Covid puts a false gloss on chamber’s accounts … Directors in and out … Explanatory memo to members … Creative fiction and negative expenses … Big pile of unpaid floor fees … Refreshments cut
The entire board led by Tom Molomby SC was turfed out at the end of last year and a bunch of new directors elected, including Julian Van Aalst, John Longworth, Paul Livingstone, Anna Perrigo and Wai Kaey Soon.
Apparently, members were hoping that directors would deliver more bread and fishes to stave off their penury.
Longworth had been on the old board and was re-elected. Shortly after, on January 11, he wrote to Van Aalst, the new secretary of the co-op, saying that he is “no longer available to continue as a director”. He gave one month’s notice.
After the letter of resignation was circulated to members Longworth told the secretary to forget the one month’s notice, his resignation was effectively immediately.
Why the rush?
The long-serving clerk Elleanor Gillard had resigned in mid-November but her departure was not made known to members until after the AGM at the Union Club on December 4.
The annual accounts showed some kind of magic pudding was at work. The 2019 loss of $313,633 was turned into a 2020 profit of $306,146.
Everyone was overjoyed at the good fortune, until a memo from the board cast a sober light on the numbers, describing the good news as “somewhat of an illusion”.
It appears Covid bought with it something positive, at least for the moment – rent reduction of $70,000; a welfare payment from the government of $50,000; a reduction in bank fees of $24,265; a $10,748 cut in expenditure on refreshments; and lower wages of $42,415.
If the Covid-related “impacts” of around $340,000 were reversed out of the accounts, there would have been a loss of $32,152.
There were also items described as “creative fiction”, with long service leave and holiday pay shown as “negative” expenses – meaning that staff had been using up leave entitlements during the pandemic.
If the negative expenses were allowed at the 2019 rate, then the loss would go to $80,101.
The co-op also successfully sued a former member for unpaid fees and recovered $80,000. If that hadn’t eventuated there would have been another adjustment with a loss of about $160,000.
The item called “members accounts receivable” stands at $527,781 – a reduction on the previous year of about $60,000. This is money owing to the co-op, at 20 percent interest, “money that in some cases may never come to us”, hence a provision for doubtful debts of $161,345.
The FJC board memo ends on a sombre note:
“By far, the greatest challenge to the viability of chambers is the number of members who (still) owe fees. The interesting parallel to this is the income item for interest … which increased from $50,222 to $57,823.
Given the historically low bank interest rates, this item is almost wholly from people who pay late. This is not a form of income we want to receive.”
We hear reports of empty rooms, rooms for sale without buyers and continuing wretched financial circumstances. The latest move is to ginger-up some door tenancies to help fill the void
There are also ongoing disputes over the co-op’s insistence that even after members have left chambers, they continue to be liable for rent and floor fees.
Members are told they cannot surrender their shares as they try to negotiate their way out – the expectation is that they should pay for services even after they have gone.
The difficulties are not Frederick Jordan’s alone. Other sets are also struggling, as the chambers’ model for practising barristers creaks and groans.