Suing trust for £56m is ‘last resort’, says Lloyds Bank

The claim arises from a dispute over the fire safety of private finance initiative-built parts of the Whittington Hospital in north London.

A fire in 2018 saw 149 patients evacuated from the wing, and Whittington said it subsequently stopped paying the PFI company, Whittington Facilities Limited, as it was not properly maintaining the premises, which was compromising fire safety.

WFL has since gone bust, and insolvency administrators are now suing the trust for £56m, comprising the payments for the rest of the contract plus interest.

Most of this appears to be owed to Lloyds. The largest single secured creditor is Lloyds Banking Group, which is owed £41.1m by WFL. The administrators’ report from last month said they had identified £43m owed to unsecured creditors, £41.3m of it owed to Uberior Investment Ltd, a subsidiary of Lloyds Banking Group.

A Lloyds Banking Group spokesman told HSJ: “The litigation is a matter for the administrators to comment upon. The Whittington Hospital Trust has a contractual obligation to pay to Whittington Facilities Ltd compensation on termination of the project. The administrators are taking this action in the interests of all creditors, including the bank.

“We are supportive of the steps being taken, recognising it is an action of last resort, with the administrators having previously sought to agree a consensual settlement.

“As that was not successful, the administrators have no option other than to progress this contractual claim via the courts.”

The trust’s defence, submitted to the High Court last week, was that it was correct to withhold the payments, and that the cost of making the building safe would be more than the £56m it claims it is owed.

New information released to HSJ this week by Whittington Healthcare Trust also reveals that since the fire it has spent about £4m on “remediation, specialist expertise, technical advice and operational mitigations such as waking watch and additional training”.

It believes that carrying out work to make the building safe in the longer-term would cost substantially more, and is trying to claim these costs from WFL.

The trust’s legal documents said: “WFL took very limited and wholly inadequate steps to address the fire safety issues before October 2018, including failing to even log them. As a result of WFL’s failure to self-report and remediate issues, the trust had to log over 600 incomplete and/or defective jobs relating to the fire safety issues with the helpdesk.”

Previous company accounts, from 2018, suggest that properly fixing the problems would itself have threatened WFL’s solvency. They state that fixing any defects would likely require cash outlays which “cast doubt on its future ability to trade as a going concern”.

One of the UK’s largest banking firms, Lloyds was bailed out with £21b by the taxpayer in the fallout of the 2008 financial crisis. It would not disclose when asked by HSJ whether it had invested in or owned shares in other PFI infrastructure, in or outside of the NHS.

WFL’s owner is listed at Companies House as Trinity Investment Capital Limited. The company and administrator Teneo was approached for comment.

The case continues with the next hearing expected in the autumn.

The trust’s PFI wing was signed off by the Department of Health and Social Care in 2002. The contract had been due to expire in 2034. The two blocks included inpatient wards, operating theatres, critical care facilities, diagnostics and cancer wards, as well as paediatrics and the food court.

The main contractor for the build was construction firm Jarvis, which went bust in 2010.

The trust confirmed to HSJ that it was pursuing WFL for the costs of rectifying the building.