The council quietly conceded defeat on May 9 in the years-long Nelson Bay Lagoons Estate case, only days before the start of a NSW Supreme Court trial and more than 18 months after receiving a court-appointed expert’s report that showed it was likely to lose.

It conceded defeat more than six months after Supreme Court Justice Michael Pembroke delivered a scathing assessment of the running of the drainage case as “myopic”, “pedantic” and “not in the interests of justice”, with the council “primarily responsible”.

The damaging expert’s report, which exposed the council to millions of dollars in damages, “may be part of the reason for the unsatisfactory conduct of these proceedings over the last year or so”, Justice Pembroke said in September, 2017.

As early as May, 2016 Justice Pembroke criticised the council for “incurring the costs of four barristers” to argue a point it was “blindly obvious” the council would lose.  

The council’s silence since May about the loss and its consequences – with a total possible bill of $20 million for legal costs, failed drainage by the council since an earlier council court loss in 2006, damages and new drainage works – has coincided with its public push for extraordinary rate increases over the next seven years.    

Now questions are being asked about the council’s handling of the case since 2006 when it was ordered to complete drainage works. The order followed a judge’s finding the council’s negligence had been “stark” after evidence it directed drainage on to the Lagoons Estate, said it would do work to reduce flooding but didn’t, and in response to complaints told the owner to “be realistic and cope with the development”.

In conceding liability on May 9 the council acknowledged work undertaken by it “in purported compliance” with the 2006 order had failed to stop excessive stormwater flowing on to the Lagoons Estate, which residents alleged caused damage to properties.

The council and Lagoons Estate owner David Vitnell will return to the Supreme Court in October for a hearing to determine the size of the damages bill, which will include losses incurred by Mr Vitnell since 2013 because he has not been able to develop another 50 homes at the site, remediation costs, legal costs and the cost to council of new drainage works estimated in the millions of dollars.

“I was always confident we were going to be successful,” said Mr Vitnell, who initiated court action in 2015 after significant stormwater flooding events on the estate.

“It was obvious after the court-appointed expert’s report in August, 2016 that the council had not complied with the original 2006 court order and it was a waste of time to defend the case brought against it, but they did.”

The council fought the case despite public warnings from former Port Stephens councillor Geoff Dingle that drainage works undertaken by the council after the 2006 court order had not only failed but councillors were warned of potential future liabilities if legal action was taken against it.

“He was right. Geoff Dingle was the only one who was right from day one but they wouldn’t listen to him,” Mr Vitnell said.

Port Stephens MP Kate Washington, who in 2016 warned Newcastle Council about a proposed merger with Port Stephens Council because the Lagoons Estate case was an expensive “ticking time bomb”, said the case was “an unbelievably expensive and ill-advised saga” and the council had “failed to heed any of the warnings”.

“Through its dogged, flawed defence of the claim Port Stephens Council has now cost ratepayers millions of dollars,” Ms Washington said.

“You have to wonder who made the decision to defend the indefensible, exposing residents to multi-million dollar legal bills and damages, and now they’re campaigning for a massive rate rise for all residents.”

She acknowledged Mr Dingle’s repeated attempts to sound the alarm, both in public and during heated confidential council meetings, but “time and again his pleas were ignored”.

“There are some very serious questions that the ratepayers of Port Stephens deserve to have answered,” Ms Washington said.

Lagoons Estate resident Randall Grayson, one of more than 100 estate residents who wrote to the then Local Government Minister Paul Toole in early 2016 asking for him to intervene, said the most upsetting part of the legal fight was “the sense that nobody ever gets held accountable for their decisions in these kinds of cases”.

Mr Grayson said he wrote to every Port Stephens councillor in early 2016 warning that the flooding was severe and the council was responsible, “so they can’t say they weren’t warned”.

“The money they’ve wasted trying to defend this thing and covering it up could have been spent dealing with the problem,” Mr Grayson said.

Port Stephens Council declined to respond to questions from the Newcastle Herald, including who made the decisions to keep pursuing the case after the expert’s report in 2016, whether insurance would cover any costs beyond that date and whether the council would apologise to Mr Dingle for public criticism of him for sounding the alarm on the Lagoons case.

“Unfortunately we are unable to make any comment whist the matter is still before the courts. Doing so would amount to a disregard for the judicial process,” a council spokesperson said.

“Council will be in a position to comment publicly once the matter has been dealt with.”