It cuts across the 1992 Treaty of Waitangi fisheries settlement negotiated on behalf of all tribes by Sir Tipene O'Regan, Sir Graham Latimer, the late Matiu Rata and the late Sir Robert Mahuta.
Sir Tipene said he believed Mr Key was misled and badly advised over the sanctuary.
The importance of the fisheries settlement was that it encompassed the right to development, "that your Treaty rights are not somehow stuck in 1840, in the technologies of that time".
The deal gave the Maori Fisheries Commission 20 per cent of all quota and $150 million to be used to acquire part of Sealord.
The Government has introduced a bill that would extinguish the 840 million shares for quota stock in the Kermadec fishery management area without consultation or compensation - on the basis that Maori have not used their fishing rights there.
Sir Tipene and Te Ohu said whether or not they used them was not a reason to extinguish the right.
"This unilateral action [is a] straight-out traducing of the indigenous right to development ... we have been cut off before it can take place."
Environment Minister Nick Smith said the group was "overstating the impacts in respect of fishery and Treaty settlement obligations and under-estimating the opportunities for economic and scientific gain".
Mr Key told reporters at his post-Cabinet press conference that it was not the Government's plan to slow down the Kermadec legislation in order for Te Ohu's legal challenge to be heard.
Comment: Undoing seven years goodwill
There is no argument that the Government's proposed enlargement of the Kermadec Sanctuary cuts across aspects of the 1992 Treaty of Waitangi Fisheries settlement and does so without consultation. The only question is if it is justified.
Conservation zealots believe conservation trumps everything. Others who have taken a close interest in Treaty settlements in the past 25 years are variously appalled, and gutted the Government could have made such a decision without reference to the affected party.
It was done in secret to maximise the impact of the Prime Minister's appearance at the UN; effectively the PR value was deemed more important than due process.
This Government has fostered strong relationships with Maori through the iwi leaders' groups, its turbo-charged Treaty settlements programme and not least its coalition relationship with the Maori Party.
It may have made a popular decision in creating the sanctuary but it has seriously damaged the goodwill it spent seven years building up.
It has given Maori a good reason not to trust the Government.