A council has lost its High Court case against a former managing director after claiming she withheld a history of depressive illness.
Cheltenham Borough Council was suing Christine Laird, 52, for £1m.
Mrs Laird was appointed in 2002, but left in 2005 on an ill-health pension after taking sick leave on full pay.
The council had claimed it suffered financial losses amounting to more than £1m including interest as a result of Mrs Laird's "deceit".
Andrew North, Chief Executive of Cheltenham Borough Council, said the authority was disappointed with the judgement.
"While the outcome is not what we had hoped for, we felt we had a duty to take action to recover losses for what we felt was a disastrous time for the council.
Hugh Laird said the case nearly cost his wife her life
"Had the council known Mrs Laird's medical history it would most probably not have employed her and incurred the costs it has.
"Undoubtedly the council went through a very difficult time between 2002 and 2005 and we are now a very different organisation to the council which Mrs Laird was appointed to lead."
Mrs Laird's husband Hugh Laird, speaking outside the High Court in London, said: "Christine's mental health has been cruelly broken.
"The personal cost of all this for us is not financial - the price was so nearly her life.
"Christine fought and won this court case. Now she will start the long fight to win back her health with the love and prayers of her friends and family.
"All of us are determined that she will make a full recovery."
Mrs Laird told the High Court in March that she believed the appointment was "unconditional" and there had been no requirement for a medical report.
She said she had given accurate information about her past.
Mr Justice Hamblen dismissed the council's action, but also rejected a counterclaim by Mrs Laird for damages.
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The judge said: "It is over eight years since Mrs Laird joined the council and much of the intervening period has been spent in bitter dispute before various tribunals, at much personal and financial cost."
He added: "I very much hope that a line can now finally be drawn, allowing Mrs Laird to get on with her life and the council to get on with the business of governing Cheltenham."
Mrs Laird said at the hearing in March that the work she did for the council was worth at least £1.5m in efficiency savings because of her financial and local housing expertise.
She claimed this resulted in a £30m benefit for the council.
In court Mrs Laird said she had been forced out of office by a poor working atmosphere on the local authority and council members who opposed her implementation of restructuring departments.
The legal costs for the action are expected to run into hundreds of thousands of pounds.
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