Probe finds house builder’s board unaware of interest-free loans from nursery part-owned by former boss

FRP was instructed to identify whether all related party relationships and transactions covering an initial review period – from 1 October 2020 to 30 September 2022 – had been identified and approved by the house builder’s board.

In its latest stock market update, the firm said: “These were the three areas which prompted the board resignations” and formed the basis for the accountancy firm’s probe.

The first area involved transactions related to First Place Nurseries (FPN). The primary education business is part-owned by Mr Wicks and Nish Malde, chief financial officer and interim chief executive at Inland.

Mr Malde took on the interim role when Mr Wicks stood down in September last year after the house builder posted a pre-tax loss of more than £37m.

Each owns approximately 40% of the shares of FPN. Despite not being listed as directors of FPN, they appear to have been involved in a number of key decisions, the report found.

On 26 November 2018, a lease was granted by a subsidiary of Inland to FPN for a term of 20 years to operate at a property and temporary buildings on the Wilton Park development site.

The lease was not disclosed to the firm’s board, the probe concluded, which meant it “did not consider whether the terms of the transaction were fair and reasonable”.

The lease was also not disclosed in either of the financial years up to the end of September 2021. FRP also said “there does not appear to be evidence that consideration was given to operating another amenity, nor to putting the operation of a nursery out to tender”.  

In the six-year period between March 2017 and March 2023, the developer has cumulatively paid £178,801 in relation to hire costs for modular temporary buildings used by FPN.

The second area of FRP’s review was how a director of FPN entered into an option agreement on 1 September 2022 with a subsidiary of Inland Homes to purchase the new Wilton Park nursery, cafe and community hub properties within three years for £3,000,000.

Again, this agreement was not disclosed to the board so it could not scrutinise the decision. 

In April 2023, Inland received a draft valuation for the nursery of £1.15m based on the property being complete. One month later it received a third-party offer for an adjacent building covered by the option agreement for £475,000.

The final area of investigation involved two interest-free loans between FPN and Inland, for which they found there “were no loan agreements, provisions for interest or security”.

The first loan, of £750,000, was received by Inland on 16 June 2022 and repaid to FPN on 15 July 2022. The second loan, of £500,000, was received by the house builder on 25 July 2022 and repaid to FPN on 27 July 2022.

These loans were also not disclosed to the board, FRP’s probe found. 

In addition, the investigation found that various Inland employees spent time on FPN projects at its Radlett and Bushey nurseries in 2021 and 2022 and these costs should have been, but were not, charged to FPN. However Inland received £66,000 from FPN in third-party costs for this work.

The FRP report identified that in May 2022, a subsidiary of the group entered into two separate contracts with each of two family members connected to Mr Wicks, in both cases for the sale of a house at Wilton Park.

Inside Housing has contacted Mr Wicks on LinkedIn for a response to the investigation.

The accounts also identified a company guarantee provided by Inland regarding a site that is owned by a company outside the group. The firm’s update to the stock market explained that this “was one of the issues cited in connection with the resignations of the group’s former directors”.

The guarantee was entered into in August 2021 and relates to a £19.6m agreement for the site, which forms part of Inland’s asset management contracts business. This guarantee was not disclosed in the group’s 2021 financial statements, with the firm’s management saying this was because of their assessment of the remoteness of it being called in at the time those accounts were finalised.

However, no related party issues arose in connection with this as “contemporaneous minutes of a board meeting prepared by external lawyers [recorded] the approval of the entering into of the guarantee by the executive directors of Inland Homes at the time”.

Inland told the stock market: “The matters covered in the FRP report have revealed significant and repeated failures in board-level corporate governance and failings of internal control in some areas of the group.

“The investigation also identified that certain information was not disclosed to the company’s board, nominated adviser and the current and previous auditors. 

“Since the events covered by the report, three new independent non-executive directors, Matthew Robinson as chairman, and Trevor Sawyer and Richard Padley, have or are in the process of being appointed in response to these historical failures in corporate governance, together with a new chief executive officer, Jolyon Harrison.”

The new chief executive of Inland was only announced to the stock market on 24 July. 

Mr Malde will retire from the house builder following an “appropriate handover” to Mr Harrison, but will remain available to the business on a consultancy basis. A new chief financial officer will also be appointed.

Following the investigation, Inland’s board has taken steps to address the shortcomings highlighted by the FRP report, which include the creation of a register of related parties and potential conflicts of interest, and has updated the formal schedule of matters reserved for the board.