Ratepayers are celebrating a legal victory after a High Court judge deemed the Kaipara Regional Council's controversial decision to build a sewerage scheme illegal.
However, the council has also welcomed the legal decision as it cleared it of any responsibility to refund historical rates.
The sewerage project, designed to clean up the harbour at Mangawhai Heads, north of Auckland, left the Kaipara District Council in major financial strife.
In a provisional High Court decision, Justice Paul Heath said Kaipara District Court allowed costs to explode from $35.6 million to $57.7m without public consultation.
Retired lawyer Clive Boonham, who helped bring the case to court, said he hoped the victory would send a message to other councils that acted above the law.
"Local government in New Zealand is such a shambles," Boonham said.
"There's a culture in New Zealand that if you're a council you can get away with murder."
The Mangawhai Ratepayers and Residents Association (MRRA) took legal action against the council for breaching the Local Government Act.
The court decision found ratepayers were not responsible for the council's debt, but left open the question of who should cover the bill.
Boonham said ratepayers should not have to bear all the costs of a council's financial failures.
However, a law change in December meant rates could not be refunded.
Strife over the sewerage project goes back more than five years when Mangawhai residents discovered the council couldn't cover the spiralling costs of the sewerage project.
The council, which is now being run by Wellington-appointed commissioners, raised rates on residents to meet the interest costs of the increasing debt.
While ratepayers celebrated the court ruling yesterday, the Kaipara District Council welcomed the news it would not have to make refunds to ratepayers.
Commissioners chairman John Robertson said a few people had been refusing to pay rates. Rates were enforceable and must now be paid.
Significant errors were made by previous councils in approving the development of the scheme, he said.
"However it was always the view of the commissioners that the debt was enforceable and that council had a legal obligation to repay the debt.
"The court has agreed with this view and I hope it is now crystal clear to everyone so that as a district, Kaipara can move forward."
Justice Heath awarded costs to MRRA for the ongoing court action.
The court decisions followed a damning report into the dysfunctional handling of the sewerage project.
Auditor-General Lyn Provost found in December that the council was out of its depth when managing the wastewater project.
She apologised for the shortcomings of audit work of the council, which failed to red flag the financial problems.