Auditor-General Lyn Provost will pay the Kaipara District Council $5.3 million in an out-of-court settlement for its alleged failure to monitor expenses relating to a controversial wastewater scheme.

In late 2014, the council filed papers in the High Court against Auditor General Lyn Provost for her office's alleged failure to scrutinise poor work done by the Audit Office when scrutinising the council books over the controversial Mangawhai Heads sewerage scheme.

However, the parties agreed to participate in a mediation which resulted in both agreeing to settle the dispute without either admitting liability.

The sum of $5,375,000 will be paid to the council and the parties will bear their own costs in the litigation to date.

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A High Court judge last year found it "incomprehensible" that the former democratically-elected Kaipara District Council would decide to increase the cost of the controversial wastewater project by tens of millions of dollars without consulting its ratepayers who were to pay for it.

In a judgment Justice Paul Heath ruled the council breached the Local Government Act by entering into the sewerage scheme and took particular aim at former Mayor Neil Tiller, his councillors and chief executive Jack McKerchar.

He said the Auditor-General's assessment that the council's decision to basically double the size of a controversial wastewater project from $35.6 million to an estimated $57.7 million "wasn't appropriate" was a "gross understatement".

"It must have been blindingly obvious to the mayor and his councillors that while ratepayers might (given that the project did not enjoy universal approval) have been prepared to pay increased rates to meet a cost of $35.6 million, it could not be said confidently that they would agree to pay $57.7 million for a similar facility."

The council has also launched legal action against Mr McKerchar.