to the write-down in the value of UK assets, after its acquisition of Quindell’s professional services division (Stephen Long, ‘Slater and Gordon at the mercy of its bankers’, ABC, 29 February 2016.) To stave off the banks demanding full repayment of the debt by 31 March 2017, the firm was able to renegotiate its syndicated bank facility so that loans owed start to mature in May 2018 (S&G, ASX Announcement – ‘Slater and Gordon Group Successfully Agrees Bank Facility Amendments’, 2 May 2016).
S&G’s troubles raise two issues: what protections exist to stop an incorporated and listed law practice favouring its bankers over its clients? What happens to the clients if the law firm is placed in external administration?