Derby City Council could be sued as Essex local authority tries to recoup multi-million losses

Derby City Council is among 23 local authorities which could be sued by an Essex council as it attempts to recoup some of the millions of pounds it lost to disastrous investments including over solar farms. Thurrock Council went bust due to disastrous solar farm investments made between 2017 and 2020 and it is now trying to recover vast sums of public money lost as part of the deals

Other councils, including Bolsover in Derbyshire, Gedling in Nottinghamshire and West Lindsey in Lincolnshire, have been shocked to have been selected by Thurrock to be liable for a £50m share of the huge losses it suffered.

The threat is part of the council’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 issued a statement last Thursday alleging that the valuations were “negligent” and assets had been overvalued, according to a report by The Bureau of Investigative Journalism (TBIJ).

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APSE, which strongly denies the allegations, is owned by its members, which include 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.

Thurrock Council said it decided to issue the legal threat after APSE refused to agree to extend the 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 ups in 2019 and 2020. In total, the council increased its investment in the farms by £130m on the basis of APSE’s 2018 valuation.

In July last year, TBIJ revealed evidence 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 this year, the approximate losses for the taxpayer were £200m.

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

The 23 local authorities that could be sued by Thurrock, including Derby and Bolsover, are: Gedling, Wolverhampton, South Tyneside, Warrington, Stockton-on-Tees, Preston, West Lindsey, East Riding of Yorkshire, Luton, Isle of Wight, Eastleigh, South Oxfordshire, Hertfordshire, Bournemouth, Christchurch and Poole, Oxfordshire, Bristol, Swansea, Vale of Glamorgan, Cardiff, Southampton and Flintshire.

Thurrock said the councils had been selected “based on having consistent involvement as active members of APSE throughout the period when the valuations were given”. However, it intends to argue, if its claim is successful, every member of APSE should be liable.

APSE met with affected council chiefs on Friday morning. Mo Baines, APSE’s chief executive, told TBIJ they had been “utterly appalled”.

“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, Thurrock sued Kavanagh and Rockfire Capital. But its claim against APSE began earlier, TBIJ can reveal, in September last year. This week it claimed APSE had “only properly engaged with the issues belatedly” – an allegation the organisation strongly denies.

Baines told TBIJ 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 the council 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.

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