The Environment Court has awarded more than $100,000 in legal costs to two iwi after it found Rotorua district council has misled the tribes.
The court is critical of the council's consultation process for plans to build a wastewater treatment plant at Lake Rotoma.
Consent was granted by the regional council, but then appealed by Ngati Pikiao and Ngati Makino.
The consent was handed back because of a cultural issue.
But it is not known what the issue is, because the matter was discussed in private.
Ngati Pikiao has been awarded $65,000 and Ngati Makino $50,000.
Following the court's decision, the district council has ordered a comprehensive internal audit on its iwi consultation procedures.
The review is being led by the council's Kaupapa Maori director, Mauriora Kingi, and someone from outside the local authority.
Local mayor Kevin Winters says he was disappointed to hear of the court criticism.
The wastewater project is on hold, and the council says the legal costs will come out of the budget for its proposed plant.