TAXPAYERS face a £4.5 million bill following a U-turn in a legal wrangle between Cornwall Council and the owners of an aborted halfway house project in Newquay.
Danesbury House, on Fore Street, was earmarked as a refuge for homeless people, addicts and even former convicts back in 2007.
But news of the multimillion-pound contract between housing providers Charles Terence Estates (CTE) and the former Restormel Borough Council caused uproar in the town.
Many said the town centre location across the road from a family pub and supermarket was hugely inappropriate, and in 2009 urged the newly formed Cornwall Council to abandon the unfulfilled plans it had inherited from the defunct borough council.
Campaigners then won their battle after council chiefs agreed to scrap the plans and stopped paying rent to CTE – but the new authority found itself hauled into the High Court last year by CTE over the move.
Cornwall Council won the case, arguing that Restormel, along with another former borough council, Penwith, had acted outside of their statutory duties to taxpayers by agreeing to pay millions to CTE to house vulnerable people in 30 of its properties.
However, on Tuesday this week CTE emerged victorious in a Court of Appeal hearing, meaning Cornwall Council must now meet the old councils' contractual obligations, reimbursing missed rent and paying legal costs.
The move has been met with disbelief by Dave Sleeman, chair of Newquay Town Residents' Association, which campaigned against the location of the halfway house five years ago.
He told the Cornish Guardian: "Restormel had a history of making bad judgements. I had no time for them and they did nothing for the town. Cornwall Council has acted responsibly here but this is not good news for taxpayers."
Allowing CTE's appeal this week, Lord Justice Maurice Kay ruled that neither Restormel nor Penwith had breached their duties.
He said the councils had wanted to obtain better quality, more cost-effective temporary accommodation for vulnerable people and the deal with CTE had achieved those objectives.
The judge added that even if it had been proved that the councils breached their duties, this would not have been enough to make the leases agreed with CTE void.
In his ruling last year, Mr Justice Cranston accepted that Bournemouth-based CTE had "at all times acted in good faith".
There was no evidence that the housing benefit system had been abused, nor that tenants had been charged excessive rents, and CTE, which had borrowed heavily to buy and refurbish the properties, had had "no reason to doubt" the lawfulness of its contracts with the two councils.
In a statement, Cornwall Council said it was "disappointed" by the decision made at the Court of Appeal, standing by its decision to challenge the "validity of the 30 lengthy leases concerned". A spokeswoman said: "It considered that the rents under the leases were not beneficial to the taxpayer.
"The majority of properties were not suitable for the residents who lived in them, nor were they all in appropriate locations in the local communities.
"The council anticipated that the earlier decision [at the High Court] would have saved at least £4.5 million in public funds. This saving would have benefited the taxpayer in Cornwall whilst allowing the council to secure better and more appropriate housing. Unfortunately, the result of this judgment is that the leases are valid and the council is still bound by their terms and the rents under them."
The council has confirmed it is considering whether to appeal to the Supreme Court.