Roger Pearson reports on a High Court action by the Secretary of State for Wales over the handling of grant money.Local authority handling of European grant aid is to come under scrutiny in the High Court. Newport County Borough, the Welsh Development Agency and two companies are being sued by the Secretary of State for Wales, Ron Davies, over accusations of involvement in unlawful deals over grants.

Declarations are being sought by the Welsh Secretary that a contract, dated 30 April 1991, between the council, the development agency, Trencherwood Commercial and Newport Development Corporation was unlawful.

The writ in the case claims that the council and development agency purported to undertake to pay the two companies half of any grant they received for certain infrastructure works, though it does not specify the nature of the work involved in the contract.

No court date has been fixed for the case, but it will entail a probe into the way grant money can be disposed. Davies will seek declarations that it would be unlawful and ultra vires for the council and the agency to pay the two companies any part of grant money received under the European Regional Development Fund Scheme, the European Social Fund, the European Agricultural Guidance and Guarantee Fund, or the Integrated Development Operation, or any sum calculated by reference to a European grant.

In addition, he will seek a declaration that the council and agency would be acting in breach of contract and trust if they paid the two companies any part of European grants received, or any sums calculated by referring to the value of grants. Davies is also seeking a court order banning payment of any European grant money to the two companies.

The court will also be asked to make declarations that if Trencherwood and Newport Development were to receive European money or money calculated by reference to the amount of the grants, they would be liable to repay it on the basis that they were not legally entitled to it.