The lawyer who first warned the Kaipara District Council its rates were illegal says Audit New Zealand should have to pay some of the Northland council's debt.
Clive Boonham, a retired solicitor who has a home in the small community of Mangawhai, has told the council repeatedly over several years that its borrowing and rating processes were unlawful.
Legal experts have now found at least $17 million of its rates were illegal and the Auditor-General is investigating the council's borrowings of more than $50 million for a sewerage scheme for Mangawhai.
Mr Boonham says he doesn't see why ratepayers should be liable when the council and the auditors ignored his warnings.
Audit New Zealand should also contribute, he says, because it did not pick up on unauthorised borrowing and rating, and is insured in such cases.
Mr Boonham says that, in his opinion, the council's borrowing for the Mangawhai sewerage scheme was also illegal.
He says the question in law is whether ratepayers are liable for a council's debts when they were not legally incurred.
Legal action threatened, say residents
Mangawhai residents staging the rates revolt say the Kaipara District Council is now threatening them with legal action.
Resident Graham McKenzie says he and others have had warning letters from the council. But he says the council has been collecting rates illegally for years - and he will not pay.
Mr McKenzie says the council holds $17 million in illegally-struck rates from Mangawhai, which means it owes him and others about $4000 each and so it can deduct the latest instalment from that.
He says it is thought about 500 Mangawhai people have withheld their rates and that will be making a dent in the council's cashflow.