Page 12 - 1_Letter from Begg 23-3-16 (13pp)

3. Please arrange for all “managing agents’ fees” (totaling £17,810 over the last four years 2012 – 2015) charged to leaseholders as part of their service charge expenditure to be reimbursed promptly to the lessees. Please also return any other money paid by lessees in respect of the 2014 refurbishment (including the supplemental work on water tank, Sky aerial, window repairs and so on) and which has been received into the bank accounts of (a) MHML or (b) any of its directors or (c) any other persons, firms or companies associated with any of those directors for work or services carried out (or alleged to have been carried out) either by MHML itself, or by any of its directors, or by any such other persons, firms or companies. No such work was authorized by the leaseholders under the Section 20 process and therefore no such work may be charged to them.
If the cash reserves in the company are insufficient for this purpose, personal contributions must be called for from the defaulting directors. It goes without saying that no further charges of this nature may be made by MHML in this or future years.
I would strongly recommend you to take legal advice on the terms of this letter, with particular reference to Sections 2-4 of the Fraud Act 2006 and the directors’ duties to be found in Sections 171 to 177 of the Companies Act 2006. The Fraud Act 2006 defines the criminal offence of fraud in three separate classes as follows:
• “Fraud by false representation” as defined by Section 2 of the Act covers cases where a person makes “any representation as to fact or law ... express or implied” which they know to be untrue or misleading. You may wish to review the representations on your website against this test – particularly the various claims made about your track record on handling RTM and other applications.
• “Fraud by failing to disclose information” as defined by Section 3 of the Act covers cases where a person fails to disclose any information to a third party when they are under a legal duty (as you are here) to disclose such information. You have been asked a number of times, and by a number of lessees, for a proper breakdown of the refurbishment expenditure. This is your last chance to do so.
• “Fraud by abuse of position” as defined by Section 4 of the Act covers cases where a person occupies a position where they are expected to safeguard the financial interests of another person, and abuses that position; I have in mind here your removal of Mrs Hillgarth from the board and your subsequent refusal to pay the same dividend to her as you thought fit to pay to yourself and your fellow directors.
Should you fail to provide the information required relating to the refurbishment expenditure, or to make the repayments properly due to my client, I intend to file a formal report with the Serious Fraud Office. I should also repeat that this letter, as well as your response (or your neglect or failure to respond, should that prove to be the case) will – if necessary - be filed as evidence in support of our application to the First Tier Tribunal (Property Chamber) under Sections 22-24 of the Landlord and Tenant Act 1987.