Folkestone & Hythe District Council have acted beyond their powers (ultra vires) by allowing in excess of £16 million to be paid to companies in which they allege they are the sole shareholder. There is no mechanism, or rather process or procedure within the council’s constitution; which allowed them, or allows them, to continue giving Otterpool Park LLP, or Oportinitas Ltd, any money whatsoever.
The processes and procedures as set out in the constitution; which is the council’s legal framework document, are those which they MUST follow by law.
The Constitution includes:
the rules that the Council must follow
how decisions are made at meetings and committees
the Code of Conduct
The constitution is the responsibility of the Monitoring Officer – Amandeep Khroud (pictured) for maintaining and interpreting the Constitution. It is her duty to ensure the lawfulness of the constitution and fairness of decision-making.
After consulting with the Head of Paid Service and Chief Finance Officer, the Monitoring Officer will report to the full Council, or to the Cabinet, in relation to a Cabinet function, if s/he considers that any proposal, decision or omission would give rise to unlawfulness or if any decision or omission has given rise to maladministration. Such a report will have the effect of stopping the proposal or decision being implemented, until the report has been considered.
In the Local authority company guidance ; which is a toolkit for undertaking strategic and governance reviews of wholly or partly owned council commercial entities, such as Oportunitas Limited or Otterpool Park LLP, it states at Paragraph 3.3
The council’s shareholder role
The council must have a designated “shareholder” to represent its ownership of the entity. The process for appointing a shareholder needs to be set out in the council’s constitution which should also detail how the shareholder reports on the exercise of delegated powers.
As such, there is an omission in the constitution as “The process for appointing a shareholder needs to be set out in the council’s constitution”, is not in the constitution. If it isn’t there the council cannot do it. It is that simple. According to lawyers we’ve spoken to this amounts to maladministration and demonstrates the council is acting beyond its powers.
This omission affects the two companies the council allege to be shareholders of, when in fact they are not, nor could be, due to the omission within the constitution.
The council claims to be the sole shareholder in Opportunitas Limited and Otterpool Park LLP, and yet nowhere in the council’s constitution, as of the 4 May 2022 (the latest version available), does it set out “the process for appointing a shareholder” which “needs” to be in its constitution and followed, to appoint the council as shareholder of the companies. No if or buts. It needs to be there, for it to be a shareholder. Without the process in place and without the process being followed it cannot be the shareholder in Opportunitas Limited and Otterpool Park LLP.
The council cannot do what it likes, when it likes, regardless of what it might think. It must abide by and follow its constitution. But it has stuck two fingers up to the legal framework, and invested as the alleged shareholder in excess of £16m of loans, equity or share capital into the companies according to its own data.
Oportunitas Limited was incorporated as a company on 14 May 2014. Report Number A/14/16 makes it clear the Council Director responsible for the report, and the company, was Dr Susan Priest, who was the company’s first director. Dr Priest (pictured) has since become the Head of Paid Service & Chief Executive of the Council on 1 April 2018.
The Council claim to be the sole shareholder in the company. They have loaned, or put up as share capital, or working capital sums in excess of £10m; without having the process for appointing itself as the shareholder in its constitution. As there is no process which allows them to be a shareholder, then they cannot transfer money to the company, regardless if they have a shareholder’s agreement or not. This means they have acted beyond their powers to send monies to Oportunitas Limited, who then have used it to purchase property, such as the flats at the former Royal Victoria Hospital site from Leo Griggs
According to the Council, Oportunitas Ltd has received £5.7m either as loans or capital, between 2020 & 2022.
However, this data is incorrect as it does not take into account the initial £2.5m loan, working capital, or equity poured into the company in 2014. Nor does it take into account the £6m +, for the 37 flats at the Royal Victoria site, and other monies loaned to the company as working capital, loans or equity, which we estimate to be in excess of £13m.
Also it means there was no mechanism, or process and procedure, to pay the directors of the company since its incorporation, but yet they’ve all got paid and continue to get paid.
The current directors of Oportunitas Ltd are:
Cllr Ann Berry (Con) – Broadmead Ward
Cllr Connor McConville (Lab) – Folkestone East Ward
Cllr Terence Mullard (UKIP) – Dymchurch Ward
Cllr Patricia Rolfe (Con) – New Romney Ward
Yet according to the Council’s payment to suppliers data it has paid Otterpool Park LLP £3.5m up until July 2022.
Again as there is no mechanism, or processes or procedure for a shareholder in the constitution, then it is NOT possible to pay Otterpool Park LLP any money. The council can only do what is written in the constitution, not what is not. If it is not in the constitution, then it is acting beyond its powers.
For Oportunitas Ltd which was set up in 2014, it means the council have been feeding it money for the last eight years without the powers to do so. For Otterpool Park LLP for two years. Nobody has noticed that the processes and procedures are not being followed, as they cannot be followed, as it’s not in the constitution. The very fact officers have acted beyond the powers of the constitution means that they should, like the four who’ve been suspended pending investigation, also be suspended. If this doesn’t happen then this would hold them open to a claim of hypocrisy. We doubt if the council will do anything to the officers who’ve allowed in excess of £16m to be paid to the companies.
Finally, but most importantly, the council’s external auditor – Grant Thornton has failed to reprimand the council in the last eight years, as the amounts paid out, all exceeded the financial materiality threshold which was set at either £1.7m or £2m.
Materiality is fundamental to the preparation of the council’s financial statements and the audit process and applies not only to the monetary misstatements but also to disclosure requirements and adherence to acceptable accounting practice and applicable law. Misstatements, including omissions, are considered to be material if they, individually or in the aggregate, could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Giving £9.2m to companies between 2020 – 2022 is material. And yet the auditor has done nothing. We wonder why? Are they like the council …
The Shepway Vox Team
Being Voxatious is NOT a Crime