Company director Steve Pilbrow said he had been in discussions with council staff about the development plans and he had received "positive feedback" on the proposed changes.
"Mr Pilbrow considered, wrongly, that the council had given the required resource consent," said Judge Thompson.
The company pleaded guilty to one charge under the Resource Management Act.
Judge Thompson noted that the "misunderstanding on Mr Pilbrow's part should not be regarded as a deliberate defiance" and it seemed "to have been a genuine error".
The court was told what had been done to the building would have been approved by the council anyway.
No harm had been done to the heritage values of the precinct; possibly the reverse, said the judge.
"The proposed work, in fact, had brought the street frontage of the building back closer to the original than it had been because of alterations over the years," said Judge Thompson.
He also noted Westwood Commercial Ltd had volunteered to make a contribution towards a heritage project in the area to demonstrate its good faith, but no suitable project was identified by the council.
The maximum penalty for the charge was $600,000.
Judge Thompson took the lower starting point of $20,000 and applied discounts for an early guilty plea and mitigating factors.
A fine of $11,000 was imposed, of which $9900 was to be paid to SWDC.
Mr Pilbrow said he understood the council's legal fees to prosecute Westwood Commercial Ltd had "greatly exceeded" the amount they had received from the fine. "I am unable to comprehend what the council was trying to gain from this prosecution, it has simply cost ratepayers dearly."
He said he had tried "numerous times" to arrange meetings with the council to resolve the matter and avoid a lengthy and expensive court process.
Mr Pilbrow said the directors of Westwood Commercial were initially excited about the project, believing they were creating something special for the community to enjoy for years to come. "The whole process brought upon them by the council has certainly taken the shine off a fantastic project."
He said the prosecution had been a significant distraction, which had caused delays to the development. "On the one hand we have the Masterton District Council advertising in Auckland to try and attract new residents and businesses to the area and in the South Wairarapa we have a council that prosecutes a developer while he's trying to create employment and growth in the community," said Mr Pilbrow.
The Times-Age contacted the council, which advised they were unavailable to comment at time of going to press.
