Mangawhai ratepayers secured a short-term victory over the Kaipara District Council when the High Court ruled the town's controversial wastewater project breached the Local Government Act.

In a judgment released yesterday - nearly four months after hearing the case in Whangarei - Justice Paul Heath said legal costs should be awarded to the Mangawhai Residents and Ratepayers' Association but invited further submissions to discuss that and other issues.

But association chairman Bruce Rogan said his members had spent $200,000 to $250,000 in legal costs so far.

The association applied for a judicial review into the Mangawhai EcoCare wastewater treatment scheme and asked the High Court to rule that the council acted against the Local Government Act and its responsibilities to its ratepayers by supporting the Kaipara Validation Act.


The validation act is a law passed validating irregularities in the setting and assessing of Kaipara District rates from the 2006-07 financial year to 2011-12.

Mangawhai ratepayers were initially told the final scheme would cost no more than $10.8 million in 2003, then $37 million in 2009, while at the same time the council had taken out a loan for $57.7 million to pay for it.

The scheme left the council with total debt of about $80 million, leading to the Government dismissing the elected councillors and appointing commissioners to run the council. The processes the council used for the scheme were also highly criticised by an Auditor General's report.

Justice Health suggested that a more "nuanced" approach must be taken by the council to the way in which it should deal with its creditors who funded the project, given the council's parlous state, and the effect major rates' rises would probably have on the ratepayers.

He said the contracts by which the council borrowed money to pay for the project were "protected transactions" for which the creditor was entitled to take enforcement action if loan payments were defaulted.

The judge made it clear the judgment wasn't sealed, meaning he wanted to hear from both parties on how the declarations should be worded and on the question of costs.

Mr Rogan said the association would study the judgement, then decide whether to ask the court for a further judicial review.

"I am slightly disappointed that we didn't get a definitive ruling on the powers of the council to set rates but I can see why he (judge) didn't do that."