Regional council chief executive Andrew Newman was later requested by inquiry chairman Hon Justice Lyn Stevens QC to return to court to take the stand.
Although counsel stated Mr Newman "must have known that laying charges would have derailed the inquiry", he maintained during cross-examination that his advice was that the regional council had a "legitimate" investigation, which was a separate matter from the inquiry.
While Mr Newman accepted there was a "time and sequence issue", he had taken advice on what actions the regional council had to take, given its regulatory role.
When questioned why the regional council laid charges in November - despite having a six-month window to do so - Mr Newman said his advice was that laying charges in the middle of the inquiry, rather than before it had started, would have been "problematic".
He was reminded that the charges were laid on the day evidence for the inquiry was due, so the district council was not able to file. It had still not filed evidence, as council staff were concerned about exposure due to the prosecution.
Hastings council group asset manager Craig Thew told the hearing how the relationship between the councils deteriorated after the gastro outbreak and became "slightly more antagonistic and disruptive".
As well as the regional council making requests of the district council while knowing the pressure it faced, Mr Thew said there were inferences that his staff had been manipulating evidence.
That became "even more difficult with the subsequent prosecution".
Under cross-examination, regional council group resource manager Iain Maxwell stated that as a regulatory body there was a "natural tension" between it and other parties. He agreed the prosecution would have an adverse effect on the working group.
He was also questioned on whether the regional council would withdraw from the prosecution - Mr Thew had said Mr Newman rejected a request from district council chief executive Ross McLeod that the prosecution be removed.
Mr Maxwell also faced questioning about the results of dye tracer testing as part of its investigation. That did not appear in any evidence supplied to the inquiry.
Justice Stevens stated the inquiry was "not amused" by that.
"Quite frankly, we should have had [the results] before now ... the panel is not impressed."
In the statement released, the regional and Hastings councils agreed the infringement notice related to a breach of consent by taking and using water from the Brookvale Rd bores, not the water contamination.
"Neither the withdrawal of the prosecution proceedings nor the non-contesting of the infringement notices either indicate or rule out any cause of the water contamination," the statement read.
The cause of the water contamination was for the Government inquiry to determine.
Both councils stated they looked forward to assisting the Government inquiry, agreeing that the most important factor in the public interest was to determine the cause and ensure there was no repeat.
