Council receives letter before claim suggesting it may have breached fiduciary duty in £138m investment decision

The Good Law Project (GLP) has sent a letter to Thurrock Council requesting further information on the decision to make a top-up investment of £138 million in a solar farm business, following an investigation by the Bureau of Investigative Journalism (BIJ).

The GLP says that the matters reported by the BIJ "raise serious concerns" that the council may have breached its fiduciary duty to taxpayers, failed to take account of relevant considerations in making its investment decisions, and failed to comply with principles of transparency around decision-making.

Between 2016 and 2021, the council invested millions into Rockfire Capital to purchase solar farms.

The BIJ's first reported on the investments in May 2020 when it claimed that the council had invested at least £74 million, and possibly more, into Rockfire Capital, "whose financial model raises serious questions over how likely it is that the public money would be recovered in full if the business failed," it claimed.

Following the BIJ report, councillors began to express concerns over the spending, including GLP's client, Cllr John Kent. The council stood by its investments and assured members that it had earned more than £80 million in returns between 2017 and July 2020. The council eventually ended its investments in Rockfire Capital in July 2021.

In July of this year, the BIJ published a new report which revealed that the council had made a top-up payment of £138m to Rockfire Capital in 2018-19. This report triggered the pre-action protocol letter from GLP and Cllr Kent. According to the BIJ report, the £138 million remains unaccounted for.

GLP's pre-action letter states that: "Despite the Council's repeated assurances that they undertook due diligence and external advice on all its investments, on this occasion, it is not clear what due diligence was undertaken or external advice sought, if any, prior to making the Top-up Investment Decision or the extent to which it was subject to scrutiny by the council, for example any relevant committees.

"Furthermore, there was no public announcement by the council in respect of the extra millions being spent and our clients now have very real concerns as to whether the council will end up in deficit as a result of the Top-up Investment Decision."

According to the letter, the claimant is concerned that the circumstances surrounding the top-up investment could amount to a potential breach of the council's fiduciary duty to taxpayers in respect of handling public monies, and a failure to comply with relevant policies and/or take account of relevant information.

The letter also notes that there appears to have been a "significant lack of transparency" around the investment.

"There are no decision-making documents, account or minutes from Cabinet and Council meetings in the public domain which suggest that the Top-up Investment Decision had prior approval from the council," the letter claims.

"It appears that the power to make the Top-Up Investment Decision was delegated to [the council's Financial Director, Sean Clark] and that its was taken with very limited due diligence and without any oversight or scrutiny by the council members or consultation with opposition leaders."

It adds that there is "very little" information published in the public domain about the decision and "therefore, as far as we understand, there was no prior democratic or public scrutiny".

"This may amount to breach of the council's duties in relation to principles of transparency, having regard to both the common law duty of transparency and the council obligations to publish certain matters pursuant to the Local Government Transparency Code 2015."

The letter asks for clarity on who made the decision, how the payment was funded and what due diligence was undertaken, amongst other questions.

It also asks that the council provide copies of its accounts displaying investments in Rockfire Capital.

The letter was sent on 5 August and provided 14 days for the council to respond, meaning it must reply to the letter by today (19 August).

A spokesperson for Thurrock Council said: “As a result of Thurrock Council’s ongoing due diligence programme, concerns regarding the valuation of this solar site investment were identified by the Council in 2021. Immediately, swift and robust action was taken. Thurrock Council and its external financial and legal experts have established a comprehensive resolution plan to safeguard the Council’s financial position."

“Thurrock Council has taken action on this matter to minimise risk and support the continued security of public funds.”

Adam Carey