The prestigious Woollahra Council in Sydney’s east has vowed to fight the NSW government’s plan to forcibly merge it with other councils after suffering a major blow in its legal challenge against the move.
The Land and Environment Court dismissed the council's bid to stop its planned amalgamation with Randwick and Waverley councils because the council had not "established any of its grounds of challenge".
The council was also ordered to pay the government's costs - most of which will come from ratepayer revenue - under the ruling made by Chief Judge Brian Preston.
"While we're disappointed with the judgment, we will continue to fight for the best interests of the Woollahra community," council mayor Toni Zeltzer said.
The council will consult with its legal team on the next best move, she said, and has until Monday to decide whether it will appeal the court decision.
The Liberal mayor has previously argued that the council's litigation costs are worth the expense given the "huge cost" residents will have to bear as a result of the merger.
Ratepayers would pay between $286 and $696 more each year in rates over a 20-year period because the area comprises of higher land values than those in Randwick, modelling done by Woollahra Council found.
Wednesday's court decision is a major victory for the Baird government after it sacked more than 40 councils under its controversial amalgamation process earlier this year.
A number of mergers have been under scrutiny in the Land and Environment Court following the May reforms.
Local Government Minister Paul Toole said the latest court judgment showed the government had followed correct processes when the proposal to merge Woollahra Council was examined earlier this year.
"The Local Government Act outlines what must be done before a council is merged and today's judgment shows that the government has followed the requirements of the Act," he said in a statement.
The government will not merge Woollahra until it has had a chance to lodge an appeal.
Greens MP David Shoebridge admitted the judgment is a setback for those opposed to the controversial council reforms.
"But it is by no means the end of the road in legal challenges," he said.
"Not only will we see an appeal in this case, but there are a series of separate cases, with separate legal points and unique factual circumstances from other councils that are also before the courts," Mr Shoebridge said.