The leaders of a rates rebellion in Northland have drawn first blood in their court battle with Kaipara District Council.
The High Court has decided it will conduct a judicial review of the council's rating practices.
The Mangawhai Ratepayers Association requested the review. It claims the council borrowed and rated illegally for several years.
Government commissioners now running the council asked the court last week to strike out the action.
But the High Court declined to do that.
A decision released on Thursday by Justice Heath awarded costs against the council and suggested the judicial review go ahead later this year.
Ratepayers Assn spokesperson Graham McDonald said that is a welcome victory, though the council's court costs will still come back on the ratepayers.
The Mangawhai Ratepayers Association says the council borrowed more than $25 million to expand a sewerage scheme, without consulting them, or showing the debt in its financial impact statements.
Council borrowings are protected transactions, under the 2002 Local Government Act, meaning the banks are guaranteed repayment.
But ratepayers are argue that the council was acting ultra vires (beyond its statutory powers) and it cannot hold the ratepayers liable for a debt that was unlawfully incurred.
Parliament is currently considering a Local Bill, promoted by the Kaipara Commissioners and Northland National MP Mike Sabin that would validate the unlawful rates, retrospectively.
In the light of Justice Heath's decision, Mr McDonald said Parliament should now put the bill on hold, pending the judicial review.
