The group that revolted over a $65m wastewater plant, brought down a local council and sparked the country's biggest rates rebellion has taken its case to the Court of Appeal.

Mangawhai Ratepayers and Residents Association was seeking a declaration that Kaipara District Council cannot rate for unlawful purposes and must quash rates charged for purposes deemed illegal.

The High Court ruled ratepayers must cough up a $57 million bill for the Mangawhai Community Wastewater Scheme. But the Association challenged that, saying the council's actions were unlawful. They said the Council made multiple decisions relating to the scheme found not to comply with the Local Government Act.

Dozens of people from the Kaipara today travelled to the court in Wellington and to Auckland, where the hearing was broadcast via videolink to that city's Court of Appeal hearing room.


The court heard the Council allowed the wastewater scheme's cost to explode from $35m to $63.5m without consulting ratepayers.

"There is an egregious series of secret and unlawful decisions by the Kaipara District Council over a long period of time," said Matthew Palmer QC, who along with Kitt Littlejohn was representing the Association.

Mr Palmer said even before the costs blowout, the Council committed to spending $30m before public consultation.

He said the wastewater plant, which was intended to benefit some 2000 properties, was not funded and built in a "transparent and democratically acceptable manner."

He said the rates revolt ensued, commissioners replaced the Council, and the Attorney-General mounted an enquiry.

Mr Palmer said a previous High Court decision featured "unusually frank language" peppered with terms such as "incomprehensible and blindingly obvious" when referring to the Council's failure to consult ratepayers.

"We have here a history of an incompetently-run process," he said.

Mr Palmer said councils did not have the power to charge rates for unlawful activities.


"The reason for the Association bringing this case is a view about who is appropriate to be able to rate," he added.

Justice Mark Cooper asked Mr Palmer to clarify what "unlawful purpose" the Council was still charging rates for, and asked why only a receiver and not the council should take action to recover a debt.

Mr Palmer said the court should ask who bears the effect of the Council's unlawful decisions. "...I say the creditors bear it."

Justice Rhys Harrison said the Association sought "effectively to quash or set aside" an earlier decision to impose a target rate and uniform annual charge on ratepayers.

The judge told Mr Palmer the Association made "a rather significant submission" and the consequences could potentially be "catastrophic."

Mr Palmer told the court the Mangawhai ratepayers and residents had thought carefully about escalating their case to the Court of Appeal, following years of legal wrangling."Their concern simply is that the law should be followed."

The hearing this morning also raised discussions about the relationship between councils and central government, which Justice Forrie Miller said sometimes took a "paternalistic" view of local authorities.

Kaipara District Council's lawyers David Goddard QC and Lizzy Wiessing have not yet had a chance to have their say.

The hearing is expected to last two days.

In March 2013 the Association filed judicial review proceedings against the Council about issues including the decision-making process around construction of the scheme. The judicial review also discussed rating irregularities.

Nine months later Parliament passed a law validating irregularities in how Kaipara District Council set and assessed rates from the 2006-07 financial year to 2011-12.