Thurrock threatens to issue claim against 23 local authority members of APSE over valuation of solar assets

Thurrock Council is threatening to issue a claim against 23 member councils of the Association for Public Service Excellence (APSE) over valuations the association provided to a failed solar farm business which Thurrock said led it to invest millions in bonds.

The litigation could see APSE's member councils fight a claim for compensation of between £42m and £54m. However, APSE believes the issues of quantum are circa £17.6m.

APSE is a not-for-profit unincorporated association working with more than 300 councils to advise and share information and expertise on a broad range of frontline public services.

Since APSE is an unincorporated association and has no legal personality separate from its members, Thurrock's claim could be advanced against the APSE's member councils. Thurrock is understood to have selected the 23 councils as representative defendants of the wider class.

In 2017, 2018 and 2020, APSE produced valuations for Rockfire Capital, an investment fund that was run by a businessman named Liam Kavanagh.

Kavanagh is currently facing a separate claim from Thurrock that alleges he misappropriated money invested in Rockfire Capital and his other companies to fund a lavish lifestyle that included buying a private jet and a country estate.

Thurrock, which has been subject to statutory intervention since September 2022, is seeking to recover around £150m from the businessman. Liam Kavanagh has strongly denied the allegations.

Kavanagh's company provided APSE's valuations to Thurrock ahead of the council choosing to invest around £400m in bonds.

Rockfire and associated companies have since collapsed.

Thurrock now claims that the valuations were "negligent and overvalued" and argues that it did not have adequate security for the value of the investments within the Rockfire group of companies between 2017 and 2020.

Thurrock alleges that this led to significant financial losses with a negative impact on taxpayers and service users.

It also argues that, as a council in statutory intervention, it has a fiduciary duty to taxpayers to pursue all actions that could see some of the lost investments brought back to the borough.

"The council has not taken this decision lightly and it is based on detailed analysis of the evidence and leading counsel's advice," the statement added.

In a letter to its members, APSE's management said the APSE associate who prepared the valuations stood by his calculations, "which have been rigorously revisited on numerous occasions". 

It also noted that the duty of Best Value has been cited by Thurrock as the overriding reason it must seek to recover from the association and its member councils.

However, the letter said that APSE "vigorously" disputes Thurrock's interpretation of the duty.

It said there must be a public interest test to also consider the outcomes of Thurrock's actions against the other councils who are "entirely without blame and yet face the cost burden imposed by Thurrock upon them".

The association has raised its concerns with the relevant Government minister, and its requests to meet, sent on behalf of APSE's area and regional chairs, have been rejected, according to the letter.

"APSE has warned that such an approach could lead to a potential challenge by way of an application for a judicial review into Thurrock's decision-making process," the letter added.

In a response issued in May 2024 to a letter before action sent to APSE by Birketts on behalf of Thurrock, APSE's solicitors, Clyde & Co, argued that Thurrock itself was "highly likely to be found responsible for a significant share of any loss it has suffered" having appeared to act ultra vires, disregarded statutory guidance, forwarded sums to Rockfire despite the warnings of its solicitors, publicly admitted to failings and failed to follow its own investment policies and protocols.

The letter also claimed that APSE had no duty of care to Thurrock and there were no material errors in the valuations provided.

In addition, the letter stated that Thurrock could not sue APSE because a "member of an unincorporated association cannot sue the membership of that unincorporated association – the rationale being that such a person would be suing himself".

Thurrock has been in discussions with APSE's management since September 2023 but said a decision must be made soon due to a looming deadline to submit its claim.

The council said it will be compelled to issue the claim unless a standstill agreement can be entered into before the deadline on 19 November.

It wants the standstill agreement to be agreed and signed by APSE's governing board and the twenty-three councils named by them as "representative" defendants of the wider class of members.

If APSE does not enter into such an agreement, Thurrock has suggested it will commence proceedings against one or more or all of the 23 councils.

However, Thurrock said it would seek a stay so that other means of recovery can be pursued before any steps are taken to progress its claims against APSE members.

Cllr John Kent, Leader of Thurrock Council, said yesterday (7 November): "Thurrock Council promised its residents, as well as Commissioners and the Government, that it will leave no stone unturned in its attempts to recover public money that was lost through its well-publicised poor investments.

"While our primary focus is on recovering money from those who sought to line their own pockets from the public purse, we have a duty to consider all lines of recovery.  This includes pursuing those organisations whose incorrect advice also contributed to the council's decision to make the poor investments.

"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. This in turn led to a course of events that cost Thurrock residents millions of pounds."

Cllr Kent added: "It is extremely concerning that APSE, in undertaking advisory work on commercial matters, has not had in place appropriate safeguards to limit the financial exposure and liability to its member local authorities.

"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."

A spokesperson for APSE said: "APSE is extremely disappointed that in the midst of a pathway to resolving a complex and costly dispute, that risks embroiling over 250 local councils in a legal matter, that Thurrock Council has chosen to issue a press release, which risk undermining sensitive discussions with our member local councils. This is even more regrettable because Thurrock are fully aware that APSE's governance board is to meet to discuss next steps tomorrow (Friday 8 November) in an emergency meeting.

"The contents of the press release are entirely rejected by APSE. It is highly disingenuous to suggest that APSE has not gone to great lengths to engage in dispute resolution.

"As these matters are the subject of legal dispute making such public statements, as made by Thurrock, risks undermining fairness and transparency, and opens up the potential for further legal action, which APSE may now need to consider."

Adam Carey