The NSW government's controversial council mergers plans have suffered a major setback with Sydney's Ku-ring-gai Council winning its appeal against forced amalgamation with Hornsby Shire.
The ruling could affect several other Sydney councils fighting proposed mergers in court and is the first since Premier Gladys Berejiklian dumped planned amalgamations in the bush despite pushing ahead with those in the city.
The NSW Court of Appeal ruled in favour of five of Ku-ring-gai's six arguments on Monday.
They included that a government-appointed delegate failed to properly assess the merger because he did not have access to a KPMG report used to underpin the financial reasoning behind it.
"The delegate could not properly carry out his function of examination without access to the KPMG documents which were the source of the calculations," Judges Robert Macfarlan and John Basten said.
The council was also denied "procedural fairness" in the process because it was similarly denied access to the consultancy firm's report, Justice Ronald Sackville said.
The ruling could affect a number of pending challenges being pursued by other councils denied full access to KPMG's reports.
The state government is considering the decision, a spokesman for Local Government Minister Gabrielle Upton said in a statement following the verdict.
Ku-ring-gai mayor Jennifer Anderson said she believed the decision - which had "vindicated" the council and its residents - would be a turning point for the Berejiklian government.
"If they continue with the merger process they will be flying in the face of our community and the court," she said.
Opposition leader Luke Foley urged the government to "do the decent thing" and scrap all remaining mergers.
"Today's judgement is a damning indictment of the unfairness of the government's approach to merging councils," he told reporters in Sydney.
Greens MP David Shoebridge called for every forced amalgamation proposal to be dumped.
"This case is a precedent for pretty much every forced amalgamation proposal because every single one was based on a hidden consultancy report," he said in a statement.
The court outcome comes with residents taking to the polls for the North Shore by-election on April 8.
There are 20 already-amalgamated councils across NSW, with five more to be created in Sydney if their legal challenges are unsuccessful.
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