The Employment Court has struck out Kaipara District Council's case against a former chief executive as a confidential agreement between both parties barred them from suing each other.
In late 2014, the council's government-appointed commissioners initiated action in the Employment Relations Authority against Jack McKerchar seeking damages for alleged breaches of his responsibilities as council's chief executive in relation to the management of the Mangawhai community wastewater scheme.
The ERA deemed the matter was in the public interest and moved the case to the Employment Court in early 2015.
The council alleged Mr McKerchar's failure to ensure lawful rates assessments and invoices were issued from about 2006 prompted Parliament to pass the Validation Act, which retrospectively legalised the situation.
Mr McKerchar launched a counterclaim, saying the council breached a deed of settlement between him and the territorial authority by releasing it to the media. The court also kicked out that claim.
He entered into the deed with the council led by then mayor Neil Tiller in August 2011 which he said was full and final settlement of all matters arising from his employment and it prevented the council from bringing employment-related proceedings against him.
Mr McKerchar said these breaches caused him loss and sought damages for breach of contract, distress and loss of reputation.
The council said it was not aware of Mr McKerchar's alleged breaches at the time the deed was entered into, which does not prevent it pursuing claims against him.
But in a judgment released Tuesday, Chief Employment Court Judge Graeme Colgan said the deed provided an absolute defence to Mr McKerchar.
''Mr McKerchar wished to ensure that there could be no comeback by the council against him if he was liable to any extent for losses which the council may have incurred, even although denying that he may have been so liable," Judge Colgan said.
Mr McKercher's counterclaim against the council was also struck out because neither the ERA nor the Employment Court have jurisdiction to hear the claim.
Mr McKerchar and Mr Tiller refused to comment on the Employment Court ruling.
Kaipara Mayor Greg Gent said it was highly unlikely the council would appeal the decision.
"It's a challenge to overturn something which is signed as full and final settlement. Then there's the potential cost which is likely to run into massive dollars," he said.
The council has set aside $1.8 million for its case against Mr McKerchar in the ERA and against Auditor General Lyn Provost in the High Court which did not proceed after her office agreed to pay $5.3m in an out-of-court settlement.
She allegedly failed to supervise poor work done by the Audit Office when scrutinising the council books over the sewerage scheme.
Under the then elected council's watch, the cost of the sewerage scheme more than doubled from $26m to $63m.
Mr Gent said although the government-appointed commissioners did their best, the council was still operating on a tight budget.
Former chairman of commissioners John Robertson said the council he led believed there were grounds for legal action against Mr McKerchar but the Court ruled otherwise.
"The response of the court is now a matter for the new council to deal with," he said.