The High Court has ruled that Kaipara ratepayers must pay for debts the council ran up for the $60 million Mangawhai sewerage scheme, which they didn't know about.
The Mangawhai Ratepayers Association was seeking a declaration that its members were not liable because the Kaipara District Council borrowed the money without telling them. Some people had withheld paying rates in protest.
In a decision released on Friday, Justice Heath said he is unable to declare that the rates levied for the scheme were invalid.
Justice Heath said there is no doubt that the association would originally have succeeded in gaining that declaration. But its right to relief was thwarted, because Parliament pre-empted the court case by passing a bill in December last year that validated the rates.
The association's chair, Bruce Rogan, said on Friday that means councils can now run up all the debts they like behind closed doors and bill the ratepayers with impunity - and that must be challenged. An appeal against the decision was likely.
Mr Rogan said the High Court has effectively told New Zealand ratepayers that they are serfs, with no control over council borrowing. He said that by law, councils must consult ratepayers before borrowing - but the Kaipara one didn't and it's now got away with it.
Mr Rogan said the implication is that any council can now borrow whatever it likes in secret, then turn on ratepayers and force them to repay its illegal debt.
Bruce Rogan said that can't have been Parliament's intended outcome, when it amended the Local Government Act in 2002.
Before then, councils were restricted in their borrowing and had to poll electors before taking out large loans. That was replaced by the consultative provisions in Annual and Long Term Plans.
The Kaipara District Council failed to notify ratepayers of its plan to extend the sewerage scheme, and borrow millions more to do it, in its public planning documents. Government auditors failed to spot the omission over several years and have since apologised.
The council said the ruling means all outstanding rates must now be paid, and the rates rebels should accept the judgement. The council, which is now run by commissioners, is owed about $6 million in rates withheld in protest.