Consider then, for example, a scenario concerning payment of legal fees. Many of SGH's actions concerns PIL matters where there are trials happening, settlements occurring, etc. In many of these, the PIL barristers have been working on a NWNF basis as indeed arguably has SGH. If so, then in the event of a TAC settlement payment being made, it is very likely that that payment would first come into SGH's trust account and from there, be disbursed to the client as well as to legal costs.
The client here is not an issue, but it is as to the legal costs that the issue potentially arises. Very likely, given how the barristers concerned will have likely acted NWNF, they will invoice their fees contemporaneously to the settlement occurring. Ordinarily, then, they would be expected to be paid from out of the settlement funds in trust. Instead however, the entirety of the legal fees are likely to be claimed by SGH, as it would have been SGH invoicing the fees inclusive of the barristers' costs rather than the barrister directly invoicing the client (hence the settlement amount). As such, the Receivers (as in appointed by the Banks) will likely then take all the fees invoiced as they would be sitting much higher in the queue than would be the barristers. So, despite doing the work, the barristers (even in successful matters) would, under these scenario conditions, likely end up as unsecured creditors of SGH.
If however the barristers were directly paid, they would very likely then have their payments declared as a priority /preference payment with resulting clawback occurring. This is because they would have been invoicing their fees, for the first time, upon the success of the settlements occurring (ie: NWNF prior to this). That is, the point of priority /preference would be determined, not be reference to their work having been done over several years but by the fact that, for all that work, they only actually ever invoiced it for payment now, once success had been assured (ie: they won or settled).
It is therefore very likely that, even if SGH survives in some way, their NWNF style of working might well take a beating.
No-one has determined this before but considering the "what ifs" suggests that NWNF invoices for payment issued upon the success of the matter could well be considered a preferential payment because, in such circumstances, what would likely matter most is the date of invoicing, not the time period to which it relates.
Of course, such scenarios will likely be further complicated by the fact that if Bank receivers were to be appointed (for any reason), then each of the legal regulators would also likely appoint their own legal receivers (typically, another legal firm and /or several specific legal practitioners) in order to manage the legal functions of the practice, etc. This is about to get very messy, very ugly indeed - not just for SGH but for the legal profession (+ the allied professions) as a whole, as well as for the trade and banking creditors. Within such settings, the shareholders do not even rate a mention.
SGH Price at posting:
6.8¢ Sentiment: Sell Disclosure: Not Held
