The largest development project in NSW can't go ahead after the NSW Land and Environment Court ruled that the planning powers of the state government are void.
Justice Peter Biscoe on Thursday said amendments to state planning laws, made in December last year by the former Labor government, were invalid, effectively stopping the massive $1.8 billion Huntlee residential project in the Hunter Valley.
Cessnock Greens councillor James Ryan, who was part of the Sweetwater Action Group (SWAG) which applied to have the planning laws overturned, said he was overjoyed by the decision.
"Unbelievably happy," Mr Ryan told AAP outside the court in Sydney.
"The government's own planners said this was the least suitable place for development in the Hunter, and yet they placed the biggest development in NSW there."
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In his judgment, Justice Biscoe ruled that SWAG was successful on grounds one and two of its four-part action.
He found that the government had failed to satisfy conditions of its own planning law, section six.
"The minister contravened (clause) six with the consequence that the recommendation was invalid and the Huntlee ... amendment is accordingly invalid," Justice Biscoe wrote in his judgment.
The Sweetwater group said the development was too far from other major metropolitan zones and would make it harder for people to get to work.
The group was also seeking protections for the endangered native shrub persoonia pauciflora, which populates two square kilometres of land on the site.
The shrub has been on the critically endangered list since it was named by scientists in 1999 and is noted for its "extremely restricted distribution" by the NSW government.
Two weeks ago, the NSW upper house passed a bill repealing the former Labor government's "Part 3A" development law, which granted powers to the planning minister to override environmental and council concerns about projects deemed to be "state significant".
Justice Biscoe said the parties had until 10am (AEST) on Friday to propose alternatives to his orders.
LWP Property Group, which is developing the Huntlee New Town project, later said it was disappointed by the decision.
"We will now regroup and assess all our options," LWP managing director Danny Murphy said.
"We remain committed to this important regional project and take Justice Biscoe's decision and feedback on board."
Mr Murphy said the development represented the first new town in the Hunter for almost 50 years and it would provide up to 7500 homes and 3000 permanent jobs.
"It will play an important role in meeting the demand for affordable housing in NSW ... over coming decades," he said.
Greens NSW MP David Shoebridge has called on NSW Planning Minister Brad Hazzard to respect the court's decision and rule out the development on the site.
"This is a significant victory for the Sweetwater Action Group, who have twice now had this totally inappropriate development struck down by the courts," he said in a statement.
Mr Shoebridge said the Department of Planning had ranked the site last out of 91 sites in terms of suitability for large scale residential development in the Hunter.
"Despite this, former planning Minister Tony Kelly pushed this decision through under Part 3A of Labor's planning laws just before Christmas," he said.
"Now the Part 3A approval has been rejected by the court, Huntlee is a real test for the new Planning Minister, Brad Hazzard.
"Will he reject Labor's broken planning system and return planning decisions to the local community?"
Mr Shoebridge said he was concerned that Mr Hazzard would use the government's new Part 4 of the Planning Act to impose the development.
