Collapsed PFI firm sues trust for £56m

The private finance initiative agreement between Whittington Facilities Ltd and Whittington Health Trust ended in August 2020 after the former went into administration.

The administrators claim the trust’s decision to withhold service payments following a fire in January 2018 caused the company to enter administration.

Ownership of the PFI buildings transferred back to the trust on termination of the contract. This left it responsible for the maintenance and costs of refurbishments, and the trust has been pursuing WFL for these costs.

Both sides have been negotiating over the final compensation sum that is due following the termination of the PFI agreement, but the mediation process has failed.

Administrators are seeking £47.3m for the “fair value of the agreement”, the total of all payments forecast to be made from termination to when the PFI deal was due to expire in 2034, minus the total costs forecast over the same period.

In addition to £3.7m in interest, administrators are also claiming £4.9m for the payments the trust withheld during the dispute over works needed to fix fire safety risks.

These risks were related to systems designed to prevent the spread of fire through the building. They had been identified during investigations by fire safety specialists following a January 2018 fire in the basement of the PFI building.

The prospect of fixing the defects itself would have threatened the company’s solvency, however, as it reported in its 2018 company accounts. It said fixing any defects would likely require cash outlays that “cast doubt on its future ability to trade as a going concern”.

The trust, which has yet to file its defence to WFL’s claim, has put in place measures to mitigate the fire risks, including additional fire safety training and 24-hour patrols, until the issues are permanently fixed.

A trust spokesperson said: “We are disappointed that the joint administrators, acting on behalf of the creditors of Whittington Facilities Ltd, have felt it necessary to commence legal proceedings.

“Since our PFI provider collapsed in 2020, we have worked diligently to ensure that our building remains safe for staff, patients and visitors, and to understand precisely what needs to be done to rectify fire safety issues and bring the building up to an acceptable standard… We will now consider this claim and take legal advice.”

HSJ  also contacted Teneo, WFL’s administrators, for comment.