HE HAS BEEN terrifying children for more than 30 years. And give or take the odd box-office disaster, Terry Gilliam has carved a good living from this unusual calling. Perhaps this is because his own inner child is never too far beneath the surface — even at 64, Gilliam giggles and gurns like a naughty schoolboy who has just seized control of the world’s largest train set.

Raised in Los Angeles without a TV, Gilliam grew up reading fairytales. Even after he relocated to London 40 years ago and became a founder member of Monty Python, the scary power of these stories never left him. His latest film, The Brothers Grimm, takes him back to these primal fantasies.

“What I like about them is they are dark and dangerous and disturbing,” Gilliam enthuses. “That’s what fairytales should do, disturb you when you are young and resilient, so when real life comes along you’re ready for it.”

Starring Heath Ledger and Matt Damon as fraternal con-men struggling to dodge the draft in Napoleonic Europe, The Brothers Grimm is Gilliam’s first film in seven years, but it taps directly into his familiar obsessions and frenzied stylistic riffs. Visually dazzling and laced with dark humour, it blends magic realism with cynical modernism. From his first solo directing credit with Jabberwocky in 1977, via such box-office hits as Time Bandits, The Fisher King and 12 Monkeys, his signature style has always been grotesque comedy mixed with time-hopping fantasy.

“They’ve always been fairytales,” Gilliam nods. “Jabberwocky was a fairytale, and Grimm is about conflicting fairytales that crash into each other. I’ve always done that. To me it’s a way of abstracting things I want to say about the modern world, putting them in another setting with different costumes.”

The Brothers Grimm arrives trailing lurid headlines about on-set battles between its notoriously single-minded director and his equally stubborn producers, Bob and Harvey Weinstein.

After the powerful duo defied his casting choices and fired his cinematographer for working too slowly, Gilliam reportedly went on strike.

Irresistible force finally met immovable object last year, when production was shut down for several months of heated discussion about the best way to complete the film.

Gilliam is now wary that this backstage drama will overshadow the film itself, but he admits that working with the Weinsteins again is not an option. “It was a rough ride,” he says. “They are independent and convinced they are right, and I’m independent and convinced I’m right. I just think my mistakes are more interesting.”

Gilliam’s reputation as a loose cannon is slightly unfair, since his track record contains only one all-out financial disaster, his sprawling 1988 romp The Adventures of Baron Munchausen. But in his bullish outbursts and self-deprecating honesty, he can sometimes be his own worst enemy. Such as when he picked a public fight with an entire studio over its refusal to release Brazil, his visionary Orwellian satire from 1985. Or when he allowed the film-makers Keith Fulton and Louis Pepe to document the collapse of his Johnny Depp project The Man Who Killed Don Quixote, resulting in the highly amusing but hardly flattering 2002 documentary Lost in La Mancha.

Even Gilliam’s uneven 1998 adaptation of Hunter S. Thompson’s “unfilmable” novel Fear and Loathing in Las Vegas has amassed a major cult following on DVD. “Fear and Loathing is probably the most perfect film I’ve made,” he grins. “The best thing I heard is that it’s the most popular film at Eton. Which is fantastic! We’re corrupting the youth of the nation, as we should.”

Gilliam and Thompson became close during the shoot, and Gilliam was not too shocked to hear of Thompson’s shotgun suicide in February. “I knew he was in real pain. He really was physically debilitated, and that’s one thing he would never be able to deal with. I couldn’t see him dribbling his way towards death. I don’t know how many times he saw the film before he topped himself . . .

I hope there was no connection!” With his mastery of fantastical visuals Gilliam was even a strong contender to direct the Harry Potter films. But, yet again, his quixotic reputation counted against him. “I was apparently the choice of the author and the producer,” he sighs, “but the studio wanted a . . . safe pair of hands.”

Although The Brothers Grimm had a poor commercial reception in America, Gilliam’s stock as a former Python continues to serve him well across the Atlantic. Witness the recent runaway success of Spamalot, the Broadway musical revamp of Monty Python and the Holy Grail. Eric Idle has been the driving force behind the stage show, although Gilliam directed the original film with his fellow Python Terry Jones.

“It’s nice to keep a bit of life in the old corpse,” he says. “Eric takes all the money, but he did all the work . . . except for writing it!” Whatever the financial fate of his latest fairytale blockbuster, Gilliam already has another ace up his sleeve — a low-budget adaptation of Mitch Cullin’s novel Tideland, shot during last year’s tense hiatus in Brothers Grimm production.

“Tideland,” Gilliam leans forward with a conspiratorial whisper. “That’s the really good one! It’s about a little girl in a strange, disturbing situation and how she deals with it. It’s another story about the resilience of children.”

And, of course, how to terrify them. Especially the bolshie, bumptious, eternal child inside Gilliam himself.

• The Brothers Grimm is the Sky Movies Special Screening, showing on Oct 31 & Nov 2 at Odeon West End 2. Terry Gilliam gives a Times Screen Talk on Nov 1 at NFT1

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