When Alfar succeed to the throne of Lochac in A.S.41, his predecessor - Draco, accused him of usurping the throne ( this was all done in fun to give a premise for war at Rowany Festival that year). As Draco was from the Northern Region of Lochac, the Baronies of the North joined him in revolt (Bacchus Wood , the only northern shire at the time, didn't formally declare for either side as far as the author is aware).
Creation of the "Duchy"
At the final court of Rowany Festival, peace was declared and Alfar proclaimed Draco and Asa "Duke and Duchess of the North". Using the precept of "Crowns word is Law" some people (though not very seriously) took this proclamation as the creation of "The Duchy of the North".
Validitiy of the "Duchy"
While the creation of the "Duchy" was proclaimed by Alfar as King of Lochac, it's creation was never made law following the procedure laid out in Kingdom Law so therefore the "Duchy" does not officially exist. Some argue it is valid using the precedent of Crown Principalities, as event though Crown Principalities physically exist , but the group type of Crown Principality does not exist in corpora. So using this line of argument some people say that the group type of "Duchy" is valid even though it does not appear in Corpora.