THE Electoral Commission misinterpreted EU referendum spending laws allowing Vote Leave to break them, the High Court has ruled.

Vote Leave paid £625,000 to clear bills allegedly run up by university student Darren Grimes.

The watchdog initially said it had no grounds to suspect this was a scheme to get round spending limits, but it later changed its mind and fined Vote Leave and Grimes – and also referred him to the police.

The High Court agreed with the Electoral Commission finding in July that Vote Leave had broken the law, but said the watchdog had misinterpreted the rules, in the run-up to the June 2016 referendum, in advice it gave to the Leave campaign.

Vote Leave’s former chief executive Matthew Elliott said that if the Electoral Commission did not launch an appeal against the ruling it would be admitting it had given incorrect advice and should drop its fines.

Anti-Brexit campaigner and Labour peer Lord Adonis said: “It sounds to me as if the Electoral Commission has not been doing its job properly. On the face of it, it seems to have been extremely incompetent.” He said that if there was another EU referendum, which he wants to see, “we need a rather more fit and proper body to be in charge of it”.

In his judgement, Lord Justice Leggatt said the Electoral Commission had “misinterpreted the definition of ‘referendum expenses’” as defined by the Political Parties, Elections and Referendum Act.

He added: “The source of its error is a mistaken assumption that an individual or body which makes ao donation to a permitted participant cannot thereby incur referendum expenses.

“As a result of this error, the Electoral Commission has interpreted the definition in a way that is inconsistent with both the language and the purpose of the legislation.”

Vote Leave’s donation to Grimes, which went straight to its Canadian digital agency AggregateIQ, should have counted as part of Vote Leave’s campaign expenses, added the judge.

“The position would have been different if the money had been given to Mr Grimes for him to use however he chose in promoting a ‘leave’ outcome of the referendum,” he added.

But the judge said there was no “rational basis” for the watchdog’s actions, which he described a “recipe for abuse” of the law.

The Electoral Commission said it welcomed the High Court’s “consideration of this aspect of electoral law”. “The court arrived at the same conclusion as the Commission did in its investigation – that Vote Leave should have accounted for the expenditure on the digital services firm, AggregateIQ – although it found an additional reason for reaching that conclusion. The Commission imposed sanctions on Vote Leave for this offence and others found during the investigation.”

But Jolyon Maugham QC of the Good Law Project, which brought the High Court challenge, said the ruling proved the watchdog “unlawfully tilted the playing field in favour of Leave” in the 2016 referendum. “Stronger In [the official Remain campaign] was also up against its spending limits. But because it didn’t get the advice from the Electoral Commission it had to stop spending. And the High Court decided that advice was wrong.”