A debt-ridden English council has alleged in a high court lawsuit that a Dubai-based businessman misused £150m of its investments for personal gain, including buying a luxury yacht and private jet.
Thurrock council in Essex, which formally declared effective bankruptcy in 2022 having run up debts of more than £1bn after a series of disastrous investments, is suing Liam Kavanagh and his firm Rockfire Capital in London’s high court.
The local authority alleges that it invested in bonds backed by solar farms in a series of deals with the businessman. It initially invested £268m and later ploughed in more funds on the basis of “fraudulent misrepresentations” by Kavanagh and Rockfire, it claimed in the high court filing.
Thurrock has alleged in the court papers, first reported by the Financial Times, that Kavanagh appeared to have used some of the funds to make purchases largely “for his personal benefit”, including spending £13.7m on a yacht and £9.1m on a Bombardier private jet, as well as using £3m for a property in Mallorca. Kavanagh denies the allegations.
Lawyers for Kavanagh said in a statement: “The claim has not been validly served on Mr Kavanagh and he is confident that his application challenging the court’s jurisdiction will succeed.
“Irrespective of the question of jurisdiction, Mr Kavanagh strenuously denies the allegations. If and when necessary to do so, and should the court permit the claim to proceed, Mr Kavanagh will be putting forward a full defence.”
Thurrock became one of the most indebted of all English local authorities in recent years after borrowing £1.5bn – 10 times its annual spending on local services – to enable a string of investments in the solar farm-backed bonds and other businesses.
The council declared effective bankruptcy in December 2022 after running up a £500m deficit – at the time thought to be the largest in local government history – triggered by the financial speculation.
Details of Thurrock council’s financial woes were outlined in a damning independent report published in June 2023.
The report concluded that between 2016 and 2022 Thurrock council pursued a strategy of borrowing large amounts of money, predominantly from other local authorities, and using this to undertake a range of speculative investments for the purposes of securing a return.
The income from this strategy enabled local political leaders to forestall or avoid difficult decisions on cost savings or raising council tax, the report said, adding that the local authority’s total external borrowing was about £1.5bn as of June 2022.
The report noted that “the root of Thurrock’s unique investment strategy” could be traced back to May 2016 when the council made an investment of £24m in Swindon Solar Farm, operated by Rockfire/Toucan, after which investments continued to be made.
Three years of investigations by the Bureau of Investigative Journalism (BIJ) helped force Thurrock to reveal the full scale of its investments, including hundreds of millions lent to companies owned by Kavanagh to invest in 53 solar farms.
In common with many other local councils, Thurrock attempted to stem the effects of years of Tory government austerity cuts to its funding by borrowing cheaply from the Treasury and investing in commercial business in the hope this would provide an alternative income stream. By 2019, English councils had borrowed more than £6bn for this purpose.
Thurrock council has been contacted for comment.