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when they are under a legal duty (as MHML is here) to disclose such information. The directors of MHML were under a clear duty to provide the leaseholders with reasonable information as to how their money had been spent on the refurbishment, and/or to provide the relevant invoices, and have failed to disclose this information in spite of multiple requests.
• “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. The deduction, by the directors of MHML, of the fees they had improperly charged to Mrs Hillgarth in the context of her “Right to Manage” application is a clear example of this.
Theft Act 1968 - Conversion
Section 1(1) of the Theft Act defines the offence of theft as follows: “A person is guilty of theft if he dishonestly appropriates property belonging to another with the intention of permanently depriving the other of it”. This would appear to be applicable to MHML’s dishonest appropriation of “fees” for dealing with Mrs Hillgarth’s RTM application.
Companies Act Offences
Each of the directors of MHML should be disqualified from acting as directors of any company. The directors’ duties to be found in Sections 171 to 177 of the Companies Act 2006 include:
171. Duty to act within powers – it is questionable whether Mr Brown-Constable individually or the MHML directors corporately, are legally entitled to impose management charges on the leaseholders.
172. Duty to exercise reasonable care, skill and diligence – all the MHML directors have plainly fallen short in their duty of care to the leaseholders at Mitre House, and Mr Karupiah and Mr Raja have made no attempt to understand or control what Mr Brown-Constable has been doing.
173. Duty to avoid conflicts of interest – The MHML directors were plainly conflicted in terms of the profit which would arise to them in the context of the refurbishment. They not only failed to disclose their conflict to the leaseholders in advance but deliberately concealed from the leaseholders the fact that MHML and/or they themselves would be benefitting personally from the refurbishment project.
174. Duty to declare interest in proposed transaction or arrangement - The MHML directors failed to disclose to the leaseholders their personal interest in the refurbishment project
Theft Act 1968 - False Accounting
Under section 17 of the Theft Act 1968 (TA 1968), a person who falsifies or conceals information required for an accounting purpose knowing that the information is misleading may commit an offence of false accounting. The offence can be committed in one of two ways either: