Liverpool City Council has suffered a setback in its battle with former Mayor Joe Anderson regarding payment of his legal fees.
The council has been ordered to reconsider paying the former leader's legal fees after he brought a High Court challenge.
Mr Anderson, 63, was arrested in December on suspicion of bribery and witness intimidation, which he denies.
Read more: Details of Joe Anderson investigation heard in court for first time
Earlier this year he brought action against his former employer for refusing to provide indemnity to cover the legal costs of defending himself against the allegations.
But in a judgement handed down today, High Court judge, Mrs Justice Yip said the council had wrongly applied its own policy when making the decision not to grant the indemnity.
Mr Anderson stepped aside from his mayoral position before May's elections. He remains under police investigation, but denies any wrongdoing.
The High Court hearing, which took place on July 20, heard that the council's decision not to grant the indemnity to Mr Anderson was made because it would not have been lawful to do so and that the allegations against him did not relate to work he carried out in his position of Mayor of Liverpool.
But Mrs Justice Yip said it had wrongly applied the policy and should reconsider the request.
Liverpool City Council today said that it was disappointed with the initial decision and that it would now reconsider.
The July hearing was told that the witness Mr Anderson was alleged to have intimidated was Liverpool City Council chief executive Tony Reeves.
The allegation is said to relate to disciplinary proceedings involving Nick Kavanagh, the council's former director of regeneration who was also arrested as part of the same Merseyside Police investigation. He too denies any wrongdoing.
The court heard that police found a disciplinary file relating to Mr Kavanagh at Mr Anderson's house.
The court heard that the allegations also include that Mr Anderson helped to secure council contracts for a company belonging to his son, David Anderson, and received financial benefit when his son bought his house.
Mr Anderson's son David also strongly denies any wrongdoing.
In her judgement, Mrs Justice Yip said: "It is plainly right that taking a bribe or engaging in witness intimidation could never fall within official functions. However, I consider that is to miss the point.
"The claimant's case is that he has not taken a bribe or done anything motivated by a desire to intimidate a witness.
"His position, as communicated in his response to the allegations, is essentially that the police have misconstrued his actions and the scope of his powers and have wrongly linked unrelated personal matters... to actions which were done in the course of his duties as mayor.
"The council has proceeded on the basis of the position if the allegations are true. However, those allegations have not yet been tested by way of criminal proceedings."
She added that the 'appropriate course' was to quash the decision to refuse indemnity, adding: "The council should reconsider the claimant's request for an indemnity applying the correct interpretation of the policy."
Mrs Justice Yip said she was not able to conclude whether Mr Anderson was or was not entitled to the indemnity based on the material she had seen.
A spokesperson for Liverpool council said: “We are disappointed that the initial decision, which was taken in accordance with the advice of Leading Counsel has been quashed.
"However, we respect the findings of the court and we will now reconsider the decision.
"We were pleased to note that in her judgment, Mrs Justice Yip made it clear that there was no evidence that council officers had acted disingenuously - and/or with any improper motives - in reaching their decision, which had been claimed by lawyers representing Mr Anderson.”
Mr Anderson and his representatives have been approached for comment.
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