Welsh local authorities face been sued by bankrupt council in ‘dodgy investment’ row

Martin Shipton

Four Welsh local authorities are facing the likelihood of substantial legal claims from a council in Essex that was bankrupted after making disastrous investments in solar farms.

The Bureau of Investigative Journalism has revealed that Cardiff, Flintshire, Swansea and Vale of Glamorgan councils are among 23 local authorities on a Thurrock “hit list” it believes should collectively pay £50m towards the losses it incurred following investments made between 2017 and 2020.

The threat of legal action against the councils is linked to Thurrock’s legal dispute with the organisation that valued the solar farms at the centre of the scandal, the Association for Public Service Excellence (APSE). Thurrock claims the valuations were “negligent” and had overvalued the assets.

APSE, which strongly denies the allegations, is owned by its members – more than 250 local authorities across the UK. This structure means its members share liability in the event of legal action. Rather than trying to sue hundreds of councils, Thurrock has selected a sample to include in its legal claim.

Deadline

Thurrock says it decided to issue the legal threat after APSE refused to agree to extend a deadline for the council to take legal action.

John Kent, leader of Thurrock council, argued that additional time would let Thurrock concentrate on its claim against Rockfire Capital and its owner, Liam Kavanagh, who owned the solar farms at the time of the investments.

APSE is a non-profit organisation that advises members on how to improve public services. It also has clients in the private sector, such as Rockfire Capital. It valued the 32 solar farms for the company in October 2017. At that time it said they were worth £542m.

When Kavanagh later asked Thurrock to increase its investment in November 2018, APSE produced a second valuation. This time it said the sites were worth £124m more than they were a year earlier.

Based on this valuation, Thurrock also made multi-million top-up investments in 2019 and 2020. In total, the council increased its investment in the farms by £130m on the basis of APSE’s 2018 valuation.

Inflated

In July last year The Bureau of Investigative Journalism revealed that the value of the solar farms had been inflated because of figures Rockfire Capital gave to APSE. An email from Kavanagh included a “direct instruction” that APSE should be sent a price far higher than had been estimated.

APSE says it relied upon information provided to it by Rockfire Capital and had not made mistakes in its own calculations.

Thurrock would ultimately invest in 53 sites owned by Kavanagh. When they were eventually sold in January 2024, the approximate losses to the taxpayer amounted to £200m.

It has been revealed that Kavanagh spent vast sums of money made from the inflated deals on luxury purchases, including a private jet and a country mansion. He has always denied wrongdoing.

The subsequent collapse of Thurrock’s £655m business deals with Kavanagh’s companies effectively bankrupted the council and amounted to what is seen as potentially the largest fraud ever perpetrated against a UK local authority.

Thurrock says the 23 councils to face litigation had been selected “based on having consistent involvement as active members of APSE throughout the period when the valuations were given”.

If its claim is successful, it will argue that every member of APSE should be liable.

‘Appalled’

Mo Baines, APSE’s chief executive, said the organisation was “utterly appalled”.

She added: “Thurrock is going after a non-profit organisation and other local authorities when everyone knows local government is in dire financial straits.

“Anyone worth their salt would read this and say, ‘hang on a minute, where is the cost-benefit analysis of pursuing these councils?’

“If that gets to the High Court, God knows what the cost would be. It’s throwing good money after bad.”

In March 2024 Thurrock began legal proceedings against Kavanagh and Rockfire Capital.

But its claim against APSE began in September 2023. Thurrock has claimed that APSE had “only properly engaged with the issues belatedly” – an allegation the organisation strongly denies.

Baines said she had attempted to agree an amicable settlement, including offering to make a donation to a local community group. An arrangement was almost reached, she said, only for Thurrock to change its position.

It was at this point that Thurrock handed over the list of other councils who it said must be liable in the result of legal action and agree to an extended deadline. Thurrock’s chance to bring a legal claim against APSE will otherwise expire on November 19.

‘Constructive solution’

Thurrock said it wanted to find a “constructive solution” with APSE but, without one, would be compelled to sue. It said that relying on APSE’s valuations had left the council without “adequate security” for its investments with Kavanagh between 2017 and 2020.

Thurrock added: “It is the council’s view that this has led to significant financial losses to Thurrock, with negative impact on taxpayers and service users.

“While the council’s primary focus is on recovering money from Mr Kavanagh (and his associated companies) who sought to line his own pockets from the public purse, we also have a duty to pursue those whose actions led to the poor investments.”

Kent said the council would “leave no stone unturned in its attempt to recover public money that was lost through its well-publicised poor investments”.

He added: “Regrettably, the advice that APSE provided on valuation, relied upon by the council, was wrong and gave the council a confidence in its decision to make its investments that did not reflect the reality of the situation. We are fully aware of the huge financial pressures facing local government, and we have no desire to increase that burden, but we do need APSE to take responsibility for the advice they provided and to help right those wrongs for the people of Thurrock.”

Baines said APSE had already racked up £400,000 in legal costs and could “burn through its reserves” as a result of the dispute, potentially causing it to fold.

‘Spurious claim’

A Cardiff Council spokesperson said: “We are aware of the spurious claim being made by Thurrock Council against APSE and 23 councils across the UK. The matter is with our lawyers and we will not be commenting further.

The spokesperson added that Cardiff council has no role in the day to day running of APSE.

A Vale of Glamorgan Council spokesperson said: “No official correspondence has been received on this matter. Should any claims be brought, they would be vigorously defended as the Vale of Glamorgan Council does not believe it has any liability for the losses suffered.”

Swansea and Flintshire councils were invited to comment, but did not do so.